TaxTMI Updates e-Newsletter
Oct 27,2018

Supply - Agreeing to the obligation to refrain from an act or to tolerate an act or a situation - Consideration (nexus with supply) - Time of supply (Section 13) - Valuation - transaction value/actual amount received - Schedule II clause 5(e)

Supply - Agreeing to the obligation to refrain from an act or to tolerate an act or a situation - Consideration (nexus with supply) - Schedule II clause 5(e) - Whether liquidated damages that may be awarded by ICC to the applicant constitute a supply liable to GST - HELD THAT: - The Authority examined the Association Agreement and concluded that the contractual framework included an agreement between the parties which envisaged monetary compensation in the event of default/termination. Clause 5(e) of Schedule II treats 'agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act' as a supply of services. The Authority found that the amounts recoverable on termination/arbitration function as monetary consideration linked to that agreed contractual arrangement and are not mere ex post tortious damages immune from GST. The arbitral mechanism and the contractual stipulation of compensation (subject to arbitrators not awarding punitive/consequential damages) indicate that any monetary award is the consequence of an agreed contractual regime and therefore satisfies the requirement of consideration with nexus to an activity treated as supply under Schedule II. The Authority rejected the applicant's contention that the amounts are solely compensatory damages devoid of any nexus to a supply and that mere inclusion of a liquidated damages clause cannot convert a non supply into a supply; it held that, on the facts and contract before it, the compensation payable under the contract/award falls within the scope of taxable supply under clause 5(e).

Liquidated damages which may be awarded by the ICC qualify as a supply of service and are liable to GST.

Time of supply (Section 13) - Point of time when the applicant's liability to pay GST on such liquidated damages arises - HELD THAT: - Having held that the amounts are taxable supplies, the Authority directed that the time of supply for the services so rendered is to be determined under the statutory rule book, namely Section 13 of the CGST Act. The Authority observed that the liability will arise in accordance with the earliest applicable event under Section 13 (invoice issuance/receipt of payment/other contingencies) and, in the subject facts, would be determined after the arbitral award is pronounced by the ICC and in accordance with Section 13's provisions.

Time of supply will be determined as per Section 13 of the CGST Act, after the arbitration award is given by the ICC in the present proceedings.

Valuation - transaction value/actual amount received - Consideration (nexus with supply) - Whether GST is payable on the amount claimed/awarded or on the amount actually received - HELD THAT: - The Authority held that valuation of the taxable supply arising from the award shall follow the general valuation principles under the Act and rules. On the facts before it the Authority answered that the value of the supply will be the actual amount of compensation/damages received by the applicant pursuant to the ICC award. The Authority therefore adopted an outcome linked approach: the taxable value is the quantum actually awarded and received under the arbitral award (subject to the valuation provisions of the Act).

Value of supply will be the actual amount of damages received by the applicant pursuant to the ICC award.

Final Conclusion: The Authority ruled that amounts awarded by the ICC under the Association Agreement constitute a taxable supply of services under Schedule II clause 5(e); the time of supply is to be determined under Section 13 of the CGST Act in relation to the arbitral award, and the value of the taxable supply is the actual amount of damages/compensation received pursuant to the award.

Profiteering under Section 171 of the CGST Act, 2017 - denial of input tax credit (ITC) - commensurate reduction in price / pass-through of tax benefit - anticipatory or pre effective date price increase - investigation by Director General Anti Profiteering under rule 129

Profiteering under Section 171 of the CGST Act, 2017 - denial of input tax credit (ITC) - commensurate reduction in price / pass-through of tax benefit - Whether the reduction in GST rate on restaurant services w.e.f. 15.11.2017 resulted in a benefit that was not passed on to the purchaser and whether the Respondent thereby contravened Section 171. - HELD THAT: - The Authority examined the reduction of GST on restaurant services from 18% (with ITC) to 5% (without ITC) effective 15.11.2017 and the Respondent's pricing for the period 15.11.2017 to 28.02.2018. The DGAP's analysis showed that ITC of Rs. 13,01,759 was available to the Respondent in July-November 2017, equal to approximately 11.80% of the taxable value for that period, and that the Respondent's average base price increased by 12.14% after the rate change. The Authority found that the increase in base prices was introduced to neutralize the loss arising from denial of ITC and that the percentage increase in base price was commensurate with the denial of ITC. Applying the legal principle that the benefit of a tax rate reduction must be passed on to consumers by way of commensurate price reduction, the Authority concluded that the allegation of not passing on the benefit was not established because the price change corresponded to the increased cost due to denial of ITC. [Paras 9]

The Respondent did not contravene Section 171 in respect of failing to pass on the benefit of the GST rate reduction; the increase in base price was commensurate with denial of ITC.

Anticipatory or pre effective date price increase - profiteering under Section 171 of the CGST Act, 2017 - Whether the collection of an alleged excess amount on 14.11.2017 (prior to the effective date 15.11.2017) from customers amounted to profiteering under Section 171. - HELD THAT: - The DGAP noted that certain items were sold on 14.11.2017 at increased base prices and 18% GST, producing an alleged excess collection. However, the reduction in rate and denial of ITC took effect only from 15.11.2017. The Authority held that a charge made on 14.11.2017 could not be treated as profiteering under Section 171 because there was no rate reduction or legal change in treatment on that date; any anticipated change effective the next day did not render the 14.11.2017 transactions a contravention under the Act. [Paras 9]

The alleged collection on 14.11.2017 does not constitute profiteering under Section 171 as the rate reduction and ITC denial were effective only from 15.11.2017.

Final Conclusion: The application alleging profiteering is dismissed; the Authority found no contravention of Section 171 by the Respondent in respect of the transactions examined.

Tax deduction at source (TDS) under Section 194J - Definition of 'technical services' for TDS - Disallowance under Section 40(a)(ia) for non-deduction of TDS - Remand for examination of technical evidence and element of income - Retrospective application of provisos to Sections 201(1) and 201(1A)

Disallowance under Section 40(a)(ia) for non-deduction of TDS - Tax deduction at source (TDS) under Section 194J - Remand for examination of technical evidence and element of income - Deletion of disallowance of wheeling/transmission and SLDC charges and liability to deduct tax at source remitted to the Assessing Officer for fresh adjudication. - HELD THAT: - The Tribunal and CIT(A) had deleted the disallowance made by the Assessing Officer in respect of wheeling/transmission charges and SLDC charges paid to HVPNL. In view of the Supreme Court's observations in CIT v. Bharti Cellular Ltd., the matter requires technical examination to determine whether the services rendered involve human intervention or otherwise fall within the ambit of 'technical services' attractable to Section 194J. The High Court set aside the orders of the authorities below insofar as they concluded no TDS liability and remitted the issue to the Assessing Officer to re-adjudicate the question of TDS liability and, consequentially, the allowability of the claimed expenses, after examination of appropriate technical evidence and in accordance with the principles laid down by the Apex Court. [Paras 6, 9]

Order of lower authorities on disallowance/TDS liability set aside and matter remitted to the Assessing Officer for fresh decision in light of Bharti Cellular Ltd.

Definition of 'technical services' for TDS - Retrospective application of provisos to Sections 201(1) and 201(1A) - Remand for examination of technical evidence and element of income - Alleged misreading of statutory provision (explanation to section 9(1)(viii)) and applicability of provisos to Sections 201(1)/201(1A) remitted to the Assessing Officer for consideration. - HELD THAT: - The High Court observed that the question whether the payments constitute 'technical services' (and the Tribunal's reference to 'human' intervention) could not be finally resolved on the existing record. The court directed that the Assessing Officer should examine technical experts and consider whether the provisos introduced by Finance Act, 2012 to Sections 201(1) and 201(1A) operate retrospectively, and also consider the element of income in the transaction, before passing a fresh order. The remand follows the Apex Court's approach that technical aspects require expert evidence and that factual determination of human intervention and revenue-sharing character must be re-examined by the assessing authority. [Paras 9]

Questions of statutory interpretation and retrospective operation of provisos remitted to the Assessing Officer for fresh adjudication with liberty to examine technical experts and consider element of income.

Final Conclusion: The orders of the lower authorities on the disallowance of wheeling/transmission and SLDC charges and on the question of TDS liability are set aside; the matters are remitted to the Assessing Officer to decide afresh in light of the Supreme Court's observations in Bharti Cellular Ltd., including examination of technical evidence and consideration of the provisos to Sections 201(1) and 201(1A). The appeal is disposed of accordingly.

Tax deduction at source under Section 194J (technical services) - technical services - human intervention test - remand to Assessing Officer for fresh adjudication - retrospective applicability of provisos to Sections 201(1) and 201(1A) - element of income

Tax deduction at source under Section 194J (technical services) - technical services - human intervention test - remand to Assessing Officer for fresh adjudication - Whether the deletion by the Tribunal of the disallowance under Section 40(a)(ia) for non-deduction of TDS on wheeling and SLDC charges should be sustained or requires fresh adjudication. - HELD THAT: - The Court set aside the orders of the lower authorities and remitted the matter to the Assessing Officer for fresh adjudication in light of the Supreme Court's observations in CIT v. Bharti Cellular Ltd. The determinative legal point requiring fresh inquiry is whether the payments for transmission/wheeling and SLDC charges partake the character of technical services attracting tax deduction under Section 194J, which depends on whether there is material showing human intervention or other technical aspects. The Assessing Officer is directed to obtain and examine appropriate technical evidence (including expert evidence) and thereafter decide whether the transactions involve fees for technical services and the consequent TDS liability. [Paras 6]

Orders of the authorities below with regard to disallowance of wheeling and SLDC charges are set aside and the matter is remanded to the Assessing Officer to decide afresh in light of the human intervention test and the observations in ITA No. 652 of 2010 (Bharti Cellular directions).

Retrospective applicability of provisos to Sections 201(1) and 201(1A) - element of income - remand to Assessing Officer for fresh adjudication - Whether the Assessing Officer should examine the retrospective applicability of the provisos to Sections 201(1) and 201(1A) and the element of income in the transactions while deciding the TDS issue. - HELD THAT: - The Court directed that on remand the Assessing Officer shall also examine, inter alia, whether the provisos inserted by the Finance Act, 2012 to Sections 201(1) and 201(1A) apply retrospectively to the transaction in question and whether there is an element of income in the payments that would affect taxability and TDS obligations. This aspect was not independently adjudicated by the Tribunal and therefore requires fresh consideration by the Assessing Officer while deciding the matter in accordance with law. [Paras 6]

The Assessing Officer is to consider afresh the retrospective application of the provisos to Sections 201(1) and 201(1A) and the question of element of income while adjudicating the TDS and disallowance issues.

Final Conclusion: The orders of the lower authorities on disallowance of wheeling and SLDC charges are set aside and the matter is remitted to the Assessing Officer for fresh adjudication in accordance with the Supreme Court's observations in Bharti Cellular (including obtaining technical evidence on human intervention), and for consideration of the retrospective applicability of the provisos to Sections 201(1) and 201(1A) and the element of income; appeal disposed.

