TaxTMI Updates e-Newsletter
Dec 09,2022

Jurisdiction under Article 226 of the Constitution of India - availability of alternative statutory remedy - non constitution / non functioning of the Appellate Tribunal - maintainability of writ petition despite alternative remedy - right to carry on business under Article 19(1)(g)

Jurisdiction under Article 226 of the Constitution of India - availability of alternative statutory remedy - maintainability of writ petition despite alternative remedy - non constitution / non functioning of the Appellate Tribunal - Whether the writ petition under Article 226 is maintainable to challenge the Commissioner (Appeals) order when the statutory Appellate Tribunal provided by the CGST Act, 2017 is not constituted. - HELD THAT: - The Court declined to permit the respondents' preliminary contention - that the petition must be dismissed because a statutory remedy of appeal to the Tribunal exists - to operate as a bar in the peculiar factual matrix where the Tribunal has not been constituted. The Bench noted the distinction between the Supreme Court authority relied upon by the respondents (which involved a circumstance where alternative appellate remedies had not been exhausted) and the present case in which the petitioner had availed the available appellate remedy under Section 107. The Court treated the reasoning in the Division Bench decision of the Telangana High Court as directly relevant, which observed that a petitioner cannot be left without remedy indefinitely where the alternate forum exists only on paper and such inaction impairs rights (including commercial rights under Article 19(1)(g)). In view of these considerations the Court did not accept the written preliminary objection as a ground for summary refusal of relief and observed that the factual position about non constitution of the Tribunal disentitles the respondents to contend that the writ is necessarily barred. [Paras 4, 5, 6]

Preliminary objection based on existence of alternative statutory remedy was not sustained as a ground for summary non entertainment of the writ petition in light of the Appellate Tribunal not being constituted; maintainability to be considered further.

Availability of alternative statutory remedy - non constitution / non functioning of the Appellate Tribunal - Whether the respondents (Union of India / CBIC) accept the stance that the petitioner is remedy less until the Tribunal is constituted and whether the Telangana High Court judgment in Appario Retail Pvt. Ltd. is challenged. - HELD THAT: - The Court observed that the Advocate for the respondents could not confirm on instructions whether the stance that the petitioner is without remedy until the Tribunal is made functional represented the official stand of the Union of India, nor could the Advocate inform whether the Telangana High Court order relied upon by the petitioner has been challenged. Given this lacuna, the Bench directed the Central Board of Indirect Taxes and Customs to file an affidavit addressing (a) whether the position advanced by the respondents' counsel in court - that the petitioner remains remedy less until the Tribunal is constituted - is the official position of the Union of India, and (b) whether the Union has challenged the Telangana High Court judgment relied upon by the petitioner. [Paras 7, 8, 9]

Directed CBIC to file an affidavit on the official stance and on challenge to the Telangana High Court judgment; matter listed for further hearing on 23 January 2023.

Final Conclusion: The Court did not allow the respondents' preliminary objection to result in summary rejection of the writ; observing that the Appellate Tribunal is not constituted, it directed the Central Board of Indirect Taxes and Customs to file an affidavit addressing the official position and any challenge to the Telangana High Court decision, and adjourned the matter to 23 January 2023 for further hearing.

Regular bail - economic offences - presumption of innocence - prima facie case - completed investigation and charge-sheet filed - danger of tampering with evidence - right to speedy trial under Article 21 - stringent conditions on bail

Regular bail - completed investigation and charge-sheet filed - presumption of innocence - right to speedy trial under Article 21 - stringent conditions on bail - Grant of regular bail to petitioner Arjun alias Muggu - HELD THAT: - The court found that investigation in the case stands concluded and the challan/charge-sheet has been presented, reducing the need for continued custody for further investigation. Balancing the established bail jurisprudence for economic offences with the presumption of innocence and the right to speedy trial under Article 21, the Court held that continued detention of petitioner Arjun for an indefinite period would violate his constitutional right to speedy trial. The Court observed that the documentary nature of the evidence and concluded investigation diminish apprehension of tampering. On that basis the Court was satisfied to release Arjun on bail subject to furnishing bonds and specified stringent conditions, including surrender of passport and undertakings regarding non-alteration of documents and notifying any change of mobile number. [Paras 10, 11, 12]

Petitioner Arjun alias Muggu is granted bail on furnishing bail/surety bonds subject to conditions including surrender of passport and undertakings; Trial Court may impose further lawful conditions.

Regular bail - economic offences - danger of tampering with evidence - prima facie case - Refusal of regular bail to petitioner Rakesh Puri - HELD THAT: - The Court took into account the conduct of petitioner Rakesh Puri and that several other FIRs with similar allegations are pending against him. Considering these factors alongside the seriousness of the charges and his recorded conduct during investigation, the Court concluded that no ground existed for granting bail to Rakesh Puri. The Court therefore refused his prayer for bail. [Paras 10, 13]

Petition of Rakesh Puri is dismissed and bail is refused.

Final Conclusion: The High Court allowed the bail petition of Arjun alias Muggu on stringent conditions (including surrender of passport and undertakings) noting completed investigation and the right to speedy trial, and dismissed the bail petition of Rakesh Puri in view of his conduct and multiple similar FIRs pending against him.

Definition of "business" under the CGST Act - profession as included within "business" - definition of "supply" and "outward supply" - composite supply - exemption for educational institutions (Entry 66 of Notification No.12/2017 C.T.(Rate)) - exemption for health care services (Entry 74 of Notification No.12/2017 C.T.(Rate)) - advances for taxable/exempt supplies - renting of immovable property as separate supply - registration liability under section 22 of the CGST Act

Definition of "business" under the CGST Act - profession as included within "business" - Whether the Appellant's activities of imparting medical education and providing health care services constitute "business" under the CGST Act, 2017. - HELD THAT: - The Appellate Authority examined section 2(17) of the CGST Act and observed that the definition of "business" is inclusive and expressly includes "profession". Having regard to dictionary meanings of "profession" and the factual position that highly trained and skilled personnel (doctors, para medics) are engaged to impart medical education and deliver health care, the impugned activities qualify as "profession" and therefore fall within the inclusive definition of "business" under the CGST Act. The Authority contrasted the wider scope of the CGST definition with the erstwhile Bombay Sales Tax definition to show the expanded coverage under GST. [Paras 31]

The activities of imparting medical education and providing health care services by the Appellant constitute "business" under the CGST Act, 2017.

Definition of "supply" and "outward supply" - exemption for educational institutions (Entry 66 of Notification No.12/2017 C.T.(Rate)) - exemption for health care services (Entry 74 of Notification No.12/2017 C.T.(Rate)) - Whether the Appellant's medical education and health care activities constitute "supply"/"outward supply" and whether those supplies attract exemption under the relevant entries of Notification No.12/2017 C.T.(Rate). - HELD THAT: - Relying on section 7(1)(a), the Authority identified two pre requisites for "supply": consideration and course or furtherance of business. The Appellant, being a "person" under the Act, performs the activities in the course of its business and receives fees/charges; hence the activities qualify as "supply" and thereby as "outward supply" under section 2(83). The Authority then applied Notification No.12/2017 C.T.(Rate): medical education provided by an educational institution recognised by the relevant university falls under Entry 66 and attracts nil rate; health care services by a clinical establishment fall under Entry 74 and attract nil rate. Consequently, fees from students and recoupment charges from patients are outward supplies but are covered by the nil rate exemptions at Entries 66 and 74 respectively. [Paras 32, 33]

The Appellant's medical education and health care services are "supply"/"outward supply" and those core supplies are exempt under Entry 66 (educational services) and Entry 74 (health care services) of Notification No.12/2017 C.T.(Rate).

Composite supply - definition of "composite supply" - exemption for health care services (Entry 74 of Notification No.12/2017 C.T.(Rate)) - Whether costs recovered for medicines, consumables and nominal diagnostic charges form part of a composite supply with health care and qualify for exemption. - HELD THAT: - The Authority considered the composite supply test under section 2(30) and concluded that medicines, consumables and diagnostic investigations are indispensable and ancillary to the principal supply of health care services. As these elements are naturally bundled with the main supply of treatment and are provided in conjunction with it to the same recipient, they form a composite supply whose principal supply is health care. Since the principal supply is an exempt health care service under Entry 74, the ancillary components qualify for exemption as part of the composite supply. [Paras 35]

The cost of medicines, consumables and nominal diagnostic charges form a composite supply with health care services and qualify for exemption under Entry 74.

Advances for taxable/exempt supplies - exemption for health care services (Entry 74 of Notification No.12/2017 C.T.(Rate)) - Whether nominal sums collected under the "Unparallel Health Insurance Scheme" are taxable or are to be treated as advances for exempt health care services. - HELD THAT: - The Authority agreed with the MAAR that the Appellant has no IRDAI licence and therefore the scheme is not an insurance business. However, on classification, the Authority accepted the Appellant's submission that the amounts collected are advances toward provision of future health care services to subscribers and are not a separate taxable insurance service. As the underlying services to be provided are health care services exempt under Entry 74, such advance collections are not subject to GST under that entry. [Paras 36]

Amounts collected under the "Unparallel Health Insurance Scheme" are advances for exempt health care services and are not subject to GST under Entry 74.

Composite supply - renting of immovable property as separate supply - Whether nominal amounts received for providing space for banking, parking, refreshment facilities and amounts from disposal of waste constitute part of exempt composite supply or are separate taxable supplies. - HELD THAT: - The Authority applied the composite supply criteria (single taxable person to a single recipient, naturally bundled, principal supply) and found them unmet: renting of space and disposal of waste are provided to third party operators/vendors, not to the same recipients of the Appellant's educational or health care services. Consequently these activities are separate and independent supplies. Renting of immovable property is classified as real estate services and taxable at the applicable rate (held at 18% by the Authority); disposal/sale of waste/scrap is also an independent supply and subject to GST at the rate applicable under Notification No.01/2017 C.T.(Rate). [Paras 37]

Renting of space to third parties and disposal of wastes are separate taxable supplies; renting is taxable as real estate services and disposal of wastes is taxable at the applicable rate.

Registration liability under section 22 of the CGST Act - Whether the Appellant is liable to obtain GST registration. - HELD THAT: - Having held that the Appellant renders both exempt supplies (educational and health care) and taxable supplies (renting, disposal of wastes etc.), the Authority concluded that the Appellant is liable to obtain registration under section 22(1) of the CGST Act if its aggregate turnover (inclusive of exempt and taxable supplies) exceeds the statutory threshold. The finding is that mixed supplies exist and registration obligation depends on turnover. [Paras 38, 40]

The Appellant is liable to register under section 22(1) of the CGST Act if aggregate turnover exceeds the threshold limit.

Final Conclusion: The Appellate Authority affirmed that the Appellant's medical education and health care activities constitute "business" and "outward supply" under the CGST Act, held those core services exempt under Entry 66 (education) and Entry 74 (health care) of Notification No.12/2017 C.T.(Rate), held medicines/diagnostics to be part of a composite exempt supply, treated advance subscription receipts under the health scheme as advances for exempt health care, and ruled that renting of space and disposal of wastes are separate taxable supplies; consequently the Appellant must obtain GST registration if aggregate turnover exceeds the statutory threshold.

Services by an employee in the course of or in relation to his employment not a supply - consideration includes payment made by any other person - director functioning in dual capacities - distinction between salary and fees - time limit for availing input tax credit under section 16(4) - RCM self-invoice as eligible document under Rule 36 - value of taxable supply - transaction value and components to be included - reverse charge to be calculated on gross consideration excluding GST

Services by an employee in the course of or in relation to his employment not a supply - consideration includes payment made by any other person - Liability of tax on reimbursement of expenses at actuals incurred by employees on behalf of the company - HELD THAT: - The Authority found that services rendered by employees to their employer are covered by Clause 1 of Schedule III and are therefore not a supply. The amounts paid by employees to third-party service providers, where invoices are in the company's name or where the employee pays on behalf of the company, represent payments made by any other person and fall within the statutory definition of "consideration" as an amount paid in respect of supply. However, since the employee's services to the employer are not a supply under Schedule III, reimbursement by the employer of such expenses does not amount to consideration for a taxable supply and is not liable to tax. [Paras 12]

Reimbursement of expenses at actual cost incurred by employees on behalf of the company is not liable to tax.

Director functioning in dual capacities - distinction between salary and fees - part of director's remuneration declared as salaries not taxable - Applicability of Reverse Charge Mechanism on reimbursement of expenses paid to a whole time director who is also an employee - HELD THAT: - Relying upon the Board's clarification (Circular No.140/10/2020) and the established distinction that a director may act in dual capacities (as employee under a contract of service and as a director), the Authority held that where the director is an employee and the amounts relate to expenses reimbursed in the course of employment (i.e., treated as part of salary), such reimbursements are not taxable. Only that portion of director's remuneration which is declared other than as salary and treated as fees (subject to TDS under section 194J) falls outside Schedule III and attracts taxation on reverse charge. Consequently, reimbursement of expenses at actuals to a whole time director who is an employee does not attract reverse charge. [Paras 13]

Reverse Charge Mechanism is not applicable on reimbursement of expenses at actuals to a whole time director who is also an employee of the company.

Time limit for availing input tax credit under section 16(4) - RCM self-invoice as eligible document under Rule 36 - Whether the time limit in section 16(4) and the year of availing ITC on tax paid under reverse charge (RCM) can be ruled upon - HELD THAT: - The Authority observed that the questions relating to applicability of section 16(4) to self invoices issued under reverse charge, and the accounting year in which ITC arising from tax paid under reverse charge should be availed, fall outside the scope of matters on which an advance ruling may be given under section 97(2) of the CGST/KGST Acts as raised by the applicant. Consequently, the Authority refrained from giving any ruling on these points. [Paras 14]

Authority refrains from giving a ruling on the applicability of section 16(4) to RCM self invoices and on the year in which ITC for tax paid under RCM may be availed.

Value of taxable supply - transaction value and components to be included - reverse charge to be calculated on gross consideration excluding GST - Whether reverse charge is to be calculated on values including GST or excluding GST - HELD THAT: - Considering the definition of value of taxable supply (transaction value) and the enumerated inclusions under section 15(2) (such as amounts incurred by the recipient and incidental expenses), the Authority concluded that reverse charge is to be computed on the gross consideration paid or payable to the supplier. Accordingly, the value on which reverse charge is calculated excludes the GST component itself. [Paras 15, 16]

Reverse charge is to be calculated on values excluding GST (i.e., on the gross consideration).

Final Conclusion: The Authority ruled that (i) reimbursement of expenses at actuals incurred by employees on behalf of the company is not taxable under Schedule III; (ii) reverse charge does not apply to such reimbursements made to a whole time director who is an employee; (iii) the Authority refrains from ruling on the applicability of section 16(4) to RCM self invoices and the year of availing ITC for tax paid under RCM; and (iv) reverse charge is to be computed on the gross consideration excluding GST.

Eligibility and conditions for taking input tax credit under Section 16 - Input tax credit wrongly availed or utilised by reason of fraud, wilful-misstatement or suppression of facts under Section 74 - Insufficiency of appellate findings and requirement of specific findings

Eligibility and conditions for taking input tax credit under Section 16 - Input tax credit wrongly availed or utilised by reason of fraud, wilful-misstatement or suppression of facts under Section 74 - The appellate authority's cryptic finding cancelling the petitioner's claim of input tax credit cannot be sustained and is set aside. - HELD THAT: - The court examined the requirements of entitlement to input tax credit and the power of the authority to issue notices where ITC is alleged to have been wrongly availed. The first Appellate Authority recorded that documents were placed on record but rejected the claim solely because no amount for loading and unloading was shown and because the supplier's registration was said to be cancelled. The appellate finding was cryptic because it did not specify the date of cancellation of the supplier's registration and did not record when the inquiry was made to verify whether the supplier was carrying on business at the alleged premises. For these reasons the appellate conclusion was held unsustainable and set aside.

Appellate authority's order cancelling ITC set aside for being cryptic and unsustainable.

Insufficiency of appellate findings and requirement of specific findings - Remand for fresh consideration and verification of supplier's registration and business activity - The matter is remanded to the first Appellate Authority for specific findings regarding the supplier's registration cancellation date and inquiries into the supplier's business activity, with directions for further information if required. - HELD THAT: - The court directed that the first Appellate Authority must determine and record whether the supplier's registration was cancelled before or after the transactions relied upon by the petitioner, and must state when and how it inquired into whether the supplier carried on business at the stated premises. The Appellate Authority was ordered to complete this exercise within six weeks from production of the certified copy of the order, and if further information is required from the assessee or regarding the supplier's registration, to obtain it within two weeks. The remand is for fresh consideration and specific fact-finding; the merits of the ITC claim were not adjudicated by this Court.

