TaxTMI Updates e-Newsletter
Nov 07,2022

Cancellation of GST registration - inadvertent error in online application - restoration of registration - substantial justice

Cancellation of GST registration - inadvertent error in online application - restoration of registration - Whether the cancellation of the petitioner's GST registration, resulting from an inadvertent selection of 'cancellation' instead of 'modification' while filing an online amendment, should be set aside and the petitioner permitted to seek restoration. - HELD THAT: - The Court accepted the petitioner's uncontradicted explanation that the factory address had been entered twice and that, while attempting to correct the mistake, the accountant inadvertently selected 'cancellation' instead of 'modification'. The counter merely observed that the cancellation was effected at the petitioner's request and did not dispute that the error was inadvertent. Applying principles of substantial justice, the Court held that the request for cancellation amounted to a simple inadvertent error and set aside the impugned order cancelling registration. The petitioner was permitted to make an application for restoration, furnishing correct details of principal and additional places of business. As the petitioner may be unable to file online because registration stood cancelled, the Court directed that the application may be filed manually before the Deputy Commissioner, GST (Central Taxes), who is directed to restore the registration within two weeks from receipt of the application.

Impugned cancellation set aside; petitioner permitted to apply for restoration and Deputy Commissioner directed to restore registration within two weeks of manual application.

Final Conclusion: Writ petition allowed: cancellation set aside as resulting from an inadvertent online error; petitioner may file a manual application for restoration and the registering authority is directed to restore registration within two weeks of receipt.

Cancellation of GST registration - failure to furnish returns for a continuous period of six months - condonation of delay in filing appeal - remand for fresh consideration of cancellation - absence of a constituted GST Tribunal leaving the assessee without an alternate remedy

Cancellation of GST registration - failure to furnish returns for a continuous period of six months - Validity of respondent No.2's order cancelling the petitioner's GST registration on the ground of non-filing of returns and related consequences. - HELD THAT: - The Court noted that respondent No.2 cancelled the petitioner's GST registration for alleged continuous non-filing of returns and that the petitioner had replied explaining the cause for non-filing. The appellate authority (respondent No.1) dismissed the appeal as time-barred. Relying on the Court's earlier decision in M/s. Chenna Krishnama Charyulu Karampudi v. Additional Commissioner (Appeals-1) 2022 (7) TMI 82, the Court observed that where registration is suo motu cancelled and no GST Tribunal is constituted, refusal to condone delay in filing an appeal may leave the assessee without any remedy. In the facts and circumstances, and without expressing any opinion on the merits of the cancellation, the Court held that justice required the matter to be remanded to respondent No.2 for reconsideration of the petitioner's grievance against cancellation, with liberty to the petitioner to submit all statutory returns during that process. [Paras 4, 5, 6]

Orders dated 05.10.2021 (cancellation) and 18.08.2022 (dismissal of appeal) set aside; matter remanded to respondent No.2 to reconsider the cancellation in accordance with law and after allowing the petitioner to submit returns.

Final Conclusion: The High Court set aside the cancellation order and the appellate dismissal, remanding the matter to the assessing authority to reconsider the petitioner's challenge to cancellation of GST registration and to pass an appropriate order in accordance with law, permitting the petitioner to file all statutory returns during the remand; writ petition disposed of with no costs.

Input Tax Credit - Marginal Scheme for second-hand goods - Rule 32(5) of the CGST Rules - determination of value for second-hand goods - Eligibility and conditions for taking input tax credit under Section 16 - ITC on input services and capital goods - Bar on ITC in respect of purchase of second-hand goods

Input Tax Credit - Marginal Scheme for second-hand goods - Rule 32(5) of the CGST Rules - determination of value for second-hand goods - Eligibility and conditions for taking input tax credit under Section 16 - ITC on input services - Whether a dealer operating under the Marginal Scheme can claim input tax credit on expenses such as rent, advertisement, commission and professional charges. - HELD THAT: - Rule 32(5) prescribes valuation for supplies of second-hand goods where no input tax credit has been availed on the purchase of such goods and thus bars availment of ITC in respect of those purchased second-hand goods. That restriction, however, is confined to input tax credit on the purchase of the second-hand goods themselves and does not extend to input services. Section 16 sets out the entitlement to take credit of input tax charged on supplies of goods or services subject to specified conditions. Applying these provisions, there is no statutory bar under Rule 32(5) or Section 16 on claiming ITC on input services and other business expenses (such as rent, advertisement, commission and professional fees), provided the conditions and restrictions in Sections 16-21 and the relevant rules are satisfied. [Paras 11, 12, 13]

Applicant under the Marginal Scheme may claim input tax credit on expenses like rent, advertisement, commission and professional charges subject to compliance with Sections 16-21 and rules 36-45 of the CGST Act and Rules.

Input Tax Credit - Marginal Scheme for second-hand goods - Rule 32(5) of the CGST Rules - determination of value for second-hand goods - Eligibility and conditions for taking input tax credit under Section 16 - ITC on capital goods - Whether a dealer operating under the Marginal Scheme can claim input tax credit on capital goods. - HELD THAT: - Rule 32(5) precludes ITC on the purchase of second-hand goods supplied under the marginal valuation mechanism but does not impose a prohibition on ITC in respect of capital goods. Section 16 provides the general entitlement to ITC subject to prescribed conditions and limitations. Consequently, capital goods remain eligible for ITC claim by a registered person operating under the Marginal Scheme, provided the statutory conditions and restrictions in Sections 16-21 and rules 36-45 are complied with, and other applicable limitations (if any) are observed. [Paras 11, 12, 13]

ITC on capital goods can be claimed by the Applicant under the Marginal Scheme subject to compliance with Sections 16-21 and rules 36-45 of the CGST Act and Rules.

Final Conclusion: The Authority ruled that being under the Marginal Scheme does not bar the Applicant from claiming ITC on input services or on capital goods; such claims are permissible provided the conditions and restrictions in Sections 16-21 and rules 36-45 of the CGST Act and Rules are met.

Pure agent - value of supply of services in case of pure agent - reimbursement of expenses excluded from taxable value - supply of services by agreeing to refrain from an act

Pure agent - reimbursement of expenses excluded from taxable value - Reimbursement of tree cut compensation paid to farmers/land owners during execution of the work is not chargeable to GST. - HELD THAT: - The Authority examined whether the applicant acted as a pure agent of the contractee for payments of tree cut compensation. Applying rule 33 of the CGST Rules, 2017 and the explanatory conditions, the Authority found that (i) the applicant entered into a contractual arrangement (Special Conditions of Contract incorporated as a contract document) to incur tree cut/crop compensation on behalf of KPTCL; (ii) payments to beneficiaries are made on authorisation of the recipient and are separately indicated when invoiced; (iii) the supplies procured from third parties are additional to the applicant's own supplies; and (iv) the applicant receives only actual amounts incurred for such payments. The Special Conditions specifically refer to tree cutting and tree cut compensation being organized and reimbursed by the owner as per actuals, satisfying the statutory tests for treatment as a pure agent for tree cut compensation. Consequently, such reimbursed amounts are excluded from the value of supply and are not taxable under GST. [Paras 15, 16, 17, 18, 19]

Tree cut compensation reimbursed by the applicant is not chargeable to GST as the applicant qualifies to be a pure agent for such payments.

Pure agent - value of supply of services in case of pure agent - Reimbursement of land compensation paid to farmers/land owners during execution of the work is chargeable to GST. - HELD THAT: - The Authority considered whether land compensation falls within the applicant's role as a pure agent. Though payments of land compensation are made to beneficiaries and reimbursed by KPTCL, the relevant contractual clause in the Special Conditions of Contract (para 1.4) does not refer to land compensation. Because there is no contractual undertaking in the incorporated contract documents authorizing the applicant to act as a pure agent for land compensation, the first explanatory condition of rule 33 (existence of contractual agreement to act as pure agent) is not satisfied for land compensation. Therefore the reimbursement of land compensation cannot be excluded from the value of supply as a pure agent and is liable to GST. [Paras 15, 18, 19]

Land compensation reimbursed by the applicant is chargeable to GST as the applicant does not qualify to be a pure agent in respect of such payments.

Final Conclusion: Advance Ruling: reimbursement of tree cut compensation paid by the applicant is not taxable (applicant qualifies as a pure agent for tree cut compensation); reimbursement of land compensation is taxable (applicant does not qualify as a pure agent for land compensation).

Advance ruling in relation to supply undertaken or proposed to be undertaken by the applicant - proper person to file application for advance ruling - jurisdiction to decide applications by recipient of services - rejection of application under Section 98(2) of the CGST Act, 2017

Advance ruling in relation to supply undertaken or proposed to be undertaken by the applicant - proper person to file application for advance ruling - jurisdiction to decide applications by recipient of services - Whether the Applicant was a proper person to seek advance ruling in respect of questions relating to services received by it. - HELD THAT: - The Authority examined the scope of an advance ruling application in light of the statutory definition which confines an applicant to seek rulings in relation to supplies of goods or services being undertaken or proposed to be undertaken by that applicant. The questions submitted by the Applicant pertained to services received by it (i.e., its status as recipient) rather than supplies made or proposed to be made by the Applicant. Consequently, the application fell outside the jurisdiction of the Advance Ruling Authority because the statutory scheme does not permit advance rulings by a person merely as recipient of the impugned services. The Authority therefore concluded that the application is not maintainable and must be rejected under the statutory provision enabling rejection of applications beyond jurisdiction. [Paras 12]

Application is beyond the jurisdiction of the Authority and is rejected under Section 98(2) of the CGST Act, 2017.

Final Conclusion: The advance ruling application filed by M/s Karnataka Urban Infrastructure Development and Finance Corporation Limited is not maintainable because it seeks a ruling in respect of services received (the Applicant being a recipient), and is therefore rejected under Section 98(2) of the CGST Act, 2017.

Reverse Charge Mechanism - liability of recipient under Section 9(3) of the CGST Act - applicability of RCM to Goods Transport Agency and Security Services - exemption of outward supplies not affecting liability on inward supplies

Reverse Charge Mechanism - liability of recipient under Section 9(3) of the CGST Act - applicability of RCM to Goods Transport Agency and Security Services - exemption of outward supplies not affecting liability on inward supplies - Whether the applicant is liable to pay GST under reverse charge for GTA and security services received despite being a manufacturer and supplier of exempted goods under HSN 23099020. - HELD THAT: - Notification No.13/2017 issued under Section 9(3) notifies GTA services and security services as categories on which tax shall be paid on reverse charge basis by the recipient. The applicant is a registered person located in the taxable territory and is therefore a recipient covered by the entries. Section 9(3) stipulates that all provisions of the Act apply to the recipient as if he is the person liable to pay tax for such notified supplies. GST liability is determined supply-wise; the taxability or exemption of the applicant's outward supplies does not alter the recipient's independent liability to pay tax on inward supplies notified under RCM. Applying these principles to the facts, the applicant is liable to discharge GST under reverse charge for the notified GTA and security services received. [Paras 9, 10, 11, 12]

The applicant is liable to pay GST under reverse charge for the notified GTA and security services received, despite supplying exempted goods under HSN 23099020.

