TaxTMI Updates e-Newsletter
Dec 05,2020

Definition of "goods" - actionable claim - constitutionality of inclusive definition of goods - Article 246A and parliamentary power to legislate for GST - hostile discrimination under Article 14 - maintainability of writ under Article 32 - value of supply under Section 15 and Rule 31A - abatement of prize money from taxable value - Sunrise Associates - lottery as an actionable claim (ratio)

Maintainability of writ under Article 32 - Writ petition under Article 32 challenging GST levy on lotteries is maintainable. - HELD THAT: - The petitioner challenged the parliamentary enactment insofar as it imposes GST on lotteries on grounds including denial of Article 14. Article 32 permits direct challenge to alleged violations of fundamental rights by Parliamentary Acts. Earlier precedents show petitions by lottery agents have been entertained under Article 32. The Court accepted petitioner's concession that Article 19(1)(g) was not being pressed and held that the petition raising Article 14 and related constitutional pleas is maintainable under Article 32. [Paras 15, 16, 17]

Preliminary objection that the petition was not maintainable under Article 32 is overruled and the writ petition is entertained.

Definition of "goods" - actionable claim - Sunrise Associates - lottery as an actionable claim (ratio) - constitutionality of inclusive definition of goods - Article 246A and parliamentary power to legislate for GST - Inclusion of actionable claims within the definition of "goods" in Section 2(52) of the CGST Act is constitutional and lottery is an actionable claim as held in Sunrise Associates. - HELD THAT: - The Court examined the legal concepts of "goods" (Sale of Goods Act and Article 366(12)), the definition of "actionable claim" (Transfer of Property Act) and the CGST definition which expressly includes actionable claims. It analysed Gannon Dunkerley and allied precedents, the evolution of constitutional definitions (including Article 366(29A) and Article 246A) and the Constitution Bench decision in Sunrise Associates. The Constitution Bench in Sunrise Associates held that lotteries are actionable claims (this was not obiter but part of the ratio) and observed that actionable claims are goods in the wider sense even if Sales Tax Acts excluded them. Given the constitutional insertion of Article 246A and Parliament's plenary power to legislate for GST (with a non obstante), Parliament's inclusive definition in Section 2(52) is within competence and not in conflict with Article 366(12) or the settled law. [Paras 34, 48, 59, 61, 62]

Inclusion of actionable claims in the definition of "goods" under Section 2(52) is neither illegal nor unconstitutional; Sunrise Associates correctly declared lottery to be an actionable claim.

Hostile discrimination under Article 14 - lottery, betting and gambling as distinct actionable claims - Exclusion of actionable claims other than lottery, betting and gambling from Schedule III does not amount to hostile discrimination under Article 14. - HELD THAT: - The Court considered whether there is an intelligible differentia and nexus between the classification (taxing lottery, betting and gambling but excluding other actionable claims) and the legislative purpose. Historical regulation and taxation of lottery, betting and gambling (including their characterization as res extra commercium and activities historically subject to special regulation) furnish a rational basis. Precedents recognise gambling-like activities as distinct and regulable. Given longstanding legislative treatment and policy considerations, the selective inclusion of these three categories for GST purposes cannot be struck down as hostile discrimination. [Paras 63, 68, 70, 71]

Item No.6 of Schedule III is not violative of Article 14; there is a rational basis for treating lottery, betting and gambling differently from other actionable claims.

Value of supply under Section 15 and Rule 31A - abatement of prize money from taxable value - Prize money paid to winners is not to be abated from the face value when determining the taxable value of lottery under the CGST statutory scheme and Rule 31A. - HELD THAT: - The Court reviewed the statutory scheme for valuation (Section 15) and the prescribed rules (original Rule 31A and its amendment by notification). Section 15 specifies what is to be included and excluded in value; Rule 31A (as amended) deems the value of supply of a lottery to be a specified fraction of the face value or notified price. Earlier service tax circulars and works-contract principles are not applicable to the GST valuation framework. Because the statute and rules prescribe the mechanism for computing taxable value (including the reverse-calculation formula), judicially excluding prize money is impermissible. Accordingly, prize money is not to be abated from the face value for GST computation under the present statutory regime. [Paras 75, 76, 78, 80, 81]

Prize money need not be excluded from the face value for computing taxable value; valuation is governed by Section 15 and Rule 31A as enacted/amended.

Final Conclusion: The writ petition is dismissed on merits: the CGST definition of "goods" (including actionable claims) is constitutional; Sunrise Associates correctly held lottery to be an actionable claim; selective taxation of lottery, betting and gambling is not hostile discrimination; and prize money is not to be abated under the statutory valuation scheme. Petitioner is granted liberty to challenge the later notifications dated 21.02.2020/02.03.2020 in appropriate proceedings.

Service of notice in certain circumstances under Section 169 - Deemed service - Invalidity of service effected on driver - Limitation for filing appeal under Section 107(1) and 107(4) - Quashing of order for defective service - Remand to appellate authority to decide appeal on merits

Service of notice in certain circumstances under Section 169 - Invalidity of service effected on driver - Deemed service - Validity of service of the order dated 15.3.2018 when it was handed to the driver of the truck - HELD THAT: - The Court examined the modes of service prescribed by Section 169(1) and the deeming provision in Section 169(2)-(3). None of the enumerated modes (tender to addressee, manager, authorised representative, authorised agent, person employed in connection with business, registered post, e-mail, common portal, publication, or affixture) are satisfied by mere service on the driver. Service on the driver therefore did not fall within clauses (a) to (f) of Section 169(1) and could not be treated as valid or as deemed service under subsection (2) or (3). Consequently the order purportedly served in that manner was arbitrary and contrary to the statutory mandate governing service.

Service effected on the driver was invalid; the impugned order dated 15.3.2018 (and the appellate dismissal relying on that service) was set aside insofar as it rests on such defective service.

Limitation for filing appeal under Section 107(1) and 107(4) - Quashing of order for defective service - Remand to appellate authority to decide appeal on merits - Whether the appeal dismissed by the appellate authority as time barred could stand where service was invalid, and the remedial direction to the appellate authority - HELD THAT: - The appellate order dated 30.11.2019 dismissed the appeal on limitation prescribed under Section 107(1) and 107(4). Given the Court's finding that service of the impugned order was invalid, the High Court concluded that the appellate dismissal could not be sustained on that basis. Rather than resolving the limitation question itself, the Court quashed the appellate order and directed the appellate authority to hear and decide GST Appeal No. 58 of 2019 A.Y. 2018-2019 on merits in accordance with law, expressly instructing the authority not to decide the matter on the preliminary question of limitation but to proceed to an expeditious adjudication on merits.

Impugned appellate order dated 30.11.2019 set aside; appeal remitted to appellate authority for fresh hearing and decision on merits without determining limitation.

Final Conclusion: Writ petition allowed; impugned order set aside for defective service, and the appeal (A.Y. 2018-2019) remitted to the appellate authority to be decided on merits expeditiously in accordance with law.

Exemption under Section 10(10)(ii) of the Income Tax Act - ceiling under Section 4(3) of the Payment of Gratuity Act - retrospective effect of legislation - strict construction of exemption notifications - equality and non discrimination under Article 14

Exemption under Section 10(10)(ii) of the Income Tax Act - ceiling under Section 4(3) of the Payment of Gratuity Act - retrospective effect of legislation - strict construction of exemption notifications - Whether the amendment notifications S.O.1419(E) and S.O.1213(E) can be given retrospective effect from 01.01.2016 so as to make the increased gratuity ceiling and corresponding income tax exemption applicable to the petitioner who retired on 28.02.2018. - HELD THAT: - Section 10(10)(ii) exempts gratuity to the extent specified by sub sections (2) and (3) of Section 4 of the Payment of Gratuity Act; therefore the exemption limit for income tax purposes is governed by the ceiling in Section 4(3). The Payment of Gratuity (Amendment) Act fixed the ceiling at the higher amount, but the amendment was expressly appointed to come into force on 29.03.2018 by Notification S.O.1419(E), and the corresponding amendment to the Income tax notification S.O.1213(E) makes the higher exemption applicable only to persons retiring on or after 29.03.2018. Parliament may legislate retrospectively, but such intention must be expressly provided; absent any express retrospective provision, the appointed date governs applicability. Further, exemption provisions and exemption notifications are to be strictly construed and ambiguities as to applicability are to be resolved in favour of the revenue. On the admitted facts the ceiling in force on the petitioner's date of retirement was the earlier limit, and the petitioner did not challenge the statutory provision as it stood at that date. Consequently there is no basis to judicially extend the effective date of the amendments back to 01.01.2016 in favour of the petitioner. [Paras 13, 16, 17]

The notifications cannot be given retrospective effect from 01.01.2016; the increased exemption applies only from the appointed date of 29.03.2018 and cannot be applied to the petitioner who retired on 28.02.2018.

