TaxTMI Updates e-Newsletter
Jan 06,2024

Show cause notice - wrongful availment or utilization of input tax credit - requirement of reasons and details in show cause notice - cancellation of GST registration - power to cancel GST registration with retrospective effect under Section 29(2) - objective satisfaction required for retrospective cancellation

Show cause notice - wrongful availment or utilization of input tax credit - requirement of reasons and details in show cause notice - Validity of the show cause notice dated 18.04.2022 seeking cancellation of GST registration for alleged wrongful availment or utilization of input tax credit. - HELD THAT: - The show cause notice merely recited "Wrongful availment or utilization of Input Tax Credit (details notice enclosed)" and the only annexure was a photograph of an unknown individual. The notice did not specify the quantum, particulars of alleged wrongful availment or any reasoned basis for the allegation. The orders rejecting the revocation applications likewise failed to record reasons and in some instances incorrectly stated that no reply had been filed. A show cause notice seeking cancellation must contain sufficient particulars and reasons so as to enable the recipient to know the case to be met; absence of such details renders the notice and consequent orders unsustainable. The Court relied on the principle in the coordinate Bench decision referenced and applied it to quash the defective proceedings. [Paras 2, 5, 6, 7, 9]

Show cause notice dated 18.04.2022 and the consequent orders rejecting revocation insofar as they are bereft of requisite details and reasons are quashed.

Cancellation of GST registration - power to cancel GST registration with retrospective effect under Section 29(2) - objective satisfaction required for retrospective cancellation - Validity of retrospective cancellation of registration with effect from 01.07.2017. - HELD THAT: - Although Section 29(2) empowers cancellation from such date as the proper officer may deem fit, the power to cancel retrospectively cannot be exercised mechanically or purely subjectively; it must be based on objective criteria and material justifying retrospective effect. There was no material on record to demonstrate wrongful availment or utilization of input tax credit from the date of registration up to the show cause notice, nor any consideration of the consequences (including denial of input tax credit to customers) that may flow from retrospective cancellation. In these circumstances retrospective cancellation was not sustainable. [Paras 10, 11, 12]

Cancellation of registration with retrospective effect from 01.07.2017 is not sustainable and is quashed for lack of supporting material and objective satisfaction.

Final Conclusion: The show cause notice and impugned orders are quashed for want of requisite particulars and reasons; cancellation of registration with retrospective effect is not sustained. Respondent is at liberty to initiate fresh proceedings in accordance with law after issuing a proper, detailed show cause notice.

Cancellation of registration with retrospective effect - requirement of objective satisfaction under Section 29(2) - show cause notice - consideration of consequences on input tax credit - direction fixing effective date of cancellation

Cancellation of registration with retrospective effect - requirement of objective satisfaction under Section 29(2) - show cause notice - consideration of consequences on input tax credit - Validity of the show cause notice and of cancelling the petitioner's GST registration with retrospective effect - HELD THAT: - The Court held that cancellation of GST registration with retrospective effect under Section 29(2) cannot be imposed mechanically; the proper officer must be objectively satisfied and may cancel from a retrospective date only if such satisfaction is based on objective criteria. A mere failure to file returns for a period does not justify cancelling registration for earlier periods when returns were filed and the taxpayer was compliant. The SCN in this case was flawed because it merely noted non-receipt of reply and suspended registration without indicating objective reasons to warrant retrospective cancellation. The Court further observed that the officer is required to consider consequences of retrospective cancellation-including denial of input tax credit to purchasers-before fixing a retrospective date, and such consequences must weigh in the exercise of discretion. [Paras 7, 8, 9, 10, 11]

The impugned order cancelling registration with retrospective effect is set aside as being bereft of reasons and lacking objective satisfaction under Section 29(2).

Direction fixing effective date of cancellation - Appropriate effective date of cancellation to be given effect - HELD THAT: - Having found the impugned retrospective cancellation impermissible in the absence of objective reasons, the Court directed that cancellation shall take effect from the date of the petitioner's application for cancellation. The petitioner had applied for cancellation on 29.05.2020; accordingly, the Court fixed that date as the effective date of cancellation. The Court clarified that this order does not preclude the respondent from initiating proceedings if violations prior to that date are discovered. [Paras 12, 13]

Cancellation shall take effect from 29.05.2020; respondent may still proceed under law if earlier violations are found.

Final Conclusion: The petition is allowed: the impugned order of retrospective cancellation is quashed and the GST registration shall stand cancelled with effect from 29.05.2020, subject to the respondent's right to act if pre-29.05.2020 violations are established.

Condonation of delay - Refund of excess tax - time bar and limitation - Natural justice - audi alteram partem - Remand for fresh consideration - Personal hearing and adjournment requests - Finality of limitation finding

Condonation of delay - Delay in filing the appeal was condoned. - HELD THAT: - The Court examined the affidavit filed in support of the application for condonation and accepted that sufficient cause was shown for the delay of 149 days in preferring the appeal. On that basis the interlocutory application for condonation was allowed and the delay in filing the appeal was condoned. [Paras 2, 3]

I.A. No. CAN 2 of 2023 is allowed and the delay in filing the appeal is condoned.

Refund of excess tax - time bar and limitation - Natural justice - audi alteram partem - Remand for fresh consideration - Personal hearing and adjournment requests - Finality of limitation finding - The order rejecting the refund application was set aside for violation of natural justice and the matter was remanded for fresh consideration; the authority was directed to afford hearing and may not reopen the limitation point decided in favour of the appellant. - HELD THAT: - The authority's rejection of the refund claim relied on a ground - that excess payment had not been shown in GSTR 3B or GSTR 9 - which was not specified in the show cause notice and thus amounted to denial of the appellant's right to be heard on that specific allegation. The appellant's request for postponement of personal hearing was also not considered. For these reasons the Court held that the refund application must be reconsidered after affording an opportunity of hearing. The appellant was directed to file a reply to the allegation regarding returns within 15 days; thereafter the authority must fix a fresh personal hearing and decide the claim on merits and in accordance with law. The Court further directed that the authority shall not reopen the issue of time bar since that aspect was held in favour of the appellant by the Court. [Paras 5, 7, 8, 9, 10]

The order dated 25th July, 2022 rejecting the refund application is set aside and the matter is remanded for fresh consideration after affording hearing; the appellant to file reply within 15 days and the authority shall not reopen the limitation issue.

Final Conclusion: The application for condonation of delay is allowed. The rejection of the refund application is set aside for breach of natural justice and remitted to the authority to decide afresh after hearing the appellant; the authority is directed to consider the appellant's reply within the specified time and shall not reopen the limitation finding previously decided in the appellant's favour.

Cancellation of GST registration with retrospective effect - Duty of statutory authority to independently satisfy itself before acting on information from another authority - Right to be heard before taking retrospective cancellation action - Requirement of issuance of a show cause notice specifying reasons for proposed retrospective cancellation - Preservation of revenue remedies despite setting aside retrospective cancellation

Cancellation of GST registration with retrospective effect - Right to be heard before taking retrospective cancellation action - Validity of cancellation of petitioner's GST registration with retrospective effect from 01.01.2019 - HELD THAT: - The Court found that the impugned order cancelling registration with retrospective effect to 01.01.2019 did not state reasons for that retrospective date and the show cause notice did not propose retrospective cancellation, so the petitioner had no opportunity to contest retrospective effect. The authority must independently record reasons when imposing retrospective cancellation and afford the affected party a chance to be heard on that specific proposal. There was no material on record demonstrating that the petitioner was non existent on or before 01.01.2019. In these circumstances the retrospective cancellation as made was unsustainable. [Paras 11, 13, 14]

Retrospective cancellation from 01.01.2019 set aside; cancellation to be effective from 08.02.2021.

Duty of statutory authority to independently satisfy itself before acting on information from another authority - Requirement of issuance of a show cause notice specifying reasons for proposed retrospective cancellation - Whether the respondents could cancel registration on the basis of a letter from another authority without independent reasons or without supplying the relied upon material - HELD THAT: - The Court reiterated that an authority charged with a statutory duty cannot act merely on the dictation of another authority and must independently satisfy itself of the grounds for action. The show cause notice relied on a letter stating the party was non existent, but that letter was not forwarded to the petitioner and the impugned order records cancellation as per a request from another authority without independent reasoning. Consequently, if the respondents wish to pursue cancellation with retrospective effect prior to 08.02.2021 they must issue a fresh show cause notice clearly setting out reasons and afford the petitioner a sufficient opportunity to be heard. [Paras 12, 15]

Direction that any attempt to cancel with a retrospective date prior to 08.02.2021 requires a fresh show cause notice stating reasons and hearing before any final order is passed.

Preservation of revenue remedies despite setting aside retrospective cancellation - Whether setting aside the retrospective cancellation precludes the respondents from pursuing recovery or other proceedings - HELD THAT: - The Court clarified that vacating the retrospective effect does not bar the respondents from initiating or continuing proceedings for statutory violations or recovery of tax or other amounts in accordance with law. The order simply corrects the date of cancellation and preserves the respondents' statutory remedies. [Paras 16]

Respondents remain free to initiate or pursue proceedings for violations or recovery despite the order altering the effective date of cancellation.

Final Conclusion: The petition succeeds insofar as the Court sets aside cancellation of GST registration with effect from 01.01.2019 and directs that cancellation shall be effective from 08.02.2021; if respondents seek an earlier retrospective date they must issue a show cause notice specifying reasons and afford the petitioner a hearing; the order does not preclude normal recovery or enforcement proceedings in accordance with law.

Show Cause Notice must disclose clear and specific reasons - Cancellation of GST registration for registration obtained by means of fraud, wilful misstatement or suppression of facts - Opportunity of hearing / principles of natural justice - Suspension and restoration of GST registration

Show Cause Notice must disclose clear and specific reasons - Cancellation of GST registration for registration obtained by means of fraud, wilful misstatement or suppression of facts - Opportunity of hearing / principles of natural justice - Validity of the impugned Show Cause Notice dated 22.05.2023 proposing cancellation of the petitioner's GST registration - HELD THAT: - The Court found that the impugned Show Cause Notice merely recited the ground as cancellation under the head of registration obtained by fraud, wilful misstatement or suppression of facts, but failed to specify any particulars of the alleged fraud, misstatement or suppression. A notice proposing adverse action must set out adequate reasons and particulars so as to enable the noticee to make a meaningful response; absence of such particulars renders the notice incapable of eliciting any effective reply. On that basis the impugned Show Cause Notice was held to be legally infirm and liable to be quashed. [Paras 6, 7, 8]

The Show Cause Notice dated 22.05.2023 is quashed and set aside.

Suspension and restoration of GST registration - Show Cause Notice must disclose clear and specific reasons - Opportunity of hearing / principles of natural justice - Consequences of quashing the impugned notice and directions regarding future action by respondents - HELD THAT: - The Court lifted the suspension of the petitioner's GST registration and directed immediate steps for restoration. The Court clarified that the respondents remain free to initiate fresh proceedings for cancellation provided they issue a proper Show Cause Notice disclosing requisite particulars and decide the matter after affording a reasonable opportunity of hearing. Further, the respondents are not precluded from pursuing recovery of any tax, penalty or interest payable by the petitioner. Thus the matter of cancellation, if pursued afresh, is left for decision on merits in accordance with law. [Paras 9, 10, 11]

Suspension of GST registration is lifted; respondents may, if they choose, issue a fresh proper Show Cause Notice and decide after hearing; respondents may pursue recovery of dues.

Final Conclusion: The impugned Show Cause Notice proposing cancellation of GST registration is quashed for failure to disclose specific particulars; the registration suspension is lifted forthwith, and the authorities are at liberty to initiate fresh proceedings by issuing a properly reasoned Show Cause Notice and affording a reasonable opportunity of hearing, without prejudice to recovery of any dues.

Provisional attachment under Section 83 of the Central Goods and Services Act, 2017 - lifting of provisional attachment - operation of bank account for payment of GST - substitution by bank guarantee for lifting attachment - direction to banks to give effect to court order

Provisional attachment under Section 83 of the Central Goods and Services Act, 2017 - operation of bank account for payment of GST - Permissibility of operating the petitioner's IDBI Bank account despite provisional attachment, and interim remittance direction for pending GST dues. - HELD THAT: - The High Court, on consent of parties and after hearing, directed that the provisional attachment of the petitioner's IDBI Bank, Neelankarai Branch account be lifted to the limited extent that the petitioner may operate the account solely for payment of GST. Additionally, the Court mandated that the petitioner remit a specified sum out of the balance in the IDBI account towards the pending GST dues within two weeks of receipt of the order. The direction balances the Department's attachment power under the CGST Act with the petitioner's ability to meet statutory dues, and is based on the parties' respective submissions and the Court's exercise of equitable interim relief. The Court also required the banks to scrupulously comply with these directions.

Attachment of the IDBI Bank account lifted only for payment of GST; petitioner to remit the directed sum towards pending GST dues within two weeks; banks directed to comply.

Lifting of provisional attachment - substitution by bank guarantee for lifting attachment - Conditions on which the provisional attachment of the petitioner's Kotak Mahindra Bank account is to be lifted. - HELD THAT: - The Court ordered that the provisional attachment of the Kotak Mahindra Bank, Nasik Thatte Nagar Road Branch account be lifted subject to the petitioner furnishing a bank guarantee to the extent specified by the Court. The condition for substitution by a bank guarantee was accepted following the department's representations and the petitioner's request for relief, thereby allowing the attachment to be vacated on provision of the guarantee. The direction is an exercise of the Court's discretion to permit substitution/security in place of continued attachment in order to protect revenue while enabling the assessee to access funds.

Attachment of the Kotak Mahindra Bank account ordered to be lifted on the petitioner furnishing the specified bank guarantee.

Final Conclusion: Writ petition allowed in part: the IDBI Bank account attachment is lifted for the limited purpose of GST payment and a directed remittance is to be made; the Kotak Mahindra Bank account attachment is lifted subject to furnishing the prescribed bank guarantee; banks are directed to implement the order. Writ petition disposed of; no costs.

Cancellation of GST registration with retrospective effect - Requirement of objective criteria for retrospective cancellation - Non-filing of returns for a continuous period of six months - Requirement of reasoned show cause notice specifying retrospective effect - Right to opportunity to be heard before retrospective cancellation - Consequences for Input Tax Credit holders

Cancellation of GST registration with retrospective effect - Requirement of objective criteria for retrospective cancellation - Non-filing of returns for a continuous period of six months - Validity of cancelling the petitioner's GST registration retrospectively on the sole ground of non-filing of returns for six continuous months - HELD THAT: - The Court recognised that Section 29(2)(c) permits cancellation from any date including retrospectively, but held that retrospective cancellation cannot be arbitrary or whimsical and must rest on objective criteria. The solitary ground relied upon by the authority was non-filing of returns for a continuous period of six months. The Court found that non-filing for six months, without more, does not justify cancelling registration retrospectively for periods during which the assessee was carrying on business and had filed returns. Even assuming consequential effects on third parties (such as denial of Input Tax Credit) that argument underscores the need for an objective and reasoned exercise of power rather than validating retrospective cancellation based solely on non-filing. [Paras 7, 8, 9]

Retrospective cancellation based solely on non-filing for six months was not sustainable; retrospective effect cannot be imposed absent objective criteria.

Requirement of reasoned show cause notice specifying retrospective effect - Right to opportunity to be heard before retrospective cancellation - Effect of the authority's failure to indicate retrospective cancellation in the show cause notice and the resulting opportunity to contest - HELD THAT: - The show cause notice did not indicate that cancellation was proposed with retrospective effect, thereby depriving the petitioner of an effective opportunity to contest such a consequence. The Court emphasised that where retrospective cancellation is contemplated its nature must be communicated so that the assessee can meet the case; absent such notice and an exercise of mind based on objective criteria, the retrospective aspect is vitiated. Taking these considerations together, the Court adjusted the effective date of cancellation to align with the period up to which returns were filed. [Paras 10, 11, 12]

Failure to notify proposed retrospective cancellation in the SCN and thereby deny an effective opportunity to contest vitiated the retrospective effect of the order.

Direction substituting effective date of cancellation - Appropriate remedial order as a consequence of the above defects - HELD THAT: - Considering that the petitioner had ceased business from 19.10.2021 and had filed returns up to 31.12.2021, and in view of the absence of objective reasoning and notice about retrospective cancellation, the Court directed that the impugned cancellation order shall operate with effect from 31.12.2021. The Court made clear that this direction does not preclude the revenue from initiating or pursuing proceedings for statutory violations. [Paras 11, 12, 13]

Impugned order modified to take effect from 31.12.2021; revenue remains free to pursue other proceedings.

Final Conclusion: The petition is allowed to the extent that the cancellation of GST registration is directed to operate only from 31.12.2021; the retrospective cancellation as originally ordered is set aside while preserving the respondent's right to pursue other proceedings.

Release of confiscated goods subject to conditions - detention and confiscation proceedings under the KGST/GST regime - security by way of bank guarantee and personal bond for release - valuation report by CAMPCO and re-appraisal of transaction value - interim relief and modification of conditions by the High Court - protective principle that a party cannot be placed worse off than an earlier interim order

Release of confiscated goods subject to conditions - interim relief and modification of conditions by the High Court - security by way of bank guarantee and personal bond for release - Modification of the interim conditions imposed for release of confiscated goods - HELD THAT: - The Court examined the impugned interim order which directed release of goods subject to deposit, bond and immovable security, and concluded that the revenue having not challenged that interim order cannot now seek to place the appellants in a worse position. Balancing the State's concern about recoverability if confiscation is upheld and the pendency of adjudication, the Court modified the conditions: (a) make good the 25% deposit provided in appeal proceedings (with adjustment of earlier deposits); (b) secure tax and penalty as per the impugned orders by bank guarantee; (c) furnish bank guarantee insofar as the invoice value of goods; (d) furnish a personal bond of the proprietor to cover the differential between invoice value and CAMPCO valuation; and (e) furnish a personal affidavit recording compliance. Four weeks' time was granted for compliance and default would invite contempt and other proceedings. [Paras 19, 20, 21, 22, 23]

Interim conditions for release were modified as set out, and compliance was directed within four weeks.

Protective principle that a party cannot be placed worse off than an earlier interim order - interim relief and modification of conditions by the High Court - Whether the State could now contend that the interim release should have been on stricter conditions and require bank guarantee for entire value - HELD THAT: - The Court held that because the revenue did not challenge the interim order permitting release, it cannot now seek to aggravate the position of the petitioner by insisting on more onerous conditions than those ordered earlier. Accordingly, contentions seeking to make the appellants worse off than the interim order could not be entertained. [Paras 16, 17, 18]

Revenue cannot argue to place the petitioner in a worse position than under the interim order; such contentions are rejected.