Matter remanded to the first Appellate Authority for specific factual findings and fresh consideration within the prescribed timelines.

Final Conclusion: Writ petitions partly allowed: appellate order cancelling the claim of input tax credit set aside as cryptic; matter remanded to the first Appellate Authority to record specific findings on the date of cancellation of the supplier's registration and on inquiries into the supplier's business activity, to be completed within the timelines directed by the Court.

Interest on delayed payment under Section 50(1) of the Central Goods and Services Act, 2017 - garnishee notice under Section 79 of the CGST Act - payment of admitted liability and conditional stay of enforcement - remand for verification and consideration - statutory appeal under Section 107 of the CGST Act

Interest on delayed payment under Section 50(1) of the Central Goods and Services Act, 2017 - payment of admitted liability and conditional stay of enforcement - garnishee notice under Section 79 of the CGST Act - statutory appeal under Section 107 of the CGST Act - Whether the writ petitioner must pay or demonstrate payment of the admitted interest liability and the consequences of such compliance for the impugned notice and garnishee action. - HELD THAT: - The Court, on the parties' common submission that the matter is covered by the earlier orders dated 19.12.2019, directed the writ petitioner to pay the admitted liability of Rs.1,45,925/- or demonstrate to respondents' satisfaction that a substantial part thereof has already been paid, within one week. On such payment or satisfactory demonstration the impugned notice and the consequent garnishee notice were ordered to stand set aside. The Court further directed that upon such compliance the respondents shall consider the petitioner's stand, pass an order in a manner known to law and communicate it within one week; if the respondents decide against the petitioner, the petitioner may avail the statutory remedy of appeal under Section 107 of the CGST Act. The order follows the operative approach of the cited precedent and implements a conditional suspension of enforcement contingent on payment or proof of payment. [Paras 3, 4, 7]

Writ petitioner to pay or demonstrate payment of the admitted liability by the specified date; on compliance the impugned notice and garnishee notice to be set aside and respondents to reconsider and communicate their decision; statutory appeal to follow if adverse.

Remand for verification and consideration - payment of admitted liability and conditional stay of enforcement - Verification of the amounts said to have been already paid and fresh consideration by the respondents of the petitioner's submissions. - HELD THAT: - The Court noted a dispute between the parties on the exact balance payable - the petitioner asserting that only a nominal sum remains while the Revenue contested the claim and sought verification. In consequence, the Court remitted the matter to the respondents to verify the payments/demonstration made by the petitioner and to consider the petitioner's reply and working sheet afresh, directing communication of the decision within one week of compliance. The remand is limited to verification of payment and reconsideration of the petitioner's contentions; substantive appellate remedy remains available thereafter. [Paras 6, 7]

Respondents to verify the payments/demonstration and reconsider the petitioner's stand, passing a reasoned order within one week of compliance; matter remanded for this limited purpose.

Final Conclusion: The writ petition is disposed by directing the petitioner to pay or demonstrate payment of the admitted liability within the stipulated time; on compliance the impugned notice and garnishee notice shall be set aside and the respondents shall reconsider and communicate their decision within one week, failing which the petitioner may pursue the statutory appeal; the matter is remanded to the respondents solely for verification and fresh consideration as directed.

Justiciability of declaratory relief during pending inquiry - prematurity of relief - administrative instruction to withhold refunds pending enquiry - right to seek separate writ challenging administrative communication

Justiciability of declaratory relief during pending inquiry - prematurity of relief - Petition for declarations and prophylactic relief was premature and academic while departmental inquiry and fact-finding are pending. - HELD THAT: - The Court recorded that authorities have initiated an enquiry into alleged double benefit of IGST and have issued letters seeking documents and information; material factual questions (whether finished goods are made wholly of imported inputs, the extent of domestically procured inputs, and entitlement to input tax credit) remain to be ascertained. In these circumstances, entertaining the Petitioner's broad declarations attacking Rule 96(10) and various circulars, and directions to release refunds would be speculative and academic. The Court therefore declined to adjudicate the substantive legal challenges at this stage as premature pending completion of the factual inquiry and proceedings already underway. [Paras 5]

Petition seeking declarations and directions was refused as premature and academic while the inquiry and adjudicatory process remain pending; petition disposed on that basis.

Administrative instruction to withhold refunds pending enquiry - right to seek separate writ challenging administrative communication - The question whether the CGST authorities had power to issue the communication directing Customs not to sanction refunds was not decided and was left open for separate challenge. - HELD THAT: - The Court noted the communication dated 30 June 2021 (tendered across the bar) by which the Commissioner informed Customs of an enquiry and requested that refunds/benefits be safeguarded. The petitioner indicated an intention to file a separate writ challenging the limited aspect of the CGST authorities' power to issue such instructions. As the communication was not the subject of a primary pleaded and contested challenge in this petition (and having been placed only at the hearing), the Court did not adjudicate that question and permitted the Petitioner to pursue a separate petition on that specific issue. [Paras 4, 6, 7]

The Court declined to rule on the validity of the CGST communication directing Customs to withhold refunds and left the issue open for determination in a separate writ petition.

Final Conclusion: The petition challenging Rule 96(10), related circulars and seeking direction for release of refunds was disposed as premature and academic in view of the ongoing inquiry; the limited question about the power of CGST to instruct Customs to withhold refunds was left undecided and may be raised in a separate writ petition.

Cancellation of GST registration for non-filing of returns - Revival/Revocation of GST registration on payment of tax, interest, penalty and filing of returns - Restriction on utilization of Input Tax Credit pending departmental scrutiny - Direction to enable GST portal access for filing of returns and payment - Judicially granted conditional relief in writ petition following precedent

Cancellation of GST registration for non-filing of returns - Revival/Revocation of GST registration on payment of tax, interest, penalty and filing of returns - Restriction on utilization of Input Tax Credit pending departmental scrutiny - Direction to enable GST portal access for filing of returns and payment - Judicially granted conditional relief in writ petition following precedent - Whether petitioner whose GST registration was cancelled for non-filing of returns is entitled to revival of registration on the same terms as laid down in Suguna Cutpiece Centre's case. - HELD THAT: - Petitioner's registration was cancelled for non-filing of monthly GST returns and he was unable to apply for revocation in time due to health reasons. This Court has consistently applied the directions contained in paragraph 229 of Suguna Cutpiece Centre (allowing revival subject to filing of returns, payment of tax, interest, fine/fee and conditions on Input Tax Credit, and steps to enable portal access), and the Revenue has not appealed those decisions. In view of that consistent precedent and the absence of departmental challenge, the Court extends the same conditional relief to the petitioner. The relief requires filing of returns for the period prior to cancellation and subsequent periods, payment of tax, interest, penalty/fine and compliance with conditions restricting utilization of Input Tax Credit until departmental scrutiny; on compliance, registration shall stand revived and the respondents are to take steps to enable filing and payment on the GST portal within the timeframe specified in the cited order. [Paras 4, 5, 6]

Writ petition allowed on the terms contained in paragraph 229 of Suguna Cutpiece Centre's order; registration to be revived subject to those conditions; no costs.

Final Conclusion: The High Court allowed the writ petition and directed revival of the petitioner's GST registration on the same conditional terms as laid down in Suguna Cutpiece Centre's case (payment of tax, interest, fine/fee, filing of returns, restrictions and scrutiny of Input Tax Credit, and enabling of portal access); no costs.

Classification of services - Maintenance, repair and overhaul services - SAC 998719 - concessional rate under entry 25(ia) of Notification No.11/2017-Central Tax (Rate) - export of services under IGST Act - place of supply - jurisdiction of Advance Ruling Authority on place of supply

Classification of services - Maintenance, repair and overhaul services - concessional rate under entry 25(ia) of Notification No.11/2017-Central Tax (Rate) - Whether the services rendered by the applicant are classifiable as 'Maintenance, repair or overhaul services in respect of aircrafts, aircraft engines and other aircraft components or parts' and thereby eligible for the concessional GST rate under entry 25(ia). - HELD THAT: - The agreement and statement of work demonstrate that the services relate to operation, maintenance, troubleshooting and software support of the MERMOZ test bench system used to test aircraft equipment. The MERMOZ system is a test equipment and does not constitute an aircraft, an aircraft engine or an aircraft component/part that forms a constituent piece used to build an aircraft. The Explanatory Notes to the Scheme of Classification show that maintenance and repair of instruments and apparatus for testing and measuring fall under maintenance and repair of other machinery and equipment. Consequently the impugned services do not fall within the description in entry 25(ia) and are not eligible for the concessional rate prescribed therein. [Paras 18, 19]

The services are not classifiable as MRO services in respect of aircrafts, aircraft engines or other aircraft components/parts and therefore entry 25(ia) concessional rate does not apply.

SAC 998719 - classification of services - The specific SAC classification of the applicant's services. - HELD THAT: - On analysis of the nature of activities - incident reporting, investigation, periodic verification, maintenance, software installation, assistance in operation and reporting - the services fall within maintenance and repair services of other machinery and equipment. The Explanatory Notes and the SAC listing identify maintenance and repair of instruments and apparatus for measuring, checking, testing and navigating as covered under SAC 998719. The Authority therefore classifies the impugned services under SAC 998719. [Paras 18, 23]

The services are classified as 'maintenance and repair services of other machinery and equipment' under SAC 998719.

Export of services under IGST Act - place of supply - jurisdiction of Advance Ruling Authority on place of supply - Whether the impugned services qualify as export of services for which a ruling can be given by this Authority. - HELD THAT: - The statutory definition of 'export of services' under the IGST Act requires, inter alia, that the place of supply of the service be outside India. Determination of the place of supply is a prerequisite to decide export status. The Authority has held that determination of place of supply falls outside its jurisdiction in the present context and therefore it cannot rule on whether the impugned services amount to export of services. Consequently no ruling is offered on exportability. [Paras 22, 23]

No advance ruling on whether the services constitute export of services is given because determination of place of supply is outside the Authority's jurisdiction.

Final Conclusion: The Authority rules that the applicant's services relating to the MERMOZ test benches are not MRO services in respect of aircrafts/aircraft engines/aircraft components and thus do not attract the concessional entry 25(ia); the services are classifiable under SAC 998719 as maintenance and repair services of other machinery and equipment; and no ruling is given on exportability since determination of place of supply is beyond the Authority's jurisdiction.

Allowability of marked-to-market loss on forward contracts as business deduction - hedging transaction under proviso (a) to Section 43(5) of the Act - Accounting Standard-11 (AS-11) treatment of exchange differences - non-binding nature of CBDT instructions which are contrary to law

Allowability of marked-to-market loss on forward contracts as business deduction - hedging transaction under proviso (a) to Section 43(5) of the Act - Accounting Standard-11 (AS-11) treatment of exchange differences - non-binding nature of CBDT instructions which are contrary to law - Losses on forward foreign-exchange contracts entered to hedge export/import exposures are allowable as business losses and not disallowable as speculative or merely notional under the CBDT instruction. - HELD THAT: - The Court accepted the factual finding that the forward contracts were entered to hedge inflows/outflows arising from underlying export/import project contracts and that the assessee was not in the business of dealing in foreign exchange. The transactions therefore fall within the exception in proviso (a) to Section 43(5) as hedging transactions. The assessee had reinstated debtors and creditors at foreign-exchange value on due dates and had recognised corresponding valuation gains/losses in its profit and loss account in compliance with AS-11. Consequently, the marked-to-market valuation loss represented the correct accounting matching entry to the underlying foreign-currency assets/liabilities and was deductible as a business loss. Further, the CBDT Instruction No.3/2010 could not override the statutory and accounting position; circulars inconsistent with law are not binding. The Tribunal and the CIT(A) were therefore justified in holding that the AO erred in treating the loss as speculative and disallowing it. [Paras 27, 28, 29, 30, 31]

The deletion of the disallowance of the forward-contract loss was upheld; the loss is allowable as a business deduction.

Final Conclusion: The Revenue's appeal is dismissed; no substantial question of law arises in ITA No.976/Del/2013 and the Tribunal's and CIT(A)'s conclusion that the forward-contract loss is allowable is sustained.

Foreign tax credit - Form No. 67 filing requirement - Rule 128(9) - directory versus mandatory - application of section 90/90A and section 91 - remand for adjudication on merits

Foreign tax credit - Form No. 67 filing requirement - Rule 128(9) - directory versus mandatory - application of section 90/90A and section 91 - Whether delay in filing Form No.67 as required by Rule 128(9), as it stood for the year under consideration, disentitled the assessee from claiming foreign tax credit under section 90/90A or section 91 of the Act. - HELD THAT: - The Tribunal examined Rule 128(9) as it stood for the relevant year and noted that it required Form No.67 to be furnished on or before the due date for furnishing the return under section 139(1). The Tribunal followed precedents of coordinate benches which held that non-compliance with the timing prescribed by Rule 128(9) is not accompanied by any statutory consequence of denial of foreign tax credit and therefore the requirement is directory rather than mandatory. The Tribunal observed that Rules cannot override the substantive provisions of section 90/91, and that the later amendment to Rule 128(9) (w.e.f. 01/04/2022) extending the time for furnishing Form No.67 until the end of the relevant assessment year indicates the legislature's acceptance of a more liberal timeline. Relying on the coordinate-bench decisions cited, and distinguishing the facts from cases addressing different statutory violations, the Tribunal held that mere delay in filing Form No.67 does not ipso facto preclude grant of foreign tax credit. Because the Assessing Officer had denied the claim on the technical ground of delayed filing without adjudicating the claim on merits, the Tribunal directed that Form No.67 and accompanying documents filed by the assessee be accepted and the claim be considered and decided on merits by the jurisdictional Assessing Officer. [Paras 9, 10, 11, 12, 13]

Delay in filing Form No.67 under Rule 128(9) (as it stood for the year) does not preclude the assessee from claiming foreign tax credit; matter remitted to the Assessing Officer to decide the claim on merits after accepting Form No.67 and related documents.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes, holding that delayed filing of Form No.67 does not automatically bar foreign tax credit; the claim is remitted to the Assessing Officer for fresh adjudication on merits after accepting the Form No.67 and supporting documents.

Deductibility of interest under Section 36(1)(iii) - scope of proviso to Section 36(1)(iii) regarding capital borrowed for acquisition of an asset - classification of land as stock-in-trade - capitalization of borrowing costs versus revenue expenditure

Deductibility of interest under Section 36(1)(iii) - classification of land as stock-in-trade - scope of proviso to Section 36(1)(iii) regarding capital borrowed for acquisition of an asset - capitalization of borrowing costs versus revenue expenditure - Whether interest paid on borrowed capital for acquisition of land held as stock-in-trade is allowable as revenue expenditure under Section 36(1)(iii) despite the proviso introduced w.e.f. 01.04.2004. - HELD THAT: - The Tribunal found on the material that the assessee, a civil construction concern, held various land parcels as part of its business and treated them as current assets/stock-in-trade, some sold as such and others retained for development; in some parcels construction was in progress. Interest paid on funds borrowed for acquisition of such land was therefore analogous to interest on working capital and relates to trading operations rather than to acquisition of a capital asset. Accounting Standards relied upon by the AO (AS-7/AS-16) and the proviso to Section 36(1)(iii) concern borrowing costs directly attributable to qualifying fixed assets and require capitalization where applicable. The proviso introduced w.e.f. 01.04.2004 applies to capital borrowed for acquisition of capital assets and the period until such asset is first put to use; it does not contemplate inventory/stock-in-trade. The Tribunal held that on the facts the proviso is inapplicable and interest is allowable as revenue expenditure. The Tribunal relied on and applied consistent precedents treating interest on borrowed funds used to acquire inventory (land held as stock-in-trade) as allowable, and distinguished decisions applying the proviso to genuinely capital asset acquisitions. [Paras 6, 7, 8, 9]

Interest paid on borrowed funds for acquisition of land held as stock-in-trade is allowable as revenue expenditure under Section 36(1)(iii); the proviso to Section 36(1)(iii) does not apply to such inventory.

Final Conclusion: The Tribunal upheld the CIT(A)'s finding that the lands were stock-in-trade and that interest on borrowed capital for their acquisition is allowable as revenue expenditure; the Revenue's appeal is dismissed.

Power of revision under section 263 - erroneous and prejudicial to the interests of revenue - interest income on investments with cooperative banks - deduction under section 80P(2)(a)(i) - deduction under section 80P(2)(d) - not a debatable or plausible view

Power of revision under section 263 - erroneous and prejudicial to the interests of revenue - not a debatable or plausible view - Validity of assumption of jurisdiction by the Commissioner under section 263 in respect of the assessment order dated 19.11.2019. - HELD THAT: - The Tribunal analysed the statutory test for exercise of revisionary power under section 263, namely that the assessment order must be both erroneous and prejudicial to the interests of revenue and that the error should not be a debatable or plausible view. Where the Assessing Officer has examined the claim and adopted one of the plausible views, the order cannot be termed erroneous so as to attract revision under section 263. Applying this principle, the Tribunal found that the question whether interest earned on investments with cooperative banks qualified for relief under section 80P was subject to judicial decisions favourable to the assessee and was therefore not an instance of a non-debatable error by the AO. Consequently the invocation of section 263 was held to be unsustainable. [Paras 10, 11]

Assumption of jurisdiction under section 263 was not valid; the revision order is unsustainable.

