TaxTMI Updates e-Newsletter
Nov 09,2022

Right to be heard - natural justice - service of notice - adequate opportunity to be heard - quashing of administrative order - fresh notice and reconsideration - speaking order

Right to be heard - service of notice - adequate opportunity to be heard - natural justice - Whether the petitioner was given adequate opportunity of hearing before passing the impugned order in Form GST MOV-09 dated 21.10.2022. - HELD THAT: - The Court examined the record and rival contentions and found that the show cause notice was not received by the petitioner and that issuing the notice only to the driver of the consignment did not constitute adequate service on the petitioner. Relying on the principles of natural justice and the statutory need to afford the affected party a real opportunity to be heard, the Court held that the procedure adopted by the respondent fell short of affording the petitioner an opportunity to present objections prior to the adverse order being passed. The deficiency in service and absence of an effective opportunity to respond rendered the impugned order invalid. [Paras 8]

Petitioner was not given adequate opportunity; service on the driver alone was inadequate and the impugned order is invalid on that ground.

Quashing of administrative order - fresh notice and reconsideration - speaking order - Relief to be granted in consequence of the procedural infirmity in the impugned order dated 21.10.2022. - HELD THAT: - In view of the procedural defect, the Court quashed the demand and penalty order in Form GST MOV-09 dated 21.10.2022 and directed the respondent to issue a fresh notice to the petitioner. The petitioner was to submit objections upon receipt of the fresh notice and the respondent was directed to consider those objections and pass a reasoned, speaking order within eight weeks from receipt of a copy of the Court's order. The directions preserve the respondent's power to adjudicate the claim subject to compliance with audi alteram partem and to render a decision with reasons. [Paras 9]

Impugned order quashed; respondent to issue fresh notice, entertain objections and pass a speaking order within eight weeks.

Final Conclusion: Writ petition allowed; the demand and penalty order in Form GST MOV-09 dated 21.10.2022 is quashed for denial of adequate opportunity. Respondent directed to issue fresh notice, consider petitioner's objections and pass a speaking order within eight weeks; no costs.

Closure of portal for filing Form GST TRAN-3 - transitional credit under the CENVAT Credit Rules and Form GST TRAN-3 - direction to reopen common portal for filing transitional forms - verification of transitional credit claims by revenue authorities - judicial compliance with Supreme Court directions in Union of India v. Filco Trade Centre Pvt. Ltd.

Closure of portal for filing Form GST TRAN-3 - direction to reopen common portal for filing transitional forms - Petitioner entitled to opportunity to file/upload table 2 of Form GST TRAN-3 despite earlier closure of the portal. - HELD THAT: - Petitioner confined the challenge to the action of closing the facility on the common portal to file Form GST TRAN-3. Having regard to the Supreme Court's directions in Union of India v. Filco Trade Centre Pvt. Ltd., which directed GSTN to open the portal for filing transitional forms (TRAN-1 and TRAN-2) for specified months and to ensure absence of technical glitches, this Court directed that the petitioner be permitted to upload table 2 of Form GST TRAN-3 within the period permitted by the Supreme Court order (the extended window including up to 30.11.2022 as recorded). The Court refrained from delving into rival contentions and limited relief to allowing the filing opportunity in the interest of justice, subject to subsequent verification by the respondents. [Paras 7, 8]

Petitioner permitted to upload table 2 of Form GST TRAN-3 within the period directed by the Supreme Court; writ petition disposed of accordingly.

Transitional credit under the CENVAT Credit Rules and Form GST TRAN-3 - verification of transitional credit claims by revenue authorities - Entitlement to transitional credit to be subject to due verification by the respondents and further action by concerned officials. - HELD THAT: - Following the Supreme Court's mandate, the Court directed that the respondents (including GSTN and revenue authorities) shall verify the veracity of the petitioner's claim for transitional credit after the upload. Concerned officials were to be given an opportunity and time to verify the claim and thereafter pass appropriate orders. The Court thus did not adjudicate entitlement on merits but remitted the matter for administrative verification and decision in accordance with the directions referred to from the Supreme Court. [Paras 7, 8]

Petitioner's claim for transitional credit remitted for verification by the respondents; benefit, if allowed, to be reflected in the electronic credit ledger after due verification and orders.

Final Conclusion: Writ petition disposed of by permitting the petitioner to upload table 2 of Form GST TRAN-3 within the period permitted by the Supreme Court's directions; entitlement to transitional credit is left open and remitted to the respondents for due verification and appropriate orders, with no order as to costs.

Rectification of omission or incorrect particulars in GSTR-1 - limitation under the proviso to Section 39(9) of the CGST Act - availability and utilisation of input tax credit - vested right under Article 300A - impact of post-facto rectification on electronic ledgers and other stakeholders - statutory scheme of self-assessment and auto-populated returns (GSTR-1/GSTR-2A/GSTR-3B) - precedent in Union of India v. Bharti Airtel Ltd. - prohibition on rectification beyond statutory period

Rectification of omission or incorrect particulars in GSTR-1 - limitation under the proviso to Section 39(9) of the CGST Act - impact of post-facto rectification on electronic ledgers and other stakeholders - precedent in Union of India v. Bharti Airtel Ltd. - prohibition on rectification beyond statutory period - Whether the petitioner is entitled to seek rectification of incorrect particulars in GSTR-1 for the period January, 2018 to August, 2018 after the statutory period prescribed under Section 39(9) has expired. - HELD THAT: - Section 39(9) permits a registered person to rectify omissions or incorrect particulars in the prescribed manner, but the proviso imposes a cut-off - no rectification is allowed after the due date for furnishing the return for the month of September or the second quarter following the end of the financial year to which such details pertain (or the actual date of furnishing of the relevant annual return), whichever is earlier. The Supreme Court in Union of India v. Bharti Airtel Ltd. has interpreted this statutory scheme to preclude permitting rectifications beyond the period specified, emphasising that self-assessment obligations, the primacy of primary documents, and the auto-population mechanism (GSTR-1/GSTR-2A/GSTR-3B) make unilateral post-facto changes beyond the statutory window impermissible as they would affect obligations and liabilities of other stakeholders and undermine finality of electronic records. While unutilised input tax credit is recognised as a vested right, the exercise of that right is subject to the statutory limitation for rectification; therefore the right does not permit rectification beyond the cut-off prescribed by Section 39(9). Applying these principles to the present case, the statutory period for rectification in respect of the returns for January-March 2018 and April-August 2018 had expired on the dates specified in law, and the petitioner's representations filed in 2021 fell outside that period. In view of the binding guidance in Bharti Airtel Ltd., permitting the requested amendments at this late stage would be contrary to the statutory mandate and liable to produce cascading uncertainty in electronic records. [Paras 11, 14, 15, 16]

Petitioner is not entitled to rectification of GSTR-1 returns for January, 2018 to August, 2018 after the statutory cut-off under Section 39(9); the writ petition is dismissed.

Final Conclusion: The High Court, applying the statutory limitation in Section 39(9) read in light of the Supreme Court's decision in Bharti Airtel Ltd., declined to permit rectification of the petitioner's GSTR-1 returns for January, 2018 to August, 2018 filed after the prescribed period and dismissed the writ petition; miscellaneous applications closed and no order as to costs.

Detention and seizure under Section 129 - Requirement of e-way bill and Rule 138 - Violation of principles of natural justice for failure to consider defence - Remand for fresh consideration of factual and legal pleas - Return of bank guarantee where not encashed

Violation of principles of natural justice for failure to consider defence - Detention and seizure under Section 129 - Impugned orders of detention, seizure and penalty were vitiated for failure to consider material defence and evidence and were set aside and remanded. - HELD THAT: - The Court found that the State Tax Officer and the Appellate Authority did not examine or verify the petitioner's material defence based on the GPS tracking report and other explanations filed in response to the show-cause notice. The impugned orders considered only the plea of the driver's illiteracy and did not deal with the petitioner's contention that the vehicle had reached the consignee's warehouse within the e-way bill validity and was standing at the petitioner's premises thereafter. The omission to consider the GPS evidence and other pleaded facts amounted to want of proper application of mind and breach of the rules of natural justice warranting interference. In consequence, the orders imposing penalty and confirming it were set aside and the matter remitted for fresh decision after considering the petitioner's submissions and evidence in accordance with law. [Paras 11, 12, 13]

Orders dated 12th July, 2018 and 26th July, 2019 set aside; matter remanded to State Tax Officer for fresh consideration after due verification of petitioner's defence and evidence.

Requirement of e-way bill and Rule 138 - Remand for fresh consideration of factual and legal pleas - On remand the State Tax Officer is to consider the petitioner's contentions including reliance on the amended proviso to Rule 138(3) and the GPS report and decide in accordance with law. - HELD THAT: - The Court directed that on remand the State Tax Officer must address the specific legal and factual contentions raised by the petitioner: namely, the GPS tracking evidence showing arrival within the e-way bill validity, the justification for moving the goods back to petitioner's premises, the absence of any allegation of tax evasion, and the effect of the amendment to Rule 138(3) (notification dated 30th March, 2018 effective 7th March, 2018) relied upon by the petitioner. The Court made clear that its observations would not prejudice the officer from taking a fresh lawful decision after considering these matters. [Paras 12]

State Tax Officer to reconsider and decide afresh taking into account GPS report, the amended Rule 138(3) and other pleas in accordance with law.

Return of bank guarantee where not encashed - Bank guarantee furnished by the petitioner is to be returned if not encashed pending fresh decision. - HELD THAT: - Because the impugned orders were set aside and the matter remitted for fresh consideration, the Court directed that the bank guarantee submitted by the petitioner for release of the vehicle, if not encashed, should be returned to the petitioner in the circumstances of the case. [Paras 12]

Bank guarantee to be returned to petitioner if not encashed.

Final Conclusion: Writ petition allowed: impugned orders of detention, seizure and penalty set aside for want of proper consideration of the petitioner's defence and evidence; matter remitted to the State Tax Officer for fresh decision after verification of GPS report and consideration of the amended Rule 138(3), and the bank guarantee, if not encashed, to be returned.

Input Tax Credit - Works Contract Services - restriction on input tax credit for works contract services used in construction of immovable property - deeming of club/association as doing business (membership organisation) - composite/mixed supply and classification of services under rate notifications

Works Contract Services - deeming of club/association as doing business (membership organisation) - Input Tax Credit - restriction on input tax credit for works contract services used in construction of immovable property - Whether the appellant cooperative housing society can be considered a provider of works contract services to its members and thereby be eligible to claim input tax credit on inward works contract services - HELD THAT: - The Appellate Authority examined the society's bye-laws, invoices and the nature of activities undertaken and agreed with the MAAR that the society's core functions are to manage, maintain and administer the society property and to raise funds from members to achieve those objects. The services provided to members, including contributions for building repair and renovation, fall within services of a membership organisation and are covered by heading 9995 (services of membership organisation). The society does not separately identify or provide distinct security, cleaning or repair services as independent works contract supplies to members but recovers amounts as charges for common benefit. The exception in the input tax credit provisions for works contract services applies only where the inward works contract service is an input service for further supply of works contract service by the recipient (for example, where a principal supplies works contract services after engaging subcontractors). The society does not act as a works contract service provider in that sense and does not step into the role of main contractor vis-a -vis its members; the works performed by the contractor are for the common benefit of members. Accordingly, the restriction on availability of ITC for works contract services in construction/renovation of immovable property applies and the society is not eligible to claim ITC of tax paid to the contractor under the exclusion in the relevant blocked-credit provision. [Paras 12, 14, 16, 18, 20]

The MAAR's advance ruling that the appellant is not providing works contract services to its members and therefore is not eligible to avail input tax credit of tax paid on such works contract services under the blocked-credit provisions is affirmed.

Final Conclusion: The appeal is dismissed; the Advance Ruling denying input tax credit on tax paid to the contractor for repair/renovation works is upheld as the society cannot be treated as a provider of works contract services to its members for the purpose of availing the ITC exception.

Classification between Chapter Heading 30.02 and Chapter Heading 38.22 - antisera / agglutinating sera - diagnostic kits - essential character - composite supply and principal supply - HSN Explanatory Notes - interpretative primacy

Antisera / agglutinating sera - diagnostic kits - essential character - classification between Chapter Heading 30.02 and Chapter Heading 38.22 - Infinite Turbilatex CRP Test Kit is classifiable as agglutinating sera under Chapter Heading 30.02 (entry "Agglutinating Sera" at Sl. No.125 of List I to Schedule I). - HELD THAT: - The product literature shows the CRP Test Kit is a multi-component in vitro diagnostic kit whose determinative component is the latex reagent coated with anti human CRP antibody (antisera) that effects agglutination and thereby gives the specificity of the test. The HSN Explanatory Notes treat antisera as products of Chapter 30.02 and state diagnostic kits are classifiable there when the essential character of the kit is given by a product of that heading. Applying the ratio in Span Diagnostics and related authorities, a diagnostic reagent that is antisera remains within Chapter 30.02 and is thereby excluded from the residuary coverage of Chapter 38.22. The MAAR's reasoning that the List I entry did not expressly use the word "kit" is negatived by the Explanatory Notes and the structure of the Schedule. For these reasons the CRP Test Kit is properly classifiable as agglutinating sera under Chapter 30.02 and attracts the rate specified in the Schedule entry. [Paras 21, 23, 24, 25]

CRP Test Kit is agglutinating sera within Chapter Heading 30.02 and is covered by the Entry No.125 of List I to Schedule I.

Antisera / agglutinating sera - diagnostic kits - essential character - classification between Chapter Heading 30.02 and Chapter Heading 38.22 - mutatis mutandis application of reasoning - Infinite HbA1c Test Kit is classifiable under Chapter Heading 30.02 (as agglutinating sera) and not under Chapter Heading 38.22. - HELD THAT: - The HbA1c Test Kit has the same functional design and working principle as the CRP kit: its principal component is the antibody reagent (derived from antisera) that governs the specificity of the agglutination based assay. Given the close similarity in constitution and function, the determinative reasoning applied to the CRP kit applies mutatis mutandis to the HbA1c kit. Under the HSN Explanatory Notes and precedents, a diagnostic reagent whose essential character is an antisera falls under Chapter 30.02 and is thereby excluded from Chapter 38.22. [Paras 26]

HbA1c Test Kit is classifiable under Chapter Heading 30.02 as agglutinating sera and not under Chapter Heading 38.22.

