TaxTMI Updates e-Newsletter
Dec 17,2024

Attachment before judgment / security to preserve decretal fruits - prima facie satisfaction under Order 38, Rule 5 CPC - power under Section 151 CPC to require security - duty to disclose documents under Rule 12, Order XI (Commercial Courts regime) - preventing disposal or removal of assets to frustrate execution - injunction/attachment in money claims

Attachment before judgment / security to preserve decretal fruits - prima facie satisfaction under Order 38, Rule 5 CPC - duty to disclose documents under Rule 12, Order XI (Commercial Courts regime) - Whether the plaintiffs were entitled to an order requiring the defendants to furnish security/attachment of assets for Rs. 1,14,88,833/- pending disposal of the suit. - HELD THAT: - The Court considered the plaintiffs' claim for security on the basis that GST proceedings had been initiated and that defendants might soon have their bank accounts frozen or properties sealed, thus frustrating any future decree. The plaintiffs relied on documentary material received after institution of the suit but had not sought leave to disclose those documents as required by Rule 12 of Order XI under the Commercial Courts regime; the duty to disclose such documents continues until disposal and leave was not prayed for (see reasoning at paras. 21 and 22). The GST proceedings were shown to be pending: a show cause notice had been issued and replied to but no demand, seizure or freezing of assets had occurred and the plaintiffs produced no document proving that accounts or properties had been seized or sealed (paras. 27-28). The defendants demonstrated continuing commercial activity and material financial indicia on record (paras. 29). The Court held that, on the material before it, the plaintiffs had not made out the requisite prima facie case under Order 38, Rule 5 CPC to infer that the defendants were endeavouring to dispose of or remove assets so as to defeat execution; contested factual contentions (including the alleged return of goods) were matters for trial (paras. 17, 30-31). Applying the principles that security or attachment before judgment may be ordered only where a prima facie satisfaction is reached and security is necessary to protect realization of any future decree, the Court declined to exercise its discretionary powers to require security in the circumstances of this case. [Paras 27, 28, 29, 31, 32]

Application for attachment/requirement of security dismissed; G.A. No. 4 of 2023 dismissed.

Final Conclusion: The application seeking attachment/security for Rs. 1,14,88,833/- was dismissed: plaintiffs failed to establish a prima facie case justifying pre-judgment security, had not complied with disclosure obligations for documents obtained after suit without leave, and produced no evidence of any seizure or freezing of defendants' assets that would warrant protective relief.

Maintainability of writ against Show Cause Notice - Jurisdictional challenge to Show Cause Notice - Principles restraining pre-adjudication judicial intervention - Adjudication under Section 74 of the CGST Act - Right to raise defence during adjudication under Section 74(9) - Obligations of recipient under Section 16 for availing Input Tax Credit - Effect of retrospective cancellation of supplier's registration on Input Tax Credit - CBIC guidance on recovery from defaulting suppliers

Maintainability of writ against Show Cause Notice - Principles restraining pre-adjudication judicial intervention - Jurisdictional challenge to Show Cause Notice - Whether the writ petition challenging the Show Cause Notice under Section 74 was maintainable or required dismissal for premature judicial intervention. - HELD THAT: - The Court applied the established principle that writ jurisdiction ordinarily should not be exercised to interfere with a Show Cause Notice which only initiates adjudication, unless the notice is shown to be wholly without jurisdiction or ex facie perverse. Relying on the ratio in Special Director v. Mohd. Ghulam Ghouse (as cited), the Court held that routine challenges to the merits of an SCN are to be addressed in the statutory adjudication process and not by way of writ. Procedural grievances and contested factual or legal pleas raised by the petitioners can be and should be agitated before the adjudicating authority under Section 74, which is competent to decide jurisdictional issues antecedently. The petitioners failed to demonstrate that the issuing authority lacked jurisdiction or that the SCN was perverse in its issuance. [Paras 19, 20]

Writ petition dismissed as premature; no jurisdictional or perverse defect shown in the issuance of the Show Cause Notice.

Adjudication under Section 74 of the CGST Act - Right to raise defence during adjudication under Section 74(9) - Whether the alleged non-consideration of the petitioners' reply to FORM GST DRC-01A renders the SCN unsustainable or warrants quashing at the writ stage. - HELD THAT: - The Court examined the statutory scheme wherein an intimation under FORM GST DRC-01A informs the taxpayer of the amount payable and, in default, the proper officer may issue an SCN under Section 74(1). Even if the petitioners' reply to the intimation were not considered to their satisfaction, the Court observed that such grievances are remediable during the adjudication under Section 74(9) where an opportunity of hearing is mandated. Consequently, failure to accept the reply at the intimation stage does not make the SCN legally untenable or justify bypassing the statutory adjudicatory remedy by way of writ. [Paras 16, 17, 20]

Allegation of non-consideration of FORM GST DRC-01A reply is not a ground to quash the SCN; issues remain open for adjudication under Section 74.

Obligations of recipient under Section 16 for availing Input Tax Credit - Effect of retrospective cancellation of supplier's registration on Input Tax Credit - CBIC guidance on recovery from defaulting suppliers - Whether reliance on the CBIC press release and retrospective cancellation of suppliers' registrations absolves the petitioners from scrutiny of their entitlement to ITC and prevents issuance of an SCN. - HELD THAT: - The Court held that the CBIC press release does not relieve buyers of their statutory obligations under Section 16 to ensure compliance for availing Input Tax Credit. Retrospective cancellation of suppliers' registrations does not ipso facto validate or invalidate the transactions for purposes of ITC; the recipient's entitlement remains subject to statutory conditions and adjudication. Accordingly, the press release cannot be a shield against initiation of proceedings where the department alleges wrongful availment of ITC. [Paras 3, 21]

CBIC guidance and retrospective cancellation do not preclude adjudication of ITC entitlement; the SCN in respect of alleged wrongful ITC is maintainable.

Final Conclusion: The writ petition challenging the Show Cause Notice for the financial year 2023-2024 is dismissed: the petitioners have not shown the SCN to be wholly without jurisdiction or ex facie perverse; procedural or substantive defences raised may be asserted before the adjudicating authority under Section 74(9); and reliance on the CBIC press release or retrospective cancellation of suppliers' registrations does not bar initiation of adjudication regarding entitlement to ITC.

Exemption from GST for educational buildings - advance ruling - non-speaking demand - requirement of a detailed speaking order - acceptance of payment without conditional demand

Non-speaking demand - exemption from GST for educational buildings - advance ruling - Validity of the GST demand dated 28.08.2024 raised by the Greater NOIDA Industrial Development Authority against the petitioner - HELD THAT: - The Court examined the communication dated 28.08.2024 raising GST demand and the petitions' reliance on the exemption notifications (as amended), an advance ruling and a prior judgment of this Court. The respondents did not demonstrate that the communication referred to any subsequent notification withdrawing the exemption or that the petitioner failed to satisfy the exemption conditions. The demand was found to be non-speaking and apparently contrary to the exemption notifications, the advance ruling and the Court's earlier judgment. In these circumstances the demand was set aside for want of proper application of mind and reasoning. [Paras 3, 4, 7, 8]

The GST demand dated 28.08.2024 is set aside as non-speaking and contrary to the exemption notifications, the advance ruling and the judgment relied upon.

Acceptance of payment without conditional demand - Obligation of the respondents to accept the balance premium payment from the petitioner - HELD THAT: - Petitioner's case was that the balance premium was ready to be paid but was not being accepted unless GST was first deposited. The Court directed that the respondents must accept the balance payment of premium from the petitioner and not withhold acceptance on account of the disputed GST demand. [Paras 5, 10]

Respondents are required to accept the balance premium payment of the petitioner without conditioning it upon deposit of the disputed GST.

Requirement of a detailed speaking order - advance ruling - exemption from GST for educational buildings - Scope for reconsideration of GST liability and procedure to be followed by the respondents - HELD THAT: - The Court left open the question of substantive liability, permitting the respondents to re-examine and, if appropriate, raise demand by passing a detailed speaking order. Such order must indicate the basis for concluding that the petitioner is liable for GST after considering the exemption notifications, the advance ruling, the Court's judgment and any notifications issued prior to 05.12.2023. The petitioner must be afforded an opportunity of hearing and the exercise is to be completed within four weeks from the date of the order. [Paras 9, 11]

Respondents may, after giving the petitioner an opportunity of hearing, pass a detailed speaking order considering the notifications, advance ruling and judicial pronouncements before 05.12.2023; the exercise to be completed within four weeks.

Final Conclusion: Writ petition allowed: the GST demand dated 28.08.2024 is set aside as non-speaking; respondents must accept the balance premium payment and may, after affording hearing, if they consider necessary, issue a detailed speaking order on GST liability within four weeks.

Show Cause Notice under Section 73(1) - Statement of determination under Section 73(3) - Summary of Show Cause Notice in FORM GST DRC-01 - Authentication of notices and orders under Rule 26(3) - Right to hearing under Section 75(4)

Show Cause Notice under Section 73(1) - Summary of Show Cause Notice in FORM GST DRC-01 - Whether the Summary in FORM GST DRC-01 and the attached statement/determination can substitute issuance of a Show Cause Notice required under Section 73(1). - HELD THAT: - The Court examined Section 73 and Rule 142(1)(a)-(b) and held that Section 73(1) requires the Proper Officer to issue a Show Cause Notice specifying the reasons and circumstances that put Section 73 in motion, while Section 73(3) requires a Statement of determination. Rule 142 mandates electronic summaries in FORM GST DRC-01 and GST DRC-02 in addition to the primary Show Cause Notice and Statement. Consequently, a summary in FORM GST DRC-01 and the attached statement of determination cannot substitute or dispense with the statutorily mandated Show Cause Notice under Section 73(1). The attachment to the Summary in the petitioner's case was only the Statement under Section 73(3) and therefore did not fulfil the requirement of a Show Cause Notice, rendering initiation of proceedings under Section 73 without a proper Show Cause Notice legally infirm (see paras 11-15, 16-17, 27). [Paras 13, 14, 15, 16, 27]

The Summary in FORM GST DRC-01 and the attached statement do not substitute the Show Cause Notice under Section 73(1); initiation of proceedings without issuance of a proper Show Cause Notice is bad in law.

Authentication of notices and orders under Rule 26(3) - Show Cause Notice under Section 73(1) - Whether notices, statements and orders issued under Section 73 must be authenticated in the manner required by Rule 26(3) despite Rule 26(3) being placed in Chapter III. - HELD THAT: - Rule 26(3) prescribes electronic issuance by the Proper Officer through digital signature or e-signature for notices, certificates and orders under Chapter III. The Court noted that Chapter XVIII (Demand and Recovery) is silent on authentication but observed that Section 73 designates the Proper Officer as the authority to issue Show Cause Notices, Statements and Orders. Given the statutory need for authentication by the Proper Officer and absence of contrary provision in other chapters, the Court applied the authentication requirement in Rule 26(3) as a necessary measure to give effect to the statutory mandate; failure to authenticate notices, statements or orders by the Proper Officer renders them ineffective (see paras 18-22, 27). The Court relied on and distinguished earlier High Court decisions addressing unsigned documents and applied the necessity of authentication to the facts at hand. [Paras 18, 19, 21, 22, 27]

Notices, statements and orders under Section 73 must be authenticated in the manner required by Rule 26(3); absence of proper authentication by the Proper Officer renders those documents ineffective.

Right to hearing under Section 75(4) - Show Cause Notice under Section 73(1) - Whether the petitioners were denied the statutory right to hearing under Section 75(4) and whether passing an adverse order without affording hearing was permissible. - HELD THAT: - Section 75(4) mandates that an opportunity of hearing be granted when requested in writing by the person chargeable with tax or when an adverse decision is contemplated. The Court noted that the FORM GST DRC-01 and the reply form (DRC-06) provided for personal hearing and that the petitioner had opted for a personal hearing, but no hearing was afforded. The Summary uploaded showed only a date for submission of reply and left hearing details blank. The Court held that passing an adverse order without providing the statutory opportunity of hearing would render Section 75(4) ineffective; therefore, absence of hearing in the circumstances constituted violation of the statutory right and principles of natural justice (see paras 23-26, 27). [Paras 23, 24, 25, 26, 27]

The petitioners were denied the statutory right to hearing under Section 75(4); passing an adverse order without affording the hearing was impermissible.

