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1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Validity of Notification No. 56/2023-Central Tax
Issue 2: Lack of Corresponding State Notification
Issue 3: Availability of Alternative Remedy
3. SIGNIFICANT HOLDINGS
Extension of limitation under Section 168A of the CGST Act - vires of a notification issued under Section 168A - issuance of corresponding State notification under the SGST Act - availability of alternative efficacious remedy by appeal under Section 107 - maintainability of writ under Article 226 where alternative remedy exists
Availability of alternative efficacious remedy by appeal under Section 107 - maintainability of writ under Article 226 where alternative remedy exists - vires of a notification issued under Section 168A - issuance of corresponding State notification under the SGST Act - Maintainability of the petition challenging Notification No. 56/2023-Central Tax dated 28.12.2023 and the impugned adjudication for the tax period April, 2019 to March, 2020. - HELD THAT: - The Court found that the petitioner has an alternative efficacious remedy by way of appeal under Section 107 of the CGST Act and therefore the writ petition under Article 226 is not maintainable. The challenge to Notification No. 56/2023-CT on the ground that no corresponding State notification under the SGST Act was issued does not furnish a separate ground on which this Court should exercise extraordinary writ jurisdiction. The petition did not present any other compelling or novel ground warranting departure from the ordinary rule that alternative statutory remedies must be exhausted. In view of these considerations the Court declined to entertain the contention on vires of the impugned notification and related adjudication and dismissed the petition. [Paras 8]
Petition dismissed as not maintainable; petitioner to avail remedy of appeal under Section 107.
Final Conclusion: The writ petition challenging the validity of Notification No. 56/2023-Central Tax dated 28.12.2023 and the impugned adjudication for April, 2019 to March, 2020 is dismissed on the ground that an alternative efficacious remedy by appeal under Section 107 is available and no exceptional circumstance was shown to warrant exercise of Article 226 jurisdiction.
Issues: Whether two show cause notices for the same period, but covering different and distinct subject matters, could be issued and sustained.
Analysis: The notices were found to relate to different controversies, one concerning availment of input tax credit on taxable and exempted supplies and the other concerning misclassification of the product as exempted instead of taxable goods. On that basis, there was held to be no legal bar to issuance of more than one show cause notice for the same period where the subject matter is distinct.
Conclusion: The challenge to the subsequent notice failed and no interference was warranted.
Show cause notice - no bar in law to issue multiple show cause notices for the same period on different subject matters - distinct subject matter adjudication - consolidation of proceedings by authorities
Show cause notice - no bar in law to issue multiple show cause notices for the same period on different subject matters - distinct subject matter adjudication - Validity of issuing more than one show cause notice for the same period where the notices concern different and independent subject matters. - HELD THAT: - The Court examined both impugned notices and found that their subject matters are totally different and independent. On that basis the Court held that there is no legal prohibition against issuing more than one show cause notice for the same period where each notice pertains to a distinct subject matter. The determinative reasoning is that multiplicity of notices is permissible so long as they address separate and independent controversies, and therefore the subsequent notice dated 04.08.2024 could not be set aside on the ground that an earlier notice for the same period had been issued. [Paras 7]
No interference with the impugned show cause notice; issuance of multiple notices for the same period on different subject matters is not barred in law.
Consolidation of proceedings by authorities - show cause notice - Whether requirement to appear before different authorities for adjudication of separate notices justifies quashing of the subsequent notice or requires consolidation by the Court. - HELD THAT: - The Court recognised the petitioner's concern that attendance before different authorities may be cumbersome and could lead to conflicting findings. It, however, declined to quash the notice on that ground. Instead the Court observed that the petitioner is free to approach the respective authorities and, upon such approach, the authorities would consider the matter and examine the viability of having both show cause notices adjudicated by the same authority. This directs the parties to seek administrative consolidation or consideration by the authorities rather than judicially invalidating the later notice. [Paras 8]
Petitioner may approach the authorities; authorities shall consider and examine whether both notices can be adjudicated by the same authority.
Final Conclusion: Petition dismissed; impugned show cause notice dated 04.08.2024 is not interfered with because it relates to a different and independent subject matter, and the petitioner may seek consolidation or consideration from the authorities for adjudicating multiple notices.
Issues: Whether anticipatory bail should be granted to the petitioner in a prosecution alleging tax evasion and related offences under the GST framework.
Analysis: The petition was considered in the light of the lapse of more than five years since registration of the FIR, the fact that the investigation was substantially documentary in nature, and the position that the input tax credit availed by the petitioner's firm had already been reversed. The record also indicated that the main accused had obtained regular bail and a similarly placed co-accused had been granted anticipatory bail. In these circumstances, custodial interrogation was found unnecessary.
Conclusion: Anticipatory bail was granted to the petitioner.
Anticipatory bail - reversal of input tax credit (ITC) - delay in arrest and prosecutorial delay - documentary evidence seized during investigation - concession of bail to co-accused as relevant consideration - conditions for grant of anticipatory bail under Section 482(2) of B.N.S.S - custodial interrogation not essential where documentary evidence predominates
Anticipatory bail - reversal of input tax credit (ITC) - delay in arrest and prosecutorial delay - documentary evidence seized during investigation - concession of bail to co-accused as relevant consideration - conditions for grant of anticipatory bail under Section 482(2) of B.N.S.S - Grant of anticipatory bail to the petitioner in FIR No.191 dated 18.06.2019. - HELD THAT: - The Court considered the prosecutorial delay of over five years and six months between registration of the FIR and the attempt to arrest the petitioner, the fact that documentary evidence has already been taken into possession by the police, and that the petitioner has reversed the Input Tax Credit claimed by his firm. The Court noted that co-accused, including the main accused and another similarly placed accused, have already been granted bail by the Court, and that custodial interrogation of the petitioner appears unnecessary in light of the documentary record and the reversal of ITC. Balancing these circumstances and without adjudicating the merits of the underlying allegations of tax evasion, the Court exercised its inherent jurisdiction to grant anticipatory bail subject to compliance with the statutory conditions laid down in Section 482(2) of B.N.S.S. The Investigating Officer remains at liberty to require the petitioner to join investigation by issuing a written notice, and the petitioner must abide by the conditions of the concession. [Paras 6, 7]
Petition allowed; petitioner granted anticipatory bail subject to the conditions specified in Section 482(2) of B.N.S.S, and subject to appearance if called by the Investigating Officer by written notice.
Final Conclusion: The petition under Section 482 is allowed and anticipatory bail is granted to the petitioner in respect of FIR No.191 dated 18.06.2019 on the stated conditions; no comment is made on the merits of the criminal allegations.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Validity of the Attachment as a Show Cause Notice
Issue 2: Lack of Signature on Attachments
Issue 3: Opportunity of Hearing
Issue 4: Application of Rule 26(3) to Chapter XVIII
3. SIGNIFICANT HOLDINGS
Show Cause Notice under Section 73 - Summary of Show Cause Notice in Form GST DRC-01 not a substitute for Show Cause Notice - Statement of determination under Section 73(3) distinct from Show Cause Notice - Authentication of notices/orders by Proper Officer under Rule 26(3) - Opportunity of hearing under Section 75(4) - Requirement that Show Cause Notice, Statement and Order be issued by the Proper Officer
Show Cause Notice under Section 73 - Summary of Show Cause Notice in Form GST DRC-01 not a substitute for Show Cause Notice - Statement of determination under Section 73(3) distinct from Show Cause Notice - Validity of initiating proceedings under Section 73 by attaching the statement of determination to the Form GST DRC-01 without issuing a separate Show Cause Notice under Section 73(1). - HELD THAT: - The Court held that Rule 142 requires issuance of a summary in Form GST DRC-01 in addition to, and not in substitution for, the Show Cause Notice and the Statement of determination. Section 73(1) requires a Show Cause Notice specifying reasons for invoking that provision; Section 73(3) provides for a Statement of determination which is distinct. The attachment to the summary that contains the Statement of determination cannot be treated as the Show Cause Notice required under Section 73(1). Consequently, initiation of proceedings under Section 73 without issuance of a proper Show Cause Notice is contrary to Section 73 and Rule 142(1)(a) and is invalid. [Paras 13, 14, 15, 16, 27]
Proceedings initiated under Section 73 by relying solely on the attachment to GST DRC-01 (statement of determination) without issuing a Show Cause Notice under Section 73(1) are invalid; the impugned order was set aside on this ground.
Authentication of notices/orders by Proper Officer under Rule 26(3) - Requirement that Show Cause Notice, Statement and Order be issued by the Proper Officer - Effect of absence of authentication/signature on the attachments to GST DRC-01 and GST DRC-07 and applicability of Rule 26(3) to demand and recovery proceedings. - HELD THAT: - Rule 26(3) prescribes electronic issuance and authentication of notices, certificates and orders through digital signature, e-signature or other notified modes, though it is located in Chapter III (Registration). The Court observed that because Section 73 mandates that Show Cause Notice, Statement and Order be issued by the Proper Officer, authentication by the Proper Officer is essential; failure to authenticate renders such documents ineffective. In the absence of an adequate filling of the procedural gap in the Rules, the authentication standard in Rule 26(3) must be applied when notices, statements and orders are issued under Section 73. The attachments in the present case lacked proper authentication and therefore had no efficacy. [Paras 19, 20, 21, 22, 27]
Attachments to GST DRC-01 and GST DRC-07 without authentication by the Proper Officer are ineffective; Rule 26(3)'s mode of authentication must be applied to notices/statements/orders required under Section 73.
Opportunity of hearing under Section 75(4) - Whether an opportunity of hearing as mandated by Section 75(4) is required before passing an adverse order when the person charged has requested personal hearing in the reply form. - HELD THAT: - Section 75(4) mandates that where a request in writing for hearing is received from the person chargeable with tax or penalty, or where an adverse decision is contemplated, an opportunity of hearing must be granted. The Form GST DRC-06 contains an option for personal hearing and the petitioner had indicated 'Yes', but no hearing was afforded. The Court held that where the statute clearly provides for a hearing, the proper officer cannot pass an adverse order without providing that opportunity; doing so would render the protection under Section 75(4) redundant. [Paras 23, 24, 25, 26, 27]
Failure to grant the statutorily mandated opportunity of hearing under Section 75(4) before passing an adverse order vitiates the order.
Show Cause Notice under Section 73 - Relief and further course of action after finding the impugned order invalid. - HELD THAT: - Having held the impugned order invalid for lack of proper Show Cause Notice, absence of authentication and denial of hearing, the Court set aside and quashed the impugned order dated 29.12.2023. In the interest of justice the Court granted liberty to respondent authorities to initiate de novo proceedings under Section 73, if deemed fit, for the relevant financial year and directed exclusion of the period from issuance of the GST DRC-01 summary until service of a certified copy of the judgment for computation of the time limit under Section 73(10). [Paras 28, 29]
Impugned order set aside and quashed; liberty granted to initiate de novo proceedings under Section 73 and specified period excluded for computation under Section 73(10).
Final Conclusion: The writ petition is allowed: the Court held that a summary in Form GST DRC-01 and the attached Statement of determination cannot substitute for a Show Cause Notice under Section 73(1); notices, statements and orders required under Section 73 must be authenticated by the Proper Officer in the manner required; an opportunity of hearing under Section 75(4) must be afforded before passing an adverse order; the impugned order dated 29.12.2023 is set aside and quashed with liberty to the authorities to initiate de novo proceedings and with exclusion of the period specified for limitation purposes.
