ISSUES PRESENTED AND CONSIDERED

1. Whether the extended timeline for BIS certification in the amended Medical Textiles (Quality Control) Order (extended to 1.4.2025 for small and micro enterprises) applies to an importer or is confined to manufacturers.

2. Whether a subsequent communication/clarification from the Department for Promotion of Industry and Internal Trade (DPIIT) (dated 19.3.2025) restricting the extended timeline to domestic manufacturers is inconsistent with, or contrary to, the statutory scheme under the Bureau of Indian Standards Act, 2016.

3. Whether the earlier order of this Court relied upon by the petitioner (granting relief to an importer in a different goods-context) governs the present facts, or is distinguishable.

4. Whether the impugned adjudication order (confiscation/re-export/penalty/redemption fine) suffers from jurisdictional error, breach of natural justice, or an error apparent on the face of the record so as to warrant exercise of extraordinary writ jurisdiction despite the availability of an alternative statutory appeal (under Section 129A(1) of the Customs Act, 1962).

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Application of the extended timeline for BIS certification to importers

Legal framework: The Bureau of Indian Standards Act, 2016 prescribes mandatory use of standard marks and regulates certification; Sections 16 and 17 (and definition of "person") extend statutory obligations to manufacturers, importers and other categories. The Medical Textiles (Quality Control) Amendment Order (01.1.2025) expressly modifies timelines in Schedule A, providing different implementation dates for Large/Medium (1.1.2025) and Small/Micro (1.4.2025) enterprises and inserts a proviso permitting certain declared old stock to be sold until 30.6.2025 for certified/applicant manufacturers.

Precedent treatment: The Court considered an earlier order in which, in a different goods-context, relief was granted to an importer; that order had reasoned that a circular from Government (19.3.2025) was ultravires and that enactment did not distinguish importers from manufacturers. In the present matter the Court re-examined the scope of the Amendment Order itself.

Interpretation and reasoning: The Amendment Order is manufacturer-centric by its express terms (applies to "manufacturer certified by the Bureau or any manufacturer who has applied for certification"); the extension to 1.4.2025 is linked to the status of the enterprise as a manufacturer (and declared old stock) rather than to the goods irrespective of the actor. The statutory scheme (BIS Act) does impose obligations on importers, but the specific express language of the Amendment confines the particular relaxation to manufacturers. The importer in the present case admitted the foreign supplier's FMCS application was pending and the imported goods did not bear the BIS mark or conform to IS 5405:2019.

Ratio vs. Obiter: Ratio - where a quality control amendment expressly ties a postponement/exemption to manufacturer status (including declared old stock), importers cannot claim that manufacturer-specific relief merely by virtue of MSME registration; importers importing non-BIS-marked goods after the effective dates must comply. Obiter - general observations about the statutory reach of the BIS Act to include importers as "persons" are explanatory.

Conclusions: The extended timeline in the Amendment Order (01.1.2025) is available only to manufacturers (including those who declared pre-commencement old stock), and does not extend to importers. The impugned importation without BIS conformity therefore did not qualify for the micro/small enterprise relaxation.

Issue 2 - Validity and effect of the DPIIT clarification dated 19.3.2025

Legal framework: Executive communications and clarificatory circulars are subordinate to, and must conform with, statutory provisions and the textual scope of delegated instruments.

Precedent treatment: The Court noted an earlier order had treated a similar circular as violative when it attempted to introduce a distinction not present in the statute; in the present case the Court analysed whether the DPIIT clarification conflicted with the Amendment Order's plain terms.

Interpretation and reasoning: The Amendment Order's plain language confines the benefit to manufacturers. The DPIIT clarification reiterated that the additional time for MSMEs does not apply to imports and confirmed that the date of implementation in the QCO must be considered for imports. The clarification thus aligns with, and confirms, the Amendment Order's manufacturer-focused relief rather than introducing an impermissible distinction beyond the statute. Where a circular only reiterates the clear tenor of the statutory or sub-statutory instrument, it is not ultra vires.

Ratio vs. Obiter: Ratio - a clarificatory communication that merely reiterates the plain scope of an amendment does not contravene the statutory scheme; it may be relied upon to interpret the operative instrument. Obiter - comments on the general limits of executive circulars when they purport to trespass statutory bounds.

Conclusions: The DPIIT clarification is consistent with the Amendment Order and does not invalidate petitioner's non-compliance claim; it confirms that importers cannot invoke the MSME timeline extension available to manufacturers.

Issue 3 - Applicability of the Court's earlier order relied upon by the petitioner

Legal framework: Binding effect and precedential value of earlier orders of the same Court; requirement to distinguish prior decisions on their facts and reasoning.

Precedent treatment: The Court reviewed its prior decision where relief was granted to an importer in a plywood/wooden flush door context. In that earlier order the Court had found the DPIIT communication to be violative and allowed clearance without BIS registration certificate. In the present matter, the Court re-examined factual and textual differences.

Interpretation and reasoning: The earlier order did not address whether the Amendment Order was manufacturer-centric in the manner this case requires; here the Amendment expressly ties relief to manufacturers (and declared stock). The Court concluded the earlier order did not explore that crucial issue and therefore cannot be applied as governing precedent for the present facts. Distinguishing is warranted because the legal and instrument-specific context differs.

Ratio vs. Obiter: Ratio - a prior judgment may be distinguished where it did not consider or decide a determinative textual point which is central to the present dispute. Obiter - prior observations about circulars and statutory scope insofar as they were not central to the present decision.

Conclusions: The earlier order relied upon by the petitioner is distinguishable and does not entitle the importer to relief in the present case.

Issue 4 - Availability of alternative remedy and suitability of writ jurisdiction

Legal framework: Principles governing exercise of judicial review under Article 226 when an alternative statutory remedy (here, appeal under Section 129A(1) of the Customs Act) is available; grounds for exceptional exercise include lack of jurisdiction, breach of natural justice, or error apparent on the face of the record.

Precedent treatment: The Court applied settled principles that where adequate alternative remedies exist and the impugned order is not vitiated by jurisdictional infirmity, breach of natural justice or prima facie error apparent on face of record, writ relief will normally be withheld.

Interpretation and reasoning: The impugned adjudication was preceded by an opportunity of hearing; no jurisdictional excess or breach of natural justice, nor any error apparent on face of record, was shown. Consequently, the Court declined to exercise extraordinary writ jurisdiction and dismissed the petition while leaving open the statutory appeal. The Court directed that time taken in prosecuting the writ be given due credit and permitted one week to file the appeal before CESTAT.

Ratio vs. Obiter: Ratio - where an alternative efficacious remedy exists and the challenged order does not exhibit jurisdictional defect, breach of natural justice, or an apparent error on face, courts will ordinarily refuse to exercise writ jurisdiction. Obiter - procedural note on time-credit and directions to appellate forum.

Conclusions: Writ relief is declined; petitioner must pursue the statutory appeal to CESTAT within the prescribed period (subject to the Court's limited time-credit direction), failing which the adjudication becomes final.

ISSUES PRESENTED AND CONSIDERED

1. Whether service tax is leviable on works contracts executed prior to 01.06.2007 where material component exists, notwithstanding departmental classification as Commercial or Industrial Construction Service (CICS).

2. Whether particular components of composite contracts - notably construction of dams, canals, intake structures, power houses, outdoor switchyards and allied works - fall outside the definition of Works Contract Service (WCS) and are therefore not leviable to service tax.

3. Whether construction of a road forming part of a larger complex is excluded from service tax as an independent activity or is integrally part of a composite contract and taxable.

4. Whether supply and placement/laying of Ready Mix Concrete (RMC) in the factual matrix constitutes a sale or a taxable service (WCS).

5. Whether a sub-contractor is independently liable to service tax where the principal contractor is exempt or has discharged tax, and whether the composition/abatement benefits extend automatically to a sub-contractor who did not formally opt.

6. Whether invocation of extended period of limitation and imposition of penalty under section 78 is sustainable where demand is based on audit report and where there existed bona fide divergent views/ambiguities (including relief by Notification issued under section 11C).

7. Whether the adjudicating authority's general findings without granular examination of individual contracts suffice for confirming demands, or whether remand for contract-specific factual/quantitative enquiry is required.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Levy prior to 01.06.2007: legal framework - Service tax regime distinguished between CICS and WCS; prior to 01.06.2007 levy could attach where transfer of property in goods was involved but established precedent holds that bona fide works contracts with material component were not leviable as service before WCS classification came into effect.

Precedent Treatment - The Court applied controlling precedents that preclude imposition of service tax on works contracts with significant material element for the period before specific classification of WCS.

Interpretation and reasoning - The Tribunal found that the impugned demands for periods prior to 01.06.2007 related to essentially works-contracts involving material portions; accordingly, departmental re-classification as CICS could not override the settled principle that such transactions were not taxable as service before the WCS classification came into effect.

Ratio vs. Obiter - Ratio: pre-01.06.2007 works contracts with material transfer are not liable to service tax.

Conclusion - Demand for period prior to 01.06.2007 set aside.

Issue 2 - Exclusion of dams/canals/related hydroelectric works from WCS - Legal framework: the statutory definition of WCS excludes construction of dams, canals, roads, etc.; notification/exclusion and concept of "dam" and its auxiliary works informs scope.

Precedent Treatment - The Tribunal recognized authorities both for excluding certain hydrological structures and auxiliary works from WCS and for requiring careful factual analysis to determine whether a component is genuinely part of an excluded activity.

Interpretation and reasoning - The Court emphasized that the adjudicating authority's generic treatment was insufficient. The correct approach is component-wise, contract-specific analysis: where a structure is primarily intended for storing or conveying water (i.e., dam/canal) the auxiliary works (spillway, intake, tunnels, pipelines) should ordinarily be treated as part of the dam/canal and excluded; conversely, standalone works not related to a dam/canal are not so excluded.

Ratio vs. Obiter - Ratio: exclusion must be determined by examining the nature, purpose and connectivity of each component to the dam/canal; blanket classification is impermissible. Obiter: descriptive observations on the general understanding of "dam" and its auxiliary works.

Conclusion - Demand in respect of hydroelectric and related works remanded for contract-specific determination whether each component falls within the WCS exclusion.

Issue 3 - Road construction as part of composite contract - Legal framework: exclusion of road construction where contract is purely for road works; Board Circular recognizes that standalone road contracts qualify for exclusion.

Precedent Treatment - The Court applied precedents distinguishing standalone road contracts (excluded) from roads forming an integrated part of construction of a complex (taxable as part of composite contract).

Interpretation and reasoning - Where a road is constructed as an integral component of a larger complex (e.g., internal connectivity of a plant/colony) and the contract expressly treats it as part of the complex, it cannot be carved out as an independent excluded activity. Whether a road is for exclusive internal use or public use must be ascertained from contract, maps and factual matrix.

Ratio vs. Obiter - Ratio: taxability depends on contractual intent and factual connectivity; standalone road contracts are excluded, roads as part of composite projects are not.

Conclusion - The road demand remanded for examination of contract terms and intended use to determine exclusion vs inclusion within composite contract.

Issue 4 - RMC: sale versus service - Legal framework: distinction between supply of goods (sale) and works contract/service where supply coupled with installation/laying is treated as service.

Precedent Treatment - The Court relied on authority treating pure sale of RMC as sale but distinguishing cases where supplier also lays/levels using its own plants and men, making it a works-contract/service.

Interpretation and reasoning - The factual matrix showed that the appellant not only delivered RMC but also laid and levelled it using its own RMC facilities; thus the transaction was not a simple sale (even though VAT was discharged) but constituted WCS.

Ratio vs. Obiter - Ratio: supply combined with performance of laying/installation using supplier's resources qualifies as service/WCS; mere VAT payment does not convert taxable service into a sale for service-tax purposes.

Conclusion - Laying of RCC M30 at raw water reservoir constitutes service (WCS) on the facts presented.

Issue 5 - Sub-contractor liability and composition/abatement benefits - Legal framework: each person providing service is independently liable; composition/abatement benefits require statutory/notification compliance and formal election where applicable.

Precedent Treatment - The Court followed authority that a sub-contractor's liability is independent of tax stance of principal contractor; composition/abatement do not automatically extend without compliance.

Interpretation and reasoning - Absence of details whether either party had actually paid or been exempted precluded treating sub-contractor as automatically exempt. Even if a principal contractor is exempt, sub-contractors must discharge their own liability if their activity attracts tax. However, if demand is confirmed within normal period, applicable abatement available during relevant period is admissible irrespective of whether the appellant had formally opted.

Ratio vs. Obiter - Ratio: sub-contractors are independently liable; abatement, if applicable and within normal period, remains available notwithstanding procedural lapses in formal election.

Conclusion - Sub-contractor liability stands; composition/abatement benefits require case-specific application and, if due, are admissible for demands within normal period.

Issue 6 - Limitation, extended period and penalty under section 78 - Legal framework: extended period/penalty attach where there is suppression/intent to evade; notification issued under section 11C evidences pre-existing ambiguity in law.

Precedent Treatment - The Court noted authorities supporting protection where bona fide belief or divergent views existed and where demands stem from audit reports and ambiguous legal position.

Interpretation and reasoning - The demand arose from C&AG audit and statements; no material was produced showing deliberate withholding of information or malafide intent to evade tax. Existence of a Notification under section 11C addressing ambiguity in treatment of transmission/distribution works supports the position that divergent views existed. On these facts, invocation of extended period and penalty under section 78 was not sustainable.

Ratio vs. Obiter - Ratio: extended period and penalty unsustainable where demand is founded on bona fide divergent views and audit-based enquiries absent deliberate suppression; issuance of clarificatory notification under section 11C is relevant to demonstrating ambiguity.

Conclusion - Invocation of extended period and imposition of penalty set aside.

Issue 7 - Sufficiency of adjudicatory findings and need for remand - Legal framework: adjudication must be grounded on contract-specific and fact-specific findings where exemption/exclusion depends on nature of component works.

Precedent Treatment - The Court reiterated that generic findings without examination of detailed scopes of work cannot support sustained demands where exclusions depend on purpose and connectivity of components.

Interpretation and reasoning - The adjudicating authority's treatment was generalized without granular examination of individual contracts, maps and work details; the Tribunal held such a non-specific approach insufficient. Each contract must be examined to determine whether components are part of excluded activities (dam/canal/road/sub-station) or standalone taxable services.

Ratio vs. Obiter - Ratio: remand is necessary where demands are based on non-specific findings and exclusions depend on contract particulars; adjudication must re-determine leviability after per-contract factual analysis.

Conclusion - Except for amounts set aside, matters remanded to adjudicating authority to re-determine demands within normal limitation period and allowing applicable abatement where confirmed.

ISSUES PRESENTED AND CONSIDERED

1. Whether disallowance under section 14A read with Rule 8D is justified where exempt income arises from (i) mark-to-market gain on mutual fund investments and (ii) dividend from associate companies, when no fresh investment or exclusive expenditure for earning such exempt income was incurred in the year.