Condonation of delay - reasonable cause for delay - liberal approach in condonation matters - absence of mala fide or negligence as determinative - principle of finality in limitation - remand for fresh consideration on merits

Condonation of delay - reasonable cause for delay - absence of mala fide or negligence as determinative - liberal approach in condonation matters - Whether the Tribunal was justified in confirming the CIT(A)'s dismissal of the appeal for non-condonation of the delay in filing the appeal, and whether the assessee had reasonable cause for the delay. - HELD THAT: - The Court examined the uncontroverted affidavit filed by the assessee's DCEO and the annexed documents showing (a) referral of the assessment order to the Board for decision, (b) resignation of the then DCEO and resulting vacancy, and (c) appointment of a new DCEO only on 15.11.2000 after which the Board decided to file the appeal. The Revenue did not file any counter-affidavit disputing these averments. The Tribunal and CIT(A) rejected the explanation on the basis that other directors could have acted, treating the delay as negligence. The High Court held that where the explanation is bona fide, supported by documentary material and not controverted, and there is no established mala fide, a rigid technical approach is inappropriate. The law of limitation seeks finality but should not be applied to defeat substantive rights on mere technicalities; courts are to adopt a pragmatic and liberal approach in condonation applications. In the present facts the Court found no gross negligence or mala fide on the assessee's part and noted that the decision-making power, under the company rules, lay with the DCEO nominated by the Government, which was material and undisputed. Having found the explanation credible and not rebutted, the Court concluded that the matter ought not to have been closed on the ground of delay without adjudication on merits and therefore remitted the case for fresh consideration of the appeal on merits. [Paras 10, 11, 12, 15, 16]

The Tribunal's confirmation of the CIT(A)'s dismissal for non-condonation of delay is set aside; the appeal is allowed on this question and the matter is remanded to the Tribunal for fresh consideration on merits.

Final Conclusion: The tax case appeal is allowed; the Tribunal's order is set aside and the matter is remanded to the Tribunal to decide the appeal on merits, parties being free to canvass all points before it. No costs.

Levy of interest under Sections 234B and 234C - minimum alternate tax (MAT) under Section 115JB - advance tax obligation for MAT companies - self-contained code of Section 115JB - applicability of advance tax provisions to computation under Chapter XII-B

Levy of interest under Sections 234B and 234C - minimum alternate tax (MAT) under Section 115JB - advance tax obligation for MAT companies - Whether interest under Sections 234B and 234C is leviable on defaults in advance tax in respect of tax payable under Section 115JB while computing MAT. - HELD THAT: - The Court answered this question against the assessee, following the decision of the Hon'ble Supreme Court in JCIT v. Rolta India Limited. Rolta holds that Section 115JB is a self-contained code imposing liability for payment of advance tax on MAT companies and that failure to pay such advance tax attracts interest under Sections 234B and 234C. The High Court noted that this Supreme Court authority was binding and has been applied by this Court in earlier decisions. Accordingly, the Tribunal's view upholding levy of interest while computing tax under the deeming provisions of Section 115JB was upheld. [Paras 6, 9]

Tribunal's order upholding levy of interest under Sections 234B and 234C in computation of MAT under Section 115JB is affirmed.

Final Conclusion: The substantial question on the levy of interest under Sections 234B and 234C in relation to MAT under Section 115JB is decided against the assessee following JCIT v. Rolta India Limited; the appeal is dismissed.

Dismissal for non-appearance and reinstatement of appeal - Duty of the Tribunal to decide appeals on merits notwithstanding absence - Dismissal without adjudication on merits - Imposition of costs as condition for restoration of hearing - Rectification application and its setting aside

Dismissal for non-appearance and reinstatement of appeal - Duty of the Tribunal to decide appeals on merits notwithstanding absence - Dismissal without adjudication on merits - Imposition of costs as condition for restoration of hearing - Revival of the petitioner's tax appeal before the Income Tax Appellate Tribunal and remand for decision on merits subject to deposit of costs. - HELD THAT: - The Court found that the Tribunal had dismissed the appeal for non-appearance without deciding the matter on merits contrary to the obligation that the Tribunal should hear the appeal on merits even where a party is absent. Although the petitioner displayed negligence in not participating before the Tribunal, the Tribunal's summary dismissal without adjudication on merits was not appropriate. In view of these circumstances the High Court set aside the Tribunal's dismissal order, revived the appeal and remanded it for consideration on merits. The Court exercised its discretion to impose a condition of costs to be deposited with the Revenue before the petitioner is permitted to argue the matter, and fixed a date for the petitioner to appear so as to avoid fresh notice. The Tribunal was left free to reschedule the hearing thereafter.

Orders dated 07.07.2016 are set aside, the tax appeal is revived and remitted to the Tribunal for decision on merits; the petitioner may be heard only after depositing the cost directed by the Court.

Rectification application and its setting aside - Validity of the order rejecting the petitioner's application for rectification. - HELD THAT: - The High Court reviewed the record and, having concluded that the appeal ought to be decided on merits by the Tribunal, found it appropriate to set aside the order rejecting the petitioner's rectification application dated 23.04.2018 as part of restoring the proceedings for fresh adjudication on merits by the Tribunal.

Order dated 23.04.2018 rejecting the rectification application is set aside.

Final Conclusion: The High Court set aside the Tribunal's dismissal for non-appearance and the rectification rejection, revived the tax appeal for decision on merits by the Tribunal, directed the petitioner to appear on the specified date to obviate fresh notice, and permitted hearing only upon deposit of the directed costs with the Revenue.

Reopening of assessment - validity of notice issued beyond four years - reasons recorded / reason to believe - valuation by Departmental Valuation Officer - quashing of reassessment notice

Reopening of assessment - validity of notice issued beyond four years - reasons recorded / reason to believe - Validity of the reassessment notice dated 20.3.2018 issued to reopen the assessment for assessment year 2011-12 which was beyond the four-year period from the end of the relevant assessment year, insofar as it rested on the stated valuation discrepancy in respect of two shop sales. - HELD THAT: - The notice to reopen the assessment was founded on the Assessing Officer's recorded reason that the sale consideration disclosed by the assessee for two shops was materially lower than the jantri value. The court permitted the AO to proceed but withheld final assessment. Thereafter the AO obtained a report from the Departmental Valuation Officer which confirmed the sale consideration as disclosed by the assessee and produced the sale deeds. The Revenue's counsel conceded that, in view of the DVO report, there was no scope for making any additions with respect to the transactions relied upon in the reasons for reopening. When the foundational basis for issuing the notice is thus negated by subsequent valuation findings accepted by the Revenue, continuation of the reopening would serve no purpose. In this factual matrix the court interfered with and set aside the notice; other legal questions raised by the Revenue were not addressed and remain open. [Paras 2, 3]

Notice of reopening dated 20.3.2018 set aside and petition allowed, the reassessment proceedings insofar as based on the valuation ground are quashed.

Final Conclusion: The petition is allowed and the reassessment notice is quashed because the Departmental Valuation Officer's report confirmed the sale consideration relied on by the assessee, eliminating the basis for reopening; other contentions of the Revenue were left open.

Classification of income from sub-lease as business income - deductibility of interest on borrowed capital for construction/acquisition when used to earn taxable income - construction of proviso to Section 24 regarding production of certificate for interest deduction - rule of consistency in tax adjudication - substantial question of law under Section 260A - perversity and error of law apparent on the face of the record

Classification of income from sub-lease as business income - rule of consistency in tax adjudication - Whether the income from sub-lease and maintenance is assessable as business income and whether earlier decisions in favour of the assessee justify the same classification for A.Y. 2010-11. - HELD THAT: - The Court recorded that the ITAT and the CIT(A) had consistently held for earlier assessment years (including A.Ys. 2006-07, 2007-08, 2008-09 and 2009-10) that the assessee's development activity for the Bio-Tech Park had commenced and that sub-lease income was properly assessable as business income. The Tribunal applied those earlier findings to the facts of A.Y. 2010-11 and, following the rule of consistency, declined to disturb the CIT(A)'s order which had set aside the A.O.'s classification. The High Court found that these determinations were primarily factual and based on earlier concurrent findings, and that there was no perversity or error of law apparent on the face of the record warranting interference under Section 260A. [Paras 10, 11]

The classification of sub-lease and maintenance income as business income for A.Y. 2010-11 is upheld; the Tribunal rightly followed earlier consistent findings and no substantial question of law arises.

Deductibility of interest on borrowed capital for construction/acquisition when used to earn taxable income - rule of consistency in tax adjudication - Whether the deduction of interest claimed by the assessee in respect of borrowed capital used for construction/acquisition could be allowed for A.Y. 2010-11. - HELD THAT: - The CIT(A) had deleted the addition disallowing interest by relying on his own earlier order in respect of the same assessee (A.Y. 2008-09), and the ITAT had confirmed that where interest is paid on capital used for acquiring or constructing assets employed in earning taxable income, the interest expenditure is allowable. The Tribunal applied that view to A.Y. 2010-11 and dismissed the revenue's appeal. The High Court noted that this was a factual determination confirmed in earlier Tribunal orders and, applying the rule of consistency and absence of any demonstrable perversity or error of law on the face of the record, held there was no substantial question of law warranting interference. [Paras 11]

The deletion of the addition relating to interest on borrowed capital is sustained; the Tribunal correctly applied earlier findings and no substantial question of law arises.

Construction of proviso to Section 24 regarding production of certificate for interest deduction - substantial question of law under Section 260A - Whether the proviso to Section 24 (requiring production of a certificate from the payee of interest) was applicable and whether its non-consideration by the ITAT gives rise to a substantial question of law. - HELD THAT: - The High Court observed that the specific contention based on the proviso to Section 24 was not raised nor argued before the ITAT. For that reason the Court held that the proviso could not be treated as giving rise to any substantial question of law from the impugned order. The Court therefore declined to admit or decide that point under Section 260A, since it was not the subject of adjudication below. [Paras 9]

The proviso to Section 24 was not argued before the ITAT and does not give rise to any substantial question of law from the impugned order.

Final Conclusion: The High Court finds no merit in the revenue's challenge to the ITAT's dismissal of its appeal for A.Y. 2010-11: the Tribunal correctly applied earlier consistent findings on classification of sub-lease income and on the allowance of interest, and there is no perversity or apparent error of law to warrant interference under Section 260A; the appeal is dismissed with no order as to costs.

Reasoned order - principles of natural justice - reasons for decision under section 250(6) - summary dismissal - remand for fresh adjudication - adjudication on merits of agricultural income genuineness - classification of gross versus net agricultural income for taxation - opportunity of being heard to parties

Reasoned order - principles of natural justice - reasons for decision under section 250(6) - summary dismissal - Validity of the appellate order of Ld. CIT(A) given that the appeal was decided ex parte and without dealing with documentary evidence or giving reasons. - HELD THAT: - The Tribunal found that although the Ld. CIT(A) recorded that the appeal was decided on merits on the basis of documents on record, the appellate order does not contain findings on the documents nor reasons for rejecting the assessee's contentions as required by law. The absence of notice for the last hearing and the failure to give findings on the documentary material on record amounted to a breach of the principles of natural justice and resulted in a summary dismissal without reasons. For these reasons the appellate order cannot be sustained and must be set aside. [Paras 5, 6]

Impugned order of Ld. CIT(A) set aside for being a summary order lacking required reasons and for violation of natural justice; appeal restored to the file of Ld. CIT(A).

Remand for fresh adjudication - adjudication on merits of agricultural income genuineness - classification of gross versus net agricultural income for taxation - opportunity of being heard to parties - Whether the matter should be remanded for reconsideration on merits including the genuineness and proper classification of the agricultural income and providing opportunity to the parties. - HELD THAT: - The Tribunal declined to decide the correctness of the addition or the factual controversies (such as non-production of lessors, replies to enquiries under section 133(6), authenticity of Form J and whether gross or net agricultural income is taxable at a higher rate). Instead, the Tribunal directed that the appeal be restored to the Ld. CIT(A) to be re-decided strictly on merits with reference to all documentary evidence on record, after affording reasonable and sufficient opportunity of being heard to both the assessee and the Assessing Officer. The assessee was permitted to raise additional grounds, and factual and legal issues were remitted for fresh consideration rather than finally adjudicated upon by the Tribunal. [Paras 6]

Matter remanded to Ld. CIT(A) for fresh adjudication on merits, with directions to consider all documents, give reasons in the order and afford parties a proper hearing.

