TaxTMI Updates e-Newsletter
Oct 15,2022

Reasoned order / speaking order requirement - Non-speaking order - Quashing and remand - Opportunity of hearing / personal hearing - Refund of tax - Limitation for refund under Section 54 of the Central Goods and Services Tax Act, 2017

Reasoned order / speaking order requirement - Non-speaking order - The impugned order rejecting the refund application is a non-speaking order and is liable to be set aside. - HELD THAT: - The Court found that the order dated 16.03.2022 rejecting the petitioner's refund claim records only the conclusion 'delay in refund application' without any reasoning. The authority did not advert to or deal with the detailed objections filed by the petitioner on 10.03.2022 contesting limitation and other points. In the absence of any explanation or application of mind to the objections, the order fails the requirement of being a speaking, reasoned order and cannot stand. [Paras 9]

Impugned order dated 16.03.2022 set aside as non-speaking.

Quashing and remand - Opportunity of hearing / personal hearing - Refund of tax - Limitation for refund under Section 54 of the Central Goods and Services Tax Act, 2017 - The refund application must be reconsidered afresh after giving the petitioner a reasonable opportunity of hearing, including personal hearing, within a stipulated time. - HELD THAT: - Since the impugned order was invalidated for lack of reasons and failure to consider the petitioner's objections (including the contention regarding limitation under Section 54), the matter is remitted to respondent No.1 for fresh adjudication. The authority is directed to afford the petitioner a reasonable opportunity of hearing, including personal hearing, and to pass a reasoned order on the refund application dated 14.01.2022. The Court prescribed that this exercise be completed within three months from receipt of a copy of the judgment. [Paras 10]

Matter remanded to respondent No.1 for fresh decision on the refund claim after hearing the petitioner within three months.

Final Conclusion: The writ petition is allowed in part: the order dated 16.03.2022 rejecting the refund claim is set aside for being non-speaking, and the matter is remitted to respondent No.1 to decide the refund application afresh after giving the petitioner a reasonable and personal hearing within three months; no order as to costs.

Cancellation and transfer of GST registration on death of sole proprietor - Linking of GSTIN of transferor and transferee - Activation/opening of common portal to enable electronic filing of FORM GST REG-16 - Completion of tax liability under Section 93 of the CGST Act, 2017 - CBIC Circular No.96/15/2019-GST clause 3(b) - Substance over form / avoidance of hyper technicality in compliance

Cancellation and transfer of GST registration on death of sole proprietor - Linking of GSTIN of transferor and transferee - Activation/opening of common portal to enable electronic filing of FORM GST REG-16 - CBIC Circular No.96/15/2019-GST clause 3(b) - Substance over form / avoidance of hyper technicality in compliance - Whether the petitioner should be permitted to have the GSTIN of the deceased proprietor's registration linked with the new GSTIN by opening the common portal to allow filing of FORM GST REG-16 notwithstanding earlier intimation given in a wrong format. - HELD THAT: - The petitioner informed the Department of the proprietor's death by a hard copy letter but did not upload the requisite FORM GST REG-16 on the common portal, with the result that the system did not link the earlier GSTIN to the new GSTIN. The respondents contend that cancellation was made in FORM GST REG-29 and not FORM GST REG-16, therefore linkage could not be effected. The Court accepted that the factual position - non linkage of the GSTINs due to absence of electronic filing of FORM GST REG-16 - is not disputed. Having regard to CBIC Circular No.96/15/2019-GST (clause 3(b)) which contemplates electronic filing of FORM GST REG-16 for cancellation on account of death and linking of transferee GSTIN, the Court rejected a rigid hypertechnical stance that would deny the petitioner the opportunity to regularise the position. The Court found the petitioner acted bona fide in intimating the death and sought clearance of tax liabilities; accordingly the respondents were directed to activate the common portal and permit upload of FORM GST REG-16 so that linkage can be effected as envisaged by the said circular.

The respondents are directed to activate the common portal within 30 days and allow the petitioner to upload FORM GST REG-16, after which the GSTINs of the transferor and transferee shall be linked in accordance with clause 3(b) of CBIC Circular No.96/15/2019-GST.

Final Conclusion: Writ petition allowed: petitioner granted opportunity to electronically file FORM GST REG-16 by activation of the common portal and have the earlier GSTIN linked to the new GSTIN to enable completion of tax liabilities; no order as to costs.

Grant of regular bail - custody unnecessary for further investigation where investigation completed and charge sheet filed - gravity of economic offence - bail is the rule and jail is the exception - conditions attached to bail to allay prosecutorial apprehensions

Grant of regular bail - custody unnecessary for further investigation where investigation completed and charge sheet filed - gravity of economic offence - conditions attached to bail to allay prosecutorial apprehensions - Entitlement of the petitioner to be released on regular bail in proceedings under the CGST Act. - HELD THAT: - The Court found that the investigation in the case had been completed and the challan/charge sheet presented; the petitioner had been in custody since 17.5.2022; recoveries including laptop and documents had been effected; nothing further remained to be recovered from the petitioner; there were 21 prosecution witnesses (officials of the Department) and the magisterial trial had not yet commenced. While acknowledging that the alleged offences are economic in nature and their gravity must be considered, the Court applied the settled precept that bail is ordinarily the rule and continued custody is not justified where continued detention is not necessary for further investigation. Reliance was placed upon precedents emphasizing that completed investigation and filing of the charge sheet weigh in favour of bail, subject to conditions to allay prosecutorial apprehensions. Having balanced the competing considerations and noting absence of allegations that the petitioner was a beneficiary of the alleged excess ITC or involved in other cases, the Court concluded that further incarceration would not serve any useful purpose and that bail should be granted on stringent conditions.

Petitioner granted regular bail on furnishing bail/surety bonds of Rs.10 lakhs to the satisfaction of the trial Court/Duty Magistrate and subject to conditions including surrender of passport, non tampering with evidence, not intimidating witnesses, undertaking to attend trial dates, not changing residence without intimation, and not committing a similar offence; breach would invite cancellation.

Final Conclusion: The petition for regular bail is allowed; the petitioner is released on bail on the enumerated conditions and subject to compliance and availability for trial, with liberty to the trial Court to impose further conditions or for the Department to seek cancellation in case of breach.

Regular bail under Section 439 Cr.P.C. - investigation completed and charge-sheet filed - economic offences and gravity of offence - non-beneficiary status of the accused - risk of tampering with evidence and witness intimidation - magisterial trial with maximum sentence of five years - conditional bail including surrender of passport and furnishing surety

Regular bail under Section 439 Cr.P.C. - investigation completed and charge-sheet filed - non-beneficiary status of the accused - magisterial trial with maximum sentence of five years - risk of tampering with evidence and witness intimidation - conditional bail including surrender of passport and furnishing surety - Grant of regular bail to the petitioner in proceedings under the Central Goods and Services Tax Act, 2017. - HELD THAT: - The Court applied established bail jurisprudence recognising that while economic offences may be grave, the grant of bail is to be considered on the facts of each case. Relying on precedents that emphasise that completed investigation and filing of the charge-sheet reduce the need for custodial interrogation, the Court noted that the investigation in the present matter is complete, the challan has been presented, no recovery is sought from the petitioner, the petitioner is not alleged to have been the beneficiary of the impugned transactions, and he has been in custody since 17.5.2022. The matter is set for a Magisterial trial with a maximum prescribed sentence of five years and involves 21 prosecution witnesses. In those circumstances the Court concluded that further incarceration would not serve any useful purpose, subject to safeguards to allay concerns of the Department about tampering with evidence or intimidating witnesses. The Court therefore directed release on regular bail on stringent and specific conditions, including surety/bail bonds, surrender of passport, undertaking to attend trial, prohibition on tampering with evidence or influencing witnesses, and liberty to the trial Court to impose further conditions or for the Department to move for cancellation on breach of conditions.

Petition allowed; petitioner released on regular bail subject to furnishing bail/surety bonds of Rs.10 lakhs, specified conditions (including surrender of passport, no tampering with evidence or witness intimidation, undertaking to attend trial), and the trial to proceed independently.

Final Conclusion: The petition for regular bail is allowed on the stated conditions and security; the trial shall proceed independently and the Department may seek cancellation of bail if any condition is violated.