Composite supply and principal supply - classification between Chapter Heading 30.02 and Chapter Heading 38.22 - The kits, being composite supplies whose principal element is the antisera component, are to be treated as supplies of that principal component for classification and rate purposes. - HELD THAT: - The kits comprise multiple components but the antisera containing reagent (R2) is the predominant element, both functionally and in cost, and thus constitutes the principal supply under the composite supply doctrine. Under the CGST Act, a composite supply is treated as supply of the principal supply; accordingly the tax classification and rate applicable to the antisera component govern the entire kit. [Paras 13]

As composite supplies whose principal supply is antisera, the kits are to be taxed according to the classification and rate applicable to the antisera component (Chapter 30.02).

Final Conclusion: The MAAR order is set aside. Both the CRP Test Kit and the HbA1c Test Kit are held to be classifiable under Chapter Heading 30.02 as agglutinating sera (antisera), and, being thus covered by Sl. No.125 of List I to Schedule I, attract the notified rate applicable to that entry (5% GST). The appeal is allowed.

Classification under the Customs Tariff / HSN - Interpretation of tariff headings by Explanatory Notes - Meaning of "pump" for Heading 84.13 - Automatic regulating or controlling instruments and apparatus under Heading 90.32 - Chapter Note 7 criteria for automatic control apparatus

Meaning of "pump" for Heading 84.13 - Interpretation of tariff headings by Explanatory Notes - Whether the CNG Dispenser supplied by the appellant is a 'pump' falling under Heading 84.13 and thereby covered by Sl. No. 117 of Schedule IV to Notification No. 1/2017 Central Tax (Rate). - HELD THAT: - The authority examined the ordinary and Explanatory Notes meaning of "pump" and observed that Heading 84.13 covers machines that raise or displace volumes of liquids by using external forces such as suction or pressure driven by mechanical or electrical means. Dictionary definitions were relied upon to the same effect. The impugned CNG Dispenser does not itself generate suction or pressure by any mechanical or electrical device; the flow to the vehicle tank occurs due to pressure differential between station storage and the vehicle tank. Having regard to the Explanatory Notes and the factual description of the product, the impugned device does not satisfy the essential feature of a pump as contemplated in Heading 84.13 and therefore cannot be classified under that heading. [Paras 44, 45, 46, 47, 48]

CNG Dispenser is not a 'pump' within Heading 84.13 and therefore not classifiable under Sl. No. 117, Schedule IV to Notification No. 1/2017 Central Tax (Rate).

Automatic regulating or controlling instruments and apparatus under Heading 90.32 - Chapter Note 7 criteria for automatic control apparatus - Interpretation of tariff headings by Explanatory Notes - Whether the CNG Dispenser is classifiable as an automatic regulating or controlling instrument under Heading 90.32 and thereby covered by Sl. No. 422 of Schedule III to Notification No. 1/2017 Central Tax (Rate). - HELD THAT: - Chapter Note 7 and the Explanatory Notes require an automatic control apparatus to comprise (i) a device for measuring the variable to be controlled (e.g., pressure or mass), (ii) a control device that compares measured and desired values and actuates a response, and (iii) a starting/stopping or operating device; these may form a single functional unit. The impugned CNG Dispenser contains a mass flow meter and pressure sensor (measurement), a controller unit that compares values and issues commands, and actuators/valves that start/stop supply when preset values are reached. The unit is sold and functions as a distinct automatic control apparatus and is not combined with a pump or compressor that executes the prime moving function. Therefore it satisfies the Chapter Note 7 criteria and falls within Heading 90.32. [Paras 31, 32, 50, 51, 52]

CNG Dispenser is an automatic regulating/controlling instrument within Heading 90.32 and is covered by Sl. No. 422, Schedule III to Notification No. 1/2017 Central Tax (Rate).

Final Conclusion: The impugned Advance Ruling is set aside; the CNG Dispenser is not a pump under Heading 84.13 but is classifiable as an automatic regulating or controlling apparatus under Heading 90.32 (Sl. No. 422, Schedule III to Notification No. 1/2017 Central Tax (Rate)), and the appeal is allowed.

Penalty under Section 271(1)(c) - concealment of particulars of income - furnishing inaccurate particulars - bona fide or debatable claim not amounting to concealment - mercantile system of accounting and year of accrual

Penalty under Section 271(1)(c) - concealment of particulars of income - bona fide or debatable claim not amounting to concealment - mercantile system of accounting and year of accrual - Whether imposition of penalty under Section 271(1)(c) for Assessment Year 1992-93 was justified. - HELD THAT: - The Tribunal and this Court found that the assessee had disclosed the source of the receipts from the foreign collaborator and had characterized them as capital receipts on the basis of professional advice and tax-audit treatment. The assessee followed the mercantile system of accounting, and part of the receipts accrued in the relevant accounting year though some instalments were reflected in the subsequent assessment year; this accounting treatment rendered the timing and characterization a debatable question of law. Reliance on authoritative precedent establishes that a mere claim in the return, even if later held unsustainable, or an inadvertent/bona fide error, does not ipso facto constitute concealment of particulars or furnishing inaccurate particulars attracting Section 271(1)(c). Applying these principles, the Tribunal correctly concluded there was no deliberate concealment or deliberate furnishing of inaccurate particulars warranting penalty, and the Tribunal's exercise of fact-finding and application of law was not in error. [Paras 7, 9, 10, 11, 13]

The imposition of penalty under Section 271(1)(c) for AY 1992-93 was not justified; the appeal is dismissed.

Final Conclusion: The High Court upheld the Tribunal's conclusion that no penalty under Section 271(1)(c) was exigible for Assessment Year 1992-93, finding the characterization and accounting treatment to be debatable and not amounting to concealment or furnishing of inaccurate particulars; the departmental appeal is dismissed.

Rectification under Section 154 of the Income Tax Act, 1961 - mistake apparent on the record - change of opinion - sequence of set-off of losses - opinion of internal audit party not constituting information for reassessment - reassessment on the basis of audit opinion - Direct Tax Vivad Se Vishwas Scheme - bar on further proceedings under Section 5

Rectification under Section 154 of the Income Tax Act, 1961 - mistake apparent on the record - change of opinion - Validity of the rectification order dated 15th February, 2021 under Section 154 - HELD THAT: - The Court held that the rectification purportedly made under Section 154 could not be sustained because the Audit Party's objection related to a debatable question of law concerning the sequence of set-off of losses, and not to a mistake apparent on the record. The assessment officer had, in the original order, adopted a permissible method of computation; the Audit Party advanced a contrary legal opinion. A mistake apparent on the record must be obvious and not require extended reasoning or admit of two opinions. Therefore the modification effected on the basis of the Audit Party's opinion amounted to impermissible change of opinion and re-assessment rather than rectification. [Paras 21, 22, 23, 24, 25]

Impugned rectification order set aside as not being a rectification of a mistake apparent on the record

Sequence of set-off of losses - change of opinion - Permissibility of the original method of computation adopted in the assessment order dated 21st December, 2019 - HELD THAT: - The Court examined the competing computations and recorded that the method adopted in the original assessment - adding the disallowed bad debt to business income, reducing business loss, and then setting off the residual loss against other heads - was permissible under section 71(2) of the Act. No legal error in that computation was shown; the alternative computation following the Audit Party's view was only another permissible opinion on law. [Paras 17, 21, 22]

Original computation held permissible and not erroneous in law

Opinion of internal audit party not constituting information for reassessment - reassessment on the basis of audit opinion - Whether the Audit Party's opinion could form the basis for amendment/reassessment or rectification - HELD THAT: - Relying on established precedent, the Court held that the opinion of an internal audit party on a point of law does not amount to 'information' that can justify reopening or reassessing an assessment. The audit objection in this case was an opinion on law; there was no new material. Consequently, the Audit Party's view could not justify treating the original assessment as vitiated or support a rectification under Section 154. [Paras 14, 27, 28, 29, 30]

Audit Party's legal opinion could not be the basis for rectification or reassessment

Direct Tax Vivad Se Vishwas Scheme - bar on further proceedings under Section 5 - Applicability of the bar under Section 5 of the DTVSV Act, 2020 to the rectification proceedings - HELD THAT: - The Court found that the protective bar under Section 5(3) of the Act of 2020, which forecloses further proceedings after issuance of Form 3, was not attracted because Form 3 had not been issued. The record showed the audit objection pre-dated or coincided with the scheme application period and rectification proceedings were not initiated solely upon the application under the Scheme. However, this statutory bar point was rendered academic because the rectification order was set aside on other grounds. [Paras 32, 33, 34, 35]

Bar under Section 5 of the Act of 2020 not attracted on the facts, but issue need not be determined further as rectification was set aside on merits

Direct Tax Vivad Se Vishwas Scheme - restoration of application - Validity of the rejection of the DTVSV Scheme application and consequent relief - HELD THAT: - Since the rectification order that led to rejection of the Scheme application was set aside, the Court set aside the consequential rejection and restored the application to the file as it stood on 28th December, 2020. The Court directed the Respondent to determine the amount payable under the Act of 2020 and to grant the certificate containing particulars of tax arrears and amount payable within two weeks. [Paras 31, 35]

Rejection set aside; application restored and respondent directed to determine payable amount and issue certificate within two weeks

Final Conclusion: The rectification order dated 15th February, 2021 was set aside as it sought to effect a change of opinion on a debatable legal question rather than correct a mistake apparent on the record; the original assessment computation was held permissible; the Audit Party's opinion could not justify rectification or reassessment; the DTVSV application rejection consequential to the rectification was set aside and the application restored for determination under the Act of 2020, with directions to the revenue to compute and issue the settlement certificate within two weeks.

Presumptive taxable income under Section 44BB - interpretation of clauses (a) and (b) of Section 44BB(2) - reimbursement of service tax not includible in gross receipts under Section 44BB(2) - service tax is a tax and not part of the service consideration - binding effect of Full Bench decision

Presumptive taxable income under Section 44BB - interpretation of clauses (a) and (b) of Section 44BB(2) - reimbursement of service tax not includible in gross receipts under Section 44BB(2) - service tax is a tax and not part of the service consideration - The reimbursement of service tax received by the assessee from the service recipient is not includible in the amounts to be aggregated under clauses (a) and (b) of Section 44BB(2) for computation of presumptive taxable income under Section 44BB. - HELD THAT: - The Court adopted the Full Bench's literal construction of Section 44BB(2), holding that the expressions 'amount paid or payable' and 'amount received or deemed to be received' are qualified by the phrase 'on account of the provision of services and facilities in connection with, or supply of plant and machinery'. Only amounts paid to the assessee for the services or supply of plant and machinery used in prospecting, extraction or production of mineral oils fall within the aggregate specified in clauses (a) and (b). A reimbursement by the service recipient of service tax previously paid by the assessee to the Government is not an amount paid to the assessee for the services provided and therefore does not form part of the gross receipts for computation under Section 44BB. The Court further noted that service tax is a tax levied on services and cannot be equated with the service itself; consequently reimbursement of such tax is not to be treated as the assessee's income under Section 44BB. [Paras 28, 29]

Reimbursement of service tax is not includible in amounts aggregable under Section 44BB(2) and therefore is excluded from the presumptive taxable income under Section 44BB.

Binding effect of Full Bench decision - The Full Bench decision in DIT (International Taxation) & others v. Schlumberger Asia Services Limited is binding on the present matters and there is no substantial question of law warranting reference to a Larger Bench. - HELD THAT: - The Court recorded that it is bound by the Full Bench's interpretation and that the Full Bench arrived at its conclusion on its own reading of Section 44BB, supporting its view by reference to the Delhi High Court decision only as persuasive authority. The appellant did not persuade the Court that the Full Bench judgment required reconsideration or a reference to a Larger Bench. Consequently, no fresh question of law arises for adjudication in these appeals. [Paras 5, 6, 8, 9]

Full Bench precedent governs these appeals; no reference to a Larger Bench required and the appeals are dismissed following that precedent.

Final Conclusion: Appeals dismissed; the High Court followed its Full Bench ruling that reimbursements of service tax are not includible in amounts aggregable under Section 44BB(2) for computing presumptive taxable income, and no fresh question of law warrants reference to a Larger Bench.

TP Adjustment - Advertisement, Marketing and Promotion expenditure - Bright Line Test - Arm's Length Price - Cost Plus Method - transfer pricing adjustment under Chapter X - selling expenses - disallowance under Section 14A - CBDT Circular No. 5/2014

Advertisement, Marketing and Promotion expenditure - Bright Line Test - Arm's Length Price - Cost Plus Method - transfer pricing adjustment under Chapter X - selling expenses - Whether the transfer pricing adjustments (protective and substantive) made by the TPO/DRP on account of AMP expenditure were sustainable - HELD THAT: - The Court accepted the ITAT's conclusion that the TPO's application of the Bright Line Test and the Cost Plus Method to make protective and substantive adjustments on account of AMP expenditure was not justified on the facts of these appeals. The ITAT had noted precedent of this Court holding that the Bright Line Test cannot be used to compute Arm's Length Price and that selling expenses (including incentives to travel agents) fall outside AMP. Applying the principles in Bausch & Lomb and Maruti Suzuki, and following its own earlier decisions for earlier assessment years where similar AMP adjustments were deleted and affirmed by this Court, the tribunal correctly found absence of an international transaction between the assessee and its AEs for brand promotion that would warrant a transfer pricing adjustment. In view of the consistent line of authority and the factual parity with earlier years where similar deletions were upheld, the Court held that deletion of both protective and substantive AMP adjustments was correct. [Paras 7, 8, 11, 13]

Deletion of the transfer pricing adjustments on account of AMP expenditure was upheld and the appeals on this issue dismissed.

