TaxTMI Updates e-Newsletter
Dec 21,2020

HSN classification and GST rate as integral to tender evaluation - Duty of procuring authority to obtain clarification from tax authorities - Level playing field - Public Procurement (Preference to Make in India) Order, 2017 and purchase preference mechanism - Margin of purchase preference

HSN classification and GST rate as integral to tender evaluation - Level playing field - Whether correct HSN code and corresponding GST rate are integral to the tendering process where total (all inclusive) price including GST is used for inter se ranking and whether failure to indicate HSN in the tender document adversely affects the level playing field. - HELD THAT: - The Court found that where the procuring authority adds GST value to the base price to arrive at the total offered price and uses that total to determine inter se ranking, the HSN code (and thereby the applicable GST rate) is material to the selection process. In such circumstances, absence of clarity as to HSN/GST permits disparity in total prices quoted by bidders (some quoting a lower GST rate), which can alter rankings and impair fair competition. The obligation placed on bidders by the tender document to quote correct tax rates does not absolve the procuring authority of responsibility once the tax component is integral to evaluation; if doubt exists about applicable classification, the procuring authority ought to seek clarification from the GST authorities to ensure uniform bidding and a level playing field consistent with Article 19(1)(g) and the principle of legal certainty under Article 14.

HSN code and applicable GST rate are integral to evaluation where GST is included in the total price, and lack of clarity on them can vitiate fairness; the procuring authority cannot refuse responsibility to clarify classification when it affects selection.

Duty of procuring authority to obtain clarification from tax authorities - Public Procurement (Preference to Make in India) Order, 2017 and purchase preference mechanism - Margin of purchase preference - Whether the tendering authority must consult GST authorities and specify the correct HSN code in the NIT/bid document where GST value is used in price evaluation, and the consequence in the present case. - HELD THAT: - The Court held that if GST value is to be added to the base price for ranking, the General Manager, Diesel Locomotive Works (respondent nos.1 and 2) is required to resolve any uncertainty regarding the applicable HSN code with the GST authorities and specify the HSN code in the NIT/tender document so as to secure uniform bidding and fair competition. The Court observed that merely placing the onus on bidders to quote HSN and tax rates, or relying on post award statutory remedies, is inadequate where classification affects the pre award ranking and purchase preference calculations (including the 20% margin). In the circumstances of this petition the Court noted that prayers for interim relief relating to the specific tender had become infructuous because the offer validity had expired and a subsequent tender was finalised in which the petitioner succeeded; nonetheless the Court issued the prospective direction above to prevent recurrence.

Respondent nos.1 and 2 must, where GST is part of price evaluation, seek necessary clarification from GST authorities and mention the correct HSN code in the NIT/tender document; the specific prayers seeking relief in respect of the lapsed tender are rendered infructuous and the petition is disposed with the stated direction.

Final Conclusion: The writ petition is disposed. The Court directs the General Manager, Diesel Locomotive Works (respondent nos.1 and 2) that where GST value is included in the total price and used for inter se ranking, any doubt as to the applicable HSN code must be clarified with the GST authorities and the correct HSN code mentioned in the NIT/tender document to ensure uniform bidding and a level playing field; the specific prayers seeking relief in respect of the expired subject tender have been rendered infructuous in view of subsequent developments.

Show-cause notice under Section 74 of the Central Goods and Services Tax Act, 2017 - demand framed under Section 73 of the Central Goods and Services Tax Act, 2017 - maintainability under Section 107 of the Central Goods and Services Tax Act, 2017 - opportunity of hearing - interim protection from coercive action - payment of disputed tax in installments - adjustment of Input Tax Credit

Interim protection from coercive action - payment of disputed tax in installments - Interim relief restraining coercive action until the next returnable date - HELD THAT: - The court, while keeping the writ petition pending, recorded the petitioner's submission that the disputed tax is being paid in monthly instalments and there is a request for adjustment of Input Tax Credit and re-fixation of instalments. In view of that projection and the pendency of the petition, the court directed that no coercive action shall be taken against the petitioner until the next returnable date so that the petitioner's instalment payments continue without interruption and the parties have time to address the substantive contentions.

No coercive action shall be taken against the petitioner till the next returnable date (01.02.2021).

Maintainability under Section 107 of the Central Goods and Services Tax Act, 2017 - Preliminary issue of maintainability raised under Section 107 reserved for decision - HELD THAT: - The Finance Department raised a preliminary objection as to maintainability under Section 107 of the CGST Act. The court did not decide this contention on the merits but expressly kept the preliminary issue open for adjudication, thereby deferring any ruling on whether the petition is maintainable under the said provision.

The question of maintainability under Section 107 is kept open for consideration at the returnable hearing.

Show-cause notice under Section 74 of the Central Goods and Services Tax Act, 2017 - demand framed under Section 73 of the Central Goods and Services Tax Act, 2017 - opportunity of hearing - Procedural directives: issuance of notice and supply of extra copies; listing of matter for hearing - HELD THAT: - The petitioner challenged two show-cause notices issued under Section 74 and summary orders under Section 73 for the stated periods. The court issued notice on the writ petition (including the interim prayer) returnable on 01.02.2021. As the respondent accepted notice, the court directed that requisite extra copies with enclosures be furnished to the respondent by the date specified, thereby ensuring service and preparedness for the returnable hearing. The court also noted the petitioner's grievance about adjudication without opportunity of hearing but did not decide that grievance at this stage.

Notice issued returnable on 01.02.2021; petitioner to furnish extra copies with enclosures to the respondent by 17.12.2020.

Final Conclusion: Notice issued on the writ petition (challenging show-cause notices and summary orders for the periods up to March, 2019 and from April, 2019 to August, 2019) returnable on 01.02.2021; preliminary objection on maintainability under Section 107 reserved; interim protection granted restraining coercive action until the returnable date; procedural direction given for supply of extra copies to respondents.

Maintainability of writ petition in absence of statutory appellate forum - appellability of order of Additional Commissioner (Appeals) under Section 112 of the Uttar Pradesh Goods and Services Tax Act, 2017 - obligation to deposit requisite court fee as condition for entertaining writ where appellate tribunal not constituted - conditional release of seized goods on furnishing security or indemnity bond

Maintainability of writ petition in absence of statutory appellate forum - obligation to deposit requisite court fee as condition for entertaining writ where appellate tribunal not constituted - Writ petition challenging the order of the Additional Commissioner (Appeals) is maintainable before the High Court because the GST Tribunal under the Uttar Pradesh Goods and Services Tax Act, 2017 has not been constituted and the petitioner has deposited the mandatory court fee required by law. - HELD THAT: - The court admitted the writ petition on the ground that the statutory appellate forum envisaged by the Act (the GST Tribunal) is not in existence, and therefore the petitioner could approach the High Court by way of writ. The petitioner produced evidence of payment of the mandatory court fee prescribed in relation to appeals under the Act. In these circumstances the court treated the prerequisite of depositing the requisite fee as satisfied and proceeded to admit the petition for consideration notwithstanding the absence of the Tribunal.

Writ petition admitted as maintainable because the GST Tribunal is not constituted and the requisite court fee has been deposited.

Conditional release of seized goods on furnishing security or indemnity bond - Whether the goods and vehicle seized may be released pending disposal of proceedings. - HELD THAT: - The court ordered the immediate release of the petitioner's goods and the truck bearing the specified registration, subject to the furnishing of security other than cash or bank guarantee or, alternatively, an indemnity bond equal to the value of tax and penalty, to the satisfaction of the seizing authority. The direction permits release on condition that appropriate security or an indemnity bond is provided, thereby protecting revenue interests while facilitating the petitioner's access to the goods during the litigation. The order is interim in nature and does not decide the merits of the underlying tax demands.

Goods and vehicle released forthwith on furnishing prescribed security or indemnity bond to the satisfaction of the seizing authority.

Final Conclusion: The High Court admitted the writ petition because the statutory GST Tribunal has not been constituted and the petitioner had paid the required court fee; respondents were granted time to file objections, and the seized goods and vehicle were ordered released subject to furnishing security or an indemnity bond equal to the value of tax and penalty.

Validity of service of orders under Section 169 of the Act - detention and quantification of demand under Section 129(1) of the Act - right to appellate hearing on merits where service is defective

Validity of service of orders under Section 169 of the Act - Service of the detention/quantification order on the vehicle driver was not in accordance with the modes of service prescribed under Section 169 of the Act and therefore was invalid. - HELD THAT: - The admitted fact in the record is that the order MOV-09 dated 14.9.2018 was served upon the driver of the vehicle. The Court applied the principle from its earlier decision in Writ Tax No. 661 of 2020, holding that service on the driver, which is not one of the modes prescribed by Section 169, is contrary to the statutory scheme. Because the order was not validly served on the petitioner in the manner contemplated by Section 169, the petitioner lacked effective notice of the quantified demand and related proceedings.

The service on the driver was invalid and the impugned proceedings founded on such service could not be sustained.

Right to appellate hearing on merits where service is defective - detention and quantification of demand under Section 129(1) of the Act - The order of the Appellate Authority dismissing the appeal for delay without considering the defective service was unsustainable; the appeal must be heard on merits. - HELD THAT: - The appellate order dated 23.9.2019 rejected the appeal on the ground of delay, reasoning that service on the driver could be presumed known to the appellant and disbelieving the asserted date of communication. Given the Court's conclusion that the earlier order was not validly served under Section 169, such reasoning was erroneous. In view of the defective service, the petitioner could not be left remediless; the proper course is to set aside the appellate dismissal and direct the Appellate Authority to decide the appeal on merits in accordance with law and expeditiously.

The appellate order dismissing the appeal for delay is set aside and the matter is remitted to the Appellate Authority for hearing on merits.

Final Conclusion: Writ petition allowed; impugned appellate order set aside for having proceeded despite defective service, and the Appellate Authority directed to hear the petitioner's appeal on merits as expeditiously as possible.

Summary order. The Court impleaded the Union of India and the GST Council as parties, issued notice, called for affidavits, and directed the matter to be listed with connected cases concerning non-constitution of the Tribunal.

Detention, seizure and release of goods in transit - notice and order under Section 129(3) - deeming provision under Section 129(5) - proceedings deemed concluded on payment - summary upload in FORM GST DRC07 and rectification in FORM GST DRC08 - laches and delay

Notice and order under Section 129(3) - deeming provision under Section 129(5) - proceedings deemed concluded on payment - laches and delay - Challenge to the order dated 15.2.2018 passed under Section 129(3) of the UPGST Act, 2017. - HELD THAT: - The Court examined Section 129, noting that subsection (3) requires the proper officer to issue a notice specifying tax and penalty and to pass an order for payment, while subsection (5) contains a deeming provision that upon payment of the amount referred to in subsection (1) all proceedings in respect of the notice under subsection (3) shall be deemed concluded. The petitioner's challenge to the 15.2.2018 order was brought belatedly; having regard to the lapse of time and the petitioner's own contention that the tax and penalty determined by the order were deposited, the remedy by way of writ was held to be barred by laches. Applying these conclusions, the Court found that the relief seeking quashing of the Section 129(3) order could not be sustained at this stage. [Paras 10, 15]

The challenge to the order under Section 129(3) is barred by laches and cannot be granted; the petitioner's contention of payment invokes the deeming provision of Section 129(5).

Summary upload in FORM GST DRC07 and rectification in FORM GST DRC08 - notice and order under Section 129(3) - Legality and remedy in relation to the electronically uploaded summary in FORM GST DRC07 dated 18.9.2020 and the procedure for its rectification or withdrawal. - HELD THAT: - The Court noted Rule 142(5)-(7) of the U.P. GST Rules, which requires a summary of certain orders (including orders under Section 129) to be uploaded in FORM GST DRC07 and treats that summary as a notice for recovery, while providing for uploading of a rectification or withdrawal summary in FORM GST DRC08 when applicable. On the material before it, the Court did not adjudicate the merits of the electronic summary but directed that if the petitioner has in fact made payment of the tax and penalty, he may produce proof of such payment before the concerned authority and apply for rectification/withdrawal of the DRC07 entry. The Court thus confined itself to indicating the established administrative remedy under the Rules rather than quashing the electronic summary in writ proceedings. [Paras 6, 11, 16]

Petitioner may submit proof of payment and apply to the authority for rectification/withdrawal of the FORM GST DRC07 entry; the Court declined to quash the electronic summary in these proceedings.

Final Conclusion: Writ petition dismissed; petitioner permitted to submit proof of payment and seek rectification/withdrawal of the FORM GST DRC07 entry in accordance with the Rules, the Court having found the challenge to the Section 129(3) order unsustainable at this belated stage.

Recharacterisation of debt as equity - thin capitalization - GAAR / impermissible avoidance arrangement - transfer pricing - arm's length price - Comparable Uncontrolled Price (CUP) method - shareholder activity (OECD Guidelines) - scope of Chapter X - determine price, not nature of transaction - remand for fresh determination of ALP - admission of additional ground - deduction of education cess

Recharacterisation of debt as equity - thin capitalization - GAAR / impermissible avoidance arrangement - shareholder activity (OECD Guidelines) - scope of Chapter X - determine price, not nature of transaction - Whether the TPO/AO was justified in recharacterizing the OCDs/CCDs issued to related parties as equity capital and treating interest payments as non-deductible (i.e., determining Nil ALP). - HELD THAT: - The Tribunal held that Chapter X-A (GAAR) and section 94B (thin capitalization rule) in their present statutory form were introduced with prospective effect w.e.f. 1.4.2018 and therefore were not available for assessment year 2013-14; in the absence of any specific thin capitalization rule at the relevant time the TPO could not recharacterize genuine debentures as equity. Chapter X (transfer pricing) focuses on determining the arm's length price of the transaction as entered and does not mandate changing the nature of the transaction unless specific anti-avoidance provisions apply. The OECD concept of "shareholder activity" relied upon by the TPO was examined and found inapplicable because the examples cited do not fit the factual matrix where the assessee itself borrowed from its AEs by issuing debentures which were reflected as such and ultimately redeemed. The obiter in EKL Appliances was distinguished; the exception of recharacterisation applies where substance differs from form (i.e., amounts in fact treated as equity but shown as debt), which is not the case here. On these bases the recharacterisation and Nil ALP determination were reversed. [Paras 6, 8, 9, 12, 15]

Recharacterisation of the OCDs/CCDs as equity and the consequential Nil ALP determination set aside; issue decided against the Revenue.