Audit under Section 65 of the CGST Act, 2017 - Scrutiny of returns under Section 61 of the CGST Act, 2017 - Prohibition of parallel proceedings by different wings of the same department for the same tax period - Show cause notice, opportunity of personal hearing and requirement of a speaking order - Restraint on further proceedings in respect of the same assessment period

Audit under Section 65 of the CGST Act, 2017 - Prohibition of parallel proceedings by different wings of the same department for the same tax period - Whether other wings of the department (Anti Evasion wing and Range Office) could proceed with enforcement action for the same financial years after audit proceedings under Section 65 had commenced. - HELD THAT: - The Court found that three wings of the same department had initiated proceedings for the identical tax periods while audit proceedings under Section 65 had already been set in motion by the Audit Commissionerate. Observing that parallel proceedings by multiple departmental wings for the same period are inappropriate, especially when an audit is underway, the Court held that the audit proceedings should be allowed to proceed to their logical conclusion and that the other wings should not continue parallel action in respect of the same period. The Court noted the absence of coordination between departmental wings and emphasised that, given the ongoing audit, the Anti Evasion wing and the Range Office must be restrained from further proceedings in respect of those periods. [Paras 4, 5, 6, 7, 9]

The Anti Evasion wing and the Range Office are restrained from proceeding further against the appellants for the financial years 2017-2018, 2018-2019 and 2019-2020 while audit proceedings under Section 65 are pending.

Show cause notice, opportunity of personal hearing and requirement of a speaking order - Restraint on further proceedings in respect of the same assessment period - What procedural directions should govern the pending audit action and how the department should proceed in respect of the matters raised by the audit. - HELD THAT: - The Court directed that the respondents who had initiated the audit must issue a formal show cause notice to the appellants within a specified period, afford a reasonable opportunity to file replies and produce documents, and provide an opportunity for personal hearing (physical or virtual) to the authorised representative. Thereafter a speaking order on merits was required to be passed within a short, prescribed timeframe after conclusion of the personal hearing. The Court confined its direction to the specified financial years and clarified that the restrained wings remain free to issue notices for other assessment periods if relevant material exists. The directions are procedural and intended to ensure adjudication on merits in an orderly and coordinated manner. [Paras 8, 10]

The first and fourth respondents are directed to issue show cause notices within six weeks, afford opportunity to reply and personal hearing, and thereafter pass a speaking order on merits within three weeks of the hearing; the direction is confined to the specified financial years.

Final Conclusion: Appeal allowed; the Single Bench order is set aside. The Court restrained the Anti Evasion wing and the Range Office from proceeding further for the financial years 2017-2018 to 2019-2020, directed the auditing respondents to follow specified procedural steps (issue show cause notice, permit replies and hearing, and pass a speaking order) within the timelines fixed, and left open the right of the restrained wings to act in respect of other assessment periods.

Benefit under Section 10(20) of the Income Tax Act - grant of tax exemption not claimed by the assessee - application of Sections 11 and 12 of the Income Tax Act - quashing and setting aside of impugned judgment and orders - remand for fresh consideration

Whether the High Court [2017 (9) TMI 1724 - RAJASTHAN HIGH COURT] was justified in dismissing the Revenue's appeals by granting the assessee the benefit under Section 10(20) when the assessee had not claimed that benefit. - HELD THAT: -When even respondent/Assessee never claimed the benefit under Section 10(20) of the Income Tax Act, 1961, the High Court is not justified in dismissing the appeals by granting the benefit to the respondent/Assessee under Section 10(20) of the IT Act. Under the circumstances, the impugned judgment and orders passed by the High Court are unsustainable and the matters are to be remanded to the High Court to consider the appeals afresh in accordance with law and on its own merits.

The present appeals succeeds. The impugned judgment and orders passed by the High Court are hereby quashed and set aside. The matters are remanded to High Court to consider the appeals afresh.

Transfer pricing treatment of receivables - Disallowance under Section 40(a)(ia) in relation to withholding obligations under Section 195 and deductions under Section 192 - Characterisation of payments as reimbursement or salary - Findings of fact versus substantial question of law

Transfer pricing treatment of receivables - Findings of fact versus substantial question of law - Deletion of the transfer-pricing adjustment made on account of receivables - HELD THAT: - The Tribunal's finding that the assessee was a debt-free, 100% captive service provider and that no interest was paid or earned led to the deletion of the TP adjustment in respect of receivables. This Court concurred with the Tribunal's factual conclusion, noting that a single-year figure of receivables does not necessarily indicate a pattern amounting to an international transaction and that the Transfer Pricing Officer must investigate patterns over time. Prior decisions were considered and distinguished on the basis that the Tribunal returned a non-perverse finding of fact. Consequently, the issue does not give rise to any substantial question of law. [Paras 6, 15]

The Tribunal's deletion of the TP adjustment in respect of receivables is upheld; the matter is a question of fact and raises no substantial question of law.

Disallowance under Section 40(a)(ia) in relation to withholding obligations under Section 195 and deductions under Section 192 - Characterisation of payments as reimbursement or salary - Deletion of additions under Section 40(a)(ia) read with Section 195 where tax was deducted under Section 192 - HELD THAT: - The Tribunal found, and this Court agreed, that once the nature of the payment was determined to be salary and tax was deducted under Section 192, Section 195 had no application and the disallowance under Section 40(a)(ia) could not be sustained. The Court further held that precedents relied upon by the Revenue were inapplicable because the Tribunal had found that the real employer of seconded employees remained the Indian entity and payments were in the nature of salary/reimbursements rather than technical services. [Paras 11, 12, 15]

The Tribunal's deletion of the additions under Section 40(a)(ia) is upheld.

Validity of draft order framed under Section 144C(1) where issued in name of a non-existent company - Procedural effect of misnaming in draft orders and subsequent proceedings - Challenge to the draft order framed under Section 144C(1) being in the name of a non-existent company - HELD THAT: - The Court declined to decide the substantial question proposed by the Revenue regarding whether the draft order framed under Section 144C(1) being in the name of a non-existent company rendered subsequent proceedings non-est. Although the Court indicated it was inclined to admit that question, it refrained from deciding it because the Court agreed with the Tribunal's factual findings on the other issues, which meant no substantive addition could be sustained in the present appeal. The question was therefore left open for adjudication in an appropriate matter. [Paras 16]

Question left open to be agitated in an appropriate matter; not decided in this appeal.

Final Conclusion: The appeal is dismissed. The Tribunal's deletions of the transfer-pricing adjustment for receivables and the additions under Section 40(a)(ia) are upheld as questions of fact giving rise to no substantial question of law; the procedural question concerning the misnaming of the draft Section 144C(1) order is left open for future adjudication.

Disallowance under Section 14A - Application of Section 14A to income forming part of total income - Effect of tax sparing credit and DTAA on taxability of dividends - Rebate under Section 90(2) read with Article 25 of the Indo Oman DTAA - Applicability of Section 14A where Chapter VI A deductions or excluded income are claimed

Disallowance under Section 14A - Application of Section 14A to income forming part of total income - Effect of tax sparing credit and DTAA on taxability of dividends - Whether expenditure claimed by the assessee in relation to dividend income from an overseas company could be disallowed under Section 14A where tax on that dividend is effectively not payable in the source country or in India by reason of rebate under the DTAA. - HELD THAT: - The Court held that Section 14A(1) disallows deductions only in respect of expenditure incurred in relation to income which does not form part of the "total income" under the Act. Dividend from OMIFCO, Oman was chargeable to tax in India under the head "Income from other sources" and thereby included in the computation of total income. However, a rebate of tax was allowed to the assessee under Section 90(2) read with Article 25 of the Indo Oman DTAA (tax sparing credit), which resulted in the dividend being in the nature of excluded income for the assessee's effective tax liability. Applying the principle that Section 14A is inapplicable where the income concerned is treated as excluded or where claims permitted under Chapter VI A are involved (as illustrated by CIT v. Kribhco), the Court concluded that Section 14A would not be attracted in the factual matrix before it. The reasoning in Kribhco was relied upon to emphasise that income which is included in total income for computation and then relieved by a statutory rebate or deduction cannot be treated as income "which does not form part of the total income" for the purposes of Section 14A. [Paras 3, 4, 5]

Section 14A disallowance could not be sustained in the circumstances; the appeal raised no substantial question of law and was dismissed.

Final Conclusion: The High Court dismissed the income tax appeal relating to AY 2007-08, holding that Section 14A did not apply to disallow expenditure in respect of the dividend income in view of the rebate under Section 90(2) read with Article 25 of the Indo Oman DTAA and the principles exemplified in CIT v. Kribhco.