2. Whether the Assessing Officer's general recording of "dissatisfaction" suffices to invoke Rule 8D and compute an indirect disallowance based on prescribed formulae, including an imputed interest component, without specific findings of expenditure directly attributable to exempt income.

3. In circumstances where the assessee has made a suo-moto disallowance computed under Rule 8D, whether the AO is required to demonstrate specific facts to displace the assessee's working and whether administrative expenses alone are the appropriate component of disallowance.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Applicability of section 14A/Rule 8D where exempt income arises from market gains on mutual funds and dividends from associates and no fresh investment/exclusive expenditure incurred

Legal framework: Section 14A disallows expenditure incurred in relation to income exempt under the Act; Rule 8D prescribes mechanics for computing such disallowance where AO records dissatisfaction with the assessee's claim. Rule 8D separates (i) direct expenditure, (ii) indirect expenditure (formula-based), and (iii) apportioned interest where applicable.

Precedent Treatment: The Court applied the settled principle that Rule 8D operates only upon a recorded dissatisfaction that is supported by facts; in cases where investments are made from own surplus and no exclusive expenditure is shown, wide imputations of interest are inappropriate. Higher-court authorities establishing that interest disallowance is not to be mechanically applied where investments are from own funds were followed.

Interpretation and reasoning: The Tribunal examined the nature of exempt income - mark-to-market gains on mutual funds and dividends received from associate companies - and the fact that no fresh investments or exclusive expenditures were incurred during the year. Given these facts, the Tribunal found the assessee's contention (that no specific expenditure was incurred to earn the exempt income) credible and observed that Rule 8D should not be applied to generate an artificial disallowance in the absence of factual foundation. The Tribunal distinguished situations where interest or other costs can be specifically linked to earning exempt income from the present facts where investments were funded from internal surplus and managed externally.

Ratio vs. Obiter: Ratio - Where exempt income arises from investments funded from internal surplus and no exclusive expenditure is shown, Rule 8D cannot be mechanically invoked to impose a large indirect disallowance. Obiter - Observations on the managerial role of portfolio managers and absence of fresh investment are supportive but not dispositive beyond the facts.

Conclusion: Disallowance under section 14A/Rule 8D cannot be upheld in respect of amounts disallowed by the AO where exempt income arose without fresh investment or exclusive expenditure; the assessee's suo-moto disallowance (a limited figure) was acceptable.

Issue 2 - Sufficiency of AO's recorded dissatisfaction under Rule 8D and requirement of specific findings to compute indirect disallowance including imputed interest

Legal framework: Rule 8D is triggered only when the AO records dissatisfaction, and the AO must specify/explain basis for rejecting the assessee's claim/no-expenditure position; indirect disallowance (formulaic) and interest component require factual nexus or specific findings.

Precedent Treatment: The Tribunal followed established jurisprudence that general or conclusory satisfaction by the AO without corroborative facts is insufficient to displace the assessee's computed disallowance; where AO fails to identify expenditure exclusively incurred for exempt income or to show attributable interest, the mechanical application of Rule 8D is impermissible.

Interpretation and reasoning: The AO's recorded dissatisfaction was found to be general and unsupported - there was no identification of exclusive or directly attributable expenditure, nor any finding of interest-bearing borrowings used for the exempt investments. The Tribunal emphasized that the indirect disallowance by formula (one per cent of specified average balances) becomes unjustified when the factual matrix does not support inclusion of an imputed interest component, particularly where the assessee has adequate surplus funds. The AO's errors in computing monthly averages and acceptance by the lower appellate authority were also noted as undermining the disallowance.

Ratio vs. Obiter: Ratio - AO must record specific, factual reasons to invoke Rule 8D; a general dissatisfaction is insufficient and cannot justify an imputed indirect disallowance that includes interest where no factual nexus exists. Obiter - Critique of AO's computation methodology and monthly-average calculations is consequential to the decision but emanates from the facts.

Conclusion: The AO's general dissatisfaction did not justify rejecting the assessee's working; indirect disallowance including interest was not sustainable on the facts and was to be restricted.

Issue 3 - Validity of assessee's suo-moto disallowance and the permissible scope of disallowance (administrative expenses only) when investments are from own funds

Legal framework: Where an assessee has made a reasonable suo-moto disallowance under Rule 8D and provided workings, the AO must demonstrate error in that computation or point to additional relevant expenditure to justify further disallowance. Jurisprudence recognizes that only those components of administrative expenditure that are attributable to earning exempt income may be disallowed where interest is not attributable.

Precedent Treatment: The Tribunal followed precedent holding that where investments are funded from own surplus, imputation of interest as part of indirect disallowance is inappropriate; only administrative/other non-interest indirect costs may be examinable for disallowance. Previous appellate and higher court rulings to this effect were applied.

Interpretation and reasoning: The assessee had made a suo-moto disallowance of a modest amount and supplied workings. The AO failed to identify any additional specific expenditure exclusively linked to exempt income. Given that the assessee had sufficient internal funds and no attributable interest cost, the Tribunal concluded that only administrative expenditure (as demonstrable) could form the basis of any disallowance. Having accepted the assessee's working, the Tribunal held that the larger disallowance made by the AO/CIT(A) must be deleted.

Ratio vs. Obiter: Ratio - A bona fide suo-moto disallowance supported by workings is to be accepted unless the AO can point to specific expenditures or errors; where investments are from internal surplus, disallowance of imputed interest is not warranted and disallowance should be limited to administrative expenses attributable to exempt income. Obiter - Remarks on the mechanics of portfolio management and non-involvement of the assessee post-investment are factual observations supporting the ratio.

Conclusion: The assessee's suo-moto disallowance was satisfactory; the larger disallowance under section 14A/Rule 8D was deleted and only the self-assessed figure warranted recognition.

Cross-references and Practical Holding

Where an assessing authority relies on Rule 8D to disallow expenditure related to exempt income, the authority must (i) record specific factual dissatisfaction, (ii) identify exclusive or directly attributable expenditure or interest, or (iii) demonstrate errors in the assessee's computation; failing this, only demonstrated administrative expenses may be disallowed and reasonable suo-moto disallowance by the assessee should be accepted.

ISSUES PRESENTED AND CONSIDERED

1. Whether tax is required to be deducted at source under Section 194-I of the Income Tax Act on lease rent/lease premium payments made to a State industrial development authority for payments made prior to 16/02/2017.

2. Whether amounts characterized as capital payments (lease premium paid according to time schedule) are subject to TDS under Section 194-I or fall outside its scope.

3. Whether amounts constituting interest on lump-sum lease premium or interest on deposits paid to the Authority are subject to TDS under Section 194A, or exempt under Section 194A(3)(iii)(f).

4. Whether a payer (deductor) can be treated as an "assessee in default" under Sections 201(1)/201(1A) for failure to deduct TDS in respect of payments to the Authority made prior to the date from which the Court applied Section 194-I prospectively.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Applicability of Section 194-I to payments made to State industrial development authority prior to 16/02/2017

Legal framework: Section 194-I requires deduction of tax at source on payment of rent; the question involves temporal applicability and whether earlier circulars or administrative practice could justify non-deduction.

Precedent treatment: The Tribunal considered and followed the substantive reasoning of the High Court decision which analyzed the statutory scheme and relevant notifications, and noted that the High Court's decision was affirmed by the Supreme Court with directions and prospective application of Section 194-I from 16/02/2017.

Interpretation and reasoning: The Court accepted the High Court's classification that certain payments to the Authority are either capital or rent and that, as a matter of law and equity, the High Court limited the obligation to deduct TDS under Section 194-I prospectively from 16/02/2017. The Tribunal relied on the High Court's analytical division of payments and on the Supreme Court's affirmation which preserved the High Court's remedial directions regarding temporal effect.

Ratio vs. Obiter: The holding that Section 194-I applies only prospectively (from 16/02/2017) to payments to the Authority, as applied to the facts in question, is treated as ratio relied upon to decide the instant assessment-year payments; ancillary observations about administrative circulars are explanatory/observational but not essential to the Tribunal's disposition.

Conclusion: Payments made to the Authority during the relevant financial year (FY 2011-12) do not attract a liability to deduct TDS under Section 194-I in light of the High Court's ruling given prospective effect and the Supreme Court's affirmation; therefore the payer cannot be held as assessee in default for failure to deduct TDS for those earlier payments.

Issue 2 - Characterization of lease premium/time-schedule payments as capital (non-TDS) versus rent (TDS)

Legal framework: Distinction between capital payments (e.g., lease premium for acquisition of leasehold rights) and recurring rent (liable to TDS under Section 194-I) is determinative of withholding obligations.

Precedent treatment: The High Court's analysis (adopted by the Tribunal) explicitly treated amounts paid as part of the lease premium in terms of the time schedule as capital payments not subject to TDS, while separately treating percentage-based recurring lease rent as rent liable to TDS.

Interpretation and reasoning: The Court accepted the High Court's categorical classification: scheduled premium installments for acquisition of leasehold rights are capital in nature and not within Section 194-I; amounts expressed as an annual percentage of premium are rent in substance and thus would attract TDS from the effective date specified by the High Court.

Ratio vs. Obiter: The classification of scheduled lease premium as capital (non-TDS) and percentage-based annual payments as rent (TDS) is treated as operative ratio insofar as it determines the nature of payments and corresponding TDS obligations.

Conclusion: Scheduled lease premium payments made in the relevant year are capital and not subject to TDS; percentage-based annual lease rent is rent and liable to TDS, but the obligation to withhold in respect of such rent was held to operate only prospectively from 16/02/2017.

Issue 3 - Applicability of Section 194A to interest payments to the Authority and exemption under Section 194A(3)(iii)(f)

Legal framework: Section 194A requires deduction of tax on interest payments, but Section 194A(3)(iii)(f) exempts specified institutions/bodies notified by the Central Government; the question is whether a State industrial development authority falls within that exemption.

Precedent treatment: The Tribunal relied on earlier ITAT decisions (e.g., bank payments to development authorities) and the High Court's adoption of those decisions to conclude that Authorities constituted under the State industrial area development Act qualify for exemption; the Supreme Court affirmed the High Court's conclusions on related matters.

Interpretation and reasoning: The Court followed the reasoning that the enabling statute (UPIDA) and the central notification together lead to the conclusion that the Authority is a kind of institution exempt under Section 194A(3)(iii)(f). Decisions of various Benches of the Tribunal treating payments of interest by banks to State development authorities as excludable from TDS were found persuasive and unreversed.

Ratio vs. Obiter: The determination that interest payments to such State Authorities are exempt under Section 194A(3)(iii)(f) is treated as ratio relied upon to relieve payers of withholding obligations on interest and to negate default assessments for those amounts.

Conclusion: Interest amounts payable to the Authority are exempt from TDS under Section 194A(3)(iii)(f); payers are not to be treated as assessee in default for non-deduction of TDS on such interest payments for the periods in question.

Issue 4 - Liability under Sections 201(1)/201(1A) for failure to deduct TDS and consequential relief

Legal framework: Sections 201(1)/201(1A) treat a person as an assessee in default for failure to deduct/collect tax at source; where legal obligation to deduct is absent or applies only prospectively, such liability should not be imposed.

Precedent treatment: The Tribunal applied the High Court's and Supreme Court's findings that TDS obligations in respect of certain payments to the Authority do not arise for periods prior to 16/02/2017 and that interest payments are exempt; earlier ITAT precedents holding banks not in default for non-deduction to State Authorities were also followed.

Interpretation and reasoning: Because the applicable authoritative rulings established either exemption or prospective operation of withholding obligations, the Tribunal concluded that the lower authorities erred in declaring the payer an assessee in default for the impugned assessment year; equitable directions in the higher court judgments (regarding reimbursement and non-pursuit of coercive recovery) informed the remedial outcome.

Ratio vs. Obiter: The determination that the payer is not an assessee in default for the relevant period is ratio; ancillary remedial observations in the High Court/Supreme Court regarding reimbursement and prevention of coercive recovery are relied upon but the Tribunal's primary conclusion is the quashing of the default assessment.

Conclusion: The orders treating the payer as assessee in default under Sections 201(1)/201(1A) for the impugned payments are set aside; consequential directions follow the higher courts' approach to restitution/reimbursement where applicable, and the appeal is allowed.

Cross-references

Refer to Issue 1 for the temporal (prospective) limitation on Section 194-I's operation; refer to Issue 3 for the exemption analysis under Section 194A(3)(iii)(f) which intersects with the default liability analysis in Issue 4.

ISSUES PRESENTED AND CONSIDERED

1. Whether two separate contracts - a "Service Level Agreement" and a "Consumables and Parts Support Agreement" - constitute distinct and independent transactions or are parts of one composite/indivisible contract such that the value of consumables and spare parts must be included in the taxable value of maintenance/support services.

2. Whether, assuming the contracts are composite or the value of goods is not segregable, service tax (as MMRS for the earlier period and as works contract service for the later period) is leviable on the value of consumables and spare parts when VAT has been paid on those goods.

3. Whether extended period of limitation and penalties under the Finance Act (Sections 76, 77 and 78) were rightly invoked/imposed in view of alleged mis-representation, suppression of facts, lack of proper invoices and maintenance of records.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Distinctness of the two agreements (service vs sale) - Legal framework

Legal framework: Determination depends on contract intention, divisibility of composite contracts, concept of "works contract" and deeming provisions converting certain indivisible contracts into deemed sales. Relevant principles include dominant-intention test, separability where goods are sold as distinct transactions, and statutory/notification provisions recognizing deduction of value of goods where sales tax/VAT is paid.

Precedent Treatment

The Tribunal followed authoritative decisions establishing that (a) whether goods constitute "sale" is primarily a matter of contract and intention; (b) the 46th Constitutional Amendment created specific deemed-sale categories but did not alter the definition of "goods"; and (c) where agreements/invoices separately identify materials and VAT/excise on such goods is paid, the goods component can be treated as sale and excluded from service tax. Prior tribunal and High Court decisions holding spare parts/materials used in maintenance to be deemed sale (and not subject to service tax) were followed.

Interpretation and reasoning

The Tribunal examined the contractual documents and commercial practice: (i) the two agreements address distinct purposes - one for supply/sale of consumables and spares and the other for provision of support/maintenance services; (ii) values of consumables/spares were separately indicated; (iii) VAT was admittedly paid on consumables/spares and accounting indicated trading of goods; (iv) departmental evidence failed to establish that VAT related to other goods or that supplies were genuinely without commercial consideration; and (v) statements relied upon did not contradict the conclusion that transactions were principal-to-principal sales of goods and separate maintenance services. Applying the dominant-intention/separability test and taking into account statutory recognition of deemed sales, the Tribunal found the contracts distinct and not an artificial split to evade service tax.