Valuation report by CAMPCO and re-appraisal of transaction value - detention and confiscation proceedings under the KGST/GST regime - Validity and quantum of valuation-based confiscation and re-appraisal of transaction value reserved for adjudication; protective security directed - HELD THAT: - The Court recognised that the question of valuation (including the CAMPCO report and alleged under-valuation) is pending adjudication under the confiscation proceedings and cannot be finally decided in the writ. Given the State's concern that revenue's valuation may be higher and must be realizable if confiscation is upheld, the Court directed security measures (bank guarantees and personal bond to cover differential) to ensure recoverability, while leaving the substantive validity of valuation and confiscation to the adjudicating authority. [Paras 6, 19, 20, 22]

Valuation and the validity of confiscation are left for adjudication; meanwhile security was ordered to secure recoverability.

Final Conclusion: The appeals were disposed by modifying the Single Judge's interim release order: the appellants must comply with the specified deposit, bank guarantees, personal bond and affidavit within four weeks; the substantive adjudication on valuation and confiscation remains open to the adjudicating authority.

Principles of natural justice - right to supply of documents or material relied upon - opportunity of personal hearing - order under Section 74 of the Goods and Services Tax Act - availability of alternative statutory remedy by appeal

Principles of natural justice - right to supply of documents or material relied upon - order under Section 74 of the Goods and Services Tax Act - Whether non-supply of the report/information received from NAHI amounted to violation of the principles of natural justice - HELD THAT: - The Court found that the material received from NAHI had its contents disclosed in the show-cause notice and that the petitioner had the substantive particulars upon which the case was founded. The petitioner had filed a reply to the show-cause notice on 07.07.2023 and the impugned order was passed after consideration of that reply. On these facts the non-supply of the copy of the NAHI communication did not occasion a breach of natural justice because the essential contents were disclosed and the petitioner had an opportunity to respond. [Paras 9]

No violation of the principles of natural justice on account of non-supply of the NAHI communication

Opportunity of personal hearing - principles of natural justice - Whether the manner and timing of notices for personal hearing violated the petitioner's right to be heard - HELD THAT: - The Court recorded that a second notice dated 21.07.2023 fixed personal hearing on 24.07.2023 (a Monday) and that the petitioner did not appear though the petitioner and the hearing venue were both at Vijayawada. The explanation that preceding days were weekend days was held not to justify failure to attend the hearing on the date fixed. As the petitioner did not avail the afforded opportunity of personal hearing, the petitioner cannot subsequently complain of denial of that opportunity. [Paras 10]

No violation of the principles of natural justice in respect of personal hearing

Availability of alternative statutory remedy by appeal - Whether the writ petition was maintainable despite the existence of an alternate statutory remedy in appeal - HELD THAT: - The Court noted that the impugned order is appealable under the GST Act and that the petitioner has the statutory alternative remedy of appeal. Having found no breach of natural justice and with an efficacious statutory remedy available, the Court held that the writ petition was not maintainable and the appropriate course would be to pursue the remedy of appeal in accordance with law. [Paras 11, 12]

Writ petition dismissed on the ground of availability of alternative statutory remedy by appeal

Final Conclusion: The writ petition under Article 226 was dismissed: the court held there was no violation of natural justice either by non-supply of the NAHI communication (its contents had been disclosed and replied to) or by denial of personal hearing (petitioner failed to attend), and an alternative remedy by appeal is available; writ accordingly dismissed.

Limitation for filing appeal under Section 107(4) of the B.G.S.T. Act - absence of power in appellate authority or constitutional court to extend statutory limitation - CBIC Notification No. 53/2023 - special procedure for filing delayed GST appeals - pre-conditions of payment for filing appeal under the notification - remand for fresh consideration by first Appellate Authority upon compliance with notification conditions

Limitation for filing appeal under Section 107(4) of the B.G.S.T. Act - absence of power in appellate authority or constitutional court to extend statutory limitation - Whether the Appellate Authority or the High Court can extend the period of limitation prescribed under Section 107(4) of the B.G.S.T. Act. - HELD THAT: - The court held that Section 107(4) prescribes a three months period for filing an appeal and a further one month for filing a delayed appeal, creating a specific statutory time-frame. There is no power vested either in the Appellate Authority or in a Constitutional Court under Article 226 to extend that period when the statute itself prescribes the period for filing a delayed appeal. The statutory prescription therefore precludes judicial or administrative extension of the limitation beyond what is provided by Section 107(4). [Paras 2]

The court held that neither the Appellate Authority nor the High Court has power to extend the statutory period prescribed by Section 107(4).

CBIC Notification No. 53/2023 - special procedure for filing delayed GST appeals - pre-conditions of payment for filing appeal under the notification - remand for fresh consideration by first Appellate Authority upon compliance with notification conditions - Applicability of CBIC Notification No. 53/2023 to an order dated 27.04.2023 and the remedial course available to the petitioner. - HELD THAT: - The notification of 02.11.2023 provides a special procedure permitting certain taxable persons to file belated appeals in FORM GST APL-01 where orders were passed on or before 31.03.2023, subject to specified payment conditions. The petitioner's impugned order was passed on 27.04.2023 and thus does not squarely fall within the cut-off date stated in the notification. The court observed no clear rationale for the 31.03.2023 cut-off and, in the exercise of equitable direction, permitted the petitioner to avail the benefit of the notification by complying with its conditions. The court directed that upon such compliance the appellate order shall stand set aside and the first Appellate Authority shall reconsider the appeal; if the petitioner fails to fulfill the notification's criteria the impugned order will continue to operate. [Paras 3, 4, 5, 6]

The court directed that the petitioner be allowed to comply with the conditions of Notification No. 53/2023 and, upon such compliance, the impugned appellate order shall be set aside and the matter remanded to the first Appellate Authority for fresh consideration; failure to comply will leave the impugned order in operation.

Final Conclusion: Writ petition allowed: statutory limitation under Section 107(4) cannot be extended by the Appellate Authority or High Court; petitioner, though not squarely covered by the 31.03.2023 cut-off in Notification No. 53/2023, is permitted to comply with the notification's payment conditions and, on so complying, the appellate order will be set aside and the appeal remitted to the first Appellate Authority for fresh consideration.

Writ under Article 226 - Cancellation of GST registration - Rejection of application for revocation of cancellation - Finding of fact based on field inspection report - Alternative statutory remedy of appeal - Maintainability of writ petition where alternative remedy exists

Finding of fact based on field inspection report - Cancellation of GST registration - Rejection of application for revocation of cancellation - Writ under Article 226 - Alternative statutory remedy of appeal - Maintainability of writ petition where alternative remedy exists - Whether the writ petition under Article 226 was maintainable to challenge cancellation of GST registration and rejection of revocation application which involved a factual finding based on a field inspection report, notwithstanding the availability of an appeal. - HELD THAT: - The court held that the question whether the petitioner was carrying on business at the registered address on the relevant date was a question of fact. The orders cancelling the GST registration and rejecting the revocation application recorded a finding of fact - prima facie supported by the field inspection report - that no business was being conducted at the registered address. Where the controversy turns on reappraisal of such factual material, the appropriate forum is the statutory appellate remedy under the GST law and not a writ under Article 226. Having regard to the availability of the alternative statutory remedy of appeal, the High Court declined to entertain the writ petition and observed that the petitioner, if so advised, may avail the remedy of appeal as provided by law. [Paras 14, 15, 16, 17]

Writ petition not entertained and dismissed; petitioner may pursue the statutory appeal remedy.

Final Conclusion: The High Court dismissed the writ petition challenging cancellation of GST registration and rejection of revocation application, holding the dispute to be factual in nature based on the field inspection report and noting the availability of the statutory appellate remedy; petitioner may avail the appeal provided by law.

Cancellation of GST registration - revocation of cancellation - finding of fact based on field inspection / physical verification - availability of statutory alternative remedy of appeal - scope of writ jurisdiction under Article 226 - principles of natural justice

Scope of writ jurisdiction under Article 226 - availability of statutory alternative remedy of appeal - Maintainability of writ petition challenging cancellation of GST registration and rejection of revocation application when a statutory appeal is available. - HELD THAT: - The Court held that the petitioner undisputedly possesses the statutory remedy of appeal under the GST law and that where the controversy principally requires reappraisal of evidence and factual determination, the appropriate forum is the statutory appellate forum rather than writ jurisdiction under Article 226. The Court declined to entertain the petition on that basis and observed that if the petitioner has evidence contrary to the field report, it should be placed before the appellate authority in accordance with law. [Paras 16, 17, 18]

Writ petition not entertained and petitioner directed to avail statutory appeal; petition dismissed.

Finding of fact based on field inspection / physical verification - cancellation of GST registration - revocation of cancellation - Whether the finding that the petitioner was not carrying on business at the registered address is a question of fact amenable to adjudication in writ proceedings. - HELD THAT: - The Court recorded that the determination whether business was being carried on at the registered address is a question of fact. The impugned cancellation order and the order rejecting revocation rest on the field inspection report and thus reflect a factual finding supported by material. Reappraisal of such factual findings and evidence is not appropriate in a writ petition; such matters are to be examined by the competent statutory forum on appeal. [Paras 15, 16]

The finding is a factual one based on the field visit report and not amenable to fresh adjudication in the present writ; appropriate remedy is by way of statutory appeal.

Final Conclusion: The writ petition challenging cancellation of GST registration and the rejection of revocation application was dismissed; the Court held the dispute involves factual findings based on a field inspection report and directed that the petitioner may avail the statutory appeal remedy rather than seek relief under Article 226.

Interim relief for release of perishable seized goods - exercise of judicial discretion to safeguard revenue by conditioned release - confiscation under Central and Karnataka Goods and Services Tax Acts - security by deposit, bond and immovable property to secure tax demand - filing of appeal operating as stay but not precluding auction proceedings

Interim relief for release of perishable seized goods - exercise of judicial discretion to safeguard revenue by conditioned release - security by deposit, bond and immovable property to secure tax demand - Validity of the Single Judge's interim order directing release of confiscated perishable arecanut subject to deposit, bond and furnishing of immovable property as security. - HELD THAT: - The Court upheld the learned Single Judge's exercise of discretion in directing release of the seized arecanut on interim terms. The reasoning accepted that the goods were perishable and that significant time had elapsed without arrangements for their preservation, making immediate release appropriate to protect the interests of both parties. The Single Judge conditioned release on deposit of 20% of the demand, execution of a bond for the full demand, and the furnishing of immovable property as additional security with a prohibition on alienation or encumbrance until disposal of the writ petition. The Court noted that filing an appeal only operates as a stay and does not by itself prevent the authorities from proceeding to auction; accordingly, conditioning release on adequate security was a proper means to safeguard revenue while permitting preservation of perishable goods. Given these considerations and the respondent's undertaking to provide the specified security, the appellate court found no illegality or infirmity in the interim directions and declined to interfere.

The Single Judge's interim order directing release of the arecanut subject to deposit of 20%, execution of a bond for the full demand and furnishing immovable property as security is upheld; respondent to furnish the security and goods to be released in accordance with the timelines ordered.

Final Conclusion: The intra-Court appeal is dismissed; the interim order releasing the perishable arecanut on specified security and conditions is affirmed, all other contentions in the writ petition remain open for adjudication.

Disallowance of Notional Forex Loss - Validity of CBDT Circular No.3/2010 dated 23rd March, 2010 - HC held [2022 (9) TMI 659 - DELHI HIGH COURT] assessee had entered into derivative contracts in order to hedge its exchange risk in respect of export proceeds receivable by it in foreign exchange. Forward contracts entered into by the assessee were not by way of trading per se in foreign exchange derivatives. Consequently, CBDT Circular No.3/2010 dated 23rd March, 2010 has no application to the facts of the present case - HELD THAT:- Delay condoned.

No case for interference is made out in exercise of our jurisdiction under Article 136 of the Constitution of India. The Special Leave Petition is, accordingly, dismissed.

Unrealized gains on revaluation of forward contracts as the bank accounts - depreciation in value of investment in HTM Securities - disallowances made u/s 36(1) (viia) - disallowance made u/s 14A - disallowances on account of AFS and HFT category of investments by relying upon the decisions which has not reached finality and even when the assessing authority rightly disallowed the depreciation on investment of Available for Sale (AFS) and held for trading (HFT) category investment and added to the taxable income -Condonation of delay in filing this petition - HELD THAT:- There is gross delay of more than 261 days in filing this special leave petition.

SLP (C) [2023 (12) TMI 659 - SC ORDER] arising from the same common order has also been dismissed on the ground of delay. Following the same, this special leave petition also stands dismissed on the ground of delay keeping open the questions of law, if any, which arises in the matter.

Additions made u/s 40(a)(ia) - Assessee in default u/s 201(1) - assessee credited lease rent to one Kerala State Co-operative Hospital Complex and Centre for Advanced Medical Services Ltd and appellant did not deduct tax for the amounts under Chapter XVII-B of the Income Tax Act, 1961 - Whether the Tribunal erred in not deleting the additions made under Section 40(a)(ia), since the second proviso introduced by Finance Act, 2012 read with the first proviso of sub-Section (1) of Section 201 absolved the assessee from being treated as an assessee in default for reason of the payment of tax by the resident, who received the said amounts? - as decided by HC [2018 (3) TMI 1022 - KERALA HIGH COURT] admittedly, resident-receiver to whom the assessee paid or credited the lease rent has filed a return belatedly and not paid any tax due on the income declared. When there is no tax paid on the income declared; even if for reason of a loss return, there cannot be any claim raised by the assessee in default to absolve him from the consequences flowing from Sections 201(1) and 40(a)(ia). He will then be treated as an 'assessee in default' and would be liable to pay the amount of TDS with interest as also subject to the expenses being disallowed - HELD THAT:- SLP dismissed.

Scope of of Sections 44BB(1) and 44BB(2) - computation of the ‘presumptive taxable income’ of the assessee - whether the service tax collected by the assessees in the course of provision of services and facilities in connection with, or supply of plant and machinery on hire, in the prospecting for, or extraction or production of, mineral oils in India, was liable to be included in the amount paid or payable for the purpose of computation of the ‘presumptive taxable income’ of the assessee? - as decided by HC [2022 (11) TMI 385 - UTTARAKHAND HIGH COURT] amount reimbursed to the assessee (service provider) by service recipient representing the service tax paid earlier by the assessee to the Government of India, would not form part of the aggregate amount referred to in Clauses (a) and (b) of sub-section (2) of Section 44 BB.

HELD THAT:- There is gross delay of 294 days and 303 days in filing SLPs

As stated at the Bar that this Special Leave Petition could be disposed of in terms of the order of this Court passed in [2023 (11) TMI 90 - SC ORDER]

Following the said order arising out of proceedings against the same Assessee, the special leave petitions are dismissed both on the ground of delay as well as on merits.

Interest free refundable security deposit - revenue receipt - income from other sources - undisclosed receipt - genuineness of Development Agreement - taxability of security deposit

Interest free refundable security deposit - revenue receipt - income from other sources - undisclosed receipt - genuineness of Development Agreement - taxability of security deposit - Whether the sum of Rs. 50.00 lakhs received under the Development Agreement is a refundable security deposit and not taxable as income for Assessment Year 2019-20 - HELD THAT: - The Development Agreement-cum-GPA (No.7592/2011) unambiguously records at clause 38 that the developer paid Rs. 50.00 lakhs as an interest free refundable security deposit to the owner, and clause 40 provides that the deposit is repayable to the developer within two months after handing over of the completed commercial units. The Department's treatment of the amount as a revenue receipt rested primarily on the fact that the petitioner did not disclose the sum as a liability in its books; however, the Department did not challenge the genuineness of the Development Agreement. Given the contractual terms showing the deposit to be refundable and repayable on completion, it is not appropriate to characterise the amount as an income/undisclosed receipt for AY 2019-20 or to levy tax on that basis. The court therefore directed that the amount be shown in the petitioner's books as an interest free security deposit until refunded and ordered the Department to drop proceedings to collect tax in respect of the sum. [Paras 4, 5, 6]

The Rs. 50.00 lakhs is a refundable security deposit under the Development Agreement and shall not be treated as taxable income for Assessment Year 2019-20; the petitioner shall show it as a security deposit in its books and the Department shall drop proceedings to collect tax on that amount.

Final Conclusion: Writ petition allowed: the disputed amount of Rs. 50.00 lakhs is held to be an interest free refundable security deposit and not taxable for Assessment Year 2019-20; the petitioner directed to show it as a security deposit in its books until refunded and the Department ordered to discontinue tax proceedings in respect thereof.

Characterisation of receipts as royalties under Article 12 of the DTAA - business profits taxable under Article 7 of the DTAA - permanent establishment by way of a fixed place of business under Article 5(1) of the DTAA - control test and place of business at the disposal doctrine - incidental use of know how in rendering services and the royalty/service distinction - attribution of profits to a permanent establishment under Article 7(2) (4)

Characterisation of receipts as royalties under Article 12 of the DTAA - incidental use of know how in rendering services and the royalty/service distinction - Receipts under the Strategic Oversight Services Agreement (SOSA) are not royalties but business income. - HELD THAT: - The Court examined the SOSA terms and found the fees are payable in consideration for comprehensive strategic planning and oversight services to operate the hotel in accordance with Hyatt Operating Standards, with access to written Know How being incidental and provided only in furtherance of those services. The Tribunal's conclusion that the receipts constituted royalties under Article 12(3) was not accepted: mere provision or access to know how and related materials incidental to the provision of integrated management services does not convert the consideration into a royalty. The Court relied on the analysis in Sheraton International (as applied by the Tribunal and the authorities) to hold that the payments are business income and not royalties or fees for technical services. [Paras 63, 64, 65, 66, 67]

The receipts payable under the SOSA are business profits and not royalties under Article 12 of the Indo UAE DTAA.

