ISSUES PRESENTED AND CONSIDERED

1. Whether reversal of input tax credit (RITC) and imposition of penalty under Section 74 of the GST Act can be sustained against a registered recipient where the supplier's GST registration was cancelled after the transaction.

2. Whether the recipient's contemporaneous documentary records (tax invoices, e-way bills, bank payments) together with the supplier having filed GSTR-1 and GSTR-3B (with tax payment) preclude adverse inference against the recipient absent independent proof of fraud or misrepresentation by the recipient.

3. Whether tax authorities may initiate proceedings under Section 74 based solely on information that the supplier was later found to be non-existent, without verifying the supplier's existence or the genuineness of transactions at the time they occurred.

4. Whether the absence of allegations or findings regarding unregistered transport (e-way/vehicle non-registration) or other defects in transportation/documentation affects the validity of proceedings under Section 74 against the recipient.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Reversal of ITC and penalty where supplier's registration was cancelled post-transaction

Legal framework: Section 74 (penalty/proceedings for fraudulent availment of ITC) and general GST provisions governing availability of input tax credit and reversal where supplies are not genuine.

Precedent Treatment: No prior authorities were invoked or considered in the judgment; the Court proceeded on statutory text and evidentiary facts.

Interpretation and reasoning: The Court held that where the recipient is a registered dealer and the purchases were documented by valid tax invoices and e-way bills, and payment has been shown through banking channels, the mere fact that the supplier's registration was cancelled subsequent to the transaction cannot, by itself, justify RITC and penalty under Section 74. The Court reasoned that payment of tax by the supplier (as evidenced by filed GSTR-1 and GSTR-3B returns) and the recipient's compliance with transactional formalities negate an inference that the recipient fraudulently availed ITC.

Ratio vs. Obiter: Ratio - orders reversing ITC and imposing penalty under Section 74 cannot be sustained solely because supplier registration was cancelled after the transaction when recipient's transactions are supported by invoices, e-way bills, bank payments, and supplier's filing of returns with tax payment. Obiter - none additional.

Conclusions: The impugned RITC and penalty based solely on subsequent cancellation of supplier registration were quashed.

Issue 2: Sufficiency of contemporaneous records and supplier's returns to preclude adverse inference absent fraud

Legal framework: Principles governing availment of ITC - availability where there are valid tax invoices, the supplier has paid tax (as per returns), and recipient has complied with statutory formalities.

Precedent Treatment: Not cited; Court applied statutory logic and evidentiary standards.

Interpretation and reasoning: The Court emphasized that GSTR-3B cannot be filed without payment of due tax; therefore, the supplier's filing of GSTR-1 and GSTR-3B for the relevant period and evidence of bank payments substantively supports genuineness. In such circumstances, absent materials showing that the recipient engaged in fraud or misrepresentation, an adverse inference against the recipient is unwarranted. The recipient discharged a preliminary duty by undertaking payments and maintaining documents; the burden to independently verify or establish fraud rests with the authorities.

Ratio vs. Obiter: Ratio - contemporaneous documentary evidence and supplier returns showing tax payment bar initiation of penal proceedings against the recipient in absence of material showing fraud or misrepresentation by the recipient. Obiter - suggestion that authorities must verify supplier status at the time of transactions.

Conclusions: The recipient's documentary compliance and supplier's returns negate justification for RITC/penalty without further evidence of recipient's culpability.

Issue 3: Obligation of authorities to verify supplier's existence/status at the time of transaction before initiating proceedings

Legal framework: Administrative duty to verify material facts before invoking penal or adverse measures under GST law; principles of fair administrative action and requirement for material satisfaction.

Precedent Treatment: Not relied upon; the Court applied principles of administrative fairness and statutory scheme.

Interpretation and reasoning: The Court held that initiation of proceedings based on "borrowed information" - namely that the supplier was later found non-existent - without verification whether the supplier existed and conducted business at the time of the transactions was improper. Authorities are required to verify the supplier's status at the relevant time and assess genuineness of transactions rather than mechanically relying on subsequent cancellation to penalize the recipient.

Ratio vs. Obiter: Ratio - authorities must verify existence/genuineness at the time of transaction before proceeding under Section 74; reliance on later cancellation alone is insufficient. Obiter - none significant beyond that verification duty.

Conclusions: Proceedings initiated without such verification were unjustified and liable to be quashed.

Issue 4: Relevance of absence of findings regarding transportation/documentation defects

Legal framework: Validity of transactions also assessed by presence of legitimate transportation documents (e-way bill, vehicle registration) and other corroborative evidence.

Precedent Treatment: Not discussed.

Interpretation and reasoning: The Court noted that the revenue did not allege or establish any defect in transportation documents (such as vehicle non-registration) for the goods in question. In the absence of such adverse findings, the initiation of proceedings could not be justified on the basis that the purchases were from an unregistered or non-existent dealer, particularly when e-way bills and bank payments existed.

Ratio vs. Obiter: Ratio - absence of any finding of transportation/documentation irregularity weakens the case for invoking Section 74 against the recipient. Obiter - none.

Conclusions: Lack of adverse findings regarding transport/documentation contributed to quashing of the impugned orders.

Overall Conclusion

The Court quashed the orders imposing RITC and penalty under Section 74 because the recipient had valid tax invoices, e-way bills, bank payments, and the supplier had filed GSTR-1 and GSTR-3B (indicating tax payment); no material showed recipient's fraud or misrepresentation; and the authorities failed to verify the supplier's existence or the genuineness of transactions at the relevant time before initiating penal proceedings. The quashing constitutes the operative ratio of the decision.

1. ISSUES PRESENTED AND CONSIDERED

1. Whether an order of provisional assessment under Section 18 of the Customs Act, 1962 is a "decision or order" appealable under Section 128.

2. Whether the Countervailing Duty (CVD) Notification which imposes CVD on "castings for wind operated electricity generators ... in raw, finished or sub-assembled form, or as a part of a sub-assembly, or as a part of an equipment/ component meant for wind-operated electricity generators" extends to castings that are imported as parts of distinct components or sub-assemblies, and whether such castings can be subjected to CVD notwithstanding that the imported item has acquired a distinct nomenclature.

3. Whether the value of a casting, when imported as part of a larger component or sub-assembly, can be separated (vivisected) from the value of the resulting item for the purpose of computing CVD; and, if separability is accepted, the proper approach to determine such value under the valuation provisions.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Appealability of provisional assessment

Legal framework: Section 128 grants right of appeal against "any decision or order". Provisional assessments are made under Section 18 of the Customs Act.

Precedent treatment: The Tribunal follows decisions holding that provisional assessment orders affecting rights of parties are appealable (coordinate Bench authorities and several Tribunal/High Court decisions cited).

Interpretation and reasoning: The Tribunal reads the phrase "any decision or order" in Section 128 broadly; simultaneous use of both words indicates legislative intention to widen scope of appeal rights. When a provisional assessment affects rights and is agreed to by a party, statutory appeal remedy is available. Relevant precedents support that no legal bar exists to appeal against provisional assessments.

Ratio vs. Obiter: Ratio - Provisional assessment orders that affect rights are appealable under Section 128. Obiter - reliance on particular cited authorities is explanatory rather than determinative beyond the proposition.

Conclusion: The Commissioner (Appeals) correctly entertained the appeal against a provisional assessment; the preliminary objection by Revenue is rejected.

Issue 2 - Scope and interpretation of the CVD Notification (castings in raw/finished/sub-assembled form or as part of sub-assembly/equipment)

Legal framework: The language of the CVD Notification imposes duty on "castings" for wind generators, including when existing in raw, finished, sub-assembled form or "as a part of a sub-assembly, or as a part of an equipment/ component" meant for such generators; tax statute interpretation principles apply, including giving effect to language used.

Precedent treatment: Reference made to DGAD Notification and prior Tribunal decision which addressed validity of CVD imposition but did not determine whether particular items fall within notification. The Tribunal distinguishes that prior decision as not addressing the present interpretive issue.

Interpretation and reasoning: The Tribunal adopts a plain-textual approach: the Notification's words are clear and authorize levy on castings even if they form part of sub-assemblies or other components. The notification aims to capture castings whether imported standalone or as part of assembled items to prevent circumvention. Emphasis on giving effect to each part of the statutory language; construing the term "as" narrowly to exclude castings when part of assemblies would render that express portion nugatory. The fact that imported goods may be finished, machined or assembled does not negate that the imported item includes castings liable to CVD.

Ratio vs. Obiter: Ratio - The Notification applies to castings even when they are imported as part of larger components or sub-assemblies; plain textual meaning controls in tax context. Obiter - observations on DGAD's reasoning about proportion of machining and policy considerations are supportive but not the primary basis.

Conclusion: The Commissioner's conclusion that the Notification applies only to pure castings and not to castings forming part of other components is not tenable; castings within imported parts/sub-assemblies are within the scope of the Notification and liable to CVD (subject to valuation issues in Issue 3).

Issue 3 - Vivisection of assembled items and valuation of casting portions

Legal framework: Valuation for customs and duties governed by Section 14 and Valuation Rules; levy of duty requires a workable computation mechanism. Principle from higher authority: levy cannot stand if computation mechanism fails.

Precedent treatment: Tribunal refers to Supreme Court principle that there can be no levy if the computation mechanism fails; DGAD analysis supports notion of limiting duty to casting portions of sub-assemblies to avoid defeating purpose of duty while not extending to entire sub-assemblies.

Interpretation and reasoning: The Tribunal rejects the Commissioner (Appeals) categorical prohibition on vivisection. It accepts that where imported items include castings, the CVD may be imposed on the casting portion even though the item is a distinct product with value additions. However, the Tribunal finds Revenue has not established an acceptable method to determine the value of the casting portion. Section 14 and valuation rules do not contemplate arbitrary splitting without evidence; the adjudicating authority must reasonably determine casting value after considering submissions. If valuation of the casting portion cannot be determined in accordance with law, no CVD can be levied because the computation mechanism would fail.

Ratio vs. Obiter: Ratio - Vivisection to subject casting portions to CVD is permissible in principle; levy requires a legally sustainable valuation of the casting portion. Obiter - observations on the impossibility of vivisection in particular factual matrices and the Commissioner's rationale are criticized as undermining the Notification but are not adopted.

Conclusion: Vivisection is legally permissible to the extent necessary to identify and tax the casting portion of an imported assembled item, but the case must be remanded for the Adjudicating Authority to determine the value of the casting in accordance with valuation law and submissions of the importer; absence of a reliable valuation precludes levy.

Cross-references and operative outcome

Cross-reference: Issue 2 establishes that castings within assemblies are within the Notification; Issue 3 qualifies that inclusion by requiring a lawful valuation method before CVD can be imposed. If valuation cannot be satisfactorily determined, no CVD can be levied.

Operative direction (ratio): Appeal on merits allowed insofar as the Notification covers castings imported as part of assemblies; remand to Adjudicating Authority to determine value of casting portions per valuation law; if value cannot be determined, CVD cannot be levied.

ISSUES PRESENTED AND CONSIDERED

1. Whether the order placing the public servant under suspension can be sustained where the alleged omission (failure to cancel GST registration and prevent claim of input tax credit) arose at a time when the public servant was on authorised leave and later posted elsewhere, and the alleged wrongful claim of set-off occurred months after the reported misconduct.

2. Whether suspension is justified as an interim measure in the circumstances of the case, or whether continuance of suspension would be prima facie unjustified and therefore liable to be set aside while permitting disciplinary inquiry to proceed.

3. What remedial course is appropriate where allegations of misconduct exist but facts show temporal and causal disconnection between the officer's absence/transfer and the later alleged loss to the exchequer.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of suspension given the officer's authorised leave and later transfer, and timing of alleged wrongful set-off

Legal framework: Principles governing suspension require that suspension be justified by necessity (e.g., to prevent influence on inquiry, tampering with evidence, or to protect public interest) and not be punitive. Administrative action must account for authorized leave and postings; temporal nexus between alleged dereliction and resultant loss is relevant to the legitimacy of immediate suspension.

Precedent treatment: The Court did not cite or apply a specific authority in the text; it proceeded on established administrative-law principles that suspension is an exceptional interim measure and must be examined in the light of factual matrix, including periods of authorised absence.

Interpretation and reasoning: The Court found the material facts undisputed: (a) the complaint/report that the firm was bogus was dated 29.05.2023; (b) the public servant was on child-care and medical leave from 01.06.2023 to 22.08.2023; (c) transfer occurred on 22.08.2023; and (d) the alleged wrongful set-off was for December 2023-March 2024 - well after the period of leave and the transfer. The Court emphasised that immediate cancellation of GST registration is not an instantaneous administrative act (a show-cause precedes cancellation), and that the public servant was not in office when the impugned set-offs occurred. On that factual matrix, the Court concluded prima facie there was insufficient causal/temporal connection to justify continuation of suspension.

Ratio vs. Obiter: Ratio - where an alleged misconduct arises at a time when the officer was on authorised leave and the alleged loss accrued at a much later date after transfer, continuance of suspension is prima facie unjustified absent material showing of necessity. Obiter - observations on the procedural pace of cancellation (show-cause requirement) and that suspension cannot be sustained as punitive in such circumstances.

Conclusion: The suspension could not be sustained on the facts; the Court set aside the suspension order as prima facie unjustified given the officer's authorised absence and the lack of temporal nexus to the alleged later claims of input tax credit.

Issue 2 - Permissibility of allowing inquiry to proceed despite setting aside suspension, and delimiting the inquiry timeline

Legal framework: Administrative authorities retain the power to conduct disciplinary inquiry even where suspension is set aside. Courts may grant relief against suspension while leaving open the disciplinary process, often directing reasonable timelines for conclusion to balance individual liberty of service with public interest in accountability.

Precedent treatment: The Court followed the established approach of permitting inquiry to continue and directing expedition, rather than quashing departmental proceedings outright; no prior case law was expressly cited or overruled.

Interpretation and reasoning: While continuance of suspension was found prima facie unjustified, the existence of allegations and an investigation report justified completion of disciplinary proceedings. To protect both service interest and public interest, the Court exercised supervisory power to revoke suspension but ordered the inquiry to be concluded within a defined, reasonable period and required cooperation of parties.

Ratio vs. Obiter: Ratio - revocation of suspension does not bar the disciplinary authority from conducting and concluding inquiry; courts may impose a limited timeline for completion (three months in the present case). Obiter - the suggestion that parties must fully cooperate is an applicatory direction consistent with supervisory jurisdiction.

Conclusion: The Court set aside the suspension while expressly permitting inquiry to proceed and directing that the disciplinary authority conclude the inquiry within three months from presentation of the certified copy of the order; parties were directed to cooperate.

