TaxTMI Updates e-Newsletter
Nov 18,2023

Show Cause Notice under Section 73 - Order under Section 65(6) - Jurisdiction to issue show cause notice - Status quo - Ex parte proceedings

Show Cause Notice under Section 73 - Order under Section 65(6) - Jurisdiction to issue show cause notice - Status quo - Petition challenging the jurisdiction to issue the Show Cause Notice dated 28.09.2023 on the ground that an order under Form GST ADT-02 issued under Section 65(6) on 17.06.2023 precludes initiation of proceedings under Section 73(1). - HELD THAT: - The petitioner contended that since an order had already been passed under Section 65(6) (Form GST ADT-02 dated 17.06.2023), issuance of a Show Cause Notice under Section 73(1) was without jurisdiction and the petitioner therefore had not filed a reply to the Show Cause Notice dated 28.09.2023. The respondents sought time to obtain instructions, including whether any ex parte order had been passed after 28.10.2023. In view of the jurisdictional challenge and pending instructions, the Court refrained from adjudicating the merits and directed interim preservation of the existing position of proceedings arising from the Show Cause Notice. [Paras 6]

If no order has been passed on or before 28.10.2023 or subsequently to date, status quo shall be maintained in respect of the proceedings arising from the Show Cause Notice dated 28.09.2023 until the next date of listing.

Final Conclusion: Writ petition listed for further consideration; in the interim the Court has directed maintenance of status quo in relation to the proceedings under the Show Cause Notice dated 28.09.2023 (subject to no order having been passed on or before 28.10.2023 or thereafter) and listed the matter on 15.11.2023 for further hearing.

Classification of goods under the Customs Tariff by application of GRI 1 and HSN Explanatory Notes - Interpretation of competing Tariff Headings - Heading 0402 (milk and cream) versus Heading 2202 (beverages including beverages containing milk) - Doctrine of noscitur a sociis in tariff interpretation - Binding nature of recommendations of the Goods and Services Tax Council - Applicability and binding effect of an Authority for Advance Ruling - Inapplicability of pre-amendment precedents where tariff entries were re cast by introduction of 8 digit HSN codes (post 28.02.2005)

Classification of goods under the Customs Tariff by application of GRI 1 - HSN Explanatory Notes as aid to classification - Flavoured milk manufactured from dairy (milch animal) milk is classifiable under Heading 0402 of the Customs Tariff Act, 1975 (residuary 0402 99 90) and not under Heading 2202 when the product is dairy milk based. - HELD THAT: - The Court applied the established rules of tariff interpretation, including GRI 1 and the HSN Explanatory Notes and Chapter/Section Notes adopted for construing Notification No.1/2017. The definition of "milk" in Chapter 4, and the standards and definition of "flavoured milk" in the Food Safety & Standards Regulations (which identify the product as made from milch animals), were held determinative. Chapter 22 (heading 2202) and its Note 3 were construed in their context and, by application of noscitur a sociis, the phrase "Beverage Containing Milk" in sub heading 2202 90 was read with adjacent items (soya drinks, fruit juice based drinks) and confined to plant/seed/other non dairy milk beverages. The Court found that a dairy milk based flavoured milk retains the character of "milk" under Chapter 4 and thus falls in Heading 0402, not in Heading 2202. The Court rejected the Fitment Committee/GST Council classification which treated the product as a non alcoholic beverage containing milk under 2202, holding that classification must be determined by application of the tariff rules and not by the Council's recommendation. [Paras 99, 102, 104, 116, 117]

Flavoured milk proposed by the petitioner (dairy milk based) is classifiable under Heading 0402 (residuary 0402 99 90) and liable to the rate applicable to that entry.

Binding nature of recommendations of the Goods and Services Tax Council - Separation of recommendatory function and statutory rulemaking - Recommendations of the GST Council are recommendatory and do not themselves determine statutory classification; the Council cannot unilaterally determine classification of goods for tariff purposes. - HELD THAT: - The Court relied on Article 279A(4) of the Constitution and the Supreme Court's pronouncement in Union of India v. Mohit Minerals (2022) to conclude that GST Council recommendations are not binding edicts that displace statutory classification. While the Council may recommend rates and model laws, classification must be made in accordance with the adopted Tariff and the statutory rules of interpretation; the Council's recommendation cannot substitute for or override classification properly determined under the Customs Tariff Act and the notification regime. [Paras 32, 33, 118, 120, 121]

The GST Council's recommendation classifying flavoured milk under Heading 2202 cannot be upheld as determinative of tariff classification; classification must be independently determined under the Customs Tariff rules.

Applicability and binding effect of an Authority for Advance Ruling - Scope of AAR decisions - binding only on the applicant and the concerned jurisdictional officer - An advance ruling is binding only on the applicant and the jurisdictional officer in respect of that applicant; AAR rulings and the Appellate AAR's decision in Britannia bind the parties to whom they were addressed but do not conclusively determine classification for other taxpayers. - HELD THAT: - The Court noted Section 103(1) of the respective GST enactments which confines the binding effect of advance rulings to the applicant and the concerned officer. Although the AAR and Appellate AAR had accepted the Fitment Committee/GST Council view in the Britannia matter, those rulings do not preclude independent classification under the statutory tariff rules for other taxpayers. Consequently, reliance on the AAR decisions cannot displace the Court's independent classification based on tariff interpretation when the AAR's binding ambit is limited. [Paras 6, 7, 8, 121]

The AAR/Appellate AAR rulings bind the applicant and concerned officer only and do not prevent independent tariff classification under the Customs Tariff rules for other assessee(s).

Inapplicability of pre-2005 precedents where tariff entries were re-cast by introduction of 8 digit HSN codes - Non-transferability of ratios from differently framed tariff entries - Pre 2005 decisions (including Commissioner v. Amrit Food) dealing with tariff entries as they stood before re casting by the 8 digit HSN amendments are not dispositive of classification under the post 2005 tariff and cannot be mechanically imported to decide classification after the 2005 re cast. - HELD THAT: - The Court observed that the Supreme Court's decision in Commissioner v. Amrit Food (2015) addressed tariff entries as they existed prior to the 2005 re cast. Since Sub Heading 2202 90 30 was specifically introduced in the post 2005 structure, the tests and rival entries considered in Amrit Food are not directly applicable to classification under the amended tariff. The Court therefore held that the petitioner could not be denied relief on the ground of Amrit Food; nonetheless, Amrit Food's tests were not relevant to the present post 2005 classification exercise. [Paras 53, 64, 75, 76, 110]

Amrit Food and other pre 2005 precedents do not govern classification under the tariff structure re cast by the 8 digit HSN amendments; they are not binding for the post 2005 classification in the present matter.

Final Conclusion: Writ petition allowed: the GST Council's recommendation classifying dairy milk based "flavoured milk" under Heading 2202 is not upheld; the product as proposed by the petitioner is to be classified under Heading 0402 (residuary 0402 99 90). The Court left open the Executive's power to amend notification entries or rates on the recommendation of the Council or otherwise; connected petitions closed, no costs.

Classification of goods for tariff/HSN - rate of Integrated Goods and Services Tax (IGST) on imports - administrative clarification by Tax Research Unit, CBIC - mandamus for responding to representations

Classification of goods for tariff/HSN - administrative clarification by Tax Research Unit, CBIC - Dialysis machines (artificial kidney apparatus) have been classified under the 8-digit HSN code 9018 90 31 as per the clarification placed on record. - HELD THAT: - The Court considered the affidavit filed by the Respondents which records that the Tax Research Unit, CBIC, has issued an office memorandum clarifying the tariff item/8-digit HSN code for artificial kidney (dialysis) apparatus as 9018 90 31. The Court directed that the affidavit be placed on record and treated the administrative clarification as answering the Petitioner's request for classification.

The Court accepted the CBIC clarification that the dialysis machine is classifiable under HSN 9018 90 31.

Rate of Integrated Goods and Services Tax (IGST) on imports - administrative clarification by Tax Research Unit, CBIC - The IGST rate applicable to 'Artificial Kidney' and 'Disposable sterilized dialyzer or micro barrier of artificial kidney' is 5%, as stated in the CBIC clarification. - HELD THAT: - The affidavit produced by the Respondents records the Tax Research Unit, CBIC OM dated 13.10.2023 which specifies that the IGST rate for the items in question (artificial kidney and specified disposables) is 5%. The Court treated this administrative communication as responsive to the Petitioner's representations on the applicable IGST rate and found the prayer answered.

The Court accepted the CBIC clarification that the IGST rate for the specified items is 5%.

Mandamus for responding to representations - The petitioner's prayer for a writ directing the Respondents to respond to its representations is satisfied by the clarification placed on record. - HELD THAT: - The petitioner sought a mandamus directing respondents to respond to representations seeking HSN classification and IGST rate. The Court noted the affidavit and the CBIC OM provided during hearing, observed that the clarification answers the petitioner's request, and consequently found that the relief sought by way of mandamus had been met.

The petitioner's request for a direction to respond to the representations stands answered and the writ petition is disposed of.

Final Conclusion: The Court disposed of the writ petition after accepting the CBIC Tax Research Unit's clarification that artificial kidney (dialysis) apparatus is classifiable under HSN 9018 90 31 and that the IGST rate for the specified items is 5%; the petitioner's prayer for a response to its representations was thus answered and the petition is disposed of.

Cancellation of GST registration for fraud, wilful misstatement or suppression of facts - requirement of reasoned order for cancellation of registration - retrospective cancellation of registration - amendment of GST registration on change of principal place of business - administrative verification of existence of business at principal place of business

Requirement of reasoned order for cancellation of registration - cancellation of GST registration for fraud, wilful misstatement or suppression of facts - Validity of the show cause notice and the impugned order cancelling the petitioner's GST registration in the absence of specific reasons or allegations. - HELD THAT: - The SCN did not specify any particular fraud, wilful misstatement or suppressed facts attributable to the petitioner, and the impugned order of cancellation contained no reasons but merely referred to the SCN. The Court held that the petitioner's contention that the SCN and the cancellation order do not disclose reasons is merited and that an order cancelling registration must be informed by reasoned material identifying the basis of cancellation. The absence of specific allegations and absence of reasons in the cancellation order rendered the impugned action unsustainable on the facts of this case. [Paras 8, 10, 12]

SCN and cancellation order lacked required reasons; petitioner's challenge on this ground is accepted.

Amendment of GST registration on change of principal place of business - administrative verification of existence of business at principal place of business - Competence to reject the petitioner's application for amendment of registration and the appropriate course to be followed on the petitioner's claim of change of principal place of business. - HELD THAT: - The petitioner had applied for amendment to reflect change of principal place of business and the application was rejected by order dated 09.05.2023 for alleged non-submission of requisite information. The Court set aside the rejection order and permitted the petitioner to furnish all requisite documents and information before the concerned officer. The Court directed that the concerned officer shall verify whether the petitioner is carrying on business at the claimed principal place of business, and if so satisfied, shall revoke the order cancelling the GST registration. The Court recognised that a prior notice of inspection is desirable, but observed that where the petitioner asserts it has shifted premises a prior notice would not necessarily serve an effective purpose; the matter is therefore left to administrative verification by the officer on receipt of documents. [Paras 5, 11, 13, 14]

Order rejecting amendment application set aside; petitioner allowed to submit documents and the officer directed to verify existence at principal place of business and, if satisfied, to revoke cancellation.

Final Conclusion: The order dated 09.05.2023 rejecting the petitioner's application for amendment is set aside. The petitioner may file requisite documents and the concerned officer shall verify the petitioner's claimed principal place of business; if satisfied, the cancellation of the GST registration (noted as effective from 01.07.2017) shall be revoked. The petition is disposed of accordingly.

Cancellation of GST registration - show cause notice - insufficiency of reasons - retrospective cancellation - procedural fairness / opportunity to be heard - restoration of registration

Show cause notice - insufficiency of reasons - The SCN was legally invalid because it did not specify the particulars of alleged fraud, wilful misstatement or suppression of facts. - HELD THAT: - The Court found that the SCN merely recited the ground of cancellation in general terms without identifying the specific acts or omissions said to constitute fraud, wilful misstatement or suppression. An SCN that proposes cancellation of registration must provide sufficient particulars so that the taxpayer can meaningfully respond; the impugned SCN was bereft of any material particulars and therefore defective. The Court treated the absence of specified allegations as fatal to the validity of the cancellation process. [Paras 2, 4]

SCN held legally deficient for lack of particularised allegations; the defect vitiated the cancellation proceeding.

Procedural fairness / opportunity to be heard - cancellation of GST registration - The impugned cancellation order was unlawful because it was passed before the expiry of the period allowed for response and without affording the petitioner the promised opportunity of hearing. - HELD THAT: - Although the petitioner was granted seven working days to reply and to appear on a specified date, the Proper Officer proceeded to cancel the registration four days later. The impugned order relied on the taxpayer's alleged absence of proper response and failure to produce documents or appear, yet that conclusion was reached without waiting for the time allowed to elapse. The premature exercise of power to cancel contravened the procedure set out in the SCN and denied the petitioner the effective opportunity to be heard. [Paras 3, 5, 6]

Cancellation set aside on grounds of denial of the procedural opportunity to respond and premature decision-making.

Retrospective cancellation - insufficiency of reasons - Cancelling the petitioner's GST registration with retrospective effect to the date of grant was unsustainable where the SCN did not propose retrospective cancellation and no reasons were articulated to justify such effect. - HELD THAT: - The impugned order cancelled registration with effect from the registration date notwithstanding that the SCN did not seek retrospective cancellation. The Court noted that the reasons stated in the order did not identify any fraud or misstatement that would warrant retrospective nullification. Retrospective cancellation cannot be imposed in the absence of proper notice and adequate reasons authorising such a consequence. [Paras 6, 7]

Retrospective cancellation was unjustified and contributed to setting aside the impugned order.

Insufficiency of reasons - cancellation of GST registration - Reliance upon cryptic portal notes alleging that the party was non-functioning and buyers/suppliers were suspicious did not cure the defect of inadequate reasons in the SCN or impugned order. - HELD THAT: - The respondents pointed to an entry on the portal describing the party as 'existent but non-functioning' and referring to 'suspicious' buyers and suppliers, but there was no explanation or particulars elucidating these assertions. The Court held that such cryptic statements, without factual amplification, do not constitute adequate reasons for cancellation; a closed shop or non-response to a phone number, without more, cannot justify cancellation of registration. [Paras 8, 9]

Portal remarks were cryptic and insufficient to validate the cancellation; they did not remedy the SCN's and order's deficiencies.