Permanent establishment by way of a fixed place of business under Article 5(1) of the DTAA - control test and place of business at the disposal doctrine - The assessee has a permanent establishment (PE) in India under Article 5(1) of the DTAA by reason of the Hotel premises being at its disposal and its exercise of control. - HELD THAT: - Applying the tests in Formula One and subsequent authorities, the Court held that a fixed place need not be legally owned or exclusively occupied but must be de facto at the disposal of the enterprise by reason of sufficient control, stability and productivity. A plain reading of the SOSA showed pervasive strategic control: long term (20 years) engagement, entitlement to frame and enforce policies across all aspects of hotel operations, rights vis a vis lenders (non disturbance obligations), discretion to second personnel, and actual deputation of senior employees to India. Although day to day operations were performed by an affiliated Indian operator (HOSA), those operations were to be carried out in accordance with the assessee's policies and under its supervisory control. On these facts the Hotel premises were sufficiently at the disposal of the assessee and used for carrying on its business, satisfying Article 5(1). [Paras 81, 82, 90, 91, 92]

The Tribunal correctly held that the assessee had a PE in India under Article 5(1) of the DTAA.

Business profits taxable under Article 7 of the DTAA - interaction of Article 12 and Article 7 where income is effectively connected to a PE - Given that the receipts are business income and the assessee has a PE, the Tribunal's conclusion that the receipts were taxable under Article 12 as royalties was unsustainable. - HELD THAT: - Article 12(4) provides that where the beneficial owner carries on business in the source State through a PE and the right in respect of which royalties are paid is effectively connected with the PE, Article 7 (business profits) applies. The Court held that (i) the receipts are business income (not royalties); and (ii) in any event, once a PE exists and the income is effectively connected to it, Article 7 is the proper charging provision. Consequently the Tribunal's simultaneous conclusion that the receipts were royalties under Article 12 could not be sustained. [Paras 60, 66, 67, 97, 98]

The Tribunal's finding that the receipts are taxable as royalties under Article 12 is set aside; the income is business profits chargeable under Article 7 as attributable to the PE.

Attribution of profits to a permanent establishment under Article 7(2) (4) - Computation/apportionment of profits attributable to the PE and related verification was not finally determined and is to be addressed afresh. - HELD THAT: - Although the Court confirmed that profits attributable to the PE are to be determined in accordance with Article 7 and relevant domestic provisions, it noted that the Tribunal had directed the assessee to submit workings for apportionment of revenue and losses. The Court preserved that direction and remitted the matter for quantification and judicial determination of profits attributable to the PE (subject to the unresolved fourth question on treatment of global losses). The Court also recorded its reservation on a Coordinate Bench decision on the effect of entity level losses and referred the unresolved fourth question for consideration by a larger Bench, but the assessee agreed not to press that question if the first three are decided in its favour. [Paras 60, 99]

The issue of apportionment/quantification of profits attributable to the PE is remitted for fresh consideration and computation in accordance with Article 7 and Section 44DA, with opportunity to the assessee to file workings.

Final Conclusion: The Court held that (i) the fees received under the SOSA are business income and not royalties under Article 12 of the Indo UAE DTAA; (ii) on the facts the Hotel premises were at the assessee's disposal and it possessed sufficient control to constitute a permanent establishment under Article 5(1); (iii) the Tribunal's finding that the receipts were royalties was set aside and Article 7 governs taxation of income attributable to the PE; and (iv) the computation/apportionment of profits attributable to the PE is remitted for fresh consideration, while the broader question concerning the effect of entity level losses has been indicated for larger bench consideration.

Reassessment notice time bar under the new reassessment regime - notice under Section 148 of the Income tax Act and its dispatch date - dispatch evidence: email transmission, digital signature and timestamp - window for issuance of fresh notices between 01.04.2021 and 30.06.2021 - setting aside of reassessment proceedings for non compliance with time bar

Notice under Section 148 of the Income tax Act and its dispatch date - dispatch evidence: email transmission, digital signature and timestamp - reassessment notice time bar under the new reassessment regime - Validity of the notice dated 30.06.2021 (and consequential notices/orders) for AY 2013-14 in view of the prescribed window for issuance of fresh notices under the new regime. - HELD THAT: - The Court examined the material on record and found that the purported notice dated 30.06.2021 was not shown to have been dispatched on that date. What is on record is an email dated 16.07.2021 indicating transmission on that later date, and the impugned notice itself does not bear the time stamp or the digital signature of the Assessing Officer. In the circumstances the obvious inference is that the notice was not dispatched on 30.06.2021. Under the new reassessment regime the revenue's window for issuing fresh notices was confined to the period 01.04.2021 to 30.06.2021. Because the notice was transmitted after 30.06.2021, the reassessment proceedings founded on that notice are time barred. The respondents did not place any contrary dispatch evidence on record despite opportunity to do so, and the Court relied on precedents of this Court dealing with similar circumstances to reach its conclusion. [Paras 6, 7, 8, 9, 11]

The impugned notice dated 30.06.2021, the notices dated 14.05.2022 and 21.05.2022 under Section 148A(b), the order dated 29.06.2022 under Section 148A(d) and the consequential notice dated 29.06.2022 under Section 148 are set aside as time barred.

Final Conclusion: Writ petition allowed; reassessment notices and connected orders set aside for having been issued outside the permissible window, and the petition disposed accordingly.

Addition under Section 68 for unexplained cash credits - triple test: identity, creditworthiness and genuineness of creditor - onus on assessee to prove genuineness of share/loan transactions - rejection of Section 41(1) claim where underlying debt is not established - AO's discretion to make addition when transaction is prima facie dubious

Addition under Section 68 for unexplained cash credits - triple test: identity, creditworthiness and genuineness of creditor - onuse on assessee to prove genuineness of loan - Addition of Rs.14,00,000 to income under Section 68 on account of an alleged loan from Gee Wire Pvt. Ltd. sustained - HELD THAT: - The Court upheld the concurrent findings of the AO, CIT(A) and Tribunal that the loan agreement raised serious doubts about the reality of the transaction. The agreement, printed on the assessee's letterhead, carried unusual terms: no obligation to pay interest and repayment only after four years by installments on "mutual consent"; the stated purpose related to remission of liabilities against capital assets rather than routine business needs. The assessee did not produce available direct evidence such as former directors of the lender, and the contention that the AO ought to have issued notices to the struck off lender was not persuasive because, given the assessee's failure to produce primary material and the lender's struck off status, issuing notices would have been futile. On this material, the initial onus on the assessee to establish identity, creditworthiness and genuineness was not discharged, and the AO was justified in making the addition under Section 68 when the transaction was prima facie dubious. [Paras 12, 13, 14, 15, 16]

Addition under Section 68 sustained; assessee failed to discharge onus under the triple test.

Rejection of Section 41(1) claim where underlying debt is not established - distinction between remission of liability and unexplained credit - Claim that the amount should be treated under Section 41(1) (remission of liability) rather than added under Section 68 rejected - HELD THAT: - The Court held that Section 41(1) operates where a real liability had earlier been recognised and subsequently remitted. Here, however, the genuineness of the loan itself was doubted; no legal liability in fact fructified that could be said to have been remitted. Therefore, the submission that remission applied and Section 41(1) should govern rather than Section 68 was untenable. The Tribunal's application of Section 68 was appropriate given the finding that the transaction lacked necessary authenticity. [Paras 5, 15]

Section 41(1) not attracted; addition under Section 68 was correctly applied.

Final Conclusion: The High Court declined to interfere with the Tribunal's order for AY 2018-19: the assessee failed to prove the genuineness and creditworthiness of the alleged lender and the addition under Section 68 was rightly sustained; the alternative plea under Section 41(1) was rejected as the debt was not established.

Condonation of delay - Protective addition - Deletion of addition by Commissioner of Income Tax (Appeals) sustained by Tribunal - Closure of appeal with liberty to revenue to pursue alternate proceedings - Proceedings under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015

Condonation of delay - Application for condonation of delay of 40 days in re-filing the appeal - HELD THAT: - The Court considered the application for condonation of delay in re-filing the appeal and, having regard to the period involved, was inclined to condone the delay. The application seeking condonation was accordingly disposed of in favour of the appellant/revenue. [Paras 3, 4]

Delay of 40 days in re-filing the appeal condoned; application disposed of.

Protective addition - Deletion of addition by Commissioner of Income Tax (Appeals) sustained by Tribunal - Closure of appeal with liberty to revenue to pursue alternate proceedings - Proceedings under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 - Disposition of the appeal against the Tribunal's order sustaining deletion of the assessed addition (relating to protective addition made against the assessee in light of substantive proceedings against the company under the 2015 Act) - HELD THAT: - The appeal arose from an order of the Tribunal upholding the CIT(A)'s deletion, made on a protective basis, of an addition that had been linked to substantive proceedings against the company Everbez under the 2015 Act. The Court, noting the submissions of the revenue and the existence of parallel proceedings against the company, agreed with counsels' proposal to close the appeal while preserving the revenue's right to pursue remedies in case the revenue were to fail in the proceedings taken against the respondent/assessee's company under the 2015 Act. Consequently, the appeal was closed with liberty to the appellant/revenue to approach the Court later if required. [Paras 5, 8, 9, 10]

Appeal closed with liberty to the appellant/revenue to proceed in the event of adverse outcome in the proceedings under the 2015 Act; no adjudication on the substantive merits of the addition in this appeal.

Final Conclusion: The Court condoned the delay in re-filing the appeal and closed the appeal concerning AY 2014-15 (the Tribunal having sustained the CIT(A)'s deletion of the protective addition), while granting liberty to the revenue to seek appropriate relief if proceedings under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 against the company do not succeed.

Operation of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - interference with ongoing Corporate Insolvency Resolution Process - suspension of adjudicatory proceedings during moratorium - revival of proceedings post-NCLT adjudication

Operation of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - suspension of adjudicatory proceedings during moratorium - revival of proceedings post-NCLT adjudication - Effect of the moratorium under Section 14 IBC on the continuation of the writ petition. - HELD THAT: - The Court found that respondent no.2 is undergoing the Corporate Insolvency Resolution Process before the NCLT and that the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, is operative. In view of the operative moratorium, the Court held that no purpose would be served by further progressing the writ petition pending the outcome of the insolvency proceedings. Consequently, the petition was closed for the present, while the petitioner/revenue was granted liberty to seek revival of the petition as per law depending upon the result of the proceedings before the NCLT. The Court recorded the factual position that the claim lodged with the Resolution Professional was rejected and that the petitioner is pursuing appropriate remedies before the fora responsible for the insolvency process, but treated those facts as background supporting the decision to defer adjudication of the writ petition during the moratorium. [Paras 4, 5]

Writ petition closed for the present due to the operative moratorium; liberty granted to the petitioner to move for revival depending on the NCLT outcome.

Final Conclusion: Proceedings in the writ petition are stayed for the present because the moratorium under Section 14 IBC is operative; the petitioner may seek revival of the petition in accordance with law after the NCLT proceedings conclude.

Penalty for undisclosed cash transactions under Section 271E - treatment of loan repayment as assessable income - books of account and audited accounts as evidence of transaction nature - assessment officer's misapprehension of cash transaction - admission of appeal without pre-deposit and time bound disposal

Penalty for undisclosed cash transactions under Section 271E - books of account and audited accounts as evidence of transaction nature - assessment officer's misapprehension of cash transaction - treatment of loan repayment as assessable income - Validity of penalty proceedings under Section 271-E where repayments were made by a third party on the basis of entries in the books and audited accounts and where no cash transaction occurred - HELD THAT: - The Court examined records showing that the petitioner advanced funds to Shakti Sugar Ltd., which, at the petitioner's request and because it was liable to the petitioner, caused payments to be made to three third parties and recorded corresponding entries in the books of both concerns and in audited accounts. The Assessing Officer treated the repayments made by Shakti Sugar Ltd. as if they were cash transactions and construed the entire repayment as the assessee's income, proceeding to impose penalty under Section 271-E. The Court found, on a prima facie perusal, that the transactions and the reduction of liabilities reflected in the books and audited accounts indicated that no cash transaction by the assessee had occurred and that the AO proceeded on a wrong assumption. These aspects were not examined by the AO and, therefore, the penalty proceedings could not be sustained without further consideration by the appellate forum. [Paras 7]

Prima facie, the penalty proceedings under Section 271-E are liable to be set aside as they were founded on a misapprehension of cash transaction and without dealing with the documentary evidence in the books and audited accounts.

Admission of appeal without pre-deposit and time bound disposal - Relief to be afforded to the petitioner pending appellate adjudication - HELD THAT: - In view of the prima facie conclusion that the AO proceeded on incorrect assumptions and having regard to earlier orders in similar matters, the Court directed that the pending appeal filed by the petitioner be taken on file by the Appellate Authority without insisting upon any pre-deposit. The Appellate Authority was directed to consider the issues adverted to in this order and to dispose of the appeal in accordance with law within eight weeks from receipt of the order. [Paras 7]

The Appellate Authority shall admit the petitioner's appeal without requiring pre-deposit and decide it on merits within eight weeks.

Final Conclusion: Writ petition disposed of by directing the Appellate Authority to admit the appeal without pre-deposit and to expeditiously consider and dispose of the appeal on merits within eight weeks; prima facie view formed that penalty under Section 271-E was unsustainable for being founded on a misapprehension of a cash transaction.

Allocation of corporate/common expenses between STPI and non STPI units - Deductibility under Section 10A linked to nexus of expenditure - Scientific and accounting principles for allocation of expenses - Consistency of accounting treatment across assessment years - Availability and sufficiency of basis for reassignment by Assessing Officer

Allocation of corporate/common expenses between STPI and non STPI units - Scientific and accounting principles for allocation of expenses - Consistency of accounting treatment across assessment years - Availability and sufficiency of basis for reassignment by Assessing Officer - Whether the Assessing Officer's reallocation of general corporate expenses between STPI and non STPI units was justified, or the assessee's method of allocation should be accepted. - HELD THAT: - The Tribunal examined the material placed by the assessee showing separate books of account for units and a methodology of allocation based on turnover ratios and established accounting principles. The assessee demonstrated that it had consistently followed the same allocation system in earlier and subsequent years, and that the revenue had accepted that methodology for assessment years 2008-09 to 2012-13. The Assessing Officer's reassignment was tested and found to lack an explained logical basis or methodology in the record; the revenue did not satisfactorily justify the alternative ratios applied. Having regard to the assessee's audited accounts, the scientific basis advanced for apportionment, and prior acceptance by revenue for related years, the Tribunal concluded that the reallocation by the Assessing Officer was not tenable. On that determinative reasoning the Tribunal set aside the CIT(A)'s confirmation of the reassignment and directed the Assessing Officer to accept the assessee's allocation methodology for computing deduction under section 10A. [Paras 7, 8]

The Assessing Officer's reallocation is set aside; the assessee's method of allocating corporate expenses between STPI and non STPI units is to be accepted and applied for determination of deduction under section 10A.

Final Conclusion: Appeal allowed; order of the CIT(A) confirming the AO's reallocation is set aside and the AO is directed to accept the assessee's allocation methodology for A.Y. 2007-08.

Validity of search under section 132 - Explanation to section 132(1) - return filed in response to section 153A - defective return under section 139(9) clause (aa) - effect of omission/repeal of a statutory provision - applicability of section 153A "so far as may be" to section 139 - interest under section 234A and section 234B - disallowance under section 36(1)(iii) - chargeability under section 28(iv)

Validity of search under section 132 - Explanation to section 132(1) - Challenge to the validity of search and consequential framing of assessment under section 153A - HELD THAT: - The Tribunal held that the assessee cannot challenge the validity of the search before the Tribunal in view of the Explanation to section 132(1) (Finance Act, 2017) which declares that the reasons to believe recorded by the income-tax authority shall not be disclosed. The Tribunal endorsed the view of the jurisdictional High Court (Prathibha Jewellery House) that appellate authorities cannot go into the recorded reasons and, therefore, the plea that search was invalid and assessment under section 153A is void is without merit. [Paras 3]

Ground contesting validity of search and framing of assessment under section 153A dismissed.

Return filed in response to section 153A - defective return under section 139(9) clause (aa) - effect of omission/repeal of a statutory provision - applicability of section 153A "so far as may be" to section 139 - Whether returns treated as defective under clause (aa) to Explanation to section 139(9) when filed in response to notice under section 153A - HELD THAT: - The Tribunal examined that clause (aa) to the Explanation to section 139(9) (inserted by Finance Act, 2013 w.e.f. 01.06.2013) was omitted by Finance Act, 2016 w.e.f. 01.04.2017 without any saving provision. Following coordinate bench decisions and the Karnataka High Court's approach in Texport/Shobha City (as applied by the Tribunal), the omission was treated as having the effect that the provision would be deemed never to have subsisted for purposes of continuing proceedings. The Bench also observed that section 153A contains a non-obstante clause and makes the provisions of section 139 applicable "so far as may be", so that not all parts of section 139 (including the deleted clause) can be mechanically applied to returns filed in response to section 153A notices. The Tribunal further held that where the original regular return had been processed under section 143(1), treating that return as the return in response to section 153A notice precluded treating it as defective on the deleted clause ground. [Paras 4, 6]

Returns filed in response to section 153A for the specified assessment years cannot be treated as defective by invoking the deleted clause (aa); grounds allowed and returns held valid for those years.

Interest under section 234A and section 234B - Claims challenging levy/computation of interest under sections 234A and 234B which were not raised before CIT(A) - HELD THAT: - The Tribunal observed that the grounds relating to levy and computation of interest under sections 234A and 234B were not before the CIT(A) and therefore did not emanate from the impugned orders. As appellate adjudication is confined to grounds arising from the order under appeal, the Tribunal refrained from adjudicating these points and dismissed the appeals on these grounds. Separately, in the case of Smt. Reddy Sangeetha the Tribunal directed the AO to give credit for any self-assessment tax paid on 24.12.2015 while computing interest under section 234B. [Paras 8, 10, 12]

Grounds on interest that were not raised before CIT(A) dismissed; directed AO to give credit for self-assessment tax paid on 24.12.2015 for computation of section 234B interest (partly allowed for that relief).

Disallowance under section 36(1)(iii) - Sustenance of disallowance under section 36(1)(iii) on borrowed funds used for advances/transactions - HELD THAT: - The Tribunal referred to its earlier decision in the related assessment year (ITA No.1110/Bang/2022) where it was held that interest claimed on borrowed funds could be disallowed under section 36(1)(iii) if the loan purpose was not established and borrowed funds were used to make interest-free advances. Having considered the material, the Tribunal held that the disallowance was justified and dismissed the ground challenging that disallowance. [Paras 11]

Disallowance under section 36(1)(iii) upheld; ground dismissed.

