ISSUES:

Whether a corrigendum issued to a Show Cause Notice (SCN) that substantially enlarges the scope and content of the original notice is sustainable in law when issued beyond the prescribed limitation period.Whether omission or incorrect reference to the specific statutory provision in the original demand notice invalidates the proceedings under the Customs Act.Determination of the applicable limitation period for issuing a demand notice under Section 28 of the Customs Act in the context of export duty demands.Whether adjudication can be initiated based on the original notice or only after issuance and receipt of the corrigendum that specifies the relevant statutory provision and details.

RULINGS / HOLDINGS:

The corrigendum issued on 11.04.2013, which "substantially changed the content of original notice" and was received by the appellant on 05.08.2013, is considered part and parcel of the notice; however, issuance of such a corrigendum beyond the one-year limitation period prescribed under Section 28 of the Customs Act renders the demand time-barred and unsustainable in law.Omission or incorrect reference to the specific provision in the original demand notice does not automatically invalidate proceedings if sufficient details regarding the amount of duty demanded, goods involved, and reasons for demand are provided; however, in this case, the original notice lacked reference to any provision, making it vague and not taxable.The limitation period under Section 28 of the Customs Act is strictly one year from the relevant date for issuing demand notices; since the corrigendum was issued and received nearly five years after the relevant export date, the demand is barred by limitation.Adjudication was initiated only after issuance and receipt of the corrigendum; no adjudication had taken place prior, and the original notice did not form a valid basis for initiation, thus the adjudication process commenced outside the limitation period and is invalid.

RATIONALE:

The Court applied the limitation provision under Section 28 of the Customs Act, which restricts the period for raising a demand to one year from the relevant date, emphasizing strict adherence to limitation timelines.Reliance was placed on judicial precedents holding that a corrigendum or revised notice that materially alters the original SCN and is issued beyond the limitation period cannot sustain proceedings or orders.The Court distinguished between cases where a wrong provision is mentioned but the claim is valid and cases where the original notice is vague and lacks any statutory foundation, holding the latter as invalid.The judgment reaffirmed that the date of service of the corrigendum is the effective date for limitation calculation when the corrigendum significantly changes the original notice, thereby preventing belated initiation of proceedings.

ISSUES:

Whether penalty under Section 114A of the Customs Act, 1962 is mandatorily leviable in addition to penalty under Section 112(a) when duty demand is confirmed under Section 28(8) due to willful suppression of facts.Whether the Adjudicating Authority was correct in not imposing penalty under Section 114A despite confirming duty demand and penalty under Section 112(a).

RULINGS / HOLDINGS:

The penalty under Section 114A is a statutory penalty that is "shall also be liable to pay a penalty equal to the duty or interest so determined" and is automatic upon finding willful mis-statement or suppression of facts leading to duty short-levy or non-levy.The Adjudicating Authority erred in not imposing penalty under Section 114A since the duty demand was confirmed under Section 28(8) on account of willful suppression of facts; therefore, penalty under Section 114A is mandatorily leviable and non-discretionary.The appeal by the Revenue succeeds in modifying the impugned order to impose penalty under Section 114A equal to the duty or interest determined.

RATIONALE:

The Court applied the statutory framework of Section 114A of the Customs Act, 1962, which prescribes penalty for short-levy or non-levy of duty arising from collusion or willful mis-statement or suppression of facts, with penalty equal to the duty or interest determined under Section 28(8).The Court relied on Supreme Court precedents including UOI vs Rajasthan Spinning and Weaving Mills and UOI vs Dharmendra Textile Processors, which held that when a statute uses the term "shall be leviable," the penalty is mandatory and the adjudicating authority has no discretion regarding quantum or imposition.The Court emphasized that the purpose of Section 114A penalty is deterrence against blameworthy conduct to prevent dishonest advantage or unjust gain.The Court noted that no penalty under Section 112 or Section 114 shall be levied if penalty under Section 114A is levied, confirming the mutually exclusive nature of these penalties.

ISSUES:

Whether the demand of differential duty on imported spares/components on the basis of Maximum Retail Price (MRP) is sustainable under the Customs Tariff Act and related statutes.Whether the imported packages were required to have Retail Sale Price (RSP)/MRP labels under the Standards of Weights and Measures (Packaged Commodity) Rules, 1977, and the Legal Metrology Act, 2009.Whether the activity of packing and repacking of imported goods amounts to "manufacture" for the purpose of excise and customs duty assessment.Whether the extended period of limitation for demand of duty can be invoked on the ground of suppression, fraud, or misstatement by the importer.

RULINGS / HOLDINGS:

The demand confirmed on the MRP basis in the impugned order is not sustainable because the imported packages were not intended for retail sales to ultimate consumers, but rather for industrial or institutional consumers, and thus the requirement of affixing MRP under Rule 6 of the Standards of Weights & Measures (Packaged Commodity) Rules, 1977, does not apply.The imported goods were exempt from the requirement of RSP/MRP labeling under the Legal Metrology Act, 2009, as the packages were not intended for retail sales, did not contain quantities less than 25 kgs or litres, and were marked "for industrial use only," consistent with the exclusion clause under Rule 34.The activity of packing and repacking post-importation amounts to "manufacture" under excise law, and since excise duty was discharged on the repacked goods, additional customs duty on MRP basis is not sustainable.The extended period of limitation under the proviso to Section 28 of the Customs Act cannot be invoked as there was no "fraud, collusion or any willful misstatement or suppression of facts" by the importer; the Department was aware of the activities and had previously adjudicated related demands.

RATIONALE:

The Court applied Rule 3, Rule 6, Rule 34, and Rule 2(p) of the Standards of Weights & Measures (Packaged Commodity) Rules, 1977, which restrict the requirement of MRP labeling to packages intended for retail sales to ultimate consumers, excluding industrial or institutional consumers.The Legal Metrology Act, 2009, as a consumer protection legislation, was interpreted in line with judicial precedent to apply only to individual consumers or groups of individuals purchasing retail packaged goods, excluding industrial/institutional consumers.Precedents including EWAC Alloys Ltd. v. Union of India and Commissioner of Customs, Chennai Vs M/s. Acer India Pvt. Ltd. were relied upon to support the principle that sales to industrial consumers do not attract MRP-based assessment under customs or excise law.The Court noted that the packages imported contained quantities exceeding 25 kgs, invoking Rule 2A(3) of the Packaged Commodity Rules, which exempts such packages from MRP labeling requirements.The extended limitation period under Section 28 of the Customs Act requires proof of fraud, collusion, willful misstatement, or suppression of facts, which was not established; the importer acted in good faith and had prior adjudications on related issues.The Court recognized that the issue was primarily one of statutory interpretation and that the Revenue's invocation of extended limitation was not justified in the absence of new evidence or suppression.