Final Conclusion: Impugned order of Ld. CIT(A) set aside for failure to give reasons and breach of natural justice; appeal restored to Ld. CIT(A) for fresh merits adjudication on the documentary evidence and issues relating to genuineness and classification of agricultural income, after affording adequate opportunity to the assessee and the AO; appeal allowed for statistical purposes.

Deemed dividend under Section 2(22)(e) - business nexus for capital expenditure - tax planning versus impermissible distribution - allowability of interest as revenue expenditure - depreciation on building used as residential accommodation - disallowance under Section 40A(3)

Deemed dividend under Section 2(22)(e) - business nexus for capital expenditure - tax planning versus impermissible distribution - Whether the purchase of the residential flat by the private company for its CMD attracted the deeming fiction of dividend under Section 2(22)(e) and whether the expenditure lacked business nexus - HELD THAT: - The Tribunal found as a matter of fact that no funds were transferred out of the company to the director and the company itself purchased the flat. The AO and CIT(A)'s conclusion that Section 2(22)(e) applied rested on the view that the acquisition constituted an indirect distribution to the 99% shareholder. Relying on settled principles that tax planning is not ipso facto impermissible and that Section 2(22)(e) requires an assurred transfer or application of funds as per the provision, the Tribunal held that the provision was not attracted on the facts. The purchase by the company for use by its CMD did not amount to an impermissible distribution where no transfer of funds to the director had occurred and no statutory requirement was breached. Accordingly the purported lack of business nexus did not sustain the deeming of dividend, and ancillary disallowances founded on that premise also fell with the primary finding.

Finding under Section 2(22)(e) set aside; purchase not treated as deemed dividend and ancillary disallowances based thereon reversed in favour of the assessee.

Allowability of interest as revenue expenditure - Whether interest on the bank loan taken for purchase of the flat was allowable as revenue expenditure - HELD THAT: - The Tribunal observed that the interest was of a revenue nature and, in view of the primary conclusion that the acquisition was not hit by Section 2(22)(e), allowed the claim for interest paid on the bank loan as an expenditure of the assessee-company. The AO's disallowance founded on the view that the purchase was not for company business was rejected.

Interest on the bank loan allowed to the assessee as revenue expenditure.

Depreciation on building used as residential accommodation - Whether depreciation on the flat was allowable and at what rate - HELD THAT: - Having held that the transaction was not a distribution, the Tribunal permitted depreciation on the property but limited the rate to the statutory allowance for buildings used as residences. The Tribunal reduced the assessee's claimed rate to the allowable rate and sustained depreciation accordingly.

Depreciation allowed at 5% of the cost; assessee's higher rate disallowed.

Allowability of principal repayment subject to verification - Treatment of repayment of loan instalments debited to profit and loss account - HELD THAT: - The CIT(A) had deleted the disallowance in respect of principal repayment but directed verification by the AO. The Tribunal did not find fault with that approach and retained the direction for verification, indicating that factual verification by the AO was appropriate before final admission.

Deletion of disallowance in respect of principal repayment upheld subject to verification by the Assessing Officer.

Disallowance under Section 40A(3) - Allowability of foreign travel expense paid in cash and disallowed under Section 40A(3) - HELD THAT: - The assessee's claim for foreign travel expenses was supported by evidence of cash payment, and the AO applied Section 40A(3) to disallow the expenditure. No business expediency was established on the record. The Tribunal found the facts indistinguishable from the earlier findings and upheld the CIT(A)'s confirmation of the addition under Section 40A(3).

Foreign travel expenses disallowed under Section 40A(3); issue decided for the revenue.

Electricity charges not pressed - Claim for electricity charges relating to the flat - HELD THAT: - The assessee did not press the claim for electricity charges before the Tribunal. As the point was not pursued, the Tribunal dismissed that claim as not pressed.

Electricity charges claim dismissed as not pressed by the assessee.

Final Conclusion: The appeal is partly allowed: the Tribunal set aside the finding that the flat purchase was a deemed dividend under Section 2(22)(e), allowed interest as revenue expenditure and depreciation at 5%, left deletion of principal repayment subject to AO's verification, dismissed the electricity claim as not pressed, and upheld disallowance of foreign travel expenses under Section 40A(3).

Treatment of provision for reward point redemption - ad-hoc disallowance of advertisement and sales promotion expenditure and remand for verification - treatment of card acquisition expenses as revenue expenditure under Section 37(1) of the Act - taxability of allotment of shares as business income under Section 28(iv) of the Act - grant of TDS credit subject to verification

Treatment of provision for reward point redemption - Provision for reward point redemption not pressed by the assessee and dismissed as not pressed. - HELD THAT: - The authorised representative expressly abandoned grounds 1.1 to 1.4 relating to the provision for reward point redemption. The Tribunal records that the issue is not being pressed and accordingly dismisses it as not pressed. [Paras 5]

Grounds on provision for reward point redemption dismissed as not pressed.

Ad-hoc disallowance of advertisement and sales promotion expenditure and remand for verification - Ad-hoc disallowance of advertisement expenses of Rs. 1 crore set aside and remitted to the Assessing Officer for fresh adjudication after verification of documents and consideration of Delhi High Court ratio for AY 2006-07. - HELD THAT: - Although the Tribunal recognises the Delhi High Court's favourable decision for the assessee in AY 2006-07 treating advertisement and sales promotion expenditure as revenue, the CIT(A) recorded deficiencies concerning supporting details for items shown under 'Gifts and Others'. The Tribunal finds it appropriate that the Assessing Officer re-examine the claim afresh, giving the assessee opportunity to produce documentary evidence and considering the High Court ratio. Consequently the matter is restored to the file of the AO for adjudication on merits after verification and hearing. [Paras 5]

Issue restored to the AO for fresh adjudication; grounds 2.1 and 2.2 allowed for statistical purposes.

Treatment of card acquisition expenses as revenue expenditure under Section 37(1) of the Act - Card acquisition expenses of Rs. 17,85,92,045 allowed as revenue expenditure in view of the Delhi High Court's precedent in the assessee's own case for AY 2006-07; order of CIT(A) set aside. - HELD THAT: - The Tribunal notes that the Delhi High Court, while upholding the ITAT, held that the assessee is entitled to treat card acquisition expenses as revenue expenditure under Section 37(1) and that the right to claim deferred revenue expenditure lies with the assessee. No distinguishing facts were pointed out by the Revenue for the impugned year. Respectfully following that ratio, the Tribunal directs the Assessing Officer to allow the entire card acquisition expenses as revenue expenditure for the year under consideration. [Paras 5]

Order of CIT(A) on card acquisition expenses set aside; expenses to be allowed as revenue expenditure.

Taxability of allotment of shares as business income under Section 28(iv) of the Act - Addition made by the Revenue in respect of allotment of shares by VISA Inc. deleted; not taxable as business income under Section 28(iv) for AY 2008-09. - HELD THAT: - The Tribunal observes that the legislative provisions subsequently introduced (Section 56(2)(vii)(a) read with Section 2(24)(xv)) became effective only in June 2010 and are prospective. Reliance is placed on the Andhra Pradesh High Court's view that benefit 'arising from business' requires the benefit itself to have arisen and mere issuance of shares does not constitute such benefit. The assessee has already paid tax on short-term capital gains for shares actually sold during the year; taxation on unsold shares would arise only on their sale. The CIT(A)'s confirmation and enhancement of the addition are therefore erroneous and are set aside. [Paras 5]

Addition in respect of allotment of shares deleted; grounds 4.1-4.3 and the additional ground allowed.

Grant of TDS credit subject to verification - Claim for TDS credit of Rs. 33,91,887 restored to the file of the Assessing Officer for verification and allowance as per law after giving the assessee opportunity to be heard. - HELD THAT: - The Tribunal does not adjudicate the merit on the papers but directs that the Assessing Officer shall verify the assessee's claim for TDS credit and grant relief as warranted by law, providing the assessee a chance to present its case. The consequential issue relating to interest is not adjudicated. [Paras 5]

TDS credit issue restored to the AO for verification and adjudication; consequential interest issue not decided.

Final Conclusion: The appeal is partly allowed: provision for reward points dismissed as not pressed; advertisement disallowance remanded to the AO for fresh consideration; card acquisition expenses allowed as revenue expenditure following the Delhi High Court precedent; addition relating to allotment of VISA shares deleted; TDS credit claim remanded to the AO for verification. The balance consequential matters are left to be decided in accordance with these directions.

Deduction under section 10A pari materia with section 10B - remand for fresh consideration to Assessing Officer - treatment of premium on forward exchange contracts as operating income - remand for fresh consideration to Transfer Pricing Officer - selection of comparable companies in transfer pricing - Dispute Resolution Panel non-speaking order

Deduction under section 10A pari materia with section 10B - remand for fresh consideration to Assessing Officer - Assessee's alternative claim for deduction under section 10A remitted to the Assessing Officer for fresh consideration. - HELD THAT: - The Tribunal noted judicial precedents holding that section 10A is pari materia with section 10B and that when deduction under section 10B is denied for lack of prescribed approval, the alternative claim under section 10A made during assessment proceedings must be considered if conditions under section 10A are satisfied. The Assessing Officer and the DRP did not consider the assessee's alternative claim because it was not made in the return. Applying the stated precedent, the Tribunal directed that the alternative claim under section 10A be remitted to the Assessing Officer for fresh consideration and grant of deduction if the statutory conditions are met. [Paras 5]

Issue remitted to the Assessing Officer to consider and decide the assessee's claim under section 10A in accordance with the cited precedents; ground allowed for statistical purposes.

Treatment of premium on forward exchange contracts as operating income - remand for fresh consideration to Transfer Pricing Officer - Whether forward contract premium should be included in operating profit margin for transfer pricing purposes was remitted to the Transfer Pricing Officer for fresh consideration in accordance with directions in the Tribunal's earlier order for the preceding assessment year. - HELD THAT: - The Tribunal recorded the assessee's contention that forward contract premium arises from hedging receivables and is attributable to business operations and thus ought to be included in the operating profit margin (PLI). The DRP did not adjudicate this specific plea. Noting that the Tribunal in the immediately preceding assessment year had directed the TPO to examine evidence and determine whether such premium is earned in the normal course of business and forms part of operating profit, the Tribunal remitted the issue to the TPO to follow those directions and consider the assessee's evidence. [Paras 6]

Issue restored to the Transfer Pricing Officer for fresh consideration as per Tribunal's earlier directions; ground allowed for statistical purposes.

Selection of comparable companies in transfer pricing - Dispute Resolution Panel non-speaking order - remand for fresh consideration to Transfer Pricing Officer - Inclusion of specified entities as comparables was remitted to the Transfer Pricing Officer for fresh consideration because the DRP confirmed the TPO's findings without a speaking order and did not deal with the assessee's specific contentions and evidence. - HELD THAT: - The Tribunal found that the DRP merely confirmed the TPO's inclusion of the listed companies without passing a speaking order and thus failed to address the assessee's substantive objections (functional dissimilarity, segmented accounts not available, presence of intangibles, failure to meet filters, and erroneous margin computation). Given that these contentions were neither considered nor adjudicated by the TPO/DRP, the Tribunal directed that the matter be restored to the TPO so that the assessee may place evidence and the TPO may re-examine the suitability of the said comparables. [Paras 7]

Issue restored to the Transfer Pricing Officer for fresh consideration of the comparability objections; ground allowed for statistical purposes.

Final Conclusion: The appeal is allowed for statistical purposes with the matters remitted as directed above; the stay application is dismissed as infructuous.