Business loss deduction - Allowability of business loss claimed (AY 2014-15) arising from assignment/transfer related to land transactions - HELD THAT: - The Tribunal found that the assessee had taken over rights of a third party pursuant to contractual/assignment arrangements and that the loss claimed arose from an actual transaction where land of 44.59 acres was sold and registered at the sub-registrar value. The AO himself had accepted that a contractual obligation existed. The Tribunal emphasised that the loss was genuine, that the assessee acted as a prudent businessman to honour contractual obligations, and that the AO should not retrospectively impute a paper transaction when registration value and contractual facts supported the loss. Accordingly the disallowance as a paper loss was reversed and the AO was directed to allow the loss. [Paras 14, 16]

Business loss of the assessee for AY 2014-15 allowed; disallowance set aside.

Chargeability under section 28(iv) - Whether cash shortage/undisclosed cash found in company during search could be taxed as benefit/perquisite of the custodian under section 28(iv) - HELD THAT: - Relying upon Supreme Court and High Court precedents, the Tribunal reiterated that section 28(iv) applies to benefits or perquisites other than in the shape of money. The cash shortage in the company's books found at search was held to belong to the company and represented amounts for which the custodian (or director) had trustee-like obligations to account; such shortage therefore could not be treated as his income or as a perquisite under section 28(iv) or as income from other sources. The Tribunal accordingly allowed the assessee's ground on this issue. [Paras 18]

Addition under section 28(iv) on account of cash discrepancy in the company disallowed in the hands of the custodian; ground allowed.

Ex-parte order under section 144 - Challenge to ex-parte assessment order under section 144 - HELD THAT: - The Tribunal noted that the assessee had been given a fair opportunity of hearing before the CIT(A) and that the powers of the CIT(A) are co-terminus with those of the AO. As no shortcoming in opportunity was shown, the grievance against passing of ex-parte order under section 144 was rejected. [Paras 19]

Ground contesting ex-parte order under section 144 dismissed.

Final Conclusion: The Tribunal dismissed the challenge to the search's validity; held that returns filed in response to section 153A could not be treated as defective by reliance on the deleted clause (aa) of section 139(9) and validated those returns; declined to adjudicate interest issues not raised before the CIT(A) (while directing credit for self-assessment tax paid in one case); upheld the disallowance under section 36(1)(iii); allowed the business loss for AY 2014-15; disallowed the addition under section 28(iv) made on account of company cash shortage in the hands of the custodian; and dismissed the challenge to the ex-parte assessment under section 144. Appeals were accordingly partly allowed or dismissed as recorded in the order.

Revenue expenditure versus capital expenditure in relation to registration/lease agreement - allowability of service tax paid subject to verification - disallowance under section 14A remand for fresh consideration

Revenue expenditure versus capital expenditure in relation to registration/lease agreement - Registration charges paid in connection with execution of agreements for taking business premises on rent are revenue expenditure and allowable. - HELD THAT: - The Tribunal held that registration charges incurred for executing lease/rent agreements for business premises are not in the nature of capital expenditure. A lease is not a permanent transfer of immovable property but a time-bound, terminable arrangement; the assessee incurred the registration expenses in connection with carrying on its business and cannot enjoy the property indefinitely. Given these facts, the registration charges were held to be revenue expenditure and the lower authorities erred in treating them as capital in nature.

Registration charges disallowance set aside and allowed in favour of the assessee.

Allowability of service tax paid subject to verification - Claim for service tax paid to be examined and allowed if found proper on verification by the Assessing Officer. - HELD THAT: - The Tribunal noted that the CIT(A) directed verification of the service tax claim and remitted the matter for compliance. The Tribunal directed the Assessing Officer to verify the claim and allow it if substantiated, thereby leaving the ultimate determination to fact-based verification by the AO in accordance with the direction given by the first appellate authority.

Service tax issue remitted to the Assessing Officer for verification and decision.

Disallowance under section 14A remand for fresh consideration - Addition under section 14A was remanded to the CIT(A) for fresh consideration with opportunity to the assessee to substantiate the claim. - HELD THAT: - The Tribunal recorded that the assessee did not participate in the first appellate proceedings, that the CIT(A)'s order was ex parte and that the assessee sought remand on the 14A issue. The Revenue did not object to remand. In these circumstances the Tribunal set aside the CIT(A) order insofar as it confirmed the 14A disallowance and remitted the issue back to the CIT(A) for fresh adjudication, directing that the assessee be given a reasonable opportunity to substantiate its claim.

Order of the CIT(A) set aside on the 14A issue and remitted to the CIT(A) for fresh consideration after affording opportunity to the assessee.

Final Conclusion: The appeal is partly allowed: registration charges are held to be revenue expenditure and allowed; the service tax claim is remitted to the Assessing Officer for verification; the disallowance under section 14A is remanded to the CIT(A) for fresh consideration after giving the assessee an opportunity to substantiate its claim.

Assessment framed in the name of a deceased person - non est in law - liability of legal representative under section 159 - validity of notice under section 148 where assessee is deceased - no statutory duty on legal representatives to intimate death to the Income Tax Department

Assessment framed in the name of a deceased person - validity of notice under section 148 - liability of legal representative under section 159 - no statutory duty on legal representatives to intimate death - non est in law - Validity of the assessment and consequential orders framed in the name of the deceased assessee - HELD THAT: - The assessee died on 06/08/2015 and the assessment order was passed on 24/02/2016. Notices issued after the date of death (other than one dated 24/06/2015) were not addressed to or served upon the legal heir, although the legal heir had placed the death certificate and medical report on record before the CIT(A). The Tribunal accepted the principle, as adverted to by the Delhi High Court in Savita Kapila, that there is no statutory obligation on legal representatives to intimate the death of an assessee to the Income Tax Department. While section 159 makes legal representatives liable for tax liabilities of the deceased, the procedural requirement to bring the legal heir on record lies with the Revenue when notices and proceedings continue after death. In the absence of issuance of notices in the name of the legal heir and without bringing the legal heir on record, the assessment framed in the name of the deceased is constitutionally and procedurally defective and is non est in law. Since the appeal is allowed on this ground, the Tribunal left the other grounds open as academic. [Paras 6, 7]

Assessment and consequential proceedings framed in the name of the deceased assessee are quashed; appeal allowed.

Final Conclusion: The appeal is allowed by quashing the assessment and related proceedings insofar as they were completed in the name of the deceased assessee; other grounds are rendered academic.

Benami transaction (definition embracing transfer and holding) - Application of Amending Act, 2016 prospective but applicable where property is held post-amendment - Holding of property after amendment converts prior transfer into benami transaction under amended definition - Forfeiture/confiscation under Amending Act, 2016 prospective in operation - Incorrect statutory citation does not vitiate proceedings if facts attract other provision - Requirement and supply of reasons to believe - Compliance with attachment procedure under Rule 5

Benami transaction (definition embracing transfer and holding) - Holding of property after amendment converts prior transfer into benami transaction under amended definition - Whether transactions involving shares transferred before 01.11.2016 fall within the Amending Act, 2016 when the shares were held by the benamidar on and after the date of amendment - HELD THAT: - The Tribunal held that the amended definition of 'benami transaction' under the Amending Act, 2016 includes both transfer and holding. If a property was transferred prior to 01.11.2016 but continued to be held by the benamidar after the amendment, and the consideration for that property was provided by another person, such holding falls within section 2(9)(A) of the Amending Act and the amended Act applies to that holding. The Tribunal accepted the respondents' contention that the word 'held' must be given full effect and that continued possession/holding after the amendment renders the transaction a benami transaction under the Amending Act even though the transfer occurred earlier. Accordingly the Apex Court's decision in Ganpati Dealcom is applied subject to this clarification: transactions that are not held by the benamidar post-amendment remain outside the scope of the Amending Act, whereas holdings continuing after the amendment are within its sweep. [Paras 27, 36, 44, 45, 51]

Held that where shares transferred prior to 01.11.2016 were nevertheless held by the benamidar on and after the amendment, the Amending Act, 2016 applies to such holdings and they constitute benami transactions under the amended definition.

Evidence sufficiency to establish benami transaction - Inference from admissions and financial profiling - Whether the respondents proved that M/s Prism Scan Express Pvt. Ltd. and M/s Futurage Corporate Care Pvt. Ltd. were benamidars and that the Initiating Officer's findings were based on surmise or conjecture - HELD THAT: - The Tribunal reviewed the material relied upon by the Adjudicating Authority: survey statements of directors admitting lack of knowledge and acting on instructions, timing of induction of directors, absence of business activity at registered addresses, infusion of funds after 2013-14 through corporate shareholders on high premium, common features identified in financial profiling, and failed responses from alleged contributing entities. The Tribunal concluded that these facts supported an inference of control and inducement by the alleged beneficiary and were sufficient to uphold the Initiating Officer's finding of benami transactions. The Tribunal rejected the appellants' contention that the respondents failed to prove the source of funds and that the conclusions were drawn on extraneous consideration. [Paras 75, 76, 80, 83, 84]

Held that the respondents adduced sufficient material and inferences to sustain the finding of benami transactions; the Initiating Officer's and Adjudicating Authority's conclusions were not based on mere surmise.

Incorrect statutory citation does not vitiate proceedings if facts attract other provision - Requirement and supply of reasons to believe - Compliance with attachment procedure under Rule 5 - Whether procedural infirmities - change in legal provisions relied upon, non-supply of reasons to believe, and non compliance with Rule 5 - vitiated the provisional attachment and adjudication - HELD THAT: - The Tribunal considered that although the initial notice referenced certain sub sections, the authorities were not precluded from applying the correct provision later if the facts warranted it; an incorrect initial citation does not invalidate proceedings where the substantive case falls under another provision. The record showed that a copy of 'reasons to believe' had been supplied to the appellants and that attachment was made following the applicable rules; the appellants failed to specify any particular rule breach. On these bases the Tribunal found no merit in allegations of violation of natural justice or procedural non-compliance. [Paras 86, 88, 91, 92, 93]

Held that the change in statutory provision relied upon did not vitiate proceedings, reasons to believe were supplied, and Rule 5 compliance was not shown to be breached; no procedural infirmity found.

Final Conclusion: The appeals are dismissed. The Tribunal affirmed that where property transferred before 01.11.2016 continued to be held by the benamidar after the Amending Act, 2016 came into force, the amended definition applies; on the facts, the authorities had sufficient material to treat the appellant companies as benamidars and no procedural infirmity vitiated the provisional attachment or its confirmation.

Condonation of delay - Entertainability of appeal - Declining to entertain appeal on basis of quantum of tax effect - Reservation of question of law for future adjudication

Condonation of delay - Delay in filing the civil appeal was condoned. - HELD THAT: - The Court recorded satisfaction with the explanation for delay and expressly condoned the delay in filing the civil appeal. This procedural relief was granted notwithstanding the ultimate disposition of the appeal on other grounds.

Delay in filing the civil appeal is condoned.

Entertainability of appeal - Declining to entertain appeal on basis of quantum of tax effect - The appeal was declined for entertainment and dismissed on account of the quantum of tax effect. - HELD THAT: - Having considered the matter and the quantum of tax effect, the Court exercised its discretion not to entertain the civil appeal and dismissed it. The dismissal was on the ground of entertainability linked to the tax effect rather than on adjudication of the substantive question of law.

The appeal is dismissed as the Court declines to entertain it in view of the quantum of tax effect.

Reservation of question of law for future adjudication - A question of law arising in the proceedings was left open for decision in an appropriate case. - HELD THAT: - The Court expressly refrained from deciding the question of law and permitted that legal question to be argued and decided in a suitable future case where it would be directly in issue. No determination on the merits of that legal question was made in the present proceedings.

The question of law is left open to be decided in an appropriate case.

Final Conclusion: Delay is condoned; the appeal is dismissed because the Court declined to entertain it on account of the quantum of tax effect; the substantive question of law is not decided and is left open for determination in an appropriate case. Pending application stands disposed of.

Provisional assessment under Section 18 of the Customs Act, 1962 - Verification of certificate of origin and authenticity - Release of goods against bond without insisting on a bank guarantee - Security for difference between provisionally assessed duty and preferential duty claimed under Section 28DA - Balancing revenue protection with clearance of perishable consignments

Verification of certificate of origin and authenticity - Provisional assessment under Section 18 of the Customs Act, 1962 - Balancing revenue protection with clearance of perishable consignments - Respondents must complete verification of the certificate of origin within a fixed time and release goods if certificate is found genuine; if not genuine, respondents may proceed in accordance with law. - HELD THAT: - The court acknowledged the revenue concern arising from reported manipulation of certificates of origin but observed no material to suggest the petitioner had engaged in such manipulation in this case, and noted the perishable nature of the goods increases risk of deterioration. Weighing the competing interests, the court directed that verification be concluded expeditiously and fixed a maximum period of thirty days for completion of verification. If on verification the certificate is found genuine, the goods are to be released without insisting on payment of duty; if the certificate is not genuine, the respondents remain entitled to take further action as permitted by law. The direction reflects the court's effort to balance the need for revenue protection with the practical urgency of clearing perishable consignments. [Paras 8, 9]

Verification to be completed within thirty days; genuine certificate - release without duty; non-genuine certificate - respondents to take action in accordance with law.

Release of goods against bond without insisting on a bank guarantee - Security for difference between provisionally assessed duty and preferential duty claimed under Section 28DA - If verification is not completed within thirty days, petitioner entitled to provisional release of goods on furnishing a bond for 100% of the value of goods without requirement of a bank guarantee; further action to follow verification outcome. - HELD THAT: - Recognising the elapsed time since import and the perishable nature of the consignment, the court directed provisional release as an interim measure where verification is not completed within the stipulated thirty-day period. The petitioner may obtain provisional release by executing a bond for the full value of the goods without being compelled to furnish a bank guarantee. Upon completion of verification, the respondents' further action is to follow the result of that verification, consistent with the statutory framework permitting security for the difference between provisionally assessed duty and preferential duty claimed. [Paras 9]

If verification not completed within thirty days, provisional release on bond for 100% of value without insisting on a bank guarantee; subsequent action governed by verification outcome.

Approval by food safety authorities as condition of release - Release of the goods in all situations is subject to approval by the relevant food safety authorities. - HELD THAT: - The court made clear that irrespective of the outcome of verification or the provisional release on bond, clearance and release remain conditional upon the approval of the competent food safety authorities, thereby safeguarding public health considerations alongside customs processes. [Paras 9]

Release subject to approval by relevant food safety authorities.

Final Conclusion: Writ petition disposed directing respondents to conclude verification within thirty days and release goods if the certificate of origin is genuine; if verification is not completed in that period, petitioner may obtain provisional release on a bond for 100% of the value without a bank guarantee; release in all cases subject to food safety approval; no order as to costs.

Mis-declaration - classification of imported goods - confiscation and redemption fine - penalties under the Customs Act - right to retest / natural justice in laboratory testing - admissibility and reliance on laboratory test reports - comparative applicability of retest reports for comingled cargo - relevance of testing standards (DIN EN 15940:2019) to characterisation

Mis-declaration - classification of imported goods - confiscation and redemption fine - penalties under the Customs Act - comparative applicability of retest reports for comingled cargo - Whether the imported goods were mis-declared as GTL Light Paraffin and liable to reclassification, confiscation and penalties - HELD THAT: - The Tribunal found that the appellant had declared the consignments as GTL Light Paraffin and that initial tests by CRCL Kandla did not show discrepancy. A subsequent report from CRCL Vadodara concluded the goods were Light Diesel Oil (LDO), but retest reports obtained from CRCL New Delhi on the direction of the High Court concluded the goods were Liquid/Light Paraffin and not LDO. Because the consignments were comingled with cargo of other importers whose retest by CRCL New Delhi confirmed paraffin, those retest results were held to apply to the appellant's imports. The Tribunal accepted that statements of end-users about fuel use were not determinative where testing established the character of goods as paraffin. On the basis that no mis-declaration was shown, the change of classification, confiscation, enhancement of value and penalties founded on mis-declaration could not be sustained. The impugned adjudication was therefore set aside and the penalties on co-noticees quashed. [Paras 14, 15, 19]

No mis-declaration established; reclassification, confiscation, revaluation and penalties set aside; appeals allowed.

Right to retest / natural justice in laboratory testing - admissibility and reliance on laboratory test reports - relevance of testing standards (DIN EN 15940:2019) to characterisation - Whether the CRCL Vadodara test report could be relied upon where retest was not permitted and different testing standards were applied - HELD THAT: - The Tribunal held that CRCL Vadodara did not test the samples against DIN EN 15940:2019, a standard used by CRCL New Delhi whose retest found the goods to be paraffin. Cross-examination of the Vadodara examiner showed lack of awareness of the New Delhi retest and that Vadodara had not performed DIN EN 15940:2019 testing; the examiner could not explain the discrepancy. Relying on precedents that denial of retest raises a serious doubt on original test results, the Tribunal concluded that the Vadodara report could not be relied upon to initiate action against the appellant. The failure to accede to requests for retest (and to provide retest) undermined the admissibility and weight of the Vadodara findings. [Paras 17, 18]

CRCL Vadodara report not relied upon; denial/absence of appropriate retest rendered that report inadmissible for sustaining action.

Final Conclusion: The impugned order upholding reclassification, confiscation, valuation revision and penalties is set aside; the goods are held to be GTL Light (Liquid) Paraffin for the consignments concerned, the penalties and confiscation are quashed, and the appeals are allowed.

Suspension under Regulation 16(1) of CBLR, 2018 - Requirement of immediate action for suspension - Requirement to record reasons for suspension (CBIC Instruction No.24/23 dated 18.07.2023) - Due diligence and KYC obligations of customs broker under CBLR - Scope of verification required from a customs broker

Suspension under Regulation 16(1) of CBLR, 2018 - Requirement of immediate action for suspension - Requirement to record reasons for suspension (CBIC Instruction No.24/23 dated 18.07.2023) - Validity of the suspension and its continuation in view of the requirement that suspension be exercised only where immediate action is necessary and reasons for such immediacy be recorded - HELD THAT: - The Tribunal examined the Commissioner's exercise of power to suspend the customs broker licence under Regulation 16(1) read with Regulation 16(2) of CBLR, 2018 in the light of CBIC Instruction No.24/23 (18.07.2023), which emphasises that suspension is an emergent power to be used only in appropriate cases where immediate action is necessary and that reasons for considering immediate suspension necessary should be recorded. The impugned orders rested on historic allegations relating to shipping bills filed in 2016 and continued suspension in 2023. The Tribunal found that the Commissioner's observations did not demonstrate the requisite emergent necessity or record why immediate suspension was appropriate in the circumstances. Given the passage of time since the alleged events and the absence of specific recorded reasons justifying immediate suspension, the continuation of suspension was not sustainable. Applying the principle that suspension should not be routine or mechanical and must be supported by reasons of immediacy, the Tribunal set aside the suspension and its continuation.