Interest income on investments with cooperative banks - deduction under section 80P(2)(a)(i) - deduction under section 80P(2)(d) - Whether interest income earned on investments made with cooperative banks is eligible for deduction/exemption under section 80P(2)(a)(i) and section 80P(2)(d). - HELD THAT: - The Tribunal noted that prior decisions of coordinate Benches and higher courts had held that interest on surplus invested with banks (including cooperative banks) is attributable to the activities of a cooperative society and qualifies for relief under section 80P(2)(a)(i) and, insofar as the counterparty is a cooperative bank (a species of cooperative society), under section 80P(2)(d). Relying on those precedents, the Tribunal concluded that the issue is covered in favour of the assessee and therefore the assessment could not be characterised as erroneous for failing to tax such income. [Paras 10, 11]

Interest income on investments with cooperative banks is covered in favour of the assessee for deduction/exemption under section 80P(2)(a)(i) and section 80P(2)(d).

Final Conclusion: The Tribunal allowed the appeal, holding that the Commissioner's revision under section 263 was not sustainable because the contested treatment of interest on investments with cooperative banks was covered by plausible judicial precedents in favour of the assessee; consequently the revision order was quashed and the assessment order restored.

Deduction under section 36(1)(va) - condition of deposit to employee's account on or before the due date prescribed under the relevant enactments - Non applicability of section 43B proviso (due date for filing return) to employees' contributions for the purpose of section 36(1)(va) - Processing of return under section 143(1)(a) - disallowance of expenditure indicated in the audit report - Meaning of "an incorrect claim apparent from any information in the return" (Explanation (a) to section 143(1)) - Scope of clause (iv) of section 143(1)(a) - disallowance of expenditure indicated in audit report is distinct from "increase in income"

Deduction under section 36(1)(va) - condition of deposit to employee's account on or before the due date prescribed under the relevant enactments - Processing of return under section 143(1)(a) - disallowance of expenditure indicated in the audit report - Disallowance under section 36(1)(va) can be made by the AO in an intimation under section 143(1)(a) where the audit report (point 20(b)) clearly indicates that employees' contributions were deposited after the due date prescribed under the relevant Acts. - HELD THAT: - Section 36(1)(va) permits deduction only if the employees' contribution is credited to the employee's account in the relevant fund on or before the due date as defined by Explanation 1. Point 20(b) of the audit report contains columns showing the sum received from employees, the due date for payment and the actual date of payment; where the actual date is beyond the prescribed due date, the audit report gives a clear indication of disallowance under section 36(1)(va). Clause (iv) of section 143(1)(a) permits processing adjustments for 'disallowance of expenditure indicated in the audit report'. The word 'indicated' is wide enough to include the audit-recorded due date and actual payment date that manifest a violation of the condition in section 36(1)(va). Where the assessee did not make the suo motu adjustment in the return although the audit report indicated delayed deposit, the AO was justified in making the disallowance in the intimation under section 143(1)(a). [Paras 4, 10, 15]

The AO's disallowance under section 36(1)(va) in the intimation under section 143(1)(a) is justified where the audit report clearly indicates late deposit beyond the due date prescribed under the relevant Acts.

Non applicability of section 43B proviso (due date for filing return) to employees' contributions for the purpose of section 36(1)(va) - Deduction under section 36(1)(va) - requirement independent of section 43B proviso - Section 43B proviso (permitting deduction where payment is made on or before the due date for furnishing return under section 139(1)) does not entitle the assessee to claim deduction under section 36(1)(va) for employees' contributions deposited after the due date prescribed under the respective enactments but before filing the return. - HELD THAT: - Section 36(1)(va) conditions deduction on deposit to the employee's account on or before the due date under the relevant Acts. Section 43B(b) deals with employer's contributions and contains a proviso allowing deduction if payment is made on or before the due date for filing the return; earlier High Court views treating employees' contributions as analogous to employer's share were examined and held to be overruled by the Supreme Court in the cited authoritative decision. The Tribunal follows that distinction: employees' contributions constitute the employer's income under section 2(24)(x) but deduction under section 36(1)(va) is strictly governed by the due dates under the relevant Acts and not by the section 43B proviso linked to the return filing date. [Paras 4, 5]

Section 43B proviso cannot be invoked to allow deduction under section 36(1)(va) where employees' contributions were deposited after the due date prescribed under the relevant Acts even if paid before filing the return.

Scope of clause (iv) of section 143(1)(a) - disallowance of expenditure indicated in audit report is distinct from "increase in income" - Meaning of "an incorrect claim apparent from any information in the return" (Explanation (a) to section 143(1)) - The disallowance made in the intimation is properly characterised under the limb 'disallowance of expenditure indicated in the audit report' of clause (iv) of section 143(1)(a); the subsequent insertion of 'increase in income' (by a later amendment) does not restrict application of clause (iv) to years prior to the amendment where the audit report indicates a disallowance of expenditure. - HELD THAT: - Explanation (a) to section 143(1) defines 'an incorrect claim apparent from any information in the return' and clause (iv) caters for 'disallowance of expenditure or increase in income indicated in the audit report'. The two limbs - disallowance of expenditure and increase in income - are independent. The AO's adjustment in these cases was for disallowance of expenditure (late deposit), not for non offer of the sums received from employees as income. The later statutory insertion of the words 'increase in income' (effective from 01 04 2021) cannot be read to exclude the earlier, independent limb of disallowance of expenditure, and therefore does not affect the AO's power to act under clause (iv) for the assessment years under consideration. [Paras 8, 10, 11]

Clause (iv) of section 143(1)(a) applied to disallowance of expenditure indicated in the audit report for the years before the amendment; the AO's action was within clause (iv) and not dependent on the later 'increase in income' insertion.

Processing of return under section 143(1)(a) - verification and rectification of audit report particulars - Two appeals were remitted to the AO for factual verification: (a) where the audit report appeared to record due dates and actual payment dates pertaining to different years (IT Cube Solutions Pvt. Ltd.), and (b) where the audit report appears to have aggregated or mis stated employees' and employer's shares together (Exfo Electro Optical Engineering (I) Pvt. Ltd.). - HELD THAT: - In IT Cube Solutions, the audit report's entries suggested that due dates were recorded for the preceding year while actual payment dates related to the current year, indicating a possible clerical error; the AO is directed to verify the correct figures and make disallowance under section 36(1)(va) if warranted. In Exfo Electro Optical, the audit report appears to have recorded employees' and employer's shares together; the AO is directed to verify the factual position and, if necessary, restrict disallowance to the employees' share alone. These matters were not finally adjudicated on merits and require fresh verification before making any disallowance. [Paras 17, 18]

Appeals in the two specified cases are allowed for statistical purposes and remitted to the AO for verification of the audit report particulars and for application of section 36(1)(va) only as justified by correct facts.

Final Conclusion: The Tribunal upheld the AO's disallowance under section 36(1)(va) made in intimations processed under section 143(1)(a) for delayed deposit of employees' contributions beyond the due dates prescribed under the relevant enactments for the assessment years 2017-18 to 2020-21, rejecting reliance on section 43B proviso; two appeals were allowed for statistical purposes and remitted to the AO for factual verification of audit report entries.

Notional interest on trade receivables as international transaction - credit period for receivables - working capital adjustment subsuming interest - remand for recomputation by TPO/AO - set-off of brought forward business losses and unabsorbed depreciation - set-off of MAT credit - foreign tax credit - interest under section 234A and section 234B - penalty under section 271(1)(c)

Notional interest on trade receivables as international transaction - credit period for receivables - working capital adjustment subsuming interest - remand for recomputation by TPO/AO - Computation of notional interest on delayed trade receivables - HELD THAT: - The Tribunal accepted that the dispute concerns computation of notional interest on trade receivables. Following earlier Coordinate Bench authority in the assessee's own case, the matter is set aside to the TPO/AO for fresh computation. The DRP's allowance of a 90-day credit period for the relevant year is to be applied. The TPO/AO is directed to compute interest in conformity with the principles enunciated by the Tribunal and relevant precedents, and if the interest so computed is found to be subsumed within the working capital adjustment (thereby avoiding double counting), no further disallowance is to be made. The assessee shall be afforded a reasonable opportunity of being heard during the recomputation. [Paras 5]

Remanded to the Ld.TPO/AO for recomputation applying a 90-day credit period; if interest is subsumed in working capital adjustment, no disallowance.

Set-off of brought forward business losses and unabsorbed depreciation - remand for recomputation by TPO/AO - Claim for set-off of brought forward business losses and unabsorbed depreciation - HELD THAT: - The Tribunal did not decide these claims on merits but directed the Assessing Officer to consider the assessee's claim in accordance with law. The assessee has been directed to furnish relevant information and details to substantiate the claim, and the AO is to adjudicate the entitlement after verification. [Paras 6]

Directed the Ld.AO to consider and decide the set-off claim in accordance with law upon production of relevant details.

Set-off of MAT credit - remand for recomputation by TPO/AO - Claim for set-off of MAT credit pertaining to earlier assessment years - HELD THAT: - The Tribunal did not rule on the entitlement but remanded the issue to the Assessing Officer for consideration in accordance with law, requiring the assessee to furnish supporting information and documents for verification. [Paras 6]

Directed the Ld.AO to verify and consider the assessee's MAT credit claim in accordance with law.

Foreign tax credit - remand for recomputation by TPO/AO - Claim for grant of foreign tax credit - HELD THAT: - The Tribunal did not adjudicate the claim on merits and directed the Assessing Officer to examine the assessee's entitlement to foreign tax credit in accordance with law after the assessee furnishes the necessary details and documentation. [Paras 6]

Directed the Ld.AO to consider and decide the foreign tax credit claim in accordance with law upon production of relevant information.

Interest under section 234A and section 234B - penalty under section 271(1)(c) - Levy of interest under sections 234A/234B and initiation/levy of penalty under section 271(1)(c) - HELD THAT: - The Tribunal observed that the assessee contends the return was filed within time and directed the Assessing Officer to verify and consider the claim regarding interest under section 234A. Interest under section 234B and the penalty under section 271(1)(c) were treated as consequential to the assessment and therefore did not require independent adjudication by the Tribunal at this stage. [Paras 7]

Directed the Ld.AO to verify the assessee's 234A contention and decide in accordance with law; interest under 234B and penalty under 271(1)(c) are consequential and not separately adjudicated.

Final Conclusion: The appeal is partly allowed: the issue of notional interest on trade receivables is remitted to the TPO/AO for recomputation applying a 90-day credit period and ensuring no double counting with working capital adjustment; claims for set-off of brought forward losses, unabsorbed depreciation, MAT credit and foreign tax credit are directed to the AO for decision in accordance with law upon production of requisite details; the AO is also directed to verify the assessee's contention on interest under section 234A, while interest under section 234B and penalty under section 271(1)(c) are consequential and not independently decided.

Taxability of advances under a joint development agreement - accrual of income - project completion method versus percentage completion method - recognition of revenue under accepted accounting methods (project completion method) - deemed transfer under section 2(47)(v) read with section 53A of the Transfer of Property Act - use of seized documents and pre-conditions for proceedings under section 153C - admissibility and evidentiary value of statements recorded under search provisions - prohibition on double taxation / revenue neutrality

Taxability of advances under a joint development agreement - deemed transfer under section 2(47)(v) read with section 53A of the Transfer of Property Act - Whether the advances/receipts received by the assessee under the Development Agreement accrued as taxable income in AYs 2014-15 to 2016-17 - HELD THAT: - The Tribunal examined the terms of the Development Agreement and the customer agreements, noting that the owner (assessee) retained legal possession, domain and control over the land; the developer was granted only a licence to enter for development. The court applied the principles of section 53A TP Act and section 2(47)(v) of the IT Act, emphasising that part performance and the requisite unqualified willingness/performance by the transferee are preconditions for invoking deemed transfer. On the facts there was no transfer of legal title, possession to buyers or effective control such as would transfer significant risks and rewards to purchasers during the years under appeal. Consequently no income had accrued to the assessee in those years and the Assessing Officer's invocation of deemed transfer and taxation in the year of receipt was found unsustainable. The Tribunal also observed that treating the advances as taxable in those years would lead to double taxation since the same revenue was accepted and taxed in subsequent years when sale deeds were executed. [Paras 7, 8, 9]

Additions for AYs 2014-15 to 2016-17 made by the Assessing Officer were deleted; the appeals by revenue are dismissed as no income accrued in those years.

Accrual of income - project completion method versus percentage completion method - recognition of revenue under accepted accounting methods (project completion method) - prohibition on double taxation / revenue neutrality - Whether the Assessing Officer could supplant the assessee's project completion method by applying percentage completion (or AS-7/AS-9) to recognize income in the years under appeal - HELD THAT: - The Tribunal reviewed the assessee's consistent adoption of the project completion (completed contract) method in its books and the department's prior acceptance in earlier years. It considered jurisprudence of the Karnataka High Court and other authorities holding that project completion is an accepted method and that Accounting Standard decisions cannot be mechanically imposed where the method adopted is regularly followed and not shown to distort profits. The Tribunal found that applying percentage completion to the landowner, merely because the developer used that method, was inappropriate; the landowner and developer are independent taxable entities with different economic substance. Recognising income in the years in question would also risk double taxation; revenue neutrality and precedents require adherence to the consistently followed method unless accounts are defective. [Paras 6, 7, 8]

The Assessing Officer was not justified in rejecting the assessee's project completion method or in applying percentage completion; the CIT(A)'s acceptance of project completion method is confirmed.

Use of seized documents and pre-conditions for proceedings under section 153C - admissibility and evidentiary value of statements recorded under search provisions - Whether the Assessing Officer could rely solely on statements recorded under search (sections 132/131) and on the seized JDA to frame assessment under section 153C for the years under appeal - HELD THAT: - The Tribunal acknowledged that documents relating to the JDA were seized in search of a third party and that statements of the assessee recorded under sections 132(4) and 131 contained admissions. It held that such statements are important but not conclusive; admissions made during search are rebuttable and cannot automatically displace legal analysis of accrual. The Tribunal emphasised that proceedings under section 153C require incriminating material and satisfaction recorded by the AO of the searched person that documents pertain to an 'other person'; where the addition rests merely on a change of opinion without fresh incriminating material establishing accrual, reliance only on statements is insufficient. Accordingly, the Tribunal declined to sustain additions founded solely on those statements and seized documents, where no legal transfer had occurred in the years under appeal. [Paras 8, 11]

Statements recorded during search and the seized JDA did not justify taxing the advances in the impugned years; the Assessing Officer could not rely solely on those materials to sustain the additions.

Use of seized documents and pre-conditions for proceedings under section 153C - Whether the legal grounds raised by the assessee challenging assumption of jurisdiction, recording of satisfaction and related procedural points under section 153C were decided by the CIT(A) - HELD THAT: - The Tribunal noted that the assessee had challenged jurisdictional aspects including the centralisation/transfer under section 127, the requirement to record and communicate reasons, and the necessity of incriminating seized material before invoking section 153C. The Tribunal observed that the CIT(A) did not decide several of these legal grounds in the appellate order. [Paras 12, 14]

All legal grounds raised in the Cross Objections regarding assumption of jurisdiction and compliance with section 153C were remitted to the CIT(A) for adjudication; the Cross Objections are partly allowed for statistical purposes.

Final Conclusion: For AYs 2014-15 to 2016-17 the Tribunal confirmed the CIT(A)'s deletion of additions: no taxable income accrued in those years on the facts of the Development Agreement, the assessee's project completion method of accounting was permissible and could not be displaced by percentage completion or by reliance solely on statements seized during searches; legal challenges concerning jurisdictional and procedural compliance under section 153C were remitted to the CIT(A) for fresh adjudication.