Issue 3 - Appropriate disciplinary response where prima facie case appears weak and misconduct, if any, may attract minor penalty

Legal framework: Disciplinary matrices and rules (e.g., State discipline and appeal rules) distinguish between minor and major penalties; suspension is typically associated with serious misconduct or necessity pending inquiry. Courts guard against use of suspension where lesser sanctions or mere inquiry would suffice.

Precedent treatment: The Court noted conceptually that at best only a minor penalty might be tenable on the given facts, implying proportionality in disciplinary response, but did not adjudicate final penalty (left to inquiry). No precedent was formally followed or distinguished.

Interpretation and reasoning: Counsel for the officer argued that absence from office negated misconduct and that suspension was disproportionate; the State accepted that suspension should be set aside while preserving inquiry. The Court's analysis of facts supported the view that immediate punitive removal from service was not warranted and that if misconduct were established, minor penalty avenues remained open.

Ratio vs. Obiter: Obiter - the remark that at best a minor penalty could be imposed on completion of inquiry; not a binding determination of penalty but a comment on proportionality. Ratio - where suspension is disproportionate to prima facie evidence of culpability, relief from suspension is appropriate while inquiry continues.

Conclusion: The Court indicated that suspension was disproportionate in the factual matrix and, while not precluding departmental adjudication and minor penalty, ordered revocation of suspension and directed an expedited inquiry process.

Relief and Directions (operative conclusions)

The Court set aside the suspension order; permitted the disciplinary inquiry to continue and directed its conclusion within three months from presentation of the certified copy of the order; and required parties' full participation and cooperation in the inquiry. These operative directions constitute the Court's dispositive relief while preserving departmental adjudicatory authority to determine culpability and appropriate penalty.

ISSUES PRESENTED AND CONSIDERED

1. Whether this Court has territorial jurisdiction to entertain a writ challenging a Look Out Circular (LOC) where critical acts (detention, service of summons, recording of statement) occurred within its territorial limits despite originating authority being situate elsewhere.

2. Whether the impugned LOC, issued in connection with alleged mis-declaration/overvaluation of imported goods, was lawful in view of the consolidated Office Memorandum dated 22.02.2021 (OM-2021) which circumscribes grounds and procedure for issuance of LOCs - specifically clauses 6(H), 6(I) and the exception in 6(L).

3. Whether the existence of concluded adjudicatory orders in favour of the person (including upholding by appellate forum) and absence of any subsisting Show Cause Notice or stayed order precludes continuation of an LOC issued in relation to the same subject-matter.

4. Whether the issuance and continuation of the LOC was justified on grounds of flight risk, non-compliance with summonses, ongoing investigations in respect of related consignments, or pending further appeals by the issuing authority.

5. What relief, if any, should follow where an LOC is found to be improperly maintained - including the role and appropriateness of conditional quashing subject to undertakings.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Territorial jurisdiction to entertain challenge to LOC

Legal framework: Article 226 (constitutional writ jurisdiction) and principles of situs of cause of action; precedents delineating when a High Court may be approached where part of cause of action arose within its territory.

Precedent treatment: The Court relied on established authorities holding that a High Court has jurisdiction where a part of cause of action arises within its limits and that situs of originating authority is not exclusively determinative; doctrine of forum conveniens is discretionary and cannot override statutory/constitutional jurisdiction.

Interpretation and reasoning: The Court identified that detention, service of summons and recording of statement occurred in the NCT of Delhi and that the DRI head office and investigating officers conducting inquiries are located in New Delhi. These factual links amount to a substantial part of the cause of action arising within this Court's territorial jurisdiction.

Ratio vs. Obiter: Ratio - where a material part of cause of action (detention, service, investigation steps) occurs within a High Court's territorial limits, the High Court may entertain a writ challenging an LOC notwithstanding origination of LOC elsewhere. Obiter - remarks on forum conveniens and its limited applicability.

Conclusion: The Court rejected the objection of want of territorial jurisdiction and held the petition maintainable before this Court.

Issue 2 - Validity of LOC under OM-2021 (clauses 6(H), 6(I), 6(L))

Legal framework: OM-2021 sets consolidated guidelines: (H) recourse to LOC in cognizable offences under IPC/penal statutes; (I) in non-cognizable matters the LOC subject cannot be detained/arrested and originator can only seek intimation; (L) carve-out permitting LOC in exceptional cases where departure is "detrimental to sovereignty, security, bilateral relations, strategic and/or economic interests" or larger public interest.

Precedent treatment: The Court surveyed and applied prior decisions interpreting the OM-2010/2017/2021 regime (including cases holding LOCs impermissible absent cognizable offences except in exceptional, high-gravity circumstances; and that "economic interest" invocation must show larger national impact). It followed and applied those precedents rather than distinguishing them.

Interpretation and reasoning: The Court emphasised that OM-2021 retained the core protection against indiscriminate use of LOCs and that clause (L) is a narrow exception requiring high gravity and demonstrable detriment to national/strategic/economic interests. The Court found no material showing that the exceptional threshold under clause (L) was satisfied. Mere revenue implications or commercial disputes with limited or private economic impact do not, without more, justify detention or preventative measures that curtail the fundamental right to travel under Article 21.

Ratio vs. Obiter: Ratio - LOCs in non-cognizable, revenue or regulatory matters cannot be used to detain/prevent departure unless the exceptional and narrowly-construed criteria of OM-2021(6)(L) are established; economic detriment must be of sufficient gravity to warrant curtailment of travel. Obiter - general observations on evolution of OM regime and comparative cases.

Conclusion: The impugned LOC, insofar as relied upon to detain and prevent travel in the absence of cognizable criminal proceedings or demonstrable exceptional detriment, was contrary to OM-2021 and not justified on the facts.

Issue 3 - Effect of concluded adjudication and appellate affirmations on continuance of LOC

Legal framework: Principles of finality of adjudicatory orders, effect of appellate affirmations and absence of stay; administrative measures must give proper weight to finalized adjudication; powers of investigating agencies vis-à-vis persons against whom proceedings were dropped.

Precedent treatment: The Court considered that administrative action cannot indefinitely restrain fundamental rights where adjudicatory forums have exonerated a person and such orders have been upheld on appeal, absent statutory basis to continue restrictive measures.

Interpretation and reasoning: The Court recorded that the Show Cause Notice proceedings were dropped by the Adjudicating Authority and that first appellate forum (CESTAT) upheld that order. A subsequent appellate order made specific findings that proceedings as framed against the individual were without jurisdiction. No stay on operation of the order was placed. The Court reasoned that continuation of an LOC in relation to concluded proceedings raises serious questions of necessity and proportionality, particularly after multiple affirmations in favour of the person.

Ratio vs. Obiter: Ratio - where adjudicatory proceedings in relation to the same subject-matter have been dropped and affirmed on appeal (with no stay), continuation of preventive measures such as LOC requires clear justification; absent such justification, the LOC is not maintainable. Obiter - comments on pending further appeals by the issuing authority not automatically sustaining an LOC.

Conclusion: The prior favorable adjudications and appellate affirmations materially undermine the legal basis for continuing the LOC in relation to the same transactions.

Issue 4 - Allegations of flight risk, non-compliance with summonses and ongoing investigations as justification for LOC

Legal framework: OM-2021 conditions for LOC in cases of evasion; criteria for assessing flight risk; requirement of reasoned request and details when seeking detention; procedural fairness in issuance and renewal of LOCs.

Precedent treatment: The Court relied on authorities that LOC should be used when there is deliberate evasion (e.g., failure to appear despite NBWs or coercive measures) or where departure would frustrate criminal proceedings; mere frequency of travel or commercial nature of allegations is insufficient.

Interpretation and reasoning: The Court examined factual claims of non-compliance and prior travel during earlier LOC period. It found absence of evidence that the person had been made aware of the earlier LOC, noted the renunciation of earlier citizenship rendering prior passport basis inapt, and recorded the petitioner's subsequent cooperation (appearances, document production, assistance to retrieve records). The alleged ongoing investigations into related consignments and pending Letters Rogatory or appeals do not, without satisfying OM-2021 thresholds or demonstrating reasonable apprehension of absconding, justify preventive detention by LOC. The Court also noted that the banks were unable to produce older records due to extraterritorial retention rules, weakening the assertion of non-cooperation.

Ratio vs. Obiter: Ratio - absence of deliberate evasion, presence of cooperation, and pragmatic impediments to document production diminish the justification for an LOC based on flight risk; frequency of pre-LOC travel and commercial transactions do not by themselves establish flight risk. Obiter - observations on interplay between overseas evidence gathering and LOC necessity.

Conclusion: On the facts, the respondent failed to establish that the petitioner was a flight risk or that non-compliance justified continuation of the LOC.

Issue 5 - Appropriate relief and conditions for quashing LOC

Legal framework: Powers of Court to quash administrative coercive measures and to impose conditional orders (undertakings) to secure continued cooperation and protect investigation; contempt consequences for breach.

Precedent treatment: The Court applied prior decisions permitting conditional quashing subject to undertakings where the person offers to cooperate and there is no demonstrated risk of absconding.

Interpretation and reasoning: Balancing the fundamental right to travel and the State's interest in investigation, the Court accepted a proffered affidavit undertaking to cooperate, appear when required and provide documents, noting that such undertaking aligns with precedent (including Puja Chadha). The Court conditioned the quashing upon filing the undertaking and cautioned that breach would attract contempt and other legal consequences.

Ratio vs. Obiter: Ratio - quashing of LOC is appropriate where (a) OM-2021 conditions are not met, (b) prior adjudication/appeals negate basis for LOC, and (c) the person furnishes a binding undertaking to cooperate; conditional quashing preserves investigatory interest while restoring liberty. Obiter - enforcement warnings for breaches.

Conclusion: The LOC was quashed subject to the petitioner filing an affidavit undertaking to cooperate and produce documents; any breach would have severe consequences including contempt proceedings.

ISSUES PRESENTED AND CONSIDERED

1. Whether statements recorded from the accused/officer in custody described as a "hostage-like" situation and under alleged duress are admissible and can form the basis for imposing penalty under the Customs Act, 1962 (including initiation under Section 136 and penalty under Section 112(b)).

2. Whether recoveries (cash and contraband) seized from the appellant and his residential premises on the date of the incident are sufficiently connected and corroborative to the alleged smuggling acts so as to sustain confiscation under Section 111 and penal consequences.

3. Whether reliance on statements of co-accused or third parties, telephone material and audio/photographic evidence without independent corroboration amounts to proof of mens rea/abetment or supports imposition of personal penalty.

4. Whether principles of natural justice were complied with in the proceedings - specifically, the right to cross-examine prosecution witnesses and to have adequate opportunity to challenge evidence relied upon in the Show Cause Notice.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Admissibility and probative value of statements recorded under alleged duress/hostage-like custody

Legal framework: Statements recorded by investigating agencies are admissible subject to compliance with statutory safeguards and general principles of voluntariness and reliability; confession or inculpatory statements obtained under coercion/duress are suspect and may be excluded or accorded low evidentiary value.

Precedent Treatment: The Court referred to authorities holding that statements of co-accused or third parties require corroboration before being treated as substantive evidence; it relied on and applied precedent distinguishing cases where a co-accused's statement inculpates both parties from cases where guilt is shifted without independent corroboration.

Interpretation and reasoning: The Tribunal found the first statements of the appellant were recorded in a "hostage-like" situation overnight, with alleged forcible seizure of phones and detention of staff; the appellant subsequently retracted or gave differing account in later statement. The Tribunal emphasized that incriminatory statements recorded in illegal custody, without presence of representatives and under duress, cannot be accepted at face value and require corroboration from independent evidence. The circumstances of detention, the differential treatment of senior officers who were allowed to go, and the appellant's immediate retraction weigh against reliability.

Ratio vs. Obiter: Ratio - Statements recorded under duress/illegal custody cannot sustain penal liability absent independent corroboration. Obiter - Observations about the conduct of DRI officers and detention practices as aggravating the unreliability of statements.

Conclusion: The impugned order could not rely solely on the statements recorded on 19/20.12.2019; those statements lacked probative value sufficient to impose penalty and were therefore insufficient to uphold personal penalty.

Issue 2: Sufficiency of recovery evidence and linkage between recovery and alleged smuggling

Legal framework: Recovery of contraband and cash can be evidentiary; however, to sustain confiscation or personal penalty the recovery must be properly linked to the accused and the specific smuggling incident. Explanation by accused for recovered property must be considered; mere temporal coincidence (recovery on same day) does not automatically establish connection.

Precedent Treatment: The Tribunal relied on prior decisions holding that recovery from an accused or his premises requires particulars linking it to the alleged offence and may be disbelieved if credible explanation is offered or if seizure lacks particularisation.

Interpretation and reasoning: The Tribunal noted that the Department did not provide specifics linking the cash recovered from the appellant's residence (Rs.8,25,500/-) to the airport smuggling incident; the appellant provided an explanation (family/ matrimonial gift) supported by a notarized affidavit. The amounts claimed as possible gratification (e.g., Rs.2,000/- per clearance) were inconsistent with the large cash recovered. The Tribunal held that recovery without nexus and without independent corroboration cannot be treated as decisive evidence of guilt or abetment.

Ratio vs. Obiter: Ratio - Recovery must be specifically linked to the offence and corroborated; unexplained or unexplained-in-fact recovery unsupported by nexus and inconsistent with alleged modus operandi is insufficient for imposing penalty. Obiter - Comment that same-day house searches while the appellant was detained undermine the reliability of linking.

Conclusion: The cash recovery and other seizures did not provide the necessary corroborative link to the appellant's alleged involvement; confiscation/penal consequences based on such recovery could not be sustained.

Issue 3: Reliance on statements of co-accused/third parties and electronic material (audio/photos) without corroboration

Legal framework: Statements of co-accused and third parties and electronic material are admissible but require verification and corroboration; the burden on the prosecuting authority to indicate how such material connects the accused to the offence remains.

Precedent Treatment: The Tribunal reiterated established position that co-accused statements, when uncorroborated, cannot be accepted as gospel truth; decisions cited demonstrate that where a co-accused shifts guilt onto others without independent evidence, personal penalty is unwarranted.

Interpretation and reasoning: The impugned Show Cause Notice relied on phone evidence, an unidentified photograph and audio clips without temporal or contextual corroboration. The Tribunal observed absence of transcripts, absence of linkages to dates/incidents or voice verification, and that the impugned paras of the SCN relied upon statements made under the alleged illegal custody. Given these deficits, the Tribunal found the electronic and third-party statement material inadequate to establish abetment or culpability.

