TaxTMI Updates e-Newsletter
Oct 15,2019

Pure services - composite supply - exemption under Notification No. 12/2017 (serial no. 3) - exemption under Notification No. 12/2017 (serial no. 3A) - functions entrusted to a Municipality under Article 243W - time of supply

Pure services - composite supply - Classification of the supply by M/s. VFS Global as pure service or composite supply of goods and services. - HELD THAT: - On examination of the contract and scope of work, the Authority found that the agreement for Operating Citizen Facilitation Centres/Collection Centres does not separately stipulate supply of goods to MCGM. Computers and consumables are used by the applicant on its own account for rendering the agreed activity and are not shown as supplied to the authority. Therefore the provision by the applicant is of services only and falls within the concept of pure services, and the contract is not a composite supply involving supply of goods to MCGM.

The supply by the applicant is a pure service and not a composite supply of goods and services.

Exemption under Notification No. 12/2017 (serial no. 3) - functions entrusted to a Municipality under Article 243W - exemption under Notification No. 12/2017 (serial no. 3A) - Whether the applicant's services are exempt from GST under serial numbers 3 or 3A of Notification No. 12/2017 as activities in relation to functions entrusted to a Municipality under Article 243W. - HELD THAT: - Even though the applicant's supply is classified as pure services, the Authority found that the applicant's role commences only after MCGM has provided its services and issued bills to citizens; the applicant merely collects payments and issues receipts on behalf of MCGM and does not perform activities that are in relation to the functions entrusted to the Municipality under Article 243W. Consequently, the services rendered by the applicant are not services 'by way of any activity in relation to any function entrusted to a Municipality' and therefore do not fall within the exemption at serial no. 3. Since the supply is a pure service, the proviso in serial no. 3A (which concerns composite supplies where value of goods is not more than 25%) is inapplicable.

The applicant's services are not exempt under serial no. 3 or 3A of Notification No. 12/2017 and are taxable.

Final Conclusion: The Authority holds that M/s. VFS Global's activity of operating CFCs/collection centres is a pure service (not a composite supply of goods to MCGM) but does not constitute an activity in relation to functions entrusted to a Municipality under Article 243W; accordingly the supply is not exempt under serial nos. 3 or 3A of Notification No. 12/2017 and is taxable.

Supply of services - In the course or furtherance of business - Services by an employee to the employer - Definition of business - Recovery of insurance premium from employees

Supply of services - In the course or furtherance of business - Services by an employee to the employer - Recovery of 50% of parental health insurance premium from employees does not amount to supply of service under Section 7 of the CGST Act, 2017. - HELD THAT: - The applicant, a manufacturer, instituted an optional parental medical insurance scheme under which it paid the entire premium to the insurer and thereafter recovered 50% from employees through salary deductions while bearing the balance. The Authority examined the definition of "supply" and the statutory definition of "business" and found that (i) the parental insurance cover is not the applicant's business activity and is not mandated by law, (ii) the insurance service is provided by the insurance company and the applicant merely pays and recovers part of the premium, and (iii) such recovery in the circumstances is not in the course or furtherance of the applicant's business. The Authority further noted that services by an employee to the employer are excluded by Schedule III and relied on a precedent ARA order with identical facts, holding that the employer is not rendering insurance services to employees. Applying these principles, the Authority concluded that the recovery of 50% of the parental health insurance premium from employees is not a taxable supply of services under Section 7. [Paras 5]

Answered in the negative; recovery of 50% of parental health insurance premium from employees is not a supply of service under Section 7 of the CGST Act, 2017.

Final Conclusion: The Authority ruled that, on the facts and for reasons stated, recovery of 50% of the parental health insurance premium from employees does not constitute a supply of services under the CGST Act, 2017 and accordingly is not taxable as such.

Works contract - composite supply - principal supply - transfer of property in goods - immovable property - classification of supply as goods or services - concessional rate for works contract pertaining to railways

Works contract - immovable property - transfer of property in goods - classification of supply as goods or services - Contract for supply, erection, installation, commissioning and testing of UPS systems with DMRC does not qualify as a works contract under Section 2(119) of the CGST Act. - HELD THAT: - The Authority found on the facts and documents that the applicant despatched UPS units to DMRC under invoice and e-way bill, and title in the goods passed on delivery prior to installation. The installed UPS units are capable of being dismantled and moved without substantial damage and were affixed only for operational stability; such attachment did not result in emergence of an immovable property. Given that a 'works contract' under Section 2(119) requires a contract in relation to immovable property involving transfer of property in goods during execution, the contract in question does not meet that requirement. The Authority therefore treated the supply as not being a works contract and proceeded to examine composite-supply principles.

Answered in the negative; the contract does not qualify as a 'works contract'.

Composite supply - principal supply - classification of supply as goods or services - concessional rate for works contract pertaining to railways - Whether the overall transaction is a composite supply and, if so, the tax treatment of the composite supply. - HELD THAT: - Having held that the contract is not a works contract, the Authority applied the definition of 'composite supply'. The goods (UPS units) constitute the principal supply because they are the major part of the contract and the services of installation, testing and commissioning are supplied in conjunction with those goods and are ancillary to the principal supply. Consequently, the composite supply is taxed according to the rate applicable to the principal supply. The UPS units fall under Heading 8504 and attract GST at 18% as supply of goods; therefore the composite supply is liable to tax at the rate applicable to those goods.

There is a composite supply with goods as the principal supply; tax liability is according to the rate applicable to the principal supply (UPS units) - 18%.

Concessional rate for works contract pertaining to railways - works contract - Applicability of the concessional 12% rate under Sr. no. 3(v) of Notification No. 11/2017-C.T. (Rate) where the supply is not a works contract. - HELD THAT: - The question of applicability of the concessional 12% rate was not adjudicated on merits because the prerequisite condition - that the supply be a 'works contract' - was negatived. As the Authority concluded the transaction is not a works contract, the concessional rate tied to works contracts was not applied. The Authority therefore did not answer the application of the concessional rate independently of that factual/legal threshold.

Not answered on merits because the supply was held not to be a works contract; concessional rate therefore not applicable.

Final Conclusion: The contract with DMRC is not a 'works contract' within Section 2(119) and, on the facts, constitutes a composite supply with goods (UPS units) as the principal supply; GST is therefore payable at the rate applicable to those goods (18%). The concessional 12% rate for works contracts was not applied since the contract was held not to be a works contract.

Procedure for inspection under the GST e-way bill regime - requirement of Form GST MOV-02, Form GST MOV-04 and recording in Part A/B of Form GST EWB-03 - detention under section 129 of the CGST Act - release order in Form GST MOV-05 - issuance of Form GST MOV-06

Procedure for inspection under the GST e-way bill regime - requirement of Form GST MOV-02, Form GST MOV-04 and recording in Part A/B of Form GST EWB-03 - detention under section 129 of the CGST Act - release order in Form GST MOV-05 - Whether the order detaining the conveyance under section 129 of the CGST Act is sustainable where the person in charge produced invoice and e-way bill but no report of physical verification (Form GST MOV-04) or final report (Part B of Form GST EWB-03) has been prepared/uploaded as required by the Board's circular. - HELD THAT: - The court noted that the person in charge of the conveyance had produced both the tax invoice and the e-way bill at the time of interception and that, under the Board's circular dated 13.4.2018, where prima facie no discrepancies are found the conveyance must be allowed to proceed. The circular prescribes that after issuance of Form GST MOV-02 the proper officer must prepare and upload a report in Part A of Form GST EWB-03 within 24 hours, and, upon completion of physical verification, prepare Form GST MOV-04 and record the final inspection report in Part B of Form GST EWB-03 within three days; if no discrepancies are found the officer shall issue a release order in Form GST MOV-05. In the present case the respondents could not produce Form GST MOV-03 or Form GST MOV-04 nor show that any report was uploaded on the common portal, and instead issued Form GST MOV-06 detaining the goods. Having regard to these omissions and the production of requisite documents by the person in charge, the court concluded that the detention order, prima facie, does not comply with the procedure mandated by the Board and is therefore not sustainable. [Paras 4, 5]

The detention order under section 129 of the CGST Act is prima facie unsustainable; respondents directed to forthwith release the conveyance and goods as interim relief.

Final Conclusion: Rule issued and made returnable; interim direction granted for immediate release of the vehicle and goods for non-compliance with prescribed inspection and reporting procedure under the Board's circular.

Detention under Section 129(1) of CGST/SGST - irregularities in e-way bill - release of detained goods on furnishing bank guarantee for tax and penalty - post-release adjudication after hearing

Detention under Section 129(1) of CGST/SGST - irregularities in e-way bill - release of detained goods on furnishing bank guarantee for tax and penalty - Detention of the two consignments held under the impugned notices and the conditions for their release. - HELD THAT: - The Court found that the consignments were detained on account of irregularities in the e-way bills produced at the time of transportation. Taking into account the facts and submissions, the Court ordered that the consignments covered by the detention notices be released to the petitioner upon his furnishing a bank guarantee covering the tax and penalty amounts in respect of those consignments. The release is conditional upon the bank guarantee being furnished and is intended to protect revenue interests pending final adjudication.

