TaxTMI Updates e-Newsletter
Dec 16,2021

Reasonableness of classification - equal protection under Article 14 - freedom to practice any profession or to carry on any occupation, trade or business under Article 19(1)(g) - right to livelihood and life under Article 21 - imposition of indirect tax by executive notification - differential tax treatment based on supply through electronic commerce operator

Reasonableness of classification - equal protection under Article 14 - differential tax treatment based on supply through electronic commerce operator - Petition challenging specified clauses of Notification No.16/2021-Central Tax (Rate) and Notification No.17/2021-Central Tax (Rate) as arbitrary and violative of Articles 14, 19(1)(g) and 21; court issued notice and sought response. - HELD THAT: - The petitioner contends that the impugned notifications amend earlier notifications to levy GST on passenger transport services by auto rickshaw when supplied through an electronic commerce operator while preserving exemption for offline, street hailed services, thereby creating an unreasonable classification and differential tax treatment. The Court recorded the challenge and directed issuance of notice to the respondents so that they may file their response; one respondent accepted notice and sought time to obtain instructions. No merits determination was made in the present order; the matter was adjourned for further consideration.

Notice issued to respondents; matter renotified for hearing on 21st December, 2021.

Final Conclusion: Interim order directing issuance of notice on challenge to the stated clauses of Notifications Nos.16/2021 and 17/2021; matter adjourned for further hearing on 21.12.2021 without any adjudication on merits.

Input tax credit - immovable property - plant or machinery - plant and machinery (Second Explanation to Section 17(5)) - civil structure - construction of immovable property (Section 17(5)(d)) - means - restrictive definition - functionality test - principles of natural justice

Plant or machinery - plant and machinery (Second Explanation to Section 17(5)) - civil structure - construction of immovable property (Section 17(5)(d)) - Whether the land filling pit constructed by the appellant qualifies as 'plant' or 'machinery' and hence is eligible for input tax credit or is a civil structure hit by the exclusion in Section 17(5)(d). - HELD THAT: - The authority examined the statutory text and the engineered nature of the landfill. The Second Explanation to Section 17(5) defines the expression 'plant and machinery' by using the word 'means', requiring a restrictive construction. The legislature thereby prescribed that 'plant or machinery' must be understood by reference to that defined expression, and foundations and structural supports for such apparatus are included, while land, buildings and other civil structures are expressly excluded. The landfill, being embedded in the earth and constructed with liners, leachate collection and treatment systems, is an immovable property and, on its construction and function, is a civil structure conceived and executed by application of civil engineering principles. It is not a compound instrument or chain of instruments fixed to earth that would qualify as an 'apparatus, equipment or machinery' within the statutory definition. The tribunal therefore concluded that the land filling pit falls within the exclusion and is not eligible for input tax credit under Section 17(5)(d). [Paras 18, 19, 21, 22, 23]

The land filling pit is a civil structure and not 'plant or machinery' for the purposes of Sections 17(5)(d) and the Second Explanation; input tax credit on its construction is blocked.

Principles of natural justice - input tax credit - Whether the Advance Ruling Authority acted contrary to the High Court's direction and principles of natural justice in the denovo proceedings so as to vitiate the impugned order. - HELD THAT: - The appellant argued that the AAR merely reproduced its earlier order despite the High Court's remand to decide afresh, and that prior opinion of the jurisdictional officer was not supplied earlier causing a breach of natural justice. The appellate authority considered the record, the denovo proceedings and the submissions made afresh by the appellant. Notwithstanding textual similarities with the earlier order, the authority undertook fresh consideration of the legal provisions, the statutory definition and the engineered nature of the landfill and reached the same conclusion on merits. The appellate authority found no reason to set aside the denovo ruling on procedural grounds and upheld the substantive decision. [Paras 6, 7, 13, 24]

The AAR's denovo order is sustained; there is no procedural infirmity warranting interference and the appeal is dismissed.

Final Conclusion: The appeal is dismissed. The land filling pit is held to be a civil structure excluded from the definition of 'plant and machinery' under the Second Explanation to Section 17(5), and input tax credit on its construction is blocked by Section 17(5)(d); the denovo AAR order is upheld.

Reverse charge mechanism - inter State supply - import of services - applicability of Notification No.10/2017 (as amended by Notification No.3/2018) / Notification No.13/2017 - zero rated supply and Letter of Undertaking (LUT) - CBIC FAQ on SEZ and reverse charge

Reverse charge mechanism - applicability of Notification No.10/2017 (as amended by Notification No.3/2018) / Notification No.13/2017 - Liability to pay GST under reverse charge mechanism on renting of immovable property procured by the SEZ unit from SEEPZ SEZ Authority (local authority). - HELD THAT: - The Authority found that supplies to or by an SEZ unit/developer are treated as inter State supplies under Section 7(5)(b) of the IGST Act, 2017, bringing the transaction within the IGST Act. Notification No.10/2017 (as amended by Notification No.3/2018) specifically notifies services by a local authority by way of renting of immovable property to a person registered under the CGST Act as taxable on reverse charge basis. The facts show the applicant (a registered SEZ unit) received renting of immovable property from SEEPZ (a local authority/SEZ developer) within India; therefore Notification No.18/2017 (exemption for import of services) is not attracted since both supplier and recipient are located in India. The CBIC FAQ corroborates that where a notified service is under reverse charge the SEZ (recipient) has to pay IGST as the deemed recipient. On harmonious construction of Section 5(3) of the IGST Act and the notifications, the Authority concluded the conditions of the reverse charge notification are satisfied and the applicant is liable to pay tax under reverse charge. [Paras 6]

Applicant is required to pay tax under reverse charge mechanism on the renting of immovable property procured from SEEPZ SEZ Authority.

Reverse charge mechanism - Whether the applicant is required to pay tax under reverse charge mechanism on other services supplied by the said Authority. - HELD THAT: - The Authority observed that Notification No.10/2017 (as amended) / Notification No.13/2017 notify only specific categories of services for reverse charge. The applicant's second question was general and did not identify particular other services; in absence of specification, the Authority could not adjudicate applicability of reverse charge to unspecified services. Hence the question could not be answered on the material before the Authority. [Paras 6]

Not answered for want of specificity.

Inter State supply - IGST levy - Under which tax head (IGST or CGST/SGST) the tax under reverse charge is to be discharged in the subject transaction. - HELD THAT: - Since the transaction is an inter State supply between SEZ developer/local authority and an SEZ unit and falls under the IGST Act, the Authority held that the tax liability arising under the reverse charge notification is to be discharged under IGST. [Paras 6]

Tax under reverse charge is to be discharged under IGST.

Final Conclusion: The Authority ruled that Portescap India Pvt. Ltd. is liable to pay GST under the reverse charge mechanism on renting of immovable property procured from SEEPZ SEZ Authority and that such tax is payable under the IGST head; the question whether reverse charge applies to other unspecified services was not answered for want of specificity.

Composite supply of works contract - works contract - construction of roads for use by general public - applicability of concessional rate to sub-contractors - advance ruling under GST - rate differentiation - 12% versus 18%

Composite supply of works contract - construction of roads for use by general public - applicability of concessional rate to sub-contractors - Whether Entry No. 3(iv) of Notification No. 20/2017 (as reflected in principal Notification No.11/2017) covering construction of roads applies to services provided by a sub-contractor. - HELD THAT: - The Authority examined Entry No. 3(iv) which specifically covers the composite supply of works contract for construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of a road for use by the general public. The entry is project oriented and is not worded so as to limit applicability to a main contractor. The subsequent amendment by Notification No.1/2018 inserted separate entries (3(ix) and 3(x)) to address sub contractors in certain itemised cases, but Entry No. 3(iv) was not shifted to those entries and remains distinct. In light of the clear and unambiguous language of Entry No. 3(iv), and the legislative intent reflected in the GST Council press release recommending that sub contractors providing works contract services to contractors for projects attracting concessional rates should also be eligible for those rates, the Authority held that a sub contractor performing the construction of roads falls within Entry No. 3(iv) and is eligible for the concessional treatment specified therein. The Authority also noted that the supply in the present case was ongoing at the time of filing and thus admissible for advance ruling consideration. [Paras 5]

Entry No. 3(iv) applies to the supply by the applicant as a sub contractor for construction of roads and is not restricted to the main contractor.

