TaxTMI Updates e-Newsletter
Nov 11,2024

Adjudication under Section 74 of the Uttarakhand GST Act, 2017 and statutory right of appeal under Section 107 - Availability of alternative remedy and maintainability of writ petition - Direction to Appellate Authority to decide pending appeal within a stipulated time - Deposit of 10% under Section 107(6)(b) as precondition for disposal of appeal

Availability of alternative remedy and maintainability of writ petition - Adjudication under Section 74 of the Uttarakhand GST Act, 2017 and statutory right of appeal under Section 107 - Whether the writ petition should be continued when a statutory appellate remedy is available against an adjudication order passed under the Act of 2017 - HELD THAT: - The Court noted that the impugned order was passed under Section 74 of the Act of 2017 and that an appeal lies under Section 107. Although the writ had been entertained earlier because no Appellate Forum was available at that time, the special appeal which caused that unavailability has since been finally decided and the appellate channel is open. In these circumstances the Court held that the appropriate forum for challenging the adjudication is the statutory appeal and not continuation of the writ petition. The petitioner was observed to have already filed an appeal before the Appellate Authority. [Paras 5, 6, 8]

Writ petition disposed as appellate remedy is available; petitioner to pursue remedy by way of appeal under Section 107.

Direction to Appellate Authority to decide pending appeal within a stipulated time - Whether the Appellate Authority should be directed to decide the appeal filed by the petitioner and within what timeframe - HELD THAT: - Having disposed the writ on the ground of availability of statutory appeal, the Court directed the Appellate Authority to decide the appeal filed by the petitioner against the impugned adjudication order. The direction is for a decision to be rendered within three months from the date on which a certified copy of this order is produced before the Appellate Authority. This constitutes a case-specific supervisory direction to ensure expeditious disposal of the appeal. [Paras 9]

Appellate Authority directed to decide the petitioner's appeal within three months from production of certified copy of this order.

Deposit of 10% under Section 107(6)(b) as precondition for disposal of appeal - Whether the petitioner must make a deposit before the Appellate Authority and, if so, the quantum and stage at which it must be deposited - HELD THAT: - The Court recorded that, as a condition precedent to disposal of the appeal, the petitioner shall deposit 10% of the amount before the Appellate Authority in terms of Section 107(6) and sub-clause (b) of the Act of 2017. This direction was given as a compliance requirement to be fulfilled prior to final adjudication of the appeal by the Appellate Authority. [Paras 10]

Petitioner to deposit 10% before the Appellate Authority under Section 107(6)(b) prior to disposal of the appeal.

Final Conclusion: Writ petition disposed as statutory appeal under Section 107 is the appropriate remedy; the Appellate Authority is directed to decide the appeal against the adjudication order within three months upon production of certified copy of this order, subject to the petitioner depositing 10% as required by Section 107(6)(b).

Seizure and penalty under section 129(3) of the GST Act - e Way bill generated post detention but before passing of order - intention to evade tax (mens rea) as prerequisite for penalty - release of goods on production of valid documents

Seizure and penalty under section 129(3) of the GST Act - e Way bill generated post detention but before passing of order - intention to evade tax (mens rea) as prerequisite for penalty - release of goods on production of valid documents - Impugned orders of seizure, levy of penalty and interest under section 129(3) could not be sustained where the e way bill was produced before the seizure order was passed and there was no finding of intention to evade tax. - HELD THAT: - The Court accepted the admitted facts that the consignment was accompanied by all relevant documents except the e way bill and that the duly filled e way bill was produced before the seizure order could be passed. The authorities did not record any finding of intention to evade tax, which the Court treated as an essential ingredient for imposing penalty under the statutory scheme. Relying on the Court's earlier decisions, the judgment reasons that where all valid documents, including the e way bill, are placed on record prior to passing the penalty/seizure order and no cogent evidence indicates an intention to evade tax, the punitive action is unsustainable. The absence of any specific rationale pointing to mens rea, together with production of the e way bill before the order, meant that the discrepancy (if any) was cured and the authorities had no sound basis to continue the penalty and seizure.

The impugned orders dated 20.11.2020 and 27.07.2021 under section 129(3) are quashed and set aside.

Final Conclusion: Writ petition allowed; impugned seizure and penalty orders quashed and the respondents directed to refund any tax and penalty deposited by the petitioner within four weeks.

GST leviability on royalty paid by a mineral concession holder - royalty not a tax - precedential effect of a larger Bench overruling earlier decision

GST leviability on royalty paid by a mineral concession holder - royalty not a tax - Levy of Goods and Services Tax on royalty paid by a mineral concession holder for a mining concession granted by the State is permissible. - HELD THAT: - The petition challenged notifications and consequential notices and summons seeking GST on royalty, relying on the earlier Seven-Judge Bench decision in India Cement Ltd. & ors. which had held that royalty is a tax. The Court observed that the Seven-Judge Bench ruling has been overruled by a subsequent Nine-Judge Bench decision in Mineral Area Development Authority & anr. vs. M/s Steel Authority of India & anr., which held that royalty is not a tax. In view of the authoritative pronouncement by the larger Bench, the respondents are entitled to treat royalty as a supply taxable under the GST law and to levy GST on royalty paid by mineral concession holders. Consequently, the impugned notice and summon issued for recovery of GST on royalty stand upheld.

Petition dismissed; impugned notice dated 16.02.2024 and summon dated 15.03.2024 upheld; parties to bear their own costs.

Final Conclusion: The High Court dismissed the petition challenging GST leviability on royalty, holding that the Nine-Judge Bench decision rejecting the characterisation of royalty as a tax governs the matter; the notices and summons issued for GST on royalty are sustained.

Royalty not a tax - legality of levy of Goods and Services Tax on royalty - effect of a Nine Judge Bench overruling prior precedent

Royalty not a tax - legality of levy of Goods and Services Tax on royalty - Validity of levy of GST on royalty paid by a mineral concession holder for a State granted mining concession. - HELD THAT: - The Court held that levy of GST on royalty payable by a mineral concession holder is legally permissible. The petition was originally grounded on the Seven Judge Bench decision in India Cement Ltd. which characterised royalty as a tax, but that precedent has been overruled by the Nine Judge Bench decision in Mineral Area Development Authority & anr. vs. M/s Steel Authority of India & anr., 2024 INSC 554, which held that royalty is not a tax. In view of the higher Bench ruling, the respondents are within their rights to impose GST on the royalty paid by mineral concession holders, and the earlier stay founded on the now overruled authority no longer prevails.

The Court upheld the legality of levying GST on royalty paid by mineral concession holders.

Legality of notices and summons - effect of overruling precedent on interim reliefs - Validity of the departmental notices and summons challenged by the petitioner and the consequential reliefs sought to quash several notifications and obtain refunds. - HELD THAT: - In light of the authoritative pronouncement that royalty is not a tax, the impugned departmental notice dated 15.02.2024 and summon dated 15.03.2024 were held to be lawful. The petitioner's challenge to the central and State notifications seeking to prohibit levy of GST on royalty was therefore rejected. The prior Division Bench stay issued on the basis of the earlier Seven Judge decision is displaced by the subsequent Nine Judge Bench ruling, removing the foundation for quashing the notices or for directing refunds.

The notices and summons were upheld; the petition seeking quashing of notifications and refund was dismissed.

Final Conclusion: The petition is dismissed; the levy of GST on royalty paid by mineral concession holders is upheld in view of the Nine Judge Bench ruling that royalty is not a tax, and the challenged notices and summons are sustained, with parties to bear their own costs.

Levy of Goods and Services Tax on mining royalty - Characterisation of royalty as a tax - Precedential effect of a larger Constitution Bench overruling an earlier decision

Levy of Goods and Services Tax on mining royalty - Characterisation of royalty as a tax - Precedential effect of a larger Constitution Bench overruling an earlier decision - GST can be levied on royalty paid by a mineral concession holder for mining concessions granted by the State. - HELD THAT: - The petition relied on the Seven-Judge decision in India Cement Ltd. treating royalty as a tax. That decision has been overruled by a Nine-Judge Bench in Mineral Area Development Authority v. Steel Authority of India, which held that royalty is not a tax. In consequence of the larger Bench's authoritative conclusion that royalty is not a tax, levy of GST on royalty by the respondents is permissible. The impugned notices and summons issued for collection of GST on royalty therefore stand upheld and the writ petition seeking quashing of the notifications and related notices is not maintainable on the basis of the earlier Seventh-Judge precedent. [Paras 5, 6]

Petition dismissed; impugned notices and summons upheld; parties to bear their own costs.

Final Conclusion: The High Court dismissed the petition challenging levy of GST on mining royalty, holding that the earlier Seven-Judge view treating royalty as a tax has been overruled by the Nine-Judge Bench, and therefore the respondents are entitled to levy GST; the impugned notices and summons are upheld.

Royalty not a tax - levy of Goods and Services Tax on royalty paid by a mineral concession holder - overruling of India Cement Ltd. by a Nine-Judge Bench in Mineral Area Development Authority v. Steel Authority of India

Royalty not a tax - levy of Goods and Services Tax on royalty paid by a mineral concession holder - Validity of levy of GST on royalty paid by mineral concession holders for mining concessions granted by the State - HELD THAT: - The petition challenged notifications and consequential notices summonsing levy of GST on royalty paid by mineral concession holders, relying on the earlier Seven-Judge decision in India Cement Ltd. that characterised royalty as a tax. The Court recorded that the said precedent has been overruled by a Nine-Judge Bench in Mineral Area Development Authority v. Steel Authority of India, wherein it was held that royalty is not a tax. In view of that authoritative decision, the respondents are entitled to levy GST on royalty paid by mineral concession holders. Consequentially, the notices and summons issued in pursuance of the challenged notifications are sustainable.

The notices and summons impugned in the petition are upheld and the writ petition is dismissed.

Final Conclusion: The petition challenging levy of GST on mining royalty is dismissed in view of the Nine-Judge Bench ruling that royalty is not a tax, and the impugned notices and summons are upheld; parties to bear their own costs.

Writ against show cause notice - Scope of judicial review under Article 226 - Jurisdiction to detain goods in transit - Inspection to ascertain genuineness of goods in transit - Alternative remedy before statutory authorities - Non-interference with release of goods

Writ against show cause notice - Scope of judicial review under Article 226 - Alternative remedy before statutory authorities - Maintainability of writ petitions challenging show cause notices and the propriety of entertaining such petitions under Article 226 - HELD THAT: - The Court held that writ petitions impugning show cause notices are not to be entertained where an alternative statutory remedy exists and the matter involves disputed questions of fact. Reliance was placed on the judgment in The State of Punjab v. M/s. Shiv Enterprises and others, where the Supreme Court held that it was premature for a High Court to quash a show cause notice and that the writ jurisdiction under Article 226 should not be exercised to decide factual disputes which are to be determined in appropriate proceedings. The coordinate Bench had examined the contention that the goods were not in transit and recorded that inspection to ascertain genuineness or verification of documents justified issuance of the notice; the present Bench declined to re-examine jurisdictional facts and directed petitioners to pursue their statutory remedy before the respondent authorities who shall proceed in accordance with law. [Paras 2, 4]

Writ petitions challenging show cause notices dismissed; petitioners to pursue alternative remedy before the respondents and the Court will not interfere under Article 226 in respect of the notices.

Jurisdiction to detain goods in transit - Inspection to ascertain genuineness of goods in transit - Non-interference with release of goods - Whether the Court would re-examine the claim that the authorities lacked jurisdiction because the goods were not in transit - HELD THAT: - The Court noted that the coordinate Bench had considered and recorded the argument that the goods were not in transit and had referred to the need for inspection to verify the genuineness of goods or documents. Applying the precedent in M/s. Shiv Enterprises, the present Bench refrained from re-examining the jurisdictional contention and declined to act as an assessing authority on disputed factual questions. The coordinate Bench's approach-leaving factual and jurisdictional determination to the statutory authorities while not interfering with any release order-was followed in dismissing the writ petitions with similar reasoning. [Paras 2, 3, 4]

Contention that authorities lacked jurisdiction because goods were not in transit was not re-examined; writ petitions dismissed in pari materia with the coordinate Bench's order.

