TaxTMI Updates e-Newsletter
Oct 13,2017

Reopening of assessment under Section 148 - Objections to reopening - requirement of disposal before assessment - Duty to pass a reasoned order on objections - Setting aside assessment for nondisposal of objections - Invalidation of consequential penalty proceedings

Reopening of assessment under Section 148 - Objections to reopening - requirement of disposal before assessment - Duty to pass a reasoned order on objections - Assessing Officer was obliged to consider and dispose of objections to the notice for reopening before passing an assessment under Section 148; failure to do so vitiates the assessment. - HELD THAT: - The Department issued notices purporting to reopen assessments under Section 148 in respect of three assessment years and furnished reasons for reopening. The petitioners filed written objections dated March 7, 2016. The Assessing Officer, however, proceeded to pass assessment orders without disposing of those objections or recording reasons rejecting them. The Court held that the Assessing Officer must first consider and decide the objections by a reasoned order before proceeding to assess the reopened years. Proceeding to assess without such disposal is procedurally impermissible and renders the resulting assessment order unsustainable. Consequently, the impugned assessment order was set aside. The Court also set aside consequential steps taken pursuant to the impugned assessment, including the penalty notice, but permitted the Assessing Officer to evaluate and decide the objections afresh in accordance with law within four weeks of communication of the order, after which the Assessing Officer may proceed as permissible by law.

Impugned assessment order quashed for failure to decide objections to reopening; consequential proceedings including the penalty notice set aside; AO directed to decide objections by a reasoned order within four weeks and may thereafter proceed in accordance with law.

Final Conclusion: Writ petition allowed; assessment order set aside for failure to dispose of objections to reopening and consequential penalty proceedings quashed; Assessing Officer permitted to decide the objections within four weeks and proceed thereafter in accordance with law.

Reopening of assessment under section 147 - deemed dividend under section 2(22)(e) - exception for payments made in the ordinary course of business where lending forms substantial part of business - change of opinion in reassessment - application of mind in recording reasons to believe

Reopening of assessment under section 147 - change of opinion in reassessment - application of mind in recording reasons to believe - Reassessment proceedings under section 147 read with section 148 were validly initiated. - HELD THAT: - The Tribunal found that the Assessing Officer recorded his own reasons to believe after considering information available in the assessment order of M/s G.D. Goenka Tourism Corporation Ltd., noting quantum of payments and accumulated profits and concluding that income chargeable to tax had escaped assessment. Merely because the information originated from the Addl. CIT in his capacity as AO of the other assessee did not amount to a direction from a superior authority to reopen; there is no material showing any directive. The Assessing Officer applied his mind in recording the reasons and there is no evidence that a concluded or contrary opinion on the issue of deemed dividend had been formed in the original assessment proceedings. For these reasons the contentions of change of opinion, mechanical reopening or direction from superior authority were rejected and the reassessment was held to be validly initiated. [Paras 9]

Cross objection dismissed; reopening under section 147/148 held valid.

Deemed dividend under section 2(22)(e) - exception for payments made in the ordinary course of business where lending forms substantial part of business - Addition of the amount as deemed dividend under section 2(22)(e) was deleted and that deletion is upheld. - HELD THAT: - On merits the Tribunal accepted the view of the CIT(A) that the exception to section 2(22)(e) applies where (i) payments were made in the ordinary course of business and (ii) lending of money forms a substantial part of the creditor company's business. Applying the principle in Parley Plastic Ltd., the Tribunal observed that the term 'substantial part' does not connote 'major part' or a specific percentage and the AO had misapplied the test by relying on peak balances and by treating inter-corporate deposits as outside the ambit. No contrary decision of the jurisdictional High Court or Supreme Court was placed before the Tribunal. On this basis the CIT(A)'s deletion of the addition was found to be sustainable and the Revenue's appeal on this issue was rejected. [Paras 15, 18]

Revenue's ground challenging deletion of the deemed dividend addition rejected; deletion upheld.

Final Conclusion: Both the Revenue's appeal and the assessee's cross objection are dismissed: reassessment under section 147/148 was validly initiated and the deletion of the deemed dividend addition under section 2(22)(e) is upheld.

Peak credit doctrine - section 68 unexplained cash deposits - ex parte assessment under section 144 - appellate duty to afford opportunity to assessing officer to rebut

Peak credit doctrine - section 68 unexplained cash deposits - ex parte assessment under section 144 - appellate duty to afford opportunity to assessing officer to rebut - Whether the order of the CIT(A) deleting most of the addition made under section 68 by applying the peak credit principle is sustainable where the assessing officer had made an ex parte assessment and was not given an opportunity to rebut the assessee's appellate contentions. - HELD THAT: - The Tribunal found that the assessing officer had completed assessment ex parte under section 144 after the assessee failed to cooperate and produce documentary evidence to explain cash deposits. The CIT(A) allowed substantial relief by applying the peak credit concept though the assessee had not laid the factual foundation for that plea before the AO; indeed the assessee admitted the cash flow statement to be an afterthought. In these circumstances the Tribunal held that the CIT(A) ought to have afforded the AO an opportunity at the appellate stage to meet and rebut the new contentions and evidence before granting relief. Because the plea of peak credit was neither raised nor substantiated before the AO and the AO had not been given a chance to respond, the appellate order could not be sustained. The matter was therefore set aside and remitted to the CIT(A) for fresh adjudication in accordance with law after providing reasonable opportunity of hearing to both the assessee and the assessing officer. [Paras 3, 4, 5]

Impugned order of the CIT(A) set aside and the matter remitted to the CIT(A) for fresh consideration in accordance with law, with directions to afford reasonable opportunity of hearing to the assessee and to the assessing officer to rebut the contentions.

Final Conclusion: The Revenue's appeal is allowed for statistical purposes; the CIT(A)'s order deleting the bulk of the addition under section 68 is set aside and the matter is remitted to the CIT(A) for reconsideration after giving both the assessee and the assessing officer adequate opportunity of hearing.

Disallowance under section 40(a)(ia) for non-deduction or short deduction of tax at source - distinction between commission and cash discount in commercial arrangements - treatment of short deduction where tax was deducted under a wrong TDS provision - applicability of Section 14A where no exempt income is earned

Distinction between commission and cash discount in commercial arrangements - disallowance under section 40(a)(ia) for non-deduction or short deduction of tax at source - Whether amounts paid to distributors represented commission (subject to TDS under section 194H) or were cash discounts, and the resultant applicability of disallowance under section 40(a)(ia). - HELD THAT: - The Tribunal found that resolution of the true nature of the payments required examination of the agreement between the assessee and distributors and the sample subscription application. The nomenclature used in the agreement cannot be conclusive. In the interest of justice the Tribunal admitted the additional evidence (agreement and subscription form) and held that the matter should be reconsidered by the Assessing Officer after perusal of those documents to determine whether the payments were commission or cash discounts. The Tribunal therefore did not decide the matter on merits but set aside the CIT(A)'s order and restored the issue to the file of the AO for fresh adjudication without being influenced by the labels used in the agreement. [Paras 8]

Issue remanded to the Assessing Officer for fresh decision on whether the payments are commission or cash discount and consequent applicability of section 40(a)(ia).

Applicability of Section 14A where no exempt income is earned - Whether disallowance under Section 14A r.w. Rule 8D is sustainable where the assessee did not earn any exempt income in the relevant year. - HELD THAT: - The Tribunal noted that the assessee did not earn any exempt dividend or other exempt income during the impugned assessment year. Following the jurisdictional High Court's decision referred to (and consistent authorities), the Tribunal held that Section 14A and Rule 8D are not applicable where no exempt income was received or receivable in the relevant previous year. No contrary binding precedent was placed before the Tribunal. [Paras 11, 12]

Disallowance under Section 14A/Rule 8D deleted; Revenue's ground dismissed.

Treatment of short deduction where tax was deducted under a wrong TDS provision - disallowance under section 40(a)(ia) for non-deduction or short deduction of tax at source - Whether expenditure is liable to disallowance under section 40(a)(ia) where the assessee deducted and deposited tax but under a wrong TDS provision (i.e., short deduction due to applying a different section). - HELD THAT: - The Tribunal examined competing High Court decisions and coordinate Bench precedent. It observed that when tax has been deducted and deposited, but the assessee applied an incorrect TDS provision resulting in shortfall, the scheme of section 40(a)(ia) does not treat the assessee as an automatic defaulter meriting disallowance. In such cases the proper consequence may be proceedings under section 201 (declaration as assessee in default) rather than disallowance of expenditure. In view of binding/co-ordinate decisions favouring the assessee, the Tribunal upheld the CIT(A)'s deletion of additions made under section 40(a)(ia). [Paras 15, 16]

Deletion of disallowance under section 40(a)(ia) affirmed; Revenue's grounds dismissed.

Final Conclusion: Assessee's appeals are allowed for statistical purposes insofar as the commission/discount issue is remanded to the AO for fresh consideration; Revenue's appeals challenging deletions under Section 14A and the deletions of 40(a)(ia) additions (where tax was deducted but under a different provision) are dismissed, and the CIT(A)'s orders are affirmed.

Penalty under section 271(1)(c) - penalty under section 271AAA - requirement of recording satisfaction before initiating penalty - show cause notice under section 274 - statutory mandate of notice under section 274 for section 271AAA - jurisdictional defect arising from non issuance of mandatory notice - curable defect under section 292B not applicable to lack of jurisdiction - requirement that show cause notice specify which limb of section 271(1)(c) is invoked

Penalty under section 271(1)(c) - requirement of recording satisfaction before initiating penalty - show cause notice under section 274 - requirement that show cause notice specify which limb of section 271(1)(c) is invoked - Validity of imposition of penalty under section 271(1)(c) for assessment year 2007-08 - HELD THAT: - The Assessing Officer, though initiating penalty proceedings, did not record any satisfaction whether the assessee had concealed particulars of income or furnished inaccurate particulars, nor did the printed show cause notice under section 274 specify which limb of section 271(1)(c) was being invoked. Applying the authorities relied upon by the assessee and the Tribunal's reasoning, the absence of a recorded satisfaction and the failure to strike off inappropriate parts of the printed show cause notice rendered the penalty proceedings invalid. For these procedural and jurisdictional lapses, the imposition of penalty under section 271(1)(c) could not be sustained. [Paras 7]

Penalty under section 271(1)(c) for assessment year 2007-08 deleted and appeal allowed.

Penalty under section 271(1)(c) - requirement of recording satisfaction before initiating penalty - show cause notice under section 274 - requirement that show cause notice specify which limb of section 271(1)(c) is invoked - Validity of imposition of penalty under section 271(1)(c) for assessment year 2008-09 - HELD THAT: - The assessment order directed initiation of penalty proceedings but failed to record the requisite satisfaction whether the penalty related to concealment or furnishing of inaccurate particulars. The printed show cause notice under section 274 was not amended to indicate the specific limb of section 271(1)(c) relied upon. Although some additions were later deleted by the Tribunal, the Tribunal found that the procedural requirement of recording satisfaction and specifying the limb in the show cause notice were not met, and on that basis deleted the penalty imposition under section 271(1)(c). [Paras 14]

Penalty under section 271(1)(c) for assessment year 2008-09 deleted and appeal allowed.

Penalty under section 271AAA - statutory mandate of notice under section 274 for section 271AAA - jurisdictional defect arising from non issuance of mandatory notice - curable defect under section 292B not applicable to lack of jurisdiction - Validity of imposition of penalty under section 271AAA for assessment year 2008-09 - HELD THAT: - Section 271AAA mandates issuance of a show cause notice under section 274 before imposition of penalty. The Assessing Officer subsequently confirmed by written communication that no show cause notice under section 274 r/w section 271AAA was served prior to imposing the penalty. The Tribunal held that non issuance of the mandatory notice constitutes a jurisdictional error which cannot be cured under section 292B, and therefore the penalty imposed under section 271AAA was invalid. [Paras 20]

Penalty under section 271AAA for assessment year 2008-09 deleted and appeal allowed.

Final Conclusion: All appeals are allowed; penalties under section 271(1)(c) for assessment years 2007-08 and 2008-09 and under section 271AAA for assessment year 2008-09 are deleted for the procedural and jurisdictional defects identified.

Classification of share transactions as business income or short-term capital gains - intention test for investor versus trader - frequency, volume and period of holding as indicia of trading - distinction between delivery-based transactions and jobbing transactions - carry forward of speculative loss and belated filing of return - application of CBDT Circular No.4/2007 on investment vs stock-in-trade

Classification of share transactions as business income or short-term capital gains - intention test for investor versus trader - frequency, volume and period of holding as indicia of trading - application of CBDT Circular No.4/2007 on investment vs stock-in-trade - Whether the assessee's share transactions for assessment year 2010-11 are to be taxed as business income (trading) or as short-term capital gains (investment). - HELD THAT: - Having regard to the material on record, the Tribunal upheld the findings of the lower authorities that the assessee's share dealings exhibited features of trading rather than investment. The assessee's purchases and sales during the year showed very high turnover (numerous purchases and sales including intraday transactions), short holding periods in several instances and a large ratio of turnover to opening holdings. The balance-sheet treatment and negligible dividend yield did not support an investment intent. Applying the cumulative-test approach endorsed in the jurisprudence and the guidance in CBDT Circular No.4/2007, the Tribunal concluded that the dominant intention was resale for profit and the transactions had the character of business (including speculation for jobbing trades), and therefore the gains were correctly treated as business income rather than short-term capital gains. The Tribunal expressly followed the reasoning of the jurisdictional High Court in Manoj Kumar Samdaria and rejected the reliance placed by the assessee on decisions treating delivery transactions as necessarily capital in character where facts differed. [Paras 7]

The classification of the assessee's share transactions as business income was confirmed and the appeal on this point dismissed.

Carry forward of speculative loss and belated filing of return - distinction between delivery-based transactions and jobbing transactions - Whether the assessee is entitled to carry forward the speculative (jobbing) loss for assessment year 2010-11 where the return was filed belatedly. - HELD THAT: - The Assessing Officer disallowed carry forward of the net speculation loss on jobbing transactions because the return of income was filed belatedly. The Tribunal found no infirmity in the factual and legal conclusion of the authorities below: as the return was belated, the statutory entitlement to carry forward speculation loss could not be allowed. The CIT(A)'s concurrence with the AO on this point was sustained. [Paras 8]

The claim to carry forward the speculative loss was rejected and the ground for carry forward dismissed.

Final Conclusion: The appeal is dismissed; the classification of the share transactions as business income (including speculative jobbing) for assessment year 2010-11 and the disallowance of carry forward of the speculative loss due to belated return are upheld.

Interest deduction on borrowed funds - Substance over form - Undistributed trust benefits treated as loan - Allowability of commission as business expense - Section 40A(2)(b) implications - Reliance on coordinate bench precedent

Interest deduction on borrowed funds - Substance over form - Undistributed trust benefits treated as loan - Deductibility of interest paid to beneficiaries in the hands of the trust for the assessment years 2009-10 and 2010-11. - HELD THAT: - The Tribunal found that the trust had undistributed benefits standing to the credit of beneficiaries which were utilised for business and on which interest was provided. Although the assessee admitted an error in presentation of the balance sheet (aggregation of amounts in Annexure A), subsidiary records demonstrated substantial opening and closing balances attributable to beneficiaries which functioned as funds used in the business. The Assessing Officer erred in treating the absence of a separate loan line in the balance sheet as conclusive proof to disallow the interest; instead the substance of transactions showed borrowed funds (undistributed benefits) and interest paid in respect thereof. Considering these supporting details and the trust deed authority to borrow, the Tribunal accepted the assessee's contention and allowed the deduction of interest. [Paras 7]

Disallowance of interest paid to beneficiaries is set aside and the interest deduction is allowed.

