ISSUES:

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

RULINGS / HOLDINGS:

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

RATIONALE:

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

ISSUES:

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

RULINGS / HOLDINGS:

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

RATIONALE:

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

ISSUES:

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

RULINGS / HOLDINGS:

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

RATIONALE:

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

ISSUES:

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

RULINGS / HOLDINGS:

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

RATIONALE:

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

ISSUES:

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

RULINGS / HOLDINGS:

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

RATIONALE:

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

ISSUES:

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

RULINGS / HOLDINGS:

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

RATIONALE:

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

1. ISSUES:

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

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

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

2. RULINGS / HOLDINGS:

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

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

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

3. RATIONALE:

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

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

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

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

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

ISSUES:

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

RULINGS / HOLDINGS:

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

RATIONALE:

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

ISSUES:

Whether maintenance of a residential township and supply of electricity thereto constitutes "business" in the course or furtherance of business under Section 2(17) read with Section 16(1) of the CGST Act, entitling the claimant to Input Tax Credit (ITC) on GST Compensation Cess paid on coal used for electricity generation'Whether ITC is available on exempt supplies, specifically on the sale of Duty Credit Scrips (DCS), prior to the amendment dated 5-7-2022 inserting Explanation 1(d) to Rule 43 of the CGST Rules?

RULINGS / HOLDINGS:

The Court held that supply of electricity to the residential township is not "intrinsically connected" to the business activity and therefore does not amount to business activity under Section 2(17) of the CGST Act; accordingly, ITC on the compensation cess attributable to electricity supplied to the township must be reversed under Rule 42 of the CGST Rules. The petitioner is not entitled to ITC on electricity consumed for township maintenance, following the Supreme Court decisions in Maruti Suzuki Limited and Gujarat Narmada Fertilizers Company Limited.The Court held that the amendment inserting Explanation 1(d) to Rule 43 of the CGST Rules, which excludes the value of supply of Duty Credit Scrips from the aggregate value of exempt supplies, is not clarificatory or retrospective in nature but a substantive amendment with prospective effect from 5-7-2022. Therefore, ITC on exempt supply of DCS prior to this amendment is not available.

RATIONALE:

The Court applied the statutory definitions under the CGST Act, particularly Sections 2(17), 2(59), 2(60), and 16(1), emphasizing that ITC is a concession and not a substantive right, available only for inputs used "in the course or furtherance of business." The Court relied on authoritative Supreme Court precedents which restrict ITC to inputs used for business activities and exclude inputs used for non-business or welfare activities, such as supply of electricity to township residents. The Court interpreted "business" as activities integrally related to manufacturing operations and not ancillary welfare activities.Regarding the amendment to Rule 43, the Court analyzed Section 164(3) of the CGST Act empowering rule-making authority to make rules retrospective but noted the absence of express retrospective effect in the relevant notification. The Court applied principles of statutory interpretation, referencing Justice G.P. Singh's treatise and Supreme Court jurisprudence, which hold that an explanation or clarification must be truly clarificatory of a previously ambiguous or vague provision to be given retrospective effect. Since the amendment expanded the scope of exempt supplies excluded from reversal, it was substantive and prospective. The Court distinguished cases cited by the petitioner as factually and legally inapposite.

ISSUES:

Whether the impugned final assessment order is barred by limitation.Whether the Transfer Pricing Officer (TPO) correctly applied the arm's length principle in determining the Arm's Length Price (ALP) of international transactions related to manufacturing and related services.Whether the TPO erred in selection and rejection of comparable companies for benchmarking international transactions.Whether the TPO's application of additional filters and exclusion/inclusion of comparables was appropriate.Whether the exclusion of "other income" items (foreign exchange gain, duty drawback, compensation for obsolete items) from operating revenue for TP adjustment was justified.Whether the TPO correctly computed the value of international transactions for TP adjustment.Whether the adjustment to transfer price on account of payment of technical assistance fee to Associated Enterprise (AE) satisfies the arm's length principle.Whether the TPO erred in rejecting the transfer pricing study and comparability analysis relating to technical assistance fee payment.Whether the TPO correctly determined the ALP of technical assistance fee payment as nil, resulting in double disallowance.Whether the TPO erred in making a TP adjustment on account of interest on outstanding receivables from AEs.Whether the TPO correctly treated outstanding receivables as loans and applied an ad-hoc credit period for interest computation.Whether the penalty proceedings under section 270A were rightly initiated.