Ratio vs. Obiter: Ratio - Electronic/audio/photo evidence and co-accused statements uncorroborated by independent proof cannot sustain penalty. Obiter - Emphasis on need for voice verification, transcripts and contextual specificity as part of due inquiry.

Conclusion: Reliance on co-accused statements and electronic material without independent corroboration does not constitute sufficient proof for imposing penalty.

Issue 4: Compliance with principles of natural justice - cross-examination and opportunity to contest evidence

Legal framework: Principles of natural justice require that an accused has an opportunity to know the case against him, to adduce evidence in rebuttal and, where relevant, to cross-examine witnesses whose statements constitute the basis for adverse findings; denial of such opportunity can vitiate findings and penalties.

Precedent Treatment: The Tribunal applied long-standing administrative law principles and prior authorities holding that absence of opportunity to cross-examine material witnesses or challenge incriminating statements may render the evidence infirm.

Interpretation and reasoning: The Tribunal found the appellant was not afforded opportunity to cross-examine witnesses or to meaningfully object to evidence relied upon in the SCN; statements were recorded under custody and there was no effective engagement with appellant's explanation for the recovered cash. The Tribunal considered these procedural deficiencies significant in assessing the weight of the evidence.

Ratio vs. Obiter: Ratio - Failure to provide adequate opportunity of hearing and cross-examination undermines the admissibility/weight of incriminating material and justifies setting aside penalty orders. Obiter - Observations on interplay between departmental disciplinary proceedings already imposed and pending departmental appeal not barring adjudicatory scrutiny.

Conclusion: Non-compliance with principles of natural justice (lack of cross-examination/opportunity to challenge evidence) contributed to the untenability of the penalty order.

Overall Conclusion and Disposition

The Tribunal held that the impugned appellate order upholding the penalty could not be sustained: (a) primary inculpatory statements were recorded under alleged duress/hostage-like custody and lacked corroboration, (b) recoveries were not sufficiently linked to the alleged smuggling incident and were plausibly explained, (c) reliance on co-accused statements and electronic material without independent corroboration was impermissible, and (d) principles of natural justice were not fully observed. On these grounds the appellate order was set aside and the appeal allowed with consequential relief as per law.

ISSUES PRESENTED AND CONSIDERED

1. Whether the Look-Out-Circular (LOC) issued against the petitioner in the course of an investigation under Section 210(1)(c) of the Companies Act, 2013, ought to be suspended during the pendency of the writ petition.

2. Whether issuance and continuation of the LOC, in the factual matrix where the petitioner is a foreign national/resident of a foreign country and a non-executive/independent director, is justified as a preventive measure in the absence of a registered FIR or completed investigation.

3. Whether the petitioner's alleged failure to personally appear on an earlier summons and subsequent cooperation post judicial intervention precludes suspension of the LOC.

4. What conditions, if any, are appropriate to balance the investigating authority's interest in securing attendance and the petitioner's liberty and professional/family obligations abroad.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether the LOC should be suspended during pendency of the writ petition

Legal framework: The Court considered the procedural scheme under Section 210(1)(c) of the Companies Act, powers of investigation by Inspectors/ROCs, the administrative Office Memoranda governing issuance of LOCs by Ministry of Home Affairs, and constitutional protections (Article 21 for persons generally and limitations on Article 19(1)(g) for foreigners as noted by respondents).

Precedent Treatment: The petitioner relied on judicial precedents (unnamed in the record) limiting LOC issuance to cognizable offences or where substantiated risk of absconding exists; the respondents relied on MHA Office Memorandum permitting preventive measures in matters of significant economic interest. The Court deferred definitive adjudication of those rival contentions on legality of the LOC to the final hearing of the main writ petition.

Interpretation and reasoning: The Court confined its present inquiry to whether the LOC should continue during pendency of the petition. It found the investigation to be at a preliminary stage, no FIR has been registered, and the petitioner's role remains unascertained. The Court balanced the investigating authority's legitimate interest against the petitioner's right to liberty and to discharge family and professional obligations abroad, noting the petitioner voluntarily entered India and demonstrated cooperation after judicial direction.

Ratio vs. Obiter: Ratio - the Court held that, on the facts before it, suspension of LOC during pendency is appropriate subject to stringent conditions to secure attendance and cooperation. Obiter - broader observations on the ultimate legality of LOC issuance and the scope of MHA memoranda were expressly reserved for final adjudication.

Conclusion: The LOC was suspended for the limited purpose of the interim application, subject to specified conditions (security of Rs.25 crores by FDR/Bank Guarantee; Rs.5 crores surety by an Indian-resident family member; continued cooperation; advance travel intimation; provision of contact and residential details abroad).

Issue 2: Validity of issuing LOC against a foreign national/non-executive director in an ongoing regulatory investigation

Legal framework: Consideration turned on the administrative criteria for issuing LOCs (MHA Office Memoranda), classification of offences under the Companies Act (contention whether offences under Section 447 are cognizable), and the investigatory powers of ROCs/Inspectors under Section 210 of the Companies Act.

Precedent Treatment: The Court noted reliance by parties on precedents but did not resolve conflicts. It recorded the petitioner's plea that LOCs should be limited to cognizable offences and the respondents' counter that serious economic offences justify preventive measures; determination of those legal questions was postponed to the main hearing.

Interpretation and reasoning: The Court observed that the present investigation is preliminary, complex and layered, and that no FIR or SFIO reference has been made so far. Given the unresolved nature of the legal question whether the present allegations attract cognizability warranting an LOC, the Court declined to decide that issue at the interim stage and instead addressed only the question of interim restraint.

Ratio vs. Obiter: Obiter - the Court's recording of competing positions on cognizability and the MHA memoranda; these legal issues were expressly reserved and not decided.

Conclusion: Legality and validity of issuing LOC against the petitioner remain open for final adjudication; interim suspension does not reflect any final ruling on that question.

Issue 3: Effect of petitioner's prior non-appearance and subsequent cooperation on entitlement to suspension

Legal framework: Principles governing interim relief balancing liberty and investigation, and the relevance of prior conduct (non-appearance) to granting interim suspension of administrative restraints.

Precedent Treatment: Parties argued on the weight to be given to prior non-compliance; the Court assessed conduct and timing rather than invoking or distinguishing specific precedents.

Interpretation and reasoning: The Court acknowledged that the petitioner did not attend the initial summons but emphasized that the LOC was issued before the scheduled date of appearance and that the petitioner replied to the summons seeking virtual appearance. Importantly, after judicial direction, the petitioner appeared before the Investigating Officer and furnished documents, and no further summons had been issued. The Court treated the petitioner's subsequent cooperation as a material factor in favor of suspension, while noting that cooperation alone does not automatically entitle one to suspension in all cases; the stage of investigation and risk of absconding remain relevant.

Ratio vs. Obiter: Ratio - where a foreign national voluntarily enters India, demonstrates cooperation after judicial direction, and no further summons are issued, prior non-appearance does not preclude granting interim suspension provided adequate safeguards are imposed.

Conclusion: The petitioner's post-intervention cooperation weighed in favor of suspension, subject to stringent conditions to address any real risk of absconding.

Issue 4: Appropriate conditions to secure investigative interests while permitting travel

Legal framework: Interim relief principles - proportionality, necessity, and feasibility of conditions to balance individual liberty and public interest in investigation.

Precedent Treatment: The Court fashioned a conditions-based order rather than rely on a categorical rule; no specific precedents were adjudicated or overruled in formulating conditions.

Interpretation and reasoning: To mitigate flight risk and ensure continued availability, the Court directed substantial financial security and surety, obligations to cooperate with prior notice for physical presence (three weeks), advance itinerary disclosure, and furnishing foreign contact and residential details. The Court reasoned that these measures appropriately protect investigatory interests while avoiding indefinite restraint of a foreign national who had voluntarily entered India.

Ratio vs. Obiter: Ratio - suspension of restraining administrative measures may be granted subject to pre-emptive and enforceable conditions (security/surety, cooperation, communication of travel plans, contact details) that secure attendance and access to the investigatory process.

Conclusion: The suspended LOC was conditioned on (i) Rs.25 crores security by FDR/Bank Guarantee; (ii) Rs.5 crores surety by an Indian-resident family member (FDR or immovable property); (iii) continued cooperation and three weeks' prior notice for physical presence; (iv) advance itinerary disclosure; and (v) provision and upkeep of foreign contact and residential details.

Final and Procedural Clarifications

The Court expressly confined its observations to adjudication of the interim application and clarified that nothing in the interim order constitutes an opinion on the merits, legality or validity of the LOC, or on contentions to be considered in the main writ petition; those issues remain open for adjudication at the appropriate stage.

1. ISSUES PRESENTED AND CONSIDERED

1. Whether writ petitions challenging Provisional Attachment Orders under Section 5 PMLA are maintainable before the High Court when a statutory appellate remedy exists under Section 26 of the PMLA.

2. Whether the impugned provisional attachment orders suffer from want of jurisdiction because the underlying predicate offences (FIRs/ECIR) were quashed/closed or otherwise not properly pleaded in the ECIR, including alleged non-reference to the principal FIR on which investigation is said to be founded.

3. Whether the Provisional Attachment Orders/Confirmation orders violate fundamental rights (Articles 14, 19(1)(e), 21 and Article 300A) or orders of higher courts (status quo / lis pendens) so as to warrant exercise of writ jurisdiction.

4. Whether the Adjudicating Authority's confirmation of provisional attachments is vitiated for want of proper constitution (requirement of three members including Chairperson under Section 6) rendering proceedings coram non judice.

5. Whether the impugned provisional attachment orders are invalid for failure to state reasons or to act "on the basis of material in his possession" as mandated by Section 5(1) PMLA and whether concealment of material facts (eg. closure/quashing of FIRs) invalidates the attachments.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Maintainability of writs in presence of statutory appellate remedy (Section 26 PMLA)

Legal framework: PMLA provides a self-contained scheme of adjudication, confirmation and appeal; Section 26 permits appeal to the Appellate Tribunal against orders of the Adjudicating Authority. Constitutional writ jurisdiction under Article 226 is discretionary and ordinarily deferred where efficacious statutory remedies exist.

Precedent treatment: Courts have repeatedly held that where a statute provides an alternative efficacious remedy, writ jurisdiction should ordinarily not be exercised (principles from Thansingh Nathmal, Titaghur, Mafatlal and subsequent decisions). Recent High Court decisions (Gold Croft Properties, Dr. U.S. Awasthi, Adventure Island Ltd.) applied the same principle in PMLA context.

Interpretation and reasoning: The Court applied the settled principle that the statutory remedy under the PMLA is adequate and capable of adjudicating all grounds raised in the writ petitions (including jurisdictional, factual and legal objections to attachments). Two of the challenged PAOs had already been confirmed and appeals filed; the third matter was sub judice before the Adjudicating Authority with judgment reserved. The Court observed that entertaining writs at this stage would bypass the statutory machinery and could lead to conflicting orders.

Ratio vs. Obiter: Ratio - Where the Adjudicating Authority has exercised jurisdiction and an effective appeal exists under Section 26, writ petitions challenging attachment orders are ordinarily not maintainable and should be relegated to the Appellate Tribunal unless exceptional circumstances are shown.

Conclusions: Writ petitions were not entertained; petitioners directed to avail the statutory appellate remedy and the Appellate Tribunal requested to decide appeals expeditiously (direction as to preferential disposal within a specified period).

Issue 2 - Jurisdictional foundation of PAOs: existence and status of predicate offences / ECIR

Legal framework: PMLA attachments proceed upon belief of proceeds of crime derived from scheduled offences; investigations are reflected in ECIRs which are linked to predicate offences (FIRs) but registration of a separate FIR is not always a sine qua non for attachment (as per Vijay Madanlal Choudhary).

Precedent treatment: The respondent relied on Vijay Madanlal Choudhary (Supreme Court) for proposition that separate FIR registration is not essential for attachment; petitioners relied on cases and factual distinctions asserting lack of surviving scheduled offence.

Interpretation and reasoning: The Court noted competing factual assertions regarding closure/quashing of multiple FIRs and whether the ECIR expressly referenced the key FIR. It recorded petitioners' contention that most underlying FIRs were closed/quashed and that the ECIR lacked reference to the principal FIR, but treated these as disputed questions of fact amenable to adjudication by the statutory forum. The Court emphasized that such factual controversies are not ordinarily resolved in writ proceedings where an alternative remedy exists.

Ratio vs. Obiter: Obiter on factual sufficiency - the Court did not finally decide whether attachments lacked predicate offences; rather it held that such issues are to be examined by the Adjudicating Authority/Appellate Tribunal.

Conclusions: The contention that ECIR lacked reference to the principal FIR and that no scheduled offence survived was left to the statutory adjudicatory process; writ relief was declined on maintainability grounds.

Issue 3 - Alleged violation of higher court orders (status quo / lis pendens) and fundamental rights

Legal framework: Orders of higher courts (status quo) and principles of lis pendens are enforceable; fundamental rights (Articles 14, 19(1)(e), 21 and Article 300A) can warrant writ jurisdiction where statutory machinery is inadequate or there is flagrant violation.

Precedent treatment: The Court acknowledged that exceptional circumstances - such as total violation of fundamental rights or blatant disregard of superior court orders - can justify writ intervention despite statutory remedies (cited Mafatlal and other authorities recognizing exceptions).

Interpretation and reasoning: While petitioners asserted that attachments contravened Supreme Court status quo directions and infringed property and other fundamental rights, the Court found these contentions capable of effective redressal before the Appellate Tribunal. The Court observed that petitioners failed to demonstrate that the statutory remedy was illusory or ineffective, or that there had been a jurisdictional or procedural violation of such magnitude as to require immediate writ relief.

Ratio vs. Obiter: Ratio - Alleged contravention of superior court orders or infringement of fundamental rights does not ipso facto render writ jurisdiction appropriate where an efficacious statutory appeal exists and no exceptional circumstances eliminating that remedy are shown.

Conclusions: Allegations of violation of status quo and fundamental rights were to be raised and adjudicated in the appeal; writ petitions dismissed without expressing any opinion on merits.

Issue 4 - Constitution/coram of the Adjudicating Authority (single member vs three members)

Legal framework: Section 6 PMLA prescribes constitution of the Adjudicating Authority; statutory provisions and subordinate rules govern bench constitution and whether a single member bench can validly decide matters.

Precedent treatment: Conflicting High Court decisions exist on whether single-member adjudication is permissible; some judgments have upheld single-member benches while others have been stayed at the Supreme Court level (eg. J. Sekar stayed).