Disallowance under Section 14A - CBDT Circular No. 5/2014 - Whether the disallowance under Section 14A was correctly deleted by the ITAT - HELD THAT: - The Court observed that no exempt income was earned by the assessee in the relevant years and that the ITAT's deletion of the Section 14A disallowance followed the decision in Cheminvest. The Revenue's reliance on CBDT Circular No. 5/2014 was found not to overturn the settled law as interpreted by this Court and a Division Bench in Principal Commissioner v. IL & FS, which declined to read the Circular as displacing Section 14A and Rule 8D. Consequently, in the facts of these appeals, deletion of the Section 14A disallowance was held to be correct. [Paras 9, 10, 12]

Deletion of the disallowance under Section 14A was upheld and the appeals on this issue dismissed.

Final Conclusion: The appeals are dismissed: the transfer pricing adjustments on account of AMP expenditure and the disallowance under Section 14A for AYs 2012-13 and 2013-14 are deleted in favour of the assessee, subject to any final outcome of the pending Supreme Court proceedings initiated by the Revenue.

Reassessment proceedings initiated under Section 147 read with Section 148 - bank cash deposits as escapement of income - explanation of source of cash deposits and supporting documentary proof - adverse inference for non-cooperation under Section 133(6) - addition of interest income for non-disclosure

Bank cash deposits as escapement of income - explanation of source of cash deposits and supporting documentary proof - reassessment proceedings initiated under Section 147 read with Section 148 - Deletion of addition made on account of cash deposits totaling Rs.73,99,000/- in the assessee's bank account - HELD THAT: - The Tribunal found that the assessee had furnished contemporaneous documents before the assessing authority and on record - including bank statements, cash flow statement, agreement to sell, receipt for cash advances, sale deed (which acknowledged substantial cash receipt), khasra/girdawari and a tahsildar's certificate evidencing agricultural receipts - which adequately explained the source of the cash deposits. Although the Assessing Officer drew an adverse inference because the purchasers did not respond to notices under Section 133(6) and there were differences in names between agreement and final sale deed, the Tribunal noted that it is common for ekrarnama and final sale deed to differ in names and that both documents recorded cash receipts covering the deposits. The Tribunal held that the authorities below erred in rejecting the explained source; the cash deposits were thus satisfactorily explained and the addition was deleted. [Paras 11, 12, 13]

Addition on account of cash deposits deleted.

Addition of interest income for non-disclosure - Confirmation of addition of interest credited to the bank account which was not explained by the assessee - HELD THAT: - The Tribunal noted that, unlike the cash-deposit explanation, there was no satisfactory explanation before the authorities for the interest amount credited by the bank. In absence of any explanation, the Tribunal sustained the addition of interest income made by the authorities below. [Paras 14]

Addition of interest income confirmed.

Final Conclusion: The appeal is partly allowed: the addition relating to cash deposits is deleted, while the addition of interest income is confirmed.

Reopening of assessment beyond four years - proviso to section 147 requiring failure to disclose fully and truly material facts - Change of opinion cannot be basis for reassessment - Reason to believe must have a rational connection between material and escapement of income

Reopening of assessment beyond four years - proviso to section 147 requiring failure to disclose fully and truly material facts - Change of opinion cannot be basis for reassessment - Reason to believe must have a rational connection between material and escapement of income - Validity of reopening the assessment for AY 2010-11 and quashing of reassessment completed under section 143(3) r.w.s. 147/148. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals) in holding that the Assessing Officer's reopening of assessment was impermissible. The original scrutiny assessment under section 143(3) had accepted the assessee's treatment of capital gains and the material on record remained the same; no new tangible material was brought to light to justify reassessment. The Tribunal applied the principle that a mere change of opinion by the Assessing Officer does not constitute 'reason to believe' that income has escaped assessment and therefore cannot sustain reopening. Where reopening is sought after four years, the proviso to section 147 mandates that the Assessing Officer must record a failure by the assessee to disclose fully and truly material facts; the reasons recorded in this case did not establish such a failure. The Tribunal relied on the Supreme Court's statement in Kelvinator and subsequent High Court and Tribunal authorities requiring a rational nexus between the material and the formation of belief for escapement; absent any new material or recorded omission by the assessee, the reassessment was vitiated. For these reasons the reassessment order dated 07.11.2017 was quashed and the Revenue's appeal dismissed. [Paras 6, 8]

Reopening was only a change of opinion and, lacking any recorded failure to disclose fully and truly material facts, the reassessment was invalid; the appeal by Revenue is dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and sustained the Commissioner (Appeals) order quashing the reassessment for AY 2010-11 on the ground that the reopening was a prohibited change of opinion and the Assessing Officer did not satisfy the proviso to section 147 by showing failure to disclose material facts.

Revision under Section 263 of the Income-tax Act - Order erroneous in so far as prejudicial to the interests of revenue - Explanation 2 to Section 263(1) - order passed without making inquiries or verification - Duty of assessing officer to make proper inquiry in scrutiny assessment under Section 143(3)

Revision under Section 263 of the Income-tax Act - Explanation 2 to Section 263(1) - order passed without making inquiries or verification - Duty of assessing officer to make proper inquiry in scrutiny assessment under Section 143(3) - Validity of the Principal Commissioner's revisionary order under Section 263 setting aside the assessment order dated 22.02.2018 for AY 2016-17 - HELD THAT: - The Tribunal examined whether the PCIT correctly invoked Section 263 to set aside the AO's assessment order u/s 143(3) as erroneous and prejudicial to the revenue. The record showed that the case had been selected for full scrutiny because of low income vis-a -vis TCS receipts, yet the AO accepted the assessee's replies and documents without making required verifications or independent inquiries: quantitative reconciliation of purchases and sales, verification of large cash deposits and their sources, examination of challans supporting licence fee claimed in the year, reconciliation of stock in carats and pieces, and specific pinpointing when making disallowances rather than lump sum adjustments. The Tribunal applied Explanation 2(a) to Section 263(1) (inserted by Finance Act, 2015) which declares an order to be erroneous and prejudicial where it is passed without making inquiries or verifications which should have been made. On the material before it the Tribunal concluded that the AO failed to make inquiries and verifications that scrutiny selection warranted and that the AO's ad hoc lump sum disallowances and acceptance of general replies showed non application of mind. Consequently the PCIT's conclusion that the assessment was erroneous in so far as prejudicial to the revenue and his directions for a fresh, denovo assessment were held to be justified and to fall within the scope of Section 263 as explained by Explanation 2(a). [Paras 6]

Revisionary order dated 13.11.2018 under Section 263 upheld; assessment order dated 22.02.2018 set aside for denovo assessment with directions to the AO to make full and proper inquiry

Final Conclusion: The appeal is dismissed; the revisionary order of the Principal Commissioner dated 13.11.2018 is upheld and the assessment dated 22.02.2018 is set aside for fresh assessment after proper inquiries.

Revenue expenditure versus capital expenditure - advertisement and brand building expenditure - allowability as revenue expenditure under section 37 - capitalisation as capital work in progress not determinative of tax character - test of enduring benefit - no concept of deferred revenue expenditure

Revenue expenditure versus capital expenditure - advertisement and brand building expenditure - capitalisation as capital work in progress not determinative of tax character - allowability as revenue expenditure under section 37 - test of enduring benefit - Advertisement and brand building expenditure capitalised as Capital Work in Progress in the books can be allowed as revenue expenditure in the revised return for the year when incurred. - HELD THAT: - The Tribunal found that the Assessing Officer did not dispute the genuineness of the advertisement expenditure and had disallowed the claim only because the assessee had initially treated the amounts as Capital Work in Progress and because the expenditure was large relative to turnover. The Tribunal held that accounting classification is not conclusive of tax character and that the mere fact that an expenditure may confer some enduring benefit does not automatically render it capital; the test of enduring benefit must be applied commercially and not mechanically. The decision relied on precedents that treat advertising and brand building outlays as allowable business expenditure where the nature of the advantage is not essentially capital, and reiterated that there is no concept of deferred revenue expenditure in the Income Tax Act. Applying these principles to the undisputed facts, the Tribunal agreed with the CIT(A) that the advertisement/brand building expenses, though shown as CWIP in the books, were revenue in nature and allowable under section 37 in the year in which they were incurred; the AO's contrary reliance on mere book classification and the magnitude of the outlay was rejected. [Paras 7]

The addition of the advertisement expenses was deleted and the claim as revenue expenditure in the revised return was held allowable.

Final Conclusion: Departmental appeal dismissed; the order of the CIT(A) deleting the addition in respect of advertisement/brand building expenditure for assessment year 2009-10 is upheld.

Income from operation of ships in international traffic - Article 9 of India-France DTAA - Inland Haulage Charges - Freight charges for feeder vessel operations - Dependent agent permanent establishment - Arm's length remuneration under APA - Admission of additional ground and remand for de novo examination - Initiation of penalty proceedings premature - Interest under section 234B of the Act

Inland Haulage Charges - Income from operation of ships in international traffic - Article 9 of India-France DTAA - IHC received by the assessee is part of shipping income in international traffic and not taxable in India - HELD THAT: - The Tribunal followed the coordinate-bench decisions in the assessee's own case for preceding years and relevant precedents holding that ancillary activities closely connected with carriage of goods by sea (including inland haulage) form part of income from operation of ships in international traffic and are covered by Article 9 of the India-France DTAA. No distinguishing material, change of facts or law was shown for the year under appeal; consequently the addition made by the AO on IHC receipts (based on an ad-hoc deemed profit rate) was deleted. [Paras 11]

Addition on account of IHC deleted; grounds No. 3-6 allowed.

Freight charges for feeder vessel operations - Income from operation of ships in international traffic - Article 9 of India-France DTAA - Freight income from transportation through feeder vessels is part of shipping income in international traffic and not taxable in India - HELD THAT: - Relying on the coordinate-bench jurisprudence in the assessee's own case and the Bombay High Court's decisions maintained therein, the Tribunal held that feeder-vessel transport is inextricably linked to international carriage and falls within Article 9 of the India-France DTAA. The Revenue offered no reason to depart from that consistent view and there was no change in facts or law for the year under appeal. [Paras 17]

Addition on account of feeder-vessel freight deleted; grounds No. 7-10 allowed.

Dependent agent permanent establishment - Arm's length remuneration under APA - The Indian agency cannot be treated as a dependent-agent PE of the assessee where the agent is remunerated at arm's length (as per APA) - HELD THAT: - Following the coordinate-bench decisions in the assessee's own case, and on the factual finding that the Indian agent's remuneration was at arm's length (per the Advance Pricing Agreement stipulating the remuneration rate), the Tribunal held that the Indian agent does not constitute an agency permanent establishment of the non-resident. No material was produced to show a change in facts; hence the PE finding of the AO was reversed. [Paras 23]

Findings treating the Indian agent as agency-PE rejected; grounds No. 11-13 allowed.

Interest under section 234B of the Act - Interest under section 234B allowed for statistical purpose (consequential) - HELD THAT: - The Tribunal noted that the ground concerning levy of interest under section 234B was consequential in nature and accordingly allowed it for statistical purposes without substantive adjudication. [Paras 24]

Ground No. 14 allowed for statistical purpose.

Initiation of penalty proceedings premature - Initiation of penalty proceedings under section 270A dismissed as premature - HELD THAT: - The Tribunal recorded that the initiation of penalty proceedings was premature and therefore dismissed the challenge to initiation of penalty proceedings. [Paras 25]

Ground No. 15 dismissed.

Admission of additional ground and remand for de novo examination - Additional ground on non-taxability of IT support fees (FTS) admitted and remanded to the Assessing Officer for de novo adjudication - HELD THAT: - The assessee had offered the IT-support receipts to tax in its return but sought, by additional ground, treatment of those receipts as non taxable under the India-France DTAA relying on tribunal precedent in the Indian agent's case and supporting documents. The Tribunal exercised its discretion to admit the additional ground and the newly filed evidences, observing that the claim alters the assessee's earlier position in the return and that true income should be taxed. The matter was restored to the AO for de novo examination and adjudication after affording the assessee a reasonable opportunity of hearing. [Paras 30]

Additional ground admitted; issue remitted to Assessing Officer for de novo consideration with opportunity of hearing.

Final Conclusion: The appeal is partly allowed: additions on account of inland haulage charges and feeder-vessel freight are deleted; the Indian agent is not a dependent-agent PE given arm's-length remuneration under the APA; interest under section 234B was allowed for statistical purposes; initiation of penalty proceedings dismissed as premature; and the admitted additional ground on IT-support fees (FTS) is restored to the Assessing Officer for de novo examination after granting opportunity of hearing.

Estimation of income by adoption of a percentage of net profit - determination of net profit percentage for estimation of income - penalty under section 271(1)(c) of the Act (levy for concealment or furnishing inaccurate particulars) - penalty under section 271F of the Act (failure to file return after notice under section 153A/153C) - penalty under section 271AAA of the Act (search-related specified previous years) - search and seizure under section 132 of the Act - ex-parte assessment under section 144 of the Act - principles of natural justice in penalty proceedings (defect in show-cause notice - striking off inappropriate words) - furnishing inaccurate particulars of income and concealment of income

Estimation of income by adoption of a percentage of net profit - determination of net profit percentage for estimation of income - Reduction of the percentage of net profit adopted for estimating the assessee's income - HELD THAT: - The Tribunal noted that the facts in these appeals are squarely covered by a coordinate-bench decision in Dillip Kumar Naik (IT(ss)A Nos.4 to 8/CTK/2015 etc.), which had reduced the net profit percentage adopted by the Commissioner (Appeals) from 10% to 8% where the highest percentage disclosed by the assessee was 6%. The assessee's own chart in the present matters showed profit percentages varying between 5.8% and 7.26% for AYs 2004-05 to 2008-09. Applying the coordinate-bench precedent on identical facts, the Tribunal held that the estimation at 10% made by the CIT(A) should be reduced to 8%. [Paras 3, 4, 5]

Estimation of income by adopting net profit at 10% is reduced to 8%.

Penalty under section 271F of the Act (failure to file return after notice under section 153A/153C) - principles of natural justice in penalty proceedings - Deletion of penalty levied under section 271F - HELD THAT: - On consideration and following the coordinate-bench decision in S.M. Enterprises (which in turn followed Gobardhan Matia), the Tribunal accepted that where the assessee had reasonable grounds related to the retrieval, verification and reconciliation of seized documents and copies thereof (post-notice under section 153A/153C), the assessee had a valid ground for non-filing within the statutory period. The coordinate-bench had held that mere delay in filing due to need to obtain and reconcile seized documents precluded a finding of willful non-filing and warranted deletion of penalty under section 271F. Applying that reasoning to the present facts, the Tribunal deleted the penalty levied under section 271F. [Paras 6, 7, 8]

Penalty under section 271F is deleted.