Capital gains vs business income - intention at time of purchase - holding period - investment portfolio vs trading portfolio - acceptance of classification by revenue in earlier years - CBDT Circular No. 6 dated 29.02.2016

Capital gains vs business income - intention at time of purchase - holding period - investment portfolio vs trading portfolio - acceptance of classification by revenue in earlier years - CBDT Circular No. 6 dated 29.02.2016 - Whether the gains of Rs. 2,14,75,356/- from sale of shares are assessable as capital gains or as business income - HELD THAT: - The Tribunal held that the gains are to be assessed as capital gains. The decisive facts were that seven scrips (in ten transactions) sold had holding periods ranging from 370 days to 1,738 days (i.e. more than 12 months), the shares treated as long-term were disclosed in the balance sheet under 'investment', and the assessee maintained distinct 'investment' and 'trade' portfolios which had been accepted by the department since Assessment Year 2002-03. The record did not establish repetitive purchase-and-sale patterns in respect of the shares treated as investments, and the assessee derived substantial dividend income from holdings. The Tribunal found the departmental precedents relied upon to be factually distinguishable and accepted that intention at the time of purchase is paramount; it relied on CBDT Circular No. 6 dated 29.02.2016 and the Apex Court's dismissal of SLP in Pr. Commissioner of Income Tax v. Bhanuprasad D. Trivedi (HUF) to the effect that where shares are treated as investments and held for more than 12 months, the revenue should not take a contrary view. On these findings, the Tribunal affirmed the Commissioner (Appeals)'s direction to assess the impugned gains as capital gains and declined to interfere with those factual conclusions. [Paras 5, 6]

The gains from sale of the shares are assessable under the head 'capital gains' and not as business income; the department's appeal is dismissed.

Final Conclusion: The departmental appeal is dismissed; the Tribunal affirms that the impugned share-sale gains for Assessment Year 2010-11 are taxable as capital gains in view of the holding periods, disclosure as investments, acceptance of separate portfolios by the revenue in earlier years, and statutory/administrative guidance.

Rectification under section 254(2) of the Income tax Act - mistake apparent from the record - review and re appreciation not permissible under section 254(2) - Explanation 5 to section 271(1)(c) - Explanation 5A to section 271(1)(c) - onus of proof in revised computation filed during assessment proceedings - requirement of recording satisfaction for levy of penalty under section 271(1)(c)

Explanation 5 to section 271(1)(c) - Explanation 5A to section 271(1)(c) - mistake apparent from the record - Whether the Tribunal's alleged reliance on Explanation 5A (instead of Explanation 5) in upholding penalty amounts to a mistake apparent from the record warranting rectification under section 254(2). - HELD THAT: - The Tribunal's order does not state that it was following Explanation 5A and the assertion that it was so guided is not apparent from the order. Whether Explanation 5 or 5A applies involves consideration of contested legal submissions and cannot be converted into a rectifiable "mistake apparent from the record." Rectification under section 254(2) is limited to obvious and patent errors and cannot be used to reopen or review a co ordinate bench's appreciation of legal provisions. [Paras 4, 9]

No mistake apparent from the record; contention amounts to an impermissible review and is not rectifiable under section 254(2).

Requirement of recording satisfaction for levy of penalty under section 271(1)(c) - mistake apparent from the record - Whether the Tribunal erred by not adjudicating an alleged failure of the Assessing Officer to specify the particular limb of section 271(1)(c) for initiating penalty proceedings, such that rectification is warranted. - HELD THAT: - The Tribunal recorded the submissions but there was no issue before it that the penalty order was bad merely because a specific limb was not specified; the claim that this constituted a mistake apparent from the record is an afterthought. A failure to accept a party's submission or to find in its favour does not constitute an obvious patent mistake amenable to rectification under section 254(2). [Paras 6, 9]

No rectifiable mistake; the contention is without merits and not a ground for section 254(2) relief.

Onus of proof in revised computation filed during assessment proceedings - voluntary revision before completion of assessment - mistake apparent from the record - Whether the Tribunal's refusal to accept the assessee's plea that the omission was an inadvertent/unintentional error corrected by a voluntary revised computation is a mistake apparent from the record. - HELD THAT: - The Tribunal considered the contention that the assessee filed a revised computation to rectify an inadvertent omission but did not accept that explanation. A mere disagreement with the assessee's version or non acceptance of a submission does not amount to an obvious patent error. Such re appreciation of facts and inferences lies outside the limited scope of rectification under section 254(2). [Paras 7, 9]

No mistake apparent from the record; the Tribunal's factual conclusion cannot be reopened by rectification.

Loose paper seized during search as source of addition - Explanation 5 to section 271(1)(c) - review and re appreciation not permissible under section 254(2) - Whether treating a seized loose sheet (document) as basis for addition and penalty under the Explanation is a mistake apparent from the record permitting rectification. - HELD THAT: - The contention that a loose paper cannot be equated with 'money, bullion, jewellery or other valuable article or thing' and therefore the penalty is leviable is essentially a challenge to the Tribunal's legal and factual conclusion. The assessee is seeking review of the Tribunal's order; such re appreciation is not permissible under section 254(2) and does not qualify as a patent mistake on the face of the record. [Paras 8, 9]

No rectifiable mistake; the grievance constitutes impermissible review/re adjudication.

Final Conclusion: The miscellaneous application under section 254(2) is dismissed. The matters urged by the assessee involve review, re appreciation of facts or debatable points of law and do not disclose any obvious or patent mistake in the Tribunal's order warranting rectification.

Provision for warranty expenses - Deductibility of accrued business liability - Mercantile system of accounting - Contingent liability versus liability in praesenti - Recognition of liability pending reimbursement from third party

Provision for warranty expenses - Deductibility of accrued business liability - Mercantile system of accounting - Contingent liability versus liability in praesenti - Recognition of liability pending reimbursement from third party - Whether the provision of Rs. 2.76 crores made by the assessee for warranty in respect of an engine failure during the warranty period is allowable as a deduction in assessment year 2006-07. - HELD THAT: - The Tribunal examined the Tripartite Agreement and found that under the contractual arrangement the assessee was obliged to handle warranty claims presented by the customer and, where the customer repaired the defect, the assessee had to refund expenses or the customer could deduct amounts from outstanding invoices. The assessee followed the mercantile system of accounting and, upon completion of the enquiry in 2006, IAF presented a claim on the assessee for reimbursement; further payments due to the assessee were being withheld by IAF on account of that claim. Applying the legal principles laid down by the Supreme Court in Bharat Earth Movers - that a business liability which has definitely arisen in the accounting year is deductible even if quantified or discharged at a future date provided the incurring of liability is certain and capable of reasonable estimation - the Tribunal held that the warranty provision was not a mere contingent liability but a liability in praesenti. The fact that reimbursement from the Russian overhauler was sought and not acknowledged by the third party did not convert the liability into a non-allowable contingent liability. The Assessing Officer had allowed a smaller portion of the claim, but the Tribunal found the balance properly provided in the assessee's accounts and allowable under the Act. [Paras 12, 13, 14, 16]

Provision of Rs. 2.76 crores for warranty expenses is allowable as a deduction in the hands of the assessee for assessment year 2006-07; the orders of the authorities below are reversed and the appeal is allowed.

Final Conclusion: The Tribunal allowed the assessee's claim and held that the provision for warranty expenses recognized in the year 2006-07 was deductible under the mercantile system applying the principle that a liability already accrued and capable of reasonable estimation is allowable even if payable or quantifiable at a future date.

Belongingness of seized documents - Proceedings under section 153C of the Income tax Act - Addition under section 69C as unexplained expenditure - Retraction of statement and its evidentiary value - Technical defect vitiating assessment proceedings

Belongingness of seized documents - Proceedings under section 153C of the Income tax Act - Technical defect vitiating assessment proceedings - Addition under section 69C as unexplained expenditure - Seized documents forming the basis of proceedings did not belong to the assessee and, therefore, invocation of proceedings under section 153C and additions under section 69C were not sustainable. - HELD THAT: - The Tribunal examined the seized papers and the line of authorities from the jurisdictional High Court and Supreme Court which held that initiation of proceedings under section 153C is maintainable only where the seized documents belong to the assessee. On the facts, the assessee was one of many land aggregators whose name appeared in loose papers seized from Jai Corp Group; earlier decisions on identical facts (including decisions of the Bombay High Court and the Supreme Court in related matters) held that such seized documents could not be held to belong to the individual aggregators and that the essential ingredients for invoking section 153C were not satisfied. In view of these binding precedents and the concurrent factual findings, the Tribunal allowed Ground No.2 on technical grounds and held that additions under section 69C based on those seized papers could not be sustained. [Paras 9]

Ground No.2 allowed; additions based on seized papers and proceedings under section 153C held unsustainable on the ground that the seized documents did not belong to the assessee.

Academic exercise - Retraction of statement and its evidentiary value - Remaining grounds raised (Grounds 1 and 3 to 6) were not adjudicated on merits and were treated as academic or consequential in view of the decision on belongingness. - HELD THAT: - Having allowed Ground No.2, the Tribunal treated adjudication of Grounds 1 and 3 to 5 as an academic exercise and dismissed them as such. Ground No.6 was dismissed as consequential and Ground No.7 as general in nature. The Tribunal noted that once the foundation for proceedings (i.e., belongingness of seized papers) is vitiated, further consideration of additions and related contentions becomes unnecessary. [Paras 10]

Grounds 1 and 3 to 5 dismissed as academic; Ground No.6 dismissed as consequential; Ground No.7 dismissed as general/consequential.

Final Conclusion: Appeal partly allowed: addition made under section 69C based on seized papers set aside on the ground that the seized documents did not belong to the assessee; other grounds treated as academic or consequential and dismissed accordingly.

Abatement of duty - remission of duty - wilful act, negligence or default - interest on duty - duty not leviable until clearance for home consumption - no unjust enrichment

Abatement of duty - remission of duty - wilful act, negligence or default - Entitlement to abatement under Section 22 or remission under Section 23 of the Customs Act, 1962 in respect of imported goods damaged by flood while in warehousing prior to clearance for home consumption. - HELD THAT: - The Court analysed the statutory distinction between Section 22 (abatement for damaged or deteriorated goods where residual value remains) and Section 23 (remission where goods are lost, destroyed or abandoned before clearance). It found that the goods suffered damage from flood but initially retained residual/salvage value (surveyor's report). Had the authorities permitted clearance on the abated value, duty on the reduced value under Section 22 would have been sustainable. However, the respondents refused clearance and ultimately the goods lost salvage value and were destroyed. In those circumstances, the petitioner became entitled to remission under Section 23 and no duty was payable. The Court further observed that the exception in Section 22 for damage caused by the importer's wilful act, negligence or default must be established by the revenue, but here the respondents' refusal to permit clearance resulted in destruction and precluded appropriation of duty even on abated value. [Paras 50, 51, 52, 55, 58]

Goods damaged in the warehouse and thereafter destroyed after the respondents refused clearance - petitioner entitled to remission under Section 23 and, accordingly, duty was not payable.

Interest on duty - duty not leviable until clearance for home consumption - no unjust enrichment - Validity of the demand of interest by the respondents (letter dated 18.3.2008) and entitlement to refund of duty and interest paid by the petitioner. - HELD THAT: - The Court held that because the respondents declined to permit clearance on abated value and thereby allowed the goods to be destroyed, the revenue could not validly retain or appropriate duty and interest. Interest cannot be demanded where no duty was payable in law because home clearance never occurred and the goods were ultimately destroyed. Applying principles that authorities must act reasonably and not deprive an assessee of benefits available in law, the Court directed refund of the amount paid by the petitioner together with interest, subject to verification that refund would not result in unjust enrichment and subject to production of a chartered accountant's certificate in lieu of a formal refund claim. [Paras 56, 57, 58, 59, 60]

Impugned demand for interest is not maintainable in the circumstances; the sum paid by the petitioner is to be refunded with interest within six weeks, subject to satisfaction that there would be no unjust enrichment.