Consignments to be released on petitioner furnishing a bank guarantee for tax and penalty.

Post-release adjudication after hearing - adjudication timeframe - Extent and timing of further proceedings by the tax authority after release of goods. - HELD THAT: - The Court remitted the matter to the 3rd respondent to undertake adjudication of the detention and related claims after affording the petitioner an opportunity of hearing. The adjudication is directed to be completed within an outer time limit of two weeks from the date the 3rd respondent receives a copy of the judgment. The petitioner is directed to present a copy of the writ petition and this judgment before the 3rd respondent to facilitate further action.

3rd respondent to adjudicate the matter after hearing the petitioner within two weeks of receipt of the judgment; petitioner to produce the writ petition and judgment to the 3rd respondent.

Final Conclusion: Writ petition disposed by directing release of the detained consignments on the petitioner furnishing a bank guarantee for tax and penalty, with the 3rd respondent to adjudicate the matter after hearing the petitioner within two weeks of receiving a copy of this judgment.

Amendment of pleading - Procedure under rule 92(3) of the Central Goods and Services Tax Rules, 2017 - Re-credit to electronic credit ledger under rule 93 of the Central Goods and Services Tax Rules, 2017 - Applicability of rule 89(3) of the Central Goods and Services Tax Rules, 2017 - Service of notice - Permission for direct service

Amendment of pleading - Draft amendment tendered on behalf of the petitioner was allowed and directed to be carried out forthwith. - HELD THAT: - The Court received a draft amendment from the petitioner and, after consideration, permitted the amendment. The order directs that the amendment shall be carried out immediately, thereby granting leave to amend the petition as proposed by the petitioner. [Paras 1]

Amendment allowed in terms of the draft and to be carried out forthwith.

Procedure under rule 92(3) of the Central Goods and Services Tax Rules, 2017 - Re-credit to electronic credit ledger under rule 93 of the Central Goods and Services Tax Rules, 2017 - Applicability of rule 89(3) of the Central Goods and Services Tax Rules, 2017 - Service of notice - The question whether the proper officer failed to follow the procedure in rule 92(3) and proceeded directly to re-credit under rule 93, and whether rule 89(3) applies, is taken on notice and not finally adjudicated; notice issued returnable on 16.10.2019 for adjudication of these contentions. - HELD THAT: - Counsel for the petitioner pointed out that the proper officer did not follow the procedure prescribed by sub-rule (3) of rule 92 and instead proceeded under rule 93 to re-credit the amount to the electronic credit ledger. It was further submitted that sub-rule (3) of rule 89 applies only to refund applications for input tax credit and is not applicable to the present case, so the question of re-crediting would not arise. The Court did not decide these contentions on the merits but issued notice to the respondent to answer the challenge and fixed the matter for further hearing on the specified date. [Paras 2, 3]

Notice issued on the procedural contentions regarding rules 92(3), 93 and 89(3); matter listed for further consideration on 16.10.2019.

Permission for direct service - Service of notice - Court permitted direct service of the notice on the respondent. - HELD THAT: - Alongside issuing notice, the Court expressly allowed direct service in the interests of expedition and to ensure the respondent receives the notice without delay. This procedural permission was granted as part of the interlocutory directions. [Paras 4]

Direct service permitted.

Final Conclusion: The petition was permitted to be amended forthwith; the procedural challenge to the officer's compliance with rules 92(3), 93 and the applicability of rule 89(3) was taken on notice with the matter posted for further hearing on 16.10.2019, and direct service was permitted.

Carry forward of input tax credit - Form GST TRAN-1 - technical glitches in GST portal - IT Grievance Redressal Committee - trial phase of GST implementation - reopening portal or manual acceptance of TRAN-1

Form GST TRAN-1 - technical glitches in GST portal - trial phase of GST implementation - carry forward of input tax credit - Petitioner's entitlement to relief permitting filing of Form GST TRAN-1 after the statutory/computerised cut-off due to alleged technical glitches, in order to claim carry forward of input tax credit as on 30-06-2017. - HELD THAT: - The Court examined the competing contentions: the petitioner's plea that it could not file TRAN-1 electronically because of technical glitches and loss of its Accounts Officer, and the respondents' contention that the petitioner failed to produce contemporaneous evidence of attempts to file TRAN-1 before the last date and had not brought the matter to the department's notice in time. The Court noted precedents recognizing that the GST system was in a trial phase and that genuine inability to connect to the portal may justify relief. Applying that principle to the facts, the Court held that the petitioner's request merited consideration and that procedural relief should be afforded to enable adjudication of the substantive claim. The Court did not decide the merits of the carry forward claim itself but required the respondents to provide the petitioner an opportunity to file TRAN-1 (electronically or manually) so that the claim can be processed in accordance with law. The determinative legal reasoning is that where technical failures of the GST portal, in the trial stage of implementation, prevent electronic filing, equitable procedural relief (reopening portal or accepting manual filing) may be granted to permit adjudication of the substantive entitlement to input tax credit.

Writ petition allowed insofar as respondents are directed to either reopen the portal to permit electronic filing of Form GST TRAN-1 or to accept a manually presented Form GST TRAN-1, if submitted on or before 31.08.2019, after which the petitioner's claim shall be processed in accordance with law.

IT Grievance Redressal Committee - reopening portal or manual acceptance of TRAN-1 - Whether the respondents must process the petitioner's claim before the IT Grievance Redressal Committee or by the statutory mechanism after permitting filing. - HELD THAT: - The Court directed that once the petitioner is permitted to file TRAN-1 (electronically upon reopening of the portal or manually), the claim must thereafter be processed by the respondents in accordance with law. The order does not predetermine the outcome before the IT Grievance Redressal Committee or any other forum; it mandates the respondents to accept the filing opportunity and to consider the claim on merits and in strict conformity with applicable legal provisions and procedures.

Respondents to process the petitioner's claim in accordance with law after acceptance of TRAN-1 filed pursuant to this order; no pre-judgment of merits is made.

Final Conclusion: Writ petition disposed of by directing respondents to permit filing of Form GST TRAN-1 (electronically by reopening the portal or by accepting manual filing) on or before 31.08.2019, and thereafter to process the petitioner's claim for carry forward of input tax credit as on 30-06-2017 in accordance with law; no order as to costs.

Reopening of assessment - statement of a tainted person - tangible material for reopening - limitation beyond four years - failure to disclose material facts - assessment under section 153A - reopening under section 147

Reopening of assessment - tangible material for reopening - statement of a tainted person - limitation beyond four years - failure to disclose material facts - assessment under section 153A - reopening under section 147 - Interim relief in respect of the notice dated 28.03.2019 under section 148 for assessment year 2013-14 and issuance of notice returnable on a specified date. - HELD THAT: - The court heard oral submissions that the reasons recorded for reopening relied upon the statement of a tainted person and that the notice dated 28.03.2019 sought to reopen assessment for 2013-14 beyond four years without any failure to disclose material facts. Counsel also contended that an assessment made under section 153A precludes reopening under section 147. Having considered these contentions, the court directed that notice be issued and, as an interim protective measure, stayed further proceedings pursuant to the impugned notice. The order preserves the parties' rights for final adjudication on merits while restraining continuation of action under the notice until the returnable date.

Further proceedings pursuant to the notice dated 28.03.2019 under section 148 for AY 2013-14 are stayed; notice issued returnable on 18.11.2019; direct service permitted; matter to be heard with connected Special Civil Applications.

Final Conclusion: Interim order: proceedings arising from the reopening notice dated 28.03.2019 for assessment year 2013-14 are stayed and notice is issued returnable on 18.11.2019, with direct service permitted and hearing listed along with related matters.

Discretion to extend time for payment under Direct Tax Dispute Resolution Scheme, 2016 - Effect of third-party payment on behalf of declarant - Doctrine preventing forfeiture of accrued rights for reasons beyond control - Consequences of non-deposit within stipulated time under a settlement scheme

Discretion to extend time for payment under Direct Tax Dispute Resolution Scheme, 2016 - Consequences of non-deposit within stipulated time under a settlement scheme - Doctrine preventing forfeiture of accrued rights for reasons beyond control - Whether relief should be granted to permit deposit of amounts due under certificates issued under the Direct Tax Dispute Resolution Scheme, 2016, where the declarant could not make payment within the stipulated time for reasons beyond its control and the tax authority maintained it had no power to extend time. - HELD THAT: - The Court noted that the designated authority maintained it had no discretion under the Scheme to extend the time for payment. Having regard to the facts that the petitioner was incapacitated from arranging payment because of the Supreme Court's injunctions on the Board for Control of Cricket in India (BCCI) which prevented BCCI from remitting funds to State Associations, and that this state of affairs persisted beyond the payment deadline, the Court applied equitable principles to avoid denuding the petitioner of accrued rights for reasons beyond its control. Citing analogous reasoning in the decision relied upon concerning deposit timelines where physical incapacity prevented timely payment, the Court directed that the respondents shall accept payment tendered by BCCI on behalf of the petitioner, provided the challan is filled and the full sum together with applicable interest under tax law for late payment is deposited. The relief was limited temporally: the mandamus and declaratory relief would endure for 180 days from the date of the order, failing which the declaration and mandamus would cease to be enforceable. The Court therefore granted a time-limited equitable accommodation notwithstanding the absence of a formal power of extension under the Scheme. [Paras 6, 7, 8]

Respondents directed to accept payment tendered by BCCI on behalf of the petitioner, with interest, within 180 days from the date of the order; if not so paid within that period the declaration and mandamus shall become non-enforceable.