Interpretation and reasoning: The Court noted petitioners' objection regarding constitution of the Authority and that the Authority relied on precedent permitting single-member constitution. The Court held that challenges to coram/non-joinder are matters for the Appellate Tribunal to consider in the appeal against the confirmation orders; mere assertion of coram defect does not automatically attract writ intervention in presence of alternate remedy.

Ratio vs. Obiter: Obiter - the Court did not adjudicate the correctness of single-member constitution; ratio - such jurisdictional/coram challenges fall appropriately for consideration by the Appellate Tribunal when an appeal is available.

Conclusions: Petitioners to raise coram/constitution issues before the Appellate Tribunal; writ relief denied.

Issue 5 - Requirement of reasons/material under Section 5(1) and concealment of material facts

Legal framework: Section 5(1) requires the Director to pass provisional attachment orders "on the basis of material in his possession" and the statutory scheme envisages reasoned adjudication and opportunity before confirmation under Section 8.

Precedent treatment: Courts have intervened where attachments were made in total disregard of material facts or where orders lacked any basis, or where principles of natural justice were breached.

Interpretation and reasoning: Petitioners alleged concealment of material (closure/quashing of five FIRs) and absence of reasons in PAOs; the Court observed these are mixed questions of law and fact which the Adjudicating Authority and the Appellate Tribunal are equipped to examine. No exceptional circumstance was demonstrated to displace the statutory route for such scrutiny.

Ratio vs. Obiter: Ratio - Alleged non-disclosure or failure to base PAOs on material is a ground for challenge but, ordinarily, must be ventilated and decided in the adjudicatory/appeal process under the Act rather than by invoking writ jurisdiction at the interlocutory stage.

Conclusions: Petitioners directed to raise these contentions before the Appellate Tribunal; no writ interference.

Overall Conclusion of the Court

The High Court declined to entertain the writ petitions and disposed of them without expressing any opinion on merits, holding that the PMLA's statutory scheme provides an effective remedy by way of appeal under Section 26, and that the issues raised (predicate offences/ECIR sufficiency, status of FIRs, effect of higher court status quo orders, constitution of Adjudicating Authority, adequacy of reasons/material and alleged fundamental rights violations) are to be adjudicated by the Adjudicating Authority/Appellate Tribunal. The petitioners were granted liberty to pursue statutory appeals, and the Appellate Tribunal was requested to decide the appeals expeditiously.

ISSUES PRESENTED AND CONSIDERED

1. Whether amounts collected by a registered Customs House Agent as reimbursement of third-party charges (Harbour/CFS dues, IAAI charges, loading/unloading, surveyor fees, freight/steamer agent charges, insurance charges) constitute "consideration" forming part of the taxable value of the service under Section 67 read with Rule 5 of the Service Tax (Determination of Value) Rules, 2006.

2. Whether the service provider qualified as a "pure agent" under Rule 5(2) and explanation 1 to Rule 5(2) so as to exclude reimbursable expenses from the taxable value.

3. Validity and applicability of Rule 5(1) of the Valuation Rules insofar as it seeks to include reimbursable expenses in taxable value - specifically whether Rule 5(1) goes beyond the legislative mandate of Sections 66/67 and is therefore ultra vires.

4. Effect of the subsequent legislative amendment to Section 67 (by Finance Act, 2015, effective May 14, 2015) that expressly includes reimbursable expenditure within "consideration" - whether that amendment has retrospective effect on periods prior to the amendment.

5. Whether the impugned appellate order remitting the matter for verification of chartered accountant certificates was sustainable in light of settled legal position on reimbursable expenses.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Inclusion of reimbursable third-party charges in taxable value

Legal framework: Section 66 levies service tax on value of taxable services; Section 67 prescribes that where provision of service is for consideration in money, taxable value is the gross amount charged for providing such service. Rule 5(1) (Valuation Rules, 2006) sought to include expenditures or costs incurred by the service provider in the course of providing taxable service in the taxable value.

Precedent treatment: The Supreme Court in the referred decision examined Rule 5 and upheld the view of the High Court that valuation must be confined to the gross amount charged "for such service" and that Rule 5 went beyond the mandate of Section 67. That High Court view was affirmed.

Interpretation and reasoning: The Court reasoned that "such service" in Section 67 means amounts calculated as quid pro quo for rendering the taxable service; amounts not calculated for providing the taxable service cannot be part of the valuation. Rule 5(1) attempted to broaden valuation to include reimbursable expenses not part of the consideration for the taxable service and therefore exceeded statutory mandate. Rules cannot override or expand the statute; subordinate legislation that conflicts with the Act yields to the statute.

Ratio vs. Obiter: Ratio - valuation for service tax is limited to the gross amount charged for the taxable service; reimbursable expenses, not being consideration for the service, do not form part of taxable value under pre-May 14, 2015 law. Obiter - general observations on rule-making and legislative competence to amend valuation regime.

Conclusions: For periods prior to the statutory amendment, reimbursable third-party charges collected on actuals without markup are not includible in taxable value under Section 67 as interpreted by the Supreme Court.

Issue 2 - Qualification as "pure agent" under Rule 5(2)

Legal framework: Rule 5(2) (and explanation 1) provides that expenditure or costs incurred by the service provider as a "pure agent" of the service recipient can be excluded from taxable value, subject to conditions.

Precedent treatment: The adjudicating authority had accepted chartered accountant certificates and found the appellant acted as a pure agent; appellate authority remitted for verification. The Court relied on higher-court pronouncements that reimbursable expenses, by their nature, could be excluded when bona fide pure agent relationship is established.

Interpretation and reasoning: While Rule 5(2) sets out conditions for exclusion as pure agent, where Rule 5(1) is invalid for extending valuation, the core issue becomes whether reimbursable amounts were actually mere pass-throughs billed on net-to-net without markup. The adjudicating authority's factual finding - supported by chartered accountant certificates and absence of markup - indicated pass-through nature. Given the legal conclusion that Rule 5(1) could not be invoked to include such amounts, factual acceptance of pure agent character supports exclusion.

Ratio vs. Obiter: Ratio - factual findings that reimbursable amounts were billed without markup and acted as pass-throughs support non-inclusion in taxable value under the statutory interpretation; Obiter - specifics of meeting each condition in Rule 5(2) where Rule 5(1) is struck down do not alter the principal statutory limitation.

Conclusions: Where reimbursable charges are bona fide pass-throughs billed on actuals without markup, the amounts are not leviable as part of taxable value for the relevant pre-amendment period; the adjudicating authority's finding in that regard was legally sustainable.

Issue 3 - Validity of Rule 5(1) vis-à-vis Sections 66/67

Legal framework: Subordinate legislation must conform to the enabling statute; Section 67(4) allows rules to prescribe manner of valuation but is subject to Section 67(1).

Precedent treatment: The Supreme Court held that Rule 5(1) went beyond the scope of Sections 66/67 and was therefore ultra vires insofar as it sought to include reimbursable expenses in valuation.

Interpretation and reasoning: The Court emphasized well-settled principles that rules cannot override or enlarge statutory provisions. The purposive reading of Section 67 confines valuation to amounts charged for the taxable service itself; Rule 5(1) attempted to import into valuation amounts that were not consideration for the taxable service and so conflicted with the statute.

Ratio vs. Obiter: Ratio - Rule 5(1) is ultra vires to the extent it includes reimbursable expenses in taxable value under the pre-amendment statutory framework.

Conclusions: Rule 5(1) cannot be applied to include reimbursable expenses in taxable value for periods before the statutory amendment; reliance on that Rule to demand tax on such amounts is unsustainable.

Issue 4 - Effect of legislative amendment to Section 67 (Finance Act, 2015)

Legal framework: Finance Act, 2015 amended Section 67 to expressly include reimbursable expenditure or cost charged in the course of providing a taxable service within "consideration".

Precedent treatment: The Court noted that the Legislature expressly corrected the scope of Section 67 prospectively by amendment.

Interpretation and reasoning: The amendment constitutes a substantive change in the statutory definition of "consideration" and thus has prospective effect; established rules of statutory interpretation disfavor retrospective operation unless clearly intended. Therefore, the amendment cannot be applied to periods prior to May 14, 2015.

Ratio vs. Obiter: Ratio - the legislative amendment applies prospectively and does not validate prior demands based on Rule 5(1) for earlier periods.

Conclusions: The post-2015 statutory position permits inclusion of reimbursable expenses, but that change does not affect the legal position for the earlier assessment periods under consideration.

Issue 5 - Remand for verification of chartered accountant certificates and appellate remit

Legal framework: Appellate authority set aside adjudicating order and remitted for verification, citing need to examine correctness of chartered accountant certificates.

Precedent treatment: The Court relied on binding authority establishing that reimbursable expenses billed on net-to-net without markup do not constitute taxable consideration under pre-amendment law.

Interpretation and reasoning: Given the settled legal position that reimbursable expenses are not taxable for the relevant period and the adjudicating authority had accepted evidence (including chartered accountant certificates) establishing pass-through nature, further remand for verification was unnecessary. The appellate authority's remit founded on applying a now-disapproved Rule 5(1) and doubt about certificates could not sustain reversal when the statute constrains valuation to amounts charged for the service.

Ratio vs. Obiter: Ratio - appellate remit based on the need to verify certificates and to apply Rule 5(1) was unsupportable; the adjudicating authority's conclusion dropping proceedings was to be restored. Obiter - observations on standards for verifying professional certificates.

Conclusions: The appellate order remitting the matter was set aside; the original adjudicatory finding dropping the demands on reimbursable expenses billed without markup was reinstated and the appeals allowed with consequential relief.

ISSUES PRESENTED AND CONSIDERED

1. Whether clinical trials and tests conducted by foreign service providers and paid for in foreign currency fall within the definition of "technical testing and analysis" (TTA) services under the Finance Act, given that the physical testing was performed outside India but reports/certificates were delivered to the Indian recipient.

2. Whether delivery of the testing/analysis report to the service recipient in India (or delivery outside India on their behalf) constitutes a part-performance in India such that the service is taxable under the Import of Services Rules/Export of Services Rules or otherwise qualifies as taxable TTA service.

3. Whether invocation of extended period of limitation and imposition of penalties for alleged non-payment/suppression are justified where the service tax, if charged, would have been eligible for CENVAT credit and where the appellant acted under a bona fide belief about taxability.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Classification of clinical trials/tests as "technical testing and analysis" services

Legal framework: The definition of "technical testing and analysis" excludes testing relating to human beings or animals but expressly declares inclusion of testing and analysis undertaken for clinical testing of drugs and formulations. "Technical testing and analysis agency" is any agency providing such services. The relevant statutory scheme treats certain services performed outside India as taxable/imported services under the Import of Services Rules and treats specified services performed outside India as export of service if conditions are met.

Precedent treatment: The Tribunal has previously examined whether services consisting of clinical testing and delivery of reports fall within the TTA definition and how completion/delivery affects territorial treatment. Earlier Tribunal authority held that delivery of the testing/analysis report is an essential part of the service and may determine territorial character.

Interpretation and reasoning: The Court examined the contractual scheme where foreign entities carried out the laboratory testing/clinical trials abroad and produced reports used by the Indian recipient. Given the statutory inclusion of clinical testing within TTA, the essential question becomes where the service is performed. The Tribunal found that, following the earlier reasoning, the production and delivery of the testing/analysis report are integral to the service's value - the analysis has no commercial utility to the client until the report/certificate is delivered. Where payment is made in foreign currency to foreign providers and the substantive testing activity occurred abroad, the activity nevertheless falls within the statutory description of TTA services when considered in light of how the service is completed and delivered.

Ratio vs. Obiter: Ratio - Clinical testing and analysis of drugs/formulations (even when testing occurs abroad) fall within the statutory definition of TTA services where delivery of the testing/analysis report is an essential component of the service. Obiter - ancillary observations about contractual auxiliaries and broad commercial distinctions not necessary to the finding.

Conclusion: The activities under the Master Laboratory Agreement are classifiable as TTA services under the Finance Act because they constitute clinical testing/analysis for drugs/formulations and the delivery of the report forms an essential component of that service.

Issue 2 - Territorial treatment: whether delivery of report completes or partly performs the service outside India and effect on exemption/import rules

Legal framework: Export/Import of Services Rules and Notification schemes provide that certain taxable services are treated as export when performed outside India (or partly performed outside India) and meet conditions such as delivery/use outside India and receipt of payment in convertible foreign exchange. Conversely, recipient-based provisions may bring services received in India within tax net if performance/part performance occurs in India.

Precedent treatment: A prior Tribunal decision interpreted the Rules to hold that testing/analysis services are not complete until the report is delivered, and where reports were delivered to clients outside India the services were partly performed outside India and could be treated as export (with resulting exemption under relevant notification). Revenue relied on that view to contend delivery in India can make the service taxable as import.

Interpretation and reasoning: The Court considered the competing positions: (a) delivery of report is merely communication of results and not separate taxable performance by the Indian recipient or (b) delivery is essential to completion of the TTA service and therefore drives territorial character. The Tribunal here followed the earlier view that delivery of the report is essential to completion; consequently, where the report is delivered outside India or used outside India, the service may qualify as performed outside India (or partly outside). However, in the present record the appellant received services from foreign providers and made payment in foreign currency; the adjudication concluded that the service constituted imported TTA service subject to tax under the pre-amendment rules because the performance (including report delivery) had territorial attributes bringing it within taxable ambit.

Ratio vs. Obiter: Ratio - Delivery/use of the testing report is an essential element in determining where a TTA service is performed; territorial character depends on where the report is delivered/used. Obiter - hypotheticals about how prospective amendments would operate in all scenarios and policy observations on unintended breadth.

Conclusion: Applying the statutory scheme and prior Tribunal reasoning, the Tribunal sustained classification of the services as taxable TTA services for the relevant periods because the completion/delivery aspects brought the services within the taxable ambit when considered with payment in foreign currency and the contractual arrangements.

Issue 3 - Extended limitation and penalties where service tax would have been eligible for CENVAT credit and appellant acted in bona fide belief

Legal framework: Extended period of limitation and penal provisions require a finding of suppression or deliberate evasion; ordinary or normal limitation applies absent such suppression. Section 80 (savings/protection) and principles allowing relief where there is bona fide belief and revenue neutrality (i.e., tax, if paid, would have been available as CENVAT credit) are relevant to penalty mitigation.

Precedent treatment: Tribunal authority recognizes that where payment of tax would have been eligible for CENVAT credit, the taxpayer suffers no revenue advantage by non-payment and, absent evidence of suppression/intent, extended limitation and penalties may be inappropriate. Prior decisions have set aside penalties and extended limitation where there was bona fide confusion over classification/territorial treatment.

