TaxTMI Updates e-Newsletter
Dec 25,2023

Territorial jurisdiction under Article 226 - provisional attachment under Section 83 of the CGST Act - pan India jurisdiction of DGGI/Central officers - reading of Section 83 with Section 122(1) and Section 122(1A) - Rule 159(5) - remedy of filing objection in FORM GST DRC 22A - requirement of pendency of proceedings under Chapters XII, XIV, XV

Territorial jurisdiction under Article 226 - cause of action arising partly within territorial limits - Maintainability of the writ petition before the Calcutta High Court challenging the provisional attachment effected by DGGI, Guwahati. - HELD THAT: - The Court held that the writ petition is maintainable in the Calcutta High Court because part of the cause of action arose within the territorial jurisdiction of the Court: the petitioner's bank account in Kolkata was the subject of provisional attachment. The court treated cause of action as a bundle of facts and concluded that attachment of the Kolkata bank account, even if ordered by an authority located in Guwahati, gives rise to sufficient territorial nexus to invoke Article 226 of the Constitution and entertain the challenge. [Paras 41]

Writ petition is maintainable before the Calcutta High Court.

Provisional attachment under Section 83 of the CGST Act - reading of Section 83 with Section 122(1) and Section 122(1A) - pan India jurisdiction of DGGI/Central officers - Rule 159(5) - remedy of filing objection in FORM GST DRC 22A - requirement of pendency of proceedings under Chapters XII, XIV, XV - Legality and validity of the provisional attachment order dated 22.03.2023 under Section 83 of the CGST Act. - HELD THAT: - On a conjoint reading of Sections 1(2), 6(1), 83, 122(1) and 122(1A) and having regard to the material recovered during investigation, the Court found the Guwahati authority's provisional attachment of the petitioner's bank account to be within jurisdiction and valid. The Court accepted that DGGI/central officers have pan India reach and that Section 83, read with Section 122(1A), permits attachment of property belonging to a person specified therein even if outside a local Commissionerate's territorial ambit. The court also noted the investigative materials indicating ineligible/failed ITC transactions and treated the authority's formation of opinion as supporting provisional attachment. The decision expressly upholds the attachment and declines interference under Article 226; the availability of the remedy under Rule 159(5) and the fact that no objection in FORM GST DRC 22A was filed were matters the respondents relied upon, and the Court proceeded to dismiss the petition on merits. [Paras 42]

Impugned provisional attachment order is legal, valid and within jurisdiction; writ petition is dismissed on merits.

Final Conclusion: The High Court dismissed the writ petition: it found the petition maintainable in Calcutta since part of the cause of action arose within its territory, and on the merits upheld the legality and territorial competence of the DGGI's provisional attachment under Section 83 read with Section 122(1)/(1A), consequently refusing relief to the petitioners.

Extension of limitation by executive notification for filing delayed appeals - conditions for maintainability of appeals under a notification (payment of admitted amount and prescribed percentage of disputed tax) - restoration of appeal subject to compliance with statutory/notification conditions - no power to condone delay beyond statutory period except as provided by statute or notification

Extension of limitation by executive notification for filing delayed appeals - no power to condone delay beyond statutory period except as provided by statute or notification - Applicability of Notification No. 53 of 2023 (S.O. 4767(E)) to permit filing of appeals against orders passed on or before 31.03.2023 under Sections 73 and 74 of the BGST Act, and the consequent effect on the rejection of the delayed appeal for want of limitation. - HELD THAT: - The Court held that the Central Board's Notification of 02.11.2023 expressly extended the time for filing appeals under Sections 73 and 74 of the BGST Act up to 31.01.2024 and deemed certain pending appeals to have been filed in accordance with the notification if they fulfil its conditions. Given the statutory rule that neither the Appellate Authority nor the High Court can condone delay beyond the period provided by statute, an executive notification that lawfully extends the filing period operates to permit belated filings only to the extent and subject to the procedure and conditions set out in that notification. The Notification thereby provides the exclusive route for condonation beyond the one-month period under Section 107(4) of the BGST Act in the cases it covers. [Paras 3, 5]

Notification No. 53 of 2023 applies to appeals against orders under Sections 73 and 74 passed on or before 31.03.2023 and operates to permit filing/ deeming of pending appeals only in accordance with its terms.

Conditions for maintainability of appeals under a notification (payment of admitted amount and prescribed percentage of disputed tax) - restoration of appeal subject to compliance with statutory/notification conditions - Whether the petitioner's appeal, earlier rejected for delay, should be restored and on what conditions it may be entertained under the Notification. - HELD THAT: - The Notification conditions (paras 2-6) require payment of the admitted part of tax, interest, fine, fee and penalty and payment of an amount equal to 12.5% of the remaining disputed tax (subject to the stated cap), with at least 20% of that 12.5% remitted from the Electronic Cash Ledger; additional procedural conditions and the applicability of Chapter XIII of the CGST Rules are prescribed. The Court found that, because the appeal was dismissed for being time-barred, it is appropriate to set aside that dismissal and restore the appeal to the Appellate Authority provided the petitioner complies with the Notification's paragraph 3 by making up any deficient payment (noting that on initial filing 10% ought to have been remitted). Compliance must occur within the time stipulated in the Notification (i.e., on or before 31.01.2024). If the conditions are satisfied within the stipulated time, the appeal will be taken up on merits; failure to satisfy the conditions will result in restoration of the impugned order. [Paras 6, 7, 8, 9, 10]

The impugned order rejecting the delayed appeal is set aside and the appeal is restored on condition that the petitioner satisfies the payment and other conditions of the Notification by 31.01.2024, failing which the impugned order shall stand restored.

Final Conclusion: Writ petition allowed; the order rejecting the delayed appeal is set aside and the appeal restored to the Appellate Authority on condition that the petitioner complies with the payment and procedural conditions of Notification No. 53 of 2023 by 31.01.2024, otherwise the impugned order will be restored.

Treatment of notices as show cause notices under Section 74 of the Central Goods and Services Tax Act, 2017 - Entitlement to copies of seized documents under Section 67(5) of the Central Goods and Services Tax Act, 2017 - No coercive enforcement pending completion of adjudication - Duty to decide representations for release of seized documents to enable effective reply

Treatment of notices as show cause notices under Section 74 of the Central Goods and Services Tax Act, 2017 - No coercive enforcement pending completion of adjudication - Impugned notices are to be treated as show cause notices and no coercive steps shall be taken until adjudication is complete. - HELD THAT: - The Court accepted the Respondents' concession that the impugned communications are show cause notices under Section 74(1) of the Act or, in any event, may be treated as such. On that footing, the respondents undertook that upon receipt of the petitioners' responses adjudication would be carried out and final orders would be passed, and that no coercive action would be taken to enforce any demand until adjudication is complete. The Court recorded and accepted these statements, left all contentions open for consideration in the adjudication and directed the respondents to act in accordance with their undertaking. [Paras 4, 5, 6]

The notices shall be treated as show cause notices; respondents to adjudicate after considering petitioners' replies and shall not take coercive steps until adjudication is complete.

Entitlement to copies of seized documents under Section 67(5) of the Central Goods and Services Tax Act, 2017 - Duty to decide representations for release of seized documents to enable effective reply - Petitioners are entitled to copies/extracts of documents seized under Section 67 and the respondents are directed to dispose of the petitioners' representations under Section 67(5). - HELD THAT: - Having considered the statutory provision in Section 67(5), which entitles the person from whose custody documents are seized to make copies or take extracts in the presence of an authorised officer unless doing so would prejudicially affect the investigation, the Court found prima facie merit in the petitioners' contention that access to the seized documents is necessary to file effective replies to the show cause notices. The Court therefore directed the concerned respondents to consider and dispose of the petitioners' representations dated 03.05.2023 and subsequent requests made under Section 67(5), while leaving open the respondents' power to refuse copying where the proper officer reasonably concludes prejudice to investigation. [Paras 7, 8, 9, 10]

Respondents directed to decide representations for supply of copies/extracts of seized documents in terms of Section 67(5), subject to the exception where release would prejudicially affect investigation.

Final Conclusion: The writ petitions are disposed of by recording the respondents' undertaking that the impugned communications will be treated as show cause notices, that adjudication will follow upon receipt of the petitioners' replies, and that no coercive steps will be taken until adjudication is complete; further, the respondents are directed to decide the petitioners' representations under Section 67(5) for copies/extracts of seized documents.

Claim of Input Tax Credit - form and manner of claiming ITC under Rule 60 - non notification of Form GSTR 2 and its consequence - use of GSTR 3B to avail input tax credit - absence of an enabling mechanism prejudicing the assessee - permissibility of manual filing where electronic facility is not provided - non speaking order - remand for reconsideration of ITC claim

Claim of Input Tax Credit - form and manner of claiming ITC under Rule 60 - non notification of Form GSTR 2 and its consequence - use of GSTR 3B to avail input tax credit - Entitlement to claim and retain ITC where Form GSTR 2 (prescribed under Rule 60) was not notified and the assessee had filed GSTR 3B physically/otherwise to account for ITC for the specified financial years. - HELD THAT: - The Court accepted the petitioner's contention that Rule 60 prescribes Form GSTR 2 for specifying inward supplies for ITC but that the Form GSTR 2 was not made available by GSTN; in that factual setting the absence of the statutorily prescribed enabling mechanism (GSTR 2) meant the assessee could not reasonably be expected to comply electronically. The Court observed that where the statutory/portal mechanism required for a taxpayer to claim credit is not available, the assessee should not be prejudiced and reliance on the recorded GSTR 3B filings (including physically tendered returns) cannot be the sole basis to deny legitimately entitled credit. The Court noted that the respondents' order failed to deal with this specific contention and that precedents of this Court and other High Courts support not denying ITC where there is no enabling mechanism for electronic claim. Applying that reasoning to the financial years in dispute, the Court concluded that the disallowance on the ground of belated claim without addressing non notification of GSTR 2 and portal constraints was unsustainable.

Impugned orders disallowing ITC on the stated ground quashed; petitioner entitled to have ITC claim reconsidered in light of non notification of GSTR 2 and related portal constraints.

Absence of an enabling mechanism prejudicing the assessee - permissibility of manual filing where electronic facility is not provided - non speaking order - Whether the authorities could sustain the assessment/order without addressing the petitioner's plea about lack of electronic facility and while issuing a non speaking order. - HELD THAT: - The Court found that the assessing authority did not deal with the petitioner's specific contentions that (a) GSTR 2 was not notified and hence electronic filing under the prescribed form was impossible, and (b) practical portal constraints prevented online filing of GSTR 3B where outward tax payment was not enabled. The order under challenge was held to be non speaking in that it did not meet or answer these determinative contentions. In view of the absence of an effective mechanism on the portal and the failure of the authority to consider the petitioner's bona fide explanations (including physical submissions), the Court held that the respondents could not rely on those technical non compliances to deny credit without fresh consideration.

The orders were set aside for being non speaking and for failure to consider the enabling mechanism plea; authorities directed to permit manual filing where portal facility is absent and to reconsider the ITC claims.

Remand for reconsideration of ITC claim - remand for reconsideration - Whether the matter should be remitted to the assessing authority for fresh consideration of the ITC claim and, if so, on what terms. - HELD THAT: - The Court remitted the matter to the respondents for fresh consideration because the assessing order had confirmed proposals without addressing crucial legal and factual contentions about non notification of GSTR 2 and portal limitations. The Court directed that the petitioner be permitted to file manual/belated returns when the petitioner claims ITC but cannot electronically file/pay output tax due to portal constraints, and that the authorities accept and examine such returns; if on reconsideration the returns are otherwise in order and in accordance with law, the ITC claim should be allowed. The remand contemplates adjudication on merits after affording the petitioner an opportunity to place records and for the authority to decide afresh.

Matter remitted to authorities for reconsideration; respondents directed to permit manual filing and to accept belated returns and allow ITC if returns are in order.

Remedy by way of writ where enabling mechanism absent - Maintainability of writ petitions despite availability of alternative appellate remedy where the grievance arises from absence of an enabling mechanism on the statutory portal. - HELD THAT: - Although the respondents contended that an alternative remedy by appeal was available, the Court entertained the writ petitions because the challenge related to the systemic absence of an enabling mechanism (non notification of Form GSTR 2 and portal incapacity) which, if left unaddressed, would cause irreparable prejudice to taxpayers. The Court exercised its discretionary jurisdiction and granted relief by quashing the impugned orders and directing remedial measures rather than relegating the petitioner to the appellate forum alone.

Writ petitions allowed; Court exercised jurisdiction to grant relief given the systemic portal/notification issues and potential prejudice to the assessee.

Final Conclusion: Impugned orders dated 16.08.2022 quashed. Petitioner permitted to file manual/belated returns for the relevant financial years (2017-2018 and 2018-2019) where the statutory Form GSTR 2 was not notified or portal constraints prevented electronic filing; matter remitted to authorities to reconsider the ITC claims afresh and allow the credit if returns and records are in order.

Deposit of tax collected with competent GST authorities - entitlement to input tax credit on lawful deposit - judicially directed interim deposit and transfer mechanism - sympathetic consideration by tax authorities in respect of interest and penalty

Deposit of tax collected with competent GST authorities - judicially directed interim deposit and transfer mechanism - Deposit of the amount erroneously paid to the Khopoli Municipal Council to be transferred to the jurisdictional GST authorities by the Court/Registry. - HELD THAT: - The petitioner had deposited the GST amount with the municipal council instead of the GST authorities. Having found that the municipal council could not retain the amount, the Court recorded that the sum of Rs.38,94,868/- was deposited in Court and directed the Registry to obtain bank account details of the jurisdictional GST authorities so that the amount could be transferred in even proportion to CGST and SGST. The Registry was directed to complete the compliance within two weeks and to effect the deposit within one week of receiving the requisite information. The Court thus provided a judicial mechanism to ensure the funds reach the competent GST authorities. [Paras 7, 8]

The Court ordered the amount deposited in Court to be transferred to the concerned GST authorities through the Registry as directed.

Entitlement to input tax credit on lawful deposit - Petitioner's entitlement to claim input tax credit once the deposited amount is placed with the GST authorities. - HELD THAT: - The Court observed that upon lawful deposit of the amount with the GST authorities, the petitioner would be entitled to claim the input tax credit. The Court recorded that the deposit made by the petitioner (permissible in law) confers the right to the claimed input credit and left the practical operation of credit to the statutory process, keeping other contentions open. [Paras 11]

On deposit with the GST authorities, the petitioner is entitled to claim the input tax credit.

Sympathetic consideration by tax authorities in respect of interest and penalty - Directed that the CGST and SGST authorities should sympathetically consider the petitioner's case in relation to interest and penalty arising from the inadvertent deposit. - HELD THAT: - Relying on a co ordinate Bench's observation in analogous circumstances, the Court held that, given the peculiar facts, the CGST and SGST authorities should consider waiving or mitigating interest and penalty and treat the petitioner's case sympathetically unless they have other reasons. The order does not itself waive interest or penalty but directs the tax authorities to exercise discretion in a sympathetic manner. [Paras 9, 10]

The CGST and SGST authorities are directed to consider the petitioner's case sympathetically regarding interest and penalty.

