TaxTMI Updates e-Newsletter
Oct 24,2019

Exemption under notification entry for "Pure Services" to Governmental Authority in relation to functions entrusted to Panchayat/Municipality - meaning of "governmental authority" for GST exemption - scope of "in relation to" in exemption notifications - classification of manpower supply as "pure services"

Meaning of "governmental authority" for GST exemption - exemption under notification entry for "Pure Services" to Governmental Authority in relation to functions entrusted to Panchayat/Municipality - Whether Karnataka Rural Road Development Agency (KRRDA) is a "governmental authority" for the purpose of Notification No.12/2017 and thus potentially eligible as a recipient under the exemption entry. - HELD THAT: - The Authority examined the constitution, registration and activities of KRRDA and the statutory definition of "governmental authority" as appearing in the Explanation to section 2(16) of the IGST Act (as incorporated in the notification). On the material, KRRDA is a society established by the Government and is engaged in creation of rural infrastructure such as roads, which falls within functions entrusted to a Panchayat under Article 243G (and related municipal functions). Accordingly, KRRDA falls within the concept of a "governmental authority" for the purposes of the notification entry. [Paras 4]

KRRDA is a "governmental authority" within the meaning of the notification and the IGST Act explanation.

Scope of "in relation to" in exemption notifications - classification of manpower supply as "pure services" - exemption under notification entry for "Pure Services" to Governmental Authority in relation to functions entrusted to Panchayat/Municipality - Whether the applicant's contract for supplying manpower to KRRDA is covered by entry No.3 of Notification No.12/2017 (i.e., whether such manpower services are "pure services" provided by way of an activity "in relation to" a function entrusted to a Panchayat/municipality and therefore exempt). - HELD THAT: - The Authority accepted that the contract is for supply of services only and therefore constitutes "pure services." However, the determinative question is whether those services are provided "by way of any activity in relation to any function entrusted" to a Panchayat or municipality. The phrase "in relation to" was taken to mean "in connection with" or "in the context of" and requires a direct link between the supplied services and the entrusted function. The manpower provided here (data entry operators, office staff, IT personnel, peons, watchmen etc.) perform back office and support functions to manage KRRDA's offices and are not directly connected or project specific to construction or maintenance of rural roads (functions listed under Article 243G). Therefore the supply is not "in relation to" the entrusted functions and does not fall within the notification entry. [Paras 4, 5, 6]

The manpower supply contract is not covered by entry No.3 of Notification No.12/2017 and is not exempt from GST.

Final Conclusion: The Authority held that although KRRDA qualifies as a "governmental authority," the applicant's supply of manpower to KRRDA is a pure support service not sufficiently connected to functions entrusted to Panchayats or Municipalities; hence the supply does not fall under entry No.3 of Notification No.12/2017 and is not exempt from GST.

Composite supply - principal supply - works contract - taxability of Solar Power Generating System at concessional rate - determination of tax liability on composite or mixed supply - bifurcation of contract value into goods and services

Composite supply - principal supply - determination of tax liability on composite or mixed supply - Whether the turnkey EPC contract for construction of a solar power plant constitutes a composite supply and, if so, the characterisation of the principal supply. - HELD THAT: - The Authority examined the contract documentation and observed that the applicant's turnkey EPC contract comprises supplies of goods and supplies of services that are naturally bundled and supplied in conjunction with each other in the ordinary course of business, with one element being predominant. Applying the definition of composite supply in section 2(30) of the CGST Act, 2017, the Authority found that the contract falls within that definition because the supplies are naturally bundled and one supply is principal. The Authority therefore treated the contract as a composite supply and proceeded to identify the governing principles for ascertaining the principal supply and the consequent tax treatment under the relevant rate notifications and Section 8. [Paras 17, 19]

The turnkey EPC contract is a composite supply in terms of section 2(30) of the CGST Act, 2017.

Works contract - taxability of Solar Power Generating System at concessional rate - bifurcation of contract value into goods and services - Whether the supply under the applicant's turnkey EPC contract is taxable as supply of goods at concessional rate of 5% or is to be treated as a works contract/service, and the applicable tax treatment for periods before and after 01.01.2019. - HELD THAT: - The Authority considered the definition of works contract in section 2(119) and the contractual scope which includes design, procurement, supply, erection, civil works and maintenance. It held that the contract involves creation/transfer of a project which, after completion, constitutes immovable property for the purposes of the works contract definition because the project cannot function without the integrated components and civil works. The Authority distinguished supply of standalone goods covered by entry no.234 of Schedule I to Notification No.1/2017 (at concessional rate) from a composite contract that results in a works contract. It noted that entry no.38 of Notification No.11/2017 (as amended) specifically covers construction/engineering/installation services for setting up a solar power generating system. Consequently, for the period upto 31.12.2018 the contract falls under the works contract entry and is taxable accordingly; with effect from 01.01.2019 the applicable regime requires values to be worked out separately for goods and services and taxation is to follow entry no.38 of Notification No.11/2017 (as amended) and entry no.234 of Schedule I of Notification No.1/2017 (as amended) with bifurcation as per the explanation therein. [Paras 17, 18, 19]

The applicant's turnkey EPC contract is a works contract (and not supply of standalone goods at concessional 5%) for the period upto 31.12.2018; from 01.01.2019 the contract is taxable by segregating values for goods and services under the respective entries and explanation.

Final Conclusion: The Authority ruled that the turnkey EPC contract for setting up a solar power plant is a composite supply. The contract qualifies as a works contract and is taxable under the works contract entry up to 31.12.2018; from 01.01.2019 taxation must be effected by segregating the values of goods and services and applying the respective entries (including the concessional goods entry where applicable) as per the notifications and the explanation provided therein.

Concessional rate under Notification No.45/2017 - public funded research institution - scientific and technical instruments, apparatus, equipment - accessories, parts and consumables - goods "required for research purposes only" - certificate from an officer not below the rank of Deputy Secretary - scope of "equipment" and "apparatus" to include transport used in support of research - advance ruling under Section 97/98 of the CGST/KGST Acts

Public funded research institution - certificate from an officer not below the rank of Deputy Secretary - Whether Satish Dhawan Space Centre (SDSC SHAR) and Electronics & Radar Development Establishment (LRDE) are Public Funded Research Institutions for the purpose of Notification No.45/2017. - HELD THAT: - The applicant produced exemption certificates issued by the competent authority certifying that SDSC SHAR and LRDE are public funded research institutions. Those certificates satisfy the condition in column (4)(a) of Notification No.45/2017 which requires production of a certificate from an officer not below the rank of Deputy Secretary. Having regard to the documentary evidence on record, the first condition of the Notification is fulfilled in respect of SDSC SHAR and LRDE. [Paras 5]

SDSC SHAR and LRDE are public funded research institutions within the meaning of Notification No.45/2017 for the supplies in question.

Scientific and technical instruments, apparatus, equipment - accessories, parts and consumables - scope of "equipment" and "apparatus" to include transport used in support of research - Whether the trucks and their spare parts fall within the description of goods eligible for concessional rate under column (3) of Notification No.45/2017. - HELD THAT: - Column (3) of Notification No.45/2017 lists, inter alia, scientific and technical instruments, apparatus and equipment and accessories and parts. The Authority considered whether trucks can be characterised as apparatus or equipment. Having examined commonly accepted definitions and the applicant's submissions that the trucks will be used to transport research equipment and materials across test sites (thus forming part of the recipient's research activity), the Authority concluded that the trucks qualify as apparatus/equipment and that spare parts qualify as accessories/parts within the meaning of the Notification. The reasoning emphasises functional connection to the research activity rather than requiring the goods to be the direct object of research. [Paras 5]

The trucks and their spare parts, as supplied to SDSC SHAR and LRDE for the stated use, fall within the description of goods in column (3) of Notification No.45/2017.

Goods "required for research purposes only" - certificate from the Head of the Institution - Whether the conditions in column (4) of Notification No.45/2017, including certification that the goods are required for research purposes only, are satisfied for the supplies to SDSC SHAR and LRDE. - HELD THAT: - Column (4) requires (a) a certificate from an officer of specified rank certifying the institution's administrative control and (b) a certificate from the Head of Institution that the goods are required for research purposes only. The Authority found that the requisite certificates were furnished by the recipients. Interpreting the phrase 'required for research purposes only' expansively, the Authority held that goods which serve any purpose forming part of the total research activity and are not used for other activities qualify; goods used to move heavy instruments and materials indispensable to research meet that test. Consequently, the condition in column (4)(b) is satisfied for the supplies to SDSC SHAR and LRDE. [Paras 5]

The conditions in column (4), including the requirement that the goods be required for research purposes only, are satisfied for the supplies to SDSC SHAR and LRDE.

Public funded research institution - verification of eligibility of other recipients - Whether the applicants' proposed supplies to other named entities (e.g., VRDE, BEL, DRDO, BrahMos, BHEL, HAL) are covered by Notification No.45/2017. - HELD THAT: - The Authority observed that some entities to which the applicant contemplates supplying may not fall within the term 'public funded research institution' as envisaged by the Notification. The question of eligibility of those other recipients requires examination of the nature of their research activity and whether they are recognised as public funded research organisations. The Authority therefore did not reach a final adjudication on those proposed supplies and indicated that verification is necessary. [Paras 4, 5]

Left open for verification - the eligibility of intended recipients such as BEL, BHEL and HAL is remanded for factual verification of their status and research activities.

Final Conclusion: The Authority rules that supply of trucks and spare parts by the applicant to Satish Dhawan Space Centre (SDSC SHAR) and Electronics & Radar Development Establishment (LRDE), as described in the application, fall within the goods and conditions of Notification No.45/2017 and are eligible for the reduced rate of tax under the CGST and KGST (and corresponding IGST) provisions; eligibility of supplies to other intended recipients requires further verification and is left open.

Supply without consideration under Schedule I (supply between related or distinct persons) - distinct persons treatment of separate registrations (establishments) for supply - bill to ship to transaction - interstate supply treated as supply for GST purposes - invoice raised on principal / contracting entity

Supply without consideration under Schedule I (supply between related or distinct persons) - distinct persons treatment of separate registrations (establishments) for supply - bill to ship to transaction - invoice raised on principal / contracting entity - interstate supply treated as supply for GST purposes - Characterisation of the delivery of spares by JNSIPL, Karnataka - whether it amounts to a supply to the ultimate consumer or is a supply to JNSIPL, Maharashtra - HELD THAT: - The Authority examined the contractual and transactional matrix and found that the AMC contract is between JNSIPL, Maharashtra and the ultimate consumer; JNSIPL, Karnataka is not a party to that contract. Spares are imported and held by JNSIPL, Maharashtra but, to reduce downtime, are delivered from the stocks of JNSIPL, Karnataka on request to meet the contractual obligation of JNSIPL, Maharashtra. The transaction is effected as a bill to ship to arrangement: the applicant raises an invoice on JNSIPL, Maharashtra and charges IGST as it is an interstate movement. Given that the supplies between separately registered establishments are treated as supplies between distinct persons and that Schedule I treats supplies between related/distinct persons as supply even without consideration, the delivery from the Karnataka establishment is not a supply to the ultimate consumer but is a supply to JNSIPL, Maharashtra. The ultimate delivery to the consumer is on account of JNSIPL, Maharashtra for the AMC services on which Maharashtra bears tax. [Paras 6]

Delivery of spares by JNSIPL, Karnataka does not amount to a supply to the ultimate consumer; the supply is to JNSIPL, Maharashtra and the invoice must be raised on JNSIPL, Maharashtra.

Final Conclusion: The Authority rules that deliveries of spares effected by the Karnataka establishment on account of JNSIPL, Maharashtra (documented as bill to ship to with invoice to JNSIPL, Maharashtra) are supplies to JNSIPL, Maharashtra and not to the ultimate consumer; the Karnataka establishment must invoice JNSIPL, Maharashtra and has correctly treated the movement as an interstate supply for GST purposes.