Final Conclusion: Advance Ruling: Recipient liability under Notification No.13/2017 read with Section 9(3) applies; the applicant must pay GST on the notified GTA and security services under reverse charge notwithstanding exemption of its outward supplies.

Electronic commerce operator - electronic commerce - liability under Section 9(5) for supplies made through an e-commerce operator - supply of services through an e-commerce operator - supply by the supplier and not by the platform

Electronic commerce operator - electronic commerce - Whether the applicant qualifies as an electronic commerce operator. - HELD THAT: - The Authority examined the statutory definitions of electronic commerce and electronic commerce operator and the factual material showing that the applicant owns and operates a digital platform (APP MYn) facilitating supply of goods or services over an electronic network. On that basis the applicant falls within the statutory definition of an electronic commerce operator as a person who owns, operates or manages a digital facility or platform for electronic commerce. [Paras 11, 12, 16]

Applicant satisfies the definition of an electronic commerce operator.

Liability under Section 9(5) for supplies made through an e-commerce operator - supply of services through an e-commerce operator - supply by the supplier and not by the platform - Whether the applicant is liable to discharge tax under Section 9(5) as an e-commerce operator for intra state transportation services supplied through its platform. - HELD THAT: - Section 9(5) makes an e-commerce operator liable for tax where specified services are "supplied through" the operator and are intra state and notified. The notification covers intra state passenger transport services, so the first two conditions are satisfied. The determinative question is the meaning of "through". Relying on dictionary meanings of "through" as indicating means, agency or that the service is carried on and concluded by the operator, the Authority applied the statutory test to the applicant's business model. The applicant only connects supplier and consumer, does not collect fare, does not control or monitor provision or completion of the ride, has no details of the ride, and does not act as intermediary in collection or operational control. Therefore the services are not supplied by means of or by the agency of the applicant from beginning to end; the supply occurs independently between the supplier and consumer. Consequently the applicant does not satisfy the condition of supply being made "through" the e commerce operator and is not liable under Section 9(5). [Paras 17, 18]

Applicant does not satisfy the conditions of Section 9(5) for discharge of tax liability by an e commerce operator and hence is not liable under Section 9(5).

Supply by the supplier and not by the platform - liability under Section 9(5) for supplies made through an e-commerce operator - Whether supplies effected by subscribers on the applicant's app amount to supplies by the applicant and whether the applicant is liable to collect and pay GST on such supplies. - HELD THAT: - On the factual matrix and contractual framework (EULA), subscribers create their own business user accounts and effect supplies on their own terms; the applicant's role is confined to granting licence to use the APP and facilitating identification of parties. The Authority held that such supplies are effected by the subscribers (suppliers) and not by the applicant. Given that the applicant is not the supplier of those supplies and, for the reasons stated in relation to Section 9(5), is not the e commerce operator liable under that provision, the applicant is not required to collect and pay GST on transactions between subscribers and their customers. [Paras 5, 18, 19]

Supply effected by service provider subscribers on the APP is not supply by the applicant, and the applicant is not liable to collect and pay GST on those supplies.

Final Conclusion: The Authority rules that M/s. Multi Verse Technologies Pvt. Ltd. qualifies as an electronic commerce operator but, because the impugned passenger transport services are not supplied "through" the applicant (the applicant merely connects parties without control or fare collection), the applicant is not liable under Section 9(5) and is not the supplier of, nor required to collect and pay GST on, supplies effected by subscribers on its platform.

Reopening of assessment - reasons to believe - disallowance for bogus purchases - addition at 12.5% as embedded profit - condonation of delay

Condonation of delay - Delay in filing the appeal was condoned. - HELD THAT: - The tribunal found sufficient cause for the delay in filing the appeal because the appellate order was not served on the assessee at the correct address due to a change of address and the impugned order came to the assessee's notice only upon receipt of a later penalty order; this conclusion was supported by an affidavit of the partner and by discrepancy in addresses on record. On that basis the tribunal exercised its discretion to condone the delay and to admit the appeal for adjudication on merits. [Paras 6]

Delay condoned and the appeal admitted for adjudication.

Reopening of assessment - reasons to believe - Validity of reopening the assessment for the year was upheld. - HELD THAT: - The tribunal accepted that the assessing officer reopened the assessment after receiving information from the Sales Tax Department and DGIT (Investigation) indicating the assessee's purchases from parties alleged to be bogus. The tribunal held there was tangible material available to form the requisite reasons to believe that income had escaped assessment, and that the reopening was therefore valid and rightly sustained by the Commissioner (Appeals). [Paras 3, 10]

Reopening under reassessment proceedings upheld as valid.

Disallowance for bogus purchases - addition at 12.5% as embedded profit - Addition of 12.5% of the disputed purchases was sustained. - HELD THAT: - On the merits the tribunal accepted the finding that purchases from the 14 parties could not be substantiated and that the assessee failed to discharge the primary onus of proving genuineness. The tribunal applied the precedent of the Bombay High Court which endorsed treating 12.5% of bogus purchases as reasonable embedded profit to be added to income. In view of that binding proposition the tribunal affirmed the addition made by the AO and confirmed by the CIT(A). [Paras 3, 10, 11, 12]

Addition of 12.5% of the non-genuine purchases confirmed.

Final Conclusion: The appeal is dismissed on merits: delay in filing the appeal is condoned; reopening of assessment was valid; and the addition of 12.5% of the disputed purchases is sustained in view of the binding precedent relied upon by the tribunal.

Penalty under Section 271(1)(c) in cases of estimated income - applicability of Section 271AAA where search conducted post-1.6.2007 and exclusion of Section 271(1)(c) - requirement to strike off inapplicable portions in notice under Section 274 to safeguard natural justice - adoption of view favourable to assessee where judicial precedents conflict

Applicability of Section 271AAA where search conducted post-1.6.2007 and exclusion of Section 271(1)(c) - penalty under Section 271(1)(c) in cases of estimated income - Validity of penalty levied under Section 271(1)(c) for AYs. 2008-2009 and 2009-2010 when search was conducted on 27.09.2008 and penalty proceedings referred to both Section 271(1)(c) and Section 271AAA. - HELD THAT: - The Tribunal examined the statutory scheme and the scheme of Section 271AAA which applies where a search has been conducted on or after 1.6.2007 and before 1.7.2012 for specified previous years; Section 271AAA(3) expressly excludes the application of Section 271(1)(c) for those specified years. The AO had issued notices invoking both provisions but the penalty order imposed 271(1)(c) (100% of tax sought to be evaded) instead of the regime under Section 271AAA (limited to 10% of undisclosed income). The Tribunal held that, given the date of search (27.09.2008), the two specified assessment years fell squarely under Section 271AAA and not Section 271(1)(c). The Tribunal therefore treated the AO's imposition of penalty under Section 271(1)(c) as contrary to the statutory exclusion and deleted the penalty for those years. [Paras 6]

Penalty under Section 271(1)(c) deleted for AYs. 2008-2009 and 2009-2010; appeals allowed on this ground.

Requirement to strike off inapplicable portions in notice under Section 274 to safeguard natural justice - penalty under Section 271(1)(c) in cases of estimated income - adoption of view favourable to assessee where judicial precedents conflict - Whether penalty under Section 271(1)(c) can be sustained for assessment years 2004-2005 to 2007-2008 where income was assessed on estimation at all stages and the notice under Section 274/271(1)(c) retained inapplicable words without striking them off. - HELD THAT: - The Tribunal found that for AYs.2004-05 to 2007-08 the assessing process at every stage involved estimation - the assessee's books were not available, the AO estimated income, the CIT(A) applied a different estimation method and the Tribunal further revised the estimate. The AO's assessment relied on inferences from seized material rather than direct documentary proof of undisclosed income. Further, the statutory notice under Section 274/271(1)(c) issued on 19.12.2014 did not have the inappropriate portions struck out; the Tribunal accepted the binding principle in Dilip N. Shroff that failure to strike out inapplicable portions can deprive the assessee of a fair opportunity and vitiate the proceedings. Having regard also to the conflicting judicial authorities on levy of penalty in cases of estimated income, the Tribunal applied the rule of adopting the view favourable to the assessee and concluded that there was no evidence of contumacious conduct or concealment of income. On these combined grounds - procedural infirmity in the notice and absence of proof of concealment where income was only estimated - the Tribunal held penalty under Section 271(1)(c) was not leviable. [Paras 7, 8, 9]

Penalty under Section 271(1)(c) deleted for AYs. 2004-2005 to 2007-2008; appeals allowed.

Final Conclusion: All appeals of the assessee are allowed: penalties under Section 271(1)(c) deleted for AYs.2004-05 to 2007-08 on account of procedural defect in the penalty notice and absence of proved concealment where income was estimated, and penalties for AYs.2008-09 and 2009-10 deleted because Section 271AAA, not Section 271(1)(c), governed those years.

Estimation of income as the best method where books are not maintained - non-cooperation and use of third-party statements not supplied to assessee - reduction of estimated net profit percentage on judicial review - protective addition and substantive assessment in the hands of the principal - penalty under section 271F: reasonable cause for delay after issuance of notice under section 153A

Estimation of income as the best method where books are not maintained - non-cooperation and use of third-party statements not supplied to assessee - reduction of estimated net profit percentage on judicial review - Whether income of the assessee should be determined by estimation and at what percentage of turnover. - HELD THAT: - The Tribunal upheld the ld. CIT(A)'s conclusion that, in view of the assessee's non-maintenance of books, failure to produce vouchers and non-cooperation in assessment proceedings, estimation was the appropriate method to determine income. The AO had relied upon turnover extracted from the mine-owner's books and on statements which were not supplied to the assessee; the Tribunal recognised that such statements could not be used against the assessee without opportunity for cross-examination but found no reason to dislodge the CIT(A)'s adoption of estimation. However, on review of percentages applied by the AO and ld. CIT(A), and having regard to the highest percentages actually assessed by the AO (notably 6% and 4.9% in some years), the Tribunal exercised its discretion to reduce the net profit rate adopted by the ld. CIT(A.) from 10% to 8%. [Paras 5, 6]

Estimation of income upheld as the appropriate method; rate of net profit reduced from 10% to 8%.

Protective addition and substantive assessment in the hands of the principal - Whether the protective addition made in the hands of the assessee requires interference. - HELD THAT: - The Tribunal found no reason to interfere with the CIT(A)'s view that the addition made in the assessee's assessment was protective and that, if any substantive addition exists, it is in the hands of M/s. Serajuddin & Co. The Tribunal observed that the substantive challenge, if possible, must be pursued in the principal's case and noted that the assessee did not press certain legal grounds. [Paras 7, 8]

No interference with deletion of protective addition in assessee's hands; revenue appeals dismissed on this point.

Penalty under section 271F: reasonable cause for delay after issuance of notice under section 153A - Whether penalty under section 271F should be sustained for failure to file return after notice under section 153A. - HELD THAT: - Relying on the Co-ordinate Bench decision in Gobardhan Matia (reported in the impugned order), the Tribunal accepted that service of notice under section 153A and the practical delay in obtaining and examining seized documents (xerox copies) constituted a valid ground for non-filing within the statutory window. The Tribunal held there is no presumption of willful violation and that the assessee had reasonable cause for delay in filing the return following the search/survey and notice under section 153A, thereby warranting deletion of the penalty. [Paras 9, 10, 12]

Penalty under section 271F deleted; both penalty appeals of the assessee allowed.