RULINGS / HOLDINGS:

The impugned final assessment order is not barred by limitation as no specific limitation challenge was upheld.The TPO erred in discarding the assessee's FAR (Functions, Assets, Risks) analysis without cogent reasons and in excluding functionally comparable companies accepted in previous years; the court directed inclusion of specified comparables in the final set.The TPO's application of additional filters and rejection of comparables without providing cogent reasons was held improper; inclusion/exclusion of comparables was directed based on functional comparability and prior acceptance.The exclusion of foreign exchange gain from operating revenue was held incorrect; following precedent, foreign exchange gain forms part of operating revenue and must be considered in TP computations.The TPO was directed to consider duty drawback and compensation for obsolete items as part of operating revenue and examine them under Rule 10TA(k)(vii) accordingly.The TPO was directed to consider the correct figure of INR 30,79,57,418 as the value of international transactions instead of the higher figure used.The payment of technical assistance fee was held to satisfy the arm's length principle, considering the evidence and the fee's proportion to turnover; the adjustment was disallowed.The rejection of the assessee's transfer pricing study and comparability analysis regarding technical assistance fee without cogent reasons was held erroneous.The determination of ALP of technical assistance fee payment as nil and resulting double disallowance was held improper.The TPO erred in treating outstanding receivables as loans and applying an ad-hoc credit period without considering actual payment terms and set-off of outstanding payables; the TPO was directed to apply LIBOR + 200 basis points with a 60-day credit period and allow set-off of receivables paid within the credit period.The initiation of penalty proceedings under section 270A was held to be without merit (implied from absence of adverse order on penalty).

RATIONALE:

The court applied the arm's length principle under the Income Tax Act, 1961 and relevant Transfer Pricing Rules, emphasizing the FAR analysis as the cornerstone for selecting comparables.Precedents, including the Delhi High Court decision in PCIT vs. B.C. Management Services (P.) Ltd., were followed to treat foreign exchange gain as part of operating revenue.The court underscored that the application of TNMM (Transactional Net Margin Method) does not require product comparability but requires functional comparability, which was inadequately considered by the TPO.The court recognized that questioning the commercial wisdom of payment for intra-group technical assistance services is beyond the TPO's domain, following the principle that benefit need not be demonstrated for such payments as per CIT vs. EKL Appliances Ltd.The court mandated that interest on outstanding receivables be computed using an arm's length interest rate (LIBOR + 200 basis points) with a reasonable credit period (60 days), reflecting international market conditions and actual payment terms.The court's directions to include/exclude comparables were based on consistency with prior years' acceptance and functional similarity, reflecting a doctrinal emphasis on stability and predictability in TP assessments.

ISSUES:

Whether the dismissal of the appeal on ex-parte basis by the Commissioner of Income-tax (Appeal) without considering submissions and evidences was erroneous.Validity of the deemed notice issued under section 148A(b) and notice under section 148 of the Income-tax Act, 1961.Whether additions made under section 69A of the Act in respect of credited amounts in bank accounts and cash deposits during demonetization period were justified.Applicability of section 69A to money recorded in books of account and whether the additions under section 68 were warranted.Legality of charging tax at the higher rate under section 115BBE of the Act.Validity of interest levied under sections 234A and 234B of the Act.Requirement of proper approval under section 151(ii) of the Act for issuance of notice under section 148 and order under section 148A(d) after the expiry of three years from the end of the assessment year.

RULINGS / HOLDINGS:

The dismissal of the appeal on ex-parte basis without considering submissions and evidences was improper; the appellant's submissions and evidences uploaded on the ITBA portal warranted consideration.The order passed under section 147 read with section 144B and notices under sections 148A(d) and 148 issued with approval of PCIT-1 instead of PCCIT/CCIT as required under section 151(ii) were invalid and bad in law; however, this issue became academic after deletion of additions on merits.Additions of Rs. 1,42,38,500/- and Rs. 7,97,000/- made under section 69A of the Act were unjustified and liable to be deleted as the amounts were "duly accounted for in the books of account" and reflected in the return of income.Section 69A applies only where money is "not recorded in the books of account"; here, the foundational requirement was absent, making additions under section 69A legally untenable.The appellant discharged the onus under section 68 by furnishing account confirmations, ledgers, contra accounts, PAN details, and bank statements of lenders, supported by authoritative precedents, thus additions under section 68 were not warranted.The levy of tax at the enhanced rate under section 115BBE became infructuous following deletion of additions under section 69A.Interest levied under sections 234A and 234B is mandatory as per Supreme Court precedent and shall be levied after giving effect to this order.