Penalty under section 271(1)(c) of the Act (levy for concealment or furnishing inaccurate particulars) - penalty under section 271AAA of the Act (search-related specified previous years) - principles of natural justice in penalty proceedings (defect in show-cause notice - striking off inappropriate words) - levy of penalty on estimated income - furnishing inaccurate particulars of income and concealment of income - Deletion of penalties imposed under section 271(1)(c) for the assessment years in issue - HELD THAT: - The Tribunal, following a coordinate-bench in S.M. Enterprises, examined two strands of reasoning: (a) for specified previous years falling within the scope of section 271AAA (search conducted after 1 6 2007 and before 1 7 2012), penalty under section 271(1)(c) is excluded for those specified years and penalty leviable, if any, would be under section 271AAA - where that linkage applied, penalty under section 271(1)(c) was deleted; and (b) for the other years the Tribunal found that the assessment and all subsequent determinations proceeded on estimation principles and that there was no evidence of contumacious conduct or proved concealment warranting penalty. The coordinate-bench also relied on the failure of the Assessing Officer to strike off inappropriate words in the show-cause notice (impinging on the principles of natural justice) and on the presence of divergent authorities such that, where there is a line of authority favourable to the assessee, that view should be adopted. Applying these conclusions to the present appeals, the Tribunal held that penalty under section 271(1)(c) as levied by the AO and confirmed by the CIT(A) must be deleted. [Paras 10, 11, 12, 13, 14]

Penalties levied under section 271(1)(c) by the AO and confirmed by the CIT(A) are deleted.

Final Conclusion: Following coordinate-bench precedents, the Tribunal (i) reduced the estimation of net profit from 10% to 8%, (ii) deleted the penalty levied under section 271F, and (iii) deleted penalties levied under section 271(1)(c) (including by application of the principles concerning section 271AAA and defects in penalty notices and on the basis that income was estimated with no proved concealment). Appeals of the assessee are accordingly allowed in part or in full as recorded.

Addition on account of alleged bogus purchases - estimation of profit element embedded in bogus purchases - application of gross profit rate to quantify addition - acceptance of sales as genuine vs. characterization of purchases as bogus

Addition on account of alleged bogus purchases - application of gross profit rate to quantify addition - estimation of profit element embedded in bogus purchases - Extent of addition to be made in respect of alleged bogus purchases shown in A.Y. 2009-10. - HELD THAT: - The Tribunal held that where sales shown by the assessee were accepted as genuine but purchases were held to be bogus by revenue authorities, the entire purchase amount could not be treated as income. Reliance was placed on the approach adopted by the High Court and the Tribunal in similar cases that the reasonable method is to tax the profit element embedded in such purchases by applying a gross profit rate, typically in a limited range. Having regard to the assessee's historic gross profit (not exceeding 9%) and precedents cited by the parties, the Tribunal concluded that additions calculated at the rates imposed below or above this measure (25% by CIT(A) / 100% by AO in other year) were not sustainable. The Tribunal therefore directed that the Assessing Officer compute the addition by applying a gross profit rate of 9% on the purchases held to be bogus for A.Y. 2009-10. [Paras 7, 9]

Addition on account of alleged bogus purchases for A.Y. 2009-10 to be quantified by applying gross profit @9% on the purchases held to be bogus.

Addition on account of alleged bogus purchases - application of gross profit rate to quantify addition - acceptance of sales as genuine vs. characterization of purchases as bogus - Extent of addition to be made in respect of alleged bogus purchases shown in A.Y. 2010-11. - HELD THAT: - The Tribunal observed that the Assessing Officer had made an ad-hoc addition at 12.5% while the CIT(A) enhanced the addition to 100%. In light of the accepted principle that when sales are admitted as genuine the appropriate relief is to tax the embedded profit rather than the entire purchase amount, and having regard to the assessee's contemporaneous gross profit levels (not exceeding 9%), the Tribunal found the enhancement to 100% unsustainable. Applying consistent reasoning as in the companion year and relevant precedents relied upon by the parties, the Tribunal directed that the addition for A.Y. 2010-11 be computed by applying gross profit @9% on the purchases held to be bogus. [Paras 7, 9]

Addition on account of alleged bogus purchases for A.Y. 2010-11 to be quantified by applying gross profit @9% on the purchases held to be bogus.

Final Conclusion: Appeals allowed; additions quantified by directing the Assessing Officer to compute taxable profit on the purchases held to be bogus for A.Y. 2009-10 and A.Y. 2010-11 by applying a gross profit rate of 9%.

Unexplained cash credit under section 68 - burden on the assessee to explain bank credits - relevance of debit entries in bank account in determining genuineness of credits - non-disclosure of bank account in return of income as evidence of concealment - remand for verification and re-examination of evidence

Unexplained cash credit under section 68 - relevance of debit entries in bank account in determining genuineness of credits - remand for verification and re-examination of evidence - Whether the addition of the entire credited amount in the undisclosed ICICI Bank account as unexplained cash credit could be sustained without considering the debit entries and the assessee's explanation that deposits were from withdrawals and share transactions - HELD THAT: - The Tribunal found that the Assessing Officer treated the full credited entries in the ICICI Bank account as unexplained cash credit, principally because the account was not disclosed in the return and because certain cash withdrawals from another bank were made a few days earlier. The assessee had produced bank passbooks, cash-flow particulars, and an explanation that cash deposits into the ICICI account were from withdrawals from Dena Bank and that many other credits and debits related to share transactions which resulted in an overall trading/capital loss. The Tribunal observed that the Assessing Officer ignored significant debit entries in the ICICI account and did not satisfactorily verify the cash-on-hand and withdrawals evidence submitted by the assessee. Given these omissions, the Tribunal held that the entire credit could not be simply added as unexplained income without reassessing the account transactions and permitting the assessee to substantiate the source of deposits and the nature of the credits. Accordingly, the Tribunal restored the matter to the file of the Assessing Officer for fresh consideration, directing the AO to grant opportunity of hearing, to examine the debit and credit entries and the supporting evidence, and to pass an order in accordance with law. [Paras 11, 13]

The addition was not finally sustained; the case is remanded to the Assessing Officer for fresh adjudication and verification of the bank transactions and explanations, with directions to grant hearing and allow the assessee to produce complete details and evidence.

Final Conclusion: The appeal is allowed for statistical purposes by setting aside the addition and remitting the matter to the Assessing Officer for fresh decision after affording opportunity to the assessee to substantiate the source and genuineness of the bank credits.

Allowability of mine closure expenses - application of Section 43B - accrual versus payment basis for provisions - deductibility as business expenditure

Application of Section 43B - allowability of mine closure expenses - Whether the sum deposited/paid to the Mining Closure Fund qualifies for deduction under Section 43B of the Income-tax Act for AY 2013-14. - HELD THAT: - The Tribunal accepted that the assessee had made provisions for mine closure in terms of Ministry of Coal guidelines and had habitually claimed deduction on actual payment basis under Section 43B when expenditure was incurred. However, the Tribunal held that the particular Mining Closure Fund payment is not in the nature of tax, duty, cess, fee or similar sum falling within the ambit of Section 43B as the Ministry guidelines prescribe a procedure and time frame for closure expenses rather than constituting a statutory tax-like obligation. The Tribunal therefore agreed with the CIT(A)'s conclusion that Section 43B was not applicable to the payment in question and rejected the reliance placed on the Rajasthan High Court decision, observing that that decision dealt with deductibility under business expenditure principles (Section 37) rather than Section 43B. [Paras 7]

The payment does not qualify for deduction under Section 43B; the CIT(A)'s conclusion on this point is sustained.

Accrual versus payment basis for provisions - deductibility as business expenditure - Whether the provision made for mine closure (already disallowed under Section 43B by the assessee) should nevertheless be allowed as a business expense on accrual basis. - HELD THAT: - Having found Section 43B inapplicable, the Tribunal considered the alternate submission that the provision for mine closure - made pursuant to mandatory guidelines applicable to mine owners - is a business expense incurred/required in the ordinary course of the assessee's operations. The Tribunal observed that the obligation to make provision arises from the requirement on mine owners and that the provision relates to the business activity of the assessee. In view of this, the Tribunal held that the amount provisioned (and which the assessee had in any event disallowed under Section 43B in its computation) should be allowed as an expense on accrual basis. [Paras 8]

The provision for mine closure expenses is allowable as a business expense on accrual basis; the assessee's appeal is partly allowed on this ground.

Final Conclusion: The appeal is partly allowed: the Tribunal upholds that the Mining Closure Fund payment does not fall within the scope of Section 43B, but allows the provision for mine closure as a business expense on accrual basis for Assessment Year 2013-14.

Capital expenditure versus revenue expenditure - Leasehold improvements - Enduring benefit test - Explanation to Section 32(1) - Condonation of delay due to COVID-19

Condonation of delay due to COVID-19 - Limitation - Admission of the assessee's appeal despite a 16-day delay in filing. - HELD THAT: - The Tribunal noted that the appeal was filed with a delay of 16 days because documents sent by Speed Post on 19.05.2021 were not considered filed earlier due to the Government of Tamil Nadu lockdown arising from the Covid-19 pandemic. Having regard to the prevailing pandemic and the directions of the Hon'ble Supreme Court in the suo motu proceedings, the Tribunal exercised its discretion to condone the delay and admit the appeal for adjudication on merits. [Paras 2]

Delay of 16 days condoned and the appeal admitted for adjudication on merits.

Capital expenditure versus revenue expenditure - Leasehold improvements - Enduring benefit test - Explanation to Section 32(1) - Whether the expenditure described as 'Furniture Maintenance' for renovating leased branch premises is capital in nature or allowable as revenue expenditure. - HELD THAT: - The Tribunal examined the nature of the expenditure (plywood purchases, hardware items, carpentry and related works) incurred by the assessee for renovating leased premises. While the Assessing Officer and the Commissioner (Appeals) treated the amounts as capital expenditure on the ground that they confer enduring benefit, the Tribunal found that the Assessing Officer had not given plausible reasons for so concluding and that the assessee produced authorities and materials showing similar expenditure for making leasehold premises functional has been held to be revenue in nature. The Tribunal relied on the substance of precedents distinguishing durable, structural capital works from expenditure incurred to make leased premises workable (such as partitions, flooring, interior decoration), and applied the principle that where expenditure is incurred to render a leasehold premises functional, it may be revenue in nature. Having regard to the facts and precedents, the Tribunal concluded that the Assessing Officer erred in characterising the assessed expenditure as capital and that the Commissioner (Appeals) wrongly sustained that addition. [Paras 9, 10, 11, 13]

The addition made by the Assessing Officer treating the furniture and maintenance expenditure as capital is set aside; the expenditure is treated as revenue and the addition is deleted.

Final Conclusion: Delay in filing the appeal was condoned due to Covid-19 and, on merits, the Tribunal allowed the assessee's appeal by setting aside the addition treating the furniture/maintenance expenditure for the leased branch as capital expenditure and directing deletion of that addition.

Depreciation on goodwill as an intangible asset - Recognition of goodwill on acquisition of business - Admissibility of depreciation under Section 32(1) - Valuation of goodwill determined by negotiated acquisition price - Applicability of Section 43(6) where transferor's books show zero written down value - Effective date of partnership and its bearing on acquisition period for depreciation - Reliance on precedent: Smifs Securities Ltd. on goodwill being depreciable

Depreciation on goodwill as an intangible asset - Recognition of goodwill on acquisition of business - Admissibility of depreciation under Section 32(1) - Valuation of goodwill determined by negotiated acquisition price - Applicability of Section 43(6) where transferor's books show zero written down value - Effective date of partnership and its bearing on acquisition period for depreciation - Reliance on precedent: Smifs Securities Ltd. on goodwill being depreciable - Whether the claim of depreciation on goodwill quantified as part of the negotiated acquisition price is allowable under Section 32(1) for A.Y. 2016-17 and whether the Assessing Officer was right to disallow the claim relying on absence of goodwill in transferor's books and Section 43(6). - HELD THAT: - The Tribunal examined the partnership deed (clauses 9 and 37) which records the agreed value of the acquired business as including goodwill and declares the business free from encumbrances. The assessee quantified the acquisition value by reference to potential subscribers and the negotiated subscriber rate. Relying on the reasoning in Smifs Securities Ltd., the Tribunal accepted that goodwill is an intangible asset eligible for depreciation under Explanation 3(b) to Section 32(1) and that there is no single prescribed valuation method for such business acquisitions; the acquisition price fixed by negotiation can represent goodwill. The Tribunal rejected the Assessing Officer's reliance on the absence of a goodwill entry in the transferor's books and the invocation of Section 43(6) to treat the asset's value as nil, observing that the subscribers constituted assets that were added to the partnership firm's assets on acquisition and that the claim was otherwise not shown to be mala fide or unreasonable. On the effective date, the Tribunal treated the partnership deed as operative from 01.04.2015 and did not uphold the Assessing Officer's alternative conclusion that the asset was acquired after 30.09.2015 so as to restrict depreciation to a short-period rate. In view of these findings, the Assessing Officer's disallowance of depreciation was held to be incorrect and the appeal was allowed. [Paras 7, 8]

Disallowance of depreciation on goodwill deleted; appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y. 2016-17, holding that the negotiated acquisition price inclusive of goodwill constitutes an intangible asset eligible for depreciation under Section 32(1), rejecting the Assessing Officer's Section 43(6) objection and upholding the valuation and recognition of goodwill as recorded in the partnership deed.