Restoration of registration - cancellation of GST registration - The impugned cancellation order was set aside and the petitioner's GST registration was ordered to be restored forthwith, subject to respondents' right to take action in accordance with law. - HELD THAT: - Having concluded that the SCN and the cancellation order were legally defective for lack of particularised reasons, premature decision-making and unsupported retrospective effect, the Court directed immediate restoration of the registration. The Court explicitly preserved the respondents' statutory right to initiate fresh proceedings if, on proper notice and with adequate reasons, violations of law are found. [Paras 10, 11, 12]

Registration restored forthwith; respondents permitted to pursue lawful action afresh if justified.

Final Conclusion: The petition succeeds: the cancellation order of 23.05.2022 is quashed and the petitioner's GST registration is to be restored immediately; this does not bar the authorities from initiating fresh proceedings in accordance with law with adequate notice and particulars.

Cancellation of GST registration with retrospective effect - show cause notice issued in the name of a deceased taxpayer - failure to furnish returns as a ground for cancellation of registration - powers of the Proper Officer to cancel registration - liability and obligations of the legal heir under the CGST Act - requirement of reasons for retrospective cancellation

Cancellation of GST registration with retrospective effect - requirement of reasons for retrospective cancellation - failure to furnish returns as a ground for cancellation of registration - Legality of cancelling the deceased taxpayer's GST registration with retrospective effect on the sole ground of non-filing of returns - HELD THAT: - The Court held that although the Proper Officer has statutory power to cancel GST registration with retrospective effect, that power cannot be exercised arbitrarily or without stating reasons. The allegation in the impugned proceedings was limited to failure to furnish returns for six months. Absent any other specific reason, mere non-filing of returns does not justify retrospective cancellation of registration. Given that the taxpayer had died and the department had been informed of the demise, the obligation to file returns after the date of death did not strictly arise. In the circumstances, the Court found retrospective cancellation inappropriate and directed cancellation to operate from the date on which the application for cancellation by the legal heir was filed. [Paras 8, 9, 10]

Cancellation with retrospective effect set aside; registration to be cancelled effective from 30.04.2022 (date of petitioner's application for cancellation).

Show cause notice issued in the name of a deceased taxpayer - powers of the Proper Officer to cancel registration - liability and obligations of the legal heir under the CGST Act - Validity of notices and show cause proceedings issued in the name of the deceased taxpayer after the department was informed of the death - HELD THAT: - The Court noted that the notices, including the impugned show cause notice and the earlier notice proposing dismissal of the cancellation application, were issued in the name of the deceased taxpayer. The petitioner stated these notices were not received and that the department had been informed of the taxpayer's demise. The Court treated issuance of proceedings in the deceased's name and the absence of reasons for retrospective cancellation as material; on that basis it directed corrective relief by fixing the effective cancellation date to the date of the legal heir's application. The petitioner was, however, directed to comply with statutory obligations for the period prior to that date and to supply the information sought in the Proper Officer's notice within two weeks. [Paras 4, 6, 7, 11]

Proceedings issued in the name of the deceased and cancellation without reasons were set aside to the extent they produced retrospective effect; petitioner to furnish departmental requisitions and ensure compliance for the prior period.

Powers of the Proper Officer to cancel registration - requirement of reasons for retrospective cancellation - Whether the Department is precluded from taking further action after the Court's direction - HELD THAT: - The Court clarified that its direction to limit cancellation to the date of the application does not bar the department from initiating proceedings if specific reasons for retrospective cancellation are discovered. If the Proper Officer considers there are specific grounds justifying retrospective cancellation, the department may issue an appropriate show cause notice to the legal heir and proceed in accordance with law. [Paras 12]

Department's power to issue further show cause notices and take steps thereafter remains preserved, subject to establishing specific reasons for retrospective action.

Final Conclusion: The Court set aside the retrospective cancellation of the deceased taxpayer's GST registration and directed that the registration be cancelled with effect from 30.04.2022 (date of the legal heir's application); the legal heir must comply with statutory obligations for the prior period and furnish the information sought, and the Department remains free to initiate properly reasoned proceedings if specific grounds for retrospective cancellation are established.

Regular bail under Section 439 CrPC - Prima facie satisfaction for grant of bail - Gravity of offence and impact on public exchequer - Completed investigation and charge-sheet filed - Comparative treatment of co-accused in bail orders - Delay in custody as factor for bail - Conditions of bail and supervision - Non-influence of trial court by preliminary observations on evidence

Regular bail under Section 439 CrPC - Prima facie satisfaction for grant of bail - Completed investigation and charge-sheet filed - Comparative treatment of co-accused in bail orders - Conditions of bail and supervision - Applicant enlarged on regular bail in connection with FIR C.R.No. 11210015220162 of 2022. - HELD THAT: - Court exercised discretionary jurisdiction under Section 439 CrPC and, on a prima facie view, found this a fit case for grant of regular bail. The court noted the applicant's custody since 16.12.2022, completion of investigation and filing of charge-sheet, and the absence of any parallel GST proceedings initiated against the applicant despite allegations of evasion. The court took into account that several co-accused have already been released by coordinate benches and applied the guidance of the Apex Court in Sanjay Chandra v. CBI as a legal touchstone for bail exercise. The court declined to delve into detailed evidence at the bail stage but recorded a prima facie conclusion sufficient to justify release, while imposing supervisory conditions designed to protect the prosecution's interest and ensure attendance. The order also emphasised that trial court should not be influenced by the preliminary observations made while granting bail.

Application allowed; applicant ordered released on regular bail on execution of personal bond and one surety, subject to specified conditions including surrender of passport, reporting obligations, furnishing address and not leaving India without permission.

Final Conclusion: Bail application allowed; applicant is released on regular bail subject to execution of bond and conditions; trial court free to modify conditions and not to be influenced by preliminary observations in this order.

Supply of works contract services - sub-contractor as a distinct taxable person - two independent taxable events - exemption to be strictly construed - exemption under Section 11(1) of the CGST Act - Notification No. 12/2017-Central Tax (Rate) as amended by Notification No. 2/2018 - Entry 3A

Supply of works contract services - sub-contractor as a distinct taxable person - two independent taxable events - Supply of works contract services by a sub-contractor to a main contractor and the supply by the main contractor to the contractee constitute separate taxable events under the CGST Act. - HELD THAT: - Under the CGST regime the taxable event is supply of service and not transfer of property in goods. The amended rate notifications and scheme of the Act recognise the sub-contractor's supply of works contract services to the main contractor as a separate taxable event. While under the earlier sales tax regime there could be a single deemed transfer to the contractee, that concept does not carry over to GST where the sub-contractor's service to the main contractor is independently taxable. The AAR therefore treats the sub-contractor-main contractor transaction and the main contractor-contractee transaction as two independent taxable events. [Paras 7]

There are two independent taxable events: one between the sub-contractor and the main contractor and another between the main contractor and the contractee.

Exemption to be strictly construed - exemption under Section 11(1) of the CGST Act - Notification No. 12/2017-Central Tax (Rate) as amended by Notification No. 2/2018 - Entry 3A - Whether the exemption available to a works contractor under the cited notification extends to supplies made to that contractor by a sub-contractor. - HELD THAT: - The exemption in Notification No. 12/2017 as amended (Entry 3A) is condition bound and applies to supplies made to the Central/State Government or local authorities in relation to specified entrusted functions. The notification does not expressly extend that exemption to supplies made by sub-contractors to a main contractor (unless such extension is specifically provided by an entry, as done elsewhere for rate parity). Exemption notifications must be read strictly; they cannot be given an extended meaning to enlarge eligibility. In absence of an express entry under Section 11(1) extending the benefit to supplies by a sub-contractor, the exemption available to the works contractor is not extendable to the sub-contractor's procurement. [Paras 7, 8]

The exemption extended to a works contractor supplying to Government or local bodies is not extendable to a person supplying services to such works contractor in the absence of an express entry or notification under Section 11(1) of the CGST Act.

Final Conclusion: The AAR ruled that the applicant's supplies to the main contractor are not covered by Notification No. 12/2017 as amended by Notification No. 2/2018; the exemption does not extend to the sub-contractor, and the applicable tax rate on the applicant's supplies is 9% CGST + 9% SGST.

Reopening of assessment on ground of escapement of income - notice under Section 148 of the Income Tax Act - application of income under Section 11 of the Income Tax Act - assessment completed for a subsequent assessment year - effect of subsequent assessment on alleged escapement in an earlier year

Reopening of assessment on ground of escapement of income - notice under Section 148 of the Income Tax Act - assessment completed for a subsequent assessment year - Validity of the notice under Section 148 and the order rejecting objections where the same receipt was offered to tax and accepted in a subsequent assessment year. - HELD THAT: - The petitioner's contention that the amount representing transfer of leasehold rights was offered to tax and returned in Assessment Year 2018-19, and that the department thereafter completed assessment accepting that returned income, was found to be determinative. The respondent admitted that the assessment for Assessment Year 2018-19 was completed on 27th August 2021 while the notice under Section 148 impugned in this petition was dated 31st March 2021. The Court recorded that where the identical amount has already been considered and accepted in a subsequent assessment year, the premise of escapement of income in the earlier year does not arise. On this basis the impugned notice and the order rejecting objections were held to be legally unsustainable and liable to be quashed.

The notice dated 31.03.2021 under Section 148 and the order dated 13.01.2022 rejecting objections were quashed and the petition allowed.

Final Conclusion: Writ petition allowed; impugned reopening notice and the order rejecting objections set aside on the ground that the same income had been offered to tax and accepted in the subsequent assessment year.

Reopening of assessment under Section 148 read with proviso to Section 147 - failure to truly and fully disclose material facts - reasoned order / sufficiency of reasons for reopening - use of material available on record in reasons for reopening - limitation period and applicability of proviso to Section 147

Reopening of assessment under Section 148 read with proviso to Section 147 - failure to truly and fully disclose material facts - reasoned order / sufficiency of reasons for reopening - Validity of the notice dated 30th March 2021 under Section 148 read with the proviso to Section 147 insofar as it alleges failure to truly and fully disclose material facts in relation to A.Y. 2014-15. - HELD THAT: - The Court examined the reasons recorded for reopening which relied upon entries in the assessee's own Profit & Loss Account (Notes 26) and the statement of computation of income to identify a discrepancy in provisions debited and added back. The proviso to Section 147 applies as the notice was issued after four years from the end of the relevant assessment year. The recorded reasons show that the Assessing Officer relied upon material already available in the documents filed by the assessee; there is no indication in the reasons that any material fact was concealed or embedded so as to be undiscoverable. An affidavit filed by respondents claiming that material facts were embedded could not supply or improve upon what is absent from the reasons. On this basis the Court found no satisfaction of the statutory requirement of `failure to truly and fully disclose material facts' necessary to invoke the proviso to Section 147 and sustain the reopening. [Paras 6, 7, 8, 9]

Notice under Section 148 read with proviso to Section 147 is quashed for want of any failure to truly and fully disclose material facts; reassessment proceedings initiated by the impugned notice and consequential orders are set aside.

Final Conclusion: The petition is allowed; the notice dated 30th March 2021 under Section 148 and the consequential scrutiny notice and order are quashed and set aside for lack of satisfaction under the proviso to Section 147 that there was failure to truly and fully disclose material facts.

TDS u/s 195 - payments made by the assessee for marketing services to the US Company as taxable in India as FTS [Fee for Technical Services] - US Company does not have any permanent establishment in India - order under Section 201(1) & 201(1A) - India- USA DTAA - HC held that [2023 (3) TMI 422 - KARNATAKA HIGH COURT] scope of the work is to generate customer leads using/subscribing customer data base, market research, analysis, and online research data and rightly held that the service provider has not made available any technical knowledge, experience, knowhow, process or develop and transfer technical plan or technical design - HELD THAT:- UPON hearing the counsel the Court made the following.

Delay in filing the special leave petition is condoned. The special leave petition is dismissed.

Pending application(s), if any, shall also stand disposed of.

Territorial jurisdiction of Appellate Tribunal - situs of the Assessing Officer - venue determined by location of the Assessing Officer's office - Standing Order under Income tax (Appellate Tribunal) Rules, 1963 - return of appeal for want of jurisdiction

Territorial jurisdiction of Appellate Tribunal - situs of the Assessing Officer - venue determined by location of the Assessing Officer's office - return of appeal for want of jurisdiction - Whether the ITAT, Pune Bench had jurisdiction to entertain the Revenue's appeal where the Assessing Officer and the CIT(A) are located at Mumbai. - HELD THAT: - The Tribunal found on the facts that the assessment under section 143(3) was framed by the Assessing Officer whose office is at Mumbai and the CIT(A)'s order was also passed at Mumbai. Applying the Standing Order under the Income tax (Appellate Tribunal) Rules, 1963 (para 4) - which fixes ordinary jurisdiction by the location of the Assessing Officer's office rather than the assessee's place of business or residence - and in light of the cited precedents endorsing that principle, the Pune Benches were held to lack territorial jurisdiction to entertain the appeal. Consequently the appeal could not be adjudicated on merits by the Pune Bench and was returned to be instituted afresh before the appropriate Bench having jurisdiction. The Tribunal recorded that all other pleadings on the merits therefore became academic. [Paras 2, 4]

Appeal returned for want of territorial jurisdiction of the Pune Bench with liberty to file afresh before the appropriate Bench; merits not decided.

Final Conclusion: The Revenue's appeal for A.Y. 2006-07 was returned for want of territorial jurisdiction of the ITAT, Pune Bench because the Assessing Officer and the lower appellate order were situated at Mumbai; the appeal may be instituted afresh before the appropriate Bench.

Furnishing of audit report under section 44AB - penalty under section 271B - reasonable cause under section 273B - audit under other law not substituting tax audit - delinking of audit obligation from return filing - ignorance of law not a reasonable cause

Furnishing of audit report under section 44AB - penalty under section 271B - Confirmation of penalty under section 271B for non-furnishing of audit report in time for AY 2013-14 - HELD THAT: - The Tribunal upheld imposition of penalty under section 271B because the assessee failed to furnish the audit reports in the manner and by the due date mandated by section 44AB. Section 44AB requires furnishing the prescribed audit report(s) and non-compliance attracts penalty under section 271B unless a reasonable cause is proved under section 273B. The assessee filed the audit reports on 21.06.2014 whereas the due date was 31.10.2013, and no reasonable cause was established to attract protection under section 273B. Reliance on controlling High Court authority (Peroorkkada Service Co-operative Bank Ltd.) showing that mandatory furnishing of both prescribed tax-audit reports is required was held binding. The Tribunal therefore confirmed the penalty. [Paras 4, 5]

Penalty under section 271B confirmed for AY 2013-14.

Audit under other law not substituting tax audit - furnishing of audit report under section 44AB - Whether audit conducted under the Kerala Co-operative Societies Act suffices to discharge obligation under section 44AB - HELD THAT: - The Tribunal rejected the contention that an audit under the Kerala Co-operative Societies Act alone satisfies the requirements of section 44AB. Even if such an audit is conducted, where the statute requires a further report in the prescribed tax-audit forms (Forms 3CA/3CD), both reports must be furnished to comply with section 44AB. The decision of the jurisdictional High Court in Peroorkkada SCB Ltd. was applied to hold that the cooperative-law audit does not substitute for the mandatory tax-audit report(s). [Paras 4]

Audit under the Kerala Act does not by itself discharge the obligation under section 44AB.