Final Conclusion: Twenty-two writ petitions dismissed on the basis that challenges to show cause notices raising disputed factual questions are not amenable to relief under Article 226 where an alternative statutory remedy exists; petitioners directed to pursue their remedies before the respondent authorities, and the Court declined to re-examine jurisdictional facts.

Quashing of FIR under Section 482 CrPC - Overlap between multiple FIRs and cause of action - Interplay between statutory tax/penal remedies and criminal investigation - Locus standi of informant to file cognizable complaint - Scope of High Court's inherent jurisdiction to prevent abuse of process

Overlap between multiple FIRs and cause of action - Quashing of FIR under Section 482 CrPC - Maintainability of FIR No.47/2024 despite overlap with FIR No.24/2024 - HELD THAT: - The Court found that although there is an overlap in background allegations between FIR No.24/2024 and FIR No.47/2024, the two FIRs arise from distinct sets of facts and different scopes. FIR No.24/2024 primarily alleges fabrication of documents and ouster from management, whereas FIR No.47/2024 concerns clandestine manufacture/sale, misappropriation of sale proceeds and conversion for personal use, facts which came to light subsequently. The Court held that the mere presence of some common historical facts does not make the second FIR a repetition or barred; the second FIR discloses cognizable offences requiring police investigation and therefore should not be quashed at the threshold. The Court applied the settled caution required in exercise of inherent jurisdiction but concluded the allegations in FIR No.47/2024 prima facie disclose offences that warrant investigation. (paras 8, 9, 10, 22, 23) [Paras 8, 9, 10, 22, 23]

FIR No.47/2024 is maintainable and is not liable to be quashed on the ground of overlap with FIR No.24/2024.

Interplay between statutory tax/penal remedies and criminal investigation - Quashing of FIR under Section 482 CrPC - Whether pending GST show-cause proceedings preclude registration of FIR No.47/2024 - HELD THAT: - The Court rejected the contention that the existence of a Show Cause Notice under the GST regime or statutory penalties under the GST Act precludes criminal investigation under the IPC. It held that specific allegations of misappropriation, conversion of sale proceeds for personal use and purchase of unaccounted assets fall outside the exclusive ambit of the GST Act and constitute separate criminal acts (e.g., criminal breach of trust, misappropriation) which the police are competent to investigate. Consequently, the pendency of GST adjudication did not render the FIR or investigation impermissible. (paras 4, 10, 12, 13) [Paras 4, 10, 12, 13]

Pending GST proceedings do not bar registration or investigation of FIR No.47/2024 where allegations disclose offences beyond the GST Act.

Locus standi of informant to file cognizable complaint - Quashing of FIR under Section 482 CrPC - Competence of the complainant to lodge FIR No.47/2024 - HELD THAT: - The Court held that the complainant's asserted interest in the company and the existence of related civil proceedings before NCLT are sufficient to confer locus to provide information to police. Since the allegations in FIR No.47/2024 relate to misappropriation causing wrongful loss to the company and shareholders and constitute cognizable offences, any person with an interest in the company can supply information to the police. The pendency of civil proceedings before NCLT does not negate the complainant's standing to initiate criminal proceedings. (paras 15, 21, 22) [Paras 15, 21, 22]

The complainant has locus to lodge the complaint and that ground does not warrant quashing of FIR No.47/2024.

Final Conclusion: The petition to quash FIR No.47/2024 is dismissed. The High Court declined to exercise its inherent jurisdiction because the allegations in the impugned FIR disclose cognizable offences distinct from earlier FIR and GST proceedings, the investigation was at a nascent stage, and the complainant had locus to furnish the information.

Penalty for delayed implementation - date of commencement of commercial production - invoice date versus date of production - plot utilization threshold for levy of penalty - recognition of project implementation - quashing of administrative order

Date of commencement of commercial production - invoice date versus date of production - Whether the petitioner commenced production beyond the stipulated period by reference to the invoice dated 18.11.2022. - HELD THAT: - The Court held that the date of raising an invoice is not synonymous with the date of commencement of production or supply. The records show that goods were supplied and despatched on 18.11.2022 and that production necessarily preceded despatch and the subsequent raising of the invoice. Therefore the invoice date cannot be treated as the date of commencement of production for the purpose of determining whether the petitioner acted beyond the stipulated period. This conclusion negates the respondents' reliance on the invoice date as proof of belated commencement. [Paras 10, 12]

The invoice dated 18.11.2022 is not the determinative date of commencement of production and cannot be used to establish belated commencement beyond 01.10.2022.

Plot utilization threshold for levy of penalty - penalty for delayed implementation - Whether the petitioner was liable for a further penalty under SIPCOT's policy when it had utilized more than the minimum required extent and had already paid the penalty previously directed by this Court. - HELD THAT: - The Court noted Clause 2.1.2.(a) of O.O.No.30 of 2020 which envisages levy of penalty where minimum plot utilization is not met. The petitioner, however, had utilized more than 65% of the plot, thereby satisfying the minimum utilization requirement, and had also paid the penalty installments as directed by this Court in earlier proceedings. Having made the payments and having implemented the project, the petitioner could not be subjected to a fresh demand for 5% of prevailing plot cost for the same belatedness that had already been addressed. [Paras 11, 12]

No fresh penalty could be levied where the petitioner met the utilization threshold and had already paid the penalty previously imposed.

Quashing of administrative order - recognition of project implementation - Whether the impugned order dated 12.08.2023 directing payment of 5% penalty should be quashed and the petitioner's project implementation recognised. - HELD THAT: - Applying the conclusions that the invoice date does not mark commencement and that the petitioner had complied with utilization and payment requirements, the Court found infirmity and illegality in the impugned administrative order which directed a fresh 5% penalty. In view of these findings the Court held the respondents' action unsustainable and ordered quashing of the impugned proceedings, with directions to recognise the petitioner's implementation of the project. [Paras 13]

The impugned order dated 12.08.2023 is quashed and the respondents are directed to recognise the petitioner's project implementation.

Final Conclusion: Writ petition allowed; impugned order dated 12.08.2023 quashed, the petitioner's implementation of the project is to be recognised, and there shall be no order as to costs.

Exemption under Entry 23A/24A for services by way of access to a road or bridge on payment of annuity - Taxability of construction services under heading 9954 vis-a -vis operation/support services under heading 9967 - Validity and scope of Circular No.150/06/2021-GST - Writ against show cause notice - prematurity and exceptional interference - Jurisdictional limits for entertaining writ petitions challenging show-cause notices - Effect of GST Council resolutions (22nd and 43rd) on notification interpretation

Validity and scope of Circular No.150/06/2021-GST - Exemption under Entry 23A/24A for services by way of access to a road or bridge on payment of annuity - Effect of GST Council resolutions (22nd and 43rd) on notification interpretation - The impugned Circular No.150/06/2021-GST is a permissible clarification and does not override or contradict Notifications Nos.12, 32 and 33 of 2017; Entry 23A/24A exempts services under SAC 9967 (access on payment of annuity) but does not exempt construction services falling under heading 9954. - HELD THAT: - The Court examined the scheme of Notification Nos.12, 32 and 33 of 2017 alongside the 22nd and 43rd GST Council resolutions. Notifications 32 and 33 inserted Entries 23A and 24A to exempt services under SAC 9967 by way of access to a road or bridge on payment of annuity. The 43rd GST Council clarified that Entry 23A preserves exemption for services under 9967 but does not extend to construction services classified under heading 9954. Circular No.150/06/2021-GST reiterates this distinction, explaining that construction services (9954), even if paid by deferred annuity, are not covered by Entry 23A. The Court found no inconsistency between the 22nd and 43rd Council resolutions and the notifications, and held that the circular is an explanatory clarification aligned with the 43rd Council's position rather than an override of the earlier notifications. [Paras 24, 26, 27, 28]

Circular No.150/06/2021-GST is valid as a clarification; Entry 23A/24A exempts SAC 9967 services (access on payment of annuity) but does not exempt construction services under heading 9954.

Writ against show cause notice - prematurity and exceptional interference - Jurisdictional limits for entertaining writ petitions challenging show-cause notices - The writ petition challenging the show cause notice is premature and not maintainable at this stage; ordinarily courts should not interfere with a mere show cause notice except in rare cases of absence of jurisdiction or wholly illegal action. - HELD THAT: - Applying settled Supreme Court precedents, the Court reiterated that a mere show cause notice does not ordinarily confer a cause of action for writ relief since it is not a final adverse order. Interference at the show-cause stage is warranted only in rare and exceptional circumstances where the notice is wholly without jurisdiction or suffers from such fundamental illegality that it cannot be permitted to stand. The petition did not demonstrate that the issuing authority lacked jurisdiction or that the notice was vitiated by the exceptional defects sufficient to justify pre-emptive quashing. Given that factual determinations remain open and the authority may drop or modify the demand after considering the petitioner's reply, judicial intervention at this stage was inappropriate. [Paras 31, 32, 33, 34, 35]

Writ petition dismissed as premature; no interference with the show cause notice in the absence of a demonstration of jurisdictional illegality or exceptional circumstances.

Taxability of construction services under heading 9954 vis-a -vis operation/support services under heading 9967 - Fact-finding on classification of services (9954 vs 9967) - Whether the petitioner's annuity receipts relate to exempt access services under SAC 9967 or to taxable construction/maintenance services under heading 9954 requires fact-finding and cannot be decided in the writ; the petitioner is permitted to present its explanation before the appropriate authority. - HELD THAT: - Although the petitioner asserted that the annuity is in lieu of toll and thus exempt under Entry 23A, the agreement on record does not expressly vest the right to collect tolls in the petitioner and the material on file does not prima facie establish that the annuity is substitutional for tolls. The Department's case is that the services rendered fall under construction/maintenance heading 9954 and hence are not exempt. Given these competing factual contentions and the necessity of detailed examination of the contract, invoices and the nature of services rendered, the Court held that adjudication on the core taxability question requires fact-finding by the competent authority rather than determination in a writ petition. The petitioner was allowed four weeks to submit its explanation to the authority, which may proceed in accordance with law. [Paras 30, 35]

Issue of classification and taxability (9954 vs 9967) is left for factual determination by the appropriate authority; petitioner directed to submit explanation and authority to proceed.

Final Conclusion: Writ petition dismissed as premature; Circular No.150/06/2021-GST is a valid clarification consistent with the 43rd GST Council's position, Entry 23A/24A exempts services under SAC 9967 but does not cover construction services under heading 9954, and the factual question whether the petitioner's annuity falls within 9967 or 9954 is left open for adjudication by the statutory authority (petitioner permitted four weeks to file explanation).

Quashing of assessment and demand orders - implementation of retrospectively inserted Section 16(5) - condonation of delay in availment of input tax credit - relegation to original authority for fresh adjudication with opportunity to be heard - unblocking and release of Input Tax Credit ledger balance - reservation of all other rival contentions

Quashing of assessment and demand orders - implementation of retrospectively inserted Section 16(5) - condonation of delay in availment of input tax credit - relegation to original authority for fresh adjudication with opportunity to be heard - Impugned Order-in-Original (Annexure-D) and Demand Order/GST-07 (Annexure-E) quashed and matter relegated for fresh consideration in light of insertion of Section 16(5). - HELD THAT: - The Court found the controversy to be directly covered by its earlier decision in M/s. Sadhana Enviro Engineering Services (W.P. No. 6138/2020 dated 03.09.2024) which recognised that Clause 118 of The Finance (No. 2) Act, 2024 inserted Section 16(5) into the CGST Act, extending the time for availing input tax credit in returns filed up to 30.11.2021 for supplies pertaining to financial years 2017-18 to 2020-21. In view of that amendment, the Court quashed the impugned orders and directed that the parties be relegated to the stage of the show cause notice so that the respondents may give effect to and implement the amended provision by providing sufficient and reasonable opportunity to the petitioner and proceed further in accordance with law within one month from receipt of a copy of this order. The Court expressly left open all other rival contentions and did not express any opinion on challenges to the statutory provisions.