Rate differentiation - 12% versus 18% - advance ruling under GST - Whether the sub contractor should charge GST at 12% (6% CGST + 6% SGST) or at 18% (9% CGST + 9% SGST) for the works contract services on construction of roads. - HELD THAT: - Having concluded that the sub contractor's supply is covered by Entry No. 3(iv), the Authority applied the rate specified by that entry. The jurisdictional officer's contention that the amended entries for sub contractors (3(ix)/(3(x))) exclude Entry No. 3(iv) was considered and rejected because Entry No. 3(iv) itself remained in the schedule and was not confined to main contractors. The Authority observed that where the schedule confers concessional treatment by reference to the project, it is the nature of the project that governs rate applicability, not the identity of the supplier. Reliance was placed on decisions of other advance ruling authorities applying the same principle. Having found the entry clear and applicable, the Authority held that the concessional rate under Entry No. 3(iv) governs the transaction and there was no basis to subject the supply to the general 18% entry. [Paras 5, 6]

The sub contractor is to charge GST at the concessional rate of 6% CGST plus 6% SGST (total 12%), and not at 18%.

Final Conclusion: The Authority rules that the works contract services provided by the applicant as a sub contractor for construction of roads fall within Entry No. 3(iv) and the applicable GST rate is 6% CGST + 6% SGST (total 12%).

Doctrine of mutuality - definition of "supply" under Section 7 (including clause (aa) inserted retrospectively) - retrospective deeming of association and its members as distinct persons - definition of "business" under Section 2(17) as including provision of facilities or benefits to members - supply of activities/transactions by an association to its members

Definition of "business" under Section 2(17) as including provision of facilities or benefits to members - doctrine of mutuality - Whether collecting contributions and spending them for meetings and administrative expenditures amounts to "business" as envisaged under Section 2(17) of the CGST Act. - HELD THAT: - The Authority examined the amended statutory scheme and the applicant's reliance on the doctrine of mutuality. The retrospective amendment to the definition of "supply" (clause (aa) of Section 7(1)) and the statutory scope of "person" under Section 2(84) establish that an association and its members are to be treated as distinct persons for GST purposes. Clause (e) of Section 2(17) expressly includes provision by a club, association or society of facilities or benefits to members for a subscription or other consideration within the definition of "business." In these circumstances the principle of mutuality, relied upon by the applicant to characterise the receipts as non-business reimbursements, is no longer applicable to preclude taxation of such receipts. Having regard to the amended statutory provisions and the nature of the activities (meetings, refreshments and administrative facilitation for members), the Authority concluded that the applicant's activities fall within the statutory definition of "business." [Paras 5]

In the affirmative - the activity of collecting contributions for meetings and administrative expenditures is "business" under Section 2(17).

Definition of "supply" under Section 7 (including clause (aa) inserted retrospectively) - supply of activities/transactions by an association to its members - Whether contributions recovered from members for meetings, refreshments and petty administrative expenses amount to or result in a "supply" within the meaning of the GST Act. - HELD THAT: - The Authority noted the substantive amendment (clause (aa) inserted in Section 7(1) with retrospective effect) which treats activities or transactions by a person other than an individual to its members or constituents (and vice versa) for valuable consideration as "supply," and clarifies that the person and its members shall be deemed to be two separate persons. Applying this provision to the facts, the fees collected and pooled for conducting meetings, providing light refreshments and meeting administrative costs are activities carried out by the applicant for its members and therefore constitute supply of services. The Authority rejected the contention that such receipts are mere reimbursements not attracting GST, holding that the amended statutory definition covers all such activities/transactions without limitation and that the receipts are consideration for supply. [Paras 5]

In the affirmative - contributions for meetings and administrative expenses constitute "supply" liable to GST.

Final Conclusion: Both questions are answered in the affirmative: the collection of contributions for meetings and administrative expenditures falls within the statutory definition of "business" and the contributions constitute "supply" under the GST law; consequently such receipts are liable to GST.

Job work - Manufacturing services on physical inputs owned by others - Classification of services - distinction between processing and manufacture - Repair and maintenance services - Section 2(68) definition of job work

Job work - Manufacturing services on physical inputs owned by others - Classification of services - distinction between processing and manufacture - Classification and rate of GST for surface coating undertaken on original/new goods received from tool manufacturers (OEMs). - HELD THAT: - The Authority found that the applicant carries out coating as a process on goods belonging to registered principals (OEMs) and that the coating does not result in the emergence of a new product having a distinct name, character and use. Relying on the statutory definition of job work and the distinction between processing and manufacture, the Authority held that the applicant's activity on OEM-supplied semi-finished/original goods is a job work service. Having examined the entries in Notification No. 11/2017 (as amended) and the residuary sub-item (id) under Heading 9988, the Authority concluded that such job-work services fall within the residuary entry for job work under Heading 9988 and are chargeable at the reduced rate applicable to job work under entry 26(id). The Authority expressly applied the reasoning that mere value addition without emergence of a new article does not convert the activity into manufacture and therefore the service is properly classifiable as manufacturing services on physical inputs owned by others in the nature of job work. [Paras 5]

Surface coating on original/new goods received from tool manufacturers (OEMs) is job work classifiable under Heading 9988 (SAC 998873/9988) and chargeable at the job-work rate under entry 26(id) of Notification No.11/2017 (i.e., 12% as amended).

Repair and maintenance services - Classification of services - distinction between processing and manufacture - Job work - Classification and rate of GST for surface coating undertaken on old, worn out or used goods received from end users. - HELD THAT: - The Authority examined the facts that old and worn out goods were received from end users who had purchased them as finished products and sought restoration to render them reusable. The Authority distinguished such activity from job work because the goods were not sent as inputs in an ongoing manufacturing process by a principal. Applying the statutory definitions and relevant precedents, the Authority concluded that the coating performed on used/ worn goods effects repair/restoration rather than manufacture or outsourced manufacturing processes. Consequently the activity falls under Heading 9987 (maintenance, repair and installation services) rather than Heading 9988, and is therefore taxable at the rate applicable to repair services under entry 25(ii) of Notification No.11/2017. [Paras 5]

Surface coating on old, worn out or used goods received from end users is a repair service classifiable under Heading 9987 and chargeable to GST under entry 25(ii) of Notification No.11/2017 (i.e., at 18%).

Final Conclusion: The Advance Ruling holds that coating services performed on original/new goods received from tool manufacturers are job-work services under Heading 9988 and attract the job-work rate under entry 26(id), whereas coating services performed on old, worn out or used goods received from end users are repair services under Heading 9987 and attract the rate under entry 25(ii) of Notification No.11/2017.

Regular bail - Right to personal liberty under Article 21 - Confession recorded under section 70 of the CGST Act, 2017 - Fraudulent availment and utilization of Input Tax Credit - Gravity of offence and quantum of sentence - Compoundability and triability by Magistrate

Regular bail - Right to personal liberty under Article 21 - Gravity of offence and quantum of sentence - Compoundability and triability by Magistrate - Fraudulent availment and utilization of Input Tax Credit - Whether the applicant is entitled to regular bail in the offences arising from alleged fraudulent availment and utilization of Input Tax Credit under the CGST Act, 2017 - HELD THAT: - The court applied the principle that bail is the rule and custody the exception as articulated by the Apex Court in Sanjay Chandra, noting that refusal of bail curtails the personal liberty guaranteed under Article 21. The offence alleged involves fraudulent passing and utilization of Input Tax Credit; however, the offences are punishable up to five years, are compoundable and triable by a Magistrate. The complaint has not yet been filed and the allegations are yet to be established at trial, which is likely to be protracted. Considering the quantum of sentence the accused is likely to face, the gravity of the allegations, the custodial period already undergone and the likelihood of prolonged trial, the court concluded that the balance favours release on regular bail. The court observed the prosecution relied upon a statement recorded under section 70 of the CGST Act, 2017 but proceeded to grant bail despite the arrest being based on that statement, imposing protective conditions to prevent tampering with evidence and ensure presence at trial. [Paras 7]

The application is allowed and the applicant is released on regular bail on furnishing a personal bond with one surety and subject to specified conditions; judicial observations do not affect the merits of the case.