Equality and non discrimination under Article 14 - payment of gratuity as remuneration for services - Whether specification of 29.03.2018 as the date of commencement of the amendments results in unconstitutional discrimination against employees who retired before that date. - HELD THAT: - The petitioner argued that retirees form a single homogeneous class and that treating those who retired before 29.03.2018 differently from those who retired on or after that date is discriminatory. The court observed that terms and conditions of employment differ between Central Government employees and employees of public sector undertakings and even across PSUs, so they do not constitute a single homogeneous class warranting identical treatment. Moreover, the impugned notifications operate pursuant to an Act of Parliament appointing a specific commencement date; the court found no infirmity in fixing the appointed date. Reliance on precedents concerning pension cut off rules did not advance the petitioner's case where the legislature had expressly fixed the operative date of the statutory amendment. [Paras 14, 17]

The challenge under Article 14 is rejected; specification of 29.03.2018 as the appointed date does not constitute unconstitutional discrimination as contended by the petitioner.

Final Conclusion: Writ petition dismissed. The amendments increasing the gratuity ceiling and the corresponding income tax exemption apply from the appointed date of 29.03.2018 and cannot be applied retrospectively to benefit the petitioner who retired on 28.02.2018; no costs.

Release of income tax refund - withholding of income tax refund under Section 241A of the Income Tax Act, 1961 - withdrawal of petition - liberty to challenge administrative action - no expression of opinion on merits

Release of income tax refund - withholding of income tax refund under Section 241A of the Income Tax Act, 1961 - withdrawal of petition - liberty to challenge administrative action - no expression of opinion on merits - Disposition of writ petition after withdrawal by the petitioner while preserving the right to challenge the withholding of refund under Section 241A. - HELD THAT: - The petitioner had sought directions for release of an admitted refund pertaining to Assessment Year 2018-2019. Respondent No.2 filed an affidavit stating that the refund has been withheld under Section 241A of the Income Tax Act, 1961 after observance of due process. The petitioner, at the hearing, elected to withdraw the writ petition to pursue a challenge to the action under Section 241A. The Court permitted withdrawal with liberty to the petitioner to challenge the withholding, disposed of the writ petition and any pending application, and expressly refrained from expressing any opinion on the merits of the underlying controversy.

Writ petition and pending application disposed of on withdrawal with liberty to challenge the action under Section 241A; rights and contentions of the parties left open; no opinion expressed on merits.

Final Conclusion: The petition has been disposed of on the petitioner's withdrawal with liberty to challenge the withholding of the income tax refund under Section 241A; the Court did not express any view on the merits and all rights and contentions are left open.

Right to cross examination in income tax proceedings - Untested evidence inadmissible for confirming tax demand - Requirement to test adverse evidence before confirming demand - Remand for fresh assessment after quashing

Right to cross examination in income tax proceedings - Untested evidence inadmissible for confirming tax demand - Evidence relied upon by the revenue which was not tested by permitting cross examination could not be relied upon to confirm a tax demand against the assessee. - HELD THAT: - The Tribunal had remanded the matter for verification of bank accounts and for permitting the assessee to cross examine a witness (Mohan Raj). On remand the assessing authority declined to permit cross examination on the ground of the witness's non availability, but nonetheless proceeded to rely upon the witness's evidence. The Court held that where adverse material is relied upon against the assessee, the assessee must be afforded an opportunity to test that material by cross examination; untested evidence cannot be used as a basis for confirming a demand. The assessing authority's reliance on such untested material was therefore impermissible.

The assessing authority could not lawfully rely on the untested evidence of Mohan Raj to confirm the demand.

Remand for fresh assessment after quashing - Requirement to test adverse evidence before confirming demand - Extent of relief and remedial direction following the impermissible reliance on untested evidence. - HELD THAT: - Because the impugned assessment order proceeded on material that was not tested by cross examination, the Court quashed the assessment order (Ext.P4). The matter was remitted to the assessing authority (2nd respondent) with directions to pass fresh orders after taking note of the Court's observations and after hearing the petitioner. The petitioner is to produce a copy of the writ petition and this judgment before the assessing authority. The assessing authority is directed to pass fresh orders within three months from receipt of a copy of the judgment.

Ext.P4 is quashed and the matter is remitted to the 2nd respondent to pass fresh orders after hearing the petitioner within three months.

Final Conclusion: The assessment order for AY 2007-2008 (Ext.P4) is quashed because it relied on untested evidence; the matter is remitted to the assessing authority to rehear and decide afresh after permitting the petitioner to test the adverse material, with fresh orders to be passed within three months.

Unexplained credit under section 68 - burden of proof under section 68 - identity, creditworthiness and genuineness of creditors - no obligation on assessee to prove source of the source - banking channel transactions as evidence of genuineness - duty of Assessing Officer to make adequate enquiry before rejecting documentary evidence

Unexplained credit under section 68 - burden of proof under section 68 - identity, creditworthiness and genuineness of creditors - no obligation on assessee to prove source of the source - banking channel transactions as evidence of genuineness - duty of Assessing Officer to make adequate enquiry before rejecting documentary evidence - Whether additions made under section 68 in respect of unsecured loans from three creditors can be sustained - HELD THAT: - The assessee produced confirmations from the creditors, acknowledgements of filing of returns, balance-sheets, ledger accounts and bank statements showing that loans were advanced through banking channels and that there were no cash deposits in the creditors' bank accounts. The authorities below doubted the transactions primarily because of low income reflected in the creditors' returns and unexplained RTGS entries in the creditors' accounts. The Tribunal held that on the material placed on record the assessee discharged the initial burden under section 68 to establish identity, creditworthiness and genuineness of the transactions. Mere low income in the creditors' returns or inability to trace the "source of the source" is not a valid reason to reject the explanation where prima facie documentary evidence (including banking channel evidence, confirmations and balance-sheets) exists. Further, the Assessing Officer had not made adequate enquiries into the documentary material before disbelieving it. In these circumstances the tribunal applied settled principles that the assessee need not prove source of the source and that the AO must carry suspicion to a logical conclusion by proper investigation before treating credits as unexplained. Having regard to the evidence and absence of further inquiry by the AO, the additions could not be sustained.

Additions under section 68 in respect of the unsecured loans from the three creditors are deleted and the appeal is allowed.

Final Conclusion: The Tribunal set aside the orders of the lower authorities, deleted the additions made under section 68 for A.Y. 2010-2011 and allowed the assessee's appeal.

Disallowance under section 14A - computation under Rule 8D(2)(iii) of the Rules - requirement of recording satisfaction by the Assessing Officer - mistake apparent on record under section 254(2) - recall and remand of Tribunal order for fresh hearing

Mistake apparent on record under section 254(2) - requirement of recording satisfaction by the Assessing Officer - Failure of the Tribunal to consider the decision of the Hon'ble Supreme Court in Godrej & Boyce and whether such failure amounted to a mistake apparent on the record warranting rectification under section 254(2). - HELD THAT: - The Tribunal recorded that the assessee had specifically relied upon the Hon'ble Supreme Court decision in Godrej & Boyce and that the Tribunal, while disposing the appeal, had not considered that binding decision when addressing the disallowance under section 14A read with Rule 8D(2). On perusal of the record and the log book, the Bench found that omission to advert to the Apex Court judgment was a clear omission in the Tribunal's reasoning. Such omission was treated as a mistake apparent on the face of the record within the meaning of section 254(2), warranting recall of the earlier Tribunal order. The Tribunal therefore recalled its order for A.Y.2008-09 and held that the decision would apply to the other assessment years with identical facts. [Paras 4, 5]

Order of this Tribunal for A.Y.2008-09 recalled as suffering from a mistake apparent for not considering Godrej & Boyce; same recall applied to the specified subsequent assessment years.

Disallowance under section 14A - computation under Rule 8D(2)(iii) of the Rules - recall and remand of Tribunal order for fresh hearing - Whether the alternative contention of the assessee-that disallowance should be restricted to the original Rs.50,000 made in assessment proceedings-required adjudication and whether the appeals should be reheard. - HELD THAT: - Having recalled the earlier order for failure to consider the Apex Court decision, the Tribunal left the assessee's alternative plea (that disallowance ought to be limited to the earlier figure reflected in the original assessment) open for fresh adjudication. The recall necessarily entails re-consideration of the disallowance under section 14A and the applicability or computation under Rule 8D(2)(iii) in light of the binding judicial precedent and the factual contentions raised by the assessee. Consequently the Tribunal directed listing of the main appeals for fresh hearing so that the disputed computation and the extent of disallowance can be examined afresh. [Paras 4, 6]

Alternative contention left open and appeals remanded for fresh hearing; registry directed to list main appeals for hearing on 25/01/2021.

Final Conclusion: The Tribunal allowed the miscellaneous applications, held that omission to consider the Apex Court decision amounted to a mistake apparent on record, recalled its earlier orders for A.Y.2008-09 (and for the similarly affected assessment years), and remanded the main appeals for fresh hearing to decide the extent and computation of any disallowance under section 14A read with Rule 8D(2)(iii).

