TaxTMI Updates e-Newsletter
Nov 02,2023

Adjudication notice - Misuse of E-way Bills - Maintainability of writ against ongoing adjudication - Inherent lack of jurisdiction - Statutory remedy

Adjudication notice - Maintainability of writ against ongoing adjudication - Inherent lack of jurisdiction - Statutory remedy - Writ petition challenging the adjudication notice is not maintainable except on grounds of inherent lack of jurisdiction and is to be defended through statutory remedies. - HELD THAT: - The Court noted that the adjudication notice dated 01.04.2023 concerns the tax period August, 2018 to March, 2019 and that prima facie allegations exist of misuse of E-way Bills involving other consignors with participation alleged by the petitioner. The petitioner's contention that the proceedings originated from a survey conducted after the petitioner had surrendered registration was rejected because the proceedings relate to an earlier tax period during which the petitioner admitted it was a registered person. The Court refrained from delving into factual correctness or guilt, observing that such inquiries require fact appreciation and are matters for the adjudicatory process where the petitioner can avail statutory objections and lead defence evidence. It reiterated the settled principle that extraordinary writ jurisdiction should not ordinarily interject in ongoing adjudication once allegations of legal infraction arise, limiting interference to cases of inherent lack of jurisdiction or similar fundamental defects. Consequently, the inference sought by the petitioner was declined in view of adequate alternative statutory remedies. [Paras 5, 6, 8, 9, 10]

Writ petition dismissed while preserving the petitioner's right to pursue statutory objections and defence in the adjudication; no finding on merits has been made and no observation to prejudice defence.

Final Conclusion: The petition challenging the adjudication notice is dismissed; the Court declined to interfere with the adjudicatory process save in cases of inherent lack of jurisdiction and left the petitioner free to pursue statutory remedies, without adjudicating the factual merits.

Education services held taxable under Notification No.11/2017 - exemption confined to services provided by an educational institution to its students, faculty and staff - affiliation and inspection fees as services rendered by University to institutions - exemption notifications construed strictly; benefit of doubt goes to State - GST applicability to accreditation/affiliation services governed by Government of India Circular dated 17.06.2021 / G.S.T. Council clarification

Exemption confined to services provided by an educational institution to its students, faculty and staff - affiliation and inspection fees as services rendered by University to institutions - education services held taxable under Notification No.11/2017 - exemption notifications construed strictly; benefit of doubt goes to State - GST applicability to accreditation/affiliation services governed by Government of India Circular dated 17.06.2021 / G.S.T. Council clarification - Affiliation fees and inspection fees charged by the University are not covered by the exemption in Notification No.12/2017 and are taxable under the GST law. - HELD THAT: - Notification No.11/2017 specifically classifies "education services" under Heading 9992 as taxable. Notification No.12/2017 grants a limited exemption at Serial No.66 only for services provided by an educational institution to its students, faculty and staff and for specified admission/examination related services; the notification does not enumerate affiliation or inspection fees charged by a University to affiliated institutions. The 2018 amendment inserting Serial No.66(aa) exempted conduct of entrance examinations against entrance fees, but did not extend exemption to accreditation/affiliation or inspection services. The G.S.T. Council and the Government's Circular dated 17.06.2021 clarify that accreditation/affiliation services provided by Boards or Universities attract GST (as per Clause (4)(iii) of the Circular) while specified examination/admission services are exempt. Exemption notifications are to be strictly construed and, in case of ambiguity, the benefit does not extend to the taxpayer. Applying these principles, the Court held that affiliation and inspection are services rendered by the University to institutions at the inception stage (prior to student admissions) and therefore fall outside the exemption in Notification No.12/2017; accordingly GST demand in respect of such fees cannot be quashed. [Paras 31, 32, 33, 34, 35]

The petitioners' claim that affiliation and inspection fees are exempt under Notification No.12/2017 is rejected; the writ petitions are dismissed.

Final Conclusion: Writ petitions dismissed; the demand for payment of GST on affiliation and inspection fees raised by the University (pursuant to GST authorities' direction) is upheld and the petitions seeking quashment are refused. Miscellaneous petitions, if any, are closed.

Time limit for completion of assessment under Section 153B - Execution of authorisation deemed on conclusion of search as recorded in the last panchnama - Last panchnama - Revisional jurisdiction under Section 263 - Assessment under Section 153A and limitation

Time limit for completion of assessment under Section 153B - Execution of authorisation deemed on conclusion of search as recorded in the last panchnama - Last panchnama - Assessment under Section 153A and limitation - Revisional jurisdiction under Section 263 - Assessment framed on 31st March, 2023 for A.Y. 2015-16 was within the limitation prescribed by Section 153B and therefore not vitiated on limitation grounds so as to invalidate invocation of revisional jurisdiction under Section 263. - HELD THAT: - Section 153B prescribes the period for completion of assessment following searches and deems the authorisation executed on conclusion of search as recorded in the last panchnama. The factual question was whether the 'last panchnama' occurred in March 2021 or on 29th April 2021. The record shows that Locker No. 299 was first inspected on 29th April, 2021 pursuant to a warrant of authorisation dated 05th April, 2021, supported by contemporaneous restraint and revocation orders. Although lockers 2070 and 1320 were re-inspected in April 2021 with nil recovery and such panchnamas reflecting nil recovery cannot be equated with a fresh concluding panchnama where there is merely repetition, the panchnama and related orders for Locker 299 demonstrate that the search operation as a whole conclusively continued until 29th April, 2021. Consequently the relevant 'last panchnama' is 29th April, 2021, and the twelve month period (as applicable for searches executed in the financial year commencing on or after 1 April 2019) for completion of assessments under Section 153B extends accordingly. On that basis the assessment order dated 31st March, 2023 falls within the time allowed by Section 153B and is not barred by limitation; there is therefore no jurisdictional error on limitation grounds that would render the impugned Section 263 notice invalid. [Paras 5, 6, 7, 8, 9]

Petition dismissed as the assessment for A.Y. 2015-16 was within the limitation under Section 153B and the challenge to invocation of Section 263 on limitation grounds fails.

Final Conclusion: Challenge to the notice issued under Section 263 was dismissed: the Court held that the search conclusively ended on 29th April, 2021 (the last panchnama), so the assessment dated 31st March, 2023 was within the time prescribed by Section 153B; merits of the assessment were not examined and are left open.

Comparability of uncontrolled comparables in transfer pricing - functional comparability - risk-bearing capacity in comparability analysis - working capital adjustment in transfer pricing - adjustment for interest on receivables vis-a -vis working capital adjustment - remand to Assessing Officer for verification

Comparability of uncontrolled comparables in transfer pricing - functional comparability - risk-bearing capacity in comparability analysis - Validity of the Tribunal's exclusion of Infobeans, Cybercom and Infosys as comparables - HELD THAT: - The Tribunal recorded factual findings that Infobeans carried on diversified activities including sale of software products and paid sales tax/MODVAT, demonstrating functional dissimilarity with the assessee; that Cybercom's segmental details were not publicly available and it performed technical services distinct from the assessee's activities; and that Infosys BPO, being a large, diversified, risk-bearing entity with substantial brand, sales and marketing expenditure and much larger turnover in the BPO sector, could not be compared with the assessee which had far smaller turnover in that sector. These findings are findings of fact and were not challenged as perverse by the revenue. On these factual conclusions the High Court declined to interfere and held that the three comparables were rightly rejected by the Tribunal. [Paras 9, 10, 11, 12, 13]

Tribunal's factual findings excluding Infobeans, Cybercom and Infosys as comparables are upheld; no interference.

Working capital adjustment in transfer pricing - adjustment for interest on receivables vis-a -vis working capital adjustment - remand to Assessing Officer for verification - Whether, having allowed working capital adjustment, an additional adjustment for interest on receivables was required and whether the matter required further verification by the AO - HELD THAT: - The DRP allowed working capital adjustment to improve comparability and directed that reliable data be furnished by the taxpayer; the Tribunal, following its earlier decision for AY 2015-16, observed that the assessee claimed a 90-day credit period and that where credit periods exceeded 90 days interest might be chargeable, and therefore restored the issue to the AO for verification of the assessee's claim after affording reasonable opportunity of hearing. The High Court noted rival contentions and authorities but found the Tribunal's approach-to remit the question to the AO for factual verification in the light of the Tribunal's earlier view-appropriate. The Court declined to substitute its view and refused interference with the remand for verification. [Paras 16, 17, 18, 19, 20]

Tribunal's order to remit the issue of interest on receivables to the AO for verification is sustained; no interference by the High Court.

Final Conclusion: The High Court dismissed the revenue's appeal: the Tribunal's factual exclusions of the three comparables were upheld and the Tribunal's remand to the Assessing Officer to verify the claim relating to interest on receivables (after allowing working capital adjustment) was sustained; no substantial question of law arises.

Reassessment under Section 148/148A(d) of the Income Tax Act, 1961 - mistake of identity - bank account discrepancy - insufficiency of information to trigger reassessment - interim stay on reassessment proceedings

Reassessment under Section 148/148A(d) of the Income Tax Act, 1961 - mistake of identity - bank account discrepancy - insufficiency of information to trigger reassessment - Reassessment proceedings initiated against the petitioner were unsustainable and the impugned order and notice issued under Sections 148A(d) and 148/148A of the Act must be set aside on the ground of mistaken identity and lack of requisite information. - HELD THAT: - The court examined the material placed on record including the bank certificates produced by the petitioner and the information table relied upon by the assessing officer which showed a discrepancy in the account number(s) said to evidence the transaction. The petitioner produced certificates from its banker stating that no remittance of the disputed amount was made from or to the petitioner's accounts in the relevant year. The respondent's counter-affidavit concedes that the Investigation Wing inadvertently mentioned the petitioner due to similarity of names and that actual details pertained to other entities. Given the discrepancy in account numbers and the bank certificates indicating no transaction between the petitioner and the alleged beneficiary, the court found that there was, at the relevant stage, no information or material to justify continuation of reassessment proceedings. The respondent accepted that reassessment could not continue in view of the admitted mistake of identity. On these findings the court concluded that the impugned order under Section 148A(d) and the consequent notice under Section 148 were unwarranted and liable to be set aside. [Paras 6, 13]

Impugned order dated 28.07.2022 under Section 148A(d) and the consequent notice dated 28.07.2022 under Section 148 relating to AY 2016-17 are set aside; writ petition disposed of.

Final Conclusion: Reassessment proceedings initiated against M/s Tirupati Trading Corporation for AY 2016-17 were premised on a mistaken identity and a bank account discrepancy; in view of the bank certificates and respondent's concession, the orders under Section 148A(d) and the consequent notice under Section 148 are quashed and the writ petition is disposed of.

Disallowance under Section 14A read with Rule 8D - calculation limited to investments made to earn exempt income - Claimable business expenditure under Section 37(1) - Depreciation of computer software - eligible at 60% as 'Computers including computer software' under Appendix I to the Income-tax Rules - Nature of website/software expenditure - revenue expenditure not capital

Disallowance under Section 14A read with Rule 8D - calculation limited to investments made to earn exempt income - Proposed challenge to deletion of disallowance calculated under Section 14A read with Rule 8D need not be entertained as it is covered by coordinate-bench precedent. - HELD THAT: - The Court recorded that the question concerning the manner of computing disallowance under Section 14A read with Rule 8D - whether only investments made to earn exempt income should be taken into account - is covered by the decision of the coordinate bench in Cargo Motors (P.) Ltd. v. Deputy Commissioner of Income-tax. Since that coordinate-bench ruling holds that Rule 8D disallowance should factor only investments made to earn exempt income, the Court declined to consider the proposed question A and treated it as covered by precedent. [Paras 7, 8, 9]

Question A need not be considered as it is covered by the coordinate-bench decision; the Tribunal's deletion stands.

Claimable business expenditure under Section 37(1) - Deletion of disallowance under Section 37(1) in respect of the claimed expenses was upheld. - HELD THAT: - The Court agreed with the Tribunal's reasoning, adopted by the CIT(A), that the AO's disallowance of the expenditure (deleted by the CIT(A)) was made on an ad hoc basis by applying historical percentage ratios without pointing to specific expenditures not incurred for business purposes. The coordinate-bench judgment in the assessee's earlier years, and the Tribunal's like findings for the year under appeal, support deletion of the disallowance and recognition of the expenditure as allowable under Section 37(1). [Paras 10, 11, 12, 13]

Deletion of the disallowance under Section 37(1) was rightly ordered by the Tribunal and is sustained.

