TaxTMI Updates e-Newsletter
Oct 22,2022

Grant of bail - offence of evasion of GST - bailability of offence under Section 132 of the Central Goods and Services Tax Act - ancillary IPC offences arising from the principal GST offence - conditioning of bail to prevent tampering with evidence and influencing witnesses

Grant of bail - bailability of offence under Section 132 of the Central Goods and Services Tax Act - offence of evasion of GST - conditioning of bail to prevent tampering with evidence and influencing witnesses - Whether the applicant is entitled to be released on bail in the case registered for alleged evasion of GST and related offences. - HELD THAT: - The Court proceeded on the basis that the principal allegation against the applicant is evasion of GST by wrongfully claiming input tax credit, an offence falling under Section 132 of the Central Goods and Services Tax Act. The learned counsel for the applicant pointed out that, as per the statutory scheme, the offence alleged (evading an amount less than 500 lacs) attracts a maximum term of imprisonment of up to three years and is bailable under the provisions applicable to Section 132. The Court noted that the other offences alleged under the Indian Penal Code arise from the principal CGST allegation. Having regard to the bailability of the principal offence, the absence of any previous criminal history of the applicant, and the inability of the prosecution to dispute these aspects, the Court concluded that the applicant is entitled to bail. The Court emphasised the need to protect the integrity of the trial and accordingly imposed conditions on bail to prohibit tampering with evidence and influencing witnesses, require attendance at trial, and prohibit inducement, threat or promise to persons acquainted with the facts. The order was passed without expressing any opinion on the merits of the prosecution case. [Paras 5, 8, 9, 10]

Bail granted to the applicant on furnishing personal bond and two sureties, subject to conditions including non-tampering with evidence, not influencing witnesses, attendance at trial, and prohibition on inducement or threat to persons acquainted with the facts.

Final Conclusion: The bail application is allowed and the applicant is ordered to be released on bail on the stated terms and conditions; the Court made no adjudication on the merits of the criminal allegations.

Revocation of cancellation of registration under Section 30 of the Central Goods and Services Tax Act, 2017 - treatment of application as within limitation - expeditious disposal on merits by the proper officer/authority - pre deposit requirement and transfer from cash ledger by filing DRC 3 - judicial remand for fresh consideration of tax liability and cancellation

Revocation of cancellation of registration under Section 30 of the Central Goods and Services Tax Act, 2017 - treatment of application as within limitation - expeditious disposal on merits by the proper officer/authority - Petitioner permitted to file an application under Section 30 and the Authority directed to treat the application as within time and decide it on merits expeditiously. - HELD THAT: - The High Court, exercising supervisory jurisdiction, afforded the petitioner an opportunity to file an application under Section 30 of the CGST Act within 15 days and directed the Authority/proper officer to construe such application as within limitation. The Authority is required to consider and decide the application on merits expeditiously and, in any event, within four weeks of receipt. The Court did not adjudicate the merits of the revocation itself but mandated that the statutory remedy be permitted and adjudicated on merits within the specified timeframe. [Paras 4]

Application under Section 30 to be filed within 15 days; Authority to treat it as within limitation and decide on merits expeditiously and within four weeks.

Pre deposit requirement and transfer from cash ledger by filing DRC 3 - judicial remand for fresh consideration of tax liability and cancellation - Petitioner directed to ensure transfer of the available cash ledger balance to Government account by filing DRC 3; the question of tax liability and validity of cancellation is to be considered afresh by the Authority. - HELD THAT: - The Court noted the department's statement regarding the assessed dues and that the petitioner has a balance in its cash ledger. The petitioner was directed to file the DRC 3 to transfer the available amount to the Government account. While the Court recognised that the cancellation order and the breakup of liability are under challenge and that details may not have been furnished to the petitioner, it did not decide the correctness of the liability or the cancellation. Instead, those matters were remitted to the Authority for fresh consideration in the proceeding under Section 30, so that the Authority may examine liability and the question of revocation on merits after receipt of the petitioner's application and transfer of the cash ledger amount as directed. [Paras 2, 3, 4]

Petitioner to file DRC 3 to transfer the available cash ledger amount to the Government account; issues of liability and cancellation remitted to the Authority for fresh adjudication on merits.

Final Conclusion: Writ petition disposed by permitting the petitioner to file an application under Section 30 within 15 days; the Authority is directed to treat the application as within time, consider and decide it on merits expeditiously (in any event within four weeks), the petitioner to file DRC 3 to transfer its cash ledger balance to the Government account, and the questions of liability and revocation of cancellation are remitted to the Authority for fresh consideration. No order as to costs.

Opportunity of hearing - jurisdiction of the assessing officer - assessment under Section 74 of the U.P. State Goods and Service Tax Act, 2017 - statutory appeal under Section 107

Opportunity of hearing - assessment under Section 74 of the U.P. State Goods and Service Tax Act, 2017 - Whether the petitioner was denied opportunity of hearing before passing the assessment order dated 23.6.2020. - HELD THAT: - The petitioner admitted service of the notice dated 12.2.2020 under Section 74 and filed a reply on 24.2.2020. Although the date specified in the notice fell on a holiday, the petitioner was granted an opportunity of hearing on the next working day. In view of the petitioner's admission regarding service, filing of reply and the subsequent hearing, the contention that the order dated 23.6.2020 was passed without furnishing opportunity of hearing was not accepted.

The plea of denial of opportunity of hearing is rejected and cannot be entertained.

Jurisdiction of the assessing officer - statutory appeal under Section 107 - Whether the Commercial Tax Officer, Kaushambi had jurisdiction to pass the impugned order. - HELD THAT: - A departmental circular dated 19.11.2018 authorised the Commercial Tax Officer to deal with trading units having taxable trade turnover between 15 lacs and 25 lacs. The petitioner disclosed a taxable turnover of Rs. 2,20,240 in the GSTR-3B for December, and it was not disputed that the taxable trade turnover did not exceed Rs. 25 lacs. On that basis the claim of lack of jurisdiction was found to be without merit. The Court noted that the appropriate remedy against the assessment order is by filing a statutory appeal under Section 107 of the U.P. State Goods and Service Tax Act, 2017.

The jurisdictional challenge is dismissed; the Commercial Tax Officer, Kaushambi had jurisdiction, and the petitioner may pursue the statutory appeal.

Final Conclusion: Writ petition dismissed; petitioner's contentions that the order was passed without hearing and that the assessing officer lacked jurisdiction were rejected. The petitioner is left free to file the statutory appeal under Section 107 of the U.P. State Goods and Service Tax Act, 2017.

Cancellation of GST registration for non-filing of returns - appeal under Section 107 of the CGST Act - remand for fresh consideration - opportunity of hearing - submission of pending GST returns and payment of tax arrears

Cancellation of GST registration for non-filing of returns - remand for fresh consideration - opportunity of hearing - submission of pending GST returns and payment of tax arrears - Order dated 26.11.2019 cancelling the petitioner's GST registration was set aside and the matter remanded to respondent No.1 for fresh consideration with direction to afford opportunity of hearing. - HELD THAT: - Petitioner's GST registration was cancelled on the ground of non-filing of returns. The petitioner explained inability to pursue the statutory appeal because the managing partner underwent major spinal surgery and subsequently suffered incapacitation, which constrained the other partner from attending to business affairs. On consideration of the circumstances and submissions, the High Court concluded that the ends of justice are met by setting aside the cancellation order and remitting the matter to respondent No.1 to reconsider the case afresh. The court directed respondent No.1 to give the petitioner a due opportunity of hearing before passing any fresh order and permitted the petitioner to submit outstanding GST returns and pay any tax arrears as per law. The remand is to be executed within two months from receipt of this order. [Paras 7, 8, 9]

Order dated 26.11.2019 cancelling GST registration set aside; matter remanded to respondent No.1 to reconsider afresh with opportunity of hearing and liberty to submit returns and pay arrears within two months.

Final Conclusion: Writ petition allowed by setting aside the cancellation order; matter remanded for fresh adjudication in accordance with law with directions to afford hearing and permitting submission of returns and payment of arrears within the stipulated two month period.

Treatment or process applied to another person's goods - Paragraph 3 of Schedule II - Manufacturing services on physical inputs (goods) owned by others - Service Accounting Code 998881 - classification of services under Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017

Treatment or process applied to another person's goods - Paragraph 3 of Schedule II - Whether commercial vehicle body-building on a chassis supplied by the customer is a supply of goods or a supply of services. - HELD THAT: - The Authority examined the nature of the activity and applied Paragraph 3 of Schedule II which treats any treatment or process applied to another person's goods as a supply of services. The applicant fabricates a vehicle body on a chassis which remains owned by the customer throughout the process; title in the chassis is not transferred to the applicant at any stage. The charges collected include cost of inputs consumed and labour for fabrication, indicating the applicant provides a service on physical inputs owned by another. On these facts the activity falls within the description of a treatment or process on another person's goods and is therefore a supply of services. [Paras 7]

The activity is a supply of services.

Manufacturing services on physical inputs (goods) owned by others - Service Accounting Code 998881 - classification of services under Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 - Classification of the service and applicable rate of GST. - HELD THAT: - Having held the activity to be a supply of services, the Authority considered the Scheme of Classification of Services and the Explanatory Notes to determine the appropriate Service Accounting Code. Services performed on physical inputs owned by units other than the service provider are characterised as manufacturing services on physical inputs owned by others. The work undertaken by the applicant falls within Transport equipment manufacturing services and specifically motor vehicle and trailer manufacturing services encompassed by SAC 998881. Entry at SI No. 26(iv) of Notification No. 11/2017 Central Tax (Rate) identifies such manufacturing services on physical inputs owned by others as taxable at the specified rate under that notification. [Paras 7]

The activity is classifiable under SAC 998881 and is taxable at 18% (9% CGST + 9% SGST).

Final Conclusion: The Authority ruled that commercial vehicle body-building on a chassis supplied by the customer constitutes a supply of services and is classifiable as manufacturing services on physical inputs (goods) owned by others (SAC 998881), liable to GST at 18% (9% CGST + 9% SGST) under Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017.

Educational institution - educational services - exemption under SI. No. 66 of Notification No. 12/2017 CT (Rate) - classification under Heading 9992 - commercial training and coaching services

Educational institution - education up to higher secondary - commercial training and coaching services - exemption under SI. No. 66 - Heading 9992 - Whether the applicant qualifies as an "educational institution" under clause (y) of Para 2 of Notification No. 12/2017 CT (Rate) and hence whether its services are exempt under SI. No. 66 of the said notification. - HELD THAT: - The Authority examined the definition of "educational institution" in clause (y) of Para 2 of Notification No. 12/2017 and the Scheme of Classification under Heading 9992. While appellate decisions recognise a broad concept of "education" as systematic instruction or training, eligibility for the SI. No. 66 exemption turns on classification as an "educational institution" within the specific sub-clauses. The applicant, though providing customised coaching and one to one tuition to school enrolled students, is not a formal school and its services are classifiable under Group 99929 (specifically SAC 999293) as commercial training and coaching services rather than core pre primary, primary or secondary school services under Groups 99921-99923. Further, the applicant's training does not form part of a curriculum leading to a qualification recognised by law nor is it an approved vocational education course. Consequently, the applicant does not fall within sub clauses (i), (ii) or (iii) of clause (y) and is therefore outside the scope of the exemption at SI. No. 66. [Paras 7]

The applicant is not an "educational institution" as defined in clause (y) of Para 2 of Notification No. 12/2017 CT (Rate); its services are classifiable as commercial training and coaching and are not exempt under SI. No. 66 of the said notification.

Final Conclusion: The Authority rules that M/s Tutor Comp Infotech India Private Limited does not qualify as an educational institution under the cited notification and accordingly its services are not exempt under SI. No. 66 of Notification No. 12/2017 CT (Rate).

Advance Ruling - Scope of advance ruling under Section 97 - Applicability of a notification under the GST Act

Scope of advance ruling under Section 97 - Applicability of a notification under the GST Act - Whether the applicant's question on the "geographical limit of Hyderabad" as mentioned in Notification No.3 of 2019 falls within the matters on which an advance ruling can be sought under Section 97 of the CGST/TGST Act. - HELD THAT: - Section 97(1) enumerates seven specified categories on which an advance ruling may be sought, including classification of goods or services and applicability of a notification. The Authority examined the applicant's query concerning the meaning of "geographical limit of Hyderabad" in Notification No.3 of 2019 and concluded that the question does not fall within any of the seven categories listed in Section 97. Accordingly, the Authority found that it had no jurisdiction to adjudicate the substantive question raised in the application and rejected the application.

Application rejected as the question does not fall within the scope of matters on which an advance ruling can be given under Section 97.

Final Conclusion: The application for advance ruling was admitted procedurally but rejected on merits for lack of jurisdiction under Section 97, since the question on the geographical limit of Hyderabad does not fall within the categories on which an advance ruling may be sought.

Construction of affordable residential apartments by a promoter in a Residential Real Estate Project - Construction of residential apartments other than affordable residential apartments by a promoter in a Residential Real Estate Project - Residential Real Estate Project (RREP) - classification based on carpet area of commercial apartments - Affordable residential apartment - unit-wise qualification by carpet area and gross amount charged - Tax rate applicability determined per apartment/unit - Conditions restricting benefit - payment from electronic cash ledger and limited input tax credit

Construction of affordable residential apartments by a promoter in a Residential Real Estate Project - Construction of residential apartments other than affordable residential apartments by a promoter in a Residential Real Estate Project - Tax rate applicability determined per apartment/unit - Affordable residential apartment - unit-wise qualification by carpet area and gross amount charged - Applicability of the concessional rate to units qualifying as affordable residential apartments in a Residential Real Estate Project that contains both affordable and non affordable units. - HELD THAT: - The Authority examined the notification entries and their definitions and held that the entries at Item (i) and Item (ia) of SI No. 3 prescribe rates for construction services of different categories of individual apartments in a residential real estate project. The definitions of "apartment", "promoter", "Real Estate Project" and "Residential Real Estate Project (RREP)", and the specific definition of "affordable residential apartment" demonstrate that qualification for the concessional rate is determined with reference to the individual apartment's characteristics (carpet area and gross amount charged) and the promoter's activity within an RREP. Consequently, where an individual unit satisfies the definition of an affordable residential apartment, the concessional rate for construction of an affordable residential apartment applies to that unit even if the overall project contains apartments that do not qualify as affordable. The Authority also noted that the concessional rates are subject to the conditions set out in the notification (including payment from the electronic cash ledger and restrictions/adjustments relating to input tax credit) which remain applicable to supplies falling under the respective entries. [Paras 7]

Units that individually qualify as affordable residential apartments in an RREP shall attract the concessional rate applicable to construction of affordable residential apartments, while other units in the same project shall attract the rate applicable to residential apartments other than affordable residential apartments, subject to the conditions in the notification.

Final Conclusion: The Authority ruled that GST shall be levied unit wise: affordable residential apartments in the project will attract the concessional rate prescribed for affordable units, while other apartments in the same project will attract the higher rate for non affordable units, each subject to the conditions prescribed in the notification.

Paragraph 3 of Schedule II - treatment or process applied to another person's goods - supply of services - manufacturing services on physical inputs (goods) owned by others - Service Accounting Code 998881 - GST rate 18% (9% CGST + 9% SGST)

Paragraph 3 of Schedule II - treatment or process applied to another person's goods - supply of services - Activity of commercial vehicle body building on chassis supplied by the customer is supply of services - HELD THAT: - The applicant fabricates vehicle bodies on chassis owned by customers and does not acquire title to the chassis at any stage. Paragraph 3 of Schedule II treats any treatment or process applied to another person's goods as a supply of services. The charges collected by the applicant comprise cost of inputs/materials used and labour/fabrication charges, and the output is not owned by the fabricator. Applying Paragraph 3, the Authority held that the activity is fabrication (treatment/process) on goods belonging to another and therefore constitutes a supply of services. [Paras 7]

The activity is a supply of services.

Manufacturing services on physical inputs (goods) owned by others - Service Accounting Code 998881 - GST rate 18% (9% CGST + 9% SGST) - Classification of the service under the Scheme of Classification of Services and applicable rate of GST - HELD THAT: - Under the notified Scheme of Classification of Services, Heading 9988 covers manufacturing services on physical inputs owned by others, i.e., outsourced manufacturing processes where the output is not owned by the service provider and the service value is based on the service fee. The subheading for transport equipment/motor vehicle manufacturing services falls within this Heading. The Authority accordingly classified the applicant's activity under SAC 998881 (motor vehicle and trailer manufacturing services as manufacturing services on physical inputs owned by others). Notification No. 11/2017-Central Tax (Rate) lists such manufacturing services under the entry attracting tax at 18% (9% CGST + 9% SGST), and the Authority applied that rate. [Paras 7]

The service is classifiable under SAC 998881 and is liable to GST at 18% (9% CGST + 9% SGST).