Reverse Charge Mechanism - Integrated Goods and Services Tax on import of services - Valuation for levy of IGST on imports - Import of goods as the taxable event - Distinct taxable transactions (supply of goods v supply of services)

Reverse Charge Mechanism - Integrated Goods and Services Tax on import of services - Notification No. 10/2017 - Integrated Tax (Rate) - Valuation for levy of IGST on imports - Distinct taxable transactions (supply of goods v supply of services) - IGST on ocean freight in CIF contract is payable by the importer under the reverse charge mechanism. - HELD THAT: - The Authority examined the notifications that (i) attract IGST on transport of goods by vessel from outside India up to the customs station of clearance and (ii) specify that tax on such services is payable by the importer under reverse charge. It noted that valuation of imported goods for customs purposes includes the cost of transport, and that IGST is levied on import of goods at the point of customs assessment. However, the taxable event under the IGST notification concerning ocean freight is the supply of transportation services by a person located outside India and the liability under Notification No.10/2017 to pay tax under RCM falls on the importer as recipient of that service. The Authority held that import-related customs valuation and levy of IGST on the import of goods and the separate levy of IGST under RCM on the transport service are two distinct taxable transactions; accordingly, the importer is liable to pay IGST under RCM on ocean freight in CIF contracts. The Authority recorded that the issue is sub judice before the Hon'ble High Court of Gujarat and expressly made the ruling subject to the final decision of that Court. [Paras 5]

Subject to the final decision of the Hon'ble High Court of Gujarat, IGST is payable by the importer on ocean freight in CIF contracts under the reverse charge mechanism.

Final Conclusion: The Authority rules that, subject to the outcome of the pending High Court matter, the importer is liable to discharge IGST under reverse charge on ocean freight for CIF imports, treating the levy as arising from a distinct supply of transportation services separate from the import of goods.

Exemption under Entry No. 3 of Notification No. 12/2017 - pure service (excluding works contract or composite supplies involving supply of goods) - activity in relation to function entrusted to a Municipality under Article 243W - Government Entity for notification purpose (90% participation by way of equity or control) - composite supply in which value of goods does not exceed 25% (Entry 3A)

Pure service (excluding works contract or composite supplies involving supply of goods) - activity in relation to function entrusted to a Municipality under Article 243W - exemption under Entry No. 3 of Notification No. 12/2017 - Government Entity for notification purpose (90% participation by way of equity or control) - Whether the services rendered by the applicant to KRIDL are exempt from GST under Entry No. 3 of Notification No.12/2017 as amended. - HELD THAT: - The authority examined the nature of the contract and the services performed (shifting, compacting, filling and leveling of inert/RDF using earth-moving machinery and tippers) and found that the transaction involves only labour and services without any supply of goods, thus constituting a pure service. The activity (solid waste management) falls within functions entrusted to a Municipality under Article 243W of the Constitution, satisfying the territorial/function nexus required by the entry. The recipient, Karnataka Rural Infrastructure Development Limited (KRIDL), being established by the State Government with full control by the State, meets the definition of a Government Entity for the purposes of the notification (90% or more participation by way of equity or control). Since all three conditions specified in Entry No.3 - (i) pure service, (ii) provided to Central/State/Union Territory/local authority/governmental authority/government entity, and (iii) activity in relation to a function entrusted to a Municipality under Article 243W - are satisfied, the services furnished by the applicant to KRIDL are covered by the exemption under Entry No.3 of Notification No.12/2017 as amended, with effect from the notified date. [Paras 10, 11]

The services rendered by the applicant to KRIDL are exempt from GST under Entry No.3 of Notification No.12/2017 (as amended) with effect from 25.01.2018.

Composite supply in which value of goods does not exceed 25% (Entry 3A) - Whether the applicant's activity falls within Entry 3A (composite supply where value of goods does not exceed 25%). - HELD THAT: - The Authority analysed the nature of the supply and concluded there is no involvement of goods and the supply is not a composite supply of goods and services. Consequently, the conditions for Entry 3A are not attracted and the activity cannot be covered under that entry. [Paras 10, 11]

The activity is not covered by Entry 3A of Notification No.12/2017 as amended.

Final Conclusion: The Authority ruled that the applicant's services (excavation, transportation, compacting and filling of inert/RDF for KRIDL) are pure services related to municipal solid waste management, and since KRIDL qualifies as a Government Entity, the services are exempt from GST under Entry No.3 of Notification No.12/2017 as amended, with effect from 25.01.2018; Entry 3A is not applicable.

Supply by principal to agent - agent acting on behalf of principal - value of supply between principal and agent - open market value / Rule 29 - time of supply - date of removal / issue of invoice / payment - reverse charge on services supplied by Government to business entity (Notification No. 13/2017, Entry 5)

Supply by principal to agent - agent acting on behalf of principal - Depositing timber with the Government Timber Depot for disposal constitutes a 'supply' under the GST Act. - HELD THAT: - The Depot performs auctions and raises invoices to third parties while acting with the rights to transfer title on behalf of the applicant; that characterisation brings the transaction within Schedule I (clause 3(a)) and the definition of supply where goods are provided by a principal to his agent who undertakes to supply on behalf of the principal. Consequently, the transfer of timber by the applicant to the Depot is a supply requiring issuance of a tax invoice and discharge of GST by the applicant. [Paras 4]

The transfer of timber to the Government Timber Depot is a supply and GST is chargeable on that supply.

Value of supply between principal and agent - open market value / Rule 29 - value determination where consideration not ascertainable - The value for which GST is chargeable on the supply from the applicant to the Depot is the open market value or as determined under the prescribed rules (Rule 30 or Rule 31 in that order). - HELD THAT: - Section 15(4) requires prescribed methods where value cannot be determined under Section 15(1). Rule 29 specifically governs value of supplies made through an agent and prescribes that the value shall be the open market value or, at the supplier's option, ninety percent of the price charged by the recipient for like goods to unrelated customers; where not determinable, Rule 30 or Rule 31 apply in that order. Therefore the applicant must determine value in accordance with these provisions. [Paras 4]

Value of the supply to the Depot shall be the open market value or otherwise determined under Rule 30 or Rule 31 in that order.

Independent supplies in chain of transactions - no provision for deemed discharge by payment of tax by another person - Payment of GST by the Depot on the sale to the buyer does not discharge the applicant's liability; both the handover to the Depot and the subsequent sale by the Depot are separate taxable supplies. - HELD THAT: - The transaction chain involves two distinct supplies: (i) supply by the applicant to the Depot (principal to agent) and (ii) supply by the Depot to the third party. The GST Act contains no mechanism by which tax paid by the Depot on the second supply operates as a deemed discharge of tax payable by the applicant on the first supply. Accordingly, tax must be discharged at both stages independently. [Paras 5]

There are two independent taxable supplies and tax liability must be discharged at both stages; payment of tax by the Depot does not extinguish the applicant's liability.

Time of supply - date of removal / invoice - issue of invoice at time of removal - The time of supply for the applicant's transfer of timber to the Depot is the time of removal of the goods for supply to the Depot (earlier of issue of invoice/last date to issue invoice or receipt of payment as per section 12(2)). - HELD THAT: - A conjoint reading of section 12(2) (time of supply) and section 31(1) (requirement to issue tax invoice before or at removal or making available) leads to the conclusion that the time of supply is the moment of removal/delivery of the timber to the Depot for supply. Subsequent actions by the Depot do not affect the time or value of the applicant's supply. [Paras 6]

Time of supply is the time of removal/delivery of timber by the applicant to the Depot for supply.

Reverse charge on services supplied by Government to business entity (Notification No. 13/2017, Entry 5) - services of supervision - taxable under reverse charge if supplier is Government Department - Supervision charges collected by the Government Timber Depot are taxable under reverse charge (Notification No. 13/2017, Entry 5) if the Depot is a Government Department; if the Depot is not a Government Department, reverse charge under that entry does not apply and the Depot must collect GST and issue invoice. - HELD THAT: - Entry 5 of Notification No. 13/2017 shifts tax liability to the recipient for services supplied by Government/State/Local authority to a business entity, subject to specified exceptions. The supervision service provided by the Depot is not within those exceptions; therefore, where the Depot qualifies as a Government Department the applicant (recipient) is liable to pay tax under reverse charge. If the Depot is not a Government Department, the reverse charge entry is inapplicable and the Depot (supplier) must charge and collect GST and issue a tax invoice. [Paras 8]

GST on supervision services is payable under reverse charge by the applicant only if the Depot is a Government Department; otherwise the Depot must collect GST and issue invoice.

Final Conclusion: The Authority rules that delivery of timber to the Government Timber Depot is a taxable supply by the applicant to its agent, taxable at open market value or as determined under the Rules; the applicant must discharge GST on that supply at the time of removal, independent of GST charged by the Depot on subsequent sale; supervision charges are taxable under reverse charge if the Depot is a Government Department, otherwise the Depot must collect GST.

Supply of goods or supply of service - composite supply and principal supply - essential character test - printing of content supplied by recipient as ancillary or principal - classification under Heading 4802 - applicability of 6% CGST and 6% SGST

Supply of goods or supply of service - printing of content supplied by recipient as ancillary or principal - essential character test - The activity of printing, centre pinning and hand numbering answer booklets for the Board is a supply of goods and not a supply of service. - HELD THAT: - The Authority examined the factual matrix that the applicant supplied the physical inputs including paper and performed printing, centre pinning and hand numbering while the Board supplied only the content, format and watermark design. Relying on CBEC Circular No.11/11/2017-GST dated 20.10.2017, the Authority applied the principle that where physical inputs belonging to the printer give the product its usage and the printing is ancillary to that product, the predominant supply is of goods; conversely, where printing imparts the essential character, the supply is a service. Applying this test to the case, the printing of the Board's content was held ancillary to the supply of the printed answer booklets made from paper belonging to the applicant, and therefore the transaction is a supply of goods. [Paras 7, 8, 9, 10]

The printing, centre pinning and hand numbering carried out by the applicant constitute supply of goods.

Classification under Heading 4802 - applicability of 6% CGST and 6% SGST - The printed answer booklets supplied to the Board are classifiable under Heading 4802 and taxable at 6% CGST and 6% SGST. - HELD THAT: - Having held the transaction to be supply of goods, the Authority proceeded to classify the printed answer booklets under Heading 4802 (uncoated paper and paperboard used for writing/printing). On that basis the supply falls within entry 112 of Schedule II to Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 and is taxable at the rate specified thereunder, namely 6% CGST and 6% SGST. The Authority recorded this classification and consequent tax treatment as the operative ruling. [Paras 11, 12, 13]

The answer booklets are classifiable under Heading 4802 and taxable at 6% CGST and 6% SGST.

Final Conclusion: The Authority ruled that the applicant's work of printing, centre pinning and hand numbering answer booklets is a supply of goods (not services), the goods being classifiable under Heading 4802, and the supply is taxable at 6% CGST and 6% SGST.

Validity of assessment under Section 64 of the U.P. GST Act, 2018 - Assessment for the month March, 2018 - Dismissal of first appeal as beyond time - Writ remedy against tax assessment

Validity of assessment under Section 64 of the U.P. GST Act, 2018 - Dismissal of first appeal as beyond time - Writ remedy against tax assessment - Writ petition challenging the assessment order dated 10.06.2018 under Section 64 of the U.P. GST Act, 2018 for March, 2018 was allowed. - HELD THAT: - The petition was filed against the Assistant Commissioner Commercial Tax's assessment order dated 10.06.2018 under Section 64 of the U.P. GST Act, 2018, assessing the petitioner for the month of March, 2018. The petitioner's first appeal against that order had been dismissed on the ground of being time-barred. The Court recorded that the facts in the present matter are identical to those in Writ Tax No. 1712 of 2018 (M/s Shailendra Eat Udyog Vs. State of U.P. & 3 Ors.) decided by a separate order of the same date, and, applying the same reasoning as in that earlier order, allowed the present writ petition on the same terms and conditions.

Writ petition allowed on the same terms and conditions as in the earlier order disposing Writ Tax No. 1712 of 2018.

Final Conclusion: The writ petition challenging the assessment under Section 64 (order dated 10.06.2018) for March, 2018 is allowed; the matter is disposed of on the same terms and conditions as in the Court's contemporaneous decision in Writ Tax No. 1712 of 2018.

Ad-interim release of seized conveyance and goods - undertaking to pay amount computed in the impugned order - order under section 130 of the Central Goods and Service Tax, 2017 - right to challenge the impugned order before the appropriate forum

Ad-interim release of seized conveyance and goods - undertaking to pay amount computed in the impugned order - order under section 130 of the Central Goods and Service Tax, 2017 - Grant of interim relief directing release of the seized conveyance with the goods on the petitioner furnishing an undertaking to pay the amount computed in the impugned order dated 5.10.2019. - HELD THAT: - The High Court, after hearing counsel, issued rule returnable and granted ad-interim relief by directing the respondents to forthwith release the conveyance along with the goods contained therein. The relief was made conditional upon the petitioner filing an undertaking within one week undertaking that, if the petitioner does not succeed in the petition, he will pay the amount computed in the impugned order dated 5.10.2019 issued under section 130 of the Central Goods and Service Tax, 2017. The court expressly stated that the undertaking is without prejudice to the petitioner's right to challenge the impugned order before the appropriate forum. Service of the rule was waived by the respondents and direct service was permitted by the court.