Interpretation and reasoning: The Court found no evidence of suppression or dishonest intention. Even if service tax should have been discharged for the relevant periods, the appellant would have been eligible for CENVAT credit, rendering the matter revenue neutral. Applying precedent, the Tribunal held that invoking extended limitation and imposing penalties in such circumstances was not justified. The adjudicated demand was restricted to the normal limitation period, interest was sustained for the normal period, and all penalties and extended-period demands were set aside. Section 80 principles and the appellant's bona fide belief further supported relief from penalties.

Ratio vs. Obiter: Ratio - Extended limitation and penalties cannot be sustained where there is no suppression/evasion and where the tax liability (if any) would have been revenue-neutral by reason of available CENVAT credit; bona fide belief can warrant relief from penalties. Obiter - specific observations on the effect of post-period amendments and future voluntary compliance.

Conclusion: The Tribunal set aside demands raised by invoking the extended period of limitation and all penalties, sustained only the demand for the normal period (with interest), and applied protective provisions to relieve penalties in view of bona fide belief and revenue neutrality.

Overall disposition

The Tribunal held that the clinical testing/analysis services at issue are classifiable as TTA services under the Finance Act because clinical testing of drugs/formulations falls within the statutory definition and delivery of the report constitutes an essential part of the service for territorial characterization; the tax demand was sustained for the normal limitation period but extended-period demands and penalties were set aside in the absence of suppression and in light of revenue neutrality and bona fide belief.

1. ISSUES PRESENTED AND CONSIDERED

1. Whether objections to enforcement of an arbitral award under Section 47, CPC, are maintainable where the award has attained finality after exhaustive challenges under the Arbitration & Conciliation Act, 1996, and new allegations of fraud, collusion and breach of fiduciary duty by the judgment-debtor's officials are raised.

2. If maintainable, whether the executing court may, at the execution stage, entertain and sustain an objection that the award is inexecutable on account of alleged fraud (including breach of fiduciary duty by the judgment-debtor's officers) affecting formation or performance of the underlying contract.

3. Scope and limits of the executing court's jurisdiction under Section 47, CPC, in light of judicial authority that allows objections only in a narrow compass (jurisdictional infirmity/nullity), and the interplay with the A&C Act's code of remedies.

4. Whether the material placed by the judgment-debtor (including internal notes, committee minutes, correspondence, subsequent criminal complaints/FIR and related documents) establishes, even prima facie, fraud or collusion sufficient to render the award inexecutable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Maintainability of Section 47 objections after final adjudication of award under A&C Act

Legal framework: Section 47, CPC, allows objections at execution limited to questions relating to execution, discharge or satisfaction of a decree. Section 36 and 37 of the A&C Act, and the scheme of the A&C Act, provide the statutory mechanisms to challenge arbitral awards (e.g., Section 34) and finality of awards once judicial remedies are exhausted.

Precedent treatment: Earlier rulings (including the Court's recent precedent) recognise that a plea of nullity of an arbitral award can be raised in execution under Section 47, CPC, but only within a narrow compass - typically where the decree/award is a nullity (jurisdictional infirmity) and not where errors of fact or law are alleged. Vasudev Dhanjibhai Modi v. Rajabhai Abdul Rehman and subsequent authority reinforce that an executing court must not permit a retrial of issues decided in earlier proceedings.

Interpretation and reasoning: The Court declined to dispose of the maintainability point on formal grounds alone, citing binding authority that Section 47 can entertain challenges to executability where the award is a nullity but emphasising narrow limits. The Court proceeded to examine merits because allegations of fraud were serious and supported by multiple documents and subsequent criminal complaints, thereby engaging the exception that fraud vitiates judicial acts.

Ratio vs. Obiter: Ratio - objections under Section 47 are maintainable only in narrow circumstances (nullity/jurisdictional infirmity); Obiter - the executing court must guard against turning execution into a retrial and must apply Section 47 to prevent abuse.

Conclusion: Section 47 objections are maintainable only in a limited sense; however, where sufficiently serious and particularised allegations of fraud are made, the executing court may examine prima facie whether the award is inexecutable. The Court retained jurisdiction to examine merits here and properly proceeded to do so.

Issue 2 - Whether alleged fraud/breach of fiduciary duty by the judgment-debtor's officials renders the award inexecutable

Legal framework: Principle that fraud vitiates all judicial acts (Lazarus Estates; S.P. Chengalvaraya Naidu; Rajendra Singh), but constrained by the execution framework - only fraud that makes a decree/award a nullity or demonstrates jurisdictional infirmity will defeat executability. Business judgment rule and principles governing breach of fiduciary duty where directors/officers are judged by the range of reasonable conduct (Re Living Images; Sharp; Maple Leaf Foods; Kerr) are applied when corporate officers' decisions are alleged to be improper.

Precedent treatment: Authorities establish (i) courts must avoid hindsight bias when judging commercial decisions of directors; (ii) the burden lies on the challenger to show decisions were outside the range of reasonable alternatives and amounted to breach of fiduciary duty; and (iii) where fraud upon the tribunal or inherent jurisdictional defect exists, execution can be resisted.

Interpretation and reasoning: The Court analysed documentary chronology (LTA, MoU dated before deadline, internal notes, SPCoD minutes, Addendum, contemporaneous correspondence, shipment records, parallel contract with another supplier, and subsequent FIR). It applied the business judgment rule and the "range of reasonableness" test to assess whether senior officers' conduct could, even prima facie, be characterised as conduct no reasonable director would adopt. The Court underscored the need to discount hindsight, to treat internal deliberations and commercial risk-taking as within permissible range unless clear evidence of deliberate malfeasance exists, and to consider whether colluding parties would, in practice, have left the contractual position unperformed and litigated for 15 years rather than share proceeds.

Ratio vs. Obiter: Ratio - where allegations of fraud are directed at corporate officers and concern commercial decision-making, the executing court must require cogent prima facie evidence showing decisions were not within the range of reasonable alternatives and amounted to breach of fiduciary duty or fraud that vitiates the award; mere suspicion, internal disagreements, contemporaneous requests to renegotiate, or subsequent criminal complaints do not suffice. Obiter - commentary on chilling effect of second-guessing business decisions and warning against treating execution as a retrial.

Conclusion: On the material before the Court, the claimant failed to establish even a prima facie case of fraud/collusion or breach of fiduciary duty that would render the award inexecutable. The acts of officers fell within the range of reasonableness and business judgment; the documentary record and conduct (including parallel purchases, committee approvals, carry-over correspondence and limited shipment) did not demonstrate the sort of deliberate fraud that vitiates the award.

Issue 3 - Scope and limits of executing court's inquiry under Section 47 in light of competing public law or criminal proceedings

Legal framework: Section 47 and Order XXI CPC set the procedure/limits of execution objections. Criminal complaints/FIRs are separate processes; pendency of a criminal investigation does not automatically make an award inexecutable. Judicial authorities emphasise expeditious disposal of execution objections to prevent abuse and multiplicity of suits (Rahul S. Shah).

Precedent treatment: Courts have recognised power to reopen awards/orders obtained by fraud but insist on strong proof; mere filing of a criminal complaint or registration of FIR does not stay enforcement absent proof that the award is a nullity. Prior cases (e.g., Rajendra Singh) vindicate inquiry into fraud where convincing material exists; however, the executing court must balance finality and prevention of abuse.

Interpretation and reasoning: The Court noted the FIR and preliminary enquiry but treated them as part of the evidentiary matrix rather than determinative. It found the FIR to be a party's version insufficient, standing alone, to render the award inexecutable. The Court observed that allowing execution to be stayed merely because an FIR is pending would encourage tactical filings to delay enforcement.

Ratio vs. Obiter: Ratio - pendency of criminal proceedings or FIR is not by itself a ground to suspend execution; executing court must look for cogent prima facie proof that fraud vitiated the award. Obiter - cautionary remarks on misuse of criminal process to frustrate enforcement.

Conclusion: The registration or pendency of criminal investigations does not automatically render an award inexecutable; the executing court should require prima facie proof that the award is nullified by fraud before staying enforcement. No such prima facie case existed here.

Issue 4 - Interaction between contractual construction, contemporaneous documents and allegation of fraud

Legal framework: Contractual terms govern rights/obligations; contemporaneous documents (MoU, internal notes, committee minutes, EJC fixation) are relevant to construction and to assess contemporaneous commercial rationale. Fraud allegations must be supported by evidence showing deliberate concealment or misrepresentation affecting the tribunal's jurisdiction or the award's validity.

Precedent treatment: Courts give weight to contemporaneous business records and committee approvals; they are mindful to avoid hindsight. Findings of fact by arbitral tribunals (majority award) and superior courts carry deference unless perverse.

Interpretation and reasoning: The Court considered the MoU exercising option before deadline, that price fixation followed the EJC decision for linked purchasers, the internal note predating Lehman collapse, the SPCoD minutes recommending price and quantity, and the Addendum as a formalisation of earlier understandings. The Court found plausible commercial explanations for actions and accepted majority factual findings of the arbitral tribunal and previous courts as possible views on the evidence, not perverse.

Ratio vs. Obiter: Ratio - contemporaneous documents supporting commercial rationale weaken fraud claims unless they demonstrably misrepresent or were procured by deliberate concealment; Obiter - discussion of carry-over mechanics and commercial industry practice.

Conclusion: Contemporaneous contractual and internal records provided a plausible, non-fraudulent commercial narrative; they did not establish the deliberate concealment or collusion required to nullify the award.

Overall Conclusion and Disposition

The Court concluded that objections under Section 47 were not sustained on the material before it. Given the narrow scope of Section 47, the need to prevent retrials at the execution stage, the business judgment rule, the lack of cogent prima facie evidence of fraud or breach of fiduciary duty putting the award beyond executability, and the insufficiency of the FIR as standalone proof, the executing court's dismissal of the Section 47 objections was upheld. No ground existed to stay enforcement pending related civil or criminal proceedings.

ISSUES PRESENTED AND CONSIDERED

1. Whether drawback paid to claimant is recoverable under Rule 16A(2) of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 where sale proceeds in foreign exchange were not supported by requisite evidence within the stipulated period under Rule 16A(1).

2. Whether production of TR-6 challans and deposit of amounts with interest discharges liability or affects the demand confirmed under Rule 16A(2).

3. Whether Banker's documents / DGFT Bank Realisation Statement (BRC/FIRC or machine-generated DGFT statement) furnished after adjudication can be the basis to set aside or remit confirmed drawback recovery demands, and what standard of verification is required.

4. Whether amount already deposited by the claimant should be appropriated against confirmed demand.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Recoverability of drawback under Rule 16A(2) for non-realisation within stipulated time

Legal framework: Rule 16A(1) requires realization of export proceeds in foreign exchange within stipulated time; Rule 16A(2) authorises recovery of drawback where realisation is not proved; Sections 75A(2) and 28AA provide for interest and recovery mechanism.

Precedent Treatment: The judgment contains no reference to earlier judicial decisions; determination rests on statutory rules and evidentiary assessment.

Interpretation and reasoning: The Tribunal accepted that failure to produce incontrovertible evidence of realization within the stipulated period renders the claim unsustainable. For two shipping bills the appellant acknowledged that GR was not issued and the bank certificates/FIRC could not be correlated to relevant shipping bills or invoices; hence the lower authority's conclusion confirming demand under Rule 16A(2) was sustained for those items. The Tribunal emphasised the requirement of documentary correlation between shipping bills/invoices and bank realisation evidence to satisfy Rule 16A(1).

Ratio vs. Obiter: Ratio - where export realisation is not supported by admissible and correlatable bank documentation within the statutory period, drawback payment is recoverable under Rule 16A(2) and interest is chargeable under Sections 75A(2)/28AA. Obiter - general observations on the nature of DGFT machine-generated statements as verifiable from the DGFT website (not necessary to decide the primary question where evidence was lacking).

Conclusion: For shipping bills where realization could not be substantiated with proper documentary linkage, the confirmed recovery under Rule 16A(2) and interest was upheld.

Issue 2 - Effect of TR-6 challans and prior deposit of amounts with interest

Legal framework: Payments into Government account evidenced by challan (TR-6) indicate discharge or part-discharge of fiscal liability and can be appropriated against confirmed demands.

Precedent Treatment: No case law cited; treatment based on statutory recovery and accounting principles.

Interpretation and reasoning: The Tribunal found that TR-6 challans evidencing deposit of drawback with interest in respect of three shipping bills were produced and were acceptable to show payment. Therefore the demand in respect of those three shipping bills could not be faulted substantively but the amount already deposited should be appropriated against the confirmed demand.

Ratio vs. Obiter: Ratio - production of TR-6 challans showing actual deposit with interest requires appropriation of those amounts against a confirmed demand; it removes the basis for sustaining a claim of non-payment for those specific items. Obiter - none beyond mechanics of appropriation.

Conclusion: Demand sustained in substance for short-payment cannot be maintained as to recovery where claimant has already deposited the due amounts; deposited sums are to be appropriated against the demand.

Issue 3 - Admissibility and sufficiency of Banker's documents / DGFT Bank Realisation Statement produced post-adjudication

Legal framework: Proof of realisation of export proceeds may be established through bank realisation certificates (BRC/FIRC) or equivalent bank documents; DGFT machine-generated bank realisation statements reflect information received electronically from banks and are verifiable via DGFT portal.

Precedent Treatment: No precedents considered or overruled; Tribunal relied on documentary sufficiency and need for verification by the adjudicating authority.

Interpretation and reasoning: The Tribunal concluded that the lower authorities failed to consider DGFT bank realisation documents and banker's certificate dated 16.12.2021 which contained shipping bill, invoice and inward details. Because these documents were not before the original adjudicating authority, the Tribunal deemed it appropriate to remand for verification rather than decide on their sufficiency at appellate stage. The Tribunal directed the Original Authority to verify whether the DGFT/banker records correlate to the shipping bills and invoices and whether they satisfy Rule 16A(1) requirements.

Ratio vs. Obiter: Ratio - where material documentary evidence (banker's certificate/DGFT statement) relevant to realisation is produced after adjudication, the matter should be remanded for verification rather than sustaining a recovery without examination of that evidence. Obiter - observations on the DGFT statement being machine-generated and verifiable on DGFT website are explanatory and not decisive of statutory interpretation.

Conclusion: The two shipping bills supported by DGFT/Banker documents require remand to the Original Authority for verification; appellate court declined to confirm recovery without that verification and directed a decision within two months.

Issue 4 - Appropriate remedy and directions on remand and appropriation

Legal framework: Appellate power to remit for fresh consideration where new material was not considered by the original authority; accounting principles permit appropriation of previously deposited funds against outstanding demands.