Allowability of commission as business expense - Section 40A(2)(b) implications - Reliance on coordinate bench precedent - Disallowance of commission payments to certain parties on the ground that nature of services was not proved and that the payments fell within the mischief of Section 40A(2)(b). - HELD THAT: - The Tribunal noted that similar disallowances in earlier assessment years (2007-08 and 2008-09) were deleted by the Tribunal on facts: the assessee produced names, addresses, PANs, TDS details, bills, party returns and explained that commission was paid to promote sales (at 1% of sales). Having regard to the identical factual matrix and the earlier coordinate bench decisions which held the expenditures to be wholly and exclusively for business, the Tribunal followed the coordinate bench precedent and held that the commission payments were legitimately incurred for business and hence allowable. The Revenue did not controvert the existence of those earlier Tribunal orders. [Paras 11, 12]

Disallowance of commission payments is deleted and the commission expenditure is allowed.

Final Conclusion: The appeals are partly allowed: the disallowance of interest paid to beneficiaries is reversed and interest is allowed; the disallowance of commission payments is deleted following coordinate bench precedent; other grounds were either not pressed or rejected and no further relief is granted.

Advertisement, Marketing and Promotion expenditure as an international transaction - Arm's Length Price determination - Transfer pricing adjustment - Bright Line Test inadmissibility - Remand for fresh determination - opportunity of being heard under section 144C(11)

Advertisement, Marketing and Promotion expenditure as an international transaction - Remand for fresh determination - Arm's Length Price determination - Whether the AMP expenditure constitutes an international transaction and, if so, remit to the TPO/AO for fresh determination of its ALP - HELD THAT: - The Tribunal found that when the TPO originally held AMP expenditure to be an international transaction he had the benefit of only some of the relevant judgments of the Jurisdictional High Court, whereas several later decisions bearing on the issue are now available. In view of the changed and more complete judicial landscape, the Tribunal concluded that the entirety of the High Court jurisprudence must be applied to the facts of this case. Consequently the matter is set aside and remitted to the file of the TPO/AO for fresh consideration of whether an international transaction of AMP expense exists; if it is found to exist, the TPO/AO is to determine the ALP in the light of the relevant judicial position after affording the assessee a reasonable opportunity of being heard. The Tribunal noted that an intensity-adjustment direction of the DRP, though canvassed, had not resulted in any protective addition by the AO and therefore did not preclude remand. [Paras 5]

Impugned order is set aside and the question whether AMP expenditure is an international transaction (and, if so, its ALP) is remitted to the TPO/AO for fresh determination.

Bright Line Test inadmissibility - Transfer pricing adjustment - Permissibility of applying the Bright Line Test for making transfer pricing adjustment in respect of AMP expenditure - HELD THAT: - The Tribunal directed that, if the TPO/AO finds it necessary to determine the ALP of AMP expenses, no transfer pricing adjustment should be made by applying the Bright Line Test because the Jurisdictional High Court has not approved the application of the Bright Line Test in several decisions. This prohibition is a binding directional limitation on the method to be employed on remand. [Paras 5]

No transfer pricing adjustment shall be made by applying the Bright Line Test; alternative methods consistent with binding judicial precedent must be applied on remand.

Remand for fresh determination - Final appellate outcome - HELD THAT: - Having set aside the impugned assessment order and remitted the matter to the TPO/AO for fresh adjudication as directed, the Tribunal disposed of the appeal in favour of the assessee for statistical purposes. [Paras 6]

Appeal allowed for statistical purposes.

Final Conclusion: The assessment order is set aside and the matter remitted to the TPO/AO for fresh determination of whether AMP expenditure constitutes an international transaction and, if so, for determination of its ALP in the light of the relevant High Court decisions; the Bright Line Test is not to be applied; appeal disposed of in favour of the assessee for statistical purposes.

Attribution of receipts to Permanent Establishment - Permanent Establishment in relation to oil and gas installations - Composite turnkey contract - subdivision to suit contractor's convenience not to avoid taxation - Taxability of receipts from operations carried out outside India - Presumptive taxation under section 44BB and admissibility of books of account - Interest under section 234B where tax is subject to deduction at source

Permanent Establishment in relation to oil and gas installations - Taxability of receipts from operations carried out outside India - Composite turnkey contract - subdivision to suit contractor's convenience not to avoid taxation - Receipts relating to operations carried out outside India in connection with the Panna, Mukta and Tapti turnkey project are assessable to tax in India. - HELD THAT: - The AO concluded that, having regard to the nature of the work - commissioning and related pre-construction activities for oil/gas platforms - the assessee had a Permanent Establishment in India and payments received even for work performed outside Indian territorial waters were taxable as they related to oil/gas wells and fell within the scope of the treaty provisions relied upon by the AO. The Ld CIT(A) had taken a contrary view and confined taxation to profits attributable to the Indian PE, but on the hearing the assessee's authorised representative conceded that receipts for operations carried outside India should be treated as assessable in India. The Tribunal, therefore, set aside the CIT(A)'s contrary conclusion and confirmed the AO's view that the entire receipts connected with execution of the turnkey project are chargeable to tax in India for the assessment years under appeal. [Paras 11, 14, 17, 20]

Tribunal confirmed AO's decision that receipts from operations carried outside India in connection with the project are assessable to tax in India; Ld CIT(A)'s exclusion of such receipts set aside.

Presumptive taxation under section 44BB and admissibility of books of account - Rejection of the assessee's books of account and the estimate of income under section 44BB(1) / 44BB(3) was not finally upheld by the Tribunal but remitted for fresh consideration. - HELD THAT: - Ld CIT(A) had confirmed the AO's rejection of the assessee's books and the AO had estimated income under the presumptive provisions. After the assessee accepted that receipts from outside India are assessable, the Tribunal held that the computation scenario materially changed and the assessee should be given an opportunity to place its accounts and computations before the AO. The Tribunal declined to direct the method of recomputation and restored the issues relating to rejection of books and determination of income to the AO for fresh examination and decision after affording the assessee adequate opportunity to produce financial statements and supporting documents. [Paras 6, 16, 19, 22]

Issues of rejection of books of account and computation of income remitted to the AO for fresh adjudication after giving the assessee an opportunity to produce accounts and documents.

Interest under section 234B where tax is subject to deduction at source - Interest under section 234B was held not chargeable in the circumstances of this case. - HELD THAT: - Ld CIT(A) had held that interest under section 234B could not be charged because the payments were subject to tax deduction at source, relying on the jurisdictional Bombay High Court decision in NGC Network Asia LLC. The Tribunal found no infirmity in that conclusion and did not disturb the CIT(A)'s determination on the point. [Paras 8, 15]

Tribunal upheld Ld CIT(A)'s finding that interest under section 234B was not chargeable.

Taxability of receipts from operations carried out outside India - Inclusion of foreign exchange gain as part of gross receipts - Foreign exchange gains relating to receipts from operations carried outside India are to be included in gross receipts for determining income for the relevant years. - HELD THAT: - The Ld CIT(A) had not adjudicated on foreign exchange gains because he excluded receipts from outside India. Having held that receipts from outside India are assessable, the Tribunal confirmed the AO's view that foreign exchange gain related to those receipts must also be taken into account in computing the assessee's income for the assessment years where this point arose. [Paras 18, 21]

Foreign exchange gains connected with the receipts from operations carried outside India to be included in gross receipts for income determination.

Final Conclusion: For AY 2006-07, the revenue's appeal is partly allowed; for AY 2007-08 and 2008-09, the revenue's appeals are allowed. The Tribunal confirmed the AO's taxability of receipts from operations outside India and inclusion of related foreign exchange gains, upheld the non-chargeability of interest under section 234B, and remitted the issues concerning rejection of books of account and computation of income to the AO for fresh consideration after affording the assessee opportunity to produce accounts and documents.

Remission or cessation of liability - section 41(1) of the Income Tax Act - unilateral book entry not sufficient - existence and genuineness of trade creditors - burden to prove cessation of liability

Section 41(1) of the Income Tax Act - remission or cessation of liability - unilateral book entry not sufficient - existence and genuineness of trade creditors - burden to prove cessation of liability - Sustenance of addition of sundry creditors amounting to Rs. 43,66,283/- as income under section 41(1) for A.Y. 2012-13. - HELD THAT: - The Tribunal held that invocation of section 41(1) requires two conditions: (i) there must be a remission or cessation of a trading liability, and (ii) such remission or cessation must have occurred during the previous year relevant to the assessment. Mere long-standing outstanding entries in the books or non-response of creditors does not establish cessation. The assessee consistently reflected the amounts as liabilities in its accounts and produced ledger copies, payment records and correspondence (for example demand by Coral Gems and proof of payments in other instances), which demonstrated that the liabilities were subsisting and not unilaterally written back. The Tribunal relied on settled precedent that a unilateral entry in the debtor's books is insufficient to conclude that the debt has ceased or become unenforceable and that, in the absence of the creditor's presence, the authorities cannot determine that the liability is barred or extinguished. On the facts - including documentary evidence of purchases, payments and demand letters, acceptance by the AO of a related creditor's liability and provision of PAN/address particulars - the AO failed to prove remission or cessation of the specified liabilities during the relevant year; accordingly the condition precedent for invoking section 41(1) was not satisfied. [Paras 6, 7]

Addition of Rs. 43,66,283/- under section 41(1) is deleted and the appeal is allowed.

Final Conclusion: The Tribunal deleted the addition made under section 41(1) in respect of sundry creditors for A.Y. 2012-13 holding that remission or cessation of liability was not proved and the liabilities were shown as subsisting in the assessee's accounts.

Disallowance under section 14A - exempt income as precondition for applicability of section 14A - exclusion of investments not yielding exempt income for computation of section 14A disallowance - disallowance under section 40(a)(ia) for payments to Restricted Money Changers - whether payment is commission attracting section 194H - principal-to-principal transaction v. principal-agent relationship - disallowance under section 40(a)(ia) in case of short deduction of tax at source - second proviso to section 40(a)(ia) - when payee offers income - compliance with Rule 46A of the Income-tax Rules by the first appellate authority

Disallowance under section 14A - exempt income as precondition for applicability of section 14A - exclusion of investments not yielding exempt income for computation of section 14A disallowance - Scope and computation of disallowance under section 14A in the assessment year under appeal - HELD THAT: - The Tribunal observed that section 14A is inapplicable in a year where the assessee has not earned any exempt income; consequently no disallowance can be made for that year. The Tribunal noted that the record did not clearly show whether the assessee had earned any exempt income in the relevant previous year and directed the Assessing Officer to examine this factual aspect. The Tribunal further recorded that exclusion of investments not yielding exempt income from the computation of section 14A disallowance arises only if section 14A is otherwise applicable for the year. Following judicial authority favourable to the assessee, the Tribunal allowed the ground and remitted the matter to the AO for verification of whether any exempt income was earned; if none is found, no disallowance is to be made. [Paras 5]

AO directed to examine whether any exempt income was earned; if no exempt income is found for the year, no disallowance under section 14A is to be made; otherwise computation should exclude investments not yielding exempt income as appropriate.

Disallowance under section 40(a)(ia) for payments to Restricted Money Changers - whether payment is commission attracting section 194H - principal-to-principal transaction v. principal-agent relationship - Whether amounts paid to Restricted Money Changers (RMCs) were commission liable to TDS under section 194H and therefore disallowable under section 40(a)(ia) - HELD THAT: - The Tribunal examined the nature of transactions between the assessee and RMCs - noting RBI authorisations, that both parties treated foreign currency as stock-in-trade, and that RMCs were free to sell purchased currency to any authorised buyer. On these facts the Tribunal held there was no principal-agent relationship and the payments were for purchase of stock (on principal-to-principal basis), not commission liable to TDS under section 194H. The Tribunal also observed that the AO made no enquiry of the RMCs to establish an agency relationship and that similar payments were not disallowed in other years or places. On this basis the Tribunal deleted the addition made under section 40(a)(ia). [Paras 11]

Addition under section 40(a)(ia) in respect of payments to RMCs deleted; transactions held to be principal-to-principal and not commission attracting section 194H.

Disallowance under section 40(a)(ia) in case of short deduction of tax at source - second proviso to section 40(a)(ia) - when payee offers income - Whether section 40(a)(ia) permits disallowance where tax has been deducted at source at a lower rate than prescribed (short deduction) - HELD THAT: - Noting divergent High Court decisions, the Tribunal followed the view of the Calcutta and Karnataka High Courts that section 40(a)(ia) applies only where there is no deduction of tax at source or where deducted TDS has not been paid to Government; it does not apply to cases of short deduction. The Tribunal further relied on the fact that the payees had offered the receipts as income in their returns, invoking the second proviso to section 40(a)(ia), and therefore held that no disallowance could be made for short deduction. Accordingly the additions on account of alleged short deduction were deleted. [Paras 16]

Disallowance under section 40(a)(ia) deleted insofar as it was based on short deduction of TDS; where payee has offered the receipt as income, the second proviso precludes disallowance.

Compliance with Rule 46A of the Income-tax Rules by the first appellate authority - Whether the CIT(A) violated Rule 46A in admitting and relying upon additional evidence furnished by the assessee - HELD THAT: - The Tribunal examined the CIT(A)'s order which records that additional evidence produced before the CIT(A) was sent to the Assessing Officer for examination and that the AO submitted a remand report after examining the material. The AO's remand report accepted that payments were for services rendered. The Tribunal held that full opportunity was given to the AO in accordance with Rule 46A and that the CIT(A) decided the issue only after considering the remand report. Relying also on a similar finding in the assessee's earlier assessment year, the Tribunal found the Department's grievance without merit. [Paras 24]

Ground alleging non-compliance with Rule 46A dismissed; CIT(A) complied with Rule 46A and rightly considered the remand report before allowing the deduction.

Final Conclusion: Assessee's appeal allowed: section 14A disallowance addressed by remand to AO to verify whether any exempt income was earned (no disallowance if none); additions under section 40(a)(ia) in respect of payments to RMCs and for alleged short deduction of TDS deleted; Department's appeal and cross-objection dismissed.

Drying and threshing of tobacco as manufacturing activity - manufacture - additional depreciation under section 32(1)(iia) - conversion into a commercially distinct commodity

Drying and threshing of tobacco as manufacturing activity - additional depreciation under section 32(1)(iia) - conversion into a commercially distinct commodity - Drying and threshing (re-drying and thrashing) of raw tobacco amounts to manufacture and the assessee is therefore eligible for additional depreciation under section 32(1)(iia) for the Assessment Year 2011-12. - HELD THAT: - The Tribunal examined the Assessing Officer's finding that the assessee's activity was limited to re-drying and threshing for trading and that raw material and end product were both tobacco. Applying the legal test of "manufacture" - transformation resulting in a new and distinct article or change in character - the Tribunal followed the coordinate-bench decision in DCIT v. Maddi Lakshmaiah & Co. Ltd. and the Madras High Court decision in CIT v. Premier Tobacco Packers Pvt. Ltd., which held that drying and threshing converted raw Virginia flue-cured tobacco into commercially distinct forms (lamina, N.R. stems, etc.) not directly usable in cigarette manufacture and thus amounted to manufacture. The Tribunal also referenced the analogy drawn from the Supreme Court's reasoning in Aspin Wall & Co. Ltd. regarding conversion of raw berry into coffee beans as manufacturing. In light of these precedents and the similarity of facts, the Tribunal concluded that the assessee's processing activity amounted to manufacture and directed the Assessing Officer to allow the claimed additional depreciation under section 32(1)(iia).

Assessee's claim for additional depreciation under section 32(1)(iia) allowed; Assessing Officer directed to grant the deduction for AY 2011-12.

Final Conclusion: The revenue appeal is dismissed; the Tribunal holds that the assessee's drying and threshing of tobacco constitutes manufacture and directs allowance of additional depreciation under section 32(1)(iia) for Assessment Year 2011-12.