Depreciation of computer software - eligible at 60% as 'Computers including computer software' under Appendix I to the Income-tax Rules - Depreciation on software was correctly treated at the rate of 60% and the deletion of the AO's adjustment confirmed. - HELD THAT: - The Tribunal and CIT(A) found that the software in question were standard software integral to computer hardware and lacked independent utility; such software thus fall under the Appendix I entry 'Computers including computer software' attracting depreciation at 60%. The Court applied the rule of consistency, noting earlier decisions in the assessee's own matters which supported this treatment, and declined to re-adjudicate an issue not earlier pressed by the Revenue before this Court. [Paras 14, 15, 16, 18, 19]

The deletion of the disallowance relating to depreciation on software (treated at 60%) is sustained; the rule of consistency applies.

Nature of website/software expenditure - revenue expenditure not capital - Treatment of software/website expenditure as revenue expenditure was correctly accepted and the related disallowance need not be entertained. - HELD THAT: - The Court noted the coordinate-bench conclusion in Pr. Commissioner of Income Tax-9 v. Times Internet Ltd. that website/software development expenditure is revenue in nature, following the precedential view in CIT v. India Visit.com. Given that the Tribunal and earlier appellate authorities had adjudicated this issue in favour of the assessee, the Court held that questions C and D (treatment as revenue and related additions) did not raise substantial questions of law warranting reconsideration. [Paras 20, 21, 22]

Questions C and D need not be entertained; software/website expenditure is revenue expenditure and the Tribunal's deletion is sustained.

Final Conclusion: The appeal is closed: the Tribunal's deletion of the various disallowances (including under Section 14A/Rule 8D as covered by precedent, deletion under Section 37(1), depreciation of software at 60%, and the revenue treatment of software/website expenditure) is sustained and none of the proposed questions of law require consideration by this Court.

Limitation for service of notice under Section 143(2) - defective return under Section 139(9) and effect on date of filing - processing of return under Section 143(1) and its legal consequence

Limitation for service of notice under Section 143(2) - defective return under Section 139(9) and effect on date of filing - notice under Section 142(1) consequent upon Section 143(2) - Validity of notices dated 11.08.2018 under Section 143(2) and 31.08.2018 under Section 142(1) for AY 2016-17 in view of limitation and treatment of a defective return - HELD THAT: - The original return of income for AY 2016-17 was filed on 14.10.2016. Defect notices under Section 139(9) were issued on 06.02.2017 and 10.07.2017 and the defects were removed on 18.02.2017 and 20.07.2017 respectively. The Assessing Officer processed the original return under Section 143(1) on 22.11.2017. The first proviso to Section 143(2), as amended w.e.f. 01.06.2016, prescribed that no notice under Section 143(2) shall be served after the expiry of six months from the end of the financial year in which the return is furnished. The financial year in which the original return was filed ended on 31.03.2017 and the six-month period therefore expired on 30.09.2017. Reliance on the decision of the High Court of Punjab and Haryana in Commissioner of Income-tax v. Sohan Lal Chhajan Mal - and the fact that the Special Leave Petition against that decision was dismissed - supports the legal position that a defective return (under Section 139(9)) does not alter the original date of filing for computing limitation under the proviso to Section 143(2). Applying these principles, the notice under Section 143(2) dated 11.08.2018 was issued after the prescribed period and is time-barred. Once the Section 143(2) notice is quashed as barred by limitation, the impugned Section 142(1) notice issued subsequently necessarily collapses. [Paras 12, 13, 14]

The notice under Section 143(2) dated 11.08.2018 is time-barred and is quashed; the notice under Section 142(1) dated 31.08.2018 consequently collapses and is quashed; the writ petition is disposed of.

Final Conclusion: For AY 2016-17 the High Court holds that the original date of filing governs computation of limitation under the proviso to Section 143(2); the impugned notices dated 11.08.2018 (Section 143(2)) and 31.08.2018 (Section 142(1)) are time-barred and are quashed.

Principles of natural justice - personal hearing - recording/transcript of virtual hearing - setting aside assessment order - remand for fresh assessment

Personal hearing - recording/transcript of virtual hearing - principles of natural justice - Validity of the assessment order dated 21.04.2021 in view of the petitioner's assertion that no personal hearing was granted and the respondents' inability to produce a record/transcript of the purported hearing held on 16.04.2021. - HELD THAT: - The petitioner averred by affidavit that no personal hearing was granted; in the absence of the respondents having produced the record or transcript of the video-conference hearing, the Court accepted the petitioner's assertion. The respondents explained loss of access to material on 'demo servers' and could not place any recording or transcript before the Court. Given the absence of relevant material to contradict the petitioner's claim, the Court found that the assessment order could not stand without affording the petitioner the opportunity required by the principles of natural justice. The appropriate remedial step was to set aside the impugned assessment order and permit the Assessing Officer to proceed afresh, ensuring that a hearing in accordance with natural justice is granted and that any proceedings are properly recorded and a copy made available to the assessee. [Paras 7, 8, 10, 11, 12]

Assessment order dated 21.04.2021 is set aside; matter remitted to the Assessing Officer to pass a fresh order after complying with the principles of natural justice and taking steps as per law.

Final Conclusion: The writ petition is disposed of by setting aside the assessment order dated 21.04.2021 (AY 2018-2019) and remitting the matter to the Assessing Officer to proceed afresh after affording a hearing in accordance with the principles of natural justice; parties to act on the digitally signed copy of the order.

Reassessment under Section 147/148 - Reason to believe - Failure to disclose fully and truly all material facts - First proviso to Section 147 - four year bar - Sanction requirement under Section 151(1)/(2) - Borrowed satisfaction / non-application of mind - Quashing of reassessment notice

Reassessment under Section 147/148 - Reason to believe - Failure to disclose fully and truly all material facts - Borrowed satisfaction / non-application of mind - Sanction requirement under Section 151(1)/(2) - Validity of the notice dated 28.03.2019 issued under Section 148 based on the reasons to believe recorded by the Assessing Officer for AY 2012-13. - HELD THAT: - The Assessing Officer initiated reassessment proceedings relying on information from the Kolkata Investigation Directorate linking the petitioner to alleged manipulated trading in a penny stock (Blue Print Securities Ltd.). The reasons to believe did not record that the assessee had failed to "fully and truly" disclose all material facts, a prerequisite where the first proviso to Section 147 applies to notices issued beyond four years. The AO also failed to refer to the original scrutiny assessment order and to the petitioner's prior disclosure of long-term capital gains in correspondence and the revised return, and did not explain the basis for the specific escaped income figure. The Form used to obtain sanction showed confusion between the applicability of Section 151(1) and Section 151(2), and the respondents conceded the notice was issued after the four-year period; thus the proviso to Section 147 and the sanction requirement under Section 151 were engaged. Overall the AO proceeded on generalized information from the Investigation Directorate without applying independent mind to tie that information to a failure by the assessee to disclose material facts, amounting to a borrowed satisfaction and non-application of mind. For these reasons the reassessment notice lacked the necessary legally adequate reasons and could not be sustained. [Paras 10, 13, 16, 17, 18]

The notice dated 28.03.2019 under Section 148 and the consequential order dated 12.06.2019 are quashed; the writ petition is allowed.

Final Conclusion: Reassessment proceedings were set aside because the Assessing Officer's reasons to believe were legally inadequate - there was no recorded finding of failure to "fully and truly" disclose material facts required by the first proviso to Section 147 for notices beyond four years, the sanction/section applicability was confused, and the AO acted on borrowed satisfaction; consequently the Section 148 notice dated 28.03.2019 and the disposal order dated 12.06.2019 are quashed and the writ petition is allowed.

Challenge to assessment pending appellate remedy - principles of natural justice - stay of recovery proceedings - pre-deposit requirement - jurisdiction to grant interim relief by appellate authority

Challenge to assessment pending appellate remedy - principles of natural justice - Whether the High Court should interfere with the impugned assessment order while an appeal against that order is pending before the CIT(A). - HELD THAT: - The Court held that where a statutory remedy of appeal is available and has been availed, the High Court would be reluctant to interfere with an assessment order. Although violation of principles of natural justice was pleaded by the petitioner, the proper course is to pursue the appeal and ancillary remedies before the appellate authority rather than invoke writ jurisdiction for the same grievance. The Court found no merit in entertaining the writ petition in the face of the pending appeal and accordingly declined to interfere with the assessment order. [Paras 5, 6, 9, 11, 13]

Writ petition dismissed insofar as it seeks interference with the impugned assessment order; petitioner directed to pursue remedies before the appellate authority.

Stay of recovery proceedings - pre-deposit requirement - jurisdiction to grant interim relief by appellate authority - Whether the petitioner may seek interim relief (stay of recovery) before the appellate authority and how such an application should be disposed of. - HELD THAT: - The Court observed that the petitioner has the option to apply to the appropriate authority for stay of recovery proceedings and for relief from the pre-deposit requirement. The Court referred to the Supreme Court's decision in LG Electronics India Pvt Ltd (as cited) as authority that the appellate authority is empowered in appropriate cases to grant suitable interim relief regarding pre-deposit. The writ petition was dismissed but the petitioner was granted liberty to file such an application, which the authority must decide in the light of the cited Supreme Court guidance. The Court also permitted the petitioner to seek an out of turn hearing of the appeal, to be considered on merits. [Paras 10, 11, 12]

Liberty granted to the petitioner to apply to the appellate authority for stay of recovery and for consideration of pre deposit relief; the authority to dispose the application in accordance with the Supreme Court's decision; recovery proceedings kept in abeyance for a limited period to enable filing.

Final Conclusion: The writ petition is dismissed. The petitioner is afforded liberty to file applications before the appellate authority for stay of recovery and for relief from pre deposit, and to seek an out of turn hearing; the authority must dispose such applications in accordance with the Supreme Court's guidance, and limited abeyance of recovery proceedings is granted to enable the petitioner to approach the authority.

Adjustment of refund against outstanding demand - principles of natural justice - quashing of administrative order - remand for fresh consideration

Adjustment of refund against outstanding demand - quashing of administrative order - Impugned intimation dated 01.09.2023 adjusting the refund for AY 2022-23 against disputed demands (including for AY 2017-18) set aside - HELD THAT: - The court found that the respondents adjusted the refund due for Assessment Year 2022-23 not only against the demands specified in the proposal emails (AY 2021-22 and AY 2018-19) but also against a demand for AY 2017-18, thereby departing from the communicated proposal. Given these departures and the attendant grievance raised by the petitioner, the court concluded that the impugned order of adjustment could not be permitted to stand and must be set aside. The court exercised its supervisory jurisdiction to quash the impugned intimation issued on 01.09.2023 and restored the position so that the tax authority may proceed only as permitted by law. [Paras 6, 7, 9, 10]

Impugned intimation dated 01.09.2023 quashed and set aside.

Principles of natural justice - remand for fresh consideration - Departure from proposal and short notice found to infringe principles of natural justice warranting fresh action by the tax authority - HELD THAT: - The court observed that the respondents moved away from what was proposed in the emails and that the petitioner had been given a longer period to respond to the proposal while the intimation was issued within four days in respect of at least one communication. In light of this breach of fair procedure, the court granted liberty to the concerned officer to take further steps afresh, but strictly in accordance with law, thereby remitting the matter to the authority for lawful action consistent with procedural fairness. [Paras 7, 9]

Matter remitted to the concerned officer with liberty to proceed afresh as per law.

Final Conclusion: The impugned intimation dated 01.09.2023 adjusting the refund for AY 2022-23 against disputed demands (including AY 2017-18) is quashed and set aside; the matter is remitted to the concerned officer to take further steps afresh in accordance with law and observing principles of natural justice.

Deductibility of bad debts acquired from predecessor-in-interest under Sections 36(1)(vii) and 36(2) - allowability of training expenses as revenue expenditure under Section 37 - non-recognition of deferred revenue expenditure by the Income tax Act

Deductibility of bad debts acquired from predecessor-in-interest under Sections 36(1)(vii) and 36(2) - Deduction in respect of bad debts acquired by the assessee from its predecessor-in-interest - HELD THAT: - The Tribunal and the lower authority allowed deduction for bad debts which had been acquired by the respondent/assessee from its predecessor-in-interest, Eicher Motors Ltd., on the demerger/acquisition of the commercial vehicle division. The revenue did not dispute that the debts had become bad or that the predecessor had offered the debts to tax earlier. Having regard to the factual matrix and binding precedent including the Supreme Court decision in Commissioner of Income Tax v. T. Veerabhadra Rao and the coordinate bench decision relied upon, the Court held that no interference was called for with the deletion of the disallowance. The Court recorded that no substantial question of law arises for consideration on this issue.