Final Conclusion: The Court directed that the GST sum erroneously paid to the municipal council, which has been deposited in Court, be transferred to the appropriate GST authorities by the Registry; held that the petitioner would be entitled to input tax credit once the amount is deposited with the GST authorities; and directed that the CGST and SGST authorities consider the question of interest and penalty sympathetically in the peculiar facts of the case. No costs.

Sale of goods - classification of supply - de-mineralised water versus ordinary treated water - Zero Liquid Discharge (ZLD) - exemption under Notification No. 2/2017 - Central Tax (Rate) - binding nature of advance ruling

Sale of goods - classification of supply - Sale of Goods Act - transfer of property - Classification of the applicant's proposed purchase of raw effluent and sale of resultant products as sale of goods. - HELD THAT: - The Authority held that the applicant's proposed modus operandi - purchasing raw effluent, treating it on its own account and selling the resultant water, salt and other products at market rates - can amount to a sale of goods only if the essential elements of a contract of sale under the Sale of Goods Act, 1930 and the principles laid down by the Supreme Court (transfer of property, money consideration and agreement between parties) are satisfied. The Authority therefore ruled that classification as sale of goods is correct subject to the applicant following the procedures and rationale identified in para 4.9, i.e., ensuring that title in goods passes pursuant to a contract of sale and other requirements of the Sale of Goods Act are met. [Paras 4, 5]

Classification of outputs as supply of goods is correct, subject to compliance with the Sale of Goods Act requirements and the conditions stated in para 4.9.

De-mineralised water versus ordinary treated water - exemption under Notification No. 2/2017 - Central Tax (Rate) - treated sewage/effluent water - Whether the treated effluent water recovered by the applicant is classifiable under heading 2201 and eligible for exemption under Notification No. 2/2017 - Central Tax (Rate). - HELD THAT: - The Authority examined the nature of recovered water and the relevant tariff/explanatory notes. It found that de-mineralised/distilled/conductivity water (classified in chapter 28) is produced by ion-exchange or similar processes and is free from soluble mineral salts, whereas the effluent-treated water in issue is not subjected to such de-mineralisation and contains chlorides, sulphates and similar impurities (as borne out by testing of comparable CETP samples). The Authority noted that heading 22.01 covers ordinary waters, whether or not clarified or purified, and that Notification No. 2/2017 (Sl. No. 99 against heading 2201) exempts water other than specified special categories (including de-mineralised water). Applying the Ministry of Finance clarification that treated sewage/treated water falling under heading 2201 is exempt, and having regard to the purpose and ZLD context (recovery for reuse to prevent pollution rather than manufacture of purified water), the Authority concluded that the effluent-treated water qualifies as ordinary water under heading 2201 and is eligible for Nil rate under Notification No. 2/2017 as amended. [Paras 4, 5]

Treated effluent water is classifiable under heading 2201 as ordinary water and is eligible for exemption under Notification No. 2/2017 - Central Tax (Rate) (Sl. No. 99).

Final Conclusion: The Advance Ruling holds that (i) the proposed purchase-treatment-sale model can be treated as sale of goods if the applicant complies with the Sale of Goods Act and the conditions set out in para 4.9, and (ii) the treated effluent water recovered by the applicant is classifiable under heading 2201 as ordinary water and is exempt from GST under Notification No. 2/2017 - Central Tax (Rate) (Sl. No. 99).

Business nexus of expenditure - perquisite treatment for personal use of company asset - deductibility of lease rentals where lessor claims depreciation - revisionary jurisdiction under Section 263 - 'one possible view' test

Business nexus of expenditure - perquisite treatment for personal use of company asset - Admissibility of maintenance expenses and depreciation in respect of aircrafts used by the assessee - HELD THAT: - The Tribunal found, as a factual conclusion not disputed by the revenue, that the assessee was engaged in chartering flights and had substantial chartering receipts, establishing that the aircrafts were used for business purposes. The Court held that where the company (an artificial juristic person) uses aircrafts in its business, maintenance expenses and depreciation cannot be disallowed on the ground that directors occasionally used the aircrafts; such incidental personal use, at best, gives rise to a perquisite in the hands of the user and does not justify disallowance of the company's depreciation or maintenance claims. The revenue's contrary stance in other assessment years (where it had conceded admissibility) reinforced that it could not take an inconsistent position in the present appeal. Applying these findings, the Court concluded that the Tribunal's allowance of the claims did not suffer from any legal error. [Paras 5, 8]

The disallowance of maintenance expenses and depreciation was set aside; the claims were admissible as relating to business use of the aircrafts.

Deductibility of lease rentals where lessor claims depreciation - revisionary jurisdiction under Section 263 - 'one possible view' test - Permissibility of deduction of lease rent paid for vehicles taken on lease and validity of invoking revision under Section 263 on that issue - HELD THAT: - The Tribunal found on facts that the assessee had taken vehicles on lease and paid lease rentals while the lessor claimed depreciation; the assessee did not claim depreciation but treated lease rentals as revenue expenditure. Relying on settled authority, the Tribunal held that the question of deductibility of lease rentals is covered by precedent and that the Assessing Officer's adoption of one possible view did not render his order erroneous so as to warrant exercise of revisionary jurisdiction under Section 263. The Court agreed with the Tribunal's factual findings and legal approach, noting prior acceptance of the same position in the assessee's own matters, and held that the impugned orders did not exhibit illegality. [Paras 9, 10, 11]

The deduction of lease rent was held permissible on the facts and the invocation of revision under Section 263 was not sustainable.

Final Conclusion: Both substantial questions of law were answered against the revenue and in favour of the assessee; the appeal is dismissed.

Amalgamation reserve - benefit or perquisite arising from business - accounting entry under double entry bookkeeping - valuation/exchange of shares on intrinsic fair value basis - Section 28(iv) of the Income Tax Act, 1961

Amalgamation reserve - benefit or perquisite arising from business - accounting entry under double entry bookkeeping - Section 28(iv) of the Income Tax Act, 1961 - Amalgamation reserve created on accounting for amalgamation does not constitute a taxable benefit or perquisite under Section 28(iv) of the Act. - HELD THAT: - The Tribunal found, and this Court concurs, that the amalgamation reserve was an accounting entry created to give effect to the sanctioned scheme of amalgamation and to balance the books under the double entry system when shares of the transferee were issued in exchange for assets and liabilities of the transferors. The exchange ratio and fair valuation for allotment were approved by the High Court and the assets, liabilities and reserves of the transferor companies were taken over at their book values. The resulting difference between face value of shares issued and their intrinsic fair value was reflected as an amalgamation reserve in the assessee's accounts. Such an accounting surplus is not real income nor a benefit arising from business activity; it is a bookkeeping device to reflect the accounting treatment of the amalgamation. Consequently Section 28(iv), which taxes any benefit or perquisite arising from business or profession, is inapplicable to such an amalgamation reserve. The Tribunal's reliance on the decision of the Delhi High Court in Bharat Development P. Ltd. (as recorded in the Tribunal's order) supports the view that such reserves are merely book entries and not taxable receipts. The Tribunal's findings on these facts are factual conclusions based on the record and do not suffer from illegality or perversity. [Paras 6, 7]

The appeal is dismissed; the substantial question of law is answered against the revenue and in favour of the assessee.

Final Conclusion: The High Court affirms the Tribunal's conclusion that the amalgamation reserve recorded pursuant to a court sanctioned scheme of amalgamation is an accounting entry and not a taxable benefit under Section 28(iv), and accordingly dismisses the revenue's appeal for assessment year 2003-04.

Treatment of notices issued after 1-4-2021 as show-cause notices under Section 148A pursuant to Ashish Agarwal - limitation under Section 149(1) of the Income Tax Act, 1961 - jurisdictional fact for reopening assessment - principles of natural justice in re-opening of assessment - CBDT Instruction No. 01/2022 and implementation of Ashish Agarwal directions

Treatment of notices issued after 1-4-2021 as show-cause notices under Section 148A pursuant to Ashish Agarwal - limitation under Section 149(1) of the Income Tax Act, 1961 - CBDT Instruction No. 01/2022 and implementation of Ashish Agarwal directions - jurisdictional fact for reopening assessment - Validity of the reopening proceedings for Assessment Year 2015-2016 in view of Ashish Agarwal, the amended limitation regime under Section 149(1), and related CBDT instructions - HELD THAT: - The Court applied the Supreme Court's directions in Ashish Agarwal treating Section 148 notices issued after April 1, 2021 as show-cause notices under Section 148A and noted that those directions operate pan India and bind the parties. The CBDT Instruction No. 01/2022 implements those directions. On the facts, the notice dated April 30, 2021 (quashed earlier) and subsequent material furnished to the assessee on May 23, 2022 complied with the procedure indicated in Ashish Agarwal; the assessee replied on June 5, 2022 and the authority passed an order under Section 148A(d), thereafter issuing notice under Section 148. The impugned order specifically considered the materials (including unexplained bank deposits) and applied the definition of 'asset' under Clause (b) of Section 149(1) to conclude escapement of income for AY 2015-2016. There is nothing on record to show that the authorities acted beyond the period of limitation prescribed or otherwise exceeded jurisdiction; therefore the finding on limitation and the decision to issue notice were held to be legally sustainable. [Paras 19, 20, 21, 22, 29]

Reopening proceedings for Assessment Year 2015-2016 were validly conducted in conformity with Ashish Agarwal and CBDT instructions, and the limitation point under Section 149(1) did not vitiate the impugned order.

Principles of natural justice in re-opening of assessment - writ jurisdiction in challenge to jurisdictional fact - Whether the impugned order dated July 28, 2022 under Section 148A(d) was vitiated by breach of principles of natural justice or warranted interference by writ jurisdiction - HELD THAT: - The Court examined whether the assessee was denied an opportunity to be heard or whether the authority failed to consider the assessee's submissions. The impugned order records and reproduces the assessee's reply dated June 5, 2022 and explains why the reply was not found tenable; accordingly the Court found no breach of natural justice. The Court also noted established principles that jurisdictional facts must exist for exercise of power, but on the material before it the authorities had recorded reasons and considered the assessee's response. The Single Judge's discretionary refusal to entertain the writ petition in these circumstances was upheld. [Paras 28, 30, 31]

No breach of principles of natural justice is established; the impugned order is not vitiated on procedural grounds and the Single Judge did not err in refusing relief by writ.

Final Conclusion: The appeal is dismissed; the High Court's order upholding the assessment proceedings for Assessment Year 2015-2016 (including the order under Section 148A(d) and subsequent notice) is sustained as being in conformity with Ashish Agarwal, CBDT instructions, and not vitiated by limitation or breach of natural justice.

Entitlement to interest on refund - equalisation levy - refund determined under Section 168(1) of the Finance Act, 2016 - interest under Section 244A of the Income-tax Act, 1961 - compensation for use and retention of unlawfully collected money

Entitlement to interest on refund - equalisation levy - interest under Section 244A of the Income-tax Act, 1961 - Petitioner is entitled to interest on the refund of equalisation levy determined and intimated under Section 168(1) of the Finance Act, 2016. - HELD THAT: - Relying on the principle in Union of India v. Tata Chemicals Ltd. and followed in Universal Cables Ltd., the Court held that where the Revenue has retained amounts paid without right it is obliged to refund them with interest as compensation for use and retention. The petitioner had paid excess equalisation levy in Financial Year 2017-2018 and the refund was determined under Section 168(1). Applying the reasoning of the cited precedents and the approach adopted in UPS Freight Services India Pvt. Ltd., the Court held that interest at the rate prescribed under Section 244A of the Income-tax Act is payable on such refund. The determinative legal principle is that a refund of tax or tax-like levy retained without right carries with it the obligation to pay interest as compensation for undue retention. [Paras 18]

Interest is payable on the refunded equalisation levy.

Interest under Section 244A of the Income-tax Act, 1961 - refund determined under Section 168(1) of the Finance Act, 2016 - compensation for use and retention of unlawfully collected money - Rate, period and consequential directions for payment of interest on the refunded amount. - HELD THAT: - The Court applied the mechanics of Section 244A to fix the rate and period. Given that the excess amounts were paid during Financial Year 2017-2018, the refund ought to have been processed by 31st July 2018; accordingly interest was held payable from 1st April 2018. The Court awarded simple interest at 6% per annum (the rate prescribed under Section 244A) from 1st April 2018 up to 21st August 2023 (date of actual payment). The Court directed that the interest be paid by 15th February 2024 and provided that, if not paid, a higher rate of 9% per annum would apply from 16th February 2024 until payment; the additional 3% would be recovered from the Officer responsible, and further measures could follow to address willful disobedience of the order. Costs were refused despite the claim for costs because simple interest at 6% was awarded. [Paras 18, 20, 21]

Simple interest at 6% p.a. is payable from 1st April 2018 to 21st August 2023; interest and payment directions as ordered, with enhanced consequences for non-compliance.

Final Conclusion: Writ petition allowed: refund already paid to petitioner attracts simple interest at 6% per annum from 1st April 2018 until 21st August 2023; interest to be paid by 15th February 2024, failing which interest shall run at 9% per annum from 16th February 2024 and the excess 3% shall be recovered from the responsible officer.

Penalty not exigible where the underlying tax liability is a debatable issue - effect of appellate decision on sustainment of penalty - taxability of domain name registration as "royalty" - penalty under Section 271(1)(c) of the Income Tax Act, 1961

Penalty under Section 271(1)(c) of the Income Tax Act, 1961 - penalty not exigible where the underlying tax liability is a debatable issue - effect of appellate decision on sustainment of penalty - Validity of the deletion of penalty imposed under Section 271(1)(c) where the taxability of receipts (domain registration charges) was a debatable issue and the assessee succeeded in related quantum appeals. - HELD THAT: - The Tribunal and the CIT(A) found that the assessee had a bonafide belief that income from domain registration was not taxable and that the question whether such income amounted to "royalty" was debatable. The Tribunal noted that the quantum appeals on the same question were pending before this Court and treated the issue as debatable, concluding that the impugned penalty was not exigible. This Court observed that the question of law framed in the related appeals was answered in favour of the assessee for AY 2013-14 and the other assessment years, and, given that outcome, the penalty imposed could not be sustained. The Court agreed with the appellate authorities' approach that where the core tax liability question is arguable and ultimately decided in the assessee's favour, the penalty under Section 271(1)(c) cannot stand. [Paras 8, 9]

Tribunal's affirmance of the deletion of the penalty is upheld and the appeal is dismissed.

Final Conclusion: The appeal is dismissed; the deletion of the penalty under Section 271(1)(c) is sustained in view of the debatable nature of the tax issue and the appellate decisions in favour of the assessee.