Ratio vs. Obiter

Ratio: Where contractual intention, separate invoicing/accounting and payment of VAT establish that consumables/spares are sold as distinct transactions, the goods component is not includible in gross value of taxable service and no service tax can be demanded on that goods value.

Obiter: Observations on historical constitutional amendments and broader jurisprudence explaining survival of prior doctrine beyond deemed-sale clauses are explanatory and supportive rather than dispositive of the specific facts.

Conclusion

The Tribunal held the two agreements to be distinct: one sale of goods (VAT paid) and one service. Consequently, value of consumables and spare parts is not includible in the taxable value of maintenance/support services; the demand for service tax on that value is set aside.

Issue 2: Applicability of service tax/works contract classification and the effect of VAT payment - Legal framework

Legal framework: Service tax classification depends on nature of activity in the relevant period (MMRS earlier; works contract post specified date). Article/constitutional deeming provisions and statutory notifications permit segregation of goods value where VAT/ sales tax has been paid; Service Tax Determination of Value Rules and Notification exempting goods value from service tax (when taxed as sale) are relevant.

Precedent Treatment

The Tribunal relied on precedents establishing that where goods used in maintenance are separately invoiced and VAT/Excise duty is paid, the goods component is to be treated as sale and excluded from service tax - decisions affirmed by higher courts. Authorities stressing the dominant intention and separability of contracts were applied.

Interpretation and reasoning

The Tribunal accepted the departmental classification (MMRS for the earlier period and works contract for the later period) only to the extent of recognizing the legal position that works contracts may attract deemed sale. However, since the goods component here was segregable, separately shown and subject to VAT, statutory/administrative instruments (notification and rules) and jurisprudence mandated exclusion of the goods value from service tax computation. The Tribunal rejected the department's approach of adding the goods value to service value on the basis of presumption without proof that VAT related to other goods or that supplies were free/non-commercial.

Ratio vs. Obiter

Ratio: Classification as works contract does not automatically render the goods component taxable as service value where that component is segregable and VAT has been paid; statutory and jurisprudential rules permit deduction of goods value from gross service value.

Obiter: Comments on rates of VAT vis-à-vis service tax rates and commercial accounting practices are ancillary.

Conclusion

The Tribunal concluded that, despite works contract classification in the later period, the segregable goods value on which VAT was paid cannot be included in the taxable value for service tax; the demand based on including such value is unsustainable.

Issue 3: Extended period, mis-representation and imposition of penalties under Sections 76, 77 and 78 - Legal framework

Legal framework: Penalties and invocation of extended period require establishment of suppression/mis-representation/intentional evasion, failure to maintain proper records or incorrect invoicing. Burden lies on revenue to demonstrate connection between alleged malpractices and tax shortfall.

Precedent Treatment

Authorities cited by both sides were considered insofar as they articulate the standards for invoking extended period and penal provisions; precedents require concrete evidence of suppression or mis-statement to sustain extended period and certain penalties.

Interpretation and reasoning

The Tribunal examined evidence relied upon by the Revenue (contract wording, lack of customer-wise records, invoice remarks) and the assessee's counter-evidence (separate invoices, VAT payments, accounting classification, statements confirming principle-to-principle sales). The Tribunal found Revenue failed to produce cogent evidence that VAT related to other goods or that supplies were without consideration; reliance on presumptions and invoice notations was insufficient to establish suppression or mis-representation. Consequently, extended period and penalty provisions predicated on such suppression were not sustained in relation to the goods component. The impugned order had already not imposed penalty under one provision; the Tribunal set aside the other penalties to the extent they flowed from the unsustainable demand.

Ratio vs. Obiter

Ratio: Invocation of extended period and imposition of penalties require demonstrable suppression/mis-representation; where the revenue fails to show that segregable goods value was other than invoiced and VAT-paid, penal consequences and extended period invocation are not maintainable insofar as they are premised on inclusion of that goods value in taxable services.

Obiter: Observations regarding the need for customer-wise records and best practices in invoicing, while persuasive, are ancillary.

Conclusion

The Tribunal held extended period/penalties based on alleged evasion with respect to the goods component were not justified. The demand and penalties confirmed insofar as they derive from inclusion of the goods value were set aside; the appeal by Revenue was dismissed and the appellant's appeal allowed.

ISSUES PRESENTED AND CONSIDERED

1. Whether services rendered by a domestic bank in respect of Vostro account transactions are liable to service tax for (a) the pre-negative list period 01.04.2012-30.06.2012 under the Export of Services Rules, 2005 and (b) the post-negative list/place of provision regime 01.07.2012-31.03.2013 under the Place of Provision of Services Rules, 2012 (POPS Rules).

2. Whether payments made to SWIFT (a foreign financial messaging service) - including user registration, connectivity, interface licence, RMA and traffic charges - constitute taxable "Banking and Other Financial Services" under Section 65(12) and whether all such components form part of the value of taxable service under Section 67 and the Valuation Rules.

3. Whether penalty is imposable for non-payment of service tax on SWIFT charges and, if so, whether it is fit to be waived under Section 80 of the Finance Act, 1994 given the interpretational nature of the controversy.

ISSUE-WISE DETAILED ANALYSIS - VOSTRO TRANSACTIONS (01.04.2012-30.06.2012)

Legal framework: Export of Services Rules, 2005 require as a basic condition that "payment for such service is received by the service provider in convertible foreign exchange" for classification as export of service; Banking & Other Financial Services are covered under Section 65(12).

Precedent treatment: Coordinate tribunal decisions dealing with identical facts have held Vostro transactions not taxable for identical periods; the Tribunal follows these coordinate bench decisions unless distinguishable.

Interpretation and reasoning: Vostro mechanism involves correspondent bank funding via convertible foreign currency (Nostro) which is reflected as balances/credits in the Vostro rupee account; Section 2(n) of FEMA treats deposits, credits and balances payable in any foreign currency and specified instruments (including those payable in Indian currency but drawn outside India) as "foreign exchange", thus payments made via Vostro accounts qualify as receipt in convertible foreign exchange notwithstanding conversion for local disbursement.

Ratio vs. Obiter: Ratio - where consideration is funded through Vostro mechanisms from convertible foreign exchange, the condition of receipt in convertible foreign exchange under Export of Services Rules is satisfied; thus services to non-resident banks via Vostro accounts qualify as export of service for the pre-negative list period. (This is the binding reasoning applied.)

Conclusion: Vostro transactions for 01.04.2012-30.06.2012 are not liable to service tax as they qualify as export of service under Export of Services Rules, 2005.

ISSUE-WISE DETAILED ANALYSIS - VOSTRO TRANSACTIONS (01.07.2012-31.03.2013, POST-NEGATIVE LIST)

Legal framework: Place of Provision of Services Rules, 2012 (Rule 3 and Rule 2(1)) determine place of provision by reference to location of the service receiver; in negative-list/post-negative regime, services provided to recipients located outside India are not taxable in India.

Precedent treatment: Circular issued by the Department of Revenue (clarifying remittance services) and tribunal decisions have treated inward remittance reception and fees where recipient is located outside India as outside the taxable territory.

Interpretation and reasoning: Service receivers (foreign exchange houses/banks) lacked any business establishment in India; under Rule 2(1) the location of the service receiver is outside India. The departmental circular (10-07-2012) clarifies that remittance and related conversion/fee activities are not services taxable in India where the recipient is situated abroad; accordingly, the place of provision is outside India.

Ratio vs. Obiter: Ratio - where the recipient of services via Vostro accounts is situated outside India and has no Indian business establishment, the place of provision is outside India under POPS Rules, and the service is not taxable in India for the post-negative period.

Conclusion: Vostro transactions for 01.07.2012-31.03.2013 are not liable to service tax; the demand for that period is set aside.

ISSUE-WISE DETAILED ANALYSIS - SWIFT CHARGES (01.04.2012-31.03.2013)

Legal framework: Section 65(12) (Banking and Other Financial Services) includes activities such as "provision and transfer of information and data processing"; valuation provisions (Section 67 and Service Tax (Determination of Value) Rules, including Rules 5 & 7) include expenditure or costs incurred by service provider in the value of taxable services.

Precedent treatment: Earlier tribunal orders have upheld levy of service tax on SWIFT charges while often allowing penalty relief due to interpretational difficulty; the present Tribunal follows coordinate decisions when facts are identical.

Interpretation and reasoning: SWIFT supplies value-added financial messaging (interface, reconciliation, reporting, encryption) that facilitates banking financial activities; even if SWIFT does not hold customer accounts, the data/information services fall within clause (vii) of Banking and Other Financial Services. Registration, connectivity, interface licence, RMA and traffic charges are shown to be integrally connected with provision of the messaging service; under valuation rules, such related expenses/fees incurred in course of providing taxable service constitute part of the consideration and thus the taxable value.

Ratio vs. Obiter: Ratio - services provided by SWIFT to Indian banks constitute "Banking and Other Financial Services" and the aggregate fees related to delivery of that messaging service (registration, connectivity, licence, RMA, traffic) form part of the value for service tax purposes under Section 67 and applicable valuation rules. (This forms the operative holding on taxability and valuation.)

Conclusion: Demand of service tax on SWIFT charges is sustainable and upheld; interest on tax is maintainable.

ISSUE-WISE DETAILED ANALYSIS - PENALTY AND WAIVER UNDER SECTION 80

Legal framework: Penalty provisions (Section 76 and related) impose consequences for non-payment; Section 80 permits waiver of penalty where a reasonable cause is shown.

Precedent treatment: Tribunal and appellate authorities in several decisions have set aside penalties on SWIFT/Vostro issues where the controversy was interpretational and litigation across forums was ongoing.

Interpretation and reasoning: The taxability of SWIFT charges involved a genuine interpretational question with divergent judicial outcomes; given long-running litigation and bona fide arguability, the appellant demonstrated reasonable cause for non-payment. Consistent with precedent and the discretion under Section 80, imposition of penalty is inappropriate in these circumstances.

Ratio vs. Obiter: Ratio - where non-compliance arises from an arguable interpretation and sustained litigation, penalties under the Act may be remitted under Section 80; this remedial conclusion is applied to the SWIFT-related penalty component.

Conclusion: Penalties levied in respect of SWIFT transactions are set aside by exercise of discretion under Section 80; interest, however, remains payable.

COORDINATION WITH PREVIOUS DECISIONS AND FINAL DISPOSITION

Precedent adherence: The Tribunal applies coordinate-bench decisions on identical facts and follows judicial discipline to adopt those conclusions unless distinguishable; past decisions held Vostro transactions non-taxable and SWIFT taxable with penalty relief - the present decision follows that pattern.

Final conclusions: Vostro transaction demand (entire period April 2012-March 2013 split by regimes) is set aside; SWIFT charge demand is upheld (tax and interest) but penalties relating to SWIFT are remitted under Section 80. The appeal is therefore partly allowed to effect these modifications.

ISSUES PRESENTED AND CONSIDERED

1. Whether use of the brand names "GANGA", "NATIONAL" and "SHINGHVI" by a small-scale manufacturer disentitles the manufacturer to SSI exemption under Para 4 of Notification No. 8/2003-CE on the ground that such brands are the "brand name or trade name (whether registered or not) of another person".

2. Whether the extended period of limitation is invokable and whether imposition of penalty is justified (considered only if the substantive demand survives).

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Effect of using brand names on entitlement to SSI exemption under Para 4 of Notification No. 8/2003-CE

Legal framework - Para 4 of Notification No. 8/2003-CE excludes from SSI exemption goods "bearing a brand name or trade name (whether registered or not) of another person". The Notification contains exceptions (e.g., components supplied as original equipment, goods manufactured in rural factories, specified government-owned brands, certain specific products and packing materials) and an Explanation that the brand must indicate a connection in the course of trade between the goods and some other person.

Precedent treatment - Tribunal and apex authority decisions have held: (a) the onus lies on Revenue to prove that a brand belongs to another person and that the assessee's use indicates an intention to communicate a trade connection with that other person; (b) generic or floating brand names not owned by any particular manufacturer do not attract Para 4; (c) assignment or transfer of a brand to the SSI unit (whether by registered trademark assignment or by unregistered deed/affidavit) converts the unit into the brand owner and removes the "another person" bar. The Board's circular recognising floating brands and the need for Revenue to establish ownership/connection has been followed by Tribunals.

Interpretation and reasoning - The core question is factual and legal: does the brand used by the manufacturer belong to "another person" and does its use indicate a connection in the course of trade with that other person? The Notification must be read to require actual ownership/possession or demonstrable connection by a third party. An assignment of rights (registered or unregistered) that pre-dates or coincides with manufacture, supported by an assignment deed, affidavit or no-objection, makes the SSI unit the owner and removes the prohibition. Conversely, mere statements by third parties, without corroborative documentary proof of ownership or exclusive rights, are insufficient to establish that the brand is "of another person" or that the manufacturer intended to exploit another's goodwill. The Department bears the evidentiary burden to show both ownership by another and use intending to communicate a connection.

Ratio vs. Obiter - Ratio: The bar in Para 4 applies only where the brand is actually of "another person" and the use indicates a connection in trade; burden of proof rests on Revenue; proof may be by evidence of registration or credible documentary proof of ownership/exclusive rights, and assignment to the SSI unit negates the "another person" character. Obiter: Observations about particular modes of proving assignment (e.g., notarized deeds, affidavits) are persuasive guidance rather than exhaustive legal rules.

Conclusions - On the facts, (a) the deed of settlement dated prior to the investigation effecting assignment of the "NATIONAL" mark to the manufacturer establishes ownership and precludes characterisation as a third-party brand; (b) for "GANGA" and "SHINGHVI" the Department adduced only statements from third parties without documentary proof of registration or exclusive ownership and did not pursue inquiry of the alleged earlier owner (no TM-23/TM-24 or statements from alleged transferor); (c) the brand names were common/generic or unclaimed such that there was no evidence of exclusive third-party ownership or intent by the manufacturer to indicate a trade connection with any other person. Accordingly, the use of the three brands did not disentitle the manufacturer to SSI exemption under Para 4 and the confirmed duty demand is unsustainable.

Issue 2 - Invocability of extended period of limitation and imposition of penalty

Legal framework - Extended limitation principles and penal provisions arise only if substantive duty demand is sustainable; penalties under relevant sections and confiscation rules follow established criteria including wilful evasion and period limitations.

Precedent treatment - Courts and Tribunals examine limitation and penalty only after establishing prima facie liability; if substantive demand fails, question of limitation/penalty becomes academic.

Interpretation and reasoning - Since the substantive demand (denial of SSI exemption) is set aside on merits because Department failed to discharge burden of proof on ownership and connection, there is no need to examine invocation of extended limitation or to sustain penalties. The Tribunal declines to reach limitation and penalty issues when the underlying demand does not survive.