Transfer pricing - arm's length price - Comparable Uncontrolled Price (CUP) method - remand for fresh determination of ALP - Determination of the arm's length rate of interest payable on debentures issued to Associated Enterprises for assessment year 2013-14. - HELD THAT: - The Tribunal observed that the ld. CIT(A) had previously determined an ALP of 13.75% for AY 2011-12 using an internal CUP (interest paid to IDBI Bank) and that decision has attained finality for that year. However, the facts for 2013-14 differ: the assessee did not pay interest to IDBI Bank in the year under consideration and the internal comparable relied upon earlier is not available. Applying the principle that ALP must be determined year-by-year on relevant contemporaneous facts and having regard to judicial guidance that the rate should be that prevailing in India where the loan is received, the Tribunal set aside the ALP determination and remitted the matter to the AO/TPO to ascertain the rate at which the assessee actually paid interest to its bank in the year under consideration and to apply that rate as the arm's length benchmark, giving the assessee an opportunity of hearing. [Paras 16, 18, 19]

ALP determination set aside and remitted to AO/TPO for fresh determination of the arm's length rate of interest for 2013-14 based on contemporaneous bank borrowing comparables; cross grounds allowed for statistical purposes.

Admission of additional ground - deduction of education cess - Whether the assessee is entitled to deduction of education cess and secondary and higher education cess while computing total income. - HELD THAT: - The Tribunal admitted the additional ground as it raised a pure question of law with relevant facts on record. In view of binding decisions of the jurisdictional High Court which held that education cess is not disallowable expenditure under the relevant provision, and as the correctness of the amount was not disputed by Revenue, the Tribunal allowed the deduction. [Paras 21, 22]

Additional ground admitted and deduction of education cess allowed.

Final Conclusion: The appeal of the assessee is partly allowed and the Revenue's appeal is partly allowed for statistical purposes: the recharacterisation of debentures as equity is set aside; the ALP of interest for AY 2013-14 is remitted to the AO/TPO for fresh determination using contemporaneous bank borrowing comparables; the assessee's claim for deduction of education cess is allowed.

Power of Tribunal to remand - Remand should be exercised sparingly and with reasons - Burden of proof under Section 68 - Genuineness of share transactions and credit-worthiness of investors - Engineered/bogus long term capital gains - Duty of Assessing Officer to investigate and record factual findings

Power of Tribunal to remand - Remand should be exercised sparingly and with reasons - Duty of Assessing Officer to investigate and record factual findings - Validity of the Tribunal's order remanding the matter to the Assessing Officer - HELD THAT: - The Court held that although the Tribunal possesses power to remand under its jurisdiction, remand is an exceptional power to be exercised sparingly and only with reasons when fresh material or inability to decide on the available record exists. The Tribunal did not disturb the factual findings of the Assessing Officer or the CIT(A), nor did it show that any fresh material was placed before it necessitating remand. The Tribunal failed to record why it could not decide the factual issues on the material before it and therefore the remand was unjustified, devoid of reasons and unsustainable in law. Reliance was placed on the principle that where all evidence has been produced and lower authorities have given definite findings after enquiry, the Tribunal should not remit the matter routinely. [Paras 15, 16, 27, 29]

The Tribunal's remand order was set aside as unjustified and without adequate reasons.

Burden of proof under Section 68 - Genuineness of share transactions and credit-worthiness of investors - Engineered/bogus long term capital gains - Duty of Assessing Officer to investigate and record factual findings - Whether the Assessing Officer and CIT(A) were justified in treating the share-sale proceeds as unexplained and making additions under Section 68 - HELD THAT: - Applying settled principles, the Court accepted that the primary onus lay on the assessee to prove identity, credit-worthiness and genuineness of the transactions. The Assessing Officer conducted field enquiries, sought details under Section 133(6), and recorded that communications to the alleged seller returned 'not known', documentary evidence lacked distinctive numbers, purchases were off-market, and material indicia pointed to circular trading and artificial price inflation. The CIT(A) examined these factual findings, concurred that the transactions were sham/engineered to generate artificial long-term capital gains and held the credits as unexplained cash credits assessable under Section 68. The Tribunal did not overturn those factual findings. Applying authorities which require cogent evidence from the assessee before rebutting the prima facie case, the Court found no reason to disturb the concurrent findings of the AO and CIT(A). [Paras 17, 24, 25, 26]

The findings of the Assessing Officer and the CIT(A) that the transactions were sham and credits were unexplained (added under Section 68) were upheld and restored.

Final Conclusion: The tax appeal is allowed; the Tribunal's remand order is set aside, the Tribunal's decision is quashed, and the order of the Commissioner of Income Tax (Appeals) is restored in favour of the Revenue.

Assumption of jurisdiction under Section 153C of the Income tax Act - Validity of assessment framed under Section 153A/143(3) where no incriminating material is found - Quashing of assessment in absence of seized/incriminating material - Reliance on satisfaction note insufficient to sustain jurisdiction where no seized material is shown

Assumption of jurisdiction under Section 153C of the Income tax Act - Quashing of assessment in absence of seized/incriminating material - Validity of assessments framed under Section 153C/143(3) for the stated assessment years where no incriminating material belonging to the assessee was shown to have been seized during search - HELD THAT: - The ITAT found, after perusal of the record and orders of revenue authorities, that the assessment orders made no reference to any seized material or other incriminating material for the years under appeal and that the additions were beyond the scope of Section 153C because no incriminating evidence was found in the course of search. The High Court agreed with the ITAT's factual finding that the Revenue did not point to any incriminating material relating to the assessee to justify assumption of jurisdiction under Section 153C; recording of a satisfaction note alone, without foundation that incriminating material of the assessee was in fact found and relied upon, does not sustain the jurisdictional exercise. Following the precedents relied upon by the ITAT, the Court held that in the factual matrix before it the assessments under Section 153C/143(3) could not be sustained and were liable to be quashed. [Paras 10, 11, 12, 13, 14]

Assessments framed under Section 153C/143(3) for AY 2001-02 and AY 2002-03 quashed; revenue appeals dismissed.

Final Conclusion: The High Court upheld the ITAT's quashing of the assessments under Section 153C/143(3) for AY 2001-02 and AY 2002-03 on the ground that no incriminating material belonging to the assessee was shown to have been found during the search; appeals by the Revenue dismissed.

Disallowance under Section 40(a)(i) of the Income Tax Act - depreciation under Section 32 of the Income Tax Act - failure to deduct tax at source under Section 195 of the Income Tax Act - precedent consideration and judicial review of tribunal orders - remand for fresh consideration

Precedent consideration and judicial review of tribunal orders - remand for fresh consideration - Whether the tribunal's order should be quashed and the matter remitted for fresh decision in view of its failure to deal with a relevant decision. - HELD THAT: - The High Court found that the tribunal did not take into account the decision in M/s Wipro Ltd. v. DCIT, and, without assigning reasons, placed reliance on an order of a coordinate bench. Given this omission and the existence of rival contentions on whether depreciation claimed under Section 32 can be disallowed under Section 40(a)(i) for failure to deduct tax at source under Section 195, the tribunal's impugned order was quashed. The matter was remitted to the tribunal for fresh decision in accordance with law, taking into account the competing submissions and relevant precedents. Because the tribunal must re-examine the issues afresh, the Court declined to answer the substantial question of law framed on admission.

Impugned tribunal order quashed and matter remitted to the tribunal for fresh decision in accordance with law; substantial question of law left unanswered.

Final Conclusion: The High Court set aside the tribunal's order for failure to consider a relevant decision and remitted the matter to the tribunal for fresh adjudication; the substantial question of law framed on admission was not decided.

Applicability of the proviso to Section 12A(2) in relation to the date of application and date of registration - effect of registration with retrospective operation from a specified date and its linkage to amended trust deed - pendency of assessment proceedings before the Assessing Officer as condition for retrospective application of exemption - interpretation of exemption provisions to be construed in favour of Revenue - burden on the assessee to establish entitlement to exemption - force of CBDT instructions where they conflict with statutory text

Applicability of the proviso to Section 12A(2) in relation to the date of application and date of registration - effect of registration with retrospective operation from a specified date and its linkage to amended trust deed - pendency of assessment proceedings before the Assessing Officer as condition for retrospective application of exemption - Whether the appellant was entitled to the benefit of Sections 11 and 12 for Assessment Year 2013-14 by application of the proviso to Section 12A(2) in view of registration granted with effect from 01.04.2015. - HELD THAT: - The Court found on the facts that the application for registration was made only on 23.02.2016 and the application was considered only after the trust deed was amended; registration was granted on 02.03.2016 with effect from 01.04.2015. The proviso to Section 12A(2) must be construed harmoniously with the main provision: Section 12A(2) extends exemption from the assessment year immediately following the financial year in which the application for registration is made. The proviso applies only where registration is given and the assessment proceedings are pending before the Assessing Officer as on the date of registration. The Bench agreed with precedents holding that the proviso cannot be read so as to render the main provision redundant; pendency before fora other than the Assessing Officer does not satisfy the proviso's condition. On the facts, there was no examination on record of exempt activities for AY 2013-14 prior to registration, and registration was effective only from 01.04.2015; hence the appellant could not claim the benefit for AY 2013-14. [Paras 7, 13]

The proviso to Section 12A(2) did not entitle the appellant to exemption for AY 2013-14; the appeal is dismissed on this ground.

Interpretation of exemption provisions to be construed in favour of Revenue - burden on the assessee to establish entitlement to exemption - force of CBDT instructions where they conflict with statutory text - Whether the judicial precedents and CBDT instructions relied upon by the appellant required a different outcome. - HELD THAT: - The Court examined the decisions relied upon by the appellant and concluded that their factual matrices were different and therefore inapplicable. The Division Bench in the cited Allahabad decision (Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan) was found to be on point and authoritative in holding that proviso must be read with the main provision and that exemptions are interpreted narrowly in favour of the Revenue. The Court accepted the Supreme Court's exposition that ambiguity in exemption provisions is resolved against the taxpayer. The Court further held that a CBDT instruction cannot override the clear statutory language, and where an instruction conflicts with the statute it cannot be applied to defeat the statutory scheme. On the facts, the appellant failed to discharge the burden of proving entitlement to exemption for the year in question. [Paras 8, 11]

Precedents and CBDT instructions relied upon by the appellant do not support extending exemption to AY 2013-14; the Court upheld the Tribunal's approach and rejected the appellant's reliance.

Final Conclusion: The Tax Case Appeal is dismissed; the substantial questions of law are answered against the assessee and the appellant is not entitled to exemption under Sections 11 and 12 for Assessment Year 2013-14, given the timing of application, the date and effect of registration, and the principles governing interpretation of exemption provisions.

Deduction under Section 14A - exclusion where investment yields no exempt income - Representative assessee / trustee assessed in representative capacity - Determination of status - Association of Persons (AoP) versus individual - Taxability of gratuitous/corpus contributions under Section 56(2)(vii) read with deeming entry - Deeming and assessment consequences under Sections 160 and 161

Deduction under Section 14A - exclusion where investment yields no exempt income - Whether investments which yielded no exempt income must be excluded while computing disallowance under Section 14A and the corresponding Rules. - HELD THAT: - The Court followed High Court and Tribunal precedents (including M/s. Marg Limited and Pragathi Krishna Gramin Bank decisions cited) and held that where an investment yields no exempt income, the disallowance under Section 14A cannot be mechanically applied; the rule-based computation must yield to the principle that no deduction under Section 14A is warranted in such circumstances. Applying those authorities, the substantial question of law No.1 was answered in favour of the assessee. [Paras 39]

Substantial question of law No.1 answered in favour of the assessee; the Tribunal's view on exclusion under Section 14A accepted.

Representative assessee / trustee assessed in representative capacity - Deeming and assessment consequences under Sections 160 and 161 - Determination of status - Association of Persons (AoP) versus individual - Taxability of gratuitous/corpus contributions under Section 56(2)(vii) read with deeming entry - Whether the private discretionary trust (assessee) is a representative assessee to be treated as an "individual" and whether the Rs.25 Crores corpus contribution is taxable under Section 56(2)(vii) read with Section 2(24)(xv). - HELD THAT: - On the facts recorded in the trust deed and supplementary deed (identified beneficiaries in annexures, contributors from group companies, and the receipts being for benefit of identifiable individual beneficiaries), the Court held the trustees are representative assessees under Section 160(1)(iv) and that Section 161 applies so that the trust is to be taxed "in the like manner and to the same extent" as the beneficiaries. The Court rejected the assessee's reliance on form of return and the insertion of the explanation to Section 2(31) as displacing this conclusion. It found the Tribunal erred in treating the trust as an AoP and correctly restored the CIT(A)'s finding that the corpus receipt is taxable as income from other sources under Section 56(1)/56(2)(vii) read with Section 2(24)(xv). [Paras 73, 81]

Substantial questions Nos.2 and 3 answered in favour of the Revenue; the assessee is a representative assessee to be treated as an "individual" for the purpose of Section 56(2)(vii), and the Rs.25 Crores is assessable as income from other sources.

Determination of status - Association of Persons (AoP) versus individual - Taxability of gratuitous/corpus contributions under Section 56(2)(vii) read with deeming entry - Whether the term "individual" in Section 56(2)(vii) must be read to mean only a natural living person so as to exclude a representative assessee/trust. - HELD THAT: - The Court examined the proviso to Section 56(2)(vii) and the scope of total income under Section 5(1), and surveyed authorities construing "individual". It held the proviso creates limited exceptions (relatives, marriage, inheritance) and does not operate to exclude a representative assessee who receives amounts on behalf of identifiable individual beneficiaries. Given the factual finding that beneficiaries are identifiable and the trust acted as conduit for amounts for their benefit, the contention that "individual" must be confined to a living natural person was rejected. [Paras 74, 79]

The argument that "individual" in Section 56(2)(vii) denotes only a natural living person is rejected; the provision applies to a representative assessee receiving amounts on behalf of identifiable individual beneficiaries.

Final Conclusion: The appeal is partly allowed: the Court answered substantial question No.1 in favour of the assessee (Section 14A exclusion where investment yielded no exempt income) and answered substantial questions Nos.2 and 3 in favour of the Revenue (the private discretionary trust is a representative assessee to be treated as an "individual" for the purposes of Section 56(2)(vii) and the Rs.25 Crores corpus contribution is taxable as income from other sources); the CIT(A)'s order assessing the corpus receipt is restored. No costs.

Bid loss deduction - remand to Assessing Officer - verification of claim and production of evidence - precedential value of tribunal decision - application of mercantile system of accounting - Taparia Tools principle on recognition timing

Bid loss deduction - precedential value of tribunal decision - verification of claim and production of evidence - remand to Assessing Officer - Taparia Tools principle on recognition timing - Claim of bid loss allowed by the tribunal was quashed and remitted for fresh adjudication to the Assessing Officer. - HELD THAT: - The tribunal had allowed the assessee's claim for bid loss by relying on its earlier decision in the assessee's own case. Subsequently the High Court set aside that earlier foundation decision in I.T.A.No.920/2008, removing the basis on which the tribunal had acted. The Assessing Officer had recorded that the assessee failed to produce evidence to substantiate the bid loss, a factual aspect not considered by the CIT(A) or the tribunal. In these circumstances the High Court quashed the impugned allowance insofar as it related to bid loss and remitted the matter to the Assessing Officer for fresh consideration, directing that the assessee be given an opportunity to produce cogent material. The Assessing Officer is to decide the issue in accordance with law and in the light of the Supreme Court's decision in Taparia Tools on the timing of recognition of such expenditure. [Paras 7]

Impugned allowance of bid loss set aside and matter remitted to the Assessing Officer for fresh decision after giving the assessee opportunity to substantiate the claim; Assessing Officer to apply Taparia Tools principle.