Final Conclusion: Criminal Misc. Application allowed; applicant ordered released on regular bail in connection with the offence under the CGST Act, 2017 on furnishing bond and surety and subject to conditions, with liberty protective observations not affecting the merits.

Interest on delayed refund under Section 244A - delay attributable to assessee - refund entitlement under Section 237 - proof of advance tax payment and its effect on interest

Interest on delayed refund under Section 244A - delay attributable to assessee - proof of advance tax payment and its effect on interest - Whether the period for which interest under Section 244A was payable should exclude the period alleged to be delayed for reasons attributable to the assessee because original advance tax challans were not filed with the return. - HELD THAT: - The court examined the statutory scheme governing refunds and interest, noting that Section 244A permits exclusion of periods of delay only where the proceedings resulting in refund have been delayed for reasons attributable to the assessee. Although the assessee submitted the original advance tax challan on 15th February 2002 rather than with the return filed on 31st October 2001, there is no finding by the Assessing Officer or the authority below that any delay in the refund proceedings occurred or that any such delay was attributable to the assessee. The department had already allowed the benefit of the advance tax in the intimation dated 26th January 2003 and the assessment was completed on 30th March 2004. In the absence of any specific finding of attributable delay and given that no reply was filed by the department in the petition, the exclusion under Section 244A(2) could not be invoked to deny interest for the period 1st April 2001 to 28th February 2002. The court therefore upheld the assessee's entitlement to interest for that period while reserving the department's right to compute the exact amount. [Paras 7, 8, 9, 10]

Impugned order excluding the period from interest under Section 244A was quashed and the assessee is entitled to interest for the period 1/4/2001 to 28/2/2002; the department to compute the exact amount.

Final Conclusion: Writ petition allowed; order dated 14/9/2004 set aside and respondent directed to grant interest on refund for the period 1/4/2001 to 28/2/2002, with the department to calculate the precise interest amount.

GKN Driveshafts principle - reopening of assessment under Section 148 - objections to reasons for reopening - requirement of a speaking order

GKN Driveshafts principle - reopening of assessment under Section 148 - objections to reasons for reopening - requirement of a speaking order - Whether the assessing officer had complied with the procedural steps mandated by GKN Driveshafts and, in their absence, what relief should be granted. - HELD THAT: - The Court found that the mechanism prescribed in GKN Driveshafts - supply of reasons for issuance of a Section 148 notice, filing of objections by the assessee, and disposal of those objections by passing a speaking order - had been followed in the present case except that the assessing officer had not passed a speaking order disposing of the assessee's objections. Paragraph 5 of GKN Driveshafts was applied: where reasons are furnished and objections are filed, the assessing officer must dispose of the objections by a speaking order before proceeding with reassessment. In consequence, the Court concluded that minimal interference was required and that compliance with GKN Driveshafts was imperative. The matter was therefore remitted to the assessing officer to consider the assessee's objections and pass a speaking order within the timeline fixed by the Court, with interim abeyance of assessment proceedings for that period. [Paras 6, 7, 8]

The assessing officer is directed to pass a reasoned speaking order on the assessee's objections to the reasons for reopening within three weeks (on or before 30.12.2021); assessment proceedings are to be kept in abeyance for that period, after which the assessing officer may proceed in accordance with the speaking order; writ petition disposed without costs.

Final Conclusion: Writ petition allowed in part: proceedings remitted to the assessing officer to comply with the GKN Driveshafts requirement of passing a speaking order on the objections to reasons for reopening within the time fixed, with interim abeyance; matter disposed of as directed.

Substitution of statutory provisions by the Finance Act, 2021 - Reassessment under Section 148 of the Income Tax Act - Mandatory pre-notice procedure under Section 148A - Effect of Enabling Act and delegated notifications on limitation - Scope of non-obstante clause and limits of delegated legislation - Requirement of valid assumption of jurisdiction by issuance ofjurisdictional notice

Substitution of statutory provisions by the Finance Act, 2021 - Reassessment under Section 148 of the Income Tax Act - Mandatory pre-notice procedure under Section 148A - Effect of Enabling Act and delegated notifications on limitation - Scope of non-obstante clause and limits of delegated legislation - Requirement of valid assumption of jurisdiction by issuance ofjurisdictional notice - Validity of reassessment notices issued after 01.04.2021 where reassessment provisions were substituted by the Finance Act, 2021 and whether Notifications under the Enabling Act could revive or extend pre existing reassessment provisions or validate notices without compliance of the substituted law including Section 148A. - HELD THAT: - The Court followed the Division Bench of the Allahabad High Court and held that the Finance Act, 2021 effected a legislative substitution of the earlier reassessment provisions w.e.f. 01.04.2021; in absence of any express saving clause the pre existing provisions stood obliterated. The Enabling Act and Notifications issued thereunder are enactments to extend time limits and cannot be read so as to override or revive substantive provisions substituted by Parliament. The non obstante wording in the Enabling Act is confined to protecting proceedings already validly pending and does not validate initiation of proceedings that are otherwise incompetent under the newly substituted law. A reassessment proceeding arises only upon valid assumption of jurisdiction evidenced by a Section 148 jurisdictional notice; where no such jurisdiction was assumed prior to substitution, time extension Notifications cannot supply jurisdiction or insulate defects. Consequently, reassessment notices issued after 01.04.2021 without adherence to the substituted provisions (including the mandatory pre notice procedure introduced by Section 148A) are without jurisdiction and liable to be quashed; assessing authorities remain at liberty to initiate reassessment under the Finance Act, 2021 after making requisite compliance.

The reassessment notice issued under Section 148 after 01.04.2021 is without jurisdiction and is quashed; assessing authorities may initiate reassessment in accordance with the Act as amended by the Finance Act, 2021 after due compliance.

Final Conclusion: Writ petition allowed; the re assessment notice under Section 148 is quashed as issued in breach of the substituted law introduced by the Finance Act, 2021 and without compliance of the mandatory procedure; authorities may re initiate proceedings under the amended law after fulfilling statutory requirements.

Charitable purpose - advancement of any other object of general public utility - proviso to Section 2(15) - exclusion of activities in the nature of trade, commerce or business or services for consideration - principle of mutuality - claim of exemption under Section 12A - incidental to the objects

Proviso to Section 2(15) - exclusion of activities in the nature of trade, commerce or business or services for consideration - advancement of any other object of general public utility - principle of mutuality - claim of exemption under Section 12A - Whether the proviso to Section 2(15) applies to the assessee's activities and thereby precludes charitable status and exemption under Section 12A. - HELD THAT: - The Court accepted the factual findings of the authorities that the assessee undertook construction-related activities for Government projects, receiving commission/fee and acting as an agency between Government bodies and contractors. Applying the CBDT Circular and the statutory proviso to Section 2(15), the Court held that where an entity whose object is 'advancement of any other object of general public utility' carries on activities in the nature of trade, commerce or business, or renders services in relation to trade, commerce or business for a fee or consideration, it falls within the proviso and is not entitled to exemption under sections 10/11/12A. The principle of mutuality was considered: mutuality exempts surplus returned within identical contributors and participants, but that doctrine did not apply here because the assessee dealt with non-members (Government, contractors) and rendered remunerative services to outsiders. The Court concluded that the construction and agency activities were commercial in nature and therefore the proviso to Section 2(15) excludes the assessee from charitable status and consequent exemption under Section 12A.

Proviso to Section 2(15) applies; assessee's activities are commercial/for consideration and exemption under Section 12A is not available.