Reassessment of completed assessments under section 153A restricted to incriminating material - scope of assessment under section 153A vis-a -vis abated and completed proceedings - meaning and evidentiary scope of 'incriminating material' - evidentiary value of statements recorded under section 132(4) - initial onus under section 68 - identity, genuineness and creditworthiness of lenders

Reassessment of completed assessments under section 153A restricted to incriminating material - scope of assessment under section 153A vis-a -vis abated and completed proceedings - Completed assessments cannot be disturbed under section 153A except on the basis of incriminating material unearthed during the search which was not already available to the Assessing Officer. - HELD THAT: - The Tribunal followed binding High Court and Supreme Court reasoning that section 153A contemplates two different situations: (a) abated/pending assessments which are to be assessed afresh and (b) completed assessments which can be reassessed only where incriminating material or information discovered by the search relates to income that escaped previous assessment. In the present appeals the Assessing Officer conceded in the remand report that no incriminating documents were seized in the search; the CIT(A) recorded and applied the legal principle that in absence of such incriminating material the completed assessment for the relevant year must be reiterated and additions de hors the seized material are not sustainable. The Tribunal accepted that the Revenue did not challenge that factual/legal finding and thus declined to interfere. The court further noted statutory scheme distinctions between 'assess' (for abated proceedings) and 'reassess' (for completed proceedings) and the necessity of nexus between seized material and any interference with a completed assessment.

Addition to completed assessments under section 153A deleted for lack of incriminating material; CIT(A) order upheld.

Meaning and evidentiary scope of 'incriminating material' - evidentiary value of statements recorded under section 132(4) - A statement recorded under section 132(4) is not by itself conclusive incriminating material capable of sustaining reassessment of a completed assessment unless supported by corroborative evidence linking the seized information to the addition sought to be made. - HELD THAT: - The Tribunal examined the nature of 'incriminating material' and the requirement of a real nexus between such material and the specific addition. Although statements of third parties (directors of a counterparty) may be relevant, the Tribunal held that in the absence of corroborative material (seized documents, tangible evidence or other material linking the statement to the impugned credits) a mere statement cannot justify undoing a completed assessment. The Assessing Officer's reliance principally on statements of others and on external lists (e.g., SFIO list) without pointing to seized or contemporaneous material directly contradicting the assessee's documentary evidence was held to be insufficient. The Tribunal therefore agreed with the CIT(A) that the AO had not established requisite incriminating material pertaining to the additions in question.

Statements recorded u/s 132(4) without corroboration do not constitute sufficient incriminating material to disturb completed assessments; addition unsustainable.

Initial onus under section 68 - identity, genuineness and creditworthiness of lenders - Where the assessee has discharged the initial onus under section 68 by producing confirmations, bank statements, ITRs and other records establishing identity, genuineness and creditworthiness of the lender, the Assessing Officer cannot arbitrarily reject that evidence and make additions without pointing to specific rebuttal or discrepancies. - HELD THAT: - The Tribunal observed that the assessee produced confirmations, bank statements and returns of the lender and that the AO did not identify any material contradiction or defect in those documents. The AO's conclusion that the lender was a shell company relied on external investigative inputs and the director's statement, but did not controvert the documentary proofs furnished by the assessee or undertake cross-verification allowed by law. Citing established precedent that once the assessee meets the initial evidentiary burden under section 68 the Department must show why that explanation is unsatisfactory, the Tribunal found the AO's addition to be arbitrary and not supported by record evidence related to the assessee's submissions.

Addition under section 68 deleted as the assessee discharged initial onus and AO failed to rebut or point to infirmity in the evidence; CIT(A) order sustained.

Final Conclusion: The Revenue's appeals are dismissed. The Tribunal upholds the CIT(A)'s deletion of additions in the four appeals: completed assessments for years where no incriminating material was found cannot be disturbed under section 153A; statements without corroboration are insufficient to justify reassessment of completed years; and the assessee having met the initial onus under section 68, the AO's additions were unsustainable.

Allowability of premium on redemption of debentures as revenue/business expenditure under the Income Tax Act - accrual (mercantile) method of accounting and pro rata spreading of premium over the tenure of debentures - distinction between debentures issued at a discount and debentures redeemable at a premium - application of the ratio in Madras Industrial Investment Corporation Ltd. to liability spread and profit presentation - precedential effect of decisions of the jurisdictional High Court and co ordinate bench

Allowability of premium on redemption of debentures as revenue/business expenditure under the Income Tax Act - accrual (mercantile) method of accounting and pro rata spreading of premium over the tenure of debentures - application of the ratio in Madras Industrial Investment Corporation Ltd. to liability spread and profit presentation - Whether the premium payable on redemption of non convertible debentures is allowable on a proportionate (accrual) basis over the tenure or only in the year of actual payment of redemption premium. - HELD THAT: - The Tribunal examined the Assessing Officer's disallowance of the proportionate premium claimed as a finance cost and the Commissioner's acceptance of the assessee's contention. The AO relied on a decision treating premium on redemption as exigible only on actual payment, but the Commissioner and the Tribunal applied the ratio of Madras Industrial Investment Corporation Ltd., as adopted by the jurisdictional High Court in cases such as Jagjeet Industries, holding that where facts justify it the liability to pay premium arises on issue of debentures and may be proportionately spread over the prescribed maturity period to avoid distortion of profits. The Tribunal further noted that the coordinate bench in the assessee's own earlier appeals on identical facts had reached the same conclusion and found no reason to disturb that view. Consequently, the pro rata accrual of the premium, recognised under the mercantile method of accounting and claimed as business expenditure, was held to be allowable. [Paras 6]

The proportionate premium on redemption of debentures, booked on accrual (mercantile) basis, is allowable and the addition is deleted.

Final Conclusion: The Tribunal upheld the Commissioner's deletion of the addition disallowing proportionate premium on redemption of debentures; the Revenue's appeal is dismissed.

Re-opening of assessment under Section 147 of the Income Tax Act - notice under Section 148 of the Income Tax Act - addition as unexplained investment under Section 69A of the Income Tax Act - assessment by best judgment under Section 144 of the Income Tax Act - denial of reasonable opportunity to be heard - treatment of interest income where tax is deducted at source - time limit for completion of reassessment under Section 153(2) of the Income Tax Act - principle of consistency in adjudication

Denial of reasonable opportunity to be heard - re-opening of assessment under Section 147 of the Income Tax Act - Whether the assessee was denied reasonable opportunity of being heard before the First Appellate Authority in respect of AY 2011-12. - HELD THAT: - The Tribunal found that the assessee did not substantiate the contention of denial of reasonable opportunity. The record shows repeated listings and multiple chances afforded; the assessee failed to appear, file any written submissions or documentary evidence before the CIT(A)/NFAC despite service and adjournments. In those circumstances the claim of denial of opportunity is not established and there is no basis to set aside the appellate order.

Grounds alleging denial of reasonable opportunity are dismissed.

Addition as unexplained investment under Section 69A of the Income Tax Act - treatment of interest income where tax is deducted at source - assessment by best judgment under Section 144 of the Income Tax Act - Whether additions were rightly made - (a) cash deposit treated as unexplained investment and added under Section 69A and (b) interest credited by bank added to income - for AY 2011-12. - HELD THAT: - The Tribunal affirmed the findings of the Assessing Officer and the First Appellate Authority because the assessee failed to produce any documentary evidence or explanation to establish the source of the cash deposit or to show that the interest income was offered to tax. The assessment was completed under best judgment procedure after the assessee did not respond to notices; the absence of any material from the assessee meant there was no justification to depart from the additions confirmed by the lower authorities.

Additions in respect of the cash deposit (treated under Section 69A) and the interest income are confirmed and the grounds are dismissed.

Treatment of interest income where tax is deducted at source - principle of consistency in adjudication - Whether the addition of interest income for AY 2012-13 should be disturbed contrary to the decision in AY 2011-12. - HELD THAT: - Applying the principle of consistency and noting that no fresh evidence or explanation was placed on record for AY 2012-13, the Tribunal upheld the addition of interest income for AY 2012-13 for the same reasons as were applied in the lead case (AY 2011-12). The assessee again failed to show that the interest was offered to tax or to produce supporting documents before any authority.

Addition of interest income for AY 2012-13 is upheld.

Time limit for completion of reassessment under Section 153(2) of the Income Tax Act - Whether the reassessment/assessment for AY 2012-13 was barred by time under Section 153(2). - HELD THAT: - The Tribunal accepted the Revenue's submission and the dates on record showing that the reassessment notice was issued and the assessment order was passed within the statutory period applicable at the relevant time. No objection on this ground was taken before the CIT(A), and on merits the reassessment was held to have been completed within the prescribed nine-month period from the end of the financial year after service of the notice.

Ground alleging time-bar under Section 153(2) is dismissed.

Final Conclusion: Both appeals for AY 2011-12 and AY 2012-13 are dismissed: the Tribunal found no denial of opportunity, affirmed the additions in respect of the unexplained cash deposit and interest income due to absence of any evidence or explanation from the assessee, upheld the similar addition for AY 2012-13 by consistency, and rejected the time-bar contention regarding completion of reassessment.

Approval under section 80G(5)(vi) - registration under section 12AA and its conclusiveness on charitable character - expenditure of donation for construction/maintenance of temple and distinction between religious and charitable purpose - non-obstante provision section 80G(5B) permitting limited religious expenditure - requirement of reasoned quasi-judicial order by Commissioner

Registration under section 12AA and its conclusiveness on charitable character - approval under section 80G(5)(vi) - Validity of rejecting grant of approval under section 80G(5)(vi) after registration under section 12AA - HELD THAT: - The Tribunal held that registration granted under section 12AA demonstrates that the Commissioner was previously satisfied about the charitable objects and genuineness of activities of the trust, and therefore the question whether the trust is established for charitable purpose does not ordinarily arise again when considering approval under section 80G(5)(vi). Applying this principle to the facts, the assessee had registration under section 12AA and the revenue did not place evidence before the Tribunal to show that the trust was not carrying out charitable activities. On that basis, and having regard to the submissions and documents produced by the assessee, the Tribunal found no legal or evidentiary foundation to sustain the CIT(Exemption)'s rejection of approval under section 80G(5)(vi). [Paras 5]

The rejection of approval under section 80G(5)(vi) was set aside and the assessee directed to be granted approval.

Expenditure of donation for construction/maintenance of temple and distinction between religious and charitable purpose - non-obstante provision section 80G(5B) permitting limited religious expenditure - Whether the donations received and intended use for temple construction rendered the trust substantially a religious institution precluding 80G approval - HELD THAT: - The Tribunal examined the order of the Joint Charity Commissioner which earmarked a specified portion of the aggregate donation to be used for purchase of land, construction of temple, goshala, old-age home and a school. The assessee represented that no temple had been constructed as on the date of hearing and that, if constructed, the objects would be amended and approvals obtained. The Tribunal observed that the earmarked amount covered multiple charitable and welfare purposes and that the revenue had not demonstrated that the trust had actually used the funds predominantly for religious purposes or exceeded the limit contemplated by section 80G(5B). The non-obstante provision in section 80G(5B), which deems institutions to be eligible where religious expenditure does not exceed five per cent of total income, further supported the assessee's position and undertaking to comply with that provision if and when such expenditure is incurred. [Paras 5, 6]

The contention that the trust was substantially a religious institution was not sustained; the alleged intention to spend on temple construction did not bar grant of 80G approval.

Requirement of reasoned quasi-judicial order by Commissioner - Whether the CIT(Exemption)'s order refusing approval was supported by valid, cogent reasons and whether the assessee had furnished required head-wise details - HELD THAT: - The Tribunal emphasized that the Commissioner, acting in a quasi-judicial capacity when deciding on approval under section 80G, must record valid and cogent reasons after applying mind to the facts. The record showed that audited balance-sheets and schedule-wise/head-wise details for the relevant financial years had been filed by the assessee and were not effectively controverted by the revenue. The CIT(Exemption)'s adverse conclusion was therefore found to lack adequate evidentiary support and reasoned application of mind. [Paras 6]

The CIT(Exemption)'s refusal was set aside for want of cogent reasons and in view of the assessee's production of required details.

Final Conclusion: The appeal is allowed; the order of the CIT(Exemption) rejecting approval under section 80G is set aside and the Commissioner is directed to grant approval under section 80G to the assessee-trust.

Section 271(1)(c) penalty for concealment or furnishing inaccurate particulars of income - Omnibus show cause notice and vagueness - Requirement to specify the relevant limb in penalty notice - Non application of mind in issuance of statutory notice - Applicability of principles of natural justice in penalty proceedings

Section 271(1)(c) penalty for concealment or furnishing inaccurate particulars of income - Omnibus show cause notice and vagueness - Requirement to specify the relevant limb in penalty notice - Non application of mind in issuance of statutory notice - Principles of natural justice in penalty proceedings - Validity of penalty under Section 271(1)(c) where notices under section 274 were issued without striking off the inapplicable limb and failed to specify which limb (concealment or furnishing inaccurate particulars) was invoked. - HELD THAT: - The Tribunal held that the two limbs of Section 271(1)(c) have different meanings and the assessee must be informed of the exact charge through the statutory notice so as to enable an effective response. Reliance was placed on the reasoning of the Bombay High Court (Full Bench at Goa) in Mr. Mohd. Farhan A. Shaikh v. ACIT, which disapproved the routine practice of issuing omnibus printed notices without deleting inapplicable portions, treating such notices as suffering from vagueness and indicative of non application of mind. The Tribunal observed that the assessment order cannot cure defects in the statutory notice and that a penal provision must be construed strictly; ambiguity in the notice must be resolved in the assessee's favour. Applying these principles to the present facts, the notices dated 23/12/2016 and 06/06/2017 failed to specify the limb under which penalty proceedings were initiated and were issued in a mechanical manner without application of mind. Consequently, the penalty levied under Section 271(1)(c) was held to be bad in law. [Paras 11, 12, 13, 14, 15]

Penalty under Section 271(1)(c) quashed because the statutory notices were omnibus, failed to specify the relevant limb and showed non application of mind; penalty cannot be sustained.

Final Conclusion: The appeal filed by the Revenue is dismissed and the order deleting the penalty under Section 271(1)(c) is upheld on the ground that the penalty notices were vague/omnibus and issued without specifying the applicable limb, thereby vitiating the penalty proceedings.

Revisionary jurisdiction under section 263 - Penalty under section 271(1)(c) - Requirement of concealment or furnishing inaccurate particulars for levy of penalty - Application of mind by the Assessing Officer in dropping penalty - Voluntary surrender of income versus surrender compelled by detection (MAK Data principle) - Re-computation of tax under section 115BBE

Revisionary jurisdiction under section 263 - Penalty under section 271(1)(c) - Validity of the Pr. CIT's assumption of jurisdiction under section 263 to direct re-deciding of penalty proceedings initiated under section 271(1)(c). - HELD THAT: - The Tribunal held that the Pr. CIT's assumption of jurisdiction under section 263 was not justified. The Pr. CIT primarily faulted the AO for not applying the ratio of MAK Data Pvt. Ltd. (supra) and for non-application of mind in dropping the penalty. The Tribunal examined MAK Data and found its peculiar factual matrix (surrender following search/detection and non-disclosure in return) absent in the present case. The assessee had disclosed the LTCG in the return, the transactions were through a recognized stock exchange, STT was paid and shares were held for more than a year; there was no material showing the assessee was connected with the company's wrongdoing. The Tribunal found the Pr. CIT's conclusion rested on surmise and conjecture and was therefore unsustainable. Further, the Tribunal observed that the AO had considered the assessee's detailed reply and recorded an ordersheet entry dropping penalty; mere brevity of the ordersheet did not establish absence of application of mind where the record showed consideration of facts. Since the twin conditions for invoking section 263 (erroneous order prejudicial to revenue) were not satisfied, the revisional order was vacated. [Paras 15, 16, 17, 18, 20]

The assumption of jurisdiction by the Pr. CIT under section 263 to direct re-decision of penalty proceedings is not sustainable and the revisional order is vacated.

Application of mind by the Assessing Officer in dropping penalty - Requirement of concealment or furnishing inaccurate particulars for levy of penalty - Whether the Assessing Officer failed to apply his mind in dropping penalty proceedings under section 271(1)(c). - HELD THAT: - The Tribunal found on the material that the AO had considered the assessee's detailed written submissions filed in response to the show cause notice and had recorded an ordersheet entry dropping penalty after the assessee deposited tax and interest. The Tribunal relied on precedents holding that an order dropping penalty cannot be set aside merely because reasons are brief when the record shows consideration of facts. Given disclosure of LTCG in the return, sale through recognized exchange, payment of STT and holding period qualifying for long-term treatment, it could not be held that the AO's decision to drop penalty was erroneous or prejudicial. A mere possibility of a different view did not justify revisional exercise. [Paras 17, 18]

The AO did apply his mind in dropping penalty; the action of dropping penalty was not shown to be erroneous or prejudicial to revenue.