Abatement of duty - remission of duty - Prayer in W.P. No.10331 of 2008 for consideration under Board Circular No.10/2006-Cus. - HELD THAT: - Having granted substantive relief by directing refund of duty and interest on the ground that the petitioner was entitled to remission and no duty was payable, the Court found there was no necessity to grant any alternate or further relief under the Board Circular and accordingly dismissed the petition seeking that relief. [Paras 61, 62, 63]

W.P. No.10331 of 2008 dismissed as unnecessary in view of the substantive relief granted.

Final Conclusion: W.P.Nos.10329 and 10330 of 2008 allowed - the demand for duty/interest was not maintainable in the circumstances and the amount paid by the petitioner is directed to be refunded with interest within six weeks, subject to a certificate to prevent unjust enrichment; W.P.No.10331 of 2008 dismissed.

Directions for compliance with prior orders - accounting of goods released subject to litigation - duty to inform importer of pending litigation - filing of compliance report - adjournment for final disposal

Directions for compliance with prior orders - accounting of goods released subject to litigation - duty to inform importer of pending litigation - filing of compliance report - Respondents to comply with the Court's order dated 7.2.2018 by ensuring that goods given clearance are accounted for and that the importer is informed that litigation is pending, and to place a compliance report on record on the next hearing date. - HELD THAT: - The Court noted its earlier order dated 7.2.2018 directing respondent Nos.3 and 4 to ensure that any goods granted clearance be properly accounted for and that information be given to the importer that litigation in this petition was pending. Respondent No.2 informed the Court that the said order has already been communicated and necessary compliance effected. The Court directed that a formal compliance report in respect of the order dated 7.2.2018 be placed on record on the next date of hearing fixed by the Court.

Compliance with the order dated 7.2.2018 is directed to be reported to the Court on 26.9.2018.

Adjournment for final disposal - filing of compliance report - Hearing for final disposal adjourned and fixed on 26.9.2018 to enable placement of the compliance report on record. - HELD THAT: - Upon joint request of the parties and having regard to the communication by respondent No.2 about compliance, the Court, by oral order dated 7.2.2018, had issued notice for final disposal. The Court has now fixed the matter for final disposal on 26.9.2018 and directed that the compliance report be filed by that date.

The matter is adjourned for final disposal to 26.9.2018, with a direction to place the compliance report on record by that date.

Final Conclusion: The Court recorded communication of compliance with its earlier directions, directed a formal compliance report in respect of the order dated 7.2.2018 to be placed on record, and adjourned the matter for final disposal to 26.9.2018.

Provisional release of seized goods - bond for full value of seized goods - bank guarantee as security for provisional release - payment of duty assessed on declared value - judicial supervision of conditions for release

Provisional release of seized goods - bond for full value of seized goods - bank guarantee as security for provisional release - payment of duty assessed on declared value - Revision of conditions imposed for provisional release of seized import consignments and direction for immediate release on compliance with revised conditions. - HELD THAT: - The Tribunal, having regard to the preliminary material indicating possible under-valuation and the representation of the Revenue, found the original conditions for provisional release to be onerous. The Tribunal noted the High Court's direction to approach this forum for review of conditions and, balancing the Revenue's concern about valuation against the importer being a regular importer and offering a bond for full value, exercised its discretion to moderate the conditions. The revised conditions require (i) furnishing a bond in the Customs Department's accepted format for the full value of the seized goods, (ii) payment at the time of release of duty as assessed on the declared value of the consignment, and (iii) submission of a bank guarantee of Rs. 5,00,000/- containing an auto-renewal clause as security to the bond. The Tribunal applied these conditions uniformly to both consignments and concluded that such measures adequately protect Revenue interest while removing disproportionately burdensome pre-conditions to provisional release. [Paras 4, 5, 6]

Appeals allowed; on compliance with the revised conditions the goods shall be immediately released to the appellants.

Final Conclusion: The Tribunal relaxed the earlier onerous conditions for provisional release and directed immediate release of the seized consignments on submission of a full-value bond in departmental format, payment of duty on the declared value at the time of release, and a bank guarantee of Rs. 5,00,000/- with auto-renewal; same conditions apply to both consignments.

Transfer of duty free imported goods between EOUs - CT 3 procedure - permissibility under Notification No. 52/2003 Cus (para 4) - foreign trade policy para 6.15 - transfer to another EOU - treatment as removal between warehouses under Section 64 of the Customs Act, 1962 - no duty on transfer to another EOU

Transfer of duty free imported goods between EOUs - permissibility under Notification No. 52/2003 Cus (para 4) - foreign trade policy para 6.15 - transfer to another EOU - CT 3 procedure - Transfer of duty free imported inputs from one EOU to another EOU under CT 3 is permissible without payment of duty. - HELD THAT: - The Tribunal held that paragraph (4) of Notification No. 52/2003 Cus, read with the Export and Import Policy, permits removal of goods (other than capital goods) or goods partially processed or manufactured in the unit to be taken outside the unit without payment of duty for specified purposes, subject to conditions. The foreign trade policy para 6.15 expressly permits transfer of goods and services imported or procured by an EOU to another EOU, treating such transfer as import for the receiving unit. The appellant transferred imported polypropylene from one EOU to another of its EOUs under CT 3 procedure, which was allowed by departmental authority. In light of the clear provisions of the notification and para 6.15 of the foreign trade policy, and consistent decisions of this Tribunal where inter EOU transfers were held permissible, the Department's contention that such transfer violated conditions of the notification and attracted duty was rejected. The Tribunal therefore found no obligation to levy duty on the transfers in question.

The demand and penalty confirmed by the lower authorities were set aside and the appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that transfers of duty free imported inputs from one EOU to another EOU under CT 3, in accordance with Notification No. 52/2003 Cus (para 4) and foreign trade policy para 6.15, are permissible without payment of duty; the impugned demand and penalty were set aside.

Interest from date of maturity till actual payment - penal interest under Rule 17 - timely disbursement to depositors within specified period - insolvency application to be disposed of on merits without reference to this Court's judgment

Interest from date of maturity till actual payment - Entitlement of depositors to post maturity interest at the rate of 12/12.5% per annum from date of maturity until actual payment. - HELD THAT: - The appellant represented that amounts have been paid to depositors within the extended period but not necessarily beyond the date of maturity up to actual payment. The appellant undertook to pay interest at the rate of 12/12.5% per annum from the date of maturity until actual payment, if not already paid. The Court directed that such interest should be released to the depositors notwithstanding any other impediment.

Direct that interest at 12/12.5% per annum from date of maturity until actual payment be released to depositors.

Penal interest under Rule 17 - Whether penal interest at 18% per annum under Rule 17 is attracted where payments were made within the extended period. - HELD THAT: - Counsel for the respondent urged imposition of penal interest under Rule 17 at 18% per annum. The Court noted that the appellant had paid within the extended period and, on that basis, did not agree that penal interest under Rule 17 is attracted.

Penal interest under Rule 17 at 18% per annum is not attracted where payments have been made within the extended period.

Timely disbursement to depositors within specified period - Timeframe for disbursing the amounts (including the directed interest) to depositors. - HELD THAT: - Having directed payment of interest as stated, the Court imposed a timeline to ensure implementation. The Court ordered that the amounts to be disbursed to depositors should be paid within twelve weeks from the date of the order.

Amounts (including the directed interest) to be disbursed to depositors within twelve weeks from the date of the order.

Insolvency application to be disposed of on merits without reference to this Court's judgment - Disposition of the insolvency application pending before the NCLT. - HELD THAT: - The Court directed that the insolvency application pending before the NCLT shall be disposed of on its own merits and expressly without reference to the impugned judgment of this Court. This leaves the matter for fresh consideration and adjudication by the NCLT on merits.

Insolvency application remitted for disposal on merits by the NCLT without reference to this Court's impugned judgment.

Final Conclusion: Appeals disposed of with directions that depositors be paid interest at 12/12.5% per annum from date of maturity until actual payment and that amounts be disbursed within twelve weeks; penal interest under Rule 17 not attracted where payment was within the extended period; the pending insolvency application is to be decided by the NCLT on merits without reference to this Court's judgment.

Initiation of corporate insolvency resolution process - existence of undisputed operational debt - notice of dispute under Section 8(2) - power of adjudicating authority to admit or reject under Section 9(5) - IBC not a substitute for recovery - pre-existing dispute principle (Mobilox) - impropriety of coercing settlement to avoid CIRP

Impropriety of coercing settlement to avoid CIRP - initiation of corporate insolvency resolution process - Validity of the NCLAT order directing the appellant to settle the respondent's claim under threat of initiation of CIRP - HELD THAT: - The NCLAT order, while styled as an interim order at admission stage, effectively directed the appellant to settle the respondent's claim and threatened initiation of CIRP if settlement was not effected. The Tribunal did not consider the merits or demonstrate that the appellant owed an undisputed debt; instead it gave a 'last chance' to settle, with an indication that the appeal would be disposed at admission. Such coercive direction to pay or face insolvency proceedings was improper. The Supreme Court found that the NCLAT had not discussed how the amount was payable despite earlier findings and orders (including the NCLT's reasoning) and therefore set aside the impugned order. [Paras 13, 16]

Impugned NCLAT order directing settlement under threat of CIRP set aside.

Existence of undisputed operational debt - notice of dispute under Section 8(2) - power of adjudicating authority to admit or reject under Section 9(5) - pre-existing dispute principle (Mobilox) - IBC not a substitute for recovery - Whether the NCLT was justified in rejecting the Section 9 petition because a pre-existing dispute existed and there was no enforceable award as to Invoice Nos. 1-57 - HELD THAT: - The Court examined the chronology: the Arbitral Council had rejected claims in respect of Invoice Nos. 1-57 as time barred; proceedings under Section 34 and subsequent steps led to no enforceable award on those invoices; the High Court at Hyderabad held there was no enforceable award for execution as to items 1-57. Applying the principle in Mobilox, the IBC cannot be used as a forum for recovery where a real dispute exists. Section 9(5) requires rejection where notice of dispute has been received or a record of dispute exists. Given the prior arbitration findings and subsequent judicial orders showing that those claims were not enforceable, the NCLT was justified in dismissing the Section 9 petition for lack of an undisputed operational debt. [Paras 12, 14, 15, 16]

NCLT's dismissal of the Section 9 petition was upheld; there was a pre-existing dispute and no undisputed debt as to Invoice Nos. 1-57.

Final Conclusion: The appeal is allowed; the NCLAT order dated 4 September 2018 is set aside. Having upheld the NCLT's conclusion that there was a pre-existing dispute and no undisputed operational debt with respect to the contested invoices, the Company Appeal before the NCLAT is dismissed. No order as to costs.