Annexure-D and Annexure-E quashed; matter remitted to original authority to implement Section 16(5) with opportunity to be heard and to proceed within one month.

Unblocking and release of Input Tax Credit ledger balance - Impugned blocking of the petitioner's ITC ledger quashed and respondents directed to unblock and release the credit balance. - HELD THAT: - The Court, applying the same reasoning that the amended Section 16(5) is applicable and in view of the need to give effect to that provision, quashed the impugned blocking of the ITC ledger and directed the respondents to unblock and release the petitioner's credit balance forthwith upon receipt of a copy of the order. This relief was granted without deciding other rival contentions which were kept open.

Blocking of ITC ledger quashed; respondents to unblock and release ITC balance immediately on receipt of copy of order.

Final Conclusion: Petition disposed of: impugned assessment and demand orders quashed; parties relegated to original authority to implement Section 16(5) of the Finance (No. 2) Act, 2024 (extending time to avail ITC for FYs 2017-18 to 2020-21) after providing opportunity to the petitioner within one month; impugned ITC blocking quashed and credit to be released; all other contentions reserved.

Turnover - gross receipts - presumptive taxation under Section 44AD - duty drawback as business receipt - profits on sale of licence as business receipt

Turnover - presumptive taxation under Section 44AD - Total turnover for the purpose of computing income under Section 44AD for the relevant year was Rs. 64,74,859/- and not Rs. 74,26,060/- as computed by the Assessing Officer. - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) after examining the sale bills and ledger account accepted the assessee's explanation that four sale bills were accounted in an earlier financial year, and therefore the correct export turnover for the year under consideration is Rs. 64,74,859/-. On this factual finding the addition made by the Assessing Officer treating turnover as Rs. 74,26,060/- was not sustained. The Tribunal recorded that the point as to the assessee's turnover being genuine was not in dispute after appellate scrutiny and directed that the correct turnover be recognised for computation under the presumptive scheme.

Recognised turnover of Rs. 64,74,859/- for computation under Section 44AD and disallowed the Assessing Officer's higher turnover computation.

Gross receipts - duty drawback as business receipt - profits on sale of licence as business receipt - income offered under Section 44AD - Receipts such as duty drawback and profit on sale of licence are business receipts to be considered for computing gross receipts under Section 44AD and the Tribunal directed the Assessing Officer to accept the assessee's fresh offer to tax incorporating such receipts. - HELD THAT: - The Tribunal examined Section 28 including sub-clauses (iiia) and (iiic) which bring duty drawback and profits on sale of licence within business receipts chargeable under the head 'profits and gains of business or profession'. It observed that the assessee had offered income on a presumptive basis under Section 44AD for his total eligible business and that where certain receipts were inadvertently not offered earlier, the assessee filed a fresh computation offering them to tax. The Tribunal noted precedent of coordinate benches treating duty drawback as part of gross receipts and found that the decisions relied upon by the Commissioner (Appeals) were distinguishable. In view of this, the Tribunal accepted the assessee's chart and directed the Assessing Officer to give effect to the new offered-to-tax computation.

Set aside the additions confirmed by the Commissioner (Appeals) in respect of these receipts and directed the Assessing Officer to accept the assessee's revised offer to tax under Section 44AD.

Final Conclusion: The assessee's appeal is allowed; the orders of the Assessing Officer and the Commissioner (Appeals) are set aside to the extent indicated and the Assessing Officer is directed to accept the assessee's revised computation and give effect to the fresh offer to tax under Section 44AD for Assessment Year 2018-19.

Genuineness of purchases - bogus purchases - reliability of documentary evidence - use of banking evidence to prove payment - perversity standard of appellate interference - Section 69C not attracted / inapplicability of deemed income provision

Genuineness of purchases - reliability of documentary evidence - use of banking evidence to prove payment - perversity standard of appellate interference - Section 69C not attracted / inapplicability of deemed income provision - Deletion by the ITAT of the addition of Rs. 7,86,21,320/- disallowing alleged bogus purchases was not impermissible. - HELD THAT: - The Assessing Officer disallowed purchases from four suppliers after field enquiries and service of summons under Section 131 returned unserved and concluded the purchases were not genuine. The assessee produced books, inwards/stock registers, goods receipt notes, transporter receipts, audited accounts, TINs and PANs of suppliers and bank statements evidencing payments. The CIT(A) carried out a project valuation and accepted that expenditure had been incurred while disallowing a part as likely to have been in cash. The ITAT accepted the documentary and banking evidence, observed absence of any material suggesting repayment of amounts to the assessee by way of cash or accommodation entries, and found no reason to reject the stock registers or the physical use of material. The High Court held that the controversy was fact-centric, the ITAT's findings that the purchases were genuine are not perverse, and that questions framed by Revenue under Section 69C do not arise because no additions had been made under that provision in the assessment or appellate orders.

ITAT's deletion of the addition is sustained; the fact-findings are not perverse and Section 69C is inapplicable.

Final Conclusion: The Revenue's appeal is dismissed; the ITAT's findings upholding the genuineness of the purchases and deleting the addition are affirmed and no substantial question of law arises.

Entitlement to TDS credit - treatment of gross sale proceeds under Rule 37BA - kaccha arahtia/commission agent turnover - application of CBDT Circular No.452 (1986) - consistency in tribunal precedents

Entitlement to TDS credit - treatment of gross sale proceeds under Rule 37BA - kaccha arahtia/commission agent turnover - application of CBDT Circular No.452 (1986) - consistency in tribunal precedents - Assessee, a licensed commission agent (kaccha arahtia) in AMYC, is entitled to credit of the entire tax deducted at source and gross sale proceeds cannot be treated as the assessee's income under Rule 37BA. - HELD THAT: - The Tribunal examined the status of the assessee as a licensed commission agent operating under the Agricultural Market Yard Committee and applied CBDT Circular No. 452 (17 March 1986), which distinguishes kaccha arahtias by excluding sales effected on behalf of principals from turnover and treating only the gross commission as turnover. Reliance was placed on earlier decisions of this Bench (Yegneswari General Traders and Thota Venkateswarlu) which applied the same principle and held that Rule 37BA could not be used to treat gross sale proceeds as the agent's income for the purpose of denying TDS credit. Applying the principle of consistency with those tribunal precedents, the Tribunal found that the AO/CPC erred in conceding TDS credit only in part and in applying Rule 37BA to the assessee's gross receipts. Accordingly, the Tribunal set aside the orders of the revenue authorities and directed the AO (CPC) to grant credit of the entire amount of tax deducted at source under the relevant provisions. [Paras 5, 6]

Orders of the revenue authorities set aside and the AO directed to grant credit of the entire TDS amount to the assessee.

Final Conclusion: Appeal allowed; the Tribunal, applying CBDT Circular No.452 (1986) and consistent precedents of this Bench, directed the AO/CPC to grant full credit of tax deducted at source to the assessee (licensed commission agent) for AY 2022-23.

Validity of assessment framed under section 143(3) vis-a -vis proceedings under section 153C - Requirement to issue notice under section 153C when using search material of a third party - Deemed date of receiving seized books/documents as the relevant date for reckoning the block of six assessment years - Quashing of assessment where proceedings under section 153C are not followed

Validity of assessment framed under section 143(3) vis-a -vis proceedings under section 153C - Requirement to issue notice under section 153C when using search material of a third party - Deemed date of receiving seized books/documents as the relevant date for reckoning the block of six assessment years - Assessment framed under section 143(3) for Asst Year 2021-22 is invalid because proceedings should have been initiated under section 153C where search material of a third party was used - HELD THAT: - The Tribunal admitted the assessee's additional grounds challenging framing of assessment under section 143(3) and examined whether the AO ought to have proceeded under section 153C since seized material belonging to a third party was used against the assessee. Relying on the Supreme Court decision in CIT v. Jasjit Singh and subsequent authoritative decisions of the Delhi High Court and coordinate benches of the Tribunal, the Bench held that where books/documents seized from a searched person are to be used against another person, the date of recording satisfaction/receipt of the seized material by the jurisdictional AO of the non-searched person is the relevant date for reckoning the block of six assessment years under section 153C/153A. In such cases the AO must record satisfaction, hand over/receive the seized material in the non-searched person's file and issue notice under section 153C; proceeding by issuing a notice under section 143(2) and framing assessment under section 143(3) without following the statutory mechanism of section 153C is legally improper. Applying these principles to the facts, the Tribunal found the deemed date of receipt/possession of seized documents in the assessee's case to be 03-10-2022, which makes Asst Year 2023-24 the year relevant for section 153C and renders the assessment for Asst Year 2021-22 (framed under section 143(3)) invalid. The Tribunal therefore quashed the assessment framed under section 143(3). [Paras 5, 6, 8]

Assessment framed under section 143(3) for Asst Year 2021-22 is quashed for non-compliance with section 153C; additional grounds allowing challenge to validity are allowed

Final Conclusion: Following Supreme Court and authoritative Delhi decisions, the Tribunal held that where search material of a third party is used, the AO must proceed under section 153C with the deemed date of receipt of seized documents determining the relevant assessment years; accordingly the assessment for Asst Year 2021-22 framed under section 143(3) is quashed and the appeal is allowed.

Penalty under section 271(1)(c) - return filed under section 153A treated as return under section 139 - voluntary disclosure and absence of incriminating material - discretionary nature of penalty - Explanation 5A not attracted without specific incriminating documents

Penalty under section 271(1)(c) - return filed under section 153A treated as return under section 139 - voluntary disclosure and absence of incriminating material - discretionary nature of penalty - Explanation 5A not attracted without specific incriminating documents - Whether the penalty imposed under section 271(1)(c) on the surrendered income is sustainable where the income was declared in the return filed in response to notice under section 153A, accepted by the Assessing Officer, and no incriminating material was relied upon. - HELD THAT: - The Tribunal held that a return filed in response to a notice under section 153A is to be treated as a return filed under section 139 for all consequential purposes. Where the additional income surrendered during search was offered in the return filed under section 153A and the Assessing Officer accepted that return without making any addition in the assessment, the question of concealment or furnishing of inaccurate particulars of income does not arise. The impugned surrendered income was shown to be an estimate of unrecorded sales and there was no specific incriminating document relied upon by the Department to establish concealment; the surrender was voluntary, taxes were paid, and there was no evidence of contumacious conduct. Penalty under section 271(1)(c) is discretionary and cannot be imposed mechanically; the onus to establish concealment rests on the authority and requires tangible evidence. Explanation 5A to section 271(1)(c) cannot be invoked in the absence of specific incriminating materials or documentary basis in the assessment or penalty order. Applying these principles to the facts, the Tribunal found no infirmity in the CIT(A)'s deletion of the penalty. [Paras 6, 8, 9]

Impugned penalty under section 271(1)(c) deleted and Revenue's appeal dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal for AY 2015-16, upholding the deletion of the penalty under section 271(1)(c) because the surrendered income was declared in the section 153A return (treated as a section 139 return), accepted by the Assessing Officer, and there was no incriminating material or evidence of concealment to justify imposition of penalty.