Penalty for concealment or misstatement under Section 271(1)(c) - taxability of domain name registration income as "royalty" - bona fide belief / debatable question defence to penalty - relevance of pending quantum appeal / interlocutory position in assessing liability to penalty

Penalty for concealment or misstatement under Section 271(1)(c) - taxability of domain name registration income as "royalty" - bona fide belief / debatable question defence to penalty - relevance of pending quantum appeal / interlocutory position in assessing liability to penalty - Sustainability of penalties imposed under Section 271(1)(c) for AY 2013-14 and AY 2014-15 in light of the legal question on taxability of domain registration income and the pendency and result of related quantum appeals. - HELD THAT: - The Tribunal had deleted the penalties on the basis that the taxability of income from domain name registration was a debatable issue and that quantum appeals were pending. This Court had earlier framed and answered the substantial question of law in favour of the assessee in the related appeals (AYs 2013-14, 2014-15 and 2015-16), holding that the income in question did not attract the characterization that led to the additions in the quantum proceedings. Given that the appellate determination on the core question of taxability favoured the assessee, the foundation for imposing penalties for concealment or misstatement under Section 271(1)(c) no longer subsisted. The Court therefore agreed with the Tribunal's conclusion that the impugned penalties could not be sustained. [Paras 8, 9]

Penalties under Section 271(1)(c) for AY 2013-14 and AY 2014-15 are not sustainable and the impugned order is upheld.

Final Conclusion: Having regard to the appellate decisions on the substantial question of law in favour of the assessee, the High Court declined to interfere with the Tribunal's deletion of the penalties for the relevant years and dismissed the appeal.

Ad hoc addition to gross profit without supporting material - addition under Section 68 - credit in books and burden to explain nature and source - opinion of the Assessing Officer must be based on material and not on surmise or conjecture - documentary evidence (account-payee cheques) as probative of genuineness of transaction

Ad hoc addition to gross profit without supporting material - Validity of the ITAT's ad hoc addition of Rs. 4,00,000 to the gross profit rate disclosed by the assessee - HELD THAT: - The Tribunal recorded that the assessee's turnover had substantially increased and there was no material produced by the revenue to disbelieve the GP rate disclosed by the assessee. The assessing officer had proposed a GP of 6% and the CIT(A) reduced it to 5%; the ITAT nonetheless made an unexplained ad hoc addition of Rs. 4,00,000. The Court held that the Tribunal assigned no reason and relied on no material to justify the addition. Absent any finding or evidentiary basis to discredit the disclosed GP rate, an ad hoc upward adjustment is arbitrary. The determinative ratio is that an addition to gross profit must rest on material and reasoned findings; the ITAT's unexplained ad hoc addition cannot be sustained. [Paras 13]

The ad hoc addition of Rs. 4,00,000 to the gross profit is arbitrary and set aside.

Addition under Section 68 - credit in books and burden to explain nature and source - documentary evidence (account-payee cheques) as probative of genuineness of transaction - opinion of the Assessing Officer must be based on material and not on surmise or conjecture - Sustainability of the addition of Rs. 9,00,000 under Section 68 in respect of sale proceeds of gifted jewellery - HELD THAT: - The revenue did not dispute receipt by the assessee of gifted jewellery nor the sale of jewellery worth Rs. 9,00,000. The assessee produced documents and received consideration through two account-payee cheques. No finding was recorded by the assessing officer or the Tribunal that the purchaser was non-existent, fake, or that the cheques were inauthentic; enquiries made by the assessing officer related to a different bank account. Section 68 applies only where the assessee offers no explanation as to the nature and source of credit or the explanation is unsatisfactory in the light of material. The Court reiterated that the Assessing Officer's adverse opinion must be formed objectively on the basis of material and not on surmises. Since the assessee's explanation was supported by documentary evidence and not disproved by any material, invoking Section 68 was impermissible and the Tribunal's upholding of the addition was perverse. [Paras 14, 15]

The addition of Rs. 9,00,000 under Section 68 is unsustainable and set aside.

Final Conclusion: The impugned ITAT order dated 23rd April, 2010 is set aside; both substantial questions of law are answered in favour of the assessee and the appeal is allowed.

Addition sustained under Section 68 - initial onus on assessee under Section 68 - entry provider doctrine - remand for further inquiry - no substantial question of law

Addition sustained under Section 68 - initial onus on assessee under Section 68 - entry provider doctrine - remand for further inquiry - Whether the Tribunal was justified in sustaining the addition under Section 68 in respect of unexplained credits for AY 2005-06 and whether the High Court should interfere with that conclusion. - HELD THAT: - The Tribunal, after a prior remand, sustained the Assessing Officer's addition under Section 68 in respect of cash/bank credits for AY 2005-06. The Tribunal noted the assessee's position that he was an entry provider and that only commission should have been assessable, but found that the material placed on record was inadequate: a list of 280 purported investors where 89 denied transactions, many others did not reply, and notices were returned unserved. The Tribunal recorded that, in law, once unexplained credit is shown in the books, the initial onus lies on the assessee to satisfactorily explain the source; in the absence of such explanation or corroborative material, the addition under Section 68 was rightly sustained. The High Court, after considering the remand history, the record of inquiries made, and the appellant's contention (including inability to obtain assistance due to death of an intermediary), concluded there was no basis to interfere with the Tribunal's factual and legal conclusions and that no substantial question of law arose for consideration. [Paras 6, 10, 11, 13, 14]

Tribunal's order sustaining the addition under Section 68 is upheld; the High Court declines to interfere and finds no substantial question of law.

Final Conclusion: The appeal challenging the Tribunal's order for AY 2005-06 is dismissed; the addition under Section 68 sustained by the Tribunal is upheld and no substantial question of law is found.

Sham transaction - commercial expediency - armchair of the businessman - revenue sharing arrangement - acceptance of receipt in assessment under Section 143(3)

Sham transaction - commercial expediency - revenue sharing arrangement - armchair of the businessman - Validity of the addition made by the AO treating the collaboration agreement as a sham and disallowing the revenue share paid to the collaborator. - HELD THAT: - The Tribunal and the CIT(A) found that the collaboration agreement between the assessee and MGF was not a sham but a commercial arrangement under which MGF furnished funds, bank guarantee, technical expertise and brand benefit in consideration of 60% of revenue from sale/transfer of the integrated hotel project. The AO had allowed specific deductions (expenses incurred from funds provided by MGF and a brand fee) and the gross remittance to MGF was accepted by the AO in MGF's own assessment framed under Section 143(3). Applying the principle that the revenue authorities cannot substitute their commercial judgment for that of the parties (cannot sit in the "armchair of the businessman"), the Tribunal held that the addition was not sustainable. Given these findings of fact and the acceptance of the receipt in the hands of MGF, the addition made in the assessee's hands could not be sustained. [Paras 9, 10, 11]

The addition made by the AO treating the collaboration agreement as a sham was deleted; the Tribunal's confirmation of the CIT(A)'s order was upheld.

Final Conclusion: Appeal dismissed: the deletion of the addition by the Tribunal is upheld as no substantial question of law arises; the connected application for condonation of delay in re-filing has become inefficacious and is closed.

Rectification of mistake apparent from the record - error apparent on the face of the record - computation of deemed income under Section 115JB - inapplicability of ICDS adjustments for minimum alternate tax base

Computation of deemed income under Section 115JB - inapplicability of ICDS adjustments for minimum alternate tax base - Addition of ICDS while computing income under Section 115JB was erroneous - HELD THAT: - The Court examined the reassessment order and found that ICDS additions were incorporated while computing the 'deemed income' under Section 115JB. The Court held that there is no provision in law to add ICDS for the purpose of computing deemed income under Section 115JB, and consequently the inclusion of ICDS in the computation was contrary to law. The determination that ICDS could not be added is treated as an error apparent on the face of the record requiring correction, the Court relying on the established principle that a glaring legal or factual mistake apparent from the record may be rectified. [Paras 5]

The addition of ICDS in computing income under Section 115JB is erroneous and must be set aside.

Rectification of mistake apparent from the record - error apparent on the face of the record - Order rejecting rectification was set aside and matter remitted for rectification under the principle permitting correction of mistakes apparent from the record - HELD THAT: - Applying the principle in M.K. Venkatachalam (as cited), the Court recognised that mistakes of law or fact which are glaring and obvious on the face of the assessment record are amenable to rectification. The Court found such a mistake in the reassessment order and, accordingly, set aside that order dated 19.04.2021 and remitted the matter to the assessing authority for rectification consistent with the correct legal position. The Court noted the Respondent's concession that an error had crept in and directed compliance with the corrective order on remand. [Paras 6, 7]

Impugned reassessment order set aside; matter remitted to the assessing authority for rectification in accordance with law.

Final Conclusion: Writ petition allowed; reassessment order for Assessment Year 2018-19 set aside and the matter remitted to the assessing authority for rectification of the ICDS addition in computing deemed income under Section 115JB.

Condonation of delay in filing revised return under Section 139(5) of the Income Tax Act - relief under Section 89 - genuine hardship test - entitlement to exemption cannot be defeated by short delay - duty of tax officers to assist and intimate defects - discipline in filing returns

Condonation of delay in filing revised return under Section 139(5) of the Income Tax Act - relief under Section 89 - genuine hardship test - entitlement to exemption cannot be defeated by short delay - Whether the delay of 37 days in filing the revised return for AY 2022-2023 should be condoned so as to permit the petitioner to claim relief under Section 89. - HELD THAT: - The petitioner had filed the original return within time but omitted to claim the relief available under Section 89 by oversight; he then sought to file a revised return but was 37 days late. The respondent rejected the condonation plea applying the requirement of genuine hardship (noting CBDT Circular para 5(i)), and the respondents emphasised the need for discipline in filing returns. The Court accepted the petitioner's factual explanation that his occupation as a pilot and trainer necessitated extensive travel and absence from home and found that the petitioner indisputably remained entitled to the exemption under Section 89. Balancing the administrative interest in discipline against the substantive right to an available exemption, the Court held that a short delay of 37 days should be condoned in the interest of justice because the claim relates to an entitlement to exemption rather than avoidance of tax liability. The Court further observed that the duty of tax officers includes assisting assessees by pointing out defects when scrutinising returns, and that such supervisory duties mitigate concerns of demoralisation of officer work in the present facts. Applying these considerations, the Court set aside the respondent's order rejecting condonation and allowed the petitioner to file the revised return to claim the Section 89 relief. [Paras 8, 9, 10, 11, 12]

The impugned order dated 19.06.2023 is set aside; the delay of 37 days in filing the revised return is condoned and the petitioner is permitted to file the revised return to claim relief under Section 89 for AY 2022-2023.

Final Conclusion: Writ petition allowed; impugned order set aside and delay of 37 days condoned permitting the petitioner to file the revised return to claim the Section 89 exemption for Assessment Year 2022-2023.

Unexplained investment and taxation under section 69 read with section 115BBE - Proof of gift from relative as a permissible source of funds - Admissibility and consideration of additional evidence in reassessment proceedings in the interest of natural justice - Assessment reopened under section 147 and notice under section 148 - scope of enquiry limited to verification

Unexplained investment and taxation under section 69 read with section 115BBE - Proof of gift from relative as a permissible source of funds - Admissibility and consideration of additional evidence in reassessment proceedings in the interest of natural justice - Whether the sum utilised for acquisition of immovable property constituted unexplained investment taxable under section 69 read with section 115BBE, or was sufficiently established as a gift from a relative so as to negate the addition. - HELD THAT: - The Tribunal reviewed the material placed before the Assessing Officer and the Dispute Resolution Panel including the assessee's bank statements showing receipt of the credited sum in December 2015, the donor's bank statement evidencing corresponding debit instruction, a signed letter of confirmation from the donor, identity documents (including UK passport and PAN) establishing the donor's identity and creditworthiness, evidence of prior substantial investments/disposals by the donor and the joint reading of the affidavit with the assessee's mother's passport to establish relationship. The DRP had directed that the additional evidence filed by the assessee be taken on record and that the AO incorporate findings of the remand report and pass a speaking order. On appraisal of these documents the Tribunal found no infirmity in the evidentiary material relied upon by the assessee and accepted that the source of funds for the investments was the gift from the donor, a relative, received prior to the relevant assessment year. In view of this, the foundational premise for an addition under section 69 did not survive; the AO's earlier conclusion that no bank statement of the donor was produced and relationship not established was not borne out in light of the material on record which the DRP had directed be considered. Consequently, no addition was called for.

Addition under section 69 read with section 115BBE is not sustainable as the source of investment (gift from a relative) was satisfactorily established and the additional evidence accepted; appeal allowed.

Final Conclusion: The Tribunal accepted the additional evidence and evidence of the donor's identity, relationship and creditworthiness, held that the challenged investments were explained as a gift received prior to the assessment year and set aside the addition; the assessee's appeal is allowed for AY 2017-18.

Exemption under Section 54F - treatment of allotment/purchase from a builder as construction for purposes of Sections 54 and 54F - time-limit for acquisition/construction of new residential property for claiming exemption - application of CBDT Circular No. 672 dated 16.12.1993

Exemption under Section 54F - time-limit for acquisition/construction of new residential property for claiming exemption - application of CBDT Circular No. 672 dated 16.12.1993 - treatment of allotment/purchase from a builder as construction for purposes of Sections 54 and 54F - Assessee entitled to exemption under Section 54F for AY 2015-16 in respect of capital gain arising on transfer of residential property. - HELD THAT: - The Assessing Officer rejected the claim on the ground that the new asset was not acquired within two years of transfer of the original asset. The Tribunal found on the record that the entire sale proceeds were invested in the new property from 01.05.2014 to 08.07.2014 and that possession/conveyance formalities relate to acquisition from a builder. Relying on CBDT Circular No. 672 (which extends the principle of treating allotment/transactions under schemes similar to DDA as cases of construction for purposes of Sections 54 and 54F), the Tribunal treated the purchase/allotment from the builder as construction, thereby attracting the three-year period for completion/possession. Since the investment of sale proceeds into the new residential property occurred within the permissible period, the assessee satisfied the temporal requirement for claiming exemption under Section 54F. For these reasons the denial by the AO was set aside and the exemption was allowed. [Paras 5, 6, 7]

Appeal allowed; exemption under Section 54F granted.

Final Conclusion: The Tribunal allowed the appeal for AY 2015-16, holding that the investment in the new residential property from the sale proceeds qualified for exemption under Section 54F by treating the allotment/purchase from the builder as construction pursuant to CBDT Circular No. 672, and accordingly set aside the Assessing Officer's disallowance.