Issues: Whether the demand order under Section 73 of the Assam Goods and Services Tax Act, 2017 was sustainable when no prior show cause notice had been issued and only the summary in Form GST DRC-01 together with the attachment to determination of tax had been served.
Analysis: The Summary of Show Cause Notice in Form GST DRC-01 and the attachment to determination of tax were held not to be a substitute for a proper show cause notice under Section 73(1). The statutory scheme requires the proper officer to issue the show cause notice, the statement under Section 73(3), and the order under Section 73(9) in the manner prescribed, and compliance with the procedural requirements is a condition precedent to a valid demand order. In the absence of a prior show cause notice and due observance of the statutory procedure, the impugned order could not be sustained. The issue of opportunity of hearing was also noted as part of the procedural infirmity.
Conclusion: The demand order was invalid and liable to be set aside for want of a proper prior show cause notice and non-compliance with the mandatory procedure.
Final Conclusion: The writ petition succeeded, the impugned demand order was quashed, and the authorities were left free to initiate proceedings afresh in accordance with law.
Ratio Decidendi: In proceedings under Section 73, service of a summary notice cannot replace the statutory show cause notice, and strict compliance with the prescribed notice and hearing procedure is mandatory before a valid demand order can be passed.
Show Cause Notice under Section 73(1) - Summary of Show Cause Notice in FORM GST DRC-01 - Statement of determination under Section 73(3) - Requirement of issuance and authentication by the Proper Officer - Compliance with Rule 142(1) - Principles of natural justice and opportunity of hearing - Validity of order under Section 73(9) as contingent on compliance with Sections 73(1)-(8) and (10)-(11)
Show Cause Notice under Section 73(1) - Summary of Show Cause Notice in FORM GST DRC-01 - Statement of determination under Section 73(3) - Compliance with Rule 142(1) - Whether the Summary of Show Cause Notice in FORM GST DRC-01 together with the Attachment (Statement of determination) can substitute for the Show Cause Notice required under Section 73(1) - HELD THAT: - The Court held that the Summary of the Show Cause Notice in FORM GST DRC-01 is not a substitute for the Show Cause Notice mandated by Section 73(1). The Statement of determination appended to the summary corresponds to Section 73(3) and cannot be treated as initiating notice under Section 73(1). Compliance with subsections (1) to (8) and (10) to (11) of Section 73 and with Rule 142(1) are conditions precedent to the validity of an order under Section 73(9). The issuance of only the summary and the attachment, without a proper Show Cause Notice issued by the Proper Officer and authenticated as required, does not set the statutory proceeding in motion and is not in conformity with the statutory scheme. [Paras 10, 11, 12, 29]
The Summary in FORM GST DRC-01 and the Attachment under Section 73(3) do not substitute for the Show Cause Notice under Section 73(1); the impugned proceedings initiated without a proper Show Cause Notice are not sustainable.
Requirement of issuance and authentication by the Proper Officer - Principles of natural justice and opportunity of hearing - Validity of order under Section 73(9) as contingent on compliance with Sections 73(1)-(8) and (10)-(11) - Whether the impugned order passed under Section 73(9) complied with the mandates of Section 75(4) and principles of natural justice - HELD THAT: - The Court observed that the Show Cause Notice, the Statement under Section 73(3) and the Order under Section 73(9) are required to be issued by the Proper Officer and authenticated as stipulated. The impugned orders did not afford the opportunity of hearing required by Section 75(4) and the principles of natural justice because they were founded on the defective procedure of issuing only summaries and attachments without a proper Show Cause Notice. Consequently, such orders violate the statutory requirement of prior notice and a hearing. [Paras 8, 11, 29]
The impugned order is in violation of Section 75(4) and principles of natural justice for lack of a proper Show Cause Notice and opportunity of hearing.
Validity of order under Section 73(9) as contingent on compliance with Sections 73(1)-(8) and (10)-(11) - Liberty to initiate de novo proceedings - Whether the impugned order should be set aside and whether the authorities may initiate fresh proceedings - HELD THAT: - Applying the conclusions reached about the invalidity of proceedings initiated by summaries and attachments, the Court found the impugned order unsustainable and set it aside and quashed it. Noting that the defect was procedural/technical, the Court granted liberty to the respondent authorities to initiate de novo proceedings under Section 73 after complying with the statutory requirements (including issuance of a valid Show Cause Notice by the Proper Officer). The Court directed exclusion of the period from issuance of the summary till service of certified copy of the judgment when computing the limitation under Section 73(10). [Paras 12, 14, 29]
The impugned order is quashed; respondent authorities are permitted to initiate de novo proceedings in accordance with statutory requirements, with the specified period excluded for limitation purposes.
Final Conclusion: The writ petition is allowed: the order passed under Section 73(9) is set aside because initiation of proceedings on the basis of the Summary (FORM GST DRC-01) and the attached Statement under Section 73(3) without a Show Cause Notice under Section 73(1) and without compliance by the Proper Officer violated statutory mandates and principles of natural justice; liberty is granted to the authorities to proceed de novo in accordance with the Act and rules, with the prescribed period excluded for computation of limitation.
1. ISSUES PRESENTED and CONSIDERED
The primary legal issues considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Mistake Apparent on Record in Applying Supreme Court Decision
Issue 2: Definition of "Local Authority" under GST Act
Issue 3: Incorrect Citation of JSW Energy Ltd. Case
3. SIGNIFICANT HOLDINGS
In summary, the court's decision emphasized the importance of finality in judgments and the limited scope for review, correcting only the citation error while maintaining its original conclusions on the substantive legal issues.
Rectification of mistake - mistakes apparent on record - Exemption from GST - pure services or supply of goods to the Notified Area Authority, Vapi - Notified Area Authority, Vapi is a “local authority” or “governmental authority”? - HELD THAT:- It is a settled law with regard to the review of the Judgment. Review means reexamination or reconsideration. Basic philosophy inherent in it is the universal acceptance of the human fallibility as held by the Apex Court in case of S. NAGARAJ AND ORS. VERSUS STATE OF KARNATAKA AND ANR. [1993 (8) TMI 292 - SUPREME COURT].
A Judgment may be open to review if there is a mistake or error apparent on face of the record as the review jurisdiction is not an appellate jurisdiction where error of law can be corrected. An erroneous decision can be corrected by the higher forum. Review therefore, is by no means an appeal in disguise as held by the Calcutta High Court in case of Joginder Pal Kapoor Versus R L Plantation Pvt. Ltd. [2006 (3) TMI 814 - CALCUTTA HIGH COURT] wherein it is held that 'We do not consider that this furnishes a suitable occasion for dealing with this difference exhaustively or in any great detail, but it would suffice for us to say that where without any elaborate argument one could point to the error and say here is a substantial point of law which stares one in the face, and there could reasonably be no two opinions entertained about it, a clear case of error apparent on the face of the record would be made out.'
In view of above settled legal position of law, when the issue as to whether the applicant original petitioner would fall within the local authority or not is decided by this Court, the same cannot be reviewed again as it would amount to sitting in appeal by this Court itself on its own judgment and order.
Conclusion - i) Review literally and even judicially means re-examination or reconsideration. Basic philosophy inherent in it is the universal acceptance of human fallibility. Yet in the realm of law the courts and even the statutes lean strongly in favour of finality of decision legally and properly made. ii) There was no mistake apparent on the record regarding the application of the Supreme Court decision and the GST Act's definition of "local authority."
This application is partly allowed.
Issues: Whether an assessment order in Form GST DRC-07 is invalid when it does not bear the signature of the assessing officer, and whether such defect can be cured by Sections 160 and 169 of the Central Goods and Services Tax Act, 2017.
Analysis: The order challenged before the Court was an assessment order issued in Form GST DRC-07 without the signature of the assessing officer. The Court followed earlier Division Bench decisions holding that signature on an assessment order is not a dispensable formality and that the defect is not cured by the saving or service provisions in Sections 160 and 169 of the Central Goods and Services Tax Act, 2017.
Conclusion: The unsigned assessment order was held invalid and was set aside.
Ratio Decidendi: An assessment order under the GST regime must bear the signature of the assessing officer, and the absence of such signature renders the order invalid without being cured by Sections 160 and 169 of the Central Goods and Services Tax Act, 2017.
Challenge to assessment order, in Form GST DRC-07 - the proceeding does not contain the signature of the assessing officer - HELD THAT:- The effect of the absence of the signature, on an assessment order was earlier considered by this Court, in the case of AV BHANOJI ROW VERSUS ASSISTANT COMMISSIONER ST VISAKHAPATNAM [2023 (2) TMI 1224 - ANDHRA PRADESH HIGH COURT]. A Division Bench of this Court, had held that the signature, on the assessment order, cannot be dispensed with and that the provisions of Sections-160 & 169 of the Central Goods and Service Tax Act, 2017, would not rectify such a defect. Following this Judgment, another Division Bench of this Court, in the case of M/S. SRK ENTERPRISES, VERSUS ASSISTANT COMMISSIONER (ST), BHEEMILI CIRCLE, VISAKHAPATNAM [2023 (12) TMI 156 - ANDHRA PRADESH HIGH COURT], had set aside the impugned assessment order.
Conclusion - The impugned assessment order would have to be set aside on account of the absence of the signature of the assessing officer, on the impugned assessment order.
Petition allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Justification of GST Registration Cancellation
Issue 2: Right to Seek Restoration Post-Appeal Period
Issue 3: Conditions for Revocation of Cancellation
3. SIGNIFICANT HOLDINGS
Cancellation of GST registration for non-filing of returns - Revocation and restoration of GST registration upon payment of statutory dues - Duty of authority to intimate outstanding statutory dues - Writ jurisdiction where statutory appeal is time barred
Cancellation of GST registration for non-filing of returns - Writ jurisdiction where statutory appeal is time barred - Revocation and restoration of GST registration upon payment of statutory dues - Validity of cancellation of the petitioner's GST registration and availability of writ remedy in view of expiry of statutory time for appeal. - HELD THAT: - The Court found that the petitioner's GST registration had been cancelled for continuous non-filing of returns. Although an appellate remedy under the CGST Act was available, the petitioner did not file an appeal within the statutory period and the appellate authority lacked power to condone the delay beyond the prescribed limit. Having regard to precedent from Co ordinate Benches and the public interest in revenue recovery, the Court exercised writ jurisdiction to examine the matter. In the exercise of that jurisdiction the Court concluded that the impugned cancellation order ought to be set aside subject to the departmental process for quantification and collection of statutory dues; similar reliefs had been granted by other Benches in like cases, and there was no purpose in keeping the petition pending. [Paras 7, 8, 9]
Impugned order dated 07.03.2024 set aside and writ petition allowed to the extent that the matter is directed to be processed for restoration of registration upon satisfaction of statutory dues.
Duty of authority to intimate outstanding statutory dues - Revocation and restoration of GST registration upon payment of statutory dues - Procedure to be followed for restoration of the petitioner's GST registration. - HELD THAT: - The Court directed that the Superintendent shall intimate to the petitioner the total outstanding statutory dues, if any, standing in the petitioner's name up to the date of cancellation. Upon such intimation the petitioner is to deposit the outstanding statutory dues without fail. After receipt of payment, the respondent authority is to pass appropriate orders revoking the cancellation and restoring the GST registration. The direction contemplates departmental verification and computation of outstanding dues and restoration upon compliance by the petitioner. [Paras 9]
Respondent to intimate outstanding dues; petitioner to pay; upon payment respondent to revoke cancellation and restore registration.