Delinking of audit obligation from return filing - furnishing of audit report under section 44AB - Whether making the audit report available at the time of assessment suffices in lieu of timely furnishing under section 44AB - HELD THAT: - The Tribunal held that the obligation to furnish audit reports under section 44AB is delinked from the obligation to file the return and cannot be cured merely by having the audit report available during assessment proceedings. The provision requires timely furnishing by the statutory due date irrespective of assessment status; information in the audit report may be used for selection and initiation of assessments, and late availability does not amount to compliance of the statutory filing requirement. [Paras 4]

Availability of the audit report at assessment time does not constitute timely compliance with section 44AB.

Reasonable cause under section 273B - ignorance of law not a reasonable cause - Whether the assessee's ignorance of the requirement or bona fide belief that exemption under section 80P obviated tax audit constitutes reasonable cause - HELD THAT: - The Tribunal found the assessee's plea of ignorance of the tax-audit requirement and reliance on exemption under section 80P to be untenable. The law and the state policy embodied in the statute are presumed known to taxpayers, especially long-standing entities whose business volume and nature indicate familiarity with statutory obligations. The Tribunal also noted that section 273B provides the statutory channel for excusing lapses where reasonable cause is shown; the assessee did not establish facts to demonstrate a reasonable cause such as sudden unavoidable disruption accepted in other authorities. Consequently, ignorance of the law was not accepted as reasonable cause to escape penalty. [Paras 4]

Ignorance of law and reliance on exemption do not constitute reasonable cause under section 273B; penalty cannot be escaped on that basis.

Final Conclusion: The Tribunal dismissed the assessee's appeal and stay application, confirming the penalty imposed under section 271B for AY 2013-14, holding that mandatory tax-audit report(s) under section 44AB were not timely furnished, the cooperative-law audit did not substitute for the prescribed tax-audit reports, availability of reports at assessment did not cure delay, and no reasonable cause was made out to relieve the assessee under section 273B.

Unexplained cash credit under Section 68 - burden of proof on assessee and duty of AO to make independent enquiries - genuineness of shareholder subscription and creditworthiness of subscriber - nonspeaking order of appellate authority

Unexplained cash credit under Section 68 - burden of proof on assessee and duty of AO to make independent enquiries - genuineness of shareholder subscription and creditworthiness of subscriber - Deletion of addition treating share capital and share premium as unexplained cash credit where assessee had produced documents proving identity, source and creditworthiness of subscriber and AO failed to make independent enquiries - HELD THAT: - The Tribunal found that the assessee produced documentary evidence establishing identity of the share subscriber, transactions through banking channel, source of funds and tax assessment records of the subscriber. Having discharged the primary onus under Section 68 by furnishing documents showing identity, genuineness and creditworthiness, the legal duty shifted to the Assessing Officer to conduct independent enquiries and point out specific discrepancies before invoking Section 68. The AO did not examine the documents, did not point to any defect or insufficiency and made a mechanical, non-speaking addition. The Tribunal applied the principles in the cited Supreme Court precedents to conclude that, in the absence of any adverse finding or further enquiry by the AO, the addition was not sustainable and was liable to be deleted. [Paras 3, 4, 5, 7]

Addition under Section 68 deleted as assessee discharged primary onus and AO failed to conduct required independent enquiries.

Nonspeaking order of appellate authority - co-terminus powers of CIT(A) and duty to examine evidence - Appellate order of CIT(A) set aside for being non-speaking where CIT(A) upheld AO's mechanical addition without discussing material facts or pointing out defects in evidence - HELD THAT: - The Tribunal observed that the CIT(A) possesses plenary/co-terminus powers and an independent duty to examine evidence and call for information. In the present case the CIT(A) reproduced submissions but did not consider material documents, did not identify any infirmity in the evidence and merely affirmed the Assessing Officer's non-speaking order. Such confirmation without reasoned examination renders the order unsustainable. Accordingly, the appellate order could not stand. [Paras 6, 7]

Order of CIT(A) held to be non-speaking and unsuitable for upholding the addition.

Final Conclusion: The Tribunal allowed the appeal, deleted the addition treated as unexplained cash credit under Section 68, and set aside the non-speaking appellate order of the CIT(A) for want of reasoned examination.

Transfer pricing adjustment - pass-through cost - arm's length price - mark-up on reimbursed third party costs - operational versus non operational expenditure - foreign exchange loss as financial/interest cost - profit level indicator (PLI) benchmarking

Pass-through cost - mark-up on reimbursed third party costs - arm's length price - Whether the TPO was justified in treating reimbursements of third party costs as part of the assessee's cost base subject to mark up for transfer pricing purposes. - HELD THAT: - The Tribunal agreed with the ld. CIT(A)'s examination of the service agreement and factual matrix showing that certain expenditures (advertisement and publicity, business promotion, participation in trade events) were incurred at the request of the overseas AE, with the budget controlled by the AE and the risk and outcome attributable to the AE. Those items involved high cost but minimal effort by the assessee (buying advertisement space) and therefore constituted true pass through costs which ought to be excluded from the cost base for determining the arm's length price. Other expenses, being integrally related to the assessee's core activities and not demonstrably incurred as pass through third party costs, must form part of the assessee's cost base and be eligible for mark up. The Tribunal found the TPO's broad conclusion that all such reimbursements should be marked up to be unsupported on the facts and upheld the ld. CIT(A)'s narrower exclusion of only the three identified categories as pass through costs. [Paras 11, 12]

Pass through treatment upheld only for advertisement and publicity, business promotion and participation in trade events; other reimbursed costs to be included in cost base and marked up.

Foreign exchange loss as financial/interest cost - operational versus non operational expenditure - profit level indicator (PLI) benchmarking - Whether foreign exchange loss and interest expenses are operational items to be included in the PLI computation for benchmarking under transfer pricing. - HELD THAT: - The Tribunal concurred with the ld. CIT(A)'s view that financial charges, including foreign exchange fluctuation loss, partake the nature of interest/financial cost and are non operating in nature. Benchmarked comparables typically exclude such financial items when computing operating margins; consequently, for parity in benchmarking, these items must be excluded from the assessee's PLI computation. The Tribunal also relied on precedent reasoning treating items like foreign exchange fluctuations as non operational for the purpose of determining operating income and PLI. [Paras 13, 14, 15, 16, 17]

Foreign exchange loss and interest expenses are non operating and are to be excluded while computing the PLI.

Final Conclusion: The Tribunal, on rehearing, dismissed the Revenue's appeal and the assessee's cross objection by upholding the ld. CIT(A)'s determination that only advertisement and publicity, business promotion and participation in trade events qualify as pass through costs (excluded from the cost base), and that foreign exchange loss and interest are non operating financial charges to be excluded from PLI computation.

Validity of Valuation Officer (DVO) report under section 142A(6) - time barred valuation report cannot be relied upon for making additions - applicability of local PWD rates (not CPWD rates) for valuation of cost of construction - addition based solely on an invalid or legally infirm DVO report is unsustainable

Validity of Valuation Officer (DVO) report under section 142A(6) - time barred valuation report cannot be relied upon for making additions - Whether the addition sustained by the CIT(A) based on the DVO valuation report is sustainable where the DVO report was furnished beyond the six month period prescribed by section 142A(6). - HELD THAT: - The Tribunal found that section 142A(6) requires the Valuation Officer to send the valuation report within six months from the end of the month in which the reference is made. In the present case the valuation report was dated after the prescribed period and therefore was barred by limitation. Reliance on settled Apex Court authority and connected decisions established that a belated DVO report cannot constitute admissible material to base additions upon, particularly where the DVO report formed the sole basis of the impugned addition. Given the invalidity of the DVO report for being time barred, the foundational material for the addition failed and no addition could be sustained on that basis. [Paras 10, 12]

The DVO report being time barred under section 142A(6) cannot be relied upon and the addition founded solely on that report is deleted.

Applicability of local PWD rates (not CPWD rates) for valuation of cost of construction - addition based solely on an invalid or legally infirm DVO report is unsustainable - Whether the valuation adopted by the DVO (which used CPWD rates) and the CIT(A)'s reliance thereon is permissible without allowing adjustment to local PWD rates as required by law. - HELD THAT: - The Tribunal observed that the DVO had applied CPWD rates whereas the settled legal position requires application of local PWD or market correlative rates for determining cost of construction; CPWD rates normally yield a substantially higher estimate. The assessee's contention that the DVO report failed to apply local PWD rates and thereby denied the assessee a legitimate benefit was accepted. On combined consideration - both the time bar infirmity of the DVO report and the use of CPWD rather than local PWD rates - the Tribunal held that the valuation relied upon was legally infirm and could not support the addition. [Paras 11, 12]

The DVO's use of CPWD rates instead of local PWD rates rendered the valuation legally infirm; the addition based on such valuation is unsustainable and is deleted.

Final Conclusion: Both appeals are allowed: the Tribunal deleted the additions sustained by the CIT(A) because the DVO valuation relied upon was time barred under section 142A(6) and legally infirm for having applied CPWD rates instead of local PWD rates; the same reasoning applies mutatis mutandis to the second appeal.

TDS under section 194C for works contracts vis-a -vis sale of goods - distinction between sale of goods and works contract - TDS under section 194H for commission or brokerage arising from discounts/incentives - treatment of credit notes/trade discounts as reduction of sale price and not commission - interest under section 201(1A) consequential to TDS default - precedential effect of jurisdictional High Court decisions

TDS under section 194C for works contracts vis-a -vis sale of goods - distinction between sale of goods and works contract - precedential effect of jurisdictional High Court decisions - Payments to six suppliers for printed packing material are not subject to TDS as works contracts under section 194C but constitute purchases of goods (sale). - HELD THAT: - The Tribunal found that the assessee purchased ready-made printed flexible packaging from the six suppliers; there was no case of the assessee supplying its own material for processing, no job-work agreement, and title in the finished goods was transferred by the suppliers to the assessee. The suppliers had independently produced the packaging and discharged excise and VAT, and the invoices described sale of goods rather than separate labour charges. The Tribunal followed the jurisdictional High Court decision in Girnar Food which holds that a contract for supply of materials with printing as per buyer's specifications, when the supplier supplies finished goods, is a sale and not a works contract attracting section 194C. Applying that principle to the facts, the Tribunal dismissed Ground No. 1 and held that section 194C did not apply. [Paras 6]

Ground No. 1 rejected; payments are purchases of goods and not liable to TDS under section 194C.

TDS under section 194H for commission or brokerage arising from discounts/incentives - treatment of credit notes/trade discounts as reduction of sale price and not commission - precedential effect of jurisdictional High Court decisions - Discounts and credit notes given to buyers/dealers are not commission attracting TDS under section 194H but reductions in sale consideration. - HELD THAT: - The Tribunal noted that section 194H applies where payments are made as commission or brokerage for services rendered or for acting on behalf of another. On the facts, the twelve parties were purchasers/customers who bought goods and sold them in their own right; they were not agents nor did they render services to the assessee. The credit notes related to returned goods, shortages, reimbursement of octroi, and incentives/discounts to boost sales, and operated to reduce the original sale consideration. The Tribunal followed the jurisdictional High Court decision in Gujarat Narmada Valley Fertilizer and Chemicals Ltd. which held that similar trade discounts do not amount to commission under section 194H. Applying that reasoning, Ground No. 2 was dismissed. [Paras 7]

Ground No. 2 rejected; discounts/credit notes reduce sale consideration and are not subject to TDS under section 194H.

Interest under section 201(1A) consequential to TDS default - consequences of deletion of TDS defaults on interest liability - Interest under section 201(1A) charged on TDS defaults is not payable where the underlying TDS defaults have been deleted. - HELD THAT: - The Tribunal observed that the interest levied under section 201(1A) was consequential to the TDS defaults which it had set aside by holding that neither section 194C nor section 194H applied. Having rejected the primary disallowances and defaults, the consequential interest charge could not survive. Accordingly, the Tribunal dismissed Ground No. 3. [Paras 8]

Ground No. 3 rejected; interest under section 201(1A) deleted as consequential to deletion of TDS defaults.

Final Conclusion: The appeal by the Revenue is dismissed: payments for printed packing materials were held to be purchases (not works contracts) and not subject to TDS under section 194C; discounts/credit notes to buyers were held to be reductions of sale consideration and not commission under section 194H; consequential interest under section 201(1A) was also deleted.

Revision under section 263 - scope of jurisdiction of Commissioner under section 263 - appreciation of evidence and adoption of a legally plausible view by Assessing Officer - distinction between receipts and taxable income - treatment of cash receipts through angadia / cash agent

Revision under section 263 - appreciation of evidence and adoption of a legally plausible view by Assessing Officer - distinction between receipts and taxable income - treatment of cash receipts through angadia / cash agent - Validity of PCIT's exercise of power under section 263 in setting aside the original assessment where the Assessing Officer applied GP rate of 19.40% to cash receipts routed through M/s National Shroff (Angadia) instead of treating the entire amount as unexplained cash income - HELD THAT: - The Tribunal found that the Assessing Officer had made detailed inquiries during original assessment proceedings, including issuing notice under section 133(6) to M/s National Shroff and examining vouchers and disclosures made by its partner. On the evidence the Assessing Officer concluded that the amounts represented out-of-book cash sales and applied the declared gross profit rate of 19.40% to compute taxable income thereon. The PCIT in revision proceeded on the view that the entire receipts should have been treated as unexplained cash and brought to tax, but the Tribunal held that where the Assessing Officer has examined material and adopted one of the permissible legal views, the Commissioner cannot invoke section 263 merely to substitute his own view. The Tribunal relied on the principle that only real income is taxable and not gross receipts, and that an assessment is erroneous and prejudicial to revenue under section 263 only if the view taken by the Assessing Officer is unsustainable in law. The Tribunal noted the settled principle from the decision relied upon in the order of the lower authority, Malabar Industrial Co. Ltd. v. CIT , that differing permissible views do not render an assessment order erroneous and prejudicial simply because the Commissioner prefers an alternative approach. Applying these principles to the facts, the Tribunal held the Assessing Officer's approach was a legally plausible view based on material on record and therefore the exercise of revision power was not justified. [Paras 8, 9]

PCIT's order under section 263 setting aside the assessment is not sustainable; the Assessing Officer's order is restored.

Final Conclusion: Appeal allowed; the order passed under section 263 is set aside and the assessment framed by the Assessing Officer for A.Y. 2012-13 is restored as the Assessing Officer had examined the material and adopted a legally plausible view.