Duty-free import entitlement under DFIA - interpretation of provisos to condition (iii) of Customs Notification No.19 of 2015 - scope of Paragraph 4.12 of the Foreign Trade Policy (SION-related accounting) - scope of Paragraph 4.30 of the Foreign Trade Policy (sensitive inputs requiring technical specification) - reading-in of requirements relating to quality, technical characteristics and specifications - binding precedents and administrative compliance

Interpretation of provisos to condition (iii) of Customs Notification No.19 of 2015 - scope of Paragraph 4.12 of the Foreign Trade Policy (SION-related accounting) - reading-in of requirements relating to quality, technical characteristics and specifications - Whether the words "same quality, technical characteristics and specifications" can be read into the first proviso to condition (iii) of Notification No.19 of 2015 and into Paragraph 4.12 of the FTP. - HELD THAT: - The Court held that the first proviso to condition (iii) and Paragraph 4.12 of the FTP do not contain the words "same quality, technical characteristics and specifications" and those words cannot be judicially read into those provisions. The express inclusion of those words in Paragraph 4.30 of the FTP and in the second proviso to condition (iii) indicates that the requirement of declaring and matching quality, technical characteristics and specifications was intended by the legislature only for the sensitive inputs enumerated in Paragraph 4.30 and for the circumstances governed by the second proviso. For non-sensitive inputs governed by SION and Paragraph 4.12 (and the first proviso to condition (iii)), the requirement for establishing nexus is limited to specific name/description or quantity as prescribed by SION and the notification; there is no obligation to require declaration or matching of quality, technical characteristics or specifications. Reading the second-proviso language into the first proviso or Paragraph 4.12 would be adding conditions that the statutory scheme omits and would be legally impermissible. The Court therefore rejected the petitioner's contention seeking a broader interpretation. [Paras 7, 8, 10, 11]

The Court refused to read the requirement of matching "same quality, technical characteristics and specifications" into the first proviso to condition (iii) or Paragraph 4.12; that requirement applies only to Paragraph 4.30 and the second proviso.

Duty-free import entitlement under DFIA - binding precedents and administrative compliance - Whether respondents' officers can be directed to deny exemption, to initiate departmental proceedings, or otherwise be proceeded against for following the established construction of the FTP and Notification No.19 of 2015. - HELD THAT: - The Court observed that the respondents' officers have been following a reasonable construction of the FTP and the Notification in line with binding judicial precedents (including decisions cited from the Bombay and Allahabad High Courts). Since those precedents permit the interpretation adopted by the authorities, the officers cannot be subjected to disciplinary or other proceedings for adhering to such precedents. Consequently, there was no prima facie case to grant writs of prohibition, to direct initiation of action against officers, or to order prosecution or recovery proceedings against exporters/importers on the basis of the petitioner's alternate interpretation. The Court therefore found the petitioner's prayers for directions and actions to be misconceived and without merit. [Paras 16, 17, 18]

No directions against the respondents' officers; no basis for initiation of proceedings or for denying DFIA benefits where authorities follow binding precedents and the statutory scheme.

Final Conclusion: The public interest petition is dismissed. The Court declines to read additional requirements of matching quality, technical characteristics and specifications into the first proviso to condition (iii) or Paragraph 4.12 of the FTP; those requirements apply only to the sensitive inputs under Paragraph 4.30 and the second proviso. No action will be directed against the respondents' officers for following the accepted judicial construction and the DFIA scheme as enacted.

Classification of imported goods - prima facie finding - finality of assessment - redemption fine - penalty reduction - proportionality of penalty

Classification of imported goods - prima facie finding - finality of assessment - Nature and classification of the imported goods (Aluminium Extrusion Scrap (Tread) vis-a -vis Aluminium Tread Grade/Aluminium sheet). - HELD THAT: - The Tribunal held that the assessment underlying the bill of entry, which was made on the department's classification and for which duty was paid, was not challenged by the appellant and therefore classification could not be conclusively reopened at this stage. Nevertheless, for the limited purpose of deciding redemption fine and penalty a prima facie view was permissible. The inspection report noted that the lot contained panel board of aluminium sheet and features suggesting used material; on this prima facie basis the goods could be treated as aluminium scrap rather than fresh aluminium sheet. The Tribunal confined itself to this provisional finding and did not disturb the assessment which had attained finality by the appellant's non-challenge. [Paras 4]

Classification not conclusively decided because assessment was not challenged; a prima facie view that the goods were used aluminium scrap was taken for the limited purpose of determining fine and penalty.

Redemption fine - penalty reduction - proportionality of penalty - Correctness and quantum of redemption fine and penalty imposed by lower authorities. - HELD THAT: - Applying the prima facie conclusion on the nature of the goods and having regard to the facts and circumstances, the Tribunal found the redemption fine and penalty imposed to be excessive. Exercising its appellate power, the Tribunal reduced the redemption fine from the amount imposed by the Commissioner (Appeals) to a lower sum and similarly reduced the penalty to a substantially smaller amount, treating proportionality as the guiding principle in modifying the monetary sanctions. [Paras 4, 5]

Redemption fine reduced and penalty substantially reduced; impugned order modified to that extent and appeal partly allowed.

Final Conclusion: The appeal is partly allowed: classification is not reopened as the assessment was unchallenged, but on a prima facie view the goods appear to be aluminium scrap; redemption fine and penalty imposed by the lower authorities are reduced and the impugned order is modified accordingly.

Correction of clerical or arithmetical errors under Section 154 of the Customs Act, 1962 - Refund of erroneously collected duty where no assessment or re assessment exists - Finality of assessment and requirement to challenge assessment before claiming refund (Priya Blue principle) - Automated EDI clearance and absence of assessment orders

Correction of clerical or arithmetical errors under Section 154 of the Customs Act, 1962 - Refund of erroneously collected duty where no assessment or re assessment exists - Finality of assessment and requirement to challenge assessment before claiming refund (Priya Blue principle) - Whether the refund claim could be rejected on the sole ground that the appellant had not challenged the assessment of the Bills of Entry. - HELD THAT: - The Tribunal held that the rule in Priya Blue - that a refund claim cannot be entertained unless the underlying assessment is challenged - does not apply where there is no assessment order or where the excess collection arises from a clerical/accidental slip correctable under Section 154. The introduction of automated EDI processing and risk management means many consignments are cleared without any officer making an assessment; in such cases there is nothing to appeal against. The consignments here showed the goods described as "Phosphorous Acid" while an incorrect HSN/CTH code (28092010 instead of 28111990) was entered, leading to erroneous levy of anti dumping duty. That incorrect HSN entry was an accidental slip by the importer and is a clerical error susceptible to correction under Section 154, entitling the importer to claim refund of duty paid. Further, the anti dumping duty was collected by departmental letter and not by adjudication following issuance of a show cause notice, so there was no assessment order to be challenged. Reliance on precedent requiring prior appeal against assessment was therefore inapposite; refunds which are the logical consequence of correcting clerical or arithmetical errors under Section 154 should not be denied for failure to prefer an appeal. [Paras 4]

The Tribunal set aside the impugned order rejecting the refund claim and held that prior challenge to an assessment was not required where the excess duty arose from an accidental/clerical slip correctable under Section 154 or where no assessment order existed.

Final Conclusion: Impugned order set aside; appeal allowed and the appellant entitled to consequential relief in accordance with law, permitting refund arising from correction of the clerical error.

Default bail under Section 167(2) of Cr.P.C. - requirement of a reasoned remand order and fifteen-day limitation for remand - effect of filing of charge-sheet/complaint on the right to statutory bail - judicial remand and production through video conferencing - bail standard for economic offences and bar under Section 212(6) & (7) of the Companies Act, 2013

Default bail under Section 167(2) of Cr.P.C. - judicial remand and production through video conferencing - Whether the applicants were entitled to statutory/default bail under Section 167(2) Cr.P.C. by reason of alleged illegality in remand between 31.05.2022 and 06.08.2022. - HELD THAT: - The Court found that the complaint against the applicants was filed on 19.05.2022, within the 60-day period, and therefore the statutory right to default bail under Section 167(2) did not arise. The endorsement dated 31.05.2022 directing production on 17.08.2022 and subsequent production by video conferencing were treated as acceptable modes of production; any alleged irregularity in the remand endorsement does not revive a right to statutory bail once the charge-sheet/complaint has been filed within the prescribed period. The Court therefore held that even if there were defects in remand formalities between 31.05.2022 and 06.08.2022, the appropriate remedies were writ proceedings or habeas corpus, and not an entitlement to default bail under Section 167(2). [Paras 23, 31, 34, 35, 36]

Applicants are not entitled to statutory/default bail under Section 167(2) Cr.P.C. on account of the alleged remand irregularity between 31.05.2022 and 06.08.2022.

Requirement of a reasoned remand order and fifteen-day limitation for remand - effect of filing of charge-sheet/complaint on the right to statutory bail - Whether after filing of the complaint/charge-sheet the Magistrate/court is required to pass a reasoned remand order each time accused are produced and whether remand beyond fifteen days at a time is impermissible post filing. - HELD THAT: - The Court interpreted Section 167 Cr.P.C. and its provisos, holding that the statutory requirements of a reasoned order and the fifteen-day remand ceiling operate during the pendency of investigation prior to filing of the charge-sheet/complaint. Once the charge-sheet/complaint is filed within the prescribed period, the right to default bail under Section 167(2) ceases; endorsement on a production warrant after filing is sufficient compliance for purposes of continuity of custody. Sub-section (3)'s requirement to record reasons pertains to police custody remands; the Code contemplates continuity of custody from the Magistrate to the court on filing of the charge-sheet and does not create a separate statutory entitlement to default bail because of remand formalities post-filing. Irregularity in remand formalities after filing does not automatically entitle the accused to statutory bail under Section 167(2). [Paras 34, 35, 36, 37, 38]

After filing of the complaint/charge-sheet within the statutory period, the requirement of a reasoned remand order and strict fifteen-day remand cycles for attracting default bail under Section 167(2) does not operate so as to entitle the accused to statutory bail; endorsement on production warrant post-filing is acceptable compliance.

Bail standard for economic offences and bar under Section 212(6) & (7) of the Companies Act, 2013 - default bail under Section 167(2) of Cr.P.C. - Whether the applicants are entitled to bail on merits having regard to the nature of allegations (economic offences), and the restrictive bail regime under Section 212(6) & (7) of the Companies Act, 2013. - HELD THAT: - The Court examined the status report and allegations, which included large-scale alleged fraud and specific roles attributed to the applicants. The Court applied the established principles for economic offences - considering nature of accusations, severity of punishment, role of accused, likelihood of tampering with witnesses, and public interest - and noted the statutory proviso in Section 212(6) and the additional limitation in Section 212(7). Given the gravity of allegations, influence over witnesses as asserted by the prosecution, and that investigation vis-a -vis other accused remained incomplete, the Court was not satisfied that reasonable grounds existed to believe the applicants were not guilty or that they would not interfere with the process. The Court further observed that earlier authorities distinguish between remedies for illegal detention and entitlement to bail, and that illegal remand alone is not an automatic ground for bail absent appropriate remedies pursued by the accused. [Paras 13, 39, 40, 42, 43]

Bail on merits is refused; applicants are not entitled to grant of bail having regard to the nature of offences, statutory restrictions under Section 212 and the facts of the case.

Final Conclusion: The bail applications are dismissed. The Court holds that filing of the complaint within the statutory period extinguished any right to default bail under Section 167(2) Cr.P.C.; remand endorsements and production by video conferencing after filing do not revive that right, and irregularity in remand formalities post-filing does not automatically entitle the applicants to statutory bail. On merits, having regard to the nature of allegations and the restrictions under Section 212 of the Companies Act, 2013, bail is refused.

Reduction of share capital - Section 66 of the Companies Act, 2013 - Conformity of accounting treatment with Accounting Standards - Statutory auditor's certificate as proof of compliance - Notice to Central Government, Registrar of Companies and sectoral regulators - Publication and website intimation of statutory notice - Opportunity to file objections within three months - Fixing of date for final hearing

Conformity of accounting treatment with Accounting Standards - Statutory auditor's certificate as proof of compliance - Sufficiency of the statutory auditor's certificate and supporting declarations to permit the application for reduction to proceed to notice and hearing stage. - HELD THAT: - The Tribunal considered the statutory auditor's certificate dated 28.07.2022 confirming that the proposed accounting treatment for the reduction of share capital conforms with the Accounting Standards specified under Section 133 of the Companies Act, 2013, and noted the affidavits by the directors verifying nil secured and unsecured creditors and no arrears of deposits. The Articles of Association (Clause 57) and the special resolution authorising the reduction were placed on record. On the basis of these documents and the representation of the authorised representative, the Tribunal was satisfied that the applicant had produced the primary statutory certifications and declarations required to proceed with the statutory notice and hearing process for capital reduction. [Paras 3, 5, 6, 7, 8]

The Tribunal accepted the auditor's certificate and the directors' declarations as sufficient to move the application forward and directed the procedural steps for notice and hearing.

Notice to Central Government, Registrar of Companies and sectoral regulators - Publication and website intimation of statutory notice - Opportunity to file objections within three months - Fixing of date for final hearing - Interim directions for service, publication and the timetable for objections and hearing in the capital reduction proceeding. - HELD THAT: - The Tribunal directed the applicant company to serve notice of the application within seven days to the Central Government, the Registrar of Companies having jurisdiction, SEBI and any other relevant sectoral regulators. It ordered publication of the prescribed notice in an English national newspaper and a vernacular newspaper of the State where the registered office is situated, and to upload notice and hearing date on the company's website, if any. The company was directed to file an affidavit within seven days confirming dispatch and publication. The authorities served with notice are to have at least three months from the date of service to file their report or objections. Finally, the Tribunal fixed 01.02.2023 as the date for hearing and further orders, and indicated that absence of objections by that date would be presumed to mean no objection to confirmation of the proposed reduction. [Paras 9, 10, 11]

Interim directions issued: notices to specified authorities; publication and website intimation required; affidavit of dispatch/publication to be filed; three-month period allowed for objections; matter listed for hearing on 01.02.2023.

Final Conclusion: The Tribunal did not finally sanction the reduction of share capital but, having accepted the auditor's certificate and requisite declarations, directed statutory notices, publication and website intimation, allowed a three month period for objections, required filing of an affidavit of compliance, and fixed the matter for final hearing on 01.02.2023.