Final Conclusion: Writ petition disposed by directing the Income Tax authorities to accept payment by BCCI on behalf of the Goa Cricket Association (covering assessment years 2006-07 to 2012-13) together with applicable interest within 180 days; parties to bear their own costs.

Failure to disclose material facts truly and fully - reopening notice beyond four years and the first proviso to Section 147 - regular assessment completed under section 143(3) - jurisdictional limitation on reassessment

Failure to disclose material facts truly and fully - reopening notice beyond four years and the first proviso to Section 147 - regular assessment completed under section 143(3) - jurisdictional limitation on reassessment - Validity of reopening assessment proceedings for Assessment Year 2006-07 where the regular assessment was completed under Section 143(3) and the reopening notice was issued beyond four years without an allegation of failure to disclose material facts - HELD THAT: - The Court accepted the concurrent factual findings of the CIT(A) and the Tribunal that the assessee had not failed to disclose truly and fully all material facts necessary for assessment. The reasons recorded in the reopening notice did not allege such failure nor did their totality disclose non-disclosure. Because the regular assessment had been completed under Section 143(3) and the reopening notice was issued beyond four years from the end of the relevant assessment year, the reopening was held to be without jurisdiction and hit by the protection afforded by the first proviso to Section 147. The Court endorsed the reliance placed by the lower authorities on the decision in Nirmal Bang Securities as supporting the conclusion that absence of a failure to disclose precludes reopening after the four-year period. [Paras 3, 5]

Reopening notice quashed as beyond jurisdiction; reassessment proceedings for AY 2006-07 set aside

Final Conclusion: The appeal is dismissed. The Tribunal and the CIT(A) correctly held that, in the absence of a failure to disclose material facts and given a regular assessment under Section 143(3), the reopening issued beyond four years was without jurisdiction under the first proviso to Section 147; the question on notice under Section 143(2) was rendered academic. No order as to costs.

Speaking order requirement - reasons for reopening - reopening of assessment - notice under section 148 - remand for passing speaking order - mandate in GKN Driveshafts India Pvt. Ltd.

Speaking order requirement - reasons for reopening - mandate in GKN Driveshafts India Pvt. Ltd. - The order of the Assessing Officer rejecting the assessee's objections to the reasons for reopening the assessment. - HELD THAT: - The reasons for reopening were furnished on 19.07.2018 in the brief form that the assessee had failed to furnish true and correct details. The assessee filed detailed objections on 14.09.2018. The Assessing Officer's disposal dated 09.10.2018 consists of brief observations repeating dispatch details and a tersely stated conclusion based on analysis of RDPL Singapore financials. The High Court held that the dismissal of objections by a single line order does not comply with the requirement that objections be disposed of by a speaking order. The court relied on the supervisory principle articulated in GKN Driveshafts India Pvt. Ltd., that reasons must be furnished within a reasonable time and objections, if filed, must be disposed of by passing a speaking order before proceeding further. [Paras 9, 10]

The order dated 09.10.2018 rejecting the objections is not a speaking order and is set aside.

Reopening of assessment - notice under section 148 - remand for passing speaking order - Relief to be afforded consequent to the finding that the objections were not disposed of by a speaking order. - HELD THAT: - Having found the rejection non speaking, the High Court remedied the procedural deficiency by remitting the matter to the Assessing Officer to consider and decide the objections on merits by passing a speaking order. The court expressly refrained from expressing any view on the merits of the reopening, including the limitation contentions, leaving those questions open for appropriate adjudication at the next stage. The Assessing Officer was directed to pass the speaking order within three weeks from receipt of the High Court's order. [Paras 11, 12]

Matter remitted to the Assessing Officer to pass a speaking order on the objections within three weeks; other questions, including limitation, left open.

Final Conclusion: Writ petition allowed in part: the Assessing Officer's order dated 09.10.2018 rejecting objections is set aside and the matter is remitted for a speaking disposal of the objections within three weeks; no decision is made on the merits of the reopening or limitation issues.

Deduction under section 35AD(5)(aa) for building and operating a new hotel of Two Star or above category - requirement of statutory certificate/classification for star rating - beneficial construction of fiscal incentive provisions - entitlement to deduction upon governmental approval and requisite licences - precedential application of Ceebros Hotels Pvt. Ltd. (Madras High Court)

Deduction under section 35AD(5)(aa) for building and operating a new hotel of Two Star or above category - requirement of statutory certificate/classification for star rating - Validity of the Tribunal's allowance of deduction under section 35AD(5)(aa) in the absence of a specific statutory certificate dated as of a particular date for star classification - HELD THAT: - The Court examined whether the assessee's claim for deduction under section 35AD(5)(aa) could be denied for lack of a particular form of certificate evidencing star classification. The Tribunal had found that the assessee produced governmental approval for a Three Star Hotel project and various statutory licences and permissions (including operation approval from the Ministry of Tourism and municipal/building use and other licenses), and therefore satisfied the conditions for deduction under section 35AD(5)(aa). The High Court applied the reasoning of the Madras High Court in Ceebros Hotels Pvt. Ltd., holding that clause (aa) does not mandate that a certificate bear a particular date and that the provision should be construed beneficially to advance the object of encouraging establishment of hotels of the prescribed category. In view of the approvals and licences produced, the Tribunal's interpretation and conclusion that the assessee was entitled to the deduction were held to be just and legal, and not amenable to interference. [Paras 6]

Tribunal rightly allowed the deduction under section 35AD(5)(aa); absence of a particular statutory certificate dated as of a specific date did not defeat the claim where governmental approval and requisite licences were on record.

Final Conclusion: Revenue's appeal is dismissed; no substantial question of law is made out as the Tribunal correctly applied the law and precedent in allowing the deduction under section 35AD(5)(aa) on the facts presented.

Validity of show-cause notice under section 271(1)(c) of the Income Tax Act, 1961 - Requirement to specify the charge in penalty proceedings (concealment of particulars of income v. furnishing inaccurate particulars) - Non-application of mind in initiating penalty proceedings - Deletion of penalty where show-cause notice is not specific

Validity of show-cause notice under section 271(1)(c) of the Income Tax Act, 1961 - Requirement to specify the charge in penalty proceedings (concealment of particulars of income v. furnishing inaccurate particulars) - Deletion of penalty where show-cause notice is not specific - The show-cause notice initiating penalty proceedings did not specify whether the penalty was for concealment of particulars of income or for furnishing inaccurate particulars of income, and whether such a notice is valid. - HELD THAT: - The Tribunal examined the notice dated 06.01.2016 and found that, although the section under which penalty was proposed was mentioned, the notice failed to specify the precise charge-i.e. whether the penalty was sought for concealment of particulars of income or for furnishing inaccurate particulars. Following the reasoning in the Tribunal's earlier decision in Varad Mehta and the Jurisdictional High Court's decision in Kulwant Singh Bhatia (as applied and discussed), the Tribunal held that a show-cause notice which does not specify the charge is defective and indicates non-application of mind by the Assessing Officer. On this legal defect the Tribunal found the notice to be invalid and untenable, and concluded that the penalty could not stand. As the penalty was set aside on this preliminary legal ground, the Tribunal did not examine or decide the merits of the substantive additions or other arguments raised by the assessee, treating them as academic. [Paras 10, 11, 12]

The penalty imposed under section 271(1)(c) was deleted and the assessee's appeal was allowed on the ground of invalidity of the show-cause notice.

Final Conclusion: Penalty of Rs. 1,00,000 imposed under section 271(1)(c) for AY 2008-09 set aside because the show-cause notice was not specific as to the charge (concealment v. inaccurate particulars), reflecting non-application of mind; merits of additions left undecided as academic.