Final Conclusion: Revenue appeals dismissed; assessee appeals partly allowed - estimation of income upheld but net profit rate reduced to 8%; protective addition in assessee's assessment not sustained as substantive addition which lies in the hands of the mine-owner; penalties under section 271F for the relevant years deleted.

Natural justice - disallowance under section 14A read with Rule 8D - deemed dividend under section 2(22)(e) - classification of rental income between Income from House Property and Income from Other Sources - computation of book profits under section 115JB

Natural justice - Whether the first appellate authority violated principles of natural justice by not affording the assessee an opportunity of hearing. - HELD THAT: - The Tribunal examined the appellate record and observed that the Commissioner (Appeals) had reproduced and considered the assessee's submissions before deciding the case. Consequently the appellant was found to have been granted an opportunity of hearing and no breach of natural justice was established. [Paras 2]

Ground No.1 dismissed; no violation of natural justice.

Disallowance under section 14A read with Rule 8D - Whether disallowance under section 14A read with Rule 8D is sustainable when no exempt income was earned in the relevant year. - HELD THAT: - Applying the ratio of the decisions of the Bombay and Delhi High Courts and relevant Tribunal precedents, the Tribunal held that section 14A disallowance presupposes actual receipt (or receivable) of exempt income in the relevant previous year. As it was an admitted position that the assessee did not earn any exempt income during the year, no disallowance under section 14A could be made. The Revenue did not rebut the assessee's contention that exempt income was nil, and the Tribunal followed binding and persuasive authorities to allow the ground. [Paras 2]

Ground No.2 allowed; disallowance under section 14A/Rule 8D deleted.

Deemed dividend under section 2(22)(e) - Whether amounts received by the assessee from two lender companies are taxable as deemed dividend under section 2(22)(e). - HELD THAT: - The Tribunal analyzed the statutory precondition that section 2(22)(e) applies where a company makes a loan/advance to a shareholder of that company. For the loan from Trenton Investment Company Pvt. Ltd., the facts showed Trenton to be a 99% shareholder of the assessee and the assessee was not a shareholder of Trenton; hence the deeming provision could not be invoked and that addition was directed to be deleted. With respect to Kimplas Piping System Ltd., the audit report and ledger showed borrowings of the impugned amount and the assessee held over 10% shares in Kimplas; the Tribunal held that the conditions of section 2(22)(e) were satisfied and, following Tribunal precedent, the loan was held to attract deemed dividend treatment. The result was a partial allowance of the ground: deletion in respect of Trenton loan and confirmation of addition in respect of Kimplas loan. [Paras 3]

Ground No.3 partly allowed - deletion of addition relating to Trenton loan; addition under section 2(22)(e) upheld in respect of loan from Kimplas Piping System Ltd.

Classification of rental income between Income from House Property and Income from Other Sources - Whether rent receipts for the leased premises (given with furniture/fixtures) should be taxed under the head 'Income from House Property' or under 'Income from Other Sources', and whether the difference between rent declared and amount reflected in 26AS is taxable without verification. - HELD THAT: - The Tribunal noted the registered lease agreements showing commercial premises let with incidental furniture/fixtures and observed that the department had accepted the same treatment as Income from House Property in earlier assessment years for the same premises. Finding no valid reason to change the head of income, the Tribunal held that the assessee was entitled to treat the receipts as income from house property. As to the discrepancy with amounts shown in 26AS, the Tribunal directed the Assessing Officer to verify and reconcile the documents after affording the assessee opportunity to produce relevant records, and remanded that aspect for verification. [Paras 5]

Ground No.4 partly allowed - rent to be treated as Income from House Property; difference remanded to AO for verification after giving opportunity to the assessee.

Computation of book profits under section 115JB - Whether the Assessing Officer was justified in adding an alleged undisclosed rent to the book profits while computing tax under section 115JB. - HELD THAT: - Following the binding principle that the AO's power under the provisions concerning computation of book profits is limited and he cannot embark upon a fresh enquiry into entries in the statutory audited accounts prepared in accordance with the Companies Act, the Tribunal held that the AO could not make the addition of the alleged undisclosed rent to book profits. Relying on the Bombay High Court's exposition, the Tribunal directed deletion of the addition. [Paras 6]

Ground No.5 allowed - addition to book profit under section 115JB deleted.

Final Conclusion: The appeal is partly allowed: the plea of denial of natural justice is dismissed; the 14A disallowance is deleted; the addition under section 2(22)(e) is deleted in respect of the loan from Trenton Investment Company Pvt. Ltd. but upheld in respect of loan from Kimplas Piping System Ltd.; rent receipts shall be treated as Income from House Property and discrepancy remanded to the AO for verification; the addition to book profits under section 115JB is deleted.

Corpus donation - voluntary contribution - exemption under Section 11(1)(d) - quid pro quo / consideration - membership subscription versus donation

Corpus donation - voluntary contribution - exemption under Section 11(1)(d) - quid pro quo / consideration - membership subscription versus donation - Whether amounts collected as cess/contributions from milk supplying societies qualify as corpus donations exempt under Section 11(1)(d). - HELD THAT: - The Tribunal upheld the findings of the Assessing Officer and the Commissioner (Appeals) that the receipts in question are not voluntary donations forming part of corpus but are cess/fees collected in relation to the sale of milk. The Association had passed a resolution to "collect" a specified amount per kg fat from milk producer societies and fixed the rate and method of computation; the receipts were linked to quantity of milk fat supplied and were recurring and operational in nature. Donors had no discretion as to payment or quantum, and the payments were made in consideration of services and benefits arising from the Association's activities. The tribunal relied on the established legal test that a corpus donation requires (a) the receipt be a donation, (b) the donation be voluntary, and (c) the donor give a specific direction that the amount be for corpus; all three must be satisfied cumulatively. On the facts, there was no evidence of a voluntary, disinterested gift or a conscious specific direction by independent donors; mere labeling on receipts did not convert compulsory/contractual subscriptions or cess into corpus donations. Authorities explaining that subscriptions or compulsory payments made as the price of membership or for services are not voluntary contributions were applied to hold the receipts as revenue/fee receipts and not eligible for exemption under Section 11(1)(d). [Paras 5, 6, 7, 11, 15]

The claim that the amounts totaling the cited receipts are corpus donations exempt under Section 11(1)(d) was rejected and the addition made by the AO was confirmed; the appeal is dismissed.

Final Conclusion: The Tribunal dismissed the appeal, holding that the cess/fees collected from milk supplying societies were not voluntary corpus donations and therefore not exempt under Section 11(1)(d) for Assessment Year 2014-15.

Disallowance in intimation processed under section 143(1)(a) - deemed income under section 36(1)(va) read with section 2(24)(x) for late deposit of employees' contributions - late deposit of employees' contribution to Provident Fund and ESI - applicability of Finance Act, 2021 amendment to section 36(1)(va) and section 43B - binding effect of jurisdictional High Court decisions on Assessing Officer - no adjustment of debatable issues in intimation under section 143(1)

Deemed income under section 36(1)(va) read with section 2(24)(x) for late deposit of employees' contributions - applicability of Finance Act, 2021 amendment to section 36(1)(va) and section 43B - binding effect of jurisdictional High Court decisions on Assessing Officer - no adjustment of debatable issues in intimation under section 143(1) - Whether the addition of deemed income under section 36(1)(va) for late deposit of employees' PF/ESI contributions in the intimation under section 143(1)(a) for AY 2017-18 was sustainable and whether the Finance Act, 2021 amendment applies to the year under consideration. - HELD THAT: - The Tribunal examined the tax-auditor's reporting and the dates of actual payments to provident fund and ESI authorities as recorded in form 3CD. The reporting in the tax-audit concerned statutory due dates under respective welfare enactments and did not, by itself, authorise a disallowance in an intimation under section 143(1)(a). The Tribunal observed that an adjustment in an intimation cannot be made on a debatable question of law or fact. Jurisdictional High Court decisions relied upon by the assessee (including Ghatge Patil Transport and AIMIL Ltd.) were held binding on the Assessing Officer and support the view that the employer's claim should not be disallowed where payments were made within the timelines recognised for the purpose of deduction. The Tribunal further noted the Supreme Court's principle that the Assessing Officer is bound by the view of the jurisdictional High Court. As to the Finance Act, 2021 amendment to section 36(1)(va) and section 43B, the Tribunal followed coordinated Benches and held (agreeing with the Hyderabad Bench in Crescent Roadways) that the amendment is prospective and effective from AY 2022-23; it is not applicable to AY 2017-18. Applying these principles to the verified payment schedule, the Tribunal concluded that the CPC and the CIT(A) erred in applying the amended provisions to disallow the claim for AY 2017-18 and that the addition was unsustainable. [Paras 8, 9, 11, 13, 14]

The additions under section 36(1)(va) in the intimation for AY 2017-18 are set aside; the Finance Act, 2021 amendment is not applicable to AY 2017-18 and the Assessing Officer/CIT(A) erred in disallowing the claim.

Final Conclusion: The appeal is allowed; the impugned order of the CIT(A) is set aside and the additions made in the intimation under section 143(1)(a) in respect of deemed income under section 36(1)(va) for AY 2017-18 are deleted as the Finance Act, 2021 amendments are prospective and jurisdictional High Court precedents bind the Revenue.

Unexplained cash credit under section 68 - share application money - creditworthiness and genuineness of the shareholder - admission of additional evidence - remand for de novo adjudication - prior period adjustment and deductibility of prior period interest - computation commencing with profit/loss before tax

Unexplained cash credit under section 68 - share application money - creditworthiness and genuineness of the shareholder - admission of additional evidence - remand for de novo adjudication - Addition of Rs. 5,00,000 treated as unexplained cash credit under section 68 remitted to the Assessing Officer for fresh adjudication. - HELD THAT: - Reassessment had been initiated on information that companies run by Shri Mukesh Choksi provided accommodation entries and that M/s Talent Infoways Ltd. (a part of that group) had subscribed to shares of the assessee. The assessee had furnished name, address, PAN, share application form, allotment particulars, board resolution and bank cheque evidence. The AO, however, declined to accept the explanation in the absence of the director's examination and audited financials of the subscriber and treated the amount as unexplained credit. The Tribunal admitted additional evidence (annual report of M/s Talent Infoways Ltd.) filed before it and found that the statement(s) relied upon by the AO (including the statement of Shri Mukesh Choksi) were not furnished to the assessee despite requests, preventing cross-examination. In view of these lacunae and because the additional evidence was not examined by the AO, the Tribunal considered it appropriate to remit the matter to the AO to provide copies of the relied-upon statements, to examine the audited financials of M/s Talent Infoways Ltd. to determine creditworthiness and genuineness, and to permit both parties to place further evidence before the AO for complete adjudication. [Paras 8]

Issue remanded to the Assessing Officer for de novo adjudication; assessee permitted to adduce further evidence and AO may call for or examine any documents/details necessary.