Disallowance under section 14A - Interest-free funds exceeding investment - Presumption as to application of funds where interest-free funds are in excess - Reliance on High Court precedents for s.14A applicability

Disallowance under section 14A - Interest-free funds exceeding investment - Reliance on High Court precedents for s.14A applicability - No disallowance under section 14A was required where the assessee's interest-free funds exceeded the investments yielding exempt income. - HELD THAT: - The Tribunal examined the Assessing Officer's disallowance under section 14A and the CIT(A)'s partial reduction to the amount of exempt income. The facts show the assessee had substantial interest-free funds which exceeded the investment made to earn exempt dividend income. The Tribunal relied on consistent decisions of the Gujarat High Court which hold that where interest-free funds available with the assessee exceed the investments made for earning exempt income, disallowance under section 14A is not justified. Applying that principle to the admitted factual position in this case, the Tribunal concluded that it could be presumed that interest-free funds were available for the exempt investments and therefore no disallowance under section 14A was called for. [Paras 7, 8]

Appeal allowed; disallowance under section 14A deleted.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y. 2016-17, holding that no disallowance under section 14A was warranted because the assessee's interest-free funds exceeded the investments yielding exempt income, and accordingly deleted the disallowance.

Interest under Section 28 of the Land Acquisition Act forms part of compensation - distinction between interest under Section 28 and interest under Section 34 of the Land Acquisition Act - taxability of compensation and solatium on compulsory acquisition - income from other sources under section 56 of the Income tax Act

Interest under Section 28 of the Land Acquisition Act forms part of compensation - income from other sources under section 56 of the Income tax Act - application of precedent treating Section 28 interest as part of compensation - Whether the interest awarded by the civil court under Section 28 of the Land Acquisition Act on enhanced compensation is taxable as income from other sources under section 56 of the Income tax Act - HELD THAT: - The Tribunal found that the Principal Senior Civil Judge enhanced the compensation and specifically awarded interest on the excess amount under Section 28 of the Land Acquisition Act. Relying on the distinction between Section 28 and Section 34 interest as recognised by the Apex Court, the Tribunal held that interest under Section 28 is part of the compensation awarded on enhancement and therefore assimilates to capital receipt on acquisition. Consequently, such interest does not constitute taxable 'income from other sources' under section 56. The Tribunal noted that no interest under Section 34 was awarded, and that the CIT(A)'s allowance of only 50% relief lacked basis in the facts and law. [Paras 7, 8]

Interest awarded under Section 28 on enhanced compensation is not taxable under section 56 and the addition is deleted.

Taxability of compensation and solatium on compulsory acquisition - exemption of compensation components on compulsory acquisition - Whether the enhanced compensation and solatium received on compulsory acquisition are taxable or exempt - HELD THAT: - The Tribunal recorded that the award comprised enhanced compensation, solatium and interest, and observed that enhanced compensation and solatium fall within the exempt ambit applicable to compensation for compulsory acquisition. Having found that the interest component likewise forms part of compensation when awarded under Section 28, the Tribunal concluded that the entire components awarded by the court (enhanced compensation and solatium, and Section 28 interest) are not taxable. The Tribunal also relied on coordinate authority following the Apex Court view to support exemption of Section 28 interest. [Paras 6, 7, 8]

Enhanced compensation and solatium are exempt; the tribunal allowed the assessee's ground and deleted the impugned addition.

Final Conclusion: The appeal is allowed: the civil court awarded enhanced compensation, solatium and interest under Section 28 are treated as components of compensation and are not taxable as income from other sources; the addition made by the Assessing Officer is deleted and the CIT(A)'s partial relief is set aside.

Disallowance under section 14A and computation under rule 8D - Inclusion of section 14A disallowance in book profit under section 115JB - Capitalisation versus revenue treatment of overheads and employee/director costs - Transfer pricing: arm's-length pricing of corporate guarantee (interest saving method) - Depreciation of temporary structures (100% rate) and treatment across assessment years - Accounting/ tax treatment of foreign exchange loss on purchase of materials (revenue v. capital/work in progress)

Disallowance under section 14A and computation under rule 8D - Inclusion of section 14A disallowance in book profit under section 115JB - Validity and quantum of disallowance under section 14A read with rule 8D and whether any such disallowance can be added to book profit under section 115JB. - HELD THAT: - The Tribunal accepted the assessee's working showing that its own funds exceeded investments yielding exempt income and, following the Special Bench in Vireet Investments Pvt. Ltd., held that for computation under rule 8D(2)(iii) only investments yielding exempt income during the year are to be considered. Consequently the CIT(A)'s deletion of the disallowance under rule 8D(2)(ii) and direction to recompute under rule 8D(2)(iii) were upheld. With regard to adjustment of any section 14A disallowance to book profit under section 115JB, the Tribunal followed co ordinate bench precedent and held that such disallowance cannot be made while computing book profit under section 115JB. The Tribunal therefore dismissed the revenue's grounds on this issue. [Paras 10, 11, 12]

Disallowance under section 14A deleted / to be recomputed only considering investments yielding exempt income; no addition under section 115JB.

Capitalisation versus revenue treatment of overheads and employee/director costs - Whether director's salary and handover facility expenses should be capitalised to cost of project or allowed as revenue expenditure in the year incurred. - HELD THAT: - The Tribunal endorsed the CIT(A)'s finding that the director's salary and handover facility expenses are recurring overheads for the company as a whole, not project specific capital expenditure or deferred revenue, relying on co ordinate bench precedents and applicable accounting guidance. The Assessing Officer's attempt to capitalise 50% was rejected and the CIT(A)'s allowance of the expenditure in the year of incurrence was sustained. [Paras 13, 14]

Director's salary and handover facility expenses are revenue expenditure and not to be capitalised; revenue's ground dismissed.

Transfer pricing: arm's-length pricing of corporate guarantee (interest saving method) - Whether the guarantee provided by the assessee to its associated enterprise (AE) is an international transaction and whether the arm's length guarantee commission should be taken at 0.3523% or at the TPO's 1.25%. - HELD THAT: - The Tribunal followed the amendment to section 92B(1) (explanation (c)) and precedent holding that corporate guarantees are international transactions, rejecting the assessee's contention that the guarantee is a mere shareholder activity. On benchmarking, the Tribunal accepted the interest saving approach applied by the CIT(A), including the creditworthiness analysis, database searches and tenor adjustments, and the sharing of interest savings on a 50:50 basis, and found no infirmity in the CIT(A)'s determination of ALP at 0.3523%. Co ordinate bench decisions on identical facts were followed. [Paras 16, 18, 20, 21]

TP adjustment deleted; arm's length guarantee commission accepted at 0.3523% and revenue's appeal dismissed.

Depreciation of temporary structures (100% rate) and treatment across assessment years - Entitlement to balance 50% depreciation in AY 2016 17 on a sample flat treated as a temporary structure where 50% had been claimed and allowed in AY 2015 16. - HELD THAT: - The Tribunal observed that the sample flat was a temporary structure (not controverted by the Revenue) and such structures are eligible for 100% depreciation under the Income tax Rules (Appendix I, rule 5). Since 50% of the depreciation had already been allowed in the earlier year when the asset was put to use for less than 180 days, the CIT(A)'s view that entitlement to depreciation including the rate should be conclusively determined in the first year was upheld and the balance 50% for AY 2016 17 was allowed. [Paras 23, 24, 26]

Balance 50% depreciation for AY 2016 17 on the temporary sample flat allowed; disallowance deleted.

Accounting/ tax treatment of foreign exchange loss on purchase of materials (revenue v. capital/work in progress) - Whether foreign exchange loss on import payments for construction materials is to be capitalised to work in progress or allowed as revenue expenditure. - HELD THAT: - Relying on Supreme Court authority and co ordinate bench treatment on similar facts, the Tribunal held that foreign exchange loss on settlement of sundry creditors (monetary items) is a revenue item and not required to be included in cost of inventory or project. Accounting standards and authoritative guidance support charging such forex loss to profit and loss account. Accordingly, the CIT(A)'s deletion of the Assessing Officer's capitalization was sustained. [Paras 27, 30, 31]

Foreign exchange loss on purchase of materials held to be revenue expenditure and not to be capitalised to work in progress; revenue's ground rejected.

Final Conclusion: The Tribunal dismissed the revenue appeals for AY 2016 17: disallowance under section 14A deleted (with recomputation limited to investments yielding exempt income and no adjustment to book profit under section 115JB); director's salary and handover facility expenses allowed as revenue expenditure; transfer pricing adjustment for guarantee commission set aside and ALP fixed at 0.3523%; depreciation on the temporary sample flat allowed (balance 50%); and foreign exchange loss on imported materials held to be revenue in nature and allowable.

Revision under section 263 of the Income Tax Act - Explanation 2 to section 263 of the Income Tax Act - Erroneous and prejudicial to the interest of Revenue - Duty of the revisional authority to conduct enquiry before invoking revisionary jurisdiction - Principles of natural justice / opportunity of being heard

Revision under section 263 of the Income Tax Act - Explanation 2 to section 263 of the Income Tax Act - Duty of the revisional authority to conduct enquiry before invoking revisionary jurisdiction - Erroneous and prejudicial to the interest of Revenue - Principles of natural justice / opportunity of being heard - Whether the Principal Commissioner of Income Tax was justified in invoking revisionary jurisdiction under section 263 of the Act in respect of the assessment order dated 27/04/2017. - HELD THAT: - The Tribunal found that the Assessing Officer had issued specific enquiries under section 142(1) and the assessee furnished detailed replies, client-wise break up of income and corresponding expenses, tax-audit annexures, TDS returns and produced books of account for verification prior to completion of assessment. The Principal Commissioner invoked Explanation 2 to section 263 on the ground that requisite enquiries were not made, but did not record what specific enquiries were omitted or how the AO's enquiries were inadequate; nor did he conduct any independent inquiry to satisfy himself that the AO's order was objectively erroneous and prejudicial to revenue. The Tribunal held that Explanation 2 cannot be used to expand revisional powers beyond the jurisdictional precondition in section 263(1): the revisional authority must first hold and record that the AO's order is erroneous and prejudicial to revenue, and if alleging inadequate enquiries must conduct or record an objective verification showing the error. Reliance was placed on the principle that in cases of alleged inadequate enquiry the Commissioner must himself conduct necessary inquiry and record clear, unambiguous reasons before exercising revisionary power; remitting the matter without such a finding is impermissible. Applying these principles to the facts, the Tribunal concluded that adequate enquiries had been made by the AO and that the PCIT's order lacked the requisite objective findings and inquiry to sustain exercise of jurisdiction under section 263. [Paras 8, 9, 10]

The revision order passed by the Principal Commissioner under section 263 was quashed and the grounds raised by the assessee were allowed.

Final Conclusion: The appeal is allowed; the revision order passed by the Principal Commissioner under section 263 is quashed for lack of objective findings and requisite enquiry, and the assessment order dated 27/04/2017 is sustained.

Deduction under section 80-IC - Eligibility of new manufacturing unit for tax holiday - Explanation to section 37(1) - disallowance for expenditure in violation of statutory/regulatory prohibition - Effect of Medical Council regulations/CBDT Circular on deductibility of sales promotion expenditures - CBDT Circular No.37/2016 - consequential enhancement of deduction under section 80-IC - Characterisation of expenditure as revenue or capital (capitalisation of IT purchases) - Remand for verification of allocation of expenses to eligible unit - Reassessment proceedings and verification of additions to plant and machinery in reassessment

Deduction under section 80-IC - Eligibility of new manufacturing unit for tax holiday - Reassessment proceedings and verification of additions to plant and machinery in reassessment - Claim of deduction in respect of Unit-III at Baddi under section 80-IC for AY 2012-13 - HELD THAT: - The Tribunal examined documentary proof showing that Unit-III operated from rented premises (registered rent agreement and rent debited and allowed), had permission from Himachal Pradesh authorities to occupy/rent the premises, had filed and had verification in earlier reassessment proceedings of bills/vouchers for additions to plant and machinery, held manufacturing licences and pollution/NOC clearance, and incurred electricity and other operating expenses. The AO's objections that Unit-III was merely operating from the sister concern's premises, that plant and machinery acquisitions were not supported, and that no competent authority approval was obtained were negatived on the basis of the rent agreement, confirmation from the State Industrial Development Corporation, the reassessment record for AY 2011-12 where bills/vouchers for additions were examined, and licences/clearances and commencement of commercial production communications. On these findings the Tribunal concluded that the assessee satisfied conditions for claiming deduction under section 80-IC in respect of Unit-III and allowed the grounds challenging the disallowance. [Paras 3]

Deduction under section 80-IC in respect of Unit-III at Baddi is allowed.

Explanation to section 37(1) - disallowance for expenditure in violation of statutory/regulatory prohibition - Effect of Medical Council regulations/CBDT Circular on deductibility of sales promotion expenditures - CBDT Circular No.37/2016 - consequential enhancement of deduction under section 80-IC - Disallowance of sales promotion expenditure incurred on medical practitioners and consequential impact on deduction under section 80-IC - HELD THAT: - The AO disallowed sales promotion expenditure on the ground that payments for freebies/benefits to medical practitioners contravened the Medical Council regulations and thus fell within the Explanation to section 37(1); the CIT(A) excluded an amount held to be bona fide conference expenditure. The Tribunal noted Supreme Court authority holding that gifting freebies prohibited by MCI regulations is disallowable under the Explanation to section 37(1). However, because the expenditure relates to the eligible unit, the Tribunal applied CBDT Circular No.37/2016 which provides that disallowance of such expenditure increases the business profits of the eligible unit and thereby results in an enhanced deduction under section 80-IC, making the adjustment revenue neutral. Consequently the grounds challenging the partial disallowance were allowed. [Paras 4]

Disallowance of sales promotion expenditure is sustained on legal grounds but, by operation of CBDT Circular No.37/2016, the resultant increase in business profit of the eligible unit is offset by enhanced section 80-IC deduction; appeal allowed on this basis.

Characterisation of expenditure as revenue or capital (capitalisation of IT purchases) - Remand for verification of allocation of expenses to eligible unit - CBDT Circular No.37/2016 - consequential enhancement of deduction under section 80-IC - Nature and allowability of payments to Dotcom Creation and Redbrook Intertrade (capital vs revenue) and allocation to eligible unit - HELD THAT: - The CIT(A) confirmed disallowance of certain amounts as capital expenditure for lack of evidence that purchases were current assets or stock-in-trade, while allowing salary paid to IT staff. The Tribunal observed uncertainty whether these expenditures pertain to the manufacturing (eligible) unit or an IT division; no clarifying material was placed before it. In the interest of justice the Tribunal remitted the issue to the AO to determine whether the expenditures relate to the unit eligible for section 80-IC; if so, the AO must apply CBDT Circular No.37/2016 and give effect to any consequential adjustment in computing enhanced deduction. The matter is therefore restored for factual verification and fresh decision by the AO. [Paras 5]

Issue remanded to the AO for determination whether the questioned expenditures pertain to the eligible unit and for consequential computation; allowed for statistical purposes.