Tax deduction at source in respect of payments having an element of income - reimbursement of expenses as not constituting income liable to TDS - sub-contract versus reimbursement: characterisation of payments - non-deduction of tax at source under section 40(a)(ia) of the Income tax Act - relevance of Joint Venture Agreement and Schedule II reimbursement clause - admission of additional evidence where assessment based on presumptions and surmises

Sub-contract versus reimbursement: characterisation of payments - reimbursement of expenses as not constituting income liable to TDS - tax deduction at source in respect of payments having an element of income - relevance of Joint Venture Agreement and Schedule II reimbursement clause - Whether the payments of Rs. 2,65,14,237/- made by the assessee AOP to its joint venture members were reimbursements (not chargeable to TDS) or payments to sub contractors attracting disallowance under section 40(a)(ia). - HELD THAT: - The Tribunal affirmed the CIT(A)'s finding that the payments were reimbursements of manpower and related costs incurred by the JV members in execution of the contract and were made pursuant to the Joint Venture Agreement (clause 9.1 and Schedule II) which provided for assignment of personnel by JV members and reimbursement of their costs. The Assessing Officer's conclusion that the amounts were payments to sub contractors rested on presumptions that a subcontract existed and that a profit element must be embedded in such transactions; those conjectures were not supported by evidence. The CIT(A) properly admitted and considered additional documentary evidence showing details of employees assigned and costs incurred by the JV members, and applied the settled principle (as explained in GE India Technology Centre Pvt. Ltd. and cited authorities) that TDS is leviable only on sums which comprise an element of income; pure reimbursement of expenditure does not constitute income in the hands of the payee and therefore is not a sum on which tax is deductible at source. Reliance on appellate decisions holding that reimbursement to members/transporters is not subject to TDS was held to support the characterisation of the payments as non taxable reimbursements. In the absence of any material showing that the payments included a profit element or were made under an actual subcontract, the disallowance under section 40(a)(ia) lacked justification.

The disallowance of Rs. 2,65,14,237/- under section 40(a)(ia) was deleted; the payments were held to be reimbursements not chargeable to TDS.

Final Conclusion: The appeal filed by the Revenue is dismissed; the Tribunal upholds the CIT(A)'s deletion of the addition and confirms that the payments to JV members for manpower costs were reimbursements not subject to tax deduction at source for AY 2009-10.

Bogus purchases - genuineness of purchases and physical delivery - addition as income on account of unexplained purchases - reasonable quantification of disallowance by percentage of purchases - relevance of declared gross and net profit in fixing disallowance - consistency with coordinate bench precedents on ad hoc disallowances

Bogus purchases - genuineness of purchases and physical delivery - addition as income on account of unexplained purchases - reasonable quantification of disallowance by percentage of purchases - relevance of declared gross and net profit in fixing disallowance - consistency with coordinate bench precedents on ad hoc disallowances - Sustained addition in respect of purchases shown to have been taken by availing hawala entries and determination of appropriate percentage disallowance. - HELD THAT: - The AO, on information from investigation, treated purchases from two parties aggregating to the stated amount as bogus and added the entire purchases to income for failure to prove physical delivery, consumption and obtain confirmations. The CIT(A) reduced the AO's addition and treated 25% of the purchases as taxable (after credit for declared gross profit resulting in a net impact of 22%). The Tribunal found on the record that the assessee had availed hawala entries for the purchases, but noted that in manufacturing trade where gray market purchases fetch cheaper rates and the assessee declared gross profit of 18.21% and net profit of 3%, a gross ad hoc addition of 22% is excessive. Having regard to the nature of business, the declared profit margins and the approach in coordinate-bench decisions which sustained ad hoc additions in the range of 5% to 12.5%, the Tribunal concluded that a reasonable and consistent quantification is 12.5% of the total purchases. The Tribunal therefore curtailed the addition to 12.5%, granted relief to the assessee accordingly, and held the Revenue's cross-ground (challenging the CIT(A)'s order) to be infructuous in view of the partial allowance to the assessee.

Assessee's appeal partly allowed by sustaining addition at 12.5% of the purchases; Revenue's appeal dismissed as infructuous.

Final Conclusion: The Tribunal found that purchases procured through hawala entries were not fully acceptable but that the addition made by the AO (100%) and sustained net by the CIT(A) (22%) was excessive; balancing declared profit margins and coordinate-bench practice, the Tribunal fixed the disallowance at 12.5% of the purchases, partly allowing the assessee's appeal and dismissing the Revenue's appeal as infructuous.

Registration under section 12AA - Approval under section 80G - Registration at commencement stage - powers of CIT limited to examining charitable objects and genuineness - Refusal of registration for lack of prior activity

Registration at commencement stage - powers of CIT limited to examining charitable objects and genuineness - Refusal of registration for lack of prior activity - Whether registration under section 12AA and approval under section 80G can be refused merely because the trust has not carried out substantial activities at the commencement stage - HELD THAT: - The Tribunal applied settled precedent and held that where a charitable trust is at its commencement stage the CIT's power on an application for registration is confined to examining whether the objects of the trust are charitable in nature and whether the institution is genuine. The fact that the trust has not substantially carried out activities soon after incorporation is not a ground, by itself, to refuse registration. The Tribunal observed that the objects in the present case undisputedly related to charitable purposes and there was no material to justify refusal of registration merely on the basis of limited activities within four months of incorporation. The reasoning follows-coordinate-bench decisions cited by the Tribunal that registration cannot be denied for lack of antecedent activity when objects are charitable and genuineness is not disputed.

The Tribunal held that refusal to grant registration under section 12AA and approval under section 80G solely for want of prior activity at the commencement stage was not justified and the legal position favours grant of registration where objects are charitable and the trust is genuine.

Registration under section 12AA - Approval under section 80G - Remedial direction to the CIT(E) in view of the Tribunal's conclusion - HELD THAT: - Although the Tribunal found no material justifying the refusal, it did not itself grant registration or approval. Instead, relying on the established principle that the CIT's role is limited at the commencement stage and on binding coordinate-bench decisions, the Tribunal directed the CIT(Exemptions) to reconsider the applications for registration under section 12AA and for grant of exemption certificate under section 80G and to pass a speaking order. The direction required the CIT(E) to take into account the Tribunal's reasoning and the cited precedents while adjudicating afresh.

The Tribunal directed the CIT(Exemptions), Kolkata to consider afresh the applications for registration under section 12AA and for approval under section 80G and to pass a speaking order within three months.

Final Conclusion: Both appeals are allowed; the matter is remitted to the CIT(Exemptions), Kolkata to reconsider the applications for registration under section 12AA and for approval under section 80G in light of the Tribunal's reasoning and binding precedents, and to pass a speaking order within three months.

Existence and proof of goods for penalty under the Customs Act - valuation and examination of alleged contraband - relevancy and proof of statements under Section 108 and Section 138B of the Customs Act - application of Section 138B to departmental adjudication proceedings - use of findings from unrelated criminal proceedings in departmental adjudication - natural justice - right to cross examination of witnesses

Existence and proof of goods for penalty under the Customs Act - valuation and examination of alleged contraband - Penalties under Section 112 cannot be validly imposed in absence of proof that the goods existed and of their quantity, quality and value determined by appropriate examination. - HELD THAT: - The Court held that Section 112 presupposes the existence of goods liable to confiscation and that valuation, quantity and quality are matters of proof requiring measurement, weighment or appropriate testing. The Collector and CESTAT had proceeded on conjecture - principally Fernandes' unaided estimate of weight and value - without laboratory testing, chemical analysis or any professional valuation. Such assumptions cannot substitute for the evidentiary certainty the statute demands; consequently the penalties imposed lack a lawful basis. [Paras 2, 38, 39]

Penalties and confiscation orders based solely on untested, unverified assertions about the existence, weight or value of alleged contraband are unsustainable.

Relevancy and proof of statements under Section 108 and Section 138B of the Customs Act - natural justice - right to cross examination of witnesses - Section 108 statements which have not been the subject of cross examination cannot, without more, be treated as proved and relied upon to sustain penalty; absence of cross examination affects the evidentiary value and may breach principles of natural justice. - HELD THAT: - The Court explained that Section 138B preserves the relevancy of statements in specified circumstances but does not equate relevancy with proof. Statements recorded under Section 108 remain subject to the rigours of proof under the Evidence Act and the right of the affected party to cross examine. Where material witnesses are not produced for cross examination, their statements may have diminished probative value and reliance on them without corroboration or production violates natural justice and may render the adjudication perverse. [Paras 41, 42, 43, 56]

Uncross examined Section 108 statements alone cannot sustain penalty adjudication; the failure to produce key witnesses for cross examination requires corroboration or other proof.

Application of Section 138B to departmental adjudication proceedings - relevancy and proof of statements under Section 108 and Section 138B of the Customs Act - Section 138B is not confined strictly to court prosecutions and, on its language, can apply to proceedings under the Act other than court proceedings; but its operation does not dispense with the need for proof and corroboration in departmental adjudication. - HELD THAT: - The Court rejected the appellants' submission that Section 138B applies only to prosecutions, noting the subsection (2) expressly extends the provisions 'so far as may be' to non court proceedings. Nevertheless, the Court emphasised that while a statement may remain relevant under Section 138B, relevancy alone does not constitute proof; departmental authorities must still satisfy evidentiary standards and respect natural justice. [Paras 41, 55, 56]

Section 138B may apply to departmental proceedings, but it cannot be used to bypass proof and cross examination requirements.

Use of findings from unrelated criminal proceedings in departmental adjudication - existence and proof of goods for penalty under the Customs Act - Observations or findings made by the Supreme Court in Fernandes' criminal/homicide matter could not be treated as conclusive proof of the existence or value of contraband in distinct departmental penalty proceedings. - HELD THAT: - The Court found that the CESTAT materially misapplied the Supreme Court's decision in Fernandes' case, which addressed protection under Section 155 and whether Fernandes should be prosecuted, not the factum, quantity or value of smuggled goods. A decision is authoritative only for the question actually decided; peripheral observations in an unrelated criminal matter cannot supply the evidentiary gap in a separate confiscation and penalty adjudication. [Paras 46, 48, 50, 51, 52]

Departmental adjudicators may not import conclusions from unrelated criminal judgments as substitute proof of contraband in penalty proceedings.

Valuation and examination of alleged contraband - relevancy and proof of statements under Section 108 - An officer's uncorroborated estimation of quantity and value, based on his subjective experience without testing or opening other packages, is inadequate to determine value for penalty purposes. - HELD THAT: - The Collector and Tribunal relied on Fernandes' claim that, from lifting one bar, he could estimate the purity, weight and aggregate value of all boxes. The Court held that such subjective estimation, unsupported by opening/ testing of each package, laboratory analysis or valuation report, cannot satisfy the statutory requirement for proof of value where penalties are assessed on the value of goods. [Paras 38, 39, 63]

Subjective, unaided estimations by an officer do not suffice as proof of the weight, purity or value of alleged contraband for imposition of penalties.

Final Conclusion: All appeals allowed; the Collector's order dated 14 October 1994 and the CESTAT order dated 13 December 2004 are quashed and set aside for failure to establish the existence, quantity, quality or value of the alleged contraband and for impermissible reliance on uncross examined statements and on observations from an unrelated criminal proceeding.

Classification of goods - articles of apparel and clothing knitted or crocheted - articles of apparel and clothing not knitted or crocheted - construction of tariff headings based on fabric construction - relevance of textile composition to classification

Classification of goods - articles of apparel and clothing knitted or crocheted - articles of apparel and clothing not knitted or crocheted - construction of tariff headings based on fabric construction - relevance of textile composition to classification - Whether the imported item described as "girls tight" is classifiable under Chapter 61 or Chapter 62 of the Customs Tariff. - HELD THAT: - The determinative test for classification between Chapter 61 and Chapter 62 is whether the article is knitted or crocheted, as Chapter 61 expressly covers "articles of apparel and clothing, accessories knitted or crocheted", while Chapter 62 applies to the corresponding articles when not knitted or crocheted. Although a Textile Committee report recorded the fibre composition of the goods, composition alone does not determine whether an article is knitted/crocheted or woven. The record contains the importer's admission that the goods are made of woven fabric containing viscose and synthetic fibres. Given the admitted woven construction, the goods fall outside Chapter 61 and within Chapter 62. The Tribunal therefore upheld the classification under Chapter 62. [Paras 5, 6]

The disputed goods, being of woven construction, are not classifiable under Chapter 61 and are correctly classifiable under Chapter 62; the impugned order is upheld.

Final Conclusion: The appeal is rejected and the Commissioner (Appeals) order classifying the goods under Chapter 62 is upheld.

Error apparent on the face of the record - rectification of orders - power to review versus rectify - classification of pre-fabricated buildings versus structures - essential character of pre-fabricated buildings - re-use of dismantled parts and impact on classification

Error apparent on the face of the record - rectification of orders - power to review versus rectify - Whether the Tribunal may entertain the ROM application seeking amendment to allege an error apparent on the face of the record and whether any such error has been made out requiring rectification. - HELD THAT: - The Bench reiterated that the Tribunal lacks power to rehear or review its final order and may only rectify a patent error apparent on the face of the record. An error apparent is one discoverable on mere inspection and not one requiring elaborate argument or reappraisal of evidence where two opinions are possible. The asserted mistake by the respondent - that the Tribunal erred in classifying certain supplies - did not constitute a patent, self-evident error; rather it required re-examination of facts and re-hearing of the appeal. Consequently the application to amend the ROM for rectification did not disclose the narrow category of error that permits correction by way of ROM. [Paras 5]

ROM application dismissed as no error apparent on the face of the record warranting rectification.

Classification of pre-fabricated buildings versus structures - essential character of pre-fabricated buildings - re-use of dismantled parts and impact on classification - Whether the Tribunal committed an apparent error in holding that supplies involving dismantling and re-use of existing structural parts do not retain the essential character of pre-fabricated buildings and are properly classifiable as structures. - HELD THAT: - The Tribunal had found that where dismantled parts of existing structures are reused and re-erected at site, the supplied items lose the essential character of pre-fabricated buildings referenced in the chapter heading and emerge as incomplete structures not classifiable under the pre-fabricated building heading. The assessee's contention that reuse of salvaged parts together with supplied new prefabricated items nonetheless made the supply an "incomplete building" having the essential character of a pre-fabricated building required factual appraisal of the purchase orders and the nature of work (dismantling, supply, re-erection). The Bench observed that this contention did not disclose a patent error; on the contrary, the Tribunal's conclusion involved application of the chapter heading to the factual matrix and did not call for interference on a ROM petition. [Paras 2, 5]

No error apparent; Tribunal's classification of the disputed supplies as structures and confirmation of duty in respect of those purchase orders upheld.

Final Conclusion: The ROM application for amendment and rectification is dismissed: the Tribunal has no power to review its final order and the allegations do not disclose a patent error on the face of the record; the Tribunal's factual-legal conclusion that supplies involving reuse of dismantled parts lack the essential character of pre-fabricated buildings is not interfered with.

Transaction value - speaking order - refund of wrongly collected duty - finality of appellate order - customs valuation - rejection under Rule 12 and re-determination under Rule 4

Transaction value - speaking order - customs valuation - rejection under Rule 12 and re-determination under Rule 4 - Validity of the assessing authority's rejection of the declared transaction value for imported goods where no valid reasons were assigned. - HELD THAT: - The Commissioner (Appeals) set aside the assessing officer's enhancement of value on the ground that the assessing authority did not assign valid reasons for rejecting the declared transaction value. The Tribunal examined the impugned order and found the Commissioner (Appeals)'s conclusion to be in conformity with the statutory scheme governing customs valuation. Having regard to the absence of speaking reasons recorded by the assessing authority for discarding the declared price, the appellate authority was justified in allowing the appeal and directing consequential relief. [Paras 4]

The rejection of the declared transaction value was invalid for lack of valid reasons and the Commissioner (Appeals) rightly allowed the appeal.

Finality of appellate order - refund of wrongly collected duty - Effect of the earlier Commissioner (Appeals) order dated 30.09.2013 and the entitlement to refund where that order was not appealed by Revenue. - HELD THAT: - The Tribunal noted that the order dated 30.09.2013, which directed the assessing officer to issue speaking orders and provided for consequential relief including refund in the absence of such orders, was not challenged by Revenue and therefore had attained finality. In view of that finality and the subsequent failure of the assessing authority to comply, the Commissioner (Appeals) correctly directed grant of refund to the respondent. The Tribunal found no error in this approach and declined to disturb the impugned order. [Paras 4]

The earlier appellate order attained finality as it was not appealed by Revenue, and consequent refund was rightly directed by the Commissioner (Appeals).