Final Conclusion: The order cancelling the petitioner's GST registration dated 07.03.2024 is set aside; the Superintendent shall inform the petitioner of outstanding statutory dues, the petitioner shall pay such dues, and upon payment the registration shall be restored. Writ petition disposed of accordingly; no costs.
ISSUES PRESENTED AND CONSIDERED
1. Whether an assessment order under the GST Act that does not bear the signature of the assessing officer is valid.
2. Whether an assessment order under the GST Act that does not contain a Document Identification Number (DIN), as per CBIC circular requirements and judicial pronouncements, is valid.
3. Remedy and consequence where an assessment order is found to be unsigned and/or without a DIN: whether the order must be set aside and whether fresh assessment may be conducted.
ISSUE-WISE DETAILED ANALYSIS
Issue 1: Validity of an assessment order lacking the signature of the assessing officer
Legal framework: The GST framework requires proper authentication of orders issued by tax authorities. Statutory provisions (as invoked in related case law) and principles of administrative validity require that orders indicate the responsible officer's authentication.
Precedent Treatment: The Court relied on prior Division Bench decisions of this High Court that held the signature on an assessment order cannot be dispensed with and that defects of absence of signature are not cured by reliance on general validating provisions (notably referenced decisions which set aside unsigned orders).
Interpretation and reasoning: The Court accepted the prior reasoning that absence of the assessing officer's signature denotes lack of authentication and undermines the validity of the assessment. The Court found, on record and on instruction of the revenue, that the impugned order indeed lacked the assessing officer's signature. The Court treated the signature requirement as essential to the validity of an assessment order.
Ratio vs. Obiter: Ratio - an assessment order under the GST regime that does not bear the signature of the assessing officer is invalid and liable to be set aside. The Court followed existing precedents of this Court which established this as a controlling principle.
Conclusions: The absence of the signature on the impugned Form GST DRC-07 renders the assessment order invalid and requires setting aside the order.
Issue 2: Validity of an assessment order lacking a DIN
Legal framework: The Central Board of Indirect Taxes and Customs (CBIC) issued a circular prescribing the use/mention of a Document Identification Number (DIN) on GST orders; the statutory and administrative scheme contemplates such identification for traceability and authentication.
Precedent Treatment: The Court referred to the Supreme Court's treatment that orders without a DIN are non-est and invalid, and to Division Bench decisions of this High Court which have held non-mention of a DIN mitigates against validity and necessitates setting aside orders lacking DIN.
Interpretation and reasoning: The Court noted the combined effect of the CBIC circular and higher judicial pronouncements that require DIN on orders for them to be valid. On the facts, the impugned assessment order did not contain a DIN, and counsel for the revenue conceded this. The Court treated the absence of DIN as a material defect affecting validity.
Ratio vs. Obiter: Ratio - an order under the GST Act that does not contain the DIN, as required or prescribed by the CBIC circular and recognised by higher judicial authority, is invalid.
Conclusions: The absence of a DIN on the impugned assessment order mandates setting aside the order.
Issue 3: Appropriate remedy where an assessment order is unsigned and/or lacks DIN; limitation consequences
Legal framework: Principles of administrative law permit setting aside of invalid administrative orders and allow the authority to reissue a valid order following prescribed formalities; limitation rules may be adjusted to account for periods when invalid orders were in existence.
Precedent Treatment: The Court followed prior High Court precedents that set aside defective assessment orders and afforded revenue opportunity to re-assess after complying with formal requirements (signature, DIN, notice).
Interpretation and reasoning: Given the dual defects (absence of signature and DIN), and consistent with the cited authorities and the CBIC circular, the Court found the only appropriate remedy is to set aside the impugned assessment order and permit the revenue to conduct a fresh assessment. The Court imposed the condition that fresh proceedings be preceded by notice and that the reassessed order carry an assigned signature. To avoid prejudice to limitation, the Court excluded the period from issuance of the impugned order until receipt of the present Order for reckoning purposes.
Ratio vs. Obiter: Ratio - where an assessment order is invalid for lack of signature and/or DIN, it must be set aside; the revenue may re-assess after giving notice and ensuring the reissued order bears proper authentication (signature and DIN). The exclusion of the period for limitation purposes is a consequential remedial direction.
Conclusions: The impugned assessment order is set aside. The revenue is granted liberty to conduct fresh assessment after issuing notice and assigning a signature to the order; the period from the date of the impugned order until receipt of the present Order is excluded for limitation. No costs were awarded.
Challenge to assessment order, in Form GST DRC-07, dated 30.04.2024 - the said proceeding does not contain the signature of the assessing officer and also DIN number, on the impugned assessment order - HELD THAT:- A Division Bench of this Court in the case of M/S. CLUSTER ENTERPRISES VERSUS THE DEPUTY ASSISTANT COMMISSIONER (ST) -2 ANDHRA PRADESH, THE ASSISTANT COMMISSIONER (ST) (FAC) , PRODDUTUR-II CIRCLE, THE COMMISSIONER OF STATE TAX, GUNTUR, STATE OF ANDHRA PRADESH. [2024 (7) TMI 1512 - ANDHRA PRADESH HIGH COURT], on the basis of the circular, dated 23.12.2019, bearing No. 128/47/2019-GST, issued by the C.B.I.C., had held that non-mention of a DIN number would mitigate against the validity of such proceedings. Another Division Bench of this Court in the case of SAI MANIKANTA ELECTRICAL CONTRACTORS VERSUS THE DEPUTY COMMISSIONER, SPECIAL CIRCLE, VISAKHAPATNAM-II, THE DEPUTY COMMISSIONER (ST) , STATE OF ANDHRA PRADESH, THE CHAIRMAN, MANAGING DIRECTOR VISAKHAPATNAM, THE EXECUTIVE ENGINEER, OPERATION DIVISION VIZIANAGARAM. [2024 (6) TMI 1158 - ANDHRA PRADESH HIGH COURT] had also held that non-mention of a DIN number would require the order to be set aside.
Conclusion - The non-mention of a DIN number and absence of the signature of the assessing officer, in the impugned assessment order would have to be set aside.
Petition allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Retrospective or Prospective Application of the Amendment
Issue 2: Entitlement to Refund under Amended Formula
Issue 3: Validity of CBIC Circular
3. SIGNIFICANT HOLDINGS
Rejection of refund applications based on Section 54 (3) of the GST Act read with Rule 89 (5) of the GST Rules - rejection of refund on the ground that the refund was not admissible since the refund as per the old formula was already granted to the petitioners - HELD THAT:- Reliance placed in the case of Ascent Meditech Ltd. [2024 (12) TMI 511 - GUJARAT HIGH COURT] where it was held that 'The Circular No. 181/22 dated 10.11.2022 so far as it clarifies that the amendment is not clarificatory in nature is quashed and set aside and it is held that the Notification No. 14/2022 is applicable retrospectively as the amendment brought in Rule 89 (5) of the Rules is curative and clarificatory in nature and the same would be applicable retrospectively to the refund or rectification applications filed within two years as per the time period prescribed under section 54 (1) of the Act. Rule is made absolute to the aforesaid extent.'
The aforesaid decision of this Court is squarely applicable to the facts of the present group of petitions and nothing could be pointed out by the respondents to persuade this Court from taking a different view.
Conclusion - Amendment to Rule 89(5) is applicable retrospectively, the petitioners are entitled to refunds under the amended formula, and the CBIC circular's prospective application is invalid.
Petition allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions addressed in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Mismatch between Forms GSTR-9 and GSTR-9C
Issue 2: Consideration of Petitioner's Reply and Documents
Issue 3: Procedural Fairness and Absence at Personal Hearing
Issue 4: Sustainability of Impugned Orders under GST Act
3. SIGNIFICANT HOLDINGS
The court's decision underscores the importance of procedural fairness and the requirement for authorities to thoroughly consider all evidence and submissions in tax adjudications.
Failure to consider reply - non-application of mind - opportunity of hearing - remand for de novo adjudication - burden of proof - verification of documentary evidence - show-cause notice under Section 73 of the Central Goods and Service Tax Act
Failure to consider reply - verification of documentary evidence - burden of proof - opportunity of hearing - non-application of mind - remand for de novo adjudication - Validity of the impugned orders in original which upheld disallowance on account of variance between Forms GSTR-9 and GSTR-9C without considering the reply and annexed documents and without affording effective hearing - HELD THAT: - The Court found that the Adjudicating Authority issued show-cause notice under Section 73 of the CGST Act and, after receiving a written reply (which included supporting documents), confirmed the demand relying on the variance between GSTR-9 and GSTR-9C. The Adjudicating Authority's reasoning recorded that no documentary evidence had been provided and that the taxpayer failed to appear for personal hearing, concluding that the taxpayer failed to discharge the burden of proof (recorded at para 12.9). On scrutiny the High Court observed that the impugned order does not engage with or discuss the details and documents annexed to the reply; instead, the conclusion appears to be based on the petitioner's non-appearance, thereby treating non-appearance as equivalent to absence of supporting evidence. That approach amounted to a non-application of mind because the written reply and annexures, though on record, were not considered on their merits. In view of these defects, the Court held that the matters required fresh adjudication: the impugned orders were quashed and the matters remanded for de novo decision, directing the Adjudicating Authority to consider the reply and supporting documents, to verify documentary assertions as necessary, and to afford the petitioner an opportunity of hearing within the stipulated time frame. [Paras 13, 14, 15]
Impugned orders quashed and set aside; matters remanded for de-novo adjudication after consideration of the reply and annexed documents and after affording opportunity of hearing to the petitioner.
Final Conclusion: The High Court allowed the petitions to the extent of quashing the impugned original orders for 2017-18 and remanded the matters to the Adjudicating Authority to decide afresh after considering the written reply and annexures, verifying documentary claims as appropriate and affording the petitioner a hearing within twelve weeks.
Outcome: The petition was disposed of as withdrawn to enable the petitioner to approach the concerned authority and raise all grounds in accordance with law.
Seeking withdarwal of petition - Non-payment of GST on royalty payments for the period 2018-19 to 2024-25 - HELD THAT:- The petitioner seeks withdrawal of this petition to approach the concerned authority in response to letter dated 07.11.2024 and raise all the grounds as per law. The same shall be taken care of by the authority concerned and ensure appropriate consequential follow up action as per law.
Petition disposed off.
Issues: Whether cancellation of the shop allotment and insistence on deposit of 25% of the bid amount with GST under the tender conditions warranted interference in writ jurisdiction.
Analysis: The allotment letter and tender conditions required the successful bidder to deposit 25% of the amount within the stipulated time and also pay GST on the sanctioned premium amount. The petitioner was aware of these conditions at the stage of bidding. Despite repeated opportunities and notices, no amount was deposited, and the objection to GST was raised only after allotment. The challenge to cancellation therefore did not disclose any arbitrariness or illegality in the respondents' action. The claim of parity with other bidders also failed because those bidders had deposited partial amounts, whereas the petitioner had not deposited anything.
Conclusion: The cancellation of allotment was upheld and no interference was called for in writ jurisdiction.
Final Conclusion: The writ petitions failed for non-compliance with the tender and allotment conditions, and the respondents were left free to proceed in accordance with law, including recovery of damages.