Ratio vs. Obiter - Ratio: Where substantive duty demand fails on merits, extended limitation and penalty issues need not be adjudicated; they are dependent on substantive liability. Obiter: None beyond the statement of non-necessity of consideration.

Conclusions - Because the demand for excise duty was unsustainable on merits, extended period of limitation is unnecessary to consider and imposition of penalty is not upheld; the appeal is allowed and the demand is set aside.

Cross-references

See Issue 1 conclusions for the factual application that negates the necessity to decide Issue 2; the Department's failure to produce documentary proof of third-party ownership and to investigate alleged transferors is central to both issues.

ISSUES PRESENTED AND CONSIDERED

1. Whether reversal of CENVAT credit was required when inputs, on which credit had been taken on receipt, were sent "as such" to a job-worker and subsequently returned after job-work.

2. Whether the payment of excise duty by the job-worker on job-worked/intermediate goods and subsequent availment of CENVAT credit by the principal constituted double-availment (double credit) on the same input.

3. Whether interest and penalties could be imposed consequent to the demand for reversal of CENVAT credit.

ISSUE-WISE DETAILED ANALYSIS - Issue 1: Applicability of Rule 4(5)(a) v. Rule 3(5) (Reversal on removal "as such" v. job-work regime)

Legal framework: Rule 3(5) CCR 2004 requires payment of an amount equal to credit availed when inputs/capital goods are removed "as such" from the factory (e.g., sale/transfer/clearance as such). Rule 4(5)(a) CCR 2004 expressly permits sending inputs (as such or partially processed) to a job-worker without reversal of credit provided specified conditions/time-limits (notably receipt back within 180 days) are complied with; if not received within stipulated time, payment equivalent to credit is required with possibility of re-credit on return.

Precedent treatment: The Court examined CBEC Circular No. 990/14/2014-CX-8 clarifying operation of Rule 4(5)(a) (180-day rule; payment and re-credit mechanics) and relied on tribunal decisions applying Rule 4(5)(a) in job-work contexts (e.g., decisions declared in the judgment summarised below).

Interpretation and reasoning: On a plain reading, Rule 3(5) governs genuine removals "as such" (sale/transfer) and cannot be equated with bona fide job-work movements which are squarely covered by Rule 4(5)(a). The record showed bona fide job-work (delivery challans, intent to return, no sale/transfer) and receipt back within prescribed period, making Rule 4(5)(a) the operative provision. The payment of duty by the job-worker on intermediate goods constitutes a distinct duty event and does not convert the job-work removal into an actionable "removal as such" under Rule 3(5).

Ratio vs. Obiter: Ratio - Rule 4(5)(a) governs inputs sent to job-workers; Rule 3(5) was not applicable where movement is bona fide job-work and returns occur within the stipulated period. Obiter - explanatory observations about practical operation of CBEC circulars and procedural features of re-credit.

Conclusion: The Tribunal overruled application of Rule 3(5) by the department in the impugned orders and held that Rule 4(5)(a) CCR 2004 is the correct governing provision for the job-work transactions under consideration.

ISSUE-WISE DETAILED ANALYSIS - Issue 2: Whether availment after return constitutes double-availment

Legal framework: CENVAT credit is allowable on inputs used in the factory per Rule 2(k)(i); Rule 4(5)(a) contemplates allowance of credit on inputs sent for job-work and re-availment when inputs/intermediate goods are received back after duty payment by job-worker.

Precedent treatment: Tribunal decisions were followed which held that intermediate products made out of inputs are different from inputs and credit of duty paid on intermediate products by job-workers cannot be denied merely because credit was earlier availed on raw inputs (Bharat Heavy Electricals Ltd.; Thermax Ltd.; and other tribunal/court precedents relied upon by the appellant and considered persuasive).

Interpretation and reasoning: The revenue failed to demonstrate identity of the alleged double claim - i.e., the same duty component on the same physical quantity and the same taxable event. Documentary evidence (delivery challans, job-worker invoices, central excise invoices) showed (a) initial credit related to duty on raw inputs at receipt; (b) subsequent duty by the job-worker related to the intermediate product (distinct taxable event and value composition), and (c) no sale/clearance that would trigger Rule 3(5). Rule 2(k)(i) supports that goods received back and used in the factory qualify as inputs eligible for credit. The onus to prove double-availment rests with the Revenue, which did not establish identity of duty twice claimed.

Ratio vs. Obiter: Ratio - Where inputs are sent for bona fide job-work and intermediate goods returned (with job-worker having paid duty on the intermediate), availment of credit upon return does not amount to impermissible double-availment; credits relate to different duty events and distinct taxable values. Obiter - remarks on the absence of any requirement in Rule 4(5)(a) that job-workers must avail conditional exemption schemes for the principal to claim credit.

Conclusion: There was no double-availment; the appellant's availment of credit on receipt and again on receipt of intermediate goods after job-work was sustainable under Rule 4(5)(a) and related jurisprudence.

ISSUE-WISE DETAILED ANALYSIS - Issue 3: Interest and penalties

Legal framework: Interest and penalties arise only upon a valid demand (e.g., confirmed reversal/payment obligation). If the underlying demand is unsustainable, ancillary interest and penalty demands fall away.

Precedent treatment: The Court applied the logical sequence that extinguishing the principal demand (reversal) negates the basis for interest and penalty imposed in consequence of that demand.

Interpretation and reasoning: Since the demand for reversal of CENVAT credit was set aside on substantive legal grounds (Rule 4(5)(a) applicable; no double-availment), the consequential claims for interest and penalties lack sustenance and are automatically extinguished.

Ratio vs. Obiter: Ratio - Interest and penalties tied to an unsustainable demand for reversal are extinguished; no separate basis remained to impose them. Obiter - none significant beyond the necessary consequence.

Conclusion: Interest and penalties consequential to the disallowed demand for reversal were set aside.

OVERALL CONCLUSION

The Tribunal held that the correct legal regime for the movements in dispute was Rule 4(5)(a) CCR 2004 (job-work provisions), not Rule 3(5); the job-worker's payment of duty on intermediate goods was a distinct taxable event and did not result in impermissible double-availment of CENVAT credit by the principal; accordingly, demands for reversal of credit, and consequential interest and penalties, were unsustainable and were set aside. The Appeals were allowed with consequential benefits if any, as per law.

ISSUES PRESENTED AND CONSIDERED

1. Whether the order under Section 148A(3) and reassessment notice under Section 148 can be sustained where the Assessing Officer did not consider the taxpayer's written submissions and explanations in response to the show-cause notice under Section 148A(1).

2. Whether, on a finding that the taxpayer's submissions were not dealt with, the appropriate remedy is to quash the impugned order/notice and remit the matter to the Assessing Officer for fresh adjudication with opportunity of hearing and requirement of a reasoned order.

3. Whether the remand should be subject to a time-limit for completion of further proceedings.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of the order under Section 148A(3) and reassessment notice under Section 148 where Assessing Officer failed to consider taxpayer's submissions.

Legal framework: Section 148A(1) requires issue of a notice and affords the taxpayer an opportunity to furnish a response; Section 148A(3) requires the Assessing Officer to consider the taxpayer's representation and to record reasons for reopening, with any subsequent issuance of notice under Section 148 being founded on that consideration.

Precedent Treatment: No earlier judicial precedent was invoked or applied by the Court in the judgment; the decision rests on statutory obligation and the record before the Court.

Interpretation and reasoning: The Court examined the record and accepted the uncontradicted position (not contested by Revenue) that the taxpayer's contentions, including explanation of the source of funds and prior assessment acceptance on the same amount, were not dealt with in the order dated 29.06.2025 under Section 148A(3). Where the statutory process under Section 148A is intended to ensure that taxpayer representations are considered before reopening, a failure to address those representations vitiates the decision to proceed with reassessment. The Court therefore concluded that an order that does not reflect consideration of the taxpayer's submissions does not satisfy the statutory mandate under Section 148A and cannot sustain the consequential notice under Section 148.

Ratio vs. Obiter: Ratio - The legal proposition that an order under Section 148A(3) and any consequent Section 148 notice must reflect consideration of the taxpayer's response and reasons for reopening, and that absence of such consideration renders the reopening invalid.

Conclusions: The Court set aside the order under Section 148A(3) and the reassessment notice under Section 148 for failure to consider the taxpayer's submissions; the impugned proceedings were held to be vitiated by this omission.

Issue 2 - Appropriate remedy where Assessing Officer failed to consider submissions: quash and remand for fresh reasoned order and hearing.

Legal framework: Principles of natural justice and statutory mandate under Section 148A require opportunity of hearing and mandate reasoned decisions; courts may quash administrative action that fails to comply and remit for fresh consideration consistent with statutory requirements.

Precedent Treatment: No case law was relied upon in the decision; the Court applied statutory and procedural principles directly to the facts.

Interpretation and reasoning: Given the conceded omission by Revenue, the Court held that a supervisory remedial course - setting aside the impugned order/notice and remitting the matter - best effectuates statutory compliance and preserves the taxpayer's right to be heard. The Court directed the Assessing Officer to pass a fresh, reasoned order after hearing the taxpayer's representative, thereby ensuring both adherence to Section 148A(3) and fulfilment of audi alteram partem obligations.

Ratio vs. Obiter: Ratio - Where an Assessing Officer fails to deal with taxpayer's representations in the Section 148A process, the appropriate remedy is to set aside the impugned order/notice and remit for a fresh, reasoned decision after hearing the taxpayer.

Conclusions: The Court remanded the matter to the Assessing Officer with directions to hear the taxpayer and pass a fresh reasoned order; the impugned order and notice were set aside.

Issue 3 - Imposition of a time-limit for completion of the remanded proceedings.

Legal framework: Courts routinely impose reasonable time-limits when remitting matters to administrative authorities to ensure expeditious disposal and prevent prejudice caused by unwarranted delay; such directions are within the supervisory jurisdiction.

Precedent Treatment: No precedents were cited; the direction was made as a matter of supervisory control in the exercise of judicial review powers.

Interpretation and reasoning: To balance the need for correct procedure with the interest in finality and expedition, the Court fixed a definite outer time limit for completion of the entire process (hearing and passing of a fresh reasoned order). This ensures that the Assessing Officer acts within a reasonable period and that the taxpayer's rights are not indefinitely postponed.

Ratio vs. Obiter: Ratio - When remitting for fresh consideration due to deficiency in the original decision under Section 148A, courts may and should impose a reasonable time-limit for completion of the further proceedings to secure prompt adjudication.

Conclusions: The Court directed that the entire process, including hearing and passing of a fresh reasoned order, be completed within six weeks from the date of the Court's order.

Ancillary findings and administrative outcome

Interpretation and reasoning: The respondents did not contest the petitioner's central factual-legal contention that its earlier explanations were not considered; that concession informed the Court's remedial outcome. No substantive adjudication was made on the merits of the reassessment (i.e., correctness of taxability of the remitted amount), since the record required fresh consideration.

Ratio vs. Obiter: Obiter - The Court's observation that the taxpayer's prior assessment acceptance dealt with the same amount and that the Assessing Officer "overlooked" the taxpayer's stand explains the basis for remand but does not constitute a final adjudication on merits.

Conclusions: The petition was disposed of by setting aside the Section 148A(3) order and Section 148 notice and remanding the matter for fresh, reasoned consideration within the prescribed six-week period; ancillary interim relief applications were addressed as indicated in the order.

ISSUES PRESENTED AND CONSIDERED

1. Whether the order under Section 148A(3) and consequent notice under Section 148 were valid where the Assessing Officer purportedly did not consider material objections/representations filed by the assessee challenging reopening on identical facts already adjudicated in earlier proceedings.

2. Whether reassessment proceedings under Section 148 can be initiated on an identical issue already examined and adjudicated by the department (including by an NFAC) without addressing the assessee's specific submissions and documents.

3. Whether remedial relief in the form of setting aside the Section 148A(3) order and the Section 148 notice and remanding the matter to the AO for fresh consideration and hearing is appropriate where the AO has not recorded a fresh, reasoned order after permitting production of documents and hearing.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of Section 148A(3) order and Section 148 notice where AO allegedly failed to consider assessee's objections/representations

Legal framework: Section 148A(1) requires issuance of notice to taxpayer when assessing officer proposes reassessment; Section 148A(3) obliges the AO to consider the representations of the assessee and pass an order with reasons before issuing notice under Section 148. Principles of reasoned decision-making and audi alteram partem apply.

Precedent Treatment: The judgment does not rely upon or distinguish any prior precedent; analysis proceeds on statutory requirements and established administrative law principles requiring consideration of objections and opportunity of hearing.

Interpretation and reasoning: The Court noted that the assessee had filed specific, cogent objections (including reference to an earlier NFAC order, confirmations, bank statements and ITRs) requesting further particulars and adjournment to file reply. The AO's impugned order under Section 148A(3) did not adequately consider these representations as reflected on the record. Where statutory procedure mandates consideration of the assessee's reply, failure to do so renders the order vitiated by lack of adequate reasoning and non-application of mind.

Ratio vs. Obiter: Ratio. The Court's setting aside of the order proceeded on the essential legal principle that an order under Section 148A(3) must record consideration of the assessee's objections and grant opportunity to produce documents and be heard; absence of such consideration is a jurisdictional defect.

Conclusion: The Section 148A(3) order was set aside because the AO did not properly consider the specific objections and documents placed on record by the assessee; corresponding relief was granted.

Issue 2 - Permissibility of reopening on an identical issue already examined and adjudicated

Legal framework: Reopening under Section 148 is constrained by the requirement that there be reason to believe income has escaped assessment; administrative fairness requires that where the same issue has already been examined and concluded in prior proceedings, the AO must address why reopening is justified and take into account earlier adjudication.

Precedent Treatment: No precedents were invoked or overruled in the judgment; the Court applied statutory and procedural safeguards to the facts before it.

Interpretation and reasoning: The assessee contended that the identical issue (alleged non-genuine/accommodation transactions) had been adjudicated and assessed under earlier proceedings, and that relevant documents and verifications were already on record. The Court observed that the AO should specifically address the fact of prior adjudication and the assessee's supporting documents when proposing reassessment on the same issue; mere issuance of fresh notice without considered reasons in that context is impermissible.

Ratio vs. Obiter: Partial ratio. The Court's direction emphasizes that reopening on an identical issue requires the AO to confront and record reasons addressing prior adjudication and the assessee's representations; failure to do so will invalidate the order.

Conclusion: Reopening on an identical issue without addressing earlier adjudication and the assessee's submissions is improper; the matter must be reconsidered with proper application of mind.

Issue 3 - Appropriate remedial relief where AO's order is deficient

Legal framework: Where a statutory order is procedurally defective or not reasoned, the Court may set it aside and remit the matter for fresh consideration after affording opportunity of hearing and permitting production of documents; remedial directions often include timelines to ensure expedition.