Deduction under section 80IB - export incentives not forming part of profits for 80IB - cash assistance/DEPB/duty drawback as export incentive - treatment of surrendered income/undisclosed stock for computation of eligible business profits - survey under section 133A and consequent surrender

Deduction under section 80IB - export incentives not forming part of profits for 80IB - cash assistance/DEPB/duty drawback as export incentive - Deduction under section 80IB in respect of export incentives (VKGUY/DEPB/duty drawback) claimed by the assessee was not allowable. - HELD THAT: - The Tribunal followed the coordinate bench decision and the view of the Hon'ble Rajasthan High Court that incentives such as VKGUY, DEPB and duty drawback are export incentives and do not constitute "profits derived from" the eligible industrial undertaking for the purposes of section 80IB. The Tribunal noted the Supreme Court's exposition that sections like 80IB form a self-contained code for computation of profits of eligible business and that receipts in the nature of export incentives are not includible as net profit of the undertaking for claiming deduction under sections 80I/80IA/80IB. Having regard to these precedents and the concurrent conclusion of the lower authorities, the Tribunal affirmed the denial of deduction in respect of the said incentive receipts. [Paras 2, 5]

Ground disallowed; deduction under section 80IB in respect of VKGUY/DEPB/duty drawback denied.

Treatment of surrendered income/undisclosed stock for computation of eligible business profits - survey under section 133A and consequent surrender - Whether the surrendered amount disclosed during survey and included in profit for computing deduction under section 80IB constituted profit "derived from" the eligible business and was admissible for deduction. - HELD THAT: - The Tribunal examined the survey record and noted that the excess undisclosed stock found during survey was raw material used in manufacture, a fact not disputed by Revenue. However, it found no clear working or disclosure showing how the surrendered amount was entered in the books under double-entry accounting or how the deduction under section 80IB was computed. The Tribunal observed absence of specific findings by the CIT(A) on these accounting and computation aspects. For these reasons, the Tribunal set aside the matter and remitted it to the CIT(A) for fresh examination after giving the assessee a reasonable opportunity to explain and produce working/details of accounting entries and the computation of deduction. [Paras 11, 12]

Issue remitted to the file of the CIT(A) for fresh consideration and verification after affording opportunity to the assessee.

Final Conclusion: Appeal dismissed in part in respect of denial of deduction for export incentives; appeal partly allowed for statistical purposes by remanding the question of surrendered/undisclosed stock to the CIT(A) for fresh examination.

Deduction under Section 80-IB(10) of the Act - joint development agreement - guideline value versus market value - shifting of income / suppression of profit - books of account maintained in ordinary course

Deduction under Section 80-IB(10) of the Act - joint development agreement - guideline value versus market value - shifting of income / suppression of profit - books of account maintained in ordinary course - Claim for deduction under Section 80-IB(10) of the Income-tax Act, 1961 by the assessee partnership firm engaged in a housing project and the validity of Assessing Officer's and CIT(A)'s disallowance on grounds of alleged suppression/ income shifting and undervaluation of land. - HELD THAT: - The Tribunal examined whether the disallowance was justified by material showing that the land transfer and profit declaration were a device to reduce tax. The authorities below relied on: (i) valuation of land at guideline value (allegedly below market rate), (ii) induction of land owners' children as partners (35% stake) and (iii) high profit margin (around 50%) to infer diversion or suppression. The Tribunal observed that Section 80-IB(10) pertains to housing projects and that no provision of Section 80-IA(10) alters that analysis. The assessee maintained books of account in the regular course and no defect in the books was pointed out. Guideline value as fixed by the registration authorities is not conclusive evidence of market value; market value fluctuates with location and other factors and guideline value may be higher or lower than actual market value. The presence of third party partners (not related to the land owners) who also had capital at risk undermined the Revenue's theory that the land owners could agree to an undervalue transfer collusively to benefit solely their children. There was no material showing that the declared profit was fabricated or that cost of land was diverted as concealed consideration; the profit shown was supported by books maintained in the ordinary course. Absent positive material of collusion, suppression or shifting of income, the Assessing Officer and CIT(A) were not justified in disregarding the assessee's claim or in treating the land consideration as a device to inflate deductible profit. [Paras 11, 12, 13, 14, 15]

Orders of the Assessing Officer and CIT(A) disallowing the deduction under Section 80-IB(10) set aside; deduction under Section 80-IB(10) to be allowed as claimed and Assessing Officer directed to give effect.

Final Conclusion: Both appeals allowed: Tribunal found no material to sustain Revenue's conclusion of undervaluation or income shifting and directed grant of deduction under Section 80-IB(10).

Revisionary jurisdiction under section 263 of the Income Tax Act - erroneous and prejudicial to the interests of revenue - when two views are possible - limits on exercise of section 263 - deduction for bad debts written off under section 36(1)(vii) - interaction of section 36(1)(vii) with section 36(1)(viia) and section 36(2)(v) - application of Supreme Court decision in Vijaya Bank to write off in accounts

Revisionary jurisdiction under section 263 of the Income Tax Act - erroneous and prejudicial to the interests of revenue - when two views are possible - limits on exercise of section 263 - Validity of the Principal Commissioner's invocation of section 263 to set aside the Assessing Officer's order giving effect to the Tribunal's direction. - HELD THAT: - The Tribunal held that the statutory test for exercise of suo motu revision under section 263 requires that the AO's order be shown to be erroneous and prejudicial to the revenue. Following the Supreme Court decisions cited (including Malabar Industrial, Max India, Greenworld Corporation) the power under section 263 cannot be exercised merely because another view is possible or because the Commissioner disagrees with the view adopted by the AO. On the facts the AO gave effect to the Tribunal's direction and adopted a view which was permissible in law; two views were available on the question of allowance of deduction. Consequently the Pr.CIT's conclusion that the AO's order was erroneous and prejudicial was not sustainable and revision under section 263 could not be validly exercised. [Paras 6, 7]

Order under section 263 setting aside the AO's order was set aside and the appeals allowed.

Deduction for bad debts written off under section 36(1)(vii) - interaction of section 36(1)(vii) with section 36(1)(viia) and section 36(2)(v) - application of Supreme Court decision in Vijaya Bank to write off in accounts - Whether the assessee's treatment of amounts in its accounts falls within the scope of deduction under section 36(1)(vii) and the relevance of sections 36(1)(viia) and 36(2)(v) to that claim. - HELD THAT: - The Tribunal observed that the amendments and the CBDT Circular explain that section 36(1)(vii) provides deduction for debts written off in the accounts and section 36(1)(viia) deals with provisions for bad and doubtful debts, with the proviso to section 36(1)(vii) and section 36(2)(v) preventing double deduction where clause (viia) applies. Applying the precedents, notably Vijaya Bank, the Tribunal found that where an assessee has debited the P&L account and simultaneously reduced loans and advances in the balance sheet, that treatment falls within the principles laid down in Vijaya Bank and qualifies as write off under section 36(1)(vii). The Tribunal nevertheless recognised that the statutory interaction with clause (viia) and section 36(2)(v) is material to computation of allowable deduction where clause (viia) has been availed; those provisions operate to limit allowance to the excess of actual write off over the credit balance in the provision account. On the facts, the assessee had in earlier and later years treated the amount as write off under section 36(1)(vii) and the AO had accepted similar treatment in other assessment years, supporting that a permissible view existed. [Paras 6]

The Tribunal held the statutory provisions (including the proviso and section 36(2)(v)) apply in principle and that the assessee's accounting treatment falls within the Vijay a Bank ratio, but the Pr.CIT's exercise of section 263 to reopen the AO's permissible view was not sustainable.

Final Conclusion: The order passed by the Principal Commissioner under section 263 for AY 1997-98 was set aside because the Assessing Officer had adopted a view permissible in law (not shown to be unsustainable), and the same result applies mutatis mutandis to AY 1998-99; appeals allowed.

Allowability of interest expenditure under section 57 - expenditure wholly and exclusively for earning income - prohibition on restricting deduction proportionately to resultant income - consistency of treatment in earlier and subsequent assessment years

Allowability of interest expenditure under section 57 - expenditure wholly and exclusively for earning income - prohibition on restricting deduction proportionately to resultant income - consistency of treatment in earlier and subsequent assessment years - Deletion of addition of interest expenditure of Rs.25,05,190 made by the Assessing Officer under section 57 for Assessment Year 2013-14 - HELD THAT: - The Tribunal accepted the assessee's contention, following coordinate-bench precedent, that interest paid is allowable if it is incurred wholly and exclusively for earning income chargeable under the head 'income from other sources'. The Tribunal observed that the Assessing Officer did not point to any concrete diversion of interest-bearing funds and that the revenue had consistently allowed similar claims in earlier and subsequent assessment years. The First Appellate Authority's approach of restricting deduction proportionately to interest income (i.e., allowing interest only to the extent of resultant income) was rejected as contrary to the requirement that the expenditure's quantum and object must satisfy the 'wholly and exclusively' test. In view of the consistent past treatment and absence of evidence showing misuse of funds, the Tribunal directed deletion of the disallowance. [Paras 3, 4]

The Assessing Officer is directed to delete the addition; the appeal is allowed.

Final Conclusion: Following coordinate-bench decisions and on facts showing consistent acceptance of such interest claims in other years and no proof of diversion, the addition disallowing interest under section 57 is deleted and the appeal is allowed.