Setting aside orders and liberty to initiate de novo proceedings - Whether the impugned order should be quashed and whether the authorities may initiate fresh proceedings. - HELD THAT: - Having found that initiation and adjudication under Section 73 proceeded without a proper Show Cause Notice, without required authentication, and without affording hearing under Section 75(4), the Court set aside and quashed the impugned order dated 31.12.2023. The Court, mindful that the defects were procedural/technical rather than foreclosing assessment on merits, granted liberty to the respondent authorities to initiate de novo proceedings under Section 73 if deemed fit for the relevant financial year, and directed exclusion of the period from issuance of the Summary DRC-01 to service of certified copy of the judgment for computing the limitation under Section 73(10) (see paras 28-29). [Paras 28, 29]

Impugned order dated 31.12.2023 set aside and quashed; respondent authorities permitted to initiate de novo proceedings and appropriate period excluded for computation under Section 73(10).

Final Conclusion: The writ petition is allowed: the Court held that a summary in FORM GST DRC-01 and an attached statement cannot substitute the Show Cause Notice under Section 73(1); authentication in the manner of Rule 26(3) is required for notices/statements/orders issued by the Proper Officer; and the petitioners' statutory right to hearing under Section 75(4) was violated. The impugned order dated 31.12.2023 is quashed, with liberty to the authorities to initiate fresh proceedings and directions excluding the period from issuance of the DRC-01 summary to service of the certified judgment for computation under Section 73(10).

Show Cause Notice under Section 73 - Statement of determination under Section 73(3) - Summary of Show Cause Notice in FORM GST DRC-01 - Authentication of notices and orders by digital signature (Rule 26(3)) - Right to opportunity of hearing under Section 75(4)

Show Cause Notice under Section 73 - Summary of Show Cause Notice in FORM GST DRC-01 - Summary in FORM GST DRC-01 is not a substitute for issuance of a Show Cause Notice under Section 73(1); the Proper Officer must issue a Show Cause Notice and the Statement of determination under Section 73(3) is distinct from the Show Cause Notice. - HELD THAT: - The Court analysed Section 73(1), (3) and (10) together with Rule 142(1)(a) and (b) and held that the legislature has distinguished between a Show Cause Notice and the Statement of determination. Rule 142 requires that, in addition to issuing the Show Cause Notice and the Statement, a summary thereof be served electronically in FORM GST DRC-01/DRC-02. Therefore, the attachment containing the Statement of determination appended to the summary cannot be treated as the statutory Show Cause Notice required to put Section 73 in motion. Initiation of proceedings under Section 73 without issuing a proper Show Cause Notice is contrary to the statute and Rule 142 and is invalid. [Paras 12, 13, 15, 16, 27]

Proceedings under Section 73 initiated by relying solely on the SUMMARY (GST DRC-01) and the attached Statement are invalid; a proper Show Cause Notice as per Section 73(1) is mandatory.

Authentication of notices and orders by digital signature (Rule 26(3)) - Proper Officer - Notices, statements and orders initiating or concluding proceedings under Section 73 must be authenticated by the Proper Officer; absence of such authentication renders them ineffective unless the Rules/Board notification provide otherwise. - HELD THAT: - Rule 26(3) prescribes that notices, certificates and orders under the Rules be issued electronically by the Proper Officer through digital signature/e-signature or other notified mode. Although Rule 26(3) is framed in Chapter III, the Court observed that given the statutory requirement that Show Cause Notices, Statements and Orders be issued by the Proper Officer (Section 2(91) and Section 73), authentication by the Proper Officer is essential. In the present case the attachments lacked an authenticated signature (only recitals like 'Sd-Proper Officer' appeared) and the portal authentication alone does not cure the absence of proper authentication in the documents; consequently, such unauthenticated documents are ineffective unless the Rules are amended or Board issues notifications to fill the void. [Paras 19, 20, 21, 22, 27]

Attachments to the summary and the order lacking authentication by the Proper Officer do not constitute valid notices/orders; authentication as contemplated by Rule 26(3) must be applied unless the Rules or Board notification provide otherwise.

Right to opportunity of hearing under Section 75(4) - Natural justice - When an adverse decision is contemplated under the Act, the person chargeable is entitled to an opportunity of hearing under Section 75(4); failure to grant such hearing where requested renders the order vulnerable. - HELD THAT: - Section 75(4) mandates grant of hearing when a written request for hearing is made or when an adverse decision is contemplated. The petitioner availed the option for personal hearing in Form GST DRC-06 but was not afforded a hearing; the summary (GST DRC-01) filed only specified the date for submission of reply and left hearing particulars blank. The Court held that passing an adverse order without providing the statutory opportunity of hearing would negate the protective purpose of Section 75(4) and is impermissible. [Paras 23, 24, 26, 27]

Failure to afford the statutory opportunity of hearing under Section 75(4) vitiates the impugned order.

Remedial relief - setting aside and liberty for de novo proceedings - Impugned order dated 17.04.2024 is set aside; respondent authorities are granted liberty to initiate de novo proceedings under Section 73 subject to statutory limits, and the exclusion of time from issuance of the summary to service of certified copy of this judgment is directed for computing limitation under Section 73(10). - HELD THAT: - Having found that initiation and completion of proceedings under Section 73 were procedurally flawed for absence of a proper Show Cause Notice, lack of authentication and denial of hearing, the Court quashed the impugned order. Recognising that the fault was procedural/technical, the Court permitted the authority to commence fresh proceedings if deemed fit. It also directed that the period from issuance of the FORM GST DRC-01 summary until service of a certified copy of the judgment on the Proper Officer be excluded for computation of the three-year period under Section 73(10). [Paras 28, 29]

Impugned order set aside; liberty granted for de novo initiation of proceedings and limited exclusion of time for limitation computation under Section 73(10).

Final Conclusion: The writ petition is allowed: the order dated 17.04.2024 is quashed as proceedings under Section 73 were initiated and concluded without a proper Show Cause Notice, without required authentication by the Proper Officer and without affording the statutory opportunity of hearing; respondent authorities may, if so advised, initiate fresh proceedings in accordance with law and the period from issuance of the SUMMARY (GST DRC-01) to service of a certified copy of this judgment is excluded for computing the time-limit under Section 73(10).

Show Cause Notice under Section 73 - Summary of Show Cause Notice in FORM GST DRC-01 - Statement of determination under Section 73(3) - Authentication of notices and orders by Proper Officer - Application of Rule 26(3) to adjudicatory notices and orders - Right to personal hearing under Section 75(4) - Limitation for passing order under Section 73(10) - Requirement of issuance of Show Cause Notice irrespective of summary

Show Cause Notice under Section 73 - Summary of Show Cause Notice in FORM GST DRC-01 - Statement of determination under Section 73(3) - Requirement of issuance of Show Cause Notice irrespective of summary - Summary in FORM GST DRC-01 and the attached statement of determination cannot substitute the statutory Show Cause Notice under Section 73(1). - HELD THAT: - The Court held that Section 73 contemplates distinct steps: issuance of a Show Cause Notice under sub-section (1), a Statement of determination under sub-section (3), and an order under sub-section (9). Rule 142 mandates that a summary in FORM GST DRC-01 accompany the notice, but does not supplant the statutory requirement of issuing the Show Cause Notice itself. The attachment to the DRC-01 in the present case was only the Statement of determination under Section 73(3) and, therefore, could not be treated as the Show Cause Notice that would put Section 73 into motion. Consequently initiation and adjudication under Section 73 without a proper Show Cause Notice is contrary to Section 73 and Rule 142(1)(a). [Paras 12, 13, 15, 16, 27]

Proceedings initiated and order passed without issuance of the statutory Show Cause Notice under Section 73(1) are invalid.

Authentication of notices and orders by Proper Officer - Application of Rule 26(3) to adjudicatory notices and orders - Notices, statements and orders required under Section 73 must be authenticated by the Proper Officer as envisaged by Rule 26(3); absence of such authentication renders them ineffective. - HELD THAT: - Rule 26(3) prescribes that notices, certificates and orders under the relevant chapter be issued electronically by the Proper Officer through digital signature, e-signature or other notified modes. Although Rule 26(3) expressly appears in Chapter III, the Court concluded that given the statutory requirement that the Proper Officer issues the Show Cause Notice, Statement and Order, authentication in the manner of Rule 26(3) must be applied to these instruments unless the Rules or Board notifications provide otherwise. The impugned attachments lacked authentication/signature and thus could not satisfy the mandatory role of the Proper Officer in issuing those documents. [Paras 18, 19, 21, 22, 27]

Attachments to the summaries which lack authentication by the Proper Officer are ineffective and cannot sustain proceedings or orders under Section 73.

Right to personal hearing under Section 75(4) - Failure to grant an opportunity of hearing as mandated by Section 75(4) vitiates the impugned adjudication. - HELD THAT: - Section 75(4) requires that when a request in writing for hearing is made by the person chargeable with tax or when an adverse decision is contemplated, an opportunity of hearing must be granted. The petitioner had indicated a request for personal hearing in the prescribed reply form, but no hearing was afforded. The Court held that proceeding to pass an adverse order without granting the hearing mandated by Section 75(4) would render the statutory safeguard meaningless and thus the impugned order suffered from violation of natural justice and the statutory mandate. [Paras 23, 24, 26, 27]

Adjudication in the absence of the statutorily mandated opportunity of hearing under Section 75(4) is invalid.

Limitation for passing order under Section 73(10) - Period from issuance of the Summary in FORM GST DRC-01 dated 30.09.2023 until service of a certified copy of this judgment on the Proper Officer is excluded for computation under Section 73(10); liberty granted to initiate de novo proceedings. - HELD THAT: - While quashing the impugned Order-in-Original dated 30.12.2023 for the procedural and statutory defects found, the Court exercised equitable relief by permitting the authorities to initiate fresh proceedings under Section 73 if deemed fit for the relevant financial year. To ensure fairness in limitation computation, the Court directed exclusion of the period from the date of issuance of the Summary DRC-01 until the date a certified copy of the judgment is served on the Proper Officer for the purpose of Section 73(10)'s time bar. [Paras 28, 29]

Impugned order set aside; respondents permitted to initiate de novo proceedings and specified period excluded for computation under Section 73(10).

Final Conclusion: The writ petition succeeds: the High Court quashed the Order-in-Original dated 30.12.2023, holding that the summary in FORM GST DRC-01 and its attachment cannot substitute the statutory Show Cause Notice under Section 73, that notices/statements/orders must be authenticated by the Proper Officer (in the manner required by Rule 26(3) unless otherwise provided), and that failure to grant the hearing under Section 75(4) vitiated the adjudication; liberty granted to the authorities to initiate de novo proceedings with the specified exclusion for limitation computation.

Place of supply under Section 12(3) of IGST Act - intra-state supply - apportionment of tax liability between States - tax deduction at source under Section 51 - refund of excess electronic cash ledger balance - jurisdiction of State appellate authority

Refund of excess electronic cash ledger balance - place of supply under Section 12(3) of IGST Act - Maintainability of the petitioner's refund application in view of the orders of the 6th respondent and related proceedings. - HELD THAT: - The Court recorded that the 6th respondent had set aside the 1st respondent's rejection of the refund claim insofar as it ignored the IGST Act and had held that the petitioner was required to obtain registration and report turnover separately for the quantum of work executed in Telangana and Maharashtra. The Court noted that the place of supply is governed by Section 12(3) of the IGST Act and, on the material before it, the nature of supply is intra-state in respective States in proportion to the value of services rendered. In light of this and the common order passed in W.P.Nos.6271 and 6299 of 2020, the Court directed that the demand notices dated 13.03.2020 be kept in abeyance and that respondent No.1 should decide the additional demand depending on the outcome of the refund application in accordance with the earlier common order. The Court also observed that the petitioner had not placed on record documents evidencing discharge of tax liability in Maharashtra or the inter se allocation of work between JV partners, which prevented a determination of proportions for refund on the basis of the record before the Court.

Refund application is to be governed by the common order in W.P.Nos.6271 and 6299 of 2020; the demand notices dated 13.03.2020 are to be kept in abeyance pending disposal of the refund application and respondent No.1 to act correspondingly.