Suspension and its continuation set aside for want of justification and recorded reasons showing immediate action was necessary.

Due diligence and KYC obligations of customs broker under CBLR - Scope of verification required from a customs broker - Whether the appellant failed to perform due diligence/KYC such that disciplinary suspension was warranted - HELD THAT: - The Tribunal considered the Commissioner's finding that the broker had failed to verify the identity and the existence of the IEC-holding exporters and had dealt with persons who were not the IEC holders. The appellant asserted that KYC documents (Aadhaar, PAN, IEC and other documents) were obtained and that CBLR does not mandate physical inspection of the principal's premises. The Tribunal accepted that regulation did not require physical verification of the address as a precondition to filing shipping bills and noted the appellant's contention and record that KYC documents had been obtained. In absence of evidence demonstrating the broker's knowledge of forged factory stuffing permissions or active participation in the alleged fraud, and having regard to the limited role of the broker in filing 29 of 1,474 shipping bills, the Tribunal found the Commissioner's conclusion that the broker was wanting on fundamental responsibilities to be unsupported for purposes of suspension. Therefore the disciplinary action in the form of suspension could not be sustained on the grounds of inadequate KYC in the factual matrix before the Tribunal.

Findings of failure to discharge due diligence insufficient to sustain suspension; suspension set aside on this ground as well.

Final Conclusion: Appeal allowed; the orders of suspension dated 24.07.2023 and continuation dated 23.08.2023 are set aside because suspension was not shown to be necessary as an immediate emergent measure and the broker's KYC/due diligence did not, on the material before the Tribunal, justify suspension.

Amendment of bill of entry under Section 149 of the Customs Act, 1962 - documentary evidence in existence at the time of clearance - clearance for home consumption - distinction between removal and clearance; finality upon final assessment - reassessment of bill of entry - refund of excess duty consequential to amendment

Amendment of bill of entry under Section 149 of the Customs Act, 1962 - documentary evidence in existence at the time of clearance - clearance for home consumption - distinction between removal and clearance; finality upon final assessment - refund of excess duty consequential to amendment - Amendment of the bill of entry under Section 149 was permissible and the appellant was entitled to consequential relief including refund. - HELD THAT: - Section 149 permits amendment of a bill of entry after presentation, subject to the proviso that no amendment shall be authorised after imported goods have been cleared for home consumption except on the basis of documentary evidence which was in existence at the time of clearance. The Tribunal applied the established distinction between mere removal and formal clearance for home consumption, holding that clearance attains finality only upon final assessment and the out-of-charge order. In the present case the bill of entry was provisionally assessed on 08.06.2018 but finally assessed on 21.06.2018. The documentary evidence relied upon by the appellant (police report dated 15.06.2018) was submitted before final assessment (on 19.06.2018) and therefore existed at the time of clearance as understood in law. On that basis the proviso to Section 149 was satisfied and the Assistant Commissioner and Commissioner (Appeals) erred in rejecting the amendment on the ground that the documentary evidence post-dated clearance. Consequently the amendment should have been allowed and the appellant was entitled to consequential relief, including refund of excess duty paid on the lost quantity. [Paras 6, 7]

Amendment under Section 149 allowed; appeals allowed and consequential relief including refund granted.

Final Conclusion: The Tribunal allowed the appeals, holding that the documentary evidence pre existed final clearance (final assessment) and therefore amendment of the bill of entry under Section 149 was permissible; consequential relief, including refund, was granted.

Provisional release of seized goods - bond for full value of goods - bank guarantee as percentage of alleged differential duty - perishable nature of goods as factor in provisional release - rules of origin inquiry under SAFTA and Certificate of Origin - prima facie evidence standard in provisional release

Provisional release of seized goods - perishable nature of goods as factor in provisional release - bond for full value of goods - bank guarantee as percentage of alleged differential duty - rules of origin inquiry under SAFTA and Certificate of Origin - Terms and quantum of security for provisional release of seized imported garlic pending determination of origin and liability - HELD THAT: - The Tribunal accepted that the goods are perishable and that the investigation into origin (under the rules of origin as applicable to SAFTA) was ongoing and the Department had not yet conclusively negatived the Certificate of Origin issued in Afghanistan. In these circumstances, provisional release was appropriate to prevent deterioration of the goods. The sole controversy was the quantum and nature of security to ensure recovery of any differential duty, fines and penalties if adjudication went against the importers. Relying on precedents recognising that excessively onerous conditions are undesirable, and distinguishing authorities relied on by the Department as involving non-perishable or smuggled goods, the Tribunal held that a bond undertaking liability for payment of differential duty, fines, penalty and interest (covering the full value of the goods) together with a bank guarantee fixed at a reduced percentage of the alleged differential duty would adequately protect revenue interests without imposing disproportionate hardship on importers. Applying that principle to the facts, the Tribunal reduced the bank guarantee requirement to 30% of the alleged differential duty while upholding the requirement of a bond for the full value of the goods. The Tribunal expressly refrained from expressing any view on the merits of the origin or duty liability, confining its order to conditions for provisional release. [Paras 5, 6, 9, 10]

Provisional release granted subject to (i) bond covering full value of goods binding the importers to pay differential duty, fine, penalty and interest as adjudicated, and (ii) bank guarantee equal to 30% of the alleged differential duty; respondents to allow provisional release within two working days of compliance; no opinion expressed on merits.

Final Conclusion: Appeals allowed to the extent of modifying the conditions of provisional release: bond for full value to be furnished and bank guarantee fixed at 30% of the alleged differential duty; provisional release to be effected within two working days of compliance; merits of origin or liability left open.

Short shipment - clerical error in supplier's invoice - duty demand on unreceived goods - amendment of Bill of Entry under Section 149 - show cause notice for duty on short receipted quantity

Short shipment - clerical error in supplier's invoice - duty demand on unreceived goods - show cause notice for duty on short receipted quantity - Whether demand of customs duty on the short shipped quantity could be sustained where the importer promptly reported short receipt and produced supplier's revised invoice and supporting documents showing the error in the original invoice. - HELD THAT: - The adjudicating authority examined the purchase order, the supplier's contemporaneous letter admitting supply of only 1100 pairs, the revised invoice and packing list, and the appellant's immediate written report of short receipt made on 04.04.2011. On the basis of these documents the adjudicating authority was satisfied that the discrepancy arose from a mistake in the supplier's invoice and set aside the demand. The Department's appeal to Commissioner (Appeals) did not record any finding rejecting the genuineness of the appellant's case. The Tribunal placed weight on the immediateness of the appellant's report of short shipment and the corroborative documentary evidence (purchase order, supplier's admission, revised invoice and bank payment record showing payment for 1100 pairs), concluding that an importer cannot be compelled to pay duty on goods not received. In view of the record, the Tribunal found no sustainable reason to upset the adjudicating authority's conclusion that the demand was based on an invoicing clerical error. [Paras 5, 6]

The Tribunal set aside the Commissioner (Appeals) order and restored the adjudicating authority's order disallowing the demand of duty on the short shipped quantity.

Final Conclusion: Impugned order of Commissioner (Appeals) set aside; the original adjudicating authority's order holding that the duty demand on the short shipped goods arose from a supplier's clerical error is restored and the appeal is allowed with consequential reliefs.

Confiscation of imported goods - classification of imported goods as scrap or serviceable - evidentiary requirement of expert opinion for quality assessment - mutilation to render goods as scrap - enhancement of declared value of imported goods - redemption fine and penalty under the Customs Act

Confiscation of imported goods - classification of imported goods as scrap or serviceable - evidentiary requirement of expert opinion for quality assessment - mutilation to render goods as scrap - Confiscation of 22 MTs alleged to be serviceable rusted pipes imported as 'scrap'. - HELD THAT: - The Tribunal noted that the departmental conclusion that the impugned 22 MTs were serviceable pipes rested on visual examination only, and that the Commissioner (Appeals) had recorded that no expert opinion or documentary evidence was produced to establish that the goods were not scrap. The Commissioner (Appeals) found that the investigation and adjudication were not completed and that the LAA did not analyze whether the pipes were part of scrap or individually serviceable. The appellant's contemporaneous request for mutilation of the goods to render them scrap before clearance was also relevant to show bonafide import as scrap. In the absence of expert evidence and in light of the unconsidered request for mutilation, the Tribunal held that confiscation of the 22 MTs was not justified. [Paras 6, 7]

Confiscation of the 22 MTs set aside.

Enhancement of declared value of imported goods - classification of imported goods as scrap or serviceable - evidentiary requirement of expert opinion for quality assessment - Validity of enhancement of declared value of the 22 MTs from the declared rate to a higher assessed rate. - HELD THAT: - The Tribunal observed that enhancement of value was founded on the premise that the goods were serviceable pipes rather than scrap. Since the department failed to establish that the goods were not scrap-no expert opinion or documentary evidence having been produced-the basis for enhancing the declared value of the 22 MTs did not survive. Accordingly, the enhancement effected by the original authority was held to be incorrect. [Paras 8]

Enhancement of the declared value of the 22 MTs set aside.

Redemption fine and penalty under the Customs Act - confiscation of imported goods - enhancement of declared value of imported goods - Whether the redemption fine and penalty imposed in consequence of the confiscation and value enhancement should be upheld. - HELD THAT: - Having set aside both the confiscation and the enhancement of value for the 22 MTs on evidentiary grounds, the Tribunal concluded that the consequential imposition of the redemption fine and the penalty could not be sustained. The appellate authority's reduction of the amounts did not address the fundamental lack of proof that the goods were serviceable rather than scrap; therefore, the fines and penalty were also liable to be set aside. [Paras 9]

Redemption fine and penalty set aside.

Final Conclusion: The appeal is partly allowed: the Tribunal set aside the confiscation of the 22 MTs, the enhancement of their declared value, and the redemption fine and penalty imposed; other aspects of the impugned order are left undisturbed.

Interpretation of conjunctive "and" in an exclusion clause - scope of exclusion under a customs exemption notification - classification of MIMO technology products vis-a -vis LTE standard - construction of "include" in administrative circulars

Interpretation of conjunctive "and" in an exclusion clause - scope of exclusion under a customs exemption notification - The conjunctive word 'and' in the exclusion Clause (iv) of Serial No. 13 of the notification is to be read conjunctively, so that the exclusion applies to products which contain both MIMO technology and LTE standard together. - HELD THAT: - The Tribunal applied principles of statutory interpretation, observing that the legislature's deliberate choice of words is significant and that the ordinary meaning of 'and' is conjunctive. Reliance was placed on dictionary meanings and precedents indicating that 'and' commonly connotes joint operation unless context compels otherwise. The Tribunal noted that in the impugned entry the noun 'products' is used once after both terms, which supports a conjunctive reading. Having examined the text, context and object of the notification, the Tribunal held that 'and' connects MIMO and LTE as jointly required for the exclusion, and that reading 'and' as 'or' would improperly enlarge the exclusion beyond the legislative language. The Tribunal also noted authority that exclusionary words in exemption notifications must be construed so as to effectuate the legislative purpose and avoid unintended results. [Paras 5]

The word 'and' in Clause (iv) is conjunctive and, therefore, the exclusion covers products which have both MIMO technology and LTE standard.

Classification of MIMO technology products vis-a -vis LTE standard - scope of exclusion under a customs exemption notification - construction of "include" in administrative circulars - Access Points imported by the respondent which operate only on MIMO technology and do not support LTE standard fall outside the exclusion and are eligible for the exemption under the notification. - HELD THAT: - Applying the conjunctive construction of 'and' to the facts, the Tribunal accepted the finding that the impugned Access Points operate on MIMO technology only and do not support LTE standard. The Tribunal noted that the department's contention to read the clause disjunctively was rejected because the textual and contextual indicators pointed to a conjunctive meaning. The Tribunal also considered the Board's circular and its use of the word 'include', but held that the textual reading of the exclusion in the notification governs the availability of exemption. The Tribunal found no infirmity in the adjudicating authority's acceptance of the respondent's technical evidence (and the department's choice not to cross-examine the expert), and accordingly held that the goods are not covered by the exclusion. [Paras 5]

The Access Points, being MIMO-only and not supporting LTE, are not covered by the exclusion and remain eligible for whole-duty exemption under Serial No. 13(iv) of the notification.

Final Conclusion: The departmental appeal is dismissed; the adjudicating authority's finding that the imported Access Points (MIMO-only) are eligible for the customs duty exemption is upheld and the cross-objections are disposed of accordingly.

Re-determination of transaction value under Rule 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - rejection of declared transaction value under Rule 12 of the Customs Valuation Rules - confiscation under Section 111(d) of the Customs Act, 1962 - redemption fine under Section 125 of the Customs Act, 1962 - penalty under Section 112(a) of the Customs Act, 1962 - import restriction under Paragraph 2.17 of the Foreign Trade Policy read with Section 3(3) of the Foreign Trade (Development and Regulation) Act, 1992 - estoppel by waiver of show cause notice and personal hearing - discretionary limitation on redemption fine not to exceed market value less duty payable

Re-determination of transaction value under Rule 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - estoppel by waiver of show cause notice and personal hearing - Effect of the appellant's written acceptance of the enhanced value on challenge to valuation and re-determination. - HELD THAT: - The Tribunal recorded that the appellant voluntarily wrote on 26.02.2014 accepting the proposed enhancement of value and requesting adjudication without issuance of a Show Cause Notice or personal hearing. That acceptance estopped the appellant from contesting the re-determination of value; had the appellant objected earlier a fuller examination might have been undertaken, but the letter precluded such a course. The Tribunal therefore declined to reopen the valuation exercise or to remit the matter for further valuation where there was no challenge to the valuation by Revenue and the appellant had accepted the enhanced value. [Paras 10, 11, 13]

The appellant is estopped from challenging the re-determination of value; no remand on valuation was ordered.

Redemption fine under Section 125 of the Customs Act, 1962 - discretionary limitation on redemption fine not to exceed market value less duty payable - Validity and quantum of the redemption fine imposed for import of restricted goods and exercise of appellate discretion to modify the fine. - HELD THAT: - The Tribunal reiterated the settled principle that imposition of redemption fine must not be arbitrary or disproportionate and, in any event, cannot exceed the market value of the goods less duty payable. The first appellate authority had reduced the original redemption fine; Revenue did not challenge that reduction. Given there was no dispute on valuation and in the interest of finality the Tribunal exercised its discretion to further reduce the redemption fine and modified the impugned order accordingly. The Tribunal considered remand unnecessary where only the quantum of redemption fine and penalty were in issue and adopted a reduced redemption fine to meet the ends of justice. [Paras 13]

Redemption fine modified and fixed at Rs.3,00,000; impugned order altered accordingly.

Penalty under Section 112(a) of the Customs Act, 1962 - import restriction under Paragraph 2.17 of the Foreign Trade Policy read with Section 3(3) of the Foreign Trade (Development and Regulation) Act, 1992 - Sustainability of penalty imposed for import contrary to Foreign Trade Policy and statutory provisions. - HELD THAT: - The Tribunal noted that the appellant had not challenged the finding that the import contravened Paragraph 2.17 of the Foreign Trade Policy read with Section 3(3) of the Foreign Trade (Development and Regulation) Act, 1992. The appellant's letter tendered before the adjudicating authority indicated acquiescence and supported the adjudicator's conclusion of impropriety of import. The first appellate authority had reduced the penalty and Revenue did not contest that reduction; accordingly the Tribunal found no basis to further interfere with the reduced penalty amount. [Paras 10, 14]

Penalty as reduced by the first appellate authority is sustained.

Final Conclusion: The appeal is partly allowed: the redemption fine is reduced to Rs.3,00,000 while the penalty as reduced by the first appellate authority is sustained; no remand on valuation was directed because the appellant had accepted the enhanced value and Revenue did not challenge the appellate findings.

Effective date of notification - publication and offer for sale as conditions for coming into force under Section 25(4) - relevance of RTI confirmation of date of offer for sale - applicability of amended/unamended notification to assess liability

Effective date of notification - publication and offer for sale as conditions for coming into force under Section 25(4) - relevance of RTI confirmation of date of offer for sale - Whether Notification No. 46/2015-Cus came into force on 17.09.2015 (date of issue/publication) or on 21.09.2015 (date when it was offered for sale). - HELD THAT: - The Tribunal found no dispute that Notification No. 46/2015-Cus was issued on 17.09.2015 but was offered for sale to the public on 21.09.2015, as confirmed by RTI information. Interpreting Section 25(4), the Tribunal held that a notification comes into effect only when it is issued/published and also offered for sale; all three events are necessary. The view taken in the appellant's earlier decision dealing with identical legal question was held to be directly applicable. On that basis the Tribunal concluded that the notification became effective on 21.09.2015, not 17.09.2015, and therefore the increased duty rate relied on by the Revenue was not operative on the date the relevant entries were assessed. The Tribunal set aside the impugned order and allowed reassessment on the basis of the unamended notification. [Paras 4, 5]

Notification No. 46/2015-Cus became effective on 21.09.2015 (date of offer for sale); the increased duty is not applicable and the impugned order is set aside with consequential reassessment.

Final Conclusion: The appeal is allowed: since the notification became effective only on 21.09.2015 (date of offer for sale as confirmed by RTI), the increased duty did not apply to the appellant's clearances and reassessment shall be carried out on the basis of the earlier/unamended notification.

Continuation of suspension of customs broker licence - inquiry report held charges inconclusive - statutory mandate to pass order within ninety days under Regulation 17(7) - absence of compliance with mandatory timeline fatal to suspension - requirement of reasoned order to sustain punitive suspension

Continuation of suspension of customs broker licence - inquiry report held charges inconclusive - statutory mandate to pass order within ninety days under Regulation 17(7) - Validity of the impugned order continuing suspension of the appellant's customs broker licence. - HELD THAT: - The Inquiry Officer conducted proceedings under Regulation 17 and submitted an inquiry report dated 03.11.2021 concluding that the available information was insufficient to hold the appellant guilty; the impugned order of continuation of suspension, however, is dated 03.02.2021. Regulation 17(7) requires that, within ninety days from submission of the report under sub regulation (5), an order revoking the suspension or revoking the licence must be passed. No order complying with Regulation 17(7) is on record after the inquiry report, and there is no material or legal compliance shown to justify continuing the punitive suspension in face of an inconclusive inquiry. The failure to act within the statutory timeframe and the absence of findings against the appellant render the continuation of suspension unsustainable.

Impugned order continuing the suspension is set aside; the appeal is allowed and the suspension of the CBLR licence cannot be sustained.

