TaxTMI Updates e-Newsletter
Dec 17,2019

Passage of benefit of tax rate reduction by commensurate reduction in prices - anti-profiteering determination and quantification - methodology for computation of profiteering (SKU-wise comparison of pre- and post-rate prices) - set aside and deposit in Consumer Welfare Fund - interest on amount returned/deposited - jurisdiction and procedural compliance of anti-profiteering investigation - show cause for imposition of penalty under Section 171(3A) - monitoring and enforcement by Commissioners of CGST/SGST

Anti-profiteering determination and quantification - methodology for computation of profiteering (SKU-wise comparison of pre- and post-rate prices) - Whether the Respondent had profiteered and the quantum thereof - HELD THAT: - On consideration of the DGAP report, the Respondent's submissions and supplementary material, the Authority found that the Respondent had not passed on the benefit of GST rate reductions to recipients on a commensurate basis. The Authority accepted the DGAP's methodology of comparing pre and post rate reduction prices at the level of outward taxable supplies for each SKU and, after correcting identified errors, fixed the total amount of profiteering at Rs. 89,73,16,384 (revised computation in Annexures). The Authority rejected the Respondent's product category aggregation/netting methodology and its alternative contentions (discount codes, extra grammage, rounding/coinage, operational constraints) as inadequate to discharge the statutory obligation to pass the commensurate benefit on each supply. The illegally collected GST component was also included in the quantified profiteering. [Paras 121, 146, 161, 200]

Profiteering established; quantified at Rs. 89,73,16,384.

Set aside and deposit in Consumer Welfare Fund - interest on amount returned/deposited - Reliefs to be ordered in relation to the quantified profiteering and adjustment for amounts already deposited - HELD THAT: - The Authority directed the Respondent to reduce prices commensurately and to deposit the balance of the profiteered amount after adjusting the suo moto deposit already made in the Consumer Welfare Fund. Having adjusted the amount the Respondent had already deposited in the CWF, the Authority ordered deposit of the balance amount of Rs. 73,14,83,660 within three months, with interest at 18% from the dates the amounts were realised until deposit, and provided a State/UT wise breakup in the revised Annexure. The Commissioners of CGST/SGST were directed to monitor compliance and report within four months. [Paras 200, 202]

Respondent directed to reduce prices commensurately; deposit Rs. 73,14,83,660 (after adjustment) with 18% interest; compliance to be monitored by Commissioners CGST/SGST.

Methodology for computation of profiteering (SKU-wise comparison of pre- and post-rate prices) - passage of benefit of tax rate reduction by commensurate reduction in prices - Validity of the Respondent's asserted methodologies (category-level netting, passing benefit by extra grammage or by discounts) and admissibility of compliance costs as offsets - HELD THAT: - The Authority held that Section 171 requires passing the benefit by commensurate reduction in prices on every supply; therefore computations and verification must focus on SKU wise outward supplies. The Respondent's product category aggregation and netting off across SKUs was inconsistent with the statutory mandate and Article 14 considerations; passing benefit by extra grammage or unsubstantiated discounts was not accepted in the absence of corroborative evidence showing commensurate benefit on each SKU. Expenditure on re labelling/packaging or publicity was not permissible as an offset against consumers' entitlement where alternative measures (stickering/reprinting) were available and no statutory provision allowed such deductions. [Paras 109, 110, 111, 146]

Respondent's category level methodology, grammage/discount defenses and claimed compliance costs disallowed for computation of profiteering.

Jurisdiction and procedural compliance of anti-profiteering investigation - show cause for imposition of penalty under Section 171(3A) - Respondent's procedural and jurisdictional objections and consequential enforcement action - HELD THAT: - The Authority rejected the Respondent's objections that proceedings were without jurisdiction, that a prior prescribed application or screening was mandatory in the circumstances, or that principles of natural justice were violated. The OM directing provisional deposit and the Respondent's own communications acknowledging non passing of benefit justified initiation of investigation under the Rules; the Respondent was afforded copies of the DGAP report, opportunities of hearing and multiple chances to file evidence. While the Authority accepted that penal consequences may follow, it revised the profiteering figure and adjusted the amount already deposited; it directed issuance of a separate show cause notice under Section 171(3A) to afford opportunity to the Respondent to explain why penalty should not be imposed, and withdrew the earlier notice to the extent it proposed other penal provisions. [Paras 72, 74, 184, 201]

Procedural and jurisdictional challenges rejected; a show cause notice for penalty under Section 171(3A) to be issued; earlier proposal invoking certain penal provisions withdrawn to that extent.

Final Conclusion: The Authority found that M/s Nestle India Ltd. had not passed on the commensurate benefit of GST rate reductions on affected SKUs and quantified profiteering at Rs. 89,73,16,384. After adjusting amounts already deposited in the Consumer Welfare Fund, the respondent was directed to deposit the balance with 18% interest, reduce prices commensurately, and comply with monitoring directions; procedural and methodological objections were rejected and a show cause notice under Section 171(3A) was directed for initiation of penalty proceedings.

Agricultural income - estimation of expenditure for agricultural operations - acceptance of sales invoices for agricultural produce - apportionment excluding income from sale of trees - reasonableness of percentage deduction

Agricultural income - estimation of expenditure for agricultural operations - acceptance of sales invoices for agricultural produce - reasonableness of percentage deduction - Whether the addition of Rs. 2,80,830/- sustained by the CIT(A) by estimating agricultural expenditure at 15% was justified. - HELD THAT: - The Tribunal noted that the Assessing Officer had initially estimated expenditure at 30% and made an incorrect computation which produced an excessive addition. The CIT(A) accepted the assessee's sales bills for agricultural produce (which the AO did not dislodge or verify with third parties), excluded receipts from sale of trees from agricultural operations, and applied a 15% deduction as a reasonable estimate of expenditure for the agricultural operations (i.e., against gross agricultural receipts of Rs. 27,92,999/-). The Tribunal held that the AO's claim of unrealistically low claimed expenses was addressed by the CIT(A)'s approach: acceptance of sales invoices, exclusion of tree-sale receipts from the operational agricultural income, and application of a moderated, evidence based percentage deduction following precedent. As the CIT(A) corrected the AO's computational errors and adopted a reasonable estimation of expenses, the partial addition upheld by the CIT(A) (Rs. 2,80,830/-) was found to be sustainable.

Addition of Rs. 2,80,830/- upheld; appeal dismissed.

Final Conclusion: The Tribunal found no infirmity in the CIT(A)'s reasoning: sales invoices were accepted, income from sale of trees was treated separately, and a 15% expenditure estimate on agricultural operations was reasonable; the assessee's appeal is dismissed.

Disallowance under section 40A(2) - reasonableness of payments to directors - allowability of directors' commission - expenditure and depreciation on aircraft - business use versus non business use - section 14A and Rule 8D - disallowance for expenditure in relation to exempt income - recording of satisfaction under section 14A - remand to Assessing Officer for fresh examination or recomputation - follow and apply coordinate bench precedents in assessee's own case - capital nature of incentives under a package scheme of incentives - allowability of provision for warranty where created on scientific basis - depreciation rate for UPS and allied items - classification with computers - restoration of issues for fresh adjudication where factual parity with prior orders

Disallowance under section 40A(2) - reasonableness of payments to directors - allowability of directors' commission - remand to Assessing Officer for fresh examination or recomputation - Disallowance of commission paid to Shri Atul Kirloskar under section 40A(2). - HELD THAT: - The Tribunal observed that for disallowance under section 40A(2) the onus is on Revenue to establish that the payment to a person referred in clause (b) is excessive or unreasonable in relation to the fair market value of services rendered. The authorities below did not examine the terms and conditions of appointment or whether the appointment terms permitted payment of commission at that time, and did not consider that the payment was within Companies Act limits and disclosed in the annual report. In view of these lacunae and the need for factual verification, the matter is directed back to the Assessing Officer for reexamination in light of the observations; the assessee's ground is allowed for statistical purposes. [Paras 5]

Remitted to the Assessing Officer for fresh examination; assessee's ground allowed for statistical purpose.

Expenditure and depreciation on aircraft - business use versus non business use - follow and apply coordinate bench precedents in assessee's own case - Allowability of aircraft running expenses and depreciation and extent of disallowance. - HELD THAT: - The Tribunal noted prior decisions in the assessee's own case where similar facts led to restriction of disallowance to 15%. As the facts and reasons for disallowance in the year under appeal are identical to earlier years, the Tribunal followed its earlier coordinate bench order and modified the CIT(A)'s finding by restricting the disallowance to 15% of the aircraft expenses. [Paras 6, 19]

Disallowance restricted to 15% of aircraft expenses; assessee's ground partly allowed and Revenue's corresponding ground dismissed.

Section 14A and Rule 8D - disallowance for expenditure in relation to exempt income - recording of satisfaction under section 14A - Assessee's appeal against disallowance under section 14A (application of Rule 8D). - HELD THAT: - The Tribunal found that the Assessing Officer had recorded the requisite satisfaction before invoking Rule 8D. The argument that manner of recording satisfaction is unspecified or that no direct expenditure (other than salary) was incurred for earning exempt income did not persuade the Tribunal. Consequently, the assessee's appeal against the section 14A disallowance was dismissed. [Paras 9, 10]

Assessee's appeal dismissed; section 14A disallowance sustained in principle (as applied by AO).

Section 14A and Rule 8D - disallowance for expenditure in relation to exempt income - follow and apply coordinate bench precedents in assessee's own case - remand to Assessing Officer for fresh examination or recomputation - Revenue's challenge to deletion of section 14A addition and recomputation of disallowance. - HELD THAT: - On review of the assessee's balance sheet and having regard to the jurisdictional High Court decision referred to (Reliance Utilities and Power Ltd.), the Tribunal observed that where substantial interest free own funds exist, a presumption may arise that investments were made from such funds. In view of these facts and the need for recomputation consistent with the cited precedent, the Tribunal restored the matter to the Assessing Officer for recomputation of disallowance under section 14A. [Paras 16]

Issue restored to the Assessing Officer for recomputation of the section 14A disallowance; Revenue's ground allowed for statistical purpose.

Late delivery fees (liquidated damages) - restoration to Assessing Officer - restoration of issues for fresh adjudication where factual parity with prior orders - Revenue's ground on addition on account of late delivery fees (liquidated damages). - HELD THAT: - The Tribunal found the issue to be recurring with facts identical to earlier assessment years where the matter was restored to the Assessing Officer by the Tribunal. Given the parity of facts, the Tribunal directed that the issue be restored to the Assessing Officer to decide in line with earlier directions. [Paras 14]

Matter restored to the Assessing Officer for fresh adjudication in line with prior Tribunal directions; Revenue's ground allowed for statistical purpose.