Ratio Decidendi: A successful bidder who knowingly accepts tender conditions cannot resist cancellation for non-deposit of the required amount by raising a belated objection, and writ interference is unwarranted absent demonstrated illegality or arbitrariness.
Cancellation of allotment for non-compliance with tender terms - deposit of upfront premium and GST liability known at bid stage - forfeiture or cancellation for failure to deposit prescribed amount - adequacy of opportunity of hearing before cancellation - competence to re-invite fresh NIT upon default by successful bidder
Deposit of upfront premium and GST liability known at bid stage - cancellation of allotment for non-compliance with tender terms - forfeiture or cancellation for failure to deposit prescribed amount - Validity of cancellation of the allotment of shop for failure to deposit 25% of the premium and applicable GST where the tender terms expressly required upfront deposit including GST. - HELD THAT: - The Court found that the NIT and its terms, specifically the obligation to deposit 25% of the premium within 21 days along with 18% GST on the sanctioned premium, were part of the tender conditions known to the petitioner at the time of bidding. The petitioner raised objections to the GST liability only after allotment and deliberately delayed payment. Respondents repeatedly afforded time to deposit the amount, but the petitioner did not comply. The non-deposit amounted to breach of the tender conditions and caused financial prejudice to the respondents, justifying cancellation and re-invitation of bids. The Court held that an objection to a condition known at the bid stage could not be used to avoid the contractual obligation post-allotment, and there was no scope to interfere with the respondents' action in cancelling the allotment for non-compliance. [Paras 9, 10]
Cancellation of allotment upheld as valid for failure to deposit the prescribed 25% premium and GST; no interference with respondents' action.
Adequacy of opportunity of hearing before cancellation - competence to re-invite fresh NIT upon default by successful bidder - Whether the petitioner was denied a proper opportunity of hearing and whether issuance of a fresh NIT prior to cancellation vitiated the process. - HELD THAT: - The Court recorded that the respondents granted multiple opportunities and issued final notices calling upon the petitioner to deposit the amount. The petitioner failed to deposit any amount despite repeated opportunities and notices; therefore the respondents were left with no option but to cancel the allotment and proceed with a fresh tender. The Court found no merit in the contention that cancellation was effected without adequate hearing or that issuance of a fresh NIT rendered the cancellation improper, and declined to disturb the respondents' exercise of power in the circumstances. [Paras 5, 10]
Petitioner's contention regarding denial of opportunity and the fresh NIT does not invalidate the cancellation; respondents were entitled to re-invite tenders after default.
Final Conclusion: Writ petitions dismissed; cancellation of allotment sustained for failure to comply with tender terms including deposit of 25% premium and GST, respondents entitled to claim damages and to proceed with fresh tendering.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Entitlement to Writ of Mandamus for GST Difference
Issue 2: Alternative Remedy under the Arbitration Act
Issue 3: Liability of Government Entity for Enhanced GST Rate
3. SIGNIFICANT HOLDINGS
Reimbursement of GST differential - interest for delayed payment - liability of a Government Entity under GST - writ of mandamus directing payment - application of stare decisis / parity with earlier Division Bench order
Reimbursement of GST differential - liability of a Government Entity under GST - writ of mandamus directing payment - interest for delayed payment - Direction to the respondent to pay the admitted difference of GST of 6% for the period 01.01.2022 to 30.09.2022 and consequences for non-payment. - HELD THAT: - The Court noted that the rate of GST was enhanced from 12% to 18% w.e.f. 01.01.2022 and that the petitioner had been paying GST at the enhanced rate while the respondent was making payments at the earlier rate. Respondent No.2 had, by letter, accepted liability to pay the additional 6% from 01.01.2022 but contended that state approval was pending. The Court observed that no disputed question of fact was raised and that the State GST Department likewise accepted that the enhanced rate applied and that the Government Entity was liable. Applying parity with the Division Bench order dated 12.12.2024 in WP No.39378 of 2024, the Court directed respondent No.2 to pay the difference of GST for the specified period within three months from receipt of certified copy of the order, and provided that failure to do so would entitle the petitioner to interest at the rate directed in the earlier order.
Petition disposed directing respondent to pay the 6% GST differential for 01.01.2022 to 30.09.2022 within three months, failing which interest as directed in the Division Bench order will follow.
Final Conclusion: The writ petition is disposed of by directing the respondent to reimburse the admitted GST differential of 6% for the period 01.01.2022 to 30.09.2022 within three months; in default the petitioner shall be entitled to interest as prescribed in the Division Bench order of 12.12.2024.
Issues: Whether the rejection of refund of TDS amounts lying in the electronic cash ledger required interference and reconsideration in the light of the later GST circular.
Analysis: The petitioner had sought refund of the surplus TDS amount remaining in the electronic cash ledger after discharge of tax liability. The refund claim had been rejected on the ground of unjust enrichment, and the appellate authority had affirmed that view. The later circular issued by the Central Board of Indirect Taxes and Customs clarified that refund of TDS/TCS amounts deposited in the electronic cash ledger is permissible in accordance with the proviso to sub-section (1) of section 54 read with sub-section (6) of section 49 of the Central Goods and Services Tax Act, 2017. In that background, the earlier orders required reconsideration.
Conclusion: The rejection orders were set aside and the matter was remanded to the respondents for fresh consideration in the light of the circular.
Final Conclusion: The refund dispute was not finally decided on merits, and the competent authorities were directed to reconsider the claim afresh within the stipulated time.
Ratio Decidendi: A refund claim relating to surplus TDS/TCS lying in the electronic cash ledger must be reconsidered where a subsequent binding circular clarifies permissibility of such refund under the GST refund scheme.
Refund of the left over TDS in the cash ledger, after his tax liability was discharged by using ITC available in his ledger - violation of Principle of Unjust Enrichment - HELD THAT:- The order of the Appellate Authority, is in a manner of speaking, superseded by the circular, issued by the Central Board of Indirect Taxes and Customs, dated 17.11.2021, bearing Circular No. 166/22/2021-GST, wherein refund of TDS/TCS amounts deposited in the electronic cash ledger is permissible, in accordance with the proviso to sub-section (1) of section 54, read with subsection (6) of section 49 of C.G.S.T. Act.
This Court deems it appropriate to dispose of this Writ Petition by setting aside the Order-in-Appeal bearing No. ZH371220OD95299, dated 26.12.2020 and the Order-in-Original bearing No. ZL3710190623900, dated 17.10.2019 and remanding the matter back to the respective respondents for reconsideration in the light of Circular No.166/22/2021-GST.
Petition disposed off.
Reopening of assessment u/s 147 - cash deposits made in the bank account of the petitioner - as decided by HC [2024 (11) TMI 1389 - DELHI HIGH COURT] threshold stage of issuing a notice u/s 148 AO is not required to finally conclude whether any income has escaped assessment. The notice merely initiates the reassessment proceedings. Thus, all rights and contentions of the petitioner to contest the quantum as well as the taxability of the amounts as reflected in the impugned notice and the impugned order are reserved - HELD THAT:- According to the learned counsel appearing for the petitioner what has been observed by the High Court in Para 10 of the impugned judgment is factually incorrect.
If that be so, it was expected of the petitioner to go back to the High Court pointing out that there is an error.
At this stage, the learned counsel sought permission to withdraw this petition as he intends to go back to the High Court.
Special Leave Petition is dismissed as not pressed.
Issues: Whether the Department's challenge was covered against it by the earlier decision on the treatment of bad debts and the effect of the retrospective amendment to the tax provision.
Analysis: The petition raised no fresh substantial question on the point that the subject issue had already been decided against the Department in the earlier binding decision. The retrospective amendment to Section 115JA of the Income-tax Act, 1961 and the principles concerning write-off of bad debts and deduction were noted, but the Court found that the issue urged by the Department stood covered by precedent.
Conclusion: The issue was answered against the Revenue and in favour of the assessee.
MAT computation - Entitlement to claim interest paid on borrowed capital - As submitted there was an amendment made with retrospective effect to Section 115JA of the Income Tax Act, 1961 the import of which is that the bad debts would ultimately be written off and they cannot be construed as a liability in the hands of the person who is to receive the outstanding dues.
HELD THAT:- This Court in the case of “VIJAYA BANK [2010 (4) TMI 46 - SUPREME COURT] observed that ultimately a bad debt can only be written off in its books of account by way of a debit to profit and loss account and simultaneously reducing corresponding amounts from loans and advances to debtors effected on the assets side in the balance sheet at the close of the year. Consequently, the assessee would be entitled to deduction under Section 36(1)(7) of the Act.
The issue which has been raised by the petitioner-Department in this case is covered against the Department in HCL COMNET SYSTEMS & SERVICES LTD.’s case [2008 (9) TMI 18 - SUPREME COURT]. Consequently, the petition is dismissed leaving open any other question which may have arisen in this Special Leave Petition.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Jurisdiction of AO to Issue Notice under Section 148
Issue 2: Period of Limitation under Section 149(1)(a)
Issue 3: Influence of Superior Authority
3. SIGNIFICANT HOLDINGS
Reopening of assessment u/s 147 - period of limitation as specified u/s 149 (1) (a) - as argued value of the transactions identified by AO as suggestive of the petitioner’s income escaping assessment is less than Rs. 50,00,000/-
Whether on the basis of material available on record, the AO could have concluded that the income chargeable to tax amounting to Rs. 50,00,000/- or more which had escaped assessment? - HELD THAT:- In terms of Section 148A(c) of the Act, the AO was required to take an informed decision after considering the petitioner’s response to the impugned notice issued u/s 148A(b) of the Act. Petitioner had asserted that the amount received from one of the entities (GMZ Commodities Pvt. Ltd.) was on account of profit on sale of shares, which had been surrendered to tax.
In the present case, the Revenue has been unable to show any documents that would establish that the petitioner had received any amount in its books of account or otherwise, which was in excess of the amount as claimed by the petitioner in its response dated 31.05.2022.
The contention that the AO is not required to form an opinion as to the correctness of the information available with it, is erroneous.
AO is required to form an opinion as to whether there is any credible information to substantiate that the petitioner’s assertion that the aggregate value of the transactions in question is less than Rs. 50,00,000/-, is incorrect.
Clearly, at the stage of passing an order u/s 148A (d) AO was not required to form any conclusive view as to whether the entries in question represented income that had escaped assessment. The question whether the said entities are accommodation entries may be a contentious issue.
The fundamental facts – that the petitioner had transactions with the named companies of an aggregate value of Rs. 66,44,134/- was required to be determined on the basis of the record. Whilst, the petitioner had produced ledger accounts, the AO did not have any material to substantiate that deposits aggregating Rs. 66,44,134/- were made in the petitioner’s bank account to contradict the same. The fundamental basis on which the petitioner’s assessment is sought to be reopened is that it had entered into the transactions of a value of Rs. 66,44,134/- during the FY 2014-15. Clearly, the AO is required to be satisfied that such entries exists particularly where the petitioner had produced its accounts to show that the value of transactions is not as stated in the notice under Section 148A(b) of the Act.
The present petition is allowed and the impugned order and the impugned notice are set aside.
1. ISSUES PRESENTED and CONSIDERED
The primary legal issue presented and considered in this judgment is:
2. ISSUE-WISE DETAILED ANALYSIS
Relevant Legal Framework and Precedents
The legal framework revolves around the computation of undisclosed income during a block assessment period, as governed by Section 158BB of the Income Tax Act. This section mandates that undisclosed income should be computed based on material found and seized during a search operation.