Maintainability of a Section 7 application - authority of an authorized signatory to institute CIRP - delegation of powers within a bank for filing insolvency proceedings - effect of Committee of Creditors' recommendation for liquidation on pending appeals

Maintainability of a Section 7 application - authority of an authorized signatory to institute CIRP - delegation of powers within a bank for filing insolvency proceedings - Whether the Section 7 application filed by the Assistant General Manager on behalf of the bank was maintainable and whether the AGM was authorised to institute the CIRP. - HELD THAT: - The Adjudicating Authority considered the challenge that the insolvency petition was not instituted by an authorised person and examined the material on record concerning internal delegation and authorisation. It had concluded that the AGM was competent to file the Section 7 application. This Appellate Tribunal agreed with the reasons recorded by the Adjudicating Authority and upheld its conclusion that the person who filed the petition was competent to institute the proceedings on behalf of the Financial Creditor. [Paras 11]

The finding of the Adjudicating Authority that the Section 7 application was maintainable and that the AGM was competent to file it is affirmed.

Effect of Committee of Creditors' recommendation for liquidation on pending appeals - Whether the appeal remained viable in view of the Committee of Creditors having recommended liquidation and a related application pending before the Adjudicating Authority. - HELD THAT: - The Tribunal noted that the Committee of Creditors had, by applying its commercial wisdom, resolved to initiate liquidation and that an interlocutory application under the relevant provision was pending before the Adjudicating Authority. In these circumstances the Appellate Tribunal held that the appeal had become infructuous and that there was no merit in entertaining it further. [Paras 11]

The appeal is rendered infructuous by the CoC's recommendation for liquidation and is accordingly dismissed.

Final Conclusion: The impugned order dated 31.08.2021 of the Adjudicating Authority is affirmed; the appeal is dismissed as infructuous and the Tribunal directs registry to upload and forward the judgment to the Adjudicating Authority.

Requirement of date of default in Form-1 - Section 7 of the Insolvency and Bankruptcy Code, 2016 - definition of default under the Code - financial debt - Form-1 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - amendment of pleadings

Requirement of date of default in Form-1 - Section 7 of the Insolvency and Bankruptcy Code, 2016 - Form-1 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Application under Section 7 must specify the date on which the default occurred in the Part IV of Form 1 and the absence of that date is fatal to maintainability of the Section 7 application. - HELD THAT: - The Court observed that Section 7 permits filing an application to initiate CIRP only when a default has occurred and Rule 4/Form 1 prescribes particulars to be furnished, including the amount claimed in default and the date on which default occurred. Part 4 of Form 1 specifically requires the date of default and workings for computation. The Appellant's Form 1 omitted any specific date of default, merely stating the aggregate as of 01.01.2019 without identifying when the debt became due. The Court held that, in the absence of the essential pleading of the date of default, the application under Section 7 could not be maintained. The Court further held that the alleged dishonour of a cheque could not be automatically treated as the date of default for the purposes of commencing proceedings under Section 7 where the application did not plead the date of default, and no amendment was sought before the Adjudicating Authority to rectify this deficiency. [Paras 7, 8, 9, 10, 11]

Appeal dismissed: failure to state the date of default in Form 1 renders the Section 7 application unmaintainable and warrants no interference with the impugned order.

Financial debt - definition of default under the Code - The Adjudicating Authority's concurrent finding that the amount advanced did not qualify as a financial debt and that there was no proved default was not disturbed by this Court because the appeal was dismissed on the procedural ground of omission of the date of default. - HELD THAT: - While noting the Appellant's contention that admission of transfer and payment of interest would bring the amount within the definition of financial debt and that dishonour of cheque and the Section 138 notice constituted a demand/default, the Court did not examine or overturn the Adjudicating Authority's findings on whether the sum constituted financial debt or whether default had occurred. Instead, the appeal was disposed of on the separate and antecedent issue that the Section 7 application was defective for not pleading the date of default. Consequently, the Adjudicating Authority's findings on financial debt and default remain undisturbed. [Paras 3, 4, 5, 11]

No interference with the Adjudicating Authority's finding that the amount did not qualify as financial debt and that default was not established, because the appeal was dismissed on the procedural ground of omission of the date of default.

Final Conclusion: The appeal is dismissed: the Section 7 application was unmaintainable for failure to state the date of default in Form 1 as required, and in view of this procedural defect the impugned order of dismissal is upheld without disturbing the Adjudicating Authority's findings on financial debt and default.

Admission of petition under section 7 of the Insolvency and Bankruptcy Code, 2016 - initiation of Corporate Insolvency Resolution Process - moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional and vesting of management in IRP - admissibility of electronic records and bank statements in summary IBC proceedings notwithstanding absence of a Section 65B(4) certificate - dismissal of application for filing supplementary affidavit at advanced stage

Admission of petition under section 7 of the Insolvency and Bankruptcy Code, 2016 - initiation of Corporate Insolvency Resolution Process - The Company Petition filed under section 7 of the IBC by the Financial Creditor was admitted and CIRP initiated against the Corporate Debtor. - HELD THAT: - The Tribunal found that loan agreements dated 29 March 2017 and 26 March 2018 establish the existence of debt between the parties and that the Financial Creditor placed on record multiple documents (including loan agreements, demand notices, computation of default and bank statements) corroborating the claim of debt and default. The supplementary affidavit filed by the Financial Creditor was regarded as sufficient to corroborate pleadings. The petition was held to be complete as required by law and showed default exceeding the minimum threshold under section 4(1) of the Code at the relevant time. On this basis the Adjudicating Authority admitted the petition and directed initiation of CIRP. [Paras 24, 25, 26, 27, 29]

Petition under section 7 admitted; CIRP initiated against the Corporate Debtor.

Admissibility of electronic records and bank statements in summary IBC proceedings notwithstanding absence of a Section 65B(4) certificate - The objection that documents generated from computer systems require a Section 65B(4) certificate was rejected and held not to defeat the petition in the summary IBC proceedings. - HELD THAT: - The Corporate Debtor contended that entries and computer-generated records required a certificate under Section 65B(4) of the Evidence Act and relied on the Bankers' Books regime and Supreme Court authority. The Tribunal observed that the main loan agreements themselves establish the debt and that the bank statements filed in the supplementary affidavit corroborate default. The Tribunal also noted the chronology of regulatory changes argued by the Corporate Debtor and treated the challenge as insufficient to invalidate the petition at the admission stage. The Tribunal therefore overruled the objection and treated the material on record as adequate for admission. [Paras 24, 25, 26, 27, 28]

Objection based on absence of a Section 65B(4) certificate overruled; documents on record held sufficient for admission.

Dismissal of application for filing supplementary affidavit at advanced stage - The I.A. filed by the Corporate Debtor seeking permission to place a supplementary affidavit on record was dismissed. - HELD THAT: - The Tribunal considered the Corporate Debtor's application to bring subsequent developments on record but observed that at this stage the burden of proof for due payment lies on the Corporate Debtor and that permitting the proposed affidavit would not be productive. Given the materials already on record establishing default, the Tribunal held there was no merit in allowing the additional affidavit and dismissed the I.A. [Paras 28, 30]

Application for filing supplementary affidavit dismissed.

Moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional and vesting of management in IRP - public announcement, IRP duties and ancillary directions - On admission, a moratorium was declared, an Interim Resolution Professional was appointed, and consequential directions (public announcement, deposit for CIRP expenses, communication to Registrar, IRP functions and reports, and assistance to IRP) were issued. - HELD THAT: - Pursuant to admission, the Tribunal imposed the moratorium as envisaged by the Code and appointed the proposed IRP subject to compliance with regulatory formalities. The order directed immediate public announcement, deposit by the Financial Creditor to meet initial CIRP expenses, communication of the order to relevant parties including the Registrar of Companies for updation of records, and required officers of the Corporate Debtor to cooperate with the IRP. The IRP was directed to carry out functions under the specified sections of the Code and to submit periodical reports. [Paras 29]

Moratorium imposed; IRP appointed; public announcement, cooperation, deposit and reporting directions issued.

Final Conclusion: The Adjudicating Authority admitted the section 7 petition and initiated CIRP against the Corporate Debtor, overruled the Corporate Debtor's evidentiary objection under Section 65B(4) at the admission stage, dismissed the Corporate Debtor's application for filing a supplementary affidavit, appointed the Interim Resolution Professional, declared a moratorium and issued consequential administrative directions.

Existence of financial debt - default under Section 7 of the Insolvency and Bankruptcy Code, 2016 - financial contract under Rule 3(1)(d) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - burden of proof on the financial creditor to establish a prima facie case of default - cheques and linkage to admitted debt - deduction of TDS and acknowledgement of debt

Existence of financial debt - financial contract under Rule 3(1)(d) - default under Section 7 of the Insolvency and Bankruptcy Code, 2016 - burden of proof on the financial creditor to establish a prima facie case of default - cheques and linkage to admitted debt - deduction of TDS and acknowledgement of debt - The Section 7 application is not maintainable because the financial creditor failed to establish the existence of a financial debt and consequent default. - HELD THAT: - The Tribunal found that although a payment of Rs. 70,00,000 was disbursed and receipt of that sum was not denied, the parties disputed the legal character of the transaction (loan claimed by the applicant; long term investment claimed by the corporate debtor). No written financial contract as envisaged under Rule 3(1)(d) was placed on record, and neither party proved through corroborative evidence the terms or tenure required to characterise the transaction as a financial debt. The Tribunal applied the established test for admission under Section 7 - disbursal for consideration of time value of money, debt becoming due and payable, and non payment - and held that the applicant, as financial creditor, bore the primary burden of making out a prima facie case of default. Reliance on dishonoured cheques did not establish a link between the cheques (aggregate lesser amount) and the entirety of the alleged debt, and deduction of TDS was held not to be conclusive proof of acknowledgement of a loan or of default. Records from an information utility (NeSL) and the affidavit/materials filed by the applicant were insufficient to discharge the burden of proving a legally recoverable financial debt and default. In view of these findings the Tribunal was not satisfied that the threshold for initiating CIRP under Section 7 was met. [Paras 13, 14, 15, 16, 18]

CP No. (IB) 332/7/JPR/2019 dismissed as rejected and CIRP not initiated.

Final Conclusion: The application under Section 7 of the IBC, 2016 was dismissed because the financial creditor failed to prove the existence of a financial debt and a default; the order is confined to the facts and pleadings before the Tribunal and does not prejudice other remedies available to the parties.

Judicial review of Committee of Creditors' commercial wisdom - approval of resolution plan under Section 31(1) read with Section 30(2) - exclusion of provident fund, gratuity and pension from liquidation estate under Section 36(4)(a)(iii) - minimum liquidation value for operational creditors under Section 30(2)(b) and waterfall under Section 53(1) - treatment of insolvency resolution process costs and CIRP costs - compliance of resolution plan with labour laws (Section 30(2)(e) and Sections 25F/25FF of ID Act) - validity of contingent/conditional resolution plans (Ebix Singapore principle) - priority/charge of statutory dues (state tax/GST/EPFO) vis-a -vis IBC

Judicial review of Committee of Creditors' commercial wisdom - approval of resolution plan under Section 31(1) read with Section 30(2) - Scope and limits of judicial review available to the Adjudicating Authority and the Appellate Tribunal in relation to a resolution plan approved by the CoC with requisite majority. - HELD THAT: - The Tribunal reaffirmed that the commercial wisdom of the Committee of Creditors is sacrosanct and not subject to judicial reappraisal except on the limited statutory grounds set out in Section 30(2) read with Section 31(1). The Adjudicating Authority/Appellate Tribunal may examine whether the approved plan meets the requirements of Section 30(2) (including that it does not contravene any law) and whether the Plan makes provision for effective implementation; it cannot substitute its view for the commercial decision of the CoC. Where a plan fails the mandatory tests under Section 30(2) the Adjudicating Authority may reject or remit the plan, but mere disagreement with CoC's commercial decision is not a ground for interference. [Paras 37, 38, 39, 40, 41]

Judicial review is limited to the compliance checks prescribed by Section 30(2) and Section 31(1); the commercial wisdom of the CoC is not open to re-appraisal beyond those checks.

Exclusion of provident fund, gratuity and pension from liquidation estate under Section 36(4)(a)(iii) - minimum liquidation value for operational creditors under Section 30(2)(b) and waterfall under Section 53(1) - Entitlement of workmen and employees to receive provident fund and gratuity in full (and the relationship of such entitlement with the waterfall/minimum liquidation value under Section 30(2)(b) and Section 53(1)). - HELD THAT: - The Tribunal held that sums due to any workman or employee from provident fund and gratuity fund are excluded from the liquidation estate under Section 36(4)(a)(iii) and, insofar as such funds (if maintained) exist, must be applied to satisfy those dues outside the waterfall in liquidation. Applying Supreme Court and three member Tribunal precedents, the Court directed that workmen and employees are entitled to the unpaid portion of provident fund and gratuity due up to the insolvency commencement date (20.06.2019), after credit for amounts already paid under the Resolution Plan. The Tribunal distinguished CIRP costs (wages during CIRP) and held only those employees who actually worked while the RP ran the corporate debtor as a going concern are entitled to wages as CIRP costs. Where no fund was maintained by the corporate debtor (or contributions were not deposited), the statutory obligation remains and the Successful Resolution Applicant must discharge unpaid statutory dues to comply with Section 30(2)(e). [Paras 63, 66, 69, 71, 72]

Workmen and employees are entitled to full provident fund and gratuity dues up to the insolvency commencement date (20.06.2019); these sums are outside the liquidation estate and Successful Resolution Applicant must pay unpaid amounts after adjusting sums already received under the Plan.

Minimum liquidation value for operational creditors under Section 30(2)(b) and waterfall under Section 53(1) - compliance of resolution plan with Section 30(2)(b) - Whether the Resolution Plan complied with the minimum liquidation value requirement of Section 30(2)(b) for the workmen and employees and whether the allocation in the Plan was deficient. - HELD THAT: - Form H submitted by the RP estimated the minimum liquidation value payable to workmen and employees at Rs.113 crores. The Plan allocated only Rs.52 crores but contained an undertaking that if liquidation value was not 'NIL' the liquidation value would be paid and given priority. The Tribunal held that the undertaking binds the Successful Resolution Applicant and directed payment of the minimum liquidation value (as estimated in Form H) to the workmen - thereby remedying the Plan's insufficient nominal allocation. The Tribunal observed that absent such undertaking a Rs.52 crore allocation would have violated Section 30(2)(b). [Paras 85, 86, 87, 88, 128]

Successful Resolution Applicant is directed to pay the minimum liquidation value to workmen and employees (Rs.113 crores as recorded in Form H), the Plan otherwise being modified to that extent to comply with Section 30(2)(b).