Depreciation rate for UPS and allied items - classification with computers - follow and apply coordinate bench precedents in assessee's own case - Allowability of depreciation at 60% on UPS and allied items. - HELD THAT: - The Tribunal noted that in the earlier assessment year the coordinate bench had upheld allowance of depreciation at 60% on such items and the CIT(A) in the year under appeal followed that conclusion. The Tribunal found no infirmity in the appellate authority's approach and affirmed the allowance. [Paras 15]

CIT(A)'s decision allowing depreciation at 60% on UPS and allied items upheld; Revenue's ground dismissed.

Capital nature of incentives under a package scheme of incentives - follow and apply coordinate bench precedents in assessee's own case - Taxability of subsidy/incentive received under the Package Scheme of Incentives, 2001. - HELD THAT: - Relying on coordinate bench decisions (and a Tribunal decision cited) which held that incentives under the Package Scheme of Incentives are capital in nature, the Tribunal found the facts identical and did not interfere with the CIT(A)'s conclusion that the receipt is capital and not taxable as revenue. [Paras 18]

CIT(A)'s finding that the incentive is a capital receipt upheld; Revenue's ground dismissed.

Allowability of provision for warranty where created on scientific basis - follow and apply coordinate bench precedents in assessee's own case - Allowability of provision for warranty created during the year. - HELD THAT: - The Tribunal observed that identical provisions in earlier years were accepted as created on a scientific basis and that the Department had not contested those appellate findings before the Tribunal. The CIT(A) followed its earlier order and granted relief; the Tribunal found no reason to interfere. [Paras 20]

Provision for warranty held allowable; CIT(A)'s finding upheld and Revenue's ground dismissed.

Allowability of directors' commission - disallowance under section 40A(2) - reasonableness of payments to directors - Revenue's challenge to deletion of disallowance of commission paid to directors (other than the specific remand for Shri Atul Kirloskar). - HELD THAT: - The Tribunal noted that in the assessee's own case for earlier years the commission paid to directors had been allowed by the Tribunal. Having regard to those findings the Tribunal saw no reason to interfere with the CIT(A)'s deletion of the addition and therefore upheld the appellate authority's decision. [Paras 17]

CIT(A)'s deletion of the disallowance of directors' commission upheld; Revenue's ground dismissed.

Final Conclusion: For assessment year 2010-11, the Tribunal partly allowed the assessee's appeal by remitting the specific director commission issue to the Assessing Officer and restricting aircraft related disallowance to 15%; the assessee's separate challenge to the section 14A disallowance was dismissed; the Revenue's appeal was partly allowed by restoring specified issues to the Assessing Officer for fresh adjudication and otherwise dismissed where the CIT(A) followed coordinate bench precedents or existing appellate findings.

Re-opening of assessment barred by limitation under proviso to Section 147 - disclosure of material facts and true disclosure in return - original assessment completed under Section 143(3) and effect on subsequent reopening - application of Section 149 limitation where alleged non-disclosure relates to assets not put to use

Re-opening of assessment barred by limitation under proviso to Section 147 - disclosure of material facts and true disclosure in return - original assessment completed under Section 143(3) and effect on subsequent reopening - Validity of notice under Section 148 where original assessment under Section 143(3) had been completed and the assessee had disclosed depreciation, hire income and supporting documents. - HELD THAT: - The Court held that once an original assessment has been completed under Section 143(3) after scrutiny, the proviso to Section 147 precludes reopening beyond four years from the end of the relevant assessment year unless the limited exceptions in the proviso are attracted. The assessee had furnished all primary material, including disclosure of hire income, claim of depreciation in respect of the boiler and turbine, and supporting documents during the original assessment proceedings. The Assessing Officer relied on the same material that was available and considered during the original assessment and there was no case made out that material facts were not disclosed or were furnished only after being called for. In these circumstances the notice issued under Section 148 on 03.04.1997 was held to be bad in law as not conforming to the requirements of Section 147 proviso, and the re-opening was annulled. [Paras 5, 6]

Notice under Section 148 issued on 03.04.1997 is invalid and re-opening is barred as the assessee had fully and truly disclosed the material facts at the time of original assessment under Section 143(3).

Application of Section 149 limitation where alleged non-disclosure relates to assets not put to use - disclosure of material facts and true disclosure in return - Whether the reopening was justified under the contention that the assessee failed to disclose that the boiler and turbine were not put to use and therefore Section 149 limitations permitted reassessment. - HELD THAT: - The Court considered the appellant's contention under the second substantial question but found no support in the record. The Tribunal recorded that the reasons for reopening were not produced for verification and that the assessee had previously furnished all details regarding hiring of the boiler and turbine. The Assessing Officer had not brought any new material to establish non-disclosure of material facts; instead the same material was relied upon which had been before the original Assessing Officer. On this basis the appellate authorities rightly rejected the contention that Section 149 authorised reassessment, and the reopening was not sustained. [Paras 4, 6, 8]

The contention that reassessment was justified under Section 149 for alleged non-disclosure that assets were not in use is rejected; reopening was not justified on that ground.

Final Conclusion: The High Court dismissed the Revenue's appeal, upholding the orders of the Commissioner (Appeals) and the Tribunal annulling the reassessment; the notice under Section 148 was held invalid as the assessee had fully disclosed the material facts during the original assessment completed under Section 143(3).

Allowability of provision for warranty based on past experience and systematic data - provision for stock obsolescence and valuation of inventory at cost or net realizable value whichever is lower - requirement to furnish details to assessing officer for claims based on estimates - treatment of administrative expenses recovered as operating revenue for computing operating profit margin

Allowability of provision for warranty based on past experience and systematic data - requirement to furnish details to assessing officer for claims based on estimates - Provision for warranty - whether claim based on historical data and averages is allowable and whether the matter must be remanded for verification of details - HELD THAT: - The Tribunal accepted the coordinate-bench reasoning that a provision for warranty calculated on the basis of past experience and systematic data (average of prior years) can constitute a deductible present obligation where a reliable estimate is possible. The Tribunal relied on its earlier decision in the assessee's own case and the principles recognized by the Supreme Court that provisions based on historical trends and technical evaluation have a sound basis. However, in the present assessment year the CIT(A) confirmed disallowance solely for want of details. In the interest of natural justice the Tribunal set aside the CIT(A)'s order and restored the issue to the file of the AO for fresh examination, directing the assessee to furnish supporting details to the satisfaction of the assessing officer and for the AO to decide the claim in light of the Tribunal's earlier decision. [Paras 6]

Set aside and remitted to the AO for fresh consideration on production of details; in principle claim allowable if supported by historical data and technical evaluation.

Provision for stock obsolescence and valuation of inventory at cost or net realizable value whichever is lower - requirement to furnish details to assessing officer for claims based on estimates - Provision for stock obsolescence - whether the provision is permissible and the consequences of debit to P&L instead of reducing closing stock; remand for verification of subsequent opening stock treatment - HELD THAT: - The Tribunal endorsed the accounting principle that inventory must be valued at cost or net realizable value, whichever is lower, and recognised that a provision for obsolescence made to the P&L is acceptable provided the corresponding opening stock of the subsequent year is taken after reducing the provision. The CIT(A) had confirmed disallowance for want of details; accordingly, the Tribunal set aside the CIT(A) order and remitted the matter to the AO to examine the details to be furnished by the assessee and verify that the opening stock of the subsequent year reflects the reduction for the provision made. [Paras 6]

Set aside and remitted to the AO for verification of details; in principle provision allowable subject to correct accounting in subsequent year.

Treatment of administrative expenses recovered as operating revenue for computing operating profit margin - Whether administrative expenses recovered by the assessee form part of operating revenue for the purpose of computing operating profit margin - HELD THAT: - The Tribunal followed the coordinate-bench decision in the assessee's own case for AY 2010-11 and the reasoning of the DRP that amounts shown as 'administrative expenses recovered' are reimbursements of expenses incurred for the related company. The Tribunal agreed that if such income is excluded from operating revenue, the corresponding expenses must also be excluded from operating cost; since the TPO/AO had not reduced the corresponding expenses, the DRP and the CIT(A) rightly directed that administrative expenses recovered be included in operating revenue for computing operating margin. The revenue did not contest the coordinate-bench conclusion before the Tribunal. [Paras 10]

CIT(A)'s order upheld - administrative expenses recovered to be treated as part of operating revenue for operating profit margin computation.

Final Conclusion: Assessee's cross-appeal allowed in part: issues on provision for warranty and stock obsolescence set aside and remitted to the AO for fresh examination on production of details (in principle allowable if supported by systematic historical data and correct subsequent accounting); revenue's appeal dismissed - administrative expenses recovered to be treated as operating revenue for computing operating profit margin.

Allowability of expenditure incurred by a partner for earning partnership remuneration - characterisation of expenses as firm liability versus personal expense of partner - rule of consistency in assessment treatment across years - remand for verification and opportunity to produce evidence

Allowability of expenditure incurred by a partner for earning partnership remuneration - characterisation of expenses as firm liability versus personal expense of partner - rule of consistency in assessment treatment across years - Whether the salary paid by the assessee to two employees could be allowed as business expenditure against remuneration received from the partnership firm. - HELD THAT: - The Tribunal found that the salary payments were not disputed and that in preceding and subsequent assessment years the revenue had accepted similar payments as allowable against the remuneration taxed as business income. It held that the nature of the expenditure could not be altered by the CIT(A) where the payments were for the purpose of earning the partner's share of income from the firm, observing that the principle in CIT v. Ramlik Lal Kothari supports allowability of expenditure incurred by a partner to earn income from the partnership. The Tribunal also relied on the consistency of treatment in other years and in respect of another partner, and noted absence of any proceedings under reassessment provisions to revisit those years. For these reasons the Tribunal set aside the disallowance made by the AO and confirmed by the CIT(A) and allowed the ground raised by the assessee. [Paras 10]

Disallowance of Rs. 1,80,000 was set aside and the claim allowed.

Remand for verification and opportunity to produce evidence - computation of income from house property where tenancy change is asserted - Whether the AO's addition to income from house property should be sustained where the assessee claims an intervening period of vacancy/alternate tenancy but produced no documentary proof before the authorities. - HELD THAT: - The AO computed income on the basis that the assessee failed to produce documentary evidence that the earlier tenant had vacated and that a subsequent tenancy at a lower rent commenced during the year. The CIT(A) upheld the addition for lack of supporting documentation. The Tribunal observed that the assessee, if given an opportunity, could substantiate the claim and in the interest of justice directed restoration of the issue to the file of the AO for verification, with a direction to grant the assessee an opportunity to produce evidence and to decide the matter afresh in accordance with law and facts. [Paras 15]

Matter remanded to the AO to grant opportunity to the assessee to substantiate the vacancy/alternate tenancy claim and to decide the issue afresh.

Final Conclusion: The appeal was allowed for statistical purposes: the disallowance of Rs. 1,80,000 was set aside and allowed; the addition of Rs. 5,25,000 under house property was remanded to the AO for fresh verification after affording the assessee an opportunity to produce evidence.