Bad debts - verification of claim and production of evidence - The substantial questions of law relating to bad debts were not answered by the High Court in this appeal. - HELD THAT: - Although the tribunal had allowed deduction for bad debts (placing reliance on TRF Ltd.) and had directed verification by the Assessing Officer, the High Court in disposing of the present appeal observed that, in view of its remit on the bid loss issue and the factual findings not having been considered by lower authorities, it was unnecessary to answer the substantial questions of law raised. The court therefore did not pronounce a final decision on the bad debts controversy in this proceeding.

No final decision on the bad debts questions; the substantial questions of law in respect of bad debts were left unanswered.

Final Conclusion: The appeal is allowed in part: the tribunal's allowance of bid loss is quashed and the matter is remitted to the Assessing Officer for fresh adjudication (with opportunity to the assessee to produce evidence and with directions to apply Taparia Tools). The Court did not answer the substantial questions of law on bad debts.

Addition based on seized documents - admissibility of witness statement without cross-examination - statutory presumption under Section 132(4A) of the Income Tax Act - onus on assessee to rebut statutory presumption - perversity challenge to findings of fact

Addition based on seized documents - admissibility of witness statement without cross-examination - perversity challenge to findings of fact - The Tribunal was justified in upholding the addition of undisclosed income where the Assessing Officer relied on documents seized during search and the finding did not suffer from perversity despite absence of cross-examination of a witness whose statement was on record. - HELD THAT: - The Court examined the assessment and subsequent appellate proceedings and found that the Assessing Officer and later authorities placed reliance primarily on the document seized during the course of the search, which related to the transactions in question and corresponded to registered sale deeds. Although a statement of a witness (Jayaram) existed, the assessment order itself did not rest on that statement. The assessee had opportunities to produce witnesses and to rebut the material but failed to do so; on the date fixed for cross-examination the witness did not appear and the assessee did not lead evidence thereafter before the appellate forums. The Tribunal's conclusion that the addition of the specified sum represented undisclosed income was a finding of fact based on the seized material and the procedural record; that factual conclusion was not shown to be perverse. Consequently, the absence of cross-examination of the witness whose statement was on file did not by itself render the impugned finding perverse where the primary basis was the seized document and the assessee had failed to avail opportunities to rebut. [Paras 8]

Finding that the addition of undisclosed income based on seized documents was sustainable and not perverse is affirmed.

Statutory presumption under Section 132(4A) of the Income Tax Act - onus on assessee to rebut statutory presumption - Section 132(4A) creates a statutory presumption in respect of documents found during search, shifting the burden to the assessee to rebut; the assessee failed to discharge that burden. - HELD THAT: - The Court noted that Section 132(4A) raises a presumption that documents found in a search belong to the person searched, that their contents are true, and that signatures/attestations are genuine, thereby shifting the evidential burden to the assessee to lead cogent evidence to the contrary. In the present case the seized notings were in respect of the property transactions subsequently reflected in registered sale deeds. Despite being supplied a copy of the witness statement and being granted multiple opportunities (including before the Assessing Officer, Commissioner (Appeals) and the Tribunal), the assessee did not produce rebuttal evidence or satisfactorily explain discrepancies in the affidavit produced. In the absence of any cogent material to rebut the statutory presumption, the authorities were entitled to act on the seized document and sustain the addition. [Paras 7, 8]

Statutory presumption under Section 132(4A) applies and, having not rebutted it, the assessee's challenge fails.

Final Conclusion: The substantial question of law framed is answered against the assessee. The Tribunal's dismissal of the appeal and sustainment of the addition based on seized documents and the statutory presumption under Section 132(4A) is upheld; the appeal is dismissed.

Interest under Section 220(2) of the Income-tax Act is leviable during period of stay - Grant of stay does not suspend statutory interest - Statutory prescription of interest

Interest under Section 220(2) of the Income-tax Act is leviable during period of stay - Grant of stay does not suspend statutory interest - Whether interest under Section 220(2) of the Act is chargeable for the period during which a stay of recovery was in place - HELD THAT: - The Court held that the levy of interest under Section 220(2) is prescribed by statute and mandatory. A grant of stay is always subject to statutory provisions; consequently, mere grant of stay does not prevent the running of interest which the statute mandates. The Tribunal's and Commissioner's finding that interest under Section 220(2) is not chargeable during the period of stay was held to be perverse because it conflicted with the statutory prescription that interest continues to be leviable notwithstanding the stay. [Paras 5]

The Tribunal's finding was set aside and it was held that interest under Section 220(2) is chargeable during the period of stay.

Final Conclusion: The appeal was partly allowed insofar as the second substantial question was answered in favour of the revenue: statutory interest under Section 220(2) continues to be leviable during any period of stay.

Penalty under section 271AA of the Income-tax Act, 1961 - maintenance of transfer pricing records under section 92D read with Rule 10D - Form 3CEB / independent accountant's report under section 92E - mistake apparent on record / review under Section 254 of the Income-tax Act, 1961 - requirement of specific application of mind by Assessing Officer when calling for Rule 10D documents

Mistake apparent on record / review under Section 254 of the Income-tax Act, 1961 - Whether the Tribunal's order dated 13.10.2020 contained a mistake apparent on the face of the record warranting recall and rehearing. - HELD THAT: - The Tribunal examined the grounds raised in the miscellaneous applications and held that the assessee was effectively seeking review of the Tribunal's own order. A mistake apparent on the record must be an obvious and patent error, not a matter to be established by a long-drawn process of argument or by raising points not emerging from the original facts. The Tribunal found that the points now urged were either not pressed before the Tribunal during the main hearing or did not constitute an obvious clerical or patent error. Consequently, the applications seeking recall and rehearing were not maintainable under Section 254 and there was no mistake apparent on the face of the record to justify interference. [Paras 4]

Miscellaneous applications dismissed; no mistake apparent on record warranting recall or rehearing.

Maintenance of transfer pricing records under section 92D read with Rule 10D - Form 3CEB / independent accountant's report under section 92E - Whether filing Form 3CEB (accountant's report) suffices as maintenance/submission of documents required under section 92D, and whether the assessee had maintained its own TP documents. - HELD THAT: - The Tribunal recorded that Form 3CEB is furnished under Section 92E and is distinct from the documents required to be maintained under Section 92D. On facts, the Assessing Officer had recorded that certain transactions (reimbursements, software payments, etc.) were not disclosed in the assessee's Form 3CEB as required by the report format and that the assessee had relied on the TP study of its Indian subsidiary rather than maintaining its own documents. The Tribunal accordingly upheld the conclusion that the assessee had failed to maintain its own TP documents as mandated by Section 92D, and that mere submission of Form 3CEB did not substitute for the documents contemplated by Section 92D. [Paras 4]

Finding that the assessee did not maintain its own TP documentation sustained; Form 3CEB alone does not satisfy Section 92D requirements.

Requirement of specific application of mind by Assessing Officer when calling for Rule 10D documents - Whether the Assessing Officer called for documents under Rule 10D in a routine or casual manner without application of mind, as contended relying on precedents. - HELD THAT: - The Tribunal noted the Assessing Officer's specific factual findings in the assessment and penalty orders identifying the alleged nondisclosures and reliance on the Indian subsidiary's records. Those findings demonstrated that the AO had particularised the documents and information which were not available from the assessee. The Tribunal observed that the contention based on precedents about routine calls for documents was not pressed with supporting factual correlation during the main hearing, and therefore the Tribunal was not persuaded that the AO's action amounted to a mere routine or casual call without application of mind. [Paras 4]

Contention that AO acted without application of mind rejected; AO's specific findings sustain the call for documents.

Final Conclusion: The miscellaneous applications filed by the assessee for recall and rehearing of the Tribunal's order dated 13.10.2020 are dismissed; the Tribunal affirmed that no patent mistake vitiating the order existed, the assessee had not maintained the requisite transfer pricing documents under Section 92D, and Form 3CEB does not substitute for the documents mandated by Section 92D.

Taxability of gift by a corporate donor - validity of gift - essentials under Section 122 of the Transfer of Property Act - conversion of stock-in-trade into capital asset and tax consequences - rejection of books of account under Section 145 - proviso and reliability - distinction between family settlement and corporate transactions (lifting of corporate veil) - requirement of real receipt of consideration for imputation of business income

Distinction between family settlement and corporate transactions (lifting of corporate veil) - Whether the transfer of shares by the assessee-company could be treated as part of a family arrangement so as to treat the transaction as not constituting a taxable transfer. - HELD THAT: - The Tribunal held that a company is a separate juridical person and cannot be treated as a member of a family for the purpose of invoking family settlement principles to alter tax consequences of a corporate transfer. Authorities permitting lifting of the corporate veil are limited and are applied to prevent tax evasion or where the corporate form is a sham; the assessee did not seek lifting of the veil for the benefit of the Revenue and there was no case that the corporate identity was a sham. Therefore the alleged family realignment, even if existing among family members, cannot be used to treat a transfer by a corporate donor as a non transfer under family settlement principles. The Tribunal expressly relied on and followed relevant High Court precedents to this effect and concluded that the corporate donor's transaction must be tested independently of any family memorandum or understanding. [Paras 12, 13, 14, 15]

Gift by the corporate assessee cannot be treated as part of a family arrangement; the corporate entity is not a member of the family for this purpose.

Validity of gift - essentials under Section 122 of the Transfer of Property Act - Whether the transfers of shares satisfied the statutory requirements of a valid gift under Section 122 of the Transfer of Property Act. - HELD THAT: - The Tribunal examined the statutory essentials of gift (absence of consideration, existence of donor and donee, voluntariness, subject-matter, transfer and acceptance). It noted amendments to the assessee's articles authorising gifts, passage of board and shareholder resolutions approving the transfers, disclosure in donor and donee annual accounts, dematerialised transfer of shares into donees' demat accounts, and acceptance evidenced by donees' financial statements and assessments. There was no record of any funds, assets or benefit credited to the assessee in lieu of the transfers. On these facts the Tribunal found that the elements of a valid gift as per Section 122 were satisfied and that the transfers were voluntary and accepted. [Paras 16]

The transfers constituted valid gifts in law; the statutory requirements under Section 122 were satisfied.

Taxability of gift by a corporate donor - requirement of real receipt of consideration for imputation of business income - Whether the gift of shares (held as stock-in-trade) gave rise to taxable business income in the hands of the donor by imputing market value as consideration. - HELD THAT: - The Tribunal held that mere notional valuation cannot substitute for real receipt of consideration; only real income can be taxed. Accounting standards define revenue as gross inflows of cash, receivables or other consideration arising from ordinary activities, and there was no inflow or benefit received by the assessee on the gifts. Reliance was placed on precedent (including the Supreme Court decision referred to) where withdrawal of stock-in-trade for settlement/gift did not attract tax on the difference between cost and market value. The Tribunal also observed there was no specific provision in the Income tax Act prior to the later statutory amendments (effective from 1 April 2019) that taxes conversion of stock in trade into capital asset or imputes fair market value on transfer by way of gift in the hands of the donor. Applying these principles to the facts, the Tribunal concluded that the AO's imputation of business income by treating the market value as consideration was not justified. [Paras 17, 18, 19, 24]

No business income arose in the hands of the donor on the gift of shares; imputation of market value as taxable business income was rejected.

Rejection of books of account under Section 145 - proviso and reliability - Whether the assessing officer was justified in rejecting the assessee's books of account under Section 145 because the notional business income was not credited to profit and loss account. - HELD THAT: - The Tribunal found no substance in rejecting the books when the determinative question was whether any real income had accrued. Since the transfers were held to be gifts with no receipt of consideration and there was no evidence of any benefit received by the donor, there was no reason to treat the books as unreliable merely because sale proceeds were not credited. The accounting entries (adjustment against reserves and disclosure in notes) and supporting documents were held sufficient to establish the treatment of the transactions in the accounts. [Paras 18, 20]

Books of account could not be rejected on the ground that notional proceeds from the gifts were not credited; invocation of Section 145 to displace the books was not sustained.

Administrative fairness - opportunity to be heard - Assessee's plea that appeal was dismissed by the CIT(A) without adequate opportunity to be heard. - HELD THAT: - The Tribunal noted that this ground was pressed but, on the materials and submissions (including failure to advance arguments before the Tribunal on that ground), there was no basis to uphold the complaint of denial of opportunity. The CIT(A)'s treatment of procedural opportunity was not found to vitiate the appellate decision on merits. [Paras 26]

Ground alleging violation of natural justice / inadequate opportunity is dismissed.

Consequential relief - interest under Section 234B - Whether interest under Section 234B should be sustained once the substantive addition was overturned. - HELD THAT: - The Tribunal treated interest under Section 234B as consequential to the substantive assessment. Having set aside the addition of business income, the consequential levy of interest was dismissed. [Paras 27]

Levy of interest under Section 234B dismissed as consequential.

Final Conclusion: The Tribunal partly allowed the appeal for Assessment Year 2014-15: it held that the corporate assessee's transfers of listed shares to group companies were valid gifts (Section 122 Transfer of Property Act satisfied), the transfers could not be treated as part of a family arrangement for taxing the corporate donor, no taxable business income arose by imputing market value, and the books could not be rejected under Section 145 for that reason; grounds on procedural hearing and consequential interest were dismissed.

Transactional net margin method (TNMM) - numerator as Operating Profit - adjustment of comparable margins under Rule 10B(1)(e)(iii) - depreciation adjustment permissible only for difference in depreciation rates on similar assets - remand to Assessing Officer/Transfer Pricing Officer for verification

Transactional net margin method (TNMM) - numerator as Operating Profit - adjustment of comparable margins under Rule 10B(1)(e)(iii) - Whether, under Rule 10B(1)(e), the numerator in TNMM can be profit before specific operating items (e.g., before depreciation) or must be the operating profit after all operating costs, and when itemised adjustments (such as for depreciation) are permissible. - HELD THAT: - The Tribunal and this Bench interpret Rule 10B(1)(e) to mandate comparison of operating profit margins (operating profit as numerator) of the tested party and comparables. The numerator under TNMM is a net operating profit figure incorporating all operating costs; truncating the numerator by excluding an item (for example, computing profit before depreciation) undermines the purpose of TNMM by distorting comparisons across differing business models. Sub-clause (iii) permits adjustment of comparables' margins to account for differences that could materially affect net profit margins, but such adjustments are limited to material differences in accounting principle or rates (for example, differing rates of depreciation on similar assets), and not merely differences in amounts or ratios of depreciation to WDV. Accordingly, an adjustment for depreciation is permissible only where there is a variance in the rates of depreciation applied to similar assets between the tested party and comparables; mere higher absolute depreciation or a higher depreciation-to-WDV ratio does not, by itself, warrant adjustment. [Paras 6, 7, 8, 11, 12]

Operating profit after all operating costs is the correct numerator under TNMM; depreciation-related adjustments to comparables are permissible only where demonstrable differences exist in the rates of depreciation on similar assets, not on the basis of differing amounts or ratios alone.