Disallowance of deduction for the bad debts was rightly deleted; appeal dismissed on this ground.

Allowability of training expenses as revenue expenditure under Section 37 - non-recognition of deferred revenue expenditure by the Income tax Act - Allowability of training expenses claimed by the assessee (whether to be treated as deferred revenue expenditure or deductible under Section 37) - HELD THAT: - The Assessing Officer treated the training expenses as deferred revenue expenditure and allowed a portion in the year while disallowing the remainder for allowance in subsequent years. The CIT(A) and the Tribunal reversed that view, holding that the Act does not recognize 'deferred revenue expenditure' and that the entire training expenditure is allowable as revenue expenditure under Section 37. The High Court agreed with the Tribunal's reasoning and with the view taken by a coordinate bench in Samsung India Electronic Limited, concluding that the whole expenditure must be allowed under Section 37. Consequently, no substantial question of law arises on this issue.

Tribunal's allowance of the entire training expenses under Section 37 upheld; appeal dismissed on this ground.

Final Conclusion: Both grounds pressed by the revenue - disallowance of bad debts acquired from the predecessor and partial disallowance of training expenses as deferred revenue expenditure - were found without merit; the Tribunal's orders deleting the disallowance for bad debts and allowing the full training expenditure under Section 37 are sustained and the appeal is dismissed.

Reopening of assessment under section 148 - Change of opinion - Reasons to believe and formation of belief for reassessment - Reassessment jurisdictional requirement - Summons under section 131(1A) - Assessment completed under section 143(3)

Reopening of assessment under section 148 - Change of opinion - Reasons to believe and formation of belief for reassessment - Summons under section 131(1A) - Assessment completed under section 143(3) - Validity of the notice under section 148 and the order rejecting objections insofar as they seek reassessment for Assessment Year 2017-18 - HELD THAT: - The court examined the reasons recorded for reopening and the material on record. The revenue's reasons alleged large cash deposits not disclosed, but the assessee had earlier responded to a summons under section 131(1A), produced reconciliation statements, audited accounts and other documents explaining the cash deposits, and the regular assessment under section 143(3) was completed on 17.12.2019 after due inquiry. In these circumstances the material relied upon by the revenue did not supply a fresh basis for forming a belief that income had escaped assessment; rather the reopening amounted to a change of opinion. Applying the principle that reasons must have a real link to the formation of belief and cannot be a mere reappraisal of already considered material (as explained in CIT vs. Kelvinator of India Ltd and related authority cited to the Court), the notice under section 148 and the order disposing objections were held to be without jurisdiction. The court therefore quashed the notice and the order rejecting objections. [Paras 7, 8]

Notice dated 31.03.2021 under section 148 and order dated 19.08.2023 rejecting objections are quashed as constituting a change of opinion; petition allowed.

Final Conclusion: The High Court quashed the reassessment notice under section 148 and the order rejecting objections for Assessment Year 2017-18 on the ground that the reopening was based on a change of opinion despite prior explanation and a completed assessment; the petition was allowed.

Reopening of assessment under Section 148 - Reasons to believe - Failure to disclose fully and truly all material facts - Change of opinion - MAT credit carry forward and verification of records - Link between reasons recorded and formation of belief - Assessment under Section 143(3) r.w.s. 144C

Reopening of assessment under Section 148 - Reasons to believe - Failure to disclose fully and truly all material facts - Validity of the notice dated 25.03.2019 under Section 148 insofar as it reopens assessment for AY 2012-13 - HELD THAT: - The court examined the reasons recorded for reopening and the material on record. The return and the assessment under Section 143(3) r.w.s. 144C already reflected the MAT credit claim and supporting audited accounts and tax credit particulars were furnished and verified in the course of the original assessment. Four years had elapsed when the reassessment notice was issued. The reasons relied upon flow from scrutiny of assessment records and do not demonstrate failure by the assessee to disclose fully and truly material facts; the facts relied on were already before the Assessing Officer and accepted in the earlier assessment. Reopening in these circumstances amounted to a change of opinion rather than reliance on any new tangible material, and therefore the reasons did not sustain the formation of a valid belief necessary to invoke Section 148.

Notice under Section 148 dated 25.03.2019 quashed as invalid.

Change of opinion - MAT credit carry forward and verification of records - Link between reasons recorded and formation of belief - Whether the recorded reasons amount to new tangible material or merely reveal a change of opinion on the MAT credit claim - HELD THAT: - The Assessing Officer's reasons acknowledged that the conclusions arose from verification of records, but the court found that the claimed MAT credit and its computation had been placed on record, assessed and accepted in the original assessment order. The purported mismatch and errors identified in the reasons were factual inaccuracies and did not constitute fresh tangible material that was not available earlier. In absence of such new material, reassessment was impermissible because it was based on reappreciation of previously available material, i.e., a change of opinion, breaking the requisite link between genuine new material and formation of belief.

Reassessment set aside as founded on change of opinion and not on new material; reasons insufficient to sustain reassessment.

Final Conclusion: The petition is allowed; the reassessment notice dated 25.03.2019 reopening AY 2012-13 is quashed and set aside as being founded on change of opinion and not on any new tangible material or failure to disclose material facts.

Reassessment under Section 148A(d) of the Income Tax Act, 1961 - escaped income / escaped assessment - time barred reassessment beyond three years - non filing of Return of Income after notice under Section 148 - opportunity to produce documents and verification of acquisition cost - remand for further inquiry

Reassessment under Section 148A(d) of the Income Tax Act, 1961 - escaped income / escaped assessment - time barred reassessment beyond three years - non filing of Return of Income after notice under Section 148 - Whether reassessment proceedings for AY 2016-17 can be sustained and whether reassessment is time barred given that the return was not filed - HELD THAT: - The court noted that reassessment proceedings have been initiated under Section 148A(d) and that the AO has taken the view that income of Rs.1,19,40,919/- has escaped assessment. The petitioner contended that on taking acquisition cost into account the escaped income would fall below Rs.50,00,000/- and that reassessment beyond three years would therefore be time barred. The court observed that the petitioner had admittedly not filed the return of income, and for that reason the question requires further inquiry rather than an immediate acceptance of the petitioner's contention. The court directed that before any assessment order is passed the AO must examine the claim regarding acquisition cost and the effect of non filing of the return, and determine the existence and quantum of any escaped income after considering the documents and submissions made by the petitioner. The court did not decide finally on time bar; it remitted the matter to the AO for adjudication on these points in the course of reassessment proceedings. [Paras 11, 12, 13, 16, 17]

Matter remanded to the AO for further inquiry and determination of whether any income has escaped assessment and whether reassessment is time barred, after considering acquisition cost and the non filing of the return.

Opportunity to produce documents and verification of acquisition cost - remand for further inquiry - What procedural directions should be given to enable the AO to proceed fairly in reassessment proceedings - HELD THAT: - The court directed that the AO must give the petitioner an opportunity to furnish documents relied upon in defence, including sale deed/agreement to sell, transfer/possession documentation and the loan statement already on record, and must deal expressly with the petitioner's allegation that the property was acquired in 2010 at the stated price. The court also recorded that the AO will deal with the petitioner's contention that escaped income would not exceed Rs.50,00,000/-. The petitioner was granted leave to file the return of income within thirty days. These directions were given so that the AO can undertake the required verification and pass an assessment order on a properly informed basis. [Paras 14, 15, 16, 18, 19]

AO to afford opportunity to the petitioner to produce the specified documents, to consider the acquisition cost and related submissions, and the petitioner permitted to file the return of income within thirty days before the AO passes the assessment order.

Final Conclusion: Writ petition disposed by remitting the matter to the Assessing Officer with directions to permit the petitioner to file the return within thirty days, to consider the documents and the acquisition cost in determining whether income has escaped assessment and whether reassessment is time barred, and thereafter to pass a fresh assessment order.

Adjournment request through e Filing deemed to be brought to notice - opportunity to produce documents in appeal proceedings - notice under Section 250 of the Income tax Act - setting aside order for failure to consider request - remand for fresh consideration with directives

Adjournment request through e Filing deemed to be brought to notice - opportunity to produce documents in appeal proceedings - setting aside order for failure to consider request - remand for fresh consideration with directives - Adjournment request made by the petitioner on 16.05.2023 through the Department's e Filing portal was deemed to have been brought to the notice of the respondent and the impugned order passed without considering that request and without giving opportunity to submit documents was liable to be set aside and remanded for fresh consideration. - HELD THAT: - The petitioner produced a screenshot of the adjournment request made electronically on 16.05.2023 seeking 15-20 days to gather documents. The respondent's contention that the request was not brought to its notice was rejected because an adjournment sought through the Department's e Filing portal is to be treated as brought to the respondent's attention. The impugned order records non receipt of submissions to notices issued under Section 250 but does not deal with the adjournment request made on 16.05.2023. As the order was passed without affording the opportunity specifically sought by the petitioner to file supporting documents, the Court set aside the order and remanded the matter to the respondent for fresh consideration. The Court directed the petitioner to file the requisite documents within one week of receipt of the order and directed the respondent to pass a fresh order after considering the material filed within twelve weeks of such submission.

Impugned order set aside; matter remanded for fresh consideration after permitting the petitioner to file documents within one week and directing the respondent to decide afresh within twelve weeks.

Final Conclusion: The writ petition is allowed to the extent that the impugned order dated 25.05.2023 is set aside for failure to consider the adjournment request made via e Filing; the matter is remanded to the respondent with directions for the petitioner to submit documents within one week and for the respondent to pass a fresh order within twelve weeks. No costs.

Condonation of delay - appeal to be decided on merits - valuation by stamp duty value vis-a -vis transaction value - application of tolerance limit under section 50 C - retrospective effect of amendment to section 50C(1) increasing tolerance band to 10%

Condonation of delay - appeal to be decided on merits - Delay in filing the appeal of 350 days was condoned and the appeal was admitted. - HELD THAT: - The assessee (HUF) through its Karta, a senior citizen unfamiliar with electronic communication and English, filed an affidavit explaining that appellate communication was sent only to email addresses managed by tax consultants, and the impugned order came to their notice on 25 March 2023. The delay was attributed to inadvertence without mala fides and prompt steps were taken to file the appeal once aware. The Tribunal accepted these grounds as sufficient to condone the delay and relied on the principle that appeals ought to be heard on merits (reference to the Supreme Court decision in Mst. Katiji as cited in the order). [Paras 2, 3, 4]

Delay condoned and appeal admitted to be decided on merits.

Valuation by stamp duty value vis-a -vis transaction value - application of tolerance limit under section 50 C - retrospective effect of amendment to section 50C(1) increasing tolerance band to 10% - Addition made under section 50C was deleted because the variation between stamp duty valuation and transaction value fell within the 10% tolerance band held applicable from 1-4-2003. - HELD THAT: - For assessment year 2016 - 17 the assessee sold property for Rs. 130 lakhs while the departmental valuation was Rs. 13,930,000, giving a difference of Rs. 930,000. Though the statutory tolerance under section 50C(1) was earlier 5% and was enhanced to 10% with effect from 1/4/2021, the Tribunal followed a coordinate bench decision which held that the enhancement to 10% is effective from the date section 50C was introduced (1-4-2003). Applying that ratio, the difference between the transaction value and the stamp-duty valuation is within the 10% tolerance and therefore cannot be treated as income under section 50C. Consequently the addition was directed to be deleted. [Paras 5, 6, 7, 8, 9]

Addition under section 50C set aside and deleted; appeal allowed on merits.

Final Conclusion: The Tribunal condoned the delay in filing the appeal, admitted the appeal for hearing on merits, and allowed the appeal by deleting the addition made under section 50C for AY 2016 - 17 on the ground that the variation was within the 10% tolerance band held applicable from 1-4-2003.

Exercise of extraordinary jurisdiction under Article 226 of the Constitution of India - exercise of writ jurisdiction notwithstanding availability of statutory remedy

Exercise of extraordinary jurisdiction under Article 226 of the Constitution of India - availability of statutory remedy - High Court validly exercised its extraordinary jurisdiction under Article 226 notwithstanding the existence of a statutory remedy. - HELD THAT: - The Court upheld the High Court's invocation of its extraordinary writ jurisdiction on the facts of the case, holding that the presence of a statutory remedy did not preclude relief under Article 226. The Supreme Court accepted the High Court's exercise of jurisdiction as correct on the material before it and found no error in the High Court's approach warranting interference.