Re-computation of tax under section 115BBE - Revisionary jurisdiction under section 263 - Validity of the Pr. CIT's direction to re-compute tax and interest in terms of section 115BBE without specific show cause on that aspect. - HELD THAT: - The assessee contended that no show cause was issued regarding invocation of section 115BBE and he was thus denied opportunity. The Revenue's representative conceded that the AO had applied provisions of section 115BBE in the assessment. The Tribunal, having vacated the revisional order on the primary grounds relating to penalty and absence of error prejudicial to revenue, did not sustain the Pr. CIT's directions. The Tribunal noted that assessment and penalty are distinct; where the AO had assessed and collected tax and interest relatable to the impugned addition, revisional direction to re-compute tax under section 115BBE was not in order in the circumstances of the case. [Paras 13, 18, 20]

The Pr. CIT's direction to recompute tax under section 115BBE is not sustained as part of the revisional order which is vacated.

Final Conclusion: The Tribunal vacated the Pr. CIT's order passed under section 263 and allowed the assessee's appeal, holding that the revisional jurisdiction was wrongly exercised since the AO's dropping of penalty was not shown to be erroneous or prejudicial to revenue and the prerequisites for revision were not satisfied.

Capitalization of CENVAT credit - restriction on claiming depreciation where CENVAT credit availed - Explanation 9 to section 43 - reduction of actual cost by CENVAT credit allowed - deductibility under section 37(1) vis-a -vis deduction under section 80G - business expenditure laid out wholly and exclusively for the purpose of business - remand for fresh adjudication

Capitalization of CENVAT credit - Explanation 9 to section 43 - reduction of actual cost by CENVAT credit allowed - Whether the amount of unutilized CENVAT credit debited to Profit & Loss account could be allowed as a deduction or had to be capitalized to the cost of the capital asset. - HELD THAT: - The Tribunal's earlier decision in the assessee's own case interpreted Explanation 9 to section 43 as mandating that where CENVAT credit has been availed the actual cost of the asset must be reduced by the amount of credit allowed; consequently the portion of duty for which credit is not available should be added to the cost of the asset and not allowed as an expenditure. Applying that reasoning, the Revenue was justified in rejecting the assessee's claim to treat the unutilized/charged off CENVAT credit as a deductible business expense. The claim for deduction on account of write off of CENVAT credit was therefore not allowable and the ground is dismissed. [Paras 3, 4]

Ground No.2 dismissed; unutilized CENVAT credit charged to P&L must be capitalized and is not allowable as deduction.

Deductibility under section 37(1) vis-a -vis deduction under section 80G - business expenditure laid out wholly and exclusively for the purpose of business - Whether the contribution made to Corporation Bank Economic Development Foundation is allowable in full as a business expenditure under section 37(1) or is only deductible under section 80G. - HELD THAT: - On the facts the contribution was made by a public sector bank to a trust carrying out rural development and training activities in furtherance of Government policy that banks act as lead institutions. The Tribunal applied the legal principle that sections 37(1) and 80G are not mutually exclusive: if a payment, though of a category covered by section 80G, is laid out wholly and exclusively for the purposes of business it can be allowed under section 37(1). Having regard to the trust's objects, the government guidelines and precedents recognising such contributions as promoting business/commercial expediency for public sector banks, the Tribunal held that the payment satisfied the requirements of section 37(1) and directed that the deduction be allowed in full. [Paras 6, 11]

Ground No.3 allowed; the donation is deductible in full under section 37(1) as being wholly and exclusively for the purpose of the assessee's business.

Remand for fresh adjudication - Whether the additional/alternate claims raised under sections 36(1)(vii) and 36(1)(viia) were to be treated as alternative grounds or required fresh adjudication by the CIT(A). - HELD THAT: - The Tribunal found that the CIT(A) treated the assessee's revised claims as merely alternate grounds and did not decide them on merits. Because the CIT(A) did not render any decision on the additional claims made during assessment proceedings, the matter was set aside to the CIT(A) for fresh consideration after giving the parties an opportunity to be heard. [Paras 15, 16]

Ground No.4 (and related Ground No.5) set aside to the CIT(A) for fresh adjudication.

Final Conclusion: Appeal partly allowed: disallowance relating to CENVAT credit upheld (dismissal of ground No.2); deduction in relation to contribution to the Corporation Bank Economic Development Foundation allowed in full (allowed ground No.3); issues concerning revised claims under sections 36(1)(vii) and 36(1)(viia) remitted to CIT(A) for fresh consideration.

Unexplained credits in foreign bank accounts - addition on account of peak credit/peak balance in foreign accounts - onus on assessee to substantiate source of credits - remand report - additional evidence under Rule 46A - deletion of assessment addition upon disclosure and payment of tax

Unexplained credits in foreign bank accounts - remand report - addition on account of peak credit/peak balance in foreign accounts - deletion of assessment addition upon disclosure and payment of tax - Whether the deduction of the addition made by the Assessing Officer on account of unexplained peak credits in the assessee's foreign bank accounts, except for the unreported interest income, was justified. - HELD THAT: - The Assessing Officer had made an addition treating the peak credits in the assessee's foreign accounts as unexplained income. On appellate remand (after additional evidence filed under Rule 46A), the AO's remand report recorded that most credit entries represented salary already offered in the return, inter bank transfers between the assessee's accounts, or loan repayments by friends/relatives and therefore were not taxable income for the year. The remand report identified only certain credit entries (interest income of Rs. 11,76,379) in a specified account which the assessee admitted had not been included in the return; the assessee subsequently offered that interest to tax and paid tax and interest. In view of the AO's own remand findings and the assessee's belated admission and payment, the CIT(A) was justified in deleting the bulk of the addition while sustaining the addition only to the extent of the unreported interest income. The Tribunal found the CIT(A)'s approach to be in order and requiring no interference.

The CIT(A)'s deletion of the addition except to the extent of the unreported interest income of Rs. 11,76,379 was upheld.

Final Conclusion: Revenue's appeal is dismissed; the appellate order deleting the addition except insofar as it related to the unreported interest (now offered to tax) is confirmed.

Entitlement to scheme incentive despite delayed application - discretion to extend time in deserving cases - interpretation of welfare scheme to further its object - laches and delay defence in public law relief - exercise of writ jurisdiction under Article 226

Laches and delay defence in public law relief - entitlement to scheme incentive despite delayed application - The claim was not barred by laches or delay and the appellant's bonafides and eligibility were not negatived so as to disentitle them from the incentive. - HELD THAT: - The Writ Court's finding that the claim was barred by latches was overturned because material facts demonstrating that the appellant had submitted the manual form on 04.11.2012 and subsequently received payments for other quarters in 2016 were not controverted by respondents. The court held that it would be incorrect to treat the claim as stale from 2012-2016 where the authority itself paid incentives for other quarters only in 2016. The appellant's bona fides were not doubted and the eligibility was not in dispute, and no record was produced to show culpable delay by the appellant that would justify denial of relief. [Paras 5, 6]

The plea of laches/delay is rejected and the appellant is not disentitled to the incentive on that ground.

Discretion to extend time in deserving cases - interpretation of welfare scheme to further its object - exercise of writ jurisdiction under Article 226 - The authority must consider the manual form submitted on 04.11.2012 for grant of incentive because the scheme permits extension of time in deserving cases and the discretion must be exercised to promote the scheme's object. - HELD THAT: - The scheme expressly allows entertaining applications beyond the prescribed four month period in deserving cases. The court construed "deserving" to mean meritorious and observed that where the purpose of the scheme is to encourage manufacturing and related public objectives, the authority's discretion should be exercised so as to further, not defeat, those objects. Given that benefits for other quarters were granted in 2016 and there was no challenge to the appellant's eligibility or bona fides, the authority is directed to take the manual application on 04.11.2012 into consideration and decide the claim expeditiously. The court declined to punish the appellant for procedural defaults of erstwhile counsel. [Paras 5, 6, 7]

The respondent authority is directed to consider the manual application dated 04.11.2012 and grant the admissible incentive in accordance with the scheme, applying its power to extend time in deserving cases.

Final Conclusion: The appeal is allowed; the order of the Writ Court is set aside, the writ petition is allowed and the respondent authority is directed to consider the manual form submitted on 04.11.2012 and grant the admissible incentive as expeditiously as possible, preferably within three months from receipt of the server copy of this order.

Reliance on statements recorded during investigation - right to cross-examination of witnesses whose statements are relied upon - remand for fresh adjudication excluding specified evidence - opportunity of personal hearing before passing fresh order

Reliance on statements recorded during investigation - right to cross-examination of witnesses whose statements are relied upon - Whether the adjudicating authority relied upon statements recorded from certain persons and thereby occasioned the need for cross-examination or reconsideration. - HELD THAT: - The Court examined the adjudicating authority's order and noted internal inconsistency: while paragraphs of the original order (referred to in the judgment) show that statements of several persons were referred to and conclusions were drawn therefrom, the adjudicating authority also recorded in paragraph 62 that he had not relied upon any of those statements. The High Court found that the adjudicating authority's own findings were contradictory and that the authority had in fact referred to and used those statements in reaching conclusions against the respondents. Given that reliance on such statements engages the respondents' entitlement to test those statements, the matter could not stand without appropriate procedural safeguards such as cross-examination where reliance is asserted. [Paras 3]

The Court held that the adjudicating authority's order contained inconsistent findings regarding reliance on recorded statements, and that where statements are relied upon the respondents are entitled to have them tested; the factual position warranted reconsideration.

Remand for fresh adjudication excluding specified evidence - opportunity of personal hearing before passing fresh order - Remedial relief to be granted in view of the inconsistency: whether the original order should be set aside and the matter remanded for fresh decision, and on what terms. - HELD THAT: - Because the adjudicating authority asserted non-reliance in one place but demonstrably relied upon the statements elsewhere, the Court concluded that a fresh order should be passed. The matter was remitted to the adjudicating authority with a clear injunction that any fresh adjudication be conducted on merits and in accordance with law without placing reliance on the statements recorded from the specified 18 persons if the authority maintains it is not relying upon them. The authority was directed to afford an opportunity of personal hearing to the authorized representative of the respondents/assessees before passing the fresh order, and to complete the exercise within a stipulated timeframe. [Paras 4]

The original order dated 14th June, 2019 was set aside and the matter remanded for fresh adjudication on merits and in accordance with law, excluding reliance on the statements of the 18 persons if the authority persists in claiming non-reliance, and after affording personal hearing within the prescribed period.

Final Conclusion: The appeal is allowed in part: the original adjudication is set aside and the matter is remitted for fresh decision on merits and in accordance with law, without reliance on the statements of the specified 18 persons (if the authority does not rely on them), and after affording an opportunity of personal hearing to the respondents' authorised representative within the time directed by the Court.

Provisional release under Section 110A of the Customs Act - seizure and statutory time-limits under Section 110(2) of the Customs Act - detention without seizure unlawful - burden to prove Country-of-Origin and verification under the Customs (Administration of Rule of Origin under Trade Agreements) Rules, 2020 - requirement of expedition of inquiry and limited security for provisional release

Detention without seizure unlawful - seizure and statutory time-limits under Section 110(2) of the Customs Act - provisional release under Section 110A of the Customs Act - Whether continued detention of imported goods for over two years without formal seizure and without invoking the statutory procedures under Section 110(1)/(2) and thereby denying access to Section 110A relief is lawful - HELD THAT: - The Court found that the goods had been detained for more than two years without any formal seizure and that the statutory mechanism under Section 110 - including inventory, six month limit (with possible extension for reasons recorded) and the consequences on return of goods where seizure proceedings are not initiated - was not followed. The Court observed that Section 110A provides for provisional release where goods have been seized and that continuous detention without seizure frustrates the statutory right to seek provisional release. The practice of detaining goods indefinitely without seizure and without initiating the mandatory time bound processes under Section 110(2) is contrary to the statute and not contemplated by law; such procedure defeats the remedial scheme and bars the assessee from invoking Section 110A. Applying these principles, the Court held that the petitioners were entitled to relief from the unlawful, prolonged detention of the consignment and that the authority must act within the statutory framework rather than by indefinite detention. [Paras 8, 10]

Detention without seizure for the period involved was unlawful; petitioners entitled to relief by provisional release of the goods subject to conditions.

Burden to prove Country-of-Origin and verification under the Customs (Administration of Rule of Origin under Trade Agreements) Rules, 2020 - requirement of expedition of inquiry and limited security for provisional release - Whether the inquiry into Country of Origin and related verification may be continued and completed subject to directions for expedition, and on what terms the goods should be provisionally released - HELD THAT: - The Court recognised the authorities' concern regarding the genuineness of the Country of Origin certificate issued by the Dubai Chamber of Commerce and the need for verification under the Rules framed for administration of origin claims. However, noting the two year delay and absence of seizure, the Court directed that the inquiry be completed within a fixed and short timeframe and that the goods be provisionally released in the interim on furnishing limited security. The Court referred to the Customs (Administration of Rule of Origin under Trade Agreements) Rules, 2020, as empowering the proper officer to requisition information and to suspend preferential treatment pending verification, and observed that any such exercise must comply with the timelines and procedure specified therein. To balance the competing interests, the Court ordered provisional release on conditions designed to secure the revenue and ensure completion of verification. [Paras 12, 13, 14, 15]

Inquiry to be expedited and completed within eight weeks; goods provisionally released on furnishing a limited bank guarantee, and further bonds to be furnished if Country of Origin is found to be Pakistan.

Final Conclusion: Petition allowed: the detained imported goods are provisionally released on conditions. The petitioners to furnish a bank guarantee of Rs.2,00,000 for eight weeks; the Customs authority shall complete the origin verification/inquiry within eight weeks from service of the order; if the goods are found to originate from Pakistan, the petitioner must furnish a bond to meet statutory obligations; service by e mode is permitted.

Binding effect of remand - res judicata - power of review - competence to re-open issues after remand - scope of appellate remand - advance license/DEEC exemption conditionality

Advance license/DEEC exemption conditionality - binding effect of remand - scope of appellate remand - Whether the CESTAT was correct in declining to re-examine the question of CaO percentage and in upholding the Commissioner's de novo finding that other conditions for exemption were fulfilled. - HELD THAT: - The Court examined the CESTAT order of 26.06.2002 which had remanded the matter to the original authority with a specific direction: if all other conditions of the advance license/DEEC scheme and exemption notification were found fulfilled, the appellants should be entitled to exemption despite non-compliance with one condition relating to CaO percentage. The Department accepted that remand and did not challenge the Commissioner's de novo findings on the fulfillment of the other conditions. Given that background, the CESTAT correctly held itself precluded from revisiting the sample/CaO issue because doing so would amount to reviewing its earlier order. The Commissioner had discharged the limited task assigned by the Tribunal by examining and recording that other conditions were complied with and by relying on the test report of an independent recognized agency; there was therefore no occasion for the Tribunal to re-open the remitted issue. [Paras 4]

The CESTAT was correct in refusing to re-examine the CaO percentage issue and in upholding the Commissioner's de novo finding that the respondent satisfied the other conditions for exemption.

Power of review - competence to re-open issues after remand - res judicata - Whether the Tribunal or the original authority could review or reopen the Tribunal's earlier decision in absence of statutory power of review. - HELD THAT: - The Court reiterated the settled principle that the power to review is statutory and not inherent in administrative tribunals created by special statutes. Citing precedent, the Court held that a Tribunal cannot review its own decision in absence of express statutory power. Directing the CESTAT to decide afresh the sample/CaO issue at this stage would amount to impermissible review of its earlier remand order. In light of the Department's acceptance of the remand direction and the Commissioner's ensuing de novo findings, there was no legal basis for the Tribunal to undertake a review or to traverse beyond the scope of its earlier direction. [Paras 4]

In absence of statutory review power, neither the Tribunal nor the original authority could revisit the Tribunal's earlier decision; the CESTAT correctly declined to review its 26.06.2002 order.

Final Conclusion: The appeals are dismissed; the CESTAT did not err in refusing to re-open the CaO sample issue after remand and in upholding the Commissioner's de novo finding that the other conditions for exemption under the advance license/DEEC scheme were satisfied.

Transactional value as primary criterion for customs valuation - admissibility and probative value of Trade Panel valuation report - confiscation and redemption under the Customs Act - concurrent findings and interference by writ jurisdiction for perversity

Transactional value as primary criterion for customs valuation - admissibility and probative value of Trade Panel valuation report - Whether the Customs Authorities were required to accept the Trade Panel's lower valuation instead of the transaction value evidenced by invoices found with the petitioner. - HELD THAT: - The Court held that Section 14 establishes transactional value (the price actually paid or payable) as the primary criterion for valuation, and all three authorities correctly proceeded on that basis. There is no statutory provision obliging the Authority to accept a Trade Panel report in preference to transaction value. The Commissioner and Commissioner (Appeals) examined the Trade Panel report and found it unreliable and lacking necessary material (uncertainty whether values were for import or export, or domestic prices), and therefore not entitled to probative weight. Consequently the Authorities were entitled to adopt the transactional value evidenced by invoices found in the petitioner's possession and to reject or not give effect to the Trade Panel valuation. [Paras 5, 6, 7]

Authorities rightly adhered to transactional value and were not bound to accept the Trade Panel's report, particularly where that report was found unreliable.