Final Conclusion: The appeals filed by Revenue lack merit; the Tribunal upholds the Commissioner (Appeals)'s allowance of the respondent's appeals and dismissal of Revenue's appeal, confirming entitlement to consequential relief including refund.

Maintainability of writ under Article 226 where statutory appellate forum is seized - Judicial restraint in presence of alternative remedy - Direction to appellate forum to accord priority to pending application - Preservation of substantive merits while refusing writ relief

Maintainability of writ under Article 226 where statutory appellate forum is seized - Judicial restraint in presence of alternative remedy - Writ petition under Article 226 not entertained because the statutory appellate forum (CESTAT) was seized of the same relief sought. - HELD THAT: - The petitioner had filed an application before the Customs, Excise and Service Tax Appellate Tribunal, Mumbai seeking the same relief as in the writ petition. Given that the appellate authority was seized of the matter and the application before it was recently filed and fixed for hearing, the High Court, applying the principle of judicial restraint where an alternative statutory remedy exists, declined to entertain the petition under Article 226. The court observed that if urgency was pointed out the Appellate Tribunal would give necessary priority to the hearing. The court therefore refrained from substituting its jurisdiction for that of the tribunal and disposed of the petition subject to the observations made. [Paras 3, 5, 6, 7]

Petition not entertained; matter left to the appellate tribunal which is to be accorded priority; petition disposed of, with merits kept open.

Final Conclusion: Writ petition dismissed in limine on maintainability grounds as the statutory appellate forum was seized; the tribunal directed (by observation) to give priority to the pending application; all questions on merits reserved.

Corporate Insolvency Resolution Process - Financial Creditor - Corporate Debtor - Financial Debt - Default - Maintainability - Misuse of insolvency proceedings / Malicious initiation - Section 65 - penalty for fraudulent or malicious initiation - Equitable mortgage by deposit of title deeds - Jurisdiction of Adjudicating Authority vis-a -vis civil courts (Section 63)

Maintainability - Misuse of insolvency proceedings / Malicious initiation - Section 65 - penalty for fraudulent or malicious initiation - Jurisdiction of Adjudicating Authority vis-a -vis civil courts (Section 63) - Maintainability of the company petition under the IBC when parallel civil and criminal proceedings exist and when insolvency is not established - HELD THAT: - The Tribunal found that although a short-term loan was advanced, the record does not show that the Corporate Debtor is insolvent or unable to pay the debt; the dispute between the parties has spawned multiple proceedings (civil suit, criminal FIR, proceedings under the N.I. Act) arising from the same cause of action. The petitioner has instituted and pursued those proceedings and also obtained interim reliefs (status quo) which have prevented the respondent from selling properties that could satisfy the debt. The Tribunal concluded that the petition under the Code was instituted for purposes other than resolution of insolvency and amounted to misuse of the IBC. Having regard to Section 65, initiation of proceedings with malicious or fraudulent intent is impermissible and liable to be penalised. The Tribunal also noted the exclusivity of the NCLT/NCLAT jurisdiction under Section 63 and that the single cause of action cannot be used to prosecute parallel remedies in a manner that defeats resolution. For these reasons the petition was held not maintainable and liable to dismissal. [Paras 9, 11, 16, 17, 18]

The company petition is not maintainable and is dismissed as maliciously instituted; proceedings are liable to be penalised under Section 65.

Equitable mortgage by deposit of title deeds - Financial Creditor - Financial Debt - Whether mere furnishing/deposit of title deeds to the creditor established an equitable mortgage and rendered the petitioner's security uncontestable - HELD THAT: - The Tribunal rejected the petitioner's contention that mere handing over of original title deeds to the petitioner amounted to a duly registered mortgage. The record showed that documents relating to the flats were with the petitioner for verification and that the respondent disputed the creation of the alleged mortgage. The petitioner could not rely on mere possession of title deeds to establish a charged security in its favour conclusively. The Tribunal recorded that this factual dispute-and the petitioner's conduct in subsequently litigating to restrain sales-undermined the petitioner's claim to an unqualified proprietary charge that would justify invoking insolvency proceedings. [Paras 9]

The contention that furnishing of title deeds alone created an equitable mortgage is rejected; the petitioner did not establish an incontestable charge over the flats.

Relief - admission, moratorium and appointment of IRP - Section 65 - penalty for fraudulent or malicious initiation - Whether the petitioner is entitled to admission of the petition, imposition of moratorium and appointment of an Interim Resolution Professional - HELD THAT: - Because the Tribunal concluded that there is no insolvency to be resolved and that the petition was instituted for purposes other than resolution of insolvency, the statutory reliefs under the Code (admission, moratorium, appointment of IRP) were not appropriate. The Tribunal applied Section 65's principle that initiation of insolvency proceedings with malicious intent is actionable and observed that the petitioner had pursued multiple fora instead of cooperating to realise assets. On this basis the Tribunal dismissed the petition and imposed a cost as a consequence of malicious initiation. [Paras 16, 18]

Petition not admitted; no moratorium or IRP; petition dismissed and costs imposed on the petitioner under the Tribunal's order.

Final Conclusion: The company petition under section 7 of the IBC is dismissed as not maintainable and maliciously instituted; the petitioner failed to establish an equitable mortgage by mere deposit of title deeds and no insolvency was found to justify invocation of the Code. The petition is dismissed with costs of Rs. 1,00,000 payable by the petitioner to the respondent within three weeks.

Initiation of Corporate Insolvency Resolution Process - maintainability of an application under Section 9 of the IBC, 2016 - requirement of banker's certificate under Section 9(3)(c) of the IBC, 2016 - rejection of an application under Section 9(5) of the IBC, 2016 for non-compliance - admission of an application under Section 9 and commencement of moratorium under Section 14 - appointment/naming of Interim Resolution Professional and the Section 16 procedure - role of Committee of Creditors and effect of Section 22 in selection of Resolution Professional

Admission of an application under Section 9 and commencement of moratorium under Section 14 - requirement of banker's certificate under Section 9(3)(c) of the IBC, 2016 - maintainability of an application under Section 9 of the IBC, 2016 - C.P. (IB)-160(PB)/2017 filed by the Operational Creditor is admitted and CIRP is initiated against the Corporate Debtor. - HELD THAT: - The petition in CP(IB)-160(PB)/2017 satisfied the statutory pre-condition in Section 9(3)(c) as the banker's certificate from the Operational Creditor's banker (SBI) confirmed non-receipt of proceeds in the specified account in relation to the invoices relied upon by the applicant. The Corporate Debtor's contentions-alleged non-issuance of notice, denial of supply of goods and existence of a dispute before the Facilitation Council-were examined and found to be inconsistent or not constituting a bona fide dispute within the meaning of the Code. Consequently the application crossed the prima facie threshold for admission. However, although an IRP was named in the application, the required disclosures/declaration under the IBBI regulations had not been filed, so the Tribunal could not appoint the named IRP immediately. [Paras 17, 18]

CP(IB)-160(PB)/2017 is admitted and CIRP is initiated; moratorium consequences under Section 14 will follow, but appointment of the named IRP awaits compliance with required disclosures.

Requirement of banker's certificate under Section 9(3)(c) of the IBC, 2016 - rejection of an application under Section 9(5) of the IBC, 2016 for non-compliance - maintainability of an application under Section 9 of the IBC, 2016 - CP(IB)-180(ND)/2017 and CP(IB)-181(ND)/2017 are not maintainable and are rejected for failure to comply with the mandatory banker-certificate requirement under Section 9(3)(c). - HELD THAT: - Both applications lacked the statutorily mandated certificate from the financial institution maintaining the Operational Creditor's account confirming non-payment by the Corporate Debtor. In CP(IB)-181(ND)/2017 the banker refused to issue the certificate despite judicial direction; in CP(IB)-180(ND)/2017 the applicant produced a certificate from its chartered accountant instead of the banker and admitted non-obtainment of the bank certificate. Reliance on established appellate authority that the banker-certificate is mandatory led the Tribunal to reject these applications under Section 9(5) after affording time for compliance. The Tribunal noted that dismissal without prejudice leaves other remedies open to the applicants. [Paras 14, 16, 19]

CP(IB)-180(ND)/2017 and CP(IB)-181(ND)/2017 are rejected under Section 9(5) for non-compliance with Section 9(3)(c); rejection is without prejudice to other remedies.

Appointment/naming of Interim Resolution Professional and the Section 16 procedure - role of Committee of Creditors and effect of Section 22 - initiation of Corporate Insolvency Resolution Process - Tribunal referred to IBBI for recommendation of an Interim Resolution Professional and declined to appoint the IRP named by the Corporate Debtor in view of objections and the scheme of the Code. - HELD THAT: - The Tribunal explained its choice to process Operational Creditor applications first in light of fairness and to avoid perceptions of bias if the Corporate Debtor's nominated IRP were appointed over creditor objections. The scheme of the Code, including the power of the Committee of Creditors under Section 22 to appoint or replace a resolution professional, supports such caution. Consequently, and pursuant to Section 16, the Tribunal has made a reference to IBBI for recommendation of an IRP within the prescribed time limit rather than appointing the IRP named by the Corporate Debtor without requisite disclosures and in the face of creditor opposition. [Paras 9, 10, 20]

Reference made to IBBI to recommend an IRP under Section 16; Tribunal declined to appoint the Corporate Debtor's nominated IRP given objections and non-compliance with disclosure requirements.

Requirement of banker's certificate under Section 9(3)(c) of the IBC, 2016 - judicial compliance and obligations of financial institutions - Direction issued to HDFC Bank to explain non-compliance with statutory mandate and Tribunal's earlier order to issue the banker-certificate. - HELD THAT: - The Tribunal deprecated the casual approach of bankers in issuing the certificate mandated by Section 9(3)(c), highlighted the inconsistent stances of different bankers in the three matters, and specifically called for an explanation from the Bank Manager of HDFC Bank, Stephen House, Kolkata for having issued a certificate not in compliance with the statutory requirement and for failing to follow the Tribunal's direction. The Tribunal directed HDFC Bank to submit an explanation within four weeks and warned of appropriate action for non-compliance. [Paras 14, 21, 22]

HDFC Bank directed to explain non-compliance with the Tribunal's order and statutory mandate within four weeks; Registry to forward the order to the bank.

Final Conclusion: Two Section 9 petitions (CP(IB)-180 and CP(IB)-181) were rejected for failure to produce the mandatory banker-certificate under Section 9(3)(c); CP(IB)-160 was admitted and CIRP initiated (moratorium under Section 14 to follow); the Tribunal has referred the matter to IBBI to recommend an IRP and has directed HDFC Bank to explain its non-compliance with the banker-certificate requirement and the Tribunal's earlier direction.

Corporate Insolvency Resolution Process - financial creditor - default - initiation of insolvency under Section 7(5) of the Insolvency and Bankruptcy Code, 2016 - power of attorney - interim resolution professional - moratorium - security interest - committee of creditors

Financial creditor - default - initiation of insolvency under Section 7(5) of the Insolvency and Bankruptcy Code, 2016 - Application under Section 7 of the Code by the Bank of Baroda was admissible and has been admitted. - HELD THAT: - The Tribunal examined whether a default had occurred and whether the application was complete. Documentary evidence including the term loan agreement, acceleration notice, bankers' book entries and CIBIL classification established a continuing default whose initial date was found to be 31.03.2016 and which stood accelerated by notice dated 06.03.2017. Variations in quantum across documents were attributed to differences in computation dates and were held not to be a ground for dismissal; any dispute as to the exact amount was left open for consideration by the Committee of Creditors. The Explanation to Section 7(1) and the position of the lead bank in a consortium supported the competence of the petitioner to file the application. Applying the completeness and default tests in Section 7(2) and Section 7(5), the Tribunal was satisfied and admitted the petition. [Paras 18, 19, 20, 21, 22]

Petition under Section 7 admitted and Corporate Insolvency Resolution Process initiated.

Power of attorney - financial creditor - The Bank's authorisation to present the application through Ms. Archana Mishra (by substitution under power of attorney) was valid and the application was not incomplete on that ground. - HELD THAT: - The Tribunal considered the challenge to the authority of the person presenting the application. The original power of attorney dated 16.12.2015 conferred power to substitute and appoint attorneys; in exercise of that clause, Shri Ravi Kant Thakral executed a power of attorney in favour of Ms. Archana Mishra on 03.03.2017. Clause 19 of the power of attorney expressly authorised actions incidental to insolvency or bankruptcy proceedings. The power of attorney was placed on record and the objection to completeness on this ground was rejected. [Paras 13, 14]

Authorization through the power of attorney held valid; objection on incompleteness for lack of POA does not survive.

Interim resolution professional - registration with Insolvency and Bankruptcy Board of India - disciplinary proceedings - Mr. Rajesh Samson was appointed as Interim Resolution Professional (IRP). - HELD THAT: - The proposed IRP produced his registration certificate issued by the Insolvency and Bankruptcy Board of India and a written communication/declaration indicating no disciplinary proceedings were pending against him and that he was not a related party of the corporate debtor. Satisfied on these points, the Tribunal appointed him as Interim Resolution Professional to perform functions under the Code. [Paras 4, 22]

Rajesh Samson appointed as Interim Resolution Professional.

Moratorium - Section 14 of the Insolvency and Bankruptcy Code, 2016 - prohibitions on suits and enforcement - Moratorium under Section 14 was declared consequential to admission and specified prohibitions were imposed. - HELD THAT: - On admission of the Section 7 application, the Tribunal directed the IRP to make the public announcement and declared the moratorium as mandated by Section 14. The Tribunal set out the statutory prohibitions on institution or continuation of suits or execution proceedings against the corporate debtor, transfer or disposition of its assets, enforcement of security, and recovery by owners/lessors in possession, while noting statutory exceptions for transactions or supplies as may be notified by the Central Government. [Paras 23, 24, 25]

Moratorium declared and the statutory prohibitions specified were imposed.

Security interest - committee of creditors - Objections based on alleged mismatch in default amounts, requirement of consortium consent, and title/lease issues did not defeat admission and were left open for determination by the Committee of Creditors or appropriate forum. - HELD THAT: - The corporate debtor challenged the claimed amount, contended that the lead bank could not individually enforce consortium rights, and raised contentions about project land ownership and lease covenants. The Tribunal held that the principal default was established and minor variations in amounts arose from differing computation dates; Explanation to Section 7(1) permits a financial creditor (including a lead bank) to file. The Tribunal observed that other financial creditors had not opposed the application. The factual and quantification disputes, and issues relating to security, title or lease covenants, were held to be matters for the Committee of Creditors or for further adjudication rather than a ground to reject the Section 7 application at the threshold. [Paras 15, 16, 20]

Contentions on amount, consortium consent and ownership insufficient to refuse admission; such disputes to be considered by the Committee of Creditors or appropriate authority.

Final Conclusion: The Tribunal admitted the Section 7 application filed by Bank of Baroda, appointed the named Insolvency Professional as Interim Resolution Professional, directed public announcement and declared the moratorium; objections on authority, quantification and title were rejected as insufficient at the admission stage and deferred for consideration by the Committee of Creditors or appropriate forum.

Retrospective operation of tax amendments - interpretation of explanation beginning with 'for the removal of doubts' - taxability of amounts credited or debited in books in transactions with associated enterprises - temporal applicability governed by date of credit/debit under Rule 6

Retrospective operation of tax amendments - interpretation of explanation beginning with 'for the removal of doubts' - taxability of amounts credited or debited in books in transactions with associated enterprises - temporal applicability governed by date of credit/debit under Rule 6 - Whether the amendment to the Explanation to Section 67 of the Finance Act, 1994 and the added Explanation to Rule 6 of the Service Tax Rules made payable service tax on amounts shown as outstanding in the assessee's books prior to 10 May 2008. - HELD THAT: - The Court held that the amendments introduced with effect from 10 May 2008 were not intended to have retrospective effect so as to tax transactions that had taken place prior to that date. Reliance was placed on the Supreme Court's reasoning in Union of India v. Martin Lottery Agencies Ltd. that an explanation commencing with the words 'for removal of doubts' is not necessarily merely clarificatory and may effect a substantive change; accordingly, such an explanation cannot be treated as automatically retrospective. The determinative temporal test under the amended Rule 6 is the date when an amount is credited or debited in the books; therefore amounts relating to transactions completed before 10 May 2008 cannot be taxed by treating their continued presence in the books after that date as attracting the new charge. Applying this principle to the facts, the amounts shown as outstanding in the assessee's books pertained to transactions prior to 10 May 2008 and could not be retrospectively brought to tax by the 2008 amendments. [Paras 9, 12, 13]

Amendments effective from 10 May 2008 do not have retrospective operation to tax amounts arising from transactions prior to that date; the CESTAT's allowance of the assessee's appeal is upheld.