High Court's exercise of extraordinary jurisdiction sustained; Special Leave Petition dismissed.

Final Conclusion: Delay condoned; the Special Leave Petition is dismissed and the High Court's exercise of writ jurisdiction under Article 226 is upheld.

Re-importation after exhibition or consignment not a supply - applicability of Notification No.45/2017-Cus entries 1(d) and 5 - six months condition for availing exemption on re-import - IGST liability on re-import where IGST was paid at export - penalty requires mens rea to evade customs duty

Re-importation after exhibition or consignment not a supply - applicability of Notification No.45/2017-Cus entries 1(d) and 5 - six months condition for availing exemption on re-import - IGST liability on re-import where IGST was paid at export - Whether re-imported goods exported for exhibition/consignment fall under entry 1(d) or residuary entry 5 of Notification No.45/2017-Cus and whether IGST demand could be sustained. - HELD THAT: - The Tribunal accepted the departmental circulars and held that goods sent/taken out of India for exhibition or on consignment basis do not constitute a 'supply' under section 7 of the CGST Act and therefore are not 'zero-rated supplies' under section 16 of the IGST Act. Consequently, where specified goods were exported for exhibition/consignment (including where export was under LUT/bond) and re-imported within six months, they do not attract the condition in entry 1(d) requiring payment of integrated tax at re-import and instead fall under the residuary entry 5 of Notification No.45/2017-Cus which provides nil duty. The Tribunal examined the facts of ten bills of entry: three bills exported under LUT/bond were re-imported within six months and therefore are out of scope of entry 1(d) and fall under entry 5; six bills where IGST was paid at export were already discharged and no demand could be sustained; one bill of entry where re-import was beyond six months did not meet the time condition and thus exemption under the notification could not be claimed for that bill. The Tribunal thus set aside the confirmed demand insofar as it related to the nine bills falling within the first two categories and sustained the demand for the single bill where the six-month condition was not complied with. [Paras 11, 12, 13, 14, 15]

Demand set aside for nine bills of entry (goods re-imported within six months or IGST already paid); demand sustained for one bill of entry where re-import occurred after the six month period.

Penalty requires mens rea to evade customs duty - Whether penalty for evasion of customs duty could be imposed on the appellant. - HELD THAT: - The Tribunal found that the controversy arose from an interpretation of Notification No.45/2017-Cus and allied circulars and that there was no evidence of intent or mens rea on the part of the appellant to evade customs duty. Although one bill of entry was held ineligible for exemption on account of non compliance with the six month condition, the record did not disclose any deliberate attempt to evade duty. In these circumstances, imposition of penalty was not justified. [Paras 16]

Order imposing penalty set aside for lack of evidence of mens rea; no penalty to be imposed.

Final Conclusion: Appeal partly allowed: the Tribunal set aside the demand confirmed by the adjudicating authority in respect of nine bills of entry (including those re-imported within six months and those where IGST was paid at export) and quashed the penalty; the demand in respect of one bill of entry where re-import occurred after the six month period was sustained.

Provisional release of seized goods for re-export - seizure without issuance of notice under Section 124(a) - investigation at a crucial stage not an absolute bar to provisional release - interest of Revenue safeguarded by deposit - requirement of bond and bank guarantee as condition for provisional release

Provisional release of seized goods for re-export - investigation at a crucial stage not an absolute bar to provisional release - requirement of bond and bank guarantee as condition for provisional release - interest of Revenue safeguarded by deposit - Provisional release of the seized imported goods for re-export was to be allowed subject to conditions. - HELD THAT: - The Tribunal found that the appellant sought provisional release solely for the purpose of re-export to the foreign supplier who had admitted wrong shipment, and that delay would cause financial prejudice to the appellant through warehousing charges and possible refusal by the supplier. The authorities relied on the investigation being at a crucial stage to refuse release, but the Tribunal held that ongoing investigation does not automatically preclude provisional release where the goods are not sought for home consumption, the Revenue's interest is secured (including by the substantial deposit already made), and there is demonstrable bonafides in the re-export proposal. In these circumstances the Tribunal set aside the refusal and directed provisional release forthwith on execution of suitable bond and bank guarantee to protect the Revenue's interest. [Paras 7, 8, 9]

Request for provisional release for re-export allowed; adjudicating authority directed to permit provisional release on taking suitable bond and bank guarantee.

Seizure without issuance of notice under Section 124(a) - interest of Revenue safeguarded by deposit - The authorities' refusal to release seized goods was not justified where no statutory notice under Section 124(a) had been issued and the Revenue's interest was protected by deposit. - HELD THAT: - The appellant contended that no notice under Section 124(a) had been issued and therefore the seizure was without jurisdiction. The Tribunal observed that the Revenue did not assert that the goods were prohibited and that the deposit made by the appellant sufficiently protected the Revenue's interest. While noting the contention regarding absence of a Section 124(a) notice, the Tribunal proceeded on the premise that, given the protection afforded to the Revenue and the purpose of re-export, the authorities had not made out a justifiable case to deny provisional release. Accordingly, the impugned order rejecting provisional release was set aside. [Paras 5, 7, 9]

Impugned order rejecting provisional release set aside on grounds that authorities failed to justify refusal where Revenue's interest was secured and no prohibition attached to the goods.

Final Conclusion: The appeal was allowed: the impugned order rejecting provisional release was set aside and the adjudicating authority was directed to permit provisional release of the seized goods for re-export forthwith upon the appellant furnishing a suitable bond and bank guarantee to secure the Revenue's interest.

Classification of goods by essential character and principal function - Automatic regulating or controlling instruments and apparatus (Chapter 90 / 9032) - Electrical transformers, static converters and electric inverters (Chapter 85 / 8504) - General Rules for the Interpretation of Import Tariff (including Rule 3(a), Rule 3(b) and Rule 4) - Section XVI / Chapter Notes and Note 1(m) exclusion - HSN Explanatory Notes - World Customs Organisation rulings and their persuasive value - show-cause notice and principles of natural justice

Classification of goods by essential character and principal function - Electrical transformers, static converters and electric inverters (Chapter 85 / 8504) - Automatic regulating or controlling instruments and apparatus (Chapter 90 / 9032) - General Rules for the Interpretation of Import Tariff (including Rule 3(a), Rule 3(b) and Rule 4) - HSN Explanatory Notes - Section XVI / Chapter Notes - World Customs Organisation rulings and their persuasive value - Imported 'Frequency Converter (Variable Speed Drive)' is classifiable under Chapter Heading 8504 and not under Chapter Heading 9032. - HELD THAT: - The Tribunal examined the technical literature and HSN explanatory notes and found that the primary and essential character of the imported drives is that of a static converter/inverter performing conversion of electrical energy (rectifier, DC bus, inverter) to produce variable frequency/voltage for motor control. The Chapter and Section Notes to Section XVI, the HSN Explanatory Notes to heading 8504 and the General Rules for Interpretation require classification according to the heading providing the most specific description and, where composite, according to the component giving the essential character. Heading 9032 is confined to instruments and apparatus designed as automatic regulators that constantly or periodically measure and maintain a variable at a desired value; the imported items are primarily static converters/inverters rather than automatic regulators of the type described in Chapter 90. The WCO classification and the supplier's invoice classification under 8504, together with the technical literature and precedent authorities, support classification under Chapter 8504. Applying the interpretative rules, the Tribunal held the goods are more akin to the description in Chapter 8504 and therefore properly classifiable thereunder. [Paras 13, 16, 18, 24, 25]

Classification under Chapter Heading 8504 upheld; classification under Chapter Heading 9032 rejected.

Show-cause notice and principles of natural justice - Validity of the show-cause notice: the challenge that the show-cause notice was invalid for failing to state grounds was rejected. - HELD THAT: - The Tribunal noted that the first show-cause notice had set out the grounds (including reference to the supplier's tariff heading and a request for manufacturer's catalogue) and that the subsequent notice dated 22.2.2010 was a recurring notice. Therefore the contention that no grounds were alleged was baseless; the Order-in-Original proceeded on grounds already articulated in the earlier notice and the absence of a fresh recital in the recurring notice did not render the proceedings invalid. [Paras 9]

Claim of invalidity of the show-cause notice dismissed; proceedings held to be validly founded on the original notice.

Final Conclusion: The Tribunal dismissed the appeals and affirmed classification of the imported Frequency Converters (Variable Speed Drives) under Chapter Heading 8504 rather than Chapter Heading 9032; the challenge to the validity of the show-cause notice was rejected.

Classification of projectors - projectors capable of directly connecting to and designed for use with an automatic data processing system - eligibility for exemption under Sl. No. 17 of Notification No. 24/2005 Cus. - application of Explanatory Notes of the Harmonized System - General Rule 3 of the General Rules for the Interpretation of the Import Tariff (prefer the most specific heading) - Chapter Note 6(C), 6(D)(v) and 6(E) to Chapter 84 concerning units and machines working with automatic data processing systems

Classification of projectors - projectors capable of directly connecting to and designed for use with an automatic data processing system - application of Explanatory Notes of the Harmonized System - General Rule 3 of the General Rules for the Interpretation of the Import Tariff (prefer the most specific heading) - Chapter Note 6(C) and 6(D)(v) to Chapter 84 - Projectors (models ZH 350, ZW 350e & ZX 350e) are classifiable under Sub heading 85286200 of the Customs Tariff. - HELD THAT: - The Authority examined the technical specifications and applicants' declarations and applied the Harmonized System Explanatory Notes and the Customs Tariff Chapter Notes. The projectors are fitted with connectors characteristic of data processing systems and are principally designed to function with automatic data processing (ADP) machines. While additional ports could permit reception from other sources, the Explanatory Notes and Chapter Notes indicate that goods fitted with ADP characteristic connectors and principally designed for use with ADP machines fall within the specific heading for projectors for use with ADP systems. Rule 3 (preference for the most specific heading) supports selecting Sub heading 85286200 over the more general heading for video/home theatre projectors. Accordingly, the products in question are not to be classified under the residual video projector heading but under 85286200 as projectors designed for and capable of direct connection to ADP machines. [Paras 8, 9, 11, 12]

Projectors ZH 350, ZW 350e and ZX 350e are classifiable under Sub heading 85286200.

Eligibility for exemption under Sl. No. 17 of Notification No. 24/2005 Cus. - machines working in conjunction with an automatic data processing machine performing a specific function other than data processing - Chapter Note 6(E) to Chapter 84 - The projectors are eligible for exemption from customs duties under Sl. No. 17 of Notification No. 24/2005 Cus., as amended. - HELD THAT: - Having held that the projectors are machines designed to work in conjunction with ADP machines and are classifiable under Sub heading 85286200, the Authority applied the exemption entry which grants relief to goods solely or principally used in an ADP system falling under the specified sub headings. Chapter Note 6(E) supports classifying machines that work with ADP machines in headings corresponding to their function. The projectors therefore satisfy the condition of being of a kind principally used in an automatic data processing system and fall within the exemption provision at Sl. No. 17 of Notification No. 24/2005 Cus. [Paras 9, 11, 12]

The subject projectors are eligible for exemption under Sl. No. 17 of Notification No. 24/2005 Cus., as amended.

Final Conclusion: The Authority rules that the data projectors (models ZH 350, ZW 350e and ZX 350e) are classifiable under Sub heading 85286200 and are eligible for exemption from customs duty under Sl. No. 17 of Notification No. 24/2005 Cus., as amended.

Ex-parte ad interim order - foundational facts - doctrine of preponderance of probability - doctrine of proportionality - urgency for interim relief - prima facie finding - substance over form / look at principle - control (positive control) - piercing the corporate veil

Foundational facts - doctrine of preponderance of probability - prima facie finding - Validity of SEBI's prima facie conclusion that funds originated from ZEEL and were round-tripped through group/associate entities - HELD THAT: - The Tribunal held that SEBI failed to establish the foundational facts required to sustain a presumption of round-tripping. Two of the entities relied upon by SEBI (Pen India Ltd. and Dish Infra Services Pvt. Ltd.) are not shown to be group/associate companies at the relevant time, and substantial portions of the alleged Rs. 143.90 crore cannot be prima facie attributed to round-tripping from ZEEL. Absent establishment of foundational facts, reliance on preponderance of probability and bank entries alone was held to be impermissible for drawing the adverse prima facie inference adopted by SEBI. The Tribunal found that the appellant had produced genuine documentary evidence explaining the first leg of transactions, which SEBI had not meaningfully disputed, and that SEBI therefore had not discharged its initial burden to demonstrate sham or fictitious transactions. [Paras 81, 82, 83, 86, 88]

SEBI's prima facie conclusion of round-tripping from ZEEL through group/associate entities is not established and cannot sustain the interim restraint.