Concurrent findings and interference by writ jurisdiction for perversity - Whether this Court should interfere with the concurrent factual findings of the Customs Authorities on valuation and confiscation in exercise of writ jurisdiction. - HELD THAT: - The Court acknowledged the settled principle that a writ court may intervene where concurrent findings are demonstrably perverse, but found no such stark perversity in the present case. The Authorities applied settled valuation principles and, moreover, took a lenient approach in reducing fines and penalties at successive stages. In these circumstances the writ court declined to disturb the concurrent findings of the Commissioner and the Revisional Authority. [Paras 8, 9]

No interference in writ jurisdiction as there is no demonstrable perversity in the concurrent findings.

Procedural requirement of raising issues before revisional authority - Whether the petitioner's contention that the documents were insurance certificates (and not invoices) could be entertained when not urged before the Revisional Authority. - HELD THAT: - The Court noted that the factual assertion that the documents were insurance certificates rather than invoices was not raised before the Revisional Authority. All authorities had proceeded on the basis that the documents were invoices found with the petitioner. Since the point was not argued below, the Court proceeded on the same basis and did not entertain the belated contention. [Paras 4]

The contention that the documents were insurance certificates and not invoices could not be entertained as it was not raised before the Revisional Authority.

Final Conclusion: Writ petition dismissed; the Customs Authorities correctly applied transactional valuation and were not bound by the Trade Panel report found unreliable, there being no perversity warranting interference, and a late contention about the nature of the documents could not be entertained.

Delay in adjudication - Principles of natural justice - Obligation to adjudicate within reasonable time - Revival of long pending show cause notice - Show cause notice under Section 28 of the Customs Act, 1962

Delay in adjudication - Principles of natural justice - Obligation to adjudicate within reasonable time - Unreasonable and unexplained delay of nine years in adjudication of the show cause notice amounted to breach of principles of natural justice and justified quashing of the notice. - HELD THAT: - The show cause notice dated 26.09.2013 was replied to by the petitioner in 2014 and the petitioner was not informed of any adjournment, call book entry or pendency; the petitioner therefore reasonably believed the proceedings were dropped. The court held that an authority is bound to adjudicate with expedition and that undue delay, particularly where it causes prejudice by loss of records and unavailability of persons who managed the affairs, violates procedural fairness and natural justice. The reasons advanced by respondents for keeping the matter in the call book and for revival after nine years were held to be unreasonable and unsupported by statutory provision; the contention that the 2018 amendment prescribing time limits applied was not argued and in any event the power to adjudicate must be exercised within a reasonable time. Given the prejudice to the petitioner and absence of justification for the inaction, revival of the long pending show cause notice was unsustainable.

The show cause notice dated 26.09.2013 was quashed and further adjudication pursuant thereto was prohibited.

Final Conclusion: The petition was allowed: the impugned show cause notice dated 26.09.2013 is quashed and the respondents are prohibited from taking any further steps under that notice; no order as to costs.

Condonation of delay - Section 129A(5) of the Customs Act, 1962 - principles analogous to Section 14 of the Limitation Act - sufficient cause - bonafide belief / mistaken forum - revisional proceedings prosecuted before wrong forum - registration of appeal and hearing on merits

Condonation of delay - Section 129A(5) of the Customs Act, 1962 - principles analogous to Section 14 of the Limitation Act - sufficient cause - bonafide belief / mistaken forum - Whether the delay of 2,159 days in filing the appeal before the CESTAT should be condoned on the ground that the appellant, acting on legal advice, had bona fide prosecuted a revision before the Revisional Authority and therefore the period ought to be excluded under principles analogous to Section 14 of the Limitation Act. - HELD THAT: - The Court found that the appellant, on legal advice, bonafide filed and diligently prosecuted a revision under Section 129DD before the Revisional Authority and only after that authority declined jurisdiction did he obtain the certified copy and file the appeal with an application under Section 129A(5). Applying the ratio in Consolidated Engineering Enterprises, the Court held that an element of mistake is inherent in invocation of the principles analogous to Section 14 and that time spent pursuing a remedy in a wrong forum bona fide and with due diligence constitutes sufficient cause for condoning delay. The Revisional Authority's rejection for lack of jurisdiction (without adjudicating merits) and the subsequent prompt filing of the appeal and condonation application after receipt of the certified copy were held to satisfy the predicates for relief, namely prosecution of prior proceedings in good faith and failure due to defect of jurisdiction. [Paras 10, 11, 12, 14]

Delay of 2,159 days is condoned; the impugned CESTAT order is set aside, and the appeal is to be registered and heard on merits.

Final Conclusion: The appeal is allowed insofar as the Miscellaneous Application for condonation of delay is concerned: delay of 2,159 days is condoned under Section 129A(5) applying principles analogous to Section 14 of the Limitation Act; the CESTAT is directed to register and decide the appeal on merits.

Confiscation of imported prohibited hazardous waste - Option to pay fine in lieu of confiscation under Section 125 - Vesting of confiscated goods in Central Government under Section 126 - Penalty for acts rendering goods liable to confiscation under Section 112(a)

Confiscation of imported prohibited hazardous waste - Confiscation of the imported oil declared as 'low sulphur waxy residue (fuel oil)', found on testing to be 'waste oil', was upheld. - HELD THAT: - The imported product was tested and found to be 'waste oil' listed in Schedule VI of the Hazardous Waste (Management, Handling and Trans-boundary Movement) Rules, 2008, the import of which is prohibited under Rule 13(4). The appellant had no licence or permission to import or process the hazardous waste and had misdeclared the goods. On these facts, confiscation under Sections 111(d) and 111(m) of the Customs Act was correctly applied by the adjudicating authority and rightly upheld on appeal. [Paras 9]

Confiscation under Sections 111(d) and 111(m) upheld.

Option to pay fine in lieu of confiscation under Section 125 - The adjudicating authority's refusal to offer redemption (option to pay fine in lieu of confiscation) was valid and is upheld. - HELD THAT: - Section 125 permits the adjudicating officer to give an option to pay a fine in lieu of confiscation; however, where importation is prohibited under the Customs Act or any other law, the officer may, but need not, permit redemption. Given that the goods were prohibited hazardous waste and the appellant lacked requisite permission, the authority properly exercised its discretion not to allow redemption of the seized hazardous material. [Paras 10, 11]

Refusal to allow redemption under Section 125 upheld as a proper exercise of discretion in respect of prohibited hazardous imports.

Vesting of confiscated goods in Central Government under Section 126 - The appellant's request to re-export the confiscated goods was rejected because, on confiscation, title vested in the Central Government. - HELD THAT: - Section 126 provides that goods confiscated under the Act thereupon vest in the Central Government and possession is to be taken and held by the adjudicating officer. Once confiscated, the appellant no longer had title to the goods and therefore could not seek their re-export. The tribunal correctly rejected the prayer to permit re-export by the appellant. [Paras 12]

Request for re-export refused as confiscated goods vest in the Central Government under Section 126.

Penalty for acts rendering goods liable to confiscation under Section 112(a) - The penalty of Rs. 1,00,000 imposed on the appellant under Section 112(a) was upheld as fair and proper. - HELD THAT: - Section 112(a) prescribes penalty for acts or omissions rendering goods liable to confiscation under Section 111. Considering the facts-misdeclaration and import of prohibited hazardous waste-and the value of the confiscated goods, the tribunal found the adjudicating authority's imposition of the specified penalty to be reasonable and within the authority's discretion. [Paras 13]

Penalty under Section 112(a) affirmed as appropriate.

Final Conclusion: The appeal is dismissed; confiscation of the prohibited hazardous waste is upheld, the adjudicating authority's refusal to permit redemption and to allow re-export by the appellant is sustained, and the penalty imposed on the appellant under Section 112(a) is affirmed.

Condonation of delay - extension of time due to COVID-19 Gazette Notification - limitation to be computed from date of communication of order - remand for fresh disposal on merits

Condonation of delay - extension of time due to COVID-19 Gazette Notification - Delay in filing the appeal before the Tribunal was condoned despite absence of a formal miscellaneous application. - HELD THAT: - The Tribunal found that the Appellant filed written submissions attaching the Gazette Notification extending due dates for compliances owing to the COVID-19 pandemic and, therefore, the requirement of filing a formal application for condoning delay was dispensed with. In view of the Gazette Notification and the Appellant's submissions, the Tribunal exercised its power to condone the delay in filing the appeal before it and took the appeal on record for hearing. [Paras 2, 3]

Delay in filing the appeal before the Tribunal is condoned and the appeal admitted for hearing.

Limitation to be computed from date of communication of order - condonation of delay - remand for fresh disposal on merits - Delay in filing the appeal before the Commissioner (Appeals) was condoned and the matter remanded to the Commissioner (Appeals) for decision on merits. - HELD THAT: - The Tribunal observed that the Order-in-Original was communicated on 07.03.2019 and that the Appellant filed the first appeal before the Commissioner (Appeals) after the statutory 60-day period but within the further condonable period of 30 days. The Commissioner (Appeals) had rejected the appeal on limitation without addressing the merits and, moreover, had computed limitation from the date of the order instead of from the date of communication. The Tribunal therefore exercised its discretion to condone the earlier delay and remitted the matter to the Commissioner (Appeals) to decide the appeal on merits, explicitly directing that the aspect of limitation should not be revisited and that the parties be given reasonable opportunity to produce evidence. [Paras 7, 8, 9]

Delay before the Commissioner (Appeals) is condoned; the appeal is remanded to the Commissioner (Appeals) for fresh adjudication on merits with liberty to both parties to lead evidence.

Final Conclusion: The Tribunal condoned the delay in instituting the appeal before it (accepting the Gazette Notification as justification) and, having also condoned the earlier delay before the Commissioner (Appeals), remitted the appeal to the Commissioner (Appeals) for fresh disposal on merits; miscellaneous application for out of turn hearing disposed of and all issues kept open with liberty to both parties to produce evidence.

Restoration of name to the Register of Companies - striking off and dissolution under Section 248 of the Companies Act, 2013 - company as a going concern / carrying on business - show cause notice under Section 248(1)(c) and publication in Official Gazette - statutory requirement to file annual returns and financial statements - restoration subject to compliances, costs and Registrar's power to take further action

Company as a going concern / carrying on business - striking off and dissolution under Section 248 of the Companies Act, 2013 - Whether the NCLT was right in concluding that the company was not carrying on business and in dismissing the appeal against striking off - HELD THAT: - The Appellate Tribunal examined the material placed before it, including registered sale deeds evidencing immovable property acquired between 2011 and 2014, and audited financial statements and balance sheets from 2012-13 to 2019-20. Having regard to those documents showing substantial movable and immovable assets and audited accounts, the Tribunal held that it could not be concluded that the company had ceased to carry on business or operations within the meaning of the statutory scheme for striking off. On that basis the Tribunal found the NCLT's conclusion unsustainable and accepted the appellant's contention that the company remained an ongoing concern despite non-filing of certain statutory returns. [Paras 6]

NCLT's conclusion that the company was not carrying on business is set aside and the finding in favour of striking off is reversed.

Restoration of name to the Register of Companies - statutory requirement to file annual returns and financial statements - restoration subject to compliances, costs and Registrar's power to take further action - Relief to be granted and conditions for restoration of the company's name - HELD THAT: - The Tribunal directed restoration of the company's name to the Register maintained by the Registrar of Companies but made restoration conditional. The company is ordered to pay costs to the RoC and to file all outstanding annual returns and balance sheets, along with payment of requisite fees and late charges. The order expressly preserves the Registrar's right to initiate any other punitive or consequential proceedings under the Companies Act for prior non-filing or late filing of statutory documents. The Tribunal therefore granted restoration while imposing compliance and cost conditions to address prior defaults. [Paras 7]

Name of the company restored to the Register subject to payment of costs, filing of outstanding statutory documents with fees/late charges, and without prejudice to the RoC taking further action under the Act.

Final Conclusion: The appeal is allowed: the NCLT order dismissing the restoration plea is set aside; the company's name is restored to the Register of Companies subject to payment of costs, filing of all outstanding annual returns and financial statements with applicable fees/late charges, and without prejudice to the Registrar's power to take further action under the Companies Act.

Restoration of company name to register - Striking off and dissolution under the removal procedure - Reasonable cause to believe company not in operation - Evidence of business activity and assets as ground for revival - Conditional restoration subject to payment of costs and compliance - Registrar's continuing power to initiate action for non-filing

Restoration of company name to register - Evidence of business activity and assets as ground for revival - The order of the Tribunal dismissing the appeal for revival was unsustainable and the company's name was to be restored to the Register of Companies. - HELD THAT: - The Appellate Tribunal examined the material placed on record and recorded that financial statements for 2016-2017 through 2019-2020 and the income-tax return evidence showed the company possessed substantial movable and immovable assets and had been carrying on business and operations. On that basis the Tribunal concluded that it could not be said the company was not in operation and therefore set aside the impugned NCLT order dismissing the revival petition. The Tribunal specifically relied on the existence of assets and filings to negate the Registrar's premise that the company was defunct. [Paras 5, 6]

Impugned order dated 10.08.2021 set aside and the company's name restored to the Register of Companies.

Conditional restoration subject to payment of costs and compliance - Registrar's continuing power to initiate action for non-filing - Restoration granted subject to specified conditions and with liberty to the Registrar to take further action for past non-compliance. - HELD THAT: - The Tribunal imposed conditional requirements as part of restoration: payment of costs to the Registrar within a stipulated time and filing of all outstanding annual returns and balance sheets with payment of requisite fees and late charges. The Tribunal further clarified that notwithstanding restoration, the Registrar would remain free to take any other punitive or other steps under the Companies Act for prior non-filing or late filing of statutory returns/documents against the company and its directors. [Paras 6]

Restoration subject to payment of costs, filing of outstanding returns and fees; RoC permitted to take further action for non-compliance.

Final Conclusion: Appeal allowed in part: NCLT order dismissing revival set aside and company's name restored to the Register subject to payment of costs and filing of outstanding statutory documents and fees; Registrar retains power to pursue further action for prior non-compliance.

Restoration of company name - striking off for not carrying on business or operations - duty to make provision for realization of assets and discharge of liabilities before dissolution - publication of notice and effect of dissolution by Registrar of Companies - conditional restoration subject to costs and filing of returns

Restoration of company name - carrying on business or operations - Validity of striking off and NCLT dismissal in light of audited financial statements and income-tax returns showing the company had assets and operations. - HELD THAT: - The Tribunal found that the Appellant had prepared audited balance sheets for the years ended 31.03.2016, 31.03.2017, 31.03.2018 and 31.03.2019 and had filed Income Tax Returns for Assessment Years 2019-20 and 2020-21, indicating existence of substantial movable and immovable assets and that the company was not non-operational. On this material the Appellate Tribunal held that the conclusion that the company was not carrying on any business or operations was unsustainable and that the NCLT order dismissing the revival appeal could not stand. The determinative reasoning is that contemporaneous audited accounts and tax filings demonstrating assets and activity negate the presumption of non-operation relied upon for striking off. [Paras 5]

Impugned order set aside and the company's name to be restored to the Register of Companies.

Duty to make provision for realization of assets and discharge of liabilities before dissolution - publication of notice and effect of dissolution by Registrar of Companies - Whether the Registrar complied with the statutory obligation to make provision for realization of amounts due and discharge of liabilities before effecting dissolution. - HELD THAT: - The Appellant contended that dissolution under the relevant provision was effected without compliance with the requirement to make sufficient provision for realization of amounts due to the company and for payment or discharge of its liabilities, and without obtaining necessary undertakings. The Appellate Tribunal accepted that no prior information was received by the company or its directors and that the RoC failed in its statutory duty in that regard. That failure contributed to the conclusion that dissolution was not sustainable in law. [Paras 5]

RoC's dissolution procedure was defective for failure to make requisite provision and the dissolution could not be sustained on that basis.

Conditional restoration subject to costs and filing of returns - Terms and conditions on which the company's name is to be restored to the Register. - HELD THAT: - The Appellate Tribunal ordered restoration of the company's name but made the relief conditional. The company was directed to pay costs to the Registrar, to file all outstanding annual returns and balance sheets and to pay applicable fees and late fees. The RoC was permitted to initiate any other punitive or statutory action for non-filing or late filing of returns/documents despite the restoration order. [Paras 6]

Restoration granted subject to payment of costs, filing of outstanding returns/balance sheets with requisite fees and without prejudice to RoC's power to take other actions.