Respondents directed to release the conveyance and goods forthwith; petitioner to file the specified undertaking within one week; liberty preserved to challenge the impugned order before the appropriate forum; service waived and direct service permitted.

Final Conclusion: Rule issued returnable; ad-interim relief granted directing immediate release of the conveyance and goods subject to the petitioner furnishing an undertaking to pay the amount computed in the impugned order dated 5.10.2019, without prejudice to the petitioner's right to contest that order before the appropriate forum.

Interim release of detained goods and conveyance - confiscation under section 130 of the CGST Act - deposit of tax and penalty as condition for interim relief - judicially mandated undertaking to pay balance if petition fails - release subject to final adjudication

Interim release of detained goods and conveyance - deposit of tax and penalty as condition for interim relief - release subject to final adjudication - Petitioner entitled to interim release of the detained conveyance and goods pending adjudication, on the basis of deposit of tax and penalty. - HELD THAT: - The court noted that the respondent authority had passed an order of confiscation of goods and conveyance and demand of tax, fine and penalty in Form GST-MOV-11 on 15.10.2019. The petitioner informed the authority of the High Court notice and had deposited the amount of tax and penalty (as evidenced by the challan annexed). In view of the deposit made in connection with the detention, the court granted interim relief directing the respondent to forthwith release the conveyance together with the goods, while preserving the respondent's rights and subject to the final outcome of the petition. The order conditions the interim release upon the filing of an undertaking by the petitioner to pay any balance found due under the confiscation order in the event the petitioner does not succeed in the petition, without prejudice to his right to challenge the confiscation order.

Directed immediate release of the conveyance and goods subject to the petition's final outcome and the petitioner filing an undertaking to pay any balance if unsuccessful.

Judicially mandated undertaking to pay balance if petition fails - confiscation under section 130 of the CGST Act - Filing of an undertaking by the petitioner as a precondition for interim relief to secure payment of any balance under the confiscation order. - HELD THAT: - The court required the petitioner to file an undertaking that, if the petition ultimately fails, he will pay the balance amount payable under the confiscation order made under section 130 of the CGST Act. This requirement operates without prejudice to the petitioner's right to contest the confiscation on merits. The undertaking serves as a protective measure to ensure compliance with any final adjudication while permitting interim release.

Petitioner directed to file the stated undertaking as a condition for the interim release granted.

Final Conclusion: Amendment allowed; interim release of the detained conveyance and goods ordered forthwith because tax and penalty were deposited, subject to the petition's final outcome and the petitioner's undertaking to pay any balance due if unsuccessful; matter posted to 20.11.2019.

Detention under section 129 of the CGST Act - confiscation under section 130 of the CGST Act - procedure for physical verification and release prescribed by Board Circular No.41/15/2018-GST - mandatory upload and reporting requirements in Form GST EWB-03 and Form GST MOV-04 - invalidity of detention/confiscation where mandatory inspection/upload requirements are not complied with

Detention under section 129 of the CGST Act - procedure for physical verification and release prescribed by Board Circular No.41/15/2018-GST - mandatory upload and reporting requirements in Form GST EWB-03 and Form GST MOV-04 - Detention of the conveyance under section 129(1) of the CGST Act was without valid ground and contrary to the mandatory procedural requirements in the Board circular. - HELD THAT: - The vehicle was intercepted and the driver produced the e-way bill and tax invoice; no discrepancy in those documents was pointed out by the respondents. Although an order for physical verification (Form GST MOV-02) was issued, the mandatory steps prescribed by the Board Circular dated 13.04.2018 - preparing and uploading a report in Part A of Form GST EWB-03 within 24 hours, completing inspection and preparing Form GST MOV-04, and recording the final report in Part B of Form GST EWB-03 within the prescribed timeframe (or obtaining written extension in Form GST MOV-03) - were not complied with. In the absence of any uploaded Part A/B of EWB-03 or Form MOV-04 and in the absence of any recorded discrepancy following inspection, the detention order (Form GST MOV-06) issued the same day cannot be sustained. The respondents have not shown any valid post-verification reason justifying continued detention. [Paras 7]

Detention under section 129(1) set aside and no demand for tax/penalty under Form GST MOV-09 can be sustained on that basis.

Confiscation under section 130 of the CGST Act - invalidity of detention/confiscation where mandatory inspection/upload requirements are not complied with - Order of confiscation passed under section 130 of the CGST Act is unsustainable because it is predicated on grounds unrelated to the validly recorded reasons for detention and after defective detention procedures. - HELD THAT: - The notice and confiscation relied on alleged irregularities discovered from preliminary online verification of the dealer (generation of multiple e-way bills and questioned IGST entries). Even if such matters warrant separate action, they do not cure the vice in the detention/inspection process which required compliance with the Board's procedural mandates before detention could be regularised and before confiscation could be validly effected. Where the conveyance carried documents and no discrepancy was shown in respect thereof, and where the mandated inspection reports were not prepared/uploaded, the confiscation order passed in Form GST MOV-11 cannot be sustained. The court observed that factual or legal proceedings against the petitioner under other provisions remain open to the respondents but do not validate the confiscation impugned here. [Paras 7, 8]

Order of confiscation dated 08.04.2019 in Form GST MOV-11 quashed and the conveyance and goods ordered to be released forthwith.

Final Conclusion: The petition is allowed: the detention order under section 129 and the demand in Form GST MOV-09, and the confiscation order under section 130 (Form GST MOV-11) are quashed; the respondents must release the conveyance and goods immediately, without prejudice to independent proceedings under the GST law. Rule made absolute with no costs.

Summary order. Notice issued; respondents granted ten days to file their response/affidavit regarding the mode of refund under Section 54 of the CGST Act, 2017 in light of non-operational GSTR Forms and the circular dated 29.12.2017; matter listed for consideration on 07.11.2019 and no further time will be granted.

Power of inspection, search and seizure - authorisation by proper officer not below Joint Commissioner - Form GST INS-02 and inventory requirements under rule 139 - Protection of interest of revenue under section 83 - access to premises under section 71 - Protection under section 157 (good faith immunity)

Power of inspection, search and seizure - authorisation by proper officer not below Joint Commissioner - Validity of the seizure effected under sub section (2) of section 67 of the GGST Act in the absence of any written authorisation by a proper officer not below the rank of Joint Commissioner. - HELD THAT: - The Court examined the seizure order which invoked section 67(2) but no material was produced to show that the Assistant Commissioner (respondent No.4) had been authorised in writing by a proper officer not below the rank of Joint Commissioner to conduct the search or seizure. The impugned order itself stated the place of seizure as the State Tax Office (Rajya Kar Bhavan), and the record does not disclose any authorization as contemplated by section 67(2). In the absence of such authorisation the exercise of powers under section 67(2) by respondent No.4 was without authority of law, rendering the seizure illegal and arbitrary. [Paras 13, 14, 16]

Seizure under section 67(2) was illegal for lack of the prescribed authorisation; the seizure is quashed and the seized items are to be released.

Form GST INS-02 and inventory requirements under rule 139 - procedural defects in seizure memo - Validity of the seizure order and inventory under rule 139 and Form GST INS-02, having regard to required contents and signatures. - HELD THAT: - The Court noted that the seizure was recorded in Form GST INS 02 but the order and inventory omitted essential particulars: vehicle make/model/condition was not stated (only registration number), the column identifying the premises owner was left blank, and witnesses' addresses were incomplete. Rule 139(5) requires preparation of an inventory with descriptive particulars and signature of the person from whom goods are seized. These material deficiencies in the seizure record further vitiated the exercise of power and indicated a defective and improper seizure process. [Paras 11, 15, 16]

Seizure order and inventory suffered material procedural defects under rule 139/Form GST INS 02, contributing to the illegality of the seizure.

Protection of interest of revenue under section 83 - access to premises under section 71 - Whether the impugned seizure could be sustained as an action to protect revenue under section 83 or was otherwise supportable during proceedings under section 71. - HELD THAT: - The Court observed that powers to attach property to protect revenue are conferred by section 83 but such powers are available only where specified proceedings (sections 62, 63, 64, 67, 73 or 74) are pending. In the present case the only proceeding referred to was under section 71 (access to business premises), and no proceedings under the enumerated sections were shown to be pending at the time of seizure. Therefore the seizure could not be justified as an exercise of powers under section 83 or as otherwise relatable to any provision of the GGST Act. [Paras 18, 19]

Seizure was not relatable to section 83 or otherwise authorised during the pendency of proceedings under section 71; it was therefore unsustainable.

Protection under section 157 (good faith immunity) - Availability of statutory immunity under section 157 to the officer who effected the seizure. - HELD THAT: - Section 157(2) shields officers from suit or prosecution for acts done or intended to be done in good faith under the Act. The Court held that such immunity presupposes that the officer was authorised to take the action complained of and that the action was in good faith. As the respondent No.4 failed to show any authorisation under section 67(2) and did not demonstrate good faith compliance with the statutory scheme, he could not invoke the protection of section 157. [Paras 21, 22]

Immunity under section 157 was not available to respondent No.4 in the circumstances; lack of authorisation and want of shown good faith precluded reliance on section 157.

Final Conclusion: The petition is allowed. The seizure order dated 25.10.2018 is quashed and set aside; the respondent No.4 is directed to forthwith release and hand over the vehicle and the two mobile phones to the petitioner. Though the Court considered exemplary costs, none were awarded at the petitioner's request; the Registry is directed to communicate the order to the Chief Secretary for appropriate administrative attention.

Benefit of input tax credit - commensurate reduction in price - profiteering - recalibrated basic price - remedial relief to recipients including interest - penalty under Section 171(3A) - investigation under Rule 129/133/136 - scope of investigation-project phases

Benefit of input tax credit - commensurate reduction in price - profiteering - recalibrated basic price - Determination of profiteered amount due to net additional ITC post-GST and requirement to pass on that benefit to buyers. - HELD THAT: - The Authority accepted the DGAP's comparison of pre-GST and post-GST periods which showed input tax credit to turnover ratios of 2.37% (pre-GST) and 2.65% (post-GST), yielding an additional benefit of 0.28%. Applying this net benefit to receipts from buyers during 01.07.2017 to 31.10.2018, the DGAP recalibrated the basic price and tax to compute excess realization. The Authority recorded that the Respondent raised no objection to the computation and had agreed to pass on the computed benefit. Consequently the profiteered amount was determined as computed by the DGAP. [Paras 9, 10, 13, 14]

Profiteered amount determined as per DGAP's computation (Rs. 2,13,468 as computed in the report) and Respondent liable to pass on this benefit to eligible buyers.

Remedial relief to recipients including interest - monitoring and recovery by Commissioners - Mechanism and timeline for passing on the profiteered amount and supervision for compliance. - HELD THAT: - The Authority directed that the Applicant and other eligible buyers shall receive the computed ITC benefit (with specified apportionment between the Applicant and other buyers) along with interest at 18% from the date of realisation until payment. The amount is to be paid within three months from the date of the order, failing which the concerned Commissioner of SGST/CGST shall recover it with interest and pay it to the eligible buyers. The DGAP was directed to re-compute amounts for all eligible buyers and convey the same to the Respondent and the Commissioners. Further, the Commissioners of CGST/SGST Gujarat were directed to monitor compliance and report under supervisory control of the DGAP within four months. [Paras 15, 16, 19]

Respondent to pay the computed benefit with interest within three months; DGAP to re-compute and Commissioners to monitor and report compliance within four months; recovery by Commissioners if payment is not made.

Penalty under Section 171(3A) - offence of profiteering - Existence of an apparent offence under the Act and initiation of penalty proceedings. - HELD THAT: - The Authority found that the Respondent had denied the benefit of additional ITC to buyers in contravention of Section 171(1) of the CGST Act and thereby committed an offence under Section 171(3A). On that basis, the Authority directed issuance of a show cause notice asking the Respondent to explain why the penalty prescribed under Section 171(3A) read with Rule 133(3)(d) of the CGST Rules should not be imposed. [Paras 17]

Show cause notice to be issued to the Respondent proposing penalty under Section 171(3A) read with Rule 133(3)(d).