Disallowance under section 14A - Rule 8D of Income Tax Rules - satisfaction of the assessing officer for invoking section 14A - expenditure in relation to earning exempt income - claim of depreciation is not an expenditure for section 14A - confirmation based on acceptance in earlier assessment years

Disallowance under section 14A - Rule 8D of Income Tax Rules - satisfaction of the assessing officer for invoking section 14A - expenditure in relation to earning exempt income - claim of depreciation is not an expenditure for section 14A - Whether the disallowance of expenditure of Rs. 234,213 under section 14A read with Rule 8D was sustainable in view of the assessee's assertion that no expenditure was incurred to earn the exempt dividend income and in the absence of a proper satisfaction recorded by the Assessing Officer. - HELD THAT: - The Tribunal examined the Assessing Officer's record and found that the assessee had specifically stated and documented that no expenditure was incurred for earning exempt dividend income and had furnished details of total expenditure debited in the books. The major items of expenditure were donations and depreciation, neither of which the AO identified as incurred for earning exempt income. The AO's note (para 3.7 of the assessment order) was held to be a bald, general satisfaction which did not point to any particular expenditure incurred in relation to exempt income and therefore did not constitute the proper satisfaction required to invoke section 14A(2). The Tribunal further observed that donation is not an allowable expense and depreciation is a claim and, following the reasoning in the Special Bench decision relied upon by the assessee, depreciation could not be treated as expenditure for disallowance under section 14A/Rule 8D. The CIT(A)'s confirmation on the basis that the assessee had accepted a similar order for earlier years was held to be an insufficient ground to sustain the disallowance for the year under consideration. On these bases the Tribunal concluded that the AO's application of Rule 8D was not justified and directed deletion of the disallowance. [Paras 7, 8]

Disallowance of Rs. 234,213 made under section 14A read with Rule 8D is deleted; the orders of the lower authorities are reversed.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2012-13, set aside the disallowance under section 14A read with Rule 8D and directed deletion of the addition, holding that the AO had not recorded a proper satisfaction nor shown any expenditure incurred for earning the exempt dividend income; confirmation based on acceptance in earlier years was not a valid basis to sustain the addition.

Stay of demand - Exemption under section 10(38) - Long term capital gains - Manipulation and rigging of stocks - Early hearing - No adjournment unless genuine and bona fide

Stay of demand - Exemption under section 10(38) - Long term capital gains - Manipulation and rigging of stocks - Stay petition against the demand of tax and interest for AY 2014-15 - HELD THAT: - The Tribunal considered the facts that the AO framed assessment u/s 143(3) disallowing exemption claimed u/s 10(38) on alleged long term capital gains from shares, treating the gains as resulting from organised manipulation and rigging in penny stocks; the CIT(A) confirmed the disallowance. Although the assessee maintained that the gains were genuine and accepted that she had a prima facie case, the Bench observed the detailed inquiries recorded by the AO and CIT(A) and declined to grant a stay of the outstanding demand. The Bench recorded that it has not expressed any view on the merits of the appeal, but found the balance of circumstances insufficient to justify a stay of tax and interest. [Paras 1, 2]

Stay petition dismissed.

Early hearing - No adjournment unless genuine and bona fide - Request for early listing of the appeal (ITA No. 2342/Chny/2019) arising from AY 2014-15 - HELD THAT: - In lieu of granting the stay the Tribunal granted the assessee an early hearing before the Division Bench, listing the appeal for hearing on 09.10.2019. The Tribunal imposed the condition that the assessee shall not seek adjournments when the appeal is listed before the regular Bench unless there are genuine and bona fide reasons; the Tribunal clarified that no observations were made on the merits and both parties were present when the date was announced in open court. [Paras 1]

Early hearing granted for 09.10.2019 subject to condition against adjournments; no comment on merits.

Final Conclusion: The stay petition is dismissed; the appeal for AY 2014-15 is granted early hearing before the Division Bench on 09.10.2019 with a condition that the assessee shall not seek adjournment except for genuine and bona fide reasons, and the Tribunal made no comment on the merits of the appeal.

Capital expenditure versus revenue expenditure - expenditure on construction on leasehold land - enduring business advantage test - construction cost on leased land not creating a capital asset of the lessee - incentive for exploring new markets treated as capital receipt - subsidy assisting expansion of market area

Expenditure on construction on leasehold land - capital expenditure versus revenue expenditure - construction cost on leased land not creating a capital asset of the lessee - enduring business advantage test - Whether the cost of construction of a building on leasehold land is capital or revenue expenditure for assessment year 2013-14. - HELD THAT: - The Tribunal held that the facts of the assessee's case are identical to those considered by the Apex Court in Madras Auto Service (P.) Ltd. and the Madras High Court in TVS Lean Logistics Ltd., where construction on leased land did not vest the capital asset in the lessee. Applying the established test (the enduring benefit test), the Tribunal found that though the assessee obtained the advantage of a building during the lease term (and paid nominal rent), the building never became the assessee's capital asset and the expenditure produced a business advantage (reduced rent) rather than acquisition of fixed capital. The Assessing Officer's attempted distinction from the cited precedents was held to be factually incorrect. In view of these authorities and the Tribunal's comparison of facts, the CIT(A)'s allowance of the expenditure as revenue in nature was confirmed. [Paras 5, 6, 7, 8]

The disallowance was set aside; the construction cost on leasehold land is revenue expenditure and the CIT(A)'s order allowing the claim is confirmed.

Incentive for exploring new markets treated as capital receipt - subsidy assisting expansion of market area - capital receipt versus revenue receipt - Whether the incentive received from the Government for exploring new markets is a capital receipt or a revenue receipt for assessment year 2016-17. - HELD THAT: - The Tribunal applied its earlier decision in the assessee's own case for AYs 2011-12 and 2012-13, which considered the Market Linked Focus Product Scheme and the CBDT circular. Relying on the distinction drawn by the Apex Court in Ponni Sugars & Chemicals Ltd., the Tribunal reasoned that where the object of assistance is to expand the market area (enable exploration of new markets), the receipt is capital in nature. Since the incentive was given to explore and expand markets (thereby expanding the assessee's market area rather than merely making current operations more profitable), it was held to be a capital receipt. The CIT(A) had followed the Tribunal's prior view and there was no reason to interfere. [Paras 10, 11]

The incentive is a capital receipt and not assessable as income; the addition made by the Assessing Officer is deleted and the CIT(A)'s order is confirmed.

Final Conclusion: Both appeals filed by the Revenue are dismissed: the tribunal confirmed that the construction cost on leasehold land is revenue expenditure for AY 2013-14, and that the government incentive for exploring new markets for AY 2016-17 is a capital receipt.

Business expenditure allowable under section 37 - genuineness of claimed business expenses - onus on assessee to prove genuineness and verifiability of expenses - related party transactions and scrutiny of payments to connected persons - deduction of TDS not conclusive proof of expenditure - disallowance of unverifiable expenses

Genuineness of claimed business expenses - related party transactions and scrutiny of payments to connected persons - deduction of TDS not conclusive proof of expenditure - onus on assessee to prove genuineness and verifiability of expenses - disallowance of unverifiable expenses - Addition of Rs. 20 lakhs on account of commission payable confirmed. - HELD THAT: - The assessee claimed large commission payments (including Rs. 18 lakhs shown payable at year end and Rs. 2 lakhs as TDS) but failed to produce agreements, bills or the persons to whom commissions were allegedly payable. Documents filed during assessment and on appeal did not establish services rendered; several payees appeared to be related and resided at common addresses (one payee being the assessee's husband). TDS was not timely deposited. The Tribunal accepted the reasoning of the revenue that the assessee, having failed to discharge the evidentiary onus to prove that the commission liabilities were genuine and incurred wholly and exclusively for business, could not rely merely on TDS deduction as conclusive proof. In these circumstances the disallowance of the commission payable as made by the authorities below was held to be justified. [Paras 7]

Addition of Rs. 20 lakhs on account of commission payable confirmed.

Business expenditure allowable under section 37 - genuineness of claimed business expenses - onus on assessee to prove genuineness and verifiability of expenses - disallowance of unverifiable expenses - Part of salary disallowance confirmed as sustained by CIT(A) at the reduced rate (addition of Rs. 10,34,290). - HELD THAT: - The assessee paid substantial salary amounts but failed to produce employee details, attendance registers or receipts to substantiate payments. The Assessing Officer's estimate of unverifiable salary was moderated by the CIT(A) from 30% to 20% of the salary outgo; the Tribunal found that the lower appellate authority had already afforded discretionary relief and that the assessee did not satisfactorily explain the steep fall in profit margin or substantiate the salary payments. On that basis the Tribunal declined to interfere with the CIT(A)'s reduction and confirmed the addition as framed by the appellate authority. [Paras 7]

Addition of Rs. 10,34,290 on account of unverifiable salary expenses confirmed (CIT(A)'s order upheld).

Final Conclusion: The Tribunal dismissed the assessee's appeal for AY 2014-15 and upheld the additions relating to unverifiable commission and salary expenses as confirmed by the CIT(A).