Precedent Treatment: The Court did not cite authority but applied standard judicial supervisory power to ensure statutory compliance and fair procedure.

Interpretation and reasoning: Given the AO's omission to consider the assessee's detailed reply and documents and the fact that the revenue did not contest that the objection was not considered, the Court found remand appropriate. The Court directed setting aside of the impugned Section 148A(3) order and Section 148 notice and ordered the AO to decide afresh after hearing and permitting production of documents, within an outer limit of eight weeks.

Ratio vs. Obiter: Ratio. The remedial order is dispositive and necessary to cure the procedural defect identified; it establishes the required course of action in such circumstances.

Conclusion: The Section 148A(3) order and consequent Section 148 notice were set aside; matter remanded to AO to pass a fresh, reasoned order after providing hearing and permitting documentary production, to be completed within eight weeks, after which parties to proceed according to law.

Cross-references and Interrelationship of Issues

The issues are interlinked: the procedural infirmity in Issue 1 (failure to consider objections) and the substance of Issue 2 (reopening on an issue already adjudicated) together justified the remedial course in Issue 3 (setting aside and remand). The Court's order requires the AO on remand to address both the procedural lapse and the substantive question of whether reopening is warranted despite prior adjudication.

ISSUES PRESENTED AND CONSIDERED

1. Whether reassessment proceedings under section 148/148A were validly initiated and within limitation under section 149 given information of escaped income exceeding the monetary threshold.

2. Whether the Assessing Officer had recorded requisite independent belief/opinion for reopening and whether reliance solely on information from investigation wing suffices.

3. Whether the addition of Rs. 55,00,000 as "Income from Other Sources" (consideration for relinquishment of rights in ancestral property) was justified in absence of corroborative evidence regarding genuineness and source of cash payments.

4. Whether the assessment proceedings complied with principles of natural justice (opportunity of hearing) and statutory procedures (including faceless assessment/section 144B implications).

5. Whether penalty proceedings under sections 271(1)(c), 271F and 271(1)(b) could be sustained given the facts and the record of cooperation/non-cooperation.

6. Whether delay in filing the present appeal should be condoned.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of reopening under sections 148/148A and limitation under section 149

Legal framework: Reopening of assessment requires issuance of notice under section 148 and adherence to time limits laid down in section 149; section 148A prescribes pre-reopening procedural steps; section 149(1)(b) extends limitation where escaped income exceeds statutory threshold.

Precedent Treatment: The Tribunal treated applicability of section 149(1)(b) and compliance with section 148A procedure as central to limitation inquiry; no precedent was overruled.

Interpretation and reasoning: The Court examined dates of notices and found that the notice under section 148A(b) was issued within the permissible time and that escaped income exceeded the threshold (Rs. 50 lakh), bringing the matter within section 149(1)(b). It further noted that procedural steps under section 148A were followed and opportunities were granted, though the assessee failed to respond.

Ratio vs. Obiter: Ratio - Where escaped income exceeds statutory threshold, limitation under section 149(1)(b) applies and procedural compliance with section 148A must be examined; finding that notices were timely and procedure followed is binding for the fact scenario. Obiter - General observations on investigation-sourced information do not form broader precedent.

Conclusion: Reopening was not barred by limitation; the reassessment proceedings were validly initiated in time under section 149(1)(b) after compliance with section 148A.

Issue 2 - Requirement of independent opinion for reopening and reliance on information from investigation wing

Legal framework: Jurisprudence mandates that AO must form an independent belief/opinion for reopening; reliance on information from other sources is permissible provided AO records own satisfaction/opinion and follows procedure.

Precedent Treatment: The Court referred to the statutory requirement of recording opinion under section 148A(d)/148 and emphasized procedural compliance; no departure from existing case law.

Interpretation and reasoning: The Tribunal observed that notices under section 148A were issued and opportunities afforded, and despite the assessee's contention, the record indicated the AO had followed the prescribed process. The AO's recording of statements and investigation findings, coupled with the absence of responses from the assessee, supported the AO's course of action.

Ratio vs. Obiter: Ratio - AO may act on information from investigation wing provided statutory pre-conditions are satisfied and AO records requisite satisfaction; mere reliance on such information without recording AO's opinion would be impermissible (distinguished factually). Obiter - Broad commentary on quality of intelligence information.

Conclusion: The reopening was not invalid merely because it originated from investigation information; procedural requirements were met such that AO's action stood.

Issue 3 - Addition of Rs. 55,00,000 as taxable income in absence of corroborative evidence (classification as "Income from Other Sources")

Legal framework: Burden lies on assessee to substantiate claimed nature/source of receipts; unexplained cash credits/receipts may be taxable as income under recognized heads where genuineness and source are not established.

Precedent Treatment: The Court applied settled principles that unexplained receipts can be taxed and that admissions in statements are relevant; no precedent was overruled.

Interpretation and reasoning: The assessee admitted receipt of Rs. 55,00,000 in cash under a family partition deed; payers failed to produce credible evidence to substantiate the source of funds. Given lack of documentary corroboration and repeated non-cooperation, the AO and CIT(A) were justified in treating the receipt as consideration for relinquishment and taxing it under "Income from Other Sources."

Ratio vs. Obiter: Ratio - In the absence of credible corroborative evidence regarding source and genuineness of large cash payments, such receipts may be assessed as income; admission by assessee and corroborative (or lack of) evidence from payers are material. Obiter - Remarks on propriety of taxing relinquishment proceeds under a particular head where different characterisation might have been possible if evidence were furnished.

Conclusion: The addition of Rs. 55,00,000 was justified on the material before the authorities; assessee's failure to substantiate the transaction warranted taxation as income from other sources.

Issue 4 - Compliance with principles of natural justice and faceless assessment regime (section 144B implications)

Legal framework: Assessments must adhere to principles of natural justice - reasonable opportunity to be heard; faceless assessment scheme operates under section 144B with prescribed procedures for issue/response.

Precedent Treatment: The Tribunal relied on authorities stressing restoration for fresh adjudication where fair opportunity was not afforded (Guduthur Bros., Tin Box, Jansampark) and applied those principles to factual record.

Interpretation and reasoning: Although authorities found that notices were issued and opportunities were afforded, the assessee repeatedly failed to respond. Nevertheless, in the interest of substantial justice and recognizing tax proceedings as quasi-judicial, the Tribunal concluded that one further opportunity should be granted and the matter remanded to the AO for fresh adjudication to ensure fairness and compliance with natural justice.

Ratio vs. Obiter: Ratio - Where there is non-cooperation but the record suggests procedural or participatory defects (or potential deficiency in the opportunity afforded), the matter may be restored to AO for fresh hearing; restoration is warranted to secure substantial justice. Obiter - Comments on faceless assessment compliance were made contextually and do not constitute broad precedent.

Conclusion: Though procedural steps were largely followed, the matter is remitted for fresh adjudication with a further opportunity to the assessee to substantiate claims, to safeguard natural justice.

Issue 5 - Initiation of penalty proceedings (sections 271(1)(c), 271F, 271(1)(b))

Legal framework: Penalty provisions require establishment of concealment, failure to file return, or non-compliance with statutory notices; imposition depends on facts and conduct.

Precedent Treatment: The Tribunal noted initiation of penalties but did not finally adjudicate their sustainment on merits pending re-adjudication of primary issue; no precedent altered.

Interpretation and reasoning: The AO had initiated penalty proceedings on account of alleged concealment and non-compliance. Given remand for fresh adjudication on the taxability issue and the assessee's non-cooperation, penalty proceedings remain contingent on outcomes of reassessment; the Tribunal did not finally decide penalties but preserved AO's authority to proceed.

Ratio vs. Obiter: Obiter - Initiation of penalties appropriate where non-cooperation observed; final determination deferred. Ratio - Not applicable as a definitive conclusion on penalties was not rendered.

Conclusion: Penalty proceedings were appropriately initiated on the facts but their fate is to be determined after re-adjudication by the AO; Tribunal did not quash penalties at this stage.

Issue 6 - Condonation of delay in filing appeal

Legal framework: Courts/Tribunals adopt a liberal, justice-oriented approach in condoning delay where sufficient cause is shown; length of delay is less material than the acceptability of explanation.

Precedent Treatment: The Tribunal relied on established Supreme Court authorities emphasizing preference for substantial justice over technicalities and acceptability of explanations for delay.

Interpretation and reasoning: The assessee explained delay due to bona fide change of accountant and inadvertent misplacement of papers. Applying liberal approach and precedents that favour substantial justice where delay is not deliberate or mala fide, the Tribunal found the explanation satisfactory and condoned the 293-day delay.

Ratio vs. Obiter: Ratio - Delay in filing appeal can be condoned where a bona fide, satisfactory explanation is furnished and absence of mala fide or deliberate lapse is demonstrated. Obiter - Remarks on administrative causes for delay.

Conclusion: Delay of 293 days in filing the appeal was condoned; appeal admitted for hearing on merits.

Relief and ancillary directions

Interpretation and reasoning: Balancing non-cooperation by assessee with principles of natural justice, the Tribunal remitted the matter to the Assessing Officer for fresh adjudication after affording opportunity to substantiate the claimed partition receipt. To ensure participation and discourage casual approach, a cost of Rs. 10,000 was imposed to be deposited before the next hearing and proof produced.

Ratio vs. Obiter: Ratio - Where reassessment is remanded for fresh consideration due to participatory defects, the Tribunal may impose costs to ensure compliance and discourage indifference. Obiter - The specific quantum of costs is a discretionary ancillary measure.

Conclusion: Matter restored to Assessing Officer for fresh adjudication; assessee to be given opportunity to produce documentary evidence; cost of Rs. 10,000 imposed to be deposited in government treasury prior to next hearing.

ISSUES PRESENTED AND CONSIDERED

1. Whether an adjustment made by the Centralized Processing Centre (CPC) under section 143(1) of the Income-tax Act without issuance of the prior intimation mandated by the first proviso to section 143(1)(a) is valid.

2. Whether an adjustment involving a debatable question of law (specifically restriction of exemption under section 10(10AA)) can be validly made by CPC under section 143(1) without following the procedural safeguard of prior intimation and opportunity to respond.

3. (Raised but not adjudicated) Whether an employee of a Central Government undertaking is entitled to full exemption under section 10(10AA)(i) as if a Government employee - i.e., the substantive question of entitlement to leave-encashment exemption beyond Rs. 3,00,000 for the year in issue.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of CPC adjustment under section 143(1) absent prior intimation under first proviso to section 143(1)(a)

Legal framework: Section 143(1) and the first proviso to section 143(1)(a) require that before making any adjustment to returned income, the assessee must be given an intimation in writing or electronic mode setting out the nature of the proposed adjustment and an opportunity to respond within 30 days. The proviso is couched in mandatory terms and embodies the audi alteram partem principle.

Precedent Treatment: The Tribunal relied on several coordinate-bench decisions holding that any adjustment under section 143(1) made without complying with the first proviso is contrary to statute and violative of natural justice; such intimation is thereby invalid and vitiates the entire 143(1) proceedings. Prior orders of the same Bench (referenced and followed) explicitly quashed CPC intimations on identical grounds.

Interpretation and reasoning: The Court examined the record and found no evidence of a prior intimation being issued by CPC before effecting the adjustment. The Departmental Representative conceded absence of such intimation. Given the mandatory wording of the proviso and its purpose to secure a hearing before unilateral adjustments, the Tribunal concluded that non-compliance defeats the statutory procedure and fundamental fairness. The Court treated the proviso not as directory but as mandatory, and emphasized that failure to afford the prescribed opportunity renders the 143(1) intimation invalid.

Ratio vs. Obiter: Ratio - Failure to issue the prior intimation as mandated by the first proviso to section 143(1)(a) vitiates and renders the CPC intimation under section 143(1) invalid in law. The holding that the entire 143(1) proceedings are unsustainable without such prior intimation constitutes the operative ratio.

Conclusion: The intimation issued by CPC under section 143(1) was quashed for non-compliance with the first proviso to section 143(1)(a); the 143(1) proceedings are invalidated on grounds of denial of audi alteram partem.

Issue 2: Competence of CPC to make adjustments on debatable questions of law under section 143(1) without prior intimation

Legal framework: The same statutory mandate (first proviso to section 143(1)(a)) governs any adjustment contemplated under section 143(1), including those touching legal questions or claims whose correctness is not immediately apparent from the return. The proviso requires written/electronic intimation and an opportunity to reply before any adjustment is made.

Precedent Treatment: Coordinate Bench decisions referred to by the Tribunal have held that CPC cannot mechanically make adjustments on debatable legal issues without issuing the statutory prior intimation and considering the taxpayer's response; failure to do so renders the adjustment unlawful.

Interpretation and reasoning: The Tribunal observed that the impugned restriction of exemption under section 10(10AA) involved a debatable legal question (entitlement and limits of exemption). Given the mandatory proviso and absence of prior intimation, the Tribunal found that CPC exceeded the permissible procedural scope by unilaterally making the adjustment. The objective of the proviso - ensuring meaningful opportunity to contest proposed adjustments - applies with full force where the correctness of a claim is debatable.

Ratio vs. Obiter: Ratio - CPC is not justified in making adjustments on debatable legal questions under section 143(1) without compliance with the first proviso; such adjustments are procedurally vitiated. This follows as part of the primary holding quashing the intimation.

Conclusion: The adjustment impinging on a debatable legal claim (section 10(10AA) exemption) could not validly be made by CPC without prior intimation and opportunity to respond; the adjustment is therefore set aside along with the 143(1) intimation.

Issue 3: Merits - entitlement to exemption under section 10(10AA) (raised but not adjudicated)

Legal framework: Section 10(10AA) prescribes exemption for leave encashment on superannuation/retirement subject to specified statutory limits; different sub-clauses distinguish Government employees from others, with limits applicable accordingly. Notifications of the Board may affect quantum prospectively.

Precedent Treatment: The assessing and appellate authorities considered judicial authorities and CBDT notifications in their merit-level analysis; however, the Tribunal expressly refrained from adjudicating the merits in view of its primary finding on procedural invalidity.

Interpretation and reasoning: Because the intimation under section 143(1) was quashed for procedural non-compliance, the Tribunal held that merit issues (including whether employees of a Central Government undertaking qualify for full exemption under the relevant sub-clause and the temporal applicability of Board notifications) became academic for purposes of the present appeal and were not decided.

Ratio vs. Obiter: Obiter - Any observations touching the substantive entitlement under section 10(10AA) are not part of the ratio; the Tribunal explicitly withheld adjudication of those merits.

Conclusion: Merits regarding entitlement to leave-encashment exemption beyond Rs. 3,00,000 were not adjudicated and remain open for future proceedings if the statutory procedure (prior intimation and opportunity to respond) is complied with.