Incidental to the objects - charitable purpose - claim of exemption under Section 12A - Whether the construction and related activities were incidental to the assessee's objects (and thus protected) or constituted predominant business activities disqualifying exemption. - HELD THAT: - The Tribunal's factual conclusion that construction and allied works constituted the assessee's predominant activities, not merely incidental or ancillary functions, was endorsed. The Court reasoned that incidental activities are those which support the main charitable objects; here the construction/agency work itself was the principal activity and generated fee-based receipts. The Court rejected the submission that registration under Section 12A or the memorandum's stated objects alone sustains exemption where the true predominant activity is commercial. On this basis, the protection under provisions intended for incidental business was not attracted and the claim of exemption fails.

Construction and agency activities are predominant and not incidental; therefore they do not attract protection as incidental to charitable objects and exemption is not maintainable.

Final Conclusion: The appeals are dismissed; the Court affirms the findings that the assessee's construction and agency activities are commercial/for consideration, bring the assessee within the proviso to Section 2(15) and are predominant (not incidental), and accordingly the assessee is not entitled to exemption under Section 12A.

Questions of law covered by earlier decision - followed ratio of earlier judgment - application of precedent in favour of the assessee - dismissal of income-tax appeals

Questions of law covered by earlier decision - followed ratio in Kerala State Electricity Board v. Deputy Commissioner of Income Tax - appeals dismissed pursuant to precedent - Whether the questions of law raised in the appeals are governed by the ratio of the earlier judgment in Kerala State Electricity Board v. Deputy Commissioner of Income Tax , and if so, whether the appeals must be dismissed in favour of the assessee. - HELD THAT: - The counsel for the parties conceded that the legal questions before the Court are covered by the earlier decision in Kerala State Electricity Board v. Deputy Commissioner of Income Tax . The High Court applied the ratio of that earlier judgment and, by following that precedent, answered the questions of law in favour of the assessee and against the Revenue. No further independent disquisition was required as the determinative legal principle had been authoritatively settled by the cited decision. [Paras 3, 4]

The questions of law were answered in favour of the assessee by following the ratio of the earlier decision, and the income-tax appeals were dismissed.

Final Conclusion: Appeals dismissed: the High Court followed the ratio in the earlier Kerala State Electricity Board decision and answered the questions of law in favour of the assessee for Assessment Years 2006-07 and 2009-10.

Deductibility of employer's payment of employees' contribution to Provident Fund and ESI under section 36(1)(va) - Payment within due date for furnishing return under section 139(1) as extension for deduction - Interplay between section 43B(b) and section 36(1)(va) - Prospective operation of statutory amendment enacted by Finance Act, 2021 - Non-retrospective application of Explanation inserted by Finance Act, 2021

Deductibility of employer's payment of employees' contribution to Provident Fund and ESI under section 36(1)(va) - Payment within due date for furnishing return under section 139(1) as extension for deduction - Whether employees' contributions to PF and ESI paid after the statutory due date under the respective Acts but before the due date for filing the return under section 139(1) are allowable as deduction under section 36(1)(va) read with section 2(24)(x). - HELD THAT: - The Tribunal found that although the contributions were remitted after the time prescribed under the respective enactments, they were deposited on or before the due date for furnishing the return of income under section 139(1). Relying on precedents of the Karnataka High Court and this Tribunal's approach, the Tribunal held that the Income-tax Code affords an extension permitting deduction where payment is made by the due date of filing the return; the consequence under the Provident Fund/ESI enactments for late deposit does not deprive the employer of the deduction under section 36(1)(va) when the amount is paid within the section 139(1) due date. Applying that principle to the facts, the Tribunal concluded that the disallowance made by the CPC/AO and sustained by the CIT(A) was not warranted, and the disputed amounts must be allowed as deduction. [Paras 8, 9]

Disallowance of employees' PF and ESI contributions paid after statutory due date but within the section 139(1) return due date is not sustainable; the deductions are allowable.

Prospective operation of statutory amendment enacted by Finance Act, 2021 - Non-retrospective application of Explanation inserted by Finance Act, 2021 - Interplay between section 43B(b) and section 36(1)(va) - Whether the Explanation inserted by the Finance Act, 2021 to section 36(1)(va) and section 43B operates retrospectively so as to affect the assessment years under consideration. - HELD THAT: - The Tribunal examined the amendment introduced by the Finance Act, 2021 and its effective date, observing that the explanatory provision is applicable only with effect from 1 April 2021. The Tribunal rejected the revenue's contention that the Explanation should be applied to pending matters, holding that the amendment could not be given retrospective effect to deny deductions in assessment years prior to its operative date. In view of the prospective nature of the Finance Act, 2021 amendment, the Tribunal held that the corresponding Explanation cannot be invoked to sustain the disallowance for the years before 1 April 2021. [Paras 14]

The Explanation inserted by the Finance Act, 2021 is prospective and does not apply to the assessment years before 1 April 2021; the amendment cannot be applied retrospectively to disallow the deductions.

Final Conclusion: Both appeals by the assessee are allowed: the disallowed employees' contributions to PF and ESI paid after the statutory due date but before the section 139(1) return due date are allowable as deduction, and the Finance Act, 2021 explanation cannot be applied retrospectively to deny that relief for the assessment years before 1 April 2021.

Unexplained cash credits u/s 68 - admission of sales as revenue receipt - double taxation - applicability of section 115BBE - demonetisation and legal tender status of currency notes

Unexplained cash credits u/s 68 - admission of sales as revenue receipt - double taxation - demonetisation and legal tender status of currency notes - applicability of section 115BBE - Whether the addition made by the AO treating deposits of demonetized currency notes as unexplained cash credits under section 68 is sustainable where those receipts represent admitted business sales already offered to tax, and whether section 115BBE is attracted. - HELD THAT: - The Tribunal noted that both the AO and the CIT(A) accepted that the cash deposits in issue were sale proceeds of the assessee's trading business and that the assessee had offered the sales for taxation. The impugned addition was made solely because certain deposits comprised notes demonetized after 8/9 November 2016 and were treated as not valid tender. The Tribunal held that treating amounts already admitted as business receipts as unexplained credits under section 68 would amount to taxing the same income twice - once as sales and again as unexplained cash credit - which is contrary to fundamental principles of taxation. The Tribunal also observed that the assessee had a single source of income from the trading business, and on the facts there was no basis to recharacterise those receipts as income from other sources so as to invoke section 115BBE. Reliance was placed on earlier tribunal decisions holding that where cash sales are admitted, supported by trading account and stock, and no defect in books is shown, there is no case for additions under section 68. Applying these principles to the facts, the Tribunal found the addition unsustainable and deleted it. [Paras 9, 10]

The addition under section 68 and consequent taxation under section 115BBE is not sustainable and is deleted.

Final Conclusion: The appeal is allowed; the addition of Rs.4,49,500 treated as unexplained cash credit is deleted as the amounts represent admitted business sales already offered to tax and re-taxation would amount to double taxation.

Deductibility of employee's contribution to PF and ESI under section 36(1)(va) - application of section 43B to employee contributions - due date for furnishing return under section 139(1) as determinative for payment-based deduction - prospective operation of Finance Act, 2021 amendments

Deductibility of employee's contribution to PF and ESI under section 36(1)(va) - due date for furnishing return under section 139(1) as determinative for payment-based deduction - application of section 43B to employee contributions - Whether employees' contributions to PF and ESI paid belatedly under the respective statutes but paid on or before the due date for filing the return under section 139(1) are deductible under section 36(1)(va). - HELD THAT: - The Tribunal followed the coordinate-bench view and the Karnataka High Court decision in Essae Teraoka (P.) Ltd that employee contributions fall within the ambit of section 43B for the purpose of determining the relevant "due date" for payment. Where the employees' share of PF/ESI was paid on or before the due date for furnishing the return under section 139(1), the claim for deduction cannot be disallowed merely because the payment was made after the due date under the respective PF/ESI statutes. The Tribunal held that the facts in the present appeals are identical to those decided in the earlier coordinate-bench decision and therefore the impugned additions under section 36(1)(va) must be deleted. [Paras 4, 5]

Additions disallowing employees' PF and ESI contributions in AYs 2017-18 and 2019-20 deleted; appeals allowed.