Treatment of insolvency resolution process costs and CIRP costs - CIRP costs and 'no work no pay' principle - Whether wages and other dues accruing to employees during the CIRP (post ICD) form part of CIRP costs and are payable in full. - HELD THAT: - Applying Supreme Court authority, the Tribunal held that wages/salaries during CIRP can be CIRP costs only if the RP managed the corporate debtor as a going concern and the employees actually worked during the CIRP; where the corporate debtor was not a going concern and employees did not work (other than 50 retained for asset protection), their post ICD wages are not CIRP costs. The RP's treatment (excluding post ICD wages except for retained APT members) was upheld. [Paras 98, 99, 100, 101]

Only wages of employees who actually worked while the RP ran the corporate debtor as a going concern qualify as CIRP costs; the post ICD wages claimed en masse were not CIRP costs and were correctly excluded except for APT members.

Compliance of resolution plan with labour laws (Section 30(2)(e) and Sections 25F/25FF of ID Act) - demerger/transfer of workforce and Section 25FF proviso - Legality of the Plan's demerger of the workforce into AGSL and whether such demerger amounted to retrenchment attracting retrenchment compensation under Section 25F/25FF of the Industrial Disputes Act and thus violated Section 30(2)(e). - HELD THAT: - The Tribunal examined the demerger scheme in the Plan and the proviso to Section 25FF. It held that the Plan's demerger fell within the proviso to Section 25FF because the scheme contemplated continuity of service for demerged employees (no interruption), offers of re employment or transfer on terms not less favourable, and the Plan provided safeguards and an employee trust equity mechanism. The Tribunal found no infringement of Section 25F/25FF or of Section 30(2)(e) in respect of the demerger; however, statutory dues (PF/gratuity) accrued up to ICD must still be paid to avoid contravention of Section 30(2)(e). [Paras 90, 91, 93, 95, 96]

The demerger into AGSL does not, on the facts, amount to unlawful retrenchment and does not by itself violate Section 30(2)(e); nevertheless, unpaid statutory dues up to ICD must be discharged by the Successful Resolution Applicant to ensure compliance with Section 30(2)(e).

Validity of contingent/conditional resolution plans (Ebix Singapore principle) - Whether the condition precedents/contingencies in the Plan rendered it a contingent/conditional plan that should have been rejected under the Ebix Singapore principle. - HELD THAT: - The Tribunal applied Ebix Singapore and concluded that the Plan's conditions were business requisite condition precedents (statutory and regulatory approvals necessary for restarting aviation operations) and not impermissible unilateral withdrawal clauses or unenforceable contingencies. The Plan's condition precedents were not a ground for rejection where they relate to necessary statutory approvals and the Resolution Applicant had satisfied relevant conditions to the Monitoring Committee's and Adjudicating Authority's satisfaction. [Paras 108, 109]

The Plan's condition precedents did not render it impermissibly contingent; the Ebix Singapore principle did not require rejection of the Plan on that ground.

Priority/charge of statutory dues (state tax/GST/EPFO) vis-a -vis IBC - status of statutory authorities as secured creditors - Whether certain statutory claimants (Regional PF Commissioner; Department of State Tax) were secured creditors entitled to priority or special charge under state laws that override IBC entitlements. - HELD THAT: - The Tribunal held that provident fund dues (EPFO) admitted by the RP must be paid in full (and directed the Successful Resolution Applicant to pay the admitted PF claim of the Regional PF Commissioner). With respect to State Tax (Maharashtra GST) the Tribunal noted the State Act's first charge provision but observed the statutory carve out for the IBC; accordingly the Department of State Tax's claim was treated as an operational creditor claim (its admitted claim being reflected in the list) and, where liquidation value is nil, no greater entitlement arose under the Plan. The Tribunal relied on Supreme Court precedents holding IBC's scheme overrides inconsistent State provisions. [Paras 117, 121, 122, 123, 124]

Regional PF Commissioner's admitted PF claim to be paid in full by the Successful Resolution Applicant; State tax claim under Maharashtra GST did not acquire a priority charge that could override IBC distribution where the IBC provides otherwise.

Distribution to secured creditors under Section 53(1)(b) - debt owed vs. value of security - Whether secured creditors' entitlement under Section 53(1)(b) must be computed by reference to the value of their security interest rather than the full admitted debt. - HELD THAT: - The Tribunal rejected the submission that distribution should be limited to the value of security interest; the plain language of Section 53(1)(b)(ii) refers to 'debts owed to a secured creditor' and the admitted debt in CIRP is the relevant measure. While academic reports suggested considering security value, no statutory amendment to that effect exists; accordingly, distribution is to be considered per the admitted debt and the commercial allocations made by the CoC subject to statutory minima. [Paras 102, 103, 104, 105, 106]

Secured creditors' claims for distribution are to be considered with reference to the debts admitted in CIRP; distribution calculated by reference to security value alone is not mandated by Section 53(1)(b).

Final Conclusion: The Tribunal upheld the Adjudicating Authority's approval of the Jalan Fritesch Consortium resolution plan subject to directed remedial payments: the Successful Resolution Applicant must pay the minimum liquidation value to workmen (as recorded in Form H) and discharge unpaid provident fund and gratuity dues up to the insolvency commencement date (20.06.2019) after adjusting amounts already paid under the Plan; other challenges (including to the Plan's commercial allocations, contingency clauses and State tax treatment) were dismissed insofar as they fall within the CoC's commercial wisdom or are governed by the IBC framework.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - mandatory compliance with statutory time-limit for availing scheme benefits - no extension or deviation from express terms of the scheme - payment after prescribed cut-off date disentitles to relief under SVLDRS - beneficial nature of a scheme does not permit relaxation of clear statutory conditions

Mandatory compliance with statutory time-limit for availing scheme benefits - payment after prescribed cut-off date disentitles to relief under SVLDRS - no extension or deviation from express terms of the scheme - Whether payment of the rebated amount after the last date prescribed under the SVLDR Scheme of 2019 entitles the petitioner to the benefits of the Scheme and precludes recovery. - HELD THAT: - The Court held that the Scheme prescribes a last date for deposit of the rebated amount and compliance with that time-limit is mandatory. The petitioner admitted that attempts to deposit the rebated amount succeeded only after the statutory cut-off date of 30.06.2020 and the payment was made after that date. There is nothing on record showing any extension of the last date. The beneficial character of the Scheme does not permit readjusting or extending express conditions of the Scheme; relief cannot be granted dehors the Scheme's terms. The Court relied on the Apex Court's decision in SLA(C) No.2070/2022 and on this Court's decision in M/s. Metrics Ptomotions to the effect that the last date prescribed for depositing the rebated amount cannot be extended and failure to deposit within the prescribed period disentitles the applicant to the concessions under the Scheme. For these reasons the challenge to the recovery order was declined. [Paras 5, 6]

Petition dismissed; payment made after the prescribed last date disentitles the petitioner to benefits under the SVLDR Scheme and recovery order upheld.

Final Conclusion: The writ petition challenging the recovery order was dismissed: the Court held that compliance with the Scheme's last date is mandatory, payment after 30.06.2020 does not attract SVLDRS relief, and the Court will not extend or alter the Scheme's express terms.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - time-bound deposit condition of a statutory scheme - no power to extend or reopen scheme beyond prescribed period - remedial recourse under the CGST Act - requirement to comply scrupulously with scheme terms

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - time-bound deposit condition of a statutory scheme - no power to extend or reopen scheme beyond prescribed period - Whether the High Court can permit reopening or extension to pay the discounted amount under the SVLDR Scheme after the last date for deposit had expired. - HELD THAT: - The Court found that the petitioner had applied under the SVLDR Scheme and accepted the estimated discounted amount but failed to deposit the sum by the last extended date. Relying on the settled principle that a person seeking benefits under a statutory scheme must strictly adhere to its terms, and having regard to the Apex Court's decision in M/s Yashi Constructions Vs. Union of India & Ors. which refused relief where deposit was not made within the scheme's time limit, the Court held that permitting reopening or extension would amount to re-writing or modifying the Scheme-an exercise beyond the judicial remit and within the prerogative of the Government. Consequently, the Court declined to grant relief to reopen or extend the period for deposit under the Scheme. [Paras 4, 7]

Petition to reopen or extend time to pay under the SVLDR Scheme after expiry of the prescribed period is refused and cannot be allowed by the High Court.

Remedial recourse under the CGST Act - Whether the petitioner has alternate remedies following refusal of relief under Article 226 in respect of non-deposit under the Scheme. - HELD THAT: - The Court observed that, having declined to reopen the scheme timeline, the petitioner must pursue available statutory remedies under the CGST Act. The order directs the petitioner to take recourse to the remedies provided in the CGST Act as per law rather than seeking modification of the Scheme through this writ petition. [Paras 6]

Petitioner is directed to seek appropriate remedy under the provisions of the CGST Act; writ relief to modify scheme timelines is declined.

Final Conclusion: Writ petition dismissed; relief to reopen or extend time under the SVLDR Scheme is refused and the petitioner is left to pursue statutory remedies under the CGST Act.

Refund of security deposit - mandamus - service tax liability - renting of immovable property used in furtherance of business - withholding of security pending tax demand - interest on fixed deposit

Refund of security deposit - withholding of security pending tax demand - service tax liability - interest on fixed deposit - Lawfulness of withholding the petitioner's refundable security deposit by respondents on the ground of alleged service tax liability and the petitioner's entitlement to refund of the deposit with accrued interest. - HELD THAT: - Respondents 2 and 3 withheld the refundable security deposit contending that the petitioner had not deposited service tax payable in respect of the leased vacant land used for cycle/scooter parking. That departmental correspondence relied upon by respondents initially indicated liability might arise under the renting of immovable property concept. However, a communication from the Assistant Commissioner (Central Excise / Central GST) recorded that service tax was not applicable to the cycle parking in the facts of this case and that no demand in respect of the parking land had been raised by the department for the relevant period. In view of the departmental position that service tax was not applicable and no show-cause had been issued in respect of the amounts relating to cycle/scooter parking for the periods in dispute, the retention of the security deposit by respondents on the sole ground of an asserted tax liability was not justified. The amount had been placed in a fixed deposit and interest accrued thereon is attributable to the petitioner. The appropriate relief is to direct release of the deposit and the interest forthwith within a short specified period.

The withheld security deposit shall be refunded to the petitioner along with the interest accrued on the fixed deposit; respondents are directed to release the amounts expeditiously, preferably within four weeks of receipt of certified copy of the order.

Final Conclusion: Writ petition allowed: respondents directed to refund the petitioner's security deposit and the interest earned thereon within the time directed, the retention being unjustified in view of the departmental communication that service tax was not applicable for the periods in dispute.

Service tax liability for architect services versus consulting engineer services - Extended period of limitation and requirement of suppression or misdeclaration - Definition of "architect" under section 65 of the Finance Act, 1994 - Registration in the register of architects maintained under section 23 of the Architects Act, 1972 - Penalty under section 78 of the Finance Act, 1994 and its implication for invocation of extended period

Extended period of limitation and requirement of suppression or misdeclaration - Penalty under section 78 of the Finance Act, 1994 and its implication for invocation of extended period - The demand for service tax for the extended period cannot be sustained in the absence of any allegation of suppression or misdeclaration. - HELD THAT: - The show cause notice does not allege suppression or misdeclaration by the appellant. The adjudicating authority also did not impose penalty under section 78, which would have been relevant had suppression or misdeclaration been found. In these circumstances the requisites for invoking the extended period of limitation are absent, and the demand made for the extended period cannot be sustained. [Paras 4]

Demand for the extended period is set aside for lack of any allegation or finding of suppression or misdeclaration.

Service tax liability for architect services versus consulting engineer services - Definition of "architect" under section 65 of the Finance Act, 1994 - Registration in the register of architects maintained under section 23 of the Architects Act, 1972 - The appellant does not fall within the taxable category of 'architect' because it is not entered in the register of architects and the allegation of rendering architect services is unsubstantiated. - HELD THAT: - Section 65 defines 'architect' to include persons whose names are entered in the register of architects maintained under section 23 of the Architects Act, 1972 and also commercial concerns rendering services in the field of architecture. The appellant is not registered under section 23 and there is no material to substantiate that it provided services qualifying as architect services. The proprietor's statement about designing, planning and site supervision does not establish provision of architect services. Absent registration or substantiated evidence of providing architect services, the demand premised on architect services cannot be sustained. [Paras 4]

Demand framed on the basis that the appellant rendered architect services is unfounded and is set aside.

Final Conclusion: The appeal is allowed; the demand of service tax (including that for the extended period) and related penalties/interest as contested in the appeal are set aside.

Refund under Rule 5 of CENVAT Credit Rules, 2004 read with Notification 27/2012 - Refund of unutilized CENVAT credit on input services used for export of services - Proof of receipt of foreign remittances in relation to export of services - Remand for fresh consideration to enable production of documents - Consideration of consistency with subsequent refund orders in the assessee's own case

Refund under Rule 5 of CENVAT Credit Rules, 2004 read with Notification 27/2012 - Proof of receipt of foreign remittances in relation to export of services - Remand for fresh consideration to enable production of documents - Consideration of consistency with subsequent refund orders in the assessee's own case - Whether the refund claims for unutilized CENVAT credit relating to April-June 2016 and July-September 2016 should be remanded to the original authority for fresh consideration and opportunity to furnish documents establishing receipt of foreign remittances. - HELD THAT: - The original authority rejected the refund claims solely on the ground that foreign remittances, though credited to the same bank account, were shown in three different names. The Tribunal noted that the authorities have accepted and sanctioned refund claims for subsequent periods in the appellant's own case and that the appellant sought an opportunity to produce documents to explain the manner in which remittances were effected. The Tribunal did not adjudicate the merits of the refund claims on the record before it; instead, having regard to the material that later refunds were allowed and the appellant's offer to produce explanatory documentation, the matter calls for fresh consideration by the original authority. Accordingly, the impugned order was set aside and the appeals were allowed by remanding the matter to the original authority with a direction to examine the orders passed in the appellant's own case for other periods, permit the appellant to produce supporting documents, and decide the refund claims afresh as expeditiously as possible.