Final Conclusion: The appeal is allowed to the extent that the NCLT order is set aside and the company's name is restored to the Register of Companies; restoration is subject to payment of costs and compliance with filing and fee requirements, and without prejudice to the RoC's authority to pursue other statutory actions.

Financial debt - disbursement for the time value of money - commercial effect of a borrowing - Section 5(8)(f) - residual clause including transactions having commercial effect of a borrowing

Financial debt - disbursement for the time value of money - Section 5(8)(f) - residual clause including transactions having commercial effect of a borrowing - Whether the amount of Rs.1.2 Crore advanced by the appellant under the Letter of Intent constitutes a financial debt under Section 5(8) of the Code - HELD THAT: - The Letter of Intent and its Clause 7 demonstrate that the payment of Rs.1.2 Crore was made as an interest free security deposit equivalent to three months' rent in the context of a proposed lease for premises, and the arrangement contemplated execution of a lease deed on a rent basis. The Court applied the statutory test that a financial debt requires a disbursement made against consideration for the time value of money. While precedents (including the principles in Orator Marketing and Pioneer Urban Land) recognise that a financial debt need not necessarily carry interest and that clause (f) captures transactions having the commercial effect of borrowing, the determinative requirement remains whether the transaction is a disbursement for the time value of money. On the facts, the advance was contractual rent-security in nature and not a commercial borrowing; there was no basis to treat the payment as raised for the time value of money. The Adjudicating Authority therefore correctly held that the amount did not qualify as a financial debt under Section 5(8). The appellant's alternative contentions that the amount is nevertheless a debt for recovery outside the Code do not entitle invocation of IBC provisions, and civil remedies remain available. [Paras 11, 12, 13, 14, 15]

The advance of Rs.1.2 Crore is not a financial debt within the meaning of Section 5(8) of the Code; the Section 7 application was rightly rejected.

Final Conclusion: Appeal dismissed. The adjudicatory finding that the advance was not a financial debt is upheld; the appellant remains free to pursue other legal remedies for recovery of the amount outside the Insolvency and Bankruptcy Code.

Moratorium under Section 14 of IBC - Binding effect of approved resolution plan under Section 31 - Extinguishment and freezing of claims upon approval of resolution plan - Adjudicating Authority's jurisdiction under Section 60(5) - Functus officio of Adjudicating Authority after approval of resolution plan - Powers and role of Resolution Professional and Committee of Creditors

Adjudicating Authority's jurisdiction under Section 60(5) - Functus officio of Adjudicating Authority after approval of resolution plan - Extinguishment and freezing of claims upon approval of resolution plan - Maintainability of IA No. 3927/2020 filed after approval of the resolution plan and the consequence of approval on the claim for refund asserted by the Corporate Debtor - HELD THAT: - The Appellate Tribunal held that the resolution plan was approved on 02.04.2019 and the application (IA No. 3927 of 2020) seeking refund was filed on 14.09.2020, approximately 18 months thereafter. Once the Adjudicating Authority approves a resolution plan, it becomes functus officio in respect of the CIRP and the plan has binding effect; claims not part of the approved plan stand frozen/extinguished so that the successful resolution applicant takes over on a clean slate. The Tribunal agreed with the Adjudicating Authority's reasoning that Section 60(5)(c) does not confer jurisdiction to reopen settled issues arising out of a completed CIRP after approval of the plan, and that the Adjudicating Authority lacks jurisdiction to entertain the IA filed post-approval where the CIRP has concluded. For these reasons the Adjudicating Authority correctly dismissed the application and the Appellate Tribunal affirmed that the claim for refund could not be entertained before the Adjudicating Authority after approval of the resolution plan. [Paras 11]

The impugned order dismissing the IAs is affirmed and the appeal is dismissed.

Final Conclusion: The Appellate Tribunal affirmed the Adjudicating Authority's order dismissing the applications filed by the Corporate Debtor, holding that after approval of the resolution plan the Adjudicating Authority was functus officio and could not entertain the refund claim; the appeal is dismissed.

Pre-existing dispute - Section 9 application under the I&B Code - Section 8 notice - moonshine defence - operational creditor - condonation of delay

Condonation of delay - Applications for condonation of delay in filing and refiling the appeal were allowed. - HELD THAT: - The Appellate Tribunal considered the affidavits explaining the delays in filing the physical copy of the appeal and in refiling the appeal. The reasons given - including medical exigency and time taken to remove defects - were held sufficient to excuse the respective delays. Both interlocutory applications for condonation were disposed of by permitting the delayed filings. [Paras 1, 2]

Delays of seven days and eleven days in filing and refiling the appeal respectively are condoned and the interlocutory applications are disposed of.

Pre-existing dispute - Section 9 application under the I&B Code - Section 8 notice - moonshine defence - operational creditor - Whether the Adjudicating Authority rightly rejected the Section 9 petition on the ground of a pre-existing dispute. - HELD THAT: - The Tribunal examined the Adjudicating Authority's reliance on contemporaneous email correspondence pre-dating the Section 8 notice of 13.07.2019, which raised complaints about deficiency of work, slow progress and defective materials. The Court applied the statutory test that the Adjudicating Authority must determine whether the defence of the Corporate Debtor is a bona fide dispute or merely a 'moonshine' defence. Finding that the emails were not frivolous and showed disputes existing prior to the demand notice, the Tribunal held that the Adjudicating Authority did not err in concluding that a pre-existing dispute existed and in dismissing the Section 9 petition. The Tribunal noted that contractual disputes arising during performance are not to be resolved in IBC proceedings and that the only enquiry in a Section 9 petition is whether the objection is bona fide. [Paras 5, 6]

The Adjudicating Authority correctly rejected the Section 9 application as the Corporate Debtor had raised a bona fide pre-existing dispute; the appeal is dismissed on merits.

Operational creditor - pre-existing dispute - Whether omission to refer to the Operational Creditor's emails amounted to error requiring reversal. - HELD THAT: - The Tribunal observed that the Adjudicating Authority's task is to examine the defence raised by the Corporate Debtor to determine existence of a pre-existing dispute. If the Adjudicating Authority is satisfied by the Corporate Debtor's material (here, the earlier emails), it is not incumbent upon it to record or refer to the explanations offered by the Operational Creditor. The absence of explicit reference to the Operational Creditor's emails therefore did not vitiate the order rejecting the Section 9 petition. [Paras 7, 8]

Failure to separately note the Operational Creditor's emails does not invalidate the Adjudicating Authority's finding of a pre-existing dispute; appeal dismissed.

Final Conclusion: Interlocutory applications for condonation of delay are allowed. On the merits, the Adjudicating Authority correctly held that a bona fide pre-existing dispute existed (established by email correspondence prior to the Section 8 notice) and therefore rightly dismissed the Section 9 petition; the appeal is dismissed, with liberty to the appellant to pursue such other remedies as available in law.

Acknowledgment of debt under Section 18 of the Limitation Act, 1963 - application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - balance sheet/financial statements as acknowledgment of debt - applicability of Sections 14 and 18 of the Limitation Act to proceedings under the IBC - extension of period of limitation by acknowledgment

Acknowledgment of debt under Section 18 of the Limitation Act, 1963 - balance sheet/financial statements as acknowledgment of debt - application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - extension of period of limitation by acknowledgment - Whether the Adjudicating Authority was justified in dismissing the Section 7 application as barred by limitation. - HELD THAT: - The Tribunal found that the Adjudicating Authority erred in holding the Section 7 petition time-barred. The amounts claimed were reflected in the corporate debtor's balance sheet (audited for Financial Year 2019-20) and therefore constituted an acknowledgment of debt within the meaning of Section 18 of the Limitation Act, 1963. Relying on the reasoning of the Supreme Court as discussed in the judgment, the Tribunal observed that Sections 14 and 18 of the Limitation Act apply to IBC proceedings and that an acknowledgment in the debtor's financial statements operates to extend the period of limitation. The Tribunal also noted that earlier reliance by the Adjudicating Authority on this Tribunal's decision in V. Padmakumar - which had been set aside by the Supreme Court - was misplaced. On the admitted facts (last tranches disbursed in March 2017 and the balance reflected in later balance sheets), the acknowledgment in the balance sheet extended the limitation period and thereby removed the bar to filing the Section 7 application. The Tribunal expressly limited its conclusion to the question of limitation and did not express any view on the merits of the debt or default, leaving those issues open for determination by the Adjudicating Authority.

The Section 7 application is not barred by limitation; the impugned order dismissing it on limitation grounds is set aside.

Final Conclusion: Appeal allowed insofar as the Adjudicating Authority's finding of bar by limitation is set aside; no decision on merits of debt or default, which may be raised before the Adjudicating Authority.

Revival of Corporate Insolvency Resolution Process - non-compliance of adjudicating authority's order - entitlement to CIRP costs and fees - set-aside of CIRP on settlement - liberty to move Tribunal to recall order

Revival of Corporate Insolvency Resolution Process - non-compliance of adjudicating authority's order - entitlement to CIRP costs and fees - liberty to move Tribunal to recall order - Maintainability and merits of the application seeking revival of CIRP and payment of IRP's fees for alleged non-compliance of the NCLT order. - HELD THAT: - The Tribunal recorded that this Appellate Bench had earlier set aside the CIRP on account of a settlement but had expressly provided that the IRP/RP could approach the Tribunal to recall its order in case of default. The NCLT subsequently considered the IRP's claim and passed an order directing the Corporate Debtor to pay the CIRP costs and fees. Given that the Adjudicating Authority has already adjudicated the IRP's claim and directed payment, there was no occasion for the IRP to seek revival of the CIRP before this Tribunal. Accordingly, the present application - premised on alleged non-compliance - was found unnecessary and devoid of merit in the circumstances, and was dismissed. The Tribunal noted procedural steps taken by parties and pending applications before the NCLT but declined to grant the relief sought in the Appellate application. [Paras 7]

I.A. No. 313 of 2021 dismissed; no order as to costs.

Final Conclusion: The application for revival of the CIRP and payment of IRP's fees was dismissed as unnecessary because the NCLT had already adjudicated and directed payment of the CIRP costs; the Tribunal found no occasion to recall its earlier order.

Requirement of existence of a registered or pending scheduled offence for prosecution under the Prevention of Money Laundering Act - no offence of money laundering where the predicate scheduled offence is quashed - quashing of Enforcement Directorate proceedings consequent to quashing of First Information Reports - power to quash summons/ECIR where predicate criminal proceedings have been finally quashed

Requirement of existence of a registered or pending scheduled offence for prosecution under the Prevention of Money Laundering Act - no offence of money laundering where the predicate scheduled offence is quashed - quashing of Enforcement Directorate proceedings consequent to quashing of First Information Reports - Validity of the impugned Enforcement Directorate proceedings (ECIR/05/CEZO II/2019 dated 12.06.2020) against the petitioner in view of this Court's quashment of the First Information Reports in the predicate criminal cases. - HELD THAT: - The Court applied the principle articulated by the Supreme Court in Vijay Madanlal Choudhary that prosecution under the Prevention of Money Laundering Act depends on the existence of an illegal gain derived from a scheduled offence and that authorities under the PMLA cannot proceed on a notional basis unless the scheduled offence is registered and pending. Since this Court had allowed Crl.O.P.Nos.12985 and 12986 of 2020 on 23.09.2022 quashing the First Information Reports in CBCID Crime Nos.2 and 3 of 2016, the predicate scheduled offences no longer subsist. In those circumstances, there can be no offence of money laundering attributable to the petitioner and the proceedings initiated by the Enforcement Directorate by way of ECIR and summons could not be sustained.

Impugned order dated 12.06.2020 in ECIR/05/CEZO II/2019 quashed and proceedings before the Enforcement Directorate set aside.

Final Conclusion: Writ petition allowed; impugned ED order quashed and connected miscellaneous petition closed; no costs.

Summary order. The appeals are dismissed in the peculiar facts and circumstances of the case, leaving all questions of law open; pending interlocutory applications, if any, are disposed of.

Condonation of delay - discretion to condone delay by the Tribunal - diligence and laches in prosecuting appeals - remand for fresh consideration - refund of service tax for export of goods - classification of specified taxable services - interest on refund

Condonation of delay - diligence and laches in prosecuting appeals - Application to condone delay of 123 days in filing the intra Court appeal - HELD THAT: - The Court examined the affidavit supporting I.A. No. CAN 1 of 2022 and found the reasons for delay satisfactory. The application for condonation of delay in filing the instant intra Court appeal was therefore allowed. Separately, the Court criticised the appellant's earlier conduct before the first appellate authority and the Tribunal, noting that the appeal before the first appellate authority was time barred and that there was inordinate delay in preferring the Tribunal appeal. While such laches and lack of diligence ordinarily weigh against granting condonation, the Court permitted condonation of delay in the present intra Court appeal after considering the material placed on record and the specific circumstances identified in the judgment. [Paras 3, 4, 5, 7, 9]

I.A. No. CAN 1 of 2022 allowed; delay of 123 days condoned.

Discretion to condone delay by the Tribunal - remand for fresh consideration - classification of specified taxable services - refund of service tax for export of goods - interest on refund - Whether the Tribunal correctly dismissed the miscellaneous applications for condonation of delay and whether those applications should be restored for fresh consideration in light of subsequent developments - HELD THAT: - The Court found that although the appellant's overall conduct in prosecuting the appeals was not commendable and there was inordinate delay before the Tribunal, a later development - namely, an order of the Assistant Commissioner dated 10th April, 2019 sanctioning refund for the earlier period (April, 2008 to September, 2008) on the basis of the appellant's classification of the specified services - was a material circumstance which the Tribunal should take into account. For that reason the Court interfered with the Tribunal's order dated 4th February, 2021 and set it aside. The miscellaneous applications (COD) which the Tribunal had dismissed are restored to its file for fresh consideration; the Tribunal is directed to note the Assistant Commissioner's acceptance of the classification for the earlier period while re examining the condonation applications and may exercise its discretion afresh. The Court also observed that, if on remand the Tribunal allows the appellant's claim and grants refund, the question of interest for the entire period was open for consideration and the revenue was given liberty to raise that point before the Tribunal. [Paras 10, 11, 12, 13, 14]

Order of the Tribunal dated 4th February, 2021 set aside; Miscellaneous Application Nos. 77827/2019 (COD), 77828/2019 (COD) and 77829/2019 (COD) restored for fresh consideration by the Tribunal, which shall take note of the Assistant Commissioner's order for the earlier period and may consider interest issues on remand.

Final Conclusion: The intra Court appeals are allowed: condonation of delay in filing the intra Court appeal is granted; the Tribunal's order refusing condonation is set aside and the misc. condonation applications are restored for fresh consideration in light of the Assistant Commissioner's earlier refund order (April, 2008 to September, 2008); the Tribunal may also consider the question of interest on any refund; no order as to costs.

Condonation of delay - restoration of appeal - removal of office objections - right to litigate on merits - technicalities not to bar adjudication on merits

Condonation of delay - certified copy - Delay of seven days in filing the restoration application was condoned. - HELD THAT: - The applicant explained that the certified copy necessary for preferring the appeal and for removing office objections was received only after a delay and that the restoration application was filed immediately upon receipt. In the totality of facts and circumstances the court found sufficient cause to excuse the seven day delay and concluded that such technical delay should not prevent adjudication on merits.

Delay of seven days is condoned and the delay condonation application is allowed.

Restoration of appeal - removal of office objections - right to litigate on merits - technicalities not to bar adjudication on merits - Application for restoration of the Tax Appeal dismissed for non removal of office objections was allowed and the appeal restored to file subject to conditions. - HELD THAT: - The Tax Appeal had been dismissed for failure to remove office objections within the stipulated time. The applicant averred lack of possession of the certified copy and pandemic related difficulties, and asserted that upon receipt of the certified copy the restoration was promptly filed. The court emphasised that technicalities should not obstruct a party's opportunity to litigate on merits and therefore permitted restoration, while protecting the administrative requirement by directing that any outstanding office objections be removed within a specified short period.

The Tax Appeal is restored to the original file on the condition that any outstanding office objections shall be removed within two weeks from the date of the order; the restoration application is allowed.

Final Conclusion: The High Court condoned the seven day delay and allowed the restoration application, restoring the Tax Appeal to file subject to the condition that any outstanding office objections be removed within two weeks, thereby enabling adjudication on merits.