Substance over form / look at principle - doctrine of preponderance of probability - Whether SEBI was justified in treating the entire series of transactions as a sham on the basis of proximity of timing and relatedness of parties without giving weight to pre-existing agreements and documents - HELD THAT: - The Tribunal held that transactions must be considered in light of genuine documentary evidence and long-standing commercial relationships. While proximity of timing may raise suspicion, it is only one factor and cannot by itself establish a sham. The Chairperson's approach of disregarding antecedent contracts, invoices and GST filings and drawing inferences of fraud on a preponderance test was held to be erroneous. The Tribunal emphasised that SEBI must first establish foundational facts demonstrating the transactions were colourable before invoking principles that look to the series of transactions as a whole. [Paras 86, 90, 91, 92, 93]

The Chairperson erred in treating the entire sequence as a sham solely on timing and relatedness; the appellant's documentary explanation of the first leg was sufficient at this stage to rebut the presumption of sham transactions.

Control (positive control) - piercing the corporate veil - Whether the appellant exercised control over the borrower/associate entities so as to justify restraints on his holding office - HELD THAT: - The Tribunal applied the established test of 'control' as positive, proactive power to direct management and policy. It found no material demonstrating that the appellant had de facto control, authorised signatory status, or active participation in the day-to-day management of the borrower/associate entities. The Chairperson's inference of control based on shareholding links and family relationships was held to be founded on surmise and conjecture rather than evidence of positive control. [Paras 96, 97, 98, 99]

The finding that the appellant exercised control over the relevant entities is unsupported and cannot justify the restraint imposed.

Urgency for interim relief - ex-parte ad interim order - doctrine of proportionality - Whether there was urgency and proportionality to justify the ex parte restraint preventing the appellant from holding office in any listed company during investigation - HELD THAT: - The Tribunal held that extreme urgency is required for ex parte interim restraints and such power must be exercised sparingly. SEBI's earlier stated basis for urgency (risk of further diversion) was materially different from the later rationale (possible impediment to investigation), and neither was supported by evidence. Bank records underpinning the investigation cannot be tampered with, and there was no material showing obstruction or risk to company assets. Further, given the limited quantum of funds that could prima facie be linked to round tripping and the existence of genuine documentary explanations, the restraint was disproportionate, punitive in effect, and not necessary to achieve SEBI's stated aim. [Paras 108, 110, 111, 112, 114]

The ex parte interim restraint lacked urgency and was disproportionate; continuation of the restraint could not be sustained.

Ex-parte ad interim order - proportionality - Relief to be granted in view of findings on merits and proportionality - HELD THAT: - Balancing the absence of foundational facts, the probative force of the appellant's documentary evidence regarding the first leg of transactions, and the disproportionality of the restraint, the Tribunal concluded that continuation of the restraint against the appellant would be harsh and unwarranted. The Tribunal nonetheless left the investigation to proceed and made clear that if incriminating material emerges, SEBI may proceed in accordance with law. [Paras 108, 109, 122, 123]

The confirmatory order is quashed insofar as it restrains the appellant; the restraint is set aside, subject to the appellant's cooperation in the ongoing investigation.

Final Conclusion: The Tribunal quashed the confirmatory order to the extent it restrained the appellant from acting as a director or KMP of any listed company, holding that SEBI had not established foundational facts of round tripping, misapplied the preponderance and proportionality principles, and lacked urgency to justify the ex parte restraint; the investigation may continue and the appellant must cooperate, but the interim restraint on his office is set aside.

Wholly consumed in SEZ - exemption under Notification No. 4/2004-ST - services provided outside SEZ but used exclusively for SEZ operations - consumption of services within Special Economic Zone - overriding effect of the SEZ Act

Wholly consumed in SEZ - exemption under Notification No. 4/2004-ST - services provided outside SEZ but used exclusively for SEZ operations - Sponsorship service provided from outside the SEZ but received and used exclusively for the appellant's SEZ unit is eligible for exemption under Notification No. 4/2004-ST. - HELD THAT: - The Tribunal found that the critical test under the notification is exclusive consumption by the SEZ unit, not the geographic location from which the service is provided. It was undisputed that the appellant had no activity outside the SEZ and that the sponsorship service, though provided outside the SEZ, related to and was used exclusively for the operation and promotion of the appellant's SEZ unit. The phrase 'wholly consumed in SEZ' was interpreted to require that the service not be used both for SEZ and non-SEZ purposes, rather than to require that the service be physically provided within the SEZ. The Tribunal relied on its earlier decision in VisionPro Event Management (Tri. Chennai) which, having regard to the object of the SEZ Act and the statutory provision giving the SEZ Act overriding effect, construed the notification liberally so as not to deny exemption where services are provided in relation to SEZ operations even if rendered outside the SEZ. Applying this reasoning, the Tribunal held that sponsorship/event-related services aimed at advertising the SEZ unit's products and approved by the Development Commissioner qualify as consumed within the SEZ and therefore fall within the exemption under Notification No. 4/2004-ST. [Paras 4, 5]

The exemption under Notification No. 4/2004-ST applies to the sponsorship service received by the appellant; the impugned order denying the exemption is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that services provided from outside but received and exclusively used for the appellant's SEZ unit satisfy the requirement of being 'wholly consumed in SEZ' and are therefore exempt under Notification No. 4/2004-ST; the impugned order denying exemption was set aside.

Rule 6(7) of the Service Tax Rules, 1994 - basic fare - commission on air fare - IATA BSP statements

Rule 6(7) of the Service Tax Rules, 1994 - basic fare - commission on air fare - IATA BSP statements - Whether the appellant's service tax liability under Rule 6(7) was correctly determined by including fuel surcharge within the 'basic fare' on which commission was regarded as paid by airlines. - HELD THAT: - The Tribunal had remanded the matter for the Commissioner to determine, on the basis of evidence produced by the appellant, whether the appellant had paid service tax under Rule 6(7) only on that part of the air fare on which commission was normally paid by the airlines. On remand the Commissioner treated 'basic fare' as including fuel surcharge and, relying on arithmetic comparisons of percentages shown in IATA BSP statements, concluded that commission was paid on fare plus fuel surcharge. The Court examined the BSP statements and found they plainly record separate elements (basic fare and fuel surcharge) and indicate commission amounts computed on the basic fare alone. The Commissioner's contrary conclusion rested on an assumption that commission rates must be uniform and on an arithmetical exercise that added fuel surcharge to the basic fare to manufacture a uniform percentage; that premise was unsupported by evidence and contrary to the Tribunal's earlier observation that 'basic fare' is the part of gross airfare on which commission is normally paid. Because the BSP statements submitted by the appellant demonstrably show commission being paid only on the basic fare, the Commissioner's finding that commission was paid on fare plus fuel surcharge was not sustainable. The Court therefore set aside that finding and the order based upon it. The Court expressly did not find it necessary to determine the correctness of invoking the extended period of limitation. [Paras 20, 21]

The finding that commission was paid on air fare including fuel surcharge is set aside; the BSP statements show commission was paid only on the basic fare and the Commissioner's order is quashed.

Final Conclusion: The order dated 30.01.2017 passed by the Commissioner is set aside and the appeal is allowed.

Requirement of specific and intelligible allegations in a show cause notice - vague and non specific show cause notice - overlapping demands - knowledge of the Department negating suppression and extended period - extended period of limitation

Requirement of specific and intelligible allegations in a show cause notice - vague and non specific show cause notice - overlapping demands - knowledge of the Department negating suppression and extended period - extended period of limitation - Whether the demand confirmed in the impugned order is sustainable in law. - HELD THAT: - The Tribunal found the Show Cause Notice and the adjudication to be legally infirm because no specific taxable service was alleged and the Department proceeded by computing a consolidated liability without classifying or identifying the services charged. The adjudicating authority failed to address the assessee's plea that earlier audits, prior show cause notices and communications had put the Department on notice of the appellant's activities; that the appellant had responded to audits and produced returns and reconciliations; and that parts of the amounts were covered by earlier adjudications. Those facts demonstrated that the Department had knowledge of the transactions and there was no concealment by the assessee, rendering invocation of the extended period unjustified. Applying the principle that a show cause notice must convey intelligible and specific allegations so that the noticee can meet them, and relying on the Bench's earlier treatment of identical factual matrices, the Tribunal held that the defects in the notice and overlapping demands were incurable and vitiated the resulting demand. Consequently the demand could not be sustained. [Paras 12, 13, 14]

Demand confirmed in the impugned order set aside as unsustainable; appeal allowed.

Final Conclusion: The consolidated tax demand confirmed by the Commissioner is set aside because the show cause notice was vague and non specific, resulted in overlapping demands despite the Department's prior knowledge of the transactions (negating concealment and invocation of the extended period), and therefore the demand is unsustainable in law; appeal allowed with consequential reliefs as per law.

Reverse charge liability for goods transport agency services - Exemption of services relating to transmission and distribution of electricity under Notification No. 11/2010 ST and Notification No. 45/2010 ST - Scope of phrase 'relating to' for exemption - Double taxation - Invocation of extended period under proviso to Section 73(1) of the Finance Act, 1994 - Imposition of penalties under Sections 77 and 78 of the Finance Act, 1994

Reverse charge liability for goods transport agency services - Exemption of services relating to transmission and distribution of electricity under Notification No. 11/2010 ST and Notification No. 45/2010 ST - Scope of phrase 'relating to' for exemption - Double taxation - Taxability of GTA services received for transport of line materials and tower parts - whether such services are exempt as "services relating to transmission and distribution of electricity" and whether demand on the assessee results in impermissible double taxation. - HELD THAT: - The Tribunal concluded that GTA services availed for transportation of line materials and tower parts to distribution circles fall within "services relating to transmission and distribution of electricity" and are eligible for exemption under Notification No. 11/2010 ST dated 27.02.2010 and Notification No. 45/2010 ST dated 20.07.2010. The reasoning relied on the wide amplitude of the phrase "relating to" and precedents recognising that activities connected with transmission and distribution (erection, installation, transport of materials necessary for transmission/distribution) are covered by the exemption. Although records did not show issuance of consignment notes by the transporters, the Tribunal accepted that GTA services were rendered for the transmission/distribution activity. Further, since the transport contractors had paid the Service Tax to Government account (major portion before issuance of the show cause notice and the balance shortly thereafter), confirming demand against the appellant would amount to double taxation on the same service activity, which is not permissible; in view of realization of the tax by the Revenue, the demand on the assessee could not be sustained. [Paras 6, 7]

GTA services for transport of line materials and tower parts are covered by the exemption notifications and the demand on the appellant cannot be sustained; confirming the demand would amount to impermissible double taxation.

Invocation of extended period under proviso to Section 73(1) of the Finance Act, 1994 - Imposition of penalties under Sections 77 and 78 of the Finance Act, 1994 - Whether the extended period for demand could be invoked and whether penalties could be imposed in the facts of the case. - HELD THAT: - The Tribunal held that invocation of the extended period was not justified because the question was one of interpretation of the scope of the exemption notifications. Given the interpretational nature of the issue and the fact that the tax had in substance been paid to the Government account by the transporters (thereby negating any evasion or concealment by the appellant), the conditions warranting invocation of the extended period and the imposition of penalties were not satisfied. Consequently, the impugned appellate order invoking extended period and upholding penalties was found unsustainable. [Paras 6, 8, 9]

Invocation of the extended period is not justified and the penalties and demand sustained in the impugned order are not sustainable.

Final Conclusion: The appeal is allowed; the impugned order is set aside as the GTA services in question are covered by the exemption notifications and the tax had been realized by the Revenue, making invocation of the extended period and sustaining penalties unjustified, with consequential relief, if any, to the appellant.

