TaxTMI Updates e-Newsletter
Dec 14,2021

Payment in installments of tax demand - adjustment of appellate orders and input tax credit against last installment - interest on reducing balance - calculation of interest excluding penalty and earlier interest - restoration and cancellation of GST registration on compliance or default - continuance of current GST dues during instalment period

Payment in installments of tax demand - Whether the total demand admitted in the December 3, 2021 letter could be discharged by payment in 24 monthly installments and on what schedule. - HELD THAT: - The Court recorded the parties' agreement that the total amount as per the December 3, 2021 letter would be paid in 24 equal or nearly equal monthly installments beginning December 15, 2021 and payable by the 15th day of the 23 succeeding months. The appellants accepted the figures subject to adjustment arising from appeals for the period 2017-18. The Court directed that in default of any installment the entire outstanding balance would become immediately payable and the CGST authorities would be entitled to proceed for realization in accordance with law. [Paras 4, 5, 7]

The admitted total demand shall be paid in 24 monthly installments on the specified schedule, with default accelerating the balance and permitting recovery by the authorities.

Adjustment of appellate orders and input tax credit against last installment - Treatment of adjustments on account of appellate orders and claimed input tax credit (ITC). - HELD THAT: - The Court accepted the appellants' submission that figures were subject to adjustment upon conclusion of appeals for 2017-18 and that any ITC entitlement, which the CGST authorities accepted might arise upon payment of the tax due, would be adjusted. The parties agreed that such adjustments (from appellate orders and ITC, if any) shall be made only against the last installment, subject to the assessee establishing entitlement in accordance with law. [Paras 2, 3, 6]

Adjustments arising from appellate outcomes and any ITC will be applied only against the last installment, subject to lawful entitlement being established.

Interest on reducing balance - calculation of interest excluding penalty and earlier interest - Computation and timing of interest payable on the admitted demand. - HELD THAT: - The Court directed that interest shall be payable by the assessee on a reducing balance basis on the tax-due component of the admitted amount (i.e., after excluding any penalty or interest already included in the admitted figure). The interest on the reducing balance will be calculated after completion of payment of the last installment and the entire interest component will be payable within 60 days of the last scheduled date for payment of installments. It was made explicit that interest ordered is to apply only to the tax due component and not to penalty or interest already added into the figure. [Paras 8, 9]

Interest will be calculated on a reducing balance basis on the tax-due component (excluding penalty and earlier interest), computed after the last installment and payable within 60 days thereafter.

Restoration and cancellation of GST registration on compliance or default - continuance of current GST dues during instalment period - Effect of compliance with the installment regime on GST registration and portal access, and obligations to pay current GST liabilities. - HELD THAT: - The Court directed that upon payment of the first installment the order cancelling the assessee's GST registration dated February 10, 2021 shall stand annulled and the respondent shall restore the assessee's portal access and facilities. The authorities retain the power to cancel registration again within 15 days of any default and to deny portal access within seven days of such default unless the default is rectified beforehand. Separately, the assessee is required to continue paying current GST dues without seeking concessions by reason of the installment arrangement. [Paras 10, 11]

First-installment payment will annul the prior cancellation and restore registration access; on any subsequent default authorities may cancel registration and deny access; the assessee must continue to pay current GST dues during the installment period.

Final Conclusion: WP(C) No. 344 of 2021 is disposed by directing payment of the admitted demand in 24 monthly installments beginning December 15, 2021, permitting adjustments from appellate outcomes and ITC only against the last installment (subject to lawful entitlement), requiring interest on a reducing-balance basis on the tax-due component payable after completion of installments, restoring GST registration and portal access upon first payment while permitting re-cancellation on default, and mandating continuance of current GST payments; no order as to costs.

Quashing of ex parte assessment order - minimum statutory period of 30 days under Section 74A - direction to issue fresh notice and pass appropriate order in accordance with law - application of earlier judgment in Krishi Educational and Health Seva Sansthan

Quashing of ex parte assessment order - minimum statutory period of 30 days under Section 74A - Validity of the notice and ex parte assessment in view of non-compliance with the statutory 30-day period under Section 74A. - HELD THAT: - The Court found that the minimum statutory period of 30 days mandated by Section 74A was not afforded to the petitioner before passing the impugned ex parte order. The notice required the petitioner to file a reply within a time that fell before the expiry of the 30-day period, thereby denying the petitioner the statutory opportunity to respond. For this reason alone the notice and the resulting ex parte assessment were quashed. The Court therefore set aside the impugned notice and assessment as recorded in the order.

Notice and ex parte assessment quashed for failure to afford the mandatory 30-day period.

Direction to issue fresh notice and pass appropriate order in accordance with law - application of earlier judgment in Krishi Educational and Health Seva Sansthan - Procedure to be followed on remand and the scope of fresh proceedings. - HELD THAT: - Having quashed the notice and assessment, the Court directed the assessing officer to issue a fresh notice and to proceed in accordance with statutory provisions, affording the petitioner the required opportunity and complying with the procedural mandates. The petitioner sought that the matter be decided in light of the Court's earlier decision in Krishi Educational and Health Seva Sansthan; the respondents did not object. Consequently the assessing officer is to reconsider and decide the case afresh in accordance with law and the relevant precedent, with all proceedings to be positively complied with.

Matter remitted to the assessing officer to issue fresh notice and pass an appropriate order in accordance with law and relevant precedent.

Final Conclusion: Petition allowed; impugned notice and ex parte assessment quashed for non-compliance with the mandatory 30-day period, and the matter is remitted with a direction to the assessing officer to issue fresh notice and decide the case in accordance with law (including the cited precedent), with the petitioner to cooperate.

Exemption for services by entities registered under section 12AA of the Income tax Act - special entry in exemption notification prevailing over general entry - rental of rooms and precincts of religious places - threshold exclusion proviso - scope of 'person' and applicability of commercial sale based precedents (Cochin Port Trust distinction)

Exemption for services by entities registered under section 12AA of the Income tax Act - scope of 'person' and applicability of commercial sale based precedents (Cochin Port Trust distinction) - Liability to GST for renting of temporary residential rooms and renting of space for stalls by a religious charitable institution - HELD THAT: - The Authority held that the question of exemption must be examined in the light of Notification No.12/2017 which contains both a general entry for services by entities registered under section 12AA and a special entry dealing specifically with renting of precincts, rooms and shops for religious purposes. The applicant's reliance on the Sai Publication Fund decision was considered inapplicable because the factual and statutory scope differs; the Authority noted the Supreme Court's distinction in Cochin Port Trust where a wider statutory definition rendered the earlier dictum inapplicable. Consequently, the special entry in Notification No.12/2017 governs the renting activity of a person registered under section 12AA and the provisos to that special entry determine taxability. [Paras 7, 8]

Renting of temporary residential rooms and renting of space for stalls by the applicant are subject to GST only as governed by the special entry in Notification No.12/2017.

Rental of rooms and precincts of religious places - threshold exclusion proviso - special entry in exemption notification prevailing over general entry - Whether renting of temporary residential rooms where charges per room are less than Rs.1,000 per day is taxable - HELD THAT: - The Authority applied the proviso to the special entry (Entry 13) in Notification No.12/2017 which expressly excludes from exemption any renting of rooms where charges are Rs.1,000 or more per day. Therefore, where the charge per room is below Rs.1,000 per day the renting falls within the exemption under the special entry and is not liable to tax. The Authority accordingly accepted that the applicant's categories with charges below the threshold are not taxable under that provision. [Paras 7, 8]

Not liable to tax for renting of temporary residential rooms where charges are less than Rs.1,000 per day.

Rental of rooms and precincts of religious places - threshold exclusion proviso - exemption for services by entities registered under section 12AA of the Income tax Act - Whether renting of space for stalls/shops is taxable - HELD THAT: - The Authority referred to the specific proviso in Entry 13 of Notification No.12/2017 which excludes from exemption renting of shops or other spaces for business or commerce where charges are Rs.10,000 or more per month. Applying this special entry, the Authority ruled that renting of stalls/shops by the applicant is taxable only if the rent charged is Rs.10,000 or more per month; otherwise such renting remains exempt under the special entry applicable to persons registered under section 12AA. [Paras 7, 8]

Liable to tax for renting of space for stalls/shops only if rent is Rs.10,000 or more per month; otherwise not liable.

Final Conclusion: The Advance Ruling holds that the applicant's temporary renting of rooms and of space for stalls is governed by the special entry in Notification No.12/2017 applicable to entities registered under section 12AA: room rentals below Rs.1,000 per day and shop/stall rentals below Rs.10,000 per month are exempt, while charges at or above those specified thresholds are taxable.

Deduction u./s 10A - Set-off of losses of STP/SEZ units against other income - Whether losses of 10A units cannot be set off against income of non-10A units? 0 principles of red-judicata - Whether High Court has erred in holding that deemed export, reimbursement of expenses, expenses incurred in foreign currency, delayed export proceeds and VAT/GST will form part of export turnover for the purpose of computation of deduction U/s. 10A? - HELD THAT:- This Special Leave Petition challenges the judgment and final order [2020 (12) TMI 1300 - KARNATAKA HIGH COURT] which was disposed of in terms of the judgment passed [2020 (12) TMI 687 - KARNATAKA HIGH COURT] which in turn was disposed of in terms of the judgment passed [2020 (12) TMI 678 - KARNATAKA HIGH COURT] issues covered by decisions of this Court in M/s. WIPRO Ltd. [2015 (10) TMI 826 - KARNATAKA HIGH COURT] and Commissioner of Income Tax & Another v. TATA Elxsi Ltd.,[2016 (3) TMI 460 - KARNATAKA HIGH COURT]are pending adjudication at the instance of the revenue before the Supreme Court. In view of the aforesaid submission needless to state that the Assessing Officer shall decide the issues in accordance with the decision which may be rendered by the Supreme Court.

As held no interference is called for with the order passed by the tribunal. The Supreme Court in Radhasoami Satsang [1991 (11) TMI 2 - SUPREME COURT] has held that even though principles of res judicata do not apply to income tax proceedings, but where a fundamental aspect permeating through the different Assessment Years has been found as the fact one way or the other and the parties have allowed the position to be sustained by not challenge the order, it would not be at all appropriate to allow the position to be changed in subsequent year. For this reason also, in the facts of the case, a different view cannot be taken. In the instant case, the tribunal has answered all the substantial questions of law in favour of the assessee

In view of the observations made by the High Court, we dispose of the instant petition by reiterating the observations and clarifying that as and when the decisions with respect to the Questions No.(i), (ii) and (viii) are rendered by this Court, the matters shall be governed in terms of directions issued by the High Court.

Expenses of corporate office are to be allocated on ad hoc percentage of 20% and not based on turnover of various undertakings/business for the purpose of deductions U/s. 10A, 80-IB and 80-IC - Whether High Court has erred in holding that deemed export, reimbursement of expenses, expenses incurred in foreign currency, delayed export proceeds and VAT/GST will form part of export turnover for the purpose of computation of deduction U/s. 10A? - HELD THAT:- Matter was disposed of in terms of the judgment passed by the High Court in [2020 (12) TMI 678 - KARNATAKA HIGH COURT] stating all the remaining issues covered by decisions of this Court in WIPRO Ltd. [2015 (10) TMI 826 - KARNATAKA HIGH COURT] and Commissioner of Income Tax & Another v. TATA Elxsi Ltd.,[2016 (3) TMI 460 - KARNATAKA HIGH COURT] are pending adjudication at the instance of the revenue before the Supreme Court. In view of the aforesaid submission needless to state that the Assessing Officer shall decide the issues in accordance with the decision which may be rendered by the Supreme Court.