Investigation under Rule 129/133/136 - scope of investigation-project phases - Direction for further investigation into the entire project beyond the phase initially examined. - HELD THAT: - The Authority observed discrepancies between project particulars submitted and RERA records and noted that the DGAP's investigation appeared restricted to 'Phase-II' of the project. Given the Respondent's admission of liability to pass on the additional ITC and the possibility that other phases were not examined, the Authority, invoking Rule 133(5) of the CGST Rules, directed the DGAP to investigate passing on of additional ITC in respect of the whole project and submit a fresh report, treating such inquiry as a new investigation governed by Rule 129 procedures. [Paras 18]

DGAP directed to conduct a fresh investigation into the entire project (all phases) and submit report under Rule 133(5)/Rule 129 procedures.

Final Conclusion: The Authority determined that the Respondent benefited from additional input tax credit post-GST (net 0.28%) and fixed the profiteered amount as computed by the DGAP, directed that this amount (with interest) be passed to eligible buyers within three months, ordered DGAP to re-compute and Commissioners to monitor compliance, issued directions for a show cause notice proposing penalty proceedings, and remanded the matter to the DGAP for investigation of the entire project beyond the phase initially examined.

Reopening of assessment against dead person - father of the petitioner expired on 12.6.2016 and impugned notice was issued on 28.3.2018 - As decided by HC [2019 (4) TMI 784 - GUJARAT HIGH COURT] no valid notice can be issued against a dead person, the impugned notice is required to be quashed and set aside - HELD THAT:- Special leave petition is dismissed. Pending application stands disposed of.

Extraordinary and discretionary jurisdiction of High Court - maintainability of appeal - Single Judge directing the appellant to exhaust the statutory remedy - whether the appeal requires to be decided on merit or not? - Section 115-O invoked unilaterally and without adjudication by treating the transactions as that of dividend, which would not come within the purview of Section 2(22)(d) - HELD THAT:- As a sum of ₹ 2806,40,15,294/- stands deposited and invested in the form of fixed deposit receipts.

Mr. Zoheb Hossain, learned Advocate appearing for the Department prays for and is granted two weeks’ time to put in affidavit in reply.

Rejoinder, if any, be filed within a week thereafter.

Considering the facts and circumstances on record, we deem it appropriate to list the matter for final disposal on 14.11.2019.

Addition u/s 68 - Assessment u/s 153A - allegation of generation of unaccounted money and also transfer of such money in exchange of share capital - proving any accommodation entry - reliance on third party statement - CIT(A) and ITAT deleted the additions also confirmed by HC [2018 (8) TMI 867 - MADHYA PRADESH HIGH COURT] - HELD THAT:- SLP Dismissed.

Scope of remand - jurisdiction of the Assessing Officer on remand - principles of natural justice - reopening of assessment by way of remand - characterisation of income - remand for verification

Scope of remand - jurisdiction of the Assessing Officer on remand - Assessing Officer exceeded the scope of the remand by reconsidering issues not remitted by the Tribunal. - HELD THAT: - The Tribunal remitted only the question relating to the addition of Rs. 25,05,304/- as Short Term Capital Gains (other than under Section 111A) for re-adjudication after verification of client code modifications. The Assessing Officer, on remand, went beyond that limited remit and reconsidered admitted items - namely Short Term Capital Gains under Section 111A and brought/forward losses for AYs 2006-07 to 2009-10 - thereby effectively reopening uncontested issues which were not part of the appeal or the remand. The Court relied on established authority that the AO's powers on remand are confined to the subject-matter of the appeal and remand and that he cannot take up questions which were not before the Tribunal. Consequently the reassessment insofar as it re-decided those additional issues was held to be beyond the AO's jurisdiction and legally unsustainable. [Paras 13, 14, 16, 17]

Assessment insofar as it re-opened and decided issues outside the Tribunal's remand (the Section 111A short term capital gains and the brought/forward losses) is invalid for being beyond the scope of the remand.

Principles of natural justice - characterisation of income - Assessing Officer failed to afford notice and opportunity of hearing before changing the characterisation of the disputed addition and taxing it under a different head. - HELD THAT: - The AO, while reiterating the addition of Rs. 25,05,304/-, altered its characterisation from Short Term Capital Gains (other than under Section 111A) to income from Undisclosed Sources under Section 68 without issuing notice to the petitioner or affording an opportunity of hearing. The Court found this to be a breach of the principles of natural justice. While the addition itself had been remitted for verification, any change in the head of income attracting a different legal consequence required prior notice and hearing; absent that, the action could not be sustained in the present order. [Paras 14, 18]

The impugned order is vitiated for failure to afford notice and hearing before changing the head under which the disputed sum was taxed.

Remand for verification - reopening of assessment by way of remand - The matter was remitted to the Assessing Officer for limited re-adjudication and is to be redone accordingly after notice. - HELD THAT: - Having found the AO exceeded his remit and failed to afford hearing, the Court set aside the impugned assessment order and directed that the only exercise to be undertaken by the AO on remand is reconsideration of the issue relegated by the Tribunal - namely the addition of Rs. 25,05,304/- as Short Term Capital Gains other than under Section 111A - after verifying client code modifications and after giving the petitioner notice and opportunity of hearing. The Court imposed a timeline for the reassessment confined strictly to the remitted issue. [Paras 19]

The assessment is set aside and the matter remitted to the AO to redo the assessment only on the issue remitted by the Tribunal, after giving notice and hearing, within six weeks.

Final Conclusion: Writ petition allowed: impugned assessment order set aside insofar as the AO exceeded the Tribunal's remand and failed to afford hearing; matter remitted to the AO to reconsider only the issue remitted by the Tribunal (addition of Rs. 25,05,304/- as Short Term Capital Gains other than under Section 111A) after notice and opportunity of hearing, to be completed within six weeks.

Competence to issue summons - summons under Section 131 of the Income Tax Act, 1961 - investigative wing - assessment proceedings - challenge to search and seizure

Competence to issue summons - summons under Section 131 of the Income Tax Act, 1961 - investigative wing - assessment proceedings - Validity of summons issued by Assistant Director of Income Tax (Inv.)-Unit 5(2), New Delhi under Section 131 in pursuance of a search conducted by the investigating wing. - HELD THAT: - The Court analysed Sections 131(1) and 131(1A) and held that, on a plain reading, the Assistant Director (Investigation), Unit 5(2), New Delhi was competent to issue the summons following the search conducted by the same investigating wing. The Court distinguished the department's investigative exercise from assessment proceedings carried out by a different wing, noting there is nothing on record to suggest that the investigating wing at New Delhi would itself undertake assessment proceedings. Given this separation of functions, the issuance of the summons by the ADIT (Inv.) was held to be within competence and lawful.

The petition challenging the summons was dismissed.

Final Conclusion: The High Court dismissed the petition, holding that the ADIT (Investigation), Unit 5(2), New Delhi was competent to issue the summons under Section 131 in connection with the search by the investigating wing; other grounds challenging the search and seizure were not examined.

Mandamus to issue administrative clarification - obligation to deduct tax at source - scope of powers under Section 119(1) of the Income Tax Act - prohibition on issuing directions to dispose of a particular case - non-justiciability of advance ruling by writ remedy

Mandamus to issue administrative clarification - scope of powers under Section 119(1) of the Income Tax Act - prohibition on issuing directions to dispose of a particular case - Whether the Court can direct the CBDT under Section 119(1) to issue a clarification that sale of shrink-wrapped software on CD/DVD is not subject to TDS under Sections 194J/194C. - HELD THAT: - The petition sought a mandamus compelling the CBDT to issue a general clarification that shrink-wrapped packaged software sold on CD/DVD is sale of goods and not subject to TDS under Sections 194J/194C. Section 119(1) empowers the Board to issue orders, instructions and directions for proper administration, but the proviso expressly bars issuance of directions so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner. The obligation to deduct tax at source under Sections 194C/194J rests on the payers (the Petitioner's customers); consequences of non-deduction accrue under Section 201. The petitioner cannot, by writ of mandamus, convert the CBDT into an adjudicatory forum to decide the tax liability or to compel issuance of the requested clarification where such issuance would effectively interfere with adjudication of particular cases. There is no legal duty on the CBDT to grant the relief sought, and the proviso to Section 119(1) precludes the type of direction the petitioner requests. [Paras 4, 5]

Writ petition dismissed; Court will not direct the CBDT to issue the requested clarification or decide the petitioner's application by way of mandamus.

Obligation to deduct tax at source - non-justiciability of advance ruling by writ remedy - Whether the petitioner has a legal right to compel its customers or the CBDT to obtain an advance ruling that no TDS is deductible on the transactions in question. - HELD THAT: - The Court noted that the right to seek non-deduction in practice is of the payer who is legally obliged to deduct TDS; consequences for non-deduction attach to that payer. The petitioner therefore lacks a legal right to compel the CBDT to adjudicate or to force its customers to refrain from deducting tax. A writ of mandamus is inappropriate to obtain what is essentially an advance ruling or adjudication in favour of the petitioner. Consequently, the petitioner's prayer for an order compelling the CBDT to consider and decide its representation was declined. [Paras 4]

Petitioner has no enforceable legal right to compel the CBDT or its customers to obtain or follow the requested clarification; mandamus refused.

Final Conclusion: Petition under Article 226 seeking a direction to the CBDT to issue a clarification that shrink-wrapped software sales on CD/DVD are not subject to TDS under Sections 194J/194C is dismissed; the Court held that Section 119(1) does not impose a duty on the CBDT to issue such a direction and that mandamus cannot be used to obtain an advance ruling or to interfere with the adjudicatory functions of tax authorities.

Revisionary power under section 263 of the Income Tax Act - Assessing Officer's application of mind - Quashing of revisional order - Erroneous and prejudicial to the interests of Revenue - Possible view

Revisionary power under section 263 of the Income Tax Act - Assessing Officer's application of mind - Quashing of revisional order - Possible view - Validity of the Principal Commissioner's exercise of powers under section 263 in setting aside the assessment on the ground that the Assessing Officer did not examine the claim of operating loss of Rs. 8.79 crore. - HELD THAT: - The Tribunal's finding that the show cause notice under section 263 proceeded on the premise that the Assessing Officer had not examined the records is supported by the assessment file. The High Court noted that the assessment order itself records examination of the D mat account and that sale, purchase and closing stock were examined before finalising the assessment. Consequently, the factual foundation for invoking revisionary jurisdiction-namely lack of any verification or application of mind by the Assessing Officer-did not exist. Further, even on merits the view taken by the Assessing Officer after considering the documentary details and explanations furnished by the assessee was a possible view; where the AO has applied his mind and arrived at a possible view, exercise of power under section 263 is impermissible. For these reasons the Tribunal rightly quashed the revisional order and set aside the Commissioner's order under section 263. [Paras 7, 8]

The Principal Commissioner's order under section 263 was quashed; the assessment was not erroneous or prejudicial as the Assessing Officer had applied his mind and taken a possible view.

Final Conclusion: The appeal raises no substantial question of law and is dismissed; the Tribunal's order quashing the revisional order under section 263 in respect of Assessment Year 2011-12 is upheld.

Allowability of business expenditure under Section 37 of the Income Tax Act - additions made under Section 69C of the Income Tax Act - alternative contention raised at appellate stage - precedent of Haji Aziz - remand for fresh consideration - scope of review of a final judgment

Allowability of business expenditure under Section 37 of the Income Tax Act - precedent of Haji Aziz - alternative contention raised at appellate stage - Redemption fine paid by the assessee is not allowable as a business expenditure under Section 37; the Tribunal's allowance was incorrect and the Revenue's appeal succeeds. - HELD THAT: - The Court examined the factual findings recorded by the Assessing Officer - including the statement of the import licence holder that the assessee had imported goods using that licence, that the redemption fine was paid by the assessee and that the licence-holder received only agreed service charges - and concluded that there was ample evidence that the assessee was directly involved and responsible for the irregularity attracting the fine. The Tribunal had followed this Court's earlier approach in Pannalal but failed to distinguish the facts from the Supreme Court's decision in Haji Aziz, which the Court found to be applicable. On that basis the Court held that the penalty arose from the assessee's infraction of law and therefore could not be allowed as a business expenditure under Section 37. The Tribunal's order allowing the deduction was set aside and the Revenue's appeal allowed. [Paras 20]

Tribunal's allowance of the redemption fine under Section 37 is set aside; appeal allowed in favour of the Revenue.

Remand for fresh consideration - scope of review of a final judgment - alternative contention raised at appellate stage - Request to remit the matter to the Tribunal for fresh fact-finding is refused and the review petition is dismissed. - HELD THAT: - The Court considered the assessee's submission that the Tribunal had not made proper fact-findings on the alternative contention raised at the appellate stage. It observed that an assessee may raise alternative contentions on appeal but must either rely on facts already on record or seek permission to produce additional evidence within permitted limits. Having examined the matter and the law (including implications of Haji Aziz and subsequent developments), the Court found no justification for remanding the case to the Tribunal and declined to reopen its earlier decision. [Paras 3, 4]

No remand; review petition dismissed.