Final Conclusion: The Authority ruled that fabrication of commercial vehicle bodies on customer supplied chassis is a supply of services (treatment/process on another person's goods), classifiable under SAC 998881 as manufacturing services on physical inputs owned by others, and is taxable at 18% (9% CGST + 9% SGST).

Works contract - composite supply of works contract - clinical establishment - governmental authority / Government Entity - concessional rate under SI No. 3(vi) of Notification No. 11/2017 - Central Tax (Rate) - temporal applicability of concessional rate consequent to Notification No. 22/2021

Works contract - composite supply of works contract - clinical establishment - concessional rate under SI No. 3(vi) of Notification No. 11/2017 - Central Tax (Rate) - Eligibility of the works contract services supplied to Malabar Cancer Centre for the concessional 12% GST under SI No. 3(vi) of Notification No. 11/2017 - HELD THAT: - The Authority examined whether the applicant's services fall within the definition of 'works contract' and whether they satisfy the specified descriptions in entry SI No. 3(vi). The term 'works contract' under the CGST Act is confined to contracts for construction, erection, commissioning, installation, completion, fitting out, improvement, repair or similar activities involving transfer of property in goods; the applicant's agreement for construction and extension of site and building therefore falls within that definition. 'Clinical establishment' as defined in Notification No. 12/2017 includes hospitals or institutions offering diagnostic or treatment services; Malabar Cancer Centre, being established and engaged in oncology care and treatment, squarely falls within that definition. Given that the supply is a composite works contract and the subject structure is a 'clinical' establishment, the supply satisfies the specified descriptions in SI No. 3(vi) and thus meets the descriptive conditions for the concessional rate prescribed therein. [Paras 7]

The works contract services rendered by the applicant to Malabar Cancer Centre qualify for the concessional rate under SI No. 3(vi) of Notification No. 11/2017.

Governmental authority / Government Entity - concessional rate under SI No. 3(vi) of Notification No. 11/2017 - Central Tax (Rate) - Whether Malabar Cancer Centre is a 'governmental authority' / 'Government Entity' for the purpose of entitlement to concessional rate under SI No. 3(vi) - HELD THAT: - The Authority considered the statutory definitions and facts. Malabar Cancer Centre is a society registered under the Societies Registration Act, established by the State Government and administered under the Department of Health and Family Welfare; its Governing Body members hold office by virtue of official positions and the Chief Minister is Chairman. Public health is a function entrusted to municipalities and panchayats under Articles 243W and 243G. On these facts, Malabar Cancer Centre is established by the State Government with full participation by way of control to carry out a function (public health) entrusted to local authorities, and therefore falls within the definition of 'governmental authority' / 'Government Entity' under Notification No. 11/2017. Consequently, supplies to it satisfy the recipient-condition in SI No. 3(vi). [Paras 7]

Malabar Cancer Centre is a 'governmental authority' / 'Government Entity' for purposes of SI No. 3(vi) and supplies to it satisfy the recipient condition for the concessional rate.

Temporal applicability of concessional rate consequent to Notification No. 22/2021 - concessional rate under SI No. 3(vi) of Notification No. 11/2017 - Central Tax (Rate) - Temporal scope of applicability of the concessional 12% rate and rate applicable thereafter - HELD THAT: - The Authority noted that while SI No. 3(vi) entitles eligible supplies to the concessional 12% rate, Notification No. 22/2021 amended the relevant entry with effect from 01.01.2022. The ruling therefore applies the concessional rate to eligible supplies made up to 31.12.2021. From 01.01.2022 onwards the amended tariff applies and such supplies will attract the rate specified in the post-amendment entry (18%). [Paras 7]

Eligible works contract services are liable to 12% GST up to 31.12.2021; from 01.01.2022 the rate is 18% as per the amended notification.

Final Conclusion: The Authority rules that the applicant's works contract services to Malabar Cancer Centre qualify for the concessional 12% GST under SI No. 3(vi) of Notification No. 11/2017 until 31.12.2021, and that with effect from 01.01.2022 the services will attract GST at 18% pursuant to the amendment by Notification No. 22/2021.

Classification of professional, technical and business services as pure services - distinction between pure service and works contract service - classification under Heading 9983 of the Scheme of Classification of Services - eligibility for exemption for pure services provided to government in relation to functions under Article 243G/243W - application of entry at SI No. 3 of Notification No. 12/2017 - exemption for specified pure services to Central/State/Union territory/local authority - applicability of GST rate at 18% under entry at SI No. 21(ii) of Notification No. 11/2017

Classification of professional, technical and business services as pure services - distinction between pure service and works contract service - classification under Heading 9983 of the Scheme of Classification of Services - applicability of GST rate at 18% under entry at SI No. 21(ii) of Notification No. 11/2017 - Whether geotechnical investigation and foundation recommendations, preparation of DPRs, architectural and engineering design, and project management services for civil/infrastructure works are pure services or works contract services, and their classificatory tariff and applicable GST rate. - HELD THAT: - The Authority examined the nature of the supplies made by the applicant and the Scheme of Classification of Services annexed to Notification No. 11/2017 CT (Rate). The services in question do not involve supply of goods and consist of provision of designs, plans, studies, investigations and management responsibilities falling within professional/technical advisory and project management activities. The Classification scheme places architectural services and engineering services (including project management for construction projects) under Heading 9983 - Other professional, technical and business services, with specific service codes covering architectural services, engineering services for building and transportation projects and project management services for construction projects. On that basis the activities of geotechnical investigation and soil reporting, DPR preparation, architectural and engineering design and project management services are appropriately classifiable under Heading 9983 and are not works contract services involving transfer of immovable property or supply of goods. Consequentially, such services attract the rate specified for Heading 9983, viz. 18% (9% CGST + 9% SGST) as per entry at SI No. 21(ii) of Notification No. 11/2017 CT (Rate). [Paras 7]

The listed services are pure services classifiable under Heading 9983 and liable to GST at 18% (9% CGST + 9% SGST) under entry at SI No. 21(ii) of Notification No. 11/2017.

Eligibility for exemption for pure services provided to government in relation to functions under Article 243G/243W - application of entry at SI No. 3 of Notification No. 12/2017 - exemption for specified pure services to Central/State/Union territory/local authority - Whether the aforesaid pure services supplied to Rebuild Kerala, the State Public Works Department, and M/s HLL Infratech Services Ltd are eligible for exemption under SI No. 3 of Notification No. 12/2017. - HELD THAT: - Entry at SI No. 3 of Notification No. 12/2017 grants nil rate for pure services (excluding works contracts or composite supplies involving goods) provided to Government or local authorities by way of any activity in relation to a function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W. The Authority found that Rebuild Kerala is an initiative of the Government of Kerala and the Public Works Department is a State Government department; the services rendered by the applicant relate to construction of roads, bridges, schools and similar infrastructure which fall within functions entrusted to Panchayats/Municipalities under Articles 243G/243W. Therefore the supplies to Rebuild Kerala and the State Public Works Department qualify for exemption under SI No. 3. By contrast, M/s HLL Infratech Services Ltd, though a public sector undertaking under the administrative control of the Ministry of Health and Family Welfare, is not the Central Government or a State Government or local authority for purposes of the entry; consequently supplies to M/s HLL Infratech Services Ltd do not satisfy the recipient condition in SI No. 3 and are not eligible for the exemption. [Paras 7]

Services supplied to Rebuild Kerala and the State Public Works Department are exempt under SI No. 3 of Notification No. 12/2017; services supplied to M/s HLL Infratech Services Ltd are not exempt under that entry.

Final Conclusion: The Authority rules that the applicant's geotechnical investigation and soil reporting, DPR preparation, architectural and engineering design and project management services are pure services classifiable under Heading 9983 and taxable at 18% (9% CGST + 9% SGST); such services supplied to Rebuild Kerala and the State Public Works Department are exempt under SI No. 3 of Notification No. 12/2017, whereas identical services supplied to M/s HLL Infratech Services Ltd are not eligible for that exemption.

Classification of goods as parts of fishing vessels - applicability of concessional GST rate 5% - interpretation of S. No. 252 of Schedule I of Notification No.1/2017-Central Tax (Rate) - distinction between use as part of goods of heading 8902 and other uses - CBIC clarification on GST rate for marine engines

Classification of goods as parts of fishing vessels - applicability of concessional GST rate 5% - interpretation of S. No. 252 of Schedule I of Notification No.1/2017-Central Tax (Rate) - CBIC clarification on GST rate for marine engines - Applicability of GST at the rate of 5% on marine engines of heading 8407 and on their spare parts when supplied for use as parts of fishing vessels of heading 8902. - HELD THAT: - The Authority examined Notification No.1/2017-Central Tax (Rate) and observed that S. No. 247 of Schedule I fixes 5% GST on goods classifiable under heading 8902 (fishing vessels) and S. No. 252 of Schedule I provides that parts of goods of headings 8901, 8902, 8904, 8905, 8906 and 8907, even if falling under any other chapter, attract GST at 5%. Applying these entries, marine engines and their spare parts, when supplied for use as parts of fishing vessels falling under heading 8902, are covered by S. No. 252 and therefore attract the concessional rate of 5% (2.5% CGST + 2.5% SGST). The Authority also noted and relied upon the CBIC clarification which states that marine engines for fishing vessels falling under the relevant tariff item attract 5% GST by virtue of S. No. 252. The Authority further clarified that where the same engines or parts are supplied for uses other than as parts of fishing vessels of heading 8902, they would be subject to the GST rate applicable to the Customs Tariff heading under which they are otherwise classifiable. [Paras 7]

Marine engines of heading 8407 and their spare parts, when supplied for use as parts of fishing vessels of heading 8902, shall attract GST at 5% (2.5% CGST + 2.5% SGST) under S. No. 252 of Schedule I of Notification No.1/2017; supplies for other uses shall attract rates applicable to their respective tariff headings.

Final Conclusion: The Authority ruled that marine engines and their spare parts supplied for use in vessels classifiable under Customs Tariff Heading 8902 are taxable at the concessional GST rate of 5% under S. No. 252 of Schedule I to Notification No.1/2017; if supplied for other uses, the rates applicable under their own tariff classification will apply.

Composite supply - works contract - continuous supply of services - time of supply - consideration - annuity as consideration for works contract - classification under SAC 995421 - applicability of 12% GST under Notification No. 11/2017 (Sl. No. 3(iv)) - exclusion of exemption under Entry 23A of Notification No. 12/2017 - bonus as additional consideration

Composite supply - works contract - annuity as consideration for works contract - classification under SAC 995421 - applicability of 12% GST under Notification No. 11/2017 (Sl. No. 3(iv)) - exclusion of exemption under Entry 23A of Notification No. 12/2017 - The taxability and rate of GST applicable to the annuity payments received by the applicant under the concession agreement. - HELD THAT: - The services rendered under the concession agreement (design, construction, operation and maintenance of roads on a DBFOT/DBFOT-Annuity basis) constitute a composite supply which is a works contract within the meaning of the CGST Act. The annuity payments received over the concession period are, in substance, consideration for the works contract services and are therefore taxable. The services are classifiable under SAC 995421 (general construction services of highways, roads, bridges etc.). The continuous nature of the supply and the contractual payment structure mean that supply is deemed made to the extent covered by each annuity payment and taxable at the time of receipt of each annuity instalment; the supplier must issue tax invoices on annuity payment dates. Entry at Sl. No. 3(iv) of Notification No. 11/2017 (as amended) prescribes GST at 12% (6% CGST + 6% SGST) for composite supply of works contract in relation to roads for use by the general public; accordingly the annuity is not exempt under Entry 23A of Notification No. 12/2017 and is liable to GST at 12%. [Paras 7]

Annuity payments received by the applicant are consideration for works contract services classifiable under SAC 995421 and are liable to GST at 12% (6% CGST + 6% SGST).

Bonus as additional consideration - works contract - applicability of 12% GST under Notification No. 11/2017 (Sl. No. 3(iv)) - Whether the early completion bonus received under the concession agreement is taxable and, if so, at what rate. - HELD THAT: - The early completion bonus stipulated in the concession agreement is an additional monetary consideration for the works contract services rendered by the concessionaire. Being part of the contractual consideration for the composite works contract supply, the bonus cannot be treated as exempt separate from the principal supply. Consequently, the bonus falls within the same classification and rate as the annuity/works contract consideration and is taxable at 12% (6% CGST + 6% SGST) under Sl. No. 3(iv) of Notification No. 11/2017 (as amended). [Paras 7]

The early completion bonus is additional consideration for the works contract and is liable to GST at 12% (6% CGST + 6% SGST).

Final Conclusion: The Authority rules that the annuity payments (including the early completion bonus) received under the concession agreement are consideration for works contract services classifiable under SAC 995421 and are taxable at 12% (6% CGST + 6% SGST); the exemption under Entry 23A of Notification No. 12/2017 is not attracted.

Classification of goods for GST - applicability of Notification No. 01/2017 Central Tax (Rate) - Sl. No. 252 (parts of goods of headings 8901-8907) - GST rate on outboard motors and their spare parts - scope of tariff-heading based rate versus end-use based classification - applicability of CBIC Circular No.52/26/2018 GST

Classification of goods for GST - GST rate on outboard motors and their spare parts - applicability of Notification No. 01/2017 Central Tax (Rate) - Sl. No. 252 (parts of goods of headings 8901-8907) - GST rate applicable to outboard motors (HSN 8407) and their spare parts when supplied for use as parts of vessels falling under heading 8902 - HELD THAT: - The Authority examined the entries in Notification No.01/2017 Central Tax (Rate) dated 28.06.2017 and the classification of the applicant's outboard motors under Customs Tariff Heading 8407 21 00. While outboard motors are classifiable under 8407 21 00 which ordinarily attracts 28% as per Schedule IV Sl. No.114, Sl. No.252 of Schedule I notifies that parts of goods of headings 8901, 8902, 8904, 8905, 8906 and 8907 falling under any chapter attract GST at 5%. Therefore where an outboard motor is supplied for use as a part of a fishing vessel falling under heading 8902, it is to be treated as a part of that vessel and will attract 5% GST (2.5% CGST + 2.5% SGST) under Sl. No.252. Conversely, supplies of outboard motors for uses other than as parts of goods of headings 8901, 8902, 8904, 8905, 8906 and 8907 will attract the rate applicable to the tariff heading in which they are classified (for example 28% under the heading 8407 where applicable). The Authority thus applied the end use/part classification contained in the notification to determine the applicable rate. [Paras 7]

Outboard motors and their spare parts supplied for use as parts of vessels falling under heading 8902 shall attract GST at 5%; if supplied otherwise, the GST rate applicable to their own tariff heading applies.

Applicability of CBIC Circular No.52/26/2018 GST - interpretative weight of administrative clarification - Whether Circular No.52/26/2018 GST (paragraph 10/10.1) applies to the classification and rate issue raised by the applicant - HELD THAT: - The Authority considered the CBIC Circular which clarified that marine engines for fishing vessels (and parts of goods of heading 8902 falling under any chapter) attract 5% GST under Sl. No.252 of Schedule I. The Authority found this circular directly on point and applicable to the instant question, confirming that marine engines/outboard motors supplied as parts of fishing vessels attract 5% GST. The circular therefore supports the interpretation and application of Sl. No.252 to the facts presented by the applicant. [Paras 7]

Circular No.52/26/2018 GST (point 10.1) is applicable and clarifies that marine engines/parts supplied as part of fishing vessels attract 5% GST.

Final Conclusion: The Advance Ruling holds that outboard motors and their spare parts supplied for use as parts of vessels falling under heading 8902 attract GST at 5% (2.5% CGST + 2.5% SGST) under Sl. No.252 of Notification No.01/2017 Central Tax (Rate); supplies not so used will attract the rate applicable to their own tariff heading. The Authority also accepts that CBIC Circular No.52/26/2018 GST is applicable to the matter.

Advance ruling - jurisdiction of Authority for Advance Ruling - binding nature of advance ruling - applicant - supply - questions in respect of supplies undertaken by third parties

Advance ruling - jurisdiction of Authority for Advance Ruling - applicant - questions in respect of supplies undertaken by third parties - Whether the Authority has jurisdiction to pronounce advance ruling on GST liability of supplies made by third persons (members of the applicant) where those supplies are not undertaken or proposed to be undertaken by the applicant itself. - HELD THAT: - The Authority analysed the statutory scheme governing advance rulings and the definitions of "advance ruling" and "applicant". The provisions require that an advance ruling relate to supplies "being undertaken or proposed to be undertaken by the applicant" and that the ruling is binding only on the applicant and its jurisdictional officer. The questions posed by the applicant concern the GST liability of developers who are members of the applicant and thus constitute supplies by third parties, not supplies undertaken or proposed to be undertaken by the applicant itself. Consequently the application does not fall within the matters enumerated for advance rulings and is beyond the jurisdiction of the Authority to decide. [Paras 7]

The Authority has no jurisdiction to answer the questions because they do not pertain to supplies undertaken or proposed to be undertaken by the applicant.