Apportionment of tax liability between States - intra-state supply - jurisdiction of State appellate authority - tax deduction at source under Section 51 - Whether the 6th respondent had jurisdiction and/or was obliged to grant refund of TDS deducted by the contractee in respect of the portion of work executed in the State of Maharashtra. - HELD THAT: - The Court accepted the principle that where a composite project spans two States the place of supply must be determined and tax liability discharged in each State proportionate to work done there, treating the supply as intra-state in the respective States. The 6th respondent had held that refund relating to Telangana registration was payable under Telangana registration and that amounts attributable to Maharashtra should be claimed before the Maharashtra authority. The Court noted that the petitioner failed to adduce material to verify that tax liability for Maharashtra works had been discharged in Maharashtra, and that the 6th respondent adopted a proportionate approach because the petitioner did not furnish details of the quantum of TDS attributable to Telangana work. The Court further observed limits on the 6th respondent's competence to adjudicate transactions attributable to other States and endorsed that refund of amounts pertaining to Maharashtra should be pursued before the Maharashtra authorities.

6th respondent's approach to allow refund only for the Telangana portion and to direct that the Maharashtra portion be claimed before the Maharashtra authority is upheld; petitioner must produce requisite material and pursue claims in the appropriate State forum.

Final Conclusion: The writ petitions are disposed of by directing that the demand notices dated 13.03.2020 remain in abeyance pending disposal of the refund application in accordance with the court's common order in W.P.Nos.6271 and 6299 of 2020; respondent No.1 shall decide the additional demand depending on that outcome, and the petitioner may pursue refund claims pertaining to Maharashtra before the competent Maharashtra authority.

Judicial review of Settlement Commission orders - scope of inquiry under Article 226 - settlement as statutory arbitration / package deal - full and true disclosure in settlement proceedings - deemed dividend treated as undisclosed income in settlement - finality of settlement orders

Judicial review of Settlement Commission orders - scope of inquiry under Article 226 - Extent to which the High Court may examine and interfere with orders passed by the Income Tax Settlement Commission under Article 226 of the Constitution. - HELD THAT: - The Court held that the High Court's jurisdiction is one of judicial review and not merits appeal. The court's inquiry is confined to whether the Settlement Commission acted contrary to the statutory provisions of Chapter XIX A, or committed grave procedural defects, or acted with bias, fraud or malice. The decision making process adopted by the Commission, and not its substantive conclusions on facts or competing legal views, is the proper subject of review. The Settlement Commission's settlement function is akin to statutory arbitration and entails a broad discretionary power to accept or reject settlement offers and to determine the amount and terms in accordance with the Act. Consequently, errors of fact or choice between two permissible views ordinarily do not justify upsetting a settlement order. [Paras 9, 11]

High Court will not undertake a merits review of Settlement Commission orders; interference is limited to jurisdictional errors, grave procedural defects, or vitiating factors such as bias, fraud or malice.

Full and true disclosure in settlement proceedings - settlement as statutory arbitration / package deal - Whether the Settlement Commission was precluded from considering material not discovered during search and seizure, and the relevance of 'full and true disclosure' for admission and settlement. - HELD THAT: - The Court observed that Chapter XIX A contemplates that the Commission may examine records, reports and further evidence, including material not before the Assessing Officer, when determining true undisclosed income. A valid application under Section 245C requires "full and true disclosure"; the Commission's jurisdiction to order in respect of matters is confined to those covered by the application and matters in the Commissioner's report. The settlement inquiry is oriented to ascertaining whether disclosure is full and true, which is a different perspective from ordinary adjudication; therefore the Commission is not barred from considering additional material when assessing undisclosed income for settlement purposes. [Paras 6, 8, 11]

Settlement Commission may consider material beyond what was discovered in search and seizure while assessing whether an applicant made full and true disclosure; such consideration does not by itself render the settlement invalid.

Deemed dividend treated as undisclosed income in settlement - finality of settlement orders - Whether an erroneous legal finding by the Settlement Commission (specifically treating certain loans as 'deemed dividend' and adding them as undisclosed income) warrants setting aside the settlement order. - HELD THAT: - The Court held that an erroneous legal conclusion on one issue among many does not automatically vitiate an entire settlement. Settlement is a composite package; a defect must vitiate the whole settlement, not merely a part, to justify interference. If the Commission adopted one of two legally tenable views, the High Court should not upset the settlement merely because it would have formed a different view. The Court emphasized the negotiated nature of settlement-partial acceptance is inconsistent with the statutory scheme-and therefore limited scope exists to convert isolated errors into a ground for setting aside the settlement. [Paras 10, 11]

An isolated erroneous legal finding by the Settlement Commission does not invalidate the settlement unless the defect vitiates the whole settlement; mere availability of an alternative legal view is not a ground for interference.

Final Conclusion: The Writ Appeal is dismissed. The High Court correctly declined to interfere with the Settlement Commission's order: the jurisdiction of judicial review is limited, the Commission may consider material for ascertaining full and true disclosure, and an isolated erroneous legal finding does not vitiate an otherwise final settlement.

Admissibility of statement under Section 132(4) - evidentiary value of admissions made during search - burden to rebut admissions recorded under oath - use of statements in proceedings under Section 158BD - valuation evidence vis-a -vis sworn statements

Admissibility of statement under Section 132(4) - evidentiary value of admissions made during search - burden to rebut admissions recorded under oath - valuation evidence vis-a -vis sworn statements - Whether the Tribunal rightly restored the addition of undisclosed investment in construction by relying on statements recorded under Section 132(4) and by reversing the Commissioner (Appeals) - HELD THAT: - The Court held that statements recorded under Section 132(4) during search proceedings are admissible evidence for proceedings under Section 158BD and carry evidentiary value under Section 3 of the Indian Evidence Act and Section 131 of the 1961 Act. While an admission is an important piece of evidence it is not conclusive - the maker of the admission may show it to be incorrect - but once recorded on oath a presumption of correctness arises unless the person who made the statement alleges coercion, undue influence or otherwise shows the admission to be incorrect. The assessees did not contend that the husbands' statements were procured by coercion nor did they produce cogent material to displace the recorded admissions. The Commissioner (Appeals) erred in setting aside the Assessing Officer's addition solely on the ground that valuation should have been obtained; the Tribunal correctly held that mere opinion of a valuer cannot obliterate sworn admissions and that the burden lay on the assessees to rebut the statements. Reliance upon Pullangode Rubber Produce Co. Ltd was placed for the proposition that admissions, though important, are not conclusive, but in the present facts the assessees failed to discharge the burden to show the admissions were incorrect; therefore the Tribunal's restoration of the addition was justified. [Paras 14, 15, 16, 17, 19]

The Tribunal did not commit error in restoring the addition; the evidence of statements under Section 132(4) was admissible and, uncontroverted, warranted treating the unexplained portion as undisclosed investment.

Final Conclusion: The substantial question of law is answered in favour of the Revenue; the appeals are dismissed and the Tribunal's order restoring the additions is upheld.

Requirement to record reasons - quashing of administrative/quasi-judicial order for failure to assign reasons - public orders not to be validated by post hoc explanations - consideration of replies and documentary evidence filed with the authority - rehearing and fresh decision in accordance with law

Requirement to record reasons - consideration of replies and documentary evidence filed with the authority - quashing of administrative/quasi-judicial order for failure to assign reasons - Assessment order vitiated by internally inconsistent findings and failure to give reasons for rejecting the petitioner's reply and documents - HELD THAT: - The Court found that the assessing authority simultaneously recorded that no reply had been furnished and yet proceeded to consider the reply dated 14.03.2024 and the documents filed therewith in a cryptic manner without assigning cogent reasons for rejecting the defence. The portal record demonstrated that bank statements and confirmation letters were uploaded with the reply, but the assessment order did not engage with their trustworthiness or explain why they were unacceptable. Reliance on post hoc explanations contained in the counter is impermissible: the validity of a public order must be judged by the reasons stated in the order itself and cannot be supplemented by fresh reasons subsequently advanced. The Court applied the settled principle that quasi judicial and administrative decisions affecting rights must record clear, cogent reasons; absence of such reasons renders the order unsustainable. Having regard to the internal contradictions in the assessment order and the lack of application of mind to the documentary material, the order was held to suffer from glaring illegality and could not be allowed to stand. [Paras 8, 10, 11, 12]

Impugned assessment order set aside and the matter remitted to the competent authority for rehearing and fresh decision in accordance with law.

Final Conclusion: Writ petition allowed; assessment order dated 19.03.2024 quashed and matter remanded for fresh hearing and decision in accordance with law; no opinion expressed on merits.

TDS credit reflected in Form 26AS - Verification of TDS credit and corresponding income - Rectification under Section 154 - Concession by Revenue

TDS credit reflected in Form 26AS - Verification of TDS credit and corresponding income - Rectification under Section 154 - Concession by Revenue - TDS credit of Rs. 168,61,96,022/- as reflected in the updated Form 26AS was to be allowed, subject to verification that the corresponding revenue has been offered to tax. - HELD THAT: - The CIT(A) allowed increased TDS credit relying on the updated Form 26AS, observing that the increase arose from late payment of TDS and late filing of revised quarterly TDS returns by port users, and directed the AO to verify and grant the credit. Before the Tribunal the Departmental Representative conceded the correctness of the CIT(A)'s determination and requested referral to the AO for verification in terms of the CIT(A)'s directions. The Tribunal applied the settled principle that TDS credit appearing in Form 26AS must be allowed when the revenue relating to such credit is already offered to tax, subject to verification by the Assessing Officer. In view of the concession and the material on record, the Tribunal found no infirmity in the CIT(A)'s order and directed compliance by the AO. [Paras 6]

Revenue's appeal dismissed as infructuous; AO directed to verify the updated Form 26AS for AY 2019-20 and grant TDS credit of Rs. 168,61,96,022/- after verifying that the corresponding revenue is included in the assessee's total income.

Final Conclusion: The appeal is dismissed; the AO is directed to verify the updated Form 26AS and grant the increased TDS credit as determined by the CIT(A), ensuring the corresponding revenue has been offered to tax.

Penalty under section 271AAB(1A) - penalty under section 271AAB - Section 275(1A) - giving effect to appellate or revision orders for revision of penalty - power of Assessing Officer to revise penalty after appellate modification - requirement of reasonable opportunity of being heard before revising penalty - effect of pendency of further appeal on levy of proportionate penalty

Penalty under section 271AAB(1A) - Section 275(1A) - giving effect to appellate or revision orders for revision of penalty - power of Assessing Officer to revise penalty after appellate modification - effect of pendency of further appeal on levy of proportionate penalty - Validity of CIT(A)'s reduction/deletion of proportionate penalty where ITAT reduced additions but Revenue has filed appeals to the High Court - HELD THAT: - The Tribunal held that Section 275(1A) empowers the Assessing Officer to pass or revise orders imposing, enhancing, reducing or cancelling penalty by giving effect to appellate or revision orders (Commissioner (Appeals), Appellate Tribunal, High Court, Supreme Court or revision under sections 263/264), subject to the assessee being given a reasonable opportunity of hearing and the AO acting within the sixmonth time limit from receipt of the appellate/revision order. Where the Tribunal's quantum order has reduced or deleted additions, the CIT(A) and Assessing Officer are entitled to give effect to that modified assessment in relation to penalty proceedings; if the appellate order is subsequently modified by a higher forum, Section 275(1A) permits further revision of the penalty accordingly. In the facts, the CIT(A) restricted/deleted the penalty to the extent of additions confirmed by the ITAT; Revenue's pendency of appeals to the High Court did not preclude the CIT(A) from acting on the ITAT order, and Revenue did not place any stay of the ITAT order on record. Accordingly the ground that CIT(A) erred in deleting proportionate penalty because Tax Appeals to the High Court were filed was rejected as devoid of merit. [Paras 9, 11, 12]

CIT(A)'s deletion/reduction of the penalty to the extent of additions confirmed by the ITAT was upheld; Revenue's appeal dismissed.

Final Conclusion: Revenue's appeals for Assessment Years 2017-18 and 2018-19 are dismissed; CIT(A)'s action in restricting/deleting the penalty in accordance with the ITAT's findings is upheld, with Section 275(1A) permitting further revision by the AO if a higher forum modifies the appellate order.