Taxability of crushing/sizing of coal as 'service' under section 65B(44) and as a 'taxable service' under section 65(105) of the Finance Act, 1994 - application of the principle that sales tax/VAT and service tax cannot concurrently attach to the same transaction - precedential application of Tribunal decisions on coal crushing/sizing (Mahanadi Coalfields Ltd. and follow-up decisions)

Taxability of crushing/sizing of coal as 'service' under section 65B(44) and as a 'taxable service' under section 65(105) of the Finance Act, 1994 - precedential application of Tribunal decisions on coal crushing/sizing (Mahanadi Coalfields Ltd. and follow-up decisions) - Crushing/sizing of coal undertaken by the appellant prior to sale does not sustain a service-tax demand where the facts are identical to earlier Tribunal decisions and those decisions are followed. - HELD THAT: - The Tribunal examined the activities of crushing/sizing performed by the assessee on mined coal prior to sale and found the circumstances identical to the earlier Tribunal ruling in Commissioner of Central Excise & Service Tax v. Mahanadi Coalfields Ltd. Subsequent similar decisions were noted. Applying those precedents, the Tribunal concluded there was no basis to sustain the impugned orders demanding service tax for the crushing/sizing activity and therefore set aside the demands. [Paras 4, 6]

Impugned orders demanding service tax on crushing/sizing of coal set aside by following earlier Tribunal decisions.

Application of the principle that sales tax/VAT and service tax cannot concurrently attach to the same transaction - interaction between inclusive sale price (including crushing charges) and levy of service tax - Where crushing/sizing charges are included in the sale price and sales tax/VAT has been paid, service-tax demands on that activity cannot be sustained in light of the principle against double taxation. - HELD THAT: - The Tribunal relied on the reasoning applied in the cited precedent which followed the Supreme Court principle that sales tax and service tax should not both attach to the same transaction. The record showed that crushing charges were included in the total sale price and sales tax/VAT had been paid; applying the foregoing principle and the earlier Tribunal rulings, the Tribunal found no reason to uphold service-tax demands based on those charges. [Paras 4, 5, 6]

Service-tax demands based on crushing/sizing where sales tax/VAT was paid on the inclusive sale price were rejected and the impugned orders set aside.

Final Conclusion: Following prior Tribunal decisions and the principle that sales tax/VAT and service tax cannot simultaneously attach to the same transaction, the appeals were allowed and the impugned service-tax demands in respect of the specified periods and locations were set aside.

SSI exemption under Notification No. 8/2003-CE as amended - conformity to BIS standard - ISI certification requirement - cum-duty price - option of reduced penalty of 25%

SSI exemption under Notification No. 8/2003-CE as amended - conformity to BIS standard - ISI certification requirement - Whether power driven pumps not conforming to BIS standard and lacking ISI certification are eligible for SSI exemption under Notification No. 8/2003-CE as amended. - HELD THAT: - The Tribunal examined the limited question whether the appellant's product (Water Turbine Pumps) which admittedly do not conform to the BIS standard and for which no ISI certificate has been obtained, fall within the exemption under Notification No. 08/2003-CE as amended. The Tribunal relied on prior decisions addressing the same requirement and on an earlier order in Coronation Industries which held that where pumps do not conform to the BIS specification and there is no ISI certification, the benefit of the notification is not available. Applying that reasoning to the admitted factual position in this appeal, the Tribunal concluded that the exemption cannot be allowed in absence of ISI certification confirming conformity to the BIS standard. [Paras 4, 5]

Exemption under Notification No. 8/2003-CE as amended is not admissible to the appellant because the pumps do not conform to the BIS standard and no ISI certificate has been produced.

Cum-duty price - option of reduced penalty of 25% - Whether the appellant is entitled to have duty re-quantified on the basis of cum-duty price and whether the appellant is entitled to the option of reduced penalty after such re-quantification. - HELD THAT: - The Tribunal observed that, notwithstanding denial of SSI exemption, the principle of cum-duty price is applicable where duty is demanded. The appellant relied on the Gujarat High Court decision in Poonam Plastic Industries for this proposition. The Tribunal directed that the Adjudicating Authority shall recalculate the duty applying the cum-duty price benefit. Because duty will be re-quantified, the Tribunal further directed that the appellant be given the statutory option of paying a reduced penalty of 25% subject to payment of the re-quantified duty and interest within one month of communication of the recalculated duty by the Adjudicating Authority. [Paras 6, 7]

Duty to be recalculated by the Adjudicating Authority on the basis of cum-duty price; appellant granted the option of reduced penalty of 25% subject to payment of re-quantified duty and interest within one month of communication.

Final Conclusion: The appeal is dismissed insofar as SSI exemption under Notification No. 8/2003-CE (as amended) is denied for pumps not conforming to BIS/without ISI certification; however, the duty demand is sustained subject to recalculation applying cum-duty price, and the appellant is entitled to the option of reduced penalty of 25% upon payment of the re-quantified duty and interest within one month of communication.

Penalty under Rule 15(2) of Cenvat Credit Rules read with Section 11AC of the Central Excise Act - Reversal of cenvat credit and non-utilisation amounting to credit not taken - Interest liability on reversed cenvat credit - Finality of demand under Section 11AC(1)(d) - Reduction of penalty by payment under Section 11A(1)(c)

Penalty under Rule 15(2) of Cenvat Credit Rules read with Section 11AC of the Central Excise Act - Reversal of cenvat credit and non-utilisation amounting to credit not taken - Interest liability on reversed cenvat credit - Finality of demand under Section 11AC(1)(d) - Whether equal penalty and interest could be imposed in respect of cenvat credit of Rs.2,07,598/- which was reversed and remained unutilised prior to issuance of the show cause notice - HELD THAT: - The Tribunal found on the record that the appellant had not contested the specified credit from the outset, had effected reversal of the amount and had deposited 15% as penalty prior to issuance of the show cause notice. The amount remained unutilised until reversal. Applying the principle in Chandrapur Magnet Wires (that reversal of cenvat credit without utilisation is equivalent to the credit having not been taken), the Tribunal held that no interest or further penalty could be levied on that amount. The Tribunal further concluded that the matter in respect of that amount stood concluded under Section 11AC(1)(d) and, consequently, a show cause notice ought not to have been issued qua that sum. In view of these findings, the imposition of equal penalty and demand of interest in respect of the reversed, unutilised credit was set aside. [Paras 7]

Penalty and interest in respect of the reversed and unutilised cenvat credit of Rs.2,07,598/- set aside and the amount held concluded under Section 11AC(1)(d)

Final Conclusion: The appeal is allowed: the equal penalty and demand of interest relating to the reversed and unutilised cenvat credit of Rs.2,07,598/- are set aside and that amount is held concluded under Section 11AC(1)(d), with consequential relief.

Reversal of CENVAT/MODVAT credit treated as not having taken credit - liability under Rule 6(3) of the CENVAT Credit Rules, 2004 - maintenance of separate accounts under Rule 6(2) of the CENVAT Credit Rules, 2004 - penalty under Rule 15 of the CENVAT Credit Rules, 2004

Reversal of CENVAT/MODVAT credit treated as not having taken credit - liability under Rule 6(3) of the CENVAT Credit Rules, 2004 - penalty under Rule 15 of the CENVAT Credit Rules, 2004 - maintenance of separate accounts under Rule 6(2) of the CENVAT Credit Rules, 2004 - Sustainability of demand under Rule 6(3) and penalty where disputed CENVAT credit on common inputs and input services was reversed - HELD THAT: - The Tribunal noted that the appellant had, in reply to the show cause notice, reversed the entire CENVAT credit taken on common inputs (furnace oil) and common input services, leaving no credit outstanding. Citing the principle in Chandrapur Magnet that reversal of MODVAT/CENVAT credit is equivalent to not having availed the credit, the Tribunal found that the foundational premise for invoking Rule 6(3) - that the assessee had retained credit attributable to exempted goods - ceased to exist. The Tribunal observed practical difficulties in segregating common inputs in pharmaceutical manufacture but emphasised that the record showed complete reversal of the specific disputed credit. On that basis, the demand for an amount equal to 10% of the value of exempted goods under Rule 6(3) and the penalty imposed under Rule 15 could not be sustained, and the adjudicating and appellate authorities were in error in confirming the demand and penalty. [Paras 8, 9, 10]

Impugned order demanding amount under Rule 6(3) and imposing penalty under Rule 15 set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the orders confirming demand under Rule 6(3) and penalty under Rule 15, holding that reversal of the disputed CENVAT credit rendered the demand and penalty unsustainable, and granted consequential relief to the appellant.

Disallowance of cenvat credit - input service distributor (ISD) distribution of credit - entitlement to cenvat credit for broker services and depository services - jurisdiction of receiving unit to adjudicate cenvat credit - penalty under Rule 15(1) read with Section 11AC(1)(a)

Disallowance of cenvat credit - input service distributor (ISD) distribution of credit - Correct quantum of cenvat credit to be disallowed from amounts distributed by the ISD to the manufacturing unit - HELD THAT: - The Tribunal found that the appellant had actually availed cenvat credit of Rs.1,10,11,284/- out of total credit distributed by the ISD of Rs.1,18,13,934/-. The lower authority had disallowed an amount of Rs.10,09,135/-, which the Tribunal held to be incorrect because the real difference requiring disallowance was the discrepancy of Rs.2,06,485/-, further reduced by an adjustment of Rs.16,716, resulting in a correct disallowance of Rs.1,89,769/-. The Tribunal therefore modified the impugned order to restrict the disallowance to Rs.1,89,769/-. The Tribunal noted that the reduced disallowance had been deposited with the revenue. [Paras 3, 7]

Disallowance restricted to Rs.1,89,769/- and the impugned disallowance of Rs.10,09,135/- set aside insofar as it exceeded the correct amount

Entitlement to cenvat credit for broker services and depository services - Whether cenvat credit on broker services and depository services is allowable to the appellant manufacturing unit - HELD THAT: - The Tribunal agreed with the Commissioner (Appeals) that the appellant is entitled to cenvat credit on stock broker service and depository service. The lower authority's disallowance of small amounts relating to certain services was examined and the entitlement in respect of broker and depository services was affirmed, resulting in allowance of those credits to the appellant. [Paras 4, 7]

Cenvat credit on broker services and depository services allowed to the appellant

Jurisdiction of receiving unit to adjudicate cenvat credit - Whether the adjudicating authority of the receiving unit can disallow credit distributed by the ISD or whether only the adjudicating authority of the ISD has jurisdiction - HELD THAT: - The appellant's contention that only the ISD's adjudicating authority could object to the input credit was rejected. The Commissioner (Appeals) and the Tribunal upheld the view that the adjudicating authority of the receiving unit may correctly examine and disallow cenvat credit not eligible to the receiving unit even though the credit was distributed by the ISD. [Paras 4]

Receiving unit's adjudicating authority may disallow ineligible cenvat credit distributed by the ISD

Penalty under Rule 15(1) read with Section 11AC(1)(a) - Validity of penalty imposed for irregular taking of cenvat credit - HELD THAT: - In view of the Tribunal's conclusion limiting the disallowance to Rs.1,89,769/- and finding that the larger disallowance was incorrect, the penalty that had been imposed by the lower authority was reconsidered. The Tribunal found that the penalty imposed in consequence of the earlier disallowance could not be sustained and accordingly set aside the penalty. [Paras 4, 7]

Penalty imposed under Rule 15(1) read with Section 11AC(1)(a) set aside

Final Conclusion: The appeal is allowed: the disallowance of cenvat credit is reduced and restricted to Rs.1,89,769/-, cenvat credit on broker and depository services is allowed, the receiving unit's adjudicatory action in disallowing ineligible credit is upheld, and the penalty imposed is set aside.

Total turnover - Section 3-D of the TNGST Act - charging provision for hotels, restaurants and sweet stalls - definition of total turnover in Section 2(q) - first point of sale / second point of sale - taxability of alcoholic liquor under Part I/J/K of the First Schedule and the Sixth Schedule - non-obstante clause in a special charging provision - remand for redetermination of tax liability and best-judgment assessment

Total turnover - Section 3-D of the TNGST Act - charging provision for hotels, restaurants and sweet stalls - definition of total turnover in Section 2(q) - taxability of alcoholic liquor under Part I/J/K of the First Schedule - first point of sale - Whether turnover from alcoholic liquor sold from the hotel bar is includable in the taxable turnover of 'food and drinks' for the purpose of Section 3-D of the TNGST Act. - HELD THAT: - Section 3-D is a special charging provision applicable to dealers whose total turnover on the sale of food and drinks exceeds the threshold. The expression "total turnover" is defined in Section 2(q) as the aggregate turnover in all goods of a dealer at all places of business in the State, whether or not any portion is liable to tax (para 25). However, Entry Sl. No.20 in Part-C of the First Schedule taxes "food and drinks (other than those falling elsewhere under the Schedules)", so goods specifically provided for in other Schedules cannot be treated as part of the 'food and drinks' entry (para 32). Alcoholic liquors, during the relevant periods, were chargeable under Parts I/J (and later J/K) of the First Schedule and, for locally manufactured liquor, under the Sixth Schedule at specified rates and points of levy (paras 29-31, 33-34). Consequently, turnover of alcoholic liquor cannot be subsumed into the 'food and drinks' turnover taxed under Section 3-D / Sl. No.20 Part C; such liquor turnover is governed by the First and Sixth Schedules and taxed at the points and rates specified therein (paras 32-34, 37). [Paras 25, 32, 33, 37]

Turnover from alcoholic liquor sold in the hotel's bar is not to be included in the 'food and drinks' turnover under Section 3-D/Sl. No.20 Part C, but is taxable as provided in the First and Sixth Schedules.

Taxability of alcoholic liquor under the Sixth Schedule - second point of sale - remand for redetermination of tax liability - best-judgment assessment - What is the appropriate remedial course where turnover of alcoholic liquor sold in the hotel appears not to have been assessed under the Sixth Schedule? - HELD THAT: - The material before the Court shows that the petitioner did not include liquor turnover in returns and there is prima facie indication of evasion with respect to locally manufactured alcoholic liquor which would be taxable at the second point of sale under the Sixth Schedule (paras 35-36). The appellate authorities did not examine or determine the tax liability under the Sixth Schedule. The High Court accepted that liquor turnover is not includable under Section 3 D as 'food and drinks' but directed that tax liability on locally procured/manufactured liquor should be re-determined by the original assessing authority under the Sixth Schedule. The petitioner is required to produce records to substantiate local purchases; failing that, assessment is to be completed on best-judgment principles as envisaged by the Act (paras 36-39). [Paras 35, 36, 38, 39]

Impugned order set aside and matter remitted to the Assessing Authority for re-determination of tax liability on alcoholic liquor manufactured/procured within the State under the Sixth Schedule within six months; assessment to proceed on best-judgment principles if records are not produced.

Final Conclusion: The writ petitions are disposed by setting aside the Tribunal's order to the extent it treated alcoholic liquor turnover as part of 'food and drinks' under Section 3 D; the Court held such liquor turnover is taxable under the First/Sixth Schedules as applicable and remitted the matter to the Assessing Authority for fresh determination of tax liability on locally procured/manufactured liquor (with best judgment assessment if records are not produced).

Exemption for sales returns - admission of appeal without reference to limitation - pre-deposit requirement - addition to turnover - characterisation of receipts as turnover - set aside of addition

Exemption for sales returns - admission of appeal without reference to limitation - pre-deposit requirement - Permissibility of filing and admitting an appeal with documents to substantiate claim of exemption for sales returns despite absence of earlier acknowledgement. - HELD THAT: - The Court found that the petitioner asserted production of hard copies and a pendrive containing sales return particulars but no acknowledgement or the documents were found on record when inspected. In light of the absence of record evidence and the petitioner's request, the Court exercised its discretion to permit filing of an appeal before the statutory authority within four weeks and ordered that such appeal be admitted without reference to limitation, subject to compliance with all other statutory conditions including pre-deposit. The Court therefore did not finally decide the exemption claim on merits but allowed fresh statutory remedy and directed admission despite limitation. [Paras 2, 3, 4, 5]

Petitioner permitted to file appeal within four weeks; appeal to be admitted without reference to limitation but subject to other statutory conditions including pre-deposit.

Addition to turnover - characterisation of receipts as turnover - set aside of addition - Validity of addition to turnover on account of miscellaneous income, resale of software licence, packing & forwarding, rewards and freight charges. - HELD THAT: - On examination of the petitioner's written explanation in the balance sheet and annual report, the Court accepted that the amounts cited were pan-India figures and, in several instances, did not represent sales (miscellaneous income being adjustments and surplus deposits; resale of software licences effected by head office to dealers outside the State; packing, forwarding, rewards and freight forming part of net billing rate absorbed by the company). The assessing authority had rejected the explanation in a single line without addressing the substance. The Court found the petitioner's explanation tenable in law and accordingly set aside the addition made on these counts. [Paras 6, 7, 8, 9]

Addition on account of miscellaneous income, resale of software licence, packing & forwarding, rewards and freight charges set aside.

Final Conclusion: Writ petitions disposed: petitioner permitted to file and have admitted an appeal within four weeks without reference to limitation (subject to statutory conditions including pre-deposit); additions made by assessing authority on account of miscellaneous income and related items are set aside; no costs.