Final Conclusion: Application dismissed for lack of jurisdiction: the questions relate to supplies by third parties (members of the applicant) and therefore do not fall within matters on which the Authority may pronounce an advance ruling.

Interpretation of "solely" in Section 10(23C)(vi) - predominant object test - incidental business/profits under the seventh proviso to Section 10(23C) - powers of the prescribed authority under the second proviso to Section 10(23C) - requirement of compliance/registration under state Charities law as relevant consideration - prospective operation of overruling

Interpretation of "solely" in Section 10(23C)(vi) - predominant object test - incidental business/profits under the seventh proviso to Section 10(23C) - Meaning of 'solely' in the phrase 'existing solely for educational purposes and not for purposes of profit' and the legal consequence for applications under Section 10(23C)(vi). - HELD THAT: - The Court held that 'solely' must be given its plain and ordinary meaning - 'exclusively' or 'only' - and is not equivalent to 'predominant', 'main' or 'primary'. The 'predominant object' test evolved from Surat Art Silk (in the context of objects of general public utility) is inapt for educational institutions governed by Section 10(23C)(vi), because the statutory formulation imposes a categorical requirement that objects must relate to imparting education. Consequently, institutions seeking exemption under Section 10(23C)(vi) should have objects exclusively directed to education or education-related activities; incidental surpluses generated in the course of such activities do not by themselves disqualify the institution, provided the business (if any) is incidental to education and separate books are maintained as contemplated by the seventh proviso. The Court overruled prior decisions to the extent they equated 'solely' with 'predominant' (notably American Hotel [2008 (5) TMI 17 - SUPREME COURT] as well as Queens Education Society [2015 (3) TMI 619 - SUPREME COURT] ) and declared that those decisions do not state the correct law on the meaning of 'solely'. [Paras 51, 52, 60, 61, 76]

The expression 'solely' in Section 10(23C)(vi) means exclusively; the 'predominant object' test is not the correct test for educational institutions and earlier decisions adopting that test are overruled to that extent.

Powers of the prescribed authority under the second proviso to Section 10(23C) - monitoring conditions as stipulable conditions for approval - Scope of inquiry and materials the Prescribed Authority/Commissioner may examine at the stage of grant of approval under Section 10(23C). - HELD THAT: - The Court held that the second proviso to Section 10(23C) permits the Prescribed Authority to call for documents, including audited annual accounts, and to make enquiries necessary to satisfy itself about the genuineness of activities before granting approval. The distinction drawn in prior authority that accounting/assessment-stage scrutiny alone is permissible was rejected: the Commissioner is not constrained from examining past accounts or other material when considering an application for approval. However, ordinarily the focus at the approval stage should be on the nature of activities (whether they are education or education-related) rather than on disproportionate emphasis on incidental surpluses; monitoring conditions in the provisos may be imposed as conditions subject to which approval is granted. [Paras 62, 63, 76]

The Prescribed Authority may call for and examine audited accounts and other material when considering approval under Section 10(23C); monitoring conditions may be stipulated as conditions of approval.

Requirement of compliance/registration under state Charities law as relevant consideration - interaction of state regulatory framework with grant of approval under Section 10(23C) - Whether compliance with state Charities legislation (registration under the A.P. Charities Act) is a relevant and, where applicable, mandatory consideration for applications under Section 10(23C). - HELD THAT: - The Court held that state Charities law (here, the A.P. Charities Act) and the Income tax Act are pari materia as regards charitable purposes and that state registration requirements are mandatory where applicable. The A.P. Charities Act applies to public charitable institutions whether registered or not and requires registration and provides supervisory and protective mechanisms (accounts, audit, restrictions on disposal, etc.). Given Entries in the Seventh Schedule empowering states in the field of charities and societies, compliance with such state laws is a legitimate and relevant consideration that the Commissioner may take into account while deciding applications for approval under Section 10(23C). [Paras 64, 69, 70, 76]

Where state law requires registration of charitable institutions, such registration and compliance with the state statutory framework are relevant and, where applicable, mandatory considerations in deciding approval under Section 10(23C).

Final Conclusion: The appeals are dismissed. The Court declares that for exemption under Section 10(23C)(vi) an institution must have objects exclusively directed to education ('solely' means exclusively), the Prescribed Authority may examine accounts and other material when granting approval and may stipulate monitoring conditions as part of approval, and compliance with applicable state Charities registration laws is a relevant and mandatory consideration; the overruling aspects operate prospectively.

Consideration of documents uploaded in response to a show cause notice under section 148A(b) - Validity of order passed under section 148A(d) and issuance of notice under section 148 - Remand for fresh consideration where procedural lapse in adjudication is shown - Initiation of reassessment on information obtained under CBDT Risk Management Strategy and Explanation-1(I) to section 148

Consideration of documents uploaded in response to a show cause notice under section 148A(b) - Validity of order passed under section 148A(d) and issuance of notice under section 148 - Remand for fresh consideration where procedural lapse in adjudication is shown - Whether the order passed under section 148A(d) and the notice under section 148 dated 16th April 2022 are sustainable where the assessee had uploaded documents in response to the show cause notice issued under section 148A(b) but the Assessing Officer's order does not refer to or appear to have considered those documents. - HELD THAT: - The petitioner uploaded four documents on the designated portal on 6th April 2022 in response to the show cause notice under section 148A(b), including the sale deed and bank statement purporting to demonstrate receipt of the consideration through banking channels. The Assessing Officer, in the order dated 16th April 2022 under section 148A(d), recorded that no reply had been furnished but made no reference to the documents acknowledged on the portal. The Court noted the existence of the uploaded documents on the record and that the Assessing Officer did not consider their effect before issuing the section 148 notice. Given this procedural omission, the documents ought to have been considered and their impact determined in the proceedings before passing the impugned order. The Court declined to speculate on the eventual outcome if the documents had been considered and, on that basis, found that the impugned order and notice could not stand without fresh consideration of the material placed by the petitioner. The matter was therefore remitted to the Assessing Officer to consider the uploaded documents afresh and to permit the petitioner to file any further explanation within two weeks, after which appropriate orders may be passed in accordance with law. [Paras 3, 4, 5]

Order dated 16th April 2022 under section 148A(d) and the notice dated 16th April 2022 under section 148 are set aside and the matter is remanded to the Assessing Officer for fresh consideration of the documents uploaded on 6th April 2022, with liberty to the petitioner to furnish further explanation within two weeks.

Final Conclusion: Writ petition disposed of by setting aside the impugned order under section 148A(d) and the notice under section 148 dated 16th April 2022, with the matter remitted to the Assessing Officer for fresh consideration of the documents already uploaded and any further explanation to be filed within two weeks.

Addition under Section 153A in non-abated assessment without incriminating material - abated and non-abated assessment - nexus between seized material and assessment/reassessment - assessment of completed proceedings on basis of incriminating material found during search - binding effect of High Court precedents in absence of stay

Addition under Section 153A in non-abated assessment without incriminating material - nexus between seized material and assessment/reassessment - abated and non-abated assessment - Whether an addition under Section 153A can be made in respect of a non-abated (completed) assessment where no incriminating material was found during the search. - HELD THAT: - The High Court recorded concurrent findings of fact by the lower authorities that no incriminating material was found during the search and that the assessment in question was non-abated. Applying the principle summarised in Kabul Chawla and followed in subsequent decisions, the Court reiterated that Section 153A does not permit arbitrary additions: 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 which has a nexus with the seized material. In a non-abated (completed) assessment where no incriminating documents or materials were found or seized, additions under Section 153A are not warranted. The Court noted that though the correctness of Kabul Chawla is under challenge before the Supreme Court, there is no stay on that judgment, and thus its ratio remains binding until set aside. Applying these precedents and the concurrent findings of fact, the Court found no substantial question of law requiring interference with the ITAT's order deleting the addition. [Paras 5, 6, 7, 8, 9]

ITAT's deletion of the addition under Section 153A is upheld; addition cannot be made in a non-abated (completed) assessment in the absence of incriminating material found during the search.

Final Conclusion: The appeal is dismissed. The High Court affirms the ITAT's conclusion-following Kabul Chawla and related decisions-that where the assessment was non-abated and no incriminating material was found in the search, additions under Section 153A cannot be sustained; no substantial question of law arises for consideration.

Applicability of provisions of section 153C in assessments following search - Scope of section 69B for reclassification of disclosed investments - Reclassification of income versus treatment as income from other sources - Voluntary disclosure and its effect on invocation of section 69B - Dismissal of Revenue appeal for want of substantial question of law under section 260A

Applicability of provisions of section 153C in assessments following search - Dismissal of Revenue appeal for want of substantial question of law under section 260A - Validity of ITAT's quashing of assessments framed under the provisions invoked after search and whether a substantial question of law arises for admission under Section 260A. - HELD THAT: - The High Court examined the impugned ITAT order which had set aside findings of the CIT(A) and quashed assessments framed in respect of certain years following search proceedings. After perusal of the record and the findings recorded by the authorities below, the Court found no illegality or perversity in the ITAT's conclusions. The Court held that the Revenue had not disclosed a substantial question of law warranting admission of the appeal under Section 260A. Consequently, the Revenue's appeal was dismissed at the admission stage. [Paras 9, 10]

Revenue's appeal under Section 260A dismissed at admission for lack of any substantial question of law concerning the quashing of assessments.

Scope of section 69B for reclassification of disclosed investments - Reclassification of income versus treatment as income from other sources - Voluntary disclosure and its effect on invocation of section 69B - Whether section 69B could be invoked to treat the disclosed additional investment (construction material) as unexplained investment and reclassify it when the assessee had voluntarily disclosed the amount and filed the return for the relevant year. - HELD THAT: - The authorities below found that the assessee had voluntarily disclosed additional income on account of construction material and offered it in the return for AY 2016-17. The CIT(A) and the ITAT applied the settled statutory test for section 69B, noting that reclassification under section 69B requires that the investment be found in possession of the assessee in excess of amounts recorded in the books and that the assessee offers no satisfactory explanation. The authorities recorded that the investment was shown in the books/return and that the Assessing Officer's conclusion under section 69B lacked specific, relevant material or particularised findings to justify reclassification; a mere statement that the explanation was unsatisfactory was held insufficient. The High Court found these findings neither illegal nor perverse and confirmed the conclusion that section 69B was not attracted and that the amount should be treated as declared income from other sources as offered by the assessee. [Paras 8, 46, 47]

Findings of CIT(A) and ITAT that section 69B is not attracted and that the disclosed amount should be treated as income from other sources are upheld; Revenue's challenge on this ground dismissed.

Final Conclusion: The High Court dismissed the Revenue's appeal under Section 260A at the admission stage, finding no substantial question of law; the ITAT's confirmation that section 69B did not apply to the voluntarily disclosed investment (treated as income from other sources for AY 2016-17) is sustained, and the quashing of the assessments in the contested years stands unchallenged.

Allowance for replanting expenses under Rule 7A(2) of the Income Tax Rules, 1962 - Deductibility of upkeep and maintenance expenses of immature plantation under Section 37 of the Income-tax Act, 1961 - Computation of business income from sale of rubber under Rule 7A and apportioned agricultural income - Strict construction of taxing statutes - Revenue expenditure versus capital expenditure test

Allowance for replanting expenses under Rule 7A(2) of the Income Tax Rules, 1962 - Computation of business income from sale of rubber under Rule 7A - Entitlement to an allowance for the cost of replanting rubber plants under Rule 7A(2) in computing income taxable under the Income-tax Act, 1961. - HELD THAT: - Sub rule (2) of Rule 7A permits an allowance in computing income to tax under the Income-tax Act for the cost of planting rubber plants in replacement of plants that have died or become permanently useless in an area already planted, provided that the area has not previously been abandoned and subject to excluding any subsidy under clause (31) of Section 10. The Rule is to be construed by its language; it contemplates continuity of plantation and replacement in an area already planted rather than fresh establishment of a plantation. Interpreting Rule 7A(2) consistently with the scheme which treats sale of centrifuged latex as business income (with apportionment under Rule 7A(1)), the Court held that replanting/replacement costs in an area not abandoned are allowable as a straight allowance under Rule 7A(2). The concept of infilling is not necessary to attract the allowance; what matters is replacement in an existing, not abandoned, planted area. [Paras 14]

Under Rule 7A(2) an allowance is available for the cost of replanting rubber plants that died or became permanently useless in an area already planted which has not been abandoned.

Deductibility of upkeep and maintenance expenses of immature plantation under Section 37 of the Income-tax Act, 1961 - Revenue expenditure versus capital expenditure test - Strict construction of taxing statutes - Whether upkeep and maintenance expenses incurred for replanted immature rubber trees until maturity are deductible as revenue expenditure in computing business income under Section 37 of the Income-tax Act, 1961. - HELD THAT: - The Court examined precedents, statutory scheme and accepted tests distinguishing revenue and capital expenditure. Applying the tests (whether expenditure creates a new capital asset or gives enduring benefit, whether it is a recurring running expense and its nexus to profit earning), the Court found upkeep and maintenance outlays for replanted immature rubber trees to be running/revenue expenses incurred wholly and exclusively for the purposes of the business and not capital in nature. The residuary provision Section 37 applies unless an expense is expressly disallowed or falls within Sections 30-36; no such prohibition was shown. Earlier decisions treating such upkeep as allowable (including the Supreme Court authorities cited) support treating these expenses as deductible revenue expenditure. The Court accordingly rejected the contrary ratio in Rehabilitation Plantations Ltd. insofar as it denied such deduction. [Paras 21]

Upkeep and maintenance expenses of replanted immature rubber trees until maturity are revenue expenditures and are deductible under Section 37 of the Income-tax Act, 1961.

Final Conclusion: The Reference is answered by holding that (i) Rule 7A(2) permits an allowance for the cost of replacing dead or permanently useless rubber plants in an area already planted which has not been abandoned, and (ii) upkeep and maintenance expenses incurred on replanted immature rubber trees until they attain maturity are revenue expenditures deductible under Section 37 of the Income-tax Act, 1961. The contrary view in Rehabilitation Plantations Ltd. is disapproved for the purposes of these questions; the listed ITAs are to be placed before the rostered Division Bench for disposal on merits.

Deduction under section 80P(2)(d) for cooperative societies - Mutuality and characterization of interest income as business income or income from other sources - Deduction under section 57 for expenditure incurred in earning income from other sources - Verification of cash deposits made during demonetisation in accordance with CBDT instructions and natural justice

Deduction under section 80P(2)(d) for cooperative societies - Mutuality and characterization of interest income as business income or income from other sources - Entitlement to deduction under section 80P(2)(d) in respect of interest earned on deposits with co-operative banks/other co-operative societies - HELD THAT: - The Tribunal held that section 80P(2)(d) allows deduction of the whole of interest or dividend income derived by a co-operative society from investments with any other co-operative society and that cooperative banks are to be regarded as falling within the broader category of cooperative societies. The Tribunal distinguished authorities which addressed section 80P(2)(a)(i) and concluded that the Supreme Court decision in Totgar's (relied on by the Revenue) did not decide the applicability of clause (d). Applying this principle, the Tribunal held that the assessee is eligible for deduction under section 80P(2)(d) in respect of interest earned from deposits made with other co-operative banks. However, recognising factual aspects (source of funds and particulars of deposits) and following precedents of coordinate benches, the Tribunal restored the matter to the file of the Assessing Officer for de novo consideration and verification, directing that the assessee be granted proper opportunity of being heard to substantiate the claim and for computation/allowance as appropriate. [Paras 2, 3, 5]

Assessee entitled in principle to deduction under section 80P(2)(d) for interest from deposits in co-operative banks; claim remitted to Assessing Officer for verification, hearing and consequential computation.

Deduction under section 57 for expenditure incurred in earning income from other sources - Allowability of expenditure in computing income chargeable under the head 'Income from Other Sources' in relation to interest earned from commercial banks - HELD THAT: - The Tribunal directed that expenditure incurred in earning interest from commercial banks be allowed while computing income under the head 'Income from Other Sources' in accordance with the statutory provisions contained in section 57. The Assessing Officer was directed to allow such expenditure when giving effect to the order. [Paras 2, 3, 5]

Expenditure incurred in earning interest from commercial banks to be allowed under section 57; Assessing Officer to give effect accordingly.