Court's Interpretation and Reasoning
The Tribunal examined the findings of the CIT (Appeals) and the Assessing Officer. It emphasized that the CIT (Appeals) had based its decision on the seized material, specifically Annexure A/12, which was corroborated by affidavits from farmers confirming the selling price of the land. The Tribunal found that the Assessing Officer was bound to accept the cost of land as shown in the seized documents, as it was a factual determination supported by evidence.
Key Evidence and Findings
The key evidence included the seized documents, particularly Annexure A/12, which detailed the cost of land. Affidavits from farmers confirmed the selling price, supporting the CIT (Appeals)'s valuation. The CIT (Appeals) had enhanced the sale consideration by Rs. 25,00,000, a point not contested by the assessee.
Application of Law to Facts
The Tribunal applied Section 158BB, emphasizing that undisclosed income should be computed based on seized material. It found the CIT (Appeals)'s determination of the land cost at Rs. 9,53,83,887 to be valid and legally sound, as it was based on the seized documents and corroborated by affidavits.
Treatment of Competing Arguments
The Tribunal considered the Revenue's argument that the sale consideration should be higher, but it dismissed this contention, finding no illegality in the CIT (Appeals)'s order. The Tribunal also addressed the assessee's argument regarding the valuation of unsold plots, agreeing that the CIT (Appeals) should have valued them at Rs. 210 per sq. yd. instead of Rs. 330 per sq. yd.
Conclusions
The Tribunal concluded that the CIT (Appeals) had correctly computed the undisclosed income based on the seized material. It reduced the addition from Rs. 17,40,337 to Rs. 3,78,517, but sustained the addition at Rs. 10,00,000 in line with the undisclosed income returned by the assessee.
3. SIGNIFICANT HOLDINGS
Preserve Verbatim Quotes of Crucial Legal Reasoning
"Section 158BB clearly lays down that undisclosed income has to be computed on the basis of material found and seized during the course of search."
"The AO was bound to accept the cost of the land as shown in the seized document."
Core Principles Established
Final Determinations on Each Issue
Undisclosed income from Shipgram Scheme - ITAT restricted addition - HELD THAT:- On perusal of the above findings of the Tribunal, we are of the opinion that the same are factual being the findings of fact upholding the findings of fact arrived at by the CIT (Appeals) coupled with the fact that the estimate has been made by the CIT (Appeals) for allocating the sum between the Assessee and M/s. Shivganga Builders @ 30% and 70% for sustaining the addition to the extent of 30%. In view of the concurrent findings of fact arrived at by the CIT (A) and Tribunal, we decline to answer the question being a question of fact confirming the order passed by the Tribunal. These appeals are accordingly dismissed.
Issues: Whether the complaint and criminal proceedings alleging offences under the Income-tax Act could be quashed in exercise of inherent powers under Section 482 of the Code of Criminal Procedure, 1973 at the initial stage.
Analysis: The petition sought quashing on the premise that the allegations were false, premature, and did not disclose any offence. The complaint specifically alleged offences under Sections 276C(1) and 277 of the Income-tax Act, 1961, and the Court noted that such offences are treated as cognizable under Section 279A of the same Act. Applying the settled principle governing quashing jurisdiction, the Court held that at the stage of considering quashing, it cannot embark upon an enquiry into the reliability or genuineness of the allegations, nor can it assess the defence that the petitioners may raise before the trial court. The grounds urged were found to be matters of defence to be tested in the criminal proceedings.
Conclusion: The complaint and the proceedings were not liable to be quashed under Section 482 of the Code of Criminal Procedure, 1973.
Ratio Decidendi: Inherent jurisdiction to quash criminal proceedings should not be exercised where the complaint discloses cognizable offences and the challenge is founded on disputed defence pleas, as such matters must ordinarily be left for trial.
Commission of offences u/s 276C (1) r.w.s. 277 - considering total sale consideration of land in question only part was shown to be the actual sale consideration in the sale deed and the remaining amount was found to have been paid by the purchasers to the seller in cash and in the process having evaded capital gain tax - whether the exercise of inherent power of this Court saved under Section 482 Cr. P.C. is warranted to be exercised in the instant case or not? - HELD THAT:-The ambit and scope of exercise of inherent power of this Court is no more res integra and stands settled in “M/s Neeharika Infrastructure Pvt. Ltd. vs. State of Maharastra & ORs [2021 (4) TMI 1244 - SUPREME COURT] held that the power of quashing should be exercised with circumspection in rarest of the rare cases (not to be confused with the formation in the context of death penalty) and while examining an FIR/complaint, quashing of which is sought, the Court cannot embark upon an enquiry as to reliability or genuineness or otherwise of the allegations made in the FIR/complaint and that the criminal proceedings ought not to be scuttled at the initial stage and that quashing of FIR/complaint should be an exception rather than an ordinary rule and that when the prayer for quashing of FIR/complaint is made by the accused and the Court when it exercise power u/s 482 Cr. P.C. only has to consider whether the allegations in the FIR/complaint disclose commission of a cognizable offence or not.
In case in hand, the respondent herein in the impugned complaint has specifically alleged commission of offences by the petitioners herein under Sections 276C (1) and 277 of the Act of 1961. Under Section 279A of the Act of 1961, offence under Section 276C (1) read with Section 277 alongwith other offences provided therein the said section have been deemed to be cognizable offences within the meaning of Code of Criminal Procedure.
This Court is not inclined to display indulgence and to exercise inherent power in the instant petition.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Validity of the Notice under Section 148
Issue 2: Extinguishment of Claims
3. SIGNIFICANT HOLDINGS
Reassessment proceedings against company insolvent - Affect of approved Resolution Plan by the NCLT - HELD THAT:- NCLT has approved the Resolution Plan vide order dated 20th June, 2022 which has now been upheld and confirmed by dismissal of the Appeal filed by the respondent-Authority by the NCLAT vide order dated 21.05.2024.
As the decision of Ghanashyam Mishra [2021 (4) TMI 613 - SUPREME COURT] would be applicable wherein, it is held that once the NCLT has approved the Resolution Plan, all the past dues shall stand extinguished and respondent-Authority could not have assumed the jurisdiction to re-open the assessment as the same would have achieved the finality.
In the facts of the present case, the petitioner stands even on better footing as the order passed by the NCLT approving the Resolution Plan already has merged into the order passed by the NCLAT while dismissing the Appeal preferred by the respondent-Authority which has achieved finality in view of the provisions of Section 62 of the IBC
The impugned notice issued u/s 148 of the Act is not tenable in the eyes of law and is accordingly, quashed and set aside.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Entitlement to Refund
Issue 2: Adjustment of Refund for Subsequent Years
Issue 3: Administrative and Technical Failures in Processing Refund
3. SIGNIFICANT HOLDINGS
Refund of income-tax after appeal - Order giving effect under section 250 - Adjustment of refunds against subsequent years' demands - Rectification / re-uploading of giving effect order due to CPC/ITBA technical issue - Direction to tax authorities to credit refund into assessee's bank account
Refund of income-tax after appeal - Order giving effect under section 250 - Entitlement of the petitioner to release of refund for A.Y. 2017-18 following the order giving effect to the CIT(A)'s decision. - HELD THAT: - The Court examined the return, the assessment, the CIT(A)'s order and the assessing officer's giving-effect order dated 04.03.2024 which revised total income for A.Y. 2017-18 to Rs. 3,52,31,670/-. Using the admitted figures of pre-paid taxes in the acknowledgment and an approximate tax computation (subject to final verification), the Court found that the assessee is entitled to a substantial refund. The Court considered the Assessing Officer's computation and the admitted accounting position and concluded that, subject to final accurate calculation of tax and interest, the assessee is entitled at least to the principal amount identified by the Court. Accordingly the Court directed the assessing authority to effect credit of the identified amount into the petitioner's bank account and to coordinate with the departments responsible for making such credit. [Paras 9, 10, 12, 13]
Respondent-Assessing Officer directed to credit the provisional sum of Rs. 6.30 Crore (subject to final computation of tax and interest) into the petitioner's specified bank account by the next date of hearing; responsible officer to be held liable for non-compliance.
Adjustment of refunds against subsequent years' demands - Treatment of refunds adjusted by the department for subsequent assessment years and their effect on the refund due to the petitioner for A.Y. 2017-18. - HELD THAT: - The Court noted and treated as admitted the respondent-department's prior adjustments of refunds for subsequent years (AY 2018-19 to AY 2023-24) as reflected in the record. Those adjustments were taken into account in the Court's computation of the minimum amount to be credited to the assessee, which includes the admitted adjusted amounts plus the balance provisional refund for A.Y. 2017-18. The Court therefore directed release of the consolidated amount subject to final verification of precise tax and interest calculations. [Paras 3, 11]
Admitted adjustments for subsequent years to be treated as part of the amount to be credited; the consolidated provisional amount directed to be paid.
Rectification / re-uploading of giving effect order due to CPC/ITBA technical issue - Direction to tax authorities to credit refund into assessee's bank account - Responsibility of the respondents to resolve technical/processing impediments (CPC/ITBA/helpdesk interactions) and to take necessary steps to effect the refund. - HELD THAT: - The Court reviewed the respondents' affidavits which describe multiple tickets and communications with CPC and ITBA helpdesk, the initial belief that rectification under section 154 was needed, subsequent re-uploading of the giving effect order, and outstanding technical queries regarding a past purported refund entry. The Court observed that the averments disclose shifting responsibility among respondents and CPC/ITBA, but that the steps required are ministerial and capable of immediate execution. Therefore the Court directed the Assessing Officer to coordinate with CPC, ITBA helpdesk and other concerned units to ensure processing and credit of the directed amount into the petitioner's bank account by the next hearing, and to treat non-compliance as breach of court order. [Paras 5, 7, 13]
Respondents to coordinate with CPC/ITBA/helpdesk and other concerned departments, complete necessary re-uploading/processing and ensure credit of the refund; failure to comply will render the responsible officer liable.
Final Conclusion: The High Court found the petitioner entitled to a provisional consolidated refund (admitted adjusted amounts plus balance refund) and directed the Assessing Officer to credit Rs. 6.30 Crore into the petitioner's specified bank account by the next date of hearing, after coordinating with CPC/ITBA and other departments; the matter listed for further hearing on 7th January, 2025 and non-compliance by the responsible officer was made actionable.
1. ISSUES PRESENTED and CONSIDERED
The legal judgment revolves around the following core issues:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Justification of Notice under Section 148-A(d)
Issue 2: Quantum of Transactions and Provisions of Section 149(1)
Issue 3: Alternative Statutory Remedy
3. SIGNIFICANT HOLDINGS
Validity of reopening proceedings - as argued since the quantum of transaction is less than 50 lacs, no notice could have been issued u/s 149(1) - whether petitioner has an alternative statutory remedy? - HELD THAT:- As in view of the judgment of M/s Amrit Homes Private Limited [2023 (8) TMI 683 - MADHYA PRADESH HIGH COURT] which is binding on this Court and also taking into consideration the law laid down in Supreme Court in Celir LLP Vs. Bafna Motors (Mumbai) (P) Limited. [2023 (10) TMI 48 - SUPREME COURT] since there exists an alternative statutory remedy, it will not be proper to advert to the merits of the case and scuttle the process of reassessment specially in view of the alternative statutory remedy as is available to the petitioner.