Existence of an international transaction - deemed international transaction under Section 92B(2) arising from invocation of a corporate guarantee - crystallisation of liability / contingent liability - subrogation and rights of a guarantor upon payment - arm's length pricing / transfer pricing cannot be applied without a deeming event

Existence of an international transaction - deemed international transaction under Section 92B(2) arising from invocation of a corporate guarantee - crystallisation of liability / contingent liability - arm's length pricing / transfer pricing cannot be applied without a deeming event - subrogation and rights of a guarantor upon payment - Whether invocation of the corporate guarantees by EXIM Bank converted the guarantor's obligation into a deemed loan (international transaction) with the assessee and thereby rendered it liable to arm's length adjustment for AY 2018-19 - HELD THAT: - The Tribunal examined the assessee's audited financial statements and tax audit report and noted that the invocation by EXIM Bank created a contingent liability whose liability was not yet crystallised during the relevant financial year (para 6). The coordinate Bench's conclusion for a different year that guarantees ceased to exist for that year does not preclude analysis under Section 92B(2) where the question is whether the transaction with the bank is the outcome of a prior agreement making it a deemed international transaction (paras 7-11). The guarantee deed shows that the guarantee arises from the loan agreement between EXIM Bank and the AE, but the Tribunal held that a deeming of the bank transaction into an international transaction depends on discharge of the AE's debt by the guarantor or enforcement/recovery by the bank such that the guarantor's payment results in benefit to the AE (para 11). In the present year there was no payment by the assessee to EXIM Bank, no allocation or apportionment of any cost or expense in the assessee's books on account of invocation, and no crystallised liability that affected income or loss computations (paras 12, 6). The principle of subrogation under the Contract Act grants the guarantor rights against the principal debtor after payment but does not itself create a new debt in the guarantor's books absent actual payment (para 13). Consequently, the authorities erred in treating the invoked guarantee as a loan to the AE and charging an arm's length interest; the addition made by the TPO/DRP is unsustainable (paras 8, 14). [Paras 10, 11, 12, 13, 14]

The invocation of the corporate guarantees did not convert the guarantor's position into a deemed loan / international transaction for AY 2018-19 in the absence of payment or crystallisation of liability; the transfer pricing adjustment was quashed and the assessee's appeal is allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2018-19, holding that invocation of the corporate guarantees by EXIM Bank did not, without payment or crystallisation of liability, amount to a deemed international transaction or a loan to the AE attractable to arm's length adjustment; the enhancement made by the tax authorities is quashed.

Comparability of uncontrolled enterprises for transfer pricing - selection and rejection of comparable companies - arm's length price adjustment on inter-company purchases - application of Rule 10B adjustments for economic differences - treatment of industry-wide commercial/extraordinary factors in transfer pricing

Selection and rejection of comparable companies - comparability of uncontrolled enterprises for transfer pricing - Exclusion of M/s. RRB Energy Ltd. as a comparable company was upheld. - HELD THAT: - The Tribunal accepted the reasons recorded by the Transfer Pricing Officer and the Dispute Resolution Panel for excluding M/s. RRB Energy Ltd. from the set of comparables. The authorities observed that RRB showed a large negative margin, derived a major portion of income from services, and exhibited abnormal margin fluctuation attributable to relocation of manufacturing and corporate offices leading to above-normal expenses. These factors rendered it not functionally and financially comparable with the assessee. The Tribunal found no infirmity in the AO/ TPO/ DRP conclusion rejecting RRB as a comparable. [Paras 6, 7]

Rejection of M/s. RRB Energy Ltd. as a comparable company sustained.

Arm's length price adjustment on inter-company purchases - selection and rejection of comparable companies - The downward transfer pricing adjustment on AE purchases based on the adopted comparable margin was sustained. - HELD THAT: - The AO adopted two comparables (Bellis India Ltd. and Indo Wind Energy Ltd. segmental) with net profit margins of 5.08% and 3.58% respectively, averaging to 4.33%, and compared the assessee's segmental margin of 1.79% against that benchmark. On this basis the AO made the downward adjustment to AE purchases. The Tribunal reviewed the material on record and found the AO/TPO/DRP had followed the comparability exercise and reasoning adequately; consequently the TP adjustment was affirmed. [Paras 6, 7]

Adjustment to AE purchases by applying comparable margin of 4.33% upheld.

Application of Rule 10B adjustments for economic differences - treatment of industry-wide commercial/extraordinary factors in transfer pricing - Claim for adjustments under Rule 10B and for special treatment of commercial/extraordinary factors (custom duty, delay in approvals, cost rises, forex movement) was rejected. - HELD THAT: - The assessee sought adjustments under Rule 10B and allowances for various commercial or extraordinary events contending these increased losses. The DRP and TPO considered these contentions and concluded that such factors were common across the industry and had been considered in the comparability analysis; no specific custom duty or other adjustments were warranted. The Tribunal found that the authorities had dealt with these issues in a clear and cogent manner and that there was no error in declining the claimed adjustments. [Paras 7]

Refusal to grant Rule 10B or other special adjustments affirmed.

Final Conclusion: The appeals are dismissed; the Tribunal upholds the AO/TPO/DRP findings rejecting RRB Energy Ltd. as a comparable, sustaining the downward transfer pricing adjustment on AE purchases based on the adopted comparables, and declining the assessee's claims for Rule 10B and other industry-related adjustments.

Deduction under Section 10AA - Mandatory filing of audit report in Form 56F - Procedural v. substantive compliance - Submission before completion of assessment - Legislative intent to promote SEZs - Restoration of deduction without remand

Deduction under Section 10AA - Form 56F - Procedural non-compliance - Submission before completion of assessment - Disallowance of the deduction claimed under Section 10AA for AY 2017-18 on the ground that Form 56F was not filed along with the return. - HELD THAT: - The Tribunal found that Form 56F, which certifies the correctness of the claim under Section 10AA, was filed on 22.11.2017 and therefore was on record well before issuance of the intimation under Section 143(1) dated 24.09.2018. Applying the principle that procedural non-compliance should not defeat substantive rights where the requisite certification is available before completion of assessment, and having regard to the legislative objective of promoting SEZ exports, the Tribunal held that the delayed filing of Form 56F was a procedural lapse that did not go to the root of the claim. Reliance was placed on coordinate and High Court precedents emphasising liberal construction of Section 10AA to advance its object. Because the necessary certification was before the assessing authority at the time of assessment processing, no remand for verification was required and the deduction was reinstated. [Paras 6]

The disallowance was not justified; the deduction under Section 10AA is restored and the appeal is allowed without remand.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2017-18, holding the late filing of Form 56F to be a procedural lapse and restoring the Section 10AA deduction without remanding the matter to the assessing officer.

Characterisation of amounts recovered in search as business receipts - satisfactory explanation to defeat deeming under section 69A - inapplicability of special tax treatment under section 115BBE - treatment of cash found in lockers vis-a -vis books of account

Characterisation of amounts recovered in search as business receipts - satisfactory explanation to defeat deeming under section 69A - inapplicability of special tax treatment under section 115BBE - treatment of cash found in lockers vis-a -vis books of account - Whether the amounts of Rs. 96,99,500/- and Rs. 1,72,00,000/- recovered from the assessee's lockers are taxable as unexplained investments under section 69A and attract special rate under section 115BBE, or are business receipts to be treated as normal business income. - HELD THAT: - The Tribunal examined material on record and the rival contentions. It noted that Rs. 96,99,500/- was reflected in the assessee's books for the year with supporting sales documentation (cash book, ledger, sales invoices, sales register, stock register, sales tax returns) and that Rs. 1,72,00,000/- was claimed to be sale proceeds not yet incorporated in the books due to pending clarifications. There was no indication in the record that the assessee's explanation as to the source of the amounts was doubted or controverted by the revenue. Reliance was placed on earlier Tribunal reasoning that section 69A employs the word 'may', and therefore, when the explanation offered is satisfactory and not disputed, the amounts cannot be treated as unexplained money under section 69A and, consequently, section 115BBE would not apply. Applying that principle to the facts, the Tribunal held that the amounts were business receipts arising from sales and should be treated as business income rather than additions under section 69A with taxation under section 115BBE. The Tribunal therefore concluded that the AO's recharacterisation and addition under section 69A r.w.s. 115BBE was not justified on the available material. [Paras 8]

The amounts recovered from the lockers are to be treated as business income and not as unexplained investments under section 69A; section 115BBE is not applicable, and the additions are disallowed to that extent.

Final Conclusion: Appeal partly allowed: the Tribunal held that the cash sums recovered from the lockers constitute business receipts supported by explanation and documents and therefore cannot be brought to tax under section 69A nor subjected to the special tax under section 115BBE; the addition of Rs. 2,68,99,500/- under section 69A r.w.s. 115BBE is set aside and the amounts are treated as business income.

Exemption under section 11 - rectification under section 154 - error apparent on the face of the record - debatable issues not permissible in rectification proceedings - functus officio of CPC after intimation under section 143(1)

Exemption under section 11 - rectification under section 154 - Validity of CIT(A)'s allowance of exemption under section 11 following a rectification order by CPC - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the assessee, a charitable trust registered under section 12AA, was entitled to exemption under section 11 for AY 2015-16. The CIT(A) noted that the assessee had filed the original and revised returns along with Form 10B within time and that the intimation under section 143(1) had earlier allowed the exemption. When the assessee filed a rectification under section 154 to claim credit of cost of acquisition of securities, CPC in the rectification order granted the acquisition credit but denied the exemption without assigning reasons or explaining its change of stance from the earlier intimation. The Tribunal accepted the CIT(A)'s conclusion that the disallowance in the rectification order could not be sustained and that the exemption should be allowed. [Paras 4, 8]

CIT(A)'s allowance of exemption under section 11 is affirmed and the Revenue's appeal challenging that allowance is dismissed.

Debatable issues not permissible in rectification proceedings - error apparent on the face of the record - functus officio of CPC after intimation under section 143(1) - Whether CPC could, in rectification proceedings under section 154, re-open a debatable question and deny exemption previously allowed by intimation under section 143(1) - HELD THAT: - The Tribunal held that rectification under section 154 is confined to correcting an "error apparent on the face of the record" and does not permit reopening debatable issues. Since CPC's intimation under section 143(1) had allowed exemption under section 11, CPC was functus officio in respect of that issue and, in rectification proceedings limited to the assessee's claim for acquisition cost credit, it was not permissible to deny the exemption without any reasoning. The Tribunal therefore endorsed the view that the denial of exemption in the rectification order amounted to inappropriate reconsideration of a debatable matter beyond the scope of section 154. [Paras 8]

Rectification proceedings could not be used to revisit a debatable issue already decided in the intimation; CPC's denial of the exemption in the rectification order was not sustainable.

Final Conclusion: The Tribunal dismissed the Revenue's appeal, affirmed the CIT(A)'s allowance of exemption under section 11 for Assessment Year 2015-16, and held that rectification under section 154 cannot be used to re-open debatable issues or to overturn an earlier intimation under section 143(1) without any record of error apparent on the face of the record.

Speculative transaction - high seas sale - delivery by transfer of documents of title - actual delivery or transfer - application of section 43(5) - document of title under Sale of Goods Act

Speculative transaction - high seas sale - delivery by transfer of documents of title - application of section 43(5) - Losses arising from purchases and sales effected on high seas basis are business losses and not speculative losses. - HELD THAT: - The Tribunal examined whether the assessee's high seas purchases and sales fell within the definition of speculative transaction under section 43(5), which treats contracts settled otherwise than by actual delivery or transfer as speculative. The Tribunal accepted the assessee's uncontroverted factual sequence: the original seller loaded goods on the vessel and possession was transferred evidenced by bills of lading; the assessee acquired title by endorsement of the bill of lading while the goods were in transit and subsequently transferred title and accompanying documents to the ultimate buyer who took physical delivery on arrival and completed customs formalities. Reliance was placed on decisions of High Courts and coordinate benches that hold delivery contemplated under section 43(5) includes transfer of documents of title under the Sale of Goods Act, and that where delivery (direct or by transfer of documents) is contemplated and ultimately effected, transactions are not speculative. The authorities below did not dispute the factual chain or documentary evidence of ultimate delivery. Applying these principles, the Tribunal concluded that these successive high seas transfers involved actual delivery by transfer of documents of title and therefore did not fall within the mischief of section 43(5). [Paras 6]

Findings of authorities below treating the high seas trading loss as speculative are set aside and the loss is held to be a business loss.