Verification of cash deposits made during demonetisation in accordance with CBDT instructions and natural justice - Adjudication and verification of cash deposits in specified bank notes (SBN) during the demonetisation period - HELD THAT: - The Tribunal found a breach of natural justice in not granting sufficient time to the assessee to represent its case before the Principal CIT, and observed that the cash deposits in SBNs require verification in accordance with various CBDT instructions (including comparative statistical analysis and other indicia of unaccounted cash). The Tribunal directed remand of the issue to the Assessing Officer to verify the deposits of specified bank notes in accordance with the cited instructions, to examine whether the deposits fall within indicia of unaccounted cash, and to afford the assessee proper opportunity including physical hearing to substantiate genuineness of deposits. [Paras 4]

Issue remanded to Assessing Officer for verification of demonetisation-period cash deposits in accordance with CBDT instructions and after affording the assessee proper hearing; burden on assessee to establish genuineness.

Final Conclusion: The Tribunal allowed the appeals for statistical purposes: (i) held that in principle interest on deposits with co-operative banks is eligible for deduction under section 80P(2)(d) but remitted the claim to the Assessing Officer for verification, hearing and computation; (ii) directed allowance of expenditure under section 57 in relation to interest from commercial banks; and (iii) remanded the demonetisation-period cash deposit issue to the Assessing Officer for verification in accordance with CBDT instructions after granting proper opportunity to the assessee.

Valuation by Departmental Valuation Officer under section 50C - tolerance limit of 15% for DVO valuation versus declared consideration - adoption of assessee's declared consideration where variation is within permissible tolerance - remand to Assessing Officer for factual verification of percentage difference - requirement to raise specific grounds before Commissioner (Appeals) - onus of proof and documentary evidence to establish nexus for deduction of interest

Valuation by Departmental Valuation Officer under section 50C - tolerance limit of 15% for DVO valuation versus declared consideration - remand to Assessing Officer for factual verification of percentage difference - Whether the value adopted by the DVO under section 50C should be substituted for the assessee's declared sale consideration, given the claimed discrepancy of less than 15% between the two valuations. - HELD THAT: - The Tribunal reviewed authorities establishing that where the difference between the DVO's valuation and the assessee's declared consideration is within a tolerable margin (recognised as 15% by higher judicial decisions), the assessee's declared consideration may be accepted due to the inherent element of estimation in property valuation. The Tribunal noted factual contentions about specific errors in the DVO's averaging and choice of comparable rates but observed that the central question for application of the tolerable margin is factual: whether the percentage difference is less than 15% in the present case. In view of the authorities and the need for a factual determination, the Tribunal did not finally substitute values itself but restored the matter to the Assessing Officer to ascertain whether the difference is below 15%; if so, the assessee's declared sale consideration is to be taken for computing capital gains. [Paras 9, 10]

Allowed in part; matter remitted to the Assessing Officer to verify if the DVO's valuation and the assessee's declared consideration differ by less than 15%, and if so to adopt the assessee's declared consideration for computation of capital gains.

Requirement to raise specific grounds before Commissioner (Appeals) - infructuousness of grounds not raised in appellate grounds - Whether the claim for deduction of cost of improvements (stamp duty etc.) was rightly considered by the Tribunal given it was not pressed before the CIT(A). - HELD THAT: - The Tribunal examined the record, including Form 35 and written submissions before the CIT(A), and found no ground or written submissions pursued before the CIT(A) in respect of cost of improvements. Although the remand report included a note about inability to verify cost of improvements, the Tribunal concluded that the issue was never advanced before the CIT(A) and therefore could not be entertained at this stage. Consequently, the ground was treated as infructuous for appellate adjudication. [Paras 11, 12]

Dismissed as infructuous since the claim had not been raised before the Commissioner (Appeals) and no evidentiary material was placed for his consideration.

Onus of proof and documentary evidence to establish nexus for deduction of interest - Whether the disallowance of interest expenses was contrary to law in absence of documentary evidence and nexus between loans and property purchase. - HELD THAT: - The Tribunal noted that before the CIT(A) the assessee failed to produce documentary evidence demonstrating that the interest related to loans taken for the property business or to show nexus between the loans and the properties. On appreciation of the materials placed before the CIT(A), the Tribunal found no infirmity in the appellate authority's conclusion that the claim lacked supporting documentation and therefore dismissal of the ground was justified. [Paras 14]

Dismissed; the disallowance of interest expenses is sustained for lack of supporting documents and demonstrated nexus.

Final Conclusion: The appeal is partly allowed: the question of which sale consideration to adopt for capital gains computation is remitted to the Assessing Officer for determination whether the DVO valuation and the assessee's declared consideration differ by less than 15%, in which event the assessee's declared consideration is to be accepted; the claim for cost of improvements is dismissed as infructuous for not having been raised before the CIT(A); and the disallowance of interest is upheld for want of documentary proof and nexus.

Short deduction of tax at source - interest on short deduction - credit for tax deducted at source - technical error in credit posting by CPC - rectification under section 154 of the Income Tax Act - direction to assessing officer to grant TDS credit

Short deduction of tax at source - interest on short deduction - credit for tax deducted at source - The demand for short deduction of TDS and consequential interest was not sustainable as the assessee had in fact deposited the TDS. - HELD THAT: - The Tribunal examined the record, including the assessee's written submission and the challans produced, together with the Revenue's "Justification Report" which indicated that the assessee had deposited taxes but credit was not reflected, apparently due to a technical issue. Having considered these materials, the Tribunal found that there was no short deduction on the part of the assessee and that the levy of interest flowed from the absence of credited TDS in records rather than any default by the assessee. On this basis the addition of the alleged short deduction and the interest charged thereon were held not sustainable and were directed to be deleted. [Paras 5, 6]

The addition for short deduction of TDS and the consequential interest are deleted and the appeal is allowed on this ground.

Technical error in credit posting by CPC - direction to assessing officer to grant TDS credit - rectification under section 154 of the Income Tax Act - The matter was remitted to the Assessing Officer for grant of credit and internal coordination with CPC to rectify the non-posting of TDS credit. - HELD THAT: - Although the Tribunal concluded that the assessee had deposited the TDS, it was apparent that credit was not available in the electronic records due to a technical issue. The Tribunal therefore restored the file to the Assessing Officer with a direction to grant the necessary credit of TDS paid, to liaise with CPC for rectification of the posting, and to delete the demand and interest arising from the non-credited entries. The remand is for implementation of the Tribunal's finding and for necessary administrative action to ensure the assessee's records reflect the deposited TDS. [Paras 6, 7]

File restored to the Assessing Officer with directions to grant TDS credit, coordinate with CPC to rectify the posting, and delete the demand and interest.

Final Conclusion: The Tribunal allowed the appeal, held that the assessee had deposited the TDS so that the demand and interest were unsustainable, and restored the file to the Assessing Officer with directions to grant the requisite TDS credit and coordinate with CPC to rectify the technical non-posting.

Undisclosed income - double taxation of disclosed receipts - allowability of business expenditure against undisclosed receipts - unexplained cash credit - disallowance of interest where cash credit held unexplained - allowability of interest under section 36(1)(iii) of the Act

Undisclosed income - double taxation of disclosed receipts - allowability of business expenditure against undisclosed receipts - Whether the addition of Rs. 11,00,00,000/- made as undisclosed income could be sustained where the same amount was offered in the books as 'other receipts' and expenses claimed against it were not doubted by the Assessing Officer. - HELD THAT: - The Tribunal accepted that the assessee had offered the sum of Rs. 11,00,00,000/- in the profit and loss account as 'other receipts' and that the partner's statement recorded during survey did not categorically state that the amount represented 'net income' exclusive of expenses. The Assessing Officer retained the amount as shown in books and then added the same amount again to total income, which would result in taxation of the same receipts twice. The Assessing Officer also did not disallow or discredit the specific expenditures claimed in relation to those receipts after detailed scrutiny. Given that the receipts were offered in the return and the related expenses were accepted by the AO, the CIT(A) correctly held that the addition on a gross basis would amount to double taxation and was not warranted. The Tribunal agreed with this reasoning and found no basis to infer from the partner's statement that the sum was a 'net' figure precluding allowance of expenses.

Addition of Rs. 11,00,00,000/- deleted; expenses claimed against the disclosed amount to be allowed as accepted in assessment.

Unexplained cash credit - disallowance of interest where cash credit held unexplained - allowability of interest under section 36(1)(iii) of the Act - Whether interest expenditure of Rs. 44,80,634/- is allowable where deposits of Rs. 4.10 crores from five companies were held to be explained in the immediately preceding assessment year. - HELD THAT: - The CIT(A) in the assessment for A.Y. 2013-14 had examined the receipts from five companies and concluded that the deposits were explained and that additions under section 68 could not be sustained. That finding on genuineness and explanation of the deposits was applied in the assessment under challenge; once the deposits were held to be genuine and used for business purposes, the interest paid on such deposits was properly allowable under section 36(1)(iii). The Tribunal found no infirmity in the CIT(A)'s reliance on the earlier year's conclusion and upheld the direction to allow the interest expenditure.

Disallowance of interest of Rs. 44,80,634/- set aside; interest allowable since underlying deposits were held explained.

Final Conclusion: The departmental appeal is dismissed: the addition of Rs. 11,00,00,000/- was rightly deleted to avoid double taxation where the sum was offered in the books with accepted expenses, and the interest disallowance of Rs. 44,80,634/- was rightly set aside because the underlying deposits were held to be explained and interest is allowable under section 36(1)(iii).

Adjustment under section 143(1) for income appearing in Form No.26AS - tax deduction at source under section 194DA - exemption under section 10(10D) - clause (c) where premium exceeds 20% of sum assured - computation of taxable income on surrender proceeds as gross sum minus premium paid - CBDT Circular No.07/2003 explanatory note on taxable income on high-premium policies

Adjustment under section 143(1) for income appearing in Form No.26AS - tax deduction at source under section 194DA - exemption under section 10(10D) - clause (c) where premium exceeds 20% of sum assured - computation of taxable income on surrender proceeds as gross sum minus premium paid - CBDT Circular No.07/2003 explanatory note on taxable income on high-premium policies - Whether the processing adjustment under section 143(1) adding the amount reflected in Form No.26AS was justified and, if so, the correct quantum of income to be added on premature surrender of the life insurance policy. - HELD THAT: - Form No.26AS showed receipt from life insurance company with tax deducted under section 194DA. Section 143(1)(a)(vi) permits adjustment for income appearing in Form No.26AS which the assessee has not included in the return. Section 194DA requires deduction of tax at source on the gross sum payable under a life policy (except amounts exempt under section 10(10D)), but that does not convert the income component into non-income; TDS may be imposed on the gross where extraction of the precise income element is difficult. Clause (c) of section 10(10D) excludes exemption where a policy issued between 1-4-2003 and 31-3-2012 has annual premium exceeding 20% of the capital sum assured, rendering the income accruing on such policies taxable. The CBDT Circular No.07/2003 clarifies that the taxable quantum is the income accruing on such policies (not including the premium paid). Consequently, while TDS under section 194DA applies to the gross sum, the adjustment under section 143(1) must be by way of addition of the income component, being the gross surrender proceeds less the premium paid. Applying these principles to the facts, the sum received on premature surrender is subject to taxation to the extent of proceeds minus premium paid, and the intimation under section 143(1) should reflect that income (after accounting for other items shown in Form No.26AS). [Paras 7, 8, 11, 13, 14]

Adjustment under section 143(1) was justified but must be limited to the taxable income component (gross surrender proceeds less premium paid); the addition is accordingly recomputed and sustained to that extent.

Final Conclusion: The appeal is partly allowed: the processing adjustment under section 143(1) is sustained insofar as it adds the income component of the premature surrender proceeds (computed as gross proceeds less premium paid) and the addition is recomputed accordingly.

Reason to believe for reopening assessment under section 147 - service of notice under section 143(2) in reassessment proceedings - addition on account of purchases shown out of books - disallowance of depreciation for allegedly bogus plant and machinery - disallowance of interest where borrowed funds were siphoned off - ad hoc disallowance of administrative expenses for want of supporting documents - remand for de novo adjudication of interest under section 234A

Reason to believe for reopening assessment under section 147 - Validity of initiation of reassessment proceedings under section 147. - HELD THAT: - The Tribunal held that the AO had relevant material arising from a survey under section 133A and related investigation indicating large purchases and claimed plant acquisitions from a cluster of companies which, on enquiry, appeared to be paper entities connected to the assessee's group. Reliance on the settled test in Rajesh Jhaveri Stock Brokers (supra) was applied: at the stage of recording reasons the AO need only have such material as would permit a reasonable person to form a belief that income had escaped assessment; sufficiency of material is not to be tested at the initiation stage. Given the information about non-production of books, common directors/management, and enquiries showing lack of business activity of the alleged suppliers, the Tribunal found no infirmity in the reopening. [Paras 5, 6, 7]

Reassessment proceedings under section 147 were validly initiated; ground raised by the assessee is dismissed.

Service of notice under section 143(2) in reassessment proceedings - Whether notice under section 143(2) was time barred. - HELD THAT: - The Tribunal observed that the statutory six month period in section 143(2) applies to issuance of that notice in relation to a return filed under section 139 or in response to a notice under section 142(1). In the present case the section 143(2) notice was issued pursuant to validly initiated reassessment under section 147; on the available record the notice was therefore held to have been served within the prescribed time in the context of reassessment proceedings. [Paras 8]

Ground challenging service of notice under section 143(2) is dismissed.

Addition on account of purchases shown out of books - Sustenance of addition treating purchases of Rs.117 crore as out of books and corresponding determination of gross profit rate for computing addition. - HELD THAT: - The Tribunal noted that despite multiple opportunities the assessee failed to produce invoices, delivery challans, goods receipt notes or other supporting documents and claimed destruction of records by fire without reconstruction. Investigations and statements established that the alleged suppliers were floated and controlled by the assessee's group and that books of those supplier entities were not available; the lower authorities' adoption of an enhanced gross profit rate (8%) was not controverted by material on record. In absence of supporting evidence to establish genuineness of the purchases, the assessing officer's treatment of purchases as out of books and the resulting addition were upheld. [Paras 9, 10, 11]

Addition on account of alleged purchases out of books is upheld; the assessee's ground is dismissed.

Disallowance of depreciation for allegedly bogus plant and machinery - Validity of disallowance of depreciation claimed on alleged purchases of plant and machinery. - HELD THAT: - The Tribunal accepted the finding that the assessee failed to produce invoices, installation details, fixed asset registers or other documentary evidence enabling verification of ownership, model, manufacture year or installation. Valuers reported machinery to be old, lacked identification plates and could not verify ownership or dates without invoices; valuers' reports did not vouch that machines were installed or corresponded to claimed additions. Given absence of supporting documents and indications of falsification, the disallowance of depreciation was sustained. [Paras 12, 13, 14]

Disallowance of depreciation on account of alleged bogus plant and machinery is upheld; the assessee's ground is dismissed.

Disallowance of interest where borrowed funds were siphoned off - Sustenance of disallowance of interest expenses on borrowed funds alleged to have been siphoned off. - HELD THAT: - The Tribunal treated the disallowance as a corollary to the finding of bogus purchases and siphoning off of borrowed funds. The CIT(A) had accepted that where borrowed funds are shown to have been siphoned off and not used for business, interest on such funds cannot be allowed; the assessing officer's computation was deemed fair and reasonable. With the bogus transactions findings affirmed, the resultant disallowance of interest was also affirmed. [Paras 15, 16]

Disallowance of interest is upheld; the assessee's ground is dismissed.

Ad hoc disallowance of administrative expenses for want of supporting documents - Validity of 10% ad hoc disallowance of administrative expenses for assessment years 2012-13 to 2014-15. - HELD THAT: - The Tribunal recorded that the assessee did not produce bills, vouchers or ledgers to substantiate administrative expenses. Apart from a bald submission that such expenses were a minuscule portion of turnover, no evidence was furnished to show that the expenses were incurred wholly for business purposes. In absence of supporting documentary evidence the assessing officer's 10% disallowance was held to be justified and the CIT(A)'s upholding of that disallowance was sustained. [Paras 17, 18]

Ad hoc disallowance of 10% of administrative expenses is upheld; the assessee's ground is dismissed.

Remand for de novo adjudication of interest under section 234A - Whether interest under section 234A was correctly levied. - HELD THAT: - The Tribunal did not decide the entitlement/existence of interest under section 234A on the record before it. It remanded the matter to the assessing officer for de novo examination of the factual question whether the return of income was filed within the prescribed time under the Act, directing fresh adjudication on that limited point. Interest under sections 234B and 234C were treated as consequential and allowed for statistical purposes. [Paras 19]

Interest under section 234A is remanded to the AO for fresh adjudication; interest under sections 234B and 234C allowed for statistical purpose.

Final Conclusion: The Tribunal upheld the reassessment and all substantive additions and disallowances challenged by the assessee (reopening under section 147; service of section 143(2) notice in reassessment context; additions for purchases out of books; disallowance of depreciation and interest; ad hoc disallowance of administrative expenses). The question of interest under section 234A was remanded to the assessing officer for de novo consideration of whether the return was filed within the prescribed time; sections 234B and 234C were dealt with as consequential and allowed for statistical purposes.