Penalty under section 271B - Tax audit under section 44AB - Reasonable cause under section 273B - Furnishing audit report before completion of assessment - Technical/venial breach not causing loss to the revenue

Penalty under section 271B - Tax audit under section 44AB - Furnishing audit report before completion of assessment - Technical/venial breach not causing loss to the revenue - Reasonable cause under section 273B - Whether penalty under section 271B can be sustained where the tax audit report required by section 44AB was filed with the return after the due date but the audit report was obtained within the due date and was available to the Assessing Officer before completion of assessment - HELD THAT: - The Tribunal found no dispute that the audit report was obtained within the due date under section 44AB and that the audit report was filed along with the return and made available to the Assessing Officer before completion of the assessment. The assessee explained a bonafide belief that the audit report could be filed together with the return before 31.3.2015 and that delay in filing the return arose from reconciliation of TDS entries in Form 26AS. The Tribunal noted that the Cochin Bench has considered identical circumstances and held that where the audit report is available to the assessing officer before completion of assessment the delay in furnishing it constituted only a technical or venial breach which caused no loss to the exchequer and therefore did not attract penalty under section 271B. Applying that reasoning, and having regard to the absence of prejudice to revenue because the audit report was before the Assessing Officer during assessment, the Tribunal concluded that the case falls within the exception recognised by precedent and that the explanations, including the bonafide belief and circumstances leading to delayed filing, suffice to treat the breach as not warranting penalty. The Tribunal thus set aside the appellate authority's confirmation of penalty and directed deletion of the penalty levied by the AO. [Paras 5, 7, 8]

Penalty under section 271B deleted and the order of the CIT(A) setting aside; AO directed to delete the penalty for AY 2014-15.

Final Conclusion: Appeal allowed; penalty under section 271B for Assessment Year 2014-15 deleted as the delayed filing of the tax audit report was a technical/venial breach, the audit report was available before completion of assessment and no loss to the revenue was caused.

Adjustment of security deposit against unrealised rent - Addition of security deposit as income - Allowability of depreciation where business not closed - Deductibility of interest on earlier-year loan

Adjustment of security deposit against unrealised rent - Addition of security deposit as income - Whether the security deposit of Rs. 63.36 lakhs could be treated as assessable rental income by adjusting it against unrealised rent for AY 2015-16. - HELD THAT: - The Tribunal examined the lease terms, the pending litigation between the assessee and its tenants and the decree of the Hon'ble High Court in favour of the assessee. It accepted the assessee's position that adjustment of the security deposit against unrealised rent was not permissible while the tenants had filed suit for recovery of the security deposit and possession was sub judice. The Tribunal noted that the assessee included the amount in its profit and loss account in AY 2016-17 after the High Court's decision and found no revenue leakage. On these facts the Assessing Officer's addition treating the security deposit as rental income was held to be unsustainable and deleted. [Paras 15, 16]

Addition of Rs. 63.36 lakhs on account of security deposit deleted; Ground No. 2 allowed.

Allowability of depreciation where business not closed - Deductibility of interest on earlier-year loan - Whether depreciation and interest on car loan amounting to Rs. 65,22,615/- were rightly disallowed on the ground that the assessee carried out no business activity in AY 2015-16. - HELD THAT: - The Tribunal found no material to suggest that the assessee had closed its business permanently. It observed that depreciation was claimed on written down value (indicating prior use in business) and that the assessee made further advances towards land (demonstrating continuity or genuine prospect of business revival). Relying on the principle that depreciation is allowable so long as the business is not closed once for all, the Tribunal held the assessee entitled to depreciation. Interest related to borrowings from earlier years was also held deductible since the Assessing Officer produced no evidence of business closure to justify disallowance. [Paras 21, 23, 24]

Addition of Rs. 65,22,615/- by way of disallowance of depreciation and interest deleted; Ground No. 3 allowed.

Final Conclusion: The appeal is allowed; the additions of Rs. 63.36 lakhs on account of security deposit and Rs. 65,22,615/- on account of depreciation and interest are deleted.

Applicability of Section 50C - Deemed consideration under Section 50C - Transactions not registered with registration authorities - Prospective operation of statutory amendment - Binding nature of CBDT circulars on the Revenue

Applicability of Section 50C - Transactions not registered with registration authorities - Prospective operation of statutory amendment - Binding nature of CBDT circulars on the Revenue - Whether Section 50C could be invoked by the Assessing Officer in respect of transfers that took place prior to 1 October 2009 and in respect of transactions not registered with registration authorities. - HELD THAT: - The Tribunal examined that the legislative amendment and the CBDT Circular No.5/2010 make clear that the amended scope of Section 50C is applicable with effect from 1 October 2009 and that transactions not registered with the registration authorities are excluded from the operation of Section 50C. The Tribunal relied on the explanatory circular and the High Court decision in CIT v. R. Sugantha Ravindran which accepted the circular's clarification and on authoritative precedent affirming that departmental circulars are binding on the Revenue. The Tribunal further observed that the insertion of the words expanding Section 50C after 1 October 2009 brought a new class of transactions (transfers without or before registration) within the section and, being an inclusion of a new class, must operate prospectively. Applying these conclusions to the facts - where the impugned transfers and agreements were executed prior to 1 October 2009 and were not registered - the Tribunal held that Section 50C could not be invoked by the Assessing Officer in the assessment for the year under consideration. The Tribunal therefore found no error in the CIT(A)'s acceptance of the circular and in allowing the assessee's appeal. [Paras 6, 7]

The appeal by the Revenue is dismissed; Section 50C was not invocable in respect of the pre-1 October 2009 unregistered transactions and the CIT(A) correctly afforded relief.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s order, holding that the amended scope of Section 50C and the CBDT circular operate from 1 October 2009 and do not apply to the unregistered transfers in issue.

Penalty under Section 272A(2)(c) of the Income Tax Act, 1961 - failure to comply with notice under Section 133(6) - refusal to sign the consent waiver form - reopening of assessment under Section 147 and its subsequent dropping - condonation of delay in filing appeal

Condonation of delay in filing appeal - Whether the delay of 46 days in filing the appeal should be condoned. - HELD THAT: - The Tribunal considered the assessee's application supported by an affidavit explaining that the delay occurred due to unavoidable business travel between 15.04.2018 and 27.06.2018. The Department did not oppose condonation. Applying established principles, the Tribunal found the delay to be bona fide and deserving of condonation and accordingly allowed the application. [Paras 6]

Delay of 46 days in filing the appeal is condoned.

Penalty under Section 272A(2)(c) of the Income Tax Act, 1961 - failure to comply with notice under Section 133(6) - refusal to sign the consent waiver form - reopening of assessment under Section 147 and its subsequent dropping - Whether penalty under Section 272A(2)(c) for alleged wilful failure to furnish information called for under Section 133(6) is justified where the assessee denied ownership of the foreign bank account and refused to sign the consent waiver form. - HELD THAT: - The Assessing Officer levied penalty on the premise that the assessee willfully failed to comply with notice under Section 133(6) by not signing the consent waiver form required to obtain bank statements from HSBC, Geneva. The Tribunal found that the assessee, in response to the notice, expressly denied ownership of the bank account and gave that denial as the reason for refusing to sign the consent waiver form. The Tribunal observed that there was no material on record to rebut the assessee's categorical denial or to show that specific information called for under the Section 133(6) notice remained unfurnished. The coordinate bench's decision in the father's case, where a similar penalty was vacated on analogous facts, was noted and relied upon. In these circumstances the Tribunal concluded that non-signing of the consent waiver, when backed by a denial of account ownership, could not be equated with wilful non-compliance warranting penalty under Section 272A(2)(c). [Paras 9, 10]

Penalty imposed under Section 272A(2)(c) is quashed.

Final Conclusion: The Tribunal condoned the 46-day delay in filing the appeal and, on merits, quashed the penalty imposed under Section 272A(2)(c) as the assessee's denial of ownership and refusal to sign the consent waiver could not be treated as wilful non-compliance with the notice under Section 133(6).

Deduction of tax at source under section 194H - Principal-to-principal transaction - Principal-agent relationship - Commission income - Deemed assessee-in-default under section 201(1) and interest under section 201(1A)

Deduction of tax at source under section 194H - Principal-to-principal transaction - Principal-agent relationship - Commission income - Whether amounts paid to stockists were commission liable to deduction of tax at source under section 194H or were payments in the nature of sale on a principal-to-principal basis not exigible to TDS - HELD THAT: - The Tribunal examined the contractual arrangements, invoices and modus operandi and agreed with the CIT(A) and a coordinate bench of the Tribunal that the assessee sold goods to stockists with invoices (inclusive of excise and sales tax) and transfer of title on delivery. The arrangement for handling, packing and dispatch through CFAs was held to ensure proper storage and delivery and did not convert the relationship into one of principal-agent providing managerial services. On the basis of the agreement and earlier consistent decisions, the transactions were held to be sales between principals and not commission-bearing agency arrangements. Consequently, the requirement to deduct tax under section 194H did not arise. [Paras 4, 7]

Payments to stockists were sales on a principal-to-principal basis and not commission liable to TDS under section 194H; the CIT(A)'s deletion of the addition was upheld and the revenue's appeal dismissed on this point.

Deemed assessee-in-default under section 201(1) and interest under section 201(1A) - Whether the assessee was a deemed defaulter under section 201(1) and liable to consequent interest under section 201(1A) for non-deduction of tax on the amounts paid to stockists - HELD THAT: - The liability to be treated as a deemed defaulter and the levy of interest were consequential on the primary finding of TDS liability. Having held that the payments were not commission and no TDS under section 194H was payable, the Tribunal concurred with the CIT(A) that there was no basis to treat the assessee as a defaulting deductor. The consequential interest computed by the AO was therefore correctly deleted. [Paras 4, 7]

Interest and deemed-defaulter determination under sections 201(1) and 201(1A) were deleted as consequential to the finding that no TDS under section 194H was payable.

Final Conclusion: The Tribunal dismissed the revenue's appeal and upheld the CIT(A)'s finding that payments to stockists were sales on a principal-to-principal basis and not commission liable to TDS under section 194H; consequential additions and interest under sections 201(1) and 201(1A) were deleted and the assessee's cross-objection was treated as not pressed.