Final Conclusion: The appellate tribunal allowed the appeal, set aside the order continuing suspension of the customs broker's licence, observing that the inquiry report was inconclusive and that no order was passed in compliance with Regulation 17(7) within the statutory period.

Inclusion of royalties, licence fees and design/engineering charges in assessable value under the Customs Valuation Rules - Condition of sale test under Rule 9(1)(e) of the Customs Valuation Rules, 1988 - Exclusion of post importation charges under the Interpretative Note to Rule 4 - Turnkey/umbrella contract features and implication for customs valuation - Burden on revenue to displace transaction value and prove non arm's length price

Inclusion of royalties, licence fees and design/engineering charges in assessable value under the Customs Valuation Rules - Rule 9(1)(c) and Rule 9(1)(e) - Whether the licence fee and basic engineering/design charges under the Know How and related agreements were includible in the assessable value of the imported equipment - HELD THAT: - The Tribunal examined the contractual matrix (confidentiality, know how/process package and equipment supply agreements) and applied the statutory scheme of valuation including Rule 9 and the Interpretative Note to Rule 4. On the facts, the agreements did not render payment of know how or basic design fees a mandatory condition of sale of the imported goods. There was no material to show that the declared invoice value was not an arm's length transaction or that the licence/design payments were paid as a condition for permitting the import. Reliance on authorities establishes that where payments relate to post importation activities or are not shown to be a condition of sale, they are not to be added to transaction value under Rule 9(1)(c)/(e). Applying that principle to the contracts before it, the Tribunal found no basis to include the licencing and design fees in the assessable value and thus set aside the inclusion ordered by the adjudicating authority. [Paras 11, 13, 18, 20]

Licence fee and basic design/engineering charges were not includible in the assessable value of the imported equipment and the addition ordered by the lower authority was quashed.

Condition of sale test under Rule 9(1)(e) of the Customs Valuation Rules, 1988 - Turnkey/umbrella contract features and implication for customs valuation - Whether the contractual arrangements constituted a condition of sale obliging the importer to obtain know how/designs from the supplier so as to attract Rule 9(1)(e) - HELD THAT: - The Tribunal applied the legal test that a payment is includible under Rule 9(1)(e) only if it is required to be paid as a condition of sale of the goods being valued. Although the contracts were inter related and described as parts of an umbrella arrangement, the confidentiality agreement predated the others and the contractual language did not impose an obligation on the importer to acquire the equipment only from the licensor or to obtain post importation designs exclusively from the supplier. Following the Supreme Court authority and earlier tribunal decisions, the Tribunal held that superficial turnkey features or multiple linked contracts do not, by themselves, satisfy the 'condition' requirement; there must be clear material demonstrating the existence of such a condition, which was absent here. [Paras 12, 17, 18]

There was no contractual 'condition of sale' obliging IOCL to obtain the know how/designs from the supplier; Rule 9(1)(e) did not apply.

Exclusion of post importation charges under the Interpretative Note to Rule 4 - Burden on revenue to displace transaction value and prove non arm's length price - Whether the payments for know how, engineering and related services were post importation charges excluded from customs value and whether revenue proved transaction value was not the true value - HELD THAT: - The Tribunal noted the Interpretative Note to Rule 4 which excludes charges for construction, erection, assembly, maintenance or technical assistance undertaken after importation from the customs value, if they are distinguishable from the price paid or payable. The contractual scope showed that the know how and engineering services were for design, installation, operation and maintenance of the plant (post import activities). Further, the department produced no material establishing that the invoice price was not at arm's length or that comparable imports disclosed a higher price. Absent such proof, the revenue could not displace the declared transaction value. Accordingly, the Tribunal concluded that the payments were not valuation factors and were properly excluded. [Paras 10, 13, 18]

Know how and engineering charges were post importation in character and excluded from assessable value; revenue failed to discharge the burden to displace the transaction value.

Final Conclusion: The appeal is allowed. The addition of licence, know how and basic design/engineering charges to the assessable value of the imported equipment was not justified: the payments were not shown to be a condition of sale, were post importation in character and the revenue did not rebut the declared transaction value; the impugned order is set aside with consequential relief if any.

Oppression and mismanagement - Just and equitable - Quasi partnership - Piercing (lifting) the corporate veil - Legitimate expectation - Buyout of shares as equitable relief - Separate legal personality of holding and subsidiary - Remuneration within statutory limits not ipso facto oppressive

Oppression and mismanagement - Remuneration within statutory limits not ipso facto oppressive - Whether the payments of remuneration/commissions by group companies and resultant dividend levels constitute oppression and mismanagement of the appellant as a shareholder. - HELD THAT: - Tribunal held that mere allegation of disparity in appointment and receipt of remuneration by majority family members does not, on the facts, establish oppression under Sections 241-242. The appellant had approved consolidated/group accounts and AGMs until 1999 and the challenged remunerations were within statutory limits; unfairness alone does not constitute oppression. Oppression requires conduct affecting proprietary rights of a shareholder involving lack of probity or unfair dealing and a consecutive story of continuous oppressive acts; such material was not established. Transactions and subsidiary-level matters where the appellant was not a shareholder could not be treated as company affairs of the holding company without lifting the corporate veil. Conclusion followed from examination of authorities and factual matrix, and therefore no relief on this ground. [Paras 31, 47, 57]

Alleged excessive remuneration and reduced dividends do not amount to oppression or mismanagement on the record; claim dismissed.

Quasi partnership - Just and equitable - Whether the Amalgamations group should be treated as a quasi partnership and whether the just and equitable standard requires intervention (including winding up or analogous relief). - HELD THAT: - Tribunal applied settled tests: quasi partnership principles arise only where there is an agreement/understanding for joint management, pre existing partnership, or comparable equitable substratum. The holding and subsidiaries have complex, independent characters (listed subsidiaries, foreign shareholders/directors) and no pre existing partnership or understanding was shown; appellant acquired shares by inheritance and joined the company long after incorporation. There was no functional deadlock or irretrievable breakdown in trust and confidence affecting company functioning. Accordingly the just and equitable doctrine and quasi partnership principles do not apply on these facts. [Paras 28, 31, 44, 45]

Company is not to be treated as a quasi partnership; just and equitable relief is not attracted.

Piercing (lifting) the corporate veil - Separate legal personality of holding and subsidiary - Whether the corporate veil should be lifted to treat the holding and subsidiaries as one economic entity for the purpose of granting relief. - HELD THAT: - Tribunal considered the Supreme Court directions and applicable authorities. It concluded that lifting the veil is an exceptional remedy requiring inextricable unity of operations or impropriety linked to use of the corporate form. The group companies do not present inextricably linked businesses; subsidiaries have independent characters, outside shareholders and directors, and commercial independence. The appellant had not sought or established lifting of the veil before the NCLT in the manner required; on the present record veil could not be pierced and subsidiary matters could not be visited in a proceeding against the holding company alone. [Paras 35, 36, 40, 42]

Corporate veil not to be lifted on these facts; subsidiaries retain separate legal personality.

Legitimate expectation - Whether the appellant had a legitimate expectation of appointment to management/office of profit in group companies entitling equitable relief. - HELD THAT: - Tribunal held that 'legitimate expectation' arises from an enforceable understanding or consistent practice amounting to an equitable right; it cannot arise from mere anticipation of participation by inheritance. No agreement, promise or established practice was shown that would create a correlative equitable right to board representation or office of profit. Absent mutual consent or contractual/right based foundation, the doctrine of legitimate expectation cannot restrain the majority's exercise of rights under the articles. [Paras 59, 60, 61, 62]

No legitimate expectation established; claim for appointment/office of profit fails.

Buyout of shares as equitable relief - Oppression and mismanagement - Whether the Tribunal should direct a buyout of the appellant's shareholding as a remedy to end the matters complained of. - HELD THAT: - Tribunal observed that buyout is an extraordinary, discretionary relief that may be moulded when oppression or deadlock affecting company functioning is established. On the facts there was no functional deadlock, the companies were solvent and profitable, and no established oppression or mismanagement existed to justify a compulsory buyout. Further, overlapping proceedings in other courts concerning title to certain shares weighed against directing buyout here. Hence, the conditions for ordering a buyout were not made out. [Paras 63, 64, 65, 66]

Prayer for buyout of shares refused; no order for purchase of appellant's shares.

Final Conclusion: Appeals dismissed; Tribunal found no established oppression, no basis to treat the group as a quasi partnership, no justification for piercing the corporate veil on the record, no legitimate expectation entitlement to management posts, and no occasion to order buyout of the appellant's shares.

Scope of judicial review of specialised regulator - delegated legislative powers of SEBI - judicial restraint in policy matters - transfer of investigation to CBI/SIT in extraordinary circumstances - regulatory failure as a ground for judicial intervention - adequacy and completion of statutory investigation - reliance on third party investigative reports as proof of regulatory inaction - allegations of conflict of interest in constitution of expert committee - regulatory recommendations to strengthen investor protection and market surveillance - role and regulation of short selling

Scope of judicial review of specialised regulator - delegated legislative powers of SEBI - judicial restraint in policy matters - Extent to which this Court may intrude into SEBI's regulatory and delegated legislative domain. - HELD THAT: - The Court reiterated that SEBI, as an expert independent regulator, exercises wide delegated legislative, administrative and adjudicatory powers and that courts must not act as appellate bodies over policy decisions made by such regulators. Judicial review is confined to legality - whether a policy or regulation violates fundamental rights, constitutional or statutory provisions, or is manifestly arbitrary - and not to the wisdom or suitability of regulatory policy. When technical questions arise and expert views have been considered by the regulator, courts should refrain from substituting their judgment. [Paras 13, 14, 15, 16, 17]

The Court will exercise restraint and will not supplant SEBI's regulatory policymaking except on the narrow grounds of illegality, arbitrariness, or constitutional infirmity.

Regulatory failure as a ground for judicial intervention - delegated legislative powers of SEBI - Whether the amendments to the FPI Regulations and the LODR Regulations amount to regulatory failure warranting this Court directing SEBI to revoke them. - HELD THAT: - The Court examined the evolution and purpose of the amendments, noting that the amendments tightened disclosure requirements by moving to mandatory upfront disclosure of beneficial ownership and removed earlier vestigial provisions. The procedure adopted by SEBI in framing and amending the regulations was not shown to be illegal, unreasonable, capricious or constitutionally infirm. The petitioners did not challenge the vires of the regulations; rather they urged that regulatory amendments caused investigative disability - a ground the Court found impermissible to substitute judicial policy for SEBI's delegated law making. Consequently, there is no basis to direct revocation of those amendments. [Paras 22, 25, 26, 28, 29]

No interference with SEBI's amendments to the FPI Regulations and LODR Regulations; the prayer to revoke those amendments is dismissed.

Adequacy and completion of statutory investigation - investigative timelines and judicial oversight - Whether SEBI's investigations into the Adani group have been adequate and whether the remaining enquiries should be transferred or indefinitely court monitored. - HELD THAT: - SEBI completed twenty two out of twenty four investigations and provided detailed status particulars (including emails, summons, documents examined and statements recorded). The Court found no prima facie indicia of deliberate inaction; the short delay in filing the status report did not demonstrate willful default given the complexity and foreign coordination involved. The Court recorded the Solicitor General's assurance and directed SEBI to complete the two pending investigations preferably within three months, while emphasising that it would not usurp the statutory regulator's investigative role. [Paras 30, 35, 36, 37, 67]

SEBI's investigations are prima facie comprehensive; SEBI shall complete the two pending investigations expeditiously, preferably within three months, and no indefinite court monitoring or supervisory takeover is ordered.

Transfer of investigation to CBI/SIT in extraordinary circumstances - judicial restraint in policy matters - Whether the investigation should be transferred from SEBI to the CBI or a court monitored SIT. - HELD THAT: - The Court reiterated that transfer to CBI or constitution of an SIT is an extraordinary power to be exercised sparingly where the authorised agency demonstrates glaring, willful and deliberate inaction or bias that would otherwise frustrate justice. Reliance on precedents, including K.V. Rajendran and subsequent authority, establishes that mere allegations or dissatisfaction do not suffice; transfer is warranted only in rare cases where confidence in impartial investigation cannot be preserved. Applying these parameters to the present facts, the Court found no such threshold established. [Paras 31, 32, 33, 34, 67]

No transfer of investigation from SEBI to CBI or an SIT; the factual and legal threshold for such extraordinary relief is not met.

Reliance on third party investigative reports as proof of regulatory inaction - adequacy and completion of statutory investigation - Whether newspaper and third party investigative reports (OCCRP/Hindenburg) and the 2014 DRI letter establish SEBI's investigative inadequacy. - HELD THAT: - The Court held that reliance on third party reports or unverified newspaper pieces cannot supplant or displace a regulator's comprehensive investigation; such reports may merely act as inputs but are not conclusive proof of regulatory failure unless their veracity is independently demonstrated. With respect to the DRI letter, SEBI sought and obtained inputs and related administrative findings by the DRI's Additional Director General, CESTAT and this Court dismissed challenges - facts not disputed by petitioners. Therefore the petitioners' attempt to revive settled findings or to treat unverified reporting as evidence of SEBI's lack of action was rejected. [Paras 41, 42, 43, 44, 67]

The OCCRP/Hindenburg reports and the DRI letter do not establish SEBI's investigative inadequacy; the reliance on them is rejected.

Allegations of conflict of interest in constitution of expert committee - Whether allegations of conflict of interest against members of the Court constituted Expert Committee justify displacing the Committee's functions or findings. - HELD THAT: - Allegations were raised belatedly and were not supported by cogent evidence. The instances cited (such as a lawyer's appearance for Adani years earlier or newspaper reports concerning indirect associations) lacked proximity in time and subject matter and did not demonstrate bias or likelihood of bias. The petitioners failed to supplement public domain material with independent verification. The Court concluded the allegations were unsubstantiated and did not warrant rerunning or rejecting the Committee's work. [Paras 47, 48, 49, 50, 67]

Allegations of conflict of interest against Expert Committee members are rejected as unsubstantiated.

Regulatory recommendations to strengthen investor protection and market surveillance - role and regulation of short selling - investor awareness - Whether the Expert Committee's recommendations on market surveillance, investor awareness, structural reforms and short selling merit consideration and action. - HELD THAT: - The Expert Committee, after seeking inputs, found Adani related volatility did not pose systemic market risk but recommended measures including improved index based volatility computation, enhanced surveillance mechanisms (ASM/GSM) with investor alerts, investor awareness and financial literacy efforts, consideration of a central authority for unclaimed property, and structural and enforcement reforms for SEBI. The Court directed SEBI and the Union Government to constructively consider these recommendations and to enquire whether short selling and conduct of entities like Hindenburg Research involved legal infractions; appropriate action should follow if violations are found. [Paras 63, 64, 65, 66, 67]

The Union Government and SEBI shall consider and, where competent, act on the Expert Committee's recommendations; investigative agencies shall probe whether short selling conduct involved legal infractions and take action if warranted.

Final Conclusion: The writ petitions are disposed: the Court declines to overturn or revoke SEBI's regulatory amendments, refuses to transfer SEBI's investigations, rejects reliance on unverified third party reports and unsubstantiated conflict allegations, directs SEBI to complete the remaining investigations preferably within three months, and directs the Union Government and SEBI to constructively consider and act upon the Expert Committee's recommendations while investigating any unlawful conduct by entities involved in short selling.

Right to claim set-off in the Corporate Insolvency Resolution Process - contractual set-off - transactional (equitable) set-off - insolvency set-off - mutual dealings - moratorium under Section 14 - IBC as a complete code and non-obstante effect of Section 238 - pari passu and anti-deprivation principles

Right to claim set-off in the Corporate Insolvency Resolution Process - insolvency set-off - IBC as a complete code and non-obstante effect of Section 238 - Applicability of statutory/insolvency set-off (including Regulation 29 of the Liquidation Regulations) during the Corporate Insolvency Resolution Process under Chapter II Part II of the IBC - HELD THAT: - The Court held that the IBC is a self-contained code and its non-obstante provision precludes importing statutory or insolvency set-off applicable to the liquidation stage into the Corporate Insolvency Resolution Process. Regulation 29 of the Liquidation Regulations and statutory set-off rules applicable to liquidation do not apply to Chapter II Part II (the CIRP) and cannot be read into the resolution stage by implication. Allowing insolvency set-off at the CIRP stage would circumvent the statutory scheme and upset the distribution and priority scheme provided by the Code. The legislative repeal and scheme (including Sections 238 and 243) support the exclusion of insolvency/statutory set-off during CIRP. [Paras 11, 13, 23, 30, 37]

Statutory or insolvency set-off is not available during the Corporate Insolvency Resolution Process and Regulation 29 of the Liquidation Regulations does not apply to CIRP.

Contractual set-off - moratorium under Section 14 - Whether contractual set-off is permissible against claims in CIRP - HELD THAT: - The Court recognised contractual set-off as an exception: where a right to set-off arises from an agreement effective before or on the commencement of CIRP, that contractual right survives the moratorium and may be available. The Resolution Professional takes the debtor's property subject to existing clogs and fetters; contractual rights agreed prior to commencement are not extinguished by CIRP. Such set-off may be self-executing when grounded in an unambiguous contractual entitlement. [Paras 30, 31]

Contractual set-off, if established as existing on or before the commencement of CIRP, is admissible despite the moratorium.

Transactional (equitable) set-off - mutual dealings - Whether equitable/transactional set-off is permissible in CIRP and on what conditions - HELD THAT: - The Court carved out a limited equitable exception (termed 'transactional set-off') permitting set-off where claim and counterclaim arise from closely connected transactions treated as one, and where adjustment is a bona fide, quantifiable and incontestable monetary claim. Transactional set-off is available as a defence to protect legal certainty and legitimate expectations, but must be clearly established on facts and law; it cannot be used to litigate disputed issues in the summary CIRP process and may be denied where it would defeat equity, justice or the statutory scheme. [Paras 32, 33, 34]

Equitable/transactional set-off is admissible in CIRP only in narrow circumstances where claims are so closely connected as to constitute a single transaction and the counterclaim is quantifiable and indisputable.

Insolvency set-off - Whether insolvency set-off under the IBC is automatic or self-executing during CIRP - HELD THAT: - The Court rejected the submission that set-off under the IBC is self-executing or automatic at the CIRP stage. There is no provision in the IBC making insolvency set-off self-executing in CIRP; while contractual set-off may operate automatically if established, insolvency/statutory set-off is not automatic in the resolution process. [Paras 46, 47, 48]

Insolvency/statutory set-off is not automatic or self-executing in the CIRP; only contractual set-off may operate automatically if properly established.