Assessment under Section 153A - requirement of incriminating material for reopening completed assessments - distinction between abated and completed assessments - nexus between additions and seized/post-search material

Assessment under Section 153A - requirement of incriminating material for reopening completed assessments - nexus between additions and seized/post-search material - Whether additions/disallowances could be sustained under Section 153A in respect of assessment years which had attained finality where no incriminating material was found in the search - HELD THAT: - The Court accepted the ITAT's finding that the assessments for the years in question were completed prior to the search and that there was no reference to any incriminating material discovered during the search to justify reopening. Relying on this Court's precedents, including the principles summarised in PCIT v. Meeta Gutgutia and the decisions in Kabul Chawla and Bhadani Financiers Pvt. Ltd., the Court reiterated that while Section 153A empowers the assessing officer to assess or reassess income for the six years, completed assessments can be interfered with under Section 153A only on the basis of incriminating material unearthed during the search or other post-search material having a nexus with the seized material. In absence of any such incriminating material, the impugned additions/disallowances could not form the basis for assessment under Section 153A and were therefore not sustainable. The Court noted that the question is presently under challenge before the Supreme Court in connected proceedings but observed that there is no stay of the High Court decisions relied upon. [Paras 5, 7]

The additions/disallowances made in completed assessment years in absence of incriminating material were held unsustainable and were set aside; the appeal was dismissed as covered by the High Court's earlier decisions.

Final Conclusion: Appeal dismissed; additions/disallowances in completed assessment years were deleted for want of incriminating material linking them to the search, the order to abide by the final decision of the Supreme Court in the related SLP.

Provisional attachment to protect the interests of the revenue - cessation of provisional attachment upon expiry of statutory period - extension of provisional attachment under the proviso to Section 281B - disposal of stay application by Assessing Officer after hearing

Disposal of stay application by Assessing Officer after hearing - continuance of attachment pending adjudication of stay application - Direction permitting the petitioner to file a stay application before the Assessing Authority and requirement that the Assessing Authority decide it after hearing, with the existing attachment of fixed deposits to continue in the interim. - HELD THAT: - The petitioner had challenged an assessment order and had filed a stay application before the Principal Commissioner. The records produced by the Department showed that the Principal Commissioner had disposed of that stay application by directing the petitioner to move the Assessing Authority. The court permitted the petitioner to move the stay application before the Assessing Authority and directed that such stay application, if filed, shall be disposed of by the Assessing Authority after hearing the petitioner and in accordance with law. Meanwhile, the court clarified that the provisional attachment of the fixed deposits shall continue. [Paras 2, 3, 4, 5]

Petitioner permitted to move the stay application before the Assessing Authority; the Assessing Authority is directed to decide it after hearing and in accordance with law; attachment of fixed deposits to continue.

Provisional attachment to protect the interests of the revenue - cessation of provisional attachment upon expiry of statutory period - extension of provisional attachment under the proviso to Section 281B - Validity and operation of provisional attachment made under Section 281B after the assessment order dated 19.08.2021 and whether such attachment could continue beyond the statutory period. - HELD THAT: - Section 281B provides for provisional attachment to protect revenue pending proceedings for assessment and prescribes that such attachment shall cease after six months, subject to a proviso permitting extension by specified authorities so that total period of extension shall not exceed two years or sixty days after the date of order of assessment or reassessment, whichever is later. The assessment order in the present case was passed on 19.08.2021; accordingly the period of sixty days after the date of assessment under the proviso would expire on 19.10.2021. Thereafter no further extension in terms of Section 281B is permissible. The impugned provisional attachment dated 17.02.2021 therefore lapsed on expiry of the statutory period, and could not subsist pending the writ petition. [Paras 6, 7, 8, 10, 11]

Writ petition allowed insofar as attachment under Section 281B had lapsed upon expiry of the statutory period; impugned attachment cannot continue.

Final Conclusion: W.P.No.24176 of 2021 disposed with direction to approach the Assessing Authority for stay, which shall be decided after hearing; attachment of fixed deposits to continue in the interim. W.P.No.24180 of 2021 allowed as the provisional attachment under Section 281B lapsed on expiry of the statutory period.

Characterisation of agricultural land for capital gains - application of Section 50C valuation for capital gains - consistency in treatment of co-owners in assessment - unexplained cash credit under Section 68

Characterisation of agricultural land for capital gains - application of Section 50C valuation for capital gains - consistency in treatment of co-owners in assessment - Whether the lands sold by the assessee are agricultural lands and therefore not capital assets liable to capital gains, and whether additions based on Section 50C are sustainable - HELD THAT: - The Tribunal examined the material on record including sale deeds, a certificate of the Patwari (VAO) recording distance of the lands from the municipality and noting agricultural cultivation (soyabean and guava), and the fact that the Commissioner (Appeals) in the co-owner's appeal had accepted that the impugned lands were agricultural. Having regard to the Patwari's certificate, the Revenue's own records showing agricultural produce on the lands, and the acceptance in the co-owner's case, the Tribunal adopted a consistent approach. On that basis the Tribunal held that the lands are agricultural in nature and not capital assets attracting capital gains; the additions made by applying Section 50C were therefore deleted. [Paras 5, 6, 8, 9]

Addition on account of long term capital gains (including invocation of Section 50C) deleted; lands held to be agricultural and not capital assets.

Unexplained cash credit under Section 68 - Whether the cash deposits detected in the assessment years could be explained by the assessee as withdrawals converted into deposits or otherwise substantiated, so as to avoid being treated as unexplained cash credits under Section 68 - HELD THAT: - The Tribunal considered the assessment order and the Commissioner (Appeals)'s finding that the assessee failed to produce relevant books of account or supporting documents to establish linkage between cash withdrawals and the cash deposits. The Commissioner (Appeals) recorded that the onus to substantiate the sources rested on the assessee and, in the absence of documentary evidence, the submissions were narrative and lacked evidentiary value. The assessee was unable to demonstrate before the Tribunal the requisite linkage or produce corroborative records. Accordingly, the Tribunal sustained the addition treating the deposits as unexplained cash credits under Section 68. [Paras 11, 12, 13]

Addition of cash deposits as unexplained cash credit under Section 68 confirmed; issue dismissed in the assessee's appeal.

Final Conclusion: The Tribunal allowed the appeals in part by deleting the long term capital gains additions (holding the lands to be agricultural) for AYs 2008-09 and 2009-10, but dismissed the appeals on the issue of unexplained cash deposits under Section 68; both appeals are partly allowed.

Depreciation deduction and requirement of use "wholly and exclusively" for business purposes - Disallowance for cash payments exceeding prescribed statutory threshold under prohibition on excessive cash payments - Assessee's burden to lead evidence to substantiate claims before the adjudicating authority

Depreciation deduction and requirement of use "wholly and exclusively" for business purposes - Assessee's burden to lead evidence to substantiate claims - Validity of disallowance of depreciation claimed on furniture and fixture on the ground that the asset was not shown to be used wholly and exclusively for business - HELD THAT: - AO observed that depreciation was claimed for furniture and fixture attached to a flat in Gurgaon but assessee did not furnish concrete evidence to demonstrate that the property and attached furniture were used wholly and exclusively for business; accordingly AO disallowed the depreciation. CIT(A) confirmed the disallowance. Before the Tribunal the assessee failed to appear despite repeated notices and did not place any documentary material to rebut the findings of the lower authorities. The Tribunal affirmed that where an assessee files an appeal it is incumbent on the assessee to lead evidence in support of the claim, and in the absence of any contrary material the Tribunal would not disturb the concurrent findings of AO and CIT(A). [Paras 6, 9]

Disallowance of depreciation on furniture and fixture sustained; appeal on this ground dismissed.

Disallowance for cash payments exceeding prescribed statutory threshold under prohibition on excessive cash payments - Assessee's burden to lead evidence to substantiate claims - Sustainability of addition/upliftment under the provision disallowing cash payments exceeding the prescribed limit (resulting in disallowance of expenses) - HELD THAT: - AO found various cash payments in Vehicle Repair & Maintenance ledger exceeding the prescribed limit and, on assessee's failure to furnish convincing justification for such cash payments, disallowed the amounts under the applicable provision. CIT(A) upheld the disallowance. The assessee did not appear before the Tribunal nor produce any documents to controvert the findings of the lower authorities despite repeated notices; accordingly the Tribunal declined to interfere with the concurrent findings as there was no material before it to warrant reversal. [Paras 7, 9]

Disallowance of cash payments exceeding the prescribed limit sustained; appeal on this ground dismissed.

Final Conclusion: Both contentious additions - disallowance of depreciation claimed on furniture and fixture for lack of proof of exclusive business use, and disallowance of cash payments exceeding the statutory limit for want of justification - were upheld by the Tribunal as the assessee failed to place any evidence before it; the appeal is dismissed.