Long Term Capital Gain - Section 54B deduction - Section 2(14) definition of capital asset - Reassessment under section 147/148 - Assessment under section 144 - Verification of factual evidence by Assessing Officer - Failure to consider evidence filed before disposal - Remand for fresh consideration

Section 54B deduction - Long Term Capital Gain - Section 2(14) definition of capital asset - Failure to consider evidence filed before disposal - Verification of factual evidence by Assessing Officer - Remand for fresh consideration - Whether the matter should be remanded to the Assessing Officer for fresh verification and adjudication of factual issues relating to classification of the sold land, entitlement to deduction under section 54B and related evidentiary contentions which the CIT(A) did not adjudicate on merits - HELD THAT: - The Tribunal noted that the assessee had filed material and submissions (including a Google map screenshot and asserted revenue records) before the CIT(A) though those submissions were uploaded late; the CIT(A) declined to give them effect on the ground of delay. The Tribunal observed that the CIT(A) also did not address certain factual facets, including that the transaction was effected by the father and the tax consequence had been assessed in the hands of the mother, facts recorded in the assessment order. Given that the assessment was completed under section 144 and that factual determinations (whether the original land falls within the definition of capital asset under section 2(14), whether the land sold/ acquired was used for agriculture for the requisite period, completeness of title/purchase deeds, and whether purchases were in the assessee's name or a third party's) remain to be verified, the Tribunal concluded that these factual issues require fresh examination. The Tribunal therefore directed that the Assessing Officer consider the factual aspects afresh, verify the evidence and documents, afford the assessee an opportunity of being heard, and determine the correct tax incidence in accordance with law. The Tribunal clarified that its remand is without expressing any view on the merits and cautioned against frivolous adjournments; the assessee was directed to remain cooperative. [Paras 8, 9]

Matter remanded to the file of the Assessing Officer to verify the factual contentions and evidence and to adjudicate entitlement to deductions and correct tax incidence after affording opportunity; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal remanded the appeal to the Assessing Officer for fresh verification of factual issues (classification of the land, entitlement to section 54B relief, supporting deeds and usage for agriculture, and correct tax incidence), directed the AO to afford opportunity to the assessee and to decide the matter on merits, and allowed the appeal for statistical purposes without expressing any view on the substantive merits.

Rejection of books of account and estimation of income under section 145(3) - estimation of net profit rate based on past history - three year average profit rate as guide for fair estimation - acceptance of declared profit rate where it exceeds historical average - treatment of overseas branch receipts in computation of domestic turnover

Estimation of net profit rate based on past history - three year average profit rate as guide for fair estimation - acceptance of declared profit rate where it exceeds historical average - treatment of overseas branch receipts in computation of domestic turnover - Whether the trading addition estimated by applying an NP rate should be sustained or modified and whether the overseas (Sri Lanka) branch receipts should be included for applying the estimated NP rate. - HELD THAT: - The Assessing Officer applied an NP rate of 8% after invoking section 145(3); the CIT(A) reduced it to 7%. The Tribunal followed the established principle that past history is the best guide for fair estimation and directed application of the average NP rate of the preceding three years. The three year average computed from the accepted past years (2013 14, 2014 15 and 2015 16) works out to 5.87%. As the assessee declared NP at 5.99% for the year under appeal, which is higher than the three year average, the Tribunal accepted the declared rate rather than increasing estimated income. The Tribunal also noted that profit from the Sri Lanka branch had already been reflected in the assessee's profit and loss account; therefore no separate addition should arise by including those receipts again for estimation. On these bases the Tribunal allowed the appeal on merits and directed the Assessing Officer to apply the three year average principle and accept the assessee's declared rate where it exceeds that average. [Paras 8]

Appeal allowed; directed AO to use three year average as guide (5.87%) and, since assessee's declared rate (5.99%) exceeds that average, accept the declared rate; no further addition in respect of Sri Lanka branch receipts.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y. 2016 17, directing the Assessing Officer to apply the three year average rule for estimating net profit but to accept the assessee's declared profit rate (5.99%) as it exceeds the computed average, and holding that the Sri Lanka branch profit already reflected in accounts should not attract a further addition.

Revisionary power under section 263 and the test of erroneousness prejudicial to revenue - chargeability of capital gains - date of transfer under a joint development agreement - treatment of gifted property for cost of acquisition and period of holding - deductions claimed from capital gains under sections 54EC and 54F - exclusion of limitation period on account of COVID-19

Exclusion of limitation period on account of COVID-19 - admissibility of the appeal despite delay - HELD THAT: - The period from 15.03.2020 to 28.02.2022 was held to be excluded for limitation in view of the Supreme Court's suo moto direction; a further 90 days from 01.03.2022 was available. Applying that exclusion, the Tribunal concluded there was no delay in filing the appeal and admitted it for hearing. The Court therefore condoned the delay and proceeded to decide the appeal on merits. [Paras 3]

Appeal admitted; no delay for limitation purposes.

Revisionary power under section 263 and the test of erroneousness prejudicial to revenue - validity of the Pr. CIT's exercise of revisionary power under section 263 in setting aside the assessment order - HELD THAT: - The Tribunal examined whether the AO's assessment was "erroneous in so far as prejudicial to the interests of revenue." Having reviewed the facts, documents and the two development agreements, the Tribunal found that certain aspects of the Pr. CIT's conclusion required modification. The Tribunal agreed that the AO's assessment required re-framing on specific points identified by the Pr. CIT, but modified the scope of the PCIT's observations where they were not correct on facts - in particular as to the date of transfer and the proper treatment of receipts under the later registered agreement. The Tribunal therefore modified the order of the Pr. CIT and directed re-framing of the assessment in accordance with its findings. [Paras 11, 19, 20]

The Pr. CIT's order under section 263 is modified; assessment to be re-framed in accordance with the Tribunal's directions.

Date of transfer under a joint development agreement - chargeability of capital gains - treatment of gifted property for cost of acquisition and period of holding - whether the capital gains were chargeable in earlier years or in AY 2015-16 and the correct date of transfer - HELD THAT: - There were two development arrangements: an unregistered agreement/MoU with the first developer which did not materialise, and a later registered joint development agreement dated 26.09.2014 with the second developer. The Tribunal held that the correct date of transfer to be considered is 26.09.2014 being the date of the registered JDA which gave rise to the balance consideration and other benefits under that arrangement. Accordingly, capital gains arising from that (registered) transaction are chargeable in AY 2015-16. The Tribunal also applied the rule that for gifted property the cost of acquisition and period of holding of the donor are to be taken into account for computing capital gains. [Paras 17, 19, 20]

Date of transfer to be taken as 26.09.2014; resultant capital gains are chargeable in AY 2015-16.

Deductions claimed from capital gains under sections 54EC and 54F - allowability of deductions under sections 54EC and 54F in the impugned assessment year - HELD THAT: - On the facts found, the Tribunal held that deduction under section 54EC was allowable in AY 2015-16 as the assessee had invested in specified bonds. The claim under section 54F required factual verification as to completion of the residential house; the AO had earlier disallowed 54F for want of supporting documents and the inspector had reported non-completion. The Tribunal directed that appropriate allowance of cost of acquisition (including donor's cost) and indexation be made, allowed 54EC, and directed that 54F be allowed or disallowed in accordance with the year of completion and on examination of supporting evidence. [Paras 9, 19]

54EC deduction to be allowed in AY 2015-16; 54F to be considered and allowed or disallowed as per the year of completion and evidence on record.

Final Conclusion: Delay in filing the appeal was excluded on account of COVID-19 and the appeal was admitted. On merits the Tribunal held that the taxable transfer is to be treated as the registered joint development agreement dated 26.09.2014 and the capital gains therefrom are chargeable in AY 2015-16; the Tribunal modified the Pr. CIT's order under section 263 accordingly, allowed the claim of deduction under section 54EC, left the claim under section 54F to be decided according to completion year and supporting evidence, and directed re-framing of the assessment in conformity with these findings.

Filing of Form 10B as a procedural requirement - curable defect in filing audit report - condonation of delay in filing audit report - substantial compliance - eligibility for exemption under Section 11

Filing of Form 10B as a procedural requirement - condonation of delay in filing audit report - eligibility for exemption under Section 11 - Whether delay in e-filing of audit report in Form 10B, caused by technical glitches though the return was filed within time, justified denial of exemption under Section 11. - HELD THAT: - The Tribunal examined the facts that the assessee, a registered trust, filed its return for A.Y. 2018-19 within the time prescribed under Section 139(1), but the auditor's report in Form 10B was uploaded after the prescribed due date due to technical glitches. On review of precedents of this Tribunal and higher courts, the Bench accepted the view that filing of Form 10B is a procedural requirement and defects in its filing are curable by condonation of delay where the substantive conditions for exemption are otherwise satisfied. The Tribunal noted authorities treating the requirement as directory and applying the doctrine of substantial compliance, and it observed that the audit itself was completed prior to filing of the return. In these circumstances, and in the absence of mala fide or lethargy by the assessee, the delay was condoned and the matter remitted to the Assessing Officer to allow the benefit of Section 11 if the assessee is otherwise eligible. [Paras 4, 5, 6]

Delay in e-filing Form 10B is condoned; denial of exemption under Section 11 on that ground set aside and AO directed to give effect to Section 11 if assessee is otherwise eligible.

Final Conclusion: Appeal allowed: delay in filing Form 10B condoned on account of technical glitches; CIT(A)'s confirmation of denial under Section 11 set aside and Assessing Officer directed to allow exemption if the assessee meets the substantive conditions.

TDS credit claim where employer has deducted but not deposited tax - onus on the assessee to substantiate TDS deduction by producing Form No.16, salary slips or bank statements - recovery of TDS from employer under statutory recovery provisions - benevolent nature of TDS credit

TDS credit claim where employer has deducted but not deposited tax - onus on the assessee to substantiate TDS deduction by producing Form No.16, salary slips or bank statements - benevolent nature of TDS credit - Allowability of claimed TDS credit for AY 2018-19 where employer deducted TDS but it was not reflected in Form 26AS and not deposited by the employer - HELD THAT: - The Tribunal recognised the legal position that a claim for TDS credit may be sustainable even if the employer has deducted tax but not deposited it, and noted precedents where recovery lies against the employer rather than the employee. However, the Tribunal emphasised that the assessee bears the primary onus to substantiate that tax was deducted from his salary. In the present case the assessee failed to produce contemporaneous or corroborative documents - notably Form No.16, salary slips, appointment letter or bank statements - and filed only an unsigned/unnamed TDS working which was not on proper letterhead. Because the assessee did not discharge the evidentiary burden, the lower authorities' refusal to grant TDS credit could not be treated as erroneous on the existing record. Notwithstanding these deficiencies, in the interests of justice and because the issue could not be adjudicated properly without allowing the assessee an opportunity to produce supporting evidence, the Tribunal remanded the matter to the Commissioner for fresh decision after granting the assessee a reasonable opportunity to produce the requisite documents; the Tribunal clarified that the prima facie onus to substantiate the claim rests on the assessee. [Paras 6]

Remanded to the file of the Commissioner for fresh decision after giving the assessee a reasonable opportunity to produce relevant documents; prima facie onus on the assessee to substantiate the TDS claim.

TDS credit claim where employer has deducted but not deposited tax - recovery of TDS from employer under statutory recovery provisions - onus on the assessee to substantiate TDS deduction by producing Form No.16, salary slips or bank statements - Disposition of the appeal for AY 2019-20 consequent to the decision in AY 2018-19 - HELD THAT: - The Tribunal applied the same reasoning adopted in the lead appeal (AY 2018-19) to the appeal for AY 2019-20. Having remanded the lead matter for fresh consideration and having allowed that appeal for statistical purposes, the Tribunal directed that the companion appeal for AY 2019-20 be treated similarly and allowed for statistical purposes in the same terms. [Paras 8]

Allowed for statistical purposes in the same terms as ITA No.3335/Mum/2023 (AY 2018-19).