Disallowance under section 40(a)(i) of the Income tax Act - obligation to deduct tax at source under section 195 - royalty within the meaning of section 9(1)(vi) - exception in section 9(1)(vi)(b) for royalty paid for business carried on outside India - source of income versus source of receipt - remand for verification of accounting treatment and netting of reversed expenditure

Remand for verification of accounting treatment and netting of reversed expenditure - disallowance under section 40(a)(i) of the Income tax Act - Whether reversal of expenditure of Rs. 32,93,513 shown as miscellaneous income should reduce the disallowance made under section 40(a)(i). - HELD THAT: - The Tribunal noted that the assessee consistently booked the full expenditure which was the subject matter of disallowance and first raised before the Tribunal for the first time that a sum was reversed and shown as miscellaneous income. The details in the profit and loss account indicate a reversal of Rs. 32,93,513 described as reversal of amounts payable to the vendor, but it is not clear from the record whether this reversal relates to the expenditure originally booked and included in the amount disallowed by the AO. In these circumstances the Tribunal held that the claim requires examination of the books of account and profit and loss account to determine whether the reversal pertains to the disallowed expenditure; if so, the disallowance must be restricted to the net amount actually payable for the year. [Paras 8]

Claim relating to reversal is restored to the file of the AO for verification; if the reversal pertains to the originally booked expenditure, restrict the disallowance to the net amount.

Royalty within the meaning of section 9(1)(vi) - exception in section 9(1)(vi)(b) for royalty paid for business carried on outside India - source of income versus source of receipt - obligation to deduct tax at source under section 195 - Whether payments to foreign marketing analysts (e.g., Gartner) are royalties that fall outside Indian taxation under section 9(1)(vi)(b) (and hence outside the obligation to deduct tax under section 195), or are taxable/require TDS because the source of income is in India. - HELD THAT: - The Tribunal recorded that the exception in section 9(1)(vi)(b) applies only if the royalty is paid by a resident for the purposes of a business carried on outside India. The assessee first claimed before the CIT(A) that its USA branch used the services exclusively, but failed there to substantiate use exclusively by the foreign branch and the CIT(A) noted invoices addressed to the Indian establishment. The Tribunal reviewed co ordinate authority where identical payments to Gartner were held to be royalty and considered precedent dealing with the distinction between the source of income and source of receipt, including the position that where export contracts are concluded in India the source of income may be situated in India. Given factual disputes on whether the services were used exclusively by the foreign business and whether the source of the income is outside India, the Tribunal held that the assessee should be given an opportunity to substantiate its claim and that the AO must examine the matter afresh in the light of the discussion and applicable authorities. [Paras 11, 12, 13, 14]

Issue restored to the file of the AO for fresh examination after affording the assessee opportunity to substantiate that the payments relate to business carried on outside India; AO to decide in accordance with law.

Final Conclusion: Both the claim for netting/reversal of expenditure and the question whether the payments qualify for the exception under section 9(1)(vi)(b) are remitted to the assessing officer for fresh examination after giving the assessee opportunity to be heard; appeal disposed of for statistical purposes.

Section 50C valuation - Guideline value versus agreed sale consideration - Reference to Valuation Officer under Section 50C(2) - Condonation of delay - Withdrawal of appeal under Vivad Se Vishwas

Section 50C valuation - Guideline value versus agreed sale consideration - Reference to Valuation Officer under Section 50C(2) - The correctness of the CIT(A)'s determination of the value of the immovable property for the purposes of Section 50C and whether the Assessing Officer was justified in adopting the Sub-Registrar's higher guideline value without reference to the Valuation Officer. - HELD THAT: - The Tribunal found on the material on record, including the remand report, site verification, Google Map and certified extracts of the Government of Karnataka guideline value provided by the District Registrar, that the impugned property (Kino Theatre) is situated on the stretch of Subedar Chatram Road between Anand Rao Circle and Seshadripuram. That entry in the guideline-value notification (entry No.157) fixed a guideline value as on 30.06.2012 which, even after applying the relevant commercial mark-up, resulted in a value lower than the sale consideration recorded in the deed. The CIT(A) had called for and examined the remand report and correctly applied the guideline notification to the correct stretch, concluding that the sale consideration disclosed by the assessee was not less than the guideline value such as would trigger the adjustment under Section 50C. The Tribunal, on perusal of the District Registrar's certified pages, upheld the CIT(A)'s factual and legal conclusion and held that the Assessing Officer's adoption of the higher value was not sustainable. The Tribunal therefore affirmed the CIT(A)'s acceptance of the sale consideration disclosed by the assessee. [Paras 6, 8]

CIT(A)'s determination accepting the assessee's sale consideration is upheld and the Assessing Officer's invocation of a higher guideline value under Section 50C is set aside.

Condonation of delay - Whether the delay of 28 days in filing the Revenue's appeal should be condoned. - HELD THAT: - The Department filed a petition for condonation supported by an affidavit of the Dy. Commissioner of Income-tax explaining the delay. The Tribunal examined the reasons and found sufficient cause for the belated filing and that no laches were attributable to the Department. [Paras 2]

Delay of 28 days in filing the Revenue's appeal is condoned and the appeal is admitted for adjudication on merits.

Withdrawal of appeal under Vivad Se Vishwas - Disposition of the assessee's cross-appeal where the assessee seeks to avail the Vivad Se Vishwas Scheme and wishes the appeal to be treated as withdrawn. - HELD THAT: - The assessee's authorised representative informed the Tribunal that the assessee intends to avail the Vivad Se Vishwas Scheme and requested that the appeal be treated as dismissed as withdrawn. The Tribunal recorded that submission and acted upon it. [Paras 9]

The assessee's appeal is dismissed as withdrawn in view of the assessee's stated intention to avail the Vivad Se Vishwas Scheme.

Final Conclusion: The Tribunal condoned the Revenue's delay and, on merits, upheld the CIT(A)'s acceptance of the sale consideration disclosed by the assessee (thereby setting aside the A.O.'s higher guideline valuation under Section 50C); the assessee's cross-appeal was dismissed as withdrawn; accordingly both appeals stand dismissed.

Registration under Sec.12AA - charitable objects - re-characterisation of receipts - corpus donations versus voluntary donations - scope of registration proceedings vis-a -vis assessment proceedings - genuineness of activities - retrospective effect of registration under Sec.12A(2)

Registration under Sec.12AA - charitable objects - re-characterisation of receipts - scope of registration proceedings vis-a -vis assessment proceedings - genuineness of activities - Grant of registration under Sec.12AA to the trust - HELD THAT: - The Tribunal found that the Commissioner (Exemptions) did not dispute that the trust's objects were charitable in nature. The denial of registration rested on re-characterising a receipt shown as "Trust Funds or Corpus Fund" in F.Y. 2018-19 as a voluntary donation under the income-tax provisions. The Tribunal held that such re-characterisation and examination of whether a receipt constitutes taxable income is a matter for assessment proceedings and not for the limited exercise of determining registration under Sec.12AA. There was no material on record to impugn the genuineness of the trust's activities; the finding to the contrary was a bald conclusion without supporting material. For these reasons the Commissioner's conclusion disallowing registration could not be sustained and registration was directed to be granted from the date of the application. [Paras 6]

Registration under Sec.12AA granted with effect from the date of application (23.05.2019).

Retrospective effect of registration under Sec.12A(2) - registration under Sec.12AA - Claim for registration with retrospective effect to earlier financial years - HELD THAT: - The Tribunal examined the appellant's contention that registration should be effective from an earlier date (claims for w.e.f. F.Y. 2018-19 or, alternatively, F.Y. 2019-20). It recalled that Sec.12A(2) provides that the provisions relating to application of Secs.11 and 12 apply from the assessment year immediately following the financial year in which the application for registration is made, and that there is no statutory provision empowering the Commissioner (Exemptions) to grant retrospective registration contrary to that scheme. Consequently, the plea for earlier effective dates could not be allowed. [Paras 7]

Grounds seeking retrospective grant of registration are dismissed; registration is not to be granted with retrospective effect.

Final Conclusion: The appeal is partly allowed: the trust is directed to be registered under Sec.12AA with effect from the date of its application (23.05.2019); the claim for registration with retrospective effect to earlier financial years is rejected.

Disallowance of interest under business nexus test - presumption of application of interest free funds where own/non interest funds exceed interest free outflows - deemed dividend under section 2(22)(e) - accumulated profits and non application of repayments - treatment of deferred tax liability reversal in computing accumulated profits - disallowance under section 14A - applicability where no exempt income is received

Disallowance of interest under business nexus test - presumption of application of interest free funds where own/non interest funds exceed interest free outflows - Deletion of proportionate disallowance of interest expenditure made by the AO under section 36(1)(iii) - HELD THAT: - The Tribunal found on the facts that the assessee had interest free funds (advances from customers) aggregating Rs.16.96 crores while interest free loans to subsidiaries amounted to Rs.10.26 crores. Applying the precedent of the jurisdictional High Court, where an assessee's own funds and other non interest bearing funds exceed the investment/loans, it must be presumed that such investments/loans were made out of interest free funds. In consequence, the nexus for disallowance of interest expenses under section 36(1)(iii) was not established and the proportionate disallowance confirmed by the authorities was set aside and deleted. [Paras 5]

Disallowance under section 36(1)(iii) deleted; AO directed to delete the addition.