Prospective operation of Finance Act, 2021 amendments - interpretation of explanatory memorandum and retrospective application of taxing amendments - Whether the amendments made by the Finance Act, 2021 to section 36(1)(va) and section 43B operate retrospectively and apply to periods prior to 01.04.2021. - HELD THAT: - The Tribunal examined the explanatory memorandum to the Finance Act, 2021 and noted that the amendments impose liabilities and therefore cannot be given retrospective effect in the absence of a clear legislative intention to that effect. The Tribunal agreed with earlier decisions of the Tribunal that the 2021 amendments are clarificatory only insofar as their language suggests, but are to be applied prospectively from 01.04.2021. Consequently, the amendments could not be invoked to deny deductions for the assessment years before 01.04.2021. [Paras 4]

Finance Act, 2021 amendments to section 36(1)(va) and section 43B held prospectively applicable from 01.04.2021 and not to be applied to the years under appeal.

Final Conclusion: Following the coordinate-bench precedent and relevant judicial authority, the Tribunal deleted the disallowances of employees' PF and ESI contributions for AYs 2017-18 and 2019-20 and allowed both appeals, holding that the Finance Act, 2021 amendments apply prospectively from 01.04.2021.

Allowability of depreciation where assets are put to use - meaning of "put to use" for claiming depreciation - admissibility of additional evidence before first appellate authority - duty of assessing officer to respond to remand and opportunity to be heard - reliance on audited financial statements and statutory records to prove commercial production

Allowability of depreciation where assets are put to use - meaning of "put to use" for claiming depreciation - reliance on audited financial statements and statutory records to prove commercial production - Depreciation claimed by the assessee for assets acquired and used in the year was allowable. - HELD THAT: - The Tribunal affirmed the first appellate authority's finding that the assessee had not only purchased plant and machinery but had also put the same to use during the assessment year. The conclusion was based on the totality of material available before the assessing officer and the first appellate authority, including audited financial statements showing revenue from operations, cost of materials consumed, finished and semi-finished stocks, trade receivables, and statutory records such as the RG-1 register, excise returns and VAT returns. The first appellate authority also relied on a Mechanical Completion Certificate indicating first feeding of raw material into the plant. The Tribunal held that these documents, taken together, demonstrated production and commercial use of the assets in the relevant year and that depreciation could not be denied on the ground that the plant and machinery were not put to use. The Tribunal also noted the settled position that depreciation is not to be denied where assets are ready and actually used for production. [Paras 6, 14, 15]

Depreciation claimed by the assessee for the assessment year 2012-13 is to be allowed.

Admissibility of additional evidence before first appellate authority - duty of assessing officer to respond to remand and opportunity to be heard - The first appellate authority rightly admitted additional evidence and adjudicated the issue where the assessing officer failed to respond to remand and did not give adequate opportunity. - HELD THAT: - The Tribunal upheld the CIT(A)'s exercise in admitting documents produced before it because the assessing officer, despite being specifically called upon for a remand report and being given reminders, did not furnish any comments or the assessment record. The remand letter expressly sought the AO's comments on whether a show-cause notice had been issued and on the admissibility and merits of the additional evidence (Mechanical Completion Certificate, RG-1, excise and VAT returns). The first appellate authority found from the order sheet and show-cause notice that no specific query requesting proof of "put to use" had been raised by the AO and that adequate opportunity had not been afforded. Reliance on the jurisdictional High Court precedent that, where the AO is given adequate opportunity to respond and fails to do so, the appellate authority may admit additional evidence, was held applicable. In these circumstances the Tribunal found no infirmity in the CIT(A)'s admission and consideration of the material. [Paras 6, 12, 13]

Admission and consideration of the additional evidence by the CIT(A) was proper; no restoration to the AO was warranted.

Final Conclusion: The assessment-year 2012-13 depreciation disallowance was correctly deleted by the first appellate authority; the appellate order admitting and relying on the additional evidence is upheld and the Revenue's appeal is dismissed.

Deduction under Section 36(1)(va) - operation of section 43B in relation to employee contributions - prima facie adjustment under section 143(1)(a)(iv) - payment before due date of filing return under section 139(1) - prospective application of Finance Act, 2021 amendment - binding effect of jurisdictional High Court decisions on appellate authorities

Deduction under Section 36(1)(va) - operation of section 43B in relation to employee contributions - payment before due date of filing return under section 139(1) - Whether employees' contributions to PF/ESI paid after the statutory due date but deposited before the due date for filing the return under section 139(1) are allowable as deduction and not liable to disallowance under section 36(1)(va) read with section 43B. - HELD THAT: - The Tribunal applied the ratio of binding decisions of the jurisdictional High Court and earlier Tribunal precedents holding that where employee contributions collected from employees are deposited before the due date for filing the return under section 139(1), such payments are admissible for deduction and cannot be disallowed under section 43B read with section 36(1)(va). The Tribunal observed that the assessee undisputedly deposited the employees' contributions before the last due date for filing the return and that the processing adjustment made by CPC under section 143(1) in respect of delayed statutory deposit cannot stand in view of the settled position within the jurisdiction. Following the series of Rajasthan High Court decisions and consistent Tribunal decisions, the addition/adjustment confirmed by the CIT(A) was held to be not sustainable and was directed to be deleted. [Paras 5, 6, 7]

Addition made while processing the return under section 143(1) in respect of employees' contribution to PF/ESI (deposited before the due date for filing return) is deleted and the deduction is allowable.

Prospective application of Finance Act, 2021 amendment - prima facie adjustment under section 143(1)(a)(iv) - Whether the explanatory amendment to section 36(1)(va) and related amendment to section 43B effected by Finance Act, 2021 apply retrospectively to assessment year 2018-19 or only prospectively from 1 April 2021 (assessment year 2021-22 onwards), and whether the CPC's processing adjustment fell within permissible prima facie adjustments under section 143(1)(a)(iv). - HELD THAT: - The Tribunal noted the explanatory memorandum to the Finance Act, 2021 which expressly states that the amendments take effect from 1 April 2021 and apply to assessment year 2021-22 and subsequent years. The Tribunal held that the amended provisions cannot be applied to assessment year 2018-19. In consequence, the rationale invoked by the Revenue based on the 2021 amendment could not sustain the disallowance for the impugned year. The Tribunal also addressed the characterisation of the CPC adjustment as a prima facie adjustment under section 143(1)(a)(iv) but found that, given the payments were made before filing the return and the binding precedents in the jurisdiction, the processing adjustment could not be upheld. [Paras 6, 7]

The Finance Act, 2021 amendment is prospective (effective from 01.04.2021) and does not apply to AY 2018-19; the processing adjustment cannot be sustained as a prima facie disallowance in the facts of this case.

Final Conclusion: Following binding decisions of the jurisdictional High Court and consistent Tribunal precedents, and noting that the Finance Act, 2021 amendments operate prospectively from 1 April 2021, the Tribunal deleted the CPC's adjustment under section 143(1) in respect of employees' PF/ESI contributions paid before the due date for filing the return and allowed the assessee's appeal for AY 2018-19.

Onus on Revenue to prove that an asset falls within taxing provisions - scope of taxation of non-resident under section 5(2) - receipts received or deemed to be received in India; accrual or arising in India - limited applicability of sections 68/69 to non-residents absent nexus with India - reopening of assessment under section 147 - requirement of valid reason to believe - maintainability of Revenue appeal before Tribunal - CBDT monetary limit for filing appeals

Maintainability of Revenue appeal before Tribunal - CBDT monetary limit for filing appeals - Revenue appeal for A.Y. 2007-08 and the assessee's cross objections dismissed as not pressed for lack of maintainability on account of tax effect being below CBDT's monetary threshold. - HELD THAT: - The assessee's authorised representative contended that the tax effect in ITA No.677/SRT/2018 was below the monetary limit fixed by CBDT for Departmental appeals to the Tribunal. The Department conceded that the tax effect was below that threshold but was granted liberty to seek appropriate relief if exceptions later applied. The assessee therefore did not press its cross-objections. On these consensual submissions the Tribunal dismissed the Revenue's appeal and the cross-objections as not pressed. [Paras 2]

ITA No.677/SRT/2018 and CO No.07/SRT/2018 dismissed as not pressed for lack of maintainability under the CBDT monetary criterion.