RATIONALE:

The Court applied the statutory provisions of the Income-tax Act, 1961, specifically sections 69A, 68, 148, 148A, 115BBE, 234A, 234B, and 151(ii).Section 69A requires that the money or valuables must be "not recorded in the books of account" for the provision to apply; since the amounts were recorded and explanations furnished, the addition was not sustainable.The onus under section 68 to explain the nature and source of credited amounts was discharged by the appellant through documentary evidence and corroborated by authoritative Supreme Court and High Court decisions.The Court noted that mere deposit in bank accounts does not trigger addition under section 69A if properly accounted for and disclosed.Regarding procedural validity, the Court acknowledged the requirement of approval under section 151(ii) for reopening assessments beyond three years but deemed the issue academic after merit-based disposal.Interest under sections 234A and 234B is mandatory irrespective of deletion of additions, following binding Supreme Court authority.

ISSUES:

Whether reimbursement of salary expenses for secondment employees deployed in India is taxable as fees for technical services or is exempt as mere reimbursement.Whether amounts received for rendering professional services qualify as "professional services" under Article 15(2) of the India-USA Double Taxation Avoidance Agreement (DTAA), or are taxable as Fees for Included Services (FIS) under Article 12.

RULINGS / HOLDINGS:

Reimbursement of salary expenses related to seconded employees working under the control and supervision of the Indian entity, with the Indian entity bearing withholding tax obligations, is not taxable as fees for technical services but is a cost-to-cost reimbursement. The overseas entity is not the employer for tax purposes during the secondment period, as the Indian entity exercises control and supervision over the employees.Amounts received for professional services fall within the inclusive definition of "professional services" under Article 15(2) of the India-USA DTAA and are not taxable as Fees for Included Services under Article 12, since the "make available" requirement of Article 12(4)(b) is not satisfied. The absence of a governing professional body does not exclude such services from the scope of Article 15(2).

RATIONALE:

The Court applied the legal framework established by the Supreme Court's judgment on secondment arrangements, which emphasized discerning the true nature of the relationship between seconded employees and the recipient entity, focusing on control, supervision, and the legal necessity of payroll retention by the overseas employer for social security purposes. The Court relied on the principle that the Indian entity is the service recipient and employer for the duration of secondment, making the reimbursement non-taxable as fees for technical services. This approach aligns with prior coordinate bench decisions and authoritative rulings affirming that such reimbursements are not subject to Section 195 withholding tax but under Section 192.Regarding professional services, the Court interpreted Article 15(2) of the India-USA DTAA as an inclusive, not exhaustive, definition encompassing independent scientific, literary, artistic, educational, and professional activities without requiring membership in a professional governing body. The Court rejected the contention that the absence of such a body excludes the services from Article 15(2). The "make available" test under Article 12(4)(b) was not met, negating the applicability of Fees for Included Services. The Court also referenced statutory definitions under sections 194J and 44AA of the Income Tax Act and relevant notifications recognizing various professions without governing bodies as "professional services."The Court distinguished the facts from cases where payments were held to be fees for technical services, emphasizing the factual matrix and agreements evidencing the nature of services and employer-employee relationship. The Court noted no profit element in reimbursements and upheld prior judicial precedents confirming that payments characterized as salary reimbursements are not taxable as fees for technical services.No dissenting opinion was recorded. The Court followed coordinate bench precedents and affirmed the applicability of established legal principles, thereby maintaining doctrinal consistency.

ISSUES:

Whether the addition under Section 56(2)(viib) of the Income-tax Act is justified when the fair market value (FMV) of shares issued is determined by adopting the valuation method under Explanation a(ii) of Section 56(2)(viib) and substantiated by valuation certificates.Whether the Assessing Officer can substitute the valuation method adopted by the assessee (valuation of unquoted shares at book value as per audited financials) with a lower valuation based on book value alone for the purpose of computing FMV of shares issued.Whether the provisions of Section 56(2)(viib) apply in the absence of any evidence or presumption of unaccounted income or non-genuine transactions.Whether the valuation of unquoted shares held by the company should be revalued afresh under Rule 11UA, even if the shares are carried at book value in the balance sheet.Whether the time gap between the date of valuation of assets and the date of share issue affects the validity of the FMV adopted.