Deemed dividend under section 2(22)(e) - accumulated profits and non application of repayments - treatment of deferred tax liability reversal in computing accumulated profits - Validity of assessing loan from subsidiary as deemed dividend under section 2(22)(e) and rejection of set off by repayments and of excluding deferred tax reversal from accumulated profits - HELD THAT: - The AO treated loan taken by the assessee from its subsidiary as deemed dividend to the extent of the subsidiary's accumulated profits, assessed at the opening 'Surplus in P&L A/c' of Rs.4,42,41,971. The CIT(A)'s allowance of netting repayments against the loan was held contrary to the Supreme Court's decision in Miss P Sarada, which treats receipt in the relevant period as constituting deemed dividend irrespective of subsequent repayment or adjustment. The assessee's contention that the deferred tax liability reversal should be excluded when computing accumulated profits was rejected: accumulated profits refers to reserves and surplus as per accounts and Explanation 2 to section 2(22)(e) does not permit such exclusion; moreover reversal merely neutralises prior provision and requires no separate adjustment. Accordingly the Tribunal held the AO was justified in assessing deemed dividend and reversed the CIT(A)'s order. [Paras 6]

Addition as deemed dividend under section 2(22)(e) upheld; CIT(A)'s reduction by set off and the deferred tax adjustment rejected.

Disallowance under section 14A - applicability where no exempt income is received - Validity of AO's disallowance under section 14A in respect of investments where no exempt income was earned in the relevant year - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the section 14A disallowance on the basis that no exempt income (dividend) was received or receivable by the assessee in the relevant previous year. The Tribunal relied on High Court authority that section 14A disallowance applies when there is an actual receipt of exempt income in the year; absent such receipt, no expenditure needs to be disallowed. On this view the AO's disallowance was deleted. [Paras 7]

Section 14A disallowance deleted; AO's addition set aside.

Final Conclusion: The Tribunal partly allowed both appeals: the disallowance under section 36(1)(iii) was deleted in favour of the assessee; the AO's addition as deemed dividend under section 2(22)(e) was upheld (CIT(A)'s relief set aside); and the section 14A disallowance raised by the AO was deleted.

Double taxation - special purpose vehicle (SPV) - taxation of income where beneficial rights attached to shares - treatment of contribution agreement under MOFA Section 10 as supervisory arrangement - presumptive taxing of contractor's profit - capital gains on conversion of capital asset into stock-in-trade under section 45(2)

Double taxation - special purpose vehicle (SPV) - taxation of income where beneficial rights attached to shares - Deletion of addition of proportionate income arising from sale of units of 'Lodha Supremus' made by the Assessing Officer. - HELD THAT: - The Tribunal accepted the CIT(A)'s finding that the assessee functioned as an SPV and that beneficial rights to occupy and use the units were inextricably linked to shares held by the holding company (SNCML). SNCML recorded and offered to tax the entire sale proceeds from the project; the assessee had no right to sell, occupy or deal with the units. Taxing the same income again in the hands of the assessee would amount to double taxation. The Tribunal relied on the appellate decision in the assessee's own case for AY 2012-13 and found no new facts or contrary authority warranting interference. On these bases the addition was held to be unjustified and was deleted. [Paras 6]

The addition of Rs. 3,49,23,699/- (proportionate income) is deleted; grounds 1-6 dismissed.

Treatment of contribution agreement under MOFA Section 10 as supervisory arrangement - presumptive taxing of contractor's profit - Validity of AO's presumption treating the assessee as a contractor and charging presumed profit at 8% of construction cost. - HELD THAT: - The Tribunal held that the contribution agreement merely assigned supervision of construction to the assessee under Section 10 of MOFA and did not create a work contract or entitle the assessee to contractual profit or commission. The assessee received contributions which were accounted for and treated by SNCML in computing project profit; no payment to the assessee as contractor formed part of the project cost. The AO's presumption that the assessee acted as a 'work contractor' and thereby earned profit was contrary to the contractual and accounting materials on record. Consequently the CIT(A)'s deletion of the presumptive 8% addition was upheld. [Paras 10]

The AO's estimation of contractor's profit at 8% is not sustained; the ground attacking deletion is dismissed.

Capital gains on conversion of capital asset into stock-in-trade under section 45(2) - Whether the godown occupancy right stood converted into stock-in-trade and attracted capital gains charge under section 45(2). - HELD THAT: - The Tribunal found that only the godown right was assigned to the assessee while the land and overall project remained owned and developed by SNCML; the cost of the godown right was included in SNCML's project inventory and accounted for in SNCML's profit computation. In the assessee's books the godown right continued as investment/capital work-in-progress and there was no conversion of that capital asset into stock-in-trade nor any transfer by the assessee of such right by sale of units. Section 45(2) is attracted only where a conversion to stock-in-trade and a subsequent transfer as stock-in-trade occur; neither element was established. Accordingly the addition under section 45(2) was not sustainable. [Paras 14]

The addition computed as capital gains under section 45(2) is not sustained; the ground is dismissed.

Final Conclusion: For the reasons stated, the Tribunal affirms the CIT(A)'s findings and dismisses the Revenue's appeals for the assessment years in dispute; the additions and presumptive assessments challenged by Revenue are not sustained.

Estimation of income by applying a net profit percentage - disallowance of business expenditure where supporting vouchers are not produced - application of Section 40A(2)(b) to payments to relatives/related parties - treatment of interest on advances under Section 36(1)(iii) - consequence of disallowance under Section 43B for amounts not paid at time of return - power to make ad hoc disallowances versus adopting a standardised net profit rate

Estimation of income by applying a net profit percentage - disallowance of business expenditure where supporting vouchers are not produced - power to make ad hoc disallowances versus adopting a standardised net profit rate - Whether the assorted disallowances made by the Assessing Officer and sustained in part by the CIT(A) should be sustained, or the assessee's income should be assessed by applying a net profit percentage to turnover. - HELD THAT: - The Tribunal noted that the Assessing Officer made various ad hoc disallowances in respect of commission, installation charges, interest, travel, conveyance, business promotion, car and scooter expenses and others, but had examined the books of account, sales and purchase bills and bank statements during assessment proceedings and had not rejected the books. The Tribunal observed the assessee's multi-year profitability record and that the disallowances were prompted by a fall in net profit rate in the year under appeal rather than by a finding that expenses were wholly not for business. Given that several vouchers were not produced before the AO and many disallowances were ad hoc, the Tribunal exercised the equitable approach of fixing the assessee's net profit at 1.90% of turnover for the assessment year 2012-13. This standardised computation was held to be just and to take care of alleged excessive or non substantiated expenditures without sustaining itemwise disallowances. The Tribunal directed the AO to assess total income at the net profit so computed and to add the amount already disallowed on account of non payment (Section 43B) to arrive at the final assessed income. All grounds raised by the assessee challenging specific disallowances were disposed of by adopting this composite remedy. [Paras 7, 8]

The AO was directed to assess the assessee's net income at 1.90% of turnover for AY 2012 13 (Rs. 2,970,532) and to add the Section 43B disallowance (Rs. 3,091,133), resulting in total income of Rs. 6,061,665; appeal partly allowed and all grounds disposed accordingly.

Application of Section 40A(2)(b) to payments to relatives/related parties - treatment of interest on advances under Section 36(1)(iii) - consequence of disallowance under Section 43B for amounts not paid at time of return - Whether specific statutory disallowances (payments characterised under Section 40A(2)(b), interest on advances under Section 36(1)(iii), and Section 43B disallowance) required separate adjustment or were to be subsumed in the net profit estimation. - HELD THAT: - The Tribunal recorded that the AO had applied Section 40A(2)(b) to disallow excessive interest/salary payments to related parties and applied Section 36(1)(iii) to compute imputed interest on interest free advances; the CIT(A) had confirmed or moderated several such disallowances. Rather than adjudicating each statutory disallowance item by item, the Tribunal adopted the pragmatic course of fixing the assessee's net profit rate which would effectively address the alleged excessive or non substantiated payments. The Tribunal nevertheless ordered that the already computed Section 43B disallowance (amounts not paid at the time of original return) be added to the assessed income computed on the basis of the fixed net profit percentage, thereby preserving the statutory consequence of non payment where invoked. [Paras 4, 5, 7]

The Tribunal treated the statutory disallowances as encompassed within the net profit estimation exercise but directed that the Section 43B disallowance be added to the assessed income computed at the fixed net profit rate.

Final Conclusion: The Tribunal partly allowed the appeal by directing the Assessing Officer to assess the assessee's income for AY 2012 13 at a net profit of 1.90% of turnover (resulting in assessed income of Rs. 2,970,532) and to add the Section 43B disallowance, bringing total assessed income to Rs. 6,061,665; all specific grounds of disallowance were disposed of by this directive.