ISSUES:

Whether Rule 6(b)(ii) of the Valuation Rules, 1975, permitting loading of "notional profit" on excisable goods not sold but used or consumed in manufacture, applies to raw materials supplied free of cost between sister units.Whether the activity carried out by the appellant unit qualifies as job-work under Central Excise law, thereby excluding the applicability of Rule 6(b)(ii).Whether imported raw materials supplied free of cost and used as inputs can be treated as "excisable goods" under Rule 6(b) for valuation purposes.

RULINGS / HOLDINGS:

The Court held that Rule 6(b)(ii) applies where excisable goods are not sold but used or consumed captive in manufacture; however, in the present case, the raw materials supplied free of cost were not excisable goods and thus Rule 6(b) is inapplicable.The appellant failed to establish that its unit was a job worker to the sister unit as per prescribed procedures, and therefore the claim of job work was rejected by the authorities and upheld by the Court.The Court found no evidence that imported raw materials underwent any process to become excisable goods before transfer; hence, such raw materials cannot be treated as excisable goods under Rule 6(b) for valuation, making the loading of notional profit unjustified.Consequently, the impugned order demanding differential duty by invoking Rule 6(b)(ii) and loading notional profit is "clearly unwarranted and hence, unsustainable."

RATIONALE:

The Court applied Section 4 of the Central Excise Act, 1944 read with Rule 6(b)(ii) of the Valuation Rules, 1975, which mandates valuation based on cost of production including profits where excisable goods are not sold but consumed captive.The Court emphasized the statutory requirement that excisable goods must be "used or consumed by the assessee or on his behalf" and that the goods must be excisable to invoke Rule 6(b).The Court relied on the absence of evidence that the raw materials supplied free of cost were excisable goods or that the appellant unit was a job worker under the statutory job work notification and procedures, rejecting the appellant's contention.The Court noted that the imported raw materials did not undergo any process to become excisable goods prior to transfer, and thus the valuation provisions for excisable goods under Rule 6(b) do not apply.No doctrinal shift or dissent was recorded; the decision reaffirms the strict interpretation of valuation rules and the necessity of compliance with job work procedures for exemption from profit loading.

The Supreme Court, with Hon'ble Justices Manoj Misra and Ujjal Bhuyan presiding, after hearing counsel, granted condonation of delay but declined to entertain the Special Leave Petitions due to the "low tax (i.e. below Rupees Fifty Lakhs)." Consequently, the Special Leave Petitions were dismissed. Pending applications, if any, were disposed of.

ISSUES:

Whether the deletion of disallowance of loss on share trading was justified despite failure to prove the genuineness of the transactions under Section 68 of the Income Tax Act, 1961'Whether the Income Tax Appellate Tribunal erred in not applying the principles laid down by the Supreme Court and Calcutta High Court regarding bogus capital loss claims and penny stock transactions'Whether the assessee discharged the initial onus under Section 68 of the Act to prove the source and genuineness of the share trading transactions'Whether the appeal by the revenue is maintainable despite the tax effect being below the prescribed monetary limit, considering the exception for organized tax evasion cases under CBDT Circular No. 5/2024'Whether the principles of natural justice were violated by not furnishing the investigation report or allowing cross-examination of persons whose statements were recorded'Whether reliance on a coordinate bench decision without examining the facts and merits of the present case was legally justified by the tribunal?

RULINGS / HOLDINGS:

The Tribunal was not justified in deleting the disallowance of Rs. 51,33,870/- on account of share trading as the assessee failed to prove the genuineness of the transactions, which were found to be "sham and fabricated" and involved "organized tax evasion".The Tribunal erred in not considering the Supreme Court's decision in Pr. CIT (Cen)-1 Kolkata Vs. NRA Iron and Steel Pvt. Ltd. and the Calcutta High Court's decision in Pr. CIT (Cen)-2, Kolkata Vs. M/s. BST Infratech Ltd., which establish that losses from penny stocks involved in bogus capital loss claims cannot be allowed.The assessee did not discharge the initial onus under Section 68 as the transactions were shown to be part of a circular trading racket involving price rigging and manipulation, with no genuine business activity of the companies involved.The appeal by the revenue is maintainable notwithstanding the tax effect being below the monetary limit, as the case falls under the exception for "organized tax evasion including cases of bogus capital gains/loss through penny stocks and case of accommodation entries" under para 3.1(h) of CBDT Circular No. 5/2024.There was no violation of principles of natural justice as the assessee was apprised of the investigation report's contents, was given opportunity to reply, and there is no vested right to cross-examine persons whose statements do not specifically indict the assessee.The Tribunal committed a serious error by mechanically following a coordinate bench decision without examining the facts and merits of the present case or recording reasons for applicability, especially since the facts were only "substantially similar" and not identical.

RATIONALE:

The Court applied the legal framework under Section 68 of the Income Tax Act, 1961, which casts the onus on the assessee to prove the source and genuineness of unexplained cash credits or share transactions.The Court relied on authoritative precedents including the Supreme Court's ruling in Sumati Dayal v. CIT, which permits testing genuineness on the "principle of preponderance of human probabilities" and the assessment of surrounding facts and circumstances.The Court emphasized the significance of the investigation report and findings of regulatory authorities (SEBI and SAT) that established manipulation and circular trading in penny stocks, which formed the basis for disallowance.The Court interpreted CBDT Circular No. 5/2024's exception clause (para 3.1(h)) as applicable to cases involving organized tax evasion, thus permitting departmental appeals despite low tax effect.The Court rejected the argument of violation of natural justice, citing that procedural fairness does not require formal cross-examination where the assessee is not specifically indicted, consistent with prior rulings including Swati Bajaj and Kishanlal Agarwalla.The Court noted a doctrinal emphasis on independent fact-based adjudication rather than mechanical reliance on coordinate bench decisions, especially where facts are not identical and the prior decision is under challenge or disposed of under a settlement scheme.