RULINGS / HOLDINGS:

The Court held that where the valuation of shares is certified by a Chartered Accountant as fair market value under Rule 11UA and adopted by the company issuing shares, "there cannot be any difference between the issue price and the Fair Market Value of the shares," and thus Section 56(2)(viib) is not attracted.The Assessing Officer is not justified in rejecting the valuation of unquoted shares held by the company based on surmises and conjectures or substituting the valuation method prescribed under Rule 11UA with a lower book value method.The provisions of Section 56(2)(viib) are intended to curb unaccounted income ("Angel tax") and do not apply where there is no presumption or evidence of unaccounted money or non-genuine transactions; mere issuance of shares to sister concerns or promoters does not automatically invoke the provision.Valuation of unquoted shares carried in the balance sheet must be revalued afresh as per Rule 11UA(1)(c)(b), and the valuation certificate of the Chartered Accountant valuing the shares of investee companies based on their audited financials is acceptable.The time gap of nine months between the valuation date of assets and the date of share issue does not invalidate the FMV determination where the valuation is supported by credible evidence and valuation certificates.

RATIONALE:

The Court applied Section 56(2)(viib) of the Income-tax Act, 1961, which taxes the excess consideration received over FMV for issue of shares, with FMV to be determined either by prescribed methods under Rule 11UA or substantiated by the company to the satisfaction of the Assessing Officer based on asset valuation including intangible assets.Rule 11UA prescribes valuation methods including net asset value method and discounted free cash flow method, allowing the assessee to choose the method; the Court recognized the validity of adopting the net asset value method supported by valuation certificates.The Court relied on precedents holding that Section 56(2)(viib) is aimed at curbing black money and does not apply to genuine business transactions with no evidence of unaccounted income.The Court emphasized that valuation of unquoted shares carried in the balance sheet must be revalued afresh under Rule 11UA, as the FMV is to be determined on the date of issue of shares, not merely based on book value.The Court rejected the Assessing Officer's reliance on surmises and non-matching projections to reduce the FMV, holding that such substitution is not permissible absent evidence of mala fide or incorrect valuation.

ISSUES:

Whether a search under section 132 of the Income Tax Act, 1961 ("the Act") can be considered valid if the search warrant is executed at an address different from the registered office or known premises of the assessee company.Whether mere mentioning of the assessee's name in the search warrant or panchnama without actual search or seizure at the assessee's premises constitutes valid initiation and conduct of search under section 132 of the Act.Whether the provisions of section 153A of the Act can be invoked in the absence of a valid search under section 132 of the Act.Whether section 292B of the Act can be relied upon to cure procedural defects or to validate assessments in cases where no valid search has been conducted.

RULINGS / HOLDINGS:

The Court held that "though the warrant of authorisation was prepared in the name of the assessee, yet there was no commencement or initiation of search in pursuance of the said warrant" at the assessee's premises, and therefore the proceedings under section 153A of the Act are "ex-facie illegal, arbitrary and without jurisdiction."The Court emphasized that "mere mentioning of name in the panchnama does not lead to the conclusion that a valid search was conducted against the assessee," and that "no search was conducted at the premises of the appellant," thus invalidating the invocation of section 153A.The Court rejected the contention that a search warrant can be validly executed at any place where the authorities suspect relevant documents to be found, unless there is evidence of initiation and conduct of search specifically against the assessee company or by its authorized representative.The Court held that section 292B of the Act "protects only procedural errors of omission or commission, but does not contemplate extrapolation of section 153A of the Act, so as to bring within its ambit non-search cases," and that it "does not confer the AO with any kind of jurisdiction where it legally does not exist."