Applicability of section 50C to transfer of leasehold rights in land - Computation of short-term capital gains on transfer of leasehold rights - Reliance on binding precedents holding non-applicability of section 50C to leasehold transfers

Applicability of section 50C to transfer of leasehold rights in land - Reliance on binding precedents holding non-applicability of section 50C to leasehold transfers - Section 50C does not apply to the transfer of leasehold rights in a plot of land. - HELD THAT: - The Tribunal found that the assessee transferred leasehold rights in a plot allotted by DDA and that the contention that section 50C applies only to transfer of land and buildings but not to leasehold rights is supported by binding precedents. The Bench noted decisions, including a ruling of the Hon'ble Bombay High Court and coordinate benches, which have held that section 50C is not attracted to the computation of capital gains on transfer of leasehold rights in land. Applying those precedents to the facts, the Tribunal concluded that the substitution of the sale consideration by circle rate under section 50C was incorrect in the present case and the addition made under section 50C should be deleted. [Paras 9]

Allowed the ground challenging applicability of section 50C to leasehold transfer and directed the Assessing Officer to delete the addition made under section 50C.

Non-adjudication of consequential grounds upon deletion under section 50C - Ancillary grounds challenging the valuation and computation were not adjudicated as they became academic after the primary issue was decided. - HELD THAT: - Having held that section 50C did not apply to the transfer of leasehold rights and directed deletion of the addition made under that provision, the Tribunal observed that the other grounds relating to valuation under section 50C and the quantum of short-term capital gain did not require separate adjudication. Those grounds were therefore left unadjudicated in view of the primary finding in favour of the assessee. [Paras 10]

Grounds contesting the valuation and the resultant addition were not decided as they were rendered unnecessary by the deletion directed on the primary issue.

Final Conclusion: The appeal is partly allowed: the Tribunal held that section 50C is not applicable to the transfer of leasehold rights in the subject plot and accordingly set aside the addition made under section 50C; consequential grounds were left unadjudicated as academic.

Invalid initiation of penalty proceedings - penalty under section 272A(2)(k) of the Income Tax Act - failure to file TDS statement in Form 26Q - tax collected at source (TCS) as distinct from tax deducted at source (TDS) - rectification under Section 154 of the Income Tax Act - summary dismissal for want of reasons

Penalty under section 272A(2)(k) of the Income Tax Act - failure to file TDS statement in Form 26Q - tax collected at source (TCS) as distinct from tax deducted at source (TDS) - invalid initiation of penalty proceedings - rectification under Section 154 of the Income Tax Act - summary dismissal for want of reasons - Whether penalty proceedings and the penalties imposed under section 272A(2)(k) for non filing of Form 26Q are sustainable where the assessee was not liable to deduct TDS and the Assessing Officer later accepted by order under Section 154 that the obligation was to file Form 27EQ (TCS) and not Form 26Q (TDS), and whether the CIT(A)'s summary confirmation without considering these facts was proper. - HELD THAT: - The Assessing Officer initiated and imposed penalty proceedings under section 272A(2)(k) for alleged failure to deliver TDS statements in Form 26Q. The assessee had consistently asserted by affidavit that it had not made payments attracting deduction of tax (TDS) and that its obligation related to collection of tax (TCS) and filing of Form 27EQ. The Assessing Officer, by an order under Section 154, accepted that the assessee was not under any obligation to deduct TDS and that the transactions related to tax collection (TCS) requiring Form 27EQ. Where the initiation of penalty proceedings is founded on a non existing factual premise - namely that the assessee was obliged to file Form 26Q - such initiation is invalid and vitiates the consequent penalty order. The Tribunal found that the penalty proceedings were based on misconceived grounds and not on a mere clerical mistake; consequently the penalties were unsustainable. The CIT(A) confirmed the Assessing Officer's orders by way of summary dismissal, relying on precedent permitting non speaking confirmations, but failed to examine or record independent findings on the crucial factual position accepted by the Assessing Officer under Section 154. The absence of consideration of the accepted factual position rendered the summary confirmation legally infirm in the circumstances. Applying these principles, the Tribunal held the impugned penalty orders to be invalid and liable to be quashed.

Penalty orders under section 272A(2)(k) for Assessment Years 2008-09 to 2011-12 quashed and penalties deleted because the proceedings were initiated on a wrong factual basis (obligation to file Form 26Q) which was later rectified by the Assessing Officer under Section 154 as an obligation to file Form 27EQ (TCS), and the CIT(A)'s summary confirmation failed to consider these determinative facts.

Final Conclusion: All appeals allowed; penalties imposed under section 272A(2)(k) for the Assessment Years 2008-09 to 2011-12 set aside as proceedings were founded on a non existing obligation to file Form 26Q and were vitiated once the Assessing Officer accepted under Section 154 that the obligation related to Form 27EQ (TCS).

Short Term Capital Gain vs Business Income - holding period test for shares - objective test of trading motive (frequency, infrastructure, dividend ratio) - separate trading account and profit & loss as indicator of business - CBDT Circular on classification of share transactions - consistency in assessment

Short Term Capital Gain vs Business Income - holding period test for shares - objective test of trading motive (frequency, infrastructure, dividend ratio) - separate trading account and profit & loss as indicator of business - consistency in assessment - Classification of gains from sale of shares as short term capital gains or business income and the application of holding-period and objective tests. - HELD THAT: - The Tribunal examined the assessment facts and the findings of the Assessing Officer and the Commissioner (Appeals). The AO applied an objective test - frequency of transactions, existence of separate trading ledger and profit & loss account, short holding periods in large number of cases, deployment of infrastructure for trading, and a low dividend yield relative to short term gains - and treated the entire short term capital gain as business income. The CIT(A) instead apportioned the gains: profits on shares held for less than one month were treated as business income, while gains on shares held for one month or more but less than one year were held to be short term capital gains. The Tribunal found no infirmity in the approach and reasoning of the CIT(A). The assessee's contention based on alleged prior acceptance by the Revenue was rejected because no documentary evidence was placed on record to establish such past acceptance. Reliance on the Coordinate Bench decision and the CBDT circular was noted, but the Tribunal upheld the CIT(A)'s application of the holding-period and objective indicia to the facts - in particular the table showing large volumes and substantial gains on holdings of less than 30 days - and agreed that such transactions, insofar as held for less than one month, constituted trading rather than investment activity.

The CIT(A)'s order directing that gains from shares held for less than one month be treated as business income and that gains on shares held for one month or more but less than one year be taxed as short term capital gains is upheld.

Final Conclusion: The appeal is dismissed and the order of the Commissioner of Income Tax (Appeals) is upheld.

Validity of assessment under section 153C - Estimation of business income in absence of books - Abatement of assessment proceedings on date of search - Deletion of additions in respect of cash seized - Deletion of additions in respect of jewellery seized - Application of co-ordinate Bench precedent

Validity of assessment under section 153C - Application of co-ordinate Bench precedent - Validity of assessments framed invoking section 153C - HELD THAT: - The Tribunal considered whether assessments could be sustained under section 153C where search was conducted at the assessee's residential premises. Relying on a co ordinate Bench decision in Shri Panati Vittalnath Reddy Vs DCIT, the Tribunal held that the facts of the present matters are similar and accordingly followed that precedent. On that basis the Tribunal upheld the validity of proceedings under section 153C and dismissed the challenge to the jurisdictional basis of assessment in the appeals where the Tribunal found seizure of valuables and documents relevant for other persons; the coordinate Bench reasoning was applied to the present facts and the ground contesting validity was dismissed. [Paras 4, 5]

Validity of assessments under section 153C upheld and the ground attacking jurisdiction dismissed.

Abatement of assessment proceedings on date of search - Estimation of business income in absence of books - Application of co-ordinate Bench precedent - Sustained estimation of business income and its extent for Assessment Years 2013-14, 2014-15 and 2015-16 - HELD THAT: - The Tribunal examined whether additions made by estimating business income could be sustained where no incriminating material relating to the relevant assessment years was found and whether the assessment proceedings had abated on the date of search. Applying the coordinate Bench's findings that, for AY 2013-14, no proceeding were pending on the date of search (and no incriminating material relating to that year was found), the Tribunal directed deletion of addition sustained under section 153C for that year. For the estimation of business profits where books were not maintained or accepted, the Tribunal followed the coordinate Bench approach of using past disclosed gross profit rates to adopt a reasonable estimate; having regard to earlier years' rates (average about 7.918%) and parity with presumptive treatment, the Tribunal restricted the estimate to 8% of gross receipts (reducing the rate earlier fixed by CIT(A) at 8.5% and AO at 12%). The same approach was applied to AYs 2014-15 and 2015-16 and the additions were recalculated accordingly. [Paras 5, 6, 7, 8, 10]

Additions made by estimation were restricted and directed to be recalculated at 8% of gross receipts for the relevant assessment years; additions under section 153C in respect of years where proceedings had abated on the date of search were deleted.