Deemed dividend under section 2(22)(e) - deemed dividend - beneficial owner - substantial interest - attribution of income to shareholder

Deemed dividend under section 2(22)(e) - deemed dividend - beneficial owner - substantial interest - attribution of income to shareholder - Whether the addition made by the Assessing Officer treating the loan received from M/s Puran Associates Pvt. Ltd. as deemed dividend in the assessment year 2011-12 should be sustained. - HELD THAT: - The Assessing Officer treated the loan as deemed dividend under deemed dividend under section 2(22)(e) on the basis that the lender was not an NBFC and that the beneficial owners of the lender (Mr. Ashok Chand Burman and Mrs. Minnie Burman) had substantial interest in both the lender and the assessee. The First Appellate Authority (Ld. CIT(A)) deleted the addition, holding that the amount could not be taxed as deemed dividend in the hands of the assessee-company which was not a shareholder of the lender, and directing the Assessing Officer to take necessary action to tax the amount in the hands of the beneficial shareholders. The Tribunal, after examining the facts and preceding-year reasoning, found no infirmity in the approach of the Ld. CIT(A): where the beneficial owners of the lender are the persons entitled to taxability and the borrower is not a shareholder of the lender, the addition in the hands of the borrower is not sustainable. The Tribunal therefore upheld the Ld. CIT(A)'s conclusion and rejected the Revenue's ground of appeal. [Paras 5]

The addition treating the loan as deemed dividend in the hands of the assessee is deleted and the appellate order of the Ld. CIT(A) is upheld.

Final Conclusion: Revenue's appeal is dismissed and the order of the Ld. CIT(A) deleting the addition under deemed dividend under section 2(22)(e) for AY 2011-12 is upheld.

Reopening of assessment - reason to believe - failure to disclose material facts - change of opinion - condonation of delay in filing cross objection

Condonation of delay in filing cross objection - Whether the delay in filing the assessee's cross objection should be condoned. - HELD THAT: - The assessee filed the cross objection after a delay of 116 days and tendered an affidavit explaining the delay on grounds of partners' illness, family exigencies and oversight in forwarding appeal papers to counsel. The Tribunal, after hearing parties, accepted the explanation and exercised discretion to condone the delay in the interests of justice, admitting the cross objection for adjudication. [Paras 5]

Delay of 116 days in filing the cross objection is condoned and the cross objection is admitted.

Reopening of assessment - reason to believe - failure to disclose material facts - change of opinion - Whether the reassessment proceedings initiated by issuing notice under section 148 and completed under section 143(3) r.w.s.147 are valid where the notice was issued after four years from the end of the assessment year. - HELD THAT: - The original assessment for AY 2008 09 was completed under section 143(3). The Assessing Officer issued notice under section 148 on 31.03.2015, beyond four years from the end of the relevant assessment year. For reopening beyond four years, the Assessing Officer is required to record a reason to believe that income had escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts. The reassessment order itself shows that the AO noted transactions and concluded film rights should be treated as intangible assets, but the AO did not record any failure on the part of the assessee to disclose material facts in the original assessment. In the absence of such recorded failure or fresh material forming a reason to believe, the reopening amounted to a mere change of opinion and was impermissible. Consequently, the reassessment order passed under section 143(3) r.w.s.147 was held invalid and quashed. [Paras 7, 8]

Reopening beyond four years is invalid as the Assessing Officer did not record any failure by the assessee to disclose fully and truly all material facts; the reassessment order is quashed and the cross objection is allowed.

Final Conclusion: The Tribunal condoned the delay in filing the assessee's cross objection and, on the merits, quashed the reassessment for AY 2008 09 because the Assessing Officer had not recorded any failure by the assessee to disclose material facts when issuing notice beyond four years; the Revenue's appeal was dismissed as infructuous.

Transfer Pricing - Arm's Length Price - Comparable Selection - Functional Comparability - Market Size and Brand-related Intangibles - Tax Deducted at Source credit - Verification of TDS claim

Transfer Pricing - Arm's Length Price - Comparable Selection - Functional Comparability - Exclusion of specific comparable enterprises from the comparable set for determination of ALP for AY 2010-11. - HELD THAT: - The Tribunal accepted the assessee's contention that certain entities introduced by the TPO were functionally non-comparable. Infosys Technologies Ltd. was directed to be excluded pursuant to the DRP direction which the AO had failed to give effect to. KALS Information Systems Ltd. was excluded because its financials indicated a products element (significant inventories) and absence of segregated segmental results, making it materially different from the assessee. Persistent Systems Ltd. was excluded because its revenues included product licensing/royalty components and segmental results were not available, rendering it functionally dissimilar. Wipro Ltd. (segment) was excluded on the ground that it was a large, diversified, brand bearing, full risk taking enterprise with substantial scale and intangibles, and its results were not comparable with the assessee. The Tribunal therefore directed exclusion of these comparables and permitted recalculation of the TP adjustments accordingly. [Paras 3, 4]

Held partly in favour of the assessee; directed exclusion of Infosys Technologies Ltd., KALS Information Systems Ltd., Persistent Systems Ltd. and Wipro Ltd. from the comparable set for AY 2010-11 and adjustment to be recalculated accordingly.

Tax Deducted at Source credit - Verification of TDS claim - Grant of credit for Tax Deducted at Source claimed by the assessee for AY 2010-11. - HELD THAT: - The Tribunal did not adjudicate the quantum substantively but directed the assessing officer to verify the assessee's TDS claim and to grant credit as per law after due verification. The direction is for factual/verification exercise by the AO. [Paras 4]

Directed the AO to verify and grant the TDS credit claimed by the assessee for AY 2010-11 as per law.

Transfer Pricing - Arm's Length Price - Comparable Selection - Functional Comparability - Exclusion of specific comparable enterprises from the comparable set for determination of ALP for AY 2011-12. - HELD THAT: - Facts being pari materia, the Tribunal followed the reasoning applied in AY 2010-11. Infosys Technologies Ltd. was to be excluded as a well diversified, non comparable entity; Wipro Ltd. was excluded for the same reasons recorded in AY 2010-11 (scale, diversification, intangibles and lack of segmental results). The Tribunal directed exclusion of these entities from the comparable set for AY 2011-12 and consequent recalculation of the TP adjustment. [Paras 5]

Held partly in favour of the assessee; directed exclusion of Infosys Technologies Ltd. and Wipro Ltd. from the comparable set for AY 2011-12 and recalculation of the TP adjustment.

Tax Deducted at Source credit - Verification of TDS claim - Grant of credit for Tax Deducted at Source claimed by the assessee for AY 2011-12. - HELD THAT: - The Tribunal directed the assessing officer to verify the assessee's TDS claim for AY 2011-12 and to grant credit in accordance with law after due verification, leaving the factual verification and quantification to the AO. [Paras 5]

Directed the AO to verify and grant the TDS credit claimed by the assessee for AY 2011-12 as per law.

Final Conclusion: Both appeals were partly allowed: selected comparables were excluded from the TP comparable sets (specified for each year) and the AO was directed to verify and grant TDS credit claims as per law; TP adjustments to be recalculated in accordance with these directions.

Penalty under section 271(1)(c) - Validity of notice under section 274 - Requirement to specify limb of section 271(1)(c) - Concealment of income - Furnishing inaccurate particulars of income - Distinction with Sundaram Finance - when both limbs are pleaded

Validity of notice under section 274 - Requirement to specify limb of section 271(1)(c) - Penalty under section 271(1)(c) - Whether the penalty imposed under section 271(1)(c) is sustainable where the notice under section 274 does not specify whether proceedings are for concealment of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal examined the notice issued under section 274 read with section 271 and found that it did not indicate which limb of section 271(1)(c) (concealment of income or furnishing inaccurate particulars) the Assessing Officer had invoked. The AO proceeded treating a part of the additions as concealment to the extent of Rs. 63,33,260/-, but the entire addition of Rs. 1,58,92,460/- was not treated uniformly as concealment; thus the record did not disclose a coherent single limb on which penalty proceedings were based. The Tribunal applied the ratio of the Hon'ble Delhi High Court in M/s. Sahara India Life Insurance Company Ltd., holding that a notice which fails to specify the limb of section 271(1)(c) is vitiated. The Tribunal distinguished the decision in Sundaram Finance (where both limbs were found to be present and the notice was therefore not defective), observing that Sundaram Finance is inapplicable when the initiating notice does not disclose which limb is invoked. On this basis the Tribunal concluded the penalty proceedings were defective and unsustainable.

Penalty order under section 271(1)(c) quashed as the notice under section 274 did not specify which limb of section 271(1)(c) was invoked; appeal allowed.

Final Conclusion: The penalty imposed under section 271(1)(c) was set aside because the initiating notice under section 274 failed to specify whether proceedings were for concealment of income or for furnishing inaccurate particulars; Sundaram Finance was distinguished as inapplicable where the notice does not disclose both limbs.

Arm's-length price of inter-unit transfer - application of section 80IA(8) to adjust eligible deduction - reliability of cost accounting certificates under excise for income-tax purposes - allocation of common or corporate overheads between manufacturing units

Reliability of cost accounting certificates under excise for income-tax purposes - Admissibility and weight of certificates prepared under excise cost rules for determining transfer price between group units for computation of eligible deduction. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the cost certificates produced by the assessee, though relevant for excise purposes, did not disclose quantitative details of material consumption or the basis of allocation of administrative and corporate overheads consistently. The certificates varied in treatment of corporate expenses and did not demonstrate market price determination; they recorded direct costs with a 10% mark-up but omitted key allocation particulars required to establish that inter-unit transfers were at arm's length for income-tax computation. Hence the certificates could not be relied upon to negate the assessing officer's adjustment under the provisions governing eligibility of deduction. [Paras 8]

Certificates accepted for excise compliance could not be treated as conclusive evidence of arm's-length transfer pricing for computing deduction; CIT(A) rightly rejected them as insufficient.

Allocation of common or corporate overheads between manufacturing units - Whether cartage, diesel and corporate office depreciation ought to be allocated to the eligible Baddi unit. - HELD THAT: - The Tribunal agreed with the CIT(A)'s finding that the corporate office rendered services to both units and that most other common expenses had been allocated; consequently, there was no justification for excluding depreciation of the corporate office or certain transport-related costs from allocation. On verification of the books and the unit-wise allocation chart, further allocation of cartage and diesel expenses and corporate office depreciation to the Baddi unit was warranted to reflect the correct manufacturing cost and profit of the eligible unit for the purpose of determining the deduction. [Paras 4, 8]

Additional allocation of cartage/diesel and corporate office depreciation to the Baddi unit was correctly made by the lower authorities.

Arm's-length price of inter-unit transfer - application of section 80IA(8) to adjust eligible deduction - Whether transfers of semi-finished goods from Noida to Baddi were not at market/arm's-length prices and whether adjustment under section 80IA(8) reducing the eligible deduction was justified. - HELD THAT: - The assessing officer observed significant disparities in gross and net profit ratios between the two units and noted that transfers were made at cost plus a 10% mark-up, not demonstrably the market price. The CIT(A) examined the inter-unit pricing, the certificates, and the allocation of expenses and found that the transfer pricing resulted in an inflated profit of the eligible unit. On that basis, the CIT(A) reduced the profits of the Baddi unit by the computed amount. The Tribunal found that the CIT(A) had considered the matters in detail, including cost allocations and margins, and that invocation of the provision to adjust eligible deduction was supported by the factual matrix and analysis. [Paras 4, 8]

Finding that inter-unit transfers were not at arm's length and that adjustment under section 80IA(8) to reduce the eligible deduction was justified is upheld.

