Tax Law : Important Judgments By Supreme Court In 2024

As the year 2024 nears its end, LiveLaw brings to you a summary of important Supreme Court judgments of the year rendered in connection with Tax Law. The same are as follows:

1. Hiring Of Motor Vehicle Or Cranes Is Not 'Sale Of Goods' If Control Over Equipment Is Retained By Contractor, VAT Can't Be Levied: Supreme Court

Case: M/s. K.P. Mozika v Oil and Natural Gas Corporation Ltd. & Ors. [2024 LiveLaw (SC) 26]

In this case, a bench of Justice Abhay S Oka and Justice Rajesh Bindal held that hiring of motor vehicles/cranes from a contractor is a service and would not attract Sales Tax or Value Added Tax assuming the transaction to be sale of goods. The Court clarified that transfer of right to use the goods not only includes possession but also control over goods by the user. If the control over the goods remains with the contractor during the hire period, then it cannot be termed as sale of goods and only service tax can be levied.

2. Tax Return Filed Without Regular Books Of Account Not Invalid, Burden To Call For Curing Of Defects On Assessing Officer: Supreme Court

Case: M/s Mangalam Publications, Kottayam v. Commissioner of Income Tax, Kottayam [2024 LiveLaw (SC) 55]

In this case, a bench of Justices BV Nagarathna and Ujjal Bhuyan held that for the purposes of tax assessment, an assessee's obligation is limited to making a "full and true" disclosure of all "material" or primary facts, and thereafter, the burden shifts on the assessing officer. If a return is defective, it is upto the officer that he intimate the assessee in order that defects may be cured. But if the officer fails to do so, the return cannot be called defective.

3. Customs Act | Claimant Entitled To Interest On Delayed Return Of The 'Duty Drawback' : Supreme Court

Case: Union of India and Ors. v. M/s. B. T. Patil and Sons Belgaum (Construction) Pvt. Ltd. [2024 LiveLaw (SC) 90]

In this case, a Bench of Justices Abhay S Oka and Ujjal Bhuyan observed that if there is a delay in refund of the 'duty drawback' to the claimant under Customs Act, 1962, then the claimant would be entitled to interest in addition to the amount of drawback at the rate of interest which was fixed by the Central Government at the relevant point of time.

4. 'Enemy Property' Not Exempt From Municipal Taxes As It Is Not Vested With Union Govt : Supreme Court

Case: Lucknow Nagar Nigam & Others v. Kohli Brothers Colour Lab. Pvt. Ltd. & Others [2024 LiveLaw (SC) 156]

In this case, a bench comprising Justices BV Nagarathna and Ujjal Bhuyan held that 'enemy property' vested in the possession of Union Government-appointed 'custodian', as per the Enemy Property Act, 1968, cannot be considered a property of the Union Government to claim exemption from municipal taxes under Article 285(1) of the Constitution of India. It was opined that the custodian acts merely as a trustee of the enemy property and not as the owner.

5. TDS Under S.194-H Income Tax Act Won't Apply To Business Transactions Where Assessee Is Not Responsible For Paying Income : Supreme Court

Case: Bharti Cellular Limited v. Assistant Commissioner of Income Tax and Another [2024 LiveLaw (SC) 176]

In this case, a bench of Justices Sanjiv Khanna (now CJI) and SVN Bhatti held that under Section 194-H of the Income Tax Act, 1961, cellular mobile service providers are not liable to deduct tax at source on income/profit component in payments received by their franchisees/distributors from third parties/customers. It was observed that the obligation to deduct tax at source in terms of Section 194-H arises when the legal relationship of principal-agent is established. To answer whether relationship between parties is that of principal-agent, Section 182 of the Contract Act, 1872 is to be applied.