Deduction under section 35(2AB) for approved in-house R&D facility - requirement of Form No.3CL and quantification of R&D expenditure prior to 01.07.2016 - pre-amendment recognition of R&D facility by prescribed authority suffices for weighted deduction - deduction under section 36(1)(va) for employees' contributions requires credit to employees' accounts by the due date - treatment of employees' contribution as income under section 2(24)(x)

Deduction under section 35(2AB) for approved in-house R&D facility - requirement of Form No.3CL and quantification of R&D expenditure prior to 01.07.2016 - Whether the assessee was entitled to weighted deduction under section 35(2AB) for the assessment year despite absence of quantification in Form No.3CL - HELD THAT: - The Tribunal examined the legal position prior to the IT (Tenth Amendment) Rules, 2016 and judicial precedents of various Benches which held that before the amendment effective 01.07.2016 the statutory scheme required recognition/approval of the in house R&D facility by the prescribed authority but did not prescribe a method for year to year quantification of expenditure. The Tribunal followed those decisions and observed that the mandate for the prescribed authority to quantify expenditure in Form No.3CL was introduced only w.e.f. 01.07.2016. In consequence, absence of an approved quantified amount in Form No.3CL for the relevant year could not justify denial of weighted deduction where the facility had been approved by DSIR; the Assessing Officer's curtailment of the claim on the ground that Form No.3CL did not quantify the expenditure was not sustainable. Applying these precedents and reasoning, the Tribunal allowed the assessee's claim for deduction under section 35(2AB). [Paras 4]

Appeal allowed on this ground; deduction under section 35(2AB) granted as facility approval by prescribed authority sufficed for A.Y. 2015-16.

Deduction under section 36(1)(va) for employees' contributions requires credit to employees' accounts by the due date - treatment of employees' contribution as income under section 2(24)(x) - Whether employees' contributions to PF/ESI credited after the due date were allowable as deduction under section 36(1)(va) or required to be treated as income under section 2(24)(x) - HELD THAT: - The Tribunal noted and respectfully followed the decisions of the jurisdictional High Court which held that sums received by an employer from employees as contributions are 'income' under section 2(24)(x) and that section 36(1)(va) permits deduction only if such sums are credited to the employees' accounts in the relevant fund on or before the due date specified in the Explanation to section 36(1)(va). The Tribunal observed that the Assessing Officer and the CIT(A) correctly applied this principle where the employees' contributions were deposited beyond the prescribed dates; such late credit does not attract the relief available under section 36(1)(va) even if payment is subsequently made within the time permitted under section 43B. Consequently, the addition treating the late employee contributions as income was sustained. [Paras 7, 8]

Appeal dismissed on this ground; addition on account of late credit of employees' PF/ESI contributions upheld.

Final Conclusion: The appeal is partly allowed: the claim of weighted deduction under section 35(2AB) is allowed on the ground that pre 1.7.2016 recognition of the in house R&D facility by the prescribed authority suffices, while the addition on account of employees' contributions credited after the due date under section 36(1)(va) (treated as income under section 2(24)(x)) is upheld.

Non-issuance of notice under section 143(2) vitiates reassessment - Reassessment under section 147 - Section 292BB not curative of non-service of notice - Principles of natural justice - opportunity to be heard - Quashing of assessment/reassessment order

Non-issuance of notice under section 143(2) vitiates reassessment - Section 292BB not curative of non-service of notice - Principles of natural justice - opportunity to be heard - Quashing of assessment/reassessment order - Validity of the assessment framed under section 143(3)/147 in absence of issuance and service of notice under section 143(2). - HELD THAT: - The Tribunal found on the record that no notice under section 143(2) was issued/served on the assessee before completion of reassessment under section 143(3)/147. In consequence, the reassessment could not be sustained because the mandatory requirement of issuing notice under section 143(2) was not complied with. The Tribunal applied precedent of a Coordinate Bench in Flovel Energy Pvt. Ltd. and relied on the reasoning of the jurisdictional High Court in Alpine Electronics Asia Pvt. Ltd., referencing Hotel Blue Moon (SC), to hold that omission to issue notice under section 143(2) is not curable. The Tribunal also noted that section 292BB cannot cure non-issuance where the assessee had objected prior to completion of assessment, following the Delhi High Court decision in PCIT v. Jai Shiv Shankar Traders. As the mandatory notice requirement was not observed, the reassessment violated principles of natural justice by depriving the assessee of the statutory opportunity to be heard, and therefore the assessment had to be quashed. Since the assessee succeeded on this legal ground, other grounds were held academic and not adjudicated. [Paras 6, 7]

Assessment framed under section 143(3)/147 is quashed for failure to issue notice under section 143(2); appeal allowed.

Final Conclusion: The reassessment order for Assessment Year 2010-11 was quashed because the Assessing Officer did not issue or serve the mandatory notice under section 143(2) before completing reassessment under section 143(3)/147, and section 292BB did not cure that defect; the appeal is allowed and other grounds are left academic.

Rejection of books of account and estimation of income - Disallowance for failure to maintain quantitative stock records - Reduction of estimated addition on merits - Capital expenditure vs revenue expenditure - Depreciation allowable on capitalised repairs - Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - Penalty cannot be imposed where income is determined on an estimation basis - Penalty order void-ab-initio if AO unclear as to limb under which penalty is levied

Rejection of books of account and estimation of income - Disallowance for failure to maintain quantitative stock records - Reduction of estimated addition on merits - Affirmation of disallowance of 10% of consumption on foods and beverages (rejection reduced from 20% to 10%). - HELD THAT: - The Assessing Officer disallowed 20% of consumption on foods and beverages after finding absence of quantitative stock records and inadequate particulars in Item No.35 of Form 3CD, leading to rejection of books for that purpose. The Commissioner (Appeals) examined the submissions, noted the absence of required quantitative details and item-wise sales, but granted relief by reducing the disallowance from 20% to 10% on the facts. The Tribunal found no material to controvert the concurrent findings that the assessee failed to demonstrate why quantitative details were not applicable and observed that the Commissioner had already given substantial relief. On that basis, the Tribunal affirmed the Commissioner's order upholding disallowance at 10% and dismissed the related grounds of appeal. [Paras 8]

The disallowance affirmed at 10% of consumption on foods and beverages and the appeal on this issue is dismissed.

Capital expenditure vs revenue expenditure - Depreciation allowable on capitalised repairs - Affirmation of disallowance of expenditure treated as capital in nature, with direction to allow depreciation before computing income. - HELD THAT: - The Assessing Officer held that amounts claimed as repairs and maintenance related to replacement and installation of equipment and renovation after a fire (air conditioner units, compressors, pipes, kitchen equipment etc.) which provided enduring benefit and were not recurring, and therefore capital in nature. The Commissioner (Appeals) concurred with this characterization but directed that depreciation on such capitalised expenditure be allowed before computing income. The Tribunal found no infirmity in the concurrent conclusions, noting the nature of the items and that they were not current repairs, and therefore affirmed the disallowance while leaving the depreciation allowance as directed by the Commissioner. [Paras 12]

The disallowance as capital expenditure is affirmed and depreciation is to be allowed on the said expenditure before computing income; the appeal on this issue is dismissed.

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - Penalty cannot be imposed where income is determined on an estimation basis - Penalty order void-ab-initio if AO unclear as to limb under which penalty is levied - Confirmation of deletion of penalty levied under section 271(1)(c); Tribunal upholds the Commissioner's cancellation of penalty and additionally notes the penalty order was void-ab-initio for lack of clarity as to which limb was invoked. - HELD THAT: - The AO imposed penalty under section 271(1)(c) for alleged concealment/furnishing inaccurate particulars arising from the affirmed additions. The Commissioner (Appeals) set aside the penalty, observing that (a) the disallowance in part was estimation-based and penalties are not exigible where income is determined on an estimated basis, and (b) classification of expenditure as capital rather than revenue involved a bona fide difference of opinion and did not amount to furnishing inaccurate particulars. The Tribunal noted that the AO's penalty order did not clearly specify under which limb the penalty was levied, rendering the order void ab initio, and agreed with the Commissioner's application of legal principles (including that an incorrect claim in law is not necessarily an inaccurate particular). On both the voidness ground and the merits, the Tribunal found no reason to interfere with the cancellation of penalty. [Paras 18]

The penalty imposed under section 271(1)(c) is cancelled; the Commissioner's order deleting the penalty is upheld and the revenue's appeal is dismissed.

Final Conclusion: The Tribunal dismissed the assessee's quantum appeal by affirming the disallowance at 10% for consumption on foods and beverages and affirming the capitalisation disallowance while allowing depreciation; the Tribunal also dismissed the revenue's appeal against deletion of penalty, upholding cancellation of penalty (and observing the penalty order was void ab initio for lack of clarity), so both appeals are dismissed.

Benami transaction - burden of proof for benami investments - entries in books of account as primary evidence - seized material and circumstantial evidence as insufficient proof of control

Benami transaction - burden of proof for benami investments - entries in books of account as primary evidence - seized material and circumstantial evidence as insufficient proof of control - Deletion of addition of Rs.2,90,00,000 alleged to represent benami investments made through fifteen Kolkata based companies - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the addition because the Assessing Officer had not established any financial connection or control between the assessee and the fifteen Kolkata based corporate entities which purportedly made payments for shares of Rohini Resorts Pvt. Ltd. The only entries evidencing receipts were in the books of Rohini Resorts Pvt. Ltd. and in the records of its erstwhile shareholders; there were no corresponding entries in the books of the assessee or in any entity shown to be under his control. The AO relied on seized documents and an investigation report from the Kolkata Investigation Wing, but failed to demonstrate a direct link or funds flow from the assessee to those companies. In absence of such proximate evidence of control or financial nexus, the AO could not shift the burden to the assessee to explain entries that did not appear in his books. The Tribunal also noted that the CIT(A) was entitled to follow the coordinate bench's decision in the assessee's earlier years and that, on the material before the AO, the characterization of the investments as benami was not proved. [Paras 8]

Addition of Rs.2,90,00,000 as alleged benami investment deleted; revenue appeal dismissed.

Final Conclusion: The Tribunal affirmed the CIT(A)'s order deleting the addition made by the AO for alleged benami investments through fifteen Kolkata based companies for AY 2007-2008, holding that the AO failed to prove control or financial connection between the assessee and those companies; revenue's appeal dismissed and assessee's cross-objection dismissed as withdrawn.

Amendment of bill of entry under Section 149 of the Customs Act, 1962 - correction of clerical errors under Section 154 of the Customs Act, 1962 - documentary evidence in existence at the time of clearance as condition for amendment - importer's right to seek reassessment on amendment of bill of entry - duty of revenue to assess in accordance with law

Amendment of bill of entry under Section 149 of the Customs Act, 1962 - documentary evidence in existence at the time of clearance as condition for amendment - correction of clerical errors under Section 154 of the Customs Act, 1962 - Whether the appellant was entitled to amendment of the Bills of Entry and reassessment where the concessionary notification applicable existed at the time of clearance and the error arose from a clerical mistake by the CHA. - HELD THAT: - The Tribunal held that Section 149 permits amendment of documents, including Bills of Entry, where the request is founded on documentary evidence that was in existence at the time the goods were cleared. Section 154 permits correction of clerical or arithmetical mistakes in decisions or orders. The material on record indicated an inadvertent error by the CHA resulting in invocation of a higher duty notification, whereas the benefit of the concessional Notification No. 46/2011 was in existence at the time of clearance. The Tribunal relied on prior Tribunal and High Court decisions construing Section 149 and recognized the importer's statutory right to apply for amendment; mere inadvertence by the importer or CHA does not disentitle the importer where documentary evidence existed at the time of clearance. The Tribunal disagreed with the Commissioner (Appeals) to the extent that the latter treated absence of documentary availability at the assessment stage as fatal, noting that Section 146/149 require existence of documentary evidence at the time of clearance and that Sections 149 and 154 postulate correction where such documentary foundation or clerical error is shown. [Paras 9, 10, 11, 12, 13]

The impugned finding denying amendment and reassessment was not sustainable; the appellant is entitled to have the request for amendment considered as falling within the scope of Sections 149 and 154.

Importer's right to seek reassessment - duty of revenue to assess in accordance with law - What relief should follow where amendment and reassessment are warranted on the basis of existing documentary evidence and a clerical error. - HELD THAT: - Applying the principles that an importer may apply for amendment of Bills of Entry under Section 149 (where documentary evidence existed at clearance) and that clerical mistakes may be corrected under Section 154, the Tribunal directed that the original authority/assessing officer must consider the appellant's request for reassessment and amendment and pass appropriate orders in accordance with law. The Tribunal emphasised that the authorities have a duty to assess in accordance with law and cannot demand duty where it is not payable, and therefore remanded the matter for fresh consideration after giving the appellant an opportunity of hearing. [Paras 14]

Appeal allowed by way of remand with directions to the original authority to consider the request for amendment/reassessment and pass a fresh order after hearing the appellant.

Final Conclusion: The appeal is allowed; the impugned order is set aside and the matter is remanded to the assessing authority to consider the appellant's request for amendment of the Bill(s) of Entry and reassessment in accordance with Sections 149 and 154 of the Customs Act, 1962, after affording an opportunity of hearing.

Interest on delayed refund under section 27A of Customs Act, 1962 - three-month period for sanction of refund - delay beyond statutory period attracts liability to pay interest - internal assessment/re-assessment procedure does not postpone statutory obligation to pay interest

Interest on delayed refund under section 27A of Customs Act, 1962 - three-month period for sanction of refund - delay beyond statutory period attracts liability to pay interest - Entitlement to interest under section 27A where refund was sanctioned after more than three months from date of claim. - HELD THAT: - The Tribunal applied the statutory mandate of section 27A literally, holding that liability to pay interest arises for any delay in sanctioning refund beyond the three-month period computed from the date of claim. The record established a delay beyond the stipulated three months. The appellant's contention that time taken for reassessment or internal procedural steps should exclude or extend the statutory three-month period was rejected, the Tribunal accepting that internal assessment/re-assessment procedures are not a statutory basis to deny or defer the obligation to pay interest. In these circumstances the first appellate authority's allowance of interest was sustained and there was no ground to interfere with the impugned order. [Paras 5, 6]

Appeal dismissed; order allowing interest under section 27A for delay beyond three months upheld; cross-objection disposed of.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals) order granting interest under section 27A of the Customs Act, 1962 for delay in sanctioning refund beyond the statutory three-month period, dismissed Revenue's appeal and disposed of the cross-objection.

Reduction of share capital in any manner under section 66(1) of the Companies Act, 2013 - selective reduction of share capital - special resolution of shareholders - majority decision / domestic concern doctrine - creditors' consent and absence of prejudice to creditors - confirmation by the Tribunal - registration of minutes under section 66(5)

Reduction of share capital in any manner under section 66(1) of the Companies Act, 2013 - selective reduction of share capital - special resolution of shareholders - majority decision / domestic concern doctrine - creditors' consent and absence of prejudice to creditors - Approval of the company's proposal to cancel/extinguish specified fully paid equity shares held by a single shareholder and to pay a nominal consideration, by way of reduction of share capital. - HELD THAT: - The Tribunal recorded that the company had complied with statutory and procedural requirements for reduction of capital: a Board resolution and a unanimous Special Resolution approving the reduction were passed; statutory auditor certificates and declarations required by the proviso to section 66(1) were filed; unsecured creditors holding 98.70% of the debt had executed consent affidavits and no secured creditors existed; no objections were received following publication and notices to statutory authorities; Regional Director, ROC and Income Tax Department raised no adverse observations. The company affirmed that it is a going concern, the reduction is to write off accumulated losses and improve balance-sheet presentation, and that creditors' rights are not prejudiced. The Tribunal also relied on established principle that reduction of share capital is a domestic matter decided by the majority and that section 66(1) permits reduction "in any manner," and noted precedents approving selective reductions. In view of these findings and absence of objections, the Tribunal concluded the statutory and equitable prerequisites for confirmation under section 66 were satisfied and the selective reduction could be permitted. [Paras 21, 22, 23]

The proposed reduction of equity share capital as approved by the company's Special Resolution is allowed and confirmed.

Registration of minutes under section 66(5) - confirmation by the Tribunal - publication and statutory notification - Directions for completion of formalities consequent to the Tribunal's confirmation of the reduction of share capital. - HELD THAT: - Having allowed the reduction and approved the minutes of the Extra-Ordinary General Meeting, the Tribunal directed registration of the minutes as per the statutory provision for registration, ordered publication of the reduction in two specified newspapers within 30 days, and required delivery of a certified copy of the order (including approved minutes) to the Registrar of Companies and concerned statutory authorities within 30 days for their action. [Paras 23, 24, 25, 26]

The Company is permitted to register the approved minutes as per law; publish the reduction in the specified newspapers; and deliver a certified copy of this order to the ROC and statutory authorities within the stipulated time.