1. ISSUES PRESENTED and CONSIDERED
The core legal question addressed in this judgment is whether the jurisdictional assessing officer could initiate and continue proceedings and pass assessment orders in cases where original notices issued by the jurisdictional assessing officer were treated as issued under the new regime by the Supreme Court in the case of Union of India vs. Ashish Aggarwal and considered within limitation as per the Supreme Court's judgment in Union of India vs. Rajeev Bansal.
2. ISSUE-WISE DETAILED ANALYSIS
Issue: Legality of proceedings initiated by jurisdictional assessing officers under the old regime post-amendment.
Relevant Legal Framework and Precedents:
The judgment discusses the amendments introduced by the Finance Act, 2021, which brought in the faceless assessment and reassessment procedures under Section 144B of the Income Tax Act, 1961. The Supreme Court's decisions in Ashish Aggarwal and Rajeev Bansal are pivotal, as they address the transition from the old to the new regime and the applicability of the new provisions to notices issued after April 1, 2021.
Court's Interpretation and Reasoning:
The court interpreted that the jurisdictional assessing officer retains the authority to process notices originally issued under the old regime, which are deemed to be issued under the new Section 148A(b) by the Supreme Court. The court reasoned that the same officer who issued the original notices should be allowed to complete the assessment or reassessment process, as the Supreme Court's directions in Ashish Aggarwal's case did not explicitly remove this jurisdiction.
Key Evidence and Findings:
The court found that the procedural part of the new regime was intended to be followed by the jurisdictional assessing officer, who had originally issued the notices under the old regime. The court emphasized the need for continuity in the assessment process to ensure that the proceedings reach a logical conclusion.
Application of Law to Facts:
The court applied the provisions of Sections 148 and 148A of the Income Tax Act, as amended, to the facts of the case. It concluded that the jurisdictional assessing officer has the authority to proceed with the assessment or reassessment based on the notices deemed to be issued under the new regime.
Treatment of Competing Arguments:
The court addressed the petitioners' arguments that the jurisdictional assessing officer lacked authority under the new faceless regime. It refuted these arguments by stating that the Supreme Court's directions allowed the jurisdictional assessing officer to continue the proceedings, as the initial notices were deemed valid under the new provisions.
Conclusions:
The court concluded that the jurisdictional assessing officer is empowered to continue with the assessment or reassessment proceedings under the new regime for notices originally issued under the old regime. The court dismissed the writ petitions challenging this authority.
3. SIGNIFICANT HOLDINGS
Preserve Verbatim Quotes of Crucial Legal Reasoning:
"We, therefore, hold that the Jurisdictional Assessing Officer would continue to proceed and have jurisdiction to decide the notices which were originally issued by him."
Core Principles Established:
Final Determinations on Each Issue:
Reassessment proceedings in old v/s new regime - Notices issued by JAO and the orders of assessment passed under the old regime, instead of the National Faceless Assessment Center - Whether the proceedings could have been initiated and continued by the jurisdictional assessing officer and the assessment order could have been passed by him in cases where the original notices issued by the jurisdictional assessing officer were treated to have been issued in terms of the new regime? - HELD THAT:- The entire scheme of the Act specifically requires the same assessing officer, who issues notices to conduct an enquiry and considered their reply in terms of Section 148A. Thereafter, the same assessing officer is required to pass an order under the new scheme after giving notice under Section 148 of the old Act. In our considered opinion, if we examine the provisions of present situation, which has arisen on account of treating the notices issued under Section 148 of the Act as notice u/s 148A (b) of the Act, the natural corollary would be that such replies which may be received to the notice issued u/s 148A (b) of the Act, would be examined by the same assessing officer, who had originally issued the notices under the old regime. His jurisdiction cannot be said to have been taken away for examining the reply to notice u/s 148A (b) of the Act. Therefore, as a result the same assessing officer i.e. JAO would be also entitled to take a decision on such reply and pass orders of assessment or reassessment in terms of the new provisions of Section 148 of the Act.
As we find that the power u/s 144B (7) and (8) has not been exercised by the Principal Chief Commissioner to the Jurisdictional Assessing Officer, however, the circumstances have been considered by the Supreme Court while exercising its power under Article 142 of the Constitution of India in Ashish Aggarwal’s case [2022 (5) TMI 240 - SUPREME COURT] whereby it has specifically provided the jurisdiction to the Jurisdictional Assessing Officer by deemed fiction of law under the new Faceless Regime.
We say so because the initial notice was issued by the Jurisdictional Assessing Officer, which has been treated to be a notice u/s 148A of the Act and Section 148 of the old Act, as notices u/s 148A(a) and (b) of the Act. He would, therefore, be the best person to assess and re-assess the provisions of law are required to be otherwise considered strictly. However, in cases where there is an allegation of escape of income, on account of which notices were issued by the Jurisdictional Assessing Officer, must reach to its logical conclusion by the same officer. We, therefore, hold that the Jurisdictional Assessing Officer would continue to proceed and have jurisdiction to decide the notices which were originally issued by him.
In the opinion of this Court, the procedure which has been laid down under the new regime will of course have to be followed by the Jurisdictional Assessing Officer.
No prejudice would be caused if such a course is adopted by the Jurisdictional Assessing Officer. The submission of the petitioners is, therefore, found to be without force.
We do not agree with the view taken by the Telangana High Court in Kankanala Ravindra Reddy’s case [2023 (9) TMI 951 - TELANGANA HIGH COURT]
The contention of petitioners relating to non-application of the judgment passed in Rajeev Bansal’s case [2024 (10) TMI 264 - SUPREME COURT (LB)] is also found to be wholly misconceived.
Jasjit Singh’s case facts [2024 (8) TMI 228 - PUNJAB AND HARYANA HIGH COURT] were different. The case deals with the notices which have been issued by the Jurisdictional Assessing Officer after the faceless regime had come into force with effect from 29.03.2022.
The view taken in Hexaware Technologies Limited’s case [2024 (5) TMI 302 - BOMBAY HIGH COURT] also does not apply to the present bunch of cases. It is made clear that the petitioners relating to the orders passed by the Assessing Officer on merits can be raised in appeal before the appellate authority. If appeals are so filed, the same shall be decided on merits and the delay shall be condoned on account of the fact that the writ petitions are pending before this Court.
All the writ petitions are dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Validity and Jurisdiction of Notice under Section 153C
Issue 2: Time-Barred Proceedings under Section 153C
Issue 3: Maintainability of Writ Petition
Issue 4: Satisfaction Note for Section 153C Proceedings
3. SIGNIFICANT HOLDINGS
Validity of proceedings u/s 153C - period of limitation - validity of satisfaction note recorded by the AO - HELD THAT:- The only objection of the petitioner is that the satisfaction note is undated and unsigned. The petitioner can raise this objection before the AO. The issue of limitation is also a mixed question of facts and law. As pointed out by the respondents, the proceedings are bound to be completed within 12 months which is going to be ended on 31.03.2025. The petitioner approached this Court at the very fag end of the period in the month of November – December 2025, therefore, at this belated stage, the petition cannot be entertained.
Objections in respect of the satisfaction note recorded by the AO of the concerned third party as well as the assessment note in respect of the petitioner - All these objections can be raised before the AO who is competent to appreciate the same after examining the documents. After the order is passed by the Assessing Officer, either party, i.e. petitioner or Department will have the remedy of appeal before the Commissioner of Income Tax and further remedy before the Income Tax Appellate Tribunal.
Even in the case of Jasjit Singh [2023 (10) TMI 572 - SUPREME COURT] the matter was travelled up to the Apex Court after exhausting the remedy before the ITAT, therefore, all these objections and grounds raised by the petitioner are liable to be considered by the authorities under the Income Tax Act, not by this Court. Hence, no case for interference is made out.
Writ Petition stands dismissed without expressing any opinion on the merit of the case.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
1. Whether the Assessee was denied the opportunity to be heard, violating principles of natural justice.
2. Whether the Assessee was entitled to the reduced tax rate under Section 115BAA for the Assessment Year (AY) 2022-23, despite the late filing of Form 10-IC for AY 2021-22.
3. Whether the rejection of Form 10-IC for AY 2021-22 automatically invalidates the Assessee's claim for subsequent years.
4. Whether the Assessee was unfairly denied the opportunity to rectify the delay in filing Form 10-IC.
5. Whether the Centralized Processing Centre (CPC) failed to provide the mandatory statutory notice under Section 143(1)(a) before processing the return with a higher tax rate.
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Denial of Opportunity to be Heard
Relevant Legal Framework and Precedents: The principles of natural justice require that parties be given an opportunity to present their case. The lack of a hearing or adequate opportunity to present submissions can be grounds for appeal.
Court's Interpretation and Reasoning: The court noted that the Assessee claimed not to have been provided an opportunity to be heard through video conferencing before the order was passed.
Key Evidence and Findings: The Assessee argued that no submissions were received by the CIT(A) and that the decision was made based on a condonation application for a different AY.
Application of Law to Facts: The court acknowledged the procedural lapse in not providing an opportunity to the Assessee to present their case.
Treatment of Competing Arguments: The Revenue did not provide substantial arguments to counter the Assessee's claim of procedural unfairness.
Conclusions: The court implied that the procedural lapse contributed to the decision to allow the appeal.
Issue 2: Entitlement to Reduced Tax Rate under Section 115BAA
Relevant Legal Framework and Precedents: Section 115BAA allows companies to opt for a reduced tax rate, provided certain conditions, including timely filing of Form 10-IC, are met.
Court's Interpretation and Reasoning: The court examined whether the Assessee met the conditions for AY 2022-23, despite issues in AY 2021-22.
Key Evidence and Findings: The Assessee filed Form 10-IC on 31/03/2022 and the return of income on 30/11/2022, both within the prescribed due dates for AY 2022-23.
Application of Law to Facts: The court found that the Assessee complied with the requirements for AY 2022-23 and should not be penalized for the previous year's delay, which was under appeal.
Treatment of Competing Arguments: The Revenue argued that the late filing in AY 2021-22 invalidated subsequent claims, but the court disagreed, emphasizing compliance for the current year.
Conclusions: The court concluded that the Assessee was entitled to the reduced tax rate for AY 2022-23.
Issue 3: Invalidation of Claims Due to Previous Year's Delay
Relevant Legal Framework and Precedents: The filing of Form 10-IC is a one-time requirement, and its acceptance is crucial for opting into the reduced tax regime.
Court's Interpretation and Reasoning: The court considered whether the delay in AY 2021-22 should impact AY 2022-23.
Key Evidence and Findings: The Assessee provided reasons for the delay, which were pending consideration for condonation.
Application of Law to Facts: The court found no basis for denying the benefit for AY 2022-23 when the Assessee met the requirements for that year.
Treatment of Competing Arguments: The court dismissed the Revenue's argument that the previous year's issues automatically affected subsequent years.
Conclusions: The court held that the Assessee's compliance for AY 2022-23 was sufficient for entitlement to the reduced rate.
Issue 4: Opportunity to Rectify Delay
Relevant Legal Framework and Precedents: Taxpayers may seek condonation for delays due to reasonable causes, which should be considered by the authorities.
Court's Interpretation and Reasoning: The court noted the Assessee's pending application for condonation of delay for AY 2021-22.
Key Evidence and Findings: The Assessee argued that no opportunity was provided to rectify the delay for AY 2022-23.
Application of Law to Facts: The court found that the pending condonation application should not preclude benefits for AY 2022-23.