Final Conclusion: The Tribunal dismissed the assessee's appeal for AY 2008-09, upholding the CIT(A)'s rejection of the excise cost certificates as insufficient for income-tax transfer pricing, the further allocation of cartage/diesel and corporate office depreciation to the eligible Baddi unit, and the adjustment under section 80IA(8) reducing the deduction.

Refund under Section 27 read with modification and assessment provisions - requirement to challenge or modify assessment before claiming refund - scope of de novo adjudication on remand - eligibility for exemption under Notification No.515/86-Cus. subject to Essentiality and Non-manufactured-in-India certificates

Requirement to challenge or modify assessment before claiming refund - refund under Section 27 read with modification and assessment provisions - Whether a refund claim can be entertained where the original Bill of Entry assessment was not appealed against or modified - HELD THAT: - The Tribunal recorded that the imported consignments were assessed to duty on merits because the requisite certificates were not produced at the time of assessment; those certificates were obtained later and refund claims were filed. Reliance was placed on the Larger Bench decision that the remedy of refund under Section 27 must be read with the provisions dealing with assessment modification and cannot be invoked to set aside an unchallenged assessment. The adjudicating authority's sole ground for rejecting the refund - that the assessment order was not appealed against or modified - was held to be legally sustainable as per the cited Supreme Court ratio that a refund claim cannot be entertained in absence of modification of the assessment order by appropriate proceedings. [Paras 5, 6]

Refund claims were not maintainable because the Bills of Entry assessments were not challenged or modified; appeal dismissed on this ground.

Scope of de novo adjudication on remand - eligibility for exemption under Notification No.515/86-Cus. subject to Essentiality and Non-manufactured-in-India certificates - Whether the original authority exceeded the scope of the Tribunal's remand by rejecting refund applications on a new ground - HELD THAT: - The Tribunal noted the remand required de novo consideration of eligibility under the notification and of the certificates. The original authority did examine the certificates and recorded that the notification conditions were complied with, but nevertheless rejected the refund solely because the assessment had not been appealed or modified. The Tribunal held that this rejection did not amount to traveling beyond the remand directions, because the legal bar (non-modification of assessment) is a determinative statutory requirement which precludes entertaining the refund claim. [Paras 1, 6]

De novo adjudication did not improperly exceed the remand; rejection on the ground of unmodified assessment was permissible and the appeals were rightly dismissed.

Final Conclusion: The Tribunal affirmed the Commissioner (Appeals): refund applications were properly rejected because the original assessments under the Bills of Entry were not challenged or modified, and the remand did not entitle the appellant to a refund absent modification of assessment; appeal dismissed.

Saved creditor's winding up petition - retention of jurisdiction by company court - transfer of pending winding up proceedings to NCLT - overriding effect of Insolvency and Bankruptcy Code - effect of appointment of provisional liquidator on parallel IBC proceedings - leave under section 446 of the Companies Act, 1956 - scope of NCLT jurisdiction in relation to civil/declaratory reliefs of intending purchasers - logical conclusion of insolvency proceedings (approval or rejection of resolution plan)

Saved creditor's winding up petition - retention of jurisdiction by company court - transfer of pending winding up proceedings to NCLT - Court's jurisdiction to hear CP 1 of 2016 and the applicable law for adjudication - HELD THAT: - The petition filed on 4th January, 2016 was served and affidavits were exchanged prior to the transfer cut off under the Companies (Transfer of Pending Proceedings) Rules, 2016 and therefore falls within the category of a saved creditor's winding up petition. On a conjoint reading of Section 434 of the Companies Act, 2013 and Rules 5 and 6 of the 2016 Transfer Rules, the Company Court retains jurisdiction to try such saved petitions and the Act of 1956 and Companies (Court) Rules, 1959 remain applicable to adjudicate the petition. Precedents relied upon do not oust the Company Court's jurisdiction in respect of saved petitions; while IBC proceedings are independent and may be preferred for revival efforts, the legislative scheme contemplates retention of a class of creditor's winding up petitions by the Company Court. Accordingly, the Company Judge retains jurisdiction and the Act of 1956 and 1959 Rules govern the petition. [Paras 17]

This Court retains jurisdiction to hear CP 1 of 2016 and the petition shall be adjudicated under the Companies Act, 1956 and the Companies (Court) Rules, 1959.

Effect of appointment of provisional liquidator on parallel IBC proceedings - logical conclusion of insolvency proceedings (approval or rejection of resolution plan) - scope of NCLT jurisdiction in relation to civil/declaratory reliefs of intending purchasers - Whether the Official Liquidator (Provisional Liquidator) should be discharged and whether the winding up petition should be stayed or transferred pending NCLT proceedings; and whether NCLT has jurisdiction to decide applications of intending purchasers - HELD THAT: - Having held that the Company Court retains jurisdiction over the saved petition, the Official Liquidator appointed by this Court shall not be discharged nor required to hand over physical possession of originals, books or assets to the IRP. The Company Court will not proceed further with the winding up petition until the NCLT either accepts or rejects a resolution plan; the NCLT may be permitted to proceed up to the stage of attempted revival (approval or rejection of a resolution plan). If a resolution plan is approved, further orders in the winding up petition may follow (including potential discharge of the Provisional Liquidator in accordance with the plan); if the plan is rejected and that rejection attains finality, the Company Court will proceed with winding up under the Act of 1956. The applications filed by intending purchasers seeking declaratory reliefs and specific performance/conveyance are within the civil/declaratory jurisdiction of the Company Court and are not matters for the NCLT under IBC. The IRP is, however, entitled to inspect and obtain copies of documents from the Provisional Liquidator for preparation of a resolution plan; originals and possession of assets shall not be handed over by the Provisional Liquidator to the IRP. [Paras 18]

The Provisional Liquidator shall not be released or required to hand over originals or possession; the winding up petition will be held in abeyance until the NCLT approves or rejects a resolution plan, and the NCLT lacks jurisdiction to decide intending purchasers' civil/declaratory applications which remain with the Company Court.

Applicability of Insolvency and Bankruptcy Code to saved petitions - prospective operation of statutes - Whether IBC is applicable to the instant winding up petition filed prior to IBC coming into force - HELD THAT: - The petition was filed before IBC came into operation and IBC is prospective in effect. Nevertheless, because the legislative scheme (Section 434 read with the Transfer Rules) provides for treatment of certain pending winding up petitions as saved petitions and envisages transfer in specified circumstances, the provisions of IBC can operate in relation to saved petitions to the extent provided by the Transfer Rules. Thus the IBC is not wholly inapplicable to saved petitions; the Company Court retains its role for saved petitions while the NCLT may be permitted to carry out the time bound revival process under IBC up to approval or rejection of a resolution plan. [Paras 19]

IBC has prospective effect but may apply to saved petitions as envisaged by the transfer scheme; the Company Court retains jurisdiction over the saved petition while NCLT may proceed with the resolution process up to acceptance or rejection of a resolution plan.

Leave under section 446 of the Companies Act, 1956 - overriding effect of Insolvency and Bankruptcy Code - Whether the NCLT could pass the order dated 13th March, 2019 without first obtaining leave of the Company Court under section 446 of the Companies Act, 1956 and whether that order is a nullity for want of such leave - HELD THAT: - The Section 7 application appears to have been filed before appointment of the Provisional Liquidator but the NCLT's order was passed after a delay. The NCLT was competent to entertain and pass the order under IBC even though leave under section 446 had not been obtained; the Court, however, observed that NCLT should have exercised greater caution before issuing mandatory directions to the Provisional Liquidator once it was informed that a Provisional Liquidator had been appointed in a saved petition and that the Company Court was considering applications relating to that Provisional Liquidator. The Court refrained from acting as appellate forum over the NCLT order and therefore did not declare that order a nullity, but criticised the NCLT's approach to making mandatory directions to a court appointed Provisional Liquidator in the circumstances. [Paras 20, 21]

NCLT had competence to pass the order without prior leave under Section 446; the order is not declared a nullity by this Court, though the NCLT should have been more cautious in issuing directions to a court appointed Provisional Liquidator.

Final Conclusion: The High Court retains jurisdiction to try the saved creditor's winding up petition (CP 1 of 2016) under the Companies Act, 1956 and the Companies (Court) Rules, 1959. The Official Liquidator appointed as Provisional Liquidator shall not be discharged or required to hand over originals or possession to the IRP; the NCLT may proceed with the corporate insolvency resolution process up to approval or rejection of a resolution plan, during which the Company Court will not proceed with winding up; if a resolution plan is approved further orders may follow, and if rejected with finality the Company Court will resume the winding up under the Act of 1956. The NCLT's competence to entertain the Section 7 application is recognised, but the NCLT should have exercised caution before directing a court appointed Provisional Liquidator to hand over books, records or assets.

Period of limitation - extended period of limitation - suppression of facts with intent to evade tax - proportionate denial of CENVAT credit - Rule 6(3) of the CENVAT Credit Rules, 2004 - trading as pure sale not liable to service tax

Period of limitation - extended period of limitation - suppression of facts with intent to evade tax - Whether the show-cause notice issued on 22.04.2014 for service tax liability relating to financial year 2008-09 was barred by limitation and whether the extended period was invocable. - HELD THAT: - The Tribunal found that the only Service Tax liability shown in the record pertained to financial year 2008-09 and that the last ST-3 return for that period was filed on 22.04.2009. A show-cause notice issued on 22.04.2014 was therefore one day beyond the statutory five-year limitation period and is time-barred. The extended period of limitation could only be invoked upon material showing suppression, fraud, collusion, wilful misstatement or contravention with intent to evade tax; no such intention or materials were found on the record for the periods under audit. The Tribunal noted that the Department had no authority to extend inquiry beyond the statutory windows absent such culpable conduct and relied on the principles in earlier Supreme Court decisions including CCE, Ahmedabad-I Vs. M. Square Chemical and Ilavia Enterprises Vs. CCE, Jaipur to hold that the demand could not be sustained as barred by limitation. [Paras 5]

Show-cause notice and resulting demand are barred by limitation and cannot be sustained.

Proportionate denial of CENVAT credit - Rule 6(3) of the CENVAT Credit Rules, 2004 - trading as pure sale not liable to service tax - Whether trading activity undertaken by the appellant attracted service tax liability and justified invocation of Rule 6(3) to deny proportionate CENVAT credit. - HELD THAT: - The Tribunal accepted the legal position that pure trading/sale, unconnected with any service component, does not attract Service Tax and therefore does not give rise to a liability under the Service Tax code that would trigger proportionate denial of CENVAT credit under Rule 6(3). The Tribunal observed that trading is a pure sale within the domain of the provisionary Government and cited the Tribunal's earlier treatment in Medisary Laboratories P. Ltd. Vs. CCGST, Kolhapur (final order referenced in the judgment) to conclude that the impugned demand founded on treating trading as an exempted service could not survive. [Paras 6]

Trading is a pure sale not liable to service tax; the demand based on invoking Rule 6(3) in respect of trading does not survive.