Deletion of additions in respect of cash seized - Application of co-ordinate Bench precedent - Sustainability of addition treating one third of cash seized as unexplained investment for AY 2015-16 - HELD THAT: - The Tribunal considered whether the AO was justified in treating one third of seized cash as unexplained investment. Relying on the assessee's evidence of cash withdrawals prior to the search and the precedent of the co ordinate Bench which accepted that cash available from prior withdrawals could explain the seized cash, the Tribunal found that cash withdrawals before the search supported the assessee's explanation and that the AO's addition was not justified. Consequently the Tribunal directed deletion of the addition made on account of the seized cash. [Paras 11, 12]

Addition in respect of one third of seized cash deleted and ground allowed.

Deletion of additions in respect of jewellery seized - Application of co-ordinate Bench precedent - Sustainability of addition treating one third of seized jewellery as unexplained investment for AY 2015-16 - HELD THAT: - The Tribunal examined whether jewellery seized should be attributed wholly to the assessee or apportioned among family members. Applying the coordinate Bench's finding that jewellery kept jointly by family members cannot be treated as solely belonging to the assessee, and noting the assessee's disclosure of a specified quantity of jewellery in earlier balance sheets and supporting evidence for purchases and receipts, the Tribunal held that no addition could be sustained in the assessee's hands. The Tribunal directed deletion of the addition attributable to jewellery seized. [Paras 13, 14]

Addition in respect of one third of seized jewellery deleted and ground allowed.

Final Conclusion: The Tribunal partly allowed the appeals: it upheld the validity of assessments under section 153C, but following co ordinate Bench precedent deleted additions where assessments had abated or where seized cash and jewellery were satisfactorily explained; further, where estimation of business income was sustained, the AO was directed to apply 8% of gross receipts for the relevant years and recompute the tax accordingly.

Reason to believe - seizure under section 110 of the Customs Act - confiscation under section 111 of the Customs Act - recording of reasons in public orders and seizure memos - prohibition on post hoc justification of administrative orders - high seas sale registration requirements - natural justice in cancellation of amendments to bills of entry

Reason to believe - seizure under section 110 of the Customs Act - confiscation under section 111 of the Customs Act - recording of reasons in public orders and seizure memos - prohibition on post hoc justification of administrative orders - Validity of the seizure memo dated 09.01.2020 under section 110 of the Customs Act. - HELD THAT: - Section 110(1) permits seizure only if the proper officer has reason to believe that goods are liable to confiscation; that belief must be founded on material and, where expressed in an order, must appear in the order itself. The impugned seizure memo was issued by one officer while the panchnama (drawn by another officer) contained the allegation of contravention; neither document records that the officer who effected the seizure had formed a reason to believe that the goods were liable to confiscation. A seizure made by one officer cannot be validated by reasons recorded by another, and subsequent explanations or affidavits cannot supply reasons absent from the seizure memo. Applying established precedents, the Court held that absence of any recorded reason in the seizure memo (and absence of a discernible reason in the panchnama attributable to the seizing officer) renders the seizure devoid of jurisdiction. Accordingly the seizure was quashed and the goods ordered released on payment of requisite duty and completion of formalities. [Paras 21, 31, 34, 35, 36]

Seizure memo dated 09.01.2020 is without jurisdiction and is quashed; seized goods to be released to the petitioner on payment of requisite duty and completion of formalities.

High seas sale registration requirements - natural justice in cancellation of amendments to bills of entry - nullity of action taken without authority - Validity of cancellation of amendment to the two bills of entry and its legal consequence. - HELD THAT: - Standing Order No.10 of 2017 prescribes that a high seas sale must be evidenced by a written, signed and notarised agreement and other specified documents; an oral high seas sale therefore did not satisfy the registration requirements. The amendments to the bills of entry effected on 18.12.2019 were allowed by the customs office on the basis of submitted NOCs and unchanged bills of lading/IGM. The subsequent nullification of those amendments was carried out months later at the instance of DRI without notice or opportunity of hearing to the petitioner and not by the authority which had applied its mind when allowing the amendment. Cancellation effected in that manner is a nullity and lacks legal sanctity. The Court however held that even if the cancellation is a nullity, that fact does not alter the central finding that the seizure itself was invalid; the cancellation therefore does not materially affect the result on the seizure issue. [Paras 34, 37, 39]

Cancellation of the amendments to the bills of entry is a nullity for absence of notice and hearing and for not being the considered act of the original authority; but this does not affect the quashing of the seizure.

Final Conclusion: Writ petition allowed: the seizure memo dated 09.01.2020 is quashed for want of jurisdictionary reason to believe recorded by the proper officer; seized goods to be released to the petitioner on payment of requisite duty and completion of formalities. The subsequent cancellation of amendments to the bills of entry is held to be a nullity but does not alter the result on the seizure.

Provisional release of seized goods - Undervaluation of imported goods - Computation of differential duty on the basis of parallel invoices - Provisional assessment and security by bond or bank guarantee - Reliance on documents recovered from mobile data and voluntary statement

Provisional release of seized goods - Provisional assessment and security by bond or bank guarantee - Validity of the provisional release order and the requirement of security for release of seized goods - HELD THAT: - The Court considered the interim order refusing unconditional release despite a provisional release order being issued. The authorities issued a provisional release demand to secure probable liability assessed pending final determination. The order under challenge provides for execution of a bond or acceptance of a bank guarantee to the satisfaction of the Commissioner as an alternative to cash deposit. In view of the prima facie material placed before the Court and the scheme permitting provisional security, there is no infirmity in directing provisional release against security rather than unconditional release.

Provisional release order upheld; release may be secured by bond or bank guarantee to the satisfaction of the Commissioner

Undervaluation of imported goods - Computation of differential duty on the basis of parallel invoices - Reliance on documents recovered from mobile data and voluntary statement - Legitimacy of the demand for differential duty based on higher-value parallel invoices and averaged computation for invoices not produced - HELD THAT: - The Department relied on a set of parallel invoices recovered from the mobile phone of the Managing Partner showing higher values than declared in the bills of entry. The Managing Partner had given a voluntary statement promising production of the remaining parallel invoices but did not furnish them. On the basis of the recovered invoices and the admitted practice of undervaluation, the Department computed probable undervaluation for the remaining entries by applying an average undervaluation discernible from the recovered documents and made a provisional demand for the probable duty, interest and penalty. The Court found no infirmity in this provisional computation as prima facie proof of systematic undervaluation existed and the provisional demand did not merely replicate amounts already paid in respect of the recovered invoices.

Demand for provisional differential duty based on average undervaluation upheld insofar as it is a provisional safeguard pending final adjudication; it is distinct from the differential duty already paid in respect of recovered invoices

Final Conclusion: The appeal is dismissed. The provisional release order and the provisional demand for differential duty founded on parallel invoices and an average computation for unproduced invoices are sustained; release may be effected on execution of a bond or provision of a bank guarantee to the satisfaction of the Commissioner. Parties to bear their own costs.

Maintainability of writ jurisdiction under Article 226 in presence of an alternative statutory remedy - exercise of discretionary writ jurisdiction to bypass statutory appeal - confiscation of goods under the Customs Act, 1962 - availability of appeal to the Customs, Excise and Service Tax Appellate Tribunal and condonation of delay - doctrine of exhaustion of alternative remedy

Maintainability of writ jurisdiction under Article 226 in presence of an alternative statutory remedy - exercise of discretionary writ jurisdiction to bypass statutory appeal - availability of appeal to the Customs, Excise and Service Tax Appellate Tribunal and condonation of delay - Writ petition challenging an order of confiscation is not maintainable where the statutory appeal to CESTAT was available and not availed of, absent sufficient cause to bypass that remedy. - HELD THAT: - The order-in-original confiscating goods expressly informed the petitioner of its right to prefer an appeal before the CESTAT within three months and of CESTAT's power to condone delay. The petitioner did not prefer that statutory appeal but filed a writ petition instead. Relying on the principle that Article 226 is not intended to short-circuit or circumvent available statutory procedures, and applying the guidance of Assistant Collector of Central Excise v. Dunlop India Limited, the Court held that absence of a good and sufficient reason to bypass the alternative remedy precludes exercise of writ jurisdiction. The Court accordingly refrained from adjudicating the merits of the confiscation order and dismissed the petition as not entertainable. [Paras 3, 4]

Writ petition dismissed as not maintainable for failure to avail the alternate statutory remedy; no adjudication on merits.

Final Conclusion: The writ petition challenging the confiscation order is dismissed for non-exhaustion of the statutory appeal remedy to the CESTAT; the court expresses no view on the merits; connected petition closed with no costs.

Alternative statutory remedy - Writ jurisdiction under Article 226 - Doctrine of exhaustion of statutory remedies - Discretionary relief-bypassing alternative remedy - Condonation of delay by CESTAT

Alternative statutory remedy - Doctrine of exhaustion of statutory remedies - Condonation of delay by CESTAT - Whether the writ petition is maintainable when a specific statutory appeal remedy before the CESTAT, with power to condone delay, was available and not availed of by the petitioner. - HELD THAT: - The Court held that the order of confiscation expressly informed the petitioner of the right to prefer an appeal to the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) within three months and that the CESTAT had power to condone delay if sufficient cause was shown. Relying on the principles in Assistant Collector of Central Excise v. Dunlop India Ltd., the Court reiterated that Article 226 is not intended to short-circuit statutory procedures and that extraordinary relief under writ jurisdiction should not be granted where adequate statutory remedies exist. In the absence of any acceptable explanation for bypassing the appellate forum vested with power to condone delay, the Court refused to entertain the writ petition and declined to express any opinion on the merits of the underlying confiscation order. [Paras 4]

Writ petition dismissed for non-availment of the statutory remedy before the CESTAT; merits not considered.