Final Conclusion: The departmental appeal is dismissed; the CESTAT correctly held that the 2008 amendments do not operate retrospectively to tax amounts credited or debited in respect of transactions prior to 10 May 2008, and no substantial question of law arises; dismissal is without costs.

Penalty under Rule 15 of Cenvat Credit Rules, 2004 - Remand for fresh adjudication - Bona fide belief / absence of intention to contravene - Non-speaking operating portion / omission of specific finding

Penalty under Rule 15 of Cenvat Credit Rules, 2004 - Bona fide belief / absence of intention to contravene - Non-speaking operating portion / omission of specific finding - Remand for fresh adjudication - Whether the adjudicating authority has passed a conclusive order on imposition of penalty under Rule 15 of the Cenvat Credit Rules, 2004 and, if not, the appropriate course to be adopted. - HELD THAT: - The Tribunal noted that although the show cause notice had proposed penalty under Rule 15, the adjudicating authority recorded the assessee's plea of bona fide belief and industry practice and reproduced those submissions in paragraph 42 but did not arrive at any express finding on the applicability of Rule 15. The operating portion of the order (paragraph 49) sets out confirmations, interest and penalties under various sections but contains no specific order on imposition or non-imposition of penalty under Rule 15. Because the authority recorded submissions without giving a conclusive finding and the operating portion omits any specific disposition on Rule 15, the Tribunal found that the question remains undecided and remanded the matter to the adjudicating authority for passing a reasoned order on the penalty proposed under Rule 15 of the Cenvat Credit Rules, 2004. [Paras 42, 49]

Appeal disposed of by remanding the issue to the adjudicating authority to pass a reasoned order on penalty under Rule 15 of the Cenvat Credit Rules, 2004.

Final Conclusion: The appeal is disposed of by remand: the adjudicating authority is directed to decide, with reasons, the proposal for penalty under Rule 15 of the Cenvat Credit Rules, 2004 (including consideration of the assessee's bona fide belief defence), and pass appropriate consequential orders; matter relates to the period 2005-06 to 2007-08 to the extent noted in the impugned order.

Retrospective operation of statutory explanation - associated enterprises - reverse charge mechanism - gross amount charged - limitation and extended period of limitation - remand for recalculation

Retrospective operation of statutory explanation - gross amount charged - associated enterprises - Amendment w.e.f. 10-5-2008 (explanation to Rule 6(1) and amendment to Section 67) cannot be given retrospective effect to demand service tax for transactions between associated enterprises prior to 10-5-2008. - HELD THAT: - The Tribunal examined the amendment to the definition of "gross amount charged" and the explanation inserted in Rule 6(1) w.e.f. 10-5-2008 and held that those changes introduced a new substantive provision for transactions between associated enterprises. Applying earlier Tribunal precedent (Sify Technologies Ltd.) and the principle that an explanation widening the tax net is not necessarily retrospective despite the words "for removal of doubts", the Tribunal concluded there was no provision prior to 10-5-2008 enabling demand of service tax upon mere book entries. Consequently, debit/credit entries in books prior to 10-5-2008 could not be treated as payments giving rise to service tax liability before actual payment. [Paras 5]

Demand for periods prior to 10-5-2008 cannot be sustained; liability for services provided before 10-5-2008 arises only on actual payment.

Reverse charge mechanism - No service tax can be demanded on reverse charge basis for services received prior to 18-4-2006 because Section 66A (reverse charge) was introduced only on 18-4-2006. - HELD THAT: - The Tribunal recorded that Section 66A, which governs tax payable under reverse charge, came into effect on 18-4-2006; therefore services received before that date cannot be subjected to reverse charge liability retrospectively. [Paras 5]

Demand for services prior to 18-4-2006 on reverse charge basis is not sustainable.

Limitation and extended period of limitation - Extended period of limitation cannot be invoked in the facts of this case for the periods in question. - HELD THAT: - Although the Department sought to invoke the extended period after examining the amendments, the Tribunal observed that similar circumstances in precedent (General Motors India Pvt. Ltd. and related registry view) led to refusal to apply the extended period. The appellants had discharged service tax on the amounts paid, and where the amended provision could not be applied retrospectively, invocation of extended limitation was not warranted. [Paras 5]

Extended period of limitation shall not be invoked.

Remand for recalculation - Matter remanded to original adjudicating authority for re-calculation of liabilities in light of the findings on retrospective operation and limitation. - HELD THAT: - Having held that the amendments of 10-5-2008 cannot be given retrospective effect and that reverse charge cannot be applied prior to 18-4-2006, and having ruled that extended period is not invocable, the Tribunal set aside the impugned order to the extent inconsistent with these conclusions and remitted the case for re-computation of duty, interest and related consequences on the basis that liabilities arise only when payment was actually made for periods prior to 10-5-2008. [Paras 5]

Impugned order set aside to the extent indicated; matter remanded for recalculation of liabilities on the lines stated.

Final Conclusion: The Tribunal held that the 10-5-2008 amendments to Section 67 and Rule 6(1) are not retrospective and cannot support demands for periods prior to 10-5-2008; reverse charge cannot be applied to services prior to 18-4-2006; the extended period of limitation is not invocable; the impugned order is set aside and the matter is remanded for recalculation of liabilities consistent with these conclusions.

Rectification of mistake - Cenvat Credit Rules, 2004 - conditional exemption under Notification No.8/2005 ST - Notification No.214/86 CE - scope of adjudication - application of exemption ratio - recovery under Rule 14 read with Section 73

Rectification of mistake - scope of adjudication - Miscellaneous application for rectification of mistake in the Tribunal's Final Order dated 09/05/2017 - HELD THAT: - The Tribunal examined whether its Final Order contained an apparent error warranting rectification. The Adjudicating Authority's order confined its findings to the eligibility of Notification No.8/2005 ST and did not consider Notification No.214/86 CE. Because the Tribunal's decision on appeal was necessarily limited to the issues decided below, there was no occasion for the Tribunal to adjudicate entitlement under Notification No.214/86 CE. In these circumstances the bench found no apparent error in the Final Order that would justify rectification. [Paras 4, 5, 6]

Application for rectification dismissed; no apparent error found in the Final Order.

Cenvat Credit Rules, 2004 - conditional exemption under Notification No.8/2005 ST - Notification No.214/86 CE - application of exemption ratio - Whether the ratio applicable to Notification No.214/86 CE could be applied to Notification No.8/2005 ST for determining applicability of the Cenvat Credit Rules, 2004 - HELD THAT: - The Tribunal recorded that the Adjudicating Authority's findings related solely to Notification No.8/2005 ST and did not address Notification No.214/86 CE. Consequently the Tribunal held, in the context of the appeal against the adjudication confined to Notification No.8/2005 ST, that the principles or ratio applied in respect of Notification No.214/86 CE could not be transplanted to determine the applicability of the Cenvat Credit Rules, 2004 to Notification No.8/2005 ST. This conclusion was treated as within the permissible scope of the Tribunal given the issues decided below. [Paras 4, 5]

Tribunal affirmed that the exemption ratio under Notification No.214/86 CE is not to be applied to Notification No.8/2005 ST for purposes of Cenvat Credit Rules, 2004 within the present appeal.

Final Conclusion: The miscellaneous application for rectification of the Tribunal's Final Order is dismissed; the Tribunal's treatment of the matter as confined to Notification No.8/2005 ST and its conclusion that the ratio under Notification No.214/86 CE is not applicable for determining Cenvat Credit Rules, 2004 in this appeal stands affirmed.

Refund of Cenvat credit - ST-3 return reconciliation - revised ST-3 return as rectification - requirement of show cause notice for disallowance of credit - correlation of invoices, payments and FIRC - invoices addressed to registered premises and name mismatch

Refund of Cenvat credit - ST-3 return reconciliation - revised ST-3 return as rectification - Refund claim cannot be denied solely because the Cenvat credit was not shown or figures did not tally in ST-3 returns. - HELD THAT: - The Tribunal held that refund claims are not to be adjudicated merely on the basis of figures in ST-3 returns, which are a report of transactions; substantive entitlement to refund is to be determined on the basis of supporting documents, nature and nexus of services and utilization. Mistakes in ST-3 are rectifiable by filing revised returns and such rectified returns should not be ignored. Further, where disallowance of credit is contemplated, the statutory/quasi judicial requirement of issuance of a show cause notice and a speaking order applies and summary rejection without initiation of that process is impermissible. [Paras 5]

The ground of denial based on ST-3 return discrepancies is rejected and cannot sustain refusal of the refund claim.

Correlation of invoices, payments and FIRC - Correlation between invoices issued, payments received and FIRC requires verification by the adjudicating authority. - HELD THAT: - The Tribunal noted discrepancies arising from name-change of the appellant and payments received in a different name/office; given these facts, the adjudicating authority must examine and correlate invoices, payments and FIRC to determine entitlement. The matter was therefore remanded for such examination and verification at the adjudication stage. [Paras 7, 9]

Remanded to the adjudicating authority for correlation of services, invoices and payments; if correlation is established, refund shall be allowed.

Invoices addressed to registered premises and name mismatch - refund of Cenvat credit - Invoices not addressed to the registered premises or issued in the earlier name of the company are not valid grounds to deny the refund claim where services were not used by others and Cenvat credit was availed. - HELD THAT: - The Tribunal observed that it was not disputed that the services were not used by any other party and that no service tax had been paid on them by others. The appellant had also obtained central registration post the period in question to rectify earlier mistakes. In these circumstances denial of refund solely because invoices were not addressed to the registered premises or bore the earlier name was held to be impermissible. [Paras 8]

Refund cannot be denied on account of invoices not being addressed to the registered premises or bearing the earlier name; entitlement to refund is upheld on this ground.

Final Conclusion: Appeal allowed in part; impugned rejection of refund set aside. The order denying refund on account of ST-3 discrepancies and invoice/addressing grounds is reversed; the matter is remanded to the adjudicating authority to verify correlation of invoices, payments and FIRC for Oct. to Dec. 2008 and, if correlation is established, to grant the refund after following requisite adjudicatory procedures.

Exemption under Notification No.1/2006 ST - condition precedent of non availment of cenvat credit - Cenvat Credit Rules, 2004 - denial of exemption for non fulfillment of conditions - service tax on goods transport agency (GTA) service

Exemption under Notification No.1/2006 ST - condition precedent of non availment of cenvat credit - denial of exemption for non fulfillment of conditions - Availability of exemption under Notification No.1/2006 ST where cenvat credit has been availed and utilized - HELD THAT: - Notification No.1/2006 ST grants exemption from service tax subject to fulfillment of specified conditions, one of which prohibits taking cenvat credit of duty/service tax on inputs, capital goods and input services used for providing the taxable service. The adjudicatory authority found that the appellant had availed and utilized cenvat credit as reflected in certain bills and, therefore, failed to satisfy the condition precedent for claiming the exemption. The Commissioner(A) upheld the adjudication denying the benefit of the notification for that reason. The Tribunal agreed with that reasoning, holding that once cenvat credit has been taken, the exemption under the notification is not available for non fulfillment of its condition.

Denial of exemption under Notification No.1/2006 ST upheld because the appellant had availed cenvat credit, and consequence appeal dismissed.

Final Conclusion: The impugned order of the Commissioner (Appeals) denying exemption under Notification No.1/2006 ST on account of availing cenvat credit is upheld; the appeal is dismissed.

Refund of service tax to an SEZ unit - compliance with Notification No. 17/2011 condition concerning non availment of CENVAT credit - reversal of CENVAT credit - approval of list of taxable services by approval committee for authorised operations

Compliance with Notification No. 17/2011 condition concerning non availment of CENVAT credit - reversal of CENVAT credit - Whether the appellant complied with the condition barring availing CENVAT credit on specified services by reversing the credit before claiming refund. - HELD THAT: - The Tribunal found that the appellant had initially availed CENVAT credit on the service tax paid on specified services but subsequently reversed that credit prior to prosecution of the refund claim. The Court treated such reversal as satisfying the condition in the notification which requires that no CENVAT credit shall be taken on the specified services used for authorised operations. On this basis the Tribunal held that the ground for rejecting the refund claim on account of alleged contravention of the non credit condition was not sustainable.

The appellant has complied with the non availment condition by reversing the CENVAT credit; rejection of refund on this ground is set aside.

Approval of list of taxable services by approval committee for authorised operations - refund of service tax to an SEZ unit - Whether the appellant obtained the approval of the approval committee for the list of taxable services used for authorised operations before filing the refund claim. - HELD THAT: - The Tribunal noted that the appellant obtained the approval letter dated 23.04.2012 approving the list of taxable services used for authorised operations, and that the refund claim was filed on 24.10.2012, i.e., after obtaining such approval. Because the approval requirement in the notification was complied with prior to filing the claim, the Tribunal concluded that the second ground for rejection - absence of approval - was without basis. Consequently, the claim could not be validly denied on that account.

The appellant obtained the requisite approval before filing the refund claim; rejection of refund on the ground of non approval is set aside.

Final Conclusion: The impugned order rejecting the refund claim is set aside. The appeal is allowed and the appellant is entitled to consequential reliefs arising from the successful refund claim for the period October 2011 to March 2012.

Eligibility of input service tax credit - validity of invoices - effect of common service tax registration for proprietary concerns - denial of credit for technical defect in registration number

Eligibility of input service tax credit - validity of invoices - effect of common service tax registration for proprietary concerns - Whether input service credit availed for services received from M/s. Allied Risk Management & INS Service during 1.4.2009 to 30.9.2009 can be denied on the ground that the invoices carried a registration number which was common to another proprietary concern (M/s. Amit Associates). - HELD THAT: - The fact that both service-provider firms were proprietary units of the same person and had been allotted and were using a common Service Tax registration number is not in dispute. The services for which credit was availed were actually provided and the service tax collected by M/s. Allied Risk Management was paid. The common use of a single registration number arose from the PAN based registration of proprietary concerns and persisted with the knowledge of the department until a subsequent objection led to separate registration of M/s. Allied Risk Management. In these circumstances, denial of input credit solely on the ground that invoices bore the registration number also used by another proprietary unit, when the service tax had been paid and there was no substantive doubt about the genuineness of the transactions, is not justified. The tribunal accordingly found no valid basis to sustain the demand, interest and penalty, and set aside the impugned orders, allowing the appeal.

Impugned orders confirming denial of credit, interest and penalty set aside; appeal allowed with consequential relief.

Final Conclusion: The appeal is allowed: input service credit availed for the period 1.4.2009 to 30.9.2009 from M/s. Allied Risk Management is held to be admissible despite earlier use of a common registration number by related proprietary units; the demand, interest and penalty imposed are set aside and consequential relief granted.

Business Auxiliary Services - service tax liability on incentives/commission from CRS/GDS - incidental or ancillary promotion/marketing as consideration - penalty under section 78 - equivalence to confirmed tax and 25% discharge option

Business Auxiliary Services - service tax liability on incentives/commission from CRS/GDS - incidental or ancillary promotion/marketing as consideration - Incentives/commission received by the appellant from Galileo for continued usage of Galileo's CRS/GDS are taxable as consideration for business auxiliary services and attract service tax. - HELD THAT: - The Tribunal examined the offer document evidencing that marketing and promotion of Galileo in India in exchange for a support fee formed part of the arrangement accepted by the group company. Given the special relationship between the appellant and Galileo and the character of the incentive as consideration for marketing/promotional support for the CRS/GDS, the activity falls within the definition of "Business Auxiliary Service" which includes services relating to promotion or marketing of services provided by the client or services incidental or ancillary thereto. The Tribunal relied on prior departmental reasoning and its own precedent to conclude that incentives paid by GDS/CRS providers to travel agents for bookings and patronage amount to business auxiliary services and are therefore taxable under the service tax provisions applicable to such services. [Paras 6, 7, 8]

The demand of service tax on the incentives/commission received from Galileo is upheld as chargeable under "Business Auxiliary Services."