Final Conclusion: The appeal is allowed; the order-in-appeal confirming the demand is set aside and the departmental demand is quashed as time-barred and unsustainable on the ground that trading is a pure sale not liable to service tax.

Benefit under Section 73(3) of the Finance Act, 1994 for payment of tax with interest before service of notice - allegation of suppression, willful misstatement, fraud or collusion as exclusion to Section 73(3) benefit - audit-based detection and issuance of show cause notice - bar on issuance of notice where tax has been paid under Section 73(3) - limitation of alleging suppression where non-compliance is detected pursuant to statutory audit

Benefit under Section 73(3) of the Finance Act, 1994 for payment of tax with interest before service of notice - allegation of suppression, willful misstatement, fraud or collusion as exclusion to Section 73(3) benefit - audit-based detection and issuance of show cause notice - Whether appellants were entitled to the protection of Section 73(3) of the Finance Act, 1994 because they paid service tax and interest before service of show cause notices arising from audit observations, and whether the show cause notices and consequent adjudication could be sustained where the Department only alleged suppression without specific positive acts. - HELD THAT: - The Tribunal examined Section 73(3) and the case law relied on by the parties, noting that the statutory provision prevents service of notice in respect of amounts paid voluntarily with interest before the issuance of a notice, except where there is suppression, fraud, collusion or willful misstatement. The revenue did not point to any positive act by the appellants amounting to suppression; the detection arose from departmental audit. Applying precedents which hold that audit-based detection does not, by itself, establish suppression and that taxpayers who pay tax with interest before issuance of notice are entitled to protection under Section 73(3), the Tribunal found that the appellants fell within the statutory shelter. Consequently, there was no legally sustainable basis for issuing the show cause notices or for confirming demands and penalties predicated on the notices in respect of the amounts paid prior to service of notice. The Tribunal therefore allowed the appellants' appeals and rejected the departmental appeal. [Paras 7, 8, 9]

Appellants are entitled to the benefit of Section 73(3) and the show cause notices and consequential orders in respect of amounts paid with interest before issuance of notice are not sustainable; appeals allowed and departmental appeal rejected.

Final Conclusion: The Tribunal allowed the appellants' appeals relating to tax paid with interest prior to issuance of show cause notices for the years 2013-14, 2014-15 and 2015-16, holding that Section 73(3) of the Finance Act, 1994 applies where no specific suppression, fraud, collusion or willful misstatement is shown; the Department's appeal was dismissed.

Clandestine removal - demand based on average yield of production - proof by corroborative evidence (unaccounted purchases, consumption, power usage, transport, sales proceeds) - reliance on invoices and transport documents to establish non-movement of goods - requirement of inquiries from transporters and recipients

Demand based on average yield of production - clandestine removal - proof by corroborative evidence (unaccounted purchases, consumption, power usage, transport, sales proceeds) - Validity of demand of duty computed by applying a single month's yield uniformly to the entire period and treating alleged manufacture and clandestine clearance as proved - HELD THAT: - The Tribunal found that the department computed the quantity of finished goods allegedly manufactured and cleared by uniformly applying the percentage yield derived from records for June 2013 to the entire period. The record shows that the factory had no electricity connection for the period in question and the department did not demonstrate any alternate power source, capacity utilisation, unaccounted purchases, freight payments, disproportionate power consumption, labour deployment, unaccounted sales proceeds or other corroborative indicia required to establish clandestine manufacture and removal. The Tribunal relied on the settled principle that charges of clandestine removal cannot rest on assumptions and formulae alone but must be supported by positive corroborative evidence; the department failed to produce such clinching evidence. [Paras 9]

Demand of duty of Rs. 2,86,17,242 based on application of average yield and alleged clandestine manufacture is unsustainable and set aside.

Reliance on invoices and transport documents to establish non-movement of goods - requirement of inquiries from transporters and recipients - Sustainability of demand based on alleged fake invoices and transport evidence for clearances during 08.01.2014 to 10.01.2014 - HELD THAT: - The Tribunal examined the department's finding that invoices for 1059.920 MT in January 2014 were fictitious because some vehicle numbers were said to be incapable of transporting the goods and inquiries showed gaps. The officers recorded statements of only 7 of 27 transporters and only 2 of those were cross-examined; no statements were obtained from the recipients of the alleged consignments. The Tribunal held that these limited inquiries and isolated transport discrepancies do not constitute sufficient proof of non-movement. In absence of adequate inquiries of all relevant transporters and of the buyers, and lacking corroborative evidence, the conclusion of non-clearance could not be sustained. [Paras 10]

Demand of duty of Rs. 48,75,834 based on alleged fake invoices and deficient transport evidence is unsustainable and set aside.

Final Conclusion: Both streams of demand-(i) arising from application of an average yield to infer clandestine manufacture and clearance prior to July 2013, and (ii) arising from alleged fictitious invoices and transport discrepancies for 08.01.2014 to 10.01.2014-were held to be unsupported by requisite corroborative evidence; the impugned order confirming duty, interest and penalties is set aside and the appeals are allowed with consequential relief.

Denial of CENVAT credit under Rule 9(1)(b) of the CENVAT Credit Rules, 2004 - Permissibility of inter unit stock transfer and credit under Rule 3(5) of the CENVAT Credit Rules, 2004 - Voluntary payment of duty on being pointed out and Section 11A(2B) of the Central Excise Act - Extended period of limitation and allegation of suppression - Revenue neutrality as a defence to denial of credit

Permissibility of inter unit stock transfer and credit under Rule 3(5) of the CENVAT Credit Rules, 2004 - Denial of CENVAT credit under Rule 9(1)(b) of the CENVAT Credit Rules, 2004 - Whether the appellant was rightly denied CENVAT credit for inputs and capital goods transferred from Unit II to Unit I. - HELD THAT: - The Tribunal found that the appellant set up a second unit and, acting on the departmental advice, effected stock transfer by raising invoices, debiting duty in Unit II and availing credit in Unit I in terms of Rule 3(5) of the CCR. Both debit and credit entries were reflected in ER 1 returns and the department was informed. The factual matrix constituted a simple stock transfer and not availment of credit on supplementary invoices. Consequently the restriction in Rule 9(1)(b) (which targets credit on supplementary invoices and suppression) was not attracted. Applying the precedent relied upon by the appellant, the Tribunal held that delayed payment voluntarily made on being pointed out does not convert the transaction into a case of credit denial under Rule 9(1)(b). On these factual and legal findings the denial of credit was held unsustainable. [Paras 6]

Credit availed under Rule 3(5) for inter unit stock transfer cannot be denied by invoking Rule 9(1)(b); the impugned denial of CENVAT credit is set aside.

Voluntary payment of duty on being pointed out and Section 11A(2B) of the Central Excise Act - Revenue neutrality as a defence to denial of credit - Whether the appellant's voluntary payment of duty and subsequent availment of credit amounted to suppression with intent to evade duty, thereby justifying denial of credit or imposition of penalty. - HELD THAT: - The Tribunal recorded that the appellant voluntarily reversed the credit and paid duty with interest on being pointed out by the Preventive Officers, and thereafter took the credit after departmental intimation. Relying on the Karnataka High Court decision cited by the parties and other authorities emphasizing revenue neutrality, the Tribunal concluded that delayed voluntary payment on being pointed out did not amount to suppression with intent to evade duty. The exercise produced a revenue neutral result and the facts were within the knowledge of the department; therefore the foundational element of suppression necessary to sustain denial of credit or penalty under the invoked provisions was absent. [Paras 6]

Voluntary payment on being pointed out and ensuing revenue neutral position do not constitute suppression with intent to evade duty; penalty and denial grounded on such suppression are not sustainable.

Extended period of limitation and allegation of suppression - Whether the demand confirmed by the department could be sustained by invoking the extended period of limitation on the ground of suppression. - HELD THAT: - The Tribunal noted that the dispute related to transactions occurring between 1.8.2008 and 10.9.2008, but the show cause notice invoking the extended period was issued on 4.5.2011. Given that the department was aware of the facts from the beginning and the appellant had given specific intimation, the Tribunal held that invocation of the extended period on the ground of suppression was not tenable. In view of the absence of suppression and the departmental knowledge, the demand was held to be time barred. [Paras 6, 7]

Demand cannot be sustained by relying on the extended period of limitation; the demand is barred by limitation and is set aside.

Final Conclusion: The appeal is allowed: the impugned order denying CENVAT credit, confirming demand and imposing penalty is set aside on merits and as barred by limitation; the departmental demand and penalty are quashed.

Definition of input service under Rule 2(l) of Cenvat Credit Rules - CENVAT credit on input services - services used directly or indirectly in or in relation to manufacture of final products - exclusion clause to input service (post 01/04/2011 amendment) - erection, commissioning and installation services

Definition of input service under Rule 2(l) of Cenvat Credit Rules - services used directly or indirectly in or in relation to manufacture of final products - exclusion clause to input service (post 01/04/2011 amendment) - erection, commissioning and installation services - CENVAT credit on input services - CENVAT credit on service tax paid for erection, commissioning, installation and related consultancy/site supervision is admissible because those services fall within the definition of "input service" under Rule 2(l) and do not fall within the exclusion clause introduced w.e.f. 01/04/2011. - HELD THAT: - The Tribunal examined Rule 2(l) and held that the principal limb-services used by a manufacturer, whether directly or indirectly, in or in relation to manufacture of final products-has wide amplitude and covers engineering, design, erection, commissioning, installation and consultancy services that assist the manufacture. The impugned services in the present case related to detailed engineering and erection/commissioning of plant and machinery for an integrated steel plant within the assessee's existing manufacturing premises and were not civil construction or works contract services used for laying foundations for support of capital goods. The Tribunal found that such services are not covered by the exclusion clause inserted w.e.f. 01/04/2011 and relied on earlier Tribunal decisions (including Primal Glass Ltd. and Shiruguppi Sugar Works Ltd.) and on the settled principle that the words "in relation to manufacture" widen the scope of admissible input services. Applying that reasoning, the denial of credit solely on the ground that the services related to "setting up of plant" was not sustainable where the nexus with manufacture was established and the services did not fall under the exclusion categories. [Paras 6, 7]

Impugned order denying CENVAT credit on the specified input services set aside and appeal allowed on merits; consequential relief, if any, to follow.

Final Conclusion: The Tribunal allowed the appeal on merits, holding that the erection, commissioning, installation and related consultancy/site supervision services are input services under Rule 2(l) and are eligible for CENVAT credit because they fall within the main limb of the definition and do not fall within the exclusion clause; the impugned order rejecting credit is set aside.