RATIONALE:

The Court applied the statutory framework of sections 132 and 153A of the Income Tax Act, 1961, along with Rule 112(1) of the Income Tax Rules, 1962, which govern the issuance and execution of search warrants and subsequent assessments.The Court relied on precedents distinguishing between "initiation" and "conduct" of search, holding that valid invocation of section 153A requires actual commencement and execution of search against the assessee at its premises or at a place where the assessee is represented by an authorized person.The Court followed the principle that "search is an invasion of Privacy of the assessee and all proceedings connected with search need to be carried out within the framework of the provisions of the Act," and non-compliance renders the search invalid and assessments null and void.Precedents from coordinate benches and High Courts were considered, including the ruling that "mere mentioning of name in the panchnama" or presence of a director who did not represent the assessee company during search does not validate the search.The Court distinguished cases where the director signed the warrant on behalf of the assessee from the present facts where no such representation or connection was established.The Court clarified that section 292B and 292BB of the Act address procedural defects and service of notices but cannot be used to confer jurisdiction or validate assessments where the fundamental condition of a valid search under section 132 is not met.

ISSUES:

Whether income covered by section 44DA is excluded from the scope of section 44BB for the Assessment Year 2022-23 following the amendment by the Finance Act, 2010 effective from 01.04.2011.Whether the Assessing Officer was correct in taxing the assessee's revenues under section 44DA and estimating income by applying a 25% rate of profit on gross receipts in absence of books of accounts and expense details.Whether reimbursement of service tax received by the assessee forms part of gross turnover for computing taxable income under section 44BB.

RULINGS / HOLDINGS:

The Tribunal upheld that income covered by section 44DA has been specially excluded from section 44BB as per the Finance Act, 2010 amendment, and the assessee's income from services connected with mineral oil extraction is taxable under section 44BB, not section 44DA.The Tribunal found no error in the Commissioner of Income Tax (Appeals) reversing the Assessing Officer's application of section 44DA and the 25% presumptive profit rate, relying on precedent that the nature of services provided falls under section 44BB.The Tribunal held that the amount received as reimbursement of service tax is not includible in gross turnover for computing taxable income under section 44BB, following the ratio laid down by the Special Bench and relevant High Court decisions.

RATIONALE:

The Tribunal applied the legal framework established by the Finance Act, 2010 amendment excluding section 44DA income from section 44BB, and relied on the Special Bench decision in the assessee's own case for Assessment Year 2011-12, which interpreted the scope of section 44BB in relation to services connected with mineral oil extraction.The Tribunal followed authoritative judicial pronouncements, including decisions of the Hon'ble Uttarakhand High Court and the Hon'ble Delhi High Court, which held that reimbursement of service tax is not part of gross receipts under section 44BB.No contrary judicial precedent or change in circumstances was presented by the Revenue to overturn the Special Bench's ruling; thus, the Tribunal affirmed the correctness of the Commissioner of Income Tax (Appeals) order.

ISSUES:

Whether cash deposits of Rs. 25,54,242/- made during the relevant financial year are properly explained as advance receipts from customers for tours conducted in the subsequent year.Whether the corresponding receipts from such advances were duly offered to tax in the relevant year of accrual under the mercantile system of accounting.Whether addition under section 69A of the Income-tax Act, 1961, on account of unexplained cash deposits is justified in absence of satisfactory reconciliation and documentary evidence.Whether the presumptive taxation scheme under section 44AD and subsequent switch to mercantile accounting affect the assessment of income from advance receipts.Whether double taxation arises from taxing the same receipts in both the year of receipt and the year of accrual, and if so, how it should be addressed.

RULINGS / HOLDINGS:

The cash deposits are substantially explained as advance receipts from customers, supported by confirmations from 13 customers and documentary evidence, but full reconciliation of adjustment in subsequent year was not satisfactorily established.The corresponding receipts were offered to tax in the subsequent year under the mercantile system of accounting, as evidenced by audited financial statements and profit and loss accounts, showing advances carried forward as liabilities and recognized as income when tours were conducted.The addition of Rs. 20,12,768/- under section 69A was partially justified due to lack of complete reconciliation, but the CIT(A) erred in ignoring evidence of subsequent taxation and the accounting treatment of advances.The presumptive taxation under section 44AD applies to declared gross receipts at 8%, but the assessee's switch to mercantile accounting in the following year with a net profit of 1.39% on gross receipts indicates a differential that was not examined, necessitating a reasonable estimate of income aligned with section 44AD.To avoid manifest double taxation, an adjustment is warranted: 8% of the disputed cash deposits is treated as estimated income, less the 1.39% already offered to tax in the subsequent year, resulting in a net addition of Rs. 1,33,427/-.