Addition based on client code modification - reliance on investigation wing / DDIT report without independent verification - onus on assessing officer to conduct independent inquiry on information received - treatment of transactions as non-genuine

Addition based on client code modification - reliance on investigation wing / DDIT report without independent verification - onus on assessing officer to conduct independent inquiry on information received - Validity of addition made by AO and confirmed by CIT(A) on the basis that the assessee shifted income by client code modification as per DDIT/Investigation Wing report - HELD THAT: - The Tribunal examined whether the AO was justified in disallowing the loss and adding the alleged shifted income solely on the basis of the Investigation Wing (DDIT) report that indicated client code modification by the broker. The Tribunal noted that the AO had not undertaken any independent verification of the allegation but had merely relied on the DDIT report; the CIT(A) likewise affirmed the addition primarily on the basis of the SEBI/DDIT findings. The Tribunal held that when an assessing officer receives such information, he is duty bound to make independent enquiries and record substantive findings rather than mechanically act on the Investigation Wing's report. The Tribunal observed that the assessee had maintained books and produced transaction documents showing trades executed on recognised stock exchanges, and that the AO had not doubted the large MTM loss in the F&O segment generally, questioning only transactions through one broker based on the DDIT report. Relying on precedents to the effect that additions for alleged shifting of income by client code modification cannot rest solely on an investigation report without further verification, the Tribunal concluded that the authorities below erred in confirming the addition without independent inquiry and consequential findings, and therefore set aside the orders and directed deletion of the addition. [Paras 5, 6]

Addition of Rs. 56,67,177/- sustained by AO and CIT(A) on the basis of the DDIT/SEBI report is set aside for lack of independent verification by the AO; the addition is deleted and the appeal is allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for Assessment Year 2009-10, setting aside the addition made on account of alleged client code modification because the Assessing Officer erred in relying solely on the Investigation Wing/DDIT report without conducting independent verification; the addition of Rs. 56,67,177/- is directed to be deleted.

Condonation of delay - ex-parte dismissal for non-prosecution - principles of natural justice - assessment under section 143(3) - estimation of profits - judicial estimation of income

Condonation of delay - The application for condonation of delay in filing the appeal was allowed and the appeal was admitted for hearing. - HELD THAT: - The assessee filed the appeal 346 days late and explained the delay by lack of awareness of the CIT(A)'s order uploaded on the portal, reliance on an aged practitioner who had ceased practice due to illness, a scooter accident causing medical treatment and bed rest, and subsequent difficulty in engaging counsel. The Tribunal examined the petition for condonation and found these explanations to constitute a justifiable cause for the delay. On that basis the Tribunal exercised its discretion to condone the delay and admit the appeal for hearing. [Paras 1, 2]

Delay of 346 days condoned and appeal admitted for hearing.

Ex-parte dismissal for non-prosecution - principles of natural justice - The ex-parte dismissal of the assessee's appeal by the CIT(A) for non-prosecution was interfered with and the assessee's grievance regarding lack of opportunity was partly upheld. - HELD THAT: - The Tribunal noted that the sole grievance raised related to the CIT(A)'s ex-parte dismissal without giving sufficient opportunity to the assessee. Having condoned the delay and admitted the appeal, the Tribunal proceeded to consider the merits and accepted that the matter warranted reconsideration rather than being left dismissed for non-prosecution. Consequently, the grounds challenging the ex-parte dismissal were allowed to the extent necessary to enable fresh adjudication on the question of income estimation. [Paras 4, 6, 8]

Ex parte dismissal set aside to the extent necessary; grounds partly allowed to enable fresh consideration on merits.

Assessment under section 143(3) - estimation of profits - judicial estimation of income - The Tribunal determined the appropriate percentage for estimation of profit and directed the Assessing Officer to compute income by estimating profit at 4% of purchases put to sale. - HELD THAT: - The Assessing Officer had estimated profit at 5% on purchases put to sale; the Revenue urged an 8% estimate while the assessee relied on precedents seeking 3%. After hearing submissions and perusing the record, the Tribunal exercised its evaluative discretion and concluded that an estimation of profit at 4% was reasonable in the circumstances. The Tribunal therefore modified the estimation adopted by the AO and directed recomputation accordingly. [Paras 3, 6, 7, 8]

Profit estimated at 4% of purchases put to sale; AO directed to recompute income accordingly; appeal partly allowed.

Final Conclusion: Delay in filing the appeal was condoned and the appeal admitted; the ex parte dismissal by the CIT(A) was set aside to the extent necessary and on merits the Tribunal directed the AO to estimate the assessee's profit at 4% of purchases put to sale, resulting in the appeal being partly allowed.

Prospective application of penal provisions - retrospective application of substantive penal provisions - in rem forfeiture - constitutionality of provisions as manifestly arbitrary - precedential effect of the Supreme Court's decision in Union of India v. Ganapati Dealcom Pvt. Ltd. - pendency of a review petition not staying operation of binding precedent

Prospective application of penal provisions - in rem forfeiture - precedential effect of the Supreme Court's decision in Union of India v. Ganapati Dealcom Pvt. Ltd. - pendency of a review petition not staying operation of binding precedent - Validity of the Appellate Tribunal's order setting aside adjudicating orders by applying the Supreme Court's holding that the in rem forfeiture provision under Section 5 of the 2016 Amendment is punitive and applies prospectively only, and whether pendency of a Review Petition alters that position. - HELD THAT: - The High Court applied the binding Supreme Court decision in Union of India v. Ganapati Dealcom Pvt. Ltd., which held that the in rem forfeiture provision in the 2016 Amendment is punitive in nature and cannot be applied retrospectively to transactions prior to the Amendment coming into force. The Tribunal's reliance on that decision in allowing the respondent's appeals and setting aside the Adjudicating Authority's orders was held to be correct. The court rejected the contention that the Department's pending review petition before the Supreme Court warranted interference with the Tribunal's order, noting that mere pendency of a review petition does not displace a binding decision of the Supreme Court nor justify declining to follow it. The court observed that if the Supreme Court were to allow the review, the Department would have the liberty to proceed in accordance with that outcome, but until then the existing precedent governs and the Tribunal's order stands. [Paras 6, 7, 9, 10, 11]

The Tribunal's order is upheld; the appeals are disposed of in accordance with the Supreme Court's precedent that the Section 5 forfeiture provisions of the 2016 Amendment apply prospectively, and pendency of the Department's review petition is not a ground to interfere.

Final Conclusion: The High Court dismissed the appeals by upholding the Appellate Tribunal's application of the Supreme Court's Ganapati Dealcom ratio that the in rem forfeiture provision under the 2016 Amendment is punitive and prospective; liberty was reserved to the Department to act if the pending Review Petition succeeds.

Detention waiver certificate - Detention of imported cargo pending investigation and removal to customs warehouse under Section 49 of the Customs Act - Detention certificate criteria in Public Notice No.111 of 1985 - Carrier liability for container detention under Regulation 10(1)(l) of the Sea Cargo Manifest and Transhipment Regulations, 2018 - Importer's duty of accuracy under Section 46(4A) of the Customs Act - Board circulars and instructions on destuffing and avoidance of long detention

Detention waiver certificate - Detention of imported cargo pending investigation and removal to customs warehouse under Section 49 of the Customs Act - Detention certificate criteria in Public Notice No.111 of 1985 - Carrier liability for container detention under Regulation 10(1)(l) of the Sea Cargo Manifest and Transhipment Regulations, 2018 - Importer's duty of accuracy under Section 46(4A) of the Customs Act - Board circulars and instructions on destuffing and avoidance of long detention - Respondent No. 2 was not justified in refusing to issue a detention waiver certificate in the facts of this case. - HELD THAT: - The Court examined the criteria for detention/detention certificates set out in the Public Notice No. 111 of 1985 and the applicable Board circulars and instructions which encourage removal of cargo to a customs warehouse under Section 49 and destuffing to avoid long detention. The respondents relied on Regulation 10(1)(l) of the Sea Cargo Manifest and Transhipment Regulations, 2018 and on Section 46(4A) of the Customs Act to contend that bill of entry entries were incorrect due to a price discrepancy. The petitioner submitted a specific explanation and supporting documents attributing the price difference to export incentives and uploaded clarifications. The respondents did not rebut that explanation. The Court found that, on the material placed before it, the petitioner had furnished a plausible and unrefuted explanation and therefore the reliance on the Regulation and Section 46(4A) to deny a waiver was not appropriate. Further, the respondents failed to respond to repeated requests from the petitioner and did not follow the administrative practice and Board instructions of offering removal to a public warehouse to mitigate detention and demurrage. For these reasons the Court concluded that respondent Nos. 1 & 2 ought to have issued the detention waiver certificate and were not justified in withholding it. [Paras 15, 16, 20, 21, 24]

Respondent Nos. 1 and 2 are directed to issue a detention waiver certificate in respect of the Bill of Entry (old and revised numbers) within four weeks; petitioner entitled to waiver up to the period 13th January 2021.

Final Conclusion: Writ petition disposed: respondents directed to issue detention waiver certificate in respect of the impugned bill of entry within four weeks; no adjudication between petitioner and respondent No.3; no costs.

Provisional release of perishable goods - stay of notification - binding effect of High Court stay on the executive - uniform application of law by Customs - error apparent on the face of the record - review jurisdiction under Order 47 Rule 1 CPC

Provisional release of perishable goods - stay of notification - binding effect of High Court stay on the executive - error apparent on the face of the record - review jurisdiction under Order 47 Rule 1 CPC - Review petition by the revenue against order directing provisional release of imported apples was dismissed. - HELD THAT: - The Court held that the review petitioner did not establish any ground warranting exercise of review jurisdiction under Order 47, Rule 1 CPC. The decisive factual and legal position was that Notification No. 5/2023, relied upon by the department to refuse clearance, had been stayed by the Kerala High Court on 11th July 2023 and that stay continued to operate. A High Court stay is binding on the department and must be applied uniformly; it cannot be treated as binding in one State but not in another. The revenue's contention that a subsequent Kerala High Court decision concerning a different notification (relating to spices) amounted to implied vacatur of the stay on Notification No. 5/2023 was rejected as misconceived. The grounds urged in review were alien to the Court's earlier order and did not disclose any error apparent on the face of the record; reliance on a decision on a different notification did not furnish a basis for review.

Review petition dismissed; no error shown to justify review and the interim stay of the notification continued to bind the department.

Final Conclusion: The review petition filed by the revenue was dismissed: the interim stay of Notification No. 5/2023 by the Kerala High Court continued to operate and was binding on the department, the grounds advanced did not disclose any error apparent on the face of the order, and review jurisdiction under Order 47, Rule 1 CPC was not attracted.

Confiscation - redetermination of assessable value - redemption fine - penalty under section 112(a) - penalty under section 114A - demand of interest on duty - conformity with judicial precedent

Confiscation - redetermination of assessable value - redemption fine - penalty under section 112(a) - conformity with judicial precedent - Validity of the adjudicating authority's order confirming confiscation, re-determining assessable value, imposing redemption fine and imposing penalty under section 112(a). - HELD THAT: - The adjudicating authority held the goods liable for confiscation under sections 111(d) and 111(m), re-determined the assessable value under the Customs Valuation Rules and imposed a redemption fine and a personal penalty under section 112(a). The authority applied the Tribunal's earlier decision in S.S. Impex (Final Order No.FO/A/75563/2014 dated 19.09.2014) which had fixed redemption fine and penalty percentages in similar circumstances. The Appellate Tribunal found that the adjudicating authority followed the judicial pronouncement on the issue and, on that basis, did not discern any infirmity in the impugned order. The Tribunal therefore upheld the findings of confiscation, re-determination of value, and the imposition of redemption fine and penalty under section 112(a).

The order confirming confiscation, re-determination of assessable value, and imposition of redemption fine and penalty under section 112(a) is upheld.

Penalty under section 114A - demand of interest on duty - Revenue's challenge to the adjudicating authority's not imposing penalty under section 114A and not demanding interest from the respondent. - HELD THAT: - The Revenue contended that penalty under section 114A should have been imposed and interest on duty demanded. The Tribunal recorded that the adjudicating authority had imposed penalty under section 112(a) and fixed redemption fine in conformity with precedent. Having considered the record and the impugned order, and noting the authority's reliance on the Tribunal's earlier order in S.S. Impex, the Tribunal found no merit in the Revenue's contentions and declined to interfere with the impugned order on these grounds.

The appeal against non-imposition of penalty under section 114A and non-demand of interest is dismissed; no interference with the impugned order.

Final Conclusion: The Appellate Tribunal dismissed the revenue's appeal and upheld the adjudicating authority's order confirming confiscation, re-determination of assessable value, and imposition of redemption fine and penalty under section 112(a), and declined to direct imposition of penalty under section 114A or demand interest.

Investigation into affairs of a company by the Serious Fraud Investigation Office under Section 212 - Requirement of prior approval for investigating related entities under Section 219 - Key managerial personnel and scope of Section 219(d) - Treatment of SFIO investigation report as a police report under Section 173 CrPC (Section 212(15)) - Power of Special Court to try offences under the Companies Act together with offences under other laws (Section 436(2)) - Permissibility of SFIO investigating offences punishable under the IPC - Further investigation after submission of a report (Section 173(8) CrPC) - Effect of illegality or defect in investigation on cognizance and trial - miscarriage of justice test

Requirement of prior approval for investigating related entities under Section 219 - Key managerial personnel and scope of Section 219(d) - Whether separate prior approval under Section 219 was required for investigation of petitioner no. 1 (a company secretary) and petitioner no. 2 - HELD THAT: - The Court construed Section 219 as dealing with investigation of 'related' bodies corporate and their managerial persons and applied the rule of ejusdem generis to read clause (d) in the context of clauses (a)-(c). It held that once approval under Section 212 has been given to investigate a company, the pre condition of prior approval under Section 219 applies to related companies and their managerial personnel as specified in Section 219, but does not extend to a Key Managerial Personnel of the company for which approval under Section 212 was granted. On the facts, petitioner no. 1, being a Key Managerial Personnel (company secretary) of BPSL, did not require separate approval under Section 219(d). The complaint, moreover, shows that the affairs of petitioner no. 2 were investigated and therefore fall within Section 219; however, absence of prior approval would not automatically invalidate the cognizance taken by the Special Court. [Paras 17, 18, 19, 20, 30]

Petitioner no. 1 did not require separate approval under Section 219; petitioner no. 2's affairs were investigated within Section 219 but lack of prior approval does not ipso facto vitiate cognizance.

Permissibility of SFIO investigating offences punishable under the IPC - Power of Special Court to try offences under the Companies Act together with offences under other laws (Section 436(2)) - Treatment of SFIO investigation report as a police report under Section 173 CrPC (Section 212(15)) - Whether SFIO is barred from investigating offences under the IPC and limited to offences under the Companies Act - HELD THAT: - The Court read Sections 212, 212(15), 212(17), 436(2) of the Companies Act and Part II of the CrPC harmoniously. Section 212(15) treats the SFIO's investigation report as a police report under Section 173 CrPC, and Section 436(2) permits a Special Court trying an offence under the Companies Act to try other offences which the accused may be charged with under the CrPC. Construed together with Section 4 CrPC and Section 438 of the Act, these provisions imply that an SFIO officer filing the report is to be treated as vested with the consequences of an officer in charge of a police station for the purpose of forwarding reports and that the SFIO is not barred from investigating offences punishable under the IPC when they arise from the same transactions under investigation. [Paras 24, 26, 27, 28, 30]

SFIO is not barred from investigating offences under the IPC that arise from the transactions being investigated under the Companies Act.