Cross-references and Practical Consequence

Where an adjusting authority (including CPC) effects changes under section 143(1) without issuing the prior intimation required by the first proviso to section 143(1)(a), such action is contrary to statute and natural justice and will be quashed; consequent merits of the adjustment need not be decided in such cases and must be reopened only after compliance with the proviso. The Tribunal follows and applies coordinate-bench precedents reaching the same conclusion.

ISSUES PRESENTED AND CONSIDERED

1. Whether the notice under section 148 read with section 147 of the Income Tax Act was validly issued where the Assessing Officer's recorded reasons stated non-filing of return for the relevant year despite record showing a filed return?

2. Whether the reasons recorded to reopen assessment constituted an application of mind by the Assessing Officer or amounted to a mechanical/borrowed satisfaction vitiating jurisdiction under section 147/148?

3. Whether an addition under section 69A (unexplained money) quantified and taxed under section 115BBE could be sustained where reassessment proceedings were quashed on grounds of invalid reopening?

4. Whether defects in the reasons for reopening or in the approval under section 151 are curable (e.g., by section 292B or by considering typographical errors) or render proceedings void when relevant factual errors influenced the satisfaction to reopen?

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of notice under section 148 where reasons recorded state non-filing though a return was filed

Legal framework: Reopening of assessment requires recording of reasons to believe under section 147 and issuance of notice under section 148; Explanation 2(a) to section 147 is attracted where no return was filed; sanction/approval under section 151 required where more than four years have not lapsed.

Precedent Treatment: Tribunal and High Court authorities discussed in the judgment (including decisions holding that where reasons are factually incorrect as to non-filing, reopening may be quashed) were followed and applied.

Interpretation and reasoning: The Tribunal examined the AO's reasons which repeatedly stated non-filing for the assessment year, while the record itself showed filing of return on 15.09.2017 (a fact acknowledged even in the assessment order). The AO treated the matter as a non-filer case and invoked Explanation 2(a) to section 147 - a provision applicable only where no return was filed. Because the foundational factual premise for invoking Explanation 2(a) was incorrect, the Tribunal concluded that the AO's satisfaction was based on a wrong fact.

Ratio vs. Obiter: Ratio - A reopening predicated on a factual premise of non-filing when a return was in fact filed vitiates the AO's satisfaction and the subsequent notice under section 148 is invalid. Obiter - Observations about potential processing/upload issues of the return and administrative typographical errors (e.g., mention of Principal Commissioner instead of Joint/Pr. CIT) were treated as curable in principle but were not dispositive given the main factual defect.

Conclusion: The notice under section 148 was invalid because it was issued on the basis that the assessee had not filed return for the year when in fact a return had been filed; the reopening was therefore unsustainable.

Issue 2 - Whether the reasons for reopening demonstrated application of mind or amounted to borrowed/mechanical satisfaction

Legal framework: The assessing authority must apply its own mind and record independent reasons; borrowed satisfaction from information/investigation without independent verification may render reopening void for lack of jurisdiction.

Precedent Treatment: The Tribunal relied on coordinate Bench and High Court decisions (cited in the judgment) which quashed reopenings where the AO merely reproduced information from investigation wings or failed to quantify/justify escapement and did not independently examine whether information was reflected in the return.

Interpretation and reasoning: The AO's reasons were primarily reproduced from NMS/Investigation data asserting large cash deposits and concluding escapement. The Tribunal found absence of independent verification or explanation as to how amounts were attributed to escapement of income, and no application of mind as the AO ignored processing/143(1) status and return particulars. The approval authority under section 151 also did not demonstrate independent consideration, indicating a borrowed satisfaction.

Ratio vs. Obiter: Ratio - Where the AO records reasons that merely repeat investigation inputs without independent verification and without linking those inputs to specific escapement not reflected in the filed return, the satisfaction to reopen is vitiated for lack of application of mind. Obiter - Quantification requirements and the formality of mentioning clause (a) of Explanation 2 are referenced as relevant but subordinate to the absence of independent examination.

Conclusion: The reasons suffer from non-application of mind and borrowed satisfaction; the reopening and notice are vitiated on that ground.

Issue 3 - Fate of additions under section 69A and applicability of section 115BBE once reassessment is quashed

Legal framework: Additions under section 69A (unexplained money) can be made in assessment/reassessment proceedings; section 115BBE prescribes special rate for taxability of undisclosed income in certain situations. However, validity of such additions depends on the validity of the underlying proceedings.

Precedent Treatment: The Tribunal treated prior decisions that quashed substantive additions where reopening was invalid as applicable; those authorities supported quashing of consequential additions where the foundational jurisdictional act (reopening) was defective.

Interpretation and reasoning: The Tribunal did not adjudicate the substantive merits of the section 69A addition because it concluded the entire reassessment was vitiated by the invalid notice/reopening. Having quashed reassessment on jurisdictional grounds, the Tribunal held further adjudication of the addition unnecessary.

Ratio vs. Obiter: Ratio - If reassessment proceedings are quashed for invalid reopening, additions made in those proceedings (including under section 69A and imposition of section 115BBE tax rate) cannot stand and need not be adjudicated. Obiter - No comments on intrinsic correctness of the addition on merits were made.

Conclusion: The addition under section 69A and related invocation of section 115BBE were set aside by consequence of quashing the reassessment; the Tribunal declined to decide merits of that addition.

Issue 4 - Curability of defects in reasons/approval and effect of irrelevant or erroneous facts on reopening

Legal framework: Procedural/typographical errors may be curable (e.g., under section 292B or by clarifying approval), but where an irrelevant or incorrect fact has overbearingly influenced the satisfaction to reopen, the reopening is vitiated. The authorities cited establish that taking into account an irrelevant or factually incorrect matter that materially affects the satisfaction makes the action unsustainable.

Precedent Treatment: High Court and Tribunal authorities cited were applied to show that when the reasons recorded are de hors (contrary to) facts on record or when the AO cannot demonstrate which factor weighed in the decision, the reopening must be quashed.

Interpretation and reasoning: The Tribunal acknowledged that minor typographical errors in recording approving authority could be curable. However, the larger factual error - asserting non-filing of return - was not a mere typographical mistake but a substantive incorrect fact that dominated the AO's rationale. Given the AO's reliance on that incorrect premise, the defect was not curable and rendered the proceedings void.

Ratio vs. Obiter: Ratio - Material factual errors relied upon in forming the satisfaction to reopen are not curable and invalidate the reopening; immaterial or clerical errors may be curable. Obiter - The Tribunal noted that administrative lapses in upload/processing could be examined in appropriate factual contexts, but did not treat such possibilities as curing the primary defect here.

Conclusion: Typographical/clerical defects in approval could be curable, but the substantive factual misstatement (non-filing) materially vitiated the satisfaction; the reopening could not be salvaged.

Concluding Disposition (operative conclusion derived from issues)

The Tribunal quashed the reassessment and assessment order because the notice under section 148 was issued on wrong reasons and without application of mind, relying on borrowed satisfaction; consequential issues (section 69A addition and section 115BBE tax) were not adjudicated as the reassessment itself was set aside.

ISSUES PRESENTED AND CONSIDERED

1. Whether a reopening under section 148 (and consequential assessment under section 147) is valid where the reasons recorded for reopening are factually incorrect and were effectively substituted or modified by the Assessing Officer during assessment proceedings.

2. Whether reassessment proceedings initiated for the relevant assessment year by issue of notices on or after 1 April 2021 are barred by limitation having regard to the interplay between the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and the post-2021 reassessment regime (including the concession recorded by the highest court that certain notices issued on/after 1 April 2021 must be dropped for the assessment year in question).

3. Whether a notice under section 148 issued after more than three years from the end of the relevant assessment year is valid where prior approval/satisfaction required under the statutory provision prescribing a "specified authority" was not obtained from the correctly designated senior authority (i.e., approval obtained from an authority other than that mandated by the statutory scheme).

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of reopening when reasons recorded are factually incorrect and substituted during assessment

Legal framework: Jurisdiction to reopen an assessment under sections 147/148 is founded on reasons recorded by the Assessing Officer and the subsequent statutory process; those reasons constitute jurisdictional facts and cannot be changed, supplemented or corrected post hoc in a manner that alters the basis for reopening.

Precedent treatment: The Tribunal considered well-established administrative law principles that recorded reasons for initiating adverse proceedings are not amenable to post-reopening substitution; prior authorities emphasize that reasons recorded are immutable and that substitution of the subject or facts at assessment stage amounts to impermissible post-facto rationalisation.

Interpretation and reasoning: The AO issued the reopening notice based on information identifying a particular source and transaction. During assessment the AO admitted that the recorded reasons were a "typographical mistake" and completed assessment by making additions on the basis of different parties and transactions than those mentioned in the reasons for reopening. The Tribunal held that the AO had not verified the information before obtaining approval to reopen; the initial information was wrong and the AO proceeded to change the subject of inquiry at the assessment stage. Since the jurisdiction to reopen rested on the original recorded reasons and the approval was obtained on that (wrong) basis, the subsequent change constituted a material alteration of the basis of jurisdiction and amounted to a jurisdictional defect rendering the reopening void ab initio.

Ratio vs. Obiter: Ratio - reasons recorded for reopening are jurisdictional facts; they cannot be modified at the assessment stage to change the party/transaction that formed the basis of reopening. Obiter - factual observations about the nature of the transactions (business advances, confirmations, bank statements) were noted but not determinative once the jurisdictional defect was found.

Conclusion: Reopening and the assessment founded on substituted reasons are invalid; assessment set aside and cross objection allowed on this ground.

Issue 2 - Limitation and effect of statutory relaxation (TOLA) and subsequent judicial concession on notices issued on/after 1 April 2021 for the assessment year

Legal framework: Limitation for issuance and completion of reassessment notices is governed by the statutory time limits in the Income-tax Act; the temporary modifications effected by the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) interact with the reformed reassessment provisions introduced by the Finance Act, 2021. Where the revenue concedes before the highest court that certain notices issued between specific dates will not fall for completion within the TOLA period, those notices are to be treated as barred.

Precedent treatment: The Tribunal relied on the highest court's concession and on subsequent High Court and Tribunal orders applying that concession to quash notices issued beyond the permissible limitation period under the statutory scheme and read in light of TOLA.

Interpretation and reasoning: In the instant facts, notices relevant to the assessment year were issued on/after dates that, in light of the statutory relief and the highest court's concession, cannot be completed within the TOLA prescribed period for that assessment year. The Tribunal accepted the assessee's submission that in view of the judicial concession and consistent court orders, the reassessment initiatives for that assessment year must be dropped as barred by limitation.

Ratio vs. Obiter: Ratio - where a binding concession of the highest court establishes that notices issued on/after certain dates cannot be completed within the TOLA period for the relevant assessment year, reassessment notices falling in that category are liable to be set aside. Obiter - references to various subsequent orders applying the concession reinforce the view but do not expand the legal principle beyond the concession.

Conclusion: Reassessment notices falling within the conceded period are time-barred; cross objection allowed and departmental appeal dismissed as infructuous on this ground.

Issue 3 - Requirement of prior approval from correctly designated "specified authority" for notices issued after three years

Legal framework: The statutory scheme requires that no notice under section 148 shall be issued where more than three years have elapsed from the end of the relevant assessment year unless prior approval is obtained from the specified authority as defined in the statute. The identification of the appropriate specified authority depends on whether more than three years have elapsed; the provision is mandatory and designed to ensure supervisory application of mind before disturbing a settled assessment.

Precedent treatment: The Tribunal referred to recent judicial pronouncements holding that failure to obtain prior sanction from the particular authority prescribed by the statute (where more than three years have elapsed, the Principal Chief Commissioner/Principal Director General or equivalent senior officer) vitiates the notice and the ensuing proceedings. Prior case law emphasises that the sanctioning function is not mechanical and must reflect the superior officer's independent application of mind to the recorded reasons.

Interpretation and reasoning: Here the notice was issued beyond three years and the approval recorded was from an authority that did not qualify as the "specified authority" under the statutory clause for the >3-year scenario. The Tribunal observed that statutory procedure is mandatory; an approval from an incorrect authority cannot substitute for the mandated prior sanction. Because the approval was not from the correctly prescribed senior authority, the notice lacked jurisdictional validity. The Tribunal further stressed that the sanction must demonstrate the superior officer's independent satisfaction and cannot be treated as a mere formality.

Ratio vs. Obiter: Ratio - where a reopening notice is issued after the three-year threshold, lack of prior approval from the specified senior authority prescribed by statute renders the notice invalid and void; the sanction requirement is mandatory and requires application of mind. Obiter - discussion referencing comparative rulings and statutory policy context illustrates the rationale but the operative holding is the invalidity of proceedings for lack of correct prior approval.

Conclusion: Notice issued without valid approval of the prescribed specified authority is illegal, without jurisdiction and liable to be quashed; cross objection allowed and departmental appeal dismissed as infructuous on this ground.

ISSUES PRESENTED AND CONSIDERED

1. Whether the sum of Rs. 1 Crore disbursed to the corporate debtor constituted a "financial debt" under Section 5(8) of the Insolvency and Bankruptcy Code by satisfying the elements of disbursal, consideration for the time value of money and the commercial effect of borrowing.

2. Whether a Section 7 application was maintainable where (a) there is no written contract evidencing terms of repayment and (b) the creditor relies on oral understandings, accounting entries and limited evidence of TDS to prove that the disbursal was interest-bearing.

3. Whether a default had occurred such that the debt became due and payable, including whether the date of default was the date of disbursal, or the date of alleged completion of the project purportedly triggering repayment, and whether the claim was time-barred.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Existence of Financial Debt (disbursal, time value of money, commercial effect)

Legal framework: Section 5(8) requires disbursal against consideration for the time value of money; other clauses describe forms that may qualify if the principal requirement is met. Definitions of "debt", "default" and "financial creditor" are relevant.

Precedent Treatment: The Court relied on leading authority of the Apex Court which holds that the essential elements of financial debt are disbursal and consideration for the time value of money, and that sub-clauses are only within Section 5(8) if such elements can be traced to the principal clause. Tribunal precedents accept that absence of a written contract is not determinative.

Interpretation and reasoning: The Tribunal accepted that disbursal of Rs. 1 Crore occurred (bank certificate and corporate balance sheets for 2010-11). However, the element of time value of money was not conclusively established. Evidence of TDS on interest exists only for two financial years (2010-11); no sustained evidence (interest payments, periodic TDS entries, reminders, subsequent accounting entries) was produced to show continuous enforcement or accrual of interest as a contractual adjunct. The absence of contemporaneous documentary proof of an ongoing interest obligation and omission of profit-share from the Section 7 claim weakened the argument that the disbursal had the commercial effect of borrowing. The Tribunal emphasized that where no written contract exists, the "real nature" of the transaction must be discerned from available records, and here those records did not incontrovertibly demonstrate the disbursal was made against consideration for time value of money.