Precedent Treatment: No authority cited; action grounded in appellate remedial powers and statutory recovery/appropriation practice.

Interpretation and reasoning: The Tribunal partially allowed the appeal: it upheld recovery for items lacking proof, ordered appropriation of amounts already deposited (TR-6) against confirmed demand for three shipping bills, and remanded the matter for two shipping bills supported by DGFT/banker documents for fresh verification. A two-month time frame was imposed for final decision by the Original Authority.

Ratio vs. Obiter: Ratio - appropriate remedy where evidence emerges post-adjudication is remand for verification; appropriated payments must be adjusted against demands. Obiter - timeframe direction is procedural guidance.

Conclusion: Appeal partially allowed; confirmed demands stand where evidence is absent; deposited amounts to be appropriated; remand directed for verification of banker/DGFT documents for two shipping bills with decision to be taken within two months.

ISSUES PRESENTED AND CONSIDERED

1. Whether the exporter was entitled to drawback in respect of nine export shipments (ladies garments) that, according to the department, did not reach the declared foreign consignee but were delivered in a third country (Dubai).

2. Whether the adjudicating authority could disallow drawback and confiscate goods by invoking Rule 16/16A of the Customs and Central Excise Duties Drawback Rules, 1995 (and related provisions of the Customs Act) in respect of exports made in 1993-1994, including questions of retrospective application and limitation.

3. Whether reliance on Reserve Bank of India Circular No. 30/1993 and alleged contravention of FERA/RBI instructions (state credit repayment funds/third-country export financing) justified denial of drawback and confiscation under Sections 75, 76 and 113 of the Customs Act.

4. Whether the Show Cause Notice was issued by a competent officer under the Drawback Rules, and whether any jurisdictional defect vitiated the proceedings (including applicability of later Supreme Court authority concerning DRI competence).

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Entitlement to drawback where goods were delivered in a third country (did export occur "to a place outside India"):

Legal framework: Drawback Rules define "Drawback" as refund of duty paid on importation in terms of section 74 of the Customs Act and define "export" to mean taking out of India to a place outside India (Rule 2(a) and (b)). Sections 75-76 of the Customs Act deal with recovery/disallowance of drawback where conditions for entitlement are not met; Section 113 deals with confiscation.

Interpretation and reasoning: The Tribunal emphasizes the plain-language test of the Drawback Rules: once goods are taken out of India to a place outside India, they qualify as export for drawback purposes. The record showed delivery orders and the fact that goods were allowed to be released provisionally at the time of export. The Tribunal found no statutory rider in the Drawback Rules conditioning entitlement on subsequent delivery to the declared consignee or on absence of third-country delivery. Further, the RBI had released remittances in Indian rupees from state credit funds, undermining the department's position that RBI rules made such receipts non-export proceeds for drawback denial.

Precedent treatment: The Tribunal considered authorities relied on by parties but distinguished them to the extent they involved different factual or regulatory matrices (e.g., cases addressing specific RBI circular application or differing timelines). No precedent was overruled.

Ratio vs. Obiter: Ratio - export for drawback is established when goods are taken out of India to a place outside India; subsequent delivery in a third country does not per se defeat drawback entitlement where exports left Indian territory and remittances were received. Obiter - observations on practices concerning surrender of original bill of lading and forgery allegations by foreign authorities not being decisive under Indian Drawback Rules.

Conclusion: The Tribunal held the exporter entitled to drawback for the nine consignments because the goods had been taken out of India and remittances were received, and the department failed to point to any statutory provision in the Drawback Rules negating drawback on the stated facts.

Issue 2 - Applicability of Rule 16/16A (1995 Drawback Rules) and retrospectivity/limitation:

Legal framework: Rule 16 and newly inserted Rule 16A of the Drawback Rules, 1995 provide mechanisms for recovery of drawback found to be inadmissible. Principle of non-retrospectivity governs enactments and amendments unless expressly made retrospective.

Interpretation and reasoning: The Tribunal found Rule 16A (notification dated 06.12.1995) and the Drawback Rules, 1995 (effective 26.05.1995) could not be applied retrospectively to exports effected in 1993-1994. The exports in question predated the later rules; the department relied on Rule 16A to recover drawback paid earlier, but the Tribunal held such invocation lacked legal basis where the rule was not in force at the time of export/claim. The Tribunal also treated limitation arguments and prior administrative decisions/orders (including Government/appeal orders fixing FOB value) as relevant background facts undermining the department's reliance on later rules.

Precedent treatment: Decisions cited by parties regarding non-retrospectivity and applicability of RBI/FERA provisions were noted; the Tribunal relied on the established legal principle that rules cannot be given retroactive effect absent express language.

Ratio vs. Obiter: Ratio - Rules introduced after the date of export cannot be applied retrospectively to deny previously-claimed drawback; therefore Rule 16A could not justify disallowance/appropriation for exports made in 1993-94. Obiter - discussion of specific prior case law cited by parties insofar as distinguishing factual matrices.

Conclusion: The Tribunal held invocation of Rule 16A and similar post-dating provisions was not legally permissible to deny drawback on the contested shipments; consequently appropriation of amounts refunded earlier by the exporter was incorrect.

Issue 3 - Effect of RBI Circular/FERA on drawback entitlement and confiscation under Customs Act:

Legal framework: RBI Circular No. 30/1993 restricted financing of third-country exports from state credit repayment funds. FERA provisions (Section 73, etc.) and customs provisions (Sections 75, 76, 113, 114) were invoked by the department to ground denial/penal measures.

Interpretation and reasoning: The Tribunal examined the department's contention that remittances received out of state credit funds and alleged contravention of the RBI circular deprived the exporter of export proceeds status and rendered the goods liable to confiscation. The Tribunal observed that the RBI had approved/released remittances in Indian rupees; had the circular operated to prohibit such treatment, RBI would not have released funds. The Tribunal further held that even if foreign authorities later found landing certificates forged, such foreign findings do not automatically negate entitlement under Indian Drawback Rules where goods had left Indian territory and statutory entitlement under domestic rules was otherwise established. The Tribunal found that the department failed to produce statutory provision or convincing evidence to link RBI circular/FERA contravention to automatic denial of drawback or to sustain confiscation under Section 113 on the facts before it.

Precedent treatment: The department's reliance on FERA/RBI-related decisions was considered but found distinguishable where those cases did not involve recorded RBI remittance release or had different fact patterns.

Ratio vs. Obiter: Ratio - alleged contravention of RBI circular/FERA does not automatically disentitle an exporter to drawback where remittances were received and domestic Drawback Rules are otherwise satisfied; confiscation cannot be sustained on such ground absent clear statutory linkage and evidence. Obiter - observations on interplay of foreign findings (e.g., Russian Customs) with domestic entitlement determinations.

Conclusion: The Tribunal concluded RBI circular/FERA arguments did not justify denial of drawback or confiscation on the present facts; the department's findings on this ground were inadequate.

Issue 4 - Competence to issue Show Cause Notice and jurisdictional validity:

Legal framework: Drawback Rules prescribe competent officers for issuance of show cause notices; recent Supreme Court authority concerning competence of DRI officers was raised by the department but was argued by the appellant to be inapplicable due to differing temporal/regulatory contexts (post-2011 notification relied upon by Supreme Court).

Interpretation and reasoning: The Tribunal noted the appellant's contention of jurisdictional vice - SCN issued by ADG, DRI - and the appellant's argument that later Supreme Court decisions grounded on Notification No. 44/2011-Cus did not apply to SCNs issued in 2000. The Tribunal did not rest its decision solely on this jurisdictional objection but observed other substantive defects in the department's case (see Issues 1-3) and found that on the merits the department had not made out a case for disallowance/confiscation. The Tribunal therefore set aside the impugned order without detailed reliance on the competence point as the dispositive reason.

Precedent treatment: The Tribunal acknowledged apex Court authority cited by the department but distinguished its application on the basis of different foundational notification and temporal scope.

Ratio vs. Obiter: Obiter - jurisdictional observations were treatment adjunctive to the main reasoning; the ultimate decision was made on substantive entitlement and rule-applicability grounds rather than on a strict competence ruling.

Conclusion: Any jurisdictional objection was not essential to the disposal; the Tribunal allowed the appeal on substantive grounds, setting aside disallowance/appropriation and the confiscation order.

Overall Conclusion

The Tribunal held that the exporter was entitled to drawback on the nine consignments of ladies garments exported in 1993-1994: (i) the exports met the Drawback Rules' definition of "export" once goods were taken out of India; (ii) post-dating Drawback Rules/Rule 16A could not be applied retrospectively to deny drawback; (iii) alleged contravention of RBI/FERA instructions and subsequent foreign findings did not legally negate domestic drawback entitlement on the facts; and (iv) appropriation of amounts earlier refunded and order of confiscation were unsustainable. The impugned order disallowing drawback in respect of the nine consignments and ordering confiscation was set aside and the appeal allowed.

ISSUES PRESENTED AND CONSIDERED

1. Whether the mandatory notice requirement under Section 28(6) must be complied with before invoking the extended limitation period and reassessment under Section 28.

2. Whether invocation of Section 28 (extended limitation) is justified where the allegation is mis-declaration or valuation variance that does not allege suppression "with intent to evade duty", and where issues may be interpretational rather than factual.

3. Whether non-issuance of the mandatory notice under Section 28(6) renders proceedings instituted by a Show Cause Notice (SCN) time-barred or otherwise vitiates the reassessment and demands raised under Rules 9 and 10 of the Customs Valuation Rules, 2007 read with Section 14 and demands under Section 28.

4. Whether an adjudication founded on the extended period of limitation can be sustained where the relevant Bills of Entry fall outside the normal limitation period and the Revenue fails to establish conditions required for invoking the extended period.

5. Treatment of an ancillary Department appeal attacking parts of an order held to be unsustainable on limitation grounds.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Mandatory nature of Section 28(6) notice before invoking extended limitation

Legal framework: Section 28 creates a mechanism for reassessment and recovery where there is short payment/variation in duty; Section 28(5) permits an importer to make an application and Section 28(6) mandates issue of a notice by the proper officer if he is of opinion there is short payment/variation. The statutory language requires issuance of notice when the officer forms such an opinion.

Precedent Treatment: No specific precedent was cited or applied in the reasoning; analysis is based on statutory interpretation of the mandatory language of Section 28(6).

Interpretation and reasoning: The Court treats Section 28(6) as mandatory and not merely directory. Non-issuance of the required notice is held to render the provision otiose and to defeat the statutory purpose. Where the officer failed to issue the notice despite recording that importer's calculations were at variance, the omission cannot be cured by subsequent adjudication invoking extended limitation.

Ratio vs. Obiter: Ratio - Failure to issue the mandatory Section 28(6) notice invalidates use of Section 28 to extend limitation and sustain reassessment. Obiter - none materially affecting outcome on this point.

Conclusion: Non-compliance with Section 28(6) is fatal to the Department's attempt to invoke extended limitation and sustain differential demand; adjudication founded on that omission cannot be sustained.

Issue 2: Requirement of intent to evade duty for invocation of Section 28 and extended period

Legal framework: Section 28 contemplates pressing extended action in specified circumstances; underlying mis-declaration or suppression that triggers extended limitation generally requires a culpable element consistent with the statutory scheme.

Precedent Treatment: No direct precedents invoked; the Court relies on statutory text and the distinction between factual suppression and interpretational/valuation disputes.

Interpretation and reasoning: The SCN did not allege suppression "with intent to evade duty"; instead the allegations relate to non-compliance with circulars and alleged mis-declaration/valuation variances. The Court observes that part of the alleged difference arose from interpretation issues, not purely factual suppression. Because Section 28 sets out specific conditions to justify extended action, an allegation lacking intent and relying on interpretational disagreements does not automatically meet those conditions.

Ratio vs. Obiter: Ratio - Extended limitation under Section 28 cannot be invoked solely on a claim of mis-declaration or valuation difference absent the requisite conditions (including intent) and procedural compliance. Obiter - observations about the distinction between factual suppression and interpretational disputes.

Conclusion: Where the case involves interpretation issues and lacks an allegation of intent to evade duty, the extended period under Section 28 is not appropriately triggered.

Issue 3: Effect of non-issuance of Section 28(6) notice on reassessment under Customs Valuation Rules and demands under Section 14/Rules 9-10

Legal framework: Reassessment of declared value can be undertaken under Rule 9 read with Rule 10 of the Customs Valuation Rules, 2007 and Section 14; any demand arising may be recoverable under Section 28 subject to its procedural and temporal safeguards.

Precedent Treatment: No authority was applied to displace the statutory mandate; the Court assessed the interplay between valuation rules and Section 28 procedural precondition.

Interpretation and reasoning: The Court found that, notwithstanding the Valuation Rules permitting redetermination, the Revenue could not bypass the mandatory procedural step in Section 28(6) when seeking to invoke extended limitation for older Bills of Entry. The Adjudicating Authority's reliance on valuation rules did not cure failure to follow Section 28(6). The factual record showed that importers had paid duty on freight, overheads and yard charges and placed a worksheet before the authority; the adjudicator characterized discrepancies as partly interpretational, undermining a finding of deliberate suppression.

Ratio vs. Obiter: Ratio - Reassessment and demand under valuation rules cannot be sustained where the prerequisite statutory notice under Section 28(6) is not issued and conditions for extended limitation are not established. Obiter - remarks about the sufficiency of the importer's explanations on payment of freight and ancillary charges.

Conclusion: The demands raised under valuation rules and Section 14, sought to be enforced through extended limitation under Section 28, are vitiated by non-compliance with Section 28(6) and by failure to establish the conditions for extended limitation.

Issue 4: Validity of invoking extended limitation where Bills of Entry and SCN timing fall outside normal period

Legal framework: Normal limitation applies to recovery of duty; extended limitation under Section 28 requires statutory conditions and procedural compliance to be invoked for older entries.

Precedent Treatment: No specific precedents were cited; the issue resolved by applying statutory conditions and the timing of SCN relative to Bills of Entry.

Interpretation and reasoning: The last relevant Bill of Entry predated the SCN by a period indicating the proceedings were beyond the normal limitation. Given the Revenue's failure to issue mandatory Section 28(6) notice and absence of established intent to evade duty, the Court held that invoking the extended period was unsustainable. The Adjudicating Authority's own observations that differences involved interpretation reinforced that extended limitation should not be applied.

Ratio vs. Obiter: Ratio - When the Revenue relies on extended limitation to sustain demands for out-of-period entries, it must both comply with mandatory procedural requirements and establish the substantive conditions permitting extension; failure on either front invalidates the demand. Obiter - none significant beyond this application.