Final Conclusion: The application for reduction of share capital by cancelling the specified fully paid equity shares held by the majority shareholder is allowed; minutes of the EOGM are approved and ordered to be registered, published and a certified copy of the order furnished to the statutory authorities. The petition is disposed of with no order as to costs.

Pre-existing dispute - operational creditor demand notice and pre-existence of dispute - Section 9 of the Insolvency and Bankruptcy Code, 2016 - summary jurisdiction of the Adjudicating Authority under the IBC - Mobilox principle on pre-existing dispute

Pre-existing dispute - operational creditor demand notice and pre-existence of dispute - Section 9 of the Insolvency and Bankruptcy Code, 2016 - summary jurisdiction of the Adjudicating Authority under the IBC - Mobilox principle on pre-existing dispute - There existed a pre-existing dispute between the parties prior to the issuance of the demand notice, rendering the Section 9 application not maintainable. - HELD THAT: - The Tribunal examined the pleaded correspondence and contemporaneous documents and concluded that disputes antecedent to the demand notice were established. The Respondent had served a legal notice alleging fraud and termination of the licence to deal in the brand prior to the supply agreement relied upon by the Appellant; criminal complaint and related documents evidenced contention that the Appellant lacked authorization to supply the branded goods. The Appellant's reply to the Respondent's legal notice admitted disputes concerning the licence, and subsequent communications showed the Appellant proposing arbitration while the Respondent denied enforceability of the agreement and withheld consent to arbitration. Applying the Supreme Court authorities on Section 8/9 (the Mobilox ratio), the Tribunal held that where a dispute pre-existed the demand notice the adjudicatory forum under Section 9 cannot be used to decide disputed questions in summary proceedings. On that basis the Adjudicating Authority's finding of a pre-existing dispute and consequent rejection of the Section 9 application was upheld. [Paras 9, 14, 15, 16, 19]

The Adjudicating Authority's dismissal of the Section 9 application on the ground of a pre-existing dispute is upheld and the appeal is dismissed.

Final Conclusion: The Tribunal dismissed the appeal, affirming that a pre-existing dispute existed prior to the demand notice and therefore the Section 9 petition was not maintainable; no interference with the Adjudicating Authority's order.

Approval of Resolution Plan - Binding effect of approved resolution plan - Submission of claim with proof under Regulation 12 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Role of Committee of Creditors and Section 30 of the I&B Code - Adjudicating Authority's approval under Section 31 of the I&B Code - Classification of creditors who failed to file claims

Submission of claim with proof under Regulation 12 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Classification of creditors who failed to file claims - Effect of the appellant's failure to submit its claim in Form B with proof despite reminders and consequence of its classification in Category 'L' of the Resolution Plan. - HELD THAT: - The Tribunal found on the record that the Resolution Professional repeatedly requested the appellant to submit its claim in Form B with supporting documents (communications dated 22.05.2020 and 25.05.2020 and a further request on 12.02.2021), but the appellant did not comply. Regulation 12(1) & (2) requires submission of proof of claim within the stipulated period or, where applicable, by the ninetieth day of the insolvency commencement date. Because the appellant did not file the prescribed claim with proof, the RP treated the appellant as a creditor who had not filed its claim and included it in Category 'L' of the Information Memorandum and the Resolution Plan. The Tribunal accepted that the plan dealt with such creditors on the basis of books of account and that the appellant's claim was reflected as a credit balance in the records and settled in the plan accordingly. [Paras 21, 22, 23, 27]

The appellant's failure to submit the claim in Form B with proof justified its classification as a creditor who had not filed claims and its treatment under Category 'L' of the approved Resolution Plan.

Role of Committee of Creditors and Section 30 of the I&B Code - Approval of Resolution Plan - Adjudicating Authority's approval under Section 31 of the I&B Code - Binding effect of approved resolution plan - Whether the Adjudicating Authority and the Committee of Creditors complied with statutory requirements in approving the Resolution Plan and whether the Tribunal should interfere with that approval. - HELD THAT: - The Tribunal observed that the CoC approved the Resolution Plan with 100% voting share and that the Adjudicating Authority recorded satisfaction that the plan complied with Regulation 38 and the requirements of Section 30(2) of the Code. Once the CoC and the Adjudicating Authority met the statutory criteria, the approved plan becomes binding on the corporate debtor and all stakeholders. The Tribunal examined the record, including the RP's requests for submission of claim and the appellant's non compliance, and concluded there was no prima facie case to disturb the Adjudicating Authority's satisfaction that the plan met the statutory requirements. [Paras 24, 25, 26, 28, 29]

The approval of the Resolution Plan by the CoC and the Adjudicating Authority was in accordance with law and did not warrant interference; the plan is binding.

Final Conclusion: The Tribunal dismissed the appeal, holding that the appellant failed to submit its claim in the prescribed form with proof despite requests, was rightly treated as a creditor who had not filed its claim and classified in Category 'L', and that the Resolution Plan - approved by the CoC and the Adjudicating Authority in compliance with the Code and Regulations - is binding and not amenable to interference.

Computation of limitation under Section 61(2) of the Insolvency and Bankruptcy Code - Availability of certified copy and commencement of limitation - Limitation extension limited to fifteen days on showing sufficient cause - Overriding framework and timeliness of the IBC vis-a -vis procedural rules - Section 421(3) of the Companies Act, 2013 - limitation computed from when copy is made available (contrasting principle)

Computation of limitation under Section 61(2) of the Insolvency and Bankruptcy Code - Availability of certified copy and commencement of limitation - Limitation extension limited to fifteen days on showing sufficient cause - Whether the appeal was time barred and whether delay beyond thirty days can be excluded until receipt of a certified copy so as to render the appeal maintainable. - HELD THAT: - The Tribunal applied the settled principle that under Section 61(2) of the IBC the thirty day limitation for filing an appeal begins from the date of pronouncement of the order and may be extended only by up to fifteen days on showing sufficient cause, giving an aggregate outer limit of forty five days. The Tribunal noted that Section 61(2) is silent about computing limitation from when a copy of the order is made available, and relied on the Hon'ble Supreme Court decision in V. Nagarajan v. SKS Ispat & Ors., which held that a party cannot await receipt of a free certified copy under the Companies Act so as to delay the commencement of limitation under the IBC. The Tribunal further relied on its earlier decision in Company Appeal (AT)(Insolvency) No.1169 of 2022 applying the same principle. Applying these authorities, the Tribunal held that the certified copy being collected on 01.08.2022 did not postpone the running of limitation which had begun on 21.07.2022; the outer limit of 45 days expired on 05.09.2022 and the instant appeal filed on 09.09.2022 was beyond that period. Consequently, the delay could not be condoned as it exceeded the fifteen day extension permissible under Section 61(2). [Paras 6, 9, 10, 11, 12]

The appeal was held to be time barred and dismissed as not maintainable; connected IA closed.

Final Conclusion: The Appellate Tribunal dismissed the appeal as barred by limitation under Section 61(2) of the IBC, applying the principle that limitation runs from pronouncement of the order and extension is limited to fifteen days on showing sufficient cause; the connected IA is closed.

Admission of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - service of demand notice - undisputed and admitted liability of the corporate debtor - operational debt and threshold limit - limitation for filing Section 9 application - moratorium under Section 14 of the Code - appointment of Interim Resolution Professional and related duties - completion and sufficiency of Form 5

Service of demand notice - Demand notice dated 16.06.2019 was validly served on the corporate debtor. - HELD THAT: - The record contains the tracking report showing delivery of the demand notice sent to the registered address of the corporate debtor as per its master data. Further, subsequent notices sent to the corporate debtor by email and to the registered address were also shown to have been delivered and the petitioner filed affidavits evidencing such service. On the basis of these materials, the Adjudicating Authority found that the statutory demand notice requirement was satisfied. [Paras 4, 5, 9]

Demand notice was properly served and the statutory notice requirement under the Code is satisfied.

Undisputed and admitted liability of the corporate debtor - operational debt and threshold limit - The claimed operational debt was neither disputed nor rebutted and the corporate debtor admitted liability. - HELD THAT: - The petitioner filed an affidavit stating that no dispute had been communicated and no payment was received; the respondent, through an authorised signatory, filed an affidavit expressly admitting liability and inability to pay. The petitioner also produced invoices, ledger statements and particulars of the debt. The Authority concluded that the liability was undisputed and established, and that the default exceeded the statutory threshold (pre-revised) for initiating CIRP. [Paras 10, 11, 12, 13]

The operational debt is established, undisputed and above the threshold; the corporate debtor admitted the debt.

Limitation for filing Section 9 application - The Section 9 petition was filed within limitation. - HELD THAT: - The application record indicates the date of default as 09.12.2018 and the petition was filed on 16.08.2019. The Adjudicating Authority accepted the dates as recorded in Part IV of Form 5 and found that the petition met the limitation requirement for filing under the Code. [Paras 11]

The petition is within the prescribed limitation period.

Completion and sufficiency of Form 5 - admission of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - moratorium under Section 14 of the Code - appointment of Interim Resolution Professional and related duties - The petition under Section 9 was admitted; moratorium was imposed; and an Interim Resolution Professional was appointed with directions. - HELD THAT: - The Authority examined the Form 5 and accompanying documents (invoices, ledger, affidavits) and found the petition complete. Having found service, absence of dispute, default and satisfaction of the threshold and limitation requirements, the Authority admitted the petition under Section 9(5)(i). Consequential reliefs followed: moratorium was declared in the terms set out in Section 14(1) and (3), the supply of essential goods/services was protected, the moratorium was directed to continue until completion of CIRP or approval of a resolution plan or liquidation, and Mr. Deepankur Sharma was appointed as Interim Resolution Professional after verification of credentials. The IRP was given statutory powers and specific administrative directions including public announcement, inventory, constitution of the Committee of Creditors, progress reporting and cooperation from the corporate debtor; the petitioner was directed to deposit an amount to meet immediate CIRP expenses. [Paras 17, 18, 19, 20, 21]

The petition is admitted; moratorium is imposed; Mr. Deepankur Sharma is appointed as Interim Resolution Professional with the directions recorded and the petitioner directed to deposit funds for CIRP expenses.

Final Conclusion: The Tribunal admitted the Section 9 petition after finding valid service of the demand notice, that the operational debt was established and undisputed with admitted default and that the petition was within limitation; consequently, CIRP was ordered to commence, moratorium imposed, and an Interim Resolution Professional appointed with consequential directions and a deposit order for immediate CIRP expenses.

Corporate Insolvency Resolution Process against Personal Guarantor - Appointment of Interim Resolution Professional under Sections 95-100 of IBC - Right of audience and notice before appointment of IRP - Principles of natural justice at the report stage under Section 99 - Obligation to serve copy of the application under Section 95(5) read with Rule 3(1)(g) - Replacement of Resolution Professional under Section 98

Corporate Insolvency Resolution Process against Personal Guarantor - Application under Section 95 filed by the financial creditor is treatable as filed against the personal guarantor and the corporate debtor may be formally added. - HELD THAT: - The petition, though framed under Section 95 of the IBC, 2016 and praying against the Personal Guarantor (Respondent No.1), was capable of being entertained as an application only against Respondent No.1, with Respondent No.2 (the Corporate Debtor) being added formally. The Tribunal found the application to be complete for the purposes of initiating proceedings under Section 95 and therefore proceeded to consider appointment of an Interim Resolution Professional. This treatment follows from the nature of the petition and the relief claimed against the Personal Guarantor.

Application under Section 95 is maintainable as against the Personal Guarantor; Corporate Debtor added formally.

Right of audience and notice before appointment of IRP - Principles of natural justice at the report stage under Section 99 - Obligation to serve copy of the application under Section 95(5) read with Rule 3(1)(g) - Replacement of Resolution Professional under Section 98 - No notice or right of audience is required to be given to the debtor/personal guarantor prior to appointment of the Interim Resolution Professional; opportunity to be heard is available at the report stage. - HELD THAT: - On construction of Sections 95 to 100 of the IBC, the Tribunal observed that the statutory scheme prescribes specific timelines and a procedure culminating in the appointment of a Resolution Professional under Section 97 and determination under Section 100 based on the report of the IRP under Section 99. Section 95(5) requires furnishing a copy of the application to the debtor, read with Rule 3(1)(g), but contemplates service of the copy of the submitted application rather than advance notice prior to appointment. Section 98 is not stage-specific and provides for replacement of a Resolution Professional only after appointment; it does not mandate notice prior to appointment. The Tribunal followed the view that principles of natural justice are complied with by providing the debtor an opportunity to respond at the report stage (including under Sections 99(2) and 99(4)), and that the statutory scheme does not require hearing before the appointment of the IRP. Reliance was placed on the reasoning in the cited High Court and appellate decisions considered in the judgment to the extent they interpret the staged procedure under Sections 95-100.

No pre-appointment notice or right of audience is required; the debtor/guarantor may make submissions during the IRP's report process and before the Adjudicating Authority decides under Section 100.

Appointment of Interim Resolution Professional under Sections 95-100 of IBC - Appointment of the Interim Resolution Professional and directions for submission of report and communication of the order. - HELD THAT: - Finding the petition complete and there being no bar to entertaining the Section 95 application, the Tribunal accepted the petitioner's proposed nominee and appointed Mr. Madasa Kumar as Interim Resolution Professional. The Tribunal directed the IRP to submit his report within ten days from receipt of the date of the order in terms of Section 99 and ordered communication of the order to the parties and the IRP for compliance. The appointment was made after confirming no disciplinary proceedings were pending against the nominee on the IBBI website.

Mr. Madasa Kumar appointed as Interim Resolution Professional; IRP to submit report within ten days and registry/petitioner to communicate order to parties and IRP.

Final Conclusion: The Tribunal entertained the Section 95 application as against the personal guarantor, held that no prior notice or right of audience is required before appointment of the Interim Resolution Professional (with opportunity available at the report stage), appointed the nominated IRP and directed him to submit his report within ten days while directing communication of the order to the parties and IRP.

Power to take possession under Section 8(4) of the Prevention of Money Laundering Act, 2002 - Ten days eviction notice under Rule 5(2) of the Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013 - Right of appeal before the Appellate Tribunal within forty five days under Section 26 of the Prevention of Money Laundering Act, 2002 - Effect of appellate stay on execution of eviction under Section 8(4) - Exceptional invocation of Section 8(4) - not as a rule but in appropriate cases - Literal statutory interpretation and prohibition on judicial re writing of clear statutory language

Power to take possession under Section 8(4) of the Prevention of Money Laundering Act, 2002 - Ten days eviction notice under Rule 5(2) of the Rules of 2013 - Right of appeal before the Appellate Tribunal within forty five days under Section 26 - Effect of appellate stay on execution of eviction - Whether an authorised officer may take possession of property confirmed attached by the Adjudicating Authority after serving a ten days eviction notice under Rule 5(2) without waiting for the forty five days appeal period under Section 26 to expire, and the effect of an appellate stay on such eviction. - HELD THAT: - The Court held that once the Adjudicating Authority confirms a provisional attachment under Section 8(3), the authorised officer is empowered by Section 8(4) to forthwith take possession of the attached property; Rule 5(2) moderates that mandate by requiring issuance of a ten days eviction notice to the owner/occupier prior to eviction. The existence of a forty five days period to file an appeal under Section 26 does not operate to defer or suspend the operation of Section 8(4) and Rule 5(2). A person aggrieved may file the statutory appeal immediately upon receipt of the confirmation and seek interim relief; if the Appellate Tribunal grants a stay of the Adjudicating Authority's order, eviction proceedings under Section 8(4) shall be rendered ineffective. Thus possession may be taken after compliance with the ten days notice, subject to any appellate stay obtained within the available period. [Paras 10, 11, 16]

Authorised officer may take possession after issuing the ten days notice under Rule 5(2); the right of appeal under Section 26 remains available and a stay by the Appellate Tribunal will suspend eviction.

Exceptional invocation of Section 8(4) - not as a rule but in appropriate cases - Literal statutory interpretation and prohibition on judicial re writing of clear statutory language - Whether Section 8(4) must be withheld in all cases until the forty five days appeal period expires, and whether the Court may read forty five days (or fifty five days) into Rule 5(2) or Section 8(4). - HELD THAT: - Relying on Supreme Court precedent, the Court observed that invocation of Section 8(4) to take possession prior to a formal confiscation order must be exceptional and fact sensitive, but that the statutory scheme as enacted permits taking possession forthwith after confirmation subject to the ten days notice in Rule 5(2). The Court emphasised the primacy of literal construction where statutory language is clear: it is not the Court's function to substitute or add to unambiguous statutory words (for example, replacing the statutory word "forthwith" or the Rule's ten days with the forty five days appeal period). While recognising that in particular cases ten days may be short, the court cannot, under guise of interpretation, rewrite the statute; any relief from perceived harshness is for the legislature or for the appellate forum by way of stay in appropriate cases. [Paras 12, 16, 17, 23]

Section 8(4) need not be deferred until expiry of the forty five days appeal period; courts must apply clear statutory language and cannot judicially substitute a longer period.