Reopening assessment under Section 147/148 of the Income-tax Act, 1961 - change of opinion - failure to fully and truly disclose material facts - role of audit objections and requirement of independent evaluation by Assessing Officer

Reopening assessment under Section 147/148 of the Income-tax Act, 1961 - change of opinion - failure to fully and truly disclose material facts - role of audit objections and requirement of independent evaluation by Assessing Officer - Validity of notice dated 31.03.2021 under Section 148 and consequential order dated 21.09.2021 reopening assessment for A.Y. 2013-14 - HELD THAT: - The Court examined the reasons recorded for reopening and found them to amount to a mere change of opinion based on the assessee's accounts and returns. It held that where a notice under Section 143 issued after four years is followed by a notice under Section 148, the Revenue must demonstrate failure by the assessee to fully and truly disclose material facts at the time of the original assessment. The reasons recorded did not show any such failure; they relied on audit queries and a different view being taken on amounts credited to corpus funds and other receipts. The Court reiterated that audit objections cannot substitute for the Assessing Officer's own evaluation of the legal effect of facts; the officer must independently determine whether the law, as newly perceived, justifies a reasonable belief that income has escaped assessment. Where the primary facts were fully and truly disclosed and the reopening is based on the same material with only a change of opinion, reassessment is impermissible. [Paras 3, 4, 5]

Notice dated 31.03.2021 under Section 148 and order dated 21.09.2021 reopening assessment for A.Y. 2013-14 quashed as based on change of opinion and absence of failure to disclose material facts.

Final Conclusion: The petition is allowed: the notice under Section 148 dated 31.03.2021 and the impugned order dated 21.09.2021 reopening assessment for A.Y. 2013-14 are quashed and set aside.

Power under Section 263 of the Income Tax Act - incriminating material / seized documents - assessment under Section 143(3) read with Section 153A - remand for fresh consideration - low tax effect - disposal of appeals

Low tax effect - disposal of appeals - Disposition of appeals for assessment years 2008-09, 2010-11, 2011-12 and 2013-14 on the ground of low tax effect. - HELD THAT: - The Court recorded that the appeals relating to assessment years 2008-09, 2010-11, 2011-12 and 2013-14 fall below the threshold tax effect as prescribed by the CBDT circular. Accordingly, those appeals were dismissed on the ground of low tax effect and the substantial questions of law raised in respect of those years were left open. The Court treated the low tax-effect threshold as determinative for administrative disposal and did not decide the merits of the legal questions framed for those years.

Appeals for AY 2008-09, 2010-11, 2011-12 and 2013-14 dismissed on ground of low tax effect; substantial questions left open.

Power under Section 263 of the Income Tax Act - incriminating material / seized documents - assessment under Section 143(3) read with Section 153A - remand for fresh consideration - Validity of Commissioner's exercise of power under Section 263 for assessment year 2009-10 in relation to seized documents (SHLA-4, SPG-2), alleged sales to M/s. Shalimar Hatcheries Limited and claim of depreciation on lorries. - HELD THAT: - The CIT invoked Section 263 relying on seized documents marked SHLA-4 and SPG-2 and on entries in the assessee's trial balance and balance sheet to conclude that the assessing officer's order was erroneous and prejudicial to revenue for AY 2009-10. The Tribunal had quashed the Section 263 order, accepting the assessee's explanation that the seized papers did not contain incriminating material and that reconciliations and explanations had been furnished. The High Court found the Tribunal's conclusion - that the assessee's explanation was acceptable - to be recorded without sufficient reasoning: where a Tribunal treats a contested factual explanation as acceptable it must either accept and give reasons or remit for re examination. Given that the Tribunal did not undertake either course and the questions turn on factual assessment of seized material and the need for further enquiry into depreciation claims, the Court set aside the Tribunal's order and remanded the matter to the Commissioner of Income Tax for fresh consideration after affording the assessee an opportunity of hearing. The Court granted the assessee liberty to raise all issues, including the contention that the seized documents are not incriminating and the merits of the additions sought.

Order of Tribunal quashing CIT's Section 263 order for AY 2009-10 set aside; matter remitted to the CIT for fresh consideration and hearing on the issues of seized documents, sales transactions and depreciation on lorries.

Final Conclusion: The appeals for AY 2008-09, 2010-11, 2011-12 and 2013-14 are dismissed on the ground of low tax effect with the substantial questions left open. The tribunal's order in relation to AY 2009-10 is set aside and the matter is remitted to the Commissioner of Income Tax for fresh consideration after hearing the assessee on whether the seized documents are incriminating and on the correctness of the depreciation and sales-related findings.

Interpretation and application of Section 43B of the Income tax Act concerning deduction on payment basis - Requirement of independent formation of belief by the Assessing Officer for reopening assessment under Section 148/147 - Impermissible influence of Revenue Audit on initiation of reassessment proceedings - Proviso to Section 147 - concealment or failure to disclose material facts

Requirement of independent formation of belief by the Assessing Officer for reopening assessment under Section 148/147 - Impermissible influence of Revenue Audit on initiation of reassessment proceedings - Interpretation and application of Section 43B of the Income tax Act concerning deduction on payment basis - Proviso to Section 147 - concealment or failure to disclose material facts - Legality of the notices and orders reopening assessment where the Assessing Officer relied on or acted under pressure from Revenue Audit and where earlier assessment under Section 143(3) had been completed. - HELD THAT: - The Court held that an Assessing Officer must form his own reasoned belief that income has escaped assessment and must evaluate the legal consequences of an audit note independently; the opinion of the audit party cannot substitute for the AO's independent conclusion (relying on Indian and Eastern Newspaper Society). The form for recording reasons and the approval were signed by the AO who, on the material before him, had reiterated the view of his predecessor that the expenditure in question was correctly allowable on the basis of actual payment under Section 43B; the AO himself observed that the audit objection was not tenable and requested withdrawal of the objection. The communications before the Court demonstrate that the reopening was initiated because of pressure from the Revenue Audit rather than a fresh independent belief formed by the AO. Where a regular assessment under Section 143(3) has been made and the AO has already recorded reasons contrary to the audit note (and, in effect, accepted the deduction on payment basis), reopening in these circumstances is without jurisdiction. The Court further observed that the petition did not allege non disclosure by the assessee and that the proviso to Section 147 (regarding failure to disclose material facts) was not shown to be applicable; consequently the condition precedent for reopening under the proviso was not satisfied. [Paras 3, 4, 5, 6, 7]

Impugned notices and consequential orders reopening assessment were issued without jurisdiction and are liable to be quashed.

Final Conclusion: Writ petition allowed in terms of prayer (a); the notices (Exhibits I 1, I 2, J 1, J 2) dated 31 March 2019 and the impugned orders dated 12 and 18 October 2019 are quashed; no order as to costs.

Re-opening of assessment under Section 148/147 on ground of escaped assessment due to failure to disclose material facts - assessment completed under Section 143(3) and four-year limitation - full and true disclosure of material facts - change of opinion - characterisation of receipts as income from house property versus business income where services are inseparably connected with letting out

Re-opening of assessment under Section 148/147 on ground of escaped assessment due to failure to disclose material facts - full and true disclosure of material facts - change of opinion - characterisation of receipts as income from house property versus business income where services are inseparably connected with letting out - Validity of the notice under Section 148 and the consequent order reopening assessment for A.Y.-2012-2013 - HELD THAT: - The Court examined the reasons recorded for re-opening and the material placed before the Assessing Officer. The onus on respondents to justify reopening after four years where assessment under Section 143(3) was completed was noted. The reasons for reopening relied on the view that certain service charges were inseparably connected with letting out and therefore should be treated as income from house property. The Court found that the petitioner had disclosed the receipts, provided agreements and party-wise break-ups, and had fully and truly disclosed material facts during original assessment proceedings; those facts were considered and scrutinised by the Assessing Officer when passing the assessment order. The alleged field inquiry report did not demonstrate nondisclosure and the Assessing Officer's view in the reopening reasons amounted to a mere change of opinion on the characterisation of receipts. Reopening an assessment on the same material merely to take a different view was impermissible. For these reasons the notice under Section 148 and the order pursuant thereto were quashed. [Paras 2, 3, 7, 9, 10]

Notice under Section 148 and the order reopening assessment for A.Y.-2012-2013 quashed as premised on change of opinion rather than any failure to fully and truly disclose material facts.

Final Conclusion: Writ petition allowed; impugned notice dated 27th March 2019 and the order dated 21st September 2019 quashed on the ground that the reopening was based on a change of opinion and not on any failure by the petitioner to fully and truly disclose material facts.

Deduction under Section 80P(2)(a)(i) - co-operative society versus co-operative bank - State Land Development Bank status - application of precedent (Mavilayi Service Co-operative Bank Ltd.) - remand for fresh adjudication by the Tribunal

Deduction under Section 80P(2)(a)(i) - co-operative society versus co-operative bank - application of precedent (Mavilayi Service Co-operative Bank Ltd.) - Whether the assessee is entitled to deduction under Section 80P(2) of the Income Tax Act for the Assessment Years 2010-11 and 2011-12, having regard to its status and the law laid down in Mavilayi Service Co-operative Bank Ltd. - HELD THAT: - The Court recognised that the principal question is the assessee's entitlement to deduction under Section 80P(2) and that the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd. casts a determinative legal principle relevant to that entitlement. The Court noted that the assessee's earlier judgment in ITA No.103/2011 (AY 2007-08) had denied the claim and is under appeal to the Supreme Court, but held that the applicability of Mavilayi to the present facts requires examination of additional materials now placed on record (including material from RBI/NABARD and statutory classification as a State Land Development Bank or otherwise). Rather than decide the entitlement on the papers before it, the Court concluded that the matter should be re-examined by the Tribunal: the Tribunal must consider the newly available materials, determine the correct classification of the assessee (whether a co-operative society entitled to Section 80P(2) relief or otherwise), and apply the Mavilayi ratio if appropriate. The Court therefore set aside the impugned portion of the Tribunal's order and remitted the question for fresh adjudication allowing both parties to place additional materials before the Tribunal. [Paras 6]

Portion of the orders denying deduction under Section 80P(2) set aside and remitted to the Tribunal for fresh adjudication after considering additional material and in light of Mavilayi.

State Land Development Bank status - alternate relief granted by the Tribunal - remand for fresh adjudication - Whether the alternate relief granted by the Tribunal treating the assessee as a State Development/Land Development Bank (as distinct from denial under Section 80P(2)) was permissible and must be sustained. - HELD THAT: - The Court observed that the alternate relief granted by the Tribunal is dependent on the primary question of entitlement under Section 80P(2). Given that the primary question has been remitted for fresh consideration, the Court considered it appropriate not to pre-empt the Tribunal on the correctness of the alternate relief. The Court accordingly set aside that portion of the Tribunal's order as well and remitted the matter to the Tribunal so that a comprehensive decision can be given after examination of the classification of the assessee and the materials now available to the parties. [Paras 7]

Portion of the orders granting alternate relief (treating the assessee as a State Development Bank) set aside and remitted to the Tribunal for fresh decision in accordance with law.

Final Conclusion: The High Court set aside the portions of the Tribunal's orders by which the assessee and the Revenue were aggrieved and remitted the matters relating to entitlement to deduction under Section 80P(2) and the alternate relief to the Income Tax Appellate Tribunal for fresh adjudication after permitting both parties to place additional material and applying the Mavilayi precedent where appropriate.

Revisional jurisdiction under section 263 - erroneous and prejudicial to the interests of revenue - tribunal's power to adjudicate merits versus remit for fresh consideration - right to be heard / opportunity to furnish reply in revisional proceedings - open remand for fresh consideration in accordance with law

Revisional jurisdiction under section 263 - erroneous and prejudicial to the interests of revenue - tribunal's power to adjudicate merits versus remit for fresh consideration - Validity of the Tribunal's setting aside of the Commissioner's order under Section 263 by adjudicating the merits instead of remitting the matter for fresh consideration - HELD THAT: - The Court examined the scope of the Commissioner's revisional power under Section 263, noting that satisfaction recorded by the Commissioner (that an assessment is erroneous and prejudicial to revenue) is the subject matter of appeal. While the Tribunal may examine material placed before it, where the assessee had not participated in the Commissioner's proceedings, the Tribunal erred in effectively re-appreciating and upsetting the Commissioner's satisfaction on merits rather than remitting the matter for fresh consideration. Two plausible views may exist on the facts; where the Tribunal, instead of sending the matter back for the Commissioner to decide after receiving the assessee's reply, proceeded to adjudicate the primary satisfaction, it exceeded permissible appellate function. The Court emphasised that the Commissioner is vested with revisional power and should be allowed to consider material afresh after affording opportunity to the assessee. [Paras 3, 4, 5]

Tribunal's course of adjudicating the Commissioner's primary satisfaction on merits was impermissible and cannot stand.