Conclusion: The impugned demands based on extended limitation are set aside as unsustainable; appeals allowed on limitation grounds with consequential relief.

Issue 5: Disposition of Departmental appeal when impugned order is set aside on limitation grounds

Legal framework: An appellate challenge to parts of an order merges into the fate of the impugned order when the primary order is quashed on threshold grounds.

Precedent Treatment: Not addressed; court applied principle of merger of grievances.

Interpretation and reasoning: Since the impugned Order-in-Original was held unsustainable on limitation/Section 28(6) non-compliance, the Department's appeal against portions of that order became subsumed and required no separate deliberation.

Ratio vs. Obiter: Ratio - Ancillary appeals raising grievances about aspects of an order that is wholly set aside on threshold grounds stand disposed and need not be independently entertained. Obiter - procedural directions for disposal of cross-objections.

Conclusion: The Departmental appeal and cross-objections were treated as disposed by virtue of setting aside the impugned order on limitation and procedural non-compliance grounds; no separate adjudication on merits was required.

ISSUES PRESENTED AND CONSIDERED

1. Whether issuance and service of a demand notice in Form I under the Competition Commission of India (Manner of Recovery of Monetary Penalty) Regulations, 2011 is a mandatory, condition precedent to the accrual and levy of interest under Regulation 5.

2. Whether interest on a penalty imposed under Section 27(b) of the Competition Act accrues automatically upon expiry of the period specified in the penalty order, independent of any demand notice, or only upon failure to comply with a demand notice issued under Regulation 3.

3. Whether the principle of restitution or the effect of an appellate stay (vacation of stay) entitles the Commission to recover interest retrospectively from the date following expiry of the penalty order period despite non-issuance of a demand notice.

4. Whether reliance on precedents from taxation and other statutory contexts (including cases permitting automatic accrual of interest) is applicable to the statutory scheme under the Competition Act and the 2011 Regulations.

5. Whether imposition of interest without compliance with the procedural prescription of Regulations 3 and 5 would infringe constitutional protections (Articles 14, 19, 21, 265, 300A) by amounting to arbitrary or unsupported deprivation.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Mandatory nature of Form I demand notice as condition precedent to levy of interest

Legal framework: Regulations 3 and 5 of the 2011 Regulations require issuance and service of a demand notice in Form I after expiry of the period specified in the penalty order; Regulation 3(2) grants a 30-day period from service; Regulation 5 makes interest payable "if the amount specified in any demand notice is not paid within the period specified by the Commission."

Precedent treatment: The Court relied on authorities interpreting analogous statutory provisions in tax and revenue statutes (Mohan Wahi; Joy Varghese; Homely Industries) which treat service of demand notice as foundational to recovery proceedings and to the accrual of penal interest.

Interpretation and reasoning: A plain and purposive reading shows the scheme is sequential and mandatory - demand notice must be issued and served before the 30-day window and before any default can be said to have occurred. Regulation 3(2)'s express language that time runs "from the date of service of the demand notice" reinforces that interest under Regulation 5 is triggered only after service and lapse of the period specified therein.

Ratio vs. Obiter: Ratio - issuance and service of Form I is a mandatory precondition for the accrual of interest under Regulation 5. Observations citing tax cases are applied as guiding precedent rather than determinative of Competition law.

Conclusions: In the absence of a valid demand notice in Form I served under Regulation 3, there is no statutory basis to levy interest under Regulation 5.

Issue 2 - Whether interest accrues automatically from expiry of penalty order period

Legal framework: The 2011 Regulations prescribe a distinct post-order procedure for demand and recovery; no provision expressly creates an automatic interest liability from the date following expiry of the penalty order itself.

Precedent treatment: The Court distinguished authorities where a statutory provision expressly created automatic interest (e.g., Prem Chopra under Section 38-A of the UP Excise Act) and noted J.K. Synthetics concerned a pre-existing interest liability which revived post-vacation of stay.

Interpretation and reasoning: The Regulations' structure contemplates demand notice as the activating instrument; to hold interest accrues automatically from expiry of the penalty order would contravene the explicit sequential scheme and amount to judicial rewriting of the regulatory machinery. Legislative silence post-amendments (Act 9 of 2023 and 2025 Regulations substantially mirroring earlier provisions) supports the view that no automatic accrual was intended.

Ratio vs. Obiter: Ratio - interest does not accrue automatically from the expiry of the period in the penalty order; accrual is contingent on a demand notice and lapse of the period specified therein.

Conclusions: Interest cannot be imposed retrospectively from the date following expiry of the penalty order where no demand notice was issued and served in accordance with Regulation 3.

Issue 3 - Applicability of restitution and effect of appellate stay/vacation on entitlement to interest

Legal framework: Principles of restitution and restoration of status quo ante are equitable doctrines; Regulations provide specific machinery for recovery and adjustment of penalty and interest where appellate reduction occurs.

Precedent treatment: The Court treated restitution as an equitable principle that cannot override explicit statutory sequences; it distinguished cases where statute created pre-existing liability (J.K. Synthetics) or where the authority was merely prevented by stay but liability had already accrued.

Interpretation and reasoning: Restitution cannot engraft a retrospective triggering event (demand notice) where the statutory scheme requires issuance and service before accrual. The fact that judicial stays impeded issuance does not operate to convert inchoate statutory steps into retrospective triggers absent express statutory authorization.

Ratio vs. Obiter: Ratio - equitable restitution does not supply statutory authority to impose retrospective interest contrary to the mandatory procedural sequence in the Regulations.

Conclusions: Vacation of stay does not automatically entitle the Commission to recover interest from dates prior to service of a valid demand notice; restitution cannot be used to circumvent procedural preconditions.

Issue 4 - Reliance on taxation and other statutory precedents

Legal framework: Principles of statutory interpretation (strict construction of penal provisions; purposive interpretation; expressio unius est exclusio alterius) guide analysis across statutes but application depends on statutory text and context.

Precedent treatment: The Court relied on a suite of authorities (Mohan Wahi; Joy Varghese; Steel Authority; J.K. Synthetics; Excel Crop Care and decisions on strict construction) to extract interpretive principles, distinguishing those cases where the tax statute or other acts contained express, automatic triggers for interest.

Interpretation and reasoning: While analogies to taxation jurisprudence are instructive for interpretive approach, they cannot override the specific language and sequential mechanics of the 2011 Regulations. Penal or quasi-penal provisions demand strict construction favoring the charged party where ambiguity exists.

Ratio vs. Obiter: Ratio - interpretive principles from taxation jurisprudence support, not displace, the conclusion that demand notice is a condition precedent; distinctions drawn from tax cases where statute expressly authorized accrual are determinative and support refusal to apply those outcomes here.

Conclusions: Tax precedents do not assist the Commission where the statutory scheme under the Competition Act and Regulations prescribes a procedural trigger that was not complied with.

Issue 5 - Constitutional dimension of imposing interest without procedural foundation

Legal framework: Articles 14, 19, 21, 265 and 300A protect against arbitrary administrative action and require authority of law for imposition/collection of charges or deprival of property.

Precedent treatment: The Court invoked constitutional safeguards as reinforcing the requirement that penal liabilities be established by clear statutory authority and procedural compliance.

Interpretation and reasoning: Imposing interest absent the statutory procedural foundation would amount to deprivation without authority and risk arbitrariness and discrimination, contrary to constitutional guarantees; hence statutory prerequisites must be observed.

Ratio vs. Obiter: Ratio - absence of statutory compliance for levy of interest raises constitutional infirmity; this underpins the legal conclusion that levy was unsustainable.

Conclusions: Levying interest without issuance and service of demand notice is constitutionally impermissible and unsupported by law.

Overall Disposition

Conclusive ratio: The demand notice in Form I under Regulation 3 is a mandatory, sequential precondition to the accrual of interest under Regulation 5; in the factual matrix where no demand notice was issued and served, the imposition of interest retrospectively from 10.12.2018 was without jurisdiction and contrary to the mandatory procedural scheme and settled principles of statutory and constitutional law. The earlier judgment setting aside the interest demand is affirmed and the Commission's appeal is dismissed.

ISSUES PRESENTED AND CONSIDERED

1. Whether writ jurisdiction under Article 226 is maintainable in cases involving alleged fraudulent availment of Input Tax Credit (ITC) where an appeal under the CGST Act is available.

2. Whether the Court should exercise writ jurisdiction where the impugned order is an appealable order under Section 107 of the CGST Act and the matters entail complex factual and evidentiary inquiries relating to fabricated supplies and bogus suppliers.

3. Whether failure to give detailed consideration to a petitioner's reply to the Show Cause Notice (SCN) warrants exercise of writ jurisdiction (i.e., whether there is violation of principles of natural justice or other exceptional circumstances).

4. Whether, and on what terms, the petitioner should be relegated to statutory appellate remedy and whether time for filing appeal/pre-deposit should be extended or condoned.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Maintainability of writ jurisdiction in cases of alleged fraudulent availment of ITC when alternate statutory remedy exists

Legal framework: Article 226 extraordinary writ jurisdiction; Section 107 (appeal) under the CGST Act providing statutory remedy against orders of the adjudicating authority.

Precedent treatment: The Court follows Supreme Court and its own precedents holding that existence of alternate remedy is not an absolute bar but writs are to be entertained only in exceptional circumstances (e.g., breach of fundamental rights, violation of natural justice, excess of jurisdiction, challenge to vires).

Interpretation and reasoning: The Court observes that alleged fraudulent availment of ITC raises extremely serious allegations and complex transactional webs involving non-existent firms and fabricated invoices, requiring detailed factual and evidentiary analysis. Given the potential burden on the exchequer and the systemic impact on the GST regime, such cases are generally unsuitable for adjudication in writ jurisdiction. The Court emphasizes that factual assessment and detailed scrutiny are matters for the adjudicatory and appellate fora established under the CGST Act.

Ratio vs. Obiter: Ratio - In matters of alleged fraudulent ITC availment where appeal is available, writ jurisdiction ordinarily should not be exercised and petitioners should be relegated to statutory appeal. Obiter - Observations on the nature and misuse of Section 16 ITC facility and its policy implications, while persuasive, are ancillary to the jurisdictional conclusion.

Conclusions: The Court declines to exercise writ jurisdiction in the present facts and relegates the petitioner to the statutory appellate remedy under Section 107 of the CGST Act.

Issue 2: Appropriateness of writ relief where the impugned order is appealable and involves complex factual inquiries

Legal framework: Principles of judicial restraint in writ jurisdiction; statutory appellate mechanism under Section 107; requirements of factual adjudication under tax statutes.

Precedent treatment: The Court relies on earlier decisions which refused writ relief in comparable cases and which required petitioners to pursue appellate remedies; the Court also notes that similar matters have been remitted or time-extended by higher courts when appeals are pursued.

Interpretation and reasoning: The Court reasons that matters involving a "complex maze of transactions" among many entities and the need to examine voluminous documentary evidence cannot be resolved by writs, which are unsuitable for detailed factfinding. The existence of an appeal with the capacity to consider evidence and adjudicate on merits means the balance favours relegation to the statutory remedy to avoid multiplicity of litigation and conflicting findings.

Ratio vs. Obiter: Ratio - Appellate remedy should be preferred where detailed factual and evidentiary determination is required; writ forum is inappropriate for resolving complex tax fraud allegations. Obiter - Illustrations regarding multiplicity of litigation and potential for contradictory findings are supportive but not foundational to the jurisdictional holding.

Conclusions: The Court holds the impugned order is appealable and directs the petitioner to file an appeal; the writ petition is not entertained on merits.

Issue 3: Whether inadequacy of consideration of petitioner's reply to the SCN constitutes an exceptional circumstance justifying writ relief

Legal framework: Principles of natural justice (audi alteram partem) and judicial review for procedural fairness; requirement that adjudicating authority consider representations made in response to SCN.

Precedent treatment: Courts have entertained writs where there is demonstrable violation of natural justice or where the reply was not considered at all; however, absence of detailed discussion in the impugned order does not automatically vitiate the order if the statutory appellate route remains available.

Interpretation and reasoning: The Court notes the petitioner filed a reply and produced documentary material, and finds that those documents are permitted to be relied upon before the Appellate Authority because the impugned order lacks detailed discussion of them. Nonetheless, the Court does not find that the procedural defect rises to the level of an exception justifying exercise of writ jurisdiction in the face of serious fraud allegations and an available appeal.

Ratio vs. Obiter: Ratio - Mere absence of detailed discussion of all documents in the impugned order does not, per se, permit bypassing the appellate remedy where no clear breach of natural justice or jurisdictional excess is established. Obiter - The Court's permission to rely on the reply documents in appeal is a discretionary accommodation and not a substantive finding on merits.

Conclusions: Petitioner's reply and documents are allowed to be relied upon in the appellate proceedings, but this procedural consideration does not warrant entertaining the writ petition; petitioner must pursue the appeal.

Issue 4: Relief by way of relegation to appeal - time-limits, pre-deposit and extension of limitation

Legal framework: Statutory time-limits and pre-deposit requirements for filing appeals under the CGST Act; judicial powers to extend time/relieve from limitation where equities exist.

Precedent treatment: The Court refers to prior orders granting limited extensions for filing appeals and conditioning adjudication on merits where appeals are filed within court-granted timelines; higher court practice has sometimes extended time periods in similar contexts.

Interpretation and reasoning: Balancing the interest of the revenue and the petitioner's right to appellate adjudication, the Court grants a specified period to file the appeal with requisite pre-deposit and directs that any appeal filed within that period will be adjudicated on merits and not dismissed on limitation grounds. The Court also permits reliance on the record and replies before the appellate forum and underscores that its observations shall not prejudice the appellate authority's final adjudication.

Ratio vs. Obiter: Ratio - Court may grant limited time and protect appeals from limitation where writ is declined, and such appeals will be adjudicated on merits provided pre-deposit and timelines directed by the Court are met. Obiter - Specific timelines granted in other matters or to co-noticees are illustrative and not binding beyond the present order.

Conclusions: The petitioner is permitted to file the appeal within the period directed by the Court (with requisite pre-deposit), the appeal shall be adjudicated on merits and will not be dismissed as time-barred if filed within the stipulated period; the writ petition is disposed of accordingly.

ISSUES PRESENTED AND CONSIDERED

1. Whether a show cause notice and order issued/uploaded via the GST common portal without a physical signature impression are invalid for want of signature.

2. Whether non-issuance of a pre-consultation notice under Rule 142(1A) of the CGST Rules, 2017 (post-amendment) vitiates a subsequently issued show cause notice and order.