Pre-existing dispute - bona fide dispute - true dispute test (Mobilox principle) - Section 9 of the Insolvency and Bankruptcy Code, 2016 - compliance with Section 9(5) of the Insolvency and Bankruptcy Code, 2016 - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional

Pre-existing dispute - bona fide dispute - true dispute test (Mobilox principle) - Existence and sufficiency of the dispute raised by the Corporate Debtor against the Operational Creditor's claim - HELD THAT: - The Tribunal examined the correspondence and material relied upon by the Corporate Debtor (emails and an analytical test report) to determine whether a true pre-existing dispute existed such that the Section 9 application should be rejected. The email produced did not identify invoice numbers or otherwise connect the complaint to the invoices forming the claim and showed that the Corporate Debtor had consumed the goods despite a vague protest. The analytical report related to a dated supply and lacked proof linking it to the invoices in the present claim or to any prescribed quality standard at the time of purchase. The Tribunal also noted inconsistent documents and similar reliance in a separate proceedings involving a sister concern, which undermined the genuineness of the objections. Applying the true dispute test in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., the Tribunal held that the dispute asserted was hypothetical, vague and not bona fide, and therefore did not bar admission of the Section 9 application. [Paras 13, 14, 16, 17, 18]

The dispute raised by the Corporate Debtor is not a bona fide pre-existing dispute and is insufficient to defeat the Section 9 application.

Section 9 of the Insolvency and Bankruptcy Code, 2016 - compliance with Section 9(5) of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional - Whether the Operational Creditor satisfied the statutory requirements for admission under Section 9 and whether the application should be admitted - HELD THAT: - The Tribunal considered whether the application under Section 9 was complete and compliant with the requirements of Section 9(5). Although no affidavit under Section 9(3)(b) was filed because of the dispute, the Tribunal found the dispute to be not bona fide. The Operational Creditor produced a bank certificate by supplementary affidavit to comply with Section 9(3)(b)(c). No name for a Resolution Professional had been proposed; nevertheless, other requirements under Section 9(5)(i)(a) to (c) were found to be complied with. On this basis, and having rejected the alleged pre-existing dispute, the Tribunal concluded that the application was maintainable and should be admitted. Consequently, the Tribunal appointed an Interim Resolution Professional and directed the statutory moratorium and related steps to be implemented. [Paras 19, 20, 21, 22]

The Section 9 application is admitted; an Interim Resolution Professional is appointed and moratorium and public announcement directions are issued.

Final Conclusion: The Tribunal held that the objections raised by the Corporate Debtor did not amount to a bona fide pre-existing dispute under the true dispute test and, having found the Section 9 prerequisites otherwise satisfied, admitted the insolvency application, appointed an Interim Resolution Professional and directed declaration of moratorium and statutory public announcement.

Committee of Creditors voting threshold - mandatoriness of Section 21(8) - approval of Resolution Plan - non contravention with Section 30(2)(e) - liquidation under Section 33 read with Section 34

Committee of Creditors voting threshold - mandatoriness of Section 21(8) - approval of Resolution Plan - non contravention with Section 30(2)(e) - All decisions of the Committee of Creditors, including approval of a resolution plan, must be taken by a vote of not less than seventy five percent of the voting share of financial creditors as mandated by Section 21(8) (as it then stood), and a resolution plan approved with less than that threshold is contrary to Section 30(2)(e). - HELD THAT: - The Tribunal examined Section 21(8) (as it then was) and held that the provision made the seventy five percent voting requirement mandatory for all Committee of Creditors decisions, including the approval of a resolution plan. Because Section 30(2)(e) requires that a resolution plan must not contravene any law, a plan approved by a lesser percentage than seventy five per cent would be in conflict with Section 21(8) and therefore could not be sanctioned by the Adjudicating Authority. Applying this principle, the Tribunal found that the Adjudicating Authority, Hyderabad Bench, approved a plan with less than the mandatory threshold and that such approval was not permissible under the I&B Code as it stood at the relevant time. The Tribunal therefore upheld the reasoning in the Mumbai Adjudicating Authority's order which refused sanction to a plan approved by less than seventy five percent and set aside the Hyderabad order which had approved a plan with a lesser percentage. [Paras 29, 30, 31]

The decision upholding the mandatory nature of the seventy five percent voting requirement is affirmed; the Hyderabad Adjudicating Authority's approval of the resolution plan with less than seventy five percent is set aside.

Liquidation under Section 33 read with Section 34 - Whether the matter should be remitted for liquidation proceedings under Section 33 read with Section 34 in view of absence of a validly approved resolution plan. - HELD THAT: - Having concluded that the resolution plan approved by the Adjudicating Authority, Hyderabad Bench, was invalid for failing to meet the statutory voting threshold, the Tribunal directed that the corporate insolvency resolution process must give way to liquidation. The Tribunal remitted the case of Kamineni Steel & Power India Pvt. Ltd. to the Adjudicating Authority to initiate liquidation proceedings in terms of Section 33 read with Section 34 of the I&B Code and to pass the requisite order immediately. The Tribunal also noted the earlier upholding of the Mumbai Adjudicating Authority's order and disposed of the related appeals accordingly. [Paras 32]

The appeals concerning Kamineni Steel & Power India Pvt. Ltd. are allowed in part and the case is remitted to the Adjudicating Authority for immediate initiation of liquidation proceedings under Section 33 read with Section 34.

Final Conclusion: The Tribunal held that the seventy five percent voting requirement of Section 21(8) (as it then stood) for Committee of Creditors' decisions is mandatory; accordingly, the Hyderabad Adjudicating Authority's sanction of a resolution plan approved by less than that threshold was set aside, the Mumbai Adjudicating Authority's contrary refusal was upheld, and the Kamineni matter was remitted for initiation of liquidation under Section 33 read with Section 34 of the I&B Code; no order as to costs.

Tour Operator services - Air Travel Agent services - service tax liability on billing versus receipt - classification of taxable service - computation of service tax where multiple rates apply - remand for fresh adjudication

Service tax liability on billing versus receipt - Whether the demand based on gross income shown in the balance sheet (billing) in place of actual receipts was correctly quantified - HELD THAT: - The Tribunal found that the appellant had specifically contended that service tax liability at the relevant time arose on actual receipts and not on gross billing reflected in the balance sheet, and that this contention was not considered by the adjudicating authority or the Commissioner (Appeals). The failure to examine and verify this contention directly affects the quantum of demand. Accordingly, the matter was not adjudicated on merits and requires fresh consideration and verification by the adjudicating authority before any quantification is made.

Remanded to the adjudicating authority for fresh consideration and verification of whether liability arises on billing or on actual receipts; quantification to follow after such examination.

Computation of service tax where multiple rates apply - Whether applying an average rate of service tax where different rates applied to the services was correct - HELD THAT: - The Tribunal recorded the appellant's submission that different rates of service tax applied to the services in question and that the lower authorities had applied an average rate without properly addressing this contention. Since this point materially impacts the computation of tax liability and was not considered by the lower fora, the Tribunal directed that the adjudicating authority consider and determine the proper rate-wise computation on fresh adjudication.

Remanded for fresh adjudication to determine correct rate-wise computation instead of applying an average rate.

Classification of taxable service - Tour Operator services - Air Travel Agent services - Whether the services rendered were correctly classified for levy of service tax - HELD THAT: - The Tribunal noted the appellant's challenge to the classification relied upon in quantifying the demand and observed that the adjudicating authority and Commissioner (Appeals) did not properly address the classification issue. Because classification is fundamental to determining the nature of taxable service and the applicable tax treatment, the Tribunal set aside the impugned order and remanded the matter for fresh consideration of classification and the consequences thereof.

Remanded for reconsideration and final determination of the classification of the services and consequent tax treatment.

Final Conclusion: The impugned order is set aside and the appeal is allowed by way of remand; the matter is directed to be decided afresh by the adjudicating authority after considering the appellant's contentions on billing versus receipts, correct rate-wise computation, and classification of services, with all issues kept open.

Adjudication cannot travel beyond the scope of the show cause notice - classification of service in the show cause notice binding on the adjudicating authority - scope of show cause notice - business auxiliary service versus advertisement agency service

Adjudication cannot travel beyond the scope of the show cause notice - classification of service in the show cause notice binding on the adjudicating authority - business auxiliary service versus advertisement agency service - Validity of demand confirmed under a service classification different from that proposed in the show cause notice. - HELD THAT: - The Tribunal found that the show cause notice proposed classification of receipts as Business Auxiliary Service, whereas the original adjudicating authority confirmed demand under advertisement agency service. It is settled that an adjudication order cannot travel beyond the scope of the show cause notice and the adjudicating authority must decide only on the proposal made in the SCN. The Commissioner (Appeals) erred in part by altering the classification on his own in appeal. Because the demand was sustained under a category not proposed in the SCN, the demand could not be upheld in law. Reliance placed on precedent establishing that the SCN limits the field of adjudication was accepted and applied to set aside the impugned order.

Demand confirmed under a service classification not proposed in the show cause notice is unsustainable; impugned order set aside and appeal allowed.

Final Conclusion: The appeal is allowed on the ground that the adjudicating authority confirmed demand under a category different from that proposed in the show cause notice; the impugned order is set aside and the demand does not sustain.

Exemption under Notification No. 12/03-ST - availability of exemption for materials consumed in providing output service - burden of proof to establish sale of goods to service recipient - waiver of penalty where service tax was paid but not collected from service recipient - remand for verification of disputed factual matters

Exemption under Notification No. 12/03-ST - availability of exemption for materials consumed in providing output service - burden of proof to establish sale of goods to service recipient - Limited question of applicability of Notification No. 12/03-ST to the material component of the service remanded for reconsideration. - HELD THAT: - The Tribunal observed that the show-cause notice raised demand on the value of material but the appellant did not produce documents before the Tribunal establishing that the materials consumed were sold to the service recipient. The Notification is conditional and its extension requires proof that the materials were sold to the recipient; absent documentary evidence the adjudicating authority must reexamine availability of the exemption. For these reasons the Tribunal did not decide the exemption on merits but remanded the matter to the original authority for reconsideration solely on the limited issue of applicability of Notification No. 12/03-ST. [Paras 4]

Matter remanded to the original authority for fresh consideration limited to the question whether Notification No. 12/03-ST applies to the material component.

Waiver of penalty where service tax was paid but not collected from service recipient - remand for verification of disputed factual matters - Whether penalty should be waived remanded for verification of the factual question whether the service tax (paid with interest) had been collected from the service recipient. - HELD THAT: - The Tribunal noted conflicting contentions on the record about whether the appellant had collected the service tax from the recipient before paying it (contention by appellant that it was not collected; Revenue's contention that it was collected). This is a question of fact requiring verification by the adjudicating authority. If it is found that the tax was not collected from the recipient, the appellant may be entitled to waiver of penalty. Consequently the Tribunal refrained from adjudicating penalty and directed the original authority to verify the factual position and decide accordingly. [Paras 4]

Issue of waiver of penalty remanded to the original authority for factual verification and fresh decision.

Final Conclusion: The impugned order is set aside and the matter is remanded to the original authority for limited fresh consideration on (a) applicability of Notification No. 12/03-ST to the material component and (b) verification whether the tax paid was collected from the service recipient for deciding waiver of penalty.

Service tax on renting of bullock carts - classification under Supply of Tangible Goods Service - precedential effect of tribunal decision

Service tax on renting of bullock carts - classification under Supply of Tangible Goods Service - precedential effect of tribunal decision - Whether renting of bullock carts during harvesting seasons for procuring sugarcane from fields is liable to service tax under the category of Supply of Tangible Goods Service. - HELD THAT: - The Tribunal examined the question of taxability of services rendered by way of hiring bullock carts for collection of sugarcane during harvest and applied its earlier decision in Bhima SSK Ltd. v. Commissioner of C. Ex. & S.T., Pune-III. Relying on that precedent, the Tribunal concluded that such renting of bullock carts for procuring sugarcane does not attract service tax under the category of Supply of Tangible Goods Service. No contrary judicial decision was placed before the Tribunal and the Revenue's stand as recorded by the Commissioner (Appeals) was not sustained in view of the binding precedent relied upon by the appellant.

Impugned order set aside; renting of bullock carts for procuring sugarcane during harvesting seasons held not liable to service tax under Supply of Tangible Goods Service.