Prior period adjustment and deductibility of prior period interest - computation commencing with profit/loss before tax - Disallowance of Rs. 1,46,379 (interest on term loan pertaining to F.Y. 2003-04) deleted. - HELD THAT: - The interest related to F.Y. 2003-04 was debited in the year under consideration as a prior period adjustment below the line (after arriving at profit/loss before tax). The assessee did not claim this amount while computing taxable income because the computation commenced with profit/loss before tax and before inclusion of the prior period adjustment. On examining the return, computation and profit and loss account, the Tribunal accepted the assessee's contention and directed deletion of the disallowance. [Paras 10]

Disallowance of Rs. 1,46,379 set aside and directed to be deleted.

Final Conclusion: The appeal is allowed for statistical purposes: the addition of Rs. 5,00,000 under section 68 is remanded to the Assessing Officer for fresh adjudication with liberty to both parties to lead evidence; the disallowance of Rs. 1,46,379 as prior period interest is deleted.

Exemption under section 10(38) - Long-term capital gains from sale of shares - Bogus/engineered/predetermined transactions (sham transactions) - Unexplained cash credit under section 68 - Addition of commission expenditure as unexplained expenditure - Test of preponderance of probabilities - Surrounding circumstances and rigging of penny stocks - Burden of proof on the assessee to prove genuineness - Binding precedent of the jurisdictional High Court

Exemption under section 10(38) - Long-term capital gains from sale of shares - Bogus/engineered/predetermined transactions (sham transactions) - Test of preponderance of probabilities - Surrounding circumstances and rigging of penny stocks - Burden of proof on the assessee to prove genuineness - Binding precedent of the jurisdictional High Court - Claimed exemption under section 10(38) in respect of long-term capital gains from sale of shares of alleged penny stock companies is not allowable where the transactions are found to be bogus. - HELD THAT: - The Tribunal applied the test of preponderance of probabilities and examined surrounding circumstances including sudden and steep rise in share prices of little-known companies, proximity of buy and sell operations, and investigative reports indicating rigging of penny stocks. The assessee, being not named in the investigation report, nonetheless bore the onus to prove the genuineness, identity and creditworthiness of the counter-parties and that the price movements were supported by fundamentals; this burden was not discharged. The Tribunal followed the binding decision of the jurisdictional High Court in Swati Bajaj & Others, which upheld the inferential approach adopted by Assessing Officer and Commissioner (Appeals) and held that, on the totality of circumstances, gains were fabricated and not genuine. Where assessees failed to rebut the departmental material and the facts mirrored those considered by the High Court, the exemption under section 10(38) was correctly denied. [Paras 5, 6]

The claimed exemption under section 10(38) was held to be not admissible as the LTCG were bogus; the Tribunal dismissed the appeals on this issue following the jurisdictional High Court.

Unexplained cash credit under section 68 - Addition of commission expenditure as unexplained expenditure - Bogus/engineered/predetermined transactions (sham transactions) - Binding precedent of the jurisdictional High Court - Additions treating the purported LTCG as unexplained cash credit under section 68 and confirming unexplained commission expenditure for arranging bogus LTCG were upheld. - HELD THAT: - On findings that the LTCG entries were engineered to convert unaccounted money into purported exempt gains, the Assessing Officer's treatment of those amounts as unexplained cash credits under section 68 was sustained. Similarly, the addition of commission/fee charged by brokers/entry operators as unexplained expenditure was accepted where such charges formed part of the contrived modus operandi. The Tribunal, following its earlier decision and the Calcutta High Court's reasoning, found no infirmity in the AO/CIT(A)'s inferential reasoning and factual conclusions and therefore confirmed the additions. [Paras 5, 6]

The additions under section 68 and the addition of commission expenditure were upheld and the appeals on these grounds were dismissed.

Final Conclusion: Following the decision of the jurisdictional High Court in Swati Bajaj & Others and the Tribunal's earlier order on identical facts, the Tribunal dismissed all the appeals and restored the assessment orders as affirmed by the respective CIT(A).

Exemption u/s 11 - Clarification to the order [2022 (10) TMI 948 - SUPREME COURT] - Applicable retrospectively or not - scope and amplitude of the definition “charitable purpose” - revenue seeks a clarification of the judgment delivered by this court [2022 (10) TMI 948 - SUPREME COURT] that para 254 of the judgment should be such as to “enable the Revenue to redo the assessments in accordance with the above judgments for the past and examine the eligibility on a yearly basis for the future and thus render justice

HELD THAT:- A plain reading of the conclusions recorded in Para 253 (A)(B)(C) (D) and (E) would disclose that this court consciously recorded its findings, with the intent of finally deciding the issues, for various organizations- in relation to the assessment years in question, - whereas in Para 253 (F), the court remitted the matter for examination and orders by the assessing officer. Similarly, the conclusion in Para 253 G, was conclusive with respect to the claim of private trusts; the appeals were dismissed. These conclusions are accurately reflected in the final, operative directions in Para 254. In Para 254 (i) to (iv), the conclusions recorded are against the revenue. In Para 254 (v), (vi), (vii) and (vii), the conclusions, are in favour of the revenue.

The reference to application of the law declared by this court’s judgment, therefore, has to be understood in the context, which is that they apply for the assessment years in question, which were before this court and were decided; wherever the appeals were decided against the revenue, they are to be treated as final. The reference to future application has to be understood in this context, which is that for the assessment years which this court was not called upon to decide, the concerned authorities will apply the law declared in the judgment, having regard to the facts of each such assessment year. In view of this discussion, no further clarification is necessary or called for.

Non-speaking order - power of revision under Section 263 of the Income-tax Act - requirement to consider submissions and afford personal hearing - remand for fresh consideration

Non-speaking order - power of revision under Section 263 of the Income-tax Act - Validity of the Principal Commissioner of Income Tax's order dated 7th February, 2019 under Section 263 as a speaking order - HELD THAT: - The Court examined the PCIT's order and found it deficient in reasons. Although the PCIT enumerated five queries, the discussion is confined and the operative finding appears only in the last lines of a paragraph without addressing the assessee's detailed replies and annexures. The assessee had filed substantive responses, including a letter dated 20th December, 2016 with multiple annexures, which the PCIT failed to consider. For these reasons the PCIT's order is held to be a non-speaking order and therefore legally inadequate as an exercise of revisionary power under Section 263.

PCIT's order dated 7th February, 2019 is set aside as a non-speaking order.

Non-speaking order - requirement to consider submissions and afford personal hearing - Validity of the Income Tax Appellate Tribunal's order challenging the PCIT order - HELD THAT: - The Tribunal's order was an appellate review of an order that itself lacked reasons. On review, the Tribunal likewise failed to furnish independent reasons and is characterised by the Court as a non-speaking order. Given that the Tribunal was constrained to test an order devoid of reasons, its order is also held to be legally unsatisfactory.

Tribunal's order is set aside.

Remand for fresh consideration - requirement to consider submissions and afford personal hearing - Procedure to be followed on remand and scope of fresh consideration - HELD THAT: - The Court noted that after the PCIT order, the Assessing Officer by a subsequent order accepted the assessee's stand on queries (B), (C) and (D), leaving only queries (A) and (E) unresolved. In view of the non-speaking character of the PCIT and Tribunal orders, the matter is remanded to the PCIT for fresh consideration limited to queries (A) and (E) alone. The assessee is permitted to file additional submissions and shall be afforded personal hearing; the PCIT must pass a fresh speaking order on the merits and in accordance with law, assigning reasons.

Matter remanded to the PCIT for fresh consideration of queries (A) and (E) only; assessee may file further submissions and shall be heard; fresh speaking order to be passed.

Final Conclusion: Appeal allowed; the orders of the Tribunal and the PCIT dated 7th February, 2019 are set aside. The matter is remanded to the PCIT for fresh, reasoned consideration limited to queries (A) and (E), with opportunity to the assessee to place additional submissions and be heard; substantial questions of law are left open.

Reopening of assessment under Section 147/148 - reason to believe - change of opinion - failure to disclose fully and truly all material facts - recording of reasons - show-cause and fair opportunity

Recording of reasons - reopening of assessment under Section 147/148 - Validity of the sanction and timing of recording of reasons for initiating reassessment proceedings - HELD THAT: - The Court accepted the Department's explanation that the reasons for reopening were recorded prior to the PrincipalCommissioner of Income Tax's approval dated 26th March, 2021 and that the communication of those reasons to the assessee occurred subsequently. On that basis the contention that sanction was granted without application of mind because reasons were recorded later was rejected. The factual finding supports the conclusion that procedural requirement of prior satisfaction by the sanctioning authority was not vitiated by the date of communication of reasons. [Paras 17]

The challenge to the validity of the sanction on the ground that reasons were recorded only after approval was rejected.

Reason to believe - change of opinion - failure to disclose fully and truly all material facts - reopening of assessment under Section 147/148 - show-cause and fair opportunity - Whether reopening of the assessment was justified on new and tangible material or amounted to a mere change of opinion - HELD THAT: - The Court found that the original scrutiny assessment under Section 143(3) involved a complete examination of the books and documents produced by the assessee and that the Assessing Officer had applied his mind to the materials. The reasons communicated for reopening merely re-examined the same material, stating only that "information available on record" showed non-deduction of TDS, without identifying any failure by the assessee to disclose fully and truly all material facts at the time of original assessment. Applying the established principles in Calcutta Discount, Lakhmani Mewal Das, S. Ganga Saran and Kelvinator, the Court held that reopening cannot be founded on mere change of opinion and that there must be an intelligible nexus to new tangible material or a failure of disclosure; absent any statement or record showing such failure, the reassessment notice was a textbook example of reopening based on change of opinion and therefore invalid. The Court also noted the requirement that a show-cause/reasoned notice must afford a fair opportunity and not convey prejudged opinion. [Paras 23, 24, 25, 26, 28]

The reassessment was invalid as it was based on re-examination of the same material and amounted to a mere change of opinion; the notice and consequential proceedings were quashed.

Final Conclusion: Writ petition allowed; the notice dated 30th March, 2021 under Section 148 and the order of the National Faceless Assessment Centre rejecting objections are quashed and all proceedings consequent thereto are set aside; no order as to costs.

Validity of reopening under Section 148 - Time limit for issuance of notice under Section 149 - Mandatory prior enquiry under Section 148-A - Effect of Finance Act, 2021 amendments and temporal applicability - Extension of limitation by Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and CBDT notifications

Mandatory prior enquiry under Section 148-A - Validity of reopening under Section 148 - Notices dated 1st April, 2021 and 5th April, 2021 are invalid for non-compliance with the mandatory prior enquiry under Section 148-A and are quashed. - HELD THAT: - The Court found as an admitted position that the subsequent notices of 1st April and 5th April, 2021 did not satisfy the mandatory requirement of prior enquiry by the Assessing Officer prescribed by Section 148-A before issuing a notice to reopen assessment. The Department's contention that compliance was unnecessary because the initial notice of 31st March, 2021 was covered by extensions was rejected in respect of these subsequent notices; the statutory prerequisite of Section 148-A applies to each notice and was not met. Consequently, those notices were held to be bad in law and quashed. [Paras 7]

Notices dated 1st April, 2021 and 5th April, 2021 quashed for non-compliance with Section 148-A.