Penalty under section 78 - equivalence to confirmed tax and 25% discharge option - The penalty imposed equal to Rs. 3 lakhs was reduced to the confirmed service tax amount and the appellant was granted the statutory option to discharge 25% of the penalty subject to fulfillment of conditions under section 78. - HELD THAT: - Section 78 mandates that penalty be equivalent to the amount of service tax confirmed. As the confirmed demand was for a lesser amount than the imposed penalty, the Tribunal revised the penalty to the amount of service tax confirmed. In view of binding High Court authority, the appellant was permitted the benefit of electing to pay 25% of the revised penalty provided the statutory conditions for such discharge are satisfied. [Paras 9]

Penalty reduced to equal the confirmed service tax demand and appellant granted option to discharge 25% of penalty on meeting conditions under section 78.

Final Conclusion: The appeal is disposed by upholding the service tax demand on incentives/commission from Galileo as business auxiliary services, with the penalty reduced to the confirmed tax amount and the appellant allowed the statutory option to discharge 25% of the penalty upon fulfillment of the conditions.

Business Auxiliary services - Air Travel Agent services - service tax levy on commission - use of Central Reservation System (CRS) - principal-to-principal sale - sub-agent liability

Business Auxiliary services - use of Central Reservation System (CRS) - service tax levy on commission - Levy of service tax as Business Auxiliary services on commission received from M/s. Amadeus India Pvt. Ltd. for use of CRS - HELD THAT: - The Tribunal applied its earlier decision in D. Pauls Consumer Benefit Ltd. (Final Order No.50861/2017 dated 15.2.20017) and followed that precedent to hold that the commission received from M/s. Amadeus for use of its CRS falls within the taxable category of Business Auxiliary services. The appellant's contentions that CRS usage is for self-use, that facilities are provided free, that incentives are rewards for increased usage, and that no promotion activity occurs were considered but the Tribunal adhered to its prior ruling which classifies such commission as chargeable to service tax under Business Auxiliary services. The demand in respect of commissions from M/s. Amadeus is therefore upheld. [Paras 7, 8, 12]

Demand of service tax under Business Auxiliary services in respect of commission received from M/s. Amadeus is upheld.

Air Travel Agent services - principal-to-principal sale - sub-agent liability - service tax levy on commission - Chargeability of service tax as Business Auxiliary services on commission received from other IATA agents - HELD THAT: - The Tribunal examined whether the amounts received from principal IATA agents by the appellant (acting as sub-agent) constitute Business Auxiliary services or form part of Air Travel Agent services. Relying on the reasoning of the Madras High Court in Airlines Agents Association v. Union of India and on analogous Tribunal authority, the Tribunal concluded that the service rendered by the appellant to customers is the same character of service as that of the principal IATA agent (air travel agent services). The commission shared between agents reflects the remuneration connected to air travel agency services rendered to customers rather than a distinct promotional service attracting Business Auxiliary services. Consequently, the view of Revenue that such shared commission is taxable as Business Auxiliary services was not sustained and the demand in this respect was set aside. [Paras 10, 11, 12]

Demand of service tax under Business Auxiliary services on commission received from other IATA agents is set aside; such receipts relate to Air Travel Agent services.

Final Conclusion: Appeal partly allowed: demand sustained in respect of commission from M/s. Amadeus (treated as Business Auxiliary services) but set aside in respect of commission received from other IATA agents (held to relate to Air Travel Agent services).

Exemption from service tax for services provided to SEZ units - Refund route versus upfront exemption under SEZ notifications - Operational scope of Notification Nos. 9/2009 and 15/2009 - Overriding effect of the SEZ Act over other laws - Harmonious construction of statutory exemption and procedural notifications

Exemption from service tax for services provided to SEZ units - Operational scope of Notification Nos. 9/2009 and 15/2009 - Refund route versus upfront exemption under SEZ notifications - Overriding effect of the SEZ Act over other laws - Harmonious construction of statutory exemption and procedural notifications - Whether the appellant is entitled to refund of service tax paid on specified services provided in relation to authorised operations in SEZ units - HELD THAT: - The Tribunal held that units operating in Special Economic Zones are entitled to exemption from service tax under the statutory scheme and, where tax has been paid, to refund. The court relied on Sections 26(1)(e) and 51 of the SEZ Act to conclude that the SEZ Act confers a primacy of exemption which cannot be nullified by procedural prescriptions. Notification No.9/2009 provided a refund mechanism for services procured from outside the SEZ, while Notification No.15/2009 introduced an upfront exemption for services consumed wholly within the SEZ and confined the refund route to services consumed partially or wholly outside the SEZ. Read harmoniously with the SEZ Act, these notifications merely operationalise the statutory exemption and do not deny refund to a recipient where service tax was paid inadvertently or otherwise. The Tribunal further relied on the Circular clarifying that Notification No.15/2009 dispenses with the refund route for services consumed wholly within the SEZ but confirms that refunds remain available where tax has been paid. Prior Tribunal precedents applying harmonious construction and recognising entitlement to refund where tax was paid were followed. On this basis the impugned orders denying refunds were set aside and the appeals allowed with consequential relief. [Paras 6, 7]

The impugned order denying the refund claims was set aside and the appeals were allowed; the appellant is entitled to the refund claims in accordance with the SEZ Act, relevant notifications and authoritative precedents.

Final Conclusion: The Tribunal allowed the appeals, holding that SEZ units are entitled to exemption and, where service tax has been paid, to refund; Notifications 9/2009 and 15/2009 operationalise the statutory exemption and cannot defeat the primacy of the SEZ Act, and consequential relief was granted to the appellant.

Adjustment of excess service tax - Service Tax Rules, 1994 - Rule 6(3) - refund of value of taxable service and service tax to the person from whom it was received - remand for redetermination - opportunity of personal hearing

Adjustment of excess service tax - Service Tax Rules, 1994 - Rule 6(3) - refund of value of taxable service and service tax to the person from whom it was received - Adjustment of excess service tax paid in an earlier period against short payment in a subsequent period under Rule 6(3) of the Service Tax Rules, 1994, and the need for adjudication on the factual fulfilment of the conditions for such adjustment. - HELD THAT: - The Tribunal observed that on the material before it there may be no short-payment of service tax and that the controversy appears to concern an adjustment of an excess payment made earlier against a subsequent purported short-payment. Rule 6(3) of the Service Tax Rules, 1994 permits adjustment of excess service tax paid for a period against liability for a subsequent period subject to the condition that where excess was paid for services not provided (wholly or partly) the assessee is permitted such adjustment only if the assessee refunded the value of the taxable service and the service tax thereon to the person from whom it was received. Given that the factual satisfaction of these conditions is determinative, the Tribunal held that the matter requires fresh adjudication on facts and compliance with the conditions prescribed by Rule 6(3). Accordingly the matter was remanded to the original adjudicating authority to decide the issue afresh after affording the assessee an opportunity of personal hearing and within a stipulated time-frame. [Paras 6, 7]

Remanded to the original adjudicating authority to determine within four months whether the conditions of Rule 6(3) are satisfied and to pass a fresh order after giving the appellant a personal hearing.

Final Conclusion: The impugned order is set aside and the appeal is allowed by remanding the matter to the original adjudicating authority for fresh determination in accordance with Rule 6(3) of the Service Tax Rules, 1994, with liberty to the authority to decide within four months after affording personal hearing.

Business Auxiliary Service - promotion or marketing of services - service tax liability on gross commission - definition of Business Auxiliary Service under Section 65(19) read with Section 65(105)(zzb) - input service character of business auxiliary service - penalty not sustainable where interpretational issues of law arise

Business Auxiliary Service - promotion or marketing of services - service tax liability on gross commission - input service character of business auxiliary service - Assessees providing promotion/marketing services by issuing insurance policies and canvassing finance are liable to service tax as Business Auxiliary Service. - HELD THAT: - The appellants, acting for Maruti Insurance Brokers Ltd./Maruti Insurance Agency Network Ltd., received commissions/remuneration for canvassing loans and issuing insurance policies. The Tribunal applied the definition of Business Auxiliary Service (as identified in the decision and statutory scheme) and followed earlier Tribunal precedents which held that such activities constitute promotion/marketing of the financial/insurance institution's services and accordingly attract service tax. The CBEC Circular No.87/05/2006-ST (para 4) treating dealer commissions for introducing customers to financiers as taxable as Business Auxiliary Service, and directing taxability on the gross commission, was noted and applied. The Tribunal found that the service so provided has the character of an input service for the banks/insurance companies and is therefore taxable; consequently the demands confirmed in the impugned orders are upheld. [Paras 4]

Liability to pay service tax as Business Auxiliary Service on the services performed by the appellants is upheld.

Penalty not sustainable where interpretational issues of law arise - Penalties imposed for the same service tax demand are set aside on account of interpretational nature of the subject matter. - HELD THAT: - Although service tax liability was sustained, the Tribunal observed that the subject involved interpretational questions of law concerning taxation of the services in issue. In view of this interpretational controversy, the imposition of penalties on the appellants was held to be not sustainable and therefore the penalties imposed in the impugned orders were cancelled. [Paras 4]

Penalties imposed on the appellants are set aside.

Final Conclusion: Appeals partly allowed: demands of service tax as Business Auxiliary Service sustained; penalties set aside; impugned orders modified accordingly.

Input and output ratio - appreciation of evidence - corroboration by documentary evidence and statements - concurrent finding of fact - no substantial question of law

Input and output ratio - corroboration by documentary evidence and statements - appreciation of evidence - concurrent finding of fact - Validity of Tribunal's and Commissioner's acceptance of the assessee's declared input-output ratio based on audit reports and corroborative statements, and whether overlooking a document raised a question of law. - HELD THAT: - The Commissioner relied on reports of the jurisdictional Deputy Commissioner and subsequent audits (including audits in 2004, June 2007 for the period from 2004 to 200708, and audits in 2009 and 2010) which recorded that the ratio declared by the assessee was in order and remained unchanged; the audit noted no base ratio of 2.5 and that objections raised earlier were not sustained. The Tribunal confirmed those findings. The High Court held that the controversy concerned appreciation of evidence and concurrent findings of fact by the authorities; the material documentary corroboration and confirmatory statements were considered by the authorities and their factual conclusion was affirmed. Consequently, the matter did not raise any substantial question of law for interference. [Paras 2, 3]

Concurrent factual findings upholding the assessee's declared ratio based on audit reports and corroborative statements are sustained; no question of law arises.

Final Conclusion: Department's appeal dismissed; Tribunal's and Commissioner's concurrent factual findings regarding the input-output ratio, supported by audit reports and corroborative statements, are affirmed and do not give rise to a question of law.

Mining as manufacture/production - excisability of iron ore - finality of refund sanction order passed under Section 11B - reopening refund by show cause under Section 11A - presumption of regularity of refund adjudication

Mining as manufacture/production - excisability of iron ore - Activity of mining carried out by the appellant amounts to manufacture/production and iron ore is excisable. - HELD THAT: - The Tribunal recorded that by its earlier Final Order No.20489-20500/2017 dated 20.4.2017 in the appellant's own case it had held that the activity of mining is to be construed as manufacture or production and that iron ore falls within the definition of excisable goods. That earlier decision was applied to the present appeals and treated as determinative of the question whether the processes carried out by the assessee amounted to manufacture and were liable to excise duty. [Paras 7]

Mining activity held to amount to manufacture/production and iron ore held excisable.

Finality of refund sanction order passed under Section 11B - reopening refund by show cause under Section 11A - presumption of regularity of refund adjudication - Revenue cannot recover an already sanctioned refund by issuing show cause notices under Section 11A without first challenging the refund sanction order. - HELD THAT: - The Tribunal followed binding precedents, including the decision of the High Court in Eveready Industries (as cited) and earlier Tribunal decisions, holding that a refund sanction order passed under the refund procedure must be presumed regular and, if not appealed against, cannot be reopened by issuance of a show cause notice under Section 11A to recover the sanctioned refund. The Department in the present cases sought recovery by issuing show cause notices without challenging the refund sanction orders; that course was held impermissible in law. [Paras 7]

Show cause notices issued to recover sanctioned refunds set aside; refund sanction orders not open to recovery by Section 11A where not challenged.

Final Conclusion: The appeals are allowed; the impugned orders rejecting the appellants' appeals are set aside - mining held to be manufacture/excisable and the Department not entitled to recover refunds already sanctioned by issuing show cause notices without challenging the refund sanction orders.

Admissibility of Cenvat credit on input services - admissibility of Cenvat credit on capital goods and inputs - eligibility of parts, components and accessories of capital goods for Cenvat credit - reliance on precedents and CBEC Circular for entitlement to credit

Admissibility of Cenvat credit on input services - service tax paid on sales commission - Cenvat credit of Service Tax paid on sales commission is admissible as input service - HELD THAT: - The Tribunal noted that the respondent's own earlier case and precedents establish that Service Tax paid on sales commission qualifies as an input service for Cenvat credit. Having considered the respondent's reliance on the earlier order in their own case and consistent case law, the Tribunal found no sustainable ground to disallow the credit of Service Tax paid on sales commission and upheld the Commissioner (Appeals) decision allowing the credit.

Credit of Service Tax paid on sales commission allowed; revenue's appeal dismissed on this point.

Admissibility of Cenvat credit on capital goods and inputs - eligibility of parts, components and accessories of capital goods for Cenvat credit - reliance on precedents and CBEC Circular for entitlement to credit - Cenvat credit on the specified items (various sheets, gaskets, belts, screens, ropes, bolts, fittings and similar inputs/parts) is admissible as capital goods/inputs or parts thereof - HELD THAT: - The Tribunal accepted the respondent's reliance on earlier Tribunal decisions and the Board clarification (Circular No. 27/110/96 TRU) that parts, components and accessories of capital goods, even if falling under diverse tariff headings, are eligible for Cenvat credit when used with capital goods. On the facts and authorities placed before it, the Tribunal found the Commissioner (Appeals) correctly allowed credit for the items in question and found no merit in Revenue's grounds challenging their classification as capital goods or admissible inputs.

Credit in respect of the listed inputs and capital-goods components allowed; revenue's appeal dismissed on these points.

Final Conclusion: Revenue's appeal is dismissed; the Commissioner (Appeals) order allowing Cenvat credit except as noted is upheld and the respondent is entitled to consequential relief as per law.

Service of notice to a director of a company in liquidation - time-bar of appeal - effect of a High Court order disposing a writ petition on a pending appellate proceeding - remand to the original adjudicating authority

Service of notice to a director of a company in liquidation - time-bar of appeal - Acknowledgement of the order by the director did not constitute service on the company and the appeal before the Commissioner(Appeals) was not time-bar. - HELD THAT: - The Tribunal found as an undisputed fact that when the order was acknowledged by the director the company was under liquidation and control rested with the official liquidator appointed by BIFR. In those circumstances the director lacked locus to represent the company and delivery or acknowledgement to the director could not be treated as service on the company. The Tribunal relied on the principles in International Shipping Ltd v. Chandpur Jute Co. Ltd and V. Natarajan v. N. Salai Muthu, which establish that where an official liquidator is in charge, notices must be served on the liquidator and not the erstwhile directors; an order or notice given to a director in such circumstances is a nullity for the purpose of fixing limitation. Applying those authorities, the Tribunal held that the appeal filed before the Commissioner(Appeals) after the company obtained the certified copy from the department was within time and therefore not barred by limitation. [Paras 5]

Appeal before the Commissioner(Appeals) was not time-bar as service on the director during liquidation did not constitute service on the company.