Final Conclusion: The Tribunal allowed the appeal, holding that the assessee's high seas purchase and sale transactions involved delivery by transfer of documents of title and therefore the loss is a business loss and not a speculative loss.

Dependent Agency Permanent Establishment - Permanent Establishment under Article 5 of the India-USA DTAA - Fees for Technical Services - Make available clause - Tax Deducted at Source under Section 195

Dependent Agency Permanent Establishment - Permanent Establishment under Article 5 of the India-USA DTAA - Whether SanDisk India constituted a Dependent Agency Permanent Establishment of the assessee and whether income of the assessee was chargeable to tax in India on that basis - HELD THAT: - The Tribunal examined the survey materials, company records and the Transfer Pricing documentation and noted that SanDisk India had rendered marketing support services to SanDisk Ireland and that revenue in respect of those activities was attributed to SanDisk Ireland. There was no material on record to establish any transaction or substantial transaction between the assessee (a US company) and SanDisk India in relation to sales, marketing or distribution of the assessee's products in India. The Tribunal applied the tests in Article 5(4)-(5) of the India-USA DTAA (authority to conclude contracts, maintenance of stock for delivery, habitually securing orders, or activities devoted wholly/almost wholly to the enterprise) and found that none of these conditions were established in relation to the assessee. The Tribunal also took into account the coordinate bench's decision in the appeals concerning SanDisk Ireland, which concluded that SanDisk India did not constitute a DAPE of SanDisk Ireland on the same set of materials. In view of the absence of transactions connecting SanDisk India with the assessee that would satisfy the DAPE criteria, the Tribunal set aside the AO/DRP conclusion that SanDisk India was the assessee's DAPE and held that the assessee's income was not chargeable to tax in India on that basis. [Paras 12]

SanDisk India is not a Dependent Agency PE of the assessee; the income of the assessee is not chargeable to tax in India on that ground.

Fees for Technical Services - Make available clause - Tax Deducted at Source under Section 195 - Whether reimbursements of salary for seconded employees received by the assessee amounted to Fees for Technical Services liable to tax in India and subject to TDS under Section 195 - HELD THAT: - The Tribunal analysed the nature of the secondment arrangement and the terms of the agreement between the assessee and SanDisk India. The AO had concluded that the seconded employees rendered technical, managerial and administrative services constituting FTS and that the arrangement satisfied the 'make available' criterion. The assessee maintained that the payments were pure cost-to-cost reimbursements and that no 'make available' of technical knowledge occurred. The Tribunal observed that an agreement of indefinite duration may indicate that the recipient remains dependent on the provider and, in such circumstances, payments are less likely to qualify as FTS under the 'make available' clause. Given the absence of the relevant operative agreement on record to demonstrate the terms and duration needed to determine whether technical know-how was made available, the Tribunal declined to finally sustain the AO/DRP finding. Instead, the Tribunal held that the receipts cannot presently be classified as FTS as a matter of adjudication on the material before it, and remitted the matter to the Assessing Officer for fresh adjudication in accordance with law and in light of the reasons given. [Paras 20]

The amount received cannot be upheld as Fees for Technical Services on the record before the Tribunal; the finding is set aside and the issue is remitted to the Assessing Officer for fresh adjudication.

Final Conclusion: The appeal is partly allowed: the Tribunal reversed the AO/DRP finding that SanDisk India was a Dependent Agency PE of the assessee (thus the assessee's income is not taxable in India on that ground) and set aside the FTS finding, remanding the latter issue to the Assessing Officer for fresh consideration.

Onus and burden shifting in relation to share application money under section 68 - genuineness, identity and creditworthiness tests for unexplained cash credits - use of third party statements recorded in search and need for opportunity to cross examine - duty of Assessing Officer to investigate and verify documentary evidence before drawing adverse inference - pre proviso legal position applicable to assessment year 2010-11 (Finance Act, 2012 provisos not applicable)

Onus and burden shifting in relation to share application money under section 68 - genuineness, identity and creditworthiness tests for unexplained cash credits - duty of Assessing Officer to investigate and verify documentary evidence before drawing adverse inference - pre proviso legal position applicable to assessment year 2010-11 (Finance Act, 2012 provisos not applicable) - Whether the addition of Rs. 2,15,00,000 made as unexplained cash credit under section 68 was sustainable - HELD THAT: - The Tribunal examined the material on record and the CIT(A)'s findings and concluded that the assessee had discharged the primary onus under the pre proviso law by producing agreements to sell, modification agreements, bank statements showing receipt through banking channels, PAN, MOA/AOA, audited financial statements, share application/allotment records and confirmations from the remitter companies. The Assessing Officer had neither produced contrary documentary evidence nor conducted meaningful enquiries (for example, from banks, ROC or the tax records of the remitter companies) to displace the appellant's documentary evidence. The Tribunal applied settled propositions that the appellant must prima facie prove identity, genuineness and creditworthiness and that, if the appellant does so on the available record, the AO must investigate and cannot rest an addition solely on suspicion. The Finance Act, 2012 provisos enlarging the onus were held not to apply to assessment year 2010-11. On facts, having regard to the documentary proofs and the absence of any cogent counter evidence or enquiries by the AO, the addition under section 68 in the hands of the assessee could not be sustained. [Paras 17, 20, 21, 24, 26]

Addition of Rs. 2,15,00,000 as unexplained cash credit under section 68 is deleted; the assessee discharged the primary onus and AO failed to disprove the transactions.

Use of third party statements recorded in search and need for opportunity to cross examine - duty of Assessing Officer to investigate and verify documentary evidence before drawing adverse inference - Whether reliance on statements recorded during search (of third parties) without supplying copies and without allowing cross examination justified the addition - HELD THAT: - The Tribunal accepted the CIT(A)'s finding that the statements of Shri Shirish Chandrakant Shah and of other third parties were recorded in the course of search and were not supplied to the assessee, nor was the assessee afforded an opportunity to cross examine the deponents. The AO relied primarily on those third party statements without obtaining corroborative evidence linking those statements to the assessee or disproving the documentary record produced by the assessee. The Tribunal followed authority that where adverse conclusions are drawn from third party statements used against an assessee, natural justice requires that the assessee be given the statements and an opportunity to cross examine; failure to do so is fatal to the addition particularly where the AO has not independently verified or disproved the appellant's documents. [Paras 15, 17, 18, 19, 21]

The AO's reliance on undisclosed third party statements without furnishing them to the assessee and without permitting cross examination rendered the addition unjustified.

Final Conclusion: The Tribunal upheld the CIT(A)'s deletion of the addition of Rs. 2,15,00,000 made under section 68 for assessment year 2010-11, holding that the assessee had discharged the primary onus and that the Assessing Officer's adverse conclusion-based largely on undisclosed third party statements and without requisite enquiries or opportunity for cross examination-was not sustainable; the Revenue's appeal is dismissed.

Reopening assessment under section 147 - reason to believe versus reason to suspect - Cash credits and unexplained credit under section 68 - identity, creditworthiness and genuineness of lender - Principles of natural justice - furnishing material relied upon and right to crossexamine witnesses - Assessment proceedings - verification by notices under section 131 and enquiries under section 133(6) - Consequential addition under section 69C relating to interest on borrowed funds

Reopening assessment under section 147 - reason to believe versus reason to suspect - Validity of reopening assessment under section 147 for A.Y. 2018-19 - HELD THAT: - The Tribunal upheld the reopening. It accepted the finding of the CIT(A) that the Assessing Officer had taken due approval, supplied reasons to the assessee and disposed of objections. Reopening was held to be based on new information received from the Investigation wing and was not a mere suspicion; earlier assessment was only processed under section 143(1). The assessee's representative did not dispute the CIT(A)'s findings before the Tribunal. In the circumstances the Tribunal found no reason to interfere with the exercise of jurisdiction under section 147. [Paras 5]

Ground dismissed; reopening under section 147 held valid.

Cash credits and unexplained credit under section 68 - identity, creditworthiness and genuineness of lender - Principles of natural justice - furnishing material relied upon and right to crossexamine witnesses - Assessment proceedings - verification by notices under section 131 and enquiries under section 133(6) - Deletion of addition made under section 68 of the Act in respect of alleged loan of Rs. 15,00,000 - HELD THAT: - The Tribunal concluded that the assessee had established identity of the lender, genuineness of the transactions and the creditworthiness of the lender by producing confirmations, PAN/ITR copies, bank statements and evidence of repayment by accountpayee cheques. Lender companies had replied to notices under section 133(6) confirming the loans and had produced bank records explaining source of funds. The AO did not disprove these materials, did not permit crossexamination of third parties whose statements were relied upon and did not exercise available powers (for example under section 131) to verify directors despite opportunities. Reliance was placed on precedents holding that denial of material used against an assessee or denial of opportunity to crossexamine deponents vitiates reassessment. Applying these principles to the facts, the Tribunal held that the addition under section 68 was not justified and deleted it. [Paras 10]

Addition under section 68 deleted.

Consequential addition under section 69C relating to interest on borrowed funds - Deletion of addition under section 69C in respect of interest charged on the alleged loan - HELD THAT: - The addition under section 69C was consequential to the disallowance under section 68. Having held the loan to be genuine and deleted the section 68 addition, the Tribunal found no basis to sustain the addition under section 69C. [Paras 11]

Addition under section 69C deleted.

Final Conclusion: Appeal partly allowed: reopening under section 147 sustained, but additions under section 68 and consequential addition under section 69C deleted; other grounds accordingly disposed of.

Disallowance under section 14A read with Rule 8D - computation of book profit under section 115JB - requirement of Form 29B for MAT/bookprofit certification - assessment under section 153A linked to search - incriminating material requirement - reopening completed assessments only upon incriminating material or under sections 147/148 - principles of natural justice in assessment proceedings

Disallowance under section 14A read with Rule 8D - computation of book profit under section 115JB - requirement of Form 29B for MAT/bookprofit certification - Whether the disallowance computed under section 14A r.w. Rule 8D can be added while computing book profit under section 115JB and whether the matter requires remand for verification of expenditures relatable to exempt income and production of Form 29B. - HELD THAT: - The Tribunal noted binding precedent that the computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resort to the computation contemplated under section 14A r.w. Rule 8D, but expenditure directly relatable to exempt income may be required to be added to book profit as per clause (f). The assessee had not produced Form 29B before the AO and did not convince the authorities on absence/existence of expenditure relatable to exempt income. In view of these principles and the factual lacunae, the Tribunal found that the question whether any expenditure was incurred for earning exempt income (and thus whether any adjustment under clause (f) is warranted) could not be finally determined on the record before it and directed restoration to the AO for fresh adjudication in the light of the legal ratio of Vireet Investment (as applied by coordinate decisions). The Tribunal therefore partly allowed the appeals by remanding the issue to the AO for verification and fresh decision (without permitting Rule 8D disallowance to be mechanically added to book profit where no relatable expenditure exists) and observed that failure to furnish Form 29B is a relevant factor for the AO to consider during remand. [Paras 16, 19, 20, 22]

Partly allowed; matter remitted to AO to verify whether any expenditure relatable to exempt income exists and to decide bookprofit adjustment in accordance with the law (disallowance under section 14A r.w. Rule 8D not to be mechanically added to section 115JB book profit).

Assessment under section 153A linked to search - incriminating material requirement - reopening completed assessments only upon incriminating material or under sections 147/148 - principles of natural justice in assessment proceedings - Whether, in the block assessment under section 153A, the addition could be sustained if the relevant assessment year was a completed/unabated year and no incriminating material pertaining to that year was found during search. - HELD THAT: - Relying on the binding principle laid down by the Apex Court in Abhisar Buildwell, the Tribunal reiterated that section 153A is linked to search/requisition and that completed/unabated assessments cannot be subjected to additions on the basis of other material unless incriminating material pertaining to the specific year is unearthed during the search; otherwise the remedy for the Revenue is to reopen under sections 147/148 subject to their conditions. The record before the Tribunal did not conclusively establish whether the year was unabated and whether incriminating material for the year was found; accordingly the Tribunal directed the AO to examine and determine these factual/legal questions during the remand. The assessee's plea regarding lack of opportunity was considered and other general grounds were held academic upon remand. [Paras 17, 19, 21, 23]

Remitted to AO to verify whether the year was a completed/unabated assessment year and whether incriminating material relating to that year was found during search; if no incriminating material is found, no addition in respect of the completed assessment can be sustained (subject to AO's powers under sections 147/148).