Incentives as non-consideration for taxable service - Valuation of taxable service under section 67 of the Finance Act, 1994 - Taxability of target incentives to travel agents - Business Auxiliary Service classification rejected

Incentives as non-consideration for taxable service - Valuation of taxable service under section 67 of the Finance Act, 1994 - Taxability of target incentives to travel agents - Business Auxiliary Service classification rejected - Whether target-based incentives received by an air travel agent constitute taxable consideration for provision of a service and attract service tax. - HELD THAT: - The Tribunal applied the Larger Bench decision in M/s Kafila Hospitality & Travels Pvt. Ltd., which held that incentives paid by airlines or CRS companies for achieving pre-determined sales targets are not transaction-specific consideration and therefore do not form part of the value of taxable services under section 67. The Larger Bench reasoning-endorsed by the Tribunal-explains that valuation under section 67 is confined to amounts which are consideration for the particular taxable service provided; incentives tied to overall performance or achievement of targets lack nexus with any particular supply and hence are not consideration. The Tribunal also relied on analogous authorities (including decisions referring to the AP Group and Rohan Motors) to underscore that target incentives encourage general business performance and do not convert into commissions or consideration for promoting the principal's business so as to attract tax as Business Auxiliary Service. Applying that precedent to the present facts (incentives received from M/s Amadeus India Private Limited for exceeding sales targets), the impugned finding that such receipts amounted to taxable Business Auxiliary Service was held to be contrary to the settled law and unsustainable. [Paras 3, 4]

Target-based incentives received by the air travel agent are not taxable consideration for provision of service under section 67 and the finding that they amounted to Business Auxiliary Service is set aside; the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that target-linked incentives paid to the air travel agent are not taxable consideration under section 67 and setting aside the impugned order treating such receipts as taxable Business Auxiliary Service.

Eligibility of cenvat credit on date of receipt of service - admissibility of credit where service received prior to omission of a proviso despite credit taken later - proportionate reversal under Rule 6(3A) of the Cenvat Credit Rules, 2004 - treatment of services specified in Rule 6(5) of the Cenvat Credit Rules, 2004

Eligibility of cenvat credit on date of receipt of service - treatment of services specified in Rule 6(5) of the Cenvat Credit Rules, 2004 - Whether eligibility for cenvat credit is to be determined as on the date of receipt of the service or on the date of taking credit in the books, and whether services received prior to omission of Rule 6(5) are admissible even if credit was taken after omission. - HELD THAT: - The Tribunal held that the determinative test for entitlement to cenvat credit is the date of receipt of the service, not the date on which credit was recorded in the books. Reliance on earlier decisions establishes that once the service is received along with invoices, the credit accrues on that date. The appellate record (excel sheet of invoices) indicated that invoices relating to the disputed input service credit were dated prior to 01.04.2011, the date when Rule 6(5) was omitted. The adjudicating authority did not examine actual dates of receipt of services when confirming demand. Consequently, the matter was remanded for verification of the dates of receipt and for fresh quantification: if services were indeed received prior to 01.04.2011, the credit taken thereafter would be admissible despite omission of Rule 6(5). [Paras 4, 5]

Impugned order set aside and matter remanded to the Adjudicating Authority to examine and verify dates of receipt of services and to quantify admissible reversal or re-credit accordingly.

Final Conclusion: Appeal allowed in part: the Tribunal set aside the order upholding inclusion of disputed input service credit and remanded the matter for the Adjudicating Authority to verify the actual dates of receipt of services (invoices) and to recompute reversal/credit in accordance with the principle that entitlement is governed by date of receipt of service.

Excisability of spent solvent - deeming fiction of marketability under Section 2(d) read with Section 2(f) - Rule 3(5A) of the CENVAT Credit Rules, 2004 and reversal of CENVAT credit on waste and scrap - treatment of containers/packaging as non-cenvatable waste - personal penalty under Rule 26 of the Central Excise Rules, 2002

Excisability of spent solvent - deeming fiction of marketability under Section 2(d) read with Section 2(f) - Demand of central excise duty on spent DMF solvent cleared from factory premises - HELD THAT: - The Tribunal held that the question of excisability of spent solvent is covered by the ratio in CCE, Hyderabad v. Aurobindo Pharma Ltd. as affirmed by higher courts. The decision explains that where solvents are repeatedly used in the manufacturing process and the residual/spent solvent cleared from the factory is the unusable residue of that process, such residue is not a marketable manufactured product within the meaning of excise law for the periods in question. The Tribunal noted the settled principle that the Revenue cannot take a contrary stand where it has earlier accepted an opposite position in identical factual matrix and that subsequent invocation of the deeming fiction of marketability (Section 2(d) read with Section 2(f)) does not sustain duty where the show cause notice itself relies on manufacturing/process arguments already negatived by precedent. Relying on the Supreme Court and Tribunal authorities cited in the record, the demand of duty on spent solvent was held unsustainable. [Paras 3]

The demand of central excise duty of Rs. 2,02,242/- on spent solvent (DMF) is not sustainable and is set aside.

Rule 3(5A) of the CENVAT Credit Rules, 2004 and reversal of CENVAT credit on waste and scrap - treatment of containers/packaging as non-cenvatable waste - Requirement to reverse CENVAT credit and levy duty on clearance of waste and scrap (MS/SS/GI parts, packing drums) claimed to have arisen from items on which no CENVAT credit was availed - HELD THAT: - The Tribunal accepted the appellants' uncontradicted case that the scraps (MS/SS/GI items) arose from parts and components (MS channels, pipes, elbows, flanges, nuts and bolts) for which no CENVAT credit had been availed at purchase; similarly, drums and packaging containers were held to be containers used for receipt of raw materials and not waste arising out of manufacture for which credit was taken. On these facts, and following precedents (including M/s. Padmashri Dr. Vitthalrao Vikhe Patil SSK and the Supreme Court decision in CCE v. West Coast Industrial Gases Ltd.), the Tribunal held that Rule 3(5A) cannot be invoked to demand reversal where credit was not availed on the items out of which the scrap arose, and that containers/drums used for inputs are not exigible to duty as waste arising from inputs for which credit was taken. The department produced no evidence to contradict the appellants' factual assertions, and the impugned demands under Rule 3(5A) and as duty on packaging/drums were set aside. [Paras 3]

The demand to reverse CENVAT credit and to levy duty on the cleared waste and scrap (including packaging drums) is not maintainable; the impugned demands are set aside.

Personal penalty under Rule 26 of the Central Excise Rules, 2002 - Imposability of personal penalties on named officials where substantive demands are set aside - HELD THAT: - The Tribunal held that where the substantive demands and liabilities on merits have been quashed, the basis for imposing personal penalties on the officers under Rule 26 falls away. Consequently, the personal penalties imposed on Shri J.D. Gandhi and C.J. Lohani were held to be extinguished and not imposable. [Paras 3]

Personal penalties imposed under Rule 26 are not imposable and are set aside.

Final Conclusion: The Tribunal allowed the appeals, setting aside the adjudicating and appellate orders: the duty demand on spent DMF solvent and the demand/reversal under Rule 3(5A) in respect of waste, scrap and packaging drums were quashed, and consequential personal penalties under Rule 26 were held not imposable.

Relevancy of statements recorded under Section 9D - Admissibility of statements recorded by Gazetted Central Excise Officers - Cenvat credit admissibility on invoices from registered dealers - Reliance on departmental registration by purchaser - Panchnama evidence of non-existence of suppliers - Penalty liability where credit taken in good faith

Relevancy of statements recorded under Section 9D - Admissibility of statements recorded by Gazetted Central Excise Officers - Statements recorded by Central Excise officers under section 14 were not admissible in adjudication proceedings in the absence of compliance with section 9D - HELD THAT: - The Tribunal examined the 35 statements relied upon in the SCN and applied the statutory procedure in section 9D. Clause (b) of section 9D requires that, where clause (a) exceptions do not apply, the person who made the statement must be examined as a witness before the adjudicating authority and the authority must form an opinion that, in the interests of justice, the statement should be admitted. The record shows no such examination or reasoned admission; nor was any circumstance under clause (a) asserted. Following settled precedents and the mandatory language of section 9D, the Tribunal held these statements neither relevant nor admissible for proving the truth of their contents and therefore they could not support the allegations in the SCN. [Paras 13, 14, 16]

The 35 statements recorded under section 14 were not relevant or admissible in the adjudication as section 9D procedure was not followed.

Cenvat credit admissibility on invoices from registered dealers - Reliance on departmental registration by purchaser - Panchnama evidence of non-existence of suppliers - Cenvat credit availed by the assessee on the invoices of registered dealers cannot be denied where the purchaser reasonably relied on departmental registrations and received, accounted for and used the inputs - HELD THAT: - Although some panchnamas indicated non-existence of certain units, the department itself had earlier granted registrations to those manufacturers/dealers and accepted their returns. The Tribunal found it unreasonable to expect the purchaser to investigate the correctness of departmental registrations or to verify upstream transactions between manufacturer and dealer. The assessee had placed orders on registered traders, received and weighed goods, accounted for them, paid duty on finished products and maintained records; the department was ambiguous about the existence of units over time. Balancing the evidence and considering that the department issued registrations (and no fraud by departmental officers was alleged), the Tribunal concluded the assessee reasonably relied on such registrations and therefore Cenvat credit could not be denied. [Paras 22, 23, 24, 28, 29]

The disallowance of Cenvat credit was set aside and the credit was held to be admissible.

Penalty liability where credit taken in good faith - Cenvat credit admissibility on invoices from registered dealers - Penalties imposed on the individual appellants could not be sustained once the disallowance of Cenvat credit was set aside - HELD THAT: - Having held that the assessee was entitled to Cenvat credit by reasonably relying on departmental registrations and having noted absence of any allegation or evidence of fraud by departmental officers, the Tribunal found no basis to sustain the penalties imposed on the appellants. The conclusion that the purchasers acted upon registrations issued by the department and took reasonable precautions meant the punitive measures could not stand. [Paras 28, 29, 30]

Penalties imposed on the appellants were set aside.

Final Conclusion: The impugned order denying Cenvat credit and imposing equal recovery and penalties was set aside; the Tribunal held the statements were inadmissible for lack of section 9D procedure, the assessee validly relied on departmental registrations and received and used inputs, and consequently the disallowance and penalties could not be sustained.

Abatement by co-noticees in suppression of clearances - clubbing of clearances for demand - penalty under Rule 25 of the Central Excise Rules, 2002 - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - treatment of co-noticees - discharge certificate under SVLDRS and its finality

Abatement by co-noticees in suppression of clearances - clubbing of clearances for demand - penalty under Rule 25 of the Central Excise Rules, 2002 - Liability of the appellants to penalty for abetting suppression of value and clubbing of clearances as found in the adjudicating order - HELD THAT: - The adjudicating authority had found, on departmental intelligence and documentary verification, that the appellants were interconnected with the main noticee and had abetted suppression of clearances, leading to confirmation of duty demand and imposition of penalty under Rule 25. The Tribunal noted the factual findings recorded in the impugned order and did not reopen the settled factual matrix regarding the main noticee. While the appellants challenged the findings on absence of proof of financial flowback and independent manufacturing, the Tribunal did not accept that these contentions required overturning of liability as recorded by the adjudicating authority. However, in view of the concurrent resolution of the main noticee under the SVLDRS and the surrounding circumstances, the Tribunal exercised its discretionary power in mitigation of penalty rather than setting aside the finding of abetment or the clubbing exercise itself. [Paras 2, 5, 7]

Findings of abetment and clubbing were not reopened on merits; penalty liability stands but is mitigated in exercise of Tribunal's discretion.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - treatment of co-noticees - discharge certificate under SVLDRS and its finality - Effect of the main noticee's settlement under SVLDRS on co-noticees and entitlement to relief under the Scheme - HELD THAT: - The Tribunal recorded that the main noticee had obtained Form SVLDRS-IV (discharge certificate) and that its appeal was dismissed as settled. The Tribunal relied on the CBIC FAQ clarifying that where a main noticee has settled tax dues, co-noticees may opt into the Scheme by filing a declaration to seek waiver of penalty. The co-noticees in these appeals had not filed such declarations before the Scheme closed; therefore, they could not claim automatic discharge. Recognising the finality of the main noticee's settlement and the CBIC clarification, the Tribunal nonetheless considered the factual context and, as a matter of equitable mitigation, reduced the penalties imposed on the co-noticees. [Paras 7, 8]

Main noticee's discharge under SVLDRS is final; co-noticees were not automatically discharged and had to file declarations to avail Scheme benefits, but Tribunal reduced penalties to Rs.50,000 each in exercise of discretion.