Cenvat credit reversal - reversal with interest treated as no credit availed - common input service used for trading - Rule 6(3) of Cenvat Credit Rules - Rule 6(3A) of Cenvat Credit Rules - verification by Revenue and restoration of appeal

Cenvat credit reversal - reversal with interest treated as no credit availed - common input service used for trading - Rule 6(3) of Cenvat Credit Rules - Rule 6(3A) of Cenvat Credit Rules - Whether demand under Rule 6(3) can be sustained where Cenvat credit attributable to trading activity has been reversed along with interest after adjudication. - HELD THAT: - The Tribunal found that the appellant had availed credit on a common input service used for both dutiable manufacture and trading, but subsequently reversed the credit attributable to trading and paid interest after adjudication. Relying on the Supreme Court precedent that reversal with interest operates as if no credit was availed and on consistent decisions of this Tribunal, the Bench held that reversal of credit together with payment of interest satisfies the condition contemplated by the law and therefore a separate demand of 6% under Rule 6(3) is not sustainable. The Tribunal distinguished the authority relied upon by Revenue on facts, observing that where reversal plus interest has in fact been made the subsequent demand under Rule 6(3) cannot be sustained. [Paras 4, 5, 6]

Demand under Rule 6(3) set aside as appellants reversed the credit attributable to trading and paid interest; therefore demand not sustainable.

Verification by Revenue and restoration of appeal - Whether the Revenue may verify the correctness of the reversal and interest payment and seek restoration if reversal is found incorrect. - HELD THAT: - The Tribunal allowed the appeal subject to the Revenue's liberty to verify the authenticity and correctness of the reversal entries and payment of interest. If on verification anything contrary is noticed, the Revenue is permitted to file an application for restoration of the appeal for appropriate orders. This constitutes a limited remand for verification rather than a decision on the merits of any contrary factual contention. [Paras 7]

Appeal allowed with the proviso that Revenue may verify reversal and payment; if discrepancies are found, Revenue may move for restoration.

Final Conclusion: The impugned demand of 6% under Rule 6(3) is set aside because the assessee reversed the Cenvat credit attributable to trading and paid interest; the Revenue, however, is granted liberty to verify the correctness of such reversal and payment and may seek restoration of the appeal if contrary facts are discovered.

Reversal of Cenvat credit with interest - effect of post-adjudication reversal - liability under Rule 6(3) of Cenvat Credit Rules - attribution of common input service between dutiable manufacture and trading - compliance with Rule 6(3A) by reversal of credit - reversal treated as if no credit was taken

Reversal of Cenvat credit with interest - liability under Rule 6(3) of Cenvat Credit Rules - compliance with Rule 6(3A) by reversal of credit - reversal treated as if no credit was taken - Whether demand under Rule 6(3) for an amount equivalent to 6% of trading turnover is sustainable where Cenvat credit attributable to trading activity has been reversed along with interest after adjudication. - HELD THAT: - The Tribunal found that the appellant had availed Cenvat credit on a common input service attributable to both dutiable manufacture and trading turnover but, after adjudication, reversed the portion of credit attributable to trading along with interest. On these facts the situation is to be treated as if no Cenvat credit had been taken in respect of the trading activity. The Tribunal applied the principle affirmed by the Supreme Court in Chandrapur Magnet Wires that reversal of credit with interest can satisfy the condition so as to negate the basis for a 6% demand. The Tribunal relied on its earlier decisions holding that where credit attributable to exempt/trading activity is reversed with interest, a demand under Rule 6(3) cannot be sustained. The decision in Lally Automobiles, cited by the revenue, was distinguished because in the present case the appellant had actually reversed the credit with interest, whereas Lally addressed deduction of credit where reversal had not been effected in the same manner. In view of the reversal with interest, the Tribunal concluded that the condition for raising the 6% demand did not exist and the impugned demand was unsustainable.

Impugned orders set aside; appeals allowed on the ground that reversal of Cenvat credit attributable to trading activity along with interest negates liability under Rule 6(3).

Final Conclusion: The Tribunal held that where the assessee reverses the Cenvat credit attributable to trading/exempt activity along with interest (even after adjudication), such reversal must be treated as if no credit was availed for that activity; accordingly, a demand under Rule 6(3) based on trading turnover cannot be sustained and the appeals were allowed.

Admissibility of computer printouts and electronic records under Section 36B of the Central Excise Act and parity with Section 65B of the Evidence Act - validity of search and seizure under Section 100 Cr.P.C. read with Section 18 of the Central Excise Act - requirement of cross-examination and examination-in-chief under Section 9D of the Central Excise Act - proof of clandestine removal requires tangible, corroborative and affirmative evidence (manufacturing capacity, raw material receipts, electricity consumption, extra labour, movement/transportation, flow of sale proceeds)

Admissibility of computer printouts and electronic records under Section 36B of the Central Excise Act and parity with Section 65B of the Evidence Act - Reliability and admissibility of computer printouts retrieved from seized electronic devices - HELD THAT: - The Tribunal found that the investigating agency failed to comply with the safeguards mandated by Section 36B of the Central Excise Act (pari materia with Section 65B of the Evidence Act). No certificate from a responsible person of the appellant was produced, the sealing/de-sealing and retrieval of data were not satisfactorily documented, and the panchanama did not establish the source and authenticity of the electronic printouts. In view of the non-compliance with the statutory/protective requirements and the guidance in the cited Supreme Court precedent, the evidentiary value of the computer printouts is vitiated and such printouts cannot be relied upon to sustain the charge of clandestine removal. [Paras 17]

Computer printouts and data obtained from the seized electronic devices are inadmissible and cannot support the demand; charges based on such unauthenticated data are set aside.

Validity of search and seizure under Section 100 Cr.P.C. read with Section 18 of the Central Excise Act - Whether the search and seizure proceedings (including panchanama and sealing of electronic devices) were valid - HELD THAT: - The Tribunal observed deficiencies in the panchanama(s): different panch witnesses at domicile and at the DGCEI office, absence of clear record of the paper seal and its signatures on the electronic devices, late-night retrieval of printouts and recording of statement after data retrieval, and denial of cross-examination of panch witnesses. These infirmities cast doubt on the veracity of the search proceedings. Having regard to the statutory requirements and the manner in which the seizure and data retrieval were carried out, the Tribunal held that the search and seizure proceedings were in violation of Section 100 Cr.P.C. read with Section 18 of the Act. [Paras 17]

Search and seizure proceedings are vitiated and cannot be relied upon to sustain the demand.

Requirement of cross-examination and examination-in-chief under Section 9D of the Central Excise Act - Admissibility and reliance on oral statements where cross-examination was denied - HELD THAT: - The adjudicating authority refused requests to cross-examine panch witnesses and other persons whose statements were relied upon. The Tribunal noted that several inculpatory statements were not subjected to cross-examination as required for testing their veracity, and that examination-in-chief requirements under Section 9D must be construed strictly. Absent cross-examination and in the absence of corroborative evidence, the Tribunal held that reliance on such untested statements is impermissible. [Paras 18, 21]

Statements relied upon without allowing cross-examination are not acceptable evidence and cannot sustain penalties or demands.

Proof of clandestine removal requires tangible, corroborative and affirmative evidence (manufacturing capacity, raw material receipts, electricity consumption, extra labour, movement/transportation, flow of sale proceeds) - Whether the department proved clandestine manufacture and removal by cogent corroborative evidence - HELD THAT: - The Tribunal reviewed the material relied upon by the department and found it lacking in affirmative corroboration: no documents evidencing purchases of excess raw material, no records showing extra electricity consumption or extra labour, absence of clear transportation/movement evidence, and the alleged shortage was computed on averaged weights and eye-estimation rather than physical weighment. Jurisprudence requires positive, tangible evidence to establish clandestine manufacture and removal; mere assumptions, uncorroborated loose papers and untested statements are inadequate. Accordingly, the Tribunal held the evidence insufficient to establish clandestine removal. [Paras 18, 19, 20]

Charges of clandestine removal based on the available material are unsustainable; demands and penalties premised on such proof are set aside.

Final Conclusion: The appeals are allowed. The Tribunal set aside the adjudicating authority's order insofar as it confirmed demands, interest and penalties based on unauthenticated electronic data, vitiated search/seizure proceedings, untested oral statements and insufficiency of corroborative evidence; consequential reliefs were granted to the appellants.

Transfer of right to use - effective control of machinery - presumption under Section 3-AAA - admission and deposit of tax by dealer - double taxation - remand for fresh consideration by last fact-finding authority

Transfer of right to use - effective control of machinery - remand for fresh consideration by last fact-finding authority - Whether tax under the head 'transfer of right to use' (section 3-F) was rightly imposed on the revisionist in respect of machinery placed with TMML. - HELD THAT: - The Tribunal and the authorities below confirmed liability under section 3-F solely on receipt of rent without examining the operative clauses of the agreement between the parties. The Court noted that the agreement contains express clauses bearing on ownership, custody, use restrictions, inspection rights, insurance and control which are material to determine whether there was an effective transfer of the right to use. As the Tribunal is the last fact-finding authority and did not consider those clauses or the relevant case-law, the Court concluded that the question requires fresh factual and legal appraisal. Accordingly the matter is remitted to the Tribunal to examine the terms of the agreement, apply the legal tests for transfer of right to use and decide the issue in accordance with law.

Remanded to the Tribunal for reconsideration of the levy under section 3-F in light of the agreement's clauses and applicable law.

Presumption under Section 3-AAA - admission and deposit of tax by dealer - double taxation - remand for fresh consideration by last fact-finding authority - Whether tax under section 3-AAA could be levied on the revisionist despite registered dealers having admitted, collected and deposited tax and having furnished prescribed forms. - HELD THAT: - The Court observed that assessment orders for two dealers (M/s Automobiles Sterling and M/s Unique Motor) were on record and showed that tax, including that on motor vehicles, had been levied and deposited by those dealers. The Tribunal and the lower authorities did not verify these assessment records with the respective Assessing Authorities before imposing tax on the revisionist. Given the existence of dealer assessments and deposits, and the statutory presumption mechanism under section 3-AAA which hinges on whether requisite forms were furnished, the Court held that the factual position must be verified and reconsidered by the Tribunal. Consequently the question of levy under section 3-AAA is remitted for fresh consideration in accordance with law.

Remanded to the Tribunal to verify dealer assessments/forms and to reconsider the imposition of tax under section 3-AAA.

Final Conclusion: The revision is allowed; both challenged questions of law are answered by remitting the matters to the Commercial Tax Tribunal for fresh consideration of the levy under section 3-F and the levy under section 3-AAA in accordance with law.