Remand to Assessing Officer/Transfer Pricing Officer for verification - depreciation adjustment permissible only for difference in depreciation rates on similar assets - Whether the matter should be remitted to the AO/TPO for fresh consideration in light of the Tribunal's direction and what standard of proof the assessee must meet on remand. - HELD THAT: - The Tribunal's earlier direction (para 44) envisaged that if the assessee could establish a material difference in the claim of depreciation vis-a -vis comparables, suitable adjustment may be made in the hands of comparables after verification by AO/TPO. This Bench holds that the proper basis for such an adjustment is demonstrable difference in rates of depreciation on similar assets. The assessee had relied on differences in depreciation-to-WDV ratios, which is insufficient; it must produce rate-wise, asset-specific data showing that it and the comparables apply materially different depreciation rates to similar assets. Given the remand in the earlier round and the assessee's request to file such rate-wise calculations, it is appropriate in the interests of justice to set aside the impugned orders and remit the issue to the AO/TPO to decide afresh on the basis of any new, rate-wise depreciation data the assessee furnishes. The onus to prove the difference in rates rests on the assessee, and the AO/TPO must give the assessee a reasonable opportunity of hearing and apply the principle that adjustments, if made, should be applied consistently across comparables and not leave the assessee in a more prejudicial position. [Paras 7, 8, 9, 12, 13]

Impugned orders set aside and the issue remitted to AO/TPO for fresh adjudication; assessee to prove material difference in depreciation rates on similar assets with opportunity of hearing, and AO/TPO to verify and decide consistently.

Final Conclusion: Both appeals are allowed for statistical purposes; the orders are set aside and the matters relating to possible depreciation adjustment under TNMM are remitted to the Assessing Officer/Transfer Pricing Officer for fresh consideration for A.Y. 2007-08 and A.Y. 2008-09, in accordance with the principles stated and subject to the assessee proving rate-wise differences in depreciation on similar assets.

Addition on account of unexplained bank deposits - burden to consider corresponding withdrawals - peak credit principle - remand for verification and re-adjudication - search and seizure under section 132 - assessment under section 153A - validity of additions in absence of incriminating material - direction to assessing officer to ascertain seized incriminating material

Addition on account of unexplained bank deposits - burden to consider corresponding withdrawals - peak credit principle - remand for verification and re-adjudication - Remand to the Assessing Officer for re-adjudication of additions made on account of unexplained bank deposits after considering withdrawals and the applicability of peak credit. - HELD THAT: - The Tribunal found that the Assessing Officer made additions for the six assessment years by considering deposits in bank accounts without accounting for corresponding withdrawals. The parties agreed that whether withdrawals establish a link with subsequent deposits is a factual question requiring examination of records. The Tribunal therefore remanded all matters to the Assessing Officer for fresh adjudication on merits, directing that the explanations of the assessee, including withdrawals from the bank account and the principle of peak credit where appropriate, be considered and that the assessee be afforded an opportunity of hearing.

Matters remanded to the Assessing Officer for re-adjudication on the issue of additions after considering withdrawals and peak credit; appeals allowed to that extent.

Search and seizure under section 132 - assessment under section 153A - validity of additions in absence of incriminating material - direction to assessing officer to ascertain seized incriminating material - Treatment of the legal contention challenging additions where no incriminating material was purportedly found during search and seizure-kept open for adjudication with a factual finding directed. - HELD THAT: - The Tribunal observed that the assessee raised a legal challenge that additions could not be sustained in the absence of incriminating material seized during the search. The Tribunal did not decide the legal question on merits but kept the issue open for parties to agitate if necessary. The Assessing Officer was directed to record a factual finding whether any incriminating material was found and seized during the search operation that disclosed income attributable to the bank deposits, thereby enabling proper adjudication of the legal contention in subsequent proceedings.

Legal issue left open; Assessing Officer directed to ascertain and record whether any incriminating material was found and seized in the search, enabling further contestation of the validity of additions.

Final Conclusion: All appeals allowed in part: assessments for assessment year 2008-09 to 2013-14 remanded to the Assessing Officer for re-adjudication of bank-deposit additions after considering withdrawals and peak credits; the legal contention regarding absence of incriminating material is left open, with the AO directed to record whether any incriminating material was found and seized during the search.

Arm's length price (ALP) determination under transfer pricing - Transaction Net Margin Method (TNMM) as Most Appropriate Method - Comparability of independent/comparable enterprises for transfer pricing - Exclusion of comparables on account of brand value, extraordinary events and functional dissimilarity - Working capital adjustment in transfer pricing - Treatment of foreign exchange fluctuation gains as operating income for Profit Level Indicator (PLI) - Computation of deduction under section 10AA - exclusion of telecommunication charges from both export turnover and total turnover

Comparability of independent/comparable enterprises for transfer pricing - Exclusion of comparables on account of brand value, extraordinary events and functional dissimilarity - Exclusion of Infosys BPO Ltd. and TCS e-Serve Ltd. from the list of comparable companies for determination of ALP. - HELD THAT: - The Tribunal examined the basis for excluding Infosys BPO Ltd. and TCS e-Serve Ltd. from the comparable set and applied precedent of the Bench and other Tribunals. Infosys BPO was excluded on grounds of substantial brand value and an extraordinary acquisition event in the relevant year which affected its profits, factors unrelated to the assessee's functional profile. TCS e-Serve was excluded on grounds of functional dissimilarity (engagement in software testing/verification, KPO activities) and disproportionate scale/turnover and brand-related profitability which render it non-comparable to the assessee. On these bases and following earlier Tribunal decisions, both companies were directed to be omitted from the final list of comparables for computing the arithmetic mean PLI and arriving at ALP. [Paras 11]

Infosys BPO Ltd. and TCS e-Serve Ltd. are to be excluded from the comparable companies list for ALP determination.

Working capital adjustment in transfer pricing - Computation of working capital adjustment required fresh consideration and is remanded to the TPO/AO. - HELD THAT: - The assessee contended that the weighted average PLR should be used for computing the working capital adjustment rather than a simple average; this submission was made before the DRP but not considered on the weighted-average point. The DRP applied a simple average and rejected the objection without addressing the weighted-average computation. Because the specific weighted-average contention was not examined by the DRP, the Tribunal found it appropriate to remit the matter for fresh consideration by the TPO/AO, allowing the assessee opportunity to be heard on the computation of working capital levels and consequent adjustment. [Paras 14]

Issue remanded to the TPO/AO for fresh consideration of working capital computation and the consequent working capital adjustment.

Treatment of foreign exchange fluctuation gains as operating income for Profit Level Indicator (PLI) - Foreign exchange fluctuation gains having nexus with the international transaction are to be treated as part of operating income for computing the assessee's operating profit margin (PLI). - HELD THAT: - Relying on consistent decisions of the Bangalore Bench, the Tribunal held that foreign exchange gains linked to the international transaction must be included in operating income to compute the operating profit/total cost PLI. The Tribunal directed that the PLI computation be adjusted to treat such forex gains as operating income when determining ALP under TNMM. [Paras 15]

Compute PLI treating foreign exchange fluctuation gains that have nexus with the international transaction as part of operating income.

Computation of deduction under section 10AA - exclusion of telecommunication charges from both export turnover and total turnover - Telecommunication charges must be excluded both from export turnover and total turnover when computing deduction under section 10AA. - HELD THAT: - The Tribunal applied the binding view of the jurisdictional High Court in CIT v. Tata Elxsi Ltd., as affirmed by the Supreme Court, that expenses such as telecommunication charges (and analogous items) ought to be excluded from both numerator (export turnover) and denominator (total turnover) while computing the deduction under section 10AA. Accordingly, the Tribunal directed that telecommunication charges be excluded from both export turnover and total turnover for the assessee's section 10AA computation. [Paras 18]

Telecommunication charges are to be excluded from both export turnover and total turnover for computing deduction under section 10AA.

Final Conclusion: Appeal partly allowed: Infosys BPO Ltd. and TCS e-Serve Ltd. excluded from comparables; working capital adjustment computation remanded to TPO/AO for fresh consideration; foreign exchange gains having nexus with the international transaction to be included in operating income for PLI computation; telecommunication charges to be excluded from both export turnover and total turnover for section 10AA computation.

Reopening of assessment - Recording of reasons for reassessment - Notice under section 148 - Jurisdictional fact - Natural justice - communication of reasons - Validity of reassessment proceedings

Admission of additional ground - Jurisdictional challenge may be raised for first time - Admission of the assessee's additional ground challenging jurisdiction to reopen the assessment. - HELD THAT: - The Tribunal examined the application to admit an additional ground which contended that notices under section 148 and 143(2) were not issued or served and that reasons for reopening were not recorded. The Tribunal held that the grievance raised was a pure question of law going to the root of jurisdiction and, following settled authority, such a point can be admitted and raised for the first time before the Tribunal. In view of those principles and the facts on record, the additional ground was admitted for adjudication. [Paras 7]

Additional ground challenging the jurisdictional validity of reassessment proceedings is admitted.

Reopening of assessment - Recording of reasons for reassessment - Notice under section 148 - Jurisdictional fact - Natural justice - communication of reasons - Validity of reassessment proceedings - Whether the reassessment initiated under section 147/notice under section 148 was valid in the absence of recorded reasons and proper service of the notice. - HELD THAT: - The Tribunal considered whether the pre-condition for exercise of jurisdiction under section 147 was satisfied by recording reasons in writing before issuing the notice under section 148. The departmental record produced at the hearing did not show any reasons recorded either prior to or after issuance of the notice. The Tribunal noted authorities holding that recording of reasons before issue of notice is mandatory, that the reasons must be communicated to the assessee as a matter of natural justice, and that lack of such recorded reasons and improper service vitiate jurisdiction. Having found no record of reasons and noting confusing entries concerning change of jurisdiction and service of statutory notices, the Tribunal concluded that the assumption of jurisdiction was without the mandatory reasons and proper service and therefore void. As the reassessment was quashed on this legal ground, the Tribunal did not decide the merits of other additions raised in the original grounds. [Paras 17, 18, 26]

Reassessment proceedings and consequential orders (including the reassessment order dated 17.3.2015) are quashed for want of recorded reasons and valid service; other merits issues left undecided.

Final Conclusion: The Tribunal admitted the additional jurisdictional ground and, on finding that no reasons for reopening were recorded or properly communicated and that notice/service was defective, quashed the reassessment proceedings and consequential orders for Assessment Year 2012-13; other substantive grounds were not adjudicated.

Stay of show cause notice - treaty interpretation - jurisdiction of adjudicating authority - remand by higher court - interim judicial restraint on administrative action

Stay of show cause notice - interim judicial restraint on administrative action - remand by higher court - Principal Commissioner of Customs, Ahmedabad restrained from proceeding with the show cause notice dated 03.12.2019 until further orders. - HELD THAT: - The Supreme Court had set aside the High Court's earlier dismissal and remanded the writ petition for fresh consideration, observing that the Treaty between India and ASEAN, particularly Article 24, could not be adjudicated by the adjudicating authority and required determination by the High Court. In view of that remand and the specific observation regarding the forum for treaty interpretation, the High Court exercised its injunctive powers to restrain the Principal Commissioner from taking further steps pursuant to the show cause notice dated 03.12.2019. The restraint is interim in nature and operative until further orders, preserving the parties' positions pending the High Court's adjudication on merits as directed by the Supreme Court. [Paras 6, 10]

Principal Commissioner of Customs, Ahmedabad is restrained from proceeding with the show cause notice dated 03.12.2019 until further orders.

Final Conclusion: On remand from the Supreme Court to decide the writ petition on merits, the High Court granted an interim injunction restraining the Principal Commissioner of Customs from proceeding with the show cause notice dated 03.12.2019, and listed the matter for further consideration on 11.02.2021.

Maintainability of writ petition - administrative adjudication versus judicial interference - liberty to aggrieved party to pursue adjudicatory remedy - adjudicating authority to consider submissions afresh - non-influence of court's refusal on factual adjudication - penalty under Section 112 of the Customs Act, 1962 - confiscation under Section 111 of the Customs Act, 1962 - Export Promotion Capital Goods scheme

Maintainability of writ petition - administrative adjudication versus judicial interference - High Court declined to entertain the writ petition challenging show cause notices and demand notices issued by the Directorate of Revenue Intelligence dated 14th June 2019. - HELD THAT: - The Court recorded that the subject matter relates to pending adjudication on show cause notices issued in June 2019 calling upon the applicants to show cause why penalty under Section 112 and confiscation under Section 111 should not follow in respect of import under the Export Promotion Capital Goods scheme. Having considered submissions, the Court was not inclined to entertain the writ petition and permitted the applicants to withdraw the writ and place all submissions before the adjudicating authority. The Court indicated that the mere lapse of time since issuance of notices and the fact that adjudication is in progress informed its reluctance to exercise writ jurisdiction in the matter. [Paras 4, 6]

Writ petition not entertained; applicants granted leave to present their case before the adjudicating authority.

Liberty to aggrieved party to pursue adjudicatory remedy - adjudicating authority to consider submissions afresh - non-influence of court's refusal on factual adjudication - Adjudicating authority directed to consider the applicants' submissions and decide the show cause notices in accordance with law, uninfluenced by the High Court's refusal to entertain the writ petition. - HELD THAT: - The Court disposed of the writ with liberty to the applicants to place all available legal submissions before the adjudicating authority. It expressly directed that the adjudicating authority may consider the submissions and take an appropriate decision in accordance with law and must not be influenced by the High Court's decline to entertain the writ. The order leaves the merits of the adjudication to the statutory forum for fresh consideration rather than adjudicating those merits itself. [Paras 5]

Adjudicating authority to consider submissions afresh and decide in accordance with law, uninfluenced by this Court's order.

Final Conclusion: Writ petition disposed of without admission; petitioners given liberty to press their case before the adjudicating authority which has been directed to consider submissions afresh and decide in accordance with law, unaffected by the High Court's refusal to entertain the writ.

Statutory appeal - re-export on payment of redemption fine - direction to appellate authority to decide appeal - interim hearing of application for re-export - reference to administrative circular - non-adjudication of merits

Statutory appeal - direction to appellate authority to decide appeal - Appellate authority (respondent No.5) is directed to take up and decide the statutory appeal preferred by the writ applicant. - HELD THAT: - The High Court observed that a statutory appeal against the order of confiscation had already been filed before the Commissioner of Customs (Appeals). In view of the pendency of that appeal, the proper course is for the appellate authority to take up and decide the appeal. The Court therefore disposed of the writ application by directing respondent No.5 to take up the appeal at the earliest and decide it in accordance with law. The Court made clear that it has not examined the merits of the underlying confiscation order. [Paras 3, 4]

Respondent No.5 directed to take up and decide the appeal in accordance with law.