Final Conclusion: Both appeals are allowed for statistical purposes; the appeal for AY 2018-19 is remanded to the Commissioner for fresh adjudication on the TDS credit claim after affording the assessee a reasonable opportunity to produce corroborative documents, and the appeal for AY 2019-20 is allowed for statistical purposes in the same terms.

Provisional attachment - cessation of provisional attachment on expiry of six months - extension of provisional attachment under proviso to sub-section (2) of Section 281B - interim stay linked to existence of provisional attachment

Provisional attachment - cessation of provisional attachment on expiry of six months - extension of provisional attachment under proviso to sub-section (2) of Section 281B - Whether the provisional attachment orders dated 10.01.2024 continue in effect after the expiry of six months in the absence of any extension under the proviso to sub-section (2) of Section 281B of the Act - HELD THAT: - The Court found that provisional attachment orders passed on 10.01.2024 under Section 281B(1) remain in force for six months by virtue of Section 281B(2). The respondents are empowered by the proviso to sub-section (2) to extend the provisional attachment for a further period (subject to the statutory conditions). In the present case no extension order was passed prior to the expiry of the original six-month period. Consequently, the original provisional attachment orders ceased to have effect upon expiry of six months from 10.01.2024, namely from 10.07.2024, because the statutory power of extension was not exercised. [Paras 6, 7]

The provisional attachment orders dated 10.01.2024 ceased to have effect from 10.07.2024 in the absence of any extension under the proviso to sub-section (2) of Section 281B.

Interim stay linked to existence of provisional attachment - infructuousness of writ petition upon cessation of attachment - Consequences of cessation of the provisional attachment on the interim orders granted by the Court and on the maintainability of the writ petitions - HELD THAT: - The Court observed that its interim order dated 15.02.2024 was operative only so long as the impugned provisional attachment orders remained in existence. Once the provisional attachment orders ceased to have effect on expiry of the six-month period and no extension was made, the interim order automatically ceased to operate. With the attachment no longer in force, there remained nothing to be adjudicated in the writ petitions, rendering them infructuous. [Paras 7, 8]

The interim stay ceased with the lapse of the provisional attachment and the writ petitions have become infructuous and are dismissed.

Final Conclusion: The provisional attachment orders dated 10.01.2024 lapsed on expiry of six months on 10.07.2024 in the absence of any statutory extension; the interim order granted by this Court accordingly ceased to operate and the writ petitions have become infructuous and are dismissed.

Revision under Section 263 of the Income Tax Act - Right to be heard / Audi alteram partem in revision proceedings - Treaty shopping and conduit arrangements - Permanent establishment and taxation as fees for technical services - Applicability of DTAA benefits contingent on factual determination

Revision under Section 263 of the Income Tax Act - Right to be heard / Audi alteram partem in revision proceedings - Treaty shopping and conduit arrangements - Validity of the Commissioner's order under Section 263 when the assessee was not given an opportunity to meet the allegation that it was a conduit company engaged in treaty shopping - HELD THAT: - The learned CIT initiated proceedings under Section 263 on the basis that the Assessing Officer had not made necessary enquiries to verify whether the assessee had a permanent establishment in India, whether the receipts were chargeable as fees for technical services, and whether the assessee was a conduit structured for treaty shopping. The Show Cause Notice identified these failures and invited explanation. However, the record shows that the tentative opinion that the assessee was a conduit and that the arrangement amounted to treaty shopping was not put to the assessee for rebuttal before the learned CIT concluded the revision. The Income Tax Appellate Tribunal was therefore justified in setting aside the revision order on the ground that the assessee was not afforded an opportunity to counter the crucial allegation affecting its entitlement to treaty benefits. Procedural fairness required that the assessee be given a chance to meet the specific adverse findings relating to commercial substance and conduit status before prescribing that the DTAA benefit be denied and taxability be determined under domestic law. [Paras 9, 14, 15]

Revision order under Section 263 set aside because the assessee was not given an opportunity to rebut the allegation of being a conduit company engaged in treaty shopping.

Applicability of DTAA benefits contingent on factual determination - Permanent establishment and taxation as fees for technical services - Whether any substantial question of law arises warranting interference with the ITAT's order allowing the appeal - HELD THAT: - The Revenue contended that entitlement to treaty benefits depends on facts of each year and that the ITAT erred in following earlier assessments without making detailed enquiries to determine ineligibility due to treaty shopping. The Revenue's principal contention, however, depended on establishing that necessary enquiries were in fact conducted and that the assessee had been given an opportunity to meet adverse findings. Having found that the learned CIT did not put the decisive allegation to the assessee and failed to afford the opportunity of rebuttal, the Court concluded that no substantial question of law arises for interference with the ITAT's order. The appeal therefore does not succeed on the grounds advanced. [Paras 16]

No question of law arises; Revenue's appeal dismissed.

Final Conclusion: The High Court dismissed the Revenue's appeal. The ITAT's decision setting aside the Commissioner's Section 263 order was upheld because the assessee was not afforded an opportunity to meet the allegation of being a conduit/treaty shopping arrangement; consequently no substantial question of law warranted interference.

Condonation of delay - sufficient cause - discretionary relief in appellate time-limits - remand for fresh adjudication - opportunity of being heard

Condonation of delay - sufficient cause - discretionary relief in appellate time-limits - Delay of 35 days in filing the appeal before the CIT(A) is condoned. - HELD THAT: - The Tribunal examined the assessee's explanation that the appeal to the CIT(A) was delayed because the assessee had earlier instituted a writ petition before the High Court and only after that petition was withdrawn the appeal was filed. The Tribunal found that the delay was not intentional and that the assessee had offered a bona fide reason amounting to sufficient cause. The CIT(A) erred in rejecting the condonation application and dismissing the appeal for delay without accepting the explanation. In view of these conclusions, the Tribunal exercised its jurisdiction to condone the delay of 35 days and stated that the appeal ought to be decided on merits. [Paras 6]

Delay of 35 days is condoned and the appeal is restored for adjudication on merits.

Remand for fresh adjudication - opportunity of being heard - Matter restored to the CIT(A) for fresh decision on merits after providing opportunity of hearing to the assessee. - HELD THAT: - Having condoned the delay, the Tribunal concluded that the CIT(A) should have proceeded to decide the appeal on its merits. The Tribunal therefore set aside the order of dismissal for delay and remitted the matter to the file of the CIT(A) with a direction to decide the appeal afresh in accordance with law after affording the assessee a proper opportunity of being heard. [Paras 6]

Matter remitted to the CIT(A) to decide the appeal afresh on merits after giving the assessee an opportunity of hearing.

Final Conclusion: Appeal partly allowed for statistical purposes: delay of 35 days condoned and the matter restored to the CIT(A) for fresh adjudication on merits after granting opportunity of hearing.

Penalty u/s. 271(1)(c) of the Income Tax Act, 1961 - addition made on estimated basis - treatment of alleged bogus purchases

Penalty u/s. 271(1)(c) of the Income Tax Act, 1961 - addition made on estimated basis - treatment of alleged bogus purchases - Whether penalty under section 271(1)(c) is leviable where the assessing officer's addition on account of alleged bogus purchases is sustained by the appellate authority only on an estimated basis - HELD THAT: - The Tribunal noted that the AO disallowed 100% of purchases treating them as non-genuine, while the Ld.CIT(A) reduced the addition to 12.5%, i.e., sustained an addition on an estimated basis. The Bench relied on precedents of the High Courts which held that penalty under 271(1)(c) is not leviable where additions are made on an estimated basis, citing CIT vs. Krishi Tyre Retreading and Rubber Industries and CIT vs. Sangrur Vanaspati Mills Ltd. . The Tribunal observed that these decisions have been followed by the Mumbai Benches in Jatin Enterprises vs. ACIT and concluded that where the addition is sustained only by estimation, penalty under 271(1)(c) cannot be imposed. Applying that principle to the facts - AO's 100% disallowance reduced to 12.5% by the Ld.CIT(A) - the Tribunal held the penalty unsustainable and directed its deletion. [Paras 5, 6]

Penalty under 271(1)(c) deleted; appeals allowed and AO directed to delete the penalties for both years.

Final Conclusion: Following precedent that penalty under section 271(1)(c) is not leviable where additions are sustained on an estimated basis, the Tribunal set aside the CIT(A)'s confirmation of penalties and directed deletion of the penalties for AYs. 2010-11 and 2011-12; both appeals are allowed.

Validity of reopening of assessment under section 147 - Accommodation entries and bogus long term capital gains - Reliance on investigation reports and requirement of independent corroboration - Principle of human probabilities versus evidentiary proof - Right to cross examination of persons whose statements are relied upon - Eligibility for exemption under section 10(38) where shares are dematerialised and STT paid

Validity of reopening of assessment under section 147 - Principle of human probabilities versus evidentiary proof - Whether the reassessment framed under section 147 was valid and sustainable in absence of material linking the assessee to fraudulent transactions - HELD THAT: - The Tribunal examined the reopening and found that the Assessing Officer and the CIT(A) proceeded largely on the basis of surmise and the concept of human probabilities, without bringing on record material establishing a link between the assessee and the alleged entry operators, price rigging or exit providers. The authorities did not point to any defect in the documents filed by the assessee nor produce evidence showing that the assessee participated in rigging or collusion. In these circumstances the reassessment could not be sustained. The Tribunal followed precedents where, despite suspicious characteristics of a scrip, additions could not be upheld absent cogent material against the taxpayer, and concluded that the reassessment was not justified on the record before it. [Paras 8, 10, 11]

Reopening and reassessment under section 147 held unsustainable and allowed in favour of the assessee.

Accommodation entries and bogus long term capital gains - Eligibility for exemption under section 10(38) where shares are dematerialised and STT paid - Whether the long term capital gains claimed on sale of the shares were bogus accommodation entries and not entitled to exemption - HELD THAT: - On the facts, the assessee produced purchase documents, demat statements, broker contract notes, bank statements showing payments through banking channels and sales routed through recognised stock exchange with STT paid. The Tribunal observed that although the scrip displayed characteristics of a penny stock, the Revenue failed to bring material implicating the assessee in any shady scheme or showing that money was routed from the assessee to entry providers. Absent such material the initial onus under section 68 (and the claim under section 10(38)) stood discharged and the addition treating LTCG as accommodation entry could not be sustained. [Paras 8, 10, 11]

Addition disallowing/excluding exemption for long term capital gains as accommodation entries rejected; exemption claim accepted.

Reliance on investigation reports and requirement of independent corroboration - Principle of human probabilities versus evidentiary proof - Whether reliance on the Investigation Wing's report without independent corroboration was sufficient to sustain additions - HELD THAT: - The Tribunal held that the Assessing Officer's heavy reliance on an investigation report, without conducting independent enquiries or adducing corroborative material, was inadequate to sustain a finding of bogus transactions. The authorities did not secure confirmation of statements or summon relevant parties whose statements were relied upon. Precedents were followed holding that investigative reports must be supported by cogent material before additions can be made. Consequently the Tribunal found the reliance on the report to be insufficient. [Paras 8, 10]

Reliance on the investigation report without independent corroboration rejected; additions based solely thereon set aside.

Right to cross examination of persons whose statements are relied upon - Reliance on investigation reports and requirement of independent corroboration - Whether denial of cross examination of persons whose statements were relied upon vitiated the assessment - HELD THAT: - The assessee had sought opportunity to cross examine persons whose statements the department relied upon, but the Assessing Officer did not afford such opportunity and proceeded on the basis of uncorroborated third party material. The Tribunal noted that statements relied upon by the department ought to be confronted and, where necessary, corroborated by independent enquiry; absence of this process rendered the reliance infirm. This procedural and evidentiary lapse formed part of the basis for setting aside the additions. [Paras 8, 10]

Denial of proper opportunity to confront and test third party statements contributed to setting aside the additions.