Final Conclusion: The Tribunal allowed the claim of deduction under section 80-IC for Unit-III for AY 2012-13; held that sales-promotion disallowance under the Explanation to section 37(1) (in view of Medical Council regulations) is legally unsustainable for deduction but is revenue-neutral because of CBDT Circular No.37/2016 and allowed the related grounds; and remitted the question of characterisation and allocation of certain IT-related payments to the AO for verification and consequential computation.

Monetary limit for appeals to the Supreme Court - jurisdictional threshold - indirect taxes and customs appeals - ministerial circular effect on maintainability

Monetary limit for appeals to the Supreme Court - indirect taxes and customs appeals - ministerial circular effect on maintainability - Maintainability of the appeal in view of the revised monetary threshold prescribed by the Ministry of Finance circular dated 02.11.2023. - HELD THAT: - The Court recorded the submission of the Department that the circular dated 02.11.2023 issued by the Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes & Customs, has raised the monetary limit for matters before the Supreme Court to Rs.2 Crores, expressly including cases pertaining to indirect taxes and customs. On that basis the Court found that the present appeal falls within the scope of the revised monetary threshold and is not maintainable before this Court. The decision rests on the effect of the ministerial circular in altering the jurisdictional/monetary threshold applicable to indirect tax and customs appeals, leading to dismissal of the appeal for lack of requisite monetary jurisdiction.

Appeal dismissed as not maintainable in view of the revised monetary limit prescribed by the 02.11.2023 circular; pending applications disposed of.

Final Conclusion: The appeal was dismissed because the Ministry of Finance circular of 02.11.2023 raised the monetary threshold for Supreme Court adjudication to Rs.2 Crores for indirect taxes and customs matters, rendering the appeal not maintainable; ancillary applications were disposed of.

Summary order. Delay condoned; Civil Appeal dismissed for lack of merit; pending applications disposed of.

Writ of Mandamus - treatment of petition as representation - direction to decide representation - speaking order - re-export of goods - detention and demurrage waiver

Treatment of petition as representation - Present petition and the letter dated 4th September 2023 be treated as a representation to Respondent No.3. - HELD THAT: - The Court recorded that the petitioner had filed a formal letter dated 4th September 2023 and, during hearing, sought that the petition itself be treated as an additional representation. Respondents raised no objection to this procedural request. The Court therefore directed that both the petition and the said letter be treated as representation submitted to Respondent No.3 for consideration on the issues raised by the petitioner.

Petition and letter of 4th September 2023 are to be treated as representation to Respondent No.3.

Direction to decide representation - speaking order - Mandate to hear the petitioner and decide the representation by a stated date, by passing a speaking order. - HELD THAT: - The Court directed the petitioner to appear before Respondent No.3 and make oral and, if desired, written submissions on the representation. After hearing, Respondent No.3 was directed to decide the representation by passing a reasoned (speaking) order within the timeline fixed by the Court. The Court kept all substantive contentions open for consideration by the authority, without adjudicating the merits.

Petitioner to appear and make submissions on 15th November 2023; Respondent No.3 to pass a speaking order deciding the representation on or before 25th November 2023.

Re-export of goods - detention and demurrage waiver - Substantive reliefs sought (permission for re-export and grant of detention and demurrage waiver) were not adjudicated and remain pending for consideration by Respondent No.3. - HELD THAT: - Although the petitioner originally sought writ relief directing clearance for re-export and issuance of a detention and demurrage waiver certificate, the Court did not decide these substantive claims. Instead, it left all contentions open and remitted the controversy for decision by Respondent No.3 after hearing the petitioner, thereby directing fresh administrative consideration rather than judicial determination on merits.

Substantive claims regarding re-export and waiver are remitted to Respondent No.3 for fresh consideration; no adjudication on merits by the Court.

Final Conclusion: The petition is disposed of by treating it and the letter dated 4th September 2023 as representations to Respondent No.3; the petitioner is to appear and make submissions on 15th November 2023 and Respondent No.3 is directed to decide the representation by a reasoned order on or before 25th November 2023, with all substantive contentions left open.

Representation - treating writ petition as representation - direction to decide representation - opportunity of hearing - speaking order - amendment of Import General Manifest

Treating writ petition as representation - direction to decide representation - opportunity of hearing - speaking order - The Writ Petition together with the letter dated 16th March 2023 is to be treated as a representation and Respondent No.3 is directed to decide it after hearing the parties. - HELD THAT: - The Court accepted the petitioner's limited prayer that its petition and the letter dated 16th March 2023 be treated as a representation to Respondent No.3. All respondents had no objection to this limited relief. The Court directed that the petitioner and Respondent Nos.4 to 7 shall appear before Respondent No.3 on the specified date and may place written submissions. Respondent No.3 is required to hear the parties and pass an appropriate speaking order within the time stipulated and in accordance with law. All contentions of the parties were expressly kept open.

Petition treated as representation; Respondent No.3 to hear parties and pass a speaking order.

Amendment of Import General Manifest - representation - opportunity of hearing - Substantive adjudication on the merits of the petitioner's request for amendment of the Import General Manifest and related reliefs is left open for decision by Respondent No.3. - HELD THAT: - The Court did not decide the merits of the petitioner's contentions regarding the alleged High Sea sale, the filing of the IGM in the name of Respondent No.7, the request for amendment of the IGM, or claims for release/waiver/detention and demurrage. Instead, these matters were remitted to Respondent No.3 for consideration on the representation, after hearing the parties and on the basis of their submissions, with the Court expressly keeping all contentions open.

Merits of reliefs relating to amendment of IGM, release of goods and waiver of charges remitted to Respondent No.3 for fresh consideration after hearing.

Final Conclusion: The petition is disposed of by directing Respondent No.3 to treat the writ petition and the letter dated 16th March 2023 as a representation, to hear the parties and decide the representation by way of a speaking order within the time fixed; substantive issues are left open for that decision.

Amendment of shipping bill - post EGM MEIS / Reward amendment - Merchandise Exports from India Scheme (MEIS) - reward scheme flag - amendment under Section 149 of the Customs Act, 1962 - administrative advisory compliance

Post EGM MEIS / Reward amendment - amendment of shipping bill - reward scheme flag - Merchandise Exports from India Scheme (MEIS) - Direction to accept and process applications for amendment of shipping bills to change the reward scheme flag from 'N' to 'Y' on the portal in light of the advisory so as to enable grant of MEIS rewards. - HELD THAT: - The petitioner exported goods under the MEIS but, due to oversight, the shipping bill recorded 'No' for claiming rewards. An application for amendment under Section 149 was earlier rejected, but the CESTAT allowed the appeal directing amendment so the petitioner could claim rewards. A manual amendment was later granted. The Director General of Systems and Data Management, CBIC issued an advisory adding an option 'Post EGM MEIS / Reward amendment' in the ICES portal to permit officers to amend the reward scheme flag post-EGM and enable transmission to DGFT. In view of this advisory, the Court directed that if the petitioner makes an application to the competent authority for amendment of the shipping bills, the portals shall accept such amendment under the newly provided system option and grant the MEIS rewards to which the petitioner is otherwise eligible. The order thus gives effect to the administrative change and requires the portal-based acceptance and processing of the petitioner's application for amendment so that rewards under the Scheme are granted. [Paras 5, 6]

Petition allowed to the extent that, upon application to the competent authority, the portal shall accept post-EGM amendments of the reward scheme flag and grant the petitioner the MEIS rewards it is otherwise eligible for.

Final Conclusion: The High Court allowed the petitions to the limited extent of directing that, in light of the CBIC advisory adding a 'Post EGM MEIS / Reward amendment' option on the portal, applications for amendment of shipping bills to change the reward flag from 'N' to 'Y' shall be accepted and the petitioner shall be granted the MEIS rewards to which it is entitled.

Entitlement to exemption under DFIA Scheme - imported input covered by description, value and quantity in DFIA - no actual user requirement - capability to be used suffices - CTH/ITC(HS) numbers not determinative where description covers input - sensitive inputs and requirement of technical specification correlation under Para 4.29 FTP - packing in smaller packs does not exclude DFIA benefit - revalidation / issuance of certificate under Para 2.20(c) of Handbook

Entitlement to exemption under DFIA Scheme - imported input covered by description, value and quantity in DFIA - Appellant entitled to basic customs duty exemption under DFIA where imported Extra Virgin Olive Oil is covered by the description, value and quantity shown in the DFIA. - HELD THAT: - The Tribunal applied its consistent precedent that where the imported goods correspond to the description, value and quantity specified in the DFIA, entitlement to exemption cannot be denied merely because the license does not mention a specific brand or specific product name. Relying on earlier decisions, the Tribunal held that a literal insistence on specific nomenclature would frustrate the DGFT licensing intention and that goods capable of being used in the export product fall within the authorization. On that basis the imported Extra Virgin Olive Oil was found to be covered by the Transferable DFIAs produced by the appellant and entitled to exemption under Notification No.25/2023-Cus dated 01.04.2023. [Paras 4]

Allowance of DFIA-based exemption for the imported Extra Virgin Olive Oil as matching the DFIA description, value and quantity.

No actual user requirement - capability to be used suffices - Scheme does not impose an actual use condition; it is sufficient that the imported input is capable of being used in the export product. - HELD THAT: - Relying on Tribunal and High Court precedents, the Tribunal accepted that DFIA is a post-export transferable certificate and that there is no inbuilt 'actual user' condition in the scheme. The appellant's technical opinions establishing that Olive Oil can be used in salads, pickles and baked products supported that the imported oil is capable of use in the exported goods, satisfying the scheme requirement. [Paras 4]

No requirement of proved actual prior use; capability to be used suffices to claim DFIA benefit.

CTH/ITC(HS) numbers not determinative where description covers input - imported input covered by description, value and quantity in DFIA - Absence or mismatch of CTH/ITC(HS) numbers in SION or DFIA does not preclude claiming benefit where the description covers the input. - HELD THAT: - The Tribunal observed that SION entries relied upon did not mandate ITC(HS) numbers for the relevant inputs and that neither the FTP nor the customs notification prescribes CTH numbers as a condition to claim DFIA benefits. Prior Tribunal decisions were followed to hold that once the imported good is covered by the descriptive entry in the authorization, the precise tariff heading is not significant for allowing the benefit. [Paras 4]

Mismatch or absence of CTH/ITC(HS) in the DFIA/SION does not defeat entitlement where the description covers the input.

Sensitive inputs and requirement of technical specification correlation under Para 4.29 FTP - No correlation of technical specifications is required for the imported Olive Oil because it is not listed as a sensitive input under Para 4.29 of the FTP. - HELD THAT: - On reading Para 4.12(i), 4.12(ii) and Para 4.29 of the FTP together, the Tribunal concluded that the requirement for imported material to be of the same quality and technical characteristics applies only to inputs specified in Para 4.29. Since Olive Oil/Salad Oil/Vegetable Oil are not specified as sensitive inputs under Para 4.29, no technical-specification correlation was required; Board and DGFT circulars were cited to support this proposition. [Paras 4]

No technical-specification correlation requirement for Olive Oil as it is not a Para 4.29 sensitive input.

Packing in smaller packs does not exclude DFIA benefit - Import of goods in smaller packs does not disqualify entitlement to DFIA benefits where the imported quantity falls within the DFIA limits. - HELD THAT: - The Tribunal found no provision in the notification or the scheme that restricts import to particular pack sizes. Absent any such restriction, and where the imported quantity is within the DFIA-stated limits, packing the goods in smaller packs does not bar the grant of DFIA exemption. [Paras 4]

Smaller pack sizes do not preclude claiming DFIA exemption if quantity and other authorization parameters are met.

Revalidation / issuance of certificate under Para 2.20(c) of Handbook - Lower authorities directed to issue a certificate under Para 2.20(c) of the Handbook to confirm the period of dispute, if requested by the appellant, for revalidation purposes. - HELD THAT: - Having allowed the substantive claim for DFIA-based exemption, the Tribunal directed the customs authorities to issue the certificate contemplated by Para 2.20(c) of the Handbook confirming the period of dispute where the appellant seeks revalidation of the DFIAs, thereby permitting consequential compliance steps. [Paras 4]

Direction to issue certificate under Para 2.20(c) of the Handbook on request to facilitate revalidation.

Final Conclusion: The Tribunal set aside the impugned appellate order, allowed the appeal and held that the appellant is entitled to basic customs duty exemption under Notification No.25/2023-Cus for import of Extra Virgin Olive Oil under the Transferable DFIAs against exports of pickles and biscuits, with consequential reliefs and a direction to issue the Handbook certificate for revalidation if requested.

Transaction value and assessable value - rejection of transaction value on basis of contemporaneous higher-priced imports - redetermination of value under Rule 7 of the Customs Valuation Rules - onus of proof in undervaluation cases and probative value of evidence - admissions recorded under Section 108 and their evidentiary weight

Transaction value and assessable value - rejection of transaction value on basis of contemporaneous higher-priced imports - redetermination of value under Rule 7 of the Customs Valuation Rules - probative value of internet-based price evidence - Validity of rejection of declared transaction value and redetermination of assessable value under Rule 7 of the Customs Valuation Rules in view of contemporaneous internet/market evidence - HELD THAT: - The Tribunal held that Section 14(1) normally mandates acceptance of the price actually paid as the transaction value, but Rule 4(2) permits rejection where contemporaneous imports of identical or similar goods at higher prices exist and reasons supported by material are given. In the present case the Department produced contemporaneous internet/market evidence indicating substantially higher prices and conducted investigation showing consistent past consignments at the lower declared price. The authorised representative was confronted with these materials and accepted the re-determined value on record. Where contemporaneous price evidence is available and the authority gives reasons for discarding transaction value, resort to Rule 7 for redetermination is sustainable. The Tribunal applied precedent requiring cogent reasons and adequate material before rejecting invoice price, found such material and reasons present, and held the redetermination under Rule 7 legally sustainable in the facts. [Paras 15, 16, 19, 20, 22]

Rejection of the declared transaction value and redetermination of assessable value under Rule 7 is upheld.

Admissions recorded under Section 108 and their evidentiary weight - onus of proof in undervaluation cases and probative value of evidence - provisional release and deposit of differential duty - Whether admissions by the authorised representative and deposit of differential duty preclude the appellants from later challenging the redetermined value and whether such admissions establish undervaluation - HELD THAT: - The Tribunal noted that admissions recorded under Section 108 which are not retracted need no further proof and carry significant evidentiary weight. The authorised representative made consistent admissions when confronted with market evidence and did not retract them; differential duty was deposited and requests for waiver of show cause were made. The appellants' contention that acceptance was only to avoid demurrage/provisional release did not carry evidentiary support and the importer failed to discharge the onus to rebut the Department's case. Applying settled principles that facts admitted need not be proved, the Tribunal found that the admissions and conduct supported the Department's findings of undervaluation and justified confirmation of the order-in-original, including consequences flowing from the re-determined value. [Paras 19, 21, 22]

Admissions and related conduct of the authorised representative are treated as conclusive evidence; appellants cannot challenge the redetermined value on those grounds.