Further investigation after submission of a report (Section 173(8) CrPC) - Permissibility of supplementary investigation by SFIO - Whether the SFIO can conduct further investigation after submitting its Investigation Report under Section 212(12) - HELD THAT: - The Court relied on Section 173(8) CrPC, which expressly permits further investigation after forwarding a report under Section 173(2), and held that nothing in Section 212(12) of the Companies Act precludes further lawful investigation by the SFIO. The Court also noted the absence of any material on record showing that petitioners were asked to join further investigation after cognizance, but held as a legal proposition that further investigation and supplementary reports are permissible in accordance with Section 173(8). [Paras 5, 29, 30]

SFIO may conduct further investigation and file supplementary reports in accordance with law.

Effect of illegality or defect in investigation on cognizance and trial - miscarriage of justice test - Effect of defective investigation on cognizance and trial - Whether defective investigation or absence of prior approval vitiates cognizance taken by the Special Court - HELD THAT: - Applying settled precedents cited in the judgment, the Court reiterated that illegality or defect in the course of investigation does not automatically affect the competence or jurisdiction of the trial court; cognizance taken by a court on a report is not to be set aside unless the illegality has occasioned a failure or miscarriage of justice. On the facts, since sanction under Section 212(14) was obtained before filing the complaint and cognizance was taken, the absence of prior approval under Section 219(c) in respect of petitioner no. 2 would not ipso facto render the proceedings invalid; petitioner no. 2 may, however, raise at trial any prejudice caused leading to miscarriage of justice. [Paras 20, 21, 30]

Defective investigation or lack of prior approval does not automatically vitiate cognizance; invalidity must have caused a miscarriage of justice to warrant setting aside proceedings.

Final Conclusion: The petition is dismissed. The Court refused to quash the SFIO investigation report, the sanction, complaint or summoning order, holding that petitioner no.1 did not require separate Section 219 approval, petitioner no.2's investigation falls within Section 219 but lack of prior approval does not ipso facto invalidate cognizance, SFIO may investigate offences under the IPC arising from the same transactions, and further lawful investigation by SFIO is permissible.

Interim stay - continuation/extension of interim relief - interlocutory adjudication versus final hearing - interpretation of Articles of Association at interlocutory stage - abeyance of order - preponement of final hearing

Interim stay - continuation/extension of interim relief - abeyance of order - Whether the impugned order dismissing I.A. No. 263 of 2023 seeking extension of the interim directions dated 04.09.2023 should be interfered with. - HELD THAT: - The appeal against the Tribunal's order dated 28.11.2023 dismissing the application for extension of the interim directions was considered in the factual matrix where the earlier order of 04.09.2023 had kept any decision to appoint the COO in abeyance until 12.09.2023 and, later, the Tribunal extended the protective effect only up to 28.11.2023. By the time the appeal was filed the protective period had expired and the respondents had proceeded to appoint the COO; no separate challenge to the conduct of the COO had been filed before this Court. The NCLAT noted that the appellants had an oral request at the time of pronouncement earlier to keep the order in abeyance for a short period (three days was granted) but the appointment occurred after that period expired. Given these circumstances and that the main petition under Sections 241/242 remains pending, the Appellate Tribunal found no ground to interfere with dismissal of the interlocutory application for extension of interim relief, while permitting the appellants to seek expedition of the main petition before the Tribunal. [Paras 16, 17, 18]

Appeal against dismissal of I.A. No. 263/2023 is disposed of without interference with the impugned dismissal; appellants granted liberty to seek preponement of the main petition.

Interpretation of Articles of Association at interlocutory stage - interlocutory adjudication versus final hearing - Whether the Tribunal erred in refraining from interpreting Article 69 of the Articles of Association at the interlocutory stage. - HELD THAT: - The Appellate Tribunal endorsed the Tribunal's approach that detailed interpretation of Article 69 (concerning the meaning of 'both directors' and the voting regime) involves a thorough examination of the Articles of Association and voluminous record, which is more appropriately dealt with at final hearing of the petition under Sections 241/242. At the interlocutory stage, the Tribunal correctly declined to determine the interpretation of Article 69 and to resolve substantive questions that require full hearing and evidence. The Court observed that the Tribunal did not make any irrevocable determination on Article 69 and recorded that final adjudication should follow in the main petition. [Paras 16, 18]

Tribunal rightly refrained from interpreting Article 69 at the interlocutory stage; the question is to be decided at the final hearing of the main petition.

Preponement of final hearing - interlocutory relief versus merits - What remedial course should be available to the appellants in view of the dismissal of the interlocutory application and the impending final hearing date. - HELD THAT: - Given that the main petition under Sections 241/242 is fixed for final hearing on 01.02.2024 and that the Tribunal had indicated in its prior order (para 49 of the impugned order) that the parties should be ready for final hearing, the Appellate Tribunal disposed of the appeal by granting the appellants liberty to move the Tribunal for preponement of the final hearing. The Tribunal directed that any such application for expedition be considered and, if appropriate, the main petition be taken up at an earlier date so that the substantive disputes, including interpretation of the Articles and allegations of oppression/mismanagement, can be decided on merits. [Paras 18]

Appeal disposed with liberty to the appellant to apply to the Tribunal for preponement of the final hearing; the Tribunal to consider and, if necessary, expedite the main petition.

Final Conclusion: The appeal against dismissal of the application for extension of interim stay is disposed of without interference; the NCLAT upheld the Tribunal's refusal to interpret Article 69 at the interlocutory stage and granted the appellants liberty to seek preponement of the main petition so that the substantive issues may be decided at final hearing.

Admission of Section 7 application - limitation - fresh period of limitation arising from written acknowledgement/novation - Letter of Acceptance as a fresh agreement/novation - proof of debt and default as basis for admission

Limitation - fresh period of limitation arising from written acknowledgement/novation - Letter of Acceptance as a fresh agreement/novation - The Section 7 application was not barred by limitation because the Letter of Acceptance dated 24.04.2019 constituted a written acknowledgement/novation giving rise to a fresh period of limitation. - HELD THAT: - The Adjudicating Authority and this Tribunal considered the date of default originally pleaded (31.03.2015) and the Letter of Acceptance dated 24.04.2019 signed by the Financial Creditor and the Corporate Debtor including the appellant. The Letter of Acceptance is an agreement acknowledging the debt and creating a fresh obligation. Applying the principle that a written promise to pay a barred debt constitutes a novation and restarts limitation (as explained in Kotak Mahindra Bank Ltd. v. Kew Precision Parts (P) Ltd.), a fresh period of limitation commenced from 24.04.2019. Consequently the Section 7 application filed on 01.11.2021 was within three years of that fresh cause of action and not time-barred. The Tribunal concurred with the Adjudicating Authority's view that the objection on limitation was without merit. [Paras 10, 11, 12]

Objection to Section 7 petition as barred by limitation is rejected; the petition is within time by reason of the Letter of Acceptance dated 24.04.2019.

Admission of Section 7 application - proof of debt and default as basis for admission - The Adjudicating Authority correctly admitted the Section 7 application on the basis that debt and default were established. - HELD THAT: - The Tribunal found no dispute on the existence of debt and default, noting the acknowledgements by the Corporate Debtor and the Letter of Acceptance. The record showed the Financial Creditor had established the assigned debt and the default, and the appellant had unsuccessfully sought settlement on multiple adjournments. Having held that the application was not time-barred, and with debt and default proved, the admission under Section 7 was held to be without error. [Paras 13, 14]

The admission of the Section 7 application was proper and is upheld.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority's order admitting the Section 7 application is affirmed.

Operational debt - default - admissibility of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - proof of delivery - raising a dispute for the first time in the reply to a Section 9 application - remand for fresh consideration

Proof of delivery - admissibility of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - operational debt - default - Whether the Tribunal was justified in dismissing the Section 9 application solely on the ground that delivery of goods was not proved, without considering the entirety of evidence on record. - HELD THAT: - The Tribunal dismissed the Section 9 application on the narrow ground that lorry details and delivery challans proving physical delivery were not established by the Operational Creditor. The Appellate Tribunal found that the Tribunal's order did not address whether the goods were in fact taken by the Corporate Debtor by its own trucks as contended by the Operational Creditor, nor did it consider other evidence on record (including emails and GST portal entries) which might demonstrate that supplies were effected and an operational debt and default existed. Given these lacunae in evaluation and absence of any discussion on key evidence, the Appellate Tribunal held that the matter required reconsideration by the Tribunal after taking into account the entire evidentiary record and determining whether that evidence suffices to admit or reject the Section 9 application. [Paras 8, 12, 13, 14]

Impugned order set aside and matter remanded to the Tribunal for fresh decision after consideration of the entire evidence as to whether delivery (and hence operational debt and default) is proved.

Raising a dispute for the first time in the reply to a Section 9 application - admissibility of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Whether a dispute raised by the Corporate Debtor for the first time in its reply to the Section 9 application can be entertained without the Tribunal examining the surrounding evidence. - HELD THAT: - The Appellate Tribunal observed that the Corporate Debtor, in its reply, contended that goods were not delivered and therefore denied debt/default. The Tribunal did not examine whether such a contention-raised first in the reply and not in response to the Section 8 notice-was permissible or whether it was substantiated by the record. The Appellate Tribunal concluded that this question requires adjudication by the Tribunal while reassessing the evidence, and therefore remitted the issue for fresh consideration so that the Tribunal may record a finding on whether the dispute, first asserted in the reply, is tenable in light of the evidence. [Paras 7, 12, 13, 14]

Issue remanded to the Tribunal to determine, on the full evidence, whether the dispute raised for the first time in the reply defeats the Section 9 application.

Final Conclusion: Appeal allowed; impugned order set aside and the petition under Section 9 is remitted to the Tribunal for fresh adjudication after considering the entire evidence and recording specific findings as to delivery, existence of operational debt/default, and the effect of a dispute raised first in the reply.

General lien under Section 171 of the Indian Contract Act, 1872 - Possession as prerequisite for exercise of lien/retention - Definition of secured creditor and security interest under the Insolvency and Bankruptcy Code, 2016 - Distribution of liquidation assets under Section 53 of the Insolvency and Bankruptcy Code, 2016 - Finality of liquidator's distribution and closure of liquidation process

General lien under Section 171 of the Indian Contract Act, 1872 - Possession as prerequisite for exercise of lien/retention - Definition of secured creditor and security interest under the Insolvency and Bankruptcy Code, 2016 - Whether the appellant (a port claiming under Section 171 of the Indian Contract Act) was entitled to be treated as a secured creditor for the purpose of distribution under Section 53 of the Code. - HELD THAT: - The Tribunal examined the appellant's reliance on Section 171 which recognizes a general lien in favour of wharfingers for goods bailed to them, and contrasted that right with the Code's concept of a secured creditor founded on a created security interest. The adjudicatory finding was that Section 171 operates only where the claimant is in possession of the goods upon which a lien is asserted; in the present case the goods were not in the appellant's possession (a fact admitted at hearing), and therefore no actual lien under Section 171 could be invoked. Having no possessory lien or other recognized security interest as defined under the Code, the appellant did not qualify as a secured creditor entitled to priority in distribution under Section 53. The Tribunal also noted that the corporate debtor had been sold as a going concern and sale proceeds distributed in terms of Section 53, a state of affairs inconsistent with reversing distributions absent a subsisting security interest. The adjudicatory conclusion that Section 171 did not avail the appellant was therefore upheld. [Paras 4, 5, 6, 7]

Appellant is not entitled to be treated as a secured creditor under the Code on the basis of Section 171 of the Indian Contract Act because it lacked possession and hence an actual lien or security interest.

Distribution of liquidation assets under Section 53 of the Insolvency and Bankruptcy Code, 2016 - Finality of liquidator's distribution and closure of liquidation process - Whether the liquidator's classification of the appellant as an operational creditor and the subsequent distribution/sale could be set aside at the stage when liquidation sale proceeds have been distributed and an application for closure filed. - HELD THAT: - The Tribunal observed that the liquidator had sold the corporate debtor as a going concern and distributed the sale proceeds to stakeholders in accordance with Section 53. The liquidator informed that an application for closure of the liquidation process had been filed, and the adjudicatory authority had recorded that reversal of the completed distribution was not feasible in the circumstances. Given the absence of any recognized security interest in favour of the appellant, and the completed distribution following statutory procedure, there was no error in the Adjudicating Authority's dismissal of the appellant's Section 42 application as misconceived. The appeal therefore raised no merit to disturb the liquidator's classification or the completed distribution. [Paras 3, 4, 8]

The challenge to the liquidator's classification and the request to reverse the completed distribution was dismissed; no interference with the liquidator's actions was warranted.

Final Conclusion: The appeal is dismissed. The Tribunal found that the appellant had no possessory lien under Section 171 and therefore no security interest to qualify as a secured creditor under the Code, and that the liquidator's completed sale and distribution in terms of Section 53 did not require reversal.

Preservation of assets and value of property as a going concern and the duties of the Resolution Professional - Power of Resolution Professional to reject Committee of Creditors' proposal to renew bank guarantees under Section 25(1) - Inclusion of costs incurred in running the business as CIRP costs under Section 15(3) - Relevance of Mega Power Plant (MPP) status and customs duty exemption to going concern valuation

Preservation of assets and value of property as a going concern and the duties of the Resolution Professional - Power of Resolution Professional to reject Committee of Creditors' proposal to renew bank guarantees under Section 25(1) - Inclusion of costs incurred in running the business as CIRP costs under Section 15(3) - Relevance of Mega Power Plant (MPP) status and customs duty exemption to going concern valuation - Whether the Adjudicating Authority was justified in holding that renewal of the customs bank guarantees was not essential for the Corporate Debtor's status as a going concern and that the Resolution Professional could reject the CoC's proposal for renewal. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's conclusion that renewal of the customs bank guarantees would not protect or preserve the assets or support the operations of the Corporate Debtor as a going concern. The court recorded that MPP status is relevant only insofar as it permits exemption from customs duty, but in the CIRP period there were no imports by the Corporate Debtor or its contractor that would attract such exemption. Several units had only partial MPP status and one relevant unit was not operational; therefore no present customs-duty benefit could be claimed. Renewal would have imposed substantial commission and renewal charges on the Corporate Debtor, increasing its financial burden without conferring any positive benefit. The Tribunal relied on the statutory scheme that obliges the Resolution Professional to preserve assets and manage the company as a going concern, and noted that costs incurred in running the business form part of CIRP costs. Applying Section 25(1) (as interpreted in the impugned order), the RP was entitled to reject the CoC proposal to renew pre-CIRP bank guarantees where renewal would not advance preservation of value or the going-concern objective but would merely increase contingent liabilities for no benefit to the corporate debtor. On these facts, there were no substantial grounds to interfere with the Adjudicating Authority's order dismissing the application for renewal. [Paras 7, 9, 11, 12]

The Adjudicating Authority's order was affirmed; the Resolution Professional may reject the CoC proposal to renew the customs bank guarantees as renewal would not protect or preserve the Corporate Debtor as a going concern.