Application of Section 50C and the proviso allowing stamp valuation on date of agreement for computing full value of consideration - Effect of a registered agreement with part payment as transfer for computation of capital gains - Admissibility of transfer/registration expenses as cost of acquisition or improvement

Application of Section 50C and the proviso allowing stamp valuation on date of agreement for computing full value of consideration - Effect of a registered agreement with part payment as transfer for computation of capital gains - Whether the Assessing Officer and CIT(A) were justified in adopting the stamp valuation on the date of registration and applying Section 50C, notwithstanding an earlier registered agreement to sell with substantial part payment. - HELD THAT: - The Tribunal accepted the assessee's contention that the matter is governed by the principle affirmed by the Hon'ble Supreme Court in Sanjeev Lal v. CIT, namely that a registered agreement to sell accompanied by part payment can constitute a transfer for the purpose of computing capital gains. Although a proviso enabling use of stamp valuation as on the date of the agreement was inserted by the Finance Act, 2016 with effect from 01.04.2017, the Tribunal held that the Supreme Court's earlier decision operating on settled legal principle renders the Assessing Officer's exclusive reliance on the circle rate of the year of registration unsustainable in the present facts where a registered agreement existed and substantial consideration had been paid before registration. For these reasons the authorities below were directed to re-examine valuation consistent with the legal principle that an earlier agreement with part payment may determine the full value of consideration for capital gains purposes. [Paras 5]

The action of the authorities in taking the circle rate of the year of registration under Section 50C is set aside and the matter is directed to be re-examined in the light of the governing Supreme Court precedent and the existence of the registered agreement with part payment.

Admissibility of transfer/registration expenses as cost of acquisition or improvement - Whether the transfer charges and other registration expenses claimed by the assessee should be allowed as part of cost of acquisition/improvement. - HELD THAT: - The Assessing Officer disallowed the claimed transfer and registration expenses for lack of satisfactory proof; the CIT(A) upheld that conclusion on the same factual basis. The assessee, however, produced a letter and details before the AO which, according to the assessee's counsel, furnished necessary particulars. In the interest of justice the Tribunal did not decide the matter on merits but directed a fresh adjudication by the Assessing Officer with opportunity to the assessee to place evidence and be heard, so that admissibility of the expenses may be determined afresh in accordance with law. [Paras 6, 8, 9]

The issue of claimed transfer/registration expenses is remanded to the Assessing Officer for fresh examination and decision after affording the assessee an opportunity of being heard.

Final Conclusion: The appeal is partly allowed: the valuation taken under Section 50C by the authorities is set aside for re-examination in view of the registered agreement with part payment and the relevant Supreme Court precedent; the claim for transfer/registration expenses is remanded to the Assessing Officer for fresh adjudication after giving the assessee an opportunity of hearing.

Limitation under Section 201(3) for TDS to resident payees - time-bar for initiation of proceedings where no limitation is prescribed (NHK principle) - reimbursement payments and not income chargeable to tax for purposes of Section 195 - treatment of payments to non-residents for TDS

Limitation under Section 201(3) for TDS to resident payees - time-bar for initiation of proceedings where no limitation is prescribed (NHK principle) - treatment of payments to non-residents for TDS - Whether the notice and order under Section 201/201(1A) for non-deduction of TDS on payments to a non-resident were time-barred. - HELD THAT: - The Tribunal noted that Section 201(3) on limitation specifically prescribes time limits in respect of TDS for residents only. In the absence of an express statutory limitation for orders in respect of payments to non-residents, the Tribunal applied the principle drawn from NHK Japan Broadcasting Corporation that action should be initiated within four years where no specific limitation is provided. The CIT(A) had held the AO's order beyond four years to be time-barred, and the Tribunal found no reason to disagree. The Tribunal observed that the jurisdictional High Court decision relied on by the CIT(A) was applicable on limitation in the present case and that the Revenue issued the notice after the four-year period prescribed by the applicable principle, rendering the order time-barred. [Paras 7, 8]

The notice and order under Section 201/201(1A) were time-barred and the addition could not be sustained.

Reimbursement payments and not income chargeable to tax for purposes of Section 195 - treatment of payments to non-residents for TDS - Whether the payments made to the non-resident holding company for data line charges were reimbursements (not taxable) and therefore not liable to TDS under Section 195. - HELD THAT: - On the merits the Tribunal accepted the CIT(A)'s factual finding that the amounts paid to the non-resident Allscripts USA represented actual cost-sharing/reimbursement for third party network connectivity without any element of markup. The Tribunal observed that the assessee had furnished the agreement and details showing inter-company cost sharing and that the AO could not disregard the contents merely because of the length of the agreement. As the payments were on an actual cost basis and not chargeable to tax, the requirement to deduct tax under Section 195 did not arise and the addition under Section 201(1)/201(1A) was rightly deleted by the CIT(A). [Paras 7]

Payments were held to be reimbursements not chargeable to tax and no TDS under Section 195 was attracted; the addition was deleted.

Final Conclusion: The Tribunal dismissed the Revenue's appeal: the Section 201/201(1A) order was time barred under the applicable limitation principle and, on merits, the payments to the non resident were reimbursements not chargeable to tax so no TDS under Section 195 was required.

Deduction under section 54 - deduction under section 54F - date of booking versus date of possession for claim of exemption - construction versus purchase for capital gains purpose - CBDT Circular Nos. 471 and 672

Deduction under section 54 - deduction under section 54F - date of booking versus date of possession for claim of exemption - CBDT Circular Nos. 471 and 672 - Claim for exemption under section 54 and section 54F was allowable notwithstanding earlier booking of the flat, the relevant date for satisfying the conditions being possession/acquisition under the facts of this case. - HELD THAT: - The Tribunal held that the assessee's case fell within the scope of CBDT Circular Nos. 471 and 672 and the line of judicial decisions treating agreements with builders for flats as construction for capital gains purposes. The Assessing Officer and the CIT(A) had disallowed the exemptions on the ground that the flat was booked before the date of transfer giving rise to long term capital gain. The Tribunal observed that the CIT(A) failed to take proper cognizance of the cited authorities and that the assessee had utilized the capital gain within one year of taking possession. Applying the Circulars and the precedents relied upon, the Tribunal concluded that the assessee was entitled to the exemptions under sections 54 and 54F and directed the Assessing Officer to grant the deductions. [Paras 5, 6]

Exemptions under section 54 and 54F allowed; appeal allowed ex parte and Assessing Officer directed to grant deduction.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2010-11, holding that on the facts and in view of CBDT Circulars and precedents the conditions for exemption under sections 54 and 54F were satisfied with reference to possession and directed the Assessing Officer to grant the deductions.

Assessment under section 153A read with section 143(3) - search and seizure under section 132 - additions not based on incriminating material seized - finality of return where no proceedings were pending on date of search - treatment of unsecured loans as unexplained cash credits under section 68 - disallowance of indexation cost for lack of documentary proof of purchase - relevance of seized material to sustain additions in post-search assessments

Assessment under section 153A read with section 143(3) - additions not based on incriminating material seized - finality of return where no proceedings were pending on date of search - disallowance of indexation cost for lack of documentary proof of purchase - treatment of unsecured loans as unexplained cash credits under section 68 - relevance of seized material to sustain additions in post-search assessments - Validity of deletions by CIT(A) of additions made in assessments framed under section 153A r.w.s. 143(3) (indexation disallowance and additions under section 68) for the years under appeal. - HELD THAT: - CIT(A) found that on the date of search no assessment or reassessment was pending for the years in question and that no seized document or incriminating material relating to the assessed years (notably A.Y. 2009-10) was discovered during the search. On the facts, the AO had disallowed indexation benefits for jewellery and shares for want of documentary proof of purchase and had made additions treating unsecured loans as unexplained cash credits under section 68 because confirmations and records were not furnished. The Tribunal accepted the CIT(A)'s factual findings - which the AO did not contest on remand - that the additions were not founded on any incriminating material seized during the search and that the return for the year had attained finality as no notice under section 143(2) had been issued within the statutory period. In those circumstances, and in the absence of any contrary or binding authority placed before the Bench, the Tribunal upheld the deletions made by CIT(A) of the disallowance of indexation and of the additions under section 68, holding that the AO had not made out a case to sustain the additions in assessments framed under section 153A r.w.s. 143(3). [Paras 13, 17, 18, 20, 21]

Deletions made by CIT(A) of the additions (indexation disallowance and additions under section 68) in assessments framed under section 153A r.w.s. 143(3) are sustained and Revenue's grounds are dismissed for all five assessment years.

Final Conclusion: For A.Ys. 2009-10 to 2013-14 the Tribunal upheld the CIT(A)'s findings that no incriminating material relating to the assessed years was seized and that the return in at least the lead year had attained finality; consequently the Tribunal dismissed Revenue's appeals and sustained deletion of the additions made by the AO.