ISSUES:

Whether the addition under Section 68 of the Income Tax Act, 1961, on account of unexplained share capital/premium, was rightly deleted despite failure to establish the genuineness of transactions, identity, and creditworthiness of share subscribers.Whether the onus on the assessee to explain and establish the source of funds under Section 68 was properly applied when the assessee failed to discharge it.Whether the deletion of addition was justified despite the receipt of high premium from entities lacking business prospects and ignoring relevant judicial precedents.Whether the assessing officer and appellate authority correctly evaluated the creditworthiness and genuineness of the share subscribers and transactions, and whether the tribunal erred in reversing those findings.Whether the appeal by the revenue is maintainable despite the tax effect being below the monetary threshold prescribed by CBDT circulars, considering exceptions for organised tax evasion.

RULINGS / HOLDINGS:

The tribunal erred in deleting the addition under Section 68 as the assessee failed to establish the "genuineness of the transactions," the "identity and creditworthiness of the share subscribers," and did not satisfactorily respond to summons for verification.The onus is on the assessee to "prove the genuineness of the transaction, the identity of the creditors, and creditworthiness of the investors" to the satisfaction of the assessing officer, which was not discharged in this case.The deletion was improper as the receipt of "high premium from seemingly unprospective entities" without adequate justification was correctly treated as suspicious, consistent with judicial precedents including Principal Commissioner of Income Tax (Central) -1 Vs. NRA Iron and Steel Pvt. Ltd. and PCIT Vs. BST Infratech Ltd.The assessing officer and appellate authority rightly concluded that the share subscriber companies were "mere paper entities" with "no visible business activity and creditworthiness," and the assessee's failure to produce directors for summons justified drawing adverse inference; the tribunal's contrary finding was a serious error.The appeal by the revenue is maintainable despite the tax effect being below the monetary limit because the case involves "organised tax evasion" as per CBDT Circular No. 9 of 2024, thus exempting it from the threshold.

RATIONALE:

The Court applied the legal framework under Section 68 of the Income Tax Act, 1961, which requires the assessee to satisfactorily explain the nature and source of any sum credited in its books, with the assessing officer's opinion formed objectively on the materials on record being critical.Precedents such as Commissioner of Income Tax Vs. P. Mohanakala and Principal Commissioner of Income Tax (Central) -1 Vs. NRA Iron and Steel Pvt. Ltd. were relied upon to emphasize that the "initial onus is on the assessee" to prove "genuineness," "identity," and "creditworthiness" of investors, especially in private placements involving share capital and premium.The doctrine of "source of source" or "origin of origin" was applied to assess whether the share capital and premium were legitimate or a device to route undisclosed money, with the Court affirming that mere incorporation of subscriber companies does not validate transactions without credible proof of business activity and financial capacity.The Court rejected the tribunal's failure to recognize the adverse inference drawn from non-compliance with summons under Section 131 as a valid investigative tool, noting that the assessing officer had analyzed the financials and found the investing companies' returns showed "NIL income" and no business operations.The Court distinguished decisions cited by the assessee where directors responded to summons and adequate evidence was furnished, underscoring the factual differences in the instant case that warranted the addition.The Court upheld the exception to the monetary threshold for filing appeals in cases involving "organised tax evasion," as per CBDT Circular No. 9 of 2024, allowing revenue's appeal to proceed on merits.

ISSUES:

Whether the upward transfer pricing adjustment under section 92CA of the Income Tax Act, 1961, on international transactions pertaining to non-binding investment advisory and support services is justified by including carried interest received by employees in the cost base for computing arm's length price (ALP)?Whether the transfer pricing adjustment under section 92CA on international transactions pertaining to provision of Information Technology enabled Services (ITeS) to associated enterprises is valid, specifically regarding the rejection of certain comparable companies and the exclusion of R Systems International Ltd. due to different financial year ending'Whether addition of refund received towards Goods and Services Tax (GST) without reasons or opportunity to the assessee is valid'Whether principles of natural justice were violated by not granting opportunity of hearing prior to making addition of GST refund to income'Whether interest under section 234A of the Act is rightly levied when the return of income was filed within the prescribed time'Whether the computation of consequential interest under section 234A and total interest amount is correct'Whether initiation of penalty proceedings under section 270A of the Act is justified?

RULINGS / HOLDINGS:

The transfer pricing adjustment of Rs. 19,80,000 by including carried interest received by employees in the cost base for provision of non-binding investment advisory services is not sustained, as the assessee was compensated on a cost-plus basis and the margin remains at 22% even after adjustment; therefore, the adjustment lacks basis.The issue of exclusion of R Systems International Ltd. as comparable due to different financial year ending is remanded to the Transfer Pricing Officer (TPO) for de novo examination upon submission of extrapolated financial data, as a company cannot be rejected solely on different financial year ending if results can be reasonably extrapolated; other grounds relating to comparables are not pressed.The addition of Rs. 33,35,64,406 relating to GST refund made without reasons or opportunity to the assessee is allowed for statistical purposes, with direction to the Assessing Officer (AO) to decide the pending rectification application in accordance with law.The failure to provide opportunity of hearing before making the addition of GST refund violates principles of natural justice; ground allowed for statistical purposes.The levy of interest under section 234A is not adjudicated on merits but the AO is directed to verify timely filing of return and levy interest only if delay is established; ground allowed for statistical purposes.The computation of consequential interest and total interest is consequential to other findings and requires no separate adjudication.The initiation of penalty proceedings under section 270A is premature and is dismissed.

RATIONALE:

The Court applied the transfer pricing provisions under sections 92CA and related sections of the Income Tax Act, 1961, emphasizing that where the tested party is compensated on a cost-plus basis, inclusion of employee incentives not contractually borne by the tested party in the cost base must reflect in both cost and revenue to maintain the arm's length margin; unilateral addition without adjusting revenue is not justified.The Court relied on precedent that a comparable company cannot be excluded solely on the basis of different financial year ending provided that financial results can be reasonably extrapolated, referencing the decision that functional comparability is paramount and different accounting periods are not a bar if data can be adjusted accordingly.The Court recognized procedural fairness principles, holding that additions without reasons or opportunity to be heard violate natural justice, and that pending rectification applications must be disposed of by the AO in accordance with law.The Court directed verification of facts regarding timely filing of return before levying interest under section 234A, underscoring the statutory requirement that interest is levied only for delay in furnishing return.The dismissal of penalty proceedings as premature reflects the Court's approach to avoid adjudicating penalty issues before final determination of substantive tax liability.