Reopening of assessment under section 147 - requirement of valid reason to believe - The reopening of assessment for A.Y.2006-07 was considered; the Tribunal did not find fault with the CIT(A)'s treatment and proceeded to examine merits of additions rather than quash reassessment on the ground of invalid reasons recorded. - HELD THAT: - The Assessing Officer recorded reasons based on information received (base note) about a foreign bank account and issued notices under section 148. The assessee objected to reopening; the CIT(A) upheld the reopening by reference to jurisdictional decisions. The Tribunal reviewed the matter, noted the factual background and authorities relied upon by the CIT(A), and did not sustain the contention that reopening was invalid in law so as to require quashing, instead addressing the substantive additions. [Paras 6, 15]

Reopening under section 147 was not set aside by the Tribunal; the matter was considered on merits.

Onus on Revenue to prove that an asset falls within taxing provisions - scope of taxation of non-resident under section 5(2) - receipts received or deemed to be received in India; accrual or arising in India - limited applicability of sections 68/69 to non-residents absent nexus with India - Additions made by the Assessing Officer - remittance credited to the assessee's NRE account and the peak credit shown in the HSBC Geneva account - were deleted; the Revenue failed to establish that the credits had an Indian nexus or were income taxable in India. - HELD THAT: - The Assessing Officer added amounts under provisions dealing with unexplained credits on the view that the assessee had not explained the source and that amounts represented income deemed to accrue or be received in India. The CIT(A) and the Tribunal examined whether, in the case of a non-resident, those provisions could be invoked absent evidence of nexus with India. Reliance was placed on the Supreme Court authority that the burden to prove that an asset falls within taxing provisions rests on the Department. The Tribunal agreed with the CIT(A)'s findings that (i) the assessee's non-resident status was not in dispute, (ii) there was no material to show business connection, source, or transfer from India to the foreign account, and (iii) mere information in a base note was insufficient to discharge the Department's burden. Consequently the additions under the impugned heads were not sustainable and were deleted. [Paras 13, 15, 16]

Additions in respect of the remittance to the NRE account and the peak credit in HSBC Geneva are deleted; revenue's grounds challenging the deletions are dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal for A.Y.2007-08 as not pressed for lack of requisite tax effect, and for A.Y.2006-07 dismissed all grounds of Revenue's appeal, affirming the CIT(A)'s deletion of the additions to the assessee's income because the Department failed to establish a taxable nexus of the foreign credits with India; the assessee's cross-objections consequently became infructuous.

Deduction under section 54B - suo-motu revision under section 263 - erroneous order prejudicial to the interests of the revenue - application of mind - change of opinion - verification by spot inspection and contemporaneous evidence (photographs, sale deed, Form-7/12, Google Earth)

Deduction under section 54B - verification by spot inspection and contemporaneous evidence (photographs, sale deed, Form-7/12, Google Earth) - application of mind - Whether the Assessing Officer's allowance of exemption under section 54B was erroneous and prejudicial to the revenue thereby justifying exercise of revisionary jurisdiction under section 263 - HELD THAT: - The Tribunal found that the Assessing Officer had raised specific queries during assessment, deputed an inspector for spot verification, obtained a contemporaneous inspection report and photographs, and had before her the sale deed and land record (Form-7/12) showing the nature of the land as agricultural. On perusal of these materials the Assessing Officer accepted the assessee's explanation that the land was used for agriculture, including seasonal vegetables and sugarcane, and granted relief. The Tribunal applied settled principles on section 263: the Commissioner can exercise suo-motu revision only where the AO's order is both erroneous and prejudicial to the revenue. Where the AO has made enquiries, considered evidence and taken a reasonable, plausible view permissible in law, mere disagreement by the Commissioner amounts to a change of opinion and does not render the order erroneous. The material on record in this case supported the AO's factual conclusion; nothing in the record showed that the view taken was unsustainable in law or reached without application of mind. Consequently, the jurisdiction under section 263 was not attracted and the PCIT's direction to reassess was impermissible. [Paras 15, 16, 17]

The Assessing Officer took a reasonable, plausible and legally sustainable view based on verification and evidence; the PCIT's exercise of revisionary power under section 263 is not justified and is set aside.

Final Conclusion: The appeal is allowed: the order passed by the Principal Commissioner under section 263 setting aside the assessment for AY 2015-16 is quashed as a mere change of opinion where the Assessing Officer had applied mind and acted on material supporting the section 54B exemption.

Disallowance of TDS credit - Form 26AS as evidentiary basis for TDS - processing of return under section 143(1) - rectification under section 154 - remand for verification - opportunity of hearing

Disallowance of TDS credit - Form 26AS as evidentiary basis for TDS - remand for verification - opportunity of hearing - Whether the claim of TDS credit of Rs. 80,951/- (part of the disputed TDS) should be verified and allowed to the assessee in light of records including Form 26AS. - HELD THAT: - The Tribunal noted that the CPC processing under section 143(1) and the rectification under section 154 resulted in short grant of TDS credit, and that the CIT(A) directed acceptance of additional credit without obtaining a remand report or verification from the Assessing Officer. The assessee produced details of receipts and corresponding TDS reflected in Form 26AS and relied on earlier favourable decisions for related years. The Department relied on mismatch with its internal database. Given that the CIT(A) did not obtain verification from the Assessing Officer and the CPC gave no reasons for some denials, the Tribunal found it appropriate in the interest of justice to remit the matter to the Assessing Officer. The Assessing Officer is directed to verify the correctness of the assessee's claim, including reconciliation with Form 26AS and departmental records, and to grant the TDS credit if supported by verification, after affording the assessee an opportunity of hearing.

Matter remanded to the Assessing Officer to verify the TDS claim (including Form 26AS reconciliation) and to allow the credit if established, after giving the assessee an opportunity of hearing.

Final Conclusion: The appeal is allowed for statistical purposes and the disputed TDS credit claim is remanded to the Assessing Officer for verification and decision in accordance with the directions given, after providing the assessee an opportunity of hearing.

Revisionary jurisdiction under section 263 - assessment framed under section 143(3) - valuation difference under section 56(2)(vii)(b) - date of allotment/agreement versus date of registration - allotment letter constituting a binding agreement - applicability of amended S.56(2)(vii)(b) from AY 2014-15

Revisionary jurisdiction under section 263 - valuation difference under section 56(2)(vii)(b) - date of allotment/agreement versus date of registration - allotment letter constituting a binding agreement - Validity of exercise of revisionary jurisdiction under section 263 on the ground that AO failed to invoke section 56(2)(vii)(b) in respect of alleged purchase at consideration lower than stamp duty value - HELD THAT: - The Tribunal held that the PCIT's invocation of revisionary jurisdiction under section 263 was unsustainable because the factual position established that the assessee had been allotted the flat by way of an allotment letter dated 25.02.2010 and had paid the entire agreed consideration by 30.06.2010; the registration executed on 10.12.2014 was consequent to earlier concluded obligations. The Tribunal applied the principle that an allotment letter containing substantive terms and acted upon by the parties constitutes a binding agreement, and relied on coordinate-bench authority holding that the amended provision of section 56(2)(vii)(b) (which was made applicable from AY 2014-15) cannot be invoked retrospectively to characterise a transaction already completed in an earlier year. On the facts, since the transfer and substantial performance occurred in AYs prior to the amendment, the assessment framed under section 143(3) was not erroneous or prejudicial for omission of section 56(2)(vii)(b). Accordingly the PCIT's order setting aside the assessment and directing fresh examination was quashed and the AO's order was restored. [Paras 6, 7]

Order passed under section 263 is quashed; assessment framed by AO is restored and the assessee's appeal is allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal, quashed the PCIT's revisionary order under section 263 and restored the assessment framed under section 143(3), holding that the allotment letter and earlier payment established the date of transaction prior to the applicability of the amended section 56(2)(vii)(b).