Final Conclusion: The review petition is dismissed; the Court affirms its earlier decision setting aside the Tribunal's allowance of the redemption fine as a business expenditure and allows the Revenue's appeal.

Trading addition - comparative yield ratio - estimation of income without rejection of books of account - ad hoc addition - verifiability of business expenditure - personal element in business expenses - disallowance of expenditure supported by self-made vouchers

Trading addition - comparative yield ratio - estimation of income without rejection of books of account - ad hoc addition - Validity of additions made on account of lower oil-yield ratios for A.Y. 2012-13 compared to A.Y. 2011-12 - HELD THAT: - The Tribunal examined the A.O.'s adoption of preceding year yield ratios to make additions and the ld. CIT(A)'s restriction of the addition to a fixed sum. The assessee had maintained books, purchases, sales and expenses were vouched and the A.O. had not rejected the books under the provisions relied upon; the variation in yield ratios between the two years was marginal and explicable by factors such as seed quality and climatic conditions. The ld. CIT(A) offered no articulated basis for sustaining an ad hoc figure of Rs. 3,00,000/-, and an addition founded on estimation when books are not rejected and without specified basis is impermissible. Having regard to the verifiability of accounts and negligible yield variance, the Tribunal held that neither the A.O.'s large estimated addition nor the ld. CIT(A)'s unexplained adhoc sustainment could stand. [Paras 6, 7]

Addition made on account of low yield ratios deleted in full.

Verifiability of business expenditure - loss on sale of vehicle - Whether the claimed loss shown as 'loss on sale of vehicle' could be allowed as transportation/delivery expenditure - HELD THAT: - The assessee contended the entry was a clerical misclassification and represented diesel and delivery costs for goods. The A.O. and ld. CIT(A) noted that (i) trucks did not appear in the fixed assets, (ii) delivery and fuel expenses had been separately claimed in the profit and loss account, and (iii) no documentary evidence was produced to show trucks were owned or hired from partners or others. The Tribunal found that where the same items (fuel/delivery) have already been claimed separately, the assessee cannot recast a distinct 'loss on sale of vehicle' entry as transportation costs without supporting evidence; the ld. CIT(A)'s disallowance was therefore upheld. [Paras 8]

Disallowance of the loss on sale of vehicle upheld.

Personal element in business expenses - disallowance of expenditure supported by self-made vouchers - ad hoc disallowance - Ten percent disallowance of various expenses (telephone, travelling, building repair & maintenance, office expenses) as not fully verifiable or containing a personal element - HELD THAT: - The Tribunal reviewed the A.O.'s 10% disallowance across heads. Telephone and travelling expenses were supported by telephone bills and not shown to be excessive, so mere suspicion of personal use did not justify ad hoc disallowance. Office expenses, largely petty and business-necessary, similarly could not be disallowed on suspicion alone. However, building repair and maintenance payments were largely in cash and supported by self-made vouchers; in the absence of corroborative documentary evidence, some disallowance was justifiable. Applying these principles, the Tribunal deleted the disallowances except for the 10% disallowance on building repair and maintenance expenses. [Paras 10]

All challenged ad hoc disallowances deleted except 10% of building repair and maintenance expenses, which is sustained.

Final Conclusion: Appeal allowed in part: additions on account of low yield ratios deleted in full; disallowance of claimed loss on sale of vehicle upheld; 10% disallowance of building repair and maintenance sustained while other 10% ad hoc disallowances are deleted.

Reopening of assessment - validity of notice u/s 147/148 - reason to believe / recording of reasons for reopening - audit objections as source material for reopening - disposal of objections to reopening in draft assessment order - principles in GKN Driveshafts regarding disposal of objections - reassessment where income for MAT (s.115JB) remains unchanged - admission of additional grounds under Rule 11 of ITAT Rules - remand for fresh adjudication on merits

Admission of additional grounds under Rule 11 of ITAT Rules - Admission and consideration of additional grounds of appeal raising specific objections to reopening - HELD THAT: - The Tribunal noted that the assessee had already pleaded the validity of reopening in the regular grounds and that the additional grounds were more specific submissions on the same controversy. All relevant material was on record and no fresh verification was required. In view of the foregoing and the fact that the grounds went to the root of the matter, the Tribunal exercised its discretion under Rule 11 to admit the additional grounds and proceeded to decide the challenge to reopening. [Paras 7]

Additional grounds admitted for adjudication

Reopening of assessment - validity of notice u/s 147/148 - audit objections as source material for reopening - Whether the reassessment was invalid because reopening was based solely on audit objections or there was no escapement of income - HELD THAT: - The Tribunal held that the AO need only be prima facie satisfied that income has escaped assessment when issuing notice u/s 148, and may rely on audit objections as one source of material. The AO had recorded reasons for reopening and communicated them to the assessee; the assessee did not produce material to show reopening was based only on audit objection. The Tribunal also examined whether the assessee had furnished all particulars supporting its claim under s.10B during the original scrutiny assessment and found that required details had not been filed despite specific requisition, which supported the AO's reason to believe. [Paras 8, 9, 13]

Objection that reopening was based only on audit objections and that there was no escapement of income rejected

Reason to believe / recording of reasons for reopening - Whether the AO recorded reasons for reopening prior to issuance of notice u/s 148 - HELD THAT: - Assessee alleged reasons were not recorded prior to the notice; Tribunal observed no material was placed to substantiate that contention. The statutory requirement is that the AO be prima facie satisfied and record reasons; on the record the AO had recorded reasons and later furnished them to the assessee. [Paras 10]

Objection that reasons were not recorded prior to issuance of notice rejected

Disposal of objections to reopening in draft assessment order - principles in GKN Driveshafts regarding disposal of objections - Whether disposal of objections to reopening in the draft assessment order (rather than by a separate order) vitiated the proceedings - HELD THAT: - The Tribunal analysed GKN Driveshafts and the Gujarat High Court decision relied on by the assessee, and found those authorities distinguishable. The AO had supplied reasons and the assessee filed objections which were recorded and disposed in the draft assessment order; the draft order was not final and the assessee had remedies including DRP and writ petition. There was no denial of opportunity or prejudice, and the facts did not disclose a breach of natural justice requiring quashing. [Paras 16, 17, 18]

Objection to disposal of objections in draft assessment order rejected

Reassessment where income for MAT (s.115JB) remains unchanged - Whether reassessment was invalid because the returned income and reassessed total income (for the relevant year) did not change the tax liability as income under s.115JB remained higher - HELD THAT: - Tribunal reiterated that issuance of notice u/s 148 requires only a prima facie satisfaction of escapement and that the AO's jurisdiction is to verify claims. Even if the final assessed taxable income for the year remains governed by s.115JB, the fact that returned loss was converted into positive income on reassessment affects MAT credit in subsequent years and therefore the reassessment cannot be said to be without consequence. Authorities cited by the assessee on MAT and penalty were held not to be directly applicable to invalidate the reopening for the year under consideration. [Paras 19, 21, 22]

Objection that reopening was invalid because s.115JB computation remained unchanged rejected

Remand for fresh adjudication on merits - Whether the substantive merits of the additions and other corporate tax issues would be adjudicated in the same hearing - HELD THAT: - The Tribunal heard the matter only on validity of reopening as it goes to the root of the appeal. Having upheld the validity of reopening, the Tribunal directed that the original and additional grounds on merits (including transfer pricing and corporate tax issues) be fixed for fresh hearing and adjudication by the Bench. [Paras 23]

Merits remanded for fresh hearing and adjudication

Final Conclusion: The Tribunal admitted the additional grounds under Rule 11, upheld the validity of reopening (notice u/s 148 issued within time, reasons recorded and not based solely on audit objections), rejected objections that disposal of objections in the draft order or unchanged MAT computation vitiated reassessment, and directed that the substantive merits of the appeal be heard afresh.

Maintainability of miscellaneous application - limitation under section 254(2) of the Income tax Act - remand to the assessing officer for verification of leave encashment claim - allowability of premium paid under Employees Group Leave Encashment Scheme as business expenditure - distinction between accrual/receipt of income and mere accumulation of policy value - deductibility principles under section 43B(f) and section 37(1)

Maintainability of miscellaneous application - limitation under section 254(2) of the Income tax Act - Miscellaneous application filed on 22.07.2019 against the Tribunal's order dated 17.05.2018 is barred by limitation and is not maintainable where no mistake has been pointed out in the impugned order. - HELD THAT: - The Tribunal noted that the application was filed beyond the six month period available under section 254(2) (counting from the end of the month in which the order was passed) and that the assessee had not shown any reason why the application is not time barred. Further, the miscellaneous application did not point out any error in the Tribunal's order; instead it sought directions because the Assessing Officer had not granted relief in the set aside proceedings. The Tribunal observed that the correct remedy against the AO's refusal in set aside proceedings is an appeal to the CIT(A) and not a miscellaneous application before the Tribunal. In these circumstances the application was held to be barred by limitation and not maintainable. [Paras 4, 5]

Miscellaneous application dismissed.

Remand to the assessing officer for verification of leave encashment claim - allowability of premium paid under Employees Group Leave Encashment Scheme as business expenditure - distinction between accrual/receipt of income and mere accumulation of policy value - deductibility principles under section 43B(f) and section 37(1) - Tribunal's earlier findings (17.05.2018 and 03.08.2018) remitting the leave encashment issue to the file of the Assessing Officer for fresh adjudication remain operative: premium paid under an Employees Group Leave Encashment Scheme is allowable if the factual conditions are satisfied and the AO must verify whether amounts credited as income are real receipts or mere accumulations of policy value. - HELD THAT: - The Tribunal recapitulated its earlier reasoning that, while the Assessing Officer had disallowed the provision for leave encashment (relying on the view that deduction is allowable only on actual payment under section 43B(f) and that section 37(1) does not cover provisions for future liabilities), the Tribunal had accepted that where a policy under an Employees Group Leave Encashment Scheme is taken and the conditions are satisfied (including absence of control by the employer over the fund), the premium/payment may be allowable as an expenditure. The Tribunal directed the AO to verify whether any income credited to profit and loss represents actual receipt by the assessee or is merely accumulation of the policy value to be used for discharging leave encashment liability, and to adjudicate the claim afresh on the basis of factual verification and submissions to be furnished by the assessee. [Paras 4]

The Tribunal's prior remand and directions to the AO stand; the AO is to verify the factual aspects and decide the claim in accordance with the Tribunal's observations.

Final Conclusion: The miscellaneous application filed by the assessee is dismissed as time barred and not maintainable for failure to point out any error in the Tribunal's order; separately, the Tribunal's earlier directions remitting the leave encashment issue to the Assessing Officer for factual verification and adjudication, and recognising that premiums under an Employees Group Leave Encashment Scheme may be allowable if conditions are met, remain binding on the AO.

Interest under section 28 of the Land Acquisition Act as part of enhanced compensation - Characterisation of enhanced compensation as capital gains and not income from other sources - Application of exemption for agricultural land under section 10(37) in relation to enhanced compensation - Obligation of Assessing Officer to examine nature of land and apply Income-tax provisions when tax was deducted at source

Interest under section 28 of the Land Acquisition Act as part of enhanced compensation - Characterisation of enhanced compensation as capital gains and not income from other sources - Application of exemption for agricultural land under section 10(37) in relation to enhanced compensation - Whether amount received under section 28 of the Land Acquisition Act is taxable as interest (income from other sources) or forms part of enhanced compensation and is to be treated in accordance with capital gains provisions and, if applicable, exempt under section 10(37) for agricultural land. - HELD THAT: - The Tribunal examined the nature of the receipt under section 28 of the Land Acquisition Act and followed the reasoning in earlier decisions of the Supreme Court and coordinate Benches which held that interest under section 28 may form part of enhanced compensation. Applying that parity, the Tribunal held that such receipt is to be treated as enhanced compensation and not as ordinary interest for the purpose of taxing it as income from other sources. The Tribunal further noted the settled approach that where land is agricultural, exemption under section 10(37) may apply and that the Assessing Officer is required to examine the factual nature of the land and apply the Income-tax Act provisions accordingly when tax has been deducted at source. On that basis, and in view of the Tribunal's precedents on similar facts, the claim of the assessee that the amount received under section 28 forms part of compensation and is not taxable as interest was accepted. [Paras 5, 7, 8]

The receipt under section 28 was held to be part of enhanced compensation and not taxable as interest; the assessee's claim was allowed and the appeal disposed in favour of the assessee.