RATIONALE:

The Court applied the provisions of the Income-tax Act, 1961, particularly sections 44AD (presumptive taxation), 69A (unexplained cash credits), 133(6) (power to summon persons), 142(1), 143(2), and 144 (assessment in absence of assessee), alongside Rule 46A of the Income Tax Rules, 1962 (admission of additional evidence).The Court relied on documentary evidence including bank books, customer confirmations obtained under section 133(6), audited financial statements, and profit and loss accounts to assess the genuineness and accounting treatment of cash advances.The Court recognized the change in accounting method from presumptive taxation under section 44AD to mercantile system in the subsequent year, emphasizing the importance of matching income recognition with the year of accrual to prevent double taxation.The Court noted the absence of specific verification by the Assessing Officer and CIT(A) regarding reconciliation of advances with subsequent income, which weakened the conclusiveness of the addition sustained.The decision reflects a balanced approach, granting partial relief by modifying the addition to align with the presumptive income under section 44AD while adjusting for income already offered to tax, thereby avoiding double taxation and adhering to principles of real income and matching concept under mercantile accounting.

ISSUES:

Whether the Fe (iron) content in iron ore fines (IOF) for the purpose of customs duty assessment is to be determined on the basis of Wet Metric Ton (WMT) or Dry Metric Ton (DMT).Whether splitting a single consignment into multiple shipping bills to evade customs duty constitutes conscious avoidance of customs duty under the Customs Act, 1962.Whether the question of law raised regarding the basis of Fe content determination constitutes a "substantial question of law" under Section 130 of the Customs Act, 1962.Whether a party can take inconsistent stands at different stages of proceedings in relation to the basis for determining Fe content.

RULINGS / HOLDINGS:

The Fe content in IOF is to be determined on the basis of Wet Metric Ton (WMT) and not on Dry Metric Ton (DMT), as held by the coordinate Bench and supported by statutory circulars and judicial precedent.The contention that Fe content should be assessed on DMT basis is "not sustainable" and does not attract a different opinion given the settled position of law.The splitting of consignments into multiple shipping bills with differing Fe content to evade customs duty was alleged but the demand for differential customs duty was rejected by the adjudicating authority and upheld by the Tribunal, based on the correct application of WMT for Fe content determination.The question whether Fe content is to be determined on WMT or DMT basis does not constitute a "substantial question of law" under Section 130 of the Customs Act, 1962 because it is a settled legal proposition and not debatable or open to alternative views.A party cannot be permitted to assume inconsistent positions at different stages of the proceedings; the appellant's change of stance on the basis for Fe content determination is impermissible and violates the principle against approbation and reprobation.

RATIONALE:

The Court applied the test for "substantial question of law" as articulated in authoritative precedent, emphasizing that such a question must be debatable, not settled by binding precedent, and must have material bearing on the rights of parties.The Court relied on a coordinate Bench decision which held that for customs duty purposes, Fe content must be assessed on WMT basis, consistent with a circular dated 17th February 2012 clarifying uniformity in assessment.The principle of judicial discipline and comity among coordinate Benches was emphasized, mandating adherence to earlier decisions unless a larger Bench is constituted.The Court invoked the doctrine against inconsistent pleadings, referencing established case law that prohibits a litigant from taking contradictory positions to the detriment of the opposing party.The Court noted that the adjudicating authority and Tribunal had correctly applied the law and that the appeal did not raise any new or unsettled substantial question of law warranting interference.

ISSUES:

Whether refund of accumulated/unutilized Cenvat Credit on input services paid as Service Tax is admissible when the final goods exported are exempted from Central Excise duty or chargeable to NIL rate of duty.Whether the condition of export under bond or Letter of Undertaking (LUT) under Rule 6(6)(v) of Cenvat Credit Rules, 2004 applies to goods exempt from excise duty for claiming refund of Cenvat Credit.Whether the refund claim filed beyond the period specified under Section 11B of the Central Excise Act, 1944 and Notification No. 27/2012-CE (NT) dated 18th June, 2012 is time barred.Whether registration under Service Tax is mandatory for availment of Cenvat Credit or refund thereof under Rule 5 of the Cenvat Credit Rules, 2004.Whether denial of refund on grounds not raised in the Show Cause Notice violates principles of natural justice and whether the scope of the Show Cause Notice can be expanded during adjudication.