Final Conclusion: The Tribunal partly allowed the appeals for statistical purposes and remitted the matters to the AO for fresh adjudication: (i) to verify and decide whether any expenditure relatable to exempt income exists for computing book profit under section 115JB (disallowance under section 14A r.w. Rule 8D not to be mechanically added), and (ii) to ascertain whether the assessment year was a completed/unabated year and whether incriminating material pertaining to that year was found during the search, failing which additions cannot be sustained (reopening, if any, to follow sections 147/148). Other grounds were rendered infructuous.

Summary order. Special Leave Petition dismissed; delay condoned; pending applications disposed of.

Determination of export duty - reliance on contractual specifications - Wet Metric Ton (WMT) basis for Fe content - Dry Metric Ton (DMT) basis for commercial invoicing - approbate and reprobate doctrine - uniformity and procedure circulars

Determination of export duty - reliance on contractual specifications - Wet Metric Ton (WMT) basis for Fe content - Dry Metric Ton (DMT) basis for commercial invoicing - Contractual specifications (DMT basis) cannot be relied upon to determine liability for export duty where levy is governed by WMT assessment of Fe content and the assessing authorities had accepted a private test report on which final assessment was made. - HELD THAT: - The Court examined the assessment and appellate record and found that the final assessment was made on the basis of information in the private test report and that the Revenue had accepted that final assessment and supported it before the first appellate authority. Having accepted the final assessment based on the private report, Revenue could not thereafter adopt an inconsistent stance before the Tribunal by relying on a different laboratory report. The established practice and the circulars require assessment for export duty to be on WMT basis (i.e., Fe content after accounting for moisture and impurities), whereas commercial contracts and invoicing may use DMT. The Tribunal's reliance on the assessment record and the private test report was therefore appropriate. Prior decisions relied upon by Revenue were found not to assist; the Court agreed with authorities recognising that export duty classification is to be determined on WMT basis and that commercial (dry) specifications do not override that method of assessment. [Paras 9, 10, 11, 12, 13]

Answer given in the negative; contractual/DMT specifications cannot be used to determine export duty where assessment for levy is governed by WMT Fe-content and the authorities had accepted the private test report.

Final Conclusion: The appeal is dismissed; the question whether contractual specifications could be relied on for determining export duty is answered in the negative and in favour of the respondent, the Tribunal's finding that export duty payable was nil is upheld.

Penalty under Section 114A of the Customs Act - Liability to pay duty as precondition for penalty - Joint and several demand for customs duty - Effect of settlement/ payment by declared liable importer

Penalty under Section 114A of the Customs Act - Liability to pay duty as precondition for penalty - Effect of settlement/ payment by declared liable importer - Joint and several demand for customs duty - Whether penalty under Section 114A could be imposed on the appellants when the differential duty was determined to be payable by the seller (BGH Exim Ltd), the duty was paid/settled by that seller, and the show-cause notice had purportedly demanded duty jointly and severally from seller and appellants. - HELD THAT: - The Tribunal examined Section 114A and held that imposition of penalty under that section is contingent on duty or interest being determined as payable by the person on whom penalty is sought to be imposed. In the present case the adjudication determined the duty to be payable by M/s. BGH Exim Ltd; that differential duty has been paid and the matter against BGH was settled by the settlement mechanism. The demand in the show-cause notice was framed jointly and severally against BGH and the appellants, but the Tribunal relied on settled law that duty cannot be confirmed jointly and severally against the importer-appellant when the finding of liability was against the seller. Because the duty was not finally held payable by the present appellants and was satisfied by the declared liable party, there was no subsisting duty against the appellants which could attract penalty under Section 114A. For these reasons the Tribunal concluded that imposition of penalty under Section 114A on the appellants was not justified.

Penalties imposed on the appellants under Section 114A are set aside and the appeals are allowed with consequential relief.

Final Conclusion: The Tribunal set aside the penalties imposed on the appellants under Section 114A, holding that penalty cannot be imposed where the duty was determined payable and paid by another party (BGH Exim Ltd) and the appellants were not held liable to pay the duty.

Assets of the corporate debtor - control and custody under Section 18(f) of the Insolvency and Bankruptcy Code - moratorium under the Insolvency and Bankruptcy Code - no lien account - one time settlement (OTS) deposits - banker's lien

Assets of the corporate debtor - control and custody under Section 18(f) of the Insolvency and Bankruptcy Code - no lien account - one time settlement (OTS) deposits - banker's lien - moratorium under the Insolvency and Bankruptcy Code - Whether the amount lying in the 'No Lien Account' belongs to the corporate debtor and whether the Resolution Professional was entitled to require its release for CIRP - HELD THAT: - The Tribunal found as an admitted fact that the sum deposited in the 'No Lien Account' was paid on behalf of the corporate debtor pursuant to an OTS proposal and was neither adjusted nor encashed by the bank after the OTS failed. Upon commencement of CIRP, assets belonging to the corporate debtor fall within the custody and control of the IRP/RP under Section 18(f) of the Code. The moratorium triggered by initiation of CIRP prohibited the bank from appropriating the amount thereafter. The bank's contention that the sum was not the corporate debtor's asset because the cheque was issued by a third party and that a banker's lien or the bank's ownership of funds in a 'No Lien Account' prevailed was rejected on the facts: the bank had not adjusted the deposit in its admitted claim and had accepted the funds on the understanding that they would not be used absent approval of the OTS. Reliance on the coordinate Bench decision in Bank of India v. Vinod Kumar P. Ambavat and on Supreme Court precedents addressing bona fide deposits for settlement reinforced that such deposits, when not appropriated before CIRP and when treated as held for the corporate debtor, constitute assets subject to takeover by the RP. Applying these principles to the undisputed facts, the Adjudicating Authority rightly directed release of the deposit to the applicant RP for use in CIRP.

The amount in the 'No Lien Account' is an asset of the corporate debtor, the IRP/RP was entitled to take it into custody under Section 18(f) of the Code, and the Adjudicating Authority's direction to release the deposit to the applicant is confirmed.

Final Conclusion: The appeal is dismissed. The adjudicating authority correctly held that the deposit in the 'No Lien Account' constituted an asset of the corporate debtor and ordered its release to the Resolution Professional; no interference is warranted.

Entertainability of writ petition where statutory remedy exists - availability of statutory appeal as alternative remedy - failure to cooperate with adjudicating authority and consequences - principles of natural justice and personal hearing - limitations under section 73 and extension for fraud or collusion

Entertainability of writ petition where statutory remedy exists - availability of statutory appeal as alternative remedy - failure to cooperate with adjudicating authority and consequences - Whether the High Court should entertain the petition under Article 226 despite the availability of a statutory appeal when the petitioner did not cooperate with the Commissioner in response to the show cause notice. - HELD THAT: - The Court applied the principles in M/s Godrej Sara Lee (and the line of authorities relied upon therein) to hold that the question before it was one of entertainability rather than mere maintainability. Where a statutory appeal is available, and the petitioner had not responded to the show cause notice or produced the requisite records and accounts before the Commissioner, the petitioner cannot now seek relief by assailing procedural defects in the notice in a writ petition. The Commissioner was compelled to decide on the available material owing to the assessee's non-cooperation. Allegations as to defects in the notice or challenges to the adjudication can be agitated before the statutory appellate forum; accordingly, the High Court declined to entertain the writ and afforded the petitioner liberty to pursue the statutory remedy. The Court also noted that the tribunal may take into account the time spent in prosecuting the writ petition. [Paras 8, 9]

Petition dismissed on merits of entertainability; liberty granted to the petitioner to pursue the statutory appeal before the tribunal.

Limitations under section 73 and extension for fraud or collusion - principles of natural justice and personal hearing - Whether the impugned action was time-barred under section 73 and whether absence of proof of fraud or collusion or alleged defects in personal hearing justified relief in writ jurisdiction. - HELD THAT: - The petitioner contended that action under section 73 was barred beyond five years and that there was no proof of fraud or collusion to extend the period; it also alleged denial of principles of natural justice because personal hearing/intimation was deficient. The Court observed these contentions but did not adjudicate them on merits. Given the availability of the statutory appellate remedy and the petitioner's non-cooperation below, such factual and legal contentions (including whether limitation is attracted or can be extended for fraud/collusion, and whether procedural defects occurred in personal hearing) were held to be matters appropriately agitable and examinable by the tribunal in the statutory appeal. [Paras 3, 8]

Contentions on limitation, fraud/collusion and alleged denial of personal hearing not decided on merits; these matters are left open for consideration in the statutory appeal to the tribunal.

Final Conclusion: Writ petition dismissed on the ground of entertainability where a statutory appeal exists and the petitioner failed to cooperate with the adjudicating authority; petitioner permitted to pursue the statutory appeal before the tribunal, which may take into account time spent in these proceedings and determine issues including limitation, fraud/collusion and alleged procedural defects.

Penalty under Section 78 of the Finance Act, 1994 - option to pay 25% of the penalty - reimbursement of expenses and assessable value - invocation of extended period for determination of service tax - failure to deposit service tax collected from customers

Reimbursement of expenses and assessable value - Whether the reimbursable diesel charges form part of the assessable value for service tax. - HELD THAT: - The Tribunal examined the agreement clause providing that bills for diesel/consumables would be reimbursed on actual basis, subject to verification and approval, and that no advance for diesel would be paid. On these contractual terms the Tribunal held that diesel expenses were reimbursable and therefore could not be included in the assessable value for service tax purposes, following the principle applied in Intercontinental Consultants and Technocrats Pvt. Ltd. (as relied upon by the parties). [Paras 7]

Reimbursable diesel charges are not includible in the assessable value for service tax and the related demand of tax on that account is not sustainable.

Penalty under Section 78 of the Finance Act, 1994 - option to pay 25% of the penalty - invocation of extended period for determination of service tax - failure to deposit service tax collected from customers - Whether penalty under Section 78 could be imposed on the appellant and whether relief by allowing payment of 25% of the penalty was warranted. - HELD THAT: - The Tribunal recorded that the appellant, a registered and regular assessee, failed to remit service tax for the specified period despite having collected it from customers, and that payment was made only after repeated departmental communications and summons. The plea of financial difficulty and officer resignations was found unconvincing, and the Tribunal accepted that the extended period for adjudication was properly invoked given departmental correspondence and the circumstances. However, balancing the facts and in view of the appellants' subsequent payment of duty and interest and the conduct of the parties, the Tribunal exercised its discretion to mitigate the penalty by giving the appellant an option to pay 25% of the penalty. The Tribunal noted that the appellants had deposited 25% of the penalty pursuant to its Miscellaneous Order and restricted the confirmed penalty accordingly. [Paras 8, 9, 10, 11, 12]

Penalty under Section 78 is sustainable but is restricted to 25% of the amount specified in the Order in Original; the appellant was given the option to pay 25% and has deposited that amount.

Final Conclusion: Appeal partly allowed: demand insofar as based on reimbursable diesel charges set aside; penalty under Section 78 sustained but restricted to 25% of the amount specified in the original order, with the appellant having deposited the 25% as directed.

Refund of CENVAT credit under Notification No.27/2012 - requirement of registration for refund - interpretation of subordinate legislation vis-a -vis parent Act and Rules - beneficial exemption notification principle - remand for verification of documents

Refund of CENVAT credit under Notification No.27/2012 - requirement of registration for refund - interpretation of subordinate legislation vis-a -vis parent Act and Rules - beneficial exemption notification principle - Refund under Notification No.27/2012 is allowable for the quarter July 2014 to September 2014 notwithstanding registration being obtained w.e.f. 12-12-2014; registration is not a condition for grant of refund under the Notification. - HELD THAT: - The Tribunal held that Notification No.27/2012, read on its face, contains no condition requiring registration as a pre requisite for grant of refund under rule 5 of the CENVAT Credit Rules. A condition not specified in the Notification or the parent Act/Rules cannot be read into the Notification by implication. The Notification is an exemption/benefit provision and must be construed in its terms; it would be illogical and absurd to import other provisions of the Act or Rules (for example, penalty or unrelated machinery provisions) into the scope of the Notification where the Notification does not so provide. The Tribunal distinguished the Apex Court decision cited by the department as dealing with a different factual matrix concerning a substantive declaration requirement and relied on decisions (including CESTAT and High Court authorities) holding that absence of registration does not preclude refund where the Notification does not make registration a condition. [Paras 3, 4]

Refund claim is permissible in law for the specified quarter and denial on ground of non registration is unsustainable.