Right to carry on trade or business in potable liquor - res extra commercium - State monopoly and regulation of liquor trade - applicability of excise law to online sale and delivery of liquor - characterisation of intermediary/platform transactions as sale - non applicability of Payment and Settlement Systems Act as exemption from excise regulation - requirement of licence/permit for transport and delivery of liquor - writ of mandamus to compel grant of licence or to restrain State regulation

Requirement of licence/permit for conduct of online order processing and delivery of liquor - applicability of excise law to online sale and delivery of liquor - Petitioner does not have a legal right to conduct online order processing and home delivery of liquor without statutory licence or permission under the Karnataka Excise Act, 1965. - HELD THAT: - The Court held that the State has an exclusive right and broad power to regulate trade in potable liquor under Article 47 and the Karnataka Excise Act, 1965. The Act provides a uniform scheme covering production, manufacture, possession, transport, purchase and sale of liquor; 'sale' is defined to include any transfer other than by way of gift. The online business model of the petitioner, by placing orders with CL-2 licence holders and receiving payment (including service charges), falls within the statutory ambit of 'sale' under the Act. The legislature and State policy may impose stringent restrictions on liquor trade as it is res extra commercium; therefore online sale and home delivery are not permissible in the absence of enabling statutory provision or licence under the Act.

Petitioner is not entitled to carry on online order processing and delivery of liquor in Karnataka without licence or statutory authority; requirement answered against petitioner.

Characterisation of intermediary/platform transactions as sale - non applicability of Payment and Settlement Systems Act as exemption from excise regulation - The petitioner's role as a mobile wallet/platform does not remove the transaction from being a 'sale' under the Excise Act, and authorisation under the PSS Act/RBI does not exempt it from excise regulation. - HELD THAT: - While the petitioner argued it merely acted as a facilitator/escrow/payment system participant under the PSS Act and charged only transaction fees, the Court found that the essential elements of sale (parties competent to contract, consent, transfer of property, and price) are present in the petitioner's business model. The PSS Act authorisation for payment systems does not confer a licence to carry on trade in liquor or relieve the petitioner from compliance with the Excise Act. Therefore sheltering under RBI authorisation does not permit activities proscribed or regulated by the Excise Act.

The transaction is properly characterised as sale for purposes of the Excise Act; PSS Act authorisation does not exempt the petitioner from excise regulation.

Requirement of licence/permit for transport and delivery of liquor - non applicability of permissive small quantity rule to continuous commercial delivery - Rule 21 of the Excise (Possession, Transport, Import and Export) Rules, 1967 cannot be invoked to permit the petitioner's routine, continuous, bulk or regular transport/delivery business; statutory permits under Section 12 are required. - HELD THAT: - The Court observed that Rule 21 contemplates limited exceptions and cannot be construed as authorising continuous, voluminous or regular commercial transport or home delivery which would subvert the regulatory scheme. Permits for transport are regulated under Section 12 and general permits are granted only to licensed persons. Allowing fragmentation of consignments to evade permit requirements would defeat the object of the Act; consequently petitioner's possession and transport for commercial home delivery is not saved by Rule 21.

Petitioner cannot rely on Rule 21 to lawfully possess or transport liquor for continuous/commercial home delivery; statutory permits are required.

Writ of mandamus to compel grant of licence - limits on issuance of mandamus where no existing legal right established - Writ of mandamus directing the State/Authority not to interfere with the petitioner's business or to compel grant of licence is not warranted. - HELD THAT: - The Court applied established principles that mandamus issues only to enforce an existing legal right or to compel performance of an existing statutory duty. The petitioner is neither a licensee under the Excise Act nor does it possess an established legal right to carry on the online sale/delivery of liquor. Granting mandamus to create or recognise such a right would be impermissible, especially given the State's exclusive privilege and regulatory scheme over liquor trade. Judicial interference with executive discretion to preserve the statutory scheme was therefore rejected.

Prayer for mandamus dismissed; no existing legal right shown to justify such relief.

Validity and revocation of Letter of Authority issued without statutory power - non est effect of administrative authorisation lacking legislative source - Any Letter of Authority issued by the respondent to permit online sale/delivery which lacked a source of power under the Excise Act was without jurisdiction and its withdrawal was within the respondent's discretion. - HELD THAT: - The Court found that the issuance of an LOA for the activities in question was not traceable to any provision of the Excise Act and was therefore issued beyond the statutory powers. An LOA issued on a trial basis, contrary to the statutory scheme, is non est in law; upon realization that it was inconsistent with the Act, the Authority was entitled to withdraw it in public interest and to protect stakeholders. Consequently the petitioner cannot complain of arbitrary revocation of an authority that should not have been issued.

LOA issued without statutory power is of no legal effect; its revocation is not arbitrary in law.

Final Conclusion: The writ petition was dismissed. The Court held that online order processing and home delivery of liquor by the petitioner are not permitted without statutory licence or permit under the Karnataka Excise Act, 1965; the transactions amount to sale and transport requiring excise authorisation, RBI/PSS Act authorisation does not displace excise regulation, and mandamus cannot be granted to create the claimed right. No costs were ordered.

Service of notice under section 16(2) of the Wealth Tax Act, 1957 - proviso to section 16(2) - twelve months limitation - deemed valid service under section 42 of the Wealth Tax Act, 1957 - invalidity of proceedings for non compliance with statutory time limit - quashing of assessment for invalid notice - classification and exemption of agricultural land under the Wealth Tax Act - valuation enhancement to circle rate/market value

Service of notice under section 16(2) of the Wealth Tax Act, 1957 - proviso to section 16(2) - twelve months limitation - deemed valid service under section 42 of the Wealth Tax Act, 1957 - invalidity of proceedings for non compliance with statutory time limit - quashing of assessment for invalid notice - Validity of notice issued under section 16(2) of the Wealth Tax Act, 1957 where issued after the twelve month period prescribed by the proviso to section 16(2). - HELD THAT: - The return was filed in August 2011 and, by the proviso to section 16(2), no notice under that subsection may be served after the expiry of twelve months from the end of the month in which the return is furnished; therefore a notice issued after 31 August 2012 did not comply with the statutory time limit. Section 42 (deemed service) only precludes objections where an assessee has appeared or cooperated in proceedings in relation to a notice that was required to be served; it does not validate a notice that was not issued within the statutory period. Treating appearance or cooperation as curing a notice that was never issued within time would amount to validating an assessment that is void ab initio. Applying these principles, the notice dated 13.09.2012 fell outside the twelve month period and was invalid, and consequently the wealth tax assessment based on that notice could not be sustained and was quashed. [Paras 8, 9, 10, 11]

Notice under section 16(2) issued on 13.09.2012 was beyond the twelve month period and invalid; assessment for AY 2011 12 quashed.

Classification and exemption of agricultural land under the Wealth Tax Act - classification of urban vs agricultural land - valuation enhancement to circle rate/market value - Claims concerning (a) classification of the Neb Sarai and Sultanpur lands as agricultural or urban and related exemption; and (b) enhancement of value from cost to circle/market rate. - HELD THAT: - Those grounds (grounds 2-4) were not adjudicated on merits because the appeal was allowed on the invalidity of the notice under section 16(2). The Tribunal expressly left these grounds open for consideration and did not decide the legality of the classification, exemption claims, or valuation enhancement; they therefore require fresh consideration by the competent authority. [Paras 12]

Grounds 2-4 left open for fresh consideration; not decided by the Tribunal.

Final Conclusion: Appeal allowed; assessment for Assessment Year 2011 12 quashed as founded on an invalid notice issued beyond the statutory twelve month period; other grounds (classification/exemption and valuation issues) left open for fresh consideration.

Maintainability of appeals under Section 37 of the Arbitration and Conciliation Act, 1996 - interaction of Section 37 of the Arbitration Act with Section 13 of the Commercial Courts Act, 2015 - juridical seat/place of arbitration - distinction between seat and venue - party autonomy in designating the seat and the role of Section 20 and award stating place under Section 31(4) - exclusive jurisdiction of courts at the seat and operation of Section 42 - precedential primacy of BALCO over Hardy Exploration regarding seat doctrine

Maintainability of appeals under Section 37 of the Arbitration and Conciliation Act, 1996 - interaction of Section 37 of the Arbitration Act with Section 13 of the Commercial Courts Act, 2015 - Appeals filed under Section 37 in these proceedings are not maintainable. - HELD THAT: - Section 37(1) prescribes appeals only from the orders enumerated in clauses (a), (b) and (c), namely refusing reference under Section 8, orders under Section 9, and orders setting aside or refusing to set aside awards under Section 34. Section 13 of the Commercial Courts Act, 2015 only provides the forum for appeals and does not create an independent right of appeal. The High Court's characterisation of an order returning a Section 34 petition to the competent court (under Section 151 read with Order VII Rule 10 CPC) as an order "refusing to set aside" an award under Section 34 is impermissible: a preliminary procedural order returning a petition for presentation to the proper court does not involve an adjudication on the merits under Section 34 and therefore does not fall within Section 37(1)(c). Authorities emphasising that an appeal is a creature of statute and must be found within the statutory provision were applied. On the facts the appeals did not fall within Section 37 and are not maintainable. [Paras 22]

Appeals under Section 37 are not maintainable and are dismissed on that ground.

Juridical seat/place of arbitration - distinction between seat and venue - party autonomy in designating the seat and the role of Section 20 and award stating place under Section 31(4) - exclusive jurisdiction of courts at the seat and operation of Section 42 - precedential primacy of BALCO over Hardy Exploration regarding seat doctrine - The juridical seat of the arbitration is New Delhi and courts at New Delhi alone have exclusive jurisdiction to entertain the Section 34 petition. - HELD THAT: - The Court applied the BALCO principle that designation of the seat (place) of arbitration anchors the arbitration and is akin to an exclusive jurisdiction clause vesting supervisory jurisdiction in the courts at the seat. Section 20 and Section 31(4) embody the party autonomy and the requirement that the award state the place of arbitration; where hearings occur and the award is made at a particular place, parties are treated as having chosen that place as the seat. The Court held that the arbitration clause stating that proceedings "shall be held at New Delhi/Faridabad, India" is indicative of a seat (not merely a venue), since it anchors the entire arbitral proceedings; on the facts, the tribunal conducted sittings and delivered the award in New Delhi and the parties thereby chose New Delhi as the seat. The Court rejected the contrary approach in Hardy Exploration to the extent it conflicts with BALCO, and held that once the seat is chosen, the fact that part of the cause of action arose elsewhere (Faridabad) does not oust exclusive jurisdiction of the courts at the seat. Consequently the Section 34 petition must be presented in the courts at New Delhi. [Paras 100, 101, 102]

Impugned judgment set aside; the seat is New Delhi and the Section 34 petition is to be presented in the courts at New Delhi.

Final Conclusion: The appeals are allowed in part: they are not maintainable under Section 37 of the Arbitration Act, 1996; on the merits of the seat question, New Delhi is the juridical seat of the arbitration (the award having been made there) and the Section 34 petition must be presented in the courts at New Delhi; the impugned High Court judgment is set aside.