6. Customs Act | Importer's Subsequent Import Bill Be Discarded If Undervalued To Previously Imported Identical Or Similar Goods: Supreme Court

Case: M/s Global Technologies and Research v. Principal Commissioner of Customs, New Delhi (Import) [2024 LiveLaw (SC) 239]

In this case, a bench comprising Justices Abhay S Oka and Pankaj Mithal held that under the Customs Act, Importer's Bill of Entry of subsequent imported goods can be discarded if the subsequent imported goods are undervalued to the previously imported identical or similar goods. It was opined that the transaction value in the bills of entry of the subsequent goods can be discarded if it is found that the importer has earlier brought/imported an identical goods or similar goods at a higher price from the same seller/exporter.

7. Customs Act | S. 71 Inapplicable If Imported Goods Were Stocked Outside Notified Public Bonded Warehouse With Permission : Supreme Court

Case: M/s Bisco Limited v. Commissioner Of Customs And Central Excise [2024 LiveLaw (SC) 257]

In this case, a bench comprising Justices BV Nagarathna and Ujjal Bhuyan held that Section 71 of the Customs Act would be inapplicable to cases where imported goods were stocked outside the notified public bonded warehouse with the permission of the concerned officer.

8. Supreme Court Expunges Gujarat HC's Adverse Observation Against GST Officials

Case: The State of Gujarat & Anr. v. Paresh Nathalal Chauhan [2024 LiveLaw (SC) 295]

In this case, a bench of Justices PS Narasimha and Aravind Kumar expunged observations made by the Gujarat High Court in an interim order that statutory protection of the good faith clause under Section 157 of the Goods and Services Tax Act may not be available to GST officers who conducted a search operation in the instant case.

The Court observed that this clause of good faith is a defence, and if successfully pleaded, it could protect officials against any legal action. Thus, if any official invokes this clause in a legal proceeding against him, then it is for the Court to scrutinise whether the defence is available or not. Such scrutiny, enquiry, or examination is done only in a proceeding against the statutory functionary, the Court stressed.

9. Labelling and Re-Labelling of Containers Qualifies as 'Manufacture' for CENVAT Credit Under Excise Act: Supreme Court

Case: Commissioner Of Central Excise Belapur v. Jindal Drugs Ltd. [2024 LiveLaw (SC) 374]

In this case, a bench of Justices Abhay S Oka and Ujjal Bhuyan held that labelling or re-labelling of containers amounts to 'manufacture' under the Central Excise Act for availing CENVAT credit.

Analyzing the definition of 'manufacture' in section 2(f) of the Central Excise Act, the bench observed that 'manufacture' includes any process incidental or ancillary to the completion of a manufacture product; any process which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act as amounting to manufacture; or any process which in relation to the goods specified in the Third Schedule involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer.

10. Chewing Tobacco Packed In High-Density Polyethylene Bags Are 'Wholesale Package'; Cannot Be Taxed As Retail Product Under Excise Act : Supreme Court

Case: Commissioner of Central Excise, Jaipur -II v. M/s Miraj Products Pvt. Ltd. [2024 LiveLaw (SC) 470]

In this case, a bench of Justices Abhay S Oka and Pankaj Mithal held that pouches of chewing tobacco packed in High-Density Polyethylene (HDPE) bags would be considered a 'wholesale package' and could not be considered for imposing excise duty as per the provisions relating to retail sale price in the Central Excise Act, 1944.

The bench observed that the larger poly packs and the HDPE bags used to distribute them did not meet the criteria for retail sale under Rule 2(q) and therefore were not retail packaging. 

11. State Not Liable To Collect Tax At Source While Giving Contractors Permit To Vend Liquor At Fixed Retail Price : Supreme Court

Case: The Excise Commissioner Karnataka & Anr. v. Mysore Sales International Ltd. & Ors [2024 LiveLaw (SC) 496]

In this case, a bench of Justices BV Nagarathna and Ujjal Bhuyan held that any vendor who buys liquor from state manufacturers without obtaining it through auction and sells in retail at a fixed price would be excluded from the definition of 'buyer' under Section 206C of the Income Tax Act. Such a trade would be exempted from TCS (Tax Collected at Source).