Contractual set-off - transactional (equitable) set-off - Application of the principles to the appellants' claims - HELD THAT: - On the facts, the Court accepted that set-off in respect of interconnect/service charges (being separate operational agreements) qualified as contractual/transactional set-off to the extent such adjustments arose from pre-commencement dealings and were properly established. However, the spectrum purchase transaction was distinct and unconnected; amounts arising from the spectrum transaction post-commencement could not be set off under the CIRP regime. The Court therefore rejected the appellants' broader claim to set-off in respect of the spectrum-related sums and held that allowing such set-off would contravene the moratorium and the statutory scheme. [Paras 35, 50]

The appellants' claim to set-off for interconnect charges could be recognised where contractual/transactional conditions were met, but the claimed set-off in respect of the spectrum transaction (sums becoming payable post-commencement) was not permissible under CIRP.

Final Conclusion: The appeals are dismissed. The IBC does not permit statutory or insolvency set-off during the Corporate Insolvency Resolution Process; limited exceptions exist for pre-commencement contractual set-off and narrowly circumscribed transactional (equitable) set-off where claims are inseparably connected and quantifiable, but the appellants' broader set-off claims in respect of the spectrum transaction were rejected.

Applicability of legislative amendment to pending insolvency proceedings - Minimum payment entitlement of dissenting financial creditors under Section 30(2)(b)(ii) - Monetary valuation of security interest in lieu of enforcement - Interaction of Sections 52 and 53 with Section 30(2)(b)(ii) - Commercial wisdom of the Committee of Creditors versus protection of dissenting creditors

Applicability of legislative amendment to pending insolvency proceedings - Amendment to Section 30(2)(b) by the Insolvency and Bankruptcy Code (Amendment) Act, 2019 applies to proceedings and appeals pending when the amendment came into force. - HELD THAT: - Explanation 2 to the 2019 Amendment declares that the substituted clause shall apply to CIRP matters where a resolution plan has not been finally approved or where appeals or legal proceedings are pending and not time-barred. The Court held that Explanation 2(ii) clearly renders the amendment applicable to appeals pending under Section 61/62 and that the Amendment Act applied when the NCLAT heard and decided the appeals after 16.08.2019. The Court relied on legislative intent and earlier authority recognising that appellate proceedings are a continuation of original proceedings and that changes in law may be applied to pending proceedings. [Paras 22, 23, 24]

The Amendment Act, 2019 (as reflected in Explanation 2) is applicable to the appeals pending and heard after its commencement; the amended Section 30(2)(b) must be considered in such proceedings.

Minimum payment entitlement of dissenting financial creditors under Section 30(2)(b)(ii) - Interaction of Sections 52 and 53 with Section 30(2)(b)(ii) - Monetary valuation of security interest in lieu of enforcement - A dissenting financial creditor is entitled to be paid, as a minimum, the amount equivalent to what it would receive under Section 53(1) on liquidation - i.e., the monetary value of its security interest. - HELD THAT: - The Court interpreted Section 30(2)(b)(ii) to guarantee dissenting financial creditors a minimum payment not less than the entitlement under Section 53(1) in the event of liquidation. Reference to Section 53 necessarily imports consideration of Section 52 (which governs secured creditors and enforcement of security) to give effect to the statutory purpose. The amendment protects minority dissenting creditors by ensuring they receive the liquidation-value in monetary terms. While the commercial wisdom of the CoC in allocating proceeds is to be respected, Section 30(2)(b)(ii) prevents a dissenting creditor from being paid less than the liquidation entitlement. The Court emphasised that the security interest is converted into a monetary entitlement for this purpose. [Paras 25, 26, 33, 40, 43]

Section 30(2)(b)(ii) entitles a dissenting financial creditor to a minimum monetary payment equal to the liquidation-value entitlement under Section 53(1), and references to Section 53 require regard to Section 52 to give effect to that entitlement.

Monetary valuation of security interest in lieu of enforcement - Commercial wisdom of the Committee of Creditors versus protection of dissenting creditors - The dissenting financial creditor's right is to receive the liquidation-value in money; it does not have an unfettered right to enforce and retain the security in a manner that would undermine the approved resolution plan. - HELD THAT: - Drawing on Jaypee Kensington and related authorities, the Court clarified that 'payment' in Section 30(2)(b)(ii) refers to discharge in monetary terms. Enforcement of a security interest may be a mode of realising that monetary payment, but a dissenting creditor cannot use enforcement to appropriate the security in a way that renders the resolution plan unworkable. On acceptance of a resolution plan by the requisite majority, the dissenting creditor statute-wise relinquishes the security interest and is entitled to the monetary value (liquidation-equivalent) rather than to an outcome that would give it greater recovery than its liquidation entitlement or subvert the plan. [Paras 28, 37, 38, 42]

The entitlement of a dissenting secured creditor is to monetary payment equal to liquidation-value; enforcement of security may be permitted only so far as it effectuates that monetary entitlement and not to frustrate the resolution plan.

Commercial wisdom of the Committee of Creditors versus protection of dissenting creditors - The commercial wisdom of the Committee of Creditors in approving a resolution plan remains paramount, but it is subject to the statutory protection that dissenting financial creditors and operational creditors receive a minimum payment as provided by the amended Section 30(2)(b). - HELD THAT: - The Court reiterated that the CoC's commercial judgment in proposing distribution is to be respected. However, the Amendment Act ensures that such commercial choices cannot result in paying dissenting financial creditors less than their liquidation entitlement. The statutory scheme balances the CoC's role in maximising asset value with a floor of protection for dissenting and operational creditors. [Paras 25, 34, 48]

CoC's commercial wisdom governs distribution but must not result in payment to dissenting creditors below the minimum mandated by Section 30(2)(b).

Final Conclusion: The Court held that the 2019 amendment to Section 30(2)(b) applies to pending appeals heard after its commencement and construed Section 30(2)(b)(ii) to entitle dissenting financial creditors to a minimum monetary payment equal to their liquidation entitlement under Section 53(1) (with Section 52 informing the meaning of that entitlement); because the matter raises a substantial question on the proper interpretation of Section 30(2)(b)(ii) vis-a -vis earlier decisions, the question is referred to a larger Bench for authoritative resolution.

Debt and default under Section 7 of the Insolvency and Bankruptcy Code, 2016 - admissibility of Section 7 application - evidentiary requirement to prove crystallised financial debt - effect of release/waiver clause in a share purchase agreement on antecedent claims - minimum threshold under Section 4 of the IBC - role of balance sheet entries as evidence of discharge of debt

Evidentiary requirement to prove crystallised financial debt - role of balance sheet entries as evidence of discharge of debt - Whether the Appellants proved existence of a crystallised debt and default so as to warrant admission of the Section 7 application. - HELD THAT: - The Adjudicating Authority correctly evaluated the materials relied upon by the Appellants and found the evidence of debt doubtful. The Facility/FInance Facility Agreement relied upon was undated and, on the record, only a draft was shown to have been emailed by the Corporate Debtor; the version placed on record lacked the Corporate Debtor's signature and bore signatures of Appellants in the guise of the Corporate Debtor's signatory. The provisional balance sheet dated 04.03.2022, acknowledged and signed by Appellants, reflected a nil claim in respect of the unsecured loans. Taking the SPA, the balance sheet entries and the nature of the documents together, the Adjudicating Authority was not satisfied that a debt had crystallised and that default had occurred, and therefore correctly exercised its jurisdiction under Section 7(5)(a) to dismiss the application. The tribunal found no error in that assessment. [Paras 6, 7, 15, 17, 18]

The Section 7 application was rightly dismissed for failure to prove a crystallised debt and default.

Admissibility of Section 7 application - debt and default under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Whether the Adjudicating Authority erred in applying the legal test under Section 7 and the principles laid down by the Supreme Court in Innoventive Industries Ltd. - HELD THAT: - The Tribunal recited the settled law that the Adjudicating Authority must be satisfied that a debt is due and default has occurred before admitting a Section 7 application. Applying that standard, the Adjudicating Authority considered the documentary record and concluded that the Appellants had not discharged the evidentiary burden to show a due debt and default. Given the doubtful nature of the documents relied upon and the balance sheet showing nil liability after closing, the Tribunal found no misapplication of law or warrant for interference with the impugned order. [Paras 16, 17, 18]

No error in law in the Adjudicating Authority's application of the Section 7 test; appeal dismissed.

Effect of release/waiver clause in a share purchase agreement on antecedent claims - Whether Clause 6.5 of the SPA operated to release/waive claims of the erstwhile shareholders in respect of antecedent liabilities. - HELD THAT: - Clause 6.5 of the SPA contains an omnibus release and waiver by the sellers and their affiliates of any claims against the company and related parties arising prior to closing. A plain reading shows that the erstwhile shareholders relinquished rights and claims in relation to pre-closing events. The Tribunal concluded that, having executed the SPA and acknowledged the closing by signing the balance sheet with nil statement, the Appellants' claims were prima facie discharged by the release clause and the closing, which supported the Adjudicating Authority's conclusion that the alleged debt was not established. [Paras 14, 15, 18]

Clause 6.5 operated to discharge the antecedent claims of the sellers, supporting dismissal of the Section 7 petition.

Minimum threshold under Section 4 of the IBC - Whether claims of certain Appellants who are non-shareholders met the statutory minimum financial threshold to be maintainable under Section 7. - HELD THAT: - The Adjudicating Authority observed that the default amounts claimed on behalf of non-shareholder Appellants fell below the statutory minimum threshold of Rs.1 crore prescribed under Section 4 of the IBC and therefore could not sustain a Section 7 petition. The Tribunal agreed with this finding and noted that this deficiency independently justified dismissal insofar as those Appellants were concerned. [Paras 17, 18]

Claims of non-shareholder Appellants below the statutory threshold were not maintainable; those heads were rightly rejected.

Final Conclusion: The Appellants failed to establish a crystallised financial debt or default; the SPA's release clause and the balance sheet showing nil liability after closing supported the Adjudicating Authority's conclusion. The Section 7 petition was correctly dismissed and the appeal is without merit.

Supply of Tangible Goods Service - Right of possession and effective control - Transfer of right to use and deemed sale - Payment of VAT as evidentiary indicator - Interpretation of lease agreement terms - Service tax and penalties under Section 77 & 78

Payment of VAT as evidentiary indicator - Right of possession and effective control - Whether non-payment of VAT/Sales Tax by the lessee conclusively establishes that legal right of possession and effective control was not transferred and, accordingly, the transaction is a taxable "Supply of Tangible Goods Service". - HELD THAT: - The Tribunal examined the Commissioner's reliance on paras 9.1-9.4 of the impugned order and the CBEC circular (Dof. No. 334/1/2008-Tru dated 29.02.2008) which states that whether a transaction involves transfer of possession and control is a question of fact and that VAT paid or payable may be a relevant indicator. The Tribunal held that mere non-payment of VAT cannot alter the nature of the transaction; payment or otherwise of VAT is only an indicator and cannot be the sole basis to conclude that legal possession and effective control were not transferred. The correct approach is to determine transfer of possession and control from the terms of the contract and other material facts rather than infer the nature of the transaction solely from the VAT position. [Paras 9]

Non-payment of VAT/Sales Tax is not by itself sufficient to conclude that right of possession and effective control was not transferred; it is only an indicator and cannot be the determinative factor.

Interpretation of lease agreement terms - Supply of Tangible Goods Service - Right of possession and effective control - Whether the specific clauses of the lease agreement between the appellant and the lessee show retention of possession or effective control by the appellant so as to attract service tax as a supply of tangible goods for use. - HELD THAT: - The Tribunal analysed the clauses of the agreement (notably those dealing with use and operation of the manufacturing facility and the lessor's interest and title quoted in para 9.6 of the impugned order). It concluded these clauses are protective of the lessor's ownership and legal title - addressing proper use, maintenance, prevention of encumbrance and protection against seizure - and are standard provisions to safeguard the owner's property. Such clauses do not, by their language or effect, demonstrate that the lessor retained day-to-day possession or effective control of the plant and machinery. Absent independent evidence showing continued effective control or possession by the lessor, the transaction cannot be characterised as a supply of tangible goods service. [Paras 9]

The terms of the lease agreement do not indicate retention of possession or effective control by the appellant; therefore the transaction is not a "Supply of Tangible Goods Service."

Final Conclusion: The Tribunal set aside the impugned order and allowed the appeal, holding that (i) non-payment of VAT alone cannot establish absence of transfer of possession and effective control, and (ii) the lease agreement's protective clauses do not demonstrate retention of possession or effective control; accordingly, the demand of service tax and penalties under Sections 77 & 78 was not justified.

Online information and database access or retrieval (OIDAR) services - Place of provision of services - location of recipient v. location of provider - Business support services / support services - Export of services - eligibility under Rule 6A - Correction of service classification in registration - Extended period of limitation - bona fide belief and interpretation of law - Automated internet-delivered services requiring minimal human intervention

Online information and database access or retrieval (OIDAR) services - Business support services / support services - Place of provision of services - location of recipient v. location of provider - Automated internet-delivered services requiring minimal human intervention - Correction of service classification in registration - Export of services - eligibility under Rule 6A - Whether the services rendered by the appellant during July 2012 to November 2016 fall within OIDAR services and are taxable in India or are business support/IT enabled services which qualify as export of services - HELD THAT: - The Tribunal examined the nature of services (data conversion, KPO and IT enabled services) and applied the clarified scope of OIDAR services as set out in the Place of Provision of Services Rules, 2012 and CBEC Guidance (Education Guide, Guidance Note 5.9.5). OIDAR services are internet/electronic network delivered services that are essentially automated, require minimal human intervention and make digital content available to the public or customers for access/retrieval for consideration. Mere use of internet or electronic means to transmit processed output to the owner of the data does not convert bespoke data processing, conversion, indexing or correction work into OIDAR; such work constitutes business support / support services or telecommunication/IT enabled services. The Tribunal accepted that the raw data and IPR remained with the content owners, the appellant acted as a processor/job worker and did not provide an automated service for public access/download, and that the appellant was entitled to correct the service classification in its registration after CBEC clarification. Consequently, the place of provision is the location of the recipient under default rules and the services qualify as export of services under Rule 6A rather than OIDAR taxable in India under Rule 9. [Paras 15, 16, 17, 18, 20]

The appellant's services are not OIDAR services and are not taxable in India; they fall within business support/IT enabled services and qualify as export of services, and the impugned demand under OIDAR is set aside.

Extended period of limitation - bona fide belief and interpretation of law - Whether the extended period of limitation could be invoked against the appellant for the service tax demand - HELD THAT: - The Tribunal found that the appellant had a bona fide belief that its activities were not taxable as OIDAR services and had maintained proper records and statutory compliances, including filing ST 3 returns and refund claims. The dispute turned on interpretation of the statute and classification clarified by CBEC; there was no evidence of mala fide or deliberate evasion. On these facts, invocation of extended period of limitation was not justified. [Paras 21]

Extended period of limitation cannot be invoked; the demand is time barred on the facts and in the circumstances.

Final Conclusion: The Tribunal allowed the appeal, set aside the adjudication order confirming service tax, interest and penalties under the OIDAR classification for the period July 2012 to November 2016, held the services to be business support/IT enabled services qualifying as export of services, and disallowed invocation of the extended period of limitation; consequential relief to follow in accordance with law.

Supply of tangible goods for use (taxable service) - Transfer of right to use (deemed sale) - Article 366(29A) of the Constitution - deemed sale by transfer of right to use - VAT payment as indicium negating service tax levy

Supply of tangible goods for use (taxable service) - Transfer of right to use (deemed sale) - Article 366(29A) of the Constitution - deemed sale by transfer of right to use - VAT payment as indicium negating service tax levy - Renting of earth moving equipment by the appellant is not taxable as 'supply of tangible goods for use' service. - HELD THAT: - The Tribunal applied its earlier decision in the appellant's own case and examined the contractual terms which expressly provided that equipment was offered on a 'rights to use' basis, placed duties and liabilities on the hirer (safe custody, liability for damage, responsibility to handle third party disputes), and showed transfer of possession and effective control to the lessee. Those terms, read with the principle in Article 366(29A) and authoritative decisions cited, establish the transaction as transfer of the right to use goods - a deemed sale - on which VAT was paid. Where the transaction is a deemed sale and VAT is payable, the levy under 'supply of tangible goods for use' is not attracted; accordingly the activity does not constitute the taxable service in question. [Paras 5]

Impugned order set aside and the appellant's appeal allowed; renting of equipment held not to be taxable as 'supply of tangible goods for use' (transaction treated as deemed sale).

Final Conclusion: Following the Tribunal's earlier reasoning and the contractual terms demonstrating transfer of right to use (deemed sale) with VAT paid, the appeal is allowed and the levy of service tax under 'supply of tangible goods for use' is not sustained (order set aside).

Rebate under Notification No.41/2012-ST - condition (c) - twenty per cent threshold - rebate procedure under paragraph 2 and paragraph 3 - forum for adjudication - customs or excise - remand for fresh adjudication

Rebate under Notification No.41/2012-ST - condition (c) - twenty per cent threshold - rebate procedure under paragraph 2 and paragraph 3 - Claim for rebate under paragraph 3 of the proviso to Notification No.41/2012 ST was not finally adjudicated and requires fresh consideration in light of condition (c). - HELD THAT: - The Tribunal observed that condition (c) of the Notification disallows rebate only where the difference between the rebate computed under paragraph 2 and paragraph 3 is less than twenty per cent of the rebate available under paragraph 2. The appellant contended, and the show cause computation indicated, that even on the lower computation they were entitled to a rebate. The lower authority, however, rejected the entire claim without pronouncing on the applicability of paragraph 3 or applying the threshold in condition (c). The Tribunal further noted there is no bar in the Notification preventing either customs or excise authorities from adjudicating claims under paragraph 3. In view of these deficiencies and on prima facie consideration that paragraph 3 may be applicable, the Tribunal held that the claim must be remanded to the original authority for fresh adjudication applying condition (c) and considering the computation under paragraph 3. [Paras 2, 4, 5]

The matter is remitted to the original authority for fresh adjudication of the rebate claim under paragraph 3 of the Notification, with application of condition (c) and without treating forum competency as a bar.

Final Conclusion: The appeal is allowed by way of remand: the Tribunal directs the original authority to re-adjudicate the appellant's rebate claim under paragraph 3 of Notification No.41/2012 ST, applying condition (c) and considering that either customs or excise may deal with the claim.