Appealability of order under Section 154 - maintainability of appeal against rectification/intimation - rectification of TDS statement by filing correction statement - levy of late fee under Section 234E - interest consequential to levy of late fee

Appealability of order under Section 154 - maintainability of appeal against rectification/intimation - Whether the Commissioner of Income Tax (Appeals) was correct in dismissing the appeal as not maintainable because the assessee preferred an appeal against the order under Section 154 instead of the original order under Section 200A. - HELD THAT: - The Tribunal found that an intimation issued on processing a correction statement under Section 154 is an appealable order before the first Appellate Authority. The assessee had availed the remedy of rectification by filing a correction statement which was processed and resulted in an intimation under Section 154. The Commissioner (Appeals) erred in treating the appeal against the Section 154 intimation as not maintainable and in declining to decide the substantive issues on merits. The Tribunal observed that the law permits challenging an order passed under Section 154 and, therefore, the appeal should have been adjudicated on its merits rather than being dismissed on the ground that the original order under Section 200A should have been appealed to the CIT(A). The Tribunal accordingly set aside the impugned appellate order and restored the matter to the first Appellate Authority for adjudication on merits. [Paras 7, 8]

The appellate order dismissing the appeal as not maintainable is set aside and the appeal is restored to the Commissioner of Income Tax (Appeals) for decision on merits.

Rectification of TDS statement by filing correction statement - levy of late fee under Section 234E - interest consequential to levy of late fee - Whether the levy of late fee and consequential interest (as processed in the Section 154 intimation) are sustainable. - HELD THAT: - The Tribunal did not decide the substantive questions relating to the validity of the levy of late fee or the consequential interest on merits. Instead, it remitted these issues to the Commissioner of Income Tax (Appeals) to be adjudicated afresh. The Tribunal directed the first Appellate Authority to consider and decide, on merits, the validity of the order passed under Section 154 by the Assessing Officer (TDS CPC) and all consequential issues raised by the assessee, including the propriety of the levy of late fee on belated filing of TDS statements and any interest charged in consequence thereof. The remit contemplates full consideration of the assessee's contentions, including temporal applicability of amendments and scope of the Assessing Officer's power in the rectification/intimation under Section 154. [Paras 7, 9]

The questions as to the validity of the Section 154 intimation, the levy of late fee and any consequential interest are remitted to the Commissioner of Income Tax (Appeals) for fresh adjudication on merits.

Final Conclusion: The Tribunal allowed the appeals for statistical purposes by setting aside the CIT(A)'s orders that dismissed the appeals as not maintainable, and restored the matters to the first Appellate Authority to decide on merits the validity of the Section 154 intimations and all consequential issues, including the levy of late fee and interest, for Assessment Years 2014 - 2015 and 2015 - 2016.

Reopening of assessment - change of opinion - reasons to believe - escaped assessment - reassessment jurisdiction within four years - fees for technical services - DTAA interpretation of "included services" - section 40(a)(ia) - disallowance for non-deduction of TDS - withholding tax / section 195 implications

Reopening of assessment - change of opinion - reasons to believe - escaped assessment - reassessment jurisdiction within four years - Validity of reassessment initiated under section 147 by issuing notice under section 148 - whether reopening was a mere change of opinion or justified by reason to believe that income had escaped assessment. - HELD THAT: - The Tribunal concurred with the CIT(A)'s factual finding that the AO had not considered the payments subject to TDS in the original assessment and therefore had not formed any opinion on that issue at the time of the assessment. Relying on established authorities and the CIT(A)'s reasoning, the Court held that where a relevant item was not considered in the original assessment, discovery of that omission within four years can constitute tangible material justifying a belief that income has escaped assessment. In such circumstances the initiation of reassessment proceedings does not amount to a mere change of opinion. The assessee failed to controvert the factual finding that the issue was not dealt with in the original order; accordingly reopening under section 147 was held to be valid. [Paras 10]

Reopening under section 147/148 upheld; ground challenging validity of reassessment dismissed.

Fees for technical services - DTAA interpretation of "included services" - section 40(a)(ia) - disallowance for non-deduction of TDS - withholding tax / section 195 implications - Whether payments made to IFANCA for plant supervision and Halal certification amounted to "included services" / fees for technical services under the Indo US DTAA and therefore required withholding, leading to disallowance under section 40(a)(ia). - HELD THAT: - The Tribunal examined the nature and purpose of the payments to IFANCA for Halal supervision/certification and the procedural steps involved. Noting the ordinary meaning of "Halal" and the certification process, the Tribunal found that the services comprised education about Halal requirements, review of sanitation and procedures, plant inspection and assurance of compliance rather than the provision of technical know how or transfer of technical expertise. The CIT(A)'s conclusion that IFANCA made available technical knowledge was held to be incorrect on facts. Applying the DTAA's concept of "included services" and the withholding provisions, the Tribunal concluded that the payment did not qualify as fees for technical services attractable to withholding, and hence the disallowance under section 40(a)(ia) was unwarranted. [Paras 15, 16, 17, 18, 19]

Disallowance of the IFANCA certification/supervision payments deleted; ground allowing deletion of the disallowance is allowed.

Section 234B interest - section 234D interest - Challenge to interest charged under sections 234B and 234D (consequential). - HELD THAT: - The Tribunal recorded that these grounds were consequential to the primary adjustments and observed that they were not dealt with on merits by the Bench. Accordingly, no independent adjudication on these interest points was undertaken in the order. [Paras 21]

Grounds relating to interest under sections 234B and 234D not addressed on merits and disposed of as consequential.

Disallowance of corporate fees - Disallowance of fees paid to ROC for increase in authorized share capital (ITA No.2078/Ahd/2012). - HELD THAT: - The assessee's counsel admitted that the issue was covered against the assessee and did not press the ground before the Tribunal. In view of the concession, the Tribunal dismissed the ground. [Paras 23, 24]

Ground dismissed as not pressed by the assessee.

Final Conclusion: The Tribunal upheld the validity of reassessment under section 147 for Asst.Year 2005-06, allowed the appeal to delete the disallowance under section 40(a)(ia) relating to IFANCA certification/supervision payments (thereby directing deletion of the addition), dismissed consequential interest grounds as not decided on merits, and dismissed the ground regarding ROC fees as not pressed; appeals partly allowed.

Residency-based taxation under India-UAE DTAA (Article 22) - taxability of unexplained investments under section 69 of the Income Tax Act - source versus residence nexus for taxation - tax domicile certificate as evidentiary material - application of treaty provisions vis a vis domestic law under section 90(2)

Taxability of unexplained investments under section 69 of the Income Tax Act - residency-based taxation under India-UAE DTAA (Article 22) - source versus residence nexus for taxation - Deletion of addition made under section 69 in respect of alleged unexplained investment of Rs.3.65 crores by a taxpayer who is tax resident of UAE. - HELD THAT: - The Tribunal found that the assessee was tax resident of the UAE for the relevant year and entitled to benefits of the India-UAE DTAA. The Tribunal followed the coordinate-bench decision in the assessee's own case holding that unexplained investments (applications of funds) do not equate to income taxable in India absent proof that such investments were made out of income earned in India or there existed an economic activity nexus with India. Article 22 (residuary 'other income') allocates taxation to the residence state for items not otherwise dealt with in the treaty; Article 22(2) contemplates source taxation only where there is a permanent establishment or fixed base and an effective connection with the income, which was absent on the facts. Consequently, even if the amount were treated as income, the treaty vests taxing rights in the UAE, and on the merits the amount was not taxable in India. The Tribunal noted no material was placed on record to show the sums were earned in India and that the revenue did not demonstrate any change in facts or law warranting departure from the earlier precedent. For these reasons the addition under section 69 was deleted. [Paras 8]

Addition deleted; amount not taxable in India under section 69 in view of the India-UAE DTAA and absence of source/PE nexus.

Tax domicile certificate as evidentiary material - application of treaty provisions vis a vis domestic law under section 90(2) - Reliance on the Tax Domicile Certificate and applicability of the India-UAE DTAA in allowing the appeal. - HELD THAT: - The assessee produced a Tax Domicile Certificate issued by the UAE authority for the relevant period. The Tribunal accepted that certificate as supporting the assessee's residence claim and, following the earlier Tribunal decision in the assessee's case, held that the treaty allocation of taxing rights under section 90(2) of the Act requires India to yield to the residence jurisdiction for the income in question. The Tribunal observed that, because the treaty allocates taxing rights to the residence state and no source nexus was established, it was unnecessary to adjudicate other evidentiary or procedural contentions raised by the assessee or revenue in detail. [Paras 6, 8]

Tax Domicile Certificate accepted; treaty invoked to permit deletion of addition and to resolve taxability in favour of the assessee.

Final Conclusion: Following the coordinate-bench precedent in the assessee's own case and on the materials before it (including the Tax Domicile Certificate), the Tribunal held that the impugned amount was not taxable in India under section 69 because the India-UAE DTAA (Article 22) vests any taxing rights in the residence jurisdiction and no source/PE nexus was shown; Revenue's appeal dismissed.