Final Conclusion: The Tribunal dismissed the appeals and upheld the Order-in-Original confirming rejection of the declared transaction value, redetermination of assessable value under Rule 7, and attendant consequential orders; the findings were held to be supported by contemporaneous price evidence and un-retracted admissions on record.

Duty demand on raw material in excess shrinkage and waste in an EOU - use of duty-free raw material in manufacture by an EOU and non-demand of duty - ex-parte adjudication - principles of natural justice - opportunity of personal hearing - remand for fresh adjudication

Ex-parte adjudication - principles of natural justice - opportunity of personal hearing - remand for fresh adjudication - The impugned ex parte order was set aside and the matter was remanded to the Adjudicating Authority for fresh adjudication after permitting the appellant to file reply/submit and to avail personal hearing. - HELD THAT: - The Adjudicating Authority had proceeded ex parte after recording that show-cause notices and hearing notices were returned as the company was recorded as closed and that no reply or attendance was filed, and therefore concluded that principles of natural justice were complied with. The Tribunal, however, observed that the appellant has since approached the Tribunal, is effectively represented and the advocates are present to argue the appeal. In these circumstances the Tribunal held that the appellant should be given an opportunity to present its case before the Adjudicating Authority. Consequently the impugned order was set aside and the matter remanded so that the Adjudicating Authority may permit filing of reply/submissions and grant personal hearing before passing a fresh order.

Impugned order set aside; appeal allowed by way of remand for fresh adjudication after affording personal hearing and opportunity to file reply/submissions.

Duty demand on raw material in excess shrinkage and waste in an EOU - use of duty-free raw material in manufacture by an EOU and non-demand of duty - The substantive question whether duty can be demanded on raw material contained in excess shrinkage and waste generated in manufacture in the EOU was not finally adjudicated and is remanded to the Adjudicating Authority for fresh consideration. - HELD THAT: - Although the appellant relied on earlier decisions holding that raw material procured duty-free by an EOU and used in manufacture cannot attract a forgone-duty demand, the Tribunal did not decide the merits of that contention. Because the impugned order was set aside for reasons of procedural defect (ex parte adjudication) the substantive controversy was left open and the Adjudicating Authority is directed to consider the question on merits after allowing the appellant to file reply/submit and to appear for personal hearing.

Substantive issue remanded to the Adjudicating Authority for fresh consideration and decision after permitting filing of reply/submissions and personal hearing.

Final Conclusion: The impugned ex parte order is set aside; the appeal is allowed by way of remand and the matter is directed to be reheard and decided afresh by the Adjudicating Authority after permitting the appellant to file reply/submit and to avail personal hearing.

Variation up to 10% from PLATTS rate for valuation of imported goods - prior written approval as procedural requirement under standing orders - standing order as administrative guideline and not statutory rule - authorization of customs agent and validity of letters on principal's letterhead - procedural lapse cannot defeat substantive entitlement

Variation up to 10% from PLATTS rate for valuation of imported goods - prior written approval as procedural requirement under standing orders - authorization of customs agent and validity of letters on principal's letterhead - standing order as administrative guideline and not statutory rule - procedural lapse cannot defeat substantive entitlement - Entitlement of the appellant to claim 10% variation from PLATTS rate for valuation despite absence of formal prior written approval and letters signed by the customs agent. - HELD THAT: - The standing order permits a variation of up to 10% from the PLATTS rate where imports are from the manufacturer, subject to prior written approval of the jurisdictional Additional/Joint Commissioner. The Tribunal found that the goods were admittedly imported from the manufacturer and that letters were submitted on the appellant's letterhead. A letter signed by the authorised customs agent on the appellant's letterhead must be treated as submitted by the appellant. Even if the formal prior written approval requirement is not complied with, that requirement is procedural since the standing order is an administrative guideline and not a statutory provision. Where substantive preconditions for allowing variation (import from manufacturer and compliance with other conditions) are satisfied, mere non-compliance with the prior approval formality cannot defeat the substantive benefit of the 10% variation. Applying these conclusions to the facts, the Tribunal held that the appellant satisfied the conditions for the 10% variation and that denial on the basis of signature/designation and non-obtainment of prior written approval was not justified. [Paras 4, 5]

The appeals are allowed; the appellant is entitled to the 10% variation from the PLATTS rate and the impugned order is set aside.

Final Conclusion: The Tribunal allowed the appeals, holding that the appellant, having imported from the manufacturer and having submitted letters on its letterhead (even though signed by the authorised customs agent), was entitled to the 10% variation from PLATTS rate; non-obtainment of the formal prior written approval under the standing order was a procedural lapse which could not deny the substantive valuation benefit.

Product under consideration - inclusion/exclusion of goods from anti-dumping scope - commercial production and sale by the domestic industry - Manual of Standard Operating Practices - Article 3.10 - causal link between dumped imports and injury to domestic industry - disclosure and principles of natural justice in trade remedy proceedings

Product under consideration - commercial production and sale by the domestic industry - Manual of Standard Operating Practices - Article 3.10 - inclusion/exclusion of goods from anti-dumping scope - disclosure and principles of natural justice in trade remedy proceedings - Colour coated aluminium coils are to be excluded from the product on which anti-dumping duty has been levied. - HELD THAT: - The Tribunal examined whether colour coated aluminium coils fall within the product under consideration for imposition of anti-dumping duty. Applying the Directorate's Manual of Standard Operating Practices (Article 3.10), the PUC should preferably include items manufactured and commercially sold in the domestic market by the domestic industry; mere competence or captive production is insufficient. The designated authority's disclosure recorded only that the domestic industry had 'supplied' such coils, while the final findings asserted production and job-working without adequate contemporaneous evidence of capacity, plant, commercial volumes or verified sales. The Tribunal noted earlier determinations and factual material (including the 2009 safeguard findings and the Tribunal's 2017 decision on foil) describing the elaborate, high investment process required to produce colour coated coils and concluding that Hindalco had not established manufacture of the product in commercial volumes or the requisite manufacturing capacity. The authority relied on a rejoinder invoice not furnished to the appellant and failed to elicit and examine specific production capacity and sales data. In these circumstances the finding that the domestic industry produced and sold colour coated coils could not be accepted, and therefore the product must be excluded from the scope of the anti dumping levy. [Paras 22, 23, 24, 25]

The customs notification dated 6-12-2021 is modified by excluding 'colour coated coil' from imposition of anti-dumping duty; the appeal is allowed to that extent.

Final Conclusion: The Tribunal allowed the appeal in part and directed that colour coated aluminium coils be excluded from the anti-dumping duty imposed by the customs notification dated 6-12-2021, on the ground that the domestic industry failed to prove commercial production and sales of that product.

Classification of goods for customs tariff - advance ruling under the Customs Act - prohibition on advance ruling where question is pending before Customs/Appellate Tribunal/Court - functional equivalence and product identity in tariff classification

Classification of goods for customs tariff - functional equivalence and product identity in tariff classification - advance ruling under the Customs Act - prohibition on advance ruling where question is pending before Customs/Appellate Tribunal/Court - Whether the application for advance ruling on classification of 'Chromecast with Google TV' can be allowed or must be refused under the proviso to Section 28-I(2)(a) of the Customs Act, 1962 because a substantially similar question is pending in the applicant's own case before the Appellate Tribunal. - HELD THAT: - The Authority analysed the operational features of the subject device and compared it with the earlier 'Google Chromecast'. Though 'Chromecast with Google TV' incorporates an integrated interface and on-screen apps in addition to casting functionality, the Authority found that its principal/primary function-streaming or casting content to an HDMI-compliant display-remains essentially the same as that of the earlier Chromecast. Therefore the subject goods are not generically different in a manner that would distinguish their classification from the product already the subject of adjudication. The proviso to Section 28-I(2)(a) bars the Authority from allowing an advance ruling where the question raised is already pending in the applicant's case before any officer of customs, the Appellate Tribunal or any Court. Applying that proviso to the facts, and having regard to the pending proceedings before the CESTAT concerning classification of a similar Google Chromecast device, the Authority refrained from passing an order on the present application and rejected it for the reasons mandated by the proviso. [Paras 6, 7]

Application for advance ruling refused under the proviso to Section 28-I(2)(a) as the same question is pending in the applicant's case before the Appellate Tribunal; no ruling will be passed until the pending dispute is settled.

Final Conclusion: The Authority declined to admit the advance ruling application and refrained from issuing a classification ruling for 'Chromecast with Google TV' because the same question is already pending in the applicant's own case before the Appellate Tribunal; the application is therefore refused under the proviso to Section 28-I(2)(a).

Prosecution of avoidance applications by successful auction purchaser - liquidation estate and distribution of proceeds recovered from avoidance proceedings - persona designata of the resolution professional and delegation of powers - treatment of avoidance proceedings post-closure under regulation 44A - recommendations of the Insolvency Law Committee on who may file avoidance applications - requirement of reasoned or speaking orders - finality of approval of acquisition plan

Prosecution of avoidance applications by successful auction purchaser - finality of approval of acquisition plan - persona designata of the resolution professional and delegation of powers - Successful Auction Purchaser permitted to be substituted in place of Resolution Professional to prosecute the avoidance application where the approved acquisition plan provides for such prosecution. - HELD THAT: - The Tribunal held that where the acquisition (or resolution/acquisition) plan explicitly provides that the Successful Auction Purchaser will pursue pending avoidance proceedings, and that acquisition plan has been approved by the Adjudicating Authority and its approval has become final, substitution of the Successful Auction Purchaser for the Resolution Professional to prosecute the avoidance application is permissible. The Court treated the present application as consequential to the approved acquisition plan and relied on the finality of that approval; it also followed the reasoning in earlier decisions where a Successful Resolution Applicant was permitted to pursue avoidance applications when the plan provided for it. The Tribunal observed that the avoidance application in this case had been filed by the Resolution Professional and the substitution was sought pursuant to the acquisition plan already approved; consequently the substitution order could not be faulted in appeal. [Paras 15, 24]

Substitution allowing the Successful Auction Purchaser to prosecute the avoidance application was held permissible and not open to interference.

Liquidation estate and distribution of proceeds recovered from avoidance proceedings - treatment of avoidance proceedings post-closure under regulation 44A - Proceeds recovered from avoidance proceedings constitute part of the liquidation estate; Regulation 44A contemplates treatment of such proceedings and does not prohibit prosecution by a Successful Auction Purchaser in the facts of this case. - HELD THAT: - The Tribunal noted that the Code expressly makes proceeds recovered through avoidance proceedings part of the liquidation estate and that Regulation 44A (inserted in 2022) contemplates how avoidance proceedings and distribution of proceeds are to be treated even after closure of liquidation. Regulation 44A therefore does not support a categorical prohibition on a Successful Auction Purchaser pursuing avoidance proceedings where the acquisition plan and approvals permit such pursuit. The Insolvency Law Committee report was considered: while it recommends that successful resolution applicants generally should not be permitted to file avoidance actions, that recommendation is inapposite here because the avoidance applications were already filed by the Resolution Professional and the acquisition plan provided for the purchaser to pursue them post-approval. [Paras 13, 14, 16, 20]

Proceedings under Sections 43-66 and the statutory scheme treating recoveries as liquidation estate were held consistent with permitting prosecution in the present circumstances; Regulation 44A and the Committee's recommendations do not prohibit the substitution sought.

Requirement of reasoned or speaking orders - The impugned order, though brief, contained sufficient basis (by reference to the applicant's averments and the context of the approved acquisition plan) and therefore did not warrant interference solely for lack of elaboration. - HELD THAT: - Acknowledging the settled principle that adjudicatory orders should ordinarily be reasoned, the Tribunal examined the impugned order which disposed of the substitution application by referring to the averments and treating the application as consequential to the acquisition plan already approved. Given the record-namely the acquisition plan's provision for prosecution and prior proceedings approving that plan-the Tribunal found the short order not amenable to being set aside on the ground of being non-speaking in the present appeal. [Paras 25, 26]

Absence of detailed reasons in the Adjudicating Authority's order did not, on the facts, justify interference.

Finality of approval of acquisition plan - Pendency of a separate Civil Appeal before the Supreme Court (relating to a different fact-matrix and resolution plan) did not require deferral of determination of the substitution application in this proceeding. - HELD THAT: - The Tribunal observed that the issue pending before the Supreme Court in the cited Civil Appeals concerned different proceedings and did not raise the precise question whether a Successful Auction Purchaser in liquidation (post-approval of an acquisition plan) could be substituted to pursue avoidance applications. Consequently, pendency of that Civil Appeal was not a bar to deciding the present appeal. The Tribunal also noted that the Supreme Court in related proceedings had permitted continuation of proceedings under Sections 43 to 66, indicating that continuation of avoidance proceedings was not stayed. [Paras 22, 28]

The pendency of the other Civil Appeal was not a ground to defer or set aside the substitution order in this case.

Final Conclusion: The Appeal was dismissed. The Tribunal upheld the order permitting substitution of the Successful Auction Purchaser to prosecute the avoidance application, held that proceeds of avoidance proceedings form part of the liquidation estate and that Regulation 44A/the Committee report did not preclude substitution in the facts, found the brief impugned order not vitiated for want of reasons on these facts, and declined to defer determination because of pendency of unrelated Civil Appeals.

Application of Section 14(2) of the Limitation Act, 1963 - Effect of a third party winding up on exclusion of limitation - Distinguishing and applicability of Sesh Nath Singh precedent - One Time Settlement and Section 25(3) of the Indian Contract Act, 1872 - Proceeding under Section 7 of the Insolvency and Bankruptcy Code, 2016

Application of Section 14(2) of the Limitation Act, 1963 - Effect of a third party winding up on exclusion of limitation - Benefit of Section 14(2) of the Limitation Act cannot be invoked by the Appellant on account of the winding up petition filed by a third party in the Bombay High Court. - HELD THAT: - Section 14(2) excludes from computation of limitation the time during which the applicant has been prosecuting with due diligence another civil proceeding against the same party for the same relief in a forum which, by defect of jurisdiction or like cause, is unable to entertain it. The winding up petition before the Bombay High Court was filed by a third party (M/s Oswal Minerals Ltd.) and not prosecuted by the Appellant. The Official Liquidator's communication shows the Appellant was notified and requested to obtain leave to prosecute proceedings under Section 446(1) of the Companies Act, 1956, but the Appellant did not seek such leave. The conditions for exclusion under Section 14(2) - that the earlier proceeding be prosecuted by the applicant, in good faith, with due diligence, and in a forum unable to entertain it by reason of defect of jurisdiction or the like - are not satisfied. Consequently the Adjudicating Authority correctly held that the period during which the third party winding up petition remained pending cannot be excluded from limitation in favour of the Appellant. [Paras 8, 9, 10, 11]

Appellant is not entitled to the benefit of Section 14(2) on account of the third party winding up petition; the Adjudicating Authority's conclusion in this regard is affirmed.