Re-export on payment of redemption fine - interim hearing of application for re-export - Permission granted to the petitioner to file an application before the appellate authority seeking permission to re-export the goods; appellate authority to hear such application within eight days if it cannot immediately take up the main appeal. - HELD THAT: - The Court permitted the petitioner to prefer an appropriate application before the appellate authority for re-export of the goods (which the adjudicating authority had allowed subject to payment of a redemption fine). Recognising the risk of loss if re-export is delayed, the Court directed that if the appellate authority, for any good reason, is unable to take up the main appeal for hearing and decision, it must at least hear the application seeking permission to re-export within eight days of its filing. This direction is procedural and intended to secure timely interim relief without deciding merits. [Paras 3, 4]

Petitioner may file application for re-export; appellate authority to hear that application within eight days if the main appeal is not immediately taken up.

Reference to administrative circular - Appellate authority's attention is invited to the circular dated 16th September 2014 (Annexure H), particularly clause 4, and the Court directed an appropriate decision within fifteen days from receipt of the writ. - HELD THAT: - The Court specifically invited the appellate authority to consider the administrative circular relied upon by the petitioner, indicating that its guidance (clause 4) should be borne in mind while making a decision. The Court further stipulated a timeline: an appropriate decision on the appeal/application is to be taken within fifteen days from receipt of this order, thereby imposing a prompt decision-making obligation on respondent No.5. [Paras 4]

Respondent No.5 to consider the cited circular and decide appropriately within fifteen days from receipt of this order.

Non-adjudication of merits - The High Court did not go into the merits of the confiscation order. - HELD THAT: - While issuing directions for the appellate authority to decide the appeal and to entertain an application for re-export on an expedited basis, the Court expressly clarified that it has not examined or decided the substantive merits of the underlying order of confiscation. The relief granted is limited to procedural directions to facilitate prompt appellate consideration. [Paras 4]

Merits of the confiscation order left open; Court did not adjudicate on merits.

Final Conclusion: Writ petition disposed by directing the Commissioner of Customs (Appeals) to take up and decide the statutory appeal promptly; petitioner permitted to apply for re-export before the appellate authority which must, if it cannot hear the main appeal, hear the re-export application within eight days and, having regard to the cited circular, take an appropriate decision within fifteen days of receipt of this order; merits not considered.

Transaction value under Section 14 of the Customs Act - rejection and redetermination of assessable value under rule 12 and rule 5 of the Customs Valuation Rules, 2007 - denial of opportunity for cross-examination and principles of natural justice - extended period of limitation under section 28(4) of the Customs Act - suppression of facts/collusion - anti-dumping duty leviable as difference between specified benchmark and landed value

Denial of opportunity for cross-examination and principles of natural justice - The impugned order could not rely on statements of co-noticees when the appellants were not confronted with those statements and were not permitted to cross-examine the declarants. - HELD THAT: - The Tribunal examined the Principal Commissioner's reliance on voluntary statements of three co-noticees as the primary basis for concluding that transaction values were inflated to evade anti-dumping duty. The Principal Commissioner refused requests for cross-examination on the ground that the statements were voluntary and no prejudice was caused. The Tribunal held that, given the pivotal role of those statements in determining valuation, the appellants should have been afforded an opportunity to test them by cross-examination; denial of that opportunity rendered those statements inadmissible for determining transaction value. The Tribunal rejected the Principal Commissioner's summary reliance on 'no prejudice' and observed that natural justice required confronting the appellants and permitting cross-examination where such statements are determinative of the outcome. [Paras 24, 25, 30, 32, 33]

Findings based on the untested statements could not be sustained; the statements could not be relied upon for redetermining transaction value.

Transaction value under Section 14 of the Customs Act - rejection and redetermination of assessable value under rule 12 and rule 5 of the Customs Valuation Rules, 2007 - The redetermination of transaction value by the Principal Commissioner was unsustainable because it rested on the impugned untested statements and did not properly treat transactions effected by High Sea Sales and banking evidence as valid. - HELD THAT: - The Tribunal reviewed the statutory framework after the 2007 amendment to section 14, which makes transaction value (price actually paid or payable) the primary criterion. The Principal Commissioner rejected declared values in 13 Bills of Entry and redetermined value using contemporaneous imports, relying substantially on the co-noticees' statements. The Tribunal noted that the imports were effected pursuant to High Sea Sales agreements and payments through banking channels, and that the Commissioner had not disputed the documents or payments. Because the discredited statements were the main basis for rejection, and there was no independent basis in the order to displace the declared transaction values, the Tribunal held that the Commissioner could not lawfully reduce the transaction value so as to levy anti-dumping duty. [Paras 22, 23, 34, 36, 38]

Redetermination of transaction value was set aside; declared transaction values could not be rejected on the basis relied upon by the Principal Commissioner.

Extended period of limitation under section 28(4) of the Customs Act - suppression of facts/collusion - The invocation of the extended five-year limitation under section 28(4) was not justified because the show cause notice and the order did not specify the deliberate suppression/collusion necessary to invoke the extended period. - HELD THAT: - Section 28(1) prescribes a one-year limitation except where duty was not levied due to collusion or wilful mis-statement or suppression of facts, in which case subsection (4) permits a five-year period. The Tribunal observed that the show cause notice merely made a general claim of suppression without setting out reasons or particulars why the extended period was invoked, and the Principal Commissioner failed to address the appellants' specific contention on limitation. Relying on settled precedents (articulated in the order) that 'suppression of facts' must be deliberate and positively established to invoke extended limitation, the Tribunal held that the Department did not plead or prove the requisite deliberate suppression or collusion in the notice or findings. [Paras 42, 43, 44, 45, 51]

Invocation of section 28(4) could not be sustained; proceedings were time-barred insofar as the extended period was not properly invoked.

Final Conclusion: The Tribunal set aside the Principal Commissioner's order dated May 30, 2019: findings based on untested statements were inadmissible, the redetermination of transaction value was unsustainable, and the extended five-year limitation under section 28(4) was not properly invoked; accordingly all five customs appeals were allowed.

Vires of adjudication for failure to investigate forgery allegations - breach of audi alteram partem and bias in inquiry - limitation under Regulation 17(1) of CBLR, 2018 - quashing of penalty and restoration of licence/card

Vires of adjudication for failure to investigate forgery allegations - Adjudication was vitiated by failure to examine the original resignation letter and to make proper inquiries into the appellant's allegation of forgery by other directors. - HELD THAT: - The Tribunal found that the department accepted assertions of the other directors without examining the original resignation letter dated 22 August, 2018 or making inquiries into the serious counter allegation of forgery and fraud. No explanation was sought from the other directors for the delay in filing Form DIR 12 or for permitting the appellant to continue using the broker facilities pending the Registrar of Companies entries. These deficiencies rendered the proceedings bad and vitiated the adjudication. [Paras 9, 11, 19]

Proceedings set aside insofar as they rest on findings made without proper enquiry into the alleged forgery and without examination of the original resignation letter.

Breach of audi alteram partem and bias in inquiry - The inquiry and adjudication were tainted by bias and violation of principles of natural justice because the same officer had earlier taken an adverse view and the enquiry report was effectively a repetition. - HELD THAT: - The Tribunal recorded that the enquiry officer had already expressed an adverse opinion against the appellant in an earlier enquiry report and that the present proceedings largely replicated that earlier report. The appellant's contention that the enquiry officer was prejudiced and that the enquiry violated natural justice was accepted, the Tribunal noting that the enquiry officer and authority failed to conduct a fair and impartial inquiry. [Paras 14, 15, 19]

Findings based on the impugned enquiry report were held to be vitiated by bias and breach of natural justice and could not sustain the penalty.

Limitation under Regulation 17(1) of CBLR, 2018 - The show cause notice issued to the appellant was time barred under Regulation 17(1) of CBLR, 2018. - HELD THAT: - The appellant argued that the offence report (letter dated 3 December, 2018) required issuance of show cause within 90 days and that the notice dated 6 September, 2019 exceeded that period. The Tribunal accepted that the proceedings represented repetition of earlier allegations and that the show cause notice was issued beyond the prescribed period, rendering it bad for being time barred. [Paras 13, 15, 19]

The show cause notice was held to be barred by limitation and consequently unsustainable.

Quashing of penalty and restoration of licence/card - Penalty imposed under Regulation 18 of CBLR, 2018 was set aside and the F Card issued to the appellant was held to be valid; the pending application for a CB licence was directed to be considered in accordance with law. - HELD THAT: - In view of the combined findings-failure to investigate forgery allegations, breach of natural justice and bias in the enquiry, and time barred proceedings-the Tribunal allowed the appeal, set aside the impugned order imposing penalty and surrender direction, and declared the appellant's F Card valid. The Tribunal further directed that the appellant's pending application for a broker licence be considered by the authority in accordance with law. [Paras 16, 19, 20]

Impugned order set aside; penalty quashed; F Card held valid; pending licence application to be considered afresh.

Final Conclusion: The appeal is allowed: the adjudication was held vitiated by lack of proper enquiry into forgery allegations, by bias and breach of natural justice, and by a time barred show cause notice; the penalty and surrender direction are set aside, the F Card is declared valid, and the pending licence application is to be considered afresh in accordance with law.

Revocation of approvals under Section 8 and Section 45 of the Customs Act, 1962 - early hearing of appeal - adjournment for filing cross-objection - interim protection from coercive action - listing on priority before Division Bench

Early hearing of appeal - livelihood considerations - Applications for early hearing of the appeals were allowed. - HELD THAT: - The Tribunal noted that the impugned order revoked the appellant's approvals as custodial agent and thereby seriously affected the livelihood of the appellant and its employees. In view of these consequences and the temporary constitution of a Division Bench for the week, the applications for early hearing were allowed to ensure expeditious adjudication. [Paras 2, 6]

Applications for early hearing are allowed and the matter shall be listed on top priority before the next Division Bench.

Adjournment for filing cross-objection - Request for adjournment to enable the Revenue to file cross-objection was accepted. - HELD THAT: - The authorised representative for the Revenue sought adjournment to file cross-objections within the time permitted after service of the appeal. The Tribunal accepted this request and adjourned the matter, directing the Revenue to mention the matter after filing the cross-objection. [Paras 3, 6]

Adjournment granted with direction to the authorised representative to mention the matter after filing the cross-objection.

Interim protection from coercive action - listing on priority before Division Bench - Interim protection was granted restraining coercive action against the appellant until further orders, and directions were given for priority listing with a condition on the appellant. - HELD THAT: - In response to the appellant's plea that coercive action not be taken pending adjudication, the Tribunal restrained any coercive measures until further orders. The Registry was directed to place the matter at top priority in the next Division Bench after receipt of the cross-objection. The Tribunal explicitly recorded that, once listed before the Division Bench, the appellant shall not seek any adjournment. [Paras 4, 7]

No coercive action shall be taken against the appellant till further orders; the matter to be listed on priority and the appellant shall not seek adjournment after listing.

Final Conclusion: The applications for early hearing were allowed; the matter was adjourned to enable the Revenue to file cross-objections with directions for priority listing before the Division Bench, interim protection was granted restraining coercive action pending further orders, and the appellant was directed not to seek adjournment once the matter is listed.

Article 226 - Article 14 - Article 19(1)(a) - Rule 20(4)(vi) of the Companies (Management and Administration) Rules, 2014 - remote e-voting - interim injunction against ongoing electoral process - excessive delegation

Rule 20(4)(vi) of the Companies (Management and Administration) Rules, 2014 - Article 14 - excessive delegation - remote e-voting - Challenge to vires of Rule 20(4)(vi) insofar as it mandates remote e-voting and the procedural requirement that remote e-voting close before the date of the general meeting. - HELD THAT: - The petitioner contended that Rule 20(4)(vi) is manifestly arbitrary and violative of Article 14 because it requires remote e-voting to close prior to the general meeting, preventing members from hearing candidates before casting votes; and that the provision involves excessive delegation under the power conferred by section 108. The Court recorded that it would examine the challenge to the vires of Rule 20(4)(vi). However, no adjudication on the constitutional validity of the Rule was made at this stage. Instead, the Court directed further proceedings by issuing notice to respondents and calling for detailed affidavits on the petitioner's contentions so that the challenge may be considered on merits. [Paras 6, 9, 12]

Challenge to the vires of Rule 20(4)(vi) has been taken on record for examination but not decided; respondents directed to file detailed affidavits for adjudication on merits.

Interim injunction against ongoing electoral process - remote e-voting - Article 226 - Petitioner's plea for interim relief restraining respondent No.4 from conducting remote e-voting/holding the AGM or appointment of an independent observer prior to adjudication. - HELD THAT: - Petitioner sought interim relief to stay the ongoing electoral process, contend that remote e-voting would be completed before the AGM and therefore should be disallowed or stayed. The Court acknowledged the submissions and the commencement of the electoral process (including timelines for nominations, withdrawals, and the scheduled remote e-voting and AGM). Reasoning that once an electoral process has commenced there should ordinarily be little or no interference by the Court, the bench declined to grant interim relief. The order records issuance of notice and directions for respondents to file affidavits, but expressly refuses to stay the ongoing election process. [Paras 7, 9, 13]

Prayer for interim relief to stay the electoral process including remote e-voting is declined; the election process will not be stayed.

Article 226 - issuance of notice - Preliminary procedural steps in the writ petition under Article 226. - HELD THAT: - The Court issued notice on the writ petition and recorded that formal service was obviated because respondents are represented. Respondents were directed to file detailed affidavits addressing the petitioner's contentions. The matter was adjourned for further consideration on the listed date. [Paras 10, 11, 12, 14]

Notice issued; respondents to file detailed affidavits; matter stood over to 25.02.2021.

Final Conclusion: The Court declined interim relief to stay the ongoing election process of respondent No.4 and issued notice to respondents to file detailed affidavits; the constitutional challenge to Rule 20(4)(vi) of the Companies (Management and Administration) Rules, 2014 has been taken for consideration but remains undecided on merits.