Ratio vs. Obiter: Ratio - disbursal alone is insufficient; claimant must demonstrate the time value of money element by reliable, probative financial or transactional records. Obiter - observations on corroborative value of limited TDS evidence and on the role of balance-sheet entries when not placed before the adjudicating authority.

Conclusion: The Tribunal concluded that while disbursal is proved, the requirement of disbursal against consideration for the time value of money was not satisfactorily established; therefore the transaction could not be conclusively treated as a "financial debt" under Section 5(8).

Issue 2 - Maintainability of Section 7 without written agreement

Legal framework: Section 7 procedure requires the adjudicating authority to be satisfied that default has occurred in respect of a financial debt; writs and statutory definitions govern what constitutes debt and default. Tribunal law recognises that written contract is not strictly necessary if the real nature of the transaction demonstrates financial debt.

Precedent Treatment: Tribunal precedents cited permit reliance on oral arrangements and accounting entries where the real nature of the transaction supports classification as financial debt. Apex Court precedent mandates that once a default on a financial debt is shown, admission follows unless incomplete.

Interpretation and reasoning: The Tribunal applied the principle that absence of a written agreement does not preclude a finding of financial debt, but stressed that the evidentiary burden remains on the creditor to prove the essential elements (disbursal + time value). The creditor's selective omission (not claiming profit-share in the petition) and lack of continuous documentary evidence undermined the contention that the transaction had commercial effect of borrowing. Therefore permissibility to file Section 7 in the absence of written proof is conditional on compelling alternative evidence of the debt's financial character.

Ratio vs. Obiter: Ratio - written contract not mandatory, but creditor must establish, by available contemporaneous records, that the transaction had the commercial effect of a borrowing and carried consideration for time value of money. Obiter - procedural advice about what financial records would be persuasive.

Conclusion: Section 7 is maintainable without a written contract in principle, but on the facts the creditor failed to discharge the evidentiary burden required to treat the advance as financial debt for purposes of Section 7.

Issue 3 - Occurrence and date of default; limitation

Legal framework: "Default" is non-payment when a debt or part thereof has become due and payable. Limitation consequences follow where date of default is antecedent and no acknowledgement or fresh cause of action arises later.

Precedent Treatment: Apex Court guidance indicates the adjudicating authority's role is limited to verifying documents showing default; if debt is due and unpaid, admission ordinarily follows. Authorities recognize that pleaded date of default in notices and petition must be consistent and supported by evidence.

Interpretation and reasoning: The Tribunal observed inconsistent pleadings: a demand notice referenced a date of default as the disbursal date (18.02.2010) while the Section 7 petition pleaded default as of project completion (01.09.2019). The creditor asserted the earlier demand notice was served under wrong advice and corrected the date in the petition. The Tribunal treated the corrected date as the operative date for limitation purposes and found the petition, as filed in 2022, to be within three years from the claimed date of default. However, on the substantive question of whether the project was completed (thus making the debt due), available material did not conclusively show completion; procedural and regulatory compliances were alleged to be pending. In absence of clear proof that liability had crystallised on project completion, default was not clearly established.

Ratio vs. Obiter: Ratio - inconsistent allegations of date of default undermine the claim; where date of default is corrected, limitation may be computed from the corrected date if bona fide. Obiter - discussion on the creditor's burden to prove project completion and consequent crystallisation of debt.

Conclusion: Limitation was not fatal given the petition was within three years of the pleaded date; nonetheless, default was not clearly established because the creditor failed to prove that the project completion rendered the debt due and payable.

Overall conclusion

The Court upheld the Adjudicating Authority's rejection of the Section 7 application: disbursal was proved but the creditor failed to establish that the advance was disbursed against consideration for the time value of money and that the debt had become due and payable. The Section 7 petition was therefore rightly dismissed for lack of proven debt and default. No costs ordered.

ISSUES PRESENTED AND CONSIDERED

1. Whether prior approvals accorded under Section 153D of the Income Tax Act by a superior authority by way of a single collective letter covering multiple assessment orders satisfy the statutory mandate of prior application of mind required by Section 153D.

2. Whether an approval or sanction (including under predecessor/proviso provisions such as Section 151/151(2) framework) recorded in a perfunctory, mechanical or "rubber-stamp" manner (e.g., by merely writing "Yes" or using a generic endorsement) constitutes valid satisfaction or application of mind for the purpose of validating issuance of assessment/reassessment or approval of draft assessment orders.

3. Whether, in light of earlier decisions of the Court addressing materially identical factual and legal issues, any substantial question of law arises for re-determination in the present appeals.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of collective approvals under Section 153D

Legal framework: Section 153D requires that no order of assessment or reassessment below the rank of Joint Commissioner in cases falling under specified search/requisition provisions shall be passed except with the prior approval of the Joint Commissioner. The legislative intent, reinforced by administrative instructions (e.g., CBDT Circular), is that superior authorities must apply their minds to the material on which the subordinate officer proposes assessment/reassessment, particularly in search/seizure contexts.

Precedent Treatment: The Court relied on its earlier decisions addressing identical approvals granted en masse, which held that approvals must reflect application of mind and reference to seized materials/assessment records; mere collective endorsements without reference to material are deficient.

Interpretation and reasoning: The Court examined the approval(s) impugned - a single approval letter covering 246 assessment orders with the endorsement: "The above draft orders, as proposed, are hereby accorded approval..." - and compared that form with the statutory mandate and legislative/administrative intent. The Tribunal had found (on facts) absence of any reference to seized material or specific assessment records accompanying the approval, and absence of any record that the approving officer had applied his mind to each proposal. The Court reasoned that the purpose of Section 153D is to ensure supervisory scrutiny and that a blanket mechanical approval devoid of reference to the materials undermines that purpose.

Ratio vs. Obiter: Ratio - Collective, undifferentiated approvals that do not show application of mind or reference to material seized/assessment records do not fulfil Section 153D's mandate. Obiter - Observations on administrative expediency and the general desirability of particular forms of endorsement are ancillary.

Conclusions: The collective approval in question was legally inadequate because it did not indicate that the superior authority applied its mind to each proposed assessment; thus approval was vitiated and the Tribunal's upholding of this defect was sustained.

Issue 2 - Sufficiency of succinct or perfunctory endorsements as evidence of satisfaction (rubber-stamp approvals)

Legal framework: Under provisions governing sanction/approval for issuance of reassessment notices and for passing orders (e.g., the former Section 151 rubric and parallel safeguards), the prescribed authority must be "satisfied" on the reasons recorded by the Assessing Officer; such satisfaction is a sine qua non and must be discernible from the approval record.

Precedent Treatment: The Court followed established authorities that have held that mere appending of "Yes", stamping, or using formulaic language without any articulation of reasons or indication of independent application of mind amounts to mechanical or ritualistic approval and is legally infirm. Earlier decisions of the Court and higher-judicial pronouncements were applied to distinguish approvals that contained some expression of satisfaction from those that were merely confirmatory.

Interpretation and reasoning: The Court reiterated that the prescribed authority need not record elaborate reasons, but some brief indication of satisfaction - reflecting application of mind to the material - is necessary. Reasons serve as the link between the material considered and the conclusion reached; without them, endorsement cannot be said to disclose rational nexus. The Court applied these principles to the approvals under challenge, observing that the approvals lacked any reference to seized material or assessment records and, in form, resembled rubber-stamping.

Ratio vs. Obiter: Ratio - An endorsement that is merely perfunctory (e.g., an unelaborated "Yes" or generic stamp) does not discharge the statutory requirement of satisfaction and is liable to be treated as invalid. Obiter - The precise minimal content sufficient to demonstrate satisfaction in different factual scenarios (left open in part) and procedural permutations (e.g., post-amendment provisions) were not exhaustively settled in this proceeding.

Conclusions: The approvals were defective insofar as they were perfunctory and did not reflect independent application of mind; therefore they could not validate the corresponding assessment/reassessment actions.

Issue 3 - Whether any substantial question of law arises in view of prior controlling decisions

Legal framework: When a matter is squarely covered by prior decisions of the same Court on identical questions, the existence of a fresh substantial question of law must be demonstrated to justify interference.

Precedent Treatment: The Court relied on its earlier decisions addressing identical legal issues (mechanical approvals, Section 153D/Section 151-type requirements) and on Tribunal findings in the same factual matrix.

Interpretation and reasoning: The Revenue's submissions proposing substantially similar questions were examined against the backdrop of those earlier determinations. The Court concluded that the present appeals concern the same legal proposition and factual texture already considered and decided; consequently, no new or substantial question of law was discernible that warranted re-examination.

Ratio vs. Obiter: Ratio - Where prior decisions of the Court have conclusively addressed identical legal and factual issues, subsequent appeals raising the same questions do not necessarily raise substantial questions of law for reconsideration. Obiter - The Court left certain peripheral statutory issues (e.g., effect/impact of particular subsequent provisions and administrative manuals) open for appropriate proceedings.

Conclusions: No substantial question of law arises in the appeals; they were dismissed in favor of the assessee (respondent) and against the Revenue (appellant). The Court additionally condoned delay in re-filing in the connected procedural application as recorded, and kept certain other related statutory questions open for consideration in appropriate forums if and when pressed.

ISSUES PRESENTED AND CONSIDERED

1. Whether the Final Assessment Order (FAO) dated 01.07.2022 is time-barred under Section 144C(13) of the Income-tax Act, having regard to the date on which directions of the Dispute Resolution Panel (DRP) are deemed to have been "received" by the Assessing Officer (AO).

2. Whether uploading the DRP directions on the Income-tax Business Application (ITBA) portal (with generation of a Document Identification Number) constitutes "dispatch" and "receipt" for the purposes of Section 144C(13), read with Section 13 of the Information Technology Act and Section 282 of the Income-tax Act, and the E-Assessment Scheme, 2019.

3. Whether exclusion of International Taxation from the Faceless Assessment Scheme (FAS) (or reliance on physical receipt in dak) displaces the effect of electronic uploading on the ITBA portal for computation of limitation under Section 144C(13).

4. Whether the ITAT erred in deciding the appeal on the preliminary/time-bar point without adjudicating transfer pricing/TPO adjustments (i.e., whether the preliminary factual dispute on receipt made the decision without jurisdiction or was properly determinable).

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Whether FAO is time-barred under Section 144C(13) - legal framework

Legal framework: Section 144C(13) requires that "upon receipt of the directions" of DRP the AO shall, in conformity therewith, complete the assessment within one month from the end of the month in which such direction is received; Section 144C(10) makes DRP directions binding; Section 144C is a self-contained code for eligible assessees. Section 282(1)(c) recognises electronic communication under Chapter IV of the Information Technology Act. Section 13 of the Information Technology Act defines time/place of dispatch and receipt of electronic records. The E-Assessment Scheme, 2019 mandates electronic uploading and exchange of internal communications via the National e-Assessment Centre/ITBA portal.

Precedent treatment: High Courts (including decisions of this Court and Bombay, Madras, Karnataka, Telangana High Courts) have held that once DRP directions are uploaded on the ITBA portal with a DIN, they are visible to the AO and deemed received for limitation purposes; the scheme treats internal electronic receipt as sufficient. Those precedents are followed and applied.

Interpretation and reasoning: The Court applied the plain textual reading of Section 144C(13) together with Section 13 IT Act and paragraph 4(2)/8 of the E-Assessment Scheme. "Dispatch" of an electronic record occurs when it enters a computer resource outside control of originator; "receipt" occurs when it enters the designated computer resource. Uploading with DIN on ITBA means the originator (DRP) has lost control of the record and the AO/assessment unit has constructive access; the Scheme expressly deems internal electronic communications as valid and sufficient. Allowing internal procedural delays or physical dak receipt to determine limitation would frustrate the statutory scheme and the object of Section 144C (alternative dispute resolution, speed, binding nature of directions).

Ratio vs. Obiter: Ratio - where DRP directions were uploaded on ITBA on 26.05.2022 (DIN generated), limitation under Section 144C(13) ran from that upload date and the FAO passed on 01.07.2022 (after expiry of one-month period ending 30.06.2022) was time-barred and void. Obiter - observations distinguishing other statutory contexts (e.g., Customs Act) and commentary on cases not in point.

Conclusions: The FAO dated 01.07.2022 is barred by limitation under Section 144C(13) because DRP directions were uploaded/received on ITBA on 26.05.2022 (deemed receipt); the ITAT correctly set aside the FAO as time-barred.

Issue 2 - Whether upload on ITBA portal constitutes dispatch/receipt (Section 13 IT Act & E-Assessment Scheme)

Legal framework: Section 13 IT Act prescribes when despatch/receipt of electronic records occurs; E-Assessment Scheme mandates exclusive electronic exchange for internal communications; Section 282 recognises electronic communication for tax purposes.

Precedent treatment: Decisions of several High Courts and this Court interpret the Scheme and Section 13 to treat upload with DIN as effective dispatch/receipt; these decisions are applied and affirmed. Authorities distinguishing generation/internal noting from actual issuance (in other statutory contexts) are distinguished on facts or scheme applicability.

Interpretation and reasoning: The Court held that when DRP uploads directions on ITBA (DIN generated), the record enters a computer resource outside originator's control - satisfying "despatch" - and enters the designated computer resource of the Department, satisfying "receipt." The Scheme treats such internal electronic delivery as sufficient; physical dak receipt is not necessary to start limitation. Departmental procedural practices cannot be allowed to defeat the statutory timeline.

Ratio vs. Obiter: Ratio - upload with DIN on ITBA constitutes dispatch/receipt for limitation. Obiter - discussion on distinctions with issuance to external addressees and other statutory regimes.

Conclusions: Uploading DRP directions on ITBA with DIN is sufficient to constitute receipt under Section 144C(13) (read with Section 13 IT Act and the Scheme); timeline for FAO computation commences from upload/receipt date.

Issue 3 - Effect of FAS exclusion for International Taxation and reliance on physical dak

Legal framework: Section 144B authorises the Board to prescribe faceless assessment scope; the Board excluded certain categories (e.g., International Taxation) from FAS; E-Assessment Scheme and electronic communications, however, apply to internal communications across units.

Precedent treatment: Precedents interpreting uploading/receipt under the Scheme have applied even where jurisdictional assessment units or international taxation were involved; those decisions are followed.

Interpretation and reasoning: The Court distinguished FAS (procedural/venue concept) from the electronic mode of communication. Even if a matter is excluded from faceless assessment, the Department itself uploaded DRP directions on ITBA; Revenue cannot disown electronic communication it effects. The Scheme's requirement of exclusive electronic internal exchange applies to assessment machinery generally; hence exclusion from FAS does not displace deemed receipt on upload.

Ratio vs. Obiter: Ratio - exclusion from FAS does not invalidate the effect of electronic upload/receipt for limitation where the Department has used the portal to upload directions. Obiter - remarks on Revenue's inconsistency in adopting electronic processes.