Final Conclusion: The petition challenging the eviction notice is dismissed. The authorised officer may proceed to take possession after issuing the ten days eviction notice under Rule 5(2), subject to any stay which the Appellate Tribunal may grant on an appeal filed within the statutory period.

Transfer of right to use goods as a deemed sale - exclusion of transfer of right to use goods from definition of service - mutual exclusivity of VAT (sales tax) and service tax - taxation of tax component (service tax on VAT) impermissible - criteria for transfer of right to use goods (BSNL test)

Transfer of right to use goods as a deemed sale - criteria for transfer of right to use goods (BSNL test) - exclusion of transfer of right to use goods from definition of service - Whether the lease of containers amounted to a transfer of the right to use goods (a deemed sale) and was therefore subject to VAT and excluded from service tax. - HELD THAT: - The Court examined the lease agreement and found that the lessee had identified goods available for delivery, accepted delivery, obtained legal rights to use the containers, bore obligations for maintenance, licences and risk of loss during the term, could sub-lease subject to conditions, and was required to return the equipment on expiry. Applying the attributes laid down by the Supreme Court in BSNL, the transaction satisfied the requirements of a transfer of the right to use goods. Section 65B(44) of the Finance Act excludes such a transfer from the definition of service, while Article 366(29A)(d) and Section 2(24) of the MVAT Act treat transfer of the right to use goods as a deemed sale subject to VAT. The respondents advanced no evidence to contradict the contractual terms, and conceded there was no material to show absence of transfer of possession or effective control. The Court therefore held that the lease was a deemed sale and fell within the VAT regime rather than service tax. [Paras 18, 19, 20, 21, 29]

The lease of containers constituted a transfer of the right to use goods (deemed sale), excluded from service tax and liable to VAT.

Mutual exclusivity of VAT (sales tax) and service tax - taxation of tax component (service tax on VAT) impermissible - Whether respondent no.3 could levy service tax on the consideration already subjected to VAT, including whether service tax could be computed on the VAT component. - HELD THAT: - The Court noted the admitted position that VAT had been discharged by the company on the lease rentals. It recorded respondents' concession that service tax could not be levied on the VAT component and observed established principle that sales tax/VAT and service tax are mutually exclusive. The impugned order relied upon an inflated taxable base which included the VAT amount, and there was no discussion in the impugned order justifying taxation of the VAT component. Given that the transaction was held to be a deemed sale and VAT had been paid, the demand for service tax (and calculation including VAT in the tax base) was erroneous. [Paras 11, 32, 33]

The demand for service tax (including computation on the VAT component) was unsustainable and wrongly calculated; the impugned order is quashed.

Final Conclusion: The writ petition is allowed: the lease of containers was a transfer of the right to use goods (deemed sale) falling under VAT and not service tax, the impugned service-tax demand (including tax computed on the VAT component) is quashed and the order dated 31.01.2022 is set aside.

Exemption for maintenance or repair of computers, computer systems or computer peripherals - classification of integrated electronic systems vis-a -vis computer systems - service tax liability for management, maintenance and repair services - voluntary payment and penalty under Section 78 - payments made after initiation of preventive inquiry and effect on penalty

Exemption for maintenance or repair of computers, computer systems or computer peripherals - classification of integrated electronic systems vis-a -vis computer systems - service tax liability for management, maintenance and repair services - Whether the appellant's services in respect of the Automatic Vehicle Entry Tax Collection System (AVETCS) fall within the exemption for maintenance or repair of computers, computer systems or computer peripherals under Notification No. 20/2003-ST. - HELD THAT: - The Tribunal examined the nature and components of AVETCS as described in the record - electronic weigh bridges, CCTV system, computers, servers, LAN & WAN, electrical systems, related software and an integrated operational arrangement for vehicle weighing, video capture, data storage and transmission. Notification No. 20/2003-ST grants exemption only for maintenance or repair of computers, computer systems or computer peripherals. The mere presence of computer components within a larger integrated system does not convert the entire AVETCS into a "computer, computer system or computer peripheral" for the purpose of the notification. Applying this classificatory principle, the Tribunal concluded that AVETCS cannot, by itself, be equated to a computer or computer system and the appellant therefore is not entitled to the exemption under Notification No. 20/2003-ST. The appeal on this ground was dismissed. [Paras 4]

Benefit of Notification No. 20/2003-ST denied; appeal dismissed on this ground.

Voluntary payment and penalty under Section 78 - payments made after initiation of preventive inquiry and effect on penalty - Whether payments of service tax and related amounts made by the appellant for specified periods qualify as voluntary payments made in the normal course so as to exclude them from quantification of penalty under Section 78. - HELD THAT: - The adjudicating authority found, and the Tribunal accepted, that the preventive wing had initiated an inquiry by summons dated 20.07.2007 and that the appellants' challans show discharge of service tax liability commencing from 12.10.2007. Because the payments relied upon by the appellant were made only after the initiation of the preventive inquiry, they could not be treated as payments made in the normal course prior to any search or inquiry. Consequently, the payments were rightly considered in the quantification of penalty and the Commissioner (Appeals) did not err in upholding the penalties and interest. The Tribunal found force in the reasoning recorded in the impugned order and dismissed the appeal on this count. [Paras 5]

Payments held not to be voluntary in the normal course; penalties and interest upheld; appeal dismissed on this ground.

Final Conclusion: The appeal is dismissed in its entirety: the appellant is not entitled to exemption under Notification No. 20/2003-ST for services in relation to AVETCS, and the penalties and interest for payments made after initiation of preventive inquiry are upheld.

Refund of service tax on input services used for export of services without payment of service tax - procedural irregularity versus substantive right - clerical error in invoice/address - receipt of services not in dispute - residuary power to act ex debito justitiae - procedure subservient to justice

Procedural irregularity versus substantive right - clerical error in invoice/address - refund of service tax on input services used for export of services without payment of service tax - receipt of services not in dispute - Whether a procedural defect in invoices relating to the address of the appellant can be a ground to reject the refund claim in respect of input services used for export of services without payment of service tax for October, 2010 to December, 2010 - HELD THAT: - The Tribunal found that the error in the address on the invoices amounted at best to a clerical error and that the appellant had produced a certificate from the service provider clarifying the floor-number error. The Tribunal applied the principle that procedural prescriptions are subservient to substantive justice and relied on the authority recognizing the residuary power of courts to act ex debito justitiae where strict adherence to procedure would defeat justice. Since the receipt of services was not in dispute, the procedural defects in the invoicing did not justify denial of the refund. Consequently, the Orders rejecting the refund were set aside and the refund claim was directed to be processed as per law. [Paras 3, 4, 5, 6]

Procedural defects in the invoice address, being clerical and where receipt of services is undisputed, do not warrant rejection of the refund claim; the Orders-in-Original and-in-Appeal are set aside and the refund is to be processed.

Final Conclusion: Appeal allowed; the impugned orders rejecting the refund are set aside and the department is directed to process the refund claim for October, 2010 to December, 2010 within eight weeks from submission of the order copy, with consequential relief if any.

Remission of excise duty under Rule 21 of Central Excise Rules, 2002 - reversal of Cenvat credit under Rule 3(5)(c) of Cenvat Credit Rules, 2004 - unavoidable accident/natural cause (fire due to short circuit) - consequential duty confirmation following rejection of remission

Remission of excise duty under Rule 21 of Central Excise Rules, 2002 - unavoidable accident/natural cause (fire due to short circuit) - Remission of excise duty on finished goods destroyed in the fire was allowable under Rule 21. - HELD THAT: - The Tribunal found on the recorded material that the fire occurred due to short circuit and that the appellant promptly informed police, fire brigade, excise and insurer and that the jurisdictional superintendent recorded a punchnama which contained no finding of lack of precaution by the appellant. The insurance survey likewise made no adverse finding and the insurer sanctioned the claim. The forensic report attributed the fire to short circuit. On these facts the adjudicating authority's conclusion that the fire was due to appellant's negligence and therefore not an unavoidable accident was held to be without basis. Applying Rule 21 to these findings, the appellant's case fell within the statutory scope for remission of duty on goods destroyed by such an accident, and the order rejecting remission was set aside. [Paras 4, 5]

Remission under Rule 21 granted and the order rejecting the remission set aside.

Reversal of Cenvat credit under Rule 3(5)(c) of Cenvat Credit Rules, 2004 - Requirement to reverse Cenvat credit in respect of inputs contained in finished goods destroyed in fire. - HELD THAT: - The Tribunal observed that while the appellant is ultimately duty-bound to reverse Cenvat credit on inputs contained in destroyed finished goods, the statutory scheme in Rule 3(5)(c) prescribes that such reversal is to be made only after remission of duty on the finished goods is granted by the competent authority. Consequently, the adjudicating authority's reliance on the appellant's failure to reverse credit prior to grant of remission was held to be contrary to the statutory provision. [Paras 4]

No adverse inference for not having reversed Cenvat credit prior to grant of remission; reversal is to follow grant of remission as per Rule 3(5)(c).

Consequential duty confirmation following rejection of remission - Sustainability of the consequential duty demand confirmed following rejection of remission. - HELD THAT: - The Tribunal noted that the separate adjudication confirming duty demanded on the lost goods was consequential upon the earlier rejection of the remission application. Having allowed the remission, the Tribunal held that the consequent demand, interest and penalty confirmed in the related order could not survive. Therefore the demand confirmed in the other appeal was declared unsustainable. [Paras 6]

Consequential duty demand (with interest and penalty) set aside as unsustainable in view of allowance of remission.

Final Conclusion: Both appeals are allowed: remission of duty on goods destroyed in the fire is granted; the adjudication criticising non-reversal of Cenvat credit prior to remission is misplaced since Rule 3(5)(c) contemplates reversal after remission; and the consequential duty demand, interest and penalty confirmed earlier are set aside.

Concessional rate of duty under Entry 1C of Notification No. 4/2006-C.E. - cleared in packaged form / cleared in other than packaged form - requirement to declare retail sale price (MRP) - Standards of Weights and Measures (Packaged Commodities) Rules, 1977 - Chapter II - Rule 2A - exclusion from Chapter II for specified packages or for industrial/institutional consumers - disjunctive reading of 'and' between Rule 2A(a) and Rule 2A(b) - retail sale / retail sale price definition - self/captive consumption not constituting retail sale - penalty under Rule 25 of the Central Excise Rules - bonafide belief and requirement for penalty

Concessional rate of duty under Entry 1C of Notification No. 4/2006-C.E. - requirement to declare retail sale price (MRP) - Rule 2A - exclusion from Chapter II for specified packages or for industrial/institutional consumers - disjunctive reading of 'and' between Rule 2A(a) and Rule 2A(b) - Whether cement cleared in 50 kg bags to industrial or institutional customers qualifies for concessional duty under Entry 1C by virtue of Rule 2A excluding such clearances from Chapter II and from the MRP declaration requirement - HELD THAT: - Entry 1C grants concessional duty to goods "other than those cleared in packaged form", with a proviso treating goods for which retail sale price is not required to be declared as if cleared other than in packaged form. Rule 2A of the Packaged Commodities Rules excludes from Chapter II (and thus from MRP declaration) (a) packages over specified quantities (with a special carve out for cement/fertilizer up to 50 kg) and (b) packaged commodities meant for industrial or institutional consumers. The Tribunal accepted the established construction that the two limbs of Rule 2A are to be read disjunctively - a package falling within either limb is excluded from Chapter II. Applying this to the facts, cement sold in 50 kg bags to industrial or institutional buyers falls within the exclusion and is not required to bear/declare MRP; consequently such clearances are to be treated as "other than packaged form" for Entry 1C and qualify for the concessional rate. The decision relied on earlier tribunal authorities construing Rule 2A and various precedents holding that supplies to builders, contractors, institutions, government bodies, RMC manufacturers and captive consumption qualify as industrial/institutional clearances excluded from retail sale requirements. [Paras 5, 6, 7]

Clearances of cement in 50 kg bags to industrial or institutional customers are not "retail sales" for purposes of the Packaged Commodities Rules, are excluded by Rule 2A, and therefore qualify for concessional duty under Entry 1C.

Retail sale / retail sale price definition - self/captive consumption not constituting retail sale - penalty under Rule 25 of the Central Excise Rules - bonafide belief and requirement for penalty - Whether clearances of cement in 50 kg bags to individual consumers are outside Entry 1C and whether penalty under Rule 25 should be sustained - HELD THAT: - The adjudicating authority had sustained a demand in respect of clearances made to individual consumers on the view that such supplies constituted retail sales requiring MRP declaration. The Tribunal observed that earlier orders had confirmed demands in similar fact situations and that authorities and higher courts have not extended the Entry 1C benefit to clearances to individual customers. On the facts, the demand of duty in respect of clearances to individual consumers was upheld. However, as to penalty under Rule 25, the Tribunal found the appellant acted under a bona fide entitlement to the concessional rate (having availed notification and paid duty where found due) and that there was no clandestine removal or mala fide intent; the appellant had also paid the duty and interest. In these circumstances the imposition of penalty was not justified and was therefore set aside. [Paras 8, 9]

Demand confirmed in respect of clearances made to individual customers is upheld; penalty under Rule 25 is set aside as the short payment arose in bona fide belief and duty with interest was paid.

Final Conclusion: Revenue appeal dismissed; assessee's appeal partly allowed - concessional duty under Entry 1C sustained for clearances in 50 kg bags to industrial/institutional customers and for captive consumption, demand in respect of clearances to individual customers upheld, but corresponding penalty under Rule 25 set aside.

Abatement of appeal upon insolvency/appointment of successor-in-interest - Binding effect of approved resolution plan on operational creditors including the Central Government - Rule 22 CESTAT Procedure Rules - continuance after adjudication as an insolvent - Merger of orders consequent to approval of resolution plan by NCLT

Rule 22 CESTAT Procedure Rules - continuance after adjudication as an insolvent - Abatement of appeal upon insolvency/appointment of successor-in-interest - Whether the appeals abate by operation of Rule 22 of the CESTAT (Procedure) Rules, 1982 on account of adjudication under the IBC and appointment of a successor-in-interest without any application for continuance being filed. - HELD THAT: - The Tribunal found on the undisputed facts that CIRP was initiated and the NCLT admitted the petition, a Resolution Professional made public announcement, and a Resolution Plan was approved by the NCLT. The approved plan and subsequent orders show that control and management of the corporate debtor passed to the resolution applicants/successor interest and that a successor-in-interest with authority to represent the corporate debtor before authorities was in place. Rule 22 requires that where a company is adjudicated as insolvent the appeal shall abate unless an application for continuance is made by or against the successor-in-interest within sixty days (subject to extension for sufficient cause). No application for continuance was filed by the successor-in-interest in these proceedings. On these findings the Tribunal held that Rule 22 applies and the appeals stand abated from the date of approval of the Resolution Plan by the NCLT. [Paras 4, 5]

Appeals abate by operation of Rule 22 of the CESTAT (Procedure) Rules, 1982, with effect from the date of approval of the resolution plan by the NCLT.

Binding effect of approved resolution plan on operational creditors including the Central Government - Merger of orders consequent to approval of resolution plan by NCLT - Extent to which the approved resolution plan affects the liabilities and claims of operational creditors and the consequences for proceedings before the CESTAT. - HELD THAT: - The Tribunal recorded the terms of the approved Resolution Plan which provided that operational creditors' claims relating to the period prior to the Closing Date shall remain nil and stand fully and finally discharged and extinguished, and that all such claims under Applicable Law (including taxes) would be treated as ''claims'' under the IBC and accordingly be discharged where not provided for. The Tribunal noted binding precedents of the Supreme Court recognising the binding effect of an approved resolution plan on the corporate debtor and its creditors, including governmental authorities, and acknowledged CBIC instructions recognizing extinguishment of claims not admitted during CIRP. However, the Tribunal also observed that once the NCLT approves a resolution plan, the appellate forum in these matters becomes functus officio in respect of the approvals/claims extinguished by that plan and that the impugned orders stand merged in the NCLT order; consequently questions such as refund of pre-deposit are not to be adjudicated by the Tribunal in these appeals and must be pursued before the appropriate authority or forum. [Paras 4, 5]

The approved resolution plan is binding and, insofar as it extinguishes pre-Closing Date claims of operational creditors, those claims are treated as discharged; the impugned orders merge in the NCLT approval and the CESTAT is not to proceed with the adjudication of such claims in these appeals, rendering the miscellaneous application non-survivable.

Final Conclusion: The appeals abate under Rule 22 of the CESTAT (Procedure) Rules, 1982, with effect from the date of approval of the Resolution Plan by the NCLT; consequently the miscellaneous application does not survive and the Tribunal declines to adjudicate on matters subsumed by the NCLT-approved Resolution Plan.