Bogus/non-genuine long term capital gains - manipulated penny stocks and market rigging - exemption u/s10(38) and burden to prove genuineness of transactions - treatment as unexplained cash credit u/s.68 - re-opening and scrutiny based on investigation report

Exemption u/s10(38) and burden to prove genuineness of transactions - manipulated penny stocks and market rigging - treatment as unexplained cash credit u/s.68 - Whether the long term capital gains claimed by the assessees from purchase and sale of Essar (India) Ltd. shares were genuine and, if not, whether the Assessing Officer was justified in treating the sale proceeds as unexplained credit under section 68 and denying exemption under section 10(38). - HELD THAT: - The Tribunal accepted the Assessing Officer's and CIT(A)'s findings based on the investigation report that the assessees acquired shares off-market at Re.1 per share and shortly thereafter sold the same on exchange at about Rs.227 per share, generating abnormally large gains. The sales related to a penny stock which investigation identified as subject to a scheme of manipulation to create fabricated LTCG. The assessees failed to identify counterparties, brokers or operators involved in the off market purchases, and did not place corroborative material to explain the improbable price movement, short holding period and pre-determined nature of exit. Reliance was placed on authorities requiring corroborative evidence where transactions are otherwise suspicious. Given the investigation findings, the anomalous price spike and the absence of satisfactory proof from the assessees, the Tribunal held that the onus to establish genuineness was not discharged and the Assessing Officer was justified in treating the receipts as unexplained credits under section 68 and denying the exemption claimed under section 10(38). [Paras 5, 6]

Findings of manipulation and non-genuineness upheld; receipts treated as unexplained credit u/s.68 and exemption u/s10(38) denied.

Final Conclusion: The appeals by the assessees for assessment years 2012-13 and 2015-16 are dismissed for failure to discharge the onus of proving genuineness of the alleged long term capital gains derived from manipulated penny stock transactions.

Charging section - levy of customs duty on import - definitive countervailing duty - application of section 15(1)(b) of the Customs Act - clearance from warehouse under section 68 - rate and tariff valuation in force on the date of presentation of bill of entry

Application of section 15(1)(b) of the Customs Act - definitive countervailing duty - rate and tariff valuation in force on the date of presentation of bill of entry - Ad-interim stay of proceedings pursuant to the show cause notice dated 13.9.2019 and issuance of notice returnable on 13th November, 2019. - HELD THAT: - The court recorded the petitioner's contention that the levy of countervailing duty is a charging event tied to import and that, under the proviso in law governing clearance from a warehouse, the rate and valuation applicable are those in force on the date a bill of entry for home consumption is presented. The petitioner relied on precedent for the position that duties not leviable at the time of import or manufacture cannot be subsequently imposed at a later stage of clearance. The court did not adjudicate the merits of these contentions; having considered the submissions and authorities cited, it issued notice and granted ad-interim relief by staying further proceedings in respect of the impugned show cause notice dated 13.9.2019. Direct service on respondent No.2 was permitted. [Paras 5]

Proceedings pursuant to the impugned show cause notice dated 13.9.2019 are stayed pending further orders and notice is issued returnable on 13th November, 2019.

Final Conclusion: Notice issued; ad-interim stay granted of actions under the show cause notice dated 13.9.2019 until the returnable date.

Classification under competing tariff headings - preference of specific tariff entry over general/residuary entry - exemption under Notification No 46/2011-Cus - self-assessment and onus on the importer - extended period of limitation under Section 28(4) of the Customs Act, 1962 - relevant date for computation of limitation under Section 28 - interest under Section 28AA of the Customs Act, 1962 - confiscation under Section 111(m) and 111(o) of the Customs Act, 1962 - penalty under Section 114A and Section 112(a) of the Customs Act, 1962 - right to seek cross-examination and adjudicating authority's discretion on natural justice

Classification under competing tariff headings - preference of specific tariff entry over general/residuary entry - Imported melamine kitchenware and tableware are classifiable under tariff heading 392410 (Tableware and Kitchenware) and not under 392490 (Other). - HELD THAT: - From the descriptions on invoices and Bills of Entry (e.g., "Pickle Set", "Butter Dish", "Short Tumbler", "Spoon", "Casserole Bowl") and admissions in statements of the importer's manager and managing director, the goods fall squarely within the HSN definition of Tableware and Kitchenware. Rule 3(a) of the General Rules of Interpretation requires preference for the more specific heading. The Tribunal finds that the specific heading 392410 applies and the classification claimed by the importer under 392490 is not correct. [Paras 4, 33]

Classification under heading 392410 is upheld.

Exemption under Notification No 46/2011-Cus - classification under competing tariff headings - Benefit of exemption under Notification No 46/2011-Cus (Sl. No. 493) is not admissible because it applies only to goods classifiable under heading 392490, not 392410. - HELD THAT: - The exemption notification expressly covers goods falling under tariff heading 392490. Once the goods are correctly classifiable under 392410, they fall outside the scope of the notification and cannot claim its benefit. Accordingly, denial of the exemption by the Commissioner is sustained. [Paras 4]

Exemption under Notification No 46/2011-Cus denied.

Extended period of limitation under Section 28(4) of the Customs Act, 1962 - self-assessment and onus on the importer - relevant date for computation of limitation under Section 28 - Extended period under Section 28(4) cannot be invoked against the appellant because there was no mis-declaration with intent to evade duty; however the Commissioner failed to determine the demand within the normal period using the correct "relevant date", and quantification must be redetermined. - HELD THAT: - Although the revenue argued willful misclassification to obtain the notification benefit, the Tribunal finds that the importer had furnished correct descriptions on import documents, and therefore the error in classification/claim of exemption does not amount to mis-declaration with intent to evade duty for the purpose of invoking the extended five-year period. Separately, the Tribunal observes that the normal period demand must be computed with reference to the statutory "relevant date" under Section 28 (for example, date of clearance under Section 47 or date of adjustment after provisional assessment). The Commissioner did not carry out the required exercise to determine and quantify the demand within the normal limitation period and therefore the matter is remanded for redetermination and re-quantification of duty demandable within the normal period. Only after redetermination can interest under Section 28AA be computed. [Paras 4, 5]

Invocation of extended period set aside; remand for determination and quantification of demand within the normal period and consequent computation of interest.

Confiscation under Section 111(m) and 111(o) of the Customs Act, 1962 - penalty under Section 112(a) of the Customs Act, 1962 - Goods are not liable for confiscation under Sections 111(m) and 111(o) where description and value correspond to the entry; consequently the finding of liability for confiscation and penalty under Section 112(a) cannot be sustained. - HELD THAT: - Sections 111(m) and 111(o) apply to goods which do not correspond in respect of value or particulars with the entry or where a condition of exemption is not observed. Where the importer has furnished correct description and value, erroneous classification alone does not bring the goods within these sub-clauses. The Tribunal therefore holds that the Commissioner's order declaring the goods liable for confiscation and imposing penalty under Section 112(a) is not sustainable. [Paras 4]

Finding of liability for confiscation and penalty under Section 112(a) set aside.

Penalty under Section 114A of the Customs Act, 1962 - Penalty under Section 114A is set aside because mis-declaration with intent to evade duty has not been established. - HELD THAT: - Having concluded that there was no mis-declaration with intent to evade payment of duty, the statutory precondition for imposing penalty under Section 114A is absent. In view of settled precedents on quantification and applicability of such penalties, the Tribunal sets aside the penalty imposed under Section 114A. [Paras 4]

Penalty under Section 114A set aside.

Right to seek cross-examination and adjudicating authority's discretion on natural justice - Denial of the appellant's request to cross-examine witnesses was not a violation of natural justice as the Commissioner recorded reasons for refusal. - HELD THAT: - While an appellant has the right to seek cross-examination of persons whose statements are relied upon, the adjudicating authority has the discretion to allow or disallow such requests after recording reasons. The Commissioner considered the request and recorded sufficient grounds for refusal; those reasons were not challenged and therefore no infringement of natural justice is made out. [Paras 4]

Request for cross-examination properly refused; no breach of natural justice.

Final Conclusion: The Tribunal affirms classification of the imported melamine ware under tariff heading 392410 and denies the exemption under Notification No 46/2011-Cus; it sets aside invocation of the extended limitation period, the confiscation finding, and the penalties under Sections 112(a) and 114A. The matter is remanded to the Commissioner for redetermination and re-quantification of the duty demand within the normal period (using the appropriate "relevant date") and consequent computation of interest under Section 28AA.