The Court observed that a twin test is to be applied to be excluded from the definition of 'buyer' under S. 206 C of the Income Tax Act as provided under explanation (a)(iii). This includes (a) obtaining the goods without auction and (b) selling the goods at a price fixed by the state government. It was also opined that an auction of the right to sell the liquor (goods in this case) would not be considered as the auction of the liquor itself.

12. Customs Act | Owner Of Goods Liable To Pay Customs Duty Even After Confiscated Goods Are Redeemed Paying Fine : Supreme Court

Case: M/s Navayuga Engineering Co. Ltd. v. Union of India & Anr. [2024 LiveLaw (SC) 504]

In this case, a bench comprising Justices PS Narasimha and Aravind Kumar held that an importer would be liable to pay customs duty in addition to fines and other charges upon redeeming confiscated goods. Further, it held that the importer would also be liable to pay interest on delayed payment of duty upon redeeming the confiscated goods.

13. States' Power To Tax Mining Rights & Mineral-Bearing Lands Not Limited By MMDR Act; Royalty Not Tax: Supreme Court Holds By 8:1

Case: Mineral Area Development Authority v. M/s Steel Authority Of India & Ors [2024 LiveLaw (SC) 512]

In this case, a 9-judge constitution bench held by an 8:1 majority that states have power to levy tax on mineral rights and that the Union law - Mines and Minerals (Development and Regulation) Act 1957 - does not limit such power of states. Conclusions of the majority judgment included the following:

- Royalty is not within the nature of a tax as it is a contractual consideration paid by the lesssee to the lessor under the mining lease. Both royalty and dead rent do not fulfil the characteristics of tax.

- Entry 54 of List 1(Union list) is a regulatory entry dealing with the regulation and development of mines and minerals. Regulatory entries are distinct from taxing entries. Entry 54 of List 1, being a general entry, does not include the power of taxation of the Union.

- The legislative power to tax mineral rights vests with the state legislatures. Parliament does not have the legislative competence o tax mineral rights under Entry 54 of List 1, it being a general entry. Since the power to tax mineral rights is enumerated in Entry 50 of List 2, Parliament cannot use its residuary power with respect to that subject matter.

- Entry 50 of List 2 envisages that the Parliament can impose any limitations on the legislative field of the States through a law relating to mineral development. The MMDR Act, as it stands, does not impose any such limitations.

- There is no specific provision in the MMDR Act imposing limitations on the taxing powers of the State. Royalty under S.9 of the MMDR Act is not in the nature of a tax. Section 9 MMDR Act does not impose any limitation on the power of States to tax minerals. The limitations imposed by S.9 on royalties do not amount to limitations on the State's powers.

- Yield of mineral-bearing land in terms of the quantity of minerals produced or royalty can be used as a measure to tax mineral-bearing lands. Mineral value or mineral produce can be used as a measure to levy tax on mineral-bearing lands.

- The limitations imposed by the Parliament in a law relating to mineral development with respect to Entry 50 of List 2 cannot operate on Entry 49 of List 2 because there is no specific stipulation in the Constitution to that effect.

Justice BV Nagarathna, in her dissenting judgment, held that royalty is in the nature of a tax. Hence, the provisions of the MMDR Act regarding levy of royalty denude the States of their power to levy taxes on minerals.

Detailed reports on the judgment can be read here and here.

14. Vodafone Idea Not Liable To Deduct TDS On Charges Paid To Non-Resident Telecom Operators : Supreme Court

Case: Deputy Director of Income Tax & Anr. v. M/s. Vodafone Idea Ltd. [2024 LiveLaw (SC) 522]

In this case, a bench of Justices BV Nagarathna and N Kotiswar Singh upheld the view that Vodafone Idea is not liable to deduct TDS (tax deducted at source) on interconnectivity usage and bandwidth charges paid to non-resident telecom operators. It was observed that the case was covered by the 2021 decision in Engineering Analysis Centre for Excellence Private Ltd v. The Commissioner of Income Tax and Anr., where it was held that payments made by Indian companies to non-residents for use of software cannot be taxed as 'royalty'.