ISSUES:

Whether the adjustment of Rs. 6,00,501/- under section 143(1)(a) of the Income Tax Act, 1961 was valid despite the non-issuance of statutory intimation or notice prior to making the adjustment.Whether a retired employee of a Public Sector Undertaking (PSU) is entitled to claim full exemption on leave encashment under section 10(10AA) beyond the notified limit of Rs. 3,00,000/-.

RULINGS / HOLDINGS:

The adjustment made under section 143(1)(a) without issuance of intimation as mandated by the first proviso to section 143(1)(a) is "procedurally defective and legally unsustainable," and therefore cannot be sustained in law.The exemption limit of Rs. 3,00,000/- under section 10(10AA)(ii), as prescribed by the Central Government vide Notification No. SO 588(E) dated 31.05.2002, applies to employees of Public Sector Undertakings, and such employees do not qualify as "Government employees" under section 10(10AA)(i); hence, the excess exemption claimed beyond Rs. 3,00,000/- was rightly disallowed by the authorities.Since the adjustment under section 143(1)(a) is invalid on procedural grounds, the Tribunal refrained from adjudicating the merits of the exemption claim under section 10(10AA).

RATIONALE:

The Tribunal applied the statutory framework of section 143(1)(a) of the Income Tax Act, 1961, which mandates that "no adjustment shall be made unless an intimation is given to the assessee either in writing or in electronic mode," and that any response from the assessee must be considered before making adjustments.The Tribunal relied on a coordinate bench decision which held that failure to provide such intimation before adjustment constitutes a violation of the prescribed procedure and principles of natural justice.Regarding the exemption under section 10(10AA), the Tribunal followed the precedent that employees of Public Sector Undertakings do not acquire the status of Central or State Government employees for the purpose of exemption under section 10(10AA)(i), as per the judgment of the Delhi High Court in Kamal Kumar Kalia v. Union of India.The Tribunal noted that the exemption limit of Rs. 3,00,000/- under section 10(10AA)(ii) is prescribed by a valid Central Government notification in force during the relevant assessment year.The Tribunal's decision represents no doctrinal shift but reinforces adherence to procedural safeguards and established legal interpretations regarding exemption eligibility.

ISSUES:

Whether a compounding application can be entertained after the adjudicating authority has passed an order imposing penalty under Section 13 of the Foreign Exchange Management Act, 1999 (FEMA).Whether the appellant can file a compounding application post adjudication when multiple contraventions are involved and different authorities have jurisdiction over compounding and appeals.Interpretation of the scope and timing of compounding under Section 15 of FEMA and the Foreign Exchange (Compounding Proceedings) Rules, 2000.The effect of filing or not filing an appeal under Section 17 or 19 of FEMA on the entitlement to compound contraventions.

RULINGS / HOLDINGS:

The court held that a compounding application cannot be entertained after the adjudication process under Section 13 of the Act has been completed, as the compounding mechanism is intended to be exercised prior to or during the pendency of proceedings, not post adjudication. The words "initiated" and "continued" in Section 15(2) of the Act emphasize this timing.The contention that a compounding application can only be made after adjudication to identify the appropriate compounding authority was rejected, especially since the appellant had filed a first compounding application prior to adjudication which was returned for lack of clarity.The court clarified that the admission of guilt, which is the sine qua non for compounding, is redundant once a person has been adjudicated guilty; therefore, compounding post adjudication defeats the purpose of the compounding scheme.Filing no appeal under Section 17 or 19 does not automatically entitle a person to compound contraventions after adjudication; the compounding application must be made while the case is pending before the adjudicating authority.The second compounding application filed after the adjudication order was rightly rejected by the compounding authority, and the dismissal of the writ petition challenging this rejection was upheld.

RATIONALE:

The court applied the statutory framework of FEMA, particularly Sections 13, 14, 15, 16, 17, and 19, along with the Foreign Exchange (Compounding Proceedings) Rules, 2000 (Rules 3, 4, 5, 6, 7, 11), and relevant master circulars (FED Master Direction No. 4 of 2015-2016).The interpretation emphasized that compounding is a voluntary admission of contravention made prior to adjudication to avoid protracted litigation and penalty enforcement, consistent with the purpose of the Act to facilitate orderly foreign exchange management and efficient penalty collection.The court noted that once adjudication is complete and penalty imposed, the compounding process cannot be invoked as the admission of guilt is implicit in the adjudication finding; thus, compounding post adjudication would disrupt the statutory scheme and timelines.The decision relied upon precedent from the Supreme Court relating to compounding under other statutes to reinforce that compounding is meant to prevent needless litigation and delay in penalty recovery.The court rejected the appellant's argument that multiple contraventions and different authorities for compounding and appeals justify post-adjudication compounding, noting that the appellant had opportunity to clarify and file the compounding application earlier.The court underscored that provisions of the Act, Rules, and Master Circular must be read conjunctively and not in isolation to preserve the integrity and purpose of the compounding mechanism.

ISSUES:

Whether elevators and conveyors used in rice mill machinery are classifiable under Chapter Heading 8437 or under Chapter Heading 8428 of the Central Excise Tariff Act, 1985.Whether parboiling and drying plants and their parts are classifiable under Chapter Heading 8437 or Chapter Heading 8419 of the Central Excise Tariff Act, 1985.Whether the departmental Circular No. 924/14/2010-CX dated 19.05.2010 is binding on the department and applicable for classification and duty liability during the relevant period.Whether the extended period of limitation under the Central Excise Act can be invoked in absence of fraud, willful mis-statement, or suppression of facts.Whether a combined show cause notice issued for both normal and extended period is sustainable if the extended period invocation is held unsustainable.