Cenvat credit on general insurance services - Input service - Nexus with the business of manufacture - Cost of service included in valuation of final product - Extended period of limitation

Cenvat credit on general insurance services - Input service - Nexus with the business of manufacture - Cost of service included in valuation of final product - Appellant entitled to cenvat credit on general insurance services (building, plant and machinery, equipment, computers, workmen compensation, group accident policy, transit insurance etc.). - HELD THAT: - The Tribunal, after considering authoritative decisions, held that the definition of "input service" is expansive and covers services used in relation to the business of manufacture and not only those having direct nexus with the physical act of manufacture. Insurance services taken to secure plant, machinery, inputs, buildings, transit and workmen's compensation are integral to the conduct of the manufacturing business and their costs are included in the valuation of final products. Reliance was placed on earlier pronouncements which recognize that where the cost of a service is part of the cost of production or valuation of the final product, credit of service tax cannot be denied. In light of consistent judicial treatment, the issue was treated as no longer res integra and decided on merits in favour of the appellant. The Tribunal expressly declined to address the contention on extended period/limitation because the matter was decided on merits.

Impugned demand disallowed; appeal allowed and cenvat credit on the insurance services upheld with consequential reliefs, if any.

Final Conclusion: The Tribunal set aside the impugned order and allowed the appeal, holding that service tax paid on the appellant's general insurance policies qualifies as cenvat credit because such insurance services are input services related to the business of manufacture and their cost is included in the valuation of the final product; the Tribunal did not decide the limitation issue.

Leviability of cess on production versus liability to pay on removal - Effect of repeal and the operation of a savings clause - Point of crystallisation of excise/cess liability - Application of cess rules prescribing payment and return obligations - Inapplicability of post-repeal collection provisions to non crystallised liabilities

Leviability of cess on production versus liability to pay on removal - Point of crystallisation of excise/cess liability - Application of cess rules prescribing payment and return obligations - Effect of repeal and the operation of a savings clause - Whether Clean Energy Cess under the 2010 Finance Act was payable by the appellant on coal stock lying as on 30.06.2017 but removed on or after 01.07.2017, having regard to the repeal w.e.f. 01.07.2017 and the savings clause in section 18(2) of the 2017 Taxation Amendment Act. - HELD THAT: - The statutory scheme under the 2010 Finance Act and the 2010 Cess Rules shows that while the levy/charge is described with reference to goods produced (section 83(3)), the rules prescribe payment and assessment linked to removal (rule 4, rule 5, rule 6 and rule 11). Precedents establish that production may attract the levy in principle but removal is the operative event for crystallisation of the liability and for collection. In the present facts the goods in question, though produced earlier, were not removed before 01.07.2017. Chapter VII of the 2010 Finance Act (and the rules framed thereunder) stood repealed w.e.f. 01.07.2017 by section 18(1) of the 2017 Taxation Amendment Act, and a new GST Compensation Cess became leviable under the 2017 Compensation Act from that date. Section 18(2) protects liabilities that had already accrued, acquired or been incurred prior to repeal; however, where, as here, the liability to pay CEC had not crystallised prior to repeal because removal (the collection event) had not occurred, section 18(2) does not operate to create or preserve a liability that had not arisen. Section 19 addresses proceeds of duties already levied or collectible as arrears, but it does not assist where no cess proceeds had crystallised before the appointed date. Applying these principles to the admitted facts, the appellant did not incur a payable CEC liability under the repealed enactment on coal removed on or after 01.07.2017 merely because the coal had been in stock on 30.06.2017; the appellant instead discharged the tax incidence applicable under the GST regime after 01.07.2017. [Paras 42, 47, 51]

The demand for Clean Energy Cess in respect of coal stock as on 30.06.2017 subsequently removed on or after 01.07.2017 is unsustainable; the savings provision does not preserve a non crystallised liability and therefore the appellant was not liable to pay CEC under the repealed enactment.

Final Conclusion: The Commissioner's order confirming demand of Clean Energy Cess, interest and penalty in respect of coal lying in stock on 30.06.2017 but removed on or after 01.07.2017 is set aside; the appeal is allowed.

Refund of education cess and secondary and higher education cess - scope of exemption notification and requirement of specific notification for cesses - non-applicability of administrative circulars to create exemption - binding effect of larger-bench precedent and per incuriam doctrine

Refund of education cess and secondary and higher education cess - scope of exemption notification and requirement of specific notification for cesses - Refund claim of education cess and secondary and higher education cess paid with excise duty under Notification No. 56/2002-CE is not admissible. - HELD THAT: - The Tribunal followed the decision of the Hon'ble Supreme Court in M/s Unicorn Industries (reported as 2019 (370) ELT 3 (SC)) and earlier binding three-Judge Bench precedents, holding that an exemption notification must expressly cover additional duties/cesses to effect exemption. The Tribunal recorded that Notification No. 56/2002-CE is pari materia to the notification considered by the Supreme Court and does not specifically exempt education cess and secondary and higher education cess which were imposed by later Finance Acts. Administrative circulars do not have the force of law to supply the requisite statutory exemption. Decisions rendered contrary to binding larger-bench authority are per incuriam and cannot be followed. Applying these principles, the Tribunal found no infirmity in the Commissioner (Appeals) order denying the refund of the cesses.

Appeal dismissed; impugned order rejecting the refund claim upheld.

Final Conclusion: The Tribunal dismissed the appeal and upheld the Commissioner (Appeals) order rejecting the refund of education cess and secondary and higher education cess, applying the binding ratio that a specific exemption notification is necessary to exempt such cesses and that administrative circulars cannot supply statutory exemption.

Composite and indivisible works contract - deemed sale in execution of works contract - inter state sale under Section 3 of the CST Act - place/time of transfer of property in goods under the Sale of Goods Act - Article 366(29A)(b) - sale involved in execution of works contract - estoppel against law where tax paid under wrong statute - penalty under Section 61 of RVAT Act for colourable device - remand beyond scope of pleadings

Composite and indivisible works contract - deemed sale in execution of works contract - The contracts awarded for the EPC project constitute one composite and indivisible turnkey works contract. - HELD THAT: - After examining the contract terms (single NIT/unified bid, lump sum pricing for entire scope, cross fall breach clause, provisions for final handing over, liquidated damages, warranty, insurance, completion criteria and TDS on composite contract value) and applying settled precedents on ascertaining parties' intention, the court agreed with the RTB that the three formally separate contracts were in substance a single EPC turnkey works contract. The court concluded the break up was for convenience of payment and did not alter the composite nature of the contract. [Paras 11, 12, 13]

Affirmed that the contracts are a single composite and indivisible works contract.

Place/time of transfer of property in goods under the Sale of Goods Act - inter state sale under Section 3 of the CST Act - Article 366(29A)(b) - sale involved in execution of works contract - The sales of goods used in execution of the EPC works contract are intra state 'deemed sales' taxable under the RVAT Act and not inter state sales under Section 3 of the CST Act. - HELD THAT: - Applying the Sale of Goods Act rules on when property in specific or future goods passes, and having found the contract to be a turnkey works contract with transfer of the complete unit upon final handing over, the court held that the goods were appropriated and became subject of the contract only in Rajasthan. Pre dispatch inspections and issuance of MDCC did not effect transfer of title. Consequently the 'deemed sale' arising in execution of the works contract took place inside Rajasthan and falls within Article 366(29A)(b) and the RVAT charging provisions; the prior characterization as inter state sale did not alter this legal conclusion. [Paras 15, 16, 17]

Held the transactions to be intra state deemed sales taxable under RVAT.

Estoppel against law where tax paid under wrong statute - Payment or assessment of tax earlier under the CST Act or Entry Tax Act does not estop the State from asserting RVAT liability when the true nature of the transaction attracts state tax. - HELD THAT: - The court observed that compliance or earlier payment under a different statute cannot create an estoppel against the law; where the nature of the transaction attracts RVAT, liability cannot be avoided merely because C Forms, VAT 47, or entry tax were issued or collected. The court relied on the principle that statutory liabilities must be determined according to the applicable law and past payments under another enactment do not absolve legal liability under the correct enactment. [Paras 18]

Rejected estoppel; earlier CST/entry tax assessments do not preclude RVAT liability.

Penalty under Section 61 of RVAT Act for colourable device - The RTB correctly set aside the penalty imposed under Section 61 of the RVAT Act. - HELD THAT: - The court considered the nature of the dispute to be one of pure statutory interpretation with disputed findings below and noted that one party to the transactions was a State entity. Given the interpretative character of the controversy and the disturbed factual findings, the court agreed with the RTB's exercise in setting aside penalty and declined to interfere with that aspect of the order. [Paras 20]

Penalty set aside - affirmed in favour of the assessee.

Remand beyond scope of pleadings - The RTB's directions to remand the matter for assessment with respect to 'goods of special importance' were set aside as being beyond the scope of pleadings and not sought by parties. - HELD THAT: - The court found the remand direction went beyond issues framed and pleaded before the authorities and RTB; no claim or argument on that specific relief had been advanced, and hence the remand was inappropriate. Relying on authority restricting orders remitting matters on points not raised, the court annulled the remand directions while maintaining the other parts of the RTB order. [Paras 21, 24]

Remand directions set aside; rest of RTB order maintained.

Final Conclusion: The RTB's finding that the three contracts form one composite turnkey works contract and that the sales of goods in execution thereof are intra state 'deemed sales' taxable under the RVAT Act is affirmed; the RTB's setting aside of penalty is upheld; however the RTB's direction to remand for consideration of concessional rate on 'goods of special importance' is set aside as beyond the scope of pleadings. STRs 217-219/2020 are decided for the Revenue; STRs 155-157/2020 are answered for the Revenue on questions 1-3 and for the assessee on question 4 (penalty).

Service of notices by registered post and e-mail under Rule 64 of the APVAT Rules - sufficient service deemed where notices are sent by prescribed modes and not controverted - principles of natural justice in assessment and penalty proceedings - certificate of service is evidentiary and not a prerequisite to validity where service is otherwise established - availability of alternative statutory remedy of appeal under the APVAT Act

Service of notices by registered post and e-mail under Rule 64 of the APVAT Rules - sufficient service deemed where notices are sent by prescribed modes and not controverted - principles of natural justice in assessment and penalty proceedings - Whether the impugned assessment and penalty orders were passed in violation of the principles of natural justice due to non-service of notices - HELD THAT: - The Court examined the record of issuance and service of show cause notices, personal hearing notices and the assessment and penalty orders. The counter-affidavit sets out, in tabular form, dispatch by ordinary post, registered post and by e-mail to the e-mail ID furnished by the dealer; those specific averments remained uncontroverted. Rule 64(1) of the APVAT Rules treats notices sent by registered post or by e-mail to the e-mail ID furnished by the dealer as sufficiently served. In the absence of any contrary evidence, the Court accepted the respondents' stand that notices and orders were served as per the prescribed modes and held that there was no infringement of the fundamental procedure or the principles of natural justice in passing the impugned orders. [Paras 6, 8, 11, 13, 16]

The challenge to the orders on the ground of non-service and violation of principles of natural justice is rejected.

Certificate of service is evidentiary and not a prerequisite to validity where service is otherwise established - Whether absence of a certificate of service under Rule 64(2) vitiates the service of notices relied upon in the proceedings - HELD THAT: - Counsel for the petitioner relied on sub rule (2) of Rule 64 contending absence of a certificate of service. The Court held that sufficiency of service under sub rule (1) does not depend upon production of the certificate contemplated by sub rule (2). Further, since the counter affidavit's averments about service were not controverted on oath, the requirement to prove service by a certificate did not arise in the facts of this case. [Paras 14, 15]

Absence of a formal certificate of service in the record does not invalidate the service where service is otherwise established and uncontroverted.

Availability of alternative statutory remedy of appeal under the APVAT Act - Whether the writ petition is maintainable notwithstanding the existence of the statutory alternative remedy of appeal - HELD THAT: - The respondents raised a preliminary objection that an efficacious alternative statutory remedy in the form of appeal under the APVAT Act exists. The petitioner did not dispute availability of that remedy but contended that violation of natural justice warranted writ jurisdiction. Having found no violation of natural justice and with no other exceptional circumstances shown, the Court declined to entertain the writ petition and observed that the petitioner remains at liberty to pursue the statutory appeal subject to law and limitation. [Paras 3, 4, 18]

Writ petition dismissed on the ground of availability of the alternative statutory remedy; petitioner permitted to avail the appeal subject to law and limitation.

Final Conclusion: The writ petition challenging the assessment and penalty orders is dismissed: the notices and orders were held to have been validly served by post and e-mail in accordance with Rule 64, there was no breach of natural justice, absence of a service certificate did not vitiate service where uncontroverted, and the petitioner may pursue the statutory appellate remedy subject to law and limitation.

Principles of natural justice - assessment based on third party information - right to be furnished with material relied upon - efficacious alternative remedy / availability of statutory appeal

Principles of natural justice - right to be furnished with material relied upon - assessment based on third party information - Whether the Assessment Order dated 26.06.2023 violated principles of natural justice by not furnishing to the petitioner the sales particulars reportedly supplied by the 3rd respondent - HELD THAT: - The Court held that there was no breach of natural justice. The show cause notice dated 17.03.2023 set out in tabular form the particulars of HSD sales said to have been made by the petitioner to the 3rd respondent for the period (February to November, 2022), and those particulars were therefore within the petitioner's knowledge and available to be compared with its own books. The petitioner neither filed a substantive reply to the show cause notice nor sought a copy of the report from the assessing authority, and did not attend the two subsequent personal hearing notices. Unlike the case relied upon by the petitioner where a vigilance report's contents were not furnished and its basis was unclear, here the particulars were sales transactions attributable to the petitioner and not new or unknown facts; hence non-supply of the third party report did not prevent the petitioner from making an effective reply and did not amount to denial of natural justice. [Paras 7]

The plea that the Assessment Order violated principles of natural justice by non-furnishing of the 3rd respondent's sales report is rejected.

Efficacious alternative remedy / availability of statutory appeal - Whether the writ petition is maintainable in view of the availability of an alternate statutory remedy of appeal against the Assessment Order - HELD THAT: - The Court noted that the petitioner has an efficacious alternative remedy of appeal against the impugned Assessment Order. In view of that remedy, the writ petition was not maintainable and this ground independently supported dismissal of the petition. [Paras 8, 9]

The writ petition is not maintainable on the ground of availability of an efficacious alternative remedy and is dismissed.

Final Conclusion: Writ petition dismissed: the challenge to the Assessment Order on grounds of violation of natural justice is rejected as the sales particulars were disclosed in the show cause notice and available to the petitioner, and the petition is also dismissed for lack of maintainability in view of the alternative statutory remedy of appeal.

Competence under Article 229 to make rules for officers and servants of High Courts - separation of powers and limits on judicial mandamus to direct executive rule making - distinction between civil contempt and criminal contempt under the Contempt of Courts Act, 1971 - summary procedure in contempt: circumspection and exceptional use - restraint in summoning government officials and role of law officers - Standard Operating Procedure for personal appearance of government officials in court proceedings

Competence under Article 229 to make rules for officers and servants of High Courts - separation of powers and limits on judicial mandamus to direct executive rule making - High Court lacked power to direct the State Government to notify Rules proposed by the Chief Justice relating to post retiral benefits for former High Court judges. - HELD THAT: - The preamble to the Rules invoked Article 229, which pertains to service conditions of officers and servants of High Courts and not to post retiral benefits for former judges. The Chief Justice therefore had no competence under Article 229 to frame binding rules for such post retiral benefits. Reliance on this Court's earlier judgments directing states to frame schemes did not empower Chief Justices to promulgate mandatorily binding rules; those judgments afforded states flexibility to frame schemes considering local conditions. Acting under Article 226 the High Court could not compel the executive to enact rules proposed by the Chief Justice or, by mandamus or otherwise, dictate the form or timing of executive rule making. At best the purported Rules were inputs for executive consideration and the State was free to examine them through its decision making processes. [Paras 27, 28, 29, 30, 46]

The High Court's direction that the State notify the Rules proposed by the Chief Justice was beyond its power and impermissible; the Rules did not fall within the Chief Justice's competence under Article 229.

Distinction between civil contempt and criminal contempt under the Contempt of Courts Act, 1971 - summary procedure in contempt: circumspection and exceptional use - Invocation of criminal contempt by the High Court against government officials for filing a recall application was unjustified; the conduct did not meet the standard for criminal or even civil contempt. - HELD THAT: - The Contempt of Courts Act draws a clear line between wilful disobedience (civil contempt) and the higher threshold for criminal contempt (scandalising the court, prejudicing proceedings or obstructing administration of justice). The High Court treated the State's recall application as 'ex facie criminal contempt' without addressing legal objections raised or explaining how the conduct met the criminal contempt standard. The State was availing a bona fide legal remedy and had previously raised the competence objection; summary committal was therefore unwarranted. Summary contempt procedures are exceptional and reserved for cases of clear, contemptuous conduct; those conditions were absent here. [Paras 34, 35, 36, 37, 46]

Criminal contempt could not be invoked on the facts; the conduct did not satisfy the tests for criminal or civil contempt and the High Court's committal order was not justified.

Restraint in summoning government officials and role of law officers - Standard Operating Procedure for personal appearance of government officials in court proceedings - Frequent summoning of government officials as a routine measure is impermissible; courts must exercise restraint and follow the SOP framed by this Court regarding personal appearance of government officials. - HELD THAT: - Physical appearance of government officials should not be the first resort and must be confined to limited circumstances (e.g., evidence based adjudication, when material is being withheld, or complex non adversarial matters). Courts should ordinarily rely on law officers who represent the government, seek affidavit material, allow video conferencing as a first option, record reasons when personal presence is directed, give reasonable notice, and avoid coercive or humiliating conduct. The Court formulated a SOP setting out procedures and safeguards (including categories of proceedings, prior procedure before directing presence, conduct during appearance, timelines for compliance, and caution in contempt enforcement) to guide courts nationwide. [Paras 42, 43, 44, 45, 46]

The High Court's practice of repeatedly summoning officials and issuing warrants to exert pressure was impermissible; the SOP in paragraph 45 is to be followed and High Courts should frame rules consistent with it.

Final Conclusion: Both impugned orders of the High Court dated 4 April 2023 and 19 April 2023 are set aside; the appeals are disposed of. The High Court remains at liberty to hear the writ petition subject to the legal observations and the SOP issued in this judgment, and all High Courts are to consider framing rules regulating the personal appearance of government officials consistent with the SOP.