Final Conclusion: Appeal dismissed. The impugned order holding that renewal of customs bank guarantees was not required for preserving the Corporate Debtor as a going concern and that the Resolution Professional could decline renewal under the statutory mandate is affirmed.

Recall of judgment under Rule 11 of the NCLAT Rules, 2016 - fraud vitiating proceedings - amendment of application under Section 7 of the Insolvency and Bankruptcy Code pursuant to remand - proper forum for filing an amendment application after remand

Recall of judgment under Rule 11 of the NCLAT Rules, 2016 - I.A. No. 1178 of 2023 seeking recall of the Tribunal's order dated 16.10.2023 - HELD THAT: - The application for recall was founded on the contention that the order dated 11.01.2022 (allowing I.A. No. 87 of 2022 for amendment) was obtained by fraud, and that consequence required recalling the dismissal dated 16.10.2023. The Tribunal examined the record, the sequence of proceedings (including the Supreme Court's remand and permission to seek amendment) and the fact that the Section 7 application was ultimately admitted by the Adjudicating Authority on 05.06.2023 followed by dismissal of the appeal on merits on 16.10.2023. The Tribunal found no basis to treat the earlier order as vitiated by fraud such as would justify recall under Rule 11; the proper remedy against the impugned orders was by statutory appeal, not by recall. The application was therefore misconceived.

I.A. No. 1178 of 2023 is dismissed; the order dated 16.10.2023 is not recalled.

Amendment of application under Section 7 of the Insolvency and Bankruptcy Code pursuant to remand - proper forum for filing an amendment application after remand - fraud vitiating proceedings - Whether filing I.A. No. 87 of 2022 before the Appellate Tribunal (instead of the Adjudicating Authority) and statements made in the order dated 11.01.2022 amounted to fraud or were impermissible - HELD THAT: - The Supreme Court's order remitted the matter and permitted the Financial Creditor to seek amendment to incorporate acknowledgment in the balance sheets; it did not specify the forum in which the amendment must be filed. At the time the I.A. was filed, proceedings were pending before this Tribunal (after restoration) and no proceedings were pending before the Adjudicating Authority, and a memo filed before the Adjudicating Authority was not a pending application. In these circumstances, filing the I.A. before the Tribunal was not contrary to the Supreme Court's order nor fraudulent. The Tribunal observed that the respondent had an available remedy by way of appeal under the Code if aggrieved by the order dated 11.01.2022 but did not challenge it. The contention that the order was obtained by fraud was rejected.

Filing of I.A. No. 87 of 2022 before the Tribunal was permissible and the allegation of fraud is unsustainable.

Final Conclusion: The recall application is dismissed. The Tribunal upheld the validity of the amendment proceedings initiated after the Supreme Court's remand, found no fraud in the order of 11.01.2022, and recorded that the proper remedy where aggrieved was by statutory appeal rather than recall.

Section 10A bar on initiation of insolvency proceedings - deemed date of default and acceleration notice - rights of debenture holders to initiate proceedings under the IBC - compliance of Debenture Trust Deed for issuance of acceleration notice - default by way of unpaid interest after moratorium period as basis for Section 7

Section 10A bar on initiation of insolvency proceedings - deemed date of default and acceleration notice - Application under Section 7 was not barred by Section 10A. - HELD THAT: - The Tribunal held that where a default continues or further defaults occur after the Section 10A period, an application under Section 7 is maintainable for defaults occurring subsequent to that period. The Section 7 petition here relied on a date of default of 1 June 2021 (following acceleration notices), and the tabular computation annexed to the petition (Exhibit K) showed defaults both within and after the Section 10A period. Applying the principle that only defaults confined to the Section 10A moratorium are barred, but subsequent defaults can be the basis of a Section 7 petition, the Tribunal found the application was not hit by Section 10A and that admission on the basis of defaults after the moratorium was permissible. [Paras 9, 11, 28, 31]

Section 7 application was not barred by Section 10A and is maintainable insofar as it alleges default after the Section 10A period.

Rights of debenture holders to initiate proceedings under the IBC - other remedies available under applicable law - Debenture holders are entitled to initiate proceedings under Section 7 of the Code. - HELD THAT: - The Tribunal construed Clause 9.8 of the Debenture Trust Deed, which reserves to debenture holders (notwithstanding other provisions) the unqualified right to take actions available under applicable law. The clause was read to include remedies generally available to lenders; a proceeding under Section 7 was held to be one such remedy. The Tribunal also took into account that the majority debenture holder (Altico/its assignee) had already initiated Section 7 proceedings, demonstrating unanimity among debenture holders to proceed, reinforcing the conclusion that the financial creditors who filed the petition had a right to initiate Section 7. [Paras 12, 13, 14, 16, 31]

Debenture holders (financial creditors) have the right to initiate Section 7 proceedings.

Compliance of Debenture Trust Deed for issuance of acceleration notice - deemed date of default and acceleration notice - The Facility Acceleration Notices dated 30/31 May 2021 were not issued in accordance with the Debenture Trust Deed. - HELD THAT: - The Debenture Trust Deed required the Debenture Trustee to act upon approved instructions of debenture holders (with written consent provisions in Schedule III requiring specified procedures and threshold). The notices impugned were issued by debenture holders and not by the Debenture Trustee after approved instructions. On that basis the Tribunal concluded that those particular acceleration notices were not in compliance with the Debenture Trust Deed. [Paras 19, 20, 21, 23, 31]

The acceleration notices of 30th/31st May 2021 were not issued in accordance with the Debenture Trust Deed.

Default by way of unpaid interest after moratorium period as basis for Section 7 - deemed date of default and acceleration notice - Even if the impugned acceleration notices are disregarded, defaults in payment of interest after the Section 10A period satisfy the threshold for Section 7 admission. - HELD THAT: - The Tribunal examined the working of defaults annexed as Exhibit K and the Debenture Trust Deed provisions that interest accrues day to day and in calendar quarters. The tabular computation showed unpaid interest amounts after the end of the Section 10A moratorium (for relevant quarters), exceeding the statutory threshold for filing a Section 7 petition. Thus, independent of the defective acceleration notices, there were clear defaults post moratorium sufficient to warrant admission of the petition. [Paras 27, 28, 29, 31]

Defaults in unpaid interest after the Section 10A period constituted a valid basis for admitting the Section 7 application.

Final Conclusion: The admitted Section 7 petition requires no interference: the petition was not barred by Section 10A; debenture holders may initiate Section 7 proceedings; although the specific acceleration notices of 30/31 May 2021 were not issued in accordance with the Debenture Trust Deed, defaults in unpaid interest after the Section 10A period independently supported admission. The appeal is dismissed.

Statutory time limit for filing appeal under the Finance Act, 1994 - condonation of delay - restoration of appeal for adjudication on merits - municipality as local authority under Article 243P of the Constitution - pre deposit condition for preferring appeal before Tribunal - recurring/identical issues and exercise of judicial discretion

Statutory time limit for filing appeal under the Finance Act, 1994 - condonation of delay - municipality as local authority under Article 243P of the Constitution - recurring/identical issues and exercise of judicial discretion - Whether the Tribunal and Commissioner (Appeals) were justified in dismissing the appeal as time barred and whether the High Court could restore the appeal despite the statutory time limit. - HELD THAT: - The Court acknowledged the statutory limitation under Section 85(3A) of the Finance Act, 1994 and that ordinarily there is no discretion to condone delay. However, having regard to the appellant's status as a municipality (a local authority within the meaning of Article 243P), the fact that the adjudicating authority had examined detailed submissions (resulting in part of the demand being dropped), the recurring nature of the legal issues, and the appellant's demonstrated diligence (production of documents and personal hearing), the Court exercised its discretion in this rare case to prevent non suiting the municipal authority on technical grounds. The Court also noted the likelihood that the appellant would have complied with any pre deposit condition before the Tribunal and emphasised that this discretion is exceptional and not to be applied routinely. On these grounds the Court set aside the orders dismissing the appeal as time barred and restored the appeal for adjudication on merits after affording an opportunity of personal hearing to the authorised representative of the appellant municipality. [Paras 5, 6, 7, 8]

The orders of the Tribunal and Commissioner (Appeals) dismissing the appeal as time barred are set aside and the appeal is restored to the file of the Commissioner (Appeals) for disposal on merits after personal hearing.

Restoration of appeal for adjudication on merits - pre deposit condition for preferring appeal before Tribunal - Whether the appeal should be remanded to the Commissioner (Appeals) for decision on merits and directed procedure. - HELD THAT: - The Court directed that the restored appeal be taken up by the Commissioner (Appeals), Siliguri, after affording an opportunity of personal hearing to the authorised representative of the appellant municipality and that an order be passed on merits and in accordance with law. The Court emphasised expeditious disposal and cautioned against unnecessary adjournments, making clear that the present order is not to be treated as a precedent and leaving substantial questions of law open for determination by the appellate authority on merits. [Paras 8, 9, 10]

The appeal is remitted to the Commissioner (Appeals) for adjudication on merits after personal hearing, with directions for expeditious disposal; the judgment is not to be treated as a precedent and substantial questions of law are left open.

Final Conclusion: The appeal is allowed insofar as the orders dismissing the appeal as time barred are set aside; the appeal is restored and remitted to the Commissioner (Appeals) for fresh adjudication on merits after affording personal hearing to the authorised representative of the Bankura Municipality, with a direction for expeditious disposal; this order is exceptional and not to be treated as a precedent.

Exemption to services relating to transmission of electricity - erection, commissioning and installation service - retrospective exemption under section 11C of the Central Excise Act made applicable to service tax - wide amplitude of the expression "relating to"

Exemption to services relating to transmission of electricity - erection, commissioning and installation service - wide amplitude of the expression "relating to" - Whether the appellant's service of erection of transmission towers is covered by the exemptions granted by Notification No. 11/2010-ST dated 27.02.2010 and Notification No. 45/2010-ST dated 20.07.2010 and thus not exigible to service tax for the disputed periods. - HELD THAT: - The Tribunal found it undisputed that the towers erected by the appellant were meant for transmission of electricity and applied its earlier decisions, notably KEC International and Kedar Constructions, which construed the notifications broadly. Notification No. 45/2010-ST (directed under section 11C) relieved taxable services "relating to" transmission up to 26.02.2010 and Notification No. 11/2010-ST exempted services "for transmission of electricity" thereafter. The Tribunal drew from precedents that the phrases "relating to" and "for" have a wide ambit and include activities such as erection/installation of transmission towers because they are rendered in relation to or for transmission of electricity. Applying this settled principle to the facts, the Tribunal concluded that the appellant's erection services fall within the exemption in both notifications and therefore no service tax is payable for the periods in dispute. [Paras 4, 5, 7]

The appellant's erection of transmission towers is covered by the exemptions in Notification No. 45/2010-ST and Notification No. 11/2010-ST, and no service tax is payable for the disputed periods.

Penalties under sections 76, 77 and 78 of the Finance Act - consequential relief on exemption - Whether the penalties imposed on the appellant under sections 76, 77 and 78 of the Finance Act can be sustained once the service tax demands are set aside by reason of exemption. - HELD THAT: - Having held that the disputed services are exempt and that no service tax liability arises, the Tribunal proceeded that penalties predicated on an unsustained tax demand cannot stand. The conclusion that the exemption applies to the underlying tax liability directly negates the basis for imposing the statutory penalties and they therefore cannot be sustained. [Paras 8, 9]

The penalties imposed under sections 76, 77 and 78 of the Finance Act are not sustainable and are set aside.

Final Conclusion: The appeal is allowed: the service tax demands confirmed by the Commissioner for the periods 2004-05 to 2008-09, 2009-10 and 2010-11 are set aside as the erection of transmission towers is exempt under the cited notifications, and the penalties imposed under the Finance Act are consequently quashed.

Reverse Charge Mechanism - Business Auxiliary Service - Taxation of services provided from outside India and received in India - Receipt of service determined by recipient's location - Extended period of limitation - Penalty

Reverse Charge Mechanism - Business Auxiliary Service - Receipt of service determined by recipient's location - Taxability of commission paid to foreign agents under reverse charge as services received in India - HELD THAT: - Appellants engaged overseas commission agents who procured export orders and were paid commission. Although the agents performed services outside India, the benefit of those services accrued to the appellants' business located in India. The Tribunal held that receipt of service is to be viewed in the light of the recipient's location and use in the recipient's business; services that promote the appellant's business (exports of tyres) fall within the category of "Business Auxiliary Service" and, insofar as the recipient and its business are in India, are treated as received in India. Consequently, such services are taxable under the Reverse Charge Mechanism in terms of Section 66A and the Taxation of Service (Provided from Outside India and Received in India) Rules, 2006. [Paras 8]

Commission paid to foreign agents is taxable on reverse charge as Business Auxiliary Service received in India.

Taxation of services provided from outside India and received in India - Receipt of service determined by recipient's location - Applicability of the Taxation of Services rules and statutory amendments from 18.04.2006 - HELD THAT: - The Tribunal noted that the amended provisions and rules (including changes effective from 18.04.2006) make the Reverse Charge Mechanism applicable where services are provided from a country other than India and received by a person in India. Given the impugned periods fall after that date, there is no dispute about applicability of reverse charge; the determinative question was whether the services were received in India. The Tribunal applied the statutory scheme and concluded that, on the facts, the services were received and used in relation to the appellants' business in India and thus covered by the notified rules and Section 66A. [Paras 7, 8]

Amendments and the Taxation of Services rules apply; services in question are covered and taxable under those provisions.

Extended period of limitation - Penalty - Invocability of extended limitation period and sustainment of penalties - HELD THAT: - On the material, the Tribunal found ongoing correspondence and litigation between the parties and that the Department had earlier treated the transactions under a different head. Considering these facts and that the Department did not make out a case for invocation of the extended period, the Tribunal held extended period could not be invoked. Relying on the principle that extended period requires specific grounds (and borrowing from cited precedents), the Tribunal restricted demands to the normal limitation period. In view of the same factual and legal conclusion, the Tribunal set aside the penalties imposed on the appellants. [Paras 10, 11]

Extended period not invocable; demands restricted to normal period and penalties set aside.

Final Conclusion: Appeals partially allowed: commission payable to foreign agents was held taxable on reverse charge as Business Auxiliary Service received in India for the periods in question, but demands were restricted to the normal limitation period and penalties imposed were set aside.