3. Whether a taxpayer challenging Section 16(2)(c) of the CGST Act, 2017 can refrain from pursuing the statutory appellate remedy pending judicial determination of that provision in other proceedings.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of notices/orders issued via GST portal without physical signature impression

Legal framework: Rule 26(3) of the CGST Rules, 2017 mandates electronic issuance of notices, certificates and orders via the common portal; the portal requires authentication using a Digital Key/Signature and system-generated OTP tied to the proper officer.

Precedent treatment: The Court considered earlier authority addressing signatures but treated the present procedural regime as determinative rather than any prior insistence on physical impressions.

Interpretation and reasoning: The Court accepted the Department's documented process showing that upload and authentication require the proper officer's Digital Key/Signature and OTP, and that documents generated and stored on the portal contain the officer's credentials (name, designation, jurisdiction). The absence of a physical signature impression on the PDF export does not demonstrate lack of authentication because the digital key constitutes the mandatory authentication mechanism. The authenticity and genuineness of portal-issued SCNs/orders cannot be disputed unless affirmative misuse of the digital key is shown.

Ratio vs. Obiter: Ratio - portal-generated documents authenticated by the required digital mechanisms satisfy the signature/authentication requirement under the statutory scheme; absence of a physical signature impression on downloaded PDFs does not invalidate the notice/order. Obiter - remarks noting potential challenge if misuse of digital key is demonstrated.

Conclusion: The challenge to the impugned SCN and order on the ground that they lack physical signatures is untenable; such documents are validly authenticated when issued through the prescribed digital process.

Issue 2 - Effect of non-issuance of pre-consultation notice under Rule 142(1A)

Legal framework: Rule 142(1A) of the CGST Rules, 2017 (as amended with effect from 15 October 2020) provides that the proper officer "may" (discretionary) communicate details in Part A of FORM GST DRC-01A before service of notice under Section 73(1) or 74(1); earlier language had been mandatory but was subsequently amended.

Precedent treatment: The Court acknowledged earlier decisions which treated the pre-consultation notice as mandatory under the prior language of Rule 142(1A), but held that the amendment changing the provision to discretionary alters the requirement.

Interpretation and reasoning: Given the express amended language making issuance of the pre-consultation notice discretionary, failure to issue such a notice cannot, by itself, vitiate an otherwise valid show cause notice or order. The Court relied on the textual change and the Department's concession regarding the amendment to conclude that non-issuance is not a ground for setting aside.

Ratio vs. Obiter: Ratio - under the post-amendment Rule 142(1A), non-issuance of a pre-consultation notice is not a fatal procedural infirmity that would invalidate a subsequent SCN/order. Obiter - contextual reference to prior mandatory regime and earlier cases.

Conclusion: The impugned SCN and order cannot be set aside solely on the ground that a pre-consultation SCN under Rule 142(1A) was not issued.

Issue 3 - Obligation to pursue statutory appeal pending adjudication of Section 16(2)(c)

Legal framework: Section 107 of the CGST Act, 2017 provides the statutory appellate remedy against orders passed under the Act; Section 16(2)(c) prescribes conditions for entitlement to input tax credit, including limitations relating to cancelled dealers.

Precedent treatment: The Court noted that the constitutional/legal challenge to Section 16(2)(c) is pending adjudication in other proceedings before the same Court; prior determinations in those proceedings may be binding on appellate authorities in later appeals.

Interpretation and reasoning: The Court held that the existence of a pending challenge to Section 16(2)(c) does not excuse the taxpayer from instituting the statutory appeal under Section 107. The proper remedy is to file the appeal within the statutory time-frame (or as permitted), and the appellate forum will be bound by the outcome of the pending proceedings to the extent applicable. To avoid prejudice, the Court directed that if the appeal is filed by a specified date it shall not be dismissed on limitation grounds and must be adjudicated on merits. The Court further limited the binding effect of the pending challenge's eventual outcome to the specific issue of demand qua cancelled dealers in relation to Section 16(2)(c).

Ratio vs. Obiter: Ratio - a taxpayer must avail itself of the appellate remedy under Section 107 despite a pending broader challenge to Section 16(2)(c); where an appeal is filed within the specified extended period, limitation will not be a ground for dismissal and the appeal must be decided on merits. Obiter - delineation that the appellate authority will be bound by the decision on the pending challenge only insofar as it relates to demands against cancelled dealers.

Conclusion: The petitioner's remedy is to file the statutory appeal; the Court granted limited indulgence on limitation if the appeal is filed by the stated date and directed adjudication on merits, with the appellate authority bound by the pending decision on Section 16(2)(c) only in respect of demands qua cancelled dealers.

Ancillary and Procedural Conclusions

The Court dismissed the objections to the impugned SCN/order grounded solely on absence of physical signatures and non-issuance of pre-consultation notice post-amendment; directed the petitioner to file the statutory appeal by the stipulated date with protection against dismissal on limitation; and confined the binding effect of the pending constitutional/legal challenge to Section 16(2)(c) to the specific category of cancelled dealers in related appeals.

ISSUES PRESENTED AND CONSIDERED

1. Whether Additional Duty of Customs (CVD) leviable under Section 3(2) of the Customs Tariff Act can be re-determined by Customs authorities after final clearance when CVD was originally paid on declared Retail Sale Price (RSP)/MRP.

2. Whether post-import activities such as packing, repacking, labelling or affixing fresh MRP stickers constitute "manufacture" under Section 2(f)(iii) of the Central Excise Act and, if so, whether resultant duty liability lies under excise law (Section 4A) rather than by way of fresh CVD demand under Customs law.

3. Whether statements recorded during investigation under Section 108 of the Customs Act are admissible and can be relied upon by the adjudicating authority without compliance with the procedure in Section 138B (examination as witness, opinion on admissibility, and opportunity for cross-examination).

4. Whether computer printouts, emails and chat transcripts recovered from hard disks are admissible evidence without compliance with Section 138C of the Customs Act (certificates and conditions) and proof of custody/ownership of storage devices.

5. Whether a demand for differential CVD based on contemporaneous website prices or seized-stock MRPs can be reliably quantified for past import consignments without matching country of origin, quantity, date of import and corroborative market/distributor evidence.

6. Whether confiscation and imposition of redemption fine under Section 125 are sustainable where the imported goods have been finally cleared under self-assessed bills of entry without bond and goods are not physically available for confiscation.

7. Whether revenue can recover differential duties by invoking extended period of limitation in a subsequent show cause notice when an earlier show cause notice on related facts had already been issued and when original self-assessments were not challenged under the statutory appeal/assessment modification provisions.

8. Whether penalties on a director survive when the substantive demand against the company is held unsustainable.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Power to re-determine CVD (Section 3(2) CTA vis-à-vis valuation rules)

Legal framework: Section 3(2) CTA prescribes value for CVD as RSP declared on the imported article less any abatement under Section 4A of the Central Excise Act; Customs Valuation Rules under Section 14 of the Customs Act govern BCD but proviso to Section 3(2) limits redetermination of RSP for CVD purposes.

Precedent treatment: Prior Tribunal and other judicial pronouncements have held there is no machinery in Section 3(2) to redetermine MRP/RSP for CVD purposes and that recourse to valuation rules is precluded when CVD is levied on declared RSP.

Interpretation and reasoning: The Court examined the statutory language and history, noting the proviso protects declared RSP from re-determination by valuation rules. The legislative scheme intended parity with domestic excise but did not provide an express mechanism under Customs law to re-fix RSP for calculating CVD where CVD is based on declared MRP.

Ratio vs. Obiter: Ratio - there is no direct statutory mechanism under Section 3(2) CTA to redetermine RSP/MRP for CVD once goods have been cleared and CVD paid on the declared RSP; re-determination of CVD in isolation is without jurisdiction. Obiter - contextual observations on policy of parity with excise and historical evolution of rules.

Conclusion: Demand for differential CVD predicated on re-determination of RSP/MRP after clearance is legally unsustainable and beyond Customs authorities' jurisdiction when CVD was originally paid on declared RSP.

Issue 2 - Post-import relabelling as "manufacture" and locus of liability (Excise v Customs)

Legal framework: Section 2(f)(iii) Central Excise Act deems certain post-import processes (packing, repacking, labelling, relabelling) as "manufacture"; Section 4A prescribes excise valuation on RSP for Third Schedule goods and abatement rules.

Precedent treatment: Prior decisions have treated relabelling/affixing MRP on Third Schedule goods as "manufacture", attracting excise duty; such cases also recognize CVD paid at import may be available as cenvat credit against excise liability.

Interpretation and reasoning: If relabelling amounts to manufacture under excise law, the proper remedy is recovery of excise duty under Section 4A (allowing cenvat credit of CVD), not a fresh CVD demand. The statutory architecture contemplates excise machinery for ascertaining RSP in certain circumstances; Customs cannot assume powers of excise authorities to raise a post-clearance duty by re-characterising excise liability as CVD.

Ratio vs. Obiter: Ratio - where post-import activities amount to "manufacture" under Section 2(f)(iii), duty liability is under excise law and CVD already paid is creditable; demanding additional CVD is incorrect. Obiter - discussion of revenue neutrality and factual distinctions where activities occur under bond.

Conclusion: The correct charge, if any, is under excise provisions; Customs demand for additional CVD on account of subsequent relabelling is erroneous.

Issue 3 - Admissibility of statements under Section 108/138B

Legal framework: Section 108 enables recording of statements during inquiry; Section 138B prescribes that such statements are relevant for proving truth only after the declarant is examined as witness before adjudicating authority and the authority forms an opinion on admissibility, with opportunity for cross-examination.

Precedent treatment: Courts and Tribunals have repeatedly held the procedure in the counterpart excise provision is mandatory and failure to examine declarants before the adjudicating authority and to allow cross-examination renders such statements inadmissible.

Interpretation and reasoning: The procedural safeguards are mandatory to guard against coerced or unreliable statements recorded during investigation. The Tribunal found the Revenue relied heavily on such statements without following Section 138B procedure; no examination before adjudicating authority or cross-examination was afforded.

Ratio vs. Obiter: Ratio - statements recorded under Section 108 lose evidentiary value if Section 138B procedure is not complied with; reliance on such statements is fatal to the demand. Obiter - articulation of the rationale for mandatory procedure.

Conclusion: The investigatory statements relied upon by Revenue are inadmissible and the demand based on them is unsustainable.

Issue 4 - Admissibility of electronic records (Section 138C)

Legal framework: Section 138C deems computer printouts admissible as documents only if statutory conditions and certificate requirements are satisfied.

Precedent treatment: Authority recognizes that computer printouts from storage devices require proof of authenticity, ownership and statutory certification; printouts from seized hard disks without compliance are inadmissible.

Interpretation and reasoning: The hard disks seized were not proved to belong to the appellant nor were statutory certificates produced. Electronic material (emails/WhatsApp chats) without compliance with Section 138C cannot constitute reliable evidence for quantification of duty or to establish suppression.

Ratio vs. Obiter: Ratio - failure to comply with Section 138C renders computer printouts and electronic evidence inadmissible. Obiter - practical remarks on need for corroboration and chain of custody.

Conclusion: Electronic printouts relied upon are inadmissible; demands grounded on them fail evidentially.

Issue 5 - Quantification using e-commerce/website MRPs and valuation methodology

Legal framework: Valuation for CVD under Section 3(2) requires declared RSP on the imported article; where re-determination is attempted, valuation must consider country of origin, quantity, date of import and comparable data.

Precedent treatment: Tribunals have required close matching of import-specific parameters before adopting external price data; e-commerce listings without corroboration are unreliable.

Interpretation and reasoning: Revenue used 2019 website screenshots and seized stock MRPs to infer past RSPs for 2015-2017 imports without showing nexus of quantity, origin or contemporaneous market data. Market prices of mobiles/laptops vary rapidly; reliance on unrelated e-commerce listings is speculative and cannot support quantification.

Ratio vs. Obiter: Ratio - external website prices and seized stock MRPs cannot be mechanically applied to past imports for differential duty without material linkage and corroboration. Obiter - caution on market dynamics and need for distributor/dealer enquiries.

Conclusion: Quantification of differential duty by reference to such sources is erroneous and unsustainable.

Issue 6 - Confiscation and redemption fine where goods not available

Legal framework: Section 125 empowers confiscation with option for redemption fine where goods are available; redemption presupposes existence/availability of goods for seizure/redemption.

Precedent treatment: Authorities have held that redemption fine cannot be imposed where goods are not physically available for confiscation because goods had been previously cleared and no bond existed.

Interpretation and reasoning: Here goods were cleared after self-assessment without bond; no goods were available for confiscation. Accordingly, confiscation and redemption fine are legally not sustainable.

Ratio vs. Obiter: Ratio - where goods are not available (cleared previously without bond), confiscation and redemption fine are not sustainable. Obiter - remarks on nature of redemption fine as compensation for wrongful import subject to availability.

Conclusion: Confiscation order and redemption fine set aside.

Issue 7 - Limitation/extended period where earlier SCN issued and finality of self-assessment

Legal framework: Statutory limitation for recovery and extended period provisions apply where suppression is proved; original self-assessments attain finality unless modified under statutory appeal or other provisions.

Precedent treatment: Courts have held Revenue cannot indirectly reopen self-assessments without invoking proper modification/appeal provisions; issuance of an earlier SCN on same facts normally precludes later invocation of extended period absent new material.

Interpretation and reasoning: Although a subsequent investigation produced additional material, the Tribunal found the core demand rested on an incorrect legal premise (CVD re-determination) and unreliable evidence; further, Department did not challenge original assessments as required. On facts the Tribunal held extended period invocation not sustainable in absence of proof of suppression and where evidentiary defects existed (inadmissible statements/electronic evidence).

Ratio vs. Obiter: Ratio - extended period invocation cannot rescue a demand founded on wrong legal basis and inadmissible evidence; self-assessments not challenged by statutory procedure limit Revenue's power to reopen. Obiter - analysis of effect of subsequent investigations.

Conclusion: Extended period demand is set aside on both merits and time-bar grounds.

Issue 8 - Penalty on director when substantive demand fails

Legal framework: Penalties on individuals flow from sustainable substantive finding against the entity and proof of culpability.

Precedent treatment: Where substantive demand or evidentiary basis collapses, consequential penalties typically do not survive.

Interpretation and reasoning: Since the substantive demand against the company was held unsustainable on jurisdictional, evidentiary and limitation grounds, penalties imposed on the director could not be sustained.

Ratio vs. Obiter: Ratio - penalties on officers fall when the substantive order against the company is set aside for lack of jurisdiction/evidence/time-bar. Obiter - reliance on detailed appeal grounds of appellants.

Conclusion: Penalties on the director are vacated as consequential relief.