Restoration of company name on register - power to strike off companies under Section 248 - satisfaction as to realization of liabilities before striking off - exercise of jurisdiction under Section 252(3) read with Rule 87A - leniency in the interest of justice and ease of doing business - conditional restoration subject to compliance and costs

Restoration of company name on register - exercise of jurisdiction under Section 252(3) read with Rule 87A - leniency in the interest of justice and ease of doing business - conditional restoration subject to compliance and costs - Whether the Tribunal should restore the name of Vishwa Dhan Investments Private Limited to the Register of Companies and on what terms. - HELD THAT: - The Tribunal found that the Registrar of Companies had validly initiated and completed striking off under the statutory scheme since the company had failed to file statutory returns and was believed not to be carrying on business; however, there were no pending investigations or objections from the Registrar to restoration and the petitioners advanced bona fide reasons for non-filing. Balancing the statutory power to strike off with the stated objects of facilitating ease of doing business and the interest of justice during the prevailing economic difficulties, the Tribunal exercised its discretionary jurisdiction under Section 252(3) read with Rule 87A to grant restoration. Restoration was made conditional: the company must file all pending statutory documents with prescribed fees/additional fees/fines within 30 days of restoration; the petitioners must ensure personal compliance; a cost is payable to the Central Government within three weeks (failure to pay to cause lapse of the order); delivery of a certified copy of the order to the Registrar and subsequent publication in the Official Gazette by the Registrar are required; and the order is confined to the violations that led to striking off and does not preclude the Registrar from taking action for any other prior or subsequent offences. The Tribunal further directed the company to resume operations expeditiously after compliance. [Paras 6, 7, 8]

The Tribunal ordered restoration of the company's name on the Register subject to specified compliance conditions, payment of costs, delivery and publication formalities, and without prejudice to the Registrar's power to take action for other violations.

Final Conclusion: The petition for restoration of Vishwa Dhan Investments Private Limited succeeds; the Tribunal directed restoration subject to filing of statutory documents with fees/fines within 30 days, personal assurance of compliance by the petitioners' representative, payment of prescribed costs to the Central Government within three weeks, delivery and Gazetting of the order, and without preventing the Registrar from initiating action for other violations.

Operational creditor - corporate insolvency resolution process - application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - existence of operational debt evidenced by dishonour of post dated cheques - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of interim resolution professional

Operational creditor - application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - existence of operational debt evidenced by dishonour of post dated cheques - The Applicant is an operational creditor and has established existence of an unpaid operational debt and compliance with statutory pre conditions for initiation of CIRP. - HELD THAT: - The Tribunal recorded that the Applicant carried out internal plumbing and electrical works under two agreements and that settlement agreements were executed wherein the Corporate Debtor agreed to pay specified amounts and issued post dated cheques which were subsequently dishonoured for insufficiency of funds. The Applicant served a demand notice under the relevant provision and no reply was received. Having considered these facts and the statutory pre condition of service of the demand notice, the Tribunal found that the existence of debt and non payment were established and that the requirements for admitting an application under the Code were satisfied, and accordingly proceeded to initiate the corporate insolvency resolution process against the Corporate Debtor. [Paras 6, 8]

The petition filed under Section 9 is admitted and CIRP of the Corporate Debtor is initiated.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - A moratorium under the Code is to be imposed from the date of the order until completion of the CIRP. - HELD THAT: - Upon initiating CIRP, the Tribunal imposed the statutory moratorium, prohibiting institution or continuation of suits or proceedings against the Corporate Debtor, transfer or disposal of its assets, enforcement of security interests and recovery of property occupied by the Corporate Debtor, subject to exceptions notified by the Central Government. The Tribunal recorded that supply of essential goods or services shall not be terminated during the moratorium and that the moratorium would remain effective for the duration of the CIRP. [Paras 9]

Moratorium in the terms set out in the order is imposed forthwith and will continue till completion of the CIRP.

Appointment of interim resolution professional - An interim resolution professional is appointed to perform the functions under the Code. - HELD THAT: - The Tribunal nominated from the list provided by the IBBI an individual as interim resolution professional and directed that he take steps required under the statute, specifically referring to duties under the relevant provisions, and file his report within 30 days before the Tribunal. The nomination was confirmed by the Bench and the Registry was directed to intimate the appointment and provide the IRP with the papers and copy of the order. [Paras 10]

Mr. Umesh Gupta is appointed as the interim resolution professional and shall act in accordance with the Code and the directions of this Bench.

Costs of CIRP and interim funding - The Applicant is directed to deposit interim funds to enable the IRP to meet immediate expenses, to be accounted for and reimbursed as costs of the CIRP. - HELD THAT: - To enable the IRP to meet immediate expenses, the Tribunal directed the Applicant to deposit a specified sum with the IRP. The order records that the IRP shall account for this amount and it shall be reimbursed to the Applicant and recovered as costs of the CIRP, indicating the interim funding mechanism for administration expenses during the resolution process. [Paras 11]

The Applicant shall deposit the directed sum to enable the IRP to meet immediate expenses; such amount will be accounted for by the IRP and reimbursed as costs of the CIRP.

Final Conclusion: The Tribunal admitted the Section 9 application, initiated the corporate insolvency resolution process against the Corporate Debtor, imposed the statutory moratorium, appointed an interim resolution professional from the IBBI list with directions to act and report, ordered an interim deposit to meet immediate expenses recoverable as CIRP costs, and directed communication of the order to the parties, the IRP, IBBI and ROC.

Exclusion of time from CIRP period under inherent powers of Adjudicating Authority (section 60(5) of the I&B Code, 2016) - Limitation on extension under section 12(2) - single 90 days - Extraordinary circumstances (COVID-19 lockdown) justifying exclusion of period - Precedent authorising exclusion of intervening period for counting of CIRP timelines - Obligation of Resolution Professional to conclude CIRP expeditiously

Exclusion of time from CIRP period under inherent powers of Adjudicating Authority (section 60(5) of the I&B Code, 2016) - Limitation on extension under section 12(2) - single 90 days - Extraordinary circumstances (COVID-19 lockdown) justifying exclusion of period - Precedent authorising exclusion of intervening period for counting of CIRP timelines - Whether, despite the fact that the single 90-day extension under section 12(2) had already been availed, the Adjudicating Authority could exclude an intervening period from computation of the CIRP time by exercising powers under section 60(5) and thereby effectively extend the CIRP on account of COVID-19 lockdown. - HELD THAT: - The Tribunal held that although section 12(2) permits only a single extension of 90 days after the initial 180-day CIRP period, the Adjudicating Authority retains inherent power under section 60(5) to exclude from the statutory computation such periods during which the Resolution Professional was prevented by reasons beyond his control from proceeding with the CIRP. The decision relied on the principle recognised by the Hon'ble Supreme Court and applied by the NCLAT that exclusion of intervening time is permissible where justified by facts and circumstances. The nationwide COVID-19 lockdown declared w.e.f. 24.03.2020, with consequent restrictions on movement, liquidity and manpower, constituted such extraordinary circumstances preventing the RP from functioning effectively. Applying these principles to the facts, the Tribunal was satisfied that exclusion of a 90-day period commencing 26.05.2020 was justified to enable the RP to complete the CIRP, maximize asset value and avert premature liquidation. The Tribunal therefore allowed the IA and directed the RP to proceed expeditiously and report before the extended period lapses. [Paras 4, 5, 6, 7, 8]

IA allowed; a period of 90 days is excluded w.e.f. 26.05.2020 and the CIRP period is extended accordingly; the Resolution Professional directed to conclude the CIRP expeditiously and file a report.

Final Conclusion: The Tribunal allowed the application by excluding 90 days from the CIRP timeline under its inherent power in view of the COVID-19 lockdown, thereby permitting the Resolution Professional additional time to conclude the CIRP and directed him to file a report before the extended period expires.

Contempt of Tribunal - status quo of shareholdings and fixed assets - direction to prepare and file up-to-date status of affairs including accounts - maintainability of contempt proceedings where mandatory filing was not directed

Contempt of Tribunal - maintainability of contempt proceedings where mandatory filing was not directed - Whether the respondents committed contempt by failing to provide an up to date monthly status of the company's affairs as directed in the order dated 11th February, 2020. - HELD THAT: - The Tribunal examined the terms of its order of 11th February, 2020 and noted that the direction required the respondents to prepare an up to date monthly status of the affairs of the company including accounts until partition proceedings were initiated and completed. The Bench found that the original order did not expressly require the respondents to file those prepared statements with the Tribunal or to serve copies on the petitioners. Having been informed that the respondents were preparing the statements regularly and in view of the omission in the earlier order, the Tribunal held that respondents could not be held liable for contempt. The application for initiating contempt proceedings was therefore without merit and not maintainable in the circumstances. [Paras 6, 10, 12]

Application seeking initiation of contempt proceedings dismissed; no finding of contempt against the respondents.

Direction to prepare and file up-to-date status of affairs including accounts - status quo of shareholdings and fixed assets - Clarification and directions as to the respondents' obligations going forward concerning preparation and filing of the company's monthly status and the timeline for pleadings. - HELD THAT: - The Tribunal clarified that, notwithstanding the omission in the earlier order, respondents are directed to file the up to date status of the affairs of the company as prepared by them and to continue doing so on a monthly basis including accounts until partition proceedings are initiated and completed. The Tribunal further directed that the respondents file their reply affidavit within two weeks and that the petitioner file rejoinder within two weeks thereafter. The order also reaffirmed that parties must maintain status quo of shareholdings and fixed assets in accordance with law, subject to partition as permitted by law. [Paras 10, 11]

Respondents directed to file the prepared monthly status with the Tribunal going forward; timetable fixed for filing reply and rejoinder; status quo direction reaffirmed.

Final Conclusion: The application for contempt is dismissed for want of merit; the Tribunal clarifies its earlier order by directing respondents to file the up to date monthly status of the company's affairs (including accounts) with the Tribunal until partition proceedings are initiated and fixes a two week timeline for filing the reply and rejoinder while reiterating maintenance of status quo of shareholdings and fixed assets.

Prematurity and maintainability of writ challenging summons under investigative statutes - Summons under Section 50 of the Prevention of Money Laundering Act, 2002 - Judicial restraint from monitoring investigation and interrogation processes - Right to legal assistance during departmental questioning

Prematurity and maintainability of writ challenging summons under investigative statutes - Summons under Section 50 of the Prevention of Money Laundering Act, 2002 - Whether the writ petition challenging issuance of summons under Section 50(2) of the Act is maintainable at the investigation stage. - HELD THAT: - The Court held that mere issuance of a summons under Section 50(2) of the Act does not, without more, give rise to a cause of action warranting interference by the High Court. Reliance was placed on precedents which establish that interlocutory steps such as summons, show-cause notices or charge-sheets ordinarily do not infringe a right until a final adverse order is passed, and therefore a writ at this stage would be premature. The petitioner's grievance based on being called to state the truth, produce documents and answer questions could not be treated as an actionable wrong. The Court found the preliminary objection on maintainability to have substantial force and accepted that interference at the investigation stage is generally inappropriate.

Writ petition dismissed as premature and not maintainable insofar as it challenges the summons at the investigation stage.

Judicial restraint from monitoring investigation and interrogation processes - Right to legal assistance during departmental questioning - Whether the Court should direct limits on detention/length of questioning or require presence of a legal practitioner during questioning by the Enforcement Directorate. - HELD THAT: - The Court declined to supervise or regulate the specifics of the investigation such as venue, timings, duration of questioning or the manner of putting questions, observing that such matters are within the discretion of the investigating agency so long as investigation does not transgress statutory limits. Authorities were cited that courts should, as far as possible, avoid intervening when a department issues summons and that entitlement to companionship or legal assistance during departmental interrogation is not absolute. The Court noted that the Directorate had acceded to requests for changes of dates on multiple occasions and found no basis for the petitioner's apprehension of coercive detention or forced statements.

No direction was issued to limit the duration of interrogation or to mandate presence of a legal practitioner; the Court refused to monitor the investigative process and dismissed the relief sought.

Final Conclusion: The writ petition was dismissed: the challenge to the summons under Section 50(2) of the Act was held to be premature and not maintainable, and the Court refused to interfere with or regulate the conduct, timing or accompaniment during the Directorate's investigation.

Writ under Article 226 - Statutory appeal and limitation - Maintainability of writ against order not appealed within statutory limitation - Condonation of delay by Appellate Authority - Precedent in Assistant Commissioner (CT) LTU, Kakinada -vs- Glaxo Smith Kline Consumer Health Care Limited

Writ under Article 226 - Statutory appeal and limitation - Condonation of delay by Appellate Authority - Precedent in Assistant Commissioner (CT) LTU, Kakinada -vs- Glaxo Smith Kline Consumer Health Care Limited - Maintainability of writ petition challenging an order when the statutory appeal was not preferred within the maximum period of limitation before the Appellate Authority - HELD THAT: - The Respondent passed an Order-in-Original determining Service Tax liability; the Petitioner received a copy and had a statutory remedy of appeal under the Act within two months, with the Appellate Authority empowered to condone delay for an additional month (thereby permitting a maximum limitation period of three months). The Petitioner did not prefer the statutory appeal but filed a writ petition before the High Court after the maximum limitation period had expired. The Supreme Court's decision in Assistant Commissioner (CT) LTU, Kakinada -vs- Glaxo Smith Kline Consumer Health Care Limited establishes that a High Court, in exercise of powers under Article 226, ought not to entertain a writ petition assailing an order of a statutory authority which was not appealed against within the maximum period of limitation before the appropriate Appellate Authority. Applying that principle, the High Court refrains from considering the merits of the departmental order and holds the writ petition to be not maintainable. [Paras 2, 3]

Writ petition dismissed; connected miscellaneous petition closed; no costs.

Final Conclusion: The High Court dismissed the writ petition as not maintainable because the statutory appeal was not filed within the maximum limitation period, and accordingly did not decide the merits of the departmental order.

Export of services - Export of Service Rules 2005 - service provided from India and used outside India - recipient situated outside India and payment in foreign currency - reverse charge on commission paid to foreign agents

Export of services - rule 3(2) of the Export of Service Rules 2005 - service provided from India and used outside India - recipient situated outside India and payment in foreign currency - Validity of service tax demand on commission received from foreign companies (treatment as export of services). - HELD THAT: - The Tribunal held that the services rendered by the appellant in promoting and procuring orders for foreign companies, who had no office in India, satisfy the twin conditions of rule 3(2) of the 2005 Rules (service provided from India and used outside India) for the period prior to February 27, 2010, and after amendment the requirement is limited to recipient being situated outside India and payment in convertible foreign exchange. The appellant received consideration in convertible foreign exchange and performed services that facilitated orders which resulted in foreign suppliers exporting goods; accordingly the transactions qualify as export of services. Reliance was placed on the Bench's earlier decision in Involute Engineering and other precedents recognising promotional/marketing services rendered in India for foreign principals as export of services. For these reasons the confirmed demand on commission received from foreign companies could not be sustained and was set aside. [Paras 15, 17, 20, 22, 34]

The demand of service tax on commission received from foreign companies is set aside; the impugned confirmation is not sustainable.