Right to be heard / opportunity to furnish reply in revisional proceedings - open remand for fresh consideration in accordance with law - Whether the orders of the Commissioner (Annexure-B) and the Tribunal (Annexure-C) should be set aside and the matter remitted for fresh consideration - HELD THAT: - Having found that the Tribunal impermissibly upset the Commissioner's satisfaction on the merits, the Court set aside both the Commissioner's order and the Tribunal's order and remitted the matter to the Commissioner for fresh enquiry and decision. The assessee is granted liberty to file a reply and produce records (with a copy of the judgment) within six weeks; the Commissioner is directed to consider the notice and pass a fresh order within six weeks thereafter. The remand is open and the Court expressly refrained from expressing any view on the merits of the underlying issue pertaining to alleged improper utilization of corpus funds under Section 11(1)(d). [Paras 5, 6]

Orders in Annexures-B and C are set aside; matter remitted to the Commissioner for fresh consideration after giving the assessee an opportunity to be heard, within the specified timelines.

Final Conclusion: The appeal is allowed in favour of the Revenue: the High Court set aside the Commissioner's order under Section 263 and the Tribunal's order, and remitted the matter to the Commissioner for fresh consideration after the assessee is permitted to file a reply within six weeks and the Commissioner is directed to decide within six weeks thereafter; no opinion is expressed on the merits.

Principal agent relationship in sale of lottery tickets - Applicability of Section 194G relating to deduction of tax on commission/remuneration/prize in lottery transactions - Applicability of Section 194H and the definition of "commission or brokerage" excluding payments for services in course of buying or selling goods - Disallowance under Section 40(a)(ia) for failure to deduct tax at source - Conduit/post office/stockist character of a wholesale dealer in state lottery distribution

Principal agent relationship in sale of lottery tickets - Applicability of Section 194H and the definition of "commission or brokerage" excluding payments for services in course of buying or selling goods - Conduit/post office/stockist character of a wholesale dealer in state lottery distribution - Whether payments received by the assessee from the State and made over to retail sellers attract Section 194H as commission or brokerage - HELD THAT: - The Tribunal and the first appellate authority found as a fact that the buyers of lottery tickets from the assessee did not render services to the assessee in the course of buying or selling goods and that the assessee acted as a conduit or post office/stockist between the State organising agency and retail sellers. The explanation to Section 194H excludes payments received for services in the course of buying or selling goods from the definition of "commission or brokerage." On the materials and findings recorded, none of the ingredients required for attracting Section 194H were established. The Court accepted the fact findings of the lower authorities that Section 194H is not attracted in the circumstances of these cases and that the transactions are factually to be treated as purchases and sales by the assessee rather than agency services giving rise to commission liable to TDS under Section 194H. [Paras 9, 10]

Section 194H is not attracted to the payments made over to retail sellers; the assessee is a conduit/stockist and not an agent paying commission liable to TDS under Section 194H.

Applicability of Section 194G relating to deduction of tax on commission/remuneration/prize in lottery transactions - Conduit/post office/stockist character of a wholesale dealer in state lottery distribution - Whether Section 194G applies to the amounts collected by the assessee from the State and passed on to retail sellers, attracting TDS obligation and consequent addition under Section 40(a)(ia) - HELD THAT: - Section 194G requires that a person responsible for paying income by way of commission, remuneration or prize to persons who have been stocking, distributing, purchasing or selling lottery tickets must deduct tax. The factual finding by the authorities was that the State was the person responsible for payment of the incentive/prize and that the State had already effected TDS before paying the amount to the assessee. The assessee merely collected the amount and made it over to the retailers. On these findings the CIT(A) and the Tribunal held, and this Court concurs, that Section 194G is not attracted because the assessee was not under an obligation to pay the commission/prize; the payment responsibility lay with the Government. Consequently, the foundational requirement for invoking Section 194G (and thereby attracting disallowance under Section 40(a)(ia) for non deduction) was not established by the Revenue. [Paras 9, 10]

Section 194G is not attracted; the assessee had no TDS obligation under Section 194G and the disallowance under Section 40(a)(ia) could not be sustained on that ground.

Disallowance under Section 40(a)(ia) for failure to deduct tax at source - Applicability of Section 194G relating to deduction of tax on commission/remuneration/prize in lottery transactions - Whether the Assessing Officer was justified in making an addition under Section 40(a)(ia) for non deduction of tax at source in respect of amounts paid/transferred to retailers - HELD THAT: - Section 40(a)(ia) disallows expenditure where tax is not deducted as required by the Act. The Assessing Officer's addition relied on the premise that either Section 194H or Section 194G required the assessee to deduct tax, which findings the CIT(A) and the Tribunal negatived on the facts. Because neither Section 194H nor Section 194G was shown to be attracted on the recorded facts, the basis for invoking disallowance under Section 40(a)(ia) did not survive. The Court upheld the concurrent factual and legal conclusions of the lower authorities that the statutory conditions for disallowance were not established. [Paras 9, 10]

The addition under Section 40(a)(ia) for non deduction of tax at source is not sustainable on the facts; the disallowance is deleted.

Final Conclusion: The concurrent findings of the CIT(A) and the Tribunal that the assessee acted as a conduit/stockist and that neither Section 194H nor Section 194G applied are upheld. The Revenue's appeals are dismissed and the additions/disallowances in respect of the amounts passed on to retail sellers are not sustained; the orders of the lower authorities are affirmed in these fact specific cases.

Addition under section 68 for unexplained cash credits - requirement of sum being credited during the previous year - proof of identity, genuineness and creditworthiness of creditors - carry forward of unsecured loans and applicability of section 68

Addition under section 68 for unexplained cash credits - requirement of sum being credited during the previous year - proof of identity, genuineness and creditworthiness of creditors - carry forward of unsecured loans and applicability of section 68 - Deletion of addition made under section 68 in relation to sums not credited in the previous year and the contention that carried forward unsecured loans are addable under section 68 - HELD THAT: - The Tribunal upheld the Commissioner (Appeals)'s finding that the amounts in question were not credited to the assessee's books in the previous year under appeal but had been received in earlier years. Section 68 applies only to any sum found credited in the books of the assessee during the previous year; therefore amounts not so credited cannot be made the subject of an addition under section 68 for that year. The Assessing Officer failed to produce evidence that the disputed sums were credited in the relevant previous year. The Commissioner (Appeals) reached his conclusion after obtaining a remand report; no material was shown to the Tribunal to displace that conclusion. The Assessing Officer's broader contention that carry forward unsecured loans are nevertheless liable to be added under section 68 was rejected on a plain reading of the provision. The Tribunal also noted that the Assessing Officer did not challenge before the Commissioner (Appeals) or raise grounds seeking a direction to make additions in the years in which the amounts were received, and the Tribunal is not empowered to direct or suggest grounds not raised by the appellant. [Paras 10, 11]

The deletion of the addition in respect of sums not credited in the previous year is sustained and the Assessing Officer's contention that carry forward unsecured loans are addable under section 68 is rejected.

Final Conclusion: The appeal filed by the Income tax Officer is dismissed; the Commissioner (Appeals)'s deletion of the addition insofar as the sums were not credited in the relevant previous year is confirmed and no interference is called for.

Mistake apparent on record - rectification under section 154 - deduction under section 57(iv) of Income from other sources - entitlement to deduction arising from receipt of interest on compensation - intimation under section 143(1) as covered by clause (b) of section 154(1) - requirement that requisite details be discernible from record (Anchor Pressings principle)

Mistake apparent on record - rectification under section 154 - deduction under section 57(iv) of Income from other sources - entitlement to deduction arising from receipt of interest on compensation - Omission to claim deduction under section 57(iv) in the return was a mistake apparent on record rectifiable under section 154 and the application under section 154 ought to have been allowed. - HELD THAT: - The Tribunal found that entitlement to a 50% deduction under section 57(iv) flows directly from the receipt of interest on compensation and is not contingent on any additional documentary material; the interest was disclosed in the return for A.Y. 2012-13 and thus the facts necessary to allow the deduction were apparent from record. The fact that the return was processed under section 143(1) and not subjected to scrutiny assessment did not preclude rectification, because an intimation under section 143(1) falls within clause (b) of section 154(1) and mistakes apparent from record in such intimations are amenable to correction under section 154. Reliance on the principle in Anchor Pressings was held to be apposite: where complete details required to allow a statutory relief are already contained in the record, the assessing officer cannot refuse rectification on hyper technical grounds. Accordingly, the assessing officer's rejection of the section 154 application and the CIT(A)'s affirmation of that rejection were held to be unsustainable. [Paras 4, 9]

The orders of the lower authorities are set aside; the Assessing Officer is directed to allow the assessee's claim for deduction under section 57(iv) (50% of the disclosed interest on compensation). Grounds 2 to 6 are allowed; Grounds 1 and 7 are dismissed as not pressed.

Final Conclusion: The appeal is allowed: the Tribunal set aside the orders rejecting the section 154 application and directed the Assessing Officer to grant the statutory deduction under section 57(iv) for A.Y. 2012-13, finding the omission to claim the deduction to be a mistake apparent on record rectifiable under section 154.

Arm's Length Price - comparability of entities for transfer pricing - functional comparability - transactional net margin method (TNMM) - exclusion of comparables

Arm's Length Price - functional comparability - exclusion of comparables - transactional net margin method (TNMM) - Exclusion of M/s Info Edge (India) Ltd. from the list of comparable entities for determination of Arm's Length Price. - HELD THAT: - CIT(A) examined the nature of activities of the assessee and M/s Info Edge (India) Ltd. and found a complete mismatch: the assessee provided administrative/facilitation assistance, product support, training, marketing/new business development support and negotiation assistance to AEs and customers, whereas Info Edge was primarily an internet-based services business accessible to general users on a payment basis. Although the TPO considered Info Edge functionally similar and relied on TNMM which permits broad comparability, CIT(A) concluded that the fundamental difference in the nature of services precluded comparability and directed its exclusion. Revenue did not point out any legal or factual fallacy in CIT(A)'s findings before the Tribunal; accordingly the Tribunal found no reason to interfere with the exclusion. [Paras 9]

Order of CIT(A) excluding M/s Info Edge (India) Ltd. as a comparable is upheld and Revenue's ground is dismissed.

Arm's Length Price - comparability of entities for transfer pricing - functional comparability - exclusion of comparables - Exclusion of CDSL Ventures Ltd. from the list of comparable entities for determination of Arm's Length Price. - HELD THAT: - CIT(A) reviewed the business profile and financials of CDSL Ventures Ltd. and recorded that it derived more than 80% of its income from online data charges and belonged to the ITES segment, performing activities (such as customer profiling and record-keeping for KYC acknowledgements) materially different from the assessee's market/support services. On that basis CIT(A) excluded CDSL Ventures from comparables. The Revenue did not demonstrate any error in those findings to the Tribunal; accordingly the Tribunal found no basis to disturb the exclusion. [Paras 16]

Order of CIT(A) excluding CDSL Ventures Ltd. as a comparable is upheld and Revenue's ground is dismissed.

Final Conclusion: Both challenged exclusions of M/s Info Edge (India) Ltd. and CDSL Ventures Ltd. from the comparables list were upheld by the Tribunal on the basis of material functional differences; having decided these grounds in the assessee's favour, the Tribunal dismissed the Revenue's appeal for Assessment Year 2011-12.

Salary income versus professional income - director's dual capacity - burden of proof for characterisation of receipts - treatment in employer's books not determinative - nexus between expenditure and income - deductibility of interest on borrowed funds - commercial expediency test - section 14A read with Rule 8D

Salary income versus professional income - director's dual capacity - burden of proof for characterisation of receipts - treatment in employer's books not determinative - deductibility of interest on borrowed funds - nexus between expenditure and income - commercial expediency test - Receipts from M/s. Smile Electronics Ltd. are taxable as salary income and the interest paid on loans mortgaging the assessee's property is not allowable as deduction against those receipts for assessment years 2013-2014 to 2015-2016. - HELD THAT: - The Tribunal accepted that a director may have a dual capacity and that remuneration paid to a director apart from sitting fees is taxable as salary if the relationship of employment exists; the onus was on the assessee to prove that the payments were for professional/technical services and not salary. Reference was made to Ram Prashad for the proposition of dual capacity. The assessee failed to produce the articles of association, terms of any contract, or particulars of the professional services rendered. The fact that the company treated the payments as professional fees and deducted tax under the provision applicable to professional fees was held not to be determinative of the assessee's tax characterisation. On the claim to deduct interest paid on loans advanced to the company, the Tribunal held there was no proved nexus between the interest expenditure and earning of the contested receipts; only expenditure incurred wholly and exclusively for earning a particular income is deductible. The Tribunal distinguished S.A.Builders and CIT v. Rajeev Lochan Kaneria , observing that in those cases funds were lent in circumstances amounting to commercial expediency or where the lending formed part of the assessee's business; no such commercial expediency or business purpose was established here. Consequently, the interest paid on borrowed funds mortgaged by the assessee could not be set off against the amounts held to be salary. [Paras 9]

Common issue dismissed; receipts treated as salary and interest expenditure disallowed for lack of nexus.