Final Conclusion: The Tribunal allowed the appeal, holding that the amount received under section 28 of the Land Acquisition Act on the facts before it forms part of enhanced compensation and is not taxable as interest; Assessing Officer to examine applicability of section 10(37) where land is agricultural as required by precedent.

Disallowance of expenses on ad hoc basis - verifiability of payments supported by self-prepared vouchers - ad hoc percentage disallowance without enquiry - payments for loading and unloading (Pala and Bharai) - statutory allowance of depreciation under Section 32

Disallowance of expenses on ad hoc basis - verifiability of payments supported by self-prepared vouchers - ad hoc percentage disallowance without enquiry - Deletion of the ad hoc disallowance of transportation expenses sustained by the CIT(A) to the extent of Rs. 1,00,000/- - HELD THAT: - The Assessing Officer made a 10% disallowance of total transportation expenses on the basis that certain payments below Rs. 20,000/- were in cash and supported by self-prepared vouchers. The AO did not specify the proportion of cash payments or identify specific irregular vouchers and made the disallowance across-the-board. The Tribunal held that where transportation and freight are inevitable in the assessee's business and the majority of payments were by cheque, an ad hoc, lump-sum percentage disallowance without specific enquiry or findings as to bogus or inflated payments is unjustified. The CIT(A)'s confirmatory reduction to a lump-sum disallowance was likewise ad hoc and not founded on verification of relevant facts; therefore the disallowance was deleted.

The disallowance of transportation expenses sustained by the CIT(A) (lump-sum Rs. 1,00,000/-) is deleted.

Payments for loading and unloading (Pala and Bharai) - verifiability of payments supported by self-prepared vouchers - Sustenance of 10% disallowance of soyabean expenses as restricted by the CIT(A) - HELD THAT: - The expenditure under soyabean relates to payments for loading and unloading (Pala and Bharai), typically made in cash to labourers. Although such payments are customary in the unorganised sector, regular labourers in the mandi ought to be identifiable and vouchers should record particulars or bear signatures. In the absence of such particulars and given cash payments supported by self-prepared vouchers, the AO's blanket 20% disallowance was excessive; the CIT(A)'s restriction to 10% was found to be reasonable and based on the nature of the payments and verification deficiency, and therefore the Tribunal declined to interfere with the CIT(A)'s order.

The disallowance of soyabean expenses is sustained at 10% as confirmed by the CIT(A).

Payments for loading and unloading (Pala and Bharai) - verifiability of payments supported by self-prepared vouchers - Sustenance of 10% disallowance of wheat expenses as restricted by the CIT(A) - HELD THAT: - The wheat expenses are of the same character as the soyabean expenses-payments for loading and unloading-thus attracting the same considerations regarding cash payments to regular mandi labour and the need for particulars/signatures in vouchers. Following the reasoning applied to soyabean expenses, the Tribunal upheld the CIT(A)'s restriction of the AO's 20% ad hoc disallowance to 10%.

The disallowance of wheat expenses is sustained at 10% as confirmed by the CIT(A).

Disallowance of expenses on ad hoc basis - statutory allowance of depreciation under Section 32 - verifiability of payments supported by self-prepared vouchers - Deletion in part and sustenance in part of the disallowance of various administrative expenses - HELD THAT: - The AO disallowed 20% of office expenses, telephone expenses, vehicle running & maintenance expenses and depreciation, citing cash payments supported by self-made vouchers. The Tribunal held that depreciation is a statutory allowance and cannot be disallowed for want of vouchers; telephone expenses are verifiable by bills and can be checked from independent sources; office expenses were largely paid by cheque and supported by vendor bills except a small labour item, hence the ad hoc disallowance was unjustified and deleted. However, vehicle running and maintenance payments were entirely in cash with inadequate particulars (only some bill numbers, no descriptions), and a 10% disallowance as fixed by the CIT(A) was held to be reasonable and left undisturbed.

Disallowance of depreciation, telephone and office expenses deleted; 10% disallowance of vehicle running and maintenance expenses sustained.

Final Conclusion: The appeal is allowed in part: the ad hoc lump-sum disallowance in respect of transportation expenses is deleted; the AO's 20% disallowances in respect of soyabean and wheat expenses are restricted and sustained at 10% each; the disallowance of administrative expenses is partly deleted (depreciation, telephone, office expenses) while a 10% disallowance on vehicle running and maintenance is sustained.

Territorial jurisdiction of assessing officer - challenge to jurisdiction after assessment - reassessment under section 148 - notice based on address particulars - allowability of brokerage as deduction against capital gains - proof of brokerage - confirmation and identity documents under Rule 46A - deduction under section 54F - cost of construction and valuation report - rectification of bona fide error in valuer's report - disallowance of expenditure for want of verifiable documentary details

Territorial jurisdiction of assessing officer - challenge to jurisdiction after assessment - reassessment under section 148 - notice based on address particulars - Validity of reassessment framed by I.T.O., Ward 7(2), Jaipur in respect of the assessee's case. - HELD THAT: - The assessee, who had not filed any return under section 139(1), challenged jurisdiction of I.T.O., Ward 7(2) before the first appellate authority and the Tribunal contending that jurisdiction lay with I.T.O., Ward 6(4) as the assessee was a government salaried employee. The Tribunal noted that notice under section 148 was issued by the I.T.O. whose territorial jurisdiction covered the assessee's address particulars and that the assessee participated in reassessment proceedings and filed computation in response to the notice. In view of section 124(3)(b) and the fact that jurisdiction was not objected to during the assessment proceedings, the objection raised after completion of assessment could not be entertained. The Tribunal found no illegality in the first appellate authority's conclusion dismissing the jurisdictional objection. [Paras 5]

Objection to jurisdiction of I.T.O., Ward 7(2) is rejected and the reassessment is valid.

Allowability of brokerage as deduction against capital gains - proof of brokerage - confirmation and identity documents under Rule 46A - Allowability of brokerage claimed (share of Rs. 76,390/ ) against long term capital gains on sale of land. - HELD THAT: - Although no proof of brokerage was produced before the Assessing Officer, the assessee produced confirmations and identity proofs of the brokers before the CIT(A) under Rule 46A. The Tribunal observed that the claimed brokerage was not excessive and corresponded with normal market practice of brokerage at about 2% in such immovable property transactions. Given the transaction was not disputed and the claim comported with prevailing practice, the Tribunal directed the Assessing Officer to allow brokerage at 2% of the sale proceeds. [Paras 9]

Brokerage claim allowed, direction given to allow brokerage at 2% of sale proceeds.

Allowability of brokerage as deduction against capital gains - proof of brokerage - confirmation and identity documents under Rule 46A - disallowance of expenditure for want of verifiable documentary details - Allowability of brokerage (Rs. 40,000/ ) and expenditure on levelling and related work (Rs. 2,78,620/ ) in computing deduction under section 54B for agricultural land purchase. - HELD THAT: - For the brokerage claimed on purchase of agricultural land, the Tribunal applied its reasoning from the sale transaction brokerage issue and allowed brokerage at the standard rate of 2%. As to the levelling and other expenses, the assessee produced a receipt from a person named Ganga Devi stating tractor work, but failed to establish that she owned or operated the requisite machinery (JCB/tractor) or to furnish details of the machinery and labour particulars. In absence of verifiable details linking the payments to the machinery/work performed, the Tribunal affirmed that the claim for levelling expenses could not be accepted. [Paras 13]

Brokerage for agricultural land allowed at 2%; levelling and related expenditure disallowed for lack of verifiable documentary particulars.

Deduction under section 54F - cost of construction and valuation report - rectification of bona fide error in valuer's report - Allowability of cost of construction claimed for exemption under section 54F where the valuer's report originally bore another person's name but was subsequently rectified. - HELD THAT: - The Assessing Officer rejected the construction cost claim on the ground that the valuation report bore the name of another person due to an inadvertent exchange of the first page. The assessee produced a rectified valuation report during appellate and remand proceedings. The Tribunal held that the substance of the valuation report related to the assessee's property and that the exchange of a page was a bona fide/typographical error. It was not appropriate to defeat the relief on such a technicality without examining the merits of the construction cost; since the rectified report and supporting material showed the construction and period thereof, the assessee discharged the onus to prove the cost of construction and the claim under section 54F was allowed. [Paras 17]

Claim for cost of construction for exemption under section 54F is allowed on the basis of the rectified valuation report and merits.

Consequential relief/dependence on earlier findings - Consequential grounds arising from allowance of cost of construction. - HELD THAT: - Ground No. 5 being consequential to the decision on cost of construction under section 54F was rendered infructuous by the Tribunal's allowance of that claim. [Paras 18]

Consequential ground is infructuous.

Final Conclusion: The appeal is allowed in part: jurisdictional objection to reassessment is dismissed; brokerage in respect of sale and purchase transactions is allowed at 2% of sale/purchase consideration; levelling and related expenses for agricultural land are disallowed for lack of verifiable particulars; cost of construction for exemption under section 54F is allowed on the rectified valuation report; consequential ground becomes infructuous.

Deductibility of interest as business expenditure under section 36(1)(iii) of the Income Tax Act, 1961 - Disallowance of interest where borrowed funds are diverted to non business advances - Onus of proof and requirement of documentary substantiation by the assessee

Deductibility of interest as business expenditure under section 36(1)(iii) of the Income Tax Act, 1961 - Disallowance of interest where borrowed funds are diverted to non business advances - Onus of proof and requirement of documentary substantiation by the assessee - Whether interest debited to profit and loss account in respect of advances amounting to Rs. 1,02,40,000/- is allowable as deduction under section 36(1)(iii) for assessment year 2014-15. - HELD THAT: - The Assessing Officer disallowed interest of Rs. 12,28,800/- computed at an average rate of 12% on advances of Rs. 1,02,40,000/-, treating those advances as not for business purposes and as diversion of borrowed funds. On appeal the CIT(A) upheld the disallowance, noting that the assessee failed to demonstrate any business purpose for the advances and did not furnish details of interest free unsecured loans claimed to be the source. The Tribunal, after considering the paper book and submissions, agrees with the authorities below that the assessee did not produce the necessary documentary evidence to substantiate that the advances were for business use or that they were funded from interest free proprietary funds rather than borrowed money. Given the absence of proof and the consequent inability to trace the source and business nexus of the advances, the disallowance under section 36(1)(iii) was correctly made and sustained. The decision rests on application of the statutory disallowance where borrowed funds are diverted to non business advances and on the settled burden on the assessee to substantiate claims with documentary evidence.

Appeal dismissed; the disallowance of Rs. 12,28,800/- under section 36(1)(iii) is upheld for assessment year 2014-15.

Final Conclusion: The Tribunal concurs with the Assessing Officer and the CIT(A) that the assessee failed to substantiate the business purpose and source of the advances; accordingly the disallowance of interest under section 36(1)(iii) is sustained and the appeal is dismissed.

Confiscation of sale proceeds of smuggled goods - burden to establish sale of smuggled goods

Confiscation of sale proceeds of smuggled goods - burden to establish sale of smuggled goods - Validity of confiscation of Nepalese currency under section 121 of the Customs Act, 1962. - HELD THAT: - The Tribunal held that section 121 permits confiscation only of sale proceeds of smuggled goods and that, before confiscating proceeds, Customs must establish that a sale of smuggled goods had taken place. Applying the test laid down in earlier decisions, the Tribunal found no material or finding in the record showing existence of smuggled goods or any sale of such goods. The Revenue did not explain how smuggled goods, if any, were sold in India for Nepalese currency rather than Indian currency, nor were the necessary ingredients for confiscation under section 121 proved. In absence of proof of smuggled goods and sale thereof, the confiscation order could not be sustained. [Paras 5]

Impugned confiscation under section 121 set aside; appeals allowed.

Final Conclusion: The Tribunal set aside the orders of confiscation sustained on appeal because the Customs Department failed to establish that the seized Nepalese currency constituted sale proceeds of smuggled goods as required under section 121 of the Customs Act, 1962; appeals allowed.