Final Conclusion: The writ petition was dismissed on the ground that the petitioner failed to avail the alternative statutory remedy of appeal to the CESTAT (which could condone delay), and the Court declined to consider the merits of the confiscation order.

Exhaustion of alternative statutory remedy - exercise of writ jurisdiction under Article 226 - requirement to prefer appeal under Section 129-A of the Customs Act, 1962 - condonation of delay by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) - principle against short-circuiting statutory procedures (Dunlop doctrine)

Exhaustion of alternative statutory remedy - requirement to prefer appeal under Section 129-A of the Customs Act, 1962 - condonation of delay by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) - Whether the writ petition could be entertained despite non exercise of the statutory remedy of appeal under Section 129-A against the Order in Original of confiscation - HELD THAT: - The Court noted that the impugned Order in Original explicitly informed the petitioner of the right to prefer an appeal before the CESTAT within three months and that the CESTAT is empowered to condone delay upon sufficient cause. The petitioner did not invoke that statutory remedy but instead filed a writ petition. Applying the established principle that Article 226 is not to be used to short circuit statutory procedures (as explained in the decision cited from Dunlop), the Court found no acceptable explanation for bypassing the alternative remedy provided by statute. Having regard to that doctrine, the Court refrained from expressing any view on the merits of the order of confiscation and held that the writ petition could not be entertained for the reasons stated. [Paras 3, 4]

Writ petition dismissed for failure to avail the statutory appeal remedy; Court declined to adjudicate merits.

Final Conclusion: The High Court dismissed the writ petition for non exhaustion of the statutory appeal remedy under Section 129 A of the Customs Act, 1962, applying the principle that writ jurisdiction should not be used to bypass available statutory procedures; the Court did not decide the merits of the confiscation order.

Review jurisdiction under Order 47 Rule 1 CPC and Section 114 CPC - error apparent on the face of the record - discovery of new and important matter or evidence - prohibition on rehearing or re-appreciation of evidence in review - mandatory pre-deposit requirement under Section 129(3) of the Customs Act, 1962

Review jurisdiction under Order 47 Rule 1 CPC and Section 114 CPC - error apparent on the face of the record - prohibition on rehearing or re-appreciation of evidence in review - Whether the review petition discloses any ground warranting review of the judgment dated 30/09/2019. - HELD THAT: - The Court applied settled principles governing review jurisdiction - that review lies only for a mistake or error apparent on the face of the record or for discovery of new and important matter/evidence which could not, despite due diligence, have been produced earlier. The Court reiterated that an error warranting review must be prima facie visible and not require elaborate re-examination or re-appreciation of evidence; review is not an appeal in disguise. Having examined the review petition and the earlier judgment, the Court found no such self-evident error, no fresh admissible material shown to be beyond petitioner's diligence, and no legal mistake that would justify reopening findings already reached on merits. Reliance was placed on authoritative precedent summarising these constraints on review power, and the petitioner's attempts to revisit merits were held impermissible in review proceedings.

Review petition does not disclose any error apparent on the face of the record or other permissible ground; review is rejected.

Mandatory pre-deposit requirement under Section 129(3) of the Customs Act, 1962 - Whether the impugned judgment correctly upheld the Tribunal's order because the mandatory pre-deposit under Section 129(3) was not complied with. - HELD THAT: - The Court affirmed the Tribunal's and earlier judgment's conclusion that the statutory requirement of pre-deposit as prescribed by Section 129(3) of the Customs Act, 1962 had not been fulfilled. That failure was a valid basis for dismissal/upholding of the impugned appeal in the earlier order. The review application did not demonstrate any legal or factual error in that conclusion; accordingly, there was no ground to disturb the finding that non-compliance with the mandatory pre-deposit condition supported the outcome.

The earlier conclusion upholding dismissal for non-compliance with the mandatory pre-deposit requirement stands affirmed.

Final Conclusion: The review petition is dismissed; there is no error apparent on the face of the record nor any other permissible ground for review, and the earlier order upholding the Tribunal's decision for non-compliance with the mandatory pre-deposit under Section 129(3) Customs Act, 1962 is affirmed.

Maintainability of writ against statutory order not appealed within limitation - exercise of powers under Article 226 - statutory appeal limitation and condonation - finality of unappealed statutory orders

Maintainability of writ against statutory order not appealed within limitation - statutory appeal limitation and condonation - Whether the High Court can entertain a writ petition under Article 226 challenging a statutory order in respect of Service Tax when no appeal was filed before the Appellate Authority within the maximum period of limitation. - HELD THAT: - The Court held that where a statutory appeal remedy is available and the period for preferring the appeal (including the extended period for condonation) has been exceeded, the High Court should not entertain a writ petition under Article 226 to challenge the statutory order. The Second Respondent's Order-in-Original dated 31.03.2017 was received by the petitioner on 20.04.2017; the petitioner did not prefer the statutory appeal under the Act within the prescribed two months nor seek condonation within the additional one month, and instead filed the writ petition beyond the maximum three-month period. The Court applied the precedent of the Hon'ble Supreme Court in Assistant Commissioner (CT) LTU, Kakinada v. Glaxo Smith Kline Consumer Health Care Limited, which directs that High Courts ought not to entertain writ petitions assailing statutory orders that were not appealed against within the maximum limitation period, thereby precluding examination of merits in such proceedings. [Paras 2, 3]

Writ petition cannot be entertained and is dismissed.

Final Conclusion: The writ petition challenging the Service Tax Order is dismissed as not entertainable because the petitioner failed to prefer the statutory appeal within the maximum limitation period; consequently the connected miscellaneous petition is closed with no costs.

Refund of accumulated Cenvat credit - refund under Rule 5 of the Cenvat Credit Rules, 2004 - Board clarification D.O.F No. 334/1/2012-TRU dated 16.03.2012 - nexus between input services and exported services - failure to follow binding precedent - hierarchical judicial discipline - remand for de-novo adjudication

Failure to follow binding precedent - hierarchical judicial discipline - remand for de-novo adjudication - Impugned appellate order set aside for failure to follow the Tribunal's earlier final order in the appellant's own case and matter remanded for fresh decision on merits. - HELD THAT: - The Tribunal found that the First Appellate Authority (FAA) did not adequately justify departing from earlier orders of the same Bench in the appellant's own case and gave no persuasive reason to ignore those higher forum findings which have not been stayed or set aside by the High Court. The Bench emphasised that where a previous final order of a higher forum covers the same assessee (albeit for a different period) it is to be followed unless stayed or reversed. Because the FAA provided no justifiable findings on the merits and failed to observe hierarchical judicial discipline and principles of natural justice, the impugned order was set aside and the matter remitted for a de-novo appellate decision after giving the appellant reasonable opportunity of hearing. The FAA was directed to pass a fresh appellate order within six months from receipt of this order. [Paras 6]

Impugned order set aside; matter remanded to FAA for fresh de-novo adjudication within six months, with direction to follow the higher forum's orders unless stayed and to afford reasonable opportunity to the appellant.

Final Conclusion: The appeal succeeds to the extent that the impugned Commissioner (Appeals) order is set aside and the matter is remitted to the First Appellate Authority for a fresh de-novo appellate decision within six months; the FAA must follow the higher forum's orders unless they are stayed or set aside and must afford the appellant reasonable opportunity of hearing.

Refund/rebate of duty on export - date of export under Section 11-B - effect of subsequent amendment notification on claims - estoppel against statute

Refund/rebate of duty on export - effect of subsequent amendment notification on claims - Whether the petitioner was entitled to refund of duty paid in respect of goods exported after 02.06.2004 in view of Notification No. 10/2004-C.E.(N.T) dated 02.06.2004. - HELD THAT: - The Court held that the petitioner was not entitled to refund of the duty paid because the goods were exported after the cut-off date of 02.06.2004. The bills of lading relied upon by the petitioner are dated 03.06.2004 and 18.06.2004, which are subsequent to the amendment carried out by Notification No. 10/2004-C.E.(N.T) dated 02.06.2004. Consequently, the amended notification applied to these exports and precluded the refund claimed by the petitioner. The Court rejected the contention that processes undertaken prior to 02.06.2004 (such as packing) could be treated as export for the purpose of entitlement to rebate, observing that preparatory acts in aid of export do not amount to export when the statutory cut-off date is later. [Paras 12]

Claim for refund of duty paid rejected as the exports occurred after 02.06.2004 and Notification No. 10/2004-C.E.(N.T) applied.