Section 14A read with Rule 8D - nexus between expenditure and exempt income - Disallowance under section 14A read with Rule 8D was upheld subject to reduction by the CIT(A) to the amount of exempt dividend income for assessment year 2015-2016. - HELD THAT: - The Assessing Officer computed a disallowance under section 14A read with Rule 8D. The CIT(A) reduced the disallowance to match the exempt dividend income received in the year. The assessee did not demonstrate that the CIT(A)'s computation was erroneous or establish entitlement to a further reduction. On the material before the Tribunal, the CIT(A)'s partial relief was not shown to be incorrect and was confirmed. [Paras 10]

CIT(A)'s order reducing the section 14A disallowance to the exempt dividend amount is confirmed.

Final Conclusion: Appeals dismissed: receipts from the company held to be salary for AYs 2013-14 to 2015-16 and related interest disallowed for want of nexus; the CIT(A)'s reduction of the section 14A disallowance for AY 2015-16 is confirmed.

Deduction under section 54F for reinvestment in residential house - Capital gains account scheme deposit deemed cost of new asset - Construction versus purchase for triggering two year/three year periods under section 54F - Proviso to section 54F(4) - taxation on non utilisation after three years

Deduction under section 54F for reinvestment in residential house - Capital gains account scheme deposit deemed cost of new asset - Proviso to section 54F(4) - taxation on non utilisation after three years - Whether the assessee, having deposited the net consideration in a capital gains account scheme within the time contemplated by section 54F(4), is entitled to claim deduction proportionate to the amount so deposited for Assessment Year 2015-16. - HELD THAT: - The Tribunal accepted the factual position that the assessee had deposited the sale consideration in the capital gains account scheme within the period prescribed under section 54F(4). Once the deposit is made as required by section 54F(4), that deposited amount is to be deemed the cost of the new asset for the purposes of section 54F and deduction to the extent of such deposit must be allowed. The proviso to section 54F(4) only contemplates that if such deposited amount is not utilised for purchase or construction within the prescribed period, the unutilised portion will be taxed in the previous year in which three years from the date of transfer expires. That contingency is to be examined and acted upon in the relevant subsequent assessment year. The Tribunal therefore held that denial of deduction for AY 2015-16 on the ground of non deposit was incorrect and directed that deduction be allowed proportionate to the amount invested in the capital gains account scheme, leaving verification of subsequent utilisation to the assessing officer for the year in which the three year period expires. [Paras 11, 14]

Deduction under section 54F is to be allowed for AY 2015-16 proportionate to the amount deposited in the capital gains account scheme; utilisation/non utilisation to be examined in the year in which the three year period expires.

Construction versus purchase for triggering two year/three year periods under section 54F - Proviso to section 54F(4) - taxation on non utilisation after three years - Whether the acquisition of the flat by agreement dated 09/05/2016 amounts to construction of a new residential house (entitling the assessee to the three year construction period) or to purchase (entitling only to the two year purchase period). - HELD THAT: - The Tribunal found that the question whether the transaction constituted construction or purchase was not necessary to finally determine for AY 2015-16 because the legal consequences of any non utilisation of the deposited amounts fall to be examined under the proviso to section 54F(4) in the assessment year when the three year period from the date of transfer expires. The Tribunal therefore declined to decide the construction versus purchase question in this appeal and left that issue open for adjudication in Assessment Year 2018-19, observing that the assessing officer may take appropriate measures available in law in that later year. [Paras 14]

Issue left open for decision in Assessment Year 2018-19; the Tribunal did not decide whether the 09/05/2016 transaction amounts to construction or purchase and directed that the question be considered in the later assessment year.

Final Conclusion: Appeal allowed: deduction under section 54F for Assessment Year 2015-16 to be allowed proportionate to the amount deposited in the capital gains account scheme; the question whether the flat acquisition on 09/05/2016 is 'construction' or 'purchase' is left open for decision in Assessment Year 2018-19 and the assessing officer is entitled to take such action as available in law in that year.

Deductibility of employees' contribution to PF and ESI where payment is made on or before the due date for furnishing return under section 139(1) - Application of the provisons of section 43B to employees' contribution - Retrospective application of amendments made by Finance Act, 2021 to section 36(1)(va) and section 43B

Deductibility of employees' contribution to PF and ESI where payment is made on or before the due date for furnishing return under section 139(1) - Application of the provisons of section 43B to employees' contribution - Whether employees' contribution to PF/ESI paid by the employer after the due date under the relevant enactments but before the due date for furnishing the return under section 139(1) is allowable as deduction and not hit by Explanation 2 to section 36(1)(va). - HELD THAT: - The Tribunal accepted the assessee's contention that the sum representing employees' contribution, although remitted after the dates stipulated under the respective labour enactments, was paid on or before the due date for furnishing the return under section 139(1) for the relevant year and therefore is not liable to be disallowed under section 36(1)(va) read with section 2(24)(x). The Tribunal relied on the reasoning in Essae Teraoka (P.) Ltd. and CIT v. Sabari Enterprises to hold that the Income-tax Act gives an extension to make such payment up to the due date for filing return under section 139(1), and that the word "contribution" in the statutory scheme includes the employees' share remitted by the employer. Consequently, the disallowance made by the CPC and confirmed by the CIT(A) was not sustainable for the assessment year under consideration. The Tribunal further held that the amendments and explanations inserted by Finance Act, 2021 apply with effect from 1/4/2021 and cannot be applied retrospectively to defeat the assessee's claim for the earlier assessment year; therefore those amendments did not affect the present appeal. [Paras 8, 9, 14]

Disallowance under section 36(1)(va) in respect of employees' contribution to PF/ESI was deleted; appeal allowed.

Retrospective application of amendments made by Finance Act, 2021 to section 36(1)(va) and section 43B - Whether the explanatory amendments introduced by Finance Act, 2021 to section 36(1)(va) and section 43B could be applied retrospectively to sustain the disallowance for the assessment year in issue. - HELD THAT: - The Tribunal held that the explanations inserted by the Finance Act, 2021 are applicable only w.e.f. 1/4/2021 and therefore cannot be invoked to justify a disallowance pertaining to the assessment year before the Tribunal. The Tribunal rejected the Revenue's contention that the 2021 explanations operate retrospectively to cover pending matters, and proceeded on the basis that the amended provisions do not alter the assessee's entitlement where payment was made within the due date of filing the return for the year in question. [Paras 14]

Amendments by Finance Act, 2021 held not retrospective; cannot be applied to sustain disallowance for the assessment year under adjudication.

Interest consequences under sections 234A, 234B and 234C as consequential relief - Whether interest levied under sections 234A, 234B and 234C should stand once the primary disallowance is deleted. - HELD THAT: - The Tribunal recorded that the issue of interest under sections 234A, 234B and 234C is consequential upon the primary addition/disallowance. Having set aside the disallowance, the consequential interest levies could not be sustained. [Paras 15]

Interest levied under sections 234A, 234B and 234C to be deleted as consequential relief.

Final Conclusion: The appeal is allowed: the disallowance of the employees' PF/ESI contribution was deleted because payment was made on or before the due date for filing the return under section 139(1); the Finance Act, 2021 amendments are not retrospective and do not apply to the assessment year in issue; consequential interest levies were to be deleted.

Penalty under section 271B - audit obligation under section 44AB - exemption for educational institutions under section 10(23C)(iiiad) - Chapter III immunity vis-a -vis applicability of Chapter IV provisions

Penalty under section 271B - audit obligation under section 44AB - exemption for educational institutions under section 10(23C)(iiiad) - Chapter III immunity vis-a -vis applicability of Chapter IV provisions - Validity of levy of penalty under section 271B for failure to get accounts audited under section 44AB where the assessee is an educational institution claiming exemption under section 10(23C)(iiiad). - HELD THAT: - The Tribunal examined whether section 44AB could be applied to an institution whose receipts arise from educational activity and which claimed exemption under the provisions relating to incomes not forming part of total income. The assessee, a society running a college, prima facie showed that its gross receipts consisted of student fees and that it acted under a bona fide belief that income was exempt under section 10(23C)(iiiad) and therefore not liable to audit under section 44AB. Relying on precedent where an assessee covered by Chapter III exemptions was held not to be subject to Chapter IV audit provisions, the Tribunal held that section 44AB operates only when computation of profits and gains of business or profession forms part of total income. Where income is governed by Chapter III and is exempt, Chapter IV provisions including section 44AB are not attracted and penalty under section 271B cannot be levied. Applying that reasoning to the facts, the Tribunal found the penalty not leviable and deleted the penalty imposed by the assessing officer and confirmed by the CIT(A). [Paras 9, 10]

Penalty under section 271B deleted; appeal allowed.

Final Conclusion: The Tribunal held that where an educational institution's receipts are exempt under the Chapter III provision relied upon by the assessee, audit requirement under section 44AB (Chapter IV) does not apply and penalty under section 271B for failure to get accounts audited is not leviable; the penalty for Assessment Year 2011-12 is deleted and the appeal is allowed.

Prohibited goods - burden to prove smuggling for non-notified goods - abuse of process of court - applicability of Foreign Trade (Development and Regulation) Act to species listed under Wildlife (Protection) Act - non-implementation of CITES recommendations in India

Prohibited goods - applicability of Foreign Trade (Development and Regulation) Act to species listed under Wildlife (Protection) Act - non-implementation of CITES recommendations in India - Seized exotic animals and birds are not 'prohibited goods' under the Customs Act, 1962 or brought within the Foreign Trade (Development and Regulation) Act, 1992 for the purposes of seizure and prosecution. - HELD THAT: - The Court examined the Import Policy Schedule entries relied upon by the Department and the qualifying remarks that import of wild animals is covered only insofar as species are included in the Schedules of the Wildlife (Protection) Act, 1972. The seized species do not appear in the Wildlife Act Schedules; accordingly the Foreign Trade Act entries and Policy Condition No.6 do not render those seized animals 'prohibited goods' under the definition in Section 2(33) of the Customs Act. The Court also noted that recommendations under CITES have not been implemented in India and therefore cannot be invoked to expand the category of prohibited goods. On that legal foundation the seizure of the animals lacked statutory sanction for the offence alleged under the Customs Act. [Paras 13, 18, 19]

The seized animals and birds are not 'prohibited goods' within the meaning of the Customs Act and the impugned seizure has no statutory sanction.

Burden to prove smuggling for non-notified goods - abuse of process of court - Proceedings based on the seizure must be quashed under Section 482 Cr.PC because the Department has no statutory basis to treat the seized non-notified exotic species as smuggled or prohibited goods. - HELD THAT: - Relying on established precedent and Board instructions referenced in the judgments cited, the Court applied the legal principle that where goods are not notified under the Customs Act the onus lies on the Department to prove unauthorized importation or contravention of prohibition or restriction. Having found that the seized species are non-notified and the Department could not rely upon a statutory prohibition, continuation of criminal proceedings would amount to an abuse of process. The Court invoked its inherent jurisdiction under Section 482 Cr.PC to prevent such abuse and to secure the ends of justice. [Paras 18, 20, 21]

Proceedings in Customs case No. 05/CL/IMP/CUS/CPF/NML/2020-2021 are an abuse of process and are quashed under Section 482 Cr.PC.

Final Conclusion: The High Court held that the seized exotic animals and birds are not 'prohibited goods' under the Customs Act or foreign trade policy as they are not scheduled under the Wildlife (Protection) Act, that the Department bore the onus to prove unauthorized importation of non notified goods, and that continuation of the Customs prosecution would be an abuse of process; accordingly the Customs case was quashed.