Time limit for issuance of notice under Section 149 - Effect of Finance Act, 2021 amendments and temporal applicability - Extension of limitation by Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and CBDT notifications - Notice dated 31st March, 2021 seeking reopening for AY 2013-14 was issued beyond the six-year outer limit under Section 149 as it stood prior to 1st April, 2021, and is quashed. - HELD THAT: - The Court observed that the outer six-year limitation for issuance of a notice under Section 148 in respect of AY 2013-14 expired on 1st April, 2020, whereas the impugned notice was dated 31st March, 2021. The Department's reliance on the 2020 Act and subsequent CBDT notifications to extend the limitation was considered and rejected for notices issued prior to 1st April, 2021. The Court followed the distinction drawn by the Supreme Court in Union of India v. Ashish Agarwal that notices issued prior to 1st April, 2021 must comply with the law as it existed before the Finance Act, 2021 amendments; consequently, the notice of 31st March, 2021, being time barred, was quashed. The Court clarified that the Department remains free to initiate fresh proceedings under the amended provisions, subject to their legal requirements. [Paras 4, 8, 11, 12]

Notice dated 31st March, 2021 quashed as barred by the six year limitation under Section 149; Department may initiate fresh proceedings under the amended law.

Final Conclusion: The writ petition is allowed: the notices dated 1st April and 5th April, 2021 are quashed for failure to comply with Section 148 A, and the notice dated 31st March, 2021 is quashed as time barred under the pre amendment Section 149; the Department may, if it so chooses, initiate fresh proceedings in accordance with the amended Sections 147-151.

Condonation of delay - applicability of CBDT Circular No.23 and Office Memorandum dated 16.9.2019 (prospective effect) - monetary limit for filing appeals by Revenue - dismissal of Revenue's appeal following precedent

Condonation of delay - Application for condonation of delay in filing the appeal was allowed. - HELD THAT: - Although the affidavit explaining the delay of 1113 days was not found fully convincing, the Court exercised its discretionary jurisdiction to condone the delay. The exercise of discretion was influenced by the fact that the legal issues raised in the appeal had been decided by this Court in earlier matters, and on that basis the application for condonation was allowed.

Delay of 1113 days in filing the appeal condoned and the application allowed.

Applicability of CBDT Circular No.23 and Office Memorandum dated 16.9.2019 (prospective effect) - monetary limit for filing appeals by Revenue - dismissal of Revenue's appeal following precedent - Appeal filed by the Revenue under section 260A was dismissed following earlier decisions on applicability of the Circular/OM and monetary limit, and the substantial questions of law raised were not considered. - HELD THAT: - The Court noted that identical issues regarding the effect of CBDT Circular No.23 dated 6.9.2019 and the Office Memorandum dated 16.9.2019 had been decided in earlier matters (including Principal Commissioner of Income Tax (1) Kolkata v. Rakesh Kumar Khemuka and Principal Commissioner of Income Tax, Central-2, Kolkata v. Giridhar Lal Goenka), where the appeals filed by the revenue were dismissed. The earlier reasoning concerned the prospective operation of the Office Memorandum and the applicability of the monetary limit; having regard to those precedents and the operative portion of the earlier orders, the Court concluded that the present appeal did not call for interference. Consequently the substantial questions of law raised by the revenue were left open and not adjudicated on their merits in this appeal.

Revenue's appeal dismissed in view of earlier decisions; the substantial questions of law raised are not adjudicated.

Final Conclusion: The application for condonation of delay is allowed; however, on the merits the appeal filed by the Revenue is dismissed following earlier decisions concerning the Circular/Office Memorandum and monetary limit, and the substantial questions of law raised are left open.

Revenue expenditure versus capital expenditure - application of Accounting Standard (AS-7) and ICAI Guidance Note for real estate - completed contract method and percentage of completion method - deductibility under Section 37(1) of the Income Tax Act - revenue neutrality of timing of deduction

Revenue expenditure versus capital expenditure - application of Accounting Standard (AS-7) and ICAI Guidance Note for real estate - Classification of advertisement, business promotion, brokerage & commission and software development charges as revenue expenditure and allowable in the relevant year. - HELD THAT: - The appellate authorities examined the nature and purpose of the four expense heads and the accounting treatment adopted by the assessee. They held that the expenses are indirect costs of the business, not attributable to any specific asset or to completion of the particular project, and that the assessee was required to prepare accounts in conformity with the applicable accounting standards. Applying AS-7 and the ICAI Guidance Note for real estate, the ITAT treated the advertisement and business promotion expenses as general administrative costs, brokerage and commission as selling cost, and the software development charges as relating to day-to-day operations. As such these items should be expensed in the year incurred and not capitalised as part of project cost. The Court endorsed these concurrent factual findings and reasoning and found no legal infirmity in applying the accounting standards and guidance to classify these expenses as revenue in nature. [Paras 10, 11, 12, 13]

The four disputed heads of expenditure are revenue expenditures and are allowable in AY 2009-10; the ITAT's classification under AS-7 and the ICAI Guidance Note is upheld.

Completed contract method and percentage of completion method - revenue neutrality of timing of deduction - deductibility under Section 37(1) of the Income Tax Act - Whether treating the disputed expenses as revenue in the relevant year prejudices Revenue or requires capitalisation because the assessee followed the completed contract method (CCM). - HELD THAT: - Revenue contended that because the assessee followed CCM the disputed expenses produced an enduring benefit and should be capitalised, deferring deduction to year of sale. The ITAT observed, and the Court accepted, that even if capitalisation shifted the year of deduction, it would not deprive Revenue of tax ultimately (revenue neutrality). The Revenue did not controvert that the expenses are not direct costs of the specific project and admitted their genuineness. The Court found no legal principle mandating capitalisation merely because the assessee used CCM where the costs are indirect and not attributable to a specific asset, and noted binding accounting treatment under AS-7 and the Guidance Note. Accordingly, postponing deduction to year of sale does not create any substantive disadvantage to Revenue that would justify overturning the classification. [Paras 10, 14]

The contention that CCM necessitates capitalisation is rejected; classification as revenue expenditure in the year incurred does not prejudice Revenue and need not be postponed.

Final Conclusion: Concurrent factual and legal conclusions of the CIT(A) and ITAT that the four disputed expense heads are revenue expenditures in AY 2009-10, properly classified in accordance with AS-7 and the ICAI Guidance Note, are upheld. No substantial question of law arises and the appeal is dismissed.

Compounding of offences under the Income-tax Act - CBDT guidelines on compounding and their binding effect - discretion of the competent authority in compounding applications - liberalisation of compounding policy and decriminalisation - remand for determination/quantification of compounding fee

Compounding of offences under the Income-tax Act - CBDT guidelines on compounding and their binding effect - discretion of the competent authority in compounding applications - remand for determination/quantification of compounding fee - Whether the order refusing compounding should be set aside and the matter remitted for consideration under the revised compounding guidelines - HELD THAT: - The Court recognised a progressive liberalisation in the CBDT's compounding policy, including the revised guidelines and press release of September 2022, which expand eligibility and restrict the erstwhile broad discretion of authorities. Applying those principles and the approach taken in K.M.Mammen, the Court held that where extenuating circumstances exist - including the passage of time, payment of tax/penalty and the age of the accused - continued prosecution serves no useful purpose and compounding can be appropriate. The Board's instructions and circulars govern the exercise of discretion under the Act and guide closure of cases where compounding is permissible. On this basis the Court concluded that the impugned refusal to compound ought to be set aside and the matter remitted to the competent authority to determine the compounding fee and related formalities in accordance with the revised guidelines. [Paras 7, 8, 9]

Impugned order set aside; matter remitted to the Respondents to demand and determine the compounding fee under the revised CBDT guidelines, with the exercise to be completed within six weeks and the Appellant to pay the amount as demanded.

Final Conclusion: Writ appeal allowed: the Single Judge's order dismissing the writ petition is set aside and the matter remitted for assessment and demand of compounding fee in accordance with the revised CBDT guidelines (16.09.2022 and press release 17.09.2022); exercise to be completed within six weeks and on payment the case shall be treated as compounded.

Deemed export drawback - All Industry Rate - Brand Rate of Duty Drawback - reading down of statutory provision - refund of customs component without actual duty-paid documents - disclaimer by Domestic Tariff Area unit

Deemed export drawback - All Industry Rate - Brand Rate of Duty Drawback - reading down of statutory provision - refund of customs component without actual duty-paid documents - Whether paragraph 7.06(b) of FTP 2015-2020 and the corresponding provision in HBP 2015-2020 (prior to amendment) could be read down so as not to require fixation of a brand rate or production of actual duty-paid documents for claiming the customs component of deemed export drawback under Column 'B' of the All Industry Rate. - HELD THAT: - The Court recorded that the legal question is covered by its earlier decision in W.P.(C) No.1644/2019 and observed that the only factual difference was the location of the impugned provision in FTP 2015-2020 (paragraph 7.06(b)) rather than in the 2013 Circular. The Court noted the subsequent amendment to paragraph 7.06 (given retrospective effect from 05.12.2017) but proceeded to read down the pre-amendment paragraph 7.06(b) of FTP 2015-2020 and the corresponding provision of HBP 2015-2020 to the extent that a brand rate need not be fixed and actual duty-paid documents need not be insisted upon for claiming the customs component under Column 'B' of the All Industry Rate. The Court directed respondents to accept and allow the petitioner's claims for the customs component under Column 'B' without insisting on actual duty-paid documents, subject to the petitioner placing on record a suitable disclaimer from the DTA supplier that it has not claimed duty drawback on that component. The Court declined to grant interest since no claim for damages was pressed. [Paras 3]

Paragraph 7.06(b) of FTP 2015-2020 and the corresponding provision of HBP 2015-2020 (prior to amendment) are read down so that the customs component of deemed export drawback may be claimed under Column 'B' of the All Industry Rate without insisting on actual duty-paid documents; respondents to accept the petitioner's claims subject to a supplier disclaimer.

Final Conclusion: Writ petition disposed of by applying the reasoning of the earlier decision to read down paragraph 7.06(b) of FTP 2015-2020 and the corresponding HBP provision, directing respondents to allow the petitioner's claims for the customs component under Column 'B' without requiring actual duty-paid documents, subject to a suitable disclaimer by the DTA supplier; no interest awarded as none was claimed.