Admissibility of retracted confessional statements - authenticity and admissibility of electronic evidence (emails and computer printouts) - requirements for acceptance of computer-generated evidence under statutory provisions - reliance on NIDB data for valuation when transaction value is not rejected - binding effect of earlier tribunal decision on identical evidence - unsustainability of demand, confiscation and consequential penalties where undervaluation not established

Admissibility of retracted confessional statements - binding effect of earlier tribunal decision on identical evidence - Whether statements retracted by the persons whose confessions were relied upon by the department could be treated as admissible evidence for sustaining demand and penalties. - HELD THAT: - The Tribunal found that the department heavily relied upon statements of Shri Prakashchandra Pandya and Shri Nandgopal Govindwamy Naidu which were subsequently retracted by letters dated 31.7.2006. The retraction letters were shown to have reached the concerned investigating officers and, in the absence of any departmental effort to reject the retractions or to record counter statements, the retracted statements could not be accepted as evidence. The present appeals involved the same set of persons, the same investigation and materially identical evidence as in the earlier Tribunal decision in Tele brands, where those statements were held not admissible. Given that the earlier Tribunal order on identical evidence attained finality, the present adjudication could not sustain the demand when it rested on such retracted statements.

Retractions rendered the confessional statements inadmissible; reliance on those statements cannot sustain demand or penalties, and the prior Tribunal decision on identical evidence is binding for present appeals.

Authenticity and admissibility of electronic evidence (emails and computer printouts) - requirements for acceptance of computer-generated evidence under statutory provisions - reliance on NIDB data for valuation when transaction value is not rejected - unsustainability of demand, confiscation and consequential penalties where undervaluation not established - Whether unauthenticated emails, undisclosed source correspondence and computer printouts, together with NIDB data, constituted sufficient and admissible evidence to reject declared transaction value and sustain differential duty, confiscation and consequential penalties. - HELD THAT: - The Tribunal examined the chain and source of the alleged email correspondence and computer printouts and found the origin undisclosed and the statutory requirements for accepting computer evidence (noted in the record as requirements of section 138C) not fulfilled. In Tele brands the Tribunal held that such electronic material was not authentic beyond doubt and therefore could not be treated as substantial evidence. Where the core reasons for rejecting transaction value (unauthenticated emails and flawed computer printouts) fall away, subsequent reliance on NIDB data does not salvage the demand. Applying that reasoning to the present appeals, the adjudicating authority's reliance on unauthenticated electronic material and NIDB data failed to establish undervaluation; consequently, differential duty, confiscation, fines and penalties consequential to the demand were unsustainable.

Unauthenticated emails and inadequately certified computer printouts are not admissible as substantial evidence; NIDB data cannot sustain a demand once transaction value rejection is negated, and therefore the demand, confiscation and consequential penalties are unsustainable.

Final Conclusion: The impugned order confirming differential duty, confiscation and penalties is set aside because the adjudication relied on retracted statements and unauthenticated electronic evidence (and consequential reliance on NIDB data), which the Tribunal found insufficient to establish undervaluation; the appeals are allowed.

Lifting the corporate veil for fraudulent trading - liability under Section 542 of the Companies Act, 1956 for carrying on business with intent to defraud - summary powers to declare persons personally liable and create charges under Section 542(2) - summary remedies under Section 543 for misfeasance - adverse inference for withholding best evidence - requirement to produce bank statements and transfer instruments to establish source of funds - framing of issues and recording of evidence where pleadings and documents comply with court directions - non-application of Benami Transactions (Prohibition) Act to the facts

Lifting the corporate veil for fraudulent trading - liability under Section 542 of the Companies Act, 1956 for carrying on business with intent to defraud - Whether the lands held in the name of Goga Foods Ltd. form part of assets acquired out of funds of Hoffland Finance Ltd. and whether the corporate veil can be pierced to treat them as Hoffland Group assets - HELD THAT: - The court examined the contemporaneous statements of the promoter, the admitted fact that lands were acquired during 1991-1995 in the name of Goga Foods Ltd. by the promoter who was also controlling Hoffland Finance Ltd., the intertwined and interspersed nature of the parcels purchased for Goga Foods Ltd. and Hoffland Engineers Ltd., and the absence of plausible business income in Goga Foods Ltd.'s balance sheets for the relevant period. The court accepted that in cases of alleged fraudulent trading the standard of proof is less stringent and that Section 542 permits declaring persons personally responsible and treating assets as effectively belonging to the fraudulent concern. Given the applicants' failure to produce bank statements, transfer instruments and other primary documents as directed, and the admissions in the promoter's statements that funds of Hoffland Finance Ltd. were used, the court held that the manner of purchases and the available material support the conclusion that the lands were bought by the Hoffland Group and not from independent resources of Goga Foods Ltd. [Paras 22, 24, 26, 27, 33]

The court found no merit in Goga Foods Ltd.'s claim to independent title for the lands and, permitting the Official Liquidator to treat and deal with the property as being part of Hoffland Finance Ltd./Hoffland Group, dismissed the applicant's claim.

Requirement to produce bank statements and transfer instruments to establish source of funds - adverse inference for withholding best evidence - Whether the applicant's failure to comply with court directions to produce bank statements, account statements and transfer instruments justified rejecting its affidavit and drawing adverse inferences - HELD THAT: - The court recalled its earlier direction dated 05.09.2008 requiring Goga Foods Ltd. to file an affidavit accompanied by bank statements, account statements, bank transfer instruments and audited accounts to demonstrate the source of funds for land acquisitions. The affidavit filed years later lacked those documents. Relying on authorities permitting adverse inference where a party withholds best evidence, the court held that in the circumstances non-production of the specified documents, despite express directions and the availability of alternate means to obtain bank records, warranted drawing adverse inference against the applicant and justified rejection of the affidavit and refusal to permit cross-examination of its deponent. [Paras 31, 32, 33, 35]

The court drew adverse inferences from the applicants' failure to produce the directed documents, refused to receive the belated affidavit in evidence and held that the conduct supported the Official Liquidator's case on source of funds.

Framing of issues and recording of evidence where pleadings and documents comply with court directions - Whether the court should frame issues and allow the applicant to lead evidence despite prior orders and non-compliance with directions - HELD THAT: - The applicant sought framing of issues and an opportunity to lead evidence, relying on precedents that permit trial and evidence where factual disputes are serious. The court noted that the same plea had been considered and rejected on 19.07.2013 because the affidavit produced did not comply with the court's prior directions and was filed after inordinate delay. The court observed that allowing further evidence after such non-compliance would be a mechanism to delay proceedings and that nothing additional would be gained in the absence of the primary documents directed to be filed. [Paras 31, 36, 37]

The court refused to frame issues or permit fresh evidence for the applicant, holding the prior rejection of the affidavit to be final and the request to be a dilatory ploy lacking merit.

Non-application of Benami Transactions (Prohibition) Act to the facts - Whether the transactions in issue attract the Benami Transactions (Prohibition) Act, 1988 - HELD THAT: - The applicant briefly contended that if the court accepted the Official Liquidator's case the land would be 'benami' and thus protected. The court noted that the contention was not elaborated and, on the material before it, held that the nature of transactions did not attract the Benami Transactions (Prohibition) Act, 1988. [Paras 38]

The court found that the Benami Transactions Act was not attracted on the facts.

Final Conclusion: Applications by Goga Foods Ltd. were dismissed. The court concluded that the lands in question form part of the Hoffland Group assets acquired from funds of Hoffland Finance Ltd.; the applicant's failure to produce bank records and other directed documents justified adverse inference and rejection of its affidavit; no further framing of issues or evidence was permitted; and the Benami Act was not attracted. The Official Liquidator was permitted to take steps regarding the property as per law.

Operational creditor - Corporate Insolvency Resolution Process (CIRP) - default in payment of operational debt - pre existing dispute - moratorium under section 14 - appointment of Interim Resolution Professional - limitation for filing section 9 application

Default in payment of operational debt - Operational creditor - The Corporate Debtor had committed default in payment of an operational debt and the Applicant qualifies as an Operational Creditor. - HELD THAT: - On the documents placed on record the Applicant provided services to the Corporate Debtor and issued invoices which remained unpaid. The Bench found that an operational debt in excess of the statutory threshold was due and payable and that the Corporate Debtor did not controvert the claim at the hearing. Consequently, default is established and the Applicant is an Operational Creditor entitled to proceed under the I&B Code. [Paras 3, 8, 11]

Default proved; Applicant is an Operational Creditor.

Pre existing dispute - Mobilox principle - The contention raised by the Corporate Debtor about non receipt of the Agreement did not constitute a pre existing dispute to defeat the section 9 application. - HELD THAT: - The Bench applied the principle that a dispute must be pre existing prior to receipt of the demand notice. The Corporate Debtor had not shown any evidence of a dispute existing before the demand notice; it had not denied the claim and the Applicant produced an email evidencing that the contract had been sent earlier. Therefore the defence based on non production of the Agreement did not qualify as a pre existing dispute and was rejected. [Paras 5, 9]

No pre existing dispute established; defence rejected.

Limitation for filing section 9 application - completeness of section 9 application - The section 9 application was complete and filed within the limitation period. - HELD THAT: - The record contains the demand notice with proof of receipt and the bank certificate required under the Code. The last payment date is on record and the application was filed thereafter within the permissible period. Although the Applicant had not proposed a name of an insolvency professional in the application, the Bench found the application complete under sub section (2) of section 9. [Paras 10, 12, 13, 14]

Application complete and within limitation.

Corporate Insolvency Resolution Process (CIRP) - moratorium under section 14 - appointment of Interim Resolution Professional - The Bench admitted the section 9 petition, ordered initiation of CIRP, declared the moratorium and appointed an Interim Resolution Professional. - HELD THAT: - Having found default, absence of pre existing dispute and completeness of the petition, the Bench admitted the application under section 9 and directed commencement of CIRP. The order declared statutory moratorium with the consequential prohibitions on suits, transfers and enforcement actions, directed public announcement, and appointed a named registered insolvency professional as Interim Resolution Professional to carry out duties under the Code. [Paras 14]

Section 9 petition admitted; CIRP initiated, moratorium declared and IRP appointed.

Final Conclusion: The Tribunal admitted the section 9 application filed by Eatigo India Private Limited, held that the Corporate Debtor committed default and no pre existing dispute existed, found the petition complete and within limitation, initiated the CIRP, declared the moratorium and appointed an Interim Resolution Professional.

Initiation of corporate insolvency resolution process - completeness of application under Section 7 - default - appointment of Interim Resolution Professional - public announcement - moratorium - duty to cooperate with the Interim Resolution Professional - Committee of Creditors' adjustment of expenses

Initiation of corporate insolvency resolution process - completeness of application under Section 7 - default - The Section 7 petition filed by the Financial Creditor is admissible and a default has occurred. - HELD THAT: - The Tribunal examined the application filed in the prescribed form and manner and the material on record showing classification of the account as NPA and outstanding unpaid debt. Service on the Corporate Debtor having resulted in no contest and the claim remaining unrebutted, the Tribunal found that the application under sub section (2) of Section 7 was complete and that a default exceeding the statutory threshold had occurred. Accordingly the requirements for admission under the Code were satisfied. [Paras 10, 11, 13]

The petition under Section 7 is admitted as the application is complete and default has occurred.

Appointment of Interim Resolution Professional - Appointment of the proposed Resolution Professional as Interim Resolution Professional. - HELD THAT: - The Financial Creditor had proposed a registered resolution professional and filed the requisite written communication and certificate of registration. Satisfied that no disciplinary proceedings were pending against the proposed professional, the Tribunal appointed the proposed individual as Interim Resolution Professional to carry out the functions assigned under the Code. [Paras 3, 14]

Shri Mahesh Taneja is appointed as Interim Resolution Professional.

Public announcement - Direction to make public announcement regarding admission of the Section 7 application within the period specified by regulation. - HELD THAT: - Pursuant to Section 13(2) of the Code and the Explanation to Regulation 6(1) of the IBBI Regulations, the Interim Resolution Professional is required to make the public announcement immediately. The Tribunal clarified that 'immediately' means within three days and directed the Interim Resolution Professional to comply accordingly. [Paras 15]

Interim Resolution Professional to make the public announcement within three days.

Moratorium - Declaration of moratorium and the prohibitions arising therefrom under the Code. - HELD THAT: - On admission of the Section 7 petition the Tribunal declared the moratorium in terms of Section 14. The prohibitions on institution or continuation of suits, transfer or disposal of assets, actions to recover or enforce security interests, and recovery of property occupied by the corporate debtor were imposed as set out in the Code, subject to statutory exceptions and applicable regulations concerning essential supplies and notified transactions. [Paras 16, 17]

Moratorium is declared and the statutory prohibitions are imposed.