Penalty under Section 114A of the Customs Act, 1962 - recovery of duties under Section 28(4) in cases of wilful mis-statement or suppression of facts - re-assessment under Section 17(4) without prejudice to other action - confiscation of prohibited goods - misdeclaration and suppression to evade customs duty

Recovery of duties under Section 28(4) in cases of wilful mis-statement or suppression of facts - re-assessment under Section 17(4) without prejudice to other action - misdeclaration and suppression to evade customs duty - Validity of demand of differential duty under Section 28(4) where goods were not cleared and Bill of Entry was filed, and relationship with reassessment under Section 17. - HELD THAT: - The Tribunal held that Section 17(4) empowers reassessment where self-assessment is incorrect but expressly preserves other actions under the Act; consequently, the consequence of suppression or misdeclaration can validly be proceeded under Section 28(4). The submission that demand under Section 28 can be invoked only after clearance for home consumption and that reassessment must be under Section 17(5) is rejected as misconceived. Reliance on Union of India v. Jain Shudh Vanaspati Ltd. was examined and distinguished: the Supreme Court in that case allowed proceedings under Sections 28 and 124 to continue and did not preclude issuance of show-cause notices under Section 28 prior to any revision under Section 47. The fact that the appellant later elected not to redeem the goods does not negate the confirmed findings of misdeclaration, suppression and confiscation; accordingly the duty demand under Section 28(4) is valid in the circumstances of wilful suppression and misdeclaration upheld by the adjudicating authority. [Paras 9, 11, 12]

Demand of differential duty under Section 28(4) is valid despite non-clearance; reassessment under Section 17(4) is without prejudice to action under Section 28(4).

Penalty under Section 114A of the Customs Act, 1962 - confiscation of prohibited goods - misdeclaration and suppression to evade customs duty - Sustainability of penalty imposed under Section 114A consequent to confirmed misdeclaration, under-declaration and confiscation. - HELD THAT: - The Tribunal found that the adjudicating authority and the first appellate authority had upheld findings of deliberate undeclaration, misdeclaration and import of prohibited goods leading to confiscation or the option to redeem upon payment. Those findings establish wilful suppression and intention to evade duty, for which penalty under Section 114A is imposable. The appellant's abandonment of redemption at the appellate stage does not erase the confirmed infractions. No additional or persuasive argument was advanced to interfere with the penalty; hence there are no grounds to set aside the penalty. [Paras 7, 8, 13, 14]

Penalty under Section 114A is upheld.

Final Conclusion: The Tribunal upheld the adjudicating order; demand of duty under Section 28(4) and the penalty under Section 114A were sustained and the appeal is dismissed.

Seizure under section 110 of Customs Act, 1962 - confiscation under section 111(d) of Customs Act, 1962 - onus under section 123 of Customs Act, 1962 - show cause notice and adjudication procedure - competence of Central Excise officers to exercise Customs powers - remand for fresh adjudication

Seizure under section 110 of Customs Act, 1962 - competence of Central Excise officers to exercise Customs powers - show cause notice and adjudication procedure - Validity of seizure and competence of the officers who issued the show cause notice and conducted adjudication. - HELD THAT: - The Tribunal examined whether the Superintendent of Central Excise could lawfully exercise powers under section 110 to seize goods and whether the Deputy Commissioner of Central Excise was competent to issue the show cause notice leading to adjudication by the Commissioner of Customs. The Tribunal observed that seizure under section 110 is meant to preserve custodianship pending confiscation under section 111 and that procedural essentials for adjudication require notice by a competent authority, opportunity to make representations and a reasoned order. Having considered the statutory hierarchy and the fact that the adjudication was ultimately by the Commissioner of Customs, the Tribunal held that there was no jurisdictional impediment or taint in the proceedings arising from the involvement of Central Excise officers, and that the procedural requirements for initiation of adjudication were not vitiated by the officers who effected seizure or issued notice. [Paras 5, 6]

Proceedings were not invalidated for want of competence; seizure and issuance of the show cause notice did not suffer from a jurisdictional defect.

Confiscation under section 111(d) of Customs Act, 1962 - onus under section 123 of Customs Act, 1962 - remand for fresh adjudication - Whether the seized goods matched the bills of entry and whether the person from whom goods were seized discharged the onus of proving legal possession; and whether the impugned adjudication should be upheld. - HELD THAT: - The Tribunal noted a material discrepancy between the denierage marked on the packages and the denierage declared in the two bills of entry; laboratory test results did not confirm conformity with the package markings. On that basis the Tribunal found it was reasonable to presume that the goods did not match the clearance documents and that the onus under section 123 had not been discharged by the person from whom the goods were seized. At the same time, the Tribunal observed that explanations and supplier clarifications submitted by the appellant had not been placed before the adjudicating authority and that certain hypotheses (such as transfer demonstrated by CENVAT availment) were not tested against records. Because it was unclear whether the appellant had been afforded every opportunity to plead and to discharge the statutory onus, the Tribunal concluded that the matter should be reconsidered afresh. [Paras 7, 8, 9]

Finding that the onus was not discharged but that procedural opportunity may have been inadequate; impugned order set aside and matter remanded for fresh adjudication with opportunity to the appellant to refute allegations and discharge the onus under section 123.

Final Conclusion: The Tribunal upheld the competence of the officers who effected seizure and issued the notice and found no jurisdictional invalidity; however, because the adjudication did not satisfactorily establish that the appellant had been afforded full opportunity to discharge the onus under section 123, the impugned order was set aside and the matter remanded to the original authority for fresh decision after giving the appellant an opportunity to be heard.

Classification of imported goods - competing tariff headings (heading 8483 v. heading 8714) - Interpretation of tariff headings and section/chapter notes - Application of exclusion notes between Section XVI and Section XVII - Specificity principle in tariff item description - Use / end use as determinant of classification - Burden of proof on Revenue in classification disputes

Classification of imported goods - competing tariff headings (heading 8483 v. heading 8714) - Specificity principle in tariff item description - Application of exclusion notes between Section XVI and Section XVII - Burden of proof on Revenue in classification disputes - Whether the imported gears are classifiable under heading 8483 (gears and gearing) as claimed by the appellant or under heading 8714 (parts and accessories of motorcycles) as held by the adjudicating authority - HELD THAT: - The Tribunal held that the classification must follow the tariff item which, as nearly as possible, describes the goods as presented and that exclusion by reference to another section is permissible only if the goods conform to the description of that other heading. The notes to sections and chapters are indispensable in determining whether an exclusion applies, but they cannot substitute for a finding that the rival heading is a better and specific description of the goods. The adjudicating authority failed to establish that the impugned goods are best described as 'parts and accessories' of motorcycles; merely showing intended use in manufacture of motorcycles did not discharge the Revenue's burden. The explanatory notes and the structure of heading 8483 demonstrate that 'gears and gearing' are specifically and appropriately described under 8483 90 00 and are not displaced by the general exclusion in note 1(l) to Section XVI unless the goods are shown to fall squarely within the scope of heading 8714. On the material before it the Tribunal found the requirement for applying the exclusion in Section XVI unmet and therefore set aside classification under 8714 and upheld heading 8483 as declared in the bills of entry. [Paras 11, 13, 15, 16, 18]

Classification under heading 8714 set aside; goods held classifiable under heading 8483 as declared by the appellant and the appeal allowed to that extent

Remand for fresh consideration - Disposition of earlier remand for two bills where the first appellate authority returned the matter for fresh consideration of classification - HELD THAT: - The Tribunal limited its adjudication to those bills in respect of which differential duty had been upheld and expressly declined to appropriate the statutory function of the original authority in the matters remanded earlier. The Court noted that it would not decide classification for those bills because the original authority has the statutory responsibility to record reasoned findings and the appellant did not contend that such findings had been rendered against it. [Paras 1]

Partial remand in the impugned order left undisturbed; the Tribunal did not adjudicate the remanded bills and did not interfere with the remand

Final Conclusion: The appeal is allowed in respect of the goods adjudicated: classification under heading 8714 is set aside and the goods are held classifiable under heading 8483 as declared in the bills of entry; the earlier partial remand in respect of other bills remains intact and is not interfered with.

Proper officer - jurisdiction to issue show cause notice under Section 28(4) of the Customs Act - power of re-assessment as administrative review - invalidity of proceedings initiated by officers of the Directorate of Revenue Intelligence

Proper officer - jurisdiction to issue show cause notice under Section 28(4) of the Customs Act - power of re-assessment as administrative review - Additional Director General, DRI did not have jurisdiction to issue the show cause notice under Section 28(4) of the Customs Act. - HELD THAT: - The Tribunal applied the decision of the Supreme Court in Canon India, which held that the power to recover duties not levied or paid after clearance is essentially a power to review the original assessment and is conferred on "the proper officer"-meaning the officer who made the original assessment or his successor or an officer specifically assigned the assessment function. Allowing an officer of another department who did not make the original assessment to re-open assessment would be contrary to the statutory scheme and result in anarchical operation. The Supreme Court further held that an officer of the DRI can exercise the functions of a Customs "proper officer" only if validly appointed or entrusted with such functions under Section 6 of the Act; the impugned entrustment by a Board notification was held to be without lawful authority. The Tribunal, following Canon India and subsequent Supreme Court and High Court authorities which applied the same principle, concluded that the Additional Director General, DRI was not the proper officer and therefore lacked jurisdiction to issue the show cause notice.

The show cause notice issued by the Additional Director General, DRI is without jurisdiction and invalid.

Invalidity of proceedings initiated by officers of the Directorate of Revenue Intelligence - effect of lack of jurisdiction on consequential orders - The order dated 30.08.2019 confirming the demand, passed pursuant to the show cause notice issued by the Additional Director General, DRI, cannot be sustained. - HELD THAT: - Since the show cause notice was issued by an officer who lacked jurisdiction, all proceedings and consequential orders flowing from that notice are vitiated. The Tribunal noted consistent application of Canon India by the Supreme Court in Agarwal Metals and Alloys, relevant High Court decisions, and several Tribunal precedents which have set aside proceedings initiated by DRI officers on the same ground. The Principal Commissioner's order confirming the demand was founded on a jurisdictionally invalid notice and therefore is liable to be set aside.

The order dated 30.08.2019 is set aside and the appeal is allowed.

Final Conclusion: Following Canon India and subsequent authorities, the Tribunal held that the Additional Director General, DRI was not the "proper officer" to issue the show cause notice under Section 28(4); the show cause notice and the consequential order dated 30.08.2019 are invalid and are set aside, and the appeal is allowed.

Jurisdiction of the Additional Director General, DRI to issue show cause notices under Section 28 of the Customs Act - meaning of "the proper officer" under Section 28(4) as the officer who made the original assessment - validity of proceedings initiated by an officer lacking statutory authority

Jurisdiction of the Additional Director General, DRI to issue show cause notices under Section 28 of the Customs Act - meaning of "the proper officer" under Section 28(4) as the officer who made the original assessment - validity of proceedings initiated by an officer lacking statutory authority - Whether the show cause notice dated 29.03.2018 issued by the Additional Director General, DRI was within jurisdiction and whether proceedings arising therefrom are valid. - HELD THAT: - The Tribunal applied the Supreme Court's decision in Canon India, subsequently followed in Agarwal Metals and Alloys, holding that the power under Section 28(4) to recover duties which escaped assessment is a power of review conferred on "the proper officer" and must be exercised by the officer who made the original assessment or his successor entrusted with assessment functions. An officer of DRI (Additional Director General), not appointed as a Customs officer and not shown to have been vested with assessment functions under Section 6, is not "the proper officer" for Section 28(4). The Supreme Court held that show cause notices issued by the Additional Director General, DRI in such circumstances are without authority of law and proceedings initiated thereby are invalid. The Tribunal noted that High Courts and other Benches have consistently set aside proceedings where SCNs were issued by DRI officers and rejected the Department's request to defer hearing pending a review petition in Canon India. Applying these authorities, the Tribunal concluded that the SCN dated 29.03.2018 issued by the Additional Director General, DRI was without jurisdiction and all consequent proceedings are without authority of law. [Paras 5, 14, 16]

The show cause notice issued by the Additional Director General, DRI was without jurisdiction; proceedings and demands arising therefrom are set aside and the appeal is allowed.