Levy of late fee under section 234E - prospective operation of statutory amendment - mechanism for computation and intimation under section 200A - condonation of delay and advancement of substantial justice

Levy of late fee under section 234E - mechanism for computation and intimation under section 200A - prospective operation of statutory amendment - Validity of demands of late fees levied under section 234E for periods prior to 01-06-2015 and consequent direction for deletion. - HELD THAT: - The Tribunal examined whether late fees imposed under section 234E could be levied for Tax Deducted at Source statements relating to the Financial Years 2012-13, 2013-14 and 2014-15. It relied on the legal position that the mechanism to compute and issue intimations for fee under section 234E was provided only after the amendment to section 200A which came into effect w.e.f. 01-06-2015. In consequence, the substantive provision creating the fee under section 234E, read together with the procedural machinery conferred by the post-01-06-2015 amendment to section 200A, could be given effect prospectively. Applying the consistent line of authority cited by the Tribunal, the intimations/demands issued under section 200A for computing and demanding fees under section 234E for periods prior to 01-06-2015 were held to be without authority of law. The Tribunal therefore directed deletion of the late fee levied for the specified pre-01-06-2015 periods. The Tribunal also noted that the issue of condonation of delay was addressed but, being purely legal, was decided on merits; the determinative legal conclusion was that fees under section 234E could not be validly demanded for the periods before the effective date of the procedural amendment. [Paras 4, 5]

Demands/intimations made under section 200A for computation and demand of fees under section 234E insofar as they relate to periods prior to 01-06-2015 are without authority and the late fees levied for F.Y. 2012-13, 2013-14 and 2014-15 are deleted.

Final Conclusion: All eight appeals are allowed: the late fee levied under section 234E for the Financial Years 2012-13, 2013-14 and 2014-15 (periods prior to 01-06-2015) is set aside and the assessing officer is directed to delete the levy.

Breach of Regulation 20(4) of the Customs Brokers Licensing Regulations, 2013 - judicial review under Article 136 of the Constitution of India - dismissal of Special Leave Petition - condonation of delay

Breach of Regulation 20(4) of the Customs Brokers Licensing Regulations, 2013 - judicial review under Article 136 of the Constitution of India - dismissal of Special Leave Petition - Validity of the High Court's finding that there was a breach of Regulation 20(4) and whether the Supreme Court should interfere under Article 136. - HELD THAT: - The Supreme Court recorded satisfaction with the specific finding made by the High Court that Regulation 20(4) of the Customs Brokers Licensing Regulations, 2013 was breached. Having considered the facts and the High Court's reasoning, the Court found no justification to exercise its extraordinary jurisdiction under Article 136 to disturb that conclusion. The Court therefore upheld the High Court's finding and declined to interfere with the adjudication on that point. [Paras 1, 2]

The Special Leave Petition challenging the High Court's finding of breach of Regulation 20(4) is dismissed.

Condonation of delay - dismissal of Special Leave Petition - Application for condonation of delay in filing and the fate of a separate Special Leave Petition which was not pressed. - HELD THAT: - Delay in filing SLP (C) Diary No. 1113/2020 was condoned by the Court. However, in view of the dismissal of the departmental Special Leave Petition (the related SLP), counsel for the petitioner chose not to press the present petition. The Court accordingly recorded that the petition is not pressed and dismissed it on that basis. Pending applications were disposed of. [Paras 3, 4, 5, 6]

Delay condoned; the present Special Leave Petition dismissed as not pressed and pending applications disposed of.

Final Conclusion: The Supreme Court upheld the High Court's finding of a breach of Regulation 20(4) and dismissed the corresponding Special Leave Petition; delay in the related SLP was condoned, and the other petition was dismissed as not pressed, with pending applications disposed of.

Interest on delayed refund - Entitlement to interest on tax/customs refund - Timeliness of refund - refund allowed within three months of submission of documents - Judicial review of High Court order

Interest on delayed refund - Timeliness of refund - refund allowed within three months of submission of documents - Appellant not entitled to interest on the refund claimed. - HELD THAT: - The Court accepted the High Court's conclusion that the refund challenged in the appeal had been allowed within a period of three months from the date on which the appellant submitted the documents demanded by the show cause notice dated 7-7-2017. Given that the refund was granted within that three-month period, the appellant's claim for interest on the refund was held not to be maintainable. The Supreme Court found no reason to interfere with the High Court's factual and legal conclusion and affirmed the refusal to grant interest. [Paras 2, 3]

Appeal dismissed; High Court order holding that no interest was payable on the refund affirmed.

Final Conclusion: The Supreme Court dismissed the appeal and upheld the High Court's order refusing interest on the refund, on the ground that the refund had been allowed within three months of submission of the documents called for by the show cause notice.

Summary order. Respondents directed to file an affidavit placing on record the Minutes of Meeting, discussion notes, file notings, representations received and the agenda placed before the Central Board of Indirect Taxes and Customs which resulted in issuance of Notification No.79/2017 dated 13th October 2017, and to serve a copy upon the petitioner by 18th October 2022; matter stood over to 20th October 2022.

Classification and assessment of imported goods - customs laboratory report - provisional assessment and security/bank guarantee - non-discrimination and uniformity in classification - re-export of prohibited imports

Classification and assessment of imported goods - customs laboratory report - Direction to respondents to assess and classify the imported consignments based on the Custom House Laboratory report within ten days - HELD THAT: - The Court noted that the import occurred in January 2021 but the Bill of Entry was filed belatedly on 24-3-2021 and, despite the lapse of time, no decision had been taken on whether the goods fall under CTH 2106 90 30 or CTH 0802 80 20. The Custom House Laboratory testing had identified the samples as pale brown cut pieces with characteristics of unboiled Betel nut and other than processed. Having regard to the laboratory findings and the perishable nature of the goods, the Court directed the respondents to pass appropriate orders assessing and classifying the goods on the basis of the laboratory report within ten days from receipt of the order. The direction compels the adjudicating authority to evaluate the classification in light of the laboratory conclusion rather than leaving the matter pending. [Paras 9, 10]

Respondents directed to assess and classify the goods based on the Custom House Laboratory report within ten days.

Non-discrimination and uniformity in classification - provisional assessment and security/bank guarantee - re-export of prohibited imports - Direction to ensure uniformity with similar imports, permit provisional clearance on appropriate security, and permit re-export if goods are ultimately found prohibited - HELD THAT: - The Court observed that identical consignments imported by others during the same period had been cleared pursuant to communications from the Commissioner/Additional Commissioner. It directed the respondents to consider those prior clearances when adjudicating the petitioner's consignments to avoid discrimination and maintain uniformity. The Court left it open for the respondents to accept securities, including bank guarantees, and to provisionally assess and clear the goods to protect revenue interests. The Court further provided that if the goods are held to be prohibited upon decision, the petitioner may be allowed to re-export them in accordance with law, referencing earlier discussion in another writ petition as relevant to prohibited imports. These directions require the respondents to consider provisional measures, uniform treatment, and statutory remedies for prohibited goods. [Paras 3, 4, 10]

Respondents to ensure no discrimination with similar imports, may accept securities for provisional clearance, and petitioner may re-export if the goods are found prohibited.

Final Conclusion: Writ petition disposed directing the respondents to assess and classify the imported consignments within ten days on the basis of the Custom House Laboratory report, to ensure uniform treatment with similar imports, to permit provisional clearance against appropriate security if warranted, and to allow re-export if the goods are finally held to be prohibited; no costs.

Penalty for facilitation where goods are liable to confiscation under Section 112(a) of the Customs Act, 1962 - penalty for abetment or assistance in prohibited import transactions under Section 114AA of the Customs Act, 1962 - confiscation of imported goods as contraband under Section 111(d) of the Customs Act, 1962 - requirement of an Import Export Code under the Foreign Trade (Development & Regulation) Act, 1992 - causal link between an accused person's actions and the acts giving rise to confiscation - timing of initiation of proceedings prior to declaration under Section 46 of the Customs Act, 1962

Penalty for facilitation where goods are liable to confiscation under Section 112(a) of the Customs Act, 1962 - penalty for abetment or assistance in prohibited import transactions under Section 114AA of the Customs Act, 1962 - causal link between an accused person's actions and the acts giving rise to confiscation - requirement of an Import Export Code under the Foreign Trade (Development & Regulation) Act, 1992 - Appellant not liable to penalties under Section 112(a) and Section 114AA of the Customs Act, 1962 - HELD THAT: - The Tribunal found that the mandatory nexus between the appellant's actions and the import-related acts that rendered the goods liable to confiscation was not established. Proceedings were founded on the bill of lading issued by the overseas shipping company and no documents under the Foreign Trade (Development & Regulation) Act, 1992 or other statutory material linking the appellant to the import transaction were filed under the Customs Act. The initiation of proceedings occurred before a declaration under Section 46 was made, and the material on record did not demonstrate that the appellant introduced or procured the Import Export Code or otherwise facilitated the import in a manner attracting the penal provisions. In absence of proof of the requisite causal link between the appellant's conduct and the circumstances giving rise to confiscation, neither Section 112(a) nor Section 114AA is attracted as to the appellant.