Short term capital gain - transfer of property - conditional sale and requirement of fulfilment of conditions before completion - section 50C - stamp duty value as deemed sales consideration - depreciation under section 32

Short term capital gain - transfer of property - conditional sale and requirement of fulfilment of conditions before completion - Deletion of the addition made as short term capital gain on sale of the flat - HELD THAT: - The Tribunal found that although a registered agreement for sale was executed in the year, possession had not been handed over and two unfulfilled conditions remained: payment of the balance consideration and obtaining of the NOC from Mumbai Port Trust for the leased property. The assessee had received only part payment and possession was contractually conditional upon full payment and NOC. Neither the Assessing Officer nor the CIT(A) produced substantive evidence to show completion despite these conditions. On these facts the Tribunal held the transaction to be a conditional sale that had not been completed during the year and therefore no short term capital gain arose in that year; the addition made by the AO and confirmed by the CIT(A) was set aside. [Paras 6]

Addition of short term capital gain deleted.

Section 50C - stamp duty value as deemed sales consideration - Invocation of section 50C not adjudicated as academic - HELD THAT: - Because the Tribunal concluded that the sale was not complete in the year and no capital gain was chargeable, the question of treating stamp duty value as deemed sales consideration under section 50C did not require adjudication and was left unconsidered at this stage. [Paras 7]

Issue rendered academic and not decided on merits.

WDV of asset - block of assets versus individual asset for computation of capital gain - Question of adopting WDV of flat versus WDV of block of assets not adjudicated as academic - HELD THAT: - The Tribunal treated this contention as consequential on the finding whether a transfer had taken place. Having held that the sale was not complete and no capital gain arose, the Tribunal did not examine whether WDV of the flat or of the block should be adopted for computation. [Paras 8]

Issue rendered academic and not decided on merits.

Depreciation under section 32 - consequential relief arising from finding of no transfer - Allowance of depreciation claimed on the flat - HELD THAT: - As the Tribunal concluded that the transfer was not complete during the year, the asset continued to be held by the assessee for the year under consideration. Consequently the disallowance of depreciation by the AO and confirmation by the CIT(A) was set aside and the Tribunal directed the Assessing Officer to allow the depreciation claimed on the flat. [Paras 9]

Depreciation on the flat to be allowed.

Final Conclusion: The appeal is allowed: the addition on account of short term capital gain is deleted and depreciation on the flat is to be allowed; issues concerning section 50C and the choice of WDV are rendered academic and were not adjudicated.

Cenvat credit of additional duty (CVD) paid under section 3(1) of the Customs Tariff Act - Rule 3(1)(vii) of the Cenvat Credit Rules, 2004 - equivalence requirement - Distinction between Customs Notification No. 12/2012-Cus and Excise Notification No. 12/2012-CE - Proviso restrictions in Rule 3(1)(i) applicable to excise notifications and not to customs notifications - Extended period of limitation (time-bar) where dispute is one of statutory interpretation

Cenvat credit of additional duty (CVD) paid under section 3(1) of the Customs Tariff Act - Rule 3(1)(vii) of the Cenvat Credit Rules, 2004 - equivalence requirement - Distinction between Customs Notification No. 12/2012-Cus and Excise Notification No. 12/2012-CE - Proviso restrictions in Rule 3(1)(i) applicable to excise notifications and not to customs notifications - Cenvat credit is admissible in respect of 2% CVD paid under Customs Notification No. 12/2012-Cus on imported coal. - HELD THAT: - The Tribunal held that Rule 3(1)(vii) permits credit of the additional duty leviable under section 3 of the Customs Tariff Act when it is equivalent to the duty of excise specified under clause (i), and that a concessional CVD levied under Customs Notification No. 12/2012-Cus (2%) is a concessional incidence of CVD flowing from the excise schedule rather than a change in the nature of the duty. The proviso in Rule 3(1)(i) disallowing credit where benefit of specified Central Excise notifications is availed applies to duties/notifications under the Central Excise regime and is not imported automatically into Rule 3(1)(vii) so as to bar credit for CVD paid under a Customs notification. The Tribunal relied on earlier tribunal decisions holding that the restriction in Rule 3(1)(i) concerns excise notifications applicable to indigenous goods and does not apply to concessions given under the Customs notification for imported goods; accordingly the Adjudicating Authority erred in applying Excise Notification No.12/2012-CE to deny credit taken on the basis of Customs Notification No.12/2012-Cus. The Tribunal therefore set aside the orders denying Cenvat credit and followed consistent precedents of the Tribunal on this issue. [Paras 7, 16, 17, 18, 19]

Cenvat credit of the 2% concessional CVD paid under Customs Notification No. 12/2012-Cus on imported coal is allowable and the impugned denial is set aside.

Extended period of limitation (time-bar) where dispute is one of statutory interpretation - Malafide, suppression and declarative ER-1 returns - Demand raised invoking extended period of limitation is not sustainable and is time-barred. - HELD THAT: - The Tribunal found that the dispute was a question of interpretation of the Cenvat Credit Rules and the Customs Tariff Act, and that identical issues had been the subject of multiple proceedings nationwide. In such circumstances, malafide or suppression could not be attributed to the appellants, who had declared the availment of Cenvat credit in their ER-1 returns. Because the Revenue applied an incorrect provision of law in denying credit, the invocation of the extended period of limitation was held to be untenable. Consequently the demand based on extended limitation was rejected. [Paras 8, 9]

The demand raised by invoking the extended period is unsustainable; the extended period cannot be invoked and the demand is time-barred.

Final Conclusion: The appeals are allowed: Cenvat credit of the 2% CVD paid under Customs Notification No. 12/2012-Cus on imported coal is admissible and the demands (including those raised by invoking the extended period) are set aside, with consequential relief as per law.

Cenvat credit on input service - time limit for availing cenvat credit - non-application of subsequently inserted limitation to invoices issued prior to amendment

Cenvat credit on input service - time limit for availing cenvat credit - non-application of subsequently inserted limitation to invoices issued prior to amendment - entitlement to cenvat credit where credit was availed after one year from invoice date but the invoices were issued before the amendment to Rule 4(1) prescribing the time limit - HELD THAT: - The Tribunal found no dispute that cenvat credit was taken after one year from the invoice dates. However, the invoices were indisputably issued prior to the amendment which inserted the six month/one year limitation in Rule 4(1). Relying on earlier decisions holding that a limitation introduced by a subsequent amendment does not apply to invoices issued before the amendment's effective date, the Tribunal held that the amended time limit could not be invoked to deny credit in respect of those earlier invoices. The Tribunal therefore concluded that the appellant was entitled to the cenvat credit and set aside the impugned order. [Paras 5, 6]

The appeal is allowed and the impugned order is set aside; the appellant is entitled to the cenvat credit in respect of invoices issued prior to 01.09.2014.

Final Conclusion: Where invoices were issued prior to the amendment introducing a time limit for availing cenvat credit, the subsequent limitation in amended Rule 4(1) does not operate to deny credit; appeal allowed and impugned order set aside.

Essential character of complete air conditioner - Levy of special excise duty on assemblies and parts - Failure to examine determinative factual criteria

Essential character of complete air conditioner - Board circular criteria - Remand for fresh factual determination - Classification of the assemblies cleared by the appellant for levy of special excise duty had to be determined by examining whether the cleared assemblies contained all six components specified in the Board circular so as to have the essential character of a complete air conditioner. - HELD THAT: - The Tribunal held that, in the appellant's own earlier case, it had already been accepted on the basis of the Board circular that an assembly can be regarded as a complete air conditioner only if it contains all the six specified components. If one or more of those components is absent, the assembly cannot be treated as a complete air conditioner and would remain only parts of air conditioner, on which special excise duty was not leviable. Since the adjudicating authority, in the impugned order, had not examined the appellant's specific claim as to whether the cleared assemblies actually contained all the six components, the determinative factual test had not been applied and the matter required fresh consideration on that limited point. [Paras 4]

The impugned order was set aside and the matter was remanded for de novo adjudication confined to verifying whether the assemblies cleared by the appellant contained all the six components mentioned in the Board circular.

Final Conclusion: The Tribunal held that liability to special excise duty depended on whether the cleared assemblies contained all six components specified in the Board circular so as to constitute a complete air conditioner. As that factual examination had not been undertaken in the impugned order, the order was set aside and the matter was remanded for fresh adjudication on that limited basis.