Service tax under reverse charge mechanism - recipient of service - reimbursement not constituting service consideration - banking and other financial services - misclassification of service as Business Auxiliary Services

Service tax under reverse charge mechanism - recipient of service - reimbursement not constituting service consideration - Exporter is not the service recipient of foreign bank charges and therefore not taxable under reverse charge - HELD THAT: - The Tribunal found as an undisputed fact that the foreign bank deducted charges while remitting export proceeds to the exporter's Indian bank and there was no contract or understanding between the exporter and the foreign bank. The dealing was exclusively between the foreign bank and the Indian bank; consequently the Indian bank, not the exporter, must be treated as the service recipient. Amounts recovered by the Indian bank from the exporter were only reimbursements of charges borne by the Indian bank in its transaction with the foreign bank and do not convert those deductions into a service received by the exporter. On these findings the exporter cannot be fastened with liability under the reverse charge mechanism imposed on service recipients, and the demand of service tax in the exporter's hands does not sustain. [Paras 4, 5]

Demand set aside insofar as it charges the exporter under reverse charge; exporter is not the service recipient.

Banking and other financial services - misclassification of service as Business Auxiliary Services - Impugned charges, if taxable, fall within banking and financial services and not under Business Auxiliary Services (BAS); demand framed under BAS is incorrect - HELD THAT: - The Tribunal accepted the appellant's alternative submission that the charges collected by the foreign bank pertain to banking and other financial services. The demand in the case was framed under the head of Business Auxiliary Services, which the Tribunal held to be an incorrect classification for the impugned bank charges. Because the Department proceeded under an incorrect service head, the demand cannot be sustained on that basis either. [Paras 4, 5]

Demand also set aside on the ground of incorrect classification under BAS instead of banking and financial services.

Final Conclusion: The impugned order confirming service tax demand is set aside; appeal allowed.

Classification of service - technical inspection and certification service - requirement of certification for inspection and certification service - works contract service - service tax demand

Technical inspection and certification service - requirement of certification for inspection and certification service - Whether X Ray of pipeline activity qualified as technical inspection and certification service liable to Service Tax - HELD THAT: - The Tribunal found that the definition of inspection and certification service requires not only inspection but also certification. In the present case no certificate was produced on the record. On that basis the X Ray activity alone could not be classified as inspection and certification service and the demand framed under that head was unsustainable. [Paras 4]

X Ray of pipeline activity does not qualify as technical inspection and certification service where no certification is issued; demand under that head is not sustainable.

Classification of service - works contract service - classification of photography like services - Whether the activity of providing X Ray along with X ray films is classifiable as works contract service - HELD THAT: - The Tribunal accepted the appellant's submission that the X Ray service was supplied together with material (X ray films). It treated the activity as analogous to photography services which, when provided with material, have been held to amount to works contract service. Applying that ratio, the Tribunal held the present service to be classifiable as works contract service rather than as a standalone technical inspection service. [Paras 4]

Service of X Ray provided along with material (films) is classifiable as works contract service; demand under inspection and certification head is therefore unsustainable.

Service tax demand - Sustainability of the impugned demand and order - HELD THAT: - Having held that the activity was not taxable as inspection and certification service and was classifiable as works contract service, the Tribunal concluded that the demand raised under the wrong head could not be sustained. The Tribunal therefore set aside the impugned order. [Paras 5]

Impugned demand and order set aside; appeal allowed.

Final Conclusion: The Tribunal held that X Ray of pipeline without issuance of a certificate does not constitute technical inspection and certification service; since the service was rendered with material (X ray films) it is classifiable as works contract service, and consequently the demand raised under inspection and certification service was unsustainable - impugned order set aside and appeal allowed.

Consideration for taxable service - value of taxable service under section 67 - declared service agreeing to tolerate an act - abatement in valuation of restaurant services - limitation and extended period - penalty waiver for an interpretational issue

Consideration for taxable service - value of taxable service under section 67 - abatement in valuation of restaurant services - Appellant liable to pay service tax on service charges collected besides the price of food. - HELD THAT: - The amount labelled as service charge was admittedly collected by the appellant while providing restaurant service and therefore forms part of the consideration for the taxable service under the valuation provision. The appellant's contention that the amount was distributed to staff does not alter that it was a gross amount charged for the service. The adjudicating authorities correctly applied Rule 2C and the TRU circular holding that separation of a portion of the bill as service charge does not exclude it from the value of services rendered. The Tribunal finds no infirmity in confirming the demand in respect of service charges.

Liability to pay service tax on the service charges is confirmed; corresponding demand upheld.

Declared service agreeing to tolerate an act - consideration must flow for declared service - liquidated damages/penalty not consideration - Amounts forfeited as 'no show charges' are not consideration for a declared service under section 66E(e) and are not taxable as such. - HELD THAT: - A declared service under section 66E(e) requires an agreement where consideration is paid for agreeing to refrain from an act, or to tolerate an act or situation. The contract between the parties contemplated supply of accommodation and associated services; forfeiture clauses operate as commercial safeguards or liquidated damages and do not evidence an intention that the amount be paid as consideration for tolerating a situation. There was no separate fee or contract for non-appearance; the consideration paid was for accommodation (on which tax was discharged on advance). Earlier Tribunal decisions on identical facts (Lemon Tree Hotel and South Eastern Coalfields Ltd.) support that retention on cancellation does not convert into a declared service. Applying that reasoning, the adjudicating authority erred in treating no-show charges as taxable declared service.

The finding that 'no show charges' are consideration for a declared service is overturned; no service tax is attracted on the forfeited amounts.

Limitation and extended period - mens rea and suppression for invoking extended period - penalty waiver for an interpretational issue - Extended period of limitation was improperly invoked and penalty is not warranted; major demand set aside except for the normal period portion. - HELD THAT: - Having held that no tax was payable on the majority of the forfeited amounts and that the service-charge issue arose from a bona fide but erroneous belief (with tax discharged where applicable and transactions recorded in books), the Tribunal finds that there was no suppression or mala fide intent warranting invocation of the extended period. Reliance is placed on authority that extended period cannot be invoked where the matter is interpretational. Given the interpretational nature of the dispute, imposition of penalty is not justified. Consequently, the extended-period demands are set aside, leaving only the small demand for the normal period (April 2015 to September 2015) on service charges.

Extended-period demands annulled and penalties waived; only the limited normal-period demand is sustained.

Final Conclusion: Except for a small demand relating to the normal period (April 2015 to September 2015) on service charges, the Tribunal sets aside the impugned demands raised for the period July, 2012 to September, 2015 and waives penalties; the appeal is accordingly partly allowed.

Erection Installation and Commissioning Service - Manpower Recruitment and Supply Agency Service - 75% abatement - double taxation / demand of service tax twice - reverse charge mechanism - taxability of services to SEZ / exemption under SEZ Act - limitation / extended period for service tax (suppression / misdeclaration)

Erection Installation and Commissioning Service - Manpower Recruitment and Supply Agency Service - 75% abatement - Classification of the appellant's scaffolding, erection and dismantling service - HELD THAT: - From the work order and contract terms the appellant's engagement was for supply of scaffolding with erection and dismantling priced by quantum (cubic metre) and not by man-hours or number of personnel. Consequently the service does not fall within manpower recruitment or supply agency service and cannot attract the 75% abatement available under that head. The Tribunal therefore classifies the service as Erection, Installation & Commissioning Service.

Service is classifiable as Erection Installation & Commissioning Service and not as Manpower Recruitment & Supply Agency Service.

Double taxation / demand of service tax twice - Sustainability of service tax demand where the service tax on part of the consideration was discharged by the recipient - HELD THAT: - Although the appellant's service is held to be Erection Installation & Commissioning Service, it is admitted that service tax on the entire service had been discharged (appellant paid on 25% and service recipient on 75%), and the payment made to the Exchequer has not been disturbed. In such circumstances the Department cannot demand service tax again on the same service; once the tax has been collected and received by the Government it cannot be recovered twice. The Tribunal applies settled precedents holding that payment of service tax by one party in respect of a service precludes a second demand on the same service and entitles the claimant to appropriate credit where applicable.

Demand on account of service tax for the same service is not sustainable and is set aside.

Taxability of services to SEZ / exemption under SEZ Act - Whether services provided to Reliance Industries Ltd. (SEZ) Jamnagar are taxable - HELD THAT: - Applying the SEZ legislative scheme and established authority, services provided to a SEZ unit are exempt from service tax. The Tribunal holds that the service provided to Reliance Industries Limited (SEZ) Jamnagar is not taxable and the demand relating to that supply is unsustainable.

Service supplied to the SEZ unit is exempt; the demand is set aside.

Limitation / extended period for service tax (suppression / misdeclaration) - Invocability of extended limitation period for alleged suppression or misdeclaration - HELD THAT: - The show cause notice did not allege specific ingredients such as suppression of fact, misdeclaration, fraud or collusion with intent to evade duty. The appellant was a registered unit filing regular ST-3 returns and discharging tax on 25% of service charges. On these facts the Tribunal finds no material to invoke the extended period and holds the remaining demand covered by the extended period to be time barred.

Extended period cannot be invoked; the remaining demand is time barred and set aside.

Clerical error / reconciliation between ST 3 and Form 26AS - Demand arising from differential value between credit in books/ST 3 return and figure in Form 26AS - HELD THAT: - The discrepancy relied upon by the Department is treated as a clerical/reconciliation error. There is no demonstration of mala fide conduct by the appellant and the demand premised on that differential is not sustainable and is time barred.

Demand based on the difference with Form 26AS is not sustainable and is time barred.

Final Conclusion: The appeals are allowed. The Tribunal holds the appellant's service to be Erection Installation & Commissioning Service (not manpower supply), finds the impugned service tax demands unsustainable because the tax on the service had already been discharged (precluding double recovery), upholds exemption for services to the SEZ unit, and rules that demands framed under the extended period or on clerical reconciliation grounds are time barred.

Suppression of facts - extended period of limitation under the proviso to section 73(1) of the Finance Act, 1994 - willful suppression with intent to evade payment of service tax - burden on Revenue to prove suppression with mens rea - bonafide belief as defence against invocation of extended limitation

Extended period of limitation under the proviso to section 73(1) of the Finance Act, 1994 - suppression of facts - willful suppression with intent to evade payment of service tax - burden on Revenue to prove suppression with mens rea - bonafide belief as defence against invocation of extended limitation - Whether the extended period of limitation under the proviso to section 73(1) could be invoked against the appellant for alleged non-payment of service tax. - HELD THAT: - The Tribunal examined the scope of the proviso to section 73(1) and held that invocation of the extended period requires more than mere non-disclosure or omission. Reliance was placed on the line of Supreme Court decisions beginning with Pushpam Pharmaceutical Co. where the Court construed "suppression of facts" in the company of words like fraud, collusion and wilful misstatement and held that suppression must be deliberate and with an intent to escape payment of duty. Subsequent authorities referred to in the judgment-Anand Nishikawa Company Ltd. , Uniworth Textile Ltd. , Continental Foundation Joint Venture Holding -were held to reinforce that suppression denotes a positive, wilful act to evade tax and that the Revenue bears the burden of proving such mens rea. The Delhi High Court decisions cited (Bharat Hotels Ltd. and Mahanagar Telephone Nigam Ltd. ) were applied to the facts, emphasising that mere omission or failure to declare receipts, or a bona fide belief that a receipt is not taxable, do not amount to willful suppression attracting the extended limitation. Applying these legal principles to the appellant's case, the Tribunal noted that the appellant asserted a bona fide belief that its services were not liable to service tax and that the Commissioner (Appeals) failed to examine whether any suppression was wilful and accompanied by intent to evade payment. In the absence of material establishing deliberate concealment or intent to evade, the proviso to section 73(1) could not be invoked. [Paras 11, 12, 20, 22]

Extended period of limitation under the proviso to section 73(1) could not be invoked in the absence of proved wilful suppression with intent to evade; impugned order is set aside.

Final Conclusion: The Commissioner (Appeals) order confirming invocation of the extended period of limitation is set aside and the appeal is allowed, since the extended limitation could not be invoked without proof of deliberate, wilful suppression with intent to evade service tax; a bona fide belief by the appellant negatives such intent.

Composite works contract - classification as Works Contract Service vs Construction of Residential Complex/Commercial or Industrial Construction Service - taxability prior to 1.6.2007 - taxability of composite contracts after 1.6.2007 - abatement as indicium of composite contract - precedential effect of Larsen & Toubro and Jain Housing (Supreme Court affirmation)

Composite works contract - taxability prior to 1.6.2007 - precedential effect of Larsen & Toubro - Whether service tax could be demanded on composite construction contracts for the period prior to 1.6.2007 under Construction of Residential Complex Service or Commercial/Industrial Construction Service. - HELD THAT: - The Tribunal followed the ratio of the Hon'ble Supreme Court in Larsen & Toubro that composite contracts involving both supply of goods and services could not be subjected to service tax prior to the introduction of Works Contract Service. Applying that principle to the facts, the contracts in question were held to be composite works contracts and therefore demands for service tax for the period prior to 1.6.2007 could not be sustained.

Demand of service tax for composite contracts prior to 1.6.2007 set aside.

Classification as Works Contract Service vs Construction of Residential Complex/Commercial or Industrial Construction Service - taxability of composite contracts after 1.6.2007 - abatement as indicium of composite contract - precedential effect of Real Value Promoters and Jain Housing (Supreme Court affirmation) - Whether, for the disputed period after 1.6.2007, the impugned activities of the appellant (being composite contracts) were properly taxable under Construction of Residential Complex Service or Commercial/Industrial Construction Service instead of Works Contract Service. - HELD THAT: - The Tribunal considered subsequent authority (Real Value Promoters and the Tribunal's decision in Jain Housing, which the Supreme Court affirmed) holding that where the activity is an indivisible composite contract (involving supply of goods/materials and rendering of services), the liability arises under Works Contract Service and not under Construction of Residential Complex Service or Commercial/Industrial Construction Service. The presence of abatement claimed by the department was treated as corroborative of the composite nature of the contracts. Applying these authorities, the Tribunal concluded that demands framed under CICS/CRC for composite contracts, even for periods after 1.6.2007, could not be sustained.

Demand under Construction of Residential Complex Service and Commercial/Industrial Construction Service for composite contracts (post 1.6.2007) set aside.

Final Conclusion: The impugned demands framed under Construction of Residential Complex Service and Commercial or Industrial Construction Service for the disputed periods (April 2006 to September 2010 and October 2010 to September 2011) cannot be sustained because the contracts are composite works contracts; demands prior to 1.6.2007 are impermissible and, following subsequent authorities (including the Supreme Court's affirmation), even the demands after 1.6.2007 must be treated as falling under Works Contract Service. The impugned order is set aside and the appeal is allowed with consequential reliefs, if any.