Final Conclusion: The order of the Commissioner of Customs (Appeals) dated 03.12.2020 is set aside; the appeal is allowed on the ground that the show cause notice issued by the Additional Director General, DRI was without jurisdiction and the consequent proceedings are invalid.

Disqualification of directors under Section 164(2)(b) of the Companies Act, 2013 - No statutory right to prior individual notice before disqualification - Prospective operation of subordinate legislation - Rule 1(2) of the Companies (Acceptance of Deposits) Rules, 2014 - Exemption for deposits accepted from directors/promoters under predecessor rules - Construction and operation of Section 74 read with Section 73 and renewal under Section 74(2) - Effect of corporate conversion on pre-existing liabilities - Section 18(3) - Effect of criminal discharge on subsequent administrative or civil disqualification

Disqualification of directors under Section 164(2)(b) of the Companies Act, 2013 - No statutory right to prior individual notice before disqualification - Validity of disqualification in the absence of a prior individual notice to the directors - HELD THAT: - The Court held that Section 164 does not contemplate a prior individual notice to each director before disqualification and there is no statutory right of hearing of the Directors prior to disqualification. Notice given to the Company and its full-time director was sufficient and the petitioners could not claim ignorance. Accordingly, absence of a prior individual notice did not vitiate the disqualification. [Paras 12, 13]

Absence of prior individual notice did not invalidate the disqualification under Section 164(2)(b).

Prospective operation of subordinate legislation - Rule 1(2) of the Companies (Acceptance of Deposits) Rules, 2014 - Whether the 2014 Rules operate retrospectively so as to benefit the petitioners - HELD THAT: - The Court noted Rule 1(2) of the 2014 Rules expressly prescribes commencement from 1 April 2014 and held there was no scope to treat the Rules as retrospective. The decision in Allied Motors was distinguished as arising in a different factual and statutory context and could not override the specific prospective commencement provision in Rule 1(2). [Paras 14, 15]

The 2014 Rules do not have retrospective operation and cannot be applied retrospectively to benefit the petitioners.

Exemption for deposits accepted from directors/promoters under predecessor rules - Construction and operation of Section 74 read with Section 73 and renewal under Section 74(2) - Whether, on the material on record, the deposits fell within exemptions under the applicable rules (1975 Rules) or could be treated as renewed under Section 74(2), thereby excluding liability attracting disqualification - HELD THAT: - The Court observed that at the relevant time the 1975 Rules applied and contained provisions (notably Rules 2(b)(ix) and (xi) of the 1975 Rules) materially similar to the exemptions relied on under the 2014 Rules. Section 74 must be read with Section 73 and Section 74(2) permits the Tribunal to allow further time for repayment on application after considering the company's financial condition and renewals, and where renewal in compliance with Section 74(2) is made no offence under Section 164(2)(b) arises. Applying these principles, the Court concluded that the amounts in question attracted the exemptions under the 1975 Rules and, consequently, no liability within the contemplation of Sections 164 and 167 could legitimately be imposed on the company or the petitioners. [Paras 17, 21, 22, 23, 24]

The deposits were covered by applicable exemptions under the 1975 Rules and consideration of renewals under Section 74(2) precluded imposition of disqualification under Sections 164 and 167.

Effect of corporate conversion on pre-existing liabilities - Section 18(3) - Whether conversion of the Company into a private limited company absolved it or its directors of liabilities incurred prior to conversion - HELD THAT: - Relying on Section 18(3), the Court held that registration on conversion does not affect debts, liabilities or obligations incurred before conversion; such liabilities continue to subsist as if conversion had not taken place. Therefore conversion into a private limited company did not absolve the company or its directors from liabilities under Section 74 where such defaults were proved and not exempted. [Paras 9, 18]

Conversion did not absolve the company or the petitioners from pre-existing liabilities.

Effect of criminal discharge on subsequent administrative or civil disqualification - Whether the criminal discharge of the company and its full-time director precluded the ROC's action or the Court's adjudication in the present matter - HELD THAT: - The Court observed the criminal discharge occurred after the ROC's complaint and was rendered in the context of criminal standard of proof ('beyond reasonable doubt'). It held that such a discharge is not conclusive or binding in the present administrative adjudication and cannot operate as res judicata to bar consideration of liability for disqualification under Sections 164/167. [Paras 7, 11, 19, 20]

Criminal discharge is not binding on the administrative/adjudicatory process and does not preclude the Court from deciding the disqualification issue.

Final Conclusion: The writ petition was allowed: the decision deactivating the petitioners' DINs was set aside as illegal, and the respondents were directed to reactivate the petitioners' DSC and DINs within one month; there was no order as to costs.

Power of appellate court under Order XLI Rule 27 CPC to admit additional evidence - admission of additional evidence at appellate stage only to remove lacuna in the record - appellate court should not permit fresh evidence to cure defects in the petition - self serving documents and auditor's certification not a ground for admission - ability of the appellate forum to pronounce judgment on materials on record

Power of appellate court under Order XLI Rule 27 CPC to admit additional evidence - admission of additional evidence at appellate stage only to remove lacuna in the record - ability of the appellate forum to pronounce judgment on materials on record - self serving documents and auditor's certification not a ground for admission - IA No.580/2021 seeking permission to file additional documents in TA No.18/2021 (Comp. App. (AT) No.325/2019) to be taken on record - HELD THAT: - The Tribunal applied the settled principle that an appellate forum should not ordinarily permit fresh evidence and may do so only under the limited discretion conferred by Order XLI Rule 27 CPC where the additional evidence is necessary to enable it to pronounce judgment by removing a lacuna in the existing record. The Tribunal observed the additional documents were relied upon to buttress the appellant's case and were, in substance, self serving (including working sheets certified by the appellant's auditors). The Tribunal further noted authorities cited in the order which establish that evidence or material that could and should have been produced earlier is not to be admitted on appeal merely to fill gaps in the petition or to enable a party to raise new points. Applying these principles, the Tribunal concluded that it can determine the lis in the main appeal on the materials already on record and that admission of the proposed additional documents is not necessary for pronouncing a satisfactory judgment. Consequently, the application to admit the documents was not entertained in furtherance of substantial justice. [Paras 16, 17]

IA No.580/2021 is dismissed and the additional documents are not taken on record; no costs.

Final Conclusion: The Appellate Tribunal declined to admit the additional documents sought by the appellant under IA No.580/2021, holding that the appeal can be decided on the record before it and that the limited discretion to admit fresh evidence on appeal does not warrant allowing the self serving material; IA No.580/2021 dismissed, no costs.

Operational debt - maintainability of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - pre-existing dispute - acknowledgment and extension of limitation under Section 18 of the Limitation Act, 1963 - initiation of Corporate Insolvency Resolution Process (CIRP)

Operational debt - maintainability of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - The claimed amount advanced to the corporate debtor is an operational debt and the petition under Section 9 is maintainable. - HELD THAT: - The Tribunal examined the nature of the transaction and the accounting entries in the books of the corporate debtor and the operational creditor. The ledger and audited balance sheet entries record the sum as advances recoverable in cash or kind and as advances/short-term loans and advances in accordance with Schedule III of the Companies Act, 2013. On that material, the Tribunal held that the amount was towards commission/brokerage and utilization of services and falls within the definition of operational debt under the Code. Consequently, the application filed under Section 9 after issuing the demand notice under Section 8 was held to be in order and maintainable. [Paras 9]

Petition under Section 9 is maintainable as the claim constitutes an operational debt.

Pre-existing dispute - There was no demonstrable pre-existing dispute between the operational creditor and the corporate debtor at the time of receipt of the demand notice. - HELD THAT: - The Tribunal applied the Mobilox Innovations principle and noted that the corporate debtor first raised objections in its reply to the demand notice without supporting documentation showing a dispute or pendency of proceedings that pre-dated the demand notice. The alleged counter-claim and reference to a separate petition by the individual director were not shown to involve the corporate debtor or to constitute a dispute existing prior to the demand notice. On that basis the Tribunal found absence of a pre-existing dispute that would bar the Section 9 petition. [Paras 9]

No pre-existing dispute barred the Section 9 application.

Acknowledgment and extension of limitation under Section 18 of the Limitation Act, 1963 - The claim was not barred by limitation because continuing transactions and acknowledgements extended the period under Section 18 of the Limitation Act, 1963. - HELD THAT: - Although the initial advance was in 2014, the Tribunal observed continuing debits/credits and exchanges between the parties up to 24 November 2017, including entries signed by the corporate debtor's director. Having regard to Section 18, such acknowledgements and continuing dealings were held to revive or extend limitation, rendering the petition filed in December 2019 within time. The Tribunal relied on the documentary ledger and audited accounts to sustain that conclusion. [Paras 9]

Limitation is extended by the acknowledged and continuing transactions; the petition is not time-barred.

Initiation of Corporate Insolvency Resolution Process (CIRP) - The matter is remanded to the Adjudicating Authority with a direction to initiate CIRP after affording the parties a 30-day period to settle. - HELD THAT: - Having set aside the Adjudicating Authority's order, the Tribunal directed that the Adjudicating Authority implement the Section 9 process and initiate CIRP against the corporate debtor, subject to giving the parties 30 days to settle the dispute. The Tribunal stayed no other substantive relief and directed forwarding of this judgment to the appropriate registry for implementation, thereby remitting factual and consequential steps to the Adjudicating Authority for action in accordance with this direction. [Paras 10]

Impugned order set aside; matter remitted to Adjudicating Authority to initiate CIRP after 30 days' opportunity to settle.

Final Conclusion: The Tribunal allowed the appeal, set aside the Adjudicating Authority's order dismissing the Section 9 petition, held the claim to be an operational debt not barred by limitation and not subject to a pre-existing dispute, and remitted the matter to the Adjudicating Authority to initiate CIRP after affording the parties 30 days to settle.

Powers of liquidator to cancel or modify sale process - stakeholders consultation non-binding but persuasive - private sale under Regulation 33 of the Liquidation Regulations - transparency and fairness in liquidation sale process - maximisation of value principle under the IBC

Powers of liquidator to cancel or modify sale process - stakeholders consultation non-binding but persuasive - private sale under Regulation 33 of the Liquidation Regulations - maximisation of value principle under the IBC - Validity of the liquidator's decision to cancel the second Swiss Challenge Process and move to a private sale based on stakeholders' recommendations and an unsolicited offer. - HELD THAT: - The Tribunal held that the liquidator is empowered by the process documents and the Liquidation Regulations to cancel or modify the Swiss Challenge Process, provided such powers are exercised without arbitrariness or favouritism. Section 35(2) of the IBC and Regulation 8 of the Liquidation Regulations make stakeholders' views consultative and not binding, but those views are valuable and desirable given stakeholders are ultimate beneficiaries and a long period had already elapsed in the liquidation. Regulation 33 permits private sale in specified circumstances (including sale that would realise price higher than reserve or where delay would deteriorate value). Applying these principles to the facts, the Tribunal found that the decision to consider WSRPL's consolidated offer and cancel the second Swiss Challenge Process was not shown to be vitiated by bias or favour; it was driven by stakeholder recommendation and the objective of value maximisation and timely completion of liquidation. The Tribunal emphasised that powers to cancel must be exercised transparently and fairly and that the liquidator must avoid conferring any undue advantage on a particular party. [Paras 36, 37, 39]

The cancellation of the second Swiss Challenge Process and the decision to pursue a private sale was held to be within the liquidator's powers and not arbitrary, subject to the requirement that the power be exercised transparently and without favouritism.

Transparency and fairness in liquidation sale process - private sale under Regulation 33 of the Liquidation Regulations - maximisation of value principle under the IBC - Validity of the Adjudicating Authority's direction to complete the private sale within three weeks and to limit participation to certain parties. - HELD THAT: - While recognising the need for timely realisation of value, the Tribunal concluded that directing an expedited three-week completion and effectively limiting prospective bidders to those already engaged risks undermining value maximisation and transparency. Given the complexity of the assets and the history of multiple failed auctions and processes, rushing the private sale with limited participation may not achieve best value. Therefore the Tribunal partially modified the Impugned Order: it upheld cancellation of the second Swiss Challenge Process but directed that the private sale be restarted with adequate preparation, open notice to prospective buyers, sufficient time for participation, and adherence to standards of fairness and transparency in accordance with IBC and the Liquidation Regulations. [Paras 40, 41]

Impugned directions to complete the private sale within three weeks and restrict participation were modified; the private sale must be recommenced with open notice, adequate time and procedural safeguards to ensure transparency and value maximisation.