Final Conclusion: The appeals are disposed of by reducing the penalties imposed on the appellants to Rs.50,000 each; the main noticee's SVLDRS discharge remains final and co-noticees, having not filed declarations under the Scheme, are not automatically discharged though granted mitigated penalty by the Tribunal.

Transaction value under Section 4(1)(a) - valuation under Section 4(1)(b) and Central Excise Valuation Rules (Rule 8 and Rule 9) - sale not in the ordinary course of trade / sales below cost as extra commercial consideration - interest under Section 11AB - penalty under Section 11AC - Section 11A(2B) - payment of duty before service of notice - invocation of extended period of limitation in light of FIAT judgment and CBEC Circular No.979/3/2014 dated 15 01 2014

Transaction value under Section 4(1)(a) - valuation under Section 4(1)(b) and Central Excise Valuation Rules (Rule 8 and Rule 9) - sale not in the ordinary course of trade / sales below cost as extra commercial consideration - Whether the assessable value of 'Heat Exchangers' must be determined under Section 4(1)(b) and the Valuation Rules (Rule 9 read with Rule 8) rather than transaction value under Section 4(1)(a). - HELD THAT: - The Tribunal accepted the conclusion that the supplies to the OEMs could not be treated as sales in the ordinary course of trade. The Commissioner (Appeals) found that the OEMs were so associated with the appellant's business and that the final product manufactured by those OEMs was purchased back by the appellant, indicating mutuality of interest. The record showed continuous selling of Heat Exchangers at prices lower than cost of manufacture and the appellant itself ultimately deposited differential duty after costing was produced. On these facts the sale price did not represent an arm's length wholesale cash price and thus Section 4(1)(a) did not apply. In cases of sale to related persons Rule 9 applies and, by its proviso, where the related person uses the goods in manufacture, Rule 8 governs valuation. The Tribunal therefore upheld the demand of differential duty computed under Rule 8/9. [Paras 4]

Assessable value to be determined under Section 4(1)(b) and Valuation Rules (Rule 9 and Rule 8); the confirmation of differential duty on Heat Exchangers is justified on merits.

Interest under Section 11AB - Whether interest under Section 11AB is payable on the confirmed differential duty. - HELD THAT: - The Tribunal noted that once the demand of duty is held sustainable, interest under Section 11AB automatically arises and is chargeable on the confirmed portion of the demand. The appellant had deposited amounts after costing was produced, and the adjudicating authority confirmed interest; the Tribunal upheld that interest is chargeable on the part of the demand which is confirmed. [Paras 4]

Interest under Section 11AB is chargeable on the confirmed demand.

Section 11A(2B) - payment of duty before service of notice - penalty under Section 11AC - invocation of extended period of limitation in light of FIAT judgment and CBEC Circular No.979/3/2014 dated 15 01 2014 - Whether penalties under Section 11AC could be imposed where the assessee had paid the differential duty and interest before issuance of notice and where the FIAT judgment post dates the period in question. - HELD THAT: - The Tribunal observed that the appellant had deposited differential duty and interest for the relevant earlier periods well before issuance of the show cause notice. Section 11A(2B) provides that where duty is paid before service of notice and the Central Excise Officer is informed, no notice should be served in respect of that duty. The Tribunal relied on the CBEC circular which states that the FIAT judgment, to the extent it creates a new premise for invoking extended limitation, does not justify invoking extended limitation for periods prior to the FIAT decision (29 08 2012). Since the transactions in question predated the FIAT judgment, extended limitation could not be invoked and penalties under Section 11AC could not be sustained. The Tribunal also cited authority treating voluntary payment before notice as falling under Section 11A(2)(b) logic, displacing the need for penalty proceedings. [Paras 4]

Penalties under Section 11AC are set aside because duty and interest were paid prior to issuance of notice and extended limitation based on FIAT could not be invoked for the earlier period.

Section 11A(2B) - payment of duty before service of notice - Whether the show cause notice ought to have been issued after the appellant had paid the differential duty and interest. - HELD THAT: - The Tribunal recorded the chronology showing that the appellant paid differential duty and interest in 2007, whereas the show cause notice was issued on 26 06 2008. In view of Section 11A(2B), which prevents service of a notice in respect of duty already paid before service of notice once the officer is informed, the Tribunal held that issuance of the show cause notice was not proper. While the Tribunal did not re open the merits of the duty already paid and confirmed, it concluded that there was no need for initiation of penalty proceedings when duty had been voluntarily deposited before notice. [Paras 4]

Show cause notice should not have been issued in respect of duty already paid before service of notice; penalty proceedings therefore were unsustainable.

Final Conclusion: The appeal is partially allowed: the adjudication confirming differential duty and interest on valuation grounds under Section 4(1)(b) and the Valuation Rules is sustained, but penalties imposed under Section 11AC are set aside because the duty and interest were paid before issuance of the notice and extended limitation based on the FIAT judgment could not be invoked for the earlier period; the show cause notice in respect of amounts paid prior to its service was improper.

Penalty under Rule 26 of the Central Excise Rules, 2002 - Acquires possession of or deals with excisable goods knowing or having reason to believe they are liable to confiscation - Facilitation of clandestine clearances by providing third party registration (ARAI certificate) - Liability for personal penalty without physical handling where facilitation enables evasion - Relevance of fake or no Central Excise invoices as indicia of knowledge or reason to believe

Penalty under Rule 26 of the Central Excise Rules, 2002 - Acquires possession of or deals with excisable goods knowing or having reason to believe they are liable to confiscation - Facilitation of clandestine clearances by providing third party registration (ARAI certificate) - Relevance of fake or no Central Excise invoices as indicia of knowledge or reason to believe - Whether the appellant is liable to personal penalty under Rule 26 for facilitating clearance and registration of vehicles cleared without payment of duty. - HELD THAT: - The Tribunal found that the appellant held ARAI registration in the name of his firm and knowingly provided that registration to M/s Shree Rajshakti Automobiles, thereby enabling registration of the manufacturer's vehicles with the RTO despite the manufacturer lacking its own ARAI certification. The adjudicating authority recorded that the appellant received 54 illicitly manufactured vehicles from the main noticee and delivered them for financing and onward delivery without any Central Excise invoice evidencing payment of duty; three fake Central Excise invoices were also recovered. On these findings the Tribunal concluded that the appellant dealt with the excisable goods "in any other manner" within the meaning of Rule 26 by facilitating clearance and transfer of possession without duty invoices, and that such conduct gave him knowledge or reason to believe the goods were liable to confiscation. The Tribunal rejected the appellant's reliance on earlier decisions as distinguishable on facts, and held that absence of physical transportation or sale did not preclude imposition of penalty where facilitation and receipt/delivery of duty unpaid goods with fake/no invoices established the requisite involvement and culpability under Rule 26. [Paras 2, 3]

Penalty under Rule 26 as imposed on the appellant is sustained and the appeal is dismissed.

Final Conclusion: The Tribunal affirmed the adjudicating authority's finding that the appellant facilitated clearance and registration of vehicles cleared without payment of Central Excise duty, constituted dealing with excisable goods under Rule 26, and accordingly dismissed the appeal upholding the personal penalty.

Imposition of penalty under Rule 26 of the Central Excise Rules, 2002 - effect of settlement under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 on penalty liability - director's liability where he was a paid employee - denial of exemption by interpretation of notification as basis for demand

Imposition of penalty under Rule 26 of the Central Excise Rules, 2002 - effect of settlement under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 on penalty liability - director's liability where he was a paid employee - Whether penalty under Rule 26 could be sustained against the appellant-director after the main demand was settled under the SVLDRS Scheme, 2019, where the appellant was a paid employee and the demand arose from an interpretation of an exemption notification. - HELD THAT: - The Tribunal held that once the principal demand of duty against the main noticee was settled under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, there remained no basis for imposing a penalty on the director. The adjudication established that the demand arose from an interpretational issue concerning the exemption notification and that the appellant was a paid employee (director) who was not involved in the mater from 2013-14 and did not avail of the Scheme himself. Applying the Tribunal's earlier reasoning in comparable precedents, the Court observed that where SVLDRS settlement would have resulted in nil duty or otherwise disposed of the duty demand, the penal consequence cannot survive independently; penal liability cannot be sustained merely because the director did not separately opt under the Scheme. For these reasons the impugned penalty was found to be unsustainable and was set aside. [Paras 4, 5]

The penalty imposed on the appellant under Rule 26 was quashed and the appeal allowed.

Final Conclusion: The Tribunal allowed the appeal and set aside the penalty imposed under Rule 26 of the Central Excise Rules, 2002 on the appellant, concluding that settlement of the main demand under SVLDRS, 2019 left no surviving basis for penal liability of the director who was a paid employee and where the demand was based on interpretation of an exemption notification.

Remand for fresh adjudication - failure to consider expert evidence - scope of remand - reliance on a set aside order prohibited - observance of principles of natural justice - classification as manufacture under the Central Excise Tariff - eligibility for SSI exemption

Remand for fresh adjudication - scope of remand - reliance on a set aside order prohibited - Validity of the impugned adjudicating authority's order in light of the Tribunal's earlier remand direction. - HELD THAT: - The Tribunal found that the adjudicating authority, notwithstanding the earlier remand, reproduced and defended findings from an order which had been set aside and which therefore ceased to operate. The adjudicating authority's order repeatedly referred to and relied upon the earlier order that had been set aside by the Tribunal, conduct that goes beyond the permissible scope of remand and disregards the appellate direction. The Tribunal held that such reliance and attempt to rehabilitate a set aside order in de novo proceedings demonstrates failure to comply with the niceties of remand proceedings and renders the order unsuited to appellate adjudication. In addition, the adjudicating authority had not adequately addressed submissions which the noticees had previously placed before it, including allegedly expert material, and thus did not effectuate the remand's purpose of fresh consideration. [Paras 4, 5, 62]

Impugned order set aside and matter remanded to the original authority for fresh proceedings confined to the proper scope of remand.

Failure to consider expert evidence - observance of principles of natural justice - classification as manufacture under the Central Excise Tariff - eligibility for SSI exemption - Whether the substantive issues (classification as manufacture and SSI exemption eligibility) were finally adjudicated or required fresh consideration on remand. - HELD THAT: - The Tribunal noted that important submissions and materials relied upon by the appellants - including the report of a Chartered Engineer, expert opinions, and catalogues - had not been considered by the original authority. The earlier Tribunal order had remanded the matter expressly to permit consideration of those materials and to enable compliance with natural justice including fresh consideration of any request for cross examination. Given the original authority's failure to consider the expert evidence and to observe the remand direction, the Tribunal did not decide the substantive questions on merits but directed that these matters be examined afresh by the adjudicating authority so that known law is applied to established facts. [Paras 4, 5, 62]

Substantive issues as to manufacture classification and SSI exemption eligibility are not finally decided; they are remanded for fresh consideration with opportunity to address expert evidence and natural justice requirements.

Final Conclusion: The appeals are allowed by setting aside the impugned order and remanding the matter to the original adjudicating authority for fresh proceedings limited to the proper scope of remand, with directions to consider all expert material and submissions, observe principles of natural justice (including consideration of cross examination), and apply the relevant law to the facts.

CENVAT credit on jigs, fixtures, moulds and dies sent to a job-worker or another manufacturer - Clarificatory amendment and retrospective application of rule 4(5)(b) - Definition of job-work and job-worker as determinative of liability - Inapplicability of invoice requirement for non-sale transfers under rule 9(3) - Remand for factual ascertainment regarding final disposal of moulds

Definition of job-work and job-worker as determinative of liability - Whether transfer of moulds to vendors without supply of raw materials from the principal manufacturer falls within the definition of job-work and precludes classification of the vendors as job-workers - HELD THAT: - The Tribunal noted that the definition of 'job-work' in rule 2(n) of the CENVAT Credit Rules, 2004 confines a 'job-worker' to persons who process or work upon raw material or semi-finished goods supplied to them. That definition is intended to identify persons who are relieved of liability as 'manufacturer' for excise purposes. The appellate record showed that the vendors did not receive raw materials or semi-finished goods from the appellant. The Tribunal treated the statutory definition as a specific and restrictive test for characterising a recipient as a job-worker, distinguishing earlier MODVAT-era decisions which addressed a different regulatory framework. The Tribunal therefore accepted that the relationship and the characterisation under rule 2(n) is central to determining liability for CENVAT credit in the present facts. [Paras 6, 7]

Definition in rule 2(n) constrains the characterization of the vendors as job-workers where they were not recipients of raw materials or semi-finished goods from the appellant; this characterisation is determinative of liability.