Classification under DEPB entry - entitlement to DEPB benefit - binding effect of DGFT clarification / policy decision - preclusion on Customs adjudicating authority to sit over DGFT policy decision - withdrawal of show cause notice

Classification under DEPB entry - entitlement to DEPB benefit - The appellant's export product 'Surimi' is classifiable under DEPB entry Sr.No.2/66 and the appellant is entitled to DEPB benefit accordingly. - HELD THAT: - The Tribunal examined the DGFT clarification dated 09.01.2009 which records the DEPB Committee's view that 'Surimi' is a fish product falling under Sr.No.2/66 of the DEPB Rate Schedule, including for periods prior to 01.04.2002, and that the earlier confusion arose from erroneous description using the word 'meat'. The DGFT clarification specifically stated that the appellant (named in the clarification) is entitled to DEPB on export of 'Surimi' under Sr.No.2/66. The Tribunal noted that on the basis of this clarification the DGFT subsequently withdrew the earlier show cause notice issued to the appellant. In light of the DGFT's considered view that the product is a fish product covered under Chapter 3 of ITC (HS) and not a meat product, the classification dispute as to DEPB entry in respect of the appellant stands resolved in the appellant's favour. [Paras 4]

The appellant's product 'Surimi' is classifiable under DEPB entry Sr.No.2/66 and the appellant is entitled to the DEPB benefit.

Binding effect of DGFT clarification / policy decision - preclusion on Customs adjudicating authority to sit over DGFT policy decision - withdrawal of show cause notice - The Customs adjudicating authority could not ignore or override the DGFT's clarification and withdraw the show cause notice; the adjudication which discarded the DGFT decision is unsustainable. - HELD THAT: - The Tribunal found that once DGFT, through its DEPB Committee, issued a clarification in favour of the appellant and DGFT withdrew the show cause notice, the adjudicating authority had no authority to 'sit over' or reject that policy decision of DGFT. The adjudicating authority had considered the DGFT letter but discarded it relying on an earlier corrigendum; the Tribunal held that in view of the change of circumstances by DGFT's clarification and the subsequent withdrawal of the show cause notice, the adjudication order which disregarded DGFT's decision could not be sustained. Therefore the impugned adjudication was set aside. [Paras 4, 5]

The adjudicating authority's order discarding the DGFT clarification is unsustainable; the DGFT clarification prevails and the impugned order is set aside.

Final Conclusion: The appeal is allowed; in view of the DGFT's clarification classifying 'Surimi' under DEPB entry Sr.No.2/66 and the withdrawal of the show cause notice, the adjudication which rejected the DGFT decision is set aside and the appellant's entitlement to DEPB is upheld.

Inordinate and unexplained delay in disposal of representation under Article 22(5) - distinction between detaining authority and appropriate Government in consideration of representation - obligation to await or not await Central Advisory Board's opinion when representation is received - confirmation of detention by the appropriate Government

Inordinate and unexplained delay in disposal of representation under Article 22(5) - distinction between detaining authority and appropriate Government in consideration of representation - obligation to await or not await Central Advisory Board's opinion when representation is received - Validity of the detention order in view of alleged inordinate and unexplained delay by the Central Government in deciding the representation dated 10.03.2022 made by the detenu. - HELD THAT: - The Court examined whether the 60 day period taken by the Central Government to decide the representation dated 10.03.2022 vitiated the detention under Article 22(5). It applied the law as expounded in Ankit Ashok Jalan and K.M. Abdulla Kunhi, distinguishing between representations addressed to a specially empowered detaining authority and those addressed to the appropriate Government. The detenu had made two separate representations: one to the detaining authority (02.03.2022), which was independently decided on 15.03.2022 without awaiting the Advisory Board's opinion, and a second to the Central Government (10.03.2022) which was received on 11.03.2022 after the matter had already been referred to the Central Advisory Board on 24.02.2022. Applying the settled principles, the Court held that where the representation to the appropriate Government is received after reference to the Advisory Board, it is permissible for the appropriate Government to await the Advisory Board's opinion and then decide the representation. Consequently, the disposal of the 10.03.2022 representation after receipt of the Advisory Board's opinion did not amount to an inordinate and unexplained delay fatal to detention.

The detention order is not vitiated on the ground of inordinate delay by the Central Government in deciding the representation dated 10.03.2022.

Final Conclusion: The writ petition challenging the detention order is dismissed; the Court held that the Central Government's decision on the representation dated 10.03.2022, taken after obtaining the Advisory Board's opinion, did not constitute an inordinate or unexplained delay rendering the detention invalid.

Preventive detention - Subjective satisfaction of detaining authority - Supply of relied-upon documents (RUDs) and the right to make an effective representation under Article 22(5) - Non-supply or illegibility of RUDs vitiating detention - Severability of grounds under Section 5-A of COFEPOSA - Parity with similarly placed detenus

Subjective satisfaction of detaining authority - Supply of relied-upon documents (RUDs) and the right to make an effective representation under Article 22(5) - Non-supply or illegibility of RUDs vitiating detention - The effect of supply of illegible or non-supplied RUDs on the validity of the detaining authority's subjective satisfaction and the consequent validity of the detention order. - HELD THAT: - The Court held that a person detained under preventive detention is constitutionally entitled to legible copies of all relevant documents relied upon in forming the detaining authority's subjective satisfaction so as to make an effective representation. The admitted position that multiple RUDs supplied to the detenu were illegible, dim or blank amounted to non-placement of vital material before the detaining authority and thereby vitiated the subjective satisfaction. Reliance was placed on this Court's earlier decisions and Supreme Court authorities to the effect that non-supply or supply of illegible vital documents renders a detention order illegal; the Court rejected the contention that the detenu must demonstrate actual prejudice as a precondition, holding that strict compliance with Article 22(5) is required and the test is not one of prejudice but of compliance. On these grounds the Court found non-application of mind by the detaining authority and decided the issue in favour of the detenu. [Paras 16, 22, 25, 31]

The supply of illegible or non-supplied RUDs vitiated the detaining authority's subjective satisfaction and rendered the detention order invalid.

Severability of grounds under Section 5-A of COFEPOSA - Non-supply or illegibility of RUDs vitiating detention - Whether the protection of severability under Section 5-A applies to save the detention order despite illegible or non-supplied RUDs. - HELD THAT: - The Court examined the argument that, even if some documents were illegible, the detention order could survive under Section 5-A as being founded on multiple independent grounds. The Court distinguished precedents relied upon by the respondents, observing that where the detaining authority's subjective satisfaction is vitiated by non-application of mind because vital material was illegible or not placed before it, the grounds are not severable in practice. The Court concluded that the severability protection of Section 5-A is not attracted where the composite foundation of the detention is undermined by such vice, and therefore Section 5-A could not save the impugned order in the present case. [Paras 27, 28, 29, 30]

Section 5-A severability does not operate to save the detention order where the detaining authority's subjective satisfaction is vitiated by non-placement or illegibility of vital RUDs.

Parity with similarly placed detenus - Supply of relied-upon documents (RUDs) and the right to make an effective representation under Article 22(5) - Whether the detenu is similarly placed to the detenus in Zakir Khan (supra) so as to attract parity and identical relief. - HELD THAT: - The Court noted that the impugned detention arose from the same investigation and that the RUDs supplied to the present detenu were admitted to be the same as those supplied in Zakir Khan (supra). The sponsoring authority's averments acknowledged that the petitioner was similarly placed with the detenus in the Zakir matter. Given the admitted identity of the relied-upon documents and the common investigative origin, the Court held that parity was attracted and identical relief was appropriate. [Paras 32, 33, 34]

The detenu is similarly placed as the detenus in Zakir Khan (supra) and entitled to parity of relief.

Final Conclusion: The writ petition succeeds. The detention order No. PD-12001/19/2021-COFEPOSA dated 28.12.2021 is quashed and set aside on grounds that illegible and non-supplied RUDs vitiated the detaining authority's subjective satisfaction; Section 5-A does not save the order; and parity with similarly placed detenus is attracted. The detenu is directed to be released forthwith unless his custody is required in connection with any other case.

Infructuous appeal - effect of resolution plan approved by NCLT on recoverability of departmental dues - tribunal's competence to adjudicate recoverability of dues in light of IBC - overriding effect of the Insolvency and Bankruptcy Code vis-a -vis other statutes - liberty to revive disposed appeal - recommendation to tax administration for guidelines in IBC-related cases

Infructuous appeal - The appeal is dismissed as infructuous. - HELD THAT: - The NCLT has approved a resolution plan in respect of the corporate debtor and, prima facie, the terms indicate that claims not admitted in the CIRP cannot be agitated after approval of the plan. In view of the resolution plan and the present status of proceedings before the NCLT/NCLAT, the Tribunal concluded that the present departmental appeal has become infructuous and ordered its dismissal. The parties are granted liberty to approach the Tribunal to revive the appeal and seek adjudication on merits if no amicable resolution is arrived at. [Paras 4, 5]

Appeal dismissed as infructuous; liberty given to revive the appeal if required.

Effect of resolution plan approved by NCLT on recoverability of departmental dues - tribunal's competence to adjudicate recoverability of dues in light of IBC - overriding effect of the Insolvency and Bankruptcy Code vis-a -vis other statutes - Whether this Tribunal can finally decide on recoverability of adjudged dues in light of the NCLT-approved resolution plan and the IBC. - HELD THAT: - Although, having regard to the approved resolution plan and the Supreme Court decision in Ghanashyam Mishra & Sons Pvt. Ltd., it prima facie appears that the adjudged dues may not be recoverable by the department, the Tribunal recorded that it is not the competent forum to finally decide the question of recoverability. There is no provision in the Customs and Central Excise enactments to give effect to NCLT proceedings; and despite the overriding effect of the IBC, absent an explicit provision under the Customs/Central Excise Act, the Tribunal (a creature of the Customs Act) cannot conclusively determine whether the adjudged amount can be recovered. That determination must be made by the revenue/department in consultation with the resolution applicant/NCLT/Resolution Professional, and by pursuing the appropriate proceedings under the IBC if necessary. [Paras 4]

Tribunal declines to decide recoverability of dues in light of the NCLT-approved resolution plan; the department must determine the issue.

Recommendation to tax administration for guidelines in IBC-related cases - liberty to revive appeal - Recommendation that the Central Board of Indirect Taxes & Customs consider issuing guidelines for departmental stand in cases where IBC proceedings are pending. - HELD THAT: - The Tribunal observed recurring difficulties faced by departmental representatives in dealing with appeals where insolvency proceedings are pending and noted the absence of a uniform guideline from the Board. The Tribunal recommended that the CBIC may consider issuing a procedure or guidelines for handling cases before the Tribunal when IBC proceedings have been initiated against a company, and directed that a copy of this order be sent to the Chairman of the CBIC by speed post. [Paras 6]

Copy of the order to be sent to Chairman-CBIC with a recommendation that the Board consider issuing guidelines; procedural recommendation only.

Final Conclusion: The Tribunal dismissed the appeal as infructuous in view of the NCLT-approved resolution plan, declined to finally adjudicate on recoverability of the departmental dues (leaving that determination to the revenue and relevant IBC authorities), granted liberty to revive the appeal if required, and recommended that the CBIC consider issuing guidelines for handling appeals affected by IBC proceedings.