Remand for verification of documents - refund claim processing - The matter is remanded to the original adjudicating authority for reprocessing the refund claim limited to verification of documents and correctness of the claim. - HELD THAT: - Following precedents of this Tribunal and High Courts, and having held that the claim is prima facie maintainable, the Tribunal directed that the Adjudicating Authority should verify the refund documents and the correctness of the claim and pass appropriate orders. The remand is limited in scope to document verification and reprocessing; it is not a remand for fresh adjudication of the substantive legal entitlement which has been affirmed. The Tribunal indicated that the authority should complete the exercise preferably within a short specified period. [Paras 3, 4, 5]

Impugned order set aside and matter remanded for limited purpose of verification and reprocessing of the refund claim.

Final Conclusion: Appeal allowed by way of remand: refund claim for July 2014 to September 2014 is maintainable despite registration being effective from 12-12-2014, and the matter is remanded to the original authority for limited verification and reprocessing of the claim.

Extended period of limitation - suppression with intent to evade tax - reconciliation between S.T.-3 returns and audited financial statements - service tax on advances - CENVAT credit eligibility - requirements of Rule 4(7) and Rule 9(2) of the CENVAT Credit Rules, 2004 - penalty under Section 78 of the Finance Act and Rule 15(2) of the CENVAT Credit Rules, 2004

Extended period of limitation - suppression with intent to evade tax - reconciliation between S.T.-3 returns and audited financial statements - Whether the demand confirmed by invoking the extended period of limitation is sustainable in view of alleged differences between S.T.-3 returns and audited accounts - HELD THAT: - The Tribunal examined the reconciliation submitted by the appellant between S.T.-3 returns and audited Profit & Loss/Balance Sheet for the period covered by the show cause notice. It found that the appellant was registered, filed returns regularly and there was no established suppression with mala fide intent to evade tax. Reliance was placed on the principle applied by the Apex Court in Nirlon Ltd. that absence of mala fide intention disentitles the Revenue to invoke the proviso for the extended period of limitation. Consequently, demands for the years covered by the show cause notice where invocation of extended limitation was relied upon are not sustainable; specifically, the Tribunal held that demands for the earlier years (2007-08 to 2010-11) are barred by limitation, while no additional liability was found for 2011-12 and 2012-13 as per the reconciliation. [Paras 12, 16]

Demand confirmed by invoking the extended period of limitation is not sustainable; demand for service tax as confirmed in the impugned order is set aside on the ground of limitation.

Service tax on advances - Whether the demand of service tax on advances (security deposits) received from customers is sustainable - HELD THAT: - The Tribunal accepted the appellant's case that the amounts classified as advances were received as refundable security deposits repayable with interest. Such receipts therefore did not attract service tax liability. On that basis the demand made in respect of the advances was held not sustainable. [Paras 6, 13, 16]

Demand in respect of advances received is not liable to service tax and is set aside.

CENVAT credit eligibility - requirements of Rule 4(7) and Rule 9(2) of the CENVAT Credit Rules, 2004 - Whether the CENVAT credit of the amount disallowed by the adjudicating authority was irregularly availed or the appellant was eligible to retain the credit - HELD THAT: - The adjudicating authority denied credit on the ground that input invoices did not satisfy Rule 4(7). On verification the Tribunal found that the bills/invoices contained the particulars required under Rule 9(2) of the CENVAT Credit Rules, 2004 and there was no contravention of Rule 4(7). Applying this finding, the Tribunal concluded that the appellant was entitled to the CENVAT credit claimed and set aside the disallowance. [Paras 7, 14, 16]

Appellant is eligible for the CENVAT credit and the disallowance in the impugned order is set aside.

Penalty under Section 78 of the Finance Act and Rule 15(2) of the CENVAT Credit Rules, 2004 - suppression with intent to evade tax - Whether the penalties imposed are sustainable in view of the findings on suppression and limitation - HELD THAT: - Because the Tribunal found no suppression with intent to evade tax and held that invocation of the extended period of limitation was not sustainable, the foundational basis for the penalties under Section 78 and Rule 15(2) failed. The Tribunal therefore concluded that penalties levied on the appellant could not be sustained and set them aside. [Paras 12, 15, 16]

Penalties imposed on the appellant are not sustainable and are set aside.

Final Conclusion: The appeal is allowed: the service-tax demand confirmed in the impugned order is set aside on limitation grounds, the demand relating to advances is set aside, the CENVAT credit disputed is held admissible, and the penalties imposed are cancelled.

Refund claim - works contract service - construction of residential complex service - classification of service - appeal against assessment/order as prerequisite to refund - execution-nature of refund proceedings - composition scheme for payment of service tax - unjust enrichment - CBEC Circular clarifying builders/developers liability

Refund claim - works contract service - construction of residential complex service - classification of service - appeal against assessment/order as prerequisite to refund - execution-nature of refund proceedings - Entitlement to refund of service tax paid under Works Contract Service without first challenging the classification/assessment - HELD THAT: - The appellant, registered and discharging tax under the Works Contract Service composition scheme, filed a refund claim on the ground that their activity was in fact Construction of Residential Complex Service and not liable for service tax for the period in dispute. The Tribunal found that the appellant had not challenged the classification or assessment under which they were registered and taxed; instead they directly sought refund. Relying on the principle, as stated in Collector of Central Excise, Kanpur v. Flock (India) Pvt. Ltd. and followed in subsequent Supreme Court decisions, the court held that a refund claim cannot be used to reopen or correct an assessment order which is appealable and has not been challenged. Refund proceedings are treated as execution-like and do not permit the officer processing the refund to sit in appeal over, or review, an unchallenged assessment order. The appellate authority therefore correctly upheld rejection of the refund where the appellant had not first availed the statutory remedy of appeal to challenge classification/assessment. The Tribunal also noted that the case-law relied upon by the appellant was factually distinguishable because those decisions did not involve a situation where the assessee had not contested the assessment/registration under the relevant service classification. [Paras 7, 8, 9]

Refund claim rejected because the appellant did not first challenge the assessment/classification and refund proceedings cannot substitute for appeal or review of such assessment.

Final Conclusion: The impugned order rejecting the refund claim is upheld and the appeal is dismissed, the Tribunal holding that a refund cannot be allowed in lieu of filing an appeal against the assessment/classification under which service tax was paid.

Refund of tax paid under protest - adjudication of show cause notice - delay in adjudication and prejudice to assessee - mandamus to direct adjudication - refusal to grant mandamus for immediate refund where adjudication is pending - tax proceedings are not adversarial - application of precedent and factual distinction of earlier decisions

Adjudication of show cause notice - application of precedent and factual distinction of earlier decisions - Quashing of the show cause notice dated 11 May 2015 is not warranted. - HELD THAT: - The petitioner had repeatedly requested adjudication of the show cause notice by letters from April 2021 up to April 2023. Having sought adjudication as late as April 2023, the petitioner cannot now seek quashing of the same on the ground of delay. The Court further observed that the issue raised by the show cause notice may be covered by Supreme Court precedent relied upon by the petitioner, but because the petitioner itself sought adjudication and factual circumstances differ from the Coordinate Bench decision relied upon, quashing is inappropriate. The question of delay in adjudication remains open to be urged before the adjudicating authority along with merits-based contentions. [Paras 10]

Petitioner's prayer to quash the show cause notice is rejected; the issue of delay may be raised before the adjudicating authority.

Refund of tax paid under protest - mandamus to direct adjudication - tax proceedings are not adversarial - Direction to the respondents to adjudicate the show cause notice and process the refund applications expeditiously rather than ordering an immediate refund. - HELD THAT: - The Court deprecated prolonged non-adjudication of refund applications and held that respondents cannot sit on such applications. However, it was not appropriate for the Court to order an immediate refund without examination of the refund claims and the show cause proceedings. Consequently, the Court directed the respondents to adjudicate the show cause notice dated 11 May 2015 (with corrigendum) and to process the two refund applications filed on 5 November 2019 within eight weeks from upload of the order. While adjudicating, the respondents must bear in mind that tax proceedings are not adversarial and, if the petitioner's case is squarely covered by binding precedent, a favourable order granting refund (if eligible) should be made rather than rejecting it for pretexts; any refund found due must be paid with interest within two weeks of adjudication. [Paras 11, 12, 16]

Respondents directed to decide the show cause notice and process the refund applications within eight weeks; if refund is due, it must be granted with interest within two weeks of adjudication.

Refusal to grant mandamus for immediate refund where adjudication is pending - Writ of mandamus ordering immediate refund is inappropriate absent exceptional circumstances or a final determination in favour of the assessee. - HELD THAT: - The Court explained that mandamus to direct refund without permitting the authority to examine the claim is not ordinarily issued except in exceptional cases where law and facts admit no other course or where a final, unchallenged determination in favour of the assessee exists and authorities are acting stubbornly. The HSBC decision relied upon by the petitioner was distinguishable because there an appellate authority had clearly determined refund dues and the authorities thereafter failed to implement that final determination. In the present case, adjudication is pending and the petitioner itself has sought adjudication; therefore a mandamus for immediate refund would render the adjudication infructuous and cannot be granted. [Paras 13, 14, 15]

Mandamus for immediate refund is refused; only a mandamus to expeditiously adjudicate and process the refund claim is issued.

Final Conclusion: Rule made absolute directing respondents to adjudicate the show cause notice dated 11 May 2015 (and corrigendum) and to process the two refund applications filed on 5 November 2019 within eight weeks from upload; if refund is found payable, it shall be granted with interest within two weeks of adjudication; petition for quashing of the show cause notice and for a writ directing immediate refund is rejected.

Eligibility clause of exemption notification - procedural versus mandatory conditions in exemption notifications - non-retrospective application of subsequent amendment to notification - production of certificate post-facto for claiming exemption - burden of proof to rebut unjust enrichment - refund of duty paid where exemption subsequently established

Non-retrospective application of subsequent amendment to notification - eligibility clause of exemption notification - refund of duty paid where exemption subsequently established - Entitlement to refund under Sl. No.336 of Notification No.12/2012C.E. for clearances in March 2013 despite later insertion of a proviso in Condition 41 by Notification No.12/2015C.E. - HELD THAT: - The Tribunal found that Condition 41, as in force in March 2013, required only that the goods be exempted from customs duties when imported into India; that requirement was satisfied by the existence of the customs exemption at Sl. No.507 of Notification No.12/2012Cus. The proviso, inserted by Notification No.12/2015C.E. on 132015, which subjects the excise exemption to mutatis mutandis compliance with conditions in the customs notification, did not exist at the relevant time and therefore could not be read into the condition applicable to March 2013. Reliance on the subsequently inserted proviso to deny the refund was therefore erroneous, and the appellant was entitled to the benefit of Sl. No.336 for the period in question. [Paras 9]

Benefit of Sl. No.336 of Notification No.12/2012C.E. for March 2013 granted; denial based on the 2015 proviso set aside.

Production of certificate post-facto for claiming exemption - procedural versus mandatory conditions in exemption notifications - burden of proof to rebut unjust enrichment - refund of duty paid where exemption subsequently established - Entitlement to refund under Notification No.108/95C.E. for clearances in February 2013 and June 2013 despite certificate being produced after clearance, and sufficiency of evidence to rebut unjust enrichment. - HELD THAT: - Applying the principle that eligibility clauses are to be strictly construed while procedural requirements may be directory, the Tribunal held that the substantive eligibility condition - that the goods were intended for a project financed by the Asian Development Bank and approved by the Government - was satisfied by the contemporaneously existing certificate dated 10.01.2013. Production of that certificate before the officer was a procedural formality that could be cured post facto where the certificate existed at the time of clearance and there was no allegation that the goods were not received or used as claimed. On unjust enrichment, the Tribunal accepted the Chartered Accountant's certificate and corroborative correspondence from the customer, concluding there was sufficient proof that the duty had not been passed on and the refund was not barred by unjust enrichment. [Paras 21, 22, 24]

Benefit of Notification No.108/95C.E. extended for February 2013 and June 2013 clearances; refund allowed as unjust enrichment bar not established.