Effect of a High Court order disposing a writ petition on a pending appellate proceeding - The Bombay High Court order dated 28-2-2013 disposing writ petition No.1951/2013 did not preclude or adversely affect the Commissioner(Appeals) from deciding the appeal on merits. - HELD THAT: - The writ petition before the High Court challenged recovery proceedings and was disposed of without granting relief; the High Court did not decide the merits of service or the substantive issues being contested before the Commissioner(Appeals). Although the department had filed an affidavit in the High Court raising service issues, the High Court gave no findings thereon and merely recorded that no relief could be granted in that petition. The Tribunal therefore concluded that the High Court order had no bearing on the maintainability or merits of the appeal pending before the Commissioner(Appeals), and the Commissioner(Appeals) was entitled to examine time-bar and merit independently. [Paras 5]

High Court order dated 28-2-2013 did not bar the Commissioner(Appeals) from deciding the appeal and had no operative implication on the appeal's merits or maintainability.

Remand to the original adjudicating authority - The remand ordered by the Commissioner(Appeals) for factual verification was proper and the matter is remanded to the original adjudicating authority for fresh disposal taking into account the observations of the Commissioner(Appeals). - HELD THAT: - The Tribunal observed that the Commissioner(Appeals) remanded the matter for verification of factual aspects. While the Commissioner(Appeals) has power to remand, the Tribunal noted that the adjudicating authority is the appropriate forum to verify and determine factual issues. Exercising its own power, the Tribunal remanded the matter to the original adjudicating authority for passing a fresh order in light of the findings and observations recorded by the Commissioner(Appeals). The remand is intended to enable the adjudicating authority to examine and decide the factual and consequential aspects afresh. [Paras 5]

Matter remanded to the original adjudicating authority for fresh adjudication incorporating the observations made by the Commissioner(Appeals).

Final Conclusion: The Tribunal held that the appeal was not time-bar because service on the director during liquidation did not constitute service on the company; the Bombay High Court order dated 28-2-2013 did not affect the Commissioner(Appeals)'s power to decide the appeal; and the matter is remanded to the original adjudicating authority for fresh disposal in accordance with the Commissioner(Appeals)'s observations.

Classification of goods - reliance on chemical analysis report - transformation by mere packing - levy under Section 3A - confiscation - penalty under Rule 26 of the Central Excise Rules, 2002 - mens rea and clandestine manufacture

Classification of goods - reliance on chemical analysis report - Whether the seized material was manufactured chewing tobacco or unmanufactured tobacco and whether classification must follow the chemical report - HELD THAT: - The Tribunal held that classification must be determined on the basis of scientific chemical analysis of samples, following the binding precedent cited by parties. The CRCL report consistently described the samples as "brownish bits of leaves", mainly containing tobacco and not containing added lime or flavouring agents. The Tribunal found no evidence that the products packed in pouches contained additives that would render them "manufactured chewing tobacco". Reliance on panchnama observations alone, without addressing the chemical report, was held to be insufficient for reclassifying the goods as manufactured chewing tobacco.

The goods were not established to be manufactured chewing tobacco; classification must follow the CRCL chemical report indicating unmanufactured tobacco.

Transformation by mere packing - classification of goods - Whether packing unmanufactured tobacco in pouches using FFS machines converts it into manufactured chewing tobacco - HELD THAT: - The Tribunal rejected the Revenue's contention that mere packing of unmanufactured tobacco in pouches on pouch-packing (FFS) machines converts it into manufactured chewing tobacco. The 2010 Rules and relevant notifications prescribe rates per packing machine but do not treat mere packing as a process that changes the nature of unmanufactured tobacco into manufactured chewing tobacco. In the absence of evidence of addition of flavouring, lime or other ingredients, mere packing did not alter classification.

Mere packing on FFS machines does not transform unmanufactured tobacco into manufactured chewing tobacco.

Levy under Section 3A - mens rea and clandestine manufacture - Whether demand of Central Excise duty under Section 3A and related notifications, founded on clandestine manufacture of branded chewing tobacco, was sustainable - HELD THAT: - The Tribunal found absence of evidence to show that any of the 14 packing machines were engaged during the relevant period in manufacture of the branded Shiv Baba scented zarda of RSP 50 paise. The recovered printed rolls were a small quantity and were plausibly explained as mistaken delivery; statements and cross-examinations did not support a finding of clandestine manufacture of branded chewing tobacco. Given the chemical reports and lack of evidence of manufacture of branded product, the imposition of the massive duty demand based on deemed operation of machines and classification under Section 3A was not sustainable.

The demand under Section 3A founded on alleged clandestine manufacture of branded chewing tobacco was not sustained.

Confiscation - penalty under Rule 26 of the Central Excise Rules, 2002 - Whether confiscation of goods and penalties imposed on the appellants could be sustained once the demand was set aside - HELD THAT: - Because the Tribunal set aside the demand-finding the goods to be unmanufactured tobacco and that clandestine manufacture of the branded product was not established-the incidental orders of confiscation and penalties based on that demand lacked foundation. The Tribunal noted that confiscation and penalties were tied to the finding of manufacture and duty evasion; with that finding quashed, confiscation and penalties did not survive.

Confiscation and the penalties confirmed by the Original Authority were set aside as unsustainable once the demand was vacated.

Final Conclusion: Impugned Order-in-Original confirmed demand, confiscation and penalties are set aside: the samples were held to be unmanufactured tobacco per CRCL report; mere packing did not convert the goods into manufactured chewing tobacco; no evidence sustained the alleged clandestine manufacture of the branded product; appeals allowed with consequential relief.

Cenvat credit - reversal of excess credit - interest on cenvat credit - penalty under section 11A(2B) of the Central Excise Act - malafide intention - ignorance of law no excuse

Cenvat credit - interest on cenvat credit - reversal of excess credit - Whether demand of interest on cenvat credit appropriated by the department was sustainable. - HELD THAT: - The Tribunal recorded that the appellant had sufficient balance in its cenvat credit account and, following the ratio in Bill Forge Pvt. Ltd. (as relied upon by the appellant), was not liable to pay interest. The appellant had availed credit of duty paid by them and, upon being pointed out by the department, immediately reversed the excess credit. On these facts the Tribunal held that the demand of interest made in the impugned order could not be sustained and set aside that demand. [Paras 5]

Demand of interest set aside.

Penalty under section 11A(2B) of the Central Excise Act - reversal of excess credit - malafide intention - ignorance of law no excuse - Whether penalty under section 11A(2B) was imposable for having availed excess cenvat credit which was later reversed. - HELD THAT: - Although the principle that ignorance of law is no excuse was accepted, the Tribunal found that on being intimated by the department the appellant immediately reversed the excess cenvat credit and did not dispute the reversal. In those circumstances the Tribunal concluded that malafide could not be attributed to the appellant and initiation of penalty proceedings under section 11A(2B) was not warranted. Consequently, the penalty imposed was held to be not imposable and was set aside. [Paras 5]

Penalty set aside.

Final Conclusion: The appeal is allowed: the demands of interest and the penalty imposed on the appellant are set aside.

Separate inventory and accounts for inputs - apportionment of inputs under Rule 57CC - exemption under Notification No.6/2000 - Cenvat/modvat credit not used on exempted clearances

Separate inventory and accounts for inputs - apportionment of inputs under Rule 57CC - Cenvat/modvat credit not used on exempted clearances - exemption under Notification No.6/2000 - Validity of demand of 8% of value of goods cleared duty-free where assessee claimed exemption and allegedly did not maintain separate accounts of inputs - HELD THAT: - The Range Superintendent was directed to verify records and submitted a report dated 26.4.2001 concluding that the assessee had maintained separate inventory and accounts in terms of Rule 57CC(9), and that inputs on which modvat/cenvat credit had been availed were not used in manufacture of the 209.765 M.T. of paper and paper board cleared at nil rate under Notification No.6/2000 during 2.3.2000 to 5.3.2000. The report further stated that the exempted goods were cleared exclusively out of stock manufactured using inputs on which no credit was availed. That factual verification report was not discarded in subsequent proceedings. In view of the supervisory report certifying separate accounts and absence of cenvat credit on inputs used for exempted clearances, the demand under the apportionment principle embodied in Rule 57CC could not be sustained and the adjudication confirming payment of 8% was set aside. [Paras 6, 7]

The demand of 8% of the value of exempted clearances is not sustainable and the impugned order is set aside; appeal allowed.

Final Conclusion: On the basis of the uncontroverted Range Superintendent's verification that separate inventories/accounts were maintained and no cenvat/modvat credit was used for the exempted clearances during 2.3.2000 to 5.3.2000, the confirmed demand under Rule 57CC is set aside and the appeal is allowed.

Clandestine removal - input-output norms - corroborative evidence - confessional statement - burden of proof

Clandestine removal - input-output norms - corroborative evidence - confessional statement - burden of proof - Sustainability of demand for duty and penalties for alleged clandestine removal based on average input consumption and inculpatory statements without independent corroboration. - HELD THAT: - The Tribunal found that the allegation of clandestine removal rested solely on average consumption of bristles derived from limited sampling and on inculpatory statements, without any independent evidence showing manufacture or clearance of the finished goods, purchasers of alleged clandestinely removed goods, increased consumption of utilities, additional packing or transport arrangements, or receipts of sale proceeds. Reliance on input-output calculations or standard norms, in the absence of positive corroborative material, amounts to assumption and cannot sustain a charge of clandestine removal. The decision applies precedents where similar demands based only on theoretical input-output shortages and uncorroborated statements were set aside, and reiterates that the burden of proof to establish clandestine manufacture and removal lies on the Department and cannot be discharged by mere presumptions or retracted/confessional statements that are not corroborated. [Paras 6, 8, 9]

Charge of clandestine removal not sustainable for want of corroborative evidence; impugned order set aside and appeals allowed.

Final Conclusion: The Tribunal allowed the appeals, holding that the demand and penalties premised on average input consumption and uncorroborated statements do not satisfactorily establish clandestine removal; the impugned order is set aside with consequential relief, if any.

CENVAT credit - input service - erection, commissioning and installation services - eligibility of credit for services used in providing output service - services provided by sub contractors

CENVAT credit - erection, commissioning and installation services - output service - services provided by sub contractors - Appellant entitled to CENVAT credit of service tax paid on erection, commissioning and installation services provided by sub contractors. - HELD THAT: - The Tribunal found that the appellant was a provider of taxable erection, commissioning and installation services and had availed input service bills from sub contractors for rendering those output services. The appellant raised separate invoices for sale of goods and for provision of erection/commissioning services, discharged service tax on the output service and reflected the same in returns. Following precedents cited in the appeal, including the Division Bench decision in Veena Industries Ltd., the Tribunal held that where input services are utilized in providing the appellant's taxable output service, the appellant is entitled to CENVAT credit of service tax paid to sub contractors for erection, commissioning and installation. Applying those ratios, the impugned demand was held unsustainable and set aside.

Impugned order set aside and appeal allowed; CENVAT credit of service tax paid on erection, commissioning and installation services availed from sub contractors held admissible.

Final Conclusion: The appeal is allowed; the demand, penalty and interest confirmed by the lower authorities insofar as they disallowed CENVAT credit on erection, commissioning and installation services are set aside and the appellant is held entitled to the claimed CENVAT credit.

Use in connection with production - writing off/obsolescence treated as remnant or waste - self-destruction with prior intimation to Revenue - 2% waste/scrap tolerance where no SION notified - conditions of Notification No.52/2003-CUS read with Notification No.22/2003-CE - penalty liability for contravention of bond/notifications

Conditions of Notification No.52/2003-CUS read with Notification No.22/2003-CE - self-destruction with prior intimation to Revenue - Whether duty is payable on raw materials, WIP, semi-finished and finished goods written off and destroyed within the EOU premises after prior intimation to the Department for the periods in dispute - HELD THAT: - The Tribunal found that the appellant had followed the procedure under Notification No.52/2003-CUS read with Notification No.22/2003-CE and the Foreign Trade Policy by giving prior intimation to the Department of the intended destruction, storing the materials separately and destroying them within the 100% EOU premises. The Tribunal rejected the Revenue's contention that self-destruction was impermissible and that the inventory could not be ascertained, noting that the Department had been duly informed and that no clear evidence of diversion or unauthorised clearance was established. On these factual and legal findings the demand of duty based on the written-off and destroyed materials was held unsustainable.

Demand of duty on the destroyed/written-off materials for the periods in dispute is set aside.

Use in connection with production - writing off/obsolescence treated as remnant or waste - 2% waste/scrap tolerance where no SION notified - Whether materials rejected, rendered un usable or recorded as 'obsolete' in the course of production amount to removal of inputs or are to be treated as used in connection with production (thereby not attracting duty) - HELD THAT: - The Tribunal held that raw materials, WIP and semi finished goods which are rejected or become unusable in the course of manufacture are equivalent to having been used in the course of production and do not amount to removal of inputs. The Tribunal accepted the appellant's categorical averment that the destroyed/written off quantity was within the 2% tolerance permitted where no SION is notified, and observed that the term 'obsolete' in the books is tantamount to remnant/leftover and does not attract adverse inference. These findings led to the conclusion that the destroyed materials were legitimately consumed/treated as waste in production and not liable to duty.

Destroyed/rejected materials recorded as 'obsolete' are treated as used in connection with production and are not chargeable to duty where within permissible norms.

Penalty liability for contravention of bond/notifications - conditions of Notification No.52/2003-CUS read with Notification No.22/2003-CE - Whether penalty could be sustained against the appellant company and its officers for alleged contravention in respect of the written-off and destroyed materials - HELD THAT: - Since the Tribunal held that there was no violation of the notifications, Foreign Trade Policy or the Central Excise/Cus toms law - the destructions having been preceded by proper intimation, the materials being stored separately and the quantities being within permissible limits - the foundational premise for invoking penalties failed. The Tribunal found no evidence of diversion, suppression or contumacious conduct warranting imposition of penalties on the company or on the named officers.

Penalties imposed by the adjudicating authority on the appellant and its officers are set aside.

Final Conclusion: The appeals are allowed: the demands of duty and the penalties confirmed by the Commissioner for the periods April, 2007 to March, 2014 are set aside as the destroyed/written off materials were held to have been used in connection with production, were destroyed after prior intimation and within permissible norms; consequential benefits to the appellant shall follow in law.

Levy of entry tax on goods imported from outside India - Entry of goods into a local area for consumption, use or sale - Legislative competence under Entry 52 of List II - Parliamentary domain over import and export and duties of customs (Entry 41 & Entry 83, List I) - Completion of import upon crossing customs frontiers and release for home consumption - Original package / unbroken package doctrine - Purchase value and treatment of customs duty - Scope of "machinery and equipment" in schedule (knocked down/knocked out plant)

Levy of entry tax on goods imported from outside India - Entry of goods into a local area for consumption, use or sale - Entry tax statutes (Orissa 1999, Kerala 1994, Bihar 1993 prior to amendment) include goods imported from outside the territory of India when such goods enter a local area for consumption, use or sale. - HELD THAT: - The Court examined the statutory definition of "entry of goods" read with the charging provisions and held the language "from any place outside that local area or any place outside the State" is wide and not limited to places within India. The charging event is the entry of scheduled goods into a local area for consumption, use or sale; origin is irrelevant to chargeability. Where other State Acts later added explicit reference to "outside the territory of India" this was held to be clarificatory/abundant caution. Accordingly, the entry tax enactments do not exclude imported goods once they enter the local area. [Paras 63, 64, 65, 66, 144]

Definition and charging provisions include imported goods entering a local area and therefore entry tax is leviable on such goods.

Legislative competence under Entry 52 of List II - Parliamentary domain over import and export and duties of customs (Entry 41 & Entry 83, List I) - State entry tax legislation under Entry 52 List II is within State competence and does not impermissibly intrude into the Union's domain under Entry 41 or Entry 83 of List I. - HELD THAT: - The Court reviewed constitutional allocation of taxing fields and precedents emphasising mutual exclusivity of Union and State taxing powers. It held the taxing event for customs duties (import within customs barriers) is distinct from the taxing event for entry tax (entry into a local area for consumption, use or sale). No overlap was found; State enactments imposing entry tax therefore do not encroach on Parliament's power to levy customs. [Paras 72, 74, 75, 98, 144]

Entry tax statutes fall within Entry 52 List II and are constitutionally valid as not encroaching Entry 41/83 List I.