Reverse charge on commission paid to foreign agents - proof of payment and computation of taxable value - Sustainability of service tax demand on commission paid to foreign agents and correctness of assessed amounts. - HELD THAT: - The Tribunal found factual and computation issues in the demand confirmed by the Commissioner: incorrect application of the service tax rate for Financial Year 2008-09, apparent double-entry of certain commission amounts in the assessee's ledger, and tax having been demanded on amounts which were reversed and not actually paid. These matters require examination of documentary evidence and computation. The Tribunal directed that the Commissioner shall re-examine these aspects afresh and allowed the appellant an opportunity to submit a representation with supporting documents within six weeks; the Principal Commissioner was directed to decide the matter within three months uninfluenced by observations in the order. [Paras 18, 19, 20]

Matter remanded to the Commissioner for fresh verification and decision on commission paid to foreign agents, permitting submission of evidence and directing a reasoned decision within three months.

Final Conclusion: The appeal is partly allowed: the service tax demand on commission received from foreign companies is set aside; the demand relating to commission paid to foreign agents is remanded to the Commissioner for fresh verification and computation in accordance with the Tribunal's directions.

Doctrine of mutuality - refund of service tax paid under protest - natural justice - requirement of show cause notice - application of Notification No.25/2012 ST Sr. No.28(c) and Circular No.175/01/2014 ST - power to inquire under Section 35A(3) of the Central Excise Act, 1944 - remand for fresh adjudication

Natural justice - requirement of show cause notice - refund of service tax paid under protest - Validity of rejection of the refund claim without issuance of a show cause notice and consequent breach of natural justice - HELD THAT: - The Tribunal found that the Order in Original rejecting the refund claim was passed without issuance of a show cause notice, thereby denying the appellant an opportunity to establish material facts (such as per head contribution and non profit character of the association). The adjudicating authority's reliance on the pendency of a Supreme Court appeal to disregard earlier Tribunal precedent was held to be impermissible; orders of the Tribunal must be respected unless and until set aside. In these circumstances the matter requires fresh adjudication so that the principles of natural justice are complied with and the appellant is afforded an opportunity to place requisite material on record before a determinative finding is recorded. [Paras 5]

Rejection of the refund claim without a show cause notice was set aside and remanded for fresh adjudication by the Commissioner (Appeals) so that natural justice is complied with.

Application of Notification No.25/2012 ST Sr. No.28(c) and Circular No.175/01/2014 ST - doctrine of mutuality - power to inquire under Section 35A(3) of the Central Excise Act, 1944 - Whether the claimed exemption under the notification and the doctrine of mutuality apply to the appellant's receipts and the need for fact finding on non profit status and quantum of per head contribution - HELD THAT: - The Tribunal observed that the Commissioner (Appeals) based rejection partly on the notification and the circular which condition exemption on the RWA being a non profit entity and contributions falling within the monetary ceiling; however, the Commissioner (Appeals) did not record clear findings that these conditions were satisfied or tested. Given that the applicability of the notification/circular and the doctrine of mutuality depends on factual matters (constitution of the association, non profit character and per head contribution), the Tribunal held that these issues were not finally adjudicated. The Tribunal noted that under Section 35A(3) of the Central Excise Act, 1944 the Commissioner (Appeals) is empowered to make such inquiry and arrive at findings; accordingly, the matter was remitted for fresh consideration of these aspects. [Paras 5]

Applicability of the notification/circular and the doctrine of mutuality was not finally decided; remanded to the Commissioner (Appeals) for inquiry and fresh adjudication on these factual and legal aspects.

Final Conclusion: The appeal is allowed by setting aside the Order in Appeal dated 29.08.2019 and remanding the matter to the Commissioner (Appeals) for fresh adjudication-including compliance with natural justice and factual determination of the applicability of the notification/circular and the doctrine of mutuality-in respect of the refund claim for April, 2016 to March, 2017.

Cenvat credit refund for exported services - requirement to debit CENVAT credit account at the time of making the claim - compliance by debit in books of account prior to filing of refund claim - reflection in statutory return (ST-3) not essential where ledger shows prior debit - prohibition on denial of refund on hyper technical grounds

Requirement to debit CENVAT credit account at the time of making the claim - compliance by debit in books of account prior to filing of refund claim - reflection in statutory return (ST-3) not essential where ledger shows prior debit - prohibition on denial of refund on hyper technical grounds - Whether a debit entry in the assessee's books dated before filing the refund claim satisfies the condition of the notification requiring debit at the time of making the claim, notwithstanding that the corresponding ST 3 return showed the debit in a subsequent period. - HELD THAT: - The appellant produced a voucher evidencing debit of CENVAT credit on 05.03.2014 and filed the refund claim on 20.03.2014. The Revenue's case rested on the fact that the ST 3 return reflected the debit only in the later period April, 2015 to September, 2015. The Tribunal held that the essential purpose of the requirement to debit the CENVAT account before claiming refund is to prevent double benefit, and that a bona fide debit recorded in the books prior to filing the claim accomplishes that purpose. A mere later transcription or reflection in the ST 3 return does not negate the prior debit recorded in the ledger. Denial of refund on such a hyper technical ground was therefore unsustainable. The Tribunal also noted precedents which discourage refusing refund on procedural technicalities where substantive entitlement is established, and observed that the appellant was otherwise entitled to refund for exported services in terms of the Rules and Notification. Applying these principles, the Tribunal set aside the orders denying refund and directed payment of the admissible credit. [Paras 4, 5]

The debit in the appellant's books dated 05.03.2014, being prior to the filing of the refund claim, satisfied the notification's requirement and the refund could not be denied merely because the ST 3 return reflected the debit in a later period; the impugned order was set aside and the admissible refund directed to be paid.

Final Conclusion: The appeal was allowed: the Tribunal directed refund of the admissible accumulated CENVAT credit, holding that a debit recorded in the assessee's books before filing the refund claim meets the notification's requirement and that the claim could not be rejected on the technicality of later reflection in the ST 3 return.

Place of provision of services - Export of service - Refund of Cenvat credit under Rule 5 - Place of provision under Rule 3 - Place of provision under Rule 8

Place of provision under Rule 3 - Place of provision under Rule 8 - Export of service - Refund of Cenvat credit under Rule 5 - Whether the appellant's supply of line production services to an overseas producer qualified as export of service and entitled the appellant to refund of Cenvat credit under Rule 5, or whether Rule 8 (place of provision when provider and recipient are in taxable territory) applied making India the place of provision. - HELD THAT: - The Tribunal examined the agreement dated 02.01.2017 and found that M/s Apple & Orange (UK) was designated the 'Producer' and the appellant only the 'Service Provider' engaged for specified line production activities for a fixed consideration, with intellectual property and production rights assignable to the overseas producer. The Tribunal noted that the film was shot partly at foreign locations and released internationally, including the UK and USA, and that the appellant did not retain the benefit or sole rights to the film. Given that the recipient of service had its business establishment in the United Kingdom, the factual matrix did not bring the case within Rule 8, which applies where both provider and recipient are located in the taxable territory. Instead, the Tribunal held that Rule 3 (place of provision generally - location of recipient) more appropriately determined the place of provision, locating it outside India and, therefore, constituting export of service. On that basis, the appellant satisfied the substantive condition for refund of Cenvat credit under Rule 5 read with the relevant notification; the department's contrary position was not sustained. The Tribunal also observed that the department had not proceeded to demand service tax on the output, indicating tacit acceptance of export treatment, but its primary conclusion rested on the contract terms and objective facts about production and release. [Paras 5, 6, 7]

The supply was held to be an export of service governed by Rule 3, entitling the appellant to refund of Cenvat credit under Rule 5; Rule 8 was held inapplicable.

Place of provision of services - Export of service - Whether reliance on the Comptroller and Auditor General (CAG) report in the impugned order could sustain the conclusion that the services were not exported. - HELD THAT: - The Tribunal found that the impugned order referred to a CAG report without furnishing any reference number or date, diminishing its evidentiary value. Further, the available CAG report pertained to production issues in a different film produced by an Indian company and did not relate to the facts of the present case. Consequently, the Tribunal held that reliance on that report was misplaced and legally unsustainable for denying the refund claim. [Paras 8]

The impugned order's reliance on the CAG report was rejected as having no evidentiary value in the present case.

Final Conclusion: The Tribunal allowed the appeals, set aside the impugned order, and held that the appellant's services to the overseas producer amounted to export of service under Rule 3, entitling the appellant to refund of Cenvat credit under Rule 5; reliance on the CAG report by the lower authority was rejected.

Summary order. Appeal admitted on the substantial questions of law framed in the order (questions (a) to (f) regarding condonation of delay, applicability of Limitation Act, entitlement to refund of terminal excise duty, interaction of provisions of section 11B, DGFT policy circular and the trigger date for refund claims).

Rule 16 of the Central Excise Rules, 2002 - Cenvat credit on duty-paid goods returned for re-making - Validity of assessee's own invoice as documentary basis for credit - Extended period of limitation where department had prior knowledge

Rule 16 of the Central Excise Rules, 2002 - Cenvat credit on duty-paid goods returned for re-making - Validity of assessee's own invoice as documentary basis for credit - Whether the appellant is entitled to avail Cenvat credit under Rule 16 on duty-paid goods returned by customers on the cover of the appellant's own invoice. - HELD THAT: - The Tribunal applied the plain terms of Rule 16 which permits an assessee to take Cenvat credit of duty paid goods brought to the factory for re-making as if such goods are inputs, subject to payment of appropriate duty on re-issue. The adjudicatory finding records that the goods in question were duty-paid and that the appellant produced its tax invoices, credit notes and buyers' debit notes evidencing return and subsequent re-sale. The Tribunal followed its earlier reasoning in BALMER LAWRIE & CO. LTD. that Rule 16 does not prohibit taking credit on the assessee's own invoices and that the critical requirement is that the goods are duty-paid and recorded in the assessee's books, with duty paid on removal; no special procedural permission is prescribed by Rule 16. Applying that determinative principle to the material on record, the Tribunal concluded that the Cenvat credit availed on the returned duty-paid goods was allowable and the demand based on reversal was not sustainable. [Paras 9, 10, 11]

Cenvat credit availed by the appellant on the duty-paid goods returned by customers is allowable under Rule 16 and the demand for recovery on this ground fails.

Extended period of limitation where department had prior knowledge - Whether the department could invoke the extended period of limitation for recovery when it had prior knowledge of the appellant's activities and had earlier issued a show cause notice. - HELD THAT: - The Tribunal noted that earlier proceedings and a show cause notice dated 01/04/2015 in respect of the same subject-matter were on record and that the department's audit and knowledge of the appellant's activities predated the impugned demand. Given that the department was aware of the facts from inception, the Tribunal held that invoking the extended period of limitation for the present proceedings was unsustainable. The conclusion on limitation was therefore determined in favour of the appellant. [Paras 6, 11]

The demand cannot be sustained on the ground of extended limitation as the department had prior knowledge; invocation of extended period is not valid.

Final Conclusion: The appeal is allowed: the demand for recovery of Cenvat credit (and consequential penalty) in respect of returned duty-paid goods is set aside and the appellant is entitled to consequential benefits.

Pre-deposit under Section 35F - protective show-cause notice - pending revision before the Revisionary Authority - abeyance of subordinate proceedings - functus officio - res judicata

Pre-deposit under Section 35F - pending revision before the Revisionary Authority - abeyance of subordinate proceedings - Validity of rejection of appeals by Commissioner (Appeals) for non-deposit when a revision against the appellate order was pending before the Revisionary Authority and whether the protective adjudication could proceed. - HELD THAT: - The Tribunal found on the record that the assessee had filed revision applications challenging the Commissioner (Appeals) orders and that the Revisionary Authority had taken the matter on file. In those circumstances the original authority proceeded to adjudicate protective show-cause notices and the Commissioner (Appeals) rejected the appeals for non-deposit under Section 35F without addressing the pendency of the revision. The Tribunal held that, once a revision is pending before the Revisionary Authority, it was incumbent on the original authority not to proceed with adjudication of the protective notices but to keep the proceedings in abeyance until the Revisionary Authority decided the matter. The Tribunal therefore concluded that the impugned orders rejecting the appeals merely for non-deposit could not stand in view of the pendency of the higher revision, and remanded the matters for fresh action by the original authority with a direction to keep the matters in abeyance pending the decision of the Revisionary Authority. [Paras 6]

Impugned orders set aside and matters remanded to the original authority with direction to keep the proceedings in abeyance till the Revisionary Authority decides the revision.

Final Conclusion: All four appeals are disposed of by setting aside the impugned orders and remanding the matters to the original authority with a direction to keep the proceedings in abeyance pending decision of the Revisionary Authority.

Concessional rate under section 8(3)(b) of the Central Sales Tax Act - Meaning of "goods" in section 8(3)(b) vis-a -vis the definition of "goods" in section 2(d) - Issuance of Form C for inter-state purchase of natural gas used as fuel in manufacture - Registration under section 7(1)/7(2) of the Central Sales Tax Act and entitlement to Form C - Interim stay of impugned order and direction to issue Form C

Meaning of "goods" in section 8(3)(b) vis-a -vis the definition of "goods" in section 2(d) - Issuance of Form C for inter-state purchase of natural gas used as fuel in manufacture - Concessional rate under section 8(3)(b) of the Central Sales Tax Act - Registration under section 7(1)/7(2) of the Central Sales Tax Act and entitlement to Form C - Interim relief was granted staying the order refusing Form C and directing respondents to issue necessary Form C to the petitioner pending final adjudication. - HELD THAT: - Petitioner, a manufacturer of float glass, was denied Form C for inter-state purchase of natural gas on the ground that the finished product does not fall within the amended definition of "goods" in section 2(d) of the CST Act and therefore natural gas used as fuel could not attract concessional treatment. The Court considered precedents including Printers (Mysore) Limited, the Punjab & Haryana High Court in Carpo Power Limited and the Jharkhand High Court decision, and noted that the expression "goods" in the second half of section 8(3)(b) need not be mechanically limited to the statutory definition in section 2(d) where context requires otherwise. Having regard to those authorities and the interim orders passed in analogous matters (including Writ Petition (St.) No.93160 of 2020), the Court was prima facie of the view that the prior decisions may be applicable and uniformity in similar matters was desirable. On that basis the Court found that a case for interim relief had been made out and, as an interim measure, stayed the impugned order dated 22.08.2019 and directed issuance of Form C to the petitioner, observing that the order is subject to any final order in the writ petition. [Paras 22, 24, 25, 26, 27]

Operation of the letter/order dated 22.08.2019 is stayed and respondents directed to issue necessary Form C to the petitioner as an interim measure, subject to final adjudication.

Final Conclusion: Interim order staying the refusal dated 22.08.2019 and directing issuance of Form C to the petitioner; the order is temporary and subject to final decision on the writ petition (matter stood over to 06.01.2021).