Distinguishing and applicability of Sesh Nath Singh precedent - The Supreme Court decision in Sesh Nath Singh is distinguishable and is not applicable to the facts of the present case. - HELD THAT: - In Sesh Nath Singh the earlier SARFAESI proceedings were stayed by the High Court on the ground of want of jurisdiction, and the conditions for exclusion under Section 14(2) were prima facie satisfied because the proceedings were shown to be without jurisdiction. In the present case there is no such finding that proceedings initiated by the Bank were without jurisdiction; moreover the winding up petition was filed by a third party and not prosecuted by the Appellant. The Tribunal correctly contrasted the factual and legal basis of Sesh Nath Singh and held that its ratio does not extend to the present facts. [Paras 11, 12]

Sesh Nath Singh does not afford relief to the Appellant; the Adjudicating Authority rightly distinguished that precedent.

One Time Settlement and Section 25(3) of the Indian Contract Act, 1872 - Proceeding under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Whether the One Time Settlement (OTS) letter dated 08.07.2021 affects the question of limitation under Section 25(3) of the Contract Act is not finally decided and is remitted to the Adjudicating Authority for fresh consideration limited to that issue. - HELD THAT: - An OTS letter dated 08.07.2021 from a director of the Corporate Debtor was produced for the first time in this appeal; it was not before the Adjudicating Authority and the Corporate Debtor has had no opportunity to reply to it. Principles governing Section 25(3) require that (i) the promise must refer to a debt which but for limitation could have been enforced, (ii) there be a distinct promise to pay in whole or in part, and (iii) the promise be in writing and signed by the debtor or his agent. Because the OTS communication was not considered below and the Corporate Debtor was not afforded a chance to respond, the Tribunal directed revival of the Section 7 application limited to adjudication of the effect, if any, of the OTS on limitation, and granted the Corporate Debtor one month to file a reply. All other grounds relating to Section 14 and SARFAESI/winding up are to remain finally decided against the Appellant and are not to be reopened. [Paras 13, 15, 16]

Section 7 application is revived only to permit the Adjudicating Authority to consider afresh the consequence of the OTS dated 08.07.2021 in relation to limitation; the Corporate Debtor is granted one month to file a reply and the Adjudicating Authority shall decide the Section 7 application in accordance with law limited to this issue.

Final Conclusion: The appeal is partly allowed: the Adjudicating Authority's dismissal of the Section 7 petition as time barred is set aside only to the extent that the effect of the One Time Settlement letter dated 08.07.2021 on limitation (under Section 25(3) of the Contract Act) is to be considered afresh; all other pleas, including reliance on Section 14(2) of the Limitation Act and the applicability of Sesh Nath Singh in relation to the third party winding up and SARFAESI proceedings, are finally negatived and shall not be reopened.

Abatement of appeal on winding up/insolvency - continuance of proceedings by successor-in-interest - Rule 22 of CESTAT (Procedure) Rules, 1982 - appointment of official liquidator - failure to prosecute due to notices returned undelivered - precedential weight of Tribunal decisions

Abatement of appeal on winding up/insolvency - continuance of proceedings by successor-in-interest - Rule 22 of CESTAT (Procedure) Rules, 1982 - appointment of official liquidator - failure to prosecute due to notices returned undelivered - Appeal abates where a company is wound up and no application for continuance is made by the successor-in-interest within the period prescribed by Rule 22. - HELD THAT: - The Tribunal recorded that Corporate Insolvency Resolution Process had been initiated and an official liquidator was appointed on 11.01.2018, but no response was received from the official liquidator or any successor despite service attempts and notices returned as undelivered. Rule 22 provides that where a company is being wound up the appeal shall abate unless an application for continuance is filed by the successor-in-interest or other legal representative within sixty days (subject to extension for sufficient cause). In similar circumstances the Tribunal in Alok Industries Ltd held that the appeal abates. Applying Rule 22 and the established approach, and given absence of any application to continue the proceedings by the successor-in-interest, the Tribunal found that the appeal must abate.

Appeal abates under Rule 22 of the CESTAT (Procedure) Rules, 1982 for want of continuance by the successor-in-interest following winding up.

Final Conclusion: The appeal is held to have abated under Rule 22 of the CESTAT (Procedure) Rules, 1982 due to the company's liquidation and absence of any application by the successor-in-interest to continue the proceedings.

Cenvat credit on outward freight beyond place of removal - place of removal - interpretation of Rule 2(l) of Cenvat Credit Rules - Board Circular No. 999/6/2015-CX dated 28/02/2015 - continuance of proceedings after adjudication as an insolvent - Rule 22 of CESTAT Procedure Rules, 1982 - application for continuance by liquidator - abatement of appeal on appointment of liquidator

Cenvat credit on outward freight beyond place of removal - place of removal - interpretation of Rule 2(l) of Cenvat Credit Rules - Board Circular No. 999/6/2015-CX dated 28/02/2015 - Availment of cenvat credit of service tax paid on outward freight for transportation of final product beyond the place of removal - HELD THAT: - The Tribunal recorded that the appellant availed cenvat credit on service tax paid on GTA for transportation of goods beyond the factory gate. Having considered the submissions and relied upon the decision of the Hon'ble Supreme Court in Commissioner of Central Excise & Service Tax, Bangalore-II v. Ultra Tech Cement Ltd. and Board Circular No. 999/6/2015-CX, the Tribunal found that after the amendment to the rules the credit is admissible only up to the place of removal and not for post-removal transportation. On that basis the credit taken for outward freight beyond the place of removal was held ineligible.

Credit availed on outward freight beyond the place of removal is not admissible and the demand confirmed below was supported by the legal position as stated.

Continuance of proceedings after adjudication as an insolvent - Rule 22 of CESTAT Procedure Rules, 1982 - application for continuance by liquidator - abatement of appeal on appointment of liquidator - Effect of insolvency and non-application by the liquidator on continuance of the appeal before the Tribunal - HELD THAT: - During pendency of the appeal the appellant company was placed in liquidation and a liquidator was appointed by the NCLT. Rule 22 of the CESTAT Procedure Rules, 1982 requires an application for continuance of proceedings by or against the successor-in-interest (including a liquidator) within sixty days, unless sufficient cause is shown for delay. No application for continuance was filed by the liquidator nor was any communication received seeking adjournment. Applying Rule 22 and precedents considered by the Tribunal, the appeal cannot be continued in absence of such an application by the liquidator.

The appeal abates for want of continuance application by the liquidator; proceedings before the Tribunal stand abated.

Final Conclusion: The Tribunal noted that the cenvat credit on outward freight beyond the place of removal is not admissible but, on account of the appellant's liquidation and failure of the liquidator to apply for continuance under Rule 22, the appeal is ordered to abate.

Commercial or Industrial Construction Service - used primarily for commerce or industry - non-commercial public welfare activity - refund of service tax - binding effect of coordinate and High Court precedents

Commercial or Industrial Construction Service - used primarily for commerce or industry - non-commercial public welfare activity - refund of service tax - Laying of pipeline for Gujarat Water Supply & Sewerage Board (GWSSB) is not taxable as Commercial or Industrial Construction Service and the service tax paid is refundable. - HELD THAT: - The Tribunal examined whether pipelines laid for GWSSB fall within the definition of Commercial or Industrial Construction Service, which requires the constructed pipeline or conduit to be used primarily for commerce or industry. Applying the reasoning of coordinate Tribunal benches and the Gujarat High Court in BMS Projects Pvt. Ltd., and relying on decisions in Dinesh Chandra Agarwal Infracon P. Ltd. and Larsen & Toubro Ltd., the Tribunal found that GWSSB was constituted under statute to provide and regulate water supply and sewerage as a public welfare function. The Board's activities, tariff structure and financing demonstrated that sale of water is incidental and subsidised, not a primary commercial or industrial activity. Consequently, the pipelines were not constructed primarily for commerce or industry. The Tribunal further noted that the cited precedents have not been stayed or reversed and thus have binding effect for the present controversy. Following these determinations, the Tribunal held that the respondent was not liable to service tax on the laying of pipelines for GWSSB and was therefore entitled to refund of the service tax paid. [Paras 4, 5]

Order of Commissioner(Appeal) allowing refund is upheld and the Revenue's appeal is dismissed.

Final Conclusion: Appeal dismissed. The laying of pipelines for GWSSB does not constitute Commercial or Industrial Construction Service as the works are not primarily for commerce or industry; accordingly the service tax paid is refundable and the Commissioner(Appeal)'s order is upheld.

Penalty under Section 78 - benefit of Section 80 of the Finance Act - interest under Section 75 - penalty under Section 77(2) for late filing of return - extended period of limitation - audit objection and admission of liability

Penalty under Section 78 - benefit of Section 80 of the Finance Act - audit objection and admission of liability - interest under Section 75 - Validity of imposition of penalty under Section 78 for the admitted service tax demand - HELD THAT: - The Tribunal found that the appellant had accepted the audit objection and deposited the admitted tax prior to issuance of the show cause notice, and that there was no deliberate breach of service tax law or rules. The appellant, a small proprietor engaged in transportation and cargo handling located in a backward area, lacked ready access to professional advice. The Commissioner (Appeals) had imposed penalty equal to the admitted demand because interest was not deposited along with the accepted proposed demand; however, the Tribunal observed that the facts do not establish wilful default. Applying Section 80 of the Finance Act, the Tribunal concluded that the appellant was entitled to relief from penalty under Section 78 and granted consequential benefits in accordance with law. [Paras 8, 9]

Penalty imposed under Section 78 set aside and appeal allowed; entitlement to benefits under Section 80 of the Finance Act recognised.

Final Conclusion: The Tribunal allowed the appeal, set aside the penalty imposed under Section 78, and directed that the appellant be given consequential benefits in accordance with law.

Intermediary service - Business and marketing support service - Export of service - Place of provision of services - Rule 6A of the Service Tax Rules, 1994 - Place of Provision of Services Rules, 2012 - CBEC circular on scope of intermediary

Intermediary service - Business and marketing support service - CBEC circular on scope of intermediary - Whether the appellant's activities qualified as an intermediary service or as business and marketing support service. - HELD THAT: - The agreement between the appellant and its overseas parent confined the appellant's role to promoting the parent in India by providing marketing, administrative and technical support, developing customer relations, obtaining market intelligence and identifying opportunities. There was no contractual obligation on the appellant to facilitate or ensure any supply of goods or services between identifiable third-party customers and the parent, nor was there evidence of the appellant acting as an agent, broker or similar intermediary facilitating two distinct supplies. Applying the parameters articulated in the CBEC circular regarding intermediary services-that there must be at least three parties, two distinct supplies (main and ancillary), and the provider must act in the character of an agent or broker-the ingredients of an intermediary service were not present. Accordingly, the services rendered by the appellant do not qualify as intermediary services but as business and marketing support services.

The appellant's services were not intermediary services but business and marketing support services.

Export of service - Place of provision of services - Rule 6A of the Service Tax Rules, 1994 - Place of Provision of Services Rules, 2012 - Whether, having regard to the location of the service recipient and manner of payment, the transaction qualified as export of service and was governed by the Place of Provision of Services Rules, 2012. - HELD THAT: - The appellant satisfied the conditions in sub-rule (1) of Rule 6A of the Service Tax Rules, 1994 in that the service recipient was located outside India and payment for the services was received in convertible foreign exchange. In the absence of any documentary evidence that the appellant had acted as an intermediary between the overseas parent and any Indian customer (which would place the location of the service recipient differently), the appropriate territorial characterisation of the transaction is export of service. Consequently, the place of provision is governed by Rule 3 of the Place of Provision of Services Rules, 2012 and the demands premised on classification as intermediary services are not sustainable.

The transaction qualified as export of service and the place of provision is governed by Rule 3 of the Place of Provision of Services Rules, 2012; the adjudged demands based on intermediary classification are unsustainable.

Final Conclusion: The impugned orders upholding the service tax demand and penalties were set aside; the appeal is allowed in favour of the appellant on the grounds that the services were business and marketing support services and qualified as export of service under the Place of Provision of Services Rules, 2012.

Stay of payment of penalty - settlement of controversy by subsequent precedent - set aside of penalty - payment of interest up to date of deposit - partial allowance of appeal

Stay of payment of penalty - settlement of controversy by subsequent precedent - set aside of penalty - Whether the penalty imposed on the appellant should be sustained in view of the interim stay earlier granted by this Court and subsequent authoritative decision. - HELD THAT: - This Court noted that by an interim order dated 26.03.2010 it had stayed the payment of penalty. The Court further observed that the legal issues which arose in the appeal remained a subject of controversy until the Constitution Bench decision in Commissioner of Central Excise, Indore v. Grasim Industried Ltd. Subsequently, having regard to the stay earlier granted and the intervening jurisprudential development, the Court held that the order imposing penalty in the instant case should be set aside.

Order imposing penalty is set aside.

Payment of interest up to date of deposit - partial allowance of appeal - Whether the outstanding interest must be paid and within what time frame. - HELD THAT: - The Court recorded that the principal duty had been tendered by the appellant and that an outstanding sum by way of interest (calculated up to date of deposit) remained unpaid. The respondent-department communicated the amount outstanding as Rs.82,955/-. The Court directed that the outstanding interest be paid to the respondent-department within a period of three months from the date of the order, granting the time frame in view of submissions that the appellant-company may be dissolved or in the process of dissolution.

Appellant directed to pay the outstanding interest of Rs.82,955/- within three months.

Final Conclusion: The appeal is allowed in part: the penalty imposed on the appellant is set aside, the principal duty already paid is noted, and the appellant is directed to pay the outstanding interest of Rs.82,955/- to the department within three months; the appeal is disposed of accordingly.