Completion of import upon crossing customs frontiers and release for home consumption - Concept of import and completion upon clearance for home consumption - Importation ends when goods enter the customs frontiers of India and are released for home consumption; thereafter State may impose entry tax. - HELD THAT: - The Court adopted the accepted meaning (supported by Customs Act definitions and case law) that the course of import begins when goods leave the foreign customs barrier and ends when they cross Indian customs barriers and are cleared for home consumption. The taxing event for customs is separate and precedes any State entry tax event. Thus, once importation is complete, State legislative competence to levy entry tax applies. [Paras 86, 95, 101, 102, 144]

Import is complete on clearance for home consumption; State may levy entry tax thereafter.

Original package / unbroken package doctrine - The U.S. original package/unbroken package doctrine is not applicable in India; imported goods released from customs are not immune from nondiscriminatory State taxation. - HELD THAT: - Having traced the doctrine's origin in U.S. jurisprudence and its subsequent abandonment by the U.S. Supreme Court, the Court reviewed Indian precedent (Federal Court and Supreme Court) rejecting application of the original package doctrine in India. It held that imported goods, once released for home consumption, may be subjected to State taxes that are nondiscriminatory and ordinary in character. [Paras 106, 111, 121, 122, 144]

Original package doctrine does not shield imported goods from State entry tax in India.

Purchase value and treatment of customs duty - Absence of an explicit reference to customs duty in the statutory definition of purchase/import value does not mean imported goods were excluded from entry tax. - HELD THAT: - The Court observed that statutory phrases such as "all other charges incidental to the purchase" encompass customs duty; precedents interpreting valuation rules also support inclusion of customs duty for valuation purposes. Hence non mention of customs duty is inconsequential and does not indicate legislative intent to exempt imported goods from entry tax. [Paras 124, 125, 126, 144]

Non inclusion of customs duty by name in purchase/import value does not preclude levy of entry tax on imported goods.

Scope of "machinery and equipment" in schedule (knocked down/knocked out plant) - A plant imported in knocked down/knocked out condition falls within the schedule description of "machinery and equipments" and is exigible to entry tax. - HELD THAT: - The Court construed 'plant' and 'machinery' broadly, observing that plant in knocked down condition is a collection of machineries and thus covered by the schedule item. The statutory words 'machinery and equipments' are wide enough to include such imported plants. [Paras 136, 137, 139, 144]

Knocked down/knocked out plants are covered by the schedule entry for machinery and equipment and attract entry tax.

Entry tax collection as State policy versus local collection - Entry 52 List II may be exercised by the State and does not oblige collection solely by local authorities; mode of collection is a matter of legislative policy. - HELD THAT: - The Court rejected the submission that Entry 52 is essentially octroi collectible only by local bodies. Constitutional history and precedent show the description in Entry 52 is broader; the form and machinery for collection (State versus local bodies) is a policy choice and does not negate the State's legislative competence to enact entry tax. [Paras 128, 132, 134, 144]

Entry tax may be legislated and collected under State law; it is not restricted to collection by local authorities.

Liberty to raise discrimination plea under Article 304(a) - Liberty granted to certain Orissa appellants (formerly writ petitioners) to revive their writ petitions in the High Court to raise discrimination claims under Article 304(a) as per the law in Jindal Stainless Ltd.; revival to be sought within 30 days. - HELD THAT: - The Court permitted revival (not by filing fresh writs in this Court) for appellants previously before the High Court to apply to the High Court to press Article 304(a) discrimination claims, indicating those discrimination issues were not finally decided on merits in these appeals and may be considered afresh by the High Court in accordance with the governing law. [Paras 143, 145]

Liberty granted to revive writ petitions before the High Court to raise Article 304(a) discrimination claims (time limited procedural permission).

Final Conclusion: The Supreme Court upheld State entry tax statutes (Orissa 1999, Kerala 1994, Bihar 1993 pre amendment) as capable of levying entry tax on goods imported from outside India once those goods enter a local area and are released for home consumption; State entry tax legislation under Entry 52 List II does not intrude upon Union powers under Entry 41/83 List I; the U.S. original package doctrine is inapplicable in India; valuation language excluding an express reference to customs duty does not imply exemption; knocked down plants fall within "machinery and equipments"; certain appellants in Orissa were granted time limited liberty to revive Article 304(a) discrimination challenges in the High Court.

Definition of "sale price" - inclusive and exclusion clauses in definition of sale price - post-sale expenditure - spot delivery - transfer of property under Sale of Goods Act, Section 19 - bailee's right to reimbursement

Definition of "sale price" - inclusive and exclusion clauses in definition of sale price - post-sale expenditure - spot delivery - bailee's right to reimbursement - transfer of property under Sale of Goods Act, Section 19 - Insurance and carrying charges do not form part of the sale price of the goods. - HELD THAT: - The Court applied the two-part statutory definition of "sale price" and the ratio in Hindustan Sugar Mills to examine whether insurance and carrying charges were components of the consideration payable to the seller or were post-sale expenditures. The Tribunal's finding that the transactions were spot deliveries established that property in the goods passed at the time and place of spot delivery, and that the buyer thereafter bore the burden of collecting and conveying the goods. Where services such as insurance and carrying were rendered after completion of the sale for the buyer's convenience, they constituted post-sale expenditures. Even if the seller retained physical possession and disbursed such amounts, he did so as a bailee entitled to reimbursement rather than as part of the sale consideration. The exclusion in the definition operates as an exclusion from the inclusive clause and can be invoked only if the State seeks to bring the amount within the inclusive part; here the charges did not fall within the first part as components of the consideration. Applying these principles to the facts, the Court agreed with the Tribunal that the insurance and carrying charges were incurred after delivery and therefore are not part of the "sale price." [Paras 15, 16, 19, 20, 21]

Affirmed that insurance and carrying charges do not form part of the sale price.

Final Conclusion: The reference is answered in favour of the assessee: insurance and carrying charges were post-sale expenditures and do not form part of the sale price; consequently the second question was not considered and the reference is disposed of.

Provisional attachment of property - cessation of provisional attachment after one year - provisional attachment under Section 45 of the Gujarat Value Added Tax Act, 2003 - recovery from bank account without assessment - refund of recovery made without assessment - statutory interest for period amount remained with department

Provisional attachment of property - cessation of provisional attachment after one year - provisional attachment under Section 45 of the Gujarat Value Added Tax Act, 2003 - Validity and continuing effect of the order dated 13.07.2016 provisionally attaching the petitioner's bank account. - HELD THAT: - Section 45 permits provisional attachment of a dealer's property during pendency of assessment proceedings to protect Government revenue, but sub-section (2) provides that such provisional attachment ceases to have effect after expiry of one year from the date of the order. The impugned provisional attachment dated 13.07.2016 has, therefore, ceased to be effective as the one year period prescribed by the statute has expired. The court declared the order dated 13.07.2016 no longer effective, while noting that this declaration does not prejudice the pending assessments.

Order dated 13.07.2016 attaching the petitioner's bank account is no longer effective as the statutory one year period for provisional attachment has expired.

Recovery from bank account without assessment - refund of recovery made without assessment - statutory interest for period amount remained with department - Legality of unilateral recovery of Rs. 1,63,000 from the petitioner's bank account in absence of any assessment order and the appropriate relief. - HELD THAT: - The respondents effected a direct recovery from the petitioner's bank account without any assessment having been framed and without the petitioner's consent. Such unilateral recovery, made in the absence of an assessment order, was held impermissible. The court directed refund of the recovered sum at this stage without interest. The court, however, qualified that if an assessment ultimately shows a liability, the period during which the amount remained with the department would attract statutory interest in favour of the petitioner, thereby preserving the department's right to recover any liability determined on assessment subject to interest consequences.

Respondents directed to refund the sum recovered (Rs. 1,63,000) from the petitioner's bank account without interest now; if assessment later establishes liability, statutory interest for the period the amount remained with the department shall be accounted in favour of the petitioner.

Final Conclusion: The provisional attachment order dated 13.07.2016 is declared to have ceased to be effective after the statutory one year period; the sum recovered directly from the petitioner's bank account is to be refunded now without interest, subject to adjustment and statutory interest consequences if a later assessment establishes liability; pending assessments remain unaffected.

Reassessment - Form F declaration - legal fiction of transfer otherwise than by reason of sale - conclusive finding under the Central Sales Tax Act - scope of enquiry on production of declaration - grounds of fraud, misrepresentation or collusion

Form F declaration - scope of enquiry on production of declaration - conclusive finding under the Central Sales Tax Act - Whether the Assessing Officer could disbelieve the Form 'F' declaration and re-determine turnover by insisting on contemporaneous documents and reopen assessment after a prolonged period. - HELD THAT: - The Court applied the principle laid down in Ashok Leyland Ltd. that where, by statutory process and the legal fiction embodied in the CST Act, a finding is recorded that movement of goods was by transfer otherwise than by reason of sale, that finding is conclusive and cannot be reopened as a mere error of judgment. Submission of Form 'F' and an inquiry thereon, if resulting in acceptance of particulars by the Assessing Authority, gives rise to the legal fiction that the transaction was not an inter-state sale; that fiction continues to have effect for assessment and reassessment under the State law as well. In the absence of allegations justifying reopening (such as fraud, misrepresentation or collusion), the Assessing Officer cannot mount a roving inquiry or insist upon additional contemporaneous documents to displace the Form 'F' declaration and re-assess turnover. [Paras 2]

Assessment revision insofar as it re-determined turnover despite production of Form 'F' declaration is impermissible and is set aside.

Grounds of fraud, misrepresentation or collusion - reassessment - Whether reassessment can be sustained in absence of any allegation of fraud, misrepresentation or collusion. - HELD THAT: - The Court held that the power to reopen or reassess in cases where a conclusive finding under CST Act has been recorded is circumscribed; only a narrow set of grounds such as fraud, misrepresentation or collusion would justify reopening. As no such allegations were made against the petitioner, the scope of enquiry could not be extended to justify the reassessment made after a long interval. [Paras 3]

Reassessment is unsustainable in the absence of pleaded or established fraud, misrepresentation or collusion; impugned reassessment set aside.

Final Conclusion: Writ petition partly allowed; impugned order revising turnover on stock transfer despite production of Form 'F' declaration is set aside for assessment year 1999-00; no costs.

Revision of assessment - Mismatch between Annexure 1 and Annexure 2 returns - Duty to furnish particulars and reconcile invoice details - Assessing Officer's obligation to verify departmental data and conduct enquiry - Right to seek additional information and make a comprehensive representation - Requirement of a speaking order after personal hearing - Conditional relief subject to deposit of a portion of disputed tax

Revision of assessment - Mismatch between Annexure 1 and Annexure 2 returns - Assessing Officer's obligation to verify departmental data and conduct enquiry - Sufficiency of the revision notices dated 13.03.2017 and the Assessing Officer's exercise in pursuing revision of assessments. - HELD THAT: - The Court found that the revision notices contained necessary details in respect of many transactions and that the Assessing Officer had taken steps to furnish invoice numbers and other particulars where available. While some entries lacked invoice numbers or showed zero turnover, that deficiency did not render the entire revision notices inadequate. The Court noted the Assessing Officer must be extra careful when re-opening assessments based on departmental data culled from the website and should conduct an enquiry in accordance with established directions, but on the material before it the Assessing Officer had prima facie performed a proper exercise. [Paras 6]

Revision notices were, in substance, sufficient and the Assessing Officer's exercise in pursuing revision was prima facie proper.

Duty to furnish particulars and reconcile invoice details - Right to seek additional information and make a comprehensive representation - Adequacy of the petitioner's objections dated 07.04.2017 and the dealer's obligation to explain mismatches. - HELD THAT: - The dealer's objections were held to be sketchy and bereft of particulars; where full details were supplied in the revision notice, the dealer was obliged to reconcile invoice numbers with its books and provide a specific factual explanation. Merely citing earlier decisions without factual reconciliation is inadequate. If the dealer required further particulars, it should have requested them from the Assessing Officer by representation; having not done so, substantial fault lay with the dealer. [Paras 4, 6]

The petitioner's objections were inadequate; the dealer must furnish particulars and reconcile details or request additional information before seeking relief.

Conditional relief subject to deposit of a portion of disputed tax - Right to seek additional information and make a comprehensive representation - Requirement of a speaking order after personal hearing - Whether the petitioner should be granted further opportunity to reply and whether the matter should be remitted to the Assessing Officer for fresh enquiry, and on what terms. - HELD THAT: - Considering the circumstances, the Court afforded the petitioner one further opportunity to submit comprehensive replies in respect of transactions where full details had been provided and to request additional particulars from the Assessing Officer for other transactions. This opportunity was made conditional: the petitioner must pay 15% of the disputed tax for each assessment year within fifteen days. On compliance, the impugned assessment orders are to be treated as notices; the petitioner may then submit a comprehensive representation, seek further information, and the Assessing Officer must enquire afresh, afford personal hearing and pass a speaking order in accordance with the procedural principles set out in the cited authority. Failure to make the deposit within the prescribed time will result in automatic dismissal of the writ petitions while leaving the appellate remedy open. [Paras 7, 8, 9]

Petitioner granted conditional opportunity to supply particulars and have Assessing Officer re-enquire, on payment of 15% of disputed tax; non-payment results in dismissal of writ petitions but appellate remedy remains available.

Final Conclusion: Writ petitions disposed of by granting the petitioner a conditional opportunity to submit detailed replies and seek additional particulars, and remitting the matter to the Assessing Officer to conduct fresh enquiry and pass a speaking order after personal hearing, provided the petitioner deposits 15% of the disputed tax within fifteen days; non-deposit leads to dismissal of the petitions with liberty to pursue appellate remedies.

Challenge to assessment notices - maintainability of writ petition against assessment - return of cheque for insufficient funds - belated filing of returns - bank attachment and its lifting - personal hearing before Assessing Officer - remand for fresh assessment

Challenge to assessment notices - return of cheque for insufficient funds - maintainability of writ petition against assessment - Impugned demand notices are not amenable to writ relief and the writ petition challenging them is not maintainable in the facts of the case. - HELD THAT: - The court examined the Assessing Officer's file and records which showed that the petitioner had issued a cheque for Rs. 30,00,000/- that was presented and returned for insufficient funds. As a consequence the subsequent demand notice incorporated the returned cheque amount, explaining the increase in the quantum of demand. The court further found from records that the petitioner habitually filed belated returns, leading to recurring arrears and attachment proceedings. Given these factual findings and the statutory assessment process, the petitioner could not sustain a writ challenging the impugned notices; the assessment-related demands were properly explained and grounded in the tax administration's steps to collect arrears arising from belated filings and the returned cheque. [Paras 5, 7, 9]

Writ petition dismissed insofar as it challenges the impugned demand notices; the notices are not set aside.

Belated filing of returns - bank attachment and its lifting - personal hearing before Assessing Officer - remand for fresh assessment - Assessment proceedings are to be continued after the petitioner files outstanding returns; the matter is remitted to the Assessing Officer for issuance of show cause notice, personal hearing and passing of an assessment order. - HELD THAT: - The court recorded that the petitioner had not filed the return for March 2017 and that assessment could not be completed until returns were filed. On the petitioner's undertaking to file returns up to date within a week, the court directed that once returns are filed the Assessing Officer shall issue a show cause notice, require the authorised representative to appear without seeking adjournment, hear the petitioner on any queries raised and thereafter pass an assessment order for the period covered by the returns (filed on time or belatedly). This directs fresh consideration and completion of assessment in accordance with statutory procedure, preserving the petitioner's right to be heard. [Paras 10, 11, 12]

Matter remitted to the Assessing Officer to issue show cause notice, afford personal hearing and complete assessment after the petitioner files outstanding returns.

Final Conclusion: The writ petition challenging the demand notices is dismissed; the petitioner is directed to file outstanding returns within the time stipulated and the Assessing Officer is directed to issue show cause notice, personally hear the authorised representative and complete the assessment for the period covered by the returns.