Treatment of Competing Arguments: The Revenue did not address the potential for rectification adequately.
Conclusions: The court implied that the Assessee should not be penalized for the unresolved issue of delay in the previous year.
Issue 5: Statutory Notice under Section 143(1)(a)
Relevant Legal Framework and Precedents: Section 143(1)(a) requires a statutory notice before adjustments to the return are made.
Court's Interpretation and Reasoning: The court considered whether the CPC failed to issue the required notice.
Key Evidence and Findings: The Assessee claimed no notice was provided before processing the return at a higher rate.
Application of Law to Facts: The court found procedural irregularity in the CPC's actions.
Treatment of Competing Arguments: The Revenue did not sufficiently counter the claim of procedural failure.
Conclusions: The court's decision to allow the appeal was influenced by this procedural oversight.
3. SIGNIFICANT HOLDINGS
Preserve Verbatim Quotes of Crucial Legal Reasoning: "The Ld. CIT(A) cannot deny the Assessee to opt for new regime at least for the Assessment Year under consideration i.e. 2022-23."
Core Principles Established: Compliance with filing requirements for the current year should be considered independently of unresolved issues from previous years.
Final Determinations on Each Issue: The Assessee's appeal was allowed, granting the benefit of the reduced tax rate for AY 2022-23 under Section 115BAA.
Denial of benefit of provision of Section 115BAA - delay in filing the Form 10IC - levy of tax and surcharge at 25% and 12% respectively, instead of 22% and 10% respectively, as prescribed under the provisions of section 115BAA - CIT(A) contending that benefit u/s 115BAA cannot be claimed for the AY 2022-23 merely because there was a delay in filing Form 10-IC for the AY 2021-22.
HELD THAT:- The Form 10IC can be filed only once and there is no option/provision to file the Form 10IC every year to opt for the new regime to get the benefit of reduced tax rate as per provisions of Section 115BAA - now, we are in Assessment Year 2022-23 and the CIT(A) failed to consider that though there was a delay in filing the Form 10IC to get benefit in the AY 2021-22, the same has been filed belatedly on 31/03/2022 and the Assessee has assigned reasons for condoning the delay and the matter is pending.
Thus in our considered opinion, CIT(A) cannot deny the Assessee to opt for new regime at least for the Assessment Year under consideration i.e. 2022-23. Considering the fact that the Assessee filed return of income on 30th November, 2022 and Form No. 10IC which was already filed on 31/03/2022, which are well within the prescribed due date of 30th November, 2022, therefore, we are of the opinion that the CIT(A) ought to have given the benefit of reduced tax rate as prescribed u/s 115BAA of the Act for the year under consideration.
Set aside the order of the A.O. as well as Ld. CIT(A) and direct the A.O. to give benefit of reduced tax rate at 22% as prescribed u/s 115BAA under the new tax regime for the year under consideration. Appeal filed by the Assessee is allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Condonation of Delay
Issue 2: Sufficient Cause for Delay
3. SIGNIFICANT HOLDINGS
In conclusion, the Tribunal's judgment highlights the importance of due diligence and active participation by appellants in legal proceedings. The decision reinforces the necessity for appellants to demonstrate sufficient cause for delays and not rely solely on legal representatives to manage their legal obligations.
Delay filling appeal before tribunal - Condonation of delay of 2655 days - only contention of the assessee is that she handed over the appeal papers to one Advocate and one Chartered Accountant to file an appeal but appeals were not filed before the ITAT - HELD THAT:- Merely handing over the appeal papers to the ld. counsel is not sufficient to say that she has acted with due diligence. In the present case on hand, there is a huge delay in filing the appeal and delay is due to negligence act of the assessee only.
Moreover, before the AO as well as the CIT(Appeals) the assessee has not appeared even inspite of issuance of twelve notices by ld. CIT(Appeals). All these acts are clearly establish that the assessee is not due diligence. Therefore, it is not a fit case to condone the huge delay of 2655 days. The condonation petition filed by the assessee is dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment were:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Treatment of Cash Deposits as Unexplained Cash Credit
Issue 2: Liability for Audit and Penalty Proceedings
3. SIGNIFICANT HOLDINGS
Addition u/s 68 - cash deposit in ICICI Bank unexplained - HELD THAT:-Assessee is a commission agent engaged in the business of acting as a middleman for procuring fruit / vegetables and supplying to the shop keepers on commission basis for which the assessee has charged commission.
Assessee has also made some purchases and sales of fruits and vegetables on his own account which were also shown in the profit and loss account of the assessee. Thus, the assessee has made purchases and sales on his behalf and also procured goods from producers/suppliers as middleman on commission basis and sold/supplied the same to retailers/shopkeepers.
Besides the assessee produced before us the bank statement of ICICI Bank and evidences of cash deposited sale of fruits / receipt and thereafter, on account of Artiaz Services and withdrawal made against cash deposits. We find that there is hardly cash balance left in the bank account after payment to growers. T
Thus, no doubt, that the receipt of money by the assessee is from sale of vegetables/ fruits as well as from Artiya Services for which the commission was charged by the assessee. The same cash deposits in the bank cannot be added to the income of the assessee on the ground that the assessee has shown less sales vis-à-vis, the cash deposit into the bank, whereas the assessee has shown the commission income from Artiya Services.
Thus, source of cash deposits is fully explained. Addition confirmed by the ld. CIT (A) is not correct and has to be deleted - Decided in favour of assessee.
1. ISSUES PRESENTED and CONSIDERED
The judgment primarily addresses the following legal issues:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Addition under Section 68 of the Income Tax Act
Issue 2: Validity of Reopening under Section 147
3. SIGNIFICANT HOLDINGS
In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the addition under Section 68, emphasizing the importance of substantive evidence and procedural compliance in tax assessments. The appeal by the revenue was dismissed, and the cross-objection was rendered academic.
Addition u/s 68 - share capital and premium treated as unexplained cash credit - HELD THAT:- The amended proviso to Section 68, requiring companies to explain the “source of the source” of the share applicant’s funds, became applicable from 01/04/2013 and is not retrospective. The CIT(A) correctly applied the judgment in Gagandeep Infrastructure P. Ltd. [2017 (3) TMI 1263 - BOMBAY HIGH COURT] and concluded that this proviso was inapplicable to A.Y. 2011- 12.
We find that the CIT(A) conducted a detailed and reasoned analysis before deleting the addition u/s 68. The assessee provided sufficient evidence to prove the identity, genuineness, and creditworthiness of the investor, while the AO failed to disprove the evidence or bring any material to justify the addition. The addition made by the AO appears to be based on assumptions and lacks substantive basis. Accordingly, the appeal filed by the revenue is dismissed.
1. ISSUES PRESENTED and CONSIDERED
The legal judgment revolves around several core issues:
2. ISSUE-WISE DETAILED ANALYSIS
Condonation of Delay
Unjustified Ex Parte Assessment
Non-Prosecution Dismissal by CIT(A)
Violation of Principles of Natural Justice
No Intention to Evade Tax
3. SIGNIFICANT HOLDINGS
Delay of 232 days in filing of the present appeal - HELD THAT:- The assessee has given no cogent reason for this delay in filing of appeal before us and has simply stated that the delay was due to misleading guidance and lack of awareness, which caused the present delay in filing of appeal. Even when the matter was called out for hearing neither any application for adjournment was filed and none appeared on behalf of the assessee.
Accordingly, we observe that even before us the assessee had continued to remain non-compliant and evasive. We are therefore, not inclined to condone the delay in filing of the present appeal, since the assessee has given a vague reasoning for the instant delay of 232 days in fling of the present appeal and has continued to remain non-cooperative even before us. Decided against assessee.
1. ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Lawfulness of Mid-term Review and Revision of TRQ Allocations
Issue 2: Denial of Due Process
Issue 3: Validity and Communication of Criteria for TRQ Revision
Issue 4: Jurisdiction and Authority for TRQ Revision
3. SIGNIFICANT HOLDINGS
Preserve verbatim quotes of crucial legal reasoning:
"In the opinion of the Court, there is significant merit in the contentions raised by the Petitioners. While Paragraph No. 7 of the Minutes of Meeting dated 15th April, 2024 does indicate that a review exercise would be conducted based on the imports up to September 2024, however, as correctly pointed out by Mr. Gulati, this review can be deemed a 'blind' review, given that no criteria were specified in the said Minutes with respect to the potential allocation."
Core principles established:
Final determinations on each issue:
Mid-term review and revision of the Bullion Tariff Rate Quota (TRQ) allocations under the India-UAE Comprehensive Economic Partnership Agreement (CEPA) for the Financial Year 2024-25 - decision was taken without granting an opportunity of hearing to the petitioner and without a sufficient prior notice - violation of principles of natural justice - HELD THAT:- This Court had issued directions and other connected matters in KAKA GOLD LLP VERSUS DIRECTOR GENERAL OF FOREIGN TRADE & ORS. [2024 (12) TMI 544 - DELHI HIGH COURT], which arose in a similar factual matrix and where it was held that 'since the review decision was made without affording the Petitioners an opportunity to be heard, and Ms. Shiva Lakshmi has also indicated that the Petitioners should have first approached the DGFT with their concerns, the Court is of the opinion that it would be more appropriate at this stage, without delving deep into the merits of the case, to direct the DGFT to examine all the issues raised by the Petitioners in the present petitions and issue a fresh decision on the basis thereof.'
The petitioners are directed to file an application for review before the DGFT within one week from today whereupon the DGFT shall examine all the issues raised by the petitioners in the present petitions and issue fresh orders/directions, within a period of three weeks thereafter.
Conclusion - i) The DGFT is directed to re-examine the issues raised by the petitioners and issue fresh decisions, maintaining current allocations during the review process. ii) The petitioners must be provided with an opportunity to be heard, and the criteria for TRQ revisions must be clearly communicated.
1. ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Contravention of Section 31 of the IBC
Issue 2: Pursuit of Customs Claims Post-Resolution Plan Approval
Issue 3: Prevalence of IBC over Customs Act
3. SIGNIFICANT HOLDINGS
Preserve verbatim quotes of crucial legal reasoning:
"No further claims, either against the company or against the resolution applicant will be permitted to be brought once the plan has been approved and implementation has commenced."
Core principles established:
Final determinations on each issue:
Contravention of Section 31 of the Insolvency and Bankruptcy Code, 2016 - applicability of order for “approval of resolution plan” under Section 31 (1) of the IBC - HELD THAT:- Hon’ble Apex Court judgment in the case of Edelweiss [2021 (4) TMI 613 - SUPREME COURT] leaves no manner of doubt whatsoever that no claim except which is categorically approved in the resolution plan shall survive after the order under Section 31 (1) of the IBC is passed.
The decision of the Hon’ble Apex Court in the case of Edelweiss applies fully and squarely to the facts of the present case. Therefore, no new customs duty, interest or penalty which has been proposed by the respondent can be levied, once the resolution plan stands approved.
Conclusion - i) Once a resolution plan is approved under Section 31 of the IBC, all claims not included in the plan are extinguished. ii) The IBC's provisions override other laws, including the Customs Act, regarding claims extinguished by a resolution plan.
Appeal allowed.
Issues: (i) whether the imported dry dates were of UAE origin or Pakistan origin and whether the contrary finding based on the export declaration and container tracking report could be sustained; (ii) whether penalties under sections 114A and 114AA of the Customs Act, 1962 were leviable.