CENVAT credit on jigs, fixtures, moulds and dies sent to a job-worker or another manufacturer - Clarificatory amendment and retrospective application of rule 4(5)(b) - Whether rule 4(5) permitted transfer of moulds to vendors/job-workers without reversal of CENVAT credit prior to the 27 February 2010 amendment and whether the 2010 incorporation is clarificatory - HELD THAT: - The Tribunal examined rule 4(5) of the CENVAT Credit Rules, 2004 and observed that it contemplates transfers to a job-worker with retention of credit for a limited time and reversal if goods are not returned to the principal manufacturer. It further noted that the 2010 amendment expressly enabled transfers to another manufacturer or job-worker and concluded that the amendment is clarificatory in nature. The Tribunal rejected the submission that the 2010 provision was merely a substantive change, observing that rule 4(5)(a)'s purpose for clearance to a job-worker is reflected and that rule 4(5)(b) merely restates and clarifies the permissibility of such transfers including where goods may not be returned to the principal manufacturer. [Paras 7, 8]

Rule 4(5) permits transfers to a job-worker with appropriate conditions; the 2010 addition of clause (b) is clarificatory and capable of explaining eligibility from earlier periods.

Inapplicability of invoice requirement for non-sale transfers under rule 9(3) - Whether rule 9(3) and the invoice requirement apply to the removal of moulds to vendors in the factual matrix where moulds were not sold - HELD THAT: - The Tribunal found that rule 9(3), which concerns inputs or capital goods removed 'as such' and requires issuance of an invoice, is not applicable where the moulds were not sold to the vendors. The factual position presented did not indicate sale; instead the removals were governed by rule 4(5) and its regime for transfers to job-workers or manufacturers on behalf of the principal. Consequently, treating the transactions as sales under rule 9(3) was inappropriate on the presented facts. [Paras 8]

Rule 9(3)'s invoice requirement does not apply where moulds are transferred to vendors without sale; such transfers fall under rule 4(5) rather than the 'as such' removals envisaged by rule 9(3).

Remand for factual ascertainment regarding final disposal of moulds - Whether recovery of alleged ineligible credit could be confirmed without ascertaining the final disposal of the moulds after completion of the contract - HELD THAT: - The Tribunal noted that the lower authorities' orders were silent on the ultimate fate or final disposal of the moulds after the contractual period. Because transfers had been made to vendors and it was not the respondent's case that the transactions were removals envisaged by rule 3(5), the Tribunal held that confirmation of recovery under rule 14 without first ascertaining factual particulars about the final disposal and the nature of the transactions would be improper. Accordingly, the Tribunal set aside the impugned order and remanded the matter to the original authority for fresh determination after factual ascertainment of the transactions and final disposal of the moulds. [Paras 9]

Matter remanded for fresh determination by the original authority to ascertain factual aspects of the transactions and final disposal of the moulds before any recovery under rule 14 is confirmed.

Final Conclusion: The Tribunal held that rule 4(5) contemplates transfers of moulds to job-workers or manufacturers and that the 2010 insertion clarifies prior permissibility; rule 9(3) did not apply to non-sale transfers in the present facts. However, because the lower authorities did not ascertain the final disposal of the moulds, the Tribunal set aside the recovery order and remanded the matter to the original authority for fresh factual determination.

Registered dealer - cancellation of registration - Group Insurance Policy - Biometric form-II - reasoned communication

Registered dealer - cancellation of registration - Whether the deceased remained a registered dealer under the Uttar Pradesh Value Added Tax Act, 2008 on the date of his death - HELD THAT: - The court found that the factual position as to whether the deceased's registration stood cancelled on the date of death was not correctly or sufficiently considered by the revenue authorities. The petitioner asserted that the deceased held a pre-existing registration obtained in 2006 which was surrendered only on 16.12.2013 and that the entry uploaded on 24.12.2013 related to that subsequent surrender; the State relied on an application dated 18.03.2013 which the petitioner explained related only to a request for addition of commodities that was withdrawn and did not operate as cancellation of the pre-existing registration. The Court concluded that the respondent-authorities had not applied their mind to the distinction between a request for additions and cancellation of the earlier registration and that this factual determination must be examined afresh by respondent no.3 in light of these observations. [Paras 6, 7, 8]

Remitted to respondent no.3 for fresh examination of the factual question whether the deceased's registration was effective on the date of death and for issuance of a reasoned communication within one month.

Group Insurance Policy - Biometric form-II - reasoned communication - Consequential directions if the deceased is found to have been a registered dealer on the date of death - HELD THAT: - The Court directed that if respondent no.3, upon fresh examination, confirms that the deceased was a registered dealer at the time of death, the respondent shall complete the necessary formalities, issue the Biometric form-II to the insurer and communicate the reasons to the petitioner within the same time frame. Thereafter, absent any other legal impediment, the insurance company is expected to pay the insurance money to the petitioner within a further period of one month. These directions are imposed to secure the petitioner's entitlement under the Group Insurance Policy contingent upon confirmation of registration. [Paras 9, 10, 11]

If registration is confirmed, respondent no.3 to issue form-II to the insurer and the insurer to pay the insurance money to the petitioner within the stipulated time periods.

Final Conclusion: Writ petition disposed with directions that respondent no.3 shall, within one month, examine and furnish a reasoned communication on whether the deceased was a registered dealer on the date of death; if so, respondent no.3 shall issue the Biometric form-II to the insurer and, subject to no other legal impediment, the insurance money shall be paid to the petitioner within a further one month.

Principles of natural justice - revisionary jurisdiction under the AP VAT Act - jurisdiction to revise a non existing or unassessed period - availability of alternative remedy and discretionary writ jurisdiction - remand for fresh consideration

Principles of natural justice - revisionary jurisdiction under the AP VAT Act - Impugned revision order dated 17.02.2023 violated principles of natural justice by failing to afford a hearing after the petitioner filed written objections. - HELD THAT: - The Division Bench had earlier remitted the matter directing the revisional authority to issue notice and hear the petitioner with documents. The revisional order records that written objections were filed on 16.11.2022 but contains no specific finding that a personal hearing was granted after those written objections were filed; the only earlier preliminary hearing was before the written objections were filed. The revisional order also does not deal with the petitioner's principal objections, including lack of jurisdiction to assess certain periods. On these facts the Court held that the mandate to afford an opportunity of hearing was not complied with and principles of natural justice were therefore violated. The writ petition was entertained notwithstanding the availability of an appellate remedy because one of the recognised exceptions to the bar of alternative remedy is violation of natural justice. [Paras 7, 8]

Writ petition allowed on this ground; revisional order set aside insofar as it was passed without hearing the petitioner on his written objections.

Jurisdiction to revise a non existing or unassessed period - remand for fresh consideration - Whether the revisional authority could lawfully include and assess the period February 2017 to June 2017 in the suo motu revision when no assessment order had been passed by the primary authority for that period was not finally adjudicated but remitted for fresh consideration. - HELD THAT: - The Court noted that the primary assessment covered January 2016 to January 2017 and that no assessment proceedings had been recorded for February 2017 to June 2017; therefore the revisional authority's inclusion of that later period was not considered or answered in the impugned order. Given the absence of findings on the jurisdictional point, the Court set aside the revisional order and remitted the matter to the revisional authority to consider and decide, after affording hearing, whether revision can be validly exercised over the periods in question and to pass an appropriate order in accordance with law. [Paras 7, 8]

Issue remitted to the revisional authority for fresh consideration and decision after affording the petitioner a hearing; no adjudication on the merits of jurisdiction in this judgment.

Final Conclusion: The writ petition is allowed; the revisional order in R.F.No.10 (18)/2019 20 dated 17.02.2023 is set aside and the matter is remitted to the 1st respondent with a direction to afford an opportunity of hearing to the petitioner with reference to the written objections and thereupon pass an appropriate order in accordance with law expeditiously; no costs.

Presumption under Section 139 of the Negotiable Instruments Act - legally enforceable debt or other liability - rebuttable statutory presumption / reverse onus - enforcement of debt under Section 138 of the Negotiable Instruments Act - violation of Section 269-SS of the Income-tax Act not rendering transaction void - penalty under Section 271-D and mitigation under Section 273-B

Presumption under Section 139 of the Negotiable Instruments Act - legally enforceable debt or other liability - enforcement of debt under Section 138 of the Negotiable Instruments Act - non-reflection of transaction in books of account or Income-tax returns - rebuttable statutory presumption / reverse onus - Whether a transaction not reflected in the books of account and/or Income-tax returns of the holder of the cheque can be treated as a legally enforceable debt and be enforced under Section 138 of the Negotiable Instruments Act. - HELD THAT: - The Division Bench held that once execution of the cheque is admitted, Section 139 mandates an initial presumption in favour of the holder that the cheque was issued for discharge of a legally enforceable debt or liability; that presumption includes existence of a legally enforceable debt and is rebuttable. The accused bears the onus of raising a probable defence to rebut the presumption on the preponderance of probabilities, and may rely upon evidence led by either party (Rangappa clarified that Krishna Janardhan Bhat to the contrary is not correct on this point). Mere non-disclosure of the advance in the payee's books or Income-tax returns is a material circumstance which the accused can use to raise a defence, but such non-disclosure does not automatically oust the presumption or require dismissal of the complaint at the threshold. Accordingly, a complaint under Section 138 is not to be summarily dismissed solely because the claimed advance was not reflected in accounts or returns; factual adjudication is required to determine whether the presumption has been rebutted. [Paras 6, 14]

A transaction not reflected in the books or Income-tax returns can, subject to rebuttal of the statutory presumption, be a legally enforceable debt and be enforced under Section 138; the accused must be permitted to raise and establish a defence to rebut the presumption.

Violation of Section 269-SS of the Income-tax Act not rendering transaction void - penalty under Section 271-D and mitigation under Section 273-B - recovery rights unaffected by statutory penalty - Whether violation of Section 269-SS of the Income-tax Act or related omissions (e.g., under Section 271-AAD) renders the transaction unenforceable under Section 138 of the Negotiable Instruments Act. - HELD THAT: - The Court examined the statutory scheme and precedents and concluded that contravention of Section 269-SS attracts penal consequences (including penalty under Section 271-D) but does not render the underlying transaction void or unenforceable. Assistant Director of Inspection Investigation upheld the constitutional validity of Section 269-SS and recognised that penalty provisions operate to curb unaccounted money; Section 273-B permits waiver of penalty on proof of reasonable cause. Prior High Court decisions have held the prohibition is on acceptance and that breach leads to civil penalties rather than invalidation of the contract. Therefore violation of Section 269-SS or omission relevant to tax does not, by itself, extinguish the payee's right to seek recovery through Section 138; such statutory violations are grounds for penalty and for the accused to raise a defence, but do not automatically defeat enforcement of the debt. [Paras 17, 18]

Breach of Section 269-SS and related tax omissions do not render the transaction unenforceable; the transaction can be enforced under Section 138 subject to the accused rebutting the statutory presumption or relying on other permissible defences.

Precedential treatment of conflicting Single Judge decisions - affirmance and overruling - Disposition of earlier conflicting High Court Single Judge decisions on the point. - HELD THAT: - The Division Bench held that the decisions in Krishna P. Morajkar, Bipin Mathurdas Thakkar and Pushpa Sanchalal Kothari, which permit enforcement despite non-disclosure or cash advances (subject to rebuttal), lay down the correct position and are affirmed. The decision in Sanjay Mishra, which held non-disclosure in Income-tax returns precluded treatment as a legally enforceable debt, is overruled to the extent it is inconsistent with the pronouncement that Section 139 includes the presumption of a legally enforceable debt and that statutory violations do not ipso facto render a transaction unenforceable. [Paras 18, 19]

Decisions permitting enforcement subject to rebuttal are affirmed; Sanjay Mishra is overruled insofar as it held non-disclosure makes a debt unenforceable. The appeal is to be placed for adjudication on merits.

Final Conclusion: The Court answered the referred question by holding that (i) Section 139 presumes existence of a legally enforceable debt once execution of the cheque is admitted, and that presumption is rebuttable by the accused on preponderance of probabilities; and (ii) contravention of Section 269-SS or related tax omissions attract penalty but do not render the transaction void or unenforceable under Section 138; the matter is remitted for merits adjudication.