RULINGS / HOLDINGS:

The refund of Cenvat Credit on input services paid as Service Tax is admissible even when the final goods exported are exempted from Central Excise duty or chargeable to NIL rate of duty; denial of refund on the ground that the goods exported are exempted is not sustainable.The proviso under Rule 6(6)(v) of the Cenvat Credit Rules, 2004, which excludes applicability of sub-rules (1) to (4) of Rule 6 for goods exported under bond, applies only to excisable goods that are dutiable; goods exempted from excise duty do not fall within this category, and hence the condition of export under bond or LUT is not applicable to such exempted goods.The limitation period prescribed under Section 11B of the Central Excise Act, 1944 does not apply to refund claims of Cenvat Credit accumulated due to export of finished goods; therefore, refund claims for past periods cannot be rejected solely on the ground of time bar under Section 11B.Registration under Service Tax is not mandatory for availment of Cenvat Credit or refund thereof under Rule 5 of the Cenvat Credit Rules, 2004; Cenvat Credit or refund cannot be denied merely because the claimant has not taken registration.The Order-in-Original cannot enhance the scope of the Show Cause Notice by raising new grounds not mentioned therein; denial of refund on such grounds is impermissible.

RATIONALE:

The legal framework includes Rule 5 and Rule 6 of the Cenvat Credit Rules, 2004, Notification No. 27/2012-CE (NT) dated 18th June, 2012, and Section 11B of the Central Excise Act, 1944.Rule 6(1) restricts availment of Cenvat Credit on input services used in or in relation to manufacture of exempted goods, but Rule 6(6)(v) excludes the applicability of certain restrictions for excisable goods exported under bond; however, the exemption applies only to dutiable excisable goods, not to goods exempted or chargeable to NIL rate of duty.Judicial precedents including decisions by the Tribunal and High Courts (e.g., Repro India Ltd. vs. UOI, CCE vs. Drish Shoes Ltd., Noble Grain India Pvt Ltd vs. CCE, and others) have held that refund of input credit is admissible for exempted goods exported without bond or LUT and that execution of bond is procedural and its violation should not disentitle refund.Decisions confirm that limitation under Section 11B does not apply to refund of Cenvat Credit accumulated due to exports, permitting refund claims for past periods.Legal principles affirm that denial of refund on grounds not raised in the Show Cause Notice violates natural justice, and the scope of adjudication cannot be expanded beyond the notice issued.The Tribunal applied binding precedent from a recent decision where similar facts were considered, confirming the entitlement to refund and directing remand for verification of documents.

ISSUES:

Whether Show Cause Notices (SCNs) were validly issued prior to passing the impugned order under Section 73(9) of the State GST Act.Whether the determination of tax and the order attached to the Summary of the Show Cause Notice in GST DRC-01 and the Summary of the Order in GST DRC-07 can be considered as valid Show Cause Notice and Order respectively.Whether the impugned orders under Section 73(9) comply with Section 75(4) of the State GST Act and conform to the principles of natural justice, particularly regarding the opportunity of hearing.

RULINGS / HOLDINGS:

The Court held that the Summary of the Show Cause Notice issued in FORM GST DRC-01 does not substitute a proper SCN required under Section 73(1) of the Central and State GST Acts, and the attachment of tax determination to the summary cannot be treated as a valid SCN. The impugned orders were passed without a proper SCN, violating Section 73 and Rule 142(1)(a).The determination of tax and the order attached to the Summary in GST DRC-01 and GST DRC-07 respectively cannot be considered valid SCN or orders as they lack authentication by the Proper Officer, contrary to Rule 26(3) of the CGST Rules, 2017, which mandates issuance through digital signature or e-signature. Unsigned documents lose their efficacy and are invalid and unenforceable.The impugned orders contravene Section 75(4) of the Act, which mandates that an opportunity of hearing must be granted either upon a written request or when an adverse decision is contemplated. Passing adverse orders without granting a hearing violates statutory requirements and the principles of natural justice.