Final Conclusion: Appeal allowed and the order-in-appeal set aside in accordance with the Tribunal's earlier decision in Bhima SSK Ltd.; the appellant is not required to discharge service tax on renting of bullock carts for procuring sugarcane during harvesting seasons.

Maintainability of departmental appeal under Government litigation policy - waiver and sustainability of penalty under Rule 173Q(1)(a) of the Central Excise Rules, 1944 - effect of setting aside excise duty demand on connected penalty

Maintainability of departmental appeal under Government litigation policy - Revenue appeal dismissed as not maintainable under Government litigation policy because amount involved is less than Rs. 20 Lakhs as per Circular No.390/Misc/116/2017-JC dated 11.07.2018. - HELD THAT: - The Tribunal noted that the Revenue's appeal sought to reinstate a demand which involved an amount below the monetary threshold prescribed in the Government's litigation policy. Applying the Circular cited in the order, the appeal did not satisfy the maintainability criteria for departmental litigation and therefore could not be entertained. [Paras 2]

Revenue's appeal dismissed on maintainability grounds.

Waiver and sustainability of penalty under Rule 173Q(1)(a) of the Central Excise Rules, 1944 - effect of setting aside excise duty demand on connected penalty - Penalty imposed under Rule 173Q(1)(a) held not sustainable since the excise duty demand to which it was connected had been set aside by the Commissioner (Appeals), following the principle laid down by the Larger Bench in Godrej Soaps v. Commissioner of Central Excise. - HELD THAT: - The Tribunal observed that the show cause notice proposed penalty for contravention of Rule 52A and that the adjudication had confirmed a duty demand which was subsequently set aside by the Commissioner (Appeals). Relying on the Larger Bench decision referenced in the judgment, the Tribunal applied the principle that when the underlying demand is dropped, the penalty provision under Rule 173Q(1)(a) cannot be sustained against the assessee. In view of that binding precedent and the factual position that the demand stood set aside, the penalty was directed to be vacated. [Paras 2, 3]

Assessee's appeal allowed; penalty under Rule 173Q(1)(a) set aside.

Final Conclusion: The Revenue's appeal is dismissed as not maintainable under the Government litigation policy; the assessee's appeal is allowed and the penalty under Rule 173Q(1)(a) is set aside because the underlying excise duty demand was dropped.

Concessional removal under CT-3 - proviso to Rule 6 - return of defective, damaged or surplus goods - duty not leviable on goods returned to original supplier under Rule 6 - interest and penalty not sustainable where return sanctioned by Rule 6 - reliance on Dr. Reddy's Laboratories decision

Concessional removal under CT-3 - proviso to Rule 6 - return of defective, damaged or surplus goods - duty not leviable on goods returned to original supplier under Rule 6 - Whether duty can be demanded where goods received by a 100% EOU under CT-3 were found unfit and returned to the original supplier in terms of Rule 6 proviso of the Central Excise Concessional Duty Rules, 2001. - HELD THAT: - The tribunal found no dispute of fact that the appellant, a 100% EOU, received inputs under CT-3 and thereafter returned them to the original supplier after they were found unfit for use. Rule 6 and its proviso in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacturer of Excisable Goods) Rules, 2001 expressly permit return of goods which are defective, damaged, unsuitable or surplus to the needs of the manufacturer to the original manufacturer. Applying that provision to the present facts, the tribunal held that duty could not be demanded where the statutory proviso authorised return of the goods. The tribunal also relied on the precedent of Dr. Reddy's Laboratories where identical factual and legal questions were decided in favour of the assessee, and found the present case to be on all fours with that decision. On these grounds the demand of duty was held unsustainable.

Demand of duty set aside as prohibited by Rule 6 proviso; appeal allowed.

Interest and penalty not sustainable where return sanctioned by Rule 6 - reliance on Dr. Reddy's Laboratories decision - Whether interest and penalty confirmed by the Commissioner (Appeals) are sustainable where the goods were returned under the Rule 6 proviso. - HELD THAT: - Having concluded that duty could not be demanded because the goods were lawfully returned under the proviso to Rule 6, the tribunal observed that consequentially the demand of interest and penalty founded on that duty also could not stand. The tribunal followed the reasoning in Dr. Reddy's Laboratories, which treated interest and penalty as unsustainable in identical circumstances, and applied that ratio to set aside the interest and penalty confirmed by the lower authority.

Demand of interest and penalty set aside; appeal allowed.

Final Conclusion: The appeal is allowed: the demand of duty, and consequential interest and penalty, are set aside because the goods received under CT-3 were returned to the original supplier as permitted by the proviso to Rule 6 of the Central Excise Concessional Duty Rules, 2001, following the ratio in Dr. Reddy's Laboratories.

Transaction value - related person valuation - value under Rule 8 and Proviso to Rule 9 of Central Excise Valuation Rules, 2000 - cost of manufacture plus 10% notional profit - acceptability of Chartered Accountant/Cost Accountant certificate as evidence of cost - burden on revenue to disprove declared value

Related person valuation - transaction value - value under Rule 8 and Proviso to Rule 9 of Central Excise Valuation Rules, 2000 - cost of manufacture plus 10% notional profit - acceptability of Chartered Accountant/Cost Accountant certificate as evidence of cost - burden on revenue to disprove declared value - Whether the demand by loading 10% on the transaction value of goods supplied to a sister concern was sustainable when the assessee produced cost certification showing that declared value exceeded cost of manufacture plus 10% notional profit. - HELD THAT: - The Tribunal found that Revenue raised a differential duty by applying a 10% loading to the transaction value on the ground that the goods were supplied to a related person and valuation under Rule 8 and the Proviso to Rule 9 should apply. The assessee produced a Chartered Accountant certificate certifying the cost data which showed that the value computed on cost of manufacture plus 10% notional profit was lower than the price charged; the assessee thereafter produced a Cost Accountant certificate endorsing the Chartered Accountant's certification. The lower authorities rejected the evidence solely because the initial certificate was by a Chartered Accountant and not a Cost Accountant. The Tribunal held there is no statutory provision in the Valuation Rules mandating that cost-of-production figures must be certified only by a Cost Accountant and that once the assessee produced certification of cost (and subsequently a Cost Accountant's endorsement), the Department was obliged to demonstrate that the cost data was incorrect. The Revenue had not made any effort to establish that the certified cost of the product was wrong. In the absence of evidence from the Revenue to displace the certified cost figure, the value adopted by the assessee could not be disputed and the demand based on the loading was therefore unsustainable.

Demand by loading 10% on the transaction value in respect of supplies to a sister concern set aside; certified cost evidence accepted and differential duty demand disallowed.

Final Conclusion: The appeal is allowed: in the absence of any evidence from Revenue disproving the assessee's certified cost of manufacture (endorsed by a Cost Accountant), the Tribunal accepted the declared value and set aside the demand based on a 10% loading for related-party valuation.

Eligibility of Cenvat credit - definition of 'Input Service' under Rule 2(l) of Cenvat Credit Rules - Construction Service exclusion from Input Service - Repair and Maintenance as Input Service - modernization, renovation and repair covered in the inclusive part of the definition of 'Input Service'

Repair and Maintenance as Input Service - Construction Service exclusion from Input Service - eligibility of Cenvat credit - Cenvat credit is admissible on construction services where those services relate to repair, renovation or modernization of the existing factory premises and are reflected as 'Repair and Maintenance' in the service provider's invoices. - HELD THAT: - The Tribunal examined the invoices and descriptions of services and found that the work involved civil repairs on existing structures - not new construction - and that the service provider discharged service tax claiming the 30% abatement available for Repairs and Maintenance. The Commissioner (Appeals) had accepted that if the services are of 'Repair and Maintenance' the appellant would be entitled to credit. The Tribunal further relied on its earlier decision which interpreted the inclusive part of the definition of 'input service' to cover services used in modernization, renovation and repair of the factory, and noted the Board's clarification (Circular No. 943/4/2011-CX dated 29.04.2011) which answered the question on eligibility of credit for construction services used in modernization, renovation or repair. Accordingly, notwithstanding the exclusion of 'Construction Service' in the exclusion clause of Rule 2(l), the harmonious reading of the inclusive provision and the exclusion clause preserves eligibility of input credit for construction-related activities that amount to modernization, renovation or repair of factory premises. Applying these principles to the facts, the Tribunal concluded that the services received by the appellant were in the nature of Repair and Maintenance and therefore eligible for Cenvat credit. [Paras 4]

Impugned order set aside; appeal allowed and Cenvat credit granted for construction services used for repair, renovation or modernization of the factory premises as shown in the invoices.

Final Conclusion: The Tribunal allowed the appeal, holding that construction-related services which in substance are repair, renovation or modernization of existing factory premises (and are invoiced/classified as Repair and Maintenance) qualify as 'input service' under Rule 2(l) and the Cenvat credit claimed is admissible.

Review or Rectification of Orders (Review/ROM) - Appellate Tribunal's Error in Characterisation of Issues - Recall and Restoration of Proceedings - Default in Payment of Excise Duty under Rule 8(3A) of Central Excise Rules, 2002 - CENVAT Credit on Sales Commission

Review or Rectification of Orders (Review/ROM) - Appellate Tribunal's Error in Characterisation of Issues - Default in Payment of Excise Duty under Rule 8(3A) of Central Excise Rules, 2002 - CENVAT Credit on Sales Commission - Recall and Restoration of Proceedings - Tribunal's ROM application allowed to rectify its earlier order which had mistakenly treated the appeal as concerning CENVAT credit on sales commission instead of default in payment of excise duty under Rule 8(3A), and the original appeal restored. - HELD THAT: - The Revenue filed a review/rectification application pointing out that the substantive question in appeal No. E/10782/2017 was default in payment of monthly excise duty under Rule 8(3A) of the Central Excise Rules, 2002, but the tribunal's order dated 24.11.2017 disposed the appeal on the basis that the issue was CENVAT credit on sales commission. On perusal of the impugned order and the appeal file the tribunal found this to be a clear error in characterization of the issue. In consequence, the tribunal concluded that rectification was warranted to correct the mistaken disposal and to restore the appeal to its original number for adjudication on the correct issue. [Paras 2, 4]

Order dated 24.11.2017 recalled; ROM application allowed; appeal restored to original number and listed for hearing on 07/09/2018.

Final Conclusion: ROM application granted to correct the tribunal's mischaracterisation of the issue; the earlier order is recalled and the appeal reinstated for determination on the correct question of default in payment of excise duty under Rule 8(3A).

Crediting error between assessment years - entry tax - adjustment of excess refund to arrears - penalty under Section 9(2)(b) read with Section 12(3)(b) of the TNGST Act

Crediting error between assessment years - penalty under Section 9(2)(b) read with Section 12(3)(b) of the TNGST Act - Penalty imposed for non-payment of tax for assessment year 2004-05 where entry tax had been mistakenly credited to assessment year 2003-04. - HELD THAT: - The Court found as an admitted fact that the petitioner had paid entry tax for the year 2004-05 which was mistakenly credited by the respondent to 2003-04 and that the respondent thereafter treated and refunded the excess amount in 2009. The mistake in crediting was attributable to the respondent. In these circumstances the court held that the respondent cannot validly impose penalty for the assessment year 2004-05 when the non-payment arose from the revenue's own error. The court therefore quashed the levy of penalty while leaving the assessment otherwise intact. [Paras 7, 8]

Penalty imposed under the stated provisions for assessment year 2004-05 quashed.