Impugned order set aside; appeals allowed by way of remand to the original authority with directions to permit production of documents, consider consistency with subsequent refund orders in the appellant's case, and decide the refund claims expeditiously.

Final Conclusion: The Tribunal set aside the impugned order and remanded the refund claims for April-June 2016 and July-September 2016 to the original authority for fresh consideration, permitting the appellant to furnish documents to establish receipt of foreign remittances and directing expeditious disposal in light of subsequent refunds allowed in the appellant's own case.

Definition of "capital goods" - office equipment exclusion - interpretation of amended definition of "capital goods" with effect from 01.04.2016 - eligibility of CENVAT credit on capital goods - eligibility of input service credit for housekeeping services - penalty under Rule 15(2) of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944

Definition of "capital goods" - office equipment exclusion - eligibility of CENVAT credit on capital goods - Credit availed on a computer server installed in the Mumbai office prior to 01.04.2016 and after 01.04.2016 - HELD THAT: - The pre-amendment definition of "capital goods" expressly excluded "any equipment or appliance used in an office"; accordingly the CENVAT credit availed on the computer server installed at the Mumbai office prior to 01.04.2016 was ineligible. The definition was amended with effect from 01.04.2016 and no longer contains the office-equipment exclusion. Applying the amended definition, credit availed on the same computer server after 01.04.2016 is eligible. The Tribunal also noted the appellant's case that the server forms an integral part of the manufacturing process by enabling order capture and data flow between offices and the factory, which supports allowability post-amendment. [Paras 6, 7]

Credit on the computer server is ineligible for amounts availed before 01.04.2016 and eligible for amounts availed on or after 01.04.2016.

Eligibility of input service credit for housekeeping services - eligibility of CENVAT credit - Credit availed on Housekeeping Services provided at the appellant's Mumbai office for the period from 2014-15 to 2017-18 (up to June) - HELD THAT: - The Tribunal found that the Mumbai office is an integral part of the appellant's business and performs administrative functions in respect of the factory. Housekeeping services procured and used at that office were therefore input services connected with the appellant's business operations and eligible for CENVAT credit. The departmental disallowance based solely on the services being consumed outside the factory was rejected. [Paras 8]

CENVAT credit on Housekeeping Services at the Mumbai office is allowable.

Penalty under Rule 15(2) of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - interpretation of law as a defence to penalty - Validity of equal penalty imposed for availing the disputed credits - HELD THAT: - The Tribunal treated the controversy as one of interpretation of the scope of "capital goods" and the allowability of input service credit where the office is an integral part of business operations. In view of the view taken that part of the credit was allowable post-amendment and housekeeping credit was allowable, the Tribunal held that imposition of equal penalty was not warranted and ought to be set aside. [Paras 9]

The equal penalty imposed on the appellant is set aside.

Final Conclusion: The appeal is partly allowed: credit on the computer server is disallowed for amounts availed before 01.04.2016 but allowed for amounts availed on or after 01.04.2016; credit on Housekeeping Services at the Mumbai office is allowed; and the penalty imposed under Rule 15(2) read with Section 11AC is set aside, with consequential reliefs as per law.

Reversal of CENVAT credit under protest - limitation under Section 11B of the Central Excise Act - refund of amount treated as revenue deposit - non-excisability of bagasse and press mud - refund claim filed after reversal of credit

Reversal of CENVAT credit under protest - limitation under Section 11B of the Central Excise Act - refund of amount treated as revenue deposit - refund claim filed after reversal of credit - Whether the refund claim dated 19.9.2014 in respect of credits reversed during 1.4.2010 to 1.5.2013 is barred by the one year limitation under Section 11B of the Central Excise Act. - HELD THAT: - The Tribunal found that the appellant had reversed CENVAT credit for bagasse and press mud while expressly reserving the right to contest the reversal, as evidenced by periodic intimations including the letter of 3.5.2010 recording reversal "without prejudice" and reserving rights to appeal. The departmental endorsement acknowledging receipt also records the appellant's note of dispute. A later show cause notice included the amounts reversed and was ultimately dropped by the adjudicating authority by applying the Supreme Court's view that bagasse and press mud are non excisable; the demand was therefore not sustained. On these facts the Tribunal held that the reversals were made under protest and, being in the nature of a revenue deposit in respect of non dutiable items, are not governed by the time bar in Section 11B. The Tribunal also relied on precedents dealing with refunds of reversals made under protest and the non excisability of the said by products to conclude that limitation would not apply where reversal was disputed and later found not payable. Applying these principles to the material record, the Tribunal set aside the finding of time bar and allowed the refund claim. [Paras 8, 9, 10, 11, 14]

The refund claim is not barred by Section 11B as the credits were reversed under protest and subsequently found not payable; the impugned order is set aside and the appeal is allowed with consequential relief.

Final Conclusion: The appeal is allowed: the order rejecting the refund as time barred is set aside and the appellant is entitled to refund/re credit of the reversed CENVAT credit, with consequential relief as may follow.

Duty on work-in-process / semi-finished goods at the time of debonding - no excise duty at intermediate stage; excise payable only when excisable goods come into existence or on clearance from factory - Foreign Trade Policy para 6.18 - duties on exit from EOU limited to imported and indigenous capital goods, raw materials, components, consumables, spares and finished goods - absence of statutory authority to demand duty on in-process goods

Duty on work-in-process / semi-finished goods at the time of debonding - no excise duty at intermediate stage; excise payable only when excisable goods come into existence or on clearance from factory - Foreign Trade Policy para 6.18 - duties on exit from EOU limited to imported and indigenous capital goods, raw materials, components, consumables, spares and finished goods - demand of excise duty and penalty on semi finished goods / work in process at the time of debonding of a 100% EOU - HELD THAT: - The Tribunal found on the facts, not in dispute, that the goods in question were at various intermediate stages of manufacture and were not marketable as such. It held that at the semi finished or in process stage no excisable goods have come into existence and therefore excise duty is not leviable at that intermediate stage, particularly where goods were not cleared from the factory. The decision relied on the scope of para 6.18 of the Foreign Trade Policy (as applied in Appendix 14 I L / FTP Handbook) which, by enumerating imported and indigenous capital goods, raw materials, components, consumables, spares and finished goods, does not provide authority to demand duty on in process goods. The Tribunal applied its earlier decisions in Tirumala Seung Han Textiles Ltd., Lupin Ltd., and EID Parry India Limited, and noted upholding of Tirumala by the High Court, to conclude that there is no legal basis to impose duty on work in process at the time of debonding. The Tribunal also observed that, in any event, duties paid at intermediate stages would be available as cenvat credit when finished goods are cleared, but the determinative legal conclusion is that duty cannot be demanded on semi finished goods at debonding in the absence of statutory provision or policy wording to that effect. [Paras 4, 6]

The demand of duty and the penalty confirmed in the impugned order are not sustainable and are set aside; the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the demand of excise duty and penalty insofar as they related to semi finished / work in process goods at the time of debonding of the 100% EOU, holding that no duty is leviable at the intermediate stage in the absence of statutory authority.

Refund of duty paid under protest - limitation extinguishes remedial right but not substantive right - precedent of Larger Bench in India Cements Limited

Refund of duty paid under protest - precedent of Larger Bench in India Cements Limited - limitation extinguishes remedial right but not substantive right - Whether the appellant was entitled to refund of excise duty paid under protest where the demand was not sustained on merit but was barred by limitation. - HELD THAT: - The Tribunal examined and applied the Larger Bench decision in India Cements Limited which held that limitation may bar the remedial right to recover an amount under the particular statutory procedure even though the underlying substantive right remains. The Tribunal relied on the discussion in India Cements (para 22) and the Kerala High Court exposition that limitation extinguishes the particular remedial right while leaving the substantive right intact. The appellant's attempt to distinguish India Cements on the ground that the demand there was not contested on merits was rejected after reference to para 3 of the Larger Bench's order showing that merits had been contested and the amount had been paid under protest. Given the applicability of the Larger Bench precedent to the facts of the present case, the Tribunal found that the department was not obliged to refund the duty paid under protest where the demand could be said to be time-barred so as to extinguish the specific remedial claim for refund under the statutory mechanism invoked. [Paras 4, 5]

The appellants are not entitled to refund of the duty paid under protest; appeal dismissed.

Final Conclusion: The appeal was dismissed; relying on the Larger Bench authority in India Cements Limited and the principle that limitation can extinguish the particular remedial right to recover duty, the Tribunal held that no refund was payable for the duty deposited under protest.

Distinction between absence and vacation of office - vacation of office resulting from disqualification - election to fill a vacant office for the remaining period - chairmanship at meetings: Vice Chairman presiding only in case of absence - exclusive internal remedy for challenging elections by candidate under Regulation 114(4)

Distinction between absence and vacation of office - vacation of office resulting from disqualification - election to fill a vacant office for the remaining period - chairmanship at meetings: Vice Chairman presiding only in case of absence - Validity of the election held on 27.12.2021 to fill the Chairmanship of the EIRC where the earlier Chairman had been disqualified on 22.12.2021 - HELD THAT: - The Court found that the earlier Chairman had been disqualified on 22.12.2021 and therefore the situation was one of vacation of office under the Regulations, not mere absence. Regulation 92(2) applies when an office bearer is absent temporarily and the Vice Chairman may preside; it does not govern cases where the office has fallen vacant by disqualification. Once the post had fallen vacant, Regulation 119(2) permits the Regional Council to elect another person from amongst its members to hold the office for the remaining period of the year. Applying these provisions, the Court held that electing respondent no.3 as Chairman for the remaining period under Regulation 119(2) was lawful and that the Single Judge and Division Bench erred in treating Regulation 92(2) as applicable to a vacancy caused by disqualification. [Paras 4]

Election of respondent no.3 as Chairman for the remaining period was valid; the High Court and Single Judge erred in quashing the election on the ground that the Vice Chairman should have presided.

Exclusive internal remedy for challenging elections by candidate under Regulation 114(4) - Whether the writ petition by respondent no.1 challenging the conduct of the election could be entertained despite existence of Regulation 114(4) and despite respondent no.1 not having been a contesting candidate - HELD THAT: - The Court observed that Regulation 114(4) provides that disputes regarding election to a Regional Council may be referred by the candidate concerned to the President within thirty days of declaration of result and that the President's decision is final. Given this internal remedy, the High Court ought not to have entertained a writ petition challenging the election. Further, respondent no.1 was not a contesting candidate and therefore lacked the statutory locus to invoke the remedy prescribed by Regulation 114(4). These factors rendered the High Court's exercise of writ jurisdiction in this matter improper. [Paras 5]

The writ petition challenging the election should not have been entertained; respondent no.1 did not have the statutory remedy available as a candidate and the internal remedy under Regulation 114(4) was the appropriate forum.

Final Conclusion: Appeals allowed. The judgments of the Single Judge and Division Bench quashing and setting aside the election of the office bearers of the EIRC held on 27.12.2021 are set aside; the original writ petitions are dismissed. No costs.

Vicarious liability of partners under Section 141 of the Negotiable Instruments Act - summoning on specific averments in the complaint - scope of High Court's power under Section 482 of the Code of Criminal Procedure to quash criminal process - burden on partners to establish absence of responsibility or due diligence - application of Section 138 of the Negotiable Instruments Act to firms and partners

Vicarious liability of partners under Section 141 of the Negotiable Instruments Act - summoning on specific averments in the complaint - application of Section 138 of the Negotiable Instruments Act to firms and partners - Validity of the summoning order against the petitioners as partners of the firm under the Negotiable Instruments Act. - HELD THAT: - The court held that the complaint contained specific averments that the petitioners were partners of the accused firm and held licences in their names on behalf of the firm; such allegations are legally sufficient at the stage of summoning. In light of settled law, including the Supreme Court's guidance in S. P. Mani and Mohan Dairy v. Dr. Snehalatha Elangovan, the complainant need only make specific averments that the persons named were in charge of the affairs of the firm to render them liable to face prosecution; existence of further exculpatory material or proof that a partner was not responsible for day-to-day affairs is a matter for trial. The Magistrate evaluated the pleadings, discharged those against whom no specific role was alleged, and issued summons where specific averments connected the partners to the cheque and licence. The petitioners' contention about internal partnership arrangements and the supplementary deed did not negate the sufficiency of the complaint at this stage and need not be gone into while considering summons. [Paras 4, 5, 6, 8, 11]

Summons against the petitioners were validly issued; the impugned summoning order is not liable to be quashed on the ground that partners were wrongly arrayed.

Scope of High Court's power under Section 482 of the Code of Criminal Procedure to quash criminal process - burden on partners to establish absence of responsibility or due diligence - Whether the High Court should exercise its inherent jurisdiction under Section 482 Cr.P.C. to quash the complaint and the summoning order. - HELD THAT: - The court applied the principles in the cited Supreme Court decisions and concluded that in the absence of 'sterling incontrovertible material' or 'acceptable circumstances' demonstrating that the petitioners were not in charge of the firm's affairs, it was not appropriate to exercise Section 482 Cr.P.C. to quash the complaint. The judgment reiterates that while vicarious criminal liability attaches only to those in charge and responsible, at the stage of quashing the process a director or partner seeking relief must produce clear and convincing material to show that proceeding would be an abuse of process. The petitioners did not place such material before the court; therefore, the court declined to interfere and left factual determinations to the trial court. [Paras 9, 10, 11, 12, 13]

Court declined to exercise Section 482 Cr.P.C. jurisdiction; petitions to quash the complaint are dismissed and trial court may proceed to decide the complaint on merits.

Final Conclusion: Petitions dismissed; summons as issued against the named partners are upheld and the High Court declined to quash the complaint under its inherent jurisdiction, leaving factual adjudication to the trial court.