RULINGS / HOLDINGS:

The classification of elevators and conveyors falls under Chapter Heading 8437 of the Central Excise Tariff Act, 1985, which is chargeable to nil rate of duty during the relevant period, as the issue is "no more res integra" and has been upheld by the Hon'ble Apex Court.Parboiling and drying plants are classifiable under Chapter Heading 8437 of the Central Excise Tariff Act, 1985 for the period prior to 15.05.2014, as the departmental Circular dated 19.05.2010 was binding and the demand for duty cannot be confirmed for that period.The departmental Circular No. 924/14/2010-CX dated 19.05.2010 is binding on departmental officers and must be given effect irrespective of subsequent legal positions, particularly when it is beneficial to the assessee.The extended period of limitation under the Central Excise Act cannot be invoked in the absence of fraud, willful mis-statement, or suppression of facts, and the department failed to prove such elements in the present case.When a combined show cause notice is issued for both normal and extended periods and the extended period is held unsustainable, the entire show cause notice is liable to be quashed.

RATIONALE:

The Court applied the statutory provisions under the Central Excise Act, 1944, including Sections 11A(4), 11AA, 11AB, and 11AC, read with Rule 25 of the Central Excise Rules, 2002.Precedents from the Tribunal and the Hon'ble Supreme Court were extensively relied upon, confirming the classification of elevators and conveyors under Chapter Heading 8437 and rejecting classification under Chapter Heading 8428.The Tribunal's Division Bench decision in Jyoti Sales Corporation, supported by subsequent affirmations by the Supreme Court and other Benches, established that departmental circulars are binding on the department and must be followed during their operative period.The Court noted that the Larger Bench's decision on classification under Chapter Heading 8419 does not override the binding nature of the departmental Circular dated 19.05.2010 for the period it was in force.The invocation of extended limitation period requires proof of fraud, willful mis-statement, or suppression of facts, which was absent; conflicting judicial views necessitated a Larger Bench, negating the element of suppression.Binding precedents from various High Courts and the Supreme Court were cited to affirm that beneficial circulars apply retrospectively, while oppressive circulars apply prospectively.The Court followed the principle that the Revenue is precluded from challenging the correctness or binding nature of departmental circulars during their operative period, even if inconsistent with statutory provisions.

ISSUES:

Whether CENVAT credit can be denied on the ground that the service provider did not remit the Service Tax collected from the service recipient.Whether the absence of the service provider's ST-3 Return is a valid basis for denial of CENVAT credit to the recipient.Whether the services were actually rendered by the service provider, or if the transactions were only "paper transactions."Whether the demand for reversal of CENVAT credit is barred by limitation.Whether penalties imposed on employees and directors are justified when no case of wrongful availment of credit is made out against them.

RULINGS / HOLDINGS:

The denial of CENVAT credit on the ground that the service provider has not paid duty is not sustainable; "Credit cannot be denied at the service recipient's end, alleging that no service has been provided," especially when the service tax has been collected and remitted by the provider.Non-providing of the ST-3 Return by the service provider cannot be the deciding factor for denial of credit where the invoices are proper and the service recipient has accounted for payments through banking channels.The evidence, including agreement, invoices, ledger entries, and proof of payment through banking channels, confirms that services were rendered and accounted for, negating the allegation of paper transactions.The demand for reversal of CENVAT credit is barred by the normal period of limitation since the credit was taken in March 2011 and the Show Cause Notice was issued more than four years later, in July 2015.Penalties imposed on employees and directors are not sustainable when no case is made out against them for wrongful availment of credit.

RATIONALE:

The court applied the provisions of the CENVAT Credit Rules, 2004, particularly Rule 9 regarding proper documents for credit and Rule 9(3) concerning reasonable steps by the recipient.Precedents relied upon include decisions holding that denial of credit cannot be based solely on the service provider's non-payment of duty, including CCE Vs. Wilson Engineering Industries Pvt. Ltd., On Quest Merchandising India P. Ltd. Vs. Govt. of NCT of Delhi, and Commissioner of Trade & Taxes Vs. Arise India Ltd.The court emphasized that the department must challenge the service provider's non-payment or non-rendering of service at the provider's end, not at the recipient's end.The investigation lacked thoroughness, notably the failure to verify the service provider's ST-3 Returns and service tax remittance at the jurisdictional office, weakening the Revenue's case.The court noted that statements recorded without adherence to Section 9D of the Central Excise Act, 1944, do not constitute admissible evidence.The limitation period was applied strictly, with the court holding that the delay in issuing the Show Cause Notice and recording statements undermines the demand's validity.A referenced difference of opinion in Royal Sundaram General Insurance Co. Ltd. Vs. CGST was resolved by the Madras High Court quashing the Tribunal's order, thus supporting the present ruling.

ISSUES:

Whether the petitioner is entitled to regular bail under Section 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023 in a case involving allegations under Sections 420, 467, 468, 471, 201 IPC, Section 132 of GST Act, and later added Section 120-B IPC.Whether the petitioner's custodial detention beyond eight months is justified given the stage of trial and evidence presented.What conditions are appropriate to impose upon granting regular bail in a complex economic offence involving alleged misuse of PAN card and large financial transactions.

RULINGS / HOLDINGS:

The court allowed the petition for regular bail, holding that "nothing tangible has been brought forward to indicate the likelihood of the petitioner absconding from the process of justice or interfering with the prosecution evidence."The court observed that the petitioner "has already suffered incarceration for a period of about more than eight months" and that "further detention of the petitioner as an undertrial is not warranted in the facts and circumstances of the case."The court imposed specific conditions on the grant of bail, including that the petitioner "shall not mis-use the liberty granted," "shall not tamper with any evidence," "shall not absent himself on any date before the trial," "shall not commit any offence while on bail," "shall deposit his passport," "shall give his cell-phone number to the Investigating Officer/SHO," and "shall not in any manner try to delay the trial."

RATIONALE:

The court applied the statutory framework of Section 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023, considering the nature of the offences under IPC and GST Act and the stage of the trial, including the number of prosecution witnesses cited and examined.The court refrained from delving into the merits or rival contentions to avoid prejudicing the trial, emphasizing that such issues "shall essentially be ratiocinated upon during the course of trial."The decision reflects the principle that bail is not to be denied solely on the seriousness of allegations if there is no evidence of risk of absconding or tampering with evidence, especially when the accused has already undergone significant pre-trial incarceration.No dissenting or concurring opinions were noted; the judgment follows established bail jurisprudence balancing liberty and trial integrity.