Exemption notification conditions - Onus of proof for exemption - Acceptance of certificate of intended use issued by apex handloom cooperative societies - Evidence required to deny benefit of exemption - Prohibition on importing extraneous or actual use conditions into taxation notifications - Strict construction of exemption as exception and liberal application once applicability is established

Onus of proof for exemption - Evidence required to deny benefit of exemption - Whether the respondent bore the onus to prove compliance with the conditions in the exemption notification and whether the adjudicating authority validly disbelieved the documentary evidence produced by the respondent. - HELD THAT: - The Tribunal found, and this Court agreed, that the respondent had produced the documentary prerequisites mandated by the notification - sales to the registered apex handloom co-operative societies and payment by cheque from their own bank accounts - together with certificates from those apex bodies stating the yarn was intended for handloom use. The adjudicating authority's contrary conclusion rested on surmise and conjecture about subsequent dealings and on an inability or unwillingness to produce positive evidence controverting the certificates. In a taxation statute context, the Court held that denial of exemption cannot be predicated on mere presumption; where the assessee fulfills the conditions in the notification and the revenue produces no evidence to rebut the certificates and payments, the onus to show non-compliance is not discharged. The Tribunal's factual findings on these points were not shown to be perverse and were thus upheld. [Paras 13, 17, 18]

The respondent satisfied the onus imposed by the notification; the adjudicating authority's disbelief of the documentary proof was unsupported and was set aside.

Exemption notification conditions - Acceptance of certificate of intended use issued by apex handloom cooperative societies - Whether the two conditions in the notification - sale to the specified apex bodies and production of certificate that the yarn was to be used only on handlooms - were fulfilled by the respondent. - HELD THAT: - The Court examined the notification's wording and the factual record: the yarn was purchased by the registered apex handloom co-operative societies (Tantuja and Tantusree), payments were made by account payee cheques drawn on their own accounts, and certificates were produced at the time of clearance stating intended use in handlooms. The Tribunal accepted expert letters and the certificates and found no evidence that the yarn was actually used otherwise. The High Court emphasised that the notification did not require proof of ultimate end-use by each weaver and that the apex bodies were entrusted with distribution. Consequently, the conditions as worded in the notification were met and entitlement to exemption followed. [Paras 15, 16]

All conditions of the exemption notification were satisfied by the respondent; the Tribunal rightly granted the exemption.

Prohibition on importing extraneous or actual use conditions into taxation notifications - Strict construction of exemption as exception and liberal application once applicability is established - Whether the adjudicating authority could read into the notification an obligation on the manufacturer to ensure actual end-use or to treat apex bodies as mere agents/commissioners rather than purchasers. - HELD THAT: - The Court reiterated established principles of construing exemption notifications: while exemptions (being exceptions) are interpreted strictly, once applicability on the wording is established, the exemption must be given full effect. The adjudicating authority impermissibly attempted to add conditions not found in the notification by drawing inferences about downstream distribution and the role of traders. The Court held that equity or speculative inferences have no place in taxation interpretation and that nothing in the notification required the manufacturer to guarantee ultimate actual use by the handloom weaver or to establish that apex bodies were not bona fide purchasers. The Tribunal's refusal to import such extraneous conditions was therefore lawful. [Paras 16, 18, 19]

The adjudicating authority erred in importing extraneous actual-use or agency conditions; the Tribunal correctly refused to read such conditions into the notification.

Final Conclusion: The High Court dismissed the revenue's appeal, holding that the Tribunal correctly found satisfaction of the notification's conditions - sale to registered apex handloom co-operative societies, payment by cheque from their own accounts, and production of certificates of intended use - and correctly declined to import extraneous conditions; the adjudication denying exemption and imposing duty, interest and penalty was set aside.

Restoration of appeal dismissed for non-prosecution - change of cause title on account of corporate merger - inclusion of amortised cost of dies/jigs in transaction value of finished goods - distinction between capital asset (dies/blocks) and consumable inserts - admissibility of cenvat credit where inputs were received and accounted in assessee's premises - remand for verification versus final adjudication on available evidence - counsel's mistake/omission and its effect on relief

Restoration of appeal dismissed for non-prosecution - change of cause title on account of corporate merger - counsel's mistake/omission and its effect on relief - Restoration of the appeal dismissed for non-prosecution and change of cause title consequent to merger - HELD THAT: - The Tribunal allowed the application for restoration and directed change of cause title on the basis of the Registrar of Companies certificate and an affidavit explaining non-receipt of hearing intimation after merger. The Tribunal found that the failure to intimate the change of name/address was a mistake of counsel and the appellant should not be penalised for that omission. The cited authorities relied upon by Revenue were distinguished on facts. Registry was directed to update records and database. [Paras 7]

Appeal restored to its original number and cause title changed to reflect merger; registry to update records.

Inclusion of amortised cost of dies/jigs in transaction value of finished goods - distinction between capital asset (dies/blocks) and consumable inserts - remand for verification versus final adjudication on available evidence - Whether amortised cost of dies/blocks is includable in the transaction value of forgings - HELD THAT: - The Tribunal held that no evidence was placed on record to show that the cost of dies/blocks or inserts was separately recovered from buyers without payment of duty. The Commissioner (Appeals) erred in remanding the matter to add amortised cost without analysing the materials already on record, including the appellant's consistent plea that dies/blocks are capital assets while inserts are consumable and, in many cases, not separately charged. Absent proof of separate consideration received for dies/inserts, their total or amortised cost cannot be added to the transaction value of the forgings. [Paras 14]

Direction to include amortised cost of dies/blocks in assessable value set aside; addition cannot be sustained for lack of evidence of separate consideration.

Admissibility of cenvat credit where inputs were received and accounted in assessee's premises - remand for verification versus final adjudication on available evidence - Whether the cenvat credit availed by the appellant is admissible - HELD THAT: - Records including invoices, transport receipts and material receipt and stock registers establish that the inputs were shipped to and received at the appellant's premises and subsequently cleared to M/s. Southern Steel & Forgings Ltd. The Tribunal found these documents sufficient to accept that the goods were received and utilized in the appellant's factory and that further remand to verify already-filed documents would be unproductive. Consequently, denial of cenvat credit on the departmental allegation of non-receipt was unwarranted. [Paras 15, 16]

Cenvat credit held admissible; impugned order set aside and appeal allowed with consequential relief as per law.

Final Conclusion: The Tribunal restored the appeal and directed change of cause title following the merger; it set aside the remand and the impugned findings, holding that (i) inclusion of amortised cost of dies/blocks in the transaction value is unsustainable for want of evidence of separate consideration and (ii) the cenvat credit claimed is admissible on the documentary record; the appeal is allowed with consequential relief.

Eligibility of CENVAT credit on inputs and capital goods - user test for capital goods - end use certification by Chartered Engineer - inputs versus capital goods distinction - application of exclusion in explanation to definition of inputs - precedential effect of High Court reversal on tribunal larger bench decision

Eligibility of CENVAT credit on inputs and capital goods - user test for capital goods - Creditability of plates classifiable under Chapters 84 and 85 and refractory plates under Chapter 69 as 'capital goods' under Rule 2(a) of the CENVAT Credit Rules, 2004. - HELD THAT: - The Tribunal held that many of the items on which credit was denied are classifiable under Chapters 84 and 85 (and some under Chapter 69) and accordingly fall within the definition of 'capital goods' in Rule 2(a) of the CENVAT Credit Rules, 2004. Applying the user test and the statutory definition, such plates used for fabrication of capital goods qualify as capital goods and therefore the credit availed on them is admissible. The adjudicating authority's blanket denial without considering the classification was erroneous. [Paras 12]

Plates classifiable under Chapters 84 and 85 and refractory plates under Chapter 69 are capital goods and the CENVAT credit availed thereon is admissible.

End use certification by Chartered Engineer - inputs versus capital goods distinction - application of exclusion in explanation to definition of inputs - precedential effect of High Court reversal on tribunal larger bench decision - Whether plates falling under Chapters 72, 73 and 74 used in manufacture or as parts/components of machinery qualify as inputs or capital goods, and whether the CE's certificate and the Notification exclusion justify denial of credit. - HELD THAT: - The Tribunal accepted the Chartered Engineer's certificate as satisfactory evidence of end use showing that the plates were used as components, parts or accessories of kilns, milling machines, coke oven gas plant, pollution control equipment, storage tanks and similar machinery. The adjudicating authority had no valid reason to reject the CE certificate. Further, the Tribunal noted that the Larger Bench decision denying credit where fabricated structures become immovable property has been reversed by the High Court, which held that goods used in fabrication of structures embedded to earth may be treated as inputs for capital goods. The Notification amending explanation to exclude certain construction materials was held inapplicable because the plates in question were not used for foundation, factory construction or support structures of that nature. Applying these considerations, the plates were held to qualify as inputs/capital goods and the denial of credit was unsustainable; accordingly interest and penalty could not be sustained. [Paras 13, 14]

The CE certificate is reliable evidence of end use; plates under Chapters 72, 73 and 74 used as parts/components of capital machinery are eligible as inputs/capital goods, and the Notification exclusion does not apply; demand, interest and penalty are unsustainable.

Final Conclusion: The impugned order denying CENVAT credit on the plates is set aside in full; the appeal is allowed and the demand, interest and penalty confirmed by the Commissioner are quashed.

Expansion of capacity - diversification - interpretation of exemption notification - plain meaning rule in taxation - benefit of exemption notification - para 8(b)(i) of the notification

Expansion of capacity - diversification - para 8(b)(i) of the notification - interpretation of exemption notification - benefit of exemption notification - Respondent entitled to benefit of Notification No. 01/2010-CE dated 06.02.2010 where there was installation of new plant and machinery and expansion by way of diversification (replacement of existing product) satisfying para 8(b)(i). - HELD THAT: - Both the adjudicating authority and the Commissioner (Appeals) examined applicability of Notification No. 01/2010-CE and concluded that the respondent satisfied the conditions for exemption. The Commissioner (Appeals) held that the notification does not restrict expansion to increase in installed capacity of the identical existing product and that para 8(b)(i) contemplates expansion by way of capacity increase of the existing product or diversification from the existing product. The factual findings that new plant and machinery were installed, put to use in manufacture of final products, and that the party was permitted by GM, DIC Jammu to manufacture Ferro Chrome instead of Calcium Carbide (with cessation of the latter) were not disputed by the department. The Commissioner (Appeals) applied the principle that exemption notifications must be interpreted from their plain language and, once a claimant falls within the wording of the notification, the benefit cannot be denied by recourse to an alleged contrary intention; reliance was placed on Tribunal and Supreme Court authorities to support a liberal construction when applicability is established. On these grounds the authorities below were held to have correctly allowed the exemption under the notification.

Impugned order upholding grant of exemption under Notification No. 01/2010-CE sustained; Revenue's appeal dismissed and cross objections disposed of accordingly.

Final Conclusion: The Tribunal found no infirmity in the orders below and upheld the grant of exemption under Notification No. 01/2010-CE dated 06.02.2010 to the respondent where expansion involved installation of new plant and machinery and diversification in production; the Revenue's appeal is dismissed and the respondent's cross objections disposed of.

Manufacture - re-packing and re-labelling - exemption under Notification No. 22/2003 - consistency of departmental view - remand for verification

Manufacture - re-packing and re-labelling - exemption under Notification No. 22/2003 - remand for verification - Whether the question of eligibility for exemption in respect of inputs cleared to 100% EOUs requires fresh adjudication to verify if the appellant's activities of re-packing and re-labelling constitute manufacture. - HELD THAT: - The Tribunal found insufficient clarity on the record as to whether the procured goods were entirely re-packed and re labelled at the appellant's factory and observed that such activities, if established, amount to manufacture and would affect entitlement to exemption under Notification No. 22/2003. Noting earlier favourable findings in the appellant's own case (including the Commissioner (Appeals) Order-in-Appeal No. 10-12/2013 dated 30.01.2013 and the Tribunal's earlier remand in Final Order No. 41075/2018), the Tribunal concluded that the adjudicating authority should verify the appellant's contention and documentary evidence that re-packing and re-labelling were carried out before clearance to 100% EOUs. The matter was not finally decided on merits; instead the Tribunal directed remand for the adjudicating authority to consider the manufacture contention, examine supporting documents, and take note of the Commissioner (Appeals) discussion in Order-in-Appeal 10-12/2013. [Paras 10, 11]

The matter is remanded to the adjudicating authority to verify and decide whether the appellant's re-packing and re-labelling activities amount to manufacture and thereby determine entitlement to the exemption.

Final Conclusion: Impugned order set aside; appeal allowed by way of remand directing the adjudicating authority to verify the appellant's claim that re-packing and re-labelling amounts to manufacture and to consider earlier favourable findings before passing a fresh decision.

Pre-deposit requirement - retrospective curative amendment - legislative competence post-GST - applicability of amendments irrespective of period - stay of recovery on filing of appeal

Pre-deposit requirement - retrospective curative amendment - legislative competence post-GST - Validity of the amendments introducing mandatory pre-deposit to Section 26(6A)-(6C) of the Maharashtra VAT Act and their retrospective application - HELD THAT: - The petitions challenged the constitutional validity of the pre-deposit regime introduced by sub-sections (6A), (6B) and (6C) of Section 26 of the Maharashtra Value Added Tax Act, 2002 as amended w.e.f. 15.04.2017 and clarified by subsequent ordinance/legislation to apply retrospectively. This Court noted the intervening full bench decision of this Court and the subsequent decision of the Supreme Court in The State of Telangana & Ors. v. Tirumala Constructions, which held that amendments of the kind seeking to revive or make applicable pre-deposit requirements for periods after the GST regime commenced lacked legislative competence and therefore could not survive. In view of the Supreme Court's conclusion that the Maharashtra amendment insofar as it required pre-deposit was void for want of competence after the GST enactment, the substantive challenge to the pre-deposit requirement is conclusively resolved by that higher authority and binds this Court.

The pre-deposit requirement introduced by the impugned amendments is settled by the Supreme Court's decision and cannot be sustained; the substantive constitutional challenge is thereby closed in accordance with that precedent.

Stay of recovery on filing of appeal - Interim relief permitting filing of appeals and protection from recovery steps for a limited period - HELD THAT: - Having recorded the finality of the legal position on the pre-deposit issue as determined by the Supreme Court, the Court permitted petitioners who had not yet filed appeals to approach the Appellate Authority/Tribunal. Petitioners were directed to file their appeals along with applications for condonation of delay and for waiver of pre-deposit within four weeks. The Court directed that if such appeals and applications were filed within the stipulated period, the Appellate Authority/Tribunal shall consider them according to law. Pending that, the department was directed not to take further steps in respect of any demand notices for that four week period. The order expressly preserved all contentions of the parties and clarified that the limited protection granted was not an expression on merits.

Petitioners may file appeals with requisite applications within four weeks; the department shall not take further recovery steps for that four week period; all contentions remain open for adjudication by the appellate forums.

Final Conclusion: The Court disposed the petitions in light of the Supreme Court's ruling that the impugned pre-deposit amendments could not be sustained, permitted petitioners four weeks to file appeals with applications for condonation and waiver of pre-deposit, directed temporary protection against recovery for that period, and left all substantive contentions open for determination by the Appellate Authority/Tribunal.