Final Conclusion: The appeals for Assessment Years 2012 13 and 2013 14 are allowed: the reassessments and consequent additions treating the long term capital gains as accommodation entries are set aside, the exemption/claims of the assessee accepted on the record before the Tribunal.

Application under Section 11(6) for appointment of arbitrator - principles underlying Order 23 Rule 1 CPC - limitation for Section 11(6) applications (Article 137) - exclusion of time under Section 14 of the Limitation Act - condonation of delay under Section 5 of the Limitation Act - distinction between CIRP under IBC and private arbitration

Application under Section 11(6) for appointment of arbitrator - principles underlying Order 23 Rule 1 CPC - Maintainability of a fresh Section 11(6) petition after unconditional withdrawal of an earlier Section 11(6) petition without liberty to file afresh - HELD THAT: - The Court held that the public policy principle embodied in Order 23 Rule 1 of the CPC-preventing refiling after withdrawal without court-granted liberty-can be extended to applications under Section 11(6) because such applications effectuate the commencement of actual arbitration proceedings and are temporally sensitive. An unconditional withdrawal of a Section 11(6) petition amounts to abandonment of both the prayer for appointment and the substantive arbitration (paras 34-36, 52-66). Where the earlier petition was withdrawn without seeking or obtaining liberty to refile, and the withdrawal was not to cure a formal defect or for other sufficient grounds but rather to pursue IBC proceedings, the subsequent Section 11(6) petition arising from the same cause of action is not maintainable (paras 56-61). The Court emphasised that bonafide conduct may save a litigant, but on these facts the respondent's conduct (withdrawing to pursue IBC despite awareness of pre-existing dispute) was not a bona fide mistake warranting deviation from the Rule (paras 58-61). [Paras 34, 52, 56, 58, 61]

Fresh Section 11(6) petition was not maintainable because the earlier petition was withdrawn unconditionally without liberty to file afresh.

Limitation for Section 11(6) applications (Article 137) - application under Section 11(6) for appointment of arbitrator - Whether the second Section 11(6) petition was time-barred - HELD THAT: - The Court applied Article 137 to hold that the limitation period for a Section 11(6) application is three years from the date the right to apply accrues (post a valid notice invoking arbitration and failure to appoint as agreed) (paras 69-71). The respondent's first Section 11(6) petition (16.02.2018) was within time, but the second petition filed on 09.12.2022 was beyond the three-year period (the relevant three-year window having expired in August 2019) and therefore time-barred (paras 72-76, 74). The Court rejected the High Court's conclusion that the intervening IBC proceedings preserved the limitation period, observing that the second petition failed the temporal test even if principles analogous to Order 23 Rule 1 were not applied (paras 72-76). [Paras 69, 71, 74, 75]

The fresh Section 11(6) petition was time-barred.

Exclusion of time under Section 14 of the Limitation Act - distinction between CIRP under IBC and private arbitration - Whether the period spent prosecuting IBC proceedings is excludable under Section 14 so as to save the second Section 11(6) petition from limitation - HELD THAT: - The Court analysed Section 14(1) and (2) and concluded that Section 14(2)-which excludes time where earlier and later proceedings are applications prosecuted for the same relief-governs a Section 11(6) application (paras 78-86). Applying that test, the Court held that CIRP proceedings under the IBC seek a fundamentally different relief (initiation of CIRP, a proceeding in rem focused on revival/rehabilitation of the corporate debtor) from a Section 11(6) application (appointment of an arbitrator to adjudicate private contractual disputes) and therefore are not proceedings "for the same relief" (paras 90-107). Consequently, the period spent pursuing IBC proceedings could not be excluded under Section 14(2). The Court further held that the respondent's choice to abandon arbitration and pursue IBC was not a bona fide mistake but a tactical decision, defeating any claim to Section 14(2) relief (paras 106-110). [Paras 83, 90, 97, 106, 107]

Respondent is not entitled to exclusion of time under Section 14; IBC proceedings are not for the same relief as a Section 11(6) arbitration application.

Condonation of delay under Section 5 of the Limitation Act - application under Section 11(6) for appointment of arbitrator - Whether the delay in filing the second Section 11(6) petition could be condoned under Section 5 - HELD THAT: - The Court confirmed that Section 5 is available to applications under Section 11(6) and that a formal application for condonation is not an absolute prerequisite, but the applicant must show sufficient cause and the Court retains discretion (paras 117-121). Exercising that framework, the Court found no sufficient cause: the respondent voluntarily abandoned a timely Section 11(6) petition to pursue IBC despite awareness of objections, and there was no convincing justification amounting to a genuine unavoidable delay. Given the need for expeditious resolution under the Arbitration Act and the respondent's conduct, the Court declined to exercise discretion to condone the delay (paras 121-124, 131). [Paras 117, 121, 122, 123, 131]

Delay in filing the second Section 11(6) petition is not to be condoned under Section 5.

Final Conclusion: The appeal is allowed: the High Court order appointing an arbitrator is set aside. The fresh Section 11(6) petition was (i) not maintainable because the earlier petition had been unconditionally withdrawn without liberty to refile, (ii) time-barred, (iii) not saved by Section 14 of the Limitation Act, and (iv) not entitled to condonation under Section 5. Parties to bear their own costs.

Eligibility of 75% abatement for Goods Transport Agency (GTA) services - sufficiency of declaration by GTA for availment of abatement - non availment of Cenvat credit as condition for exemption - reverse charge liability on recipient for GTA service - administrative clarification in CBEC circular cannot override absence of prescribed format

Eligibility of 75% abatement for Goods Transport Agency (GTA) services - sufficiency of declaration by GTA for availment of abatement - non availment of Cenvat credit as condition for exemption - administrative clarification in CBEC circular cannot override absence of prescribed format - Entitlement of the appellant (service recipient) to 75% abatement under Notification No. 32/2004 ST and Notification No. 1/2006 ST for GTA services where declarations regarding non availment of Cenvat/benefit of Notification No.12/2003 ST were furnished by the transporters. - HELD THAT: - The Tribunal examined whether the appellant could claim the 75% abatement though the department alleged that declarations required under the Board's circular were not made on each consignment note. The record shows that the transport agencies had declared - on consignment notes, invoices and/or their letter heads - that they had neither availed Cenvat credit on inputs/capital goods nor the benefit of Notification No.12/2003 ST and would not avail such benefit in future. The Tribunal accepted the line of earlier decisions holding that the notifications do not prescribe a specific format for the declaration and that, in absence of any format prescribed in the notifications, a general or letter head declaration by the GTA is sufficient. The Tribunal further relied on the Board's circular and subsequent clarifications which recognise that a declaration by the GTA in suitable form suffices and on precedent which rejected the Revenue's insistence on declaration on each consignment note. Applying those principles to the facts, the Tribunal found substantive compliance with the conditions of the notifications and held that the benefit of the 75% abatement could not be denied to the appellant. [Paras 6, 7]

Impugned adjudication denying the abatement set aside and the appeal allowed; appellant entitled to the 75% abatement.

Final Conclusion: The Tribunal set aside the adjudication and allowed the appeal, holding that the appellant - being the recipient who paid service tax on GTA services under reverse charge - was entitled to the 75% abatement under the relevant notifications since the transport agencies had made the requisite declarations and no specific format for such declarations is prescribed.

Reverse charge mechanism - liability to pay service tax - works contract services - CENVAT credit on input services - non-extinguishment of liability despite non-reimbursement

Liability to pay service tax - reverse charge mechanism - works contract services - Appellant, as service provider of works contract services, was liable to pay 50% of the service tax notwithstanding that the service recipient paid the other 50% under the notification shifting part liability under reverse charge. - HELD THAT: - The notification applicable to works contract services apportioned the service tax liability equally between the service provider and the service recipient. The service recipient's payment of its 50% share does not absolve the service provider from its statutory obligation to pay the remaining 50%. The records show that the service recipient paid its share, whereas the appellant did not discharge its share and also failed to file returns; consequently a show cause notice was issued and the dues were confirmed. The Tribunal finds no error in upholding the liability of the appellant to pay its 50% share of service tax. [Paras 4, 5, 6, 11, 12]

Demand for appellant's 50% share of service tax was validly raised and confirmed.

CENVAT credit on input services - reverse charge mechanism - Appellant was not entitled to CENVAT credit for service tax paid by the service recipient under the reverse charge mechanism on the appellant's output service. - HELD THAT: - Where service tax is paid by the service recipient under reverse charge, the statutory entitlement to take CENVAT credit lies with the service recipient if the tax was paid on an input service for a taxable output. There is no provision allowing the service provider to claim credit of service tax paid by the recipient on the provider's output service. The appellant's contention that it could claim credit for amounts deducted by the service recipient is a misreading of the law; payment by the recipient does not create a credit entitlement in the provider. [Paras 7, 10, 11]

Claim that appellant could claim credit for service tax deducted/paid by the service recipient was rejected.

Non-extinguishment of liability despite non-reimbursement - Withholding or non-payment by the service recipient of amounts in invoices does not extinguish the appellant's statutory liability to pay its share of service tax. - HELD THAT: - Payment disputes between the service provider and service recipient over contractual consideration or withheld amounts do not affect the statutory obligation to discharge tax liabilities. The liability to pay service tax arises from the rendering of a taxable service and is to be complied with irrespective of recovery from the recipient. Consequently, the fact that amounts were withheld by the recipient cannot be a defence against a tax demand when the provider failed to pay its share and did not file returns. [Paras 11]

Appellant's defence based on withheld payments by the recipient was rejected and does not negate tax liability.

Final Conclusion: The impugned order confirming the demand, interest and penalties was upheld; the appeal was dismissed.

Classification as 'commercial or industrial construction service' - exemption for construction services provided to educational institutions - classification as 'works contract service' - support services vs construction services - extended period of limitation for recovery of service tax - interpretation and application of exemption notifications

Classification as 'commercial or industrial construction service' - exemption for construction services provided to educational institutions - interpretation and application of exemption notifications - Construction of a hostel building for an educational institution is not taxable as a commercial or industrial construction service. - HELD THAT: - The Tribunal found as an undisputed fact that the works were for Gujarat Adani Institute of Medical Science, an educational institution. Relying on earlier Tribunal and High Court decisions, the Tribunal held that construction of buildings predominantly for educational use cannot be treated as commercial or industrial construction. The reasoning emphasises that such constructions are non-commercial in nature and fall outside the taxable ambit, particularly having regard to exemption notifications and circulars which exclude civil structures meant predominantly for use other than commerce, industry or any other profit-oriented business. The Tribunal also observed that services received for construction of such educational structures are not support services of the recipient institution where those functions are not ordinarily carried out by the institution itself. Applying these principles to the facts, the demand under the impugned head was held unsustainable.

Demand set aside; construction of the hostel for the educational institute is not taxable under 'commercial or industrial construction service'.

Extended period of limitation for recovery of service tax - support services vs construction services - Extended period of limitation could not be invoked because there was no suppression with intent to evade tax; the appellant's bona fide belief about non-taxability is accepted. - HELD THAT: - The appellant advanced a bona fide view that the term 'commercial or industrial construction service' did not cover construction of buildings for educational institutions and relied on precedent decisions supporting that position. The Tribunal, having held the construction non-taxable on merits and observing that the view was supported by earlier authoritative decisions and notifications, concluded there was no deliberate suppression or intent to evade payment of tax. Consequently, invoking the extended period of limitation was not warranted.

Extended period of limitation not invoked; no liability on that ground.

Final Conclusion: The impugned demand was quashed: the hostel construction for the educational institute is not taxable as commercial or industrial construction service, and the extended limitation period cannot be applied; appeal allowed.