Maintainability of a petition under section 9 of the Insolvency and Bankruptcy Code - exclusion of a Financial Service Provider from the definition of "corporate person" - requirement that CIRP against a Financial Service Provider is governed by specific FSP rules and ordinarily initiated by the appropriate regulator

Maintainability of a petition under section 9 of the Insolvency and Bankruptcy Code - exclusion of a Financial Service Provider from the definition of "corporate person" - requirement that CIRP against a Financial Service Provider is governed by specific FSP rules and ordinarily initiated by the appropriate regulator - Whether the company petition filed under section 9 of the Code is maintainable against the Corporate Debtor which is a Financial Service Provider. - HELD THAT: - The Tribunal examined the Corporate Debtor's status and noted the registration certificate on record showing it to be a Financial Service Provider. Applying the settled approach reflected in higher authority, the definition of "corporate person" under the Code excludes Financial Service Providers. Given that exclusion and the special regime for insolvency proceedings of Financial Service Providers (including the Rules applicable to FSPs and the principle that initiation by the appropriate regulator is the ordinary route), the petition under section 9 could not be maintained against the Corporate Debtor. The Tribunal therefore rejected the petition while leaving open other remedies available to the Operational Creditor under different laws. [Paras 9, 10]

The petition under section 9 is rejected as the Corporate Debtor is a Financial Service Provider and the petition is not maintainable.

Final Conclusion: Company Petition under section 9 dismissed on maintainability grounds because the respondent is a Financial Service Provider excluded from the definition of "corporate person" under the Code; Operational Creditor free to pursue other remedies.

Impounding of instruments under Section 33 of the Indian Stamp Act - court's duty to examine stamping irrespective of objection - admissibility of document once marked without objection - admission in evidence under Section 36 of the Indian Stamp Act - payment of deficit stamp duty and penalty on adjudication - procedure for adjudication and certification by Collector under Section 31 and Section 32 - discretion to impound notwithstanding prior marking

Admissibility of document once marked without objection - admission in evidence under Section 36 of the Indian Stamp Act - payment of deficit stamp duty and penalty on adjudication - Whether the petitioner can be permitted to pay the deficit stamp duty and penalty upon adjudication of the original Transfer Deed (Form 7-B) which was marked in evidence without objection. - HELD THAT: - The Tribunal held that when a document has been marked in evidence without objection, the parties cannot subsequently challenge its admissibility on the ground of insufficiency or non-payment of stamp duty; Section 36 (admission in evidence) bars questioning such admission at a later stage, subject to the limited exceptions in the Act. However, this doctrinal protection for admissibility does not absolve the Court of its statutory duty under Section 33 to examine and, if it appears the instrument is not duly stamped, to impound it. Accordingly, although Exhibit R-3 was marked without objection and thus its admissibility cannot now be contested by the parties, the Tribunal nevertheless exercised the statutory power to impound the document under Section 33 and directed that it be dealt with in terms of Section 39. The appellant's prayer to be permitted to pay the deficit duty and penalty on adjudication by the Tribunal or by the District Registrar/Collector was held misconceived and unsustainable in the circumstances, because the proper course is impounding and dealing with the instrument under the Stamp Act rather than allowing a post-marking remedial payment in the present forum. [Paras 10, 11, 12, 15, 16]

Prayer to permit retrospective payment and adjudication on a document marked without objection is dismissed; Tribunal impounded the document and directed it to be dealt with under Section 39 of the Indian Stamp Act.

Final Conclusion: Application IA 116 of 2022 in CP(IB) No. 767/59/HDB/2019 is dismissed; the Transfer Deed (Exhibit R-3) is impounded to be dealt with under the Indian Stamp Act, and no costs.

Classification of service as Clearing and Forwarding Agent Service versus Business Auxiliary Service - application of binding Supreme Court precedent - change of law affecting earlier tribunal decision - remand for fresh consideration in light of higher court ruling

Classification of service as Clearing and Forwarding Agent Service versus Business Auxiliary Service - application of binding Supreme Court precedent - change of law affecting earlier tribunal decision - remand for fresh consideration in light of higher court ruling - Whether the appeal should be remitted to the Commissioner (Appeals) for fresh decision in view of the subsequent Supreme Court judgment in Coal Handlers reversing the Tribunal's earlier view relied upon below. - HELD THAT: - The Tribunal observed that the Commissioner (Appeals) had relied on this Tribunal's earlier decision in Coal Handlers to classify the appellant's services as Clearing and Forwarding Agent Service. The Supreme Court subsequently allowed the appeal in Coal Handlers and reversed the Tribunal's decision, representing a change in the legal position upon which the Commissioner (Appeals) had based its order. Given that the present case involves identical questions of law and requires comparison of factual matrices with the Coal Handlers matter, the Tribunal concluded that the Commissioner (Appeals) must reconsider the matter afresh in the light of the Supreme Court judgment. Accordingly, the impugned order is set aside and the matter is remanded for fresh adjudication taking into account the higher court's decision and verifying the factual similarities and differences between the cases.

Impugned order set aside and matter remanded to the Commissioner (Appeals) to decide afresh in light of the Supreme Court judgment in Coal Handlers, with comparison and verification of relevant facts.

Final Conclusion: The Tribunal set aside the impugned order and remitted the case to the Commissioner (Appeals) for fresh adjudication in light of the Supreme Court's decision in Coal Handlers, directing re-examination of classification and factual comparisons between the cases.

Facility sharing charges - reimbursement of electricity expenses - business support service - renting of immovable property service - extended period of limitation - imposition of penalty for suppression/mis-declaration

Facility sharing charges - reimbursement of electricity expenses - Taxability of facility sharing charges claimed as reimbursement of electricity expenses. - HELD THAT: - The Tribunal found that the amounts collected as facility sharing charges (quantified in the record for 2008-2009 to 2011-2012) were wholly attributable to apportioned electricity expenses where the electricity meter and bill were in the appellant's name and the cost was shared proportionately among group concerns. On the facts, the receipts were not for a separate service rendered by the appellant but represented sharing/reimbursement of electricity consumption. Consequently, those receipts are not exigible to service tax as a distinct taxable service. [Paras 9]

Facility sharing charges held not liable to service tax as they represent reimbursement of electricity expenses.

Business support service - renting of immovable property service - Taxability of monthly service charges received from Webdunia as Business Support Service. - HELD THAT: - The Tribunal noted that editorial assistance was provided free and office space was made available without charge, and that Webdunia and the appellant were under common management so there was an element of mutuality in use of the news library and facilities. On these facts the monthly receipts from Webdunia (Rs.30,000/month as recorded) did not constitute a taxable Business Support Service. The characterization of the receipts was therefore not chargeable to service tax. [Paras 13]

Receipts from Webdunia not taxable as Business Support Service.

Extended period of limitation - Invokability of the extended period of limitation for the show cause notice. - HELD THAT: - The Tribunal observed that the appellant maintained proper records of transactions and receipts, was registered with the Department and had regularly filed returns and paid admitted tax. The dispute was interpretational or a change of opinion rather than suppression. In those circumstances the extended period of limitation could not be invoked to sustain the demand, and the show cause notice was held to be invalid insofar as it invoked extended limitation. [Paras 13]

Extended period of limitation held not invokable; show cause notice bad insofar as it relied on extended limitation.

Imposition of penalty for suppression/mis-declaration - Validity of penalties imposed on the appellant. - HELD THAT: - Having held that the amounts in dispute were not exigible to service tax (facility sharing charges and receipts from Webdunia) and that the extended period was not invokable because the issue was interpretational and records were maintained, the Tribunal concluded there was no basis for penalties. The appellate order imposing penalties was therefore set aside and the appellant was held entitled to consequential benefits. [Paras 14]

All penalties imposed set aside.

Final Conclusion: Appeal allowed: amounts received as facility sharing (electricity reimbursements) and from Webdunia are not taxable; extended period of limitation not invokable; all penalties set aside and consequential relief granted.

Cenvat credit - retrospective effect of Notification No. 16/2009-CE (NT) - precedential effect of a tribunal larger bench decision and judicial reversal - remand for fresh adjudication in light of subsequent decisions

Cenvat credit - retrospective effect of Notification No. 16/2009-CE (NT) - precedential effect of a tribunal larger bench decision and judicial reversal - remand for fresh adjudication in light of subsequent decisions - Whether the appellant is entitled to claim cenvat credit in respect of specified goods for the period March, 1995 to September, 2003, and whether the adjudicating authority's order based on the larger bench decision in Vandana Global requires reconsideration. - HELD THAT: - The adjudicating authority denied cenvat credit relying solely on this Tribunal's larger bench decision in Vandana Global which held that the amendment to Notification No.16/2009-CE (NT) has retrospective effect, disallowing credit for the earlier period. The Tribunal noted that the Vandana Global larger bench decision was subsequently reversed by the Hon'ble Chhattisgarh High Court and that several High Courts and tribunals have rendered decisions subsequent to that reversal which bear on the admissibility of credit for the goods in question. Given that the impugned order rests entirely on the Vandana Global larger bench view and that subsequent judicial developments may affect the conclusion, the matter is not finally adjudicated on merits by this Bench. The Tribunal set aside the impugned order and remanded the matter to the adjudicating authority for fresh consideration and decision in the light of the subsequent judicial pronouncements. [Paras 4, 5]

Impugned order set aside and appeals allowed by remanding the matter to the adjudicating authority for fresh adjudication in light of subsequent judgments.

Final Conclusion: The Tribunal remanded the issue of admissibility of cenvat credit for the period March, 1995 to September, 2003 to the adjudicating authority for fresh consideration and decision in light of subsequent judicial decisions that altered the precedential landscape after the Vandana Global larger bench ruling.

Interest under Section 35FF of the Central Excise Act - interest from the date of deposit till the date of refund - interest on deposit made during investigation/audit - entitlement to interest on success in appeal - pre-deposit mandatory for filing appeal - rate of interest @ 12% per annum - classification of appeal as Service Tax appeal

Interest under Section 35FF of the Central Excise Act - interest from the date of deposit till the date of refund - interest on deposit made during investigation/audit - rate of interest @ 12% per annum - pre-deposit mandatory for filing appeal - Entitlement to interest on the deposit made during investigation and the applicable rate and period for such interest. - HELD THAT: - The Tribunal applied the Division Bench ruling in Parle Agro Ltd. and held that the appellant is entitled to interest on the amount deposited during investigation from the date of deposit until the date of refund. The adjudicating authority's limitation of interest to only the portion equal to the mandatory pre-deposit and confining the period to date of filing of the appeal was not accepted. Although the authorised representative relied on a notified rate of 6%, the Tribunal followed precedent allowing interest at 12% per annum and directed grant of the balance interest. The adjudicating authority was directed to pay the balance interest within 30 days from receipt of the order. [Paras 7]

Appeal allowed; appellant entitled to interest on the deposit from date of deposit till date of refund at 12% per annum; adjudicating authority to grant balance interest within 30 days.

Classification of appeal as Service Tax appeal - Correction of the appeal classification from Excise Appeal to Service Tax Appeal. - HELD THAT: - The Tribunal noted that the issue relates to Service Tax and directed the Registry to correct the record to show the appeal as a Service Tax Appeal instead of an Excise Appeal. [Paras 7]

Registry directed to correct the appeal classification to Service Tax Appeal.

Final Conclusion: The appeal is allowed: the impugned order is modified to direct payment of interest on the deposit from the date of deposit until refund at 12% p.a., the balance interest to be paid within 30 days, and the Registry is directed to recategorise the appeal as a Service Tax Appeal.