Interpretational dispute regarding eligibility of cenvat credit on input services for electricity wheeled out from a co-generation plant - cenvat credit on input services for manufacture of exempted goods - penalty under Section 11AC of the Central Excise Act, 1944 - extended period for issuance of show cause notice - suppression of facts with intent to evade duty

Interpretational dispute regarding eligibility of cenvat credit on input services for electricity wheeled out from a co-generation plant - penalty under Section 11AC of the Central Excise Act, 1944 - extended period for issuance of show cause notice - suppression of facts with intent to evade duty - Whether the equal penalty under Section 11AC is liable to be imposed for availment of cenvat credit on input services used in the co-generation plant where electricity was wheeled out and sold outside - HELD THAT: - The Tribunal found that the department's audit in August 2008 identified the alleged wrong credit, which the appellant reversed and paid immediately, but the show cause notice was issued only after a four-year delay. The question whether service-tax credit was admissible on input services for electricity wheeled out from a co-generation plant was the subject of conflicting views and decided by the Apex Court later, making the matter interpretational. There is no positive finding of deliberate suppression by the appellant; the department had access to the appellant's accounts and E.R1 returns showing the credits. In these circumstances, invoking the extended period on the premise of suppression and imposing penalty is unwarranted. Applying this reasoning, the Tribunal set aside the penalty insofar as it related to the cenvat credit on input services for electricity generated by the co-generation plant and sold outside. [Paras 8, 10]

Penalty under Section 11AC set aside in respect of cenvat credit availed on input services for generation of electricity from the co-generation plant that was sold outside.

Cenvat credit on input services for manufacture of exempted goods - penalty under Section 11AC of the Central Excise Act, 1944 - suppression of facts with intent to evade duty - Whether the equal penalty under Section 11AC is liable to be imposed for availment of cenvat credit on input services used in manufacture of exempted product (Ethyl Alcohol) - HELD THAT: - The Tribunal noted that a small amount of credit was availed in respect of input services used for manufacture of Ethyl Alcohol, an exempted product, and that this inadvertent availment was detected only because of the departmental audit. Unlike the co-generation credit dispute, the appellant's plea of inadvertence was not found to be sufficient to negate imposition of penalty. The Tribunal did not find grounds to set aside the penalty in respect of the Ethyl Alcohol-related credit and therefore upheld the equal penalty imposed under Section 11AC for that part. [Paras 9, 10]

Penalty under Section 11AC upheld in respect of cenvat credit availed on input services used in the manufacture of Ethyl Alcohol (exempted product).

Final Conclusion: The appeal is partly allowed: the equal penalty under Section 11AC is set aside insofar as it relates to cenvat credit on input services for electricity generated by the co-generation plant and sold outside, but the penalty is upheld in respect of cenvat credit wrongly availed for manufacture of Ethyl Alcohol; consequential relief, if any, to follow.

Utilization of Education Cess and Secondary and Higher Education Cess - Refund of unutilized cess as on 30/06/2017 - Revenue neutrality of deposit and refund - Invocation of extended period of limitation

Utilization of Education Cess and Secondary and Higher Education Cess - Refund of unutilized cess as on 30/06/2017 - Revenue neutrality of deposit and refund - Validity of demand for alleged wrongful utilization of Education Cess and Secondary & Higher Education Cess credited in the Cenvat Register and the appropriate remedy. - HELD THAT: - The Tribunal followed earlier Division Bench and High Court authorities holding that unutilized credit of Education Cess and Secondary & Higher Education Cess lying in balance as at 30/06/2017 would have been refundable. Applying that principle to the facts, the Tribunal observed that if the appellant is required to deposit the amount which it had utilized in December 2016, the appellant would be entitled to an equivalent refund as on 30/06/2017, producing a revenue-neutral position. In view of this revenue neutrality and the cited precedents, the Tribunal set aside the adjudicating authorities' demand, interest and penalty as confirmed, and allowed the appeal with consequential benefits. [Paras 11, 12]

Impugned order confirming demand, interest and penalty set aside; appeal allowed and consequential relief granted on merits regarding utilization/refund.

Invocation of extended period of limitation - Whether the show cause notice was rightly issued by invoking the extended period of limitation. - HELD THAT: - The Tribunal did not adjudicate the limitation point on merits. The order records that the ground as to limitation is left open, and the appeal was allowed on the revenue-neutrality/refund basis without deciding whether the extended period of limitation was correctly invoked by the revenue. [Paras 12]

Limitation challenge left open for determination; not decided by the Tribunal.

Final Conclusion: The appeal is allowed on the ground that the amount of Education Cess and Secondary & Higher Education Cess utilized in December 2016 would have been refundable as on 30/06/2017, making any cash deposit revenue-neutral; the demand and penalties confirmed by the authorities are set aside and the limitation point is left open.

Cenvat credit - input service - eligibility of input services - nature and purpose of use - user test - remand for de novo adjudication - opportunity of personal hearing

Cenvat credit - input service - nature and purpose of use - Whether the impugned order correctly denied Cenvat credit on various input services without proper examination of the nature and use of those services in the appellant's factory - HELD THAT: - The Tribunal found that the adjudicating authority denied credit without discussing the nature and use of the disputed services in the appellant's factory. Eligibility of a service as an input service requires examination of the nature and purpose of its use in relation to manufacture or provision of output services, and such parameters differ case by case. Because the adjudicating authority did not address these facts and the appellant's explanations regarding use, the impugned order cannot stand and requires fresh fact-finding and application of the legal test to the material on record. [Paras 9]

Impugned order set aside and matter remanded for de novo adjudication with direction to examine the nature and use of disputed services in deciding eligibility for Cenvat credit.

Remand for de novo adjudication - opportunity of personal hearing - Procedure to be followed on remand - HELD THAT: - The Tribunal directed that the original authority shall pass a de novo order after considering all documents the appellant submits, afford the appellant sufficient opportunity to make submissions and place documents, and grant personal hearing before adjudication. The remand is for proper fact finding and fresh decision-making rather than merely for quantification. [Paras 10, 11]

Appeal allowed by way of remand; original authority to rehear the matter afresh with full opportunity to the appellant, including personal hearing.

Final Conclusion: The Tribunal set aside the impugned order denying Cenvat credit and allowed the appeal by remanding the matter to the adjudicating authority for de novo adjudication after fresh consideration of the nature and use of the disputed services and after affording the appellant full opportunity of submissions and personal hearing.

Utilisation of Cenvat Credit for payment of duty - Cenvat credit on inputs used in testing and trial (exhibit batches) - Chargeability of excise duty on samples dispatched on non-returnable challans - Marketability test for dutiability

Utilisation of Cenvat Credit for payment of duty - Demand of duty on goods procured under Notification 43/2001-CE (NT) can be discharged by utilising Cenvat credit. - HELD THAT: - The Tribunal considered whether Rule 6 of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2002 and the application of Section 11A permit payment of the duty by utilisation of Cenvat credit. The Tribunal noted identical earlier tribunal decisions where utilisation of Cenvat credit for payment of duty on goods procured under Notification 43/2001-CE (NT) was allowed and expressly followed those decisions. Finding no legal bar to utilisation of available Cenvat credit for discharge of the duty demanded, the Tribunal held that payment by utilisation of Cenvat credit is permissible. [Paras 9]

The demand can be met by utilising Cenvat credit.

Cenvat credit on inputs used in testing and trial (exhibit batches) - Appellant entitled to Cenvat credit on inputs and packing materials used in manufacture of exhibit batches that are tested/used for quality control and later destroyed within factory. - HELD THAT: - The Tribunal found as a fact that the inputs and packing materials were used in the process of manufacturing exhibit batches for statutory testing/quality control under the Drugs and Cosmetics Act and were consumed/destroyed thereafter. The Tribunal held that such inputs form part of the manufacture or are used in relation to manufacture of the final product because testing and trial are integral and necessary steps in the manufacture of pharmaceutical products to ascertain marketability. The Tribunal relied on precedents treating in-house samples consumed in testing as not excisable and applied that reasoning to sustain entitlement to Cenvat credit for such inputs. [Paras 10, 11, 12]

Cenvat credit is allowable on inputs/packing materials used for manufacture of exhibit batches tested and consumed/destroyed within the factory.

Chargeability of excise duty on samples dispatched on non-returnable challans - Marketability test for dutiability - Medicaments cleared on non-returnable challans for testing and sampling outside the factory are not liable to excise duty. - HELD THAT: - The Tribunal examined whether medicaments sent out on non-returnable challans for testing attain marketability and thus attract excise duty. It observed that pharmaceutical goods require statutory testing and that samples dispatched for testing/sampling do not attain a state of marketability. Citing consistent tribunal and High Court decisions, the Tribunal applied the marketability test and concluded that samples sent for testing/quality control are not excisable. Accordingly, demands based on such removals could not be sustained. [Paras 13]

Samples dispatched for testing/sampling on non-returnable challans are not dutiable; demand is unsustainable.

Final Conclusion: Impugned order of the Commissioner (Appeals) is set aside; appeal is allowed and the demands confirmed by the adjudicating authority are quashed in respect of the matters decided, with consequential relief as applicable.

Jurisdiction of CESTAT to decide appeals under pre-GST laws - application of Section 174 of the CGST Act - application of Section 142(6)(a) of the CGST Act - cash refund under Section 11B of the Central Excise Act for un availed CENVAT credit - transitional credit and remedy through Tran I - bar on refund where CENVAT credit balance has been carried forward / prohibition of dual benefit

Jurisdiction of CESTAT to decide appeals under pre-GST laws - application of Section 174 of the CGST Act - CESTAT has jurisdiction to entertain and decide appeals arising under the pre GST Central Excise Act and amended Finance Act where proceedings are continued after the appointed date. - HELD THAT: - The Tribunal examined the effect of the saving and continuation provisions and held that Section 174(2)(5) of the CGST Act preserves proceedings (including appeals) instituted before, on or after the appointed date and permits their continuation as if the CGST Act had not come into force. Having regard to that saving, the Tribunal concluded that it is empowered to deal with appeals instituted against orders under the erstwhile Central Excise Act and the amended Finance Act. The Tribunal noted earlier conflicting pronouncements and observed that the Chennai reference was confined to Section 142(3) and did not deal with Section 174; on that basis it declined to await the Larger Bench and proceeded to decide jurisdiction in favour of CESTAT. [Paras 4]

CESTAT is competent to hear and decide the present appeal arising out of pre GST Central Excise proceedings.

Cash refund under Section 11B of the Central Excise Act for un availed CENVAT credit - application of Section 142(6)(a) of the CGST Act - un availed CENVAT credit not carried forward - transitional credit and remedy through Tran I - Appellant is entitled to cash refund of un availed CENVAT credit paid as CVD and SAD because the credit balance was not carried forward on the appointed date and Section 142(6)(a) mandates refund in such cases. - HELD THAT: - On merits the Tribunal found that the appellant undisputedly paid CVD and SAD and was eligible for CENVAT credit under the pre GST law but, due to a procedural lapse during transition, failed to record the credit in the electronic ledger. The Tribunal relied on Section 142(6)(a) which preserves proceedings relating to CENVAT credit and provides for cash refund of any amount of credit found admissible under the existing law, subject to the usual exceptions (for example, where unjust enrichment is established) and except where the balance had been carried forward under the CGST Act. Because the credit balance was not carried forward on the appointed date and no unjust enrichment was shown, the appellant was held entitled to refund in cash. The Tribunal observed that the appellant retains the alternative remedy of availing transitional credit through Tran I as per subsequent directions of the Supreme Court, but cannot obtain dual benefit once refund is paid. [Paras 5, 6, 8, 9, 10]

Appeal allowed; appellant entitled to cash refund of the un availed CENVAT credit, subject to check for unjust enrichment, and directed to be paid within two months.

Final Conclusion: The appeal was allowed: CESTAT upheld its jurisdiction to decide pre GST excise appeals and, on the merits, directed refund in cash of the un availed CENVAT credit paid as CVD/SAD (subject to the usual restriction against unjust enrichment and the bar on double recovery), to be paid within two months.

Disallowance of Cenvat credit by an Input Service Distributor without invocation of Rule 14 of CCR, 2004 - distribution of input service credit under Input Service Distributor (ISD) - Rule 14 of Cenvat Credit Rules, 2004 and procedure for disallowance - extended period of limitation for recovery

Disallowance of Cenvat credit by an Input Service Distributor without invocation of Rule 14 of CCR, 2004 - distribution of input service credit under Input Service Distributor (ISD) - Whether Cenvat credit distributed by the Head Office as an ISD could be disallowed when Rule 14 of CCR, 2004 was not invoked in the show cause notices - HELD THAT: - The Tribunal found that the show cause notices did not invoke Rule 14 of the Cenvat Credit Rules, 2004. Since the disallowance of Cenvat credit distributed by the ISD was not made by resort to the procedure prescribed under Rule 14, the disallowance could not be sustained. The appellant had distributed input service credits from the Head Office to manufacturing units and the adjudicating authority confirmed demands without invoking the mandatory provision. On this basis the Tribunal concluded that the impugned orders could not stand. [Paras 7]

Impugned orders set aside and disallowance held not sustainable in absence of invocation of Rule 14 of CCR, 2004

Final Conclusion: Both appeals are allowed; the impugned orders are set aside and the appellant is entitled to consequential benefits in accordance with law.

Remand for verification - duty demand and penalty under Section 11AC of the Central Excise Act - return of goods and subsequent supply under GST - verification of buyer's records - opportunity of hearing before adjudicating authority - common jurisdiction of the Central Excise authority

Remand for verification - return of goods and subsequent supply under GST - duty demand and penalty under Section 11AC of the Central Excise Act - opportunity of hearing before adjudicating authority - verification of buyer's records - Whether the matter requires remand to the original Adjudicating Authority for verification of records and hearing in respect of the alleged duty short payment and penalty. - HELD THAT: - The Tribunal found that the appellant produced evidence, including a certificate from the buyer and related invoices/debit notes, asserting that goods cleared in May and June 2017 were returned as defective and later resupplied after rectification under GST, with payment having been made then. Both parties are registered with and located under the jurisdiction of the same Central Excise authority. The Tribunal concluded that the evidence led by the appellant warrants verification and an opportunity of hearing by the original Adjudicating Authority rather than disposal solely on the basis of the ex-parte order. Consequently, the appeal is allowed by way of remand with a direction to the Adjudicating Authority to verify records (including, if necessary, the buyer's records), hear the appellant on the merits, and pass a reasoned order in accordance with law. The appellant is directed to appear before the Adjudicating Authority within sixty days from receipt of this order and to cooperate in the proceedings. All substantive issues, including the demand of duty and penalty, are kept open for adjudication on remand. [Paras 5, 7, 8]

Appeal allowed by way of remand to the original Adjudicating Authority with directions to verify records, afford hearing, and pass a reasoned order; appellant to appear within sixty days and cooperate; all issues kept open.

Final Conclusion: The appeal is allowed by way of remand: the matter is sent back to the original Adjudicating Authority for verification of records (including buyer's records if necessary), to provide the appellant an opportunity of hearing and to decide the demand of duty and penalty in a reasoned order; appellant directed to appear within sixty days and cooperate; all issues remain open.

Penalty under section 11AC of the Central Excise Act, 1944 - Payment of duty and interest prior to issuance of show cause notice - Imposition of penalty where demand rests on interpretation of exemption or valuation - Appropriation of pre-deposited amounts against duty, interest and penalty

Penalty under section 11AC of the Central Excise Act, 1944 - Payment of duty and interest prior to issuance of show cause notice - Imposition of penalty where demand rests on interpretation of exemption or valuation - Penalty under section 11AC was not imposable on the appellant where the duty and interest were paid before issuance of the show cause notice and the demand mirrored a disputed question of interpretation. - HELD THAT: - The Tribunal considered whether penalty under section 11AC could be sustained when the appellant had discharged the duty liability and interest before issuance of the show cause notice. Relying on the Tribunal's earlier decision in KUNNATH TEXTILES, the Bench noted that where the substantive demand turns on interpretation of relevant conditions (here relating to valuation/entitlement and registration), an assessee should not be penalised. The facts of the present case-non-registration for clearances during 2011-12 to 2014-15, pre-SCN payment of duty and interest, and a demand subsequently confirmed-were held to fall squarely within that principle. Consequently, in the peculiar facts and circumstances, imposition of penalty was set aside. [Paras 5, 6, 7, 8]

The penalty imposed under section 11AC is set aside and the appeal is allowed to that extent.

Final Conclusion: The Tribunal allowed the appeal insofar as the penalty under section 11AC is concerned, setting aside the penalty because the duty and interest were paid prior to issuance of the show cause notice and the demand involved a question of interpretation.