15. Gujarat Value Added Tax Act | 'Purchase Price' Definition Doesn't Include Value Added Tax : Supreme Court

Case: The State of Gujarat v. M/s. Ambuja Cement Ltd [2024 LiveLaw (SC) 544]

In this case, a bench comprising Justices Abhay S Oka and AG Masih, while dealing with the Gujarat Value Added Tax Act, 2003, observed that value-added tax would not be included in the definition of purchase price. It was held that no value-added tax would be added to purchase price to calculate tax as the same is not mentioned in the categories of tax/duties enumerated under Section 2(18) of GVAT.

In essence, the Court said that the definition of 'purchase price' would only include duties and levies that are levied in the form of two Acts i.e., Central Excise Tariff Act, 1985 and the Customs Act, 1962 and other charges enumerated therein but no other tax.

16. Income Tax Act | Supreme Court Refuses To Give Retrospective Application To 2022 Amendment To S.80DD Regarding 'Jeevan Adhar' Policies

Case: Ravi Agrawal v. Union of India & Another [2024 LiveLaw (SC) 650]

In this case, a bench of Justices BV Nagarathna and N Kotiswar Singh refused to give retrospective operation to the amended Section 80DD of the Income Tax Act which provided an option to the subscriber the Jeevan Aadhar Policy upon attaining the age of 60 years to discontinue the deposit made under the policy and make use of the money accumulated for the benefit of the disabled person for whom the policy was purchased.

The Court opined that if the amendment was given a retrospective operation, it would frustrate the very purpose and objective of the Policy which was designed for the benefit of the disabled person so that in the event of the demise of the caregiver they would not be kept in the financial lurch.

17. 'Technological Impediment Can't Be A Reason To Harass Assessee' : Supreme Court Asks Income Tax Dept, CBDT To Resolve Software Issues

Case: Sunil Bakht v. Asst. Director of Income Tax, CPC and Another [2024 LiveLaw (SC) 751]

In this case pertaining to imposition of surcharge, a bench of Justices PS Narasimha and Sandeep Mehta, while asking the Income Tax Department to upgrade its software, said that technological impediment cannot be a reason to harass an assessee. The Court directed that the Central Board for Direct Taxes should also take necessary steps for rectifying software.

18. GST Input Tax Credit On Construction Costs Can Be Claimed If Building Construction Was Necessary For Renting Out Service : Supreme Court

Case: Chief Commissioner of Central Goods and Service Tax and Ors v. M/s Safari Retreats Private Limited and Ors. [2024 LiveLaw (SC) 774]

In this case, a bench of Justice Abhay Oka and Justice Sanjay Karol held that if construction of a building is essential for supplying services such as renting out, it could fall into the "plant" exception to section 17(5)(d) of CGST Act which provides that Input Tax Credit cannot be claimed for construction material (other than plant or machinery) for immovable property construction.

The Court said that functionality test will have to be applied to the facts of each case to decide whether a building is a plant. It further held that it is not necessary to read down Section 17(5)(d) of the CGST Act so that it does not apply to cases where immovable property is constructed for the purpose of letting out on rent.

19. TOLA Extends Income Tax Reasssment Timelimit; Notices Can Be Issued After 2021 Under Old Regime : Supreme Court

Case: Union of India v. Rajeev Bansal [2024 LiveLaw (SC) 772]

In this batch of cases, a bench comprising former CJI DY Chandrachud and Justices JB Pardiwala, Manoj Misra set aside judgments of High Courts which held that the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions Act) (TOLA) 2021 will not extend the time limit for issuing notices for re-assessment under the Income Tax Act.

In other words, the Court allowed revenue authorities to issue notices for reassessment under the Income Tax Act for the period between 01.04.2021 and 30.06.2021 by granting the benefit of time extensions under TOLA.