Impugned order imposing penalties under Section 112(a) and Section 114AA set aside; appeal allowed.

Final Conclusion: The appeal is allowed and the order imposing penalties on the appellant under the Customs Act is set aside for want of a demonstrated link between the appellant's conduct and the import transaction that led to confiscation.

Levy of excise duty on goods falling under Entry 84 of the Union List - Effect of repeal and saving under Section 174 of the CGST Act, 2017 - National Calamity Contingent Duty (NCCD) as a surcharge and independent excise duty - Continuity of NCCD levy despite exemption from basic excise duty

Levy of excise duty on goods falling under Entry 84 of the Union List - Effect of repeal and saving under Section 174 of the CGST Act, 2017 - Whether excise duty can be levied on tobacco and tobacco products notwithstanding their taxation under GST - HELD THAT: - The Court held that the CGST Act expressly saves the operation of the Central Excise Act insofar as goods included in Entry 84 of the Union List, which specifically includes tobacco and tobacco products. Section 174(1) of the CGST Act repeals earlier excise enactments except as respects Entry 84; the saving provisions preserve the power to levy excise on those goods. Having regard to Entry 84 and the express saving, the levy of excise duty on tobacco and tobacco products is a matter of legislative policy and is permissible; exercise of writ jurisdiction to interfere with such policy-based levy is not warranted. Consequently, the respondents are entitled to levy excise duty on tobacco and tobacco products in addition to GST. [Paras 13]

Levy of excise duty on tobacco and tobacco products in addition to GST is valid.

National Calamity Contingent Duty (NCCD) as a surcharge and independent excise duty - Continuity of NCCD levy despite exemption from basic excise duty - Whether NCCD could be levied on tobacco and tobacco products during the period when basic excise duty was exempted (01.07.2017 to 06.07.2019) - HELD THAT: - The Court concluded that NCCD, though described as a surcharge, is levied under Section 136 of the Finance Act, 2001 as a duty on the goods specified in the Seventh Schedule and operates as a type of excise duty independent of the basic excise duty under the Central Excise Act. The fact that exemption was granted for a particular excise duty (by notification No.11/2017) does not automatically extinguish other duties or cesses imposed by different statutory provisions for different purposes. Reliance was placed on precedents recognising that exemption from one kind of duty does not preclude determination and levy of another distinct duty. Therefore NCCD could lawfully be levied during the period when basic excise duty was exempted. [Paras 20]

Levy of NCCD on tobacco and tobacco products during the exemption period is valid; NCCD can be levied independently of basic excise duty.

Final Conclusion: Writ petitions dismissed: levy of excise duty on tobacco and tobacco products in addition to GST is lawful under Entry 84 and Section 174(1) of the CGST Act, 2017; NCCD is a separate statutory duty and its levy during the period of exemption of basic excise duty (01.07.2017 to 06.07.2019) is not impermissible.

Classification under Harmonised System of Nomenclature (HSN) - Definition of heat pump in HSN - Principal purpose test / Chapter Note 7 to Chapter 84 - Market / common parlance test - Functional classification of multi functional machines - Interpretive primacy of HSN definitions in tariff classification

Definition of heat pump in HSN - Principal purpose test / Chapter Note 7 to Chapter 84 - Market / common parlance test - Classification under Harmonised System of Nomenclature (HSN) - Whether the Modified Vapour Absorption Chiller (MVAC) manufactured by the appellant is classifiable as a heat pump under Heading 8418 and thereby entitled to the limited exemption under Notification No. 155/86 CE dated 1.3.1986. - HELD THAT: - The Court applied the HSN definition of a heat pump and the established principle that HSN definitions and nomenclature have overriding guidance in tariff classification. The HSN defines a heat pump as a device which, by drawing heat from a suitable source and with the assistance of supplementary energy, converts it into a source of more intense heat. The MVAC's operation produces chilled/cold water as its continual and primary output; any production of hot water is incidental and cannot be obtained independently of the cooling function. The Court held that where a machine performs multiple functions, Chapter Note 7 and the principal purpose test operate as a tie breaker in intra heading disputes: the principal function determines classification. Market/common parlance evidence (including the appellant's own product listings) shows MVACs are recognized and purchased as Vapour Absorption Chillers for cooling/refrigeration, not as heat pumps for heating. Reliance on decisions where rival products were treated differently was examined and distinguished because those earlier matters involved rival entries or did not decide the HSN definition issue now before the Court. Applying the HSN definition, the principal purpose test and the market parlance test, the Court concluded that MVACs do not meet the HSN definition of heat pump and thus cannot be classified as such for the purpose of the concessional notification. [Paras 13, 17, 18, 20, 21]

MVAC is not a heat pump within the HSN meaning and must be classified as refrigerating equipment under Sub heading 8418.10; the CESTAT's conclusion against the appellant is affirmed.

Remand for quantification / computation - Assessable value - treatment of components - Whether any aspect of assessment was remanded for fresh consideration or computation by the adjudicating authority. - HELD THAT: - The impugned CESTAT order had remanded the matter to the adjudicating authority to facilitate computation of the payable duty, and observed that the value of Lithium Bromide is not to be included in the assessable value of the machine. The Supreme Court affirmed the CESTAT's classification conclusion and, by affirmance, left intact the remand direction made by the CESTAT for the limited purpose of computation and assessment. [Paras 3]

The remand to the adjudicating authority for computation of duty (as directed by the CESTAT) remains in effect for quantification/verification.

Final Conclusion: The appeals are dismissed; the Modified Vapour Absorption Chiller manufactured by the appellant is not a heat pump under the HSN and is to be classified under Sub heading 8418.10 as refrigerating equipment. The CESTAT's order is affirmed, and the remand for computation/assessment by the adjudicating authority remains operative. Parties to bear their own costs.

Review petition - distinguishing a binding precedent - per incuriam - leave to file review petition limited to a specific contention - reconsideration of precedent reserved

Review petition - leave to file review petition limited to a specific contention - Permission to file a review petition in the High Court limited to the contention that Unicorn Industries is distinguishable on the facts of the present case. - HELD THAT: - The Court granted leave to the petitioner to file a review petition in the High Court confined to the first contention, namely that the decision in Union of India & Ors. v. Unicorn Industries is distinguishable on the peculiar facts and by application of a different notification. The Court expressly declined to express any opinion on the correctness of that submission and limited the remedy to pursuing review before the High Court as the first step. The order disposes the special leave petition insofar as it permits that procedural course. [Paras 4, 5, 7]

Petitioner permitted to file a review petition in the High Court limited to the contention of distinguishability; SLP disposed accordingly; pending applications disposed of.

Distinguishing a binding precedent - per incuriam - reconsideration of precedent reserved - Whether the decision in Unicorn Industries is per incuriam and requires reconsideration was not decided and is left open for future consideration. - HELD THAT: - The Court did not adjudicate the second contention that Unicorn Industries is per incuriam and in need of reconsideration. It made clear that it was not expressing any opinion on that submission. The petitioner may, after the High Court determines the review petition (if adverse to the petitioner), urge before this Court that the Unicorn decision requires reconsideration. Thus the question of per incuriam/reconsideration of Unicorn is reserved for future proceedings and was not decided on the merits. [Paras 2, 3, 5, 6]

No opinion expressed; the contention that Unicorn is per incuriam is left open to be urged later before this Court after the High Court's review determination.

Final Conclusion: The special leave petition is disposed of by permitting the petitioner to file a review petition in the High Court limited to the contention that Unicorn Industries is distinguishable; the question whether Unicorn is per incuriam or requires reconsideration is not decided and is reserved for future proceedings; pending applications are disposed of.

Penalty under Section 11AC - penalty under Rule 209A of the Central Excise Rules, 1944 - clandestine removal / burden of proof for clandestine clearance - reliance on stock-taking (Dip method) and installed capacity as evidentiary factor - absence of reasonable basis for imposition of penalty

Penalty under Section 11AC - clandestine removal / burden of proof for clandestine clearance - reliance on stock-taking (Dip method) and installed capacity as evidentiary factor - absence of reasonable basis for imposition of penalty - Validity of imposition of penalty under Section 11AC on the appellant company - HELD THAT: - The Tribunal found that the impugned orders confirm penalty under Section 11AC without a reasonable explanation or basis. The adjudication ignored the appellant's installed/actual production capacity and the declared clearances (3066 MT) for the relevant year, thereby causing prejudice. There was no direct evidence of clandestine removals such as interception of consignments lacking invoices or other indicia of illicit clearance. The stock-taking method (Dip method) and related calculations relied upon did not afford a sufficiently reliable basis to sustain the penalty in the circumstances. Given that the appellant had already suffered civil consequences by the duty demands, and on the record there was no persuasive proof justifying penal consequences, the imposition of penalty under Section 11AC was found to be without reasonable basis and unsustainable. [Paras 10, 11]

Penalty under Section 11AC imposed on the appellant company set aside.