Principles of natural justice - adequacy of show cause notice - duty to provide particulars - right to personal hearing - reasoned assessment order - quashing and remand for fresh adjudication

Principles of natural justice - adequacy of show cause notice - duty to provide particulars - Impugned show cause notice was inadequate and contravened principles of natural justice by failing to supply particulars of alleged incorrect sales, claims or deductions. - HELD THAT: - The Court accepted the petitioner's contention that the show cause notice dated 5th November 2019 was a bald notice lacking particulars of the alleged incorrect recordings, claims or deductions and that such omission prevented the petitioner from effectively meeting the allegations. The Court held that respondents are obliged to furnish all details necessary to enable an effective response and that providing particulars only at a later personal hearing is improper. The established requirement of fair notice and opportunity to be heard therefore required the show cause notice to contain the particulars complained of so as to satisfy principles of natural justice. [Paras 2, 4]

Show cause notice quashed for being inadequate; respondents directed that every future show cause notice must contain all particulars enabling an effective response.

Quashing and remand for fresh adjudication - right to personal hearing - reasoned assessment order - procedural directions for reassessment - Impugned assessment order set aside and matter remanded for fresh adjudication after issuance of a detailed show cause notice, with specified timelines and directions as to personal hearing and reasoned order. - HELD THAT: - Having found the show cause notice deficient and the assessment order consequent thereto unsustainable, the Court quashed the impugned order and directed Respondent No.3 to issue a fresh show cause notice containing all details by which tax is alleged to have been evaded or claims/deductions are said to be incorrect. The Court prescribed timelines: issue the fresh notice within two weeks of service of the judgment, allow the petitioner two weeks to file a detailed reply, then hold a personal hearing (with at least seven working days' notice) and pass a final assessment within eight weeks of receiving the reply. The Court further directed that the reassessment order must record all reasons for the findings and, where the Assessing Officer disagrees with the petitioner's contentions, must state detailed reasons for such disagreement. While initially inclined to impose personal costs on the officer, the Court refrained but warned of possible future adverse measures in officers' career records and urged training and remedial steps by the Board and Principal Commissioner. [Paras 6, 7]

Impugned assessment order set aside; matter remanded with mandatory directions for issuance of a detailed show cause notice, opportunity to reply and personal hearing, and requirement of a reasoned assessment order within the prescribed timelines; no costs awarded but warning issued to respondents.

Final Conclusion: The show cause notice dated 5th November 2019 and the consequent assessment order dated 31st December 2021 are quashed; respondents are directed to issue a detailed show cause notice and proceed to fresh adjudication in accordance with the timelines and procedural safeguards set out by the Court, with no costs awarded but with a caution to the departmental authorities regarding training and possible future disciplinary consequences.

Violation of principles of natural justice - opportunity to file objections and right to be heard - exercise of revisional power under Section 32(2) of the VAT Act - remand for fresh consideration after affording hearing

Violation of principles of natural justice - opportunity to file objections and right to be heard - exercise of revisional power under Section 32(2) of the VAT Act - remand for fresh consideration after affording hearing - Whether the revisional order passed before expiry of the period granted to the petitioner to file objections amounted to a breach of natural justice and warranted setting aside and remand. - HELD THAT: - The revisional authority issued a show cause notice dated 08.07.2022 calling for written objections within seven days of receipt. The notice was received by the petitioner on 11.07.2022, making the expiry of the seven-day period 18.07.2022. Notwithstanding this, the revisional order was passed on 16.07.2022, before the expiry of the period granted for filing objections. By granting a seven-day period and then concluding the revision before that period elapsed, the revisional authority pre-empted the petitioner's opportunity to file objections and thereby infringed the petitioner's right to be heard. The explanation that the period was to be computed from the date of the show cause notice rather than the date of receipt was not accepted. In the circumstances the revisional order could not stand and the matter required reconsideration after affording the petitioner the opportunity contemplated by the show cause notice. [Paras 4, 7, 8, 12]

Revisional order dated 16.07.2022 set aside; matter remanded to the 1st respondent to afford the petitioner the specified opportunity to submit written objections within seven days from receipt of a copy of this order and thereafter to pass a fresh order in accordance with law after giving due opportunity of hearing.

Final Conclusion: Writ petition allowed; revisional order quashed and matter remitted for fresh decision after affording the petitioner the opportunity to file objections within seven days; no order as to costs.

Natural justice - requirement of pre-decisional hearing - revision power under Section 49(3) of the Chhattisgarh Value Added Tax Act, 2005 - amendment/cancellation of certificate of registration - Rule 9 of the Central Sales Tax (Registration and Turnover) Rules, 1957 - validity of show-cause/notice - requirement of distinct issuance and service for separate proceedings - consequential quashing of tax demand and penalty where foundational order is vitiated - exercise of writ jurisdiction despite availability of alternate statutory remedy where principles of natural justice are breached

Revision power under Section 49(3) of the Chhattisgarh Value Added Tax Act, 2005 - natural justice - requirement of pre-decisional hearing - validity of show-cause/notice - requirement of distinct issuance and service for separate proceedings - Deletion of the entries 'mining' and 'high-speed diesel (HSD)' from petitioners' registration certificates was unlawful for want of valid notice and opportunity of hearing under Section 49(3) of the Act of 2005 and Rule 9 of the Rules of 1957. - HELD THAT: - The Court found that the departmental action curtailing entries in the registration certificates proceeded in Revision matters that included both State and Central registrations, but the record did not disclose separate, properly issued show-cause notices under Section 49(3) for the Central registration revisions. The notices placed on record were either marked as show-cause under Section 49(1) or bore the same despatch number as the earlier Section 49(1) notice and were annotated as 'amended notice' with handwritten corrections; there was no distinct despatch or separate notice for the Central revision files. Section 49(3) mandates that the Commissioner may pass an order after giving the dealer a reasonable opportunity of being heard; Rule 9 of the Rules of 1957 similarly requires an opportunity of being heard before amending or cancelling a certificate of registration. Read conjunctively, these provisions make pre-decisional hearing mandatory. Because the Department decided Revision No.146 K.C.-1/20 (Central) and other central revision matters without issuing the requisite separate notice and affording the mandatory opportunity of hearing, those amendment orders were vitiated for violation of principles of natural justice and were quashed. [Paras 28, 29, 30, 33, 34]

The impugned orders deleting 'mining' and 'HSD' from the registration certificates (in the Central revision matters and similarly defective State/Central joint revisions) are quashed for failure to issue valid show-cause notices and for denial of opportunity of hearing.

Consequential quashing of tax demand and penalty where foundational order is vitiated - amendment/cancellation of certificate of registration - Rule 9 of the Central Sales Tax (Registration and Turnover) Rules, 1957 - Recovery orders demanding tax with penalty under the Central Sales Tax Act (Sections 10/10A) that were founded on the quashed amendments to registration certificates must likewise be quashed. - HELD THAT: - The Court held that the demand and penalty proceedings instituted under the Act of 1956 (Central Sales Tax) were consequent upon and premised on the amendment/deletion of entries in the registration certificates. Having quashed the foundational amendment orders for want of valid notice and hearing, the consequential recovery orders (including demands of tax and penalty under Section 10/10A of the Act of 1956) could not stand. The Court therefore quashed the consequential tax and penalty orders which arose from the impugned deletions. [Paras 31, 32, 35]

Consequential tax demands and penalty orders based on the quashed amendments are quashed.

Exercise of writ jurisdiction despite availability of alternate statutory remedy where principles of natural justice are breached - natural justice - requirement of pre-decisional hearing - The High Court exercised Article 226 jurisdiction notwithstanding availability of the statutory appeal under Section 49(4), because the petitions disclosed a breach of the principles of natural justice and orders that were wholly without jurisdiction. - HELD THAT: - While acknowledging that alternate statutory remedies normally weigh against entertaining writ petitions, the Court applied settled principles that permit exercise of writ jurisdiction where there is a violation of natural justice, orders are without jurisdiction or where the authority has usurped jurisdiction. The petitioners had shown that notice requirements and opportunity to be heard were not complied with in respect of at least the Central revision matters, which constituted a mandatory procedural infirmity. In those circumstances the Court exercised its discretion to entertain and decide the writ petitions rather than relegating the petitioners to the appellate remedy. [Paras 10, 11, 12]

Writ petitions were maintainable and entertained despite the availability of an alternate remedy because the departmental action involved violation of the principles of natural justice and jurisdictional defect.

Final Conclusion: The High Court allowed all writ petitions: it quashed the departmental orders deleting the entries 'mining' and 'high-speed diesel (HSD)' from the petitioners' registration certificates for want of valid notices and opportunity of hearing under Section 49(3) of the Chhattisgarh VAT Act read with Rule 9 of the Rules of 1957; and it quashed the consequential Central Sales Tax demands and penalty orders founded upon those defective amendments. The Court entertained the petitions notwithstanding availability of statutory appeal because of the demonstrated breach of natural justice and jurisdictional infirmity.

Vicarious liability of directors under Section 141 of the Negotiable Instruments Act - requirement of specific averments to fasten criminal liability on non executive/independent directors - distinction between designation and actual control or responsibility for conduct of company's business - pre summoning scrutiny of complaints under Section 138 r/w 141 NI Act - summoning order requiring application of mind and not to be mechanical

Vicarious liability of directors under Section 141 of the Negotiable Instruments Act - requirement of specific averments to fasten criminal liability on non executive/independent directors - summoning order requiring application of mind and not to be mechanical - Whether the summoning order dated 28.11.2018 insofar as it issued summons to the petitioner, an independent/non executive director, could be sustained when the complaint contained only general and bald allegations against all directors without specific averments showing that she was in charge of and responsible for the conduct of the company's business at the relevant time. - HELD THAT: - The Court applied the settled principles in S.M.S. Pharmaceuticals Ltd., National Small Industries Corporation Ltd., Pooja Ravinder Devidasani, Anita Malhotra and subsequent authority in Sunita Palita, holding that Section 141 imposes vicarious liability only on those who, at the time of the offence, were in charge of and responsible for the conduct of the business of the company. Mere designation as a director, particularly an independent/non executive director, or a bare recital in the complaint that all directors were "in charge" is insufficient. The complaint in the present case reproduced general averments that all accused directors were managing day to day affairs and dealt with the complainant, but did not contain specific, unambiguous allegations explaining how the petitioner, who was an independent director per Form DIR 12, was responsible for the conduct of business or had knowledge/consent/connivance in relation to the issuance or dishonour of the cheques. The Court reiterated the obligation on trial courts to scrutinise pre summoning material and to avoid mechanically issuing summons to persons who do not satisfy the statutory test. Applying these principles to the material on record, the Court found no averments to fasten vicarious liability on the petitioner. [Paras 17, 18, 22, 24]

Impugned summoning order dated 28.11.2018 is quashed insofar as it issues summons to the petitioner for alleged offence under Section 138 of the Negotiable Instruments Act, 1881.

Final Conclusion: The petition is allowed; the summons issued to the petitioner (an independent/non executive director) in CC No.16201/2017 are quashed for failure of the complaint to make the specific averments required to fasten vicarious liability under Section 141 NI Act and because the Trial Court's summoning was not supported by application of mind.