Committee of Creditors' adjustment of expenses - Direction to the Financial Creditor to deposit an interim amount to meet IRP expenses, subject to adjustment by the Committee of Creditors. - HELD THAT: - The Tribunal directed the Financial Creditor to deposit the specified sum with the Interim Resolution Professional within three days to meet the expenses of the resolution process. The Tribunal recorded that such deposited amount would be accounted for and would be subject to adjustment by the Committee of Creditors and repayment procedures in accordance with the Regulations. [Paras 19]

Financial Creditor to deposit the directed amount with the Interim Resolution Professional; amount subject to adjustment by the Committee of Creditors.

Default - Initiation of corporate insolvency resolution process - Discrepancies in the statement of account cannot be determined in summary admission proceedings and are to be verified/addressed during the resolution process. - HELD THAT: - The Tribunal observed that it cannot in summary admission proceedings undertake determination of disputed account particulars. The role of the Information Utility and the functions of the Interim Resolution Professional for verifying and, if necessary, seeking corrections from ex promoters/directors were noted. The Tribunal left factual reconciliation and quantification of the claim to the Resolution Professional and appropriate mechanisms available under the Code. [Paras 20]

Account discrepancies not decided at admission; Resolution Professional to seek verification/corrections and proceed accordingly.

Final Conclusion: The Section 7 petition filed by the Financial Creditor is admitted; the proposed Resolution Professional is appointed as Interim Resolution Professional; public announcement to be made within three days; moratorium declared with statutory prohibitions; the Financial Creditor directed to deposit the specified interim expenses to the Interim Resolution Professional (subject to Committee of Creditors' adjustment); discrepancies in the account are not determined at admission and are to be verified during the resolution process.

Order of liquidation - application under section 33(1)(a) of the Insolvency & Bankruptcy Code, 2016 - assets of the corporate debtor - rights in immovable property - jurisdiction of the Liquidation Forum - appellate interference in absence of infirmity - application under section 60 not filed - adjudicating authority did not decide

Order of liquidation - application under section 33(1)(a) of the Insolvency & Bankruptcy Code, 2016 - appellate interference in absence of infirmity - Validity of the Adjudicating Authority's order dated 5th December, 2018 passing the order of liquidation on the application under section 33(1)(a) of the I&B Code. - HELD THAT: - The Appellate Tribunal examined the challenge to the liquidation order and found no infirmity in the Adjudicating Authority's decision to pass the order of liquidation. The Tribunal noted that the liquidation order had been passed on the application under section 33(1)(a) and that more than 180 days had elapsed as the basis for the Adjudicating Authority's action. In the absence of any demonstrated error or legal infirmity in the impugned order, the Tribunal declined to interfere with the order of liquidation.

Appeal against the liquidation order dismissed; appellate interference refused.

Assets of the corporate debtor - rights in immovable property - jurisdiction of the Liquidation Forum - application under section 60 not filed - adjudicating authority did not decide - Claim that certain immovable properties are not assets of the corporate debtor because consideration was allegedly not transferred, and the proper forum to decide that claim. - HELD THAT: - The Tribunal observed that records on the file and registered instruments indicated the immovable properties were shown as assets of the corporate debtor. However, the Tribunal refrained from adjudicating the factual and proprietary dispute raised by the appellant regarding non-payment of consideration and ownership, noting that the Adjudicating Authority had not decided the point since no application under section 60 was filed before it. The Tribunal directed that the appellant may move the Liquidation Forum and that the liquidator's stand should be communicated to the appellant; the Liquidation Forum is to hear and pass appropriate orders on the claim.

Proprietary claim left open and remitted to the Liquidation Forum for consideration; Tribunal declined to decide the issue.

Final Conclusion: The appeal is dismissed insofar as interference with the liquidation order is concerned. The appellant's grievance regarding ownership of the immovable properties is not decided and is directed to be pursued before the Liquidation Forum; the Adjudicating Authority had not ruled on that point for want of an application under section 60.

Mis classification of service (Business Auxiliary Service versus Travel Agency Service) - Taxability under a specific service v. residuary or ancillary service - Extended period of limitation not invokable for disputes of pure interpretation or classification

Mis classification of service (Business Auxiliary Service versus Travel Agency Service) - Taxability under a specific service v. residuary or ancillary service - Whether the demand of service tax under the head 'Business Auxiliary Service' could be sustained where the appellant booked bus tickets as a travel agent and the transactions fell within the specific category of Travel Agency Service. - HELD THAT: - The Tribunal held that the transactions in issue - booking of bus tickets and handling travel arrangements for passengers for commission - fall within the specific service of travel agency service and cannot be re characterised as business auxiliary service. The decision of the Hon'ble High Court of Kerala in Shabeer Travels vs. CCE, Cochin , which examined identical factual and legal contours, supports the view that where the service rendered is essentially that of a travel agency (agents of a principal travel operator), assessment under the residuary/auxiliary category is not tenable. Following that ratio, and noting that the Department itself had treated similar services as travel agency services in related proceedings, the Tribunal set aside the demand confirmed under Business Auxiliary Service as not sustainable in law.

Demand under 'Business Auxiliary Service' set aside; taxability to be governed by classification as Travel Agency Service.

Extended period of limitation not invokable for disputes of pure interpretation or classification - Whether the demand for the period April 2004 to March 2005 could be sustained by invoking the extended limitation period on the ground of suppression when the controversy was one of interpretation/classification of service. - HELD THAT: - The Tribunal found that the Department relied on alleged suppression to invoke the extended period, but the core controversy concerned interpretation and classification of the service rendered. Citing precedents relied upon in the impugned order, the Tribunal held that extended limitation cannot be invoked where the matter is essentially one of legal interpretation rather than deliberate concealment of material facts. Consequently, the demand for the period April 2004 to March 2005 was held to be time barred.

Demand for April 2004 to March 2005 barred by limitation; extended period invocation rejected.

Final Conclusion: Appeals allowed: impugned orders confirming demand under Business Auxiliary Service are set aside; in respect of April 2004-March 2005 the demand is barred by limitation; consequential relief, if any, to follow.

Online Information and Database Access or Retrieval Service - reverse charge mechanism - place of business - chargeability under Section 66A - classification of CRS services - reference to larger bench - limitation - pre-18.04.2006 period excluded

Online Information and Database Access or Retrieval Service - classification of CRS services - Services provided by foreign CRS/GDS companies to Cathay Pacific were classified as "Online Information and Database Access or Retrieval Service". - HELD THAT: - The Tribunal examined the nature of CRS activity and agreed with the adjudicating authority's description that CRS companies maintain a real time database of flight schedules, fares and seat availability, provide access to that database to travel agents and enable airlines to access and update booking information through the CRS network. On that basis the activity falls within the definition of online database access/retrieval services and is therefore taxable as such when provided or deemed to be provided in India. The Tribunal relied on the reasoning reproduced from the British Airways decision regarding classification and adopted the Commissioner's finding on the substantive nature of the service. [Paras 5]

Classification of the CRS services as "Online Information and Database Access or Retrieval Service" is upheld and treated as taxable service.

Reverse charge mechanism - place of business - chargeability under Section 66A - Cathay Pacific's branch office in India is a place of business and the services received from foreign CRS providers are taxable under Section 66A on reverse charge basis in respect of services received in India. - HELD THAT: - The Tribunal held that the relevant inquiry under Section 66A is the location of the recipient's "place of business, fixed establishment, permanent address or usual place of residence" rather than the separate legal identity of head office and branch. Applying Supreme Court authorities on place of business and permanent establishment, the Tribunal concluded that the Indian branch constituted the place of business for purposes of Section 66A and thus services facilitating ticketing received in India are taxable on the recipient (branch) under the reverse charge mechanism, irrespective of the fact that contractual agreements and payments were routed through the head office abroad. The Tribunal therefore disagreed with earlier Tribunal decisions which treated head office and branch as distinct persons for this purpose and declined to accept the appellants' reliance on those decisions. [Paras 5]

Appellant's branch in India is a place of business and liable to service tax under Section 66A on services received from foreign CRS providers for bookings relating to India.

Reference to larger bench - Whether earlier Tribunal decisions (notably British Airways and those following it) were correctly decided on the interpretation and scope of Section 66A and the treatment of head office/branch for reverse charge liability is referred to a larger Bench. - HELD THAT: - Having disagreed with several earlier Tribunal decisions that held the head office (which made the contract and payment) to be the recipient for Section 66A purposes, the Bench considered the conflict sufficiently significant to warrant resolution by a larger Bench. The matter is formally referred to the President for constitution of a larger Bench to decide (a) the true scope and interpretation of Section 66A and (b) whether the Tribunal correctly held in British Airways that a branch office is a distinct entity from the head office for Section 66A such that payments by the head office render the head office the recipient. [Paras 5, 6]

The conflicting questions of law regarding scope of Section 66A and the head office/branch distinction are referred to the President for constitution of a larger Bench.

Final Conclusion: The Tribunal upheld classification of CRS services as online database access/retrieval services and held that Cathay Pacific's Indian branch constitutes a place of business such that services received from foreign CRS providers are taxable under Section 66A on reverse charge basis for the period after 18.04.2006; the demand for the pre-18.04.2006 period was dropped. Significant questions on the proper interpretation of Section 66A and the head office/branch distinction are referred to a larger Bench.

Penalty for wrongful availment of input tax credit - Reversal of wrongly availed credit before issuance of show-cause notice - Section 73(3) and (4) of the Finance Act, 1994 - effect of reversal on issuance of show-cause notice - Section 78(1) - liability for penalty upon determination of demand - Intention to evade tax / suppression of facts

Reversal of wrongly availed credit before issuance of show-cause notice - Section 73(3) and (4) of the Finance Act, 1994 - effect of reversal on issuance of show-cause notice - Penalty for wrongful availment of input tax credit - Intention to evade tax / suppression of facts - Section 78(1) - liability for penalty upon determination of demand - Whether penalty for wrongly availed credit can be sustained where the assessee reversed the entire wrongly availed credit with interest before issuance of the show-cause notice and there is no finding of intention to evade tax. - HELD THAT: - The Tribunal found as a fact that the appellant reversed the entire wrongly availed credit along with interest before issuance of the show-cause notice. Section 73(3) precludes issuance of a show-cause notice where the credit has been reversed on being pointed out by departmental officers; there are no ingredients on the record to attract section 73(4) relating to suppression or fraud. The departmental allegation that the appellant had not reversed the entire amount was negated by the subsequent complete reversal on being pointed out by the audit party and by the account entries which correctly reflected the figures. In the absence of any determination of tax demand under the scheme relied on and without any finding of intention to evade tax or suppression of facts, liability to a penalty as contemplated under the statutory provisions does not arise. Applying these principles, the Tribunal concluded that the penalty was unwarranted.

Penalty imposed for wrongly availed credit set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that reversal of the wrongly availed credit with interest before issuance of the show-cause notice and absence of any finding of intent to evade or suppression disentitled the department from imposing the penalty; the impugned order is set aside with consequential reliefs, if any.

Goods Transport Agency Services - Cargo Handling Services - classification of taxable service - essential character test - relevance of distance (short haul vs long haul) - Section 65(105)(zzp) read with Section 65(50a) and Section 65(50b) of the Finance Act, 1994

Goods Transport Agency Services - Cargo Handling Services - relevance of distance (short haul vs long haul) - Section 65(105)(zzp) read with Section 65(50a) and Section 65(50b) of the Finance Act, 1994 - Whether the services of loading and transportation of coal within the mines fall under Goods Transport Agency Services or are taxable as Cargo Handling Services, and whether the short distance of transport is a relevant criterion for classification. - HELD THAT: - The Tribunal held that the contractual provisioning of loading and transportation by a goods carriage satisfies the requirements of a taxable service rendered by a Goods Transport Agency under Section 65(105)(zzp) read with Section 65(50a) and Section 65(50b) of the Finance Act, 1994. The question of whether the transport is for short or long distances is not a determinative or relevant criterion for classification under Goods Transport Agency Services. The appellate authority's conclusion that the essential character of the contract was cargo handling because transportation was over short distances could not be sustained. The Tribunal further relied on its earlier decision in CCE v. Sainik Mining Allied Services Ltd. (as cited in the record) and the final order in that appeal, where loading and transportation of coal within mines were held not to attract taxation as Cargo Handling Services. Applying that reasoning to the present contracts, the services in question are to be treated as Goods Transport Agency Services and not as Cargo Handling Services

The impugned order upholding demand and penalties under Cargo Handling Services set aside; appeal allowed and consequential relief granted to the appellant.

Final Conclusion: The Tribunal allowed the appeal, holding that the loading and transportation of coal within the mines fall within Goods Transport Agency Services and are not taxable as Cargo Handling Services; the impugned order confirming demand and penalties is set aside with consequential relief.