Final Conclusion: The appeal is disposed of by upholding the liquidator's cancellation of the second Swiss Challenge Process as within permissible power but subjecting the ensuing private-sale process to mandatory standards of openness, fairness and adequate notice; the Adjudicating Authority's short three week completion direction and limitation of participants was set aside and the private sale must be re initiated in accordance with the IBC and Liquidation Regulations.

Credit card services - interchange fee - taxable service - gross amount charged - double taxation - value added tax - interest - transaction in money - wilful suppression - extended period of limitation - proof of payment by acquiring bank - remand for verification - payment of service tax - registration and return

Credit card services - interchange fee - taxable service - gross amount charged - Liability of the issuing bank to service tax on interchange fee - HELD THAT: - The Court found that an issuing bank performs activities integral to the settlement of card transactions (approval, risk-taking and use of funds) which fall within clause (iii) of the definition of card services and therefore constitute a taxable service. The interchange fee retained by the issuing bank is consideration received for that service and is includible in the value of the taxable service under the valuation provisions. The words 'gross amount charged' are to be read with reference to the particular service provided by the particular service provider; separate services provided by an issuing bank and an acquiring bank are distinct and the value for each provider is determined with reference to the service that provider renders. Consequently the issuing bank was, in law, liable to include the interchange fee in its return and pay service tax on it (finding summarised at para. 109 and supported by the analysis of the definition and valuation provisions in the judgment). [Paras 52, 54, 62, 63, 109]

The issuing bank was liable to pay service tax on the interchange fee and to include it in its return.

Interest - transaction in money - Whether the interchange fee is interest or a mere transaction in money (and therefore excluded from service) - HELD THAT: - The Court rejected the characterization of the interchange fee as interest. There is no creditor-debtor relationship between the issuing bank and other participants analogous to lending/borrowing; the interchange fee is contractual consideration for services (approval, facilitation and risk) and not compensation for use of money. Likewise, the contention that the credit card transaction is merely a 'transaction in money' and therefore excluded from the definition of service was held to be unacceptable because the issuing bank performs activities in relation to the use of money that amount to a service within the statutory meaning (discussion at paras 65-69 and 71-73; conclusion in para. 109). [Paras 65, 69, 109]

Interchange fee is not interest and the credit card transaction is not to be treated as a mere transaction in money for the purpose of exclusion; the interchange fee is taxable as consideration for service.

Double taxation - value added tax - gross amount charged - Effect of payment of service tax by the acquiring bank on the respondent's liability and the principle against double taxation - HELD THAT: - The Court recognised that service tax operates as a value added tax and that separate services in a chain may each be taxable. However, it held that taxing the same measure of consideration twice on the same service would amount to impermissible double taxation. If it is established that the acquiring bank has already discharged service tax on the portion of consideration constituting the interchange fee (as part of the MDR), the issuing bank should not be compelled to pay tax again on the same amount. The Court therefore accepted the legal liability of the issuing bank in principle but held that double taxation must be avoided and that proof of prior discharge by the acquiring bank is a relevant defence (analysis and conclusions at paras 86, 92 and 109). [Paras 86, 92, 109]

Double taxation on the same measure is impermissible; if the acquiring bank has discharged tax on the interchange fee, the issuing bank should not be taxed again on that same amount.

Payment of service tax - registration and return - gross amount charged - Obligation to assess, register and furnish return including interchange fee under valuation rules - HELD THAT: - The Court analysed the valuation and compliance code and determined that a person providing a taxable service is obliged to assess the tax, obtain registration and furnish returns including the consideration received for the particular service. The 'gross amount charged' for a service provider must be determined with respect to the service actually provided by that provider; accordingly the issuing bank, being a service provider in relation to settlement activities, was obliged to include the interchange fee in its self assessment and returns (discussion at paras 58-61 and the conclusions in para. 109 VII-VIII). [Paras 58, 60, 61, 109]

The issuing bank was liable under the statutory scheme to include the interchange fee in its returns and pay the service tax due thereon.

Wilful suppression - extended period of limitation - Whether extended period of limitation (on account of wilful suppression) was rightly invoked for the period covered by SCN dated 24.04.2013 - HELD THAT: - The Court held that the question whether there was 'wilful suppression' within the meaning of the limitation proviso is a factual matter requiring specific findings. The Tribunal had not considered this issue fully. Given the differing contentions and the need to examine available materials and evidence as to whether respondent knowingly suppressed facts, the Court remanded that factual issue to the Tribunal for fresh consideration and findings (paras 101-108 and remand directions in para. 111(a)). [Paras 101, 108, 111]

Remanded to the Tribunal to determine whether wilful suppression existed for the period covered by the SCN dated 24.04.2013; if not established, extended limitation cannot be invoked.

Proof of payment by acquiring bank - remand for verification - Opportunity to establish that the acquiring bank discharged tax on the interchange fee and mechanism for verification - HELD THAT: - The Court found that the respondent had asserted before lower authorities that the acquiring bank had discharged service tax on the MDR (including interchange) but had not produced conclusive evidence before the Tribunal. Because the existence of such proof would determine whether double taxation arises and affect liability for interest and penalty, the Court remanded the matter so the Tribunal may permit the respondent to produce material, call for records from acquiring banks, and, if necessary, have the Commissioner examine and find on that evidence (remand directions at para. 111(b)-(d); related discussion at paras 94-96 and 109 IX-X). [Paras 94, 96, 111]

Remanded to permit the respondent to produce evidence and for the Tribunal (and Commissioner, if required) to verify whether the acquiring bank discharged the tax on interchange fee; findings to determine effect on demand, interest and penalty.

Final Conclusion: The appeals are allowed in part. The Court held that the issuing bank performs a taxable service in relation to settlement of card transactions and that the interchange fee is exigible to service tax and ought to have been included in returns; it rejected the characterisation of the interchange fee as interest and as a mere transaction in money. However, the Court remanded factual questions to the Tribunal: (a) whether wilful suppression (for extension of limitation) is made out for the period covered by the principal SCN; and (b) whether the acquiring bank in fact discharged service tax on the interchange fee (with directions to allow production/verification of evidence). If the acquiring bank is shown to have paid the tax on the interchange fee, the Commissioner's demands are to be set aside; otherwise demands (and interest/penalty) may stand subject to the Tribunal's findings.

Admissibility of Cenvat credit for Club and Association services - admissibility of Cenvat credit for Outdoor Catering services - input service exclusion for personal use under Rule 2(l)(C) of CCR, 2004 - precedential application of Tribunal decision

Admissibility of Cenvat credit for Club and Association services - input service exclusion for personal use under Rule 2(l)(C) of CCR, 2004 - precedential application of Tribunal decision - Cenvat credit in respect of Club and Association services is admissible for the appellant. - HELD THAT: - The Tribunal allowed the appeal on the Club and Association services point by applying an earlier decision of the Tribunal (order No. A/85742-85743/2020 dated 11.09.2020) which held that Rule 2(l)(C) of the Cenvat Credit Rules, 2004 excludes club membership from the definition of "input service" only where such services are used primarily for personal use or consumption by any employee. Corporate or organisational membership not linked to a specific employee remains eligible. The Revenue produced no evidence to show that the memberships were used personally by any employee; the appellant furnished documentary proof of payment of service tax for memberships and explained the business nexus-access to industry information, facilities for meetings and conferences-demonstrating that the services enhanced the quality and efficiency of output services. On these determinative considerations the Tribunal found the Club and Association services to have sufficient nexus with the output service and held the cenvat credit admissible. [Paras 4, 5]

Appeals are allowed insofar as cenvat credit in respect of Club and Association services is held admissible.

Admissibility of Cenvat credit for Outdoor Catering services - The claim in respect of Outdoor Catering services was not pressed by the appellant. - HELD THAT: - Learned consultant stated that the amount involved for Outdoor Catering services was nominal and that this aspect was not pressed in the appeal. The Tribunal recorded that the Outdoor Catering claim was not pursued and did not adjudicate that issue on merits. [Paras 3]

The Outdoor Catering services issue was not pressed and is not decided on merits.

Final Conclusion: The appeals were partially allowed: cenvat credit for Club and Association services was held admissible in favour of the appellant; the challenge to Outdoor Catering services was not pressed and was not adjudicated on merits.

Intermediary services - export of services - refund under Rule 5 of CENVAT Credit Rules, 2004 - place of provision of services - test of agency / three party requirement for intermediary - remand versus decision on merits by appellate forum

Intermediary services - export of services - place of provision of services - test of agency / three party requirement for intermediary - refund under Rule 5 of CENVAT Credit Rules, 2004 - Whether the impugned orders rejecting refund claims by treating the appellant as an intermediary were sustainable, and whether the Commissioner(Appeals) was justified in remanding the matter instead of deciding the intermediary question on merits. - HELD THAT: - The Tribunal examined the authorities and the agreements and held that the question before the original authority and Commissioner (Appeals) arose in the context of refund claims under Rule 5 of the CENVAT Credit Rules, 2004 and not as a reclassification exercise to deny credit. The law and binding precedents (including Orange Business Solutions and the Board's clarification) require that to attract the definition of an intermediary there must be two distinct supplies and a minimum of three parties, with the intermediary merely arranging or facilitating the main supply and not supplying the main service on his own account. The adjudicating authority had relied on excerpts of transfer pricing documentation and reimbursement entries without identifying the requisite three party arrangement or demonstrating that the appellant acted as an agent/arranger rather than a principal supplying services on its own account. The Commissioner (Appeals) also remanded the matter for re examination despite recognising limits to reliance on transfer pricing material and without deciding the intermediary question on merits. Applying the legal tests from the cited tribunal decisions and the Board's Guidance/Circular, the Tribunal found that the authorities erred in treating the appellant as an intermediary on the basis relied upon and that the remand was unnecessary for the intermediary issue. The Tribunal nevertheless emphasised that its order setting aside the impugned remand does not itself allow the refund claims; the jurisdiction to examine and decide refund quantification and other formalities remains with the original adjudicating authority. [Paras 4, 5]

Impugned orders remanding/rejecting the refund on the ground that the appellant was an intermediary were set aside; the appeals are allowed insofar as the issue of intermediary services is concerned, without adjudicating the refund claims themselves, which remain to be examined by the original authority.

Final Conclusion: The Tribunal set aside the Commissioner(Appeals) order that remanded the refund appeals on the ground of 'intermediary services', allowed the appeals on that issue applying the three party/two supply test and relevant precedents and clarifications, but did not decide or allow the refund claims-those remain for the original adjudicating authority to examine and decide in accordance with law.

Mandatory pre-deposit under Section 35-F - Application of amended appeal pre-deposit rules to proceedings initiated before commencement - Dismissal for non-compliance of statutory pre-deposit - Opportunity to comply with statutory pre-deposit and remit for admission of appeal

Application of amended appeal pre-deposit rules to proceedings initiated before commencement - Mandatory pre-deposit under Section 35-F - The amended pre-deposit requirement under Section 35-F applies notwithstanding that the show-cause notice or the original proceedings commenced prior to the commencement of the Finance (No.2) Act, 2014. - HELD THAT: - The High Court considered the appellant's contention that the lis and filing of the appeal pre-dated the insertion of Section 35-F and relied on the 2nd proviso thereto. Having examined the provision and earlier authority of the High Court of Allahabad, the Court held that the amended requirement of pre-deposit is applicable and the mere fact that the show-cause notice or appeal preceded the amendment does not exempt the appellant from compliance. The Court expressly agreed with the view in Ganesh Yadav v. Union of India as cited in the judgment and applied that reasoning to conclude that Section 35-F governs the admissibility of the appeal in the present case. [Paras 9, 11, 12]

Section 35-F's pre-deposit obligation applies and the appellant is not exempt from making the mandated deposit despite earlier initiation of proceedings.