Penalty under Rule 209A of the Central Excise Rules, 1944 - clandestine removal / burden of proof for clandestine clearance - absence of reasonable basis for imposition of penalty - Validity of penalties imposed under Rule 209A on the two directors - HELD THAT: - The Tribunal held that the record did not establish clandestine removal on such basis as would justify penal action against the directors under Rule 209A. There were no instances of interception or independent proof of illicit consignments, and the impugned assessments proceeded on presumptions and resumed documents without a reasonable evidentiary foundation. For the same reasons that dispensed with the company penalty, the penalties on the two directors were also found to lack a reasonable basis. [Paras 10, 11]

Penalties under Rule 209A imposed on the two directors set aside.

Final Conclusion: Appeals allowed in part: penalties under Section 11AC on the appellant company and under Rule 209A on the two directors are set aside for want of a reasonable basis; other aspects of demand remained subject to the impugned orders as modified earlier by the Tribunal.

Quashing of appellate judgment - remand for fresh adjudication - compulsion of settlement on a statutory body - conflicting stands by Union departments - continuance of interim order

Quashing of appellate judgment - remand for fresh adjudication - Validity of the Division Bench's judgment dated 30th June 2021 and the appropriate remedy - HELD THAT: - The Supreme Court found the impugned Division Bench order unsustainable and set it aside. The Court held that, rather than deciding the writ petitions at the appellate stage and effectively determining contested questions, the proper course was to remit SCA Nos. 184 and 5816 of 2017 to the learned Single Judge for fresh consideration on merits. The appeals were allowed and the High Court's order quashed; the Single Judge was directed to decide the petitions expeditiously and preferably within six months. Meanwhile, a limited interim direction previously granted (order dated 26th April 2019) was ordered to continue until further orders by the Single Judge. [Paras 49, 55, 56, 57]

Impugned judgment and order of the High Court quashed and set aside; SCA Nos. 184 and 5816 of 2017 remitted to the learned Single Judge for fresh consideration with continuation of the interim order dated 26th April 2019.

Compulsion of settlement on a statutory body - Whether the Division Bench was justified in directing CWC to accept the first two conditions of a composite settlement while leaving the third to be negotiated - HELD THAT: - The Court held that the Division Bench erred in compelling a statutory corporation (CWC) to accept part of a composite settlement on which acceptance was conditionally dependent. The Division Bench's approach effectively thrust a settlement upon CWC to its detriment and favoured the private party by enforcing the first two conditions while not holding the private party to the third, which was integral to the composite offer and necessary to safeguard CWC's interests. The High Court's adverse observations about CWC's conduct and characterization of its stance were found to be unwarranted given CWC's statutory status, prior governmental inputs (including CVC observations and the Ministry of CAF&PD's stance) and the consequential financial implications of relocation. [Paras 43, 44, 45, 46, 47]

Division Bench's insistence that CWC accept the first two conditions while leaving the third unresolved was legally unsustainable and constituted an improper compulsion of settlement on a statutory body.

Conflicting stands by Union departments - continuance of interim order - Approach required when different Union departments take contradictory positions and ancillary administrative directions - HELD THAT: - The Court noted with concern that the Ministry of Commerce & Industry and the Ministry of Consumer Affairs, Food & Public Distribution had taken diametrically opposite positions on the permissibility of delineation/denotification and related reliefs. The Supreme Court emphasised that the Union should not speak in two voices and urged the government to evolve a mechanism to resolve such inter-departmental conflict at the governmental level. The Registry was directed to send a copy of the judgment to the Attorney General for India to assist in resolving the matter. The Court refrained from deciding the underlying delineation issues so as not to prejudice parties and left those questions to the Single Judge on remand. [Paras 50, 51, 52, 53, 54]

Union of India must ensure departments do not adopt conflicting stands; Registry to furnish copy of judgment to the Attorney General for intervention, and substantive delineation issues left open for determination by the Single Judge on remand.

Final Conclusion: Appeals allowed. The Division Bench judgment dated 30th June 2021 is quashed and set aside; SCA Nos. 184 and 5816 of 2017 are remitted to the learned Single Judge of the High Court for fresh adjudication preferably within six months. The interim order dated 26th April 2019 shall continue until further orders. The Registry is directed to furnish a copy of this judgment to the Attorney General for India to assist in resolving inter-departmental conflict.

Maintainability of writ under Article 32 to challenge or revisit a prior decision of this Court - balance between right to information and right to privacy as competing fundamental rights - doctrine of finality of judgments vis-a -vis the Court's inherent power to rectify or reconsider judgments ex debito justitiae - scope of disclosure under the Right to Information Act in respect of third party and confidential banking information - effect of earlier Supreme Court decisions on subsequent petitions by non parties

Maintainability of writ under Article 32 to challenge or revisit a prior decision of this Court - effect of earlier Supreme Court decisions on subsequent petitions by non parties - Preliminary objection that the writ petitions are not maintainable because they effectively seek to reopen or challenge the final judgment in Reserve Bank of India vs. Jayantilal N. Mistry was rejected. - HELD THAT: - The Court examined the authorities on the limited scope of Article 32 to correct judicial orders and the principles of finality (including Naresh Shridhar Mirajkar, Mohd. Aslam, Major S.P. Sharma and Rupa Ashok Hurra). It noted that although final orders of this Court ordinarily cannot be collaterally reopened, the Court has recognised occasions where the ratio decidendi may be examined or re examined in a later petition and that the inherent power of the Court may be exercised to prevent or cure grave miscarriage of justice. The Court observed that the dismissal of earlier applications for recall in the Jayantilal N. Mistry proceedings did not foreclose the banks from pursuing other remedies available in law. Applying these principles, the preliminary objection that the present petitions are barred because they impugn the earlier decision was held not sustainable and was rejected, permitting the petitions to proceed for consideration on merits. [Paras 42, 43]

Preliminary objection dismissed; writ petitions maintainable and not barred by the earlier judgment.

Balance between right to information and right to privacy as competing fundamental rights - scope of disclosure under the Right to Information Act in respect of third party and confidential banking information - Whether the directions of the Reserve Bank of India to disclose certain confidential banking information can be impugned on grounds that Jayantilal N. Mistry did not balance the right to information with the right to privacy. - HELD THAT: - The Court noted that both the right to information and the right to privacy are recognised as fundamental rights and where they conflict a balance must be struck. Prima facie, and without expressing a final view, the Court found that the judgment in Jayantilal N. Mistry did not sufficiently advert to the aspect of balancing these competing rights. The petitioners (banks) contend that certain disclosures mandated by RBI under that decision impinge upon confidentiality protections in special enactments and on privacy. Having observed that this consideration was not dealt with in the earlier judgment, the Court indicated that the question of balancing RTI and privacy requires adjudication in these proceedings. [Paras 39, 40, 41, 42]

Held that prima facie Jayantilal N. Mistry did not adequately consider the balance between RTI and privacy; the issue requires adjudication and the petitions may proceed.

Doctrine of finality of judgments vis-a -vis the Court's inherent power to rectify or reconsider judgments ex debito justitiae - Whether principles permitting reconsideration of this Court's earlier decisions (including ex debito justitiae and prevention of miscarriage of justice) could justify entertaining the present petitions. - HELD THAT: - The Court surveyed authorities (Rupa Ashok Hurra, A.R. Antulay, Sanjay Singh and others) observing that while finality of judgments is an important principle, the Court's inherent power and jurisprudence recognise limited circumstances where reconsideration is permissible to prevent grave injustice or to rectify a judgment vitiated by error. The Court emphasised that the balance between certainty and justice may, in rare cases, require re examination of earlier pronouncements. Applying these principles, the Court declined to foreclose consideration of the present petitions on the basis of finality alone. [Paras 31, 32, 36, 41, 42]

Principles allowing reconsideration in rare cases acknowledged; finality does not automatically bar the present petitions and they may be examined to prevent possible miscarriage of justice.

Final Conclusion: The preliminary objection that these writ petitions are barred by or impermissibly seek to re open the judgment in Jayantilal N. Mistry is rejected. Without expressing any final view on merits, the Court observed that Jayantilal N. Mistry prima facie did not balance the right to information with the right to privacy, and directed that the petitions may proceed for adjudication; interlocutory applications seeking dismissal are dismissed.