Priority of secured creditors - priority to secured creditors under Section 31-B of the RDB Act - priority to secured creditors after registration of security interest under Section 26-E of the SARFAESI Act - statutory first charge in favour of the State under value added tax law - effect of non-registration under Section 26-D of the SARFAESI Act on priority

Priority of secured creditors - priority to secured creditors under Section 31-B of the RDB Act - statutory first charge in favour of the State under value added tax law - Whether the secured creditor's mortgage charge has priority over the State's statutory charge for VAT/sales tax dues. - HELD THAT: - The Court held that a secured creditor, as defined by the SARFAESI Act and RDB Act, is entitled to priority in realisation of secured debts by sale of assets over which security interest is created. Section 31-B of the RDB Act (and, insofar as applicable, Section 26-E of the SARFAESI Act) contains a non obstante provision which gives secured creditors priority over Government dues including taxes. Section 37 of the MVAT Act, which creates a first charge for tax, is expressly subject to any provision regarding creation of first charge in any Central Act; accordingly it cannot prevail over the priority conferred on secured creditors by the central enactments. The Court followed the consistent view of several High Courts and its earlier decision in ASREC (India) Limited, concluding that the question is one of statutory priority under central law and not merely priority in point of time. [Paras 31, 32, 34, 35, 39]

Secured creditor's mortgage charge has priority over the State's charge for VAT/sales tax dues.

Priority to secured creditors after registration of security interest under Section 26-E of the SARFAESI Act - effect of non-registration under Section 26-D of the SARFAESI Act on priority - Whether non-registration of the security interest under Section 26-D/26B (Central Registry) affects the priority of the secured creditor under Section 26-E of the SARFAESI Act or Section 31-B of the RDB Act. - HELD THAT: - The Court noted Respondents' contention that registration in the Central Registry is a pre-condition for the benefit of Chapter IVA of the SARFAESI Act. However, the Court held that even if Section 26-E were operative only prospectively or registration under Section 26-D was not effected, Section 31-B of the RDB Act independently confers priority to secured creditors. Thus alleged non-registration does not alter the legal position that secured creditors enjoy priority over State tax charges under Section 31-B. [Paras 20, 33, 38]

Non-registration under Section 26-D does not defeat the secured creditor's priority in view of Section 31-B of the RDB Act.

Quashing of attachment/charge - relief by writ under Article 226 - Relief to be granted to the petitioner-bank in respect of the attachment under the MVAT Act on Plot No. W-7. - HELD THAT: - Applying the foregoing legal conclusions on priority, the Court held that the attachment/charge placed by the Sales Tax authority on the mortgaged property was contrary to the priority enjoyed by the secured creditor and therefore unlawful. In exercise of writ jurisdiction under Article 226, the Court quashed and set aside the attachment/charge under Section 32 of the MVAT Act and the notices issued thereunder. Interim orders previously granted were vacated. [Paras 39, 40, 43]

Attachment/charge on Plot No. W-7 under Section 32 of the MVAT Act is quashed and set aside.

Final Conclusion: Writ petition allowed: the Bank as secured creditor is held to have priority over the State's VAT/sales tax charge on the mortgaged property; the attachment/charge under Section 32 of the MVAT Act and related notices are quashed and set aside; interim order vacated; no order as to costs.

Issuance of Form 'F' - amendment of revised return - limitation on filing revised returns - conditions for issuance of Forms under Rule 8 of CST (Delhi) Rules, 2005 - suspension of directions pending disposal of Supreme Court appeals

Issuance of Form 'F' - amendment of revised return - limitation on filing revised returns - Rule 8 of CST (Delhi) Rules, 2005 - suspension of directions pending disposal of Supreme Court appeals - Direction to respondent to permit amendment of the petitioner's revised return for the fourth quarter of 2015-16 and to enable issuance of Form 'F', subject to suspension pending outcome of related Supreme Court appeals. - HELD THAT: - The Court found that the petitioner had discovered an omission in its return for the fourth quarter of 2015-16 and sought permission to amend the revised return so as to download Forms 'F'. While the respondents had rejected the request on the ground that the time limit for filing a revised return had expired, the Court considered prior decisions of this Court and the existence of pending Civil Appeals before the Supreme Court which had attracted interim orders. Balancing the petitioner's entitlement to rectify the omission and the effect of the stayed/suspended precedents, the Court directed that the respondent should allow the amendment sought by the petitioner in respect of the specified quarter. However, acknowledging the pendency of civil appeals in the Supreme Court and the interim orders therein, the Court made the direction conditional: the grant of amendment and related issuance of Forms 'F' is to remain suspended until the Supreme Court disposes of the listed appeals, and shall abide by the decision of the Supreme Court. [Paras 11, 12]

Respondent is directed to allow the amendment in the petitioner's return for the fourth quarter of 2015-16 and enable issuance of Forms 'F', subject to suspension of this direction until the Supreme Court disposes of the pending civil appeals; writ petition disposed accordingly.

Final Conclusion: Writ petition allowed to the extent that the respondent is directed to permit the amendment in the petitioner's return and issuance of Forms 'F' for the fourth quarter of 2015-16, but that direction is stayed/suspended pending disposal of the related civil appeals before the Supreme Court and will be governed by the Supreme Court's decision.

Entertainment Tax - payment for admission - online booking charges - mandatory condition for entry - separate optional service not exigible to entertainment tax - pith and substance

Entertainment Tax - payment for admission - online booking charges - mandatory condition for entry - Online booking charges collected by a cinema owner are not part of the taxable receipt for the purposes of the Tamil Nadu Entertainment Tax Act, 1939, unless such charges are a mandatory condition for entry. - HELD THAT: - The court applied the statutory test that entertainment tax attaches to payment necessary as a condition for gaining entry to the place of entertainment. Online booking or internet handling charges are additional, optional services provided for convenience and are not a mandatory precondition for attending the entertainment. The words in the definition of 'payment for admission' must be read conjunctively with the requirement that the payment be one which a person is required to make as a condition of attending or continuing to attend the entertainment. Reliance on precedents (including Drive-in Theatre and lift charge decisions) was considered and distinguished on facts; the 'pith and substance' principle was applied to hold that only the amount paid for entry to the entertainment falls within the scope of the Entertainment Tax Act, whereas separate optional services do not. [Paras 21, 22, 23, 24]

Online booking charges are not exigible to entertainment tax because they are optional and not a mandatory condition for entry.

Entertainment Tax - separate optional service not exigible to entertainment tax - Reassessment orders and consequential tax and penalty levied on online booking charges for the relevant years were unsustainable and quashed. - HELD THAT: - Applying the legal conclusion that online booking charges do not form part of 'payment for admission', the court held that the reassessment orders which imposed entertainment tax and penalty on such charges could not be sustained. The assessing authority's view that absence of service tax payment rendered the charges taxable under the State Act was rejected in light of the statutory requirement that the payment be mandatory for entry. Consequently, the reassessment orders for the years in question were set aside. [Paras 25, 26]

The reassessment orders (including tax and penalty) for the relevant assessment years are quashed.

Final Conclusion: Writ appeals allowed; the order of the Single Judge is set aside. Reassessment orders imposing entertainment tax and penalty on online booking charges for AY 2007-08 to 2014-15 (upto December 2014) (including the AY 2010-11 reassessment noted) are quashed, and no costs were imposed.

High Court's restraint in entertaining writs where statutory appeal time barred - maximum limitation period for statutory appeal and appellate condonation - recourse to rectification under Section 84 of the TNVAT Act - application of Supreme Court precedent on maintainability of writs in tax appeals

High Court's restraint in entertaining writs where statutory appeal time barred - maximum limitation period for statutory appeal and appellate condonation - Whether the High Court should entertain a writ petition under Article 226 against an order under the TNVAT Act which was not appealed to the Appellate Authority within the maximum period of limitation - HELD THAT: - The Court applied the binding principle articulated by the Supreme Court in the cited precedent that, ordinarily, the High Court should not exercise writ jurisdiction to assail an order of a statutory authority where the aggrieved party failed to prefer the statutory appeal within the maximum permissible period before the designated Appellate Authority. The impugned order issued on 29.05.2017 was received on 31.05.2017; the statutory appeal window was 30 days with a further discretionary condonation power of the Appellate Authority for an additional 30 days. The petitioner did not avail the statutory appellate remedy within the maximum limitation period but filed the writ petition beyond that outer limit. In accordance with the Supreme Court's directive, the High Court declined to examine the merits of the tax dispute and dismissed the writ petition, while noting that this restraint is without prejudice to statutory remedies available to the petitioner. [Paras 3, 4]

Writ petition dismissed on maintainability grounds as the statutory appeal was not preferred within the maximum limitation period; court declined to examine merits.

Recourse to rectification under Section 84 of the TNVAT Act - Availability of alternative statutory remedy after dismissal of writ on maintainability grounds - HELD THAT: - While dismissing the writ, the Court expressly clarified that the petitioner is not precluded from seeking correction of the impugned order by initiating proceedings under Section 84 of the TNVAT Act, if otherwise entitled to do so, and that no opinion was expressed on the merits of such a claim. This preserves the petitioner's right to pursue statutory rectification without resolving that entitlement in the present proceedings. [Paras 3]

Petitioner permitted to pursue rectification under Section 84 of the TNVAT Act; no adjudication on the correctness of the claim.

Final Conclusion: The writ petition challenging the TNVAT order for 2007-2008 is dismissed as not maintainable because the statutory appeal was not filed within the maximum limitation period; petitioner remains free to seek rectification under Section 84 of the TNVAT Act.

Recovery of tax in advance by inspecting officials - spot collection of taxes - requirement of assessment order for recovery - quashing of demand notice - dishonoured cheques - remand for assessment

Recovery of tax in advance by inspecting officials - spot collection of taxes - requirement of assessment order for recovery - dishonoured cheques - quashing of demand notice - Lawfulness of demand based on cheques collected at inspection without any assessment order - HELD THAT: - The Court found on the admitted facts that the cheques taken from the petitioner at the time of inspection were towards payment of tax and not compounding fees, and that no assessment order has been passed. Applying settled law that advance recovery of tax by inspecting officials is illegal, the Court held that the demand dated 17.04.2017 issued for the dishonoured cheques lacked legal sanctity. Having regard to the respondents' admission and absence of any assessment, the impugned demand could not be sustained and required to be quashed. [Paras 3, 6, 8, 10, 11]

Impugned demand dated 17.04.2017 quashed as illegal for having been made without any assessment order.

Remand for assessment - requirement of assessment order for recovery - Whether respondents may proceed with assessment and recover any tax found due - HELD THAT: - While the demand based on the collected cheques was quashed, the Court granted the respondents liberty to complete the statutory assessment proceedings in accordance with law. If, after completion of assessment, it is found that the petitioner is liable for tax, penalty or other charges, the respondents are entitled to recover those amounts following the assessment process prescribed by law. [Paras 11]

Respondents permitted to complete assessment proceedings and, if liability is found, recover tax, penalty or other charges in accordance with law.

Final Conclusion: The writ petition is allowed; the demand dated 17.04.2017 based on cheques collected at inspection is quashed for being made without any assessment order, but the respondents are granted liberty to complete assessment proceedings and recover any tax or charges found due in accordance with law.

Summary order. The writ petitions are listed together with Writ Petition (Stamp) No.93160 of 2020 on 01.12.2020; if those petitions cannot be heard on that date, the petitioners' prayer for interim relief may be considered.

Arbitrability of disputes under the Transfer of Property Act, 1882 - non-arbitrability of tenancy disputes governed by special rent statutes - Sections 111, 114 and 114A of the Transfer of Property Act - international commercial arbitration - appointment of arbitrator under Section 11(5)/(6) of the Arbitration and Conciliation Act, 1996 - party agreement to court appointment of arbitrator and its limitation in international arbitration

Arbitrability of disputes under the Transfer of Property Act, 1882 - Sections 111, 114 and 114A of the Transfer of Property Act - non-arbitrability of tenancy disputes governed by special rent statutes - Disputes arising under a lease governed by the Transfer of Property Act are arbitrable, whereas tenancy/eviction disputes governed by special Rent Acts where tenants enjoy statutory protection are non-arbitrable. - HELD THAT: - The Court analysed the scope of Sections 111, 114 and 114A of the Transfer of Property Act and the precedents on arbitrability. It held that the protections in Sections 114 and 114A constitute discretionary, equitable reliefs which an arbitrator can take into account when deciding claims for determination of lease or ejectment; those statutory provisions do not ipso facto render disputes non-arbitrable. By contrast, where a special Rent Act applies and confers statutory protection and exclusive jurisdiction on designated fora, such disputes are non-arbitrable. The Court noted that earlier dicta suggesting non-arbitrability of Transfer of Property Act disputes (as interpreted in Himangni Enterprises) were clarified and, insofar as they held otherwise, overruled in favour of the view that TP Act matters are arbitrable unless a special statute applies. [Paras 12, 15, 16, 17, 18]

Disputes under a lease governed by the Transfer of Property Act are arbitrable; only tenancy/eviction matters governed by special Rent Acts with statutory protection are non-arbitrable.

International commercial arbitration - appointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 - party agreement to court appointment of arbitrator and its limitation in international arbitration - The petitioner's nationality and habitual residence render the dispute an international commercial arbitration, attracting appointment under Section 11(6) of the Act and vesting power in the Supreme Court rather than the High Court named in the contract. - HELD THAT: - The Court observed that the petitioner is a citizen and habitual resident of Kenya; accordingly the dispute qualifies as an 'International Commercial Arbitration' under the Act. In such cases the statutory scheme entrusts appointment of arbitrators to the Supreme Court under Section 11(6), overriding the contractual stipulation conferring exclusive appointment jurisdiction on the High Court of Delhi. Thus the nomination route agreed in Clause 12.3 cannot oust the court designated by the Act for international arbitrations. [Paras 7]

The dispute is an international commercial arbitration and the Supreme Court, not the High Court designated in the contract, has jurisdiction to appoint the arbitrator under Section 11(6).

Appointment of arbitrator under Section 11(5)/(6) of the Arbitration and Conciliation Act, 1996 - The petition for appointment of a sole arbitrator is allowed and Shri Justice (Retd.) Mukul Mudgal is appointed as Sole Arbitrator. - HELD THAT: - Having found the disputes arbitrable and determined that the Court has jurisdiction to appoint in view of the international character of the arbitration, the Court accepted the petitioner's nomination and observed that the respondent did not contest the proposal. Consequently the Court appointed the proposed Sole Arbitrator and directed that the arbitral fee be payable as per the Fourth Schedule to the Act. [Paras 19, 20]

Petition allowed; Justice (Retd.) Mukul Mudgal appointed as Sole Arbitrator and arbitral fee payable as per the Fourth Schedule to the Act.

Final Conclusion: The petition under Section 11(5) of the Arbitration and Conciliation Act, 1996 is allowed: the Court held that disputes under a lease governed by the Transfer of Property Act are arbitrable (whereas matters governed by special Rent Acts are non-arbitrable), treated the dispute as an international commercial arbitration vesting appointment jurisdiction in this Court, and appointed Shri Justice (Retd.) Mukul Mudgal as the Sole Arbitrator; arbitral fee to be paid in accordance with the Fourth Schedule and no order as to costs.