Includibility of royalties and licence fees in transaction value under Rule 10(1)(c) of the Customs Valuation Rules - interpretative notes to Rule 10(1)(c) - exclusion of charges for right to reproduce vis-a -vis inclusion of payments for distribution/resale when a condition of sale - condition of sale test for addition to assessable value - confiscation for misdeclaration under Section 111(m) of the Customs Act, 1962 - personal penalty for misdeclaration under Section 112(a) of the Customs Act, 1962 - burden of proof on assessee to establish separability/exclusion of part of royalty

Includibility of royalties and licence fees in transaction value under Rule 10(1)(c) of the Customs Valuation Rules - interpretative notes to Rule 10(1)(c) - exclusion of charges for right to reproduce vis-a -vis inclusion of payments for distribution/resale when a condition of sale - condition of sale test for addition to assessable value - License fees/royalties paid under distribution/licence agreements in respect of imported Digi Beta tapes are includible in the assessable transaction value. - HELD THAT: - The Tribunal examined the licence and distribution agreements and held that the payments were for distribution rights and were payable as a condition precedent to delivery/initial supply of the tangible media. Interpretative Note (1) excludes charges solely for the right to reproduce the imported goods, but Interpretative Note (2) and Rule 10(1)(c) require addition of royalties and licence fees that the buyer is required to pay as a condition of sale. The relevant contracts expressly tied vesting/delivery to payment of the full License Fee/Guarantee, demonstrating that the sale could not occur without those payments; therefore they are includible. The decision relied on higher authority holding that intellectual property embodied in media is goods and that transaction value may include such licence/royalty components; the Tribunal found the appellant did not discharge the burden of proving any separable portion attributable solely to an excluded reproduction right, and hence the entire contested charges had to be added to the assessable value. [Paras 5]

Declared values were rightly rejected and the License Fee/Guarantee paid under the agreements was to be added to the transaction value; enhancement of value sustained.

Confiscation for misdeclaration under Section 111(m) of the Customs Act, 1962 - personal penalty for misdeclaration under Section 112(a) of the Customs Act, 1962 - burden of proof on assessee to establish separability/exclusion of part of royalty - Misdeclaration of value by excluding the licence fees rendered the imported goods liable to confiscation under Section 111(m) and attracted personal penalties under Section 112(a); the redemption fines and penalties imposed were upheld as reasonable. - HELD THAT: - Having concluded that licence/guarantee payments formed part of the assessable value and were not legitimately excluded, the Tribunal held the appellant's non-inclusion amounted to misdeclaration. Consequently, confiscation under Section 111(m) and liability to personal penalty under Section 112(a) followed. The Tribunal noted the quantum of misdeclaration and found the redemption fines imposed by the lower authorities just and reasonable. The appellant's reliance on alternative authorities and commentaries did not discharge the onus to segregate any excluded reproduction-only element; therefore penalties and fines could be sustained. The Tribunal also considered and rejected the appellant's limitation/extended-period/contention in the light of the authorities examined. [Paras 5]

Goods held liable for confiscation for misdeclaration and personal penalties under Section 112(a) were properly imposed; redemption fines and assessed penalties sustained.

Final Conclusion: Appeals dismissed: the Tribunal affirmed enhancement of transaction value by inclusion of licence/guarantee payments (being distribution-related and a condition of sale), and upheld confiscation/penalties and redemption fines as sustainable in law and on the facts.

Classification of blended polyester-viscose woven fabrics under Drawback Schedule entries 551202A and 551502A - distinction between "synthetic" and "artificial" (viscose) fibres for tariff classification - application of General Notes and General Rules of Interpretation of the Customs Tariff to Drawback Schedule - repayment of erroneously or excess paid drawback under Rule 16 of the Drawback Rules - temporal scope for recovery in cases of mis-declaration (reasonable time / five years) - interest on inadmissible drawback under Section 75A of the Customs Act - confiscation and redemption fine where goods are not available for confiscation - penalty under Section 114 for mis-declaration rendering goods liable to confiscation

Classification of blended polyester-viscose woven fabrics under Drawback Schedule entries 551202A and 551502A - distinction between "synthetic" and "artificial" (viscose) fibres for tariff classification - application of General Notes and General Rules of Interpretation of the Customs Tariff to Drawback Schedule - Classification of the exported blended woven fabrics is under Sl No 551502A of the Drawback Schedule and not under Sl No 551202A. - HELD THAT: - The Tribunal accepted the revenue's analysis that Chapter Note 1 and HSN explanatory notes distinguish between synthetic and artificial (regenerated) man-made fibres, with polyester being a synthetic fibre and viscose a distinct artificial fibre. Consequently the Drawback Schedule entries which use the terms "synthetic staple fibre" and "man-made staple fibre" must be read in that technical sense and the General Notes mandate application of Customs Tariff classification at the four-digit level. Material evidence (yarn purchase records and loom cards) showed the exported fabrics were blends (eg. 65/35, 70/30) in which polyester staple fibre was below 85% by weight; filament/texturised polyester yarn could not be counted towards polyester staple fibre percentage. Applying the tariff headings and drawback schedule alignment, the blended fabrics therefore fall within the "other woven fabrics" entry corresponding to 5515 and specifically 551502A of the Drawback Schedule rather than 551202A, and the revenue discharged its onus by documentary evidence rather than solely the recorded statement of the director. [Paras 4]

Classification under Sl No 551502A upheld and claim under Sl No 551202A held incorrect.

Repayment of erroneously or excess paid drawback under Rule 16 of the Drawback Rules - temporal scope for recovery in cases of mis-declaration (reasonable time / five years) - Excess drawback is recoverable under Rule 16 and recovery was within a reasonable time in cases of mis declaration. - HELD THAT: - Rule 16 requires repayment of erroneously or excess paid drawback on demand. Considering authorities on limitation and reasonable exercise of power, the Tribunal held that in mis declaration cases the recovery may be exercised within a reasonable period and, as a guideline, at least five years from disbursement is appropriate. The Tribunal found the department acted within that reasonable period in this matter and that the exporter had misdeclared the goods to obtain higher drawback; accordingly the differential amount is recoverable and the deposit made by the exporter may be appropriated against the demand. [Paras 4]

Demand for recovery of excess drawback under Rule 16 sustained as not time barred.

Interest on inadmissible drawback under Section 75A of the Customs Act - Interest on the inadmissible drawback is payable from the date of disbursement till payment under Section 75A. - HELD THAT: - The Tribunal applied established authority that interest on wrongly paid or short levied amounts is payable compulsorily under the Customs regime. Since inadmissible drawback was disbursed to the appellants, interest for the period from disbursement until repayment was held to be justifiable and demand for interest under Section 75A was upheld, relying on precedent that treats such interest as a civil liability without discretion to withhold. [Paras 4]

Demand for interest on the excess drawback upheld.

Confiscation and redemption fine where goods are not available for confiscation - Order of confiscation and imposition of redemption fine set aside because goods were not available for confiscation or released under bond/undertaking. - HELD THAT: - Although mis declaration would render goods liable to confiscation under Section 113(h)(i), the Tribunal followed binding precedents which hold that confiscation and redemption fine cannot be sustained where the goods are not available for confiscation and were not released against any bond or security. Applying that principle, the Tribunal set aside the Commissioner's order of confiscation and the redemption fine. [Paras 4]

Confiscation and redemption fine set aside.

Penalty under Section 114 for mis-declaration rendering goods liable to confiscation - Penalty under Section 114 is justified against the appellants for mis declaration that rendered the goods liable to confiscation. - HELD THAT: - Section 114 penalises acts or omissions that would render goods liable to confiscation under Section 113. The Tribunal held that, having found the goods were misdeclared so as to procure inadmissible drawback, the appellants were responsible for the incorrect declarations and therefore liable to penalties under Section 114. The Tribunal clarified that the penalty provision operates irrespective of whether confiscation was actually effected. [Paras 4]

Penalties under Section 114 sustained.

Final Conclusion: The Tribunal affirmed classification of the blended polyester-viscose woven fabrics under Sl No 551502A, upheld recovery of excess drawback with interest under Rule 16 and Section 75A as not time barred, sustained penalties under Section 114, but set aside the confiscation and redemption fine because the goods were not available for confiscation; appeals were otherwise dismissed.

Evidentiary value of statements recorded under Section 108 - effect of non-availability/refusal of witness for cross-examination in adjudicatory proceedings - liability of high-sea seller as actual importer where high-sea buyer is a fictitious entity - confiscation under Section 111(o) of the Customs Act - penalty under Section 112(a) of the Customs Act - scope of remand proceedings and enhancement of penalty on re-adjudication

Evidentiary value of statements recorded under Section 108 - effect of non-availability/refusal of witness for cross-examination in adjudicatory proceedings - Statements recorded under Section 108 retain evidentiary value and need not be discarded merely because the declarant/co-noticee did not submit to cross-examination; such statements may be relied upon if not retracted and corroborated by other material. - HELD THAT: - The Tribunal held that the Commissioner was entitled to place reliance on statements recorded under Section 108 notwithstanding that certain persons (notably Shri Jayesh Tanna and others) refused or failed to appear for cross-examination after direction by the CESTAT. The impugned order shows that cross-examination was allowed and efforts were made to procure attendance; one witness (Shri Pankaj Mehta) was cross-examined. The Commissioner examined the totality of evidence and recorded that the statements under Section 108 were not retracted and had probative value. The Tribunal applied precedents of the Supreme Court and earlier authorities holding that statements under Section 108 constitute substantive evidence and that the absence or hostility of a witness does not automatically efface his prior statement; consequently, the adjudicating authority did not commit infirmity in relying upon such statements in the factual matrix of the case (see findings recorded in paras 41-46 and 4.3-4.4). [Paras 42, 43, 44, 45, 46]

Reliance on the statements under Section 108 was upheld and not vitiated by the refusal of certain witnesses to submit to cross-examination; the adjudicating authority could consider them along with other evidence.