Conclusions: The claim that International Taxation exclusion or physical dak receipt governs limitation is unsustainable where DRP directions were uploaded on ITBA; electronic upload controls.

Issue 4 - Whether deciding preliminary time-bar point was permissible without adjudicating merits (jurisdictional/piecemeal adjudication)

Legal framework: Courts may decide preliminary points of law/fact that dispose of appeals; Section 144C(13) prescribes mandatory timelines whose breach vitiates orders as null and void.

Precedent treatment: Authorities emphasise that failure to comply with Section 144C timelines amounts to illegality; internal procedural failure cannot be visited upon assessee.

Interpretation and reasoning: The Court accepted that the only determinative legal/factual question was the date of receipt of DRP directions; since that question was answerable from portal records and Scheme/principles, deciding it was proper and disposed of the appeal. Merits (transfer pricing adjustments) became academic once FAO was vitiated by limitation.

Ratio vs. Obiter: Ratio - adjudicating the preliminary limitation point was proper and sufficient to determine the appeal; no jurisdictional defect in so doing. Obiter - none on merits.

Conclusions: ITAT properly decided the preliminary/time-bar issue which disposed of the appeal; omission to decide transfer-pricing merits was appropriate as those issues became academic.

Ancillary findings and final disposition

1. The Court followed earlier High Court decisions construing Section 144C(13), Section 13 IT Act and the E-Assessment Scheme to treat upload with DIN on ITBA as deemed receipt; decisions to the contrary in other statutory contexts (e.g., Customs Act) are distinguishable.

2. Procedural or internal delays of the Department cannot be permitted to defeat legislatively prescribed timelines; Section 144C is mandatory in character and intended to provide an expedited, binding mechanism.

3. No substantial question of law arises for consideration; the appeal is dismissed and the ITAT's order setting aside the FAO as barred by limitation is upheld.

ISSUES PRESENTED AND CONSIDERED

1. Whether commission receipts from sugar factories earned by a cooperative society for marketing members' agricultural produce constitute "profits and gains of business" eligible for deduction under Section 80P(2)(a)(iii) of the Income Tax Act, 1961, or are assessable as "Income from Other Sources".

2. Whether the ratio of the decision in Totgars' Cooperative Sale Society (concerning interest on surplus invested in short-term deposits) applies to commission income earned from marketing agricultural produce, thereby precluding deduction under Section 80P(2)(a)(iii).

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Characterisation of commission receipts as business income eligible for deduction under Section 80P(2)(a)(iii)

Legal framework: Section 80P(2)(a)(iii) provides deduction in respect of "profits and gains of business" attributable to activities specified therein, including marketing of agricultural produce grown by members of a cooperative society. Distinction exists between "operational income"/business profits and income assessable as "other income".

Precedent treatment: Prior decisions have held that income not attributable to the specified cooperative activity (e.g., interest on surplus investments) is "other income" and not eligible for Section 80P deduction; Totgars' decision is specifically relied upon for that principle.

Interpretation and reasoning: The Tribunal examined the nature and source of the commission receipts and the society's bylaws and activity. The commission was received as consideration for marketing sugarcane supplied by members and constituted turnover arising from the society's core activity. The Assessing Officer's denial did not point to any contrary material showing the receipts were not derived from marketing members' agricultural produce. The CIT(A) found the commission to be business income arising from activities covered by Section 80P(2)(a)(iii) and allowed the deduction. The Tribunal agreed, observing that the income was operational and directly connected to the specified activity.

Ratio vs. Obiter: Ratio - where receipts are commission earned as consideration for marketing members' agricultural produce, such receipts qualify as "profits and gains of business" attributable to the activity specified in Section 80P(2)(a)(iii) and are eligible for deduction. Obiter - general observations distinguishing other types of income (e.g., interest on investments) are explanatory but not applied to commission receipts in this case.

Conclusions: The commission receipts from sugar factories, being consideration for marketing members' sugarcane, were correctly characterized as business income and allowable for deduction under Section 80P(2)(a)(iii). The CIT(A)'s allowance was affirmed.

Issue 2: Applicability of Totgars' decision to commission receipts

Legal framework: Totgars' decision emphasises that the source and nature of income determine eligibility for Section 80P, and that interest on surplus investments not attributable to the cooperative's specified activities is "other income".

Precedent treatment: Totgars is relied upon by the Assessing Officer to deny Section 80P relief in cases where income (specifically interest) is not operational income of the cooperative activity. The Tribunal and CIT(A) considered whether that ratio extends to commission receipts for marketing services.

Interpretation and reasoning: The Tribunal and CIT(A) distinguished Totgars on its facts: Totgars addressed interest income from surplus investments, which was not generated by the cooperative's marketing activity and thus was not operational income. By contrast, the commission in the present matter arises directly from the marketing of members' produce and is part of the society's turnover as per its objects and bylaws. Therefore, the Totgars ratio concerning interest on deposits does not apply to commission earned for marketing services.

Ratio vs. Obiter: Ratio - Totgars' holding that non-operational income (e.g., interest on surplus investments) is not eligible under Section 80P remains good law for facts where income is not derived from the specified cooperative activity. Distinguishing principle - Totgars does not govern commission receipts that are operational and directly connected to marketing activities; this distinction forms the binding reasoning in this decision.

Conclusions: The Totgars decision was correctly distinguished; its ratio concerning investment income is inapplicable to commission income earned from marketing members' agricultural produce. Consequently, denial of deduction based solely on reliance on Totgars was unsustainable.

Cross-reference

The conclusions on Issue 1 and Issue 2 are interdependent: the characterisation of the commission as operational business income (Issue 1) underpins the distinguishing of Totgars (Issue 2) - because Totgars is confined to non-operational income such as interest on investments, it does not preclude deduction where income is shown to arise from the marketing activity specified in Section 80P(2)(a)(iii).

Disposition

The order denying deduction under Section 80P(2)(a)(iii) in respect of the commission receipts was set aside insofar as those receipts were shown to be earned from marketing members' agricultural produce; the appellate authority's allowance of the deduction was affirmed and the Revenue's appeal was dismissed.

ISSUES PRESENTED AND CONSIDERED

1. Whether goods supplied to a foreign-bound vessel on the high seas without filing shipping bills and without Customs permission are liable to confiscation under Section 113(f) and (g) of the Customs Act, 1962 (interaction with Sections 50 and 51).

2. Whether a conveyance (tug) used to effect such supply is liable to confiscation under Section 115(2), and whether redemption fine under Section 125 is sustainable where the title owner disclaims operational control, knowledge or connivance.

3. Whether partners/owners and associated firms can be penalised under Section 114(iii) and Section 114AA for acts or omissions of the master or employees (knowledge, connivance, agency and operational control required for liability).

4. Whether a seller/retailer of fuel can be penalised under Section 114(iii) of the Customs Act where there is no evidence that the seller knew the sale would render the goods liable to confiscation under Section 113.

5. Whether denial of opportunity for cross-examination or alleged non-speaking nature of adjudication vitiates the order (principles of natural justice/material consideration).

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Confiscation of exported goods under Sections 113(f) and (g) read with Sections 50 & 51 - Legal framework

Legal framework: Sections 50 and 51 mandate entry (shipping bill/manifest) and permission/clearance for export; Section 113(f) covers goods loaded/attempted to be loaded in contravention of s.33/34 (loading rules); Section 113(g) covers goods loaded/attempted to be loaded on a conveyance destined outside India without permission of the proper officer.

Precedent treatment: No judicial precedents are invoked in the order-text; Tribunal applies statutory text to facts.

Interpretation and reasoning: The Tribunal found that diesel and spare parts were supplied to a foreign-bound vessel in the high seas without filing manifest/shipping bills and without Customs permission; those acts squarely fall within Section 113(f)/(g) as they were loaded/attempted to be water-borne without required permission/entry. The Master admitted awareness that such supply without Customs permission was unlawful and admitted the omission.

Ratio vs. Obiter: Ratio - goods supplied without prescribed export formalities and without permission attract confiscation under Sections 113(f) and (g). Obiter - none material beyond direct application.

Conclusion: Confiscation of the diesel oil, grinder and welding rods under Sections 113(f) and (g) is upheld on the proved facts.

Issue 2: Liability of the conveyance under Section 115(2) and validity of redemption fine

Legal framework: Section 115(2) makes any conveyance used in smuggling or carriage of smuggled goods liable to confiscation unless the owner proves it was so used without his knowledge or connivance; Section 125 allows redemption on payment of fine in lieu of confiscation.

Precedent treatment: Not cited; Tribunal applies statutory burden allocation (owner to prove absence of knowledge/connivance) against factual findings on operational control.

Interpretation and reasoning: The Adjudicating Authority initially confiscated the tug and imposed a redemption fine on the owner. Tribunal notes the Adjudicating Authority itself found the tug was under the operational control of the previous owner/lessor (operational control at the time of transaction) and that the titled owner did not exercise control nor had knowledge/connivance. Given that finding, the owner successfully establishes lack of knowledge/connivance and absence of control, defeating Section 115(2) confiscation. Imposition of redemption fine on that basis was contrary to the Adjudicating Authority's own finding and thus unsustainable.

Ratio vs. Obiter: Ratio - where the fact-finding establishes that a conveyance was under the operational control of another and the title owner proves absence of knowledge/connivance, Section 115(2) confiscation (and related redemption fine) is not sustainable. Obiter - observations on operational control as determinative factor in Section 115(2) assessments.

Conclusion: Confiscation/redemption fine imposed on the tug's owner under Section 115(2)/125 is set aside for lack of knowledge/connivance and absence of operational control.

Issue 3: Penalty under Sections 114(iii) and 114AA for partners/owners/associated firms - knowledge, connivance and agency

Legal framework: Section 114(iii) penalises any person who, in relation to goods, does or omits an act rendering goods liable to confiscation under Section 113 or who abets such act/omission; Section 114AA addresses penalty on persons failing to discharge specific obligations (as charged here) - both require mens rea/culpable act/omission or abetment.

Precedent treatment: No precedents relied upon; Tribunal analyses statements and documentary record to assess knowledge/intent/operational role.

Interpretation and reasoning: The Tribunal examined recorded statements and documentary material. Key findings: (a) the Master admitted he supplied goods without permission and did not file manifest/shipping bills; (b) employees (supervisor who prepared port/clearance applications) and the Master played primary operational roles; (c) certain partners/firm representatives expressly denied knowledge, had not filed Customs/Port applications, and were found to have entrusted procedural tasks to an employee who prepared the applications incorrectly; (d) one partner was physically absent at the material time. The Tribunal concluded that mere ownership/partnership or past title does not, without proof of knowledge/connivance or active participation/abetment, justify imposition of penalty under Section 114(iii) or Section 114AA. Specific penalties were therefore unsustainable where no evidence showed the partner/firm had requisite knowledge or had abetted omissions (cross-reference to Issue 2 on operational control).

Ratio vs. Obiter: Ratio - imposition of Section 114(iii) / 114AA penalties requires proof that the accused did or omitted an act rendering goods liable to confiscation, or abetted it, with knowledge/connivance; ownership or past title and commercial linkage are insufficient alone. Obiter - emphasis on role of employees/supervisors and the necessity to examine who actually prepared and submitted false or misleading documents.

Conclusion: Penalties under Section 114(iii) and 114AA on partners/associated firms were not sustainable where record showed lack of prior knowledge, absence at material time, delegation of port/customs formalities to employees, and no evidence of connivance or abetment; such penalties are set aside.

Issue 4: Penalty on fuel supplier under Section 114(iii)

Legal framework: Section 114(iii) requires that the person's act/omission render goods liable to confiscation or abet such act.

Precedent treatment: None invoked.

Interpretation and reasoning: The Tribunal found no evidence that the fuel supplier knew the diesel would be exported in violation of Customs law. Even systemic breaches of other regulations (sale limits under other statutes) do not, without proof of knowledge that sale would render goods liable to confiscation under Section 113, attract Section 114(iii). The mere fact of selling 20KL through multiple invoices, or rule violations under other statutes, cannot be equated with culpability under the Customs Act absent knowledge of illegal export.

Ratio vs. Obiter: Ratio - imposition of Customs Act penalties on a seller requires evidence of knowledge that the transaction would result in the goods being exported in contravention of Customs law; breaches of other statutory regimes are not substitutive proof. Obiter - caution against conflating regulatory breaches under different statutes with mens rea under Customs law.

Conclusion: Penalty under Section 114(iii) on the fuel supplier was wrongly imposed and is set aside.

Issue 5: Natural justice - right to cross-examination and sufficiency of reasoning

Legal framework: Principles of natural justice require opportunity to confront and cross-examine witnesses where their evidence is material; adjudicatory orders must be speaking to issues raised.

Precedent treatment: No precedents cited; Tribunal assesses the record of requests for cross-examination and material impact.

Interpretation and reasoning: The appellants contended denial of cross-examination on key witnesses rendered the adjudication non-speaking and violative of natural justice. The Tribunal noted requests for cross-examination were made to elicit sequence and content of events (e.g., to test which applications/documents were filed and whose omissions led to misstatements). However, Tribunal's judgment resolves the central factual questions on the basis of recorded statements and documentary record, and its conclusions on liability and penalties turn on absence of knowledge/connivance and operational control. The Tribunal did not find reversible prejudice requiring remand on natural justice grounds in respect of the successful challenges to penalties where absence of culpability was demonstrated in the record; it set aside penalties on merits and on probative deficiencies.

Ratio vs. Obiter: Ratio - failure to permit cross-examination can vitiate an order if prejudice is shown; where material admits no reasonable prospect of changing outcome, the Tribunal may adjudicate on the record. Obiter - observations on the role of cross-examination appear but are not determinative beyond the facts.

Conclusion: Although requests for cross-examination were rejected at earlier stage, the Tribunal's factual findings and lack of evidence of knowledge/connivance rendered those procedural complaints non-determinative of the final outcome; penalties were set aside on substantive deficiencies in proof.

Cross-references and operative conclusions

1. Findings on operational control and lack of knowledge/connivance (Issues 2 & 3) are central and interlinked: proof that a conveyance was under operational control of another and that owners/partners lacked knowledge negates both conveyance confiscation and partner/firm penalties.

2. Confiscation of the goods themselves under Section 113(f)/(g) stands on admitted supply without filing shipping bill/manifest and without permission (Issue 1), distinct from penalties on third persons (Issues 2-4) which require independent proof of knowledge or abetment.

3. Where the record fails to show that a supplier or partner knew the sale would render goods confiscable, Section 114(iii) penalties cannot be sustained (Issues 3-4).

Final operative outcome: Goods confiscation under Section 113(f)/(g) is supported by the record; however, confiscation/redemption fine of the conveyance and penalties under Sections 114(iii)/114AA imposed on certain partners/owners/firm(s) and on the fuel supplier are set aside for lack of evidence of knowledge, connivance, operational control or abetment.