Levy of service tax on developers prior to 01.07.2010 - Construction of residential complex services - Composite works contract versus service simpliciter - Self service doctrine where service rendered prior to issue of completion certificate - Application of Larsen & Toubro precedent

Levy of service tax on developers prior to 01.07.2010 - Construction of residential complex services - Composite works contract versus service simpliciter - Application of Larsen & Toubro precedent - Levy of service tax on the appellant/developer for the period prior to 01.07.2010 was not justified - HELD THAT: - The Tribunal accepted the appellant's contention that various Benches of CESTAT, following the decision of the Hon'ble Apex Court in CCE & CC, Kerala v. Larsen & Toubro Ltd., have held that service tax could not be levied on developers for construction of residential complexes prior to 01.07.2010. The Tribunal surveyed coordinating Benches and its own recent order in M/s. Casa Grande Private Ltd., which summarised the law: prior to 01.06.2007 composite works contracts were not taxable as service; after 01.06.2007 but before 01.07.2010 the characterization as works contract or service simpliciter depended on contract nature, yet where service was rendered prior to issuance of completion certificate and transfer to the customer it was regarded as self service and not taxable; and after 01.07.2010 construction of complex services became chargeable. Applying these consistent precedents to the facts, the Tribunal concluded there was no justification to levy service tax on the appellant for the period before 01.07.2010 and restricted any liability to the period after that date.

Impugned order upholding service tax demand for the period prior to 01.07.2010 set aside and appeal allowed with consequential reliefs.

Final Conclusion: The appeal is allowed: the demand of service tax upheld by the lower authority for the period prior to 01.07.2010 is quashed in view of binding precedents following Larsen & Toubro, and any tax liability is restricted to the period after 01.07.2010; consequential benefits to the appellant to follow as per law.

Refund of service tax - renegotiation of consideration / waiver of service fee - absence of consideration negating "service" under Section 65B(44) - refund under Rule 6(3) of the Service Tax Rules read with Section 11B of the Central Excise Act

Refund of service tax - renegotiation of consideration / waiver of service fee - absence of consideration negating "service" under Section 65B(44) - refund under Rule 6(3) of the Service Tax Rules read with Section 11B of the Central Excise Act - Entitlement to refund of service tax paid for services for the period 01.04.2014 to 30.06.2014 consequent to retrospective waiver of the service fee - HELD THAT: - The appellant had rendered marketing and related services to its member milk unions and originally charged a fixed service fee for the period in question, discharging service tax thereon. Subsequently, the Annual General Meeting approved a retrospective waiver (reduction of the invoice value to nil) of the service fee for the period 01.04.2014 to 30.06.2014 and the appellant refunded the fees and the service tax to the milk unions. The tribunal treated that waiver as a re negotiation/amendment of the contractual consideration which, once effected and the consideration refunded, meant the transaction no longer satisfied the essential element of "consideration" required for a "service" under Section 65B(44). Consequently, service tax could not be leviable for that period and the tax so paid was refundable. The tribunal applied this legal principle to the undisputed factual finding that the service fee and tax were waived and refunded to the recipients, and held that the appellant was entitled to the refund under the statutory refund provisions (Rule 6(3) read with Section 11B). [Paras 10, 12, 14, 16, 17]

The order rejecting the refund claim is set aside and the appeal is allowed, entitling the appellant to refund of the service tax paid for 01.04.2014 to 30.06.2014.

Final Conclusion: Where the consideration for a previously taxed activity is retrospectively waived and refunded to the service recipients, the transaction ceases to qualify as a "service" for the relevant period and the service tax paid is refundable; the impugned order rejecting the refund is set aside and the refund claim is allowed for 01.04.2014 to 30.06.2014.

Gross amount charged - valuation of taxable services - inclusion of reimbursable expenses in value - Rule 5 ultra vires Section 67 - service tax chargeable only on amount charged to the service recipient - prospective operation of legislative amendment

Gross amount charged - valuation of taxable services - Rule 5 ultra vires Section 67 - service tax chargeable only on amount charged to the service recipient - Whether unbilled expenditure/revenue not charged to the service recipient forms part of the gross value and is liable to service tax - HELD THAT: - The Tribunal accepted that the amounts in question were neither billed to nor charged on the service recipient. Section 67 requires valuation to be the gross amount charged by the service provider for the service 'provided or to be provided', and service tax is leviable only on the value of services actually rendered. Reliance was placed on the decision of the Hon'ble Supreme Court in Intercontinental Consultants & Technocrats Pvt. Ltd. and the jurisdictional Gujarat High Court decision in Linde Engineering India Pvt. Ltd. which held that Rule 5 of the Service Tax (Determination of Value) Rules, 2006 went beyond the mandate of Section 67 by including reimbursable or incurred expenses within the gross value where such amounts were not charged as consideration for the service. The Tribunal followed those precedents and held that where the amount was unbilled and not charged to the service recipient it could not be treated as part of the gross amount charged for the taxable service and therefore was not liable to service tax for the period prior to the statutory amendment which expressly included reimbursable expenditure. [Paras 4]

Unbilled amount not part of gross value and not liable to service tax; impugned order set aside and appeal allowed.

Limitation - extended period - Validity of demand on the ground of limitation/extended period - HELD THAT: - The Tribunal noted the appellant's contention that the show cause notice invoked the extended period without suppression of facts. However, the Tribunal did not adjudicate the limitation point on merits and expressly left the question of limitation open for determination. [Paras 5]

Issue of limitation/extended period is left open.

Final Conclusion: The appeal is allowed: the demand based on unbilled/uncollected amounts is unsustainable for the period prior to the statutory amendment and the impugned order is set aside; the question of limitation is not decided and remains open.

Input service - sales promotion - Cenvat credit on commission paid to sales agents - Explanation to Rule 2(l) - retrospective/declaratory effect - extended period of limitation invoked on allegation of suppression

Input service - sales promotion - Cenvat credit on commission paid to sales agents - Whether the commission paid to the foreign sales agent under the agreement dated 05.06.2008 amounts to an "input service" attributable to "sales promotion" and is therefore eligible for Cenvat credit. - HELD THAT: - The Tribunal examined Rule 2(l) of the Cenvat Credit Rules, 2004 and the Explanation which expressly includes services by way of sale of dutiable goods on commission basis within "sales promotion". The agreement appointing the agent as sales agent to represent the principal in sales, the agent's obligations to procure sale orders, assist in payments, provide market information and the agreed commission linked to invoice value demonstrate that the agent's activity was for sale promotion. The Tribunal found no adequate reason in the lower orders to deny that the arrangement was for sales promotion and observed that the Explanation and Board Circular treat commissions for sale of dutiable goods on commission basis as covered by "sales promotion", resolving earlier divergent High Court views. Consequently the commission paid was held to be an eligible input service and Cenvat credit was rightly availed by the appellant. [Paras 6, 7, 8, 9, 11]

Commission paid to the sales agent is a sales promotion activity falling within the definition of "input service" and the Cenvat credit claimed on such commission is allowable.

Extended period of limitation invoked on allegation of suppression - Whether the Show Cause Notice invoking the extended period of limitation based on alleged suppression was valid. - HELD THAT: - The Tribunal found that the allegations of suppression were redundant once the commission payments were held to be eligible for Cenvat credit. In view of the substantive finding that the payments constituted sales promotion/input service and the appellant's production of the agreement evidencing the arrangement, the basis for invoking the extended limitation period failed. Therefore the Show Cause Notice was held to be time-barred insofar as it relied on suppression. [Paras 11]

The Show Cause Notice invoking the extended period on the ground of suppression is barred by time.

Final Conclusion: Impugned order-in-appeal is set aside; appeal allowed - Cenvat credit on commission paid to the sales agent for 2011-12 to 2012-13 is held allowable and the Show Cause Notice based on suppression is time-barred, with consequential relief to the appellant.

Penalty under Rule-26 - personal liability of director for excise evasion - scope of liability limited to manufacture - operation of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - section 124(1)(b) of the Amended Finance Act - remand for determination of limitation - statutory time-limits for adjudication under section 11A - CESTAT practice of joint listing of appeals arising from common orders

Penalty under Rule-26 - personal liability of director for excise evasion - scope of liability limited to manufacture - Imposition of penalty on the appellant (Director of Sales and Marketing) was sustainable in law and fact. - HELD THAT: - The adjudicating authority had fastened penal liability on the appellant under the impugned order while recording that the appellant looked after sales and marketing and participated in pricing decisions. Excise duty liability is principally linked to manufacture; sales and marketing are post-manufacture activities. The record did not contain material implicating the appellant as a person equally responsible for evading payment of excise duty. In these circumstances the penalty as imposed on the appellant was unsustainable, the earlier Tribunal order setting aside the Commissioner's order in respect of the appellant having become final, and no material exists to warrant re-adjudication or fresh imposition of penalty on the appellant. [Paras 8, 9]

Penalty imposed on the appellant is unsustainable and is set aside.

Operation of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - section 124(1)(b) of the Amended Finance Act - Whether the appellant's penalty is rendered 'NIL' by operation of the Sabka Vishwas Scheme and section 124(1)(b). - HELD THAT: - The Tribunal noted that the principal noticee availed and obtained relief under the Sabka Vishwas Scheme and relied on the statutory provision and administrative clarifications which treat penalty and related liabilities covered by the Scheme. Given that the appellant's appeal technically remained pending but, by operation of the prior Tribunal order and the Scheme, the penal charge recoverable from the appellant ought to be treated as NIL under section 124(1)(b) of the Amended Finance Act. The Department's contention that co-noticees cannot be granted relief absent a formal order was considered against the statutory scheme and CBIC instructions concerning discharge certificates where the main noticee's liability is settled. [Paras 5, 6, 7, 8]

Penalty recoverable from the appellant shall be treated as NIL by operation of the Scheme and section 124(1)(b).

Remand for determination of limitation - CESTAT practice of joint listing of appeals arising from common orders - statutory time-limits for adjudication under section 11A - Consequences of the Tribunal's remand on limitation and the Registry's failure to list related appeals for joint hearing. - HELD THAT: - The Tribunal observed that its earlier order remanded the matters for determination solely on limitation and that the Registry should have listed appeals arising from a common order together as per CESTAT practice. Because the Commissioner's order was set aside and the appellant's appeal remained technically pending, the matter reverted to the stage of show-cause notice; further, the adjudication has in the instant case exceeded the statutory time-limits contemplated by section 11A. In view of the finality of the Tribunal's earlier order as to the appellant and the absence of proper re-adjudication, no scope for fresh proceedings against the appellant remains. [Paras 3, 4, 7, 9]

The appeal arising from the remand is rendered infructuous as to the appellant and no re-adjudication is warranted.

Final Conclusion: The appeal is allowed: the penalty imposed on the appellant (Director of Sales and Marketing) is set aside as unsustainable; the penalty liability is to be treated as NIL by operation of the Sabka Vishwas Scheme and section 124(1)(b); and no re-adjudication against the appellant is directed.

Prohibition on utilization of CENVAT credit during duty default under Rule 8(3A) of the Central Excise Rules, 2002 - constitutional invalidity / ultra vires of Rule 8(3A) as violative of Article 14 - consequential unsustainability of demands and penalties founded on an invalid rule - revival of High Court precedents following settlement and vacatur of stay in Supreme Court proceedings

Prohibition on utilization of CENVAT credit during duty default under Rule 8(3A) of the Central Excise Rules, 2002 - constitutional invalidity / ultra vires of Rule 8(3A) as violative of Article 14 - Validity of demands confirmed under Rule 8(3A) for alleged default in payment of excise duty - HELD THAT: - The Tribunal recorded that multiple High Courts have held the fetter in Rule 8(3A) - that an assessee in default must pay duty in cash without utilizing CENVAT credit - to be unconstitutional, arbitrary and violative of Article 14. The decision in Indsur Global Ltd. (Gujarat High Court) and subsequent High Court rulings were held to settle the question against the Department. The Department's appeal against Indsur Global before the Supreme Court was resolved by settlement and the stay merged into the settlement, thereby reviving the High Court decisions as binding precedent. In view of those settled authorities and the revival of those precedents, the demand founded on the statutory fiction in Rule 8(3A) could not be sustained and had to be set aside. [Paras 8, 9, 11, 12]

Demand confirmed for violation of Rule 8(3A) is set aside.