Adjustment of excess refund to arrears - entry tax - Whether the respondent could and ought to have adjusted the excess refundable amount against arrears instead of effecting refund or permitting inter-company adjustment. - HELD THAT: - The Court noted that after finalisation of assessment for 2003-04 the respondent showed an excess refundable amount which remained with the department and was refunded in 2009; the petitioner had requested adjustment of that excess in favour of a related concern. The court observed that there was no impediment to the respondent adjusting the excess amount towards arrears of tax under the CST Act for the relevant year and that, had the respondent adjusted the amount for the correct year rather than effecting the refund, the question of imposing penalty would not have arisen. The finding records the respondent's error in crediting and the consequent available remedy of adjustment to arrears. [Paras 6, 7]

Respondent could and ought to have adjusted the excess refundable amount to the arrears, and the failure to do so contributed to the illegitimacy of the penalty.

Final Conclusion: Writ petition allowed in part; impugned order quashed insofar as it levies penalty for assessment year 2004-05 on account of the respondent's mistake in crediting entry tax to 2003-04, and no costs.

Recovery of tax pending assessment - encashment of post-dated cheques collected during search - search and seizure - statement recorded during search - protective measures to safeguard revenue

Encashment of post-dated cheques collected during search - recovery of tax pending assessment - protective measures to safeguard revenue - Respondents restrained from depositing/realising the remaining post-dated cheques collected during the search pending completion of assessment. - HELD THAT: - The court observed that although statements were recorded and documents collected during the search and assessment proceedings have been initiated but are not complete, the department cannot proceed to utilize and recover tax by realising the remaining cheques until the tax liability is finally determined in the assessment. The court recognised that statutory provisions permit the department to take measures to protect revenue where necessary, but on the material before it a limited protective order preventing further encashment of the cheques was appropriate. Accordingly, the respondents were directed not to deposit the remaining cheques and to return them to the petitioner. [Paras 3, 4]

Respondents are prevented from depositing/realising the remaining cheques collected during the search and they are to be returned to the petitioner.

Recovery of tax pending assessment - encashment of post-dated cheques collected during search - Prayer for refund of the amount already recovered was rejected. - HELD THAT: - The court noted that the petitioner had issued a cheque and had, in lieu thereof, transferred money by RTGS for one payment; in those circumstances the question of coercive recovery had some significance. Without delving into detailed factual minutiae, the court declined to grant a refund of amounts already recovered, implying that recoveries already effected would not be disturbed by the order. [Paras 3]

Prayer for refund of the amount already recovered is not granted.

Search and seizure - statement recorded during search - Petition to quash the statement recorded during the search was refused. - HELD THAT: - The court held that the legality of the statement recorded during the search could not be determined in the petition since its validity depends on a range of factors that must be considered in the course of the assessment proceedings. Therefore, the request to declare the statement illegal was not acceded to at this stage. [Paras 3]

The request to quash the statement dated 04.08.2018 is refused.

Final Conclusion: Petition disposed of: respondents restrained from realising the remaining post-dated cheques collected during the search and directed to return them; other prayers for refund and quashing of the statement are refused, with no expression of opinion on issues arising in the pending assessment.

Quashing of criminal proceedings under Section 482 Cr.P.C. - criminal breach of trust - criminal conspiracy - cheating - prima facie satisfaction on a private complaint - effect of restitution/re-deposit on criminal liability

Criminal breach of trust - criminal conspiracy - prima facie satisfaction on a private complaint - Prima facie offence under Section 406 read with Section 120 B of the IPC was made out from the complaint against the applicants and therefore the complaint could not be quashed at the threshold. - HELD THAT: - The Court examined the averments that the complainant's demat and trading accounts were maintained with the applicant company, that unauthorised sale of the complainant's shares and utilisation of his trading balance were effected by the co-accused and that the company subsequently re-transferred shares to the complainant. The court held that these facts, taken on the face of the complaint, furnished a prima facie case of criminal breach of trust in connivance with others. The defence that the transactions were solely by the agent and that the company later re-deposited shares raised factual disputes requiring evidence; such disputed questions of fact could not be resolved on a Section 482 petition. Accordingly, the trial court was correct in proceeding with the complaint on the offences of criminal breach of trust and conspiracy as prima facie made out. [Paras 8, 9]

Complaint not quashed insofar as offences under Section 406 read with 120 B IPC are concerned; trial to continue on those charges.

Cheating - quashing of criminal proceedings under Section 482 Cr.P.C. - No offence of cheating under Section 420 of the IPC was made out from the allegations in the complaint against the present applicants. - HELD THAT: - The Court observed that the complaint contained no allegation that the applicants made any false representation to the complainant inducing him to deposit money or effect transactions. The absence of such averments meant that the essential ingredients of cheating were not disclosed in the complaint. Both the Magistrate and the Sessions Judge were found to have erred in holding that an offence under Section 420 was prima facie made out against the applicants. [Paras 11, 12]

Impugned finding that Section 420 IPC was made out against the applicants is set aside; proceedings for cheating quashed as to the applicants.

Effect of restitution/re-deposit on criminal liability - criminal breach of trust - Restitution or subsequent re-deposit of shares does not negate the commission of criminal breach of trust which was made out at the time of the unauthorised sale. - HELD THAT: - The Court held that the offence of criminal breach of trust was consummated the moment the shares and funds were sold or utilised without the complainant's permission. Subsequent re-transfer or restoration of the shares may have civil consequences and may mitigate consequences, but it cannot erase the criminal act already committed and therefore does not preclude criminal prosecution. [Paras 10]

Re-deposit of shares does not vitiate the prima facie offence of criminal breach of trust; prosecution may proceed.

Quashing of criminal proceedings under Section 482 Cr.P.C. - continuation of trial on limited charges - Scope of relief in the petitions: petitions partly allowed by setting aside the finding of cheating; trial court directed to proceed with other offences as earlier indicated by Sessions Judge. - HELD THAT: - Having held that Section 420 was not made out, the Court set aside the Sessions Judge's observation to that effect and directed that the trial Court proceed with the complaint on the remaining offences (criminal breach of trust and conspiracy) as remitted by the Sessions Judge. The Court also noted the long pendency and urged early disposal. [Paras 13]

Petitions partly allowed; Section 420 finding set aside; trial to continue on other offences with direction for expeditious disposal.

Final Conclusion: Petitions under Section 482 Cr.P.C. partly allowed: the court set aside the finding that an offence under Section 420 IPC was made out against the applicants, but upheld the prima facie case for criminal breach of trust (Section 406) read with Section 120 B IPC and directed the trial court to proceed with those charges expeditiously.

Section 311 Cr.P.C. - Power to summon or recall witnesses - Section 91 Cr.P.C. - Power to call for documents - Presumption under Section 138 NI Act and burden on accused to rebut - Exercise of judicial discretion in invoking Section 311 Cr.P.C. - Inherent jurisdiction under Section 482 Cr.P.C.

Section 311 Cr.P.C. - Power to summon or recall witnesses - Section 91 Cr.P.C. - Power to call for documents - Exercise of judicial discretion in invoking Section 311 Cr.P.C. - Whether the trial Court and the revisional Court were in error in refusing to summon the Income Tax Officer under Section 311 Cr.P.C. - HELD THAT: - The trial Court had rejected the petitioners' application under Section 311 Cr.P.C. to summon the Income Tax Officer after the officer had produced and the Court had exhibited documents called under Section 91 Cr.P.C. The Sessions Court affirmed the trial Court, noting that the disputed amount was given in cash and was not reflected in the Income Tax Return; the petitioners had cross-examined the complainant regarding the exhibited documents; and the Section 311 application was filed at a late stage after several opportunities to adduce defence evidence. The Court examined the scope of Section 311 Cr.P.C., emphasizing that the power to summon or recall witnesses must be exercised judicially and only where the witness's evidence is essential to the just decision (relying on the principles in Natasha Singh Vs. CBI(State) ). Applying those principles to the facts, the Court found no necessity to summon the Income Tax Officer because the material documents had already been produced and exhibited, the petitioners had cross-examined the complainant on them, the contested amount did not appear in the return due to it being cash, and the application was made belatedly in the defence stage. In these circumstances invoking inherent jurisdiction under Section 482 Cr.P.C. to interfere was not warranted. [Paras 11, 12, 14, 15]

The refusal to summon the Income Tax Officer under Section 311 Cr.P.C. was justified; the petition under Section 482 Cr.P.C. is dismissed.

Final Conclusion: The High Court held that there was no necessity to summon the Income Tax Officer after the documents were produced and exhibited under Section 91 Cr.P.C., particularly where the petitioners had cross-examined the complainant on those documents, the contested amount was not reflected in the returns for the stated period, and the Section 311 application was belated; inherent jurisdiction under Section 482 Cr.P.C. was not to be exercised and the petition is dismissed.

Good character requirement for naturalisation - discretion of the Central Government in grant of citizenship by naturalisation - limited scope of judicial review of executive naturalisation decisions (arbitrariness, mala fides, caprice) - relevance of criminal acquittal and adverse administrative reports in evaluating fitness for naturalisation - onus on applicant to establish qualification for naturalisation - statelessness not established as ground to compel grant of citizenship

Discretion of the Central Government in grant of citizenship by naturalisation - limited scope of judicial review of executive naturalisation decisions (arbitrariness, mala fides, caprice) - good character requirement for naturalisation - Validity of the impugned order rejecting the petitioner s application for naturalisation and review under Section 15A of the Citizenship Act. - HELD THAT: - The Court held that the grant of citizenship by naturalisation under Section 6(1) is a discretionary, subjective determination for the Central Government and is governed by the conditions in the Third Schedule, including the requirement of being 'of good character'. The expression 'good character' must be understood contextually and may be applied by the executive to a reasonable standard. Judicial interference with such executive satisfaction is available only on limited grounds where the decision is capricious, malafide or arbitrary. The impugned order set out reasons showing that the authority was not satisfied on the good character requirement, referred to the criminal proceedings and adverse reports from local authorities, and therefore contained sufficient reasons for refusal; it was not shown to be arbitrary or perverse warranting interference. [Paras 25, 26, 31, 35, 36]

The impugned order rejecting the review application and refusing naturalisation is lawful and is not liable to be set aside.

Relevance of criminal acquittal and adverse administrative reports in evaluating fitness for naturalisation - onus on applicant to establish qualification for naturalisation - Whether the petitioner s acquittal in NDPS proceedings precluded the Central Government from considering the earlier suspicion and adverse reports while assessing her suitability for naturalisation. - HELD THAT: - The Court observed that acquittal in criminal proceedings reflects that the prosecution failed to prove guilt beyond reasonable doubt, but does not obliterate the existence of serious grounds for suspicion. A large consignment being found in the petitioner s baggage and adverse reports from local authorities could legitimately be considered by the executive in assessing the good character requirement. The statutory onus to satisfy the good character test lies on the applicant, and absence of conviction does not bar the authority from evaluating adverse material in deciding naturalisation. [Paras 21, 22, 23, 35]

The executive could lawfully take the prior investigation, adverse administrative reports and the circumstances of the seizure into account despite the criminal acquittal.

Statelessness not established as ground to compel grant of citizenship - Whether the petitioner would be rendered stateless by refusal of naturalisation and whether that would oblige the respondents to grant citizenship. - HELD THAT: - The Court recorded that the petitioner is a German national by birth and parentage. Consequently, denial of Indian naturalisation would not render her stateless. The contention that refusal must be overridden to avoid statelessness therefore did not arise on the facts and could not furnish a basis to direct grant of citizenship. [Paras 37]

The statelessness argument is without merit and does not require grant of citizenship.

Final Conclusion: The petition challenging the Central Government s refusal to grant citizenship by naturalisation and the dismissal of the review application is dismissed; the impugned order stands as a lawful exercise of executive discretion in light of the good character requirement, the relevant adverse material and the limited scope for judicial interference.