Date of export under Section 11-B - refund/rebate of duty on export - Whether the date of packing or inspection at the factory could be treated as the date of export instead of the date on which the ship left the port under Section 11-B. - HELD THAT: - Relying on Section 11-B of the Central Excise Act, 1944 and its Explanation, the Court held that for goods exported by sea the relevant date of export is the date on which the ship in which the goods are loaded leaves India. The bills of lading and evidence showing the ship's departure on 03.06.2004 and 18.06.2004 therefore determined the date of export. Acts such as inspection, packing and sealing at the factory prior to departure are ancillary to export and cannot be equated with the statutory date of export under Section 11-B. [Paras 12]

Date of export is the date the ship left India; earlier packing/inspection cannot be treated as date of export.

Estoppel against statute - effect of subsequent amendment notification on claims - Whether the plea of estoppel could preclude application of the statutory provision and the amendment notification to the petitioner's claim. - HELD THAT: - The Court noted and rejected the plea of estoppel, observing that estoppel cannot operate against a statute. Where Section 11-B and the amendment by Notification No. 10/2004-C.E.(N.T) prescribe the legal test for entitlement to refund, private assertions of entitlement by the petitioner cannot override the statutory provision. The statutory definition of export and the amendment's applicability governed the outcome. [Paras 12]

Plea of estoppel rejected; estoppel cannot be invoked to defeat statutory provision or amendment.

Final Conclusion: The petition was dismissed; the authorities below correctly rejected the petitioner's rebate/refund claims because the exports occurred after 02.06.2004, the date of export is the ship's departure under Section 11-B, the amendment notification applied, and estoppel could not be invoked against the statute.

Refund of pre-deposit - interest on delayed refund under Section 35FF of the Central Excise Act, 1944 - appellate order communication and computation of interest - appropriation of refundable pre-deposit contrary to Tribunal order

Refund of pre-deposit - appropriation of refund by adjudicating authority - The appellant is entitled to refund of the pre-deposit made pursuant to directions of the Tribunal. - HELD THAT: - The Tribunal found that the appeal was decided in favour of the appellant by setting aside the impugned adjudication order, and that the pre-deposit paid in compliance with Section 35F became refundable. The adjudicating authority had, notwithstanding the Tribunal's order, appropriated the deposited amount against demands of interest and penalty which were set aside by the Tribunal; that appropriation was held to be contrary to the Tribunal's order and impermissible. The Tribunal criticised the Commissioner (Appeals) for failing to take cognizance of the Tribunal's order which had been uploaded and communicated, and directed refund accordingly. [Paras 8, 11, 16]

Refund of the pre-deposit is granted and the deposited amount is to be refunded to the appellant.

Interest on delayed refund under Section 35FF of the Central Excise Act, 1944 - appellate order communication and computation of interest - The appellant is entitled to interest on the delayed refund and the period for which interest is payable is from 19.02.2019 (date on which the refund claim was allowed by the adjudicating authority) until realization. - HELD THAT: - Section 35FF (unamended) provides for payment of interest at the specified rate where an amount deposited under Section 35F is required to be refunded consequent upon an appellate order and is not refunded within three months from the date of communication of such order. The Tribunal held that the amended provision w.e.f. 06.08.2014 is not applicable to the facts (the deposit having been made prior thereto) and applied the unamended provision. The Tribunal observed that although the appeal disposing the substantive issue was dated 05.07.2018, the adjudicating authority allowed the refund claim only on 19.02.2019 and thereafter had improperly appropriated the deposit; accordingly interest on delayed refund was awarded from 19.02.2019 until actual refund. The Tribunal considered and distinguished contrary authorities and relevant High Court and Tribunal decisions in light of the factual matrix and statutory scheme. [Paras 9, 10, 12, 16]

Interest on the delayed refund is payable from 19.02.2019 until the date of actual refund.

Final Conclusion: The appeal is allowed: the pre-deposit of Rs. 15,00,000/- is directed to be refunded to the appellant, with interest on delayed refund from 19.02.2019 up to the date of realisation.

Prima facie case - undue financial hardship - stay of demand - deposit as condition for stay - arbitrariness in exercise of discretion - precedent governing grant of stay - revisional jurisdiction

Prima facie case - undue financial hardship - stay of demand - deposit as condition for stay - arbitrariness in exercise of discretion - precedent governing grant of stay - Whether the Tribunal was justified in directing deposit of 10% of the tax despite recording that a prima facie case was made out and that deposit would cause undue financial hardship. - HELD THAT: - The Tribunal recorded that a prima facie case in favour of the revisionist was made out and that a direction for deposit of the entire amount would cause undue financial hardship, but nevertheless directed a deposit of 10% by granting only 90% stay. It is well settled that while deciding a waiver (stay) application the authority must record whether a prima facie case exists and whether deposit would cause undue hardship, and exercise its discretion consistently with precedents governing grant of stay. The Tribunal's conclusion to impose a deposit after recording both an arguable/prima facie case and financial hardship is arbitrary and contrary to the settled legal position articulated in the cited decisions. The order thus lacks proper application of the legal tests for stay and is liable to be set aside as illegal and arbitrary.

Order dated 28.10.2020 of the Tribunal directing deposit of 10% is arbitrary and set aside; the revision is allowed on the questions framed and in favour of the assessee.

Final Conclusion: The revision is allowed; the Tribunal's stay order dated 28.10.2020 is set aside for being arbitrary and contrary to settled law. The First Appellate Authority is directed to hear and decide the appeal on merits in accordance with law with all expedition. Any recovery already effected may be challenged by the revisionist in appropriate proceedings; this Court does not direct refund.

Punishment for quantity between small and commercial - commercial quantity - quantum of sentence - sentence reduction on account of time served - confirmation of conviction by High Court - condonation of delay

Punishment for quantity between small and commercial - commercial quantity - quantum of sentence - sentence reduction on account of time served - Whether the sentence of 10 years rigorous imprisonment imposed for possession of 6.300 kilogram of Ganja should be modified in light of the quantity involved and the period already undergone by the appellant. - HELD THAT: - The Court observed that 6.300 kilogram of Ganja recovered from the appellant falls between the small quantity and the commercially significant threshold, and that the statutory maximum punishment for that category is imprisonment up to 10 years. Having regard to the fact that the appellant had already undergone six years of rigorous imprisonment and considering ancillary personal circumstances placed before the Court (youth at the relevant time, absence of antecedents, family responsibilities), the Court exercised its appellate discretion limited to quantum and modified the sentence. The conviction and other aspects of the trial Court's and High Court's orders were left intact; only the term of imprisonment was reduced from ten years to six years. [Paras 3, 5]

Sentence reduced from ten years rigorous imprisonment to six years rigorous imprisonment; rest of the conviction and orders confirmed.

Final Conclusion: Delay in filing the appeal was condoned; appeal allowed in part by reducing the sentence imposed for possession of 6.300 kg of Ganja from ten years to six years rigorous imprisonment, while confirming the conviction and other aspects of the trial and High Court orders.

Liability of directors under Section 138 read with Section 141 of the Negotiable Instruments Act - quashing of summoning order under Article 227 of the Constitution read with Section 482 Cr.P.C. - requirement of specific averment that a director was in charge of and responsible for conduct of company's business - triability of defence that cheque was given as security and not for discharge of debt - abuse of process and unimpeachable evidence standard for quashing

Liability of directors under Section 138 read with Section 141 of the Negotiable Instruments Act - requirement of specific averment that a director was in charge of and responsible for conduct of company's business - quashing of summoning order under Article 227 of the Constitution read with Section 482 Cr.P.C. - Whether the summoning order against the petitioner for the offence under Section 138 N.I. Act should be sustained, having regard to the averments and pre-summoning material about her being in charge of and responsible for the company's business. - HELD THAT: - The Court examined the legal requirement that a complaint under Section 138 read with Section 141 must contain a specific averment that the director was in charge of and responsible for the conduct of the company's business at the relevant time, and that the High Court may quash proceedings only if unimpeachable evidence or totally acceptable circumstances show the director could not have been so concerned. In the present case the legal notice, complaint and pre-summoning evidence acknowledged the petitioner's reply asserting she had no role in day-to-day affairs and that her husband handled the company's business. Despite that specific stand, the complainant did not furnish further particulars in the complaint or pre-summoning evidence identifying meetings, signatures or any act by the petitioner; the petitioner did not sign the distributorship agreement or the cheque and there is no averment she was present when the agreement was signed. On combined reading of the material, there are no unimpeachable or incontrovertible facts establishing that the petitioner was in charge of and responsible for the company's business at the relevant time; allowing proceedings to continue against her on the present record would amount to prosecutorial overreach. The Court noted that the question whether the cheque was given as security is a triable question of fact and not for determination at this stage. [Paras 13, 14, 17, 18, 20]

Impugned summoning order insofar as it summons the petitioner for the offence punishable under Section 138 of the N.I. Act is quashed.

Final Conclusion: The petition is allowed; the order summoning the petitioner for offence under Section 138 of the Negotiable Instruments Act is quashed on the ground that the material on record does not establish that she was in charge of and responsible for the company's business at the relevant time.