Consequential unsustainability of demands and penalties founded on an invalid rule - Sustainability of invocation of extended period and imposition of penalties under the impugned order consequential to the Rule 8(3A) finding - HELD THAT: - The impugned Order-in-Original invoked extended period provisions and imposed penalties based on the finding of non-utilisation of CENVAT credit as mandated by Rule 8(3A). Having held that Rule 8(3A) is ultra vires and the foundational basis for treating the clearances as 'non-duty paid' is unsustainable, the Tribunal concluded that the consequential demand, interest and penalties premised upon that finding must also fall. The Tribunal therefore set aside the entire impugned order with consequential relief as per law. [Paras 2, 12, 13]

Extended-period demand, interest and penalties imposed on that basis are set aside as consequential relief.

Final Conclusion: The appeals are allowed; the Order in Original No. 23/2015 dated 23.04.2015 is set aside and the demand, interest and penalties founded on Rule 8(3A) are quashed, with consequential relief as per law.

Payment of interest - Section 12-A of the Himachal Pradesh Passenger and Goods Taxation Act, 1955 - Liability for tax where vehicles ply within a State despite payment elsewhere - Doctrine of unjust enrichment

Payment of interest - Section 12-A of the Himachal Pradesh Passenger and Goods Taxation Act, 1955 - Liability for tax where vehicles ply within a State despite payment elsewhere - The petitioner is liable to pay interest under Section 12-A of the PGT Act for tax due to Himachal Pradesh notwithstanding that tax was deposited with the authorities of another State. - HELD THAT: - The Court found that the petitioner operated buses within Himachal Pradesh but did not deposit the tax with Himachal authorities and thereby deprived the State of its legitimate revenue. In these circumstances the petitioner cannot avoid interest liability by showing that the tax was deposited in Punjab through inadvertence. The PGT Act mandates payment of simple interest on amounts of tax or surcharge not paid within prescribed periods; the statutory scheme in Section 12-A contemplates accrual and recovery of interest as compensation for deprivation of use of governmental funds. The Court relied on the settled principle that a person deprived of money to which another is legitimately entitled must compensate for such deprivation by way of interest, and held that the interest charged and upheld by the authorities below was in accordance with law.

Petition dismissed insofar as it challenged imposition of interest; liability to pay interest under Section 12-A sustained.

Doctrine of unjust enrichment - Payment of interest - Remedial relief for mistaken payment to another State and Court's directions regarding amounts deposited in the Registry. - HELD THAT: - The Court observed that if tax was wrongly paid to Punjab, the petitioner should have sought refund or recovery from the Punjab tax authorities invoking principles of unjust enrichment, equity and good conscience; that avenue does not absolve the petitioner of interest liability to Himachal. As a matter of disposition, the Court directed that 50% of the amount deposited in the Court's Registry be refunded to the State upon furnishing account details and ordered the petitioner to deposit the remaining 50% of the interest liability along with interest as payable under Section 12-A within one month if not already deposited.

Directions issued for partial refund to the State and for deposit by the petitioner of the remaining interest liability with interest under Section 12-A within one month.

Final Conclusion: Writ petition dismissed; interest liability to Himachal Pradesh upheld under Section 12-A of the PGT Act for the tax relating to 1991-92 to 1999-2000; court directed refund of 50% of the amount deposited in the Registry to the State on furnishing account details and directed the petitioner to deposit the remaining 50% of the interest liability with interest under Section 12-A within one month.

Quashing of assessment order - remand for fresh adjudication - requirement to furnish orders of cancellation of registration - treatment of impugned order as addendum to show cause notice - input tax credit eligibility - retrospective cancellation of registration - consideration of precedents including Division Bench decision

Quashing of assessment order - remand for fresh adjudication - treatment of impugned order as addendum to show cause notice - Impugned assessment orders passed under Section 27 of the TNVAT Act, 2006 are quashed and matter remitted for fresh disposal after providing specified material to the assessee. - HELD THAT: - The Court examined the assessment orders which were preceded by Show Cause Notices dated 05.07.2016 and noted that the Department relied on alleged retrospective cancellations of selling dealers' registrations and on a further case that transactions were bogus, rendering input tax credit ineligible. The Court found that the Assessing Officer must first furnish copies of the orders cancelling the registration certificates of the respective dealers before passing any fresh orders. In view of the absence of those cancellation orders on record and having considered the parties' submissions and relevant precedents, the impugned orders are quashed and the matter is remitted for fresh adjudication on merits. The impugned orders shall be treated as an addendum to the original Show Cause Notices dated 05.07.2016. The Assessing Officer is directed to consider, while passing fresh orders, the Division Bench decision in Tvl. Sahyadri Industries Ltd v. State of Tamil Nadu (order dated 18.04.2023) as may be applicable. [Paras 7, 8, 9]

Impugned assessment orders quashed; matter remitted for fresh orders after furnishing cancellation orders, with the impugned order treated as addendum to the Show Cause Notice and fresh consideration to be afforded on merits.

Final Conclusion: Writ petitions allowed; assessment orders quashed and remitted for fresh adjudication within prescribed timelines after furnishing cancellation orders to the petitioner and permitting a fresh reply; exercise to be completed within six months.

Compounding of royalty - average sale price (ASP) - manifest arbitrariness - Article 14 - explanation to a rule - judicial restraint in economic policy - separation of powers - public consultation

Manifest arbitrariness - Article 14 - compounding of royalty - judicial restraint in economic policy - explanation to a rule - Validity of the Explanation(s) to Rule 38 of the MCR, 2016 and Rule 45 of the MCDR, 2017 under Article 14 insofar as they result in inclusion of previously paid royalty, DMF and NMET contributions in computation of sale value and thereby cause compounding of royalty. - HELD THAT: - The Court held that challenges to economic or fiscal policy require a higher degree of judicial deference and that courts should not substitute their policy judgment for that of the executive or legislature unless there is excess of power, illegality, or manifest arbitrariness. The Explanation(s) appended to Rule 38 and Rule 45 are clarificatory in character and explain the scope of the main provisions; they do not, by themselves, transgress the statutory scheme. Although the mechanism may produce a monetary burden by way of a compounding effect, there is nothing on the record to demonstrate that the respondents acted beyond their powers or that the Explanation(s) are capricious or devoid of any rational basis. Given the executive domain over complex economic regulation, the Court declined to strike down the Explanation(s) on the ground of Article 14 manifest arbitrariness while noting the prima facie anomaly acknowledged by the executive. [Paras 44, 61, 66, 72]

The challenge to the validity of the Explanation(s) to Rule 38 of the MCR, 2016 and Rule 45 of the MCDR, 2017 on the ground of manifest arbitrariness under Article 14 is answered against the petitioners and the Explanation(s) are not struck down.

Public consultation - administrative reconsideration - compounding of royalty - Obligation of the executive to conclude consideration of the acknowledged anomaly and take a final decision. - HELD THAT: - The Court recorded that the executive has itself recognised the issue of compounding of royalty, constituted a committee and initiated public consultation. In view of the ongoing process and the acknowledged anomaly, the Court directed the respondents to complete the public consultation and take a final decision expeditiously. The respondents were reminded of the requirement of fairness, transparency and promptness in administrative decision-making and warned against indefinite delay in exercising the discretion to amend the statutory/regulatory framework. [Paras 77, 78, 80, 84, 86]

Respondents directed to conclude the public consultation process and decide on the cascading impact of royalty on royalty within two months; Registry to list the matter thereafter to report compliance.

Final Conclusion: The Court declined to strike down the Explanations to Rule 38 of the MCR, 2016 and Rule 45 of the MCDR, 2017 as manifestly arbitrary, while noting the executive's acknowledgment of the compounding anomaly and directing the respondents to conclude public consultation and take a final decision within two months, with reporting to the Court thereafter.

Existence of a prima facie arbitration agreement - limited enquiry at the Section 11(6) stage - application of the Limitation Act to Section 11(6) petitions under Article 137 - commencement of limitation upon failure or refusal to comply with a notice invoking arbitration - referral court may decline reference only where claims are manifestly and ex facie time-barred

Existence of a prima facie arbitration agreement - Existence of an arbitration agreement in Clause 13.10 of the Shareholders Agreement is not disputed and supports reference to arbitration. - HELD THAT: - The Court noted that Clause 13.10 of the Shareholders Agreement provides for resolution of disputes by arbitration and that neither party disputed the existence of this arbitration clause. Consistent with the requirement that referral courts examine the existence of a prima facie arbitration agreement and not other issues at the Section 11 stage, the Court held that the arbitration agreement exists and that disputes under the Shareholders Agreement fall within its ambit. Consequently, the matter is fit for reference to arbitration subject to the limited enquiry on limitation. [Paras 12, 45]

Arbitration agreement exists and disputes under the Shareholders Agreement are referable to arbitration.

Limited enquiry at the Section 11(6) stage - application of the Limitation Act to Section 11(6) petitions under Article 137 - commencement of limitation upon failure or refusal to comply with a notice invoking arbitration - Whether the Section 11(6) petitions were filed within the three-year limitation period prescribed for such applications. - HELD THAT: - Relying on precedents, the Court held that while limitation law applies to Section 11(6) petitions, the referral court's enquiry is limited to whether the Section 11(6) application itself was filed within the three-year period under Article 137. The limitation period for a Section 11(6) petition commences only after a valid notice invoking arbitration has been issued and there has been a failure or refusal to comply with that notice. The petitioner served the arbitration notice on 24.01.2017; the respondents failed to comply within 30 days (i.e., by 23.02.2017), from which date the three-year limitation ran. The petitions filed on 09.04.2019 were therefore within the prescribed period, and the Court must not undertake an intricate evidentiary inquiry into when the underlying cause of action arose, which is a matter for the arbitral tribunal. [Paras 31, 36, 41, 42]

The Section 11(6) petitions were filed within the three-year limitation period and are not to be rejected on limitiation at this stage; detailed limitation questions are for the tribunal.

Referral court may decline reference only where claims are manifestly and ex facie time-barred - limited enquiry at the Section 11(6) stage - Whether the substantive merits, including contention that the petitioner's claims are time-barred, should be decided at the Section 11 stage or left to the arbitral tribunal. - HELD THAT: - The Court emphasised that allegations concerning the substantive entitlement to shares and whether those claims are time-barred involve merits and factual inquiries inappropriate for resolution at the Section 11 stage. Subject to the narrow exceptional category of manifestly dead claims, such issues must be left for the arbitral tribunal to decide, including as preliminary issues. The Court observed that if the tribunal ultimately finds claims time-barred or an abuse of process, it may direct that costs be borne by the offending party. [Paras 43, 45, 47, 48]

Merits and questions of limitation of the substantive claims are left for the arbitral tribunal to decide; the tribunal may award costs if claims are found time-barred or abusive.

Final Conclusion: Petitions under Section 11(6) are allowed: the existence of a prima facie arbitration agreement is affirmed; the Section 11(6) applications were filed within limitation (three years from 23.02.2017) and detailed limitation or merit issues are to be decided by the arbitral tribunal. The Court directed constitution of an arbitral tribunal comprising the sole arbitrator already appointed for related disputes, Mr. Mayur Khandeparkar, leaving all other rights and contentions open and noting that the tribunal may award costs if the petitioner's claims are ultimately held time-barred.