ISSUES:

Whether the authorized courier violated the conditions of the bond and provisions of the Courier Imports and Exports (Electronic Declaration and Processing) Regulation, 2010 (CIER 2010) by filing benami courier Bills of Entry and mis-declaring goods.Whether failure to obtain authorization from consignees or consignors as required under Regulation 12(i) of CIER 2010 constitutes grounds for suspension or revocation of courier registration.Whether the courier's failure to verify the antecedents, correctness of Importer Exporter Code (IEC), and identity of clients as mandated by Regulation 12(iv) amounts to violation justifying revocation.Whether non-compliance with obligations to advise consignors/consignees to comply with customs laws and to bring non-compliance to the notice of customs authorities under Regulation 12(iii) is a violation warranting cancellation.Whether failure to exercise due diligence to ascertain correctness and completeness of information submitted to customs under Regulation 12(v) is a breach of regulatory duties.Whether withholding information relating to assessment and clearance of goods from assessing officers under Regulation 12(vii) is established.Whether the cumulative violations amount to non-abidance with all provisions of the Act and regulations under Regulation 12(x), justifying revocation, forfeiture of security deposit, and imposition of penalty.Whether the appellant's limited role as courier and absence of direct knowledge or intent to commit fraud absolves it from liability under the regulations.

RULINGS / HOLDINGS:

The authorized courier violated Regulations 12(i), 12(iii), 12(iv), 12(v), 12(vii), and 12(x) of CIER 2010 by filing benami courier Bills of Entry without obtaining requisite authorization from consignees or consignors and mis-declaring goods as household articles while actually importing electronic goods.Failure to obtain authorization from consignees or consignors as required under Regulation 12(i) was established by the undisputed fact that letters sent to consignees were returned undelivered or denied receipt of goods, and the appellant admitted no authorization was obtained.The appellant did not verify antecedents, correctness of IEC, or identity of clients as mandated by Regulation 12(iv), evidenced by absence of KYC documents and failure to conduct independent verification.The courier failed to advise consignors or consignees to comply with customs laws and did not bring non-compliance to customs authorities as required under Regulation 12(iii).The appellant did not exercise due diligence under Regulation 12(v) to ascertain correctness and completeness of information submitted to customs, as admitted in statements during investigation.Withholding of information related to assessment and clearance of imported goods under Regulation 12(vii) was established by mis-declaration of goods and use of benami Bills of Entry.The cumulative violations constituted non-abidance with the provisions of the Act and regulations under Regulation 12(x), justifying revocation of courier registration, forfeiture of security deposit, and imposition of penalty.The appellant's limited role and lack of direct knowledge or intent to commit fraud did not absolve it of responsibility, given the principal-agent relationship and regulatory obligations imposed on authorized couriers.

RATIONALE:

The Court applied the regulatory framework under the Courier Imports and Exports (Electronic Declaration and Processing) Regulation, 2010, specifically Regulation 12, which imposes strict obligations on authorized couriers as agents of importers to ensure compliance with customs laws, including obtaining authorization, verifying client identity, exercising due diligence, and full disclosure to customs authorities.The Court distinguished the role of an authorized courier from that of a customs broker, emphasizing that couriers act as agents who pay customs duty on behalf of importers and deliver goods, necessitating knowledge and verification of consignees.The Court relied on factual findings that consignments were mis-declared, consignees were non-existent or denied ordering goods, and the appellant admitted lack of authorization and KYC verification, establishing violations of multiple regulatory provisions.The Court rejected the appellant's contention that it had no control over the contents and limited role, holding that the principal-agent relationship and regulatory duties require couriers to ensure authenticity and compliance.The Court distinguished the present case from precedent where the courier had obtained genuine KYC documents and acted without knowledge of mis-declaration, noting that in the present case, the appellant engaged in willful disregard of regulatory requirements for financial gain.No dissenting or concurring opinions were recorded.

ISSUES:

Whether the time limit of 90 days prescribed under Regulation 2B(1) of the Insolvency and Bankruptcy Board of India (IBBI) (Liquidation Process) Regulations, 2016, for completion of a scheme of compromise or arrangement under Section 230 of the Companies Act, 2013, is mandatory or directory.Whether an extension of time beyond the prescribed 90 days can be granted for completing and operationalising a scheme of arrangement under Section 230 of the Companies Act, 2013, read with Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016.Whether the provisos to Regulation 2B(1), including the 30-day filing restriction and eligibility criteria for scheme proponents, operate as absolute bars to filing or extension.Whether the commercial wisdom of the parties and approval by the Stakeholders Consultation Committee (SCC) should influence the grant of extension for enforcement of the scheme.Whether the liquidator's engagement with certain individuals connected to suspended directors affects the entitlement to extension.Whether the provisions of Section 230 of the Companies Act, 2013, and the Insolvency and Bankruptcy Code, 2016, support revival of the corporate debtor through scheme of arrangement even during liquidation.

RULINGS / HOLDINGS:

Regulation 2B(1) of the IBBI (Liquidation Process) Regulations, 2016, prescribing the 90-day time limit for completion of a scheme of compromise or arrangement under Section 230 of the Companies Act, 2013, is held to be "directory in nature and not mandatory."An extension of time beyond the 90-day period can be granted to complete and operationalise the scheme where it facilitates revival and resolution, subject to judicial discretion and compliance with statutory provisions.The provisos to Regulation 2B(1), including the requirement that the proposal be filed within 30 days from the liquidation commencement date and eligibility restrictions, do not create an absolute bar to extension of time for enforcement of the scheme once approved by requisite creditors.The commercial wisdom of the parties, evidenced by approval of the scheme by the Stakeholders Consultation Committee, must be given due respect and can justify grant of extension to ensure effective implementation of the scheme.The liquidator's prior engagement with individuals connected to suspended directors does not constitute a legal bar to granting extension if the scheme meets the objectives of the Code and is not prejudicial to any party.Section 230 of the Companies Act, 2013, read with the Insolvency and Bankruptcy Code, 2016, contemplates revival of the corporate debtor through compromise or arrangement even during liquidation, and the scheme, once sanctioned, is binding on stakeholders including the liquidator.