Final Conclusion: Both appeals succeed on merits; the impugned appellate orders are set aside and refunds are allowed with consequential relief as per law.

Eligibility for 100% CENVAT credit - input versus capital goods classification - Rule 2(k) exception for capital goods used as parts or components - temporal bar on taking CENVAT credit under proviso to subrule 7 - Rule 4(2)(a) restriction on capital goods credit in a financial year

Rule 2(k) exception for capital goods used as parts or components - eligibility for 100% CENVAT credit - Whether cylinders (baseshells) used in printing constituted 'input' under the exception to capital goods and thereby entitled the assessee to avail 100% CENVAT credit. - HELD THAT: - The Tribunal examined the amended definition of 'input' in Rule 2(k) and the exception in clause (C)(i) which treats capital goods as input when used as parts or components in the manufacture of a final product. Applying that provision to the material facts, the Tribunal accepted the finding (recorded by the adjudicating authority) that the cylinders are fitted to the printing machinery, are mounted as integral components for performing printing jobs across substrates, and that the functioning of the printing machine depends on those cylinders. On that basis the Tribunal concluded that the cylinders fell within the exclusion to capital goods and were properly classifiable as 'input', rendering the availment of credit at 100% not irregular. The Tribunal further noted that the credit so availed was not fully utilised and that proportionate interest had been paid for the period in issue, reinforcing that the exercise was not revenueprejudicial. The Tribunal also observed the temporal proviso (to subrule 7) restricting taking credit after six months of invoice issuance but resolved the matter on the applicability of the Rule 2(k) exception rather than on the temporal bar. Having applied the determinative legal principle embodied in Rule 2(k)(C)(i) to the stated facts, the Tribunal allowed the appeal and set aside the demand, interest and penalty confirmed by the Commissioner. [Paras 6, 7, 8]

Cylinders qualify as 'input' under the exception in Rule 2(k)(C)(i); availment of 100% CENVAT credit was lawful and the order confirming demand, interest and penalty is set aside.

Final Conclusion: Appeal allowed; the order of the Commissioner confirming demand, interest and penalty is set aside as the cylinders are held to be inputs under the exclusion to capital goods and the 100% CENVAT credit availment was not irregular.

Personal penalty under Rule 26 of the Central Excise Rules - wrong availment of Cenvat credit - voluntary reversal of Cenvat credit - absence of mala fide intention - Rule 15(1) of the CENVAT Credit Rules, 2004

Personal penalty under Rule 26 of the Central Excise Rules - wrong availment of Cenvat credit - voluntary reversal of Cenvat credit - absence of mala fide intention - Validity of personal penalty imposed on the employee under Rule 26 read with Rule 15(1) of the CENVAT Credit Rules in respect of alleged wrong availment of Cenvat credit by the company - HELD THAT: - The Tribunal found that the company inadvertently availed Cenvat credit pertaining to its other unit and there was no allegation or finding of malafide on the part of the company. The company voluntarily reversed the entire credit on being pointed out by the audit party and did so before issuance of the show cause notice, with no utilization of the credit; thus there was no gain to the company and the wrongful availment arose from an error confined to internal units of the same company. In these circumstances the imposition of a personal penalty on the employee was not justified. Applying the legal principle that penal action under Rule 26 is not appropriate where the contravention lacks mala fide intent and the employer itself has rectified the error, the Tribunal set aside the penalty. [Paras 4, 5]

Penalty imposed under Rule 26 read with Rule 15(1) is set aside and the appeal is allowed.

Final Conclusion: The personal penalty imposed on the appellant under Rule 26 of the Central Excise Rules read with Rule 15(1) of the CENVAT Credit Rules is quashed because the wrongful availment arose from inadvertent error relating to the company's other unit, was voluntarily reversed before any show cause notice, and there was no mala fide intent.

Inclusion of value of inputs supplied free of cost in assessable value (Rule 6; Rule 10A) - Valuation of goods manufactured on job work basis (Rule 10A and valuation rules mutatis mutandis) - Scope of CENVAT Rule 4(5)(a) as an enabling record/credit provision and not an exemption from duty - Applicability of Notification No.214/86 CE as the statutory mechanism to transfer duty liability from job worker to principal manufacturer - Invocation of extended limitation period for suppression (Section 11A(4) - suppression with intent) - Recoverability of interest where duty is held leviable (Sections 11AA/11AB - interest obligation follows confirmed duty) - Imposition of penalty for deliberate suppression/intent to evade (Section 11AC)

Inclusion of value of inputs supplied free of cost in assessable value (Rule 6; Rule 10A) - Valuation of goods manufactured on job work basis (Rule 10A and valuation rules mutatis mutandis) - Value of materials supplied free of cost by the principal manufacturer to the job worker is includable in the assessable value of job worked goods under Rule 6 read with Rule 10A and Section 4 valuation scheme. - HELD THAT: - The Tribunal applied Rule 6 and Rule 10A of the Central Excise Valuation Rules and the Supreme Court precedents (Ujagar Prints, Pawan Biscuits and related authorities) to hold that where the transaction between job worker and principal manufacturer is a sale or is to be valued under the valuation rules, the assessable value must aggregate the transaction value and the money value of additional consideration including materials supplied free of cost. Rule 10A governs valuation of job work goods and mandates application of valuation rules mutatis mutandis where clauses (i) and (ii) do not apply. The adjudicating authority's conclusion that the job worker excluded the value of principal supplied materials and thereby under assessed the value was upheld. The Tribunal rejected reliance on the Modvat/CENVAT record facility (Rule 4(5)(a)) to justify excluding that value for assessable value determination. (Reasoning set out at paras 4.15, 4.18, 4.2 and 4.5-4.6.) [Paras 4]

Assessable value of job worked goods must include the value of materials supplied free by the principal manufacturer; duty demand on that basis is sustainable.

Scope of CENVAT Rule 4(5)(a) as an enabling record/credit provision and not an exemption from duty - Applicability of Notification No.214/86 CE as the statutory mechanism to transfer duty liability from job worker to principal manufacturer - Rule 4(5)(a) of the CENVAT Credit Rules is an enabling procedure for credit/record and does not itself exempt the job worker from duty; benefit under Notification No.214/86 CE requires strict/ prescribed compliance by the principal manufacturer and was not established here. - HELD THAT: - The Tribunal analysed Rule 4(5)(a) as a provision governing CENVAT credit and record keeping enabling a principal manufacturer to send inputs to a job worker without reversing credit; it does not transfer liability to pay excise duty. Exemption/transfer of liability to the principal manufacturer is available only under Notification No.214/86 CE subject to the conditions and undertaking prescribed therein. The principal manufacturer had not followed the notification's procedure; therefore the job worker, being the manufacturer when the process amounts to manufacture, remains liable to duty. Earlier decisions treating Rule 4(5)(a) as pari materia with erstwhile Rule 57F(4) were distinguished on facts where the principal manufacturer had in fact discharged duty or complied with notification conditions. (Reasoning at paras 4.14, 4.16, 4.18, 7.3-7.13 of the impugned discussion reproduced in the order.) [Paras 4]

Rule 4(5)(a) does not operate as an exemption from duty; in absence of compliance with Notification No.214/86 CE the job worker remains liable to pay duty.

Invocation of extended limitation period for suppression (Section 11A(4) - suppression with intent) - Deliberate suppression of material facts as basis for extended period and penalty - Extended limitation under Section 11A(4) was rightly invoked because the adjudicating authority found intentional suppression of material facts by the appellant with intent to evade duty. - HELD THAT: - The Tribunal endorsed the adjudicating authority's finding that the appellant did not disclose the value of materials received from the principal manufacturer and delayed or failed to produce required challans despite requests, consistent with an intentional suppression to evade duty. Given those findings, the extended period for issuance of show cause notice was held properly invoked. The Tribunal rejected the contention of mere vagueness or bonafide belief as negating suppression, observing the show cause notice and order addressed the specific valuation omission and that prior opportunity to raise vagueness before the adjudicating authority was not taken. (Findings recorded at paras 4.19, 4.3-4.4, 4.2.) [Paras 4]

Extended limitation period applies; demand is not barred by limitation.

Recoverability of interest where duty is held leviable (Sections 11AA/11AB - interest obligation follows confirmed duty) - Interest under the relevant statutory provisions is recoverable on the duty confirmed as leviable. - HELD THAT: - The Tribunal accepted the adjudicating authority's reasoning and precedent that once the duty demand is sustained the statutory interest provisions apply and interest becomes payable immediately for delayed payment. The appellant's conduct of not paying duty at the appropriate time justified recovery of interest at the prescribed rates. (See impugned findings reproduced in para 4.2 and the authority references discussed in the order; specific finding at para 4.21.) [Paras 4]

Interest on the confirmed duty is recoverable under the applicable interest provisions.

Imposition of penalty for deliberate suppression/intent to evade (Section 11AC) - Penalty under Section 11AC was correctly imposed because the authority found suppression of material facts with intent to evade duty. - HELD THAT: - Relying on the statutory language of Section 11AC and judicial precedents, the Tribunal held that the adjudicating authority had recorded a legally tenable finding of intentional suppression by the appellant in not including the value of principal supplied materials in assessable value. Given that finding of deliberate evasion, imposition of penalty equal to duty was held justified. The Tribunal also reviewed and rejected the appellant's reliance on case law distinguishable on facts. (Decision reasoning appears at paras 4.2, 4.21 and the penalty discussion.) [Paras 4]

Penalty under Section 11AC is justified and sustained.

Final Conclusion: The appeal is dismissed. The Tribunal upholds the adjudicating authority's conclusions that (i) value of materials supplied free of cost by the principal manufacturer is includable in the assessable value of job worked goods; (ii) Rule 4(5)(a) does not confer exemption from duty and Notification No.214/86 CE conditions were not satisfied; (iii) extended limitation was rightly invoked for suppression; and (iv) interest and penalty consequential to the confirmed duty are recoverable and sustained for the period covered by the adjudication.

Consumer protection interim order granting final relief - restoration of allotment subject to payment - authority's power to cancel allotment for default - delay and laches in enforcing allotment rights - requirement of fresh tender/auction and due process for allotment

Consumer protection interim order granting final relief - delay and laches in enforcing allotment rights - restoration of allotment subject to payment - Validity of State Commission and National Commission orders directing the authority to accept delayed payment and handover possession after long lapse - HELD THAT: - The Court examined the sequence: allotment under the NIT was restored by the High Court subject to payment within 30 days; the respondent failed to pay the outstanding dues; the authority thereafter reduced interest and gave time, but the respondent still did not deposit the full amount and pursued remedies before consumer fora. The State Commission granted by an interlocutory order what amounted to final relief directing acceptance of the outstanding amount and delivery of possession; the National Commission thereafter directed acceptance and handing over of possession after a lapse of 28 years. The Court held that the State Commission ought not to have granted final relief on an interlocutory application and that, in the peculiar facts where the allottee defaulted and a very long period had elapsed, the National Commission erred in directing the authority to accept belated payment and restore possession without adequate consideration of those circumstances and the appellant's grounds. Consequently, the orders of the State Commission and the National Commission were unsustainable in law. [Paras 9, 10, 11]

Orders dated 15.12.2017 (State Commission) and 29.03.2023 (National Commission) set aside; directions to accept belated payment and handover possession quashed.

Requirement of fresh tender/auction and due process for allotment - authority's power to cancel allotment for default - Appropriate remedy for the authority following set aside of consumer fora orders - HELD THAT: - Having set aside the consumer fora directions to accept payment and restore possession, the Court clarified the proper course for the authority: the Indore Development Authority shall issue a fresh tender in respect of the plot and allot the plot only by way of auction or otherwise in accordance with applicable rules and due process. This remedy recognises the authority's power to cancel allotment for default and addresses the passage of time and changed circumstances since the original NIT. [Paras 11, 12]

Appellant directed to issue fresh tender and allot the plot by auction or as per rules; appeal allowed.

Final Conclusion: The appeal is allowed; the impugned orders of the State Commission and National Commission directing acceptance of belated payment and handing over possession are set aside, and the Indore Development Authority is directed to re-tender and allot the plot only by auction or following due process.