Dismissal for non-compliance of statutory pre-deposit - Opportunity to comply with statutory pre-deposit and remit for admission of appeal - The CESTAT's dismissal of the appeal for non-compliance with the pre-deposit requirement was legally sustainable, but the High Court granted a limited opportunity to comply and directed that the appeal be adjudicated on merits thereafter. - HELD THAT: - The Court noted that Section 35-F mandates that an appellate authority shall not entertain an appeal where the prescribed pre-deposit is not made, and that the appellant had not remitted the required amount. While the CESTAT therefore acted within law in dismissing the appeal for non-compliance, the High Court exercised its supervisory jurisdiction to afford the appellant three months to make the pre-deposit. The Court required production of its order at the time of deposit and directed the CESTAT to proceed to dispose of the appeal on merits expeditiously, within a fixed six-month period after compliance. The Court addressed the appellant's contention regarding the Registry's scrutiny and the absence of an earlier objection by observing that the Tribunal had, at the hearing, found non-compliance and dismissed the appeal, and accordingly granted the remedial opportunity rather than reinstating or deciding merits without compliance. [Paras 9, 10, 13, 14]

The CESTAT's dismissal for non-compliance is sustained; however the appellant is permitted three months to make the pre-deposit and, upon production of this judgment, the CESTAT must decide the appeal on merits within six months.

Final Conclusion: The order of the CESTAT dismissing the appeal for failure to make the statutory pre-deposit under Section 35-F is sustained; the appellant is granted three months to comply with the pre-deposit requirement and, upon such compliance and production of this judgment, the CESTAT is directed to hear and dispose of the appeal on merits within six months.

Following its own precedent - reference to a larger bench - requirement of prior approval for exemption notification - claim for refund under an exemption notification - remand for fresh consideration

Following its own precedent - reference to a larger bench - Whether the Customs, Central Excise and Service Tax Appellate Tribunal was obliged to follow its earlier decision in Mahindra Engineering Services Ltd. and, if disagreeing with that view, to refer the question to a larger bench. - HELD THAT: - The Court found that the Tribunal was not justified in distinguishing or disregarding its earlier decision in Mahindra Engineering Services Ltd. merely because a particular argument was not raised in the earlier proceedings. The Tribunal's earlier order had held that Notification No.09/2009 did not require prior approval from the Approval Committee before provision of services and had accepted that filing the refund claim after approval was obtained amounted to sufficient compliance. Where a subsequent bench doubts the correctness of an earlier bench's view, the proper course is to refer the question to a larger bench for re-consideration; it is not permissible to ignore or distinguish the earlier adjudication on the ground that a contention was not advanced previously. The Court therefore answered the substantial question of law by holding that the Tribunal ought to have considered its earlier decision and, if inclined to depart from it, referred the question to a larger bench. [Paras 5, 6]

The Tribunal erred in failing to follow its earlier decision and, if it sought to re-open that view, should have referred the question to a larger bench; the substantial question of law is answered accordingly.

Requirement of prior approval for exemption notification - claim for refund under an exemption notification - remand for fresh consideration - Whether the appellant was entitled to the refund claimed under Notification No.12/2013, and the appropriate course of action where the Tribunal declined to follow its earlier view. - HELD THAT: - The Court prima facie accepted that the appellant could rely upon the earlier Tribunal decision (Mahindra Engineering Services Ltd.) which treated filing the refund claim after approval as sufficient compliance with the notification then in force. Given the Tribunal's failure to follow or formally re-open that precedent, the Court concluded that reconsideration by the Tribunal was warranted. Rather than deciding entitlement on the merits, the Court set aside the Tribunal's order and remitted the matter for fresh adjudication on its own merits and in accordance with law, permitting the Tribunal to address applicability of Notification No.12/2013 (including any contention regarding prior approval) and to follow or refer its earlier view as appropriate. [Paras 6]

The order of the Tribunal is set aside and the proceedings are remanded to the Tribunal to decide the appeal afresh on merits and in accordance with law.

Final Conclusion: Central Excise Appeal No.06/2019 is allowed; the Tribunal's order dated 10/06/2016 is set aside and the matter is remitted to the Tribunal for fresh consideration of the refund claim under Notification No.12/2013, with the Tribunal to resolve or, if necessary, refer any conflict with its prior decision. The Tribunal is requested to decide the remanded proceedings expeditiously.

Maintainability of appeals under Section 35G of the Central Excise Act - orders relating to the rate of duty of excise - classification of by-products as waste not subject to excise duty - penalty proceedings against company and directors

Maintainability of appeals under Section 35G of the Central Excise Act - orders relating to the rate of duty of excise - Whether the appeals to the High Court were maintainable in view of Section 35G where the Tribunal's order related to the rate of duty of excise on the subject goods. - HELD THAT: - The appeals were filed under Section 35G of the Central Excise Act. Section 35G(1) permits an appeal to the High Court from an order passed by the Appellate Tribunal only if the High Court is satisfied that the case involves a substantial question of law. The order under challenge concerned the classification/rate of duty of the goods (the question whether certain by-products are waste and not exigible to excise duty). Such an order falls within the statutory embargo on entertaining appeals to the High Court under Section 35G. Consequently the High Court is precluded from deciding the substantive questions of classification and the concurrent penalty issues arising from the same order. [Paras 6, 7, 8]

The appeals are not maintainable and are dismissed; liberty is granted to the Revenue to approach the Supreme Court if so advised; no costs.

Final Conclusion: The High Court dismissed the Revenue's appeals as not maintainable under Section 35G because the Tribunal's order related to the rate of excise duty; the Court did not adjudicate the substantive classification or penalty questions and granted liberty to the Revenue to file an appeal before the Supreme Court.

Pre-deposit requirement under Section 26(6A) of the MVAT Act - amount of tax disputed by the appellant - amounts paid under protest - proof of payment accompanying appeal - adjustment / set-off of protest payments against pre-deposit - strict and literal construction of taxing statutes

Pre-deposit requirement under Section 26(6A) of the MVAT Act - amount of tax disputed by the appellant - amounts paid under protest - strict and literal construction of taxing statutes - Whether amounts deposited under protest prior to an order of assessment must be excluded when computing the mandatory pre-deposit under Section 26(6A) of the MVAT Act - HELD THAT: - Both clauses (b) and (c) of Section 26(6A) require proof of payment of "an amount equal to ten per cent of the amount of tax disputed by the appellant" and the statute mandates deposit of the aggregate amounts specified. The Court applied the plain and grammatical meaning of the provision and held that where the appellant disputes the entirety of the tax demand, 10 per cent of the entire disputed tax liability must accompany the appeal. There is no wording in the statute that disallows taking into account payments made earlier under protest; absent express exclusion by the legislature, such protest payments cannot be ignored for the purpose of satisfying the statutory pre-deposit. The Court further emphasised that taxing statutes must be construed strictly and literally and that the High Court's reliance on automatic adjustment of protest payments against the demand did not override the plain statutory language requiring deposit of 10 per cent of the disputed tax. Consequently, if the amount deposited under protest, when taken into account, meets the Section 26(6A) requirement, the statutory condition is satisfied. [Paras 3, 11, 12]

Amounts paid under protest prior to the order of assessment are to be taken into account in computing the 10 per cent pre-deposit required by Section 26(6A); the appellant was obliged to deposit 10 per cent of the tax disputed as interpreted.

Proof of payment accompanying appeal - adjustment / set-off of protest payments against pre-deposit - Whether the appeal should be restored and what further action is required following the Court's interpretation - HELD THAT: - The Court found that the appellant complied with Section 26(6A) if, upon taking into account the payments made under protest, the aggregate deposited satisfied the 10 per cent requirement. The High Court's rejection of the petition was therefore not in order. The matter was remitted to the appellate authority for verification that the pre-deposit condition, as interpreted by this judgment (i.e., taking protest payments into account), has been met. Subject to such verification, the appeal is to be restored to the appellate authority's file. [Paras 12, 13]

The High Court order is set aside; the appeal is restored to the appellate authority subject to verification that the required pre-deposit (taking into account the protest payments) has been duly deposited.

Final Conclusion: The appeal is allowed; the impugned High Court order is set aside and the matter is restored to the appellate authority for verification that, when amounts paid under protest are taken into account, the aggregate deposited satisfies the 10 per cent pre-deposit requirement under Section 26(6A) of the MVAT Act.

Definition of 'dealer' under Section 2(15) of the TNVAT Act - taxability of sale of repossessed/hypothecated motor vehicles - agent's liability for turnover and tax when selling on behalf of another - scope of Explanation III and Explanation IV to the definition of sale under the TNVAT Act - compulsory sale for realisation of debt

Definition of 'dealer' under Section 2(15) of the TNVAT Act - scope of Explanation III and Explanation IV to the definition of sale under the TNVAT Act - Assessee (NBFC) falls within the ambit of 'dealer' under the TNVAT Act. - HELD THAT: - The Court followed the Division Bench decision in Cholamandalam/ HDFC Bank, holding that the character of the transaction, not merely the regulatory statute under which the entity operates, determines liability. The contractual right to repossess and sell hypothecated vehicles, exercised independently and without the owner's consent, brings the activity within the wide definitions of 'sale' and 'dealer'. Explanation III (and, alternatively, Explanation IV) to the definition of sale is of wide ambit and covers disposal of goods by persons who bring about sale of hypothecated/unclaimed goods. Consequently, the NBFC's modus operandi-identical in substance to that of banks-renders it a dealer for purposes of the TNVAT Act. [Paras 33, 35, 36, 42, 43]

Assessee held to be a 'dealer' under Section 2(15) and liable accordingly.

Taxability of sale of repossessed/hypothecated motor vehicles - compulsory sale for realisation of debt - Sale of repossessed/hypothecated vehicles by the assessee is liable to VAT. - HELD THAT: - Relying on the reasoning in HDFC Bank and the Division Bench in Cholamandalam, the Court held that sales effected by financial institutions to realise debt are in the nature of compulsory sales and are not mere agency sales on behalf of the owner. The contractual powers to repossess and dispose, the practice of conducting sales without involving the registered owner, and statutory amendments facilitating transfer without owner's consent demonstrate that such disposals attract tax under the TNVAT Act. [Paras 24, 25, 27, 28, 33]

Resale of repossessed/hypothecated motor vehicles by the assessee is taxable under the TNVAT Act.

Agent's liability for turnover and tax when selling on behalf of another - definition of turnover including sales effected on account of others - Even if the assessee claims to act as agent of the borrower, it remains liable for tax on the turnover arising from sales. - HELD THAT: - The Court noted that the Act's definition of turnover includes aggregate amounts of goods sold 'either directly or through another, on his own account or on account of others'. Thus, acceptance of an agency plea would not exonerate the assessee because the turnover to be assessed includes sales effected on behalf of others. Moreover, factual features of the loan agreements (power to sell without consent, lack of accountability to borrower for sale value) negate the pure agency characterization in practice. [Paras 34, 35, 38, 42]

Agent status, even if claimed, does not relieve the assessee from tax liability; agent is also liable.

Contractual non-ownership and tax liability - effect of hypothecation on ownership characterisation - Contractual stipulation that the assessee is not the owner of the vehicle does not preclude it from being treated as liable for sales tax when it exercises contractual rights to sell. - HELD THAT: - The Court observed that technical non-ownership (e.g., registration in borrower's name or hire-purchase characterisation) does not determine tax liability where the financier retains substantive rights under the hypothecation agreement. Authorities cited establish that hypothecation creates a charge with right to possession; when the financier exercises contractual rights to effect sale without owner's consent, the financier's acts fall within the taxable ambit recognised by Explanation III/IV. [Paras 29, 30, 31, 42]

Non-ownership stated in contract does not prevent imposition of sales tax when the assessee exercises contractual powers of sale.

Taxability of resale of plant, machinery, furniture and fittings used for own business - distinction between sale and scrap treatment - Sales by the assessee of used plant, machinery, furniture, fittings and other fixed assets used in its business are liable to VAT rather than being necessarily treated as scrap exempt from tax. - HELD THAT: - The High Court disposed the petitions by applying the precedent in Cholamandalam and HDFC, thereby rejecting the assessee's plea that disposals of business assets should be treated as scrap not liable to VAT. The determination turns on the nature of the transaction and whether the disposal falls within the wide statutory definition of 'sale'; where disposals are in the course of business or as part of realization of dues, they fall within taxable turnover.

Disposals of such used business assets are taxable under the TNVAT Act and not automatically to be treated as scrap outside the Act's ambit.

Final Conclusion: The High Court dismissed the tax cases, holding the assessee liable under the TNVAT Act on the grounds stated above by following the Division Bench decisions in Cholamandalam and HDFC Bank; no costs.