20. Banks Can Claim Tax Deductions For Broken Period Interest On HTM Securities If Held As Trading Assets: Supreme Court

Case: Bank of Rajasthan Ltd. v. Commissioner of Income Tax [2024 LiveLaw (SC) 817]

In this case, a bench of Justices Abhay S Oka and Pankaj Mithal held that banks can claim tax deductions for broken period interest on held to maturity (HTM) government securities if they are held as trading asset. It was observed that whether HTM securities are held as investments or stock-in-trade depends on the facts of each case. If a bank holds HTM securities until maturity and values them at cost, they may be considered investments, in which case the broken period interest would not be deductible. If held as trading assets, the deduction would be available.

21. 'Bank Juristic Person, No Mens Rea' : Supreme Court Quashes FIR Against HDFC Bank & Officials For Violating Income Tax Dept Order

Case: HDFC Bank Ltd. v. The State of Bihar & Ors. [2024 LiveLaw (SC) 823]

In this case, a bench comprising Justices BR Gavai and KV Viswanathan quashed a criminal case registered against HDFC Bank Ltd./its officials for violating notice issued by the Income Tax Department to stop the operation of bank accounts, fixed deposits, and lockers of an income tax assessee. The Court was of the view that essential ingredients of the alleged offences (Sections 34, 37, 120B, 201, 206, 217, 406, 409, 420 and 462 of IPC) were not made out to book the appellant-bank.

22. Card Issuing Bank Not Liable To Pay Service Tax On Interchange Fee When It Is Already Paid On MDR : Supreme Court

Case: Commissioner of GST & Central Excise v. Citibank [2024 LiveLaw (SC) 827]

In this case, a bench of Justice Sanjiv Khanna (now CJI), Justice Sanjay Kumar and Justice R Mahadevan ruled that a card issuing bank is not liable to separately pay service tax on the interchange fee when the said tax already stands paid on the Merchant Discount Rate (MDR). “[The] entire amount of the service tax payable on the MDR has been paid to the Government and there is no loss of revenue”, it said.

The decision was rendered pursuant to a reference arising from a split verdict delivered by a two-judge bench (Justices KM Joseph and S Ravindra Bhat) in 2021.

23. DRI Officers Can Issue Show-Cause Notices Under Customs Act : Supreme Court Allows Review Against 'Canon India' Judgment

Case: Commissioner of Customs v. M/s Canon India Private Limited [2024 LiveLaw (SC) 867]

In this case, a bench comprising former CJI DY Chandrachud and Justices JB Pardiwala, Manoj Misra ruled that officers of the Directorate of Revenue Intelligence (DRI) can exercise powers under the Customs Act to issue show-cause notices and recover duties.

The Court made the observation while allowing a review petition filed by Customs Department against the 2021 judgment in Canon India Private Ltd. v. Commissioner of Customs, where it was held that DRI officers do not have powers under the Customs Act.

24. Mobile Towers & Pre-Fabricated Buildings Moveable Properties, Qualify As 'Capital Goods' For CENVAT Credit : Supreme Court

Case: M/s Bharti Airtel Ltd. v. The Commissioner of Central Excise, Pune [2024 LiveLaw (SC) 909]

In this case, a bench comprising Justices BV Nagarathna and N Kotiswar Singh held that mobile service providers (MSPs) could avail the benefit of Central Value Added Tax/CENVAT Credit over excise duties paid on items such as mobile towers and prefabricated buildings.

It observed that since mobile towers and PFBs could be detached and relocated, they qualified as movable properties and accessories in enhancing the functionality of the mobile service antenna attached on top of the tower. Thus, the items qualified as 'capital goods' or 'inputs' which were indispensable to provide effective mobile services (output) and MSPs can get a credit set-off on these items.

25. Subsequent Purchaser Of Imported Vehicle Cannot Be Asked To Pay Customs Duty; Liability On Importer : Supreme Court

Case: Nalin Choksey v. The Commissioner of Customs, Kochi [2024 LiveLaw (SC) 962]

In this case, a bench comprising Justices BV Nagarathna and N Kotiswar Singh ruled that the 'subsequent purchaser' of an imported motor car cannot be called an 'importer' to attract the liability under the Customs Act to pay customs duty on the import of the vehicle.

Other Supreme Court 2024 round-up stories can be read here.