RATIONALE:

The Court applied the statutory framework of Section 230 of the Companies Act, 2013, and Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016, interpreting the latter's time limits as directory to avoid frustration of the legislative intent of revival and resolution under the Insolvency and Bankruptcy Code, 2016.Precedents including judgments of the National Company Law Appellate Tribunal and the Supreme Court, notably Swiss Ribbons Pvt. Ltd. v. Union of India and Arun Kumar Jagatramka v. Jindal Steel & Power Ltd., were relied upon to emphasize the beneficial and protective purpose of the Code, prioritizing revival over liquidation.The Court noted that the principal statute (Companies Act, 2013) does not prescribe an absolute upper time limit for completion of the scheme, and subordinate legislation (IBBI Regulations) cannot override this principle rigidly.The Court recognized that the liquidator's duties under the Code include attempting revival by facilitating schemes under Section 230 and that such schemes, once approved and sanctioned, bind all stakeholders, including the liquidator.The Court distinguished between procedural delays and wilful default, holding that procedural delays due to internal approval processes do not preclude extension if the scheme promises value maximization and revival.The Court underscored that the grant of extension is a matter of judicial discretion exercised in light of commercial wisdom, viability of the scheme, and the objective of minimizing litigation and corporate death.The Court rejected the impugned order's rigid application of the 90-day limit and absence of sound reasoning for denying extension, holding that prior extensions granted and the scheme's approval by the SCC warranted a pragmatic and flexible approach.The Court directed that a further 90-day extension be granted subject to compliance with Section 230(5) of the Companies Act, 2013, and related rules, to enable completion of the scheme and promote revival.

ISSUES:

Whether the MRP price can be adopted for valuation of goods sold to institutional customers when purchase order prices exist.Whether Section 4A or Section 4 of the Central Excise Act, 1944 is applicable for valuation when MRP is fixed on packages cleared to institutional customers.Whether the Department discharged the burden of proof to establish that MRP-based valuation reflects the actual transaction value for institutional sales.Whether imposition of interest under Section 11AA and penalty under Sections 11A(4)(e) and 11AC of the Central Excise Act is sustainable when the demand of excise duty itself is unsustainable.

RULINGS / HOLDINGS:

The MRP price cannot be adopted for valuation of goods sold to institutional customers where purchase order prices exist; valuation must be based on transaction value under Section 4 of the Central Excise Act, 1944.Section 4A of the Central Excise Act applies only to goods where the Central Government mandates declaration of retail sale price (RSP) on the package; it is inapplicable to institutional sales exempt from Legal Metrology rules.The Department failed to discharge the burden of proof that MRP value was collected from institutional customers, and no independent verification or market investigation was conducted; therefore, the demand based on MRP valuation is fundamentally flawed and unsustainable.Since the excise duty demand is unsustainable, the imposition of interest under Section 11AA and penalty under Sections 11A(4)(e) and 11AC of the Central Excise Act also fails.

RATIONALE:

The Court applied the statutory framework of Sections 4 and 4A of the Central Excise Act, 1944, distinguishing between valuation based on transaction value and valuation based on MRP/RSP declared on packages as mandated by law.It relied on the binding Board Circular No. 354/81/2000-TRU dated 30.06.2000, which mandates that valuation under Section 4 must be based on commercial consideration charged between unrelated parties, emphasizing the transaction value over notionally determined values.Precedent from the Supreme Court and various Tribunals was considered, including the decision that mere affixation of MRP does not qualify goods for valuation under Section 4A absent a statutory requirement to declare MRP, especially in the context of institutional sales exempt from Legal Metrology rules.The Court noted a doctrinal clarification that institutional customers are intermediaries and not ultimate consumers; thus, sales to them do not constitute retail sales under the Act, negating the applicability of Section 4A.The Court rejected the Department's approach of mixing Section 4A valuation (MRP without abatement) with institutional sales, finding no evidence that higher MRP values were collected from institutional customers, and held that the burden of proof lies on the Department.The Court affirmed the binding nature of Board circulars on departmental officers and emphasized that failure to follow such circulars renders the demand unsustainable.

ISSUES:

Whether penalty under Rule 26 of the Central Excise Rules, 2002 can be imposed on a transporter and related parties without proof that they knew or had reason to believe that the excisable goods transported were liable to confiscation.Whether mere possession or transportation of excisable goods, found outside the manufacturer's premises, suffices to attract penalty under Rule 26.Whether the transporter has a legal obligation under the Central Excise Act or Rules to ensure that goods transported are duty paid.Whether evidence of connivance or knowledge of clandestine removal of goods is necessary to sustain penalty under Rule 26 against transporters and their directors.

RULINGS / HOLDINGS:

The Court held that penalty under Rule 26 can be imposed only if the person "knows or has reason to believe" that the excisable goods are liable to confiscation; mere transportation without such knowledge is insufficient to attract penalty.It was found that no evidence established that the appellants had knowledge of the non-duty paid nature of the goods or that they were liable for confiscation; therefore, penalties imposed on the transporters and director are unsustainable and set aside.The Court confirmed that there is "no legal obligation on the transporter to ensure that the goods which he is carrying are duty paid" under the Central Excise Act or Rules.The imposition of penalty requires proof of conscious knowledge or at least reason to believe that the goods were non-duty paid and that the transporter was "hand in glove" or connived with the manufacturer; such proof was absent in this case.

RATIONALE:

The Court applied Rule 26 of the Central Excise Rules, 2002, which penalizes any person who "acquires possession of, or is in any way concerned in transporting... any excisable goods which he knows or has reason to believe are liable to confiscation."The Court relied on precedent interpreting the erstwhile Rule 209A of the Central Excise Rules, 1944, emphasizing that the department must prove "conscious knowledge" or at least "reason to believe" the goods were non-duty paid to attract penalty on transporters.It was noted that wrongful or incorrect documentation is common in transportation, and without evidence of aiding and abetting or knowledge, penalty cannot be imposed.The Court referred to multiple Tribunal decisions reinforcing that penalty under Rule 26 requires proof of knowledge or reason to believe, not mere possession or transportation.No dissent or doctrinal shift was indicated; the decision follows established legal principles regarding penalty imposition on transporters under Central Excise Rules.