Cenvat Credit - GTA services - FOR sale and place of removal - transaction value under Section 4 of the Central Excise Act, 1944 - deemed inclusion of freight in assessable value - binding precedent of tribunal and High Court

Cenvat Credit - GTA services - FOR sale and place of removal - deemed inclusion of freight in assessable value - transaction value under Section 4 of the Central Excise Act, 1944 - Entitlement to Cenvat credit on GTA services where freight was borne by the assessee and included in the assessable value because the sale was on FOR basis. - HELD THAT: - The lower authorities denied Cenvat credit solely because the appellant had not produced a CAS-4 certificate to verify whether freight was included in the cost of the final product. The Tribunal found on the materials (invoices, LRs and CA/Cost Accountant certificates) that freight was borne by the appellant and not charged separately to the buyer, and therefore was deemed included in the assessable value on which duty was paid. Applying the transaction-value principle under Section 4 of the Central Excise Act, 1944, where the value arrived at under Section 4(1)(a) is accepted, no further question arises. On the facts the sales are FOR (buyer's place as place of removal) because expenses up to delivery at buyer's place were borne by the appellant. Following the Tribunal's earlier decisions in Ultratech Cements Ltd. and Sanghi Industries Ltd. (upheld by the Gujarat High Court) and consistent administrative guidance, credit of service tax paid on GTA for transportation beyond the place of removal cannot be denied when the sale is on FOR basis and freight is included in the assessable value. Thus the absence of a CAS-4 certificate did not justify denial of credit in these circumstances. [Paras 4, 5]

Credit of Cenvat on outward GTA services allowed as freight was borne by the appellant and included in the assessable value; impugned order set aside and the appeals allowed.

Final Conclusion: The appeals are allowed: the denial of Cenvat credit on GTA services is set aside because the sales were on FOR basis with freight borne by the appellant and included in the assessable value, and therefore Cenvat credit is admissible.

Reassessment under Section 43(1) of the OVAT Act - completion of assessment under Sections 39, 40, 42 and 44 - self-assessment and deemed acceptance of returns - prospective effect of statutory amendment (1st October, 2015) - reopening of assessment on the basis of information in possession

Reassessment under Section 43(1) of the OVAT Act - completion of assessment under Sections 39, 40, 42 and 44 - self-assessment and deemed acceptance of returns - Reopening of assessment under Section 43(1) of the OVAT Act in the absence of completion or formal acceptance of initial assessment for the tax period 1st April, 2010 to 31st March, 2011. - HELD THAT: - Prior to the amendments effective 1st October, 2015 Section 43(1) could be invoked only "where, after a dealer is assessed" under Sections 39, 40, 42 or 44 for the relevant tax period; this language presupposed an initial assessment having been made and accepted. The amendment effective 1st October, 2015 introduced the concept of "deemed" self-assessment and permitted invoking Section 43(1) on the basis of information in the assessing authority's possession even where there had been no formal acceptance of the return. Those amendments are prospective and cannot be treated as clarificatory for periods prior to 1st October, 2015. Consequently, for tax periods prior to 1st October, 2015 (including 1st April, 2010 to 31st March, 2011), reassessment under Section 43(1) is not sustainable in law unless the initial assessment under Sections 39, 40, 42 or 44 had been completed/accepted in accordance with the law then in force. Applying this principle to the present case, the reopening undertaken under Section 43(1) for the period 1st April, 2010 to 31st March, 2011 was held to be legally impermissible. [Paras 14, 15, 21, 22, 23]

Reopening of assessment under Section 43(1) for the tax period 1st April, 2010 to 31st March, 2011 is unsustainable in law in the absence of completion/formal acceptance of the initial assessment.

Final Conclusion: The Tribunal's order and the orders of the Joint Commissioner and Sales Tax Officer reopening assessment under Section 43(1) for the period 1st April, 2010 to 31st March, 2011 are set aside; the revision petition is allowed.

Rectification of assessment - mandamus to dispose of pending application - opportunity of being heard - statutory appeal as alternate remedy

Rectification of assessment - mandamus to dispose of pending application - opportunity of being heard - Direction to the assessing authority to consider and dispose of the rectification application (Ext.P5) if still pending, after affording opportunity of being heard, within a specified time. - HELD THAT: - The Court noted that Ext.P5 was received by the respondents on 26.3.2021 and, on the material before it, had not been disposed of. While the Single Judge observed that the remedy against the earlier assessment/rectification order lies by way of statutory appeal, the Writ Appeal court entertained the limited relief prayed for and directed the 2nd respondent to dispose of Ext.P5 as expeditiously as possible, preferably within four weeks from receipt of a copy of this judgment. The direction is qualified: it applies only if Ext.P5 is still pending and requires the authority to afford the appellant an opportunity of being heard before passing orders. The appellant was also granted liberty to re-submit Ext.P5 accompanied by a copy of the judgment within one week, to facilitate disposal. The Court accepted the Government Pleader's statement that it was not informed whether Ext.P5 had already been disposed of and therefore made the direction conditional on the application remaining pending. [Paras 3]

Ext.P5 shall be disposed of, if still pending, after hearing the appellant, preferably within four weeks; appellant may re-submit Ext.P5 with a copy of this judgment within one week.

Final Conclusion: The Writ Appeal is allowed in part by directing the authority to consider and dispose of the rectification application (Ext.P5), if pending, after giving the appellant an opportunity of hearing and preferably within four weeks; appellant permitted to re-submit Ext.P5 within one week.

Compounding of offence under Section 147 of the Negotiable Instruments Act - compensation under Section 357(3) Cr.P.C. payable only when sentence (other than fine) is imposed - limited scope of revisional jurisdiction under Section 397 Cr.P.C. - forfeiture of admission deposit towards sentence and transfer to legal services authority

Compounding of offence under Section 147 of the Negotiable Instruments Act - compensation under Section 357(3) Cr.P.C. payable only when sentence (other than fine) is imposed - Petitioner is not entitled to the deposit made at admission (claimed as compensation) after the offence under Section 138 N.I. Act was compounded. - HELD THAT: - The offence under Section 138 N.I. Act is compoundable by virtue of Section 147 of the N.I. Act and the parties executed a voluntary Mediation Settlement directing repayment. Once the offence is compounded in accordance with Section 147, imposition of sentence does not arise. Section 357(3) Cr.P.C. authorises an order for compensation only when a court imposes a sentence (other than fine) and deems compensation appropriate. In the present facts there is no subsisting sentence to which compensation under Section 357(3) can be tethered; accordingly that provision is inapplicable and the petitioner cannot claim the admission deposit as compensation following compounding of the offence. [Paras 6, 7, 8]

Claim for the deposited amount on the basis of Section 357(3) Cr.P.C. is rejected; petitioner is not entitled to compensation after compounding.

Limited scope of revisional jurisdiction under Section 397 Cr.P.C. - forfeiture of admission deposit towards sentence and transfer to legal services authority - Impugned order modifying sentence and directing forfeiture/transfer of the admission deposit is not legally infirm and the revision petition does not merit interference; costs are imposed for misuse of process. - HELD THAT: - The revisional jurisdiction under Section 397 Cr.P.C. is narrowly circumscribed and is available where there is a patent legal error, perversity, non consideration of relevant material or arbitrary exercise of discretion. The impugned order records a mediated settlement, modification of sentence and transfer/forfeiture of the deposit in accordance with that outcome. The High Court finds no palpable error or illegality in the trial court's considered order and holds that the petition is misconceived and an abuse of process. Having regard to the misuse of judicial time, the Court exercises its power to impose a monetary cost to deter such proceedings, directing deposit to a notified welfare fund and dismissal of the petition. [Paras 9, 10, 11]

Revision dismissed; impugned order upheld and petitioner directed to pay costs to be deposited as ordered.

Final Conclusion: Revision petition dismissed; petitioner is not entitled to the admission deposit as compensation after compounding of the offence, the trial court's order is upheld and a cost is imposed for abuse of process.