RATIONALE:

The Court applied the statutory framework of the Central Goods and Services Tax Act, 2017 and the corresponding State Act, particularly Sections 73 and 75, and Rules 26 and 142 of the CGST Rules, 2017. Section 73 mandates issuance of a proper SCN by the Proper Officer before passing an order for tax determination, interest, or penalty. Rule 142 requires a summary of the SCN to be issued electronically in FORM GST DRC-01, which supplements but does not replace the SCN.Rule 26(3) requires all notices, certificates, and orders to be electronically issued by the Proper Officer with digital or e-signature, ensuring authentication and validity. Although Rule 26 falls under Chapter III (Registration), judicial precedents have extended its applicability to Chapter XVIII (Demand and Recovery), filling a regulatory gap and ensuring enforceability of notices and orders.The Court relied on precedents from various High Courts which held that unsigned SCNs and orders are invalid and that summaries cannot replace proper SCNs. It also emphasized the mandatory nature of the opportunity of hearing under Section 75(4), interpreting the use of "or" in the provision to mean that hearing is required even if no written request is made when an adverse decision is contemplated.The Court recognized a procedural gap in the Rules regarding authentication of notices under Demand and Recovery but held that Rule 26(3) must be applied by default until specific rules are enacted. The Court also excluded the period between issuance of the defective Summary of SCN and service of the judgment from the limitation period under Section 73(10) to enable fresh proceedings.

ISSUES:

Whether valid Show Cause Notices (SCNs) were issued prior to passing the impugned order under Section 73(9) of the State GST Act.Whether the determination of tax and the order attached to the Summary of the Show Cause Notice in GST DRC-01 and Summary of the Order in GST DRC-07 respectively can be treated as valid Show Cause Notice and Order.Whether the impugned orders under Section 73(9) comply with Section 75(4) of the State GST Act and conform to the principles of natural justice, particularly regarding the opportunity for hearing.Whether the absence of authentication (digital or e-signature) on the Show Cause Notice, Statement, and Order violates Rule 26(3) of the CGST Rules, 2017 and affects their validity.Whether Rule 26(3) of the CGST Rules, 2017, though located under Chapter III (Registration), applies to notices and orders issued under Chapter XVIII (Demand and Recovery).

RULINGS / HOLDINGS:

The Court held that the Summary of the Show Cause Notice issued in FORM GST DRC-01 does not substitute the proper SCN required under Section 73(1) of both the Central and State GST Acts; a formal and duly authenticated SCN is mandatorily required to initiate proceedings under Section 73.The determination of tax and order attached to the Summary in GST DRC-01 and GST DRC-07 cannot be said to be the Show Cause Notice and Order respectively, as these attachments lack the required authentication and do not meet statutory requirements.The impugned orders under Section 73(9) violate Section 75(4) of the State GST Act and principles of natural justice by failing to provide an opportunity of hearing when an adverse decision was contemplated, especially since the date and time of hearing were left blank in the Summary of the Show Cause Notice.Rule 26(3) of the CGST Rules, 2017 mandates that all notices, certificates, and orders must be electronically issued with digital or e-signature by the Proper Officer or authorized officer; absence of such authentication renders the documents invalid and unenforceable.Despite Rule 26(3) being under Chapter III (Registration), the Court, following precedents, applied it to Chapter XVIII (Demand and Recovery) to fill the regulatory gap and ensure validity of notices and orders issued under the Act.

RATIONALE:

The Court relied on the statutory framework of Section 73 of the GST Act, which requires issuance of a proper SCN before passing any demand order, distinguishing clearly between a Show Cause Notice and a Statement of determination of tax.Rule 142 of the CGST Rules, 2017 mandates issuance of a summary of the SCN electronically in FORM GST DRC-01, but this summary is supplementary and cannot replace the requirement of a proper SCN under Section 73(1).Precedents from various High Courts (Telangana, Andhra Pradesh, Jharkhand, Karnataka, and Chhattisgarh) were followed, emphasizing the necessity of proper authentication of SCNs and orders and the mandatory nature of opportunity of hearing under Section 75(4).The Court identified a regulatory gap as Rule 26(3) is under Chapter III, while Demand and Recovery fall under Chapter XVIII, but held that Rule 26(3) must be applied by default to ensure legal validity until specific rules or notifications are issued.The Court underscored that Section 75(4) mandates an opportunity of hearing "when any adverse decision is contemplated," irrespective of whether the person chargeable requests it, aligning with the principles of natural justice and preventing procedural lapses.Failure to provide a hearing in such circumstances renders the impugned order violative of statutory provisions and natural justice, warranting interference and setting aside of the order.