Liability of high-sea seller as actual importer where high-sea buyer is a fictitious entity - confiscation under Section 111(o) of the Customs Act - penalty under Section 112(a) of the Customs Act - M/s. Peacock Industries Ltd. (the high-sea seller) and its director were held liable as the actual importers; goods cleared duty-free through a fictitious high-sea buyer were liable to confiscation under Section 111(o) and the seller/director liable for penalty under Section 112(a). - HELD THAT: - The Commissioner recorded findings that the so-called high-sea buyer was a non-existent entity and that the high-sea sale was not at arm's length: identical addresses, return of a substantial portion of the consignment to the seller, and admissions in statements showed that the seller had appropriated goods cleared duty-free. The Commissioner concluded that conditions of the DEEC notification had been violated (goods were not used by the actual user) and that confiscation under Section 111(o) was warranted; consequentially, penalties under Section 112(a) were justified against the seller and its director. The Tribunal sustained these conclusions on the basis that the order rested on a holistic appraisal of evidence and applicable precedent (paras 41-46 and 4.3-4.4). [Paras 42, 43, 44, 45, 46]

Findings that the high-sea seller and its director were effectively the importers and liable to confiscation under Section 111(o) and penalty under Section 112(a) were affirmed.

Scope of remand proceedings and enhancement of penalty on re-adjudication - In remand proceedings the adjudicating authority could not enhance the quantum of penalty beyond what was imposed in the earlier adjudication when the revenue had not appealed against that earlier order; accordingly, the enhanced penalties imposed on re-adjudication were reduced to the earlier levels. - HELD THAT: - The Tribunal observed that the Commissioner's remit on remand is limited and that appellants should not be placed in a more precarious position on re-adjudication than they were before filing the appeal, particularly where the revenue did not appeal the earlier penalty. Relying on Tribunal precedents cited in the impugned order, the Tribunal held that enhancement of penalty in remand proceedings was impermissible and exercised its power to reduce the penalties imposed under Section 112(a) to the quantum fixed in the earlier adjudication (paras 4.5 and 5.1). [Paras 4, 5]

Penalties enhanced in remand proceedings were corrected downward to the amounts imposed in the earlier adjudication.

Final Conclusion: Appeals partly allowed: the Tribunal upheld the Commissioner's findings on confiscation and liability of the high-sea seller/director based on Section 108 evidence, but reduced the penalties imposed on the appellants to the quantum fixed in the earlier adjudication, disposing of the appeals accordingly.

Bona fide baggage - penalty under Section 117 of the Customs Act - seizure of passenger baggage - violation of the Baggage Rules

Bona fide baggage - seizure of passenger baggage - violation of the Baggage Rules - penalty under Section 117 of the Customs Act - Whether the penalty imposed under Section 117 of the Customs Act on the appellant was justified where goods (posters) handed to a passenger for carriage were seized as not being bona fide baggage. - HELD THAT: - The Tribunal found that the packet contained 193 posters handed to the passenger bound for Maldives, the posters were neither prohibited nor restricted and their value and quantity did not indicate trade import/export. The Revenue Representative failed to identify any specific provision of the Baggage Rules that was violated and did not establish that the appellant was involved in illegal export. On the material on record there was no evidence to connect the appellant with an unlawful export transaction or to justify treating the packet as non-bona fide baggage. In the absence of any demonstrated breach of the Baggage Rules or proof implicating the appellant, imposition of penalty under Section 117 was unwarranted. [Paras 6]

Penalty imposed under Section 117 set aside and the appeal of the appellant allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the penalty under Section 117 of the Customs Act, holding that the seized posters constituted bona fide passenger baggage and there was no material to involve the appellant in illegal export.

Custody and control of corporate debtor's assets under Section 25(2) of the Insolvency and Bankruptcy Code, 2016 - effect of SARFAESI proceedings on corporate insolvency resolution process where title has not been conveyed - power of the resolution professional under Section 19(2) of the Insolvency and Bankruptcy Code, 2016 to take custody of assets and seek assistance - assistance under Section 429 of the Companies Act, 2013 for recovery of corporate records from former directors

Custody and control of corporate debtor's assets under Section 25(2) of the Insolvency and Bankruptcy Code, 2016 - effect of SARFAESI proceedings on corporate insolvency resolution process where title has not been conveyed - Whether the resolution professional is entitled to take immediate custody and control of the asset currently held by R5 despite prior SARFAESI possession and part consideration having been paid. - HELD THAT: - The Bench examined the Assignment and Custodian arrangements between the Financial Creditor (R6) and R5 and the antecedent SARFAESI possession. It recorded that, on the materials before it, legal ownership of the asset remains vested in the corporate debtor and the title has not been conveyed to R6 or any third party. The Bench held that SARFAESI proceedings do not affect the CIRP entitlement of the resolution professional to take custody where the title has not been fully transferred under the SARFAESI regime. Part payment of consideration does not defeat the RP's right under the Code to assume custody and control of the corporate debtor's assets. Applying Section 25(2) of the IBC, the Bench directed delivery of possession and custodial control by R5 to the RP within ten days and allowed the MA accordingly. [Paras 3, 4, 5]

R5 directed to deliver possession and custodial control of the corporate debtor's asset to the resolution professional within ten days; MA allowed.

Power of the resolution professional under Section 19(2) of the Insolvency and Bankruptcy Code, 2016 to take custody of assets and seek assistance - assistance under Section 429 of the Companies Act, 2013 for recovery of corporate records from former directors - Whether the erstwhile directors (R1-R4) must produce the corporate records to the resolution professional and what assistance may be sought if they fail to do so. - HELD THAT: - The Bench considered the respondents' contention that company records were not with them on account of prior transfer of shares and the assertion that assets were taken over under SARFAESI. The RP relied on contemporaneous filings (Income Tax, GST, bank signatory records) indicating the former directors' continued access to and knowledge of company affairs until 2019. Finding that the RP has been unable to obtain records and that no undertaking was given by the suspended directors to produce them, the Bench observed that Section 19(2) of the IBC permits the RP to seek assistance to procure records and that Section 429 of the Companies Act, 2013 provides the appropriate official assistance. The Bench therefore directed R1-R4 to hand over the required documents to the RP within ten days and, in default, requested the District Collector of Madurai to assist the RP in obtaining custody of the records and any other assistance necessary for discharge of RP's functions during the CIRP. [Paras 6, 7, 8, 9]

R1-R4 directed to produce the corporate records to the resolution professional within ten days; failing which the District Collector of Madurai is requested to provide assistance to the RP under Section 19(2) IBC r/w Section 429 Companies Act, 2013.

Final Conclusion: MA/381/2019 allowed: R5 ordered to hand over possession and custodial control of the corporate debtor's asset to the resolution professional within ten days; R1-R4 directed to produce company records within ten days, failing which the District Collector of Madurai is requested to assist the resolution professional in obtaining the records and other necessary assistance during the CIRP.

Corporate Insolvency Resolution Process - operational creditor's claim - existence of a dispute - summary nature of insolvency proceedings - admissibility of Section 9 petition - alternative remedy of eviction and recovery

Existence of a dispute - admissibility of Section 9 petition - summary nature of insolvency proceedings - Whether the petition under Section 9 of the IBC was maintainable in view of a pre existing dispute and the operational creditor's failure to establish an undisputed debt and compliance with contractual obligations. - HELD THAT: - The Tribunal found that the corporate debtor had raised substantial disputes prior to the statutory demand - namely, that the lessor had not obtained requisite statutory sanctions, occupancy certificate and other approvals, and had made representations on which the lessee relied. The lease deed contained termination and other clauses which the corporate debtor relied upon, and the petitioner had not terminated the lease or pursued alternative remedies earlier despite issuing notices. The petitioner also failed to demonstrate that it had fulfilled obligations under the lease (including delivery of premises in terms of the deed and treatment of rent free period and security deposit). Given that proceedings under the Code are summary in nature and cannot be used to decide disputed questions of fact and law, the admitted and pleaded disputes over entitlement to rent and non compliance by the petitioner rendered the claimed debt not free from dispute. Consequently the petition was held not maintainable under Section 9. [Paras 11, 12, 13, 14]

Petition dismissed as the claimed debt was subject to a pre existing dispute and the petitioner failed to prove entitlement to the rents claimed; Section 9 petition not maintainable.

Final Conclusion: C.P.(IB) No.134/BB/2019 dismissed for want of entitlement to invoke CIRP under Section 9; petitioner remains at liberty to pursue other remedies available under law.