ISSUES:

Whether income received by a statutory university from granting affiliation and recognition fees to colleges constitutes a taxable "service" under the Finance Act, 1994 (Service Tax law).Whether the activity of granting affiliation/recognition by a statutory university involves "activity carried out by a person for another for consideration" as defined under clause (44) of Section 65B of the Finance Act, 1994.Whether penalties and interest under Sections 75, 77, and 78 of the Finance Act, 1994 can be imposed for non-payment of service tax on affiliation fees collected by a statutory university.Whether the extended period of limitation under proviso to Section 73(1) of the Finance Act, 1994 is invokable for recovery of service tax on affiliation fees.

RULINGS / HOLDINGS:

The income from affiliation and recognition fees collected by a statutory university does not constitute a taxable "service" under the Finance Act, 1994, as the activity is not an "activity carried out by a person for another for consideration" within the meaning of clause (44) of Section 65B.The act of granting affiliation/recognition is a statutory/public duty discharged under law without commercial elements and does not satisfy the "activity for consideration" requirement essential for service tax liability.Penalties and interest under Sections 75, 77, and 78 of the Finance Act, 1994 cannot be imposed for non-payment of service tax on such affiliation fees, as the underlying demand for service tax is not sustainable.The extended period of limitation under proviso to Section 73(1) of the Finance Act, 1994 is not applicable since the foundational tax demand is unsustainable.

RATIONALE:

The Court applied the definition of "service" under clause (44) of Section 65B of the Finance Act, 1994, which requires an "activity carried out by a person for another for consideration." The term "consideration" was interpreted with reference to Section 2(d) of the Indian Contract Act, 1872, emphasizing the necessity of a quid pro quo contractual relationship.It was held that statutory functions performed by a university under a special State Act, such as granting affiliation or recognition, are public law duties lacking commercial elements and do not constitute activities "for consideration" as required for service tax liability.Precedents from various tribunals and High Courts, including a detailed analysis by the Hon'ble Karnataka High Court in Rajiv Gandhi University of Health Sciences case, were relied upon to reject the taxability of affiliation fees.The Court noted the dismissal of the Special Leave Petition by the Supreme Court against the Karnataka High Court's ruling, reinforcing the settled position that such statutory functions are outside the service tax net.There was no dissenting opinion or doctrinal shift; the judgment reaffirmed established legal principles distinguishing sovereign/statutory functions from taxable services under the Finance Act.

1. ISSUES:

1.1 Whether the appellant is required to pay service tax on the entire amount collected as entry fee from non-resident guests or only on the share of the entry fee retained by the appellant after remitting the balance to the other party providing accommodation and restaurant services.

1.2 Whether the sharing of the entry fee between the appellant and the other party constitutes "consideration" for a "service" under Section 67 of the Finance Act, 1994.

1.3 Whether the appellant's act of collecting the entry fee on behalf of the other party amounts to providing a taxable service to that party.

2. RULINGS / HOLDINGS:

2.1 The appellant is liable to pay service tax only on the share of the entry fee retained by it and not on the entire amount collected, as the other party pays service tax on the accommodation and restaurant services provided to the non-resident guests.

2.2 The sharing of the profit under the agreement does not amount to "consideration" for the provisions of service between the appellant and the other party, as both act on a principal-to-principal basis and neither provides a service to the other.

2.3 The appellant's collection of the entry fee on behalf of the other party cannot be considered a "service" provided to the other party, and hence, no service tax liability arises on the entire amount collected by the appellant.

3. RATIONALE:

3.1 The Court examined the Revenue Sharing Agreement clauses which clearly delineate the rights and obligations of both parties, including the adjustment of entry fee against accommodation or restaurant services and the sharing of the entry fee accordingly.

3.2 The Court noted that the other party pays service tax on accommodation and restaurant services enjoyed by the non-resident guests, while the appellant pays service tax only on the amount retained by it, consistent with the agreed terms.

3.3 The Court emphasized that the Revenue cannot add terms to the agreement contrary to the parties' intention and that the contractual arrangement reflects a joint venture with mutual interests rather than a provider-recipient service relationship between the appellant and the other party.

3.4 The Court relied on the principle that "no consideration has been provisioned in favour of the appellant for collecting entry fee," negating the characterization of the appellant's collection activity as a taxable service to the other party.

3.5 The Court referred to a subsequent Commissioner (Appeals) decision upholding the same interpretation, which was not challenged by the Revenue, thereby reinforcing the settled position on the merits.

ISSUES:

Whether service tax is leviable on 'Ocean Freight' paid by an importer under the provisions of the Finance Act, 1994 and related Notifications.Whether the levy of service tax on ocean freight constitutes an extraterritorial tax beyond the taxable territory of India.Whether the Notifications issued by the Central Government imposing service tax on ocean freight are intra vires the Finance Act, 1994.

RULINGS / HOLDINGS:

The levy of service tax on 'Ocean Freight' paid by the importer is not sustainable as the service of sea transportation occurs beyond the land mass of India and is thus extraterritorial in nature.The provisions of the Finance Act, 1994, specifically Section 66B, Section 65B(52), and Section 64(1), restrict service tax to services provided and consumed within the taxable territory of India, and do not empower the Central Government to levy service tax on extraterritorial events.The impugned Notifications Nos. 15/2017-ST and 16/2017-ST, which seek to levy service tax on ocean freight by way of reverse charge on importers, are declared ultra vires the Finance Act, 1994.Consequently, no service tax liability can be fastened on the importer for ocean freight, and the demand for service tax on ocean freight is set aside.

RATIONALE:

The Court applied the legal framework under the Finance Act, 1994, particularly the charging Section 66B, the definition of "taxable territory" in Section 65B(52), and the territorial application under Section 64(1), which collectively limit service tax to events occurring within India.The Court relied on the constitutional principle that while Parliament may enact laws with extraterritorial effect subject to certain conditions, delegated legislation by the Executive (such as Notifications) cannot extend taxation beyond the territorial limits prescribed by the statute.The decision follows the precedent set by the Gujarat High Court, which held the Notifications imposing service tax on ocean freight as ultra vires, and is consistent with subsequent Tribunal and High Court rulings, as well as the Supreme Court's dismissal of Revenue's appeal in related matters.No dissenting or differing opinions were recorded; the judgment affirms a doctrinal position limiting service tax jurisdiction to within India's territorial boundaries and invalidating executive attempts to extend tax liability extraterritorially.