Imposition of penalty and recovery of interest for suppression with intent to evade - bona fide belief based on precedent as a defence to penalty - valuation by bifurcation of hardware and embedded software to evade duty - application of Acer India precedent on remand

Imposition of penalty and recovery of interest for suppression with intent to evade - valuation by bifurcation of hardware and embedded software to evade duty - bona fide belief based on precedent as a defence to penalty - Whether imposition of penalty under Section 11AC and recovery of interest under Section 11AB was justified for the clearances in July and August 1999, and whether the appellant's plea of a bona fide belief (relying on earlier case law) absolved them of penalty and interest. - HELD THAT: - The Tribunal, on remand from its earlier order, affirmed the Commissioner (Appeals) finding that the appellants had deliberately split the invoice value of modems into hardware and software components although the purchase orders and manufacturing indicated a single integrated product with embedded software. The Commissioner (Appeals) concluded that the practice of non-inclusion of software value applied only for a short period (July-August 1999), was discontinued later by the appellant, and duty for the impugned period was paid only much later, which together evidenced suppression with intent to evade duty. The record that invoices for software were issued from the trading division and descriptions used ("software for PC") despite being for embedded modem software supported the conclusion of deliberate bifurcation. The Tribunal found no contrary evidence to rebut these findings and rejected the appellant's contention that they had entertained a bona fide legal view based on earlier authority; the timing of the events and the manner of invoicing negatived any bona fide belief defence. Having applied the determinative facts to the legal standard for penalty and interest, and having regard to the remand direction to consider Acer India, the Tribunal found no reason to interfere with the Commissioner (Appeals) conclusion that penalty and interest were rightly imposed. [Paras 6, 7]

Penalty under Section 11AC and interest under Section 11AB upheld for the clearances in July and August 1999; the plea of bona fide belief was rejected as not supported by the evidence.

Final Conclusion: The impugned order of the Commissioner (Appeals) confirming the demand and upholding imposition of penalty and recovery of interest is affirmed; the appeal is dismissed.

Mandatory penalty under Section 11AC where extended period is invoked - application of proviso to Section 11A(1) and determination of duty under Section 11A(2) - penalty equal to duty determined where mens rea/contravention is found - hearing ex parte under Rule 21 of the CESTAT Procedure Rules, 1982 - misuse of adjournments and consequences for non-appearance

Mandatory penalty under Section 11AC where extended period is invoked - application of proviso to Section 11A(1) and determination of duty under Section 11A(2) - penalty equal to duty determined where mens rea/contravention is found - Whether penalty under Section 11AC must be imposed equal to the duty determined in respect of both premises where duty was confirmed invoking the proviso to Section 11A(1). - HELD THAT: - The adjudicating authority invoked the proviso to Section 11A(1) and determined duty for two premises separately. It recorded findings of contravention and held the assessee liable under the provisions relevant to extended period and penalty. It, however, imposed penalty under Section 11AC only in respect of the duty confirmed at the registered premises and omitted penalty for the duty confirmed in respect of the unregistered premises. The Tribunal applied settled law that where the extended period of limitation is invoked on the basis of findings of conscious or deliberate contravention (as in the proviso to Section 11A(1)), Section 11AC becomes attracted and, once attracted, leaves no discretion in quantification: penalty equal to the duty determined must be imposed. Having regard to the adjudicating authority's findings that attract the extended period for both premises, the omission to impose penalty for the duty confirmed at the unregistered premises was erroneous. The appeal filed by the Revenue seeking modification on this limited point is therefore meritorious and is allowed. [Paras 8, 9, 10, 11]

Penalty under Section 11AC must be imposed equal to the duty determined for both premises; Revenue's appeal allowed to that extent.

Hearing ex parte under Rule 21 of the CESTAT Procedure Rules, 1982 - misuse of adjournments and consequences for non-appearance - Whether the appeal could be heard ex parte in view of non-receipt of notices/continued non-appearance of the respondent and multiple adjournments. - HELD THAT: - The record shows repeated failed attempts to serve and secure attendance of the respondent, with notices returned undelivered, pasting of notices and repeated adjournments sought by the respondent which were not availed. The Tribunal noted the proviso to Section 35C(1A) limiting adjournments and relied on Rule 21 to proceed where the appellant appears and respondent does not. Having regard to the service attempts, non-appearance and the Departmental Representative's submissions, the appeal was rightly taken up and heard ex parte in terms of Rule 21 and decided on merits. [Paras 3, 5, 6]

Proceeding and hearing of the appeal ex parte was proper in view of non-appearance and repeated adjournments; the appeal was heard on merits.

Final Conclusion: The Tribunal allowed the Revenue's appeal limited to directing imposition of penalty under Section 11AC equal to the duty determined for both premises (in line with the application of proviso to Section 11A and settled precedent); the appeal was heard and decided ex parte due to the respondent's non-appearance and repeated adjournments.

Eligibility for exemption under Notification No.10/1997-CE (serial no.2) - classification of "cables" as "scientific or technical instruments, apparatus, accessories, parts or consumables" for exemption - entitlement to exemption on production of certificate issued by competent authority - binding effect of Tribunal precedent on identical issue

Eligibility for exemption under Notification No.10/1997-CE (serial no.2) - classification of "cables" as "scientific or technical instruments, apparatus, accessories, parts or consumables" for exemption - entitlement to exemption on production of certificate issued by competent authority - Whether supplies of "cables" made to specified research/academic institutions between September 2010 and August 2011 are eligible for exemption under the impugned notification where supplies were made against the prescribed certificate. - HELD THAT: - The denial in the impugned order proceeded on the view that the goods supplied, described as "cables", were not "scientific or technical instruments", "apparatus" or their accessories/parts/consumables which alone qualify for the exemption. The end-use by eligible institutions and the validity of certificates produced were not disputed in the order. The Tribunal has previously considered and decided the identical question in favour of the assessee, holding that when the certificate required by the notification is issued by the competent authority, exemption cannot be denied and that cables supplied to research institutions are eligible for the benefit of the notification. In view of that binding precedent and the undisputed production of the requisite certificates, the impugned denial of exemption could not be sustained. [Paras 4, 5]

Impugned order set aside and the appeal allowed - cables supplied against the prescribed certificates are eligible for exemption under the notification.

Final Conclusion: The Tribunal allowed the appeal, holding that supplies of cables to the specified institutions during September 2010 to August 2011, made against the requisite certificate issued by the competent authority, are eligible for exemption under the impugned notification; the impugned order denying exemption was set aside.

Deemed manufacture - definition of manufacture under Section 2(f) - job worker versus principal manufacturer - consideration and declared service - agreeing to tolerate an act (Section 66E(e)) - nexus between amount charged and taxable service

Deemed manufacture - definition of manufacture under Section 2(f) - job worker versus principal manufacturer - Appellant is not liable to pay Central Excise duty as manufacturer for footwear affixed with its labels/tags/barcodes by vendors. - HELD THAT: - Applying the settled principle that excise is levied on the manufacturer as defined in Section 2(f), the Tribunal held that mere supply of specifications, labels, tags, barcodes or raw material and exercising commercial stipulations in an agreement does not convert the brand owner or principal into the manufacturer. Reliance was placed on earlier decisions of this Tribunal which establish that where an independent vendor uses its own machinery, labour and undertakes manufacture, the vendor is the manufacturer; commercial clauses reserving inspection, specifications or penalties do not create mutuality of interest to treat the brand owner as manufacturer. The authorities below failed to apply this binding jurisprudence and erred in treating the appellant as engaged in "deemed manufacture." The alternative plea under Notification No. 214/86 was examined and rejected on facts because the notification conditions were not applicable. [Paras 8, 9, 10]

Demand of excise duty set aside; appellant not the manufacturer and not liable to pay excise duty.

Consideration and declared service - agreeing to tolerate an act (Section 66E(e)) - nexus between amount charged and taxable service - Penalties/liquidated damages recovered from vendors are not taxable as service under Section 66E(e) (toleration) or as consideration for a declared service. - HELD THAT: - The Tribunal held that recovery of contractual penalties/liquidated damages is compensatory and lacks nexus with any independent taxable service. Reading the agreement as a whole, the penal clauses safeguard commercial interests and are not consideration for tolerating a breach or for any service provided by the vendor to the appellant. The decision follows earlier Tribunal and Larger Bench reasoning (as relied upon in the impugned order) that amounts recovered as penalties for breach are merely a flow of money/compensation and not consideration for a taxable service. The Circular cited by the appellant corroborates this position by treating such penalties as not constituting consideration for supply. [Paras 11, 15, 16, 17]

Service tax demand on penalties set aside; penalties recovered from vendors are not taxable as declared service under Section 66E(e).

Final Conclusion: Both the excise duty demand and the service tax demand (with consequential interest and penalties) were set aside and the appeal was allowed.

Stay of recovery on remittance of pre-deposit - adjustment of pre-deposit paid under Section 55 towards requirement under Section 60(1A) - pre-deposit threshold of 10% for suspension of recovery - conditional stay subject to deposit and bond

Adjustment of pre-deposit paid under Section 55 towards requirement under Section 60(1A) - stay of recovery on remittance of pre-deposit - Whether the tribunal's condition to remit a further 10% pre-deposit and execute a bond can be sustained where the appellant had already remitted 20% of the demand at the time of filing the first appeal and Section 60(1A) provides for adjustment of any pre-deposit paid under Section 55. - HELD THAT: - The Court examined the proviso to sub-section (1A) of Section 60 as inserted by the Kerala Finance Act, 2023, which mandates that any pre-deposit already remitted under Section 55 shall be adjusted towards the amount required under sub-section (1A). The petitioner had deposited 20% of the demand when filing the first appeal under Section 55. Applying the proviso, that earlier payment must be set off against the 10% pre-deposit requirement under Section 60(1A). Consequently, there was no legal basis for the appellate tribunal to impose an additional deposit condition in Ext. P6 where the statutory adjustment operates to satisfy the pre-deposit threshold for staying recovery. The Court therefore concluded that the conditional direction to remit 10% of the balance tax demand and execute a bond was unsustainable insofar as it required further payment from a petitioner who had already made the deposit under Section 55. [Paras 8, 9]

The tribunal's condition to deposit an additional 10% of the balance tax demand is set aside insofar as the petitioner had already remitted the requisite amount under Section 55; no further deposit is required and the conditional order is vacated on that basis.

Final Conclusion: Original Petition allowed; Ext. P6's condition to remit 10% of the balance tax demand and execute a bond is set aside to the extent the petitioner has already remitted the pre-deposit under Section 55 for assessment years 2014-15 and 2015-16; petitioner to produce certified copy of this judgment for compliance.

Failure to raise issue in show cause notice - violation of principle of natural justice / audi alteram partem - processing charges liable for TDS under Section 13(1) of the Income Tax Act - setting aside order and remand for fresh consideration

Failure to raise issue in show cause notice - processing charges liable for TDS under Section 13(1) of the Income Tax Act - violation of principle of natural justice / audi alteram partem - Impugned order confirmed processing charges as liable to TDS though this issue was not raised in any show cause notice, and whether that omission vitiates the order. - HELD THAT: - The Court found that the department issued multiple notices which were received by the petitioner but none of those notices raised the question of processing charges being liable to TDS. The impugned order alone introduced confirmation of processing charges as liable to TDS, a substantive issue not put to the assessee for reply. Where an aspect is to be adjudicated, the department must raise it in a notice or show cause so the assessee can respond; introducing a new substantive finding only in the final order offends fair decision-making and the principles of natural justice. In view of this omission, the impugned order was held not to be in accordance with law and could not stand. [Paras 8, 9]

Impugned order set aside and matter remitted to the respondent for reconsideration; petitioner directed to file reply within 30 days and respondent to decide afresh on merits in accordance with law.

Final Conclusion: The writ petition is allowed to the extent that the impugned order dated 10.05.2022 is set aside on account of the department having confirmed processing charges as liable to TDS without having raised that issue in the notices; the matter is remitted for fresh consideration after the petitioner files a reply within 30 days.

Levy of entry tax - binding effect of a larger Bench decision - scope of notice limited to a specific question

Levy of entry tax - binding effect of a larger Bench decision - scope of notice limited to a specific question - Appeal confined to the question of levy of entry tax was dismissed as covered by the majority nine Judge Bench decision in Jindal Stainless Limited and Anr. vs. State of Haryana and Ors. - HELD THAT: - The Court recorded that notice in this appeal was restricted to the question of levy of entry tax. Learned counsel for the appellant accepted that the issue is governed by the nine Judge Bench majority decision in Jindal Stainless Limited and Anr. vs. State of Haryana and Ors. The respondent also accepted that, in view of that authoritative decision, nothing further survives in the appeal. Applying the binding effect of the larger Bench decision to the limited question before it, the Court dismissed the appeal without considering any other issues.

Appeal dismissed in view of the majority judgment in Jindal Stainless Limited and Anr. vs. State of Haryana and Ors.; notice having been limited to the question of levy of entry tax, no other issue was considered; pending applications disposed of.

Final Conclusion: The appeal was dismissed solely on the basis that the determinative question of levy of entry tax is governed by the majority nine Judge Bench decision in Jindal Stainless Limited and Anr. vs. State of Haryana and Ors.; the Court confined its decision to that question and disposed of pending applications.

Presumption under Section 139 of the Negotiable Instruments Act - Burden of proof regarding financial capacity of complainant - Defence to be proved on preponderance of probabilities - Deemed service of legal notice - Interference with an order of acquittal where two possible conclusions exist

Presumption under Section 139 of the Negotiable Instruments Act - Burden of proof regarding financial capacity of complainant - Applicability of the statutory presumption under Section 139 when the accused challenges the complainant's ability to have advanced the loan - HELD THAT: - The Court found that the cheque and signature were admitted, attracting the initial presumption under Section 139 in favour of the complainant; however, because the accused specifically challenged the complainant's financial capacity to have advanced the alleged loan, the trial court permissibly refrained from drawing the Section 139 presumption. The complainant failed to explain or produce evidence to establish how she mobilised the substantial amount said to have been advanced and did not examine her husband or other witnesses to prove financial capacity. In that factual backdrop, and having regard to the settled principle that where a defence on financial incapacity is raised and is more probable on the record, the presumption under Section 139 may not be drawn, the trial court's approach was a possible view and legitimately accepted the accused's defence on the preponderance of probabilities. [Paras 12, 13, 14]

The presumption under Section 139 was held not to operate in the complainant's favour because the accused's challenge to the complainant's financial capacity rendered the defence more probable on the record.

Defence to be proved on preponderance of probabilities - Interference with an order of acquittal where two possible conclusions exist - Deemed service of legal notice - Whether the High Court should interfere with the trial Court's acquittal - HELD THAT: - Having regard to the evidence and applicable precedents, the High Court held that the trial Court's conclusion was a possible and permissible view. The accused was entitled to raise the defence of financial incapacity even though no reply to the notice was filed, and such defence may be established by cogent evidence or by making the complainant's evidence improbable on cross-examination. The Full Bench and subsequent decisions require compelling reasons to disturb an acquittal and, where two reasonable conclusions are possible, the view favourable to the accused must prevail. The trial Court had accepted the defence on a credible basis and the legal notice was held to have been deemed served; none of these facts warranted interference. [Paras 14, 15]

The acquittal was not perverse or arbitrary and the High Court declined to interfere; the appeal was dismissed.

Final Conclusion: The appeal is dismissed; the trial Court's acquittal is upheld as a possible and permissible view in light of the challenge to the complainant's financial capacity and the applicable principles governing interference with convictions or acquittals.