Issue (i): Whether the imported dry dates were of UAE origin or Pakistan origin and whether the contrary finding based on the export declaration and container tracking report could be sustained.
Analysis: The imported goods were supported by commercial invoice, packing list, fumigation certificate, country of origin certificate issued by the competent UAE authority, and phytosanitary certificate, all indicating UAE origin. The certificate of origin was neither shown to be forged nor cancelled, and no verification was undertaken with the UAE authority in the manner contemplated by Rule 6 of the Customs (Administration of Rules of Origin) Rules, 2020. The reliance placed on an unsigned and discrepant export declaration and on container tracking details was held insufficient to displace the official certificate of origin, particularly when the documents relied upon by the department contained inconsistencies and were not obtained from the customs authority of the exporting country.
Conclusion: The goods were held to be of UAE origin, and the contrary finding that they were of Pakistan origin was not sustainable.
Issue (ii): Whether penalties under sections 114A and 114AA of the Customs Act, 1962 were leviable.
Analysis: Penalty under section 114A requires short payment by reason of collusion, wilful misstatement, or suppression of facts. The bill of entry was filed on the basis of documents examined by Customs, and there was no evidence that the appellant knowingly made a false declaration or intentionally used false documents. In the absence of proof of wilful misstatement, suppression, or conscious falsity, the statutory ingredients for penalty were not established.
Conclusion: The penalties under sections 114A and 114AA were not leviable and were set aside.
Final Conclusion: The impugned order was annulled and the appeal succeeded, with consequential relief to the appellant.
Ratio Decidendi: A duly issued and un-cancelled certificate of origin cannot be displaced by suspicion, and penalty provisions requiring wilful misstatement or intentional falsity cannot be invoked without clear proof of conscious misconduct.
Classification of imported dry dates - would fall under Customs Tariff Item 9806 00 00 or CTI 08404 10 30? - origin of imported dry dates - Whether the Principal Commissioner was justified in imposing penalties upon the appellant under sections 114 A and 114 AA of the Customs Act?
Whether the dry dates imported by the appellant through invoice dated 15.07.2019 and Bill of Entry dated 19.08.2019 originated from UAE or from Pakistan? - HELD THAT:- There is nothing on the record to suggest that such verification as contemplated under the 2020 Rules was carried out with the concerned UAE Authorities to verify the genuineness and correctness of the certificate of origin.
This issue was examined by a Division Bench of the Tribunal in M/s. Omega Packwell Pvt. Ltd. vs. Pr. Commissioner of Customs, Noida [2024 (6) TMI 455 - CESTAT ALLAHABAD], where it was held that 'It shows that the said certificate was issued after proper verification of origin of goods. Authenticity of the said certificate was never challenged by way of any enquiry from the exporting country. We further notice that phyotsanitary certificate which was issued by National Plant Protection Organization of exporting country also indicates country of origin UAE. No evidence was brought out to infer that country of origin shown in the said phytosanitary certificate was incorrect. Bags of dry dates were found, during physical verification, carrying slips on which country of origin was mentioned as UAE. Mere suspicion is not enough to discard aforesaid documents.'
The facts of the present case are similar to the facts of Omega Packwell decided by the Tribunal. In the present case, the Principal Commissioner has not recorded a finding that the country of origin certificate produced by the appellant was forged and all that has been stated is that it was obtained by the appellant in collusion with the exporter by submitting incorrect documents. This finding is based purely on conjectures and surmises - The Principal Commissioner was not justified in ignoring the certificate of origin issued by the competent authority in UAE. In the absence of a finding by the competent authority that this is a fake certificate, this certificate would conclusively prove that the imported goods originated from UAE - the goods imported by the appellant originated from UAE and not from Pakistan.
Whether the Principal Commissioner was justified in imposing penalties upon the appellant under sections 114 A and 114 AA of the Customs Act? - HELD THAT:- Penalty under section 114 A of the Customs Act can be imposed when there is short payment of duty by reason of collusion or any willful mis-statement or suppression of facts - In the instant case, it cannot be said that the appellant had willfully mis-stated facts or suppressed facts. These are necessary ingredients for applicability of the provisions of section 114 A of the Customs Act. The statement was made by the appellant in the Bill of Entry on the basis of documents, and these documents had been examined by the proper officer and, thereafter, the goods were cleared on payment of duty. The imposition of penalty under section 114A of the Customs Act on the appellant is unjustified and is liable to be set aside. - The penalty under section 114 AA of the Customs Act could also not have been imposed upon the appellant. Section 114 AA of the Customs Act provides that if a person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business for the purposes of this Act, then he shall be liable to a penalty not exceeding five times the value of goods.
There is no evidence on the record from which it can be deduced that the appellant had intentionally made a false declaration. The declaration had been made by the appellant on the basis of documents. Nothing has been brought on record to show that the appellant was aware that the goods that were imported by the appellant were of Pakistan origin and not of UAE origin. The imposition of penalty under section 114 AA of the Customs Act is, therefore, also liable to be set aside.
Conclusion - i) The goods imported by the appellant originated from UAE and not from Pakistan. ii) There is no evidence on the record from which it can be deduced that the appellant had intentionally made a false declaration. The declaration had been made by the appellant on the basis of documents. Nothing has been brought on record to show that the appellant was aware that the goods that were imported by the appellant were of Pakistan origin and not of UAE origin. The imposition of penalty under section 114 AA of the Customs Act is, therefore, also liable to be set aside.
Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Adherence to Time Limits under Regulation 17 of CBLR 2018
Relevant Legal Framework and Precedents:
Regulation 17 of the CBLR 2018 outlines the procedure for revoking a license or imposing a penalty on a Customs Broker. It prescribes specific time limits for various stages of the process, including the issuance of a show cause notice and the submission of an inquiry report. The Delhi High Court in Leo Cargo Services and other cases has consistently held these time limits to be mandatory.
Court's Interpretation and Reasoning:
The court examined whether the prescribed time limits were followed. It noted that the show cause notice was issued more than a year after the receipt of the offence report, violating Regulation 17(1). Similarly, the order revoking the license was issued beyond the 90-day period after the inquiry report, violating Regulation 17(7).
Key Evidence and Findings:
The court found that the show cause notice was issued on 26.06.2019, well beyond the 90-day limit from the alleged receipt of the offence report on 15.05.2018. Additionally, the final order was passed on 30.04.2020, exceeding the 90-day limit from the inquiry report submission date of 25.09.2019.
Application of Law to Facts:
The court applied the mandatory nature of the time limits as established in previous judgments. It concluded that the failure to adhere to these limits rendered the revocation order invalid.
Treatment of Competing Arguments:
The department argued that delays were due to ongoing proceedings under the Customs Act, 1962, and should not invalidate the order. However, the court rejected this, emphasizing the mandatory nature of the time limits as upheld by multiple precedents.
Conclusions:
The court concluded that the violation of the time limits under Regulation 17(1) and 17(7) necessitated the setting aside of the order revoking the license.
3. SIGNIFICANT HOLDINGS
Preserve Verbatim Quotes of Crucial Legal Reasoning:
"The timelines as prescribed under various Regulations in CBLR, 2018, have been consistently held by the Courts as mandatory in nature. Each timeline is sacrosanct, and the idea of prescribing a time limit by statute becomes redundant if not adhered to."
Core Principles Established:
Final Determinations on Each Issue:
This judgment reinforces the importance of adhering to procedural timelines in regulatory frameworks, emphasizing the legal consequences of non-compliance.
Mandatory nature of timelines under Regulation 17 of the Customs Brokers Licensing Regulations, 2018 - failure to issue show cause notice within ninety days from receipt of offence report - failure to pass final order within ninety days of submission of inquiry report - consequence of breach of prescribed timelines - invalidity of consequent proceedings and orders - suspension and revocation of customs broker licence
Mandatory nature of timelines under Regulation 17 of the Customs Brokers Licensing Regulations, 2018 - failure to issue show cause notice within ninety days from receipt of offence report - Whether the show cause notice issued beyond the 90day period prescribed by regulation 17(1) vitiates the proceedings. - HELD THAT: - The Tribunal found that the show cause notice was issued more than one year after the Commissioner acted on the offence report and that, even if 15.05.2018 is treated as the date of receipt of the offence report, the show cause notice issued on 26.06.2019 was well beyond the 90day limit under regulation 17(1). The Tribunal applied the settled principle - followed in Leo Cargo Services and earlier High Court decisions - that the timelines in the Regulations are mandatory and sacrosanct; a failure to issue the notice within the prescribed period infects the subsequent proceedings. The Tribunal rejected the revenue's contention that other departmental notices caused or justified the delay and held that breach of the prescribed 90day period under regulation 17(1) disentitles the authority to proceed further on merits. [Paras 7, 15]
Show cause notice issued beyond the 90day period under regulation 17(1) rendered the initiated proceedings infirm.
Mandatory nature of timelines under Regulation 17 of the Customs Brokers Licensing Regulations, 2018 - failure to pass final order within ninety days of submission of inquiry report - consequence of breach of prescribed timelines - invalidity of consequent proceedings and orders - Whether the order revoking the customs broker licence, passed beyond the 90day period prescribed by regulation 17(7), is liable to be set aside. - HELD THAT: - The Tribunal noted that the inquiry report was submitted on 25.09.2019 but the Commissioner passed the revocation order only on 30.04.2020, which is beyond the 90day period mandated by regulation 17(7). Relying on the reasoning in Leo Cargo Services and a consistent line of High Court authorities, the Tribunal held that regulation 17(7)'s timeline is mandatory and noncompliance thereof vitiates the final order. The Tribunal accordingly concluded that delay in passing the final order could not be excused by consideration of merits or other departmental proceedings and that the statutory timetable must be adhered to. [Paras 11, 15]
The order revoking the customs broker licence, being passed after lapse of the 90day period under regulation 17(7), is invalid.
Final Conclusion: For breach of the mandatory timelines in regulation 17(1) and regulation 17(7) of the 2018 Regulations, the Commissioner's order dated 30.04.2020 revoking the appellant's Customs Broker licence is set aside and the appeal is allowed.
ISSUES:
RULINGS / HOLDINGS:
RATIONALE:
Condonation of delay - Recall of admission order in CIRP - Fraudulent initiation of CIRP - IBC's overriding effect over other laws - Admission and treatment of claims in CIRP - Insufficiency of bald allegations without substantiation
Condonation of delay - Application for condonation of 14 days' delay in filing the appeal was allowed. - HELD THAT: - The Appellate Tribunal accepted the explanation that the impugned order dated 13.08.2024 was received by the authorised representative only by letter dated 27.08.2024 and that subsequent steps were taken leading to filing of the appeal on 26.09.2024. Upon hearing the parties, the Tribunal found that sufficient cause had been shown for the delay and therefore condoned the same. [Paras 1]
Delay condoned; I.A. No.7176 of 2024 allowed.
Recall of admission order in CIRP - Fraudulent initiation of CIRP - IBC's overriding effect over other laws - Admission and treatment of claims in CIRP - Insufficiency of bald allegations without substantiation - Appeal against rejection of application seeking recall of admission of CIRP was dismissed on merits. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's findings. The AA recorded that the Customs Department's claim had been admitted and that the IBC governs the treatment of such claims (para 5.1), and it further found that the allegations of fraudulent initiation were bald and unsubstantiated (para 18). The Appellant's contention that only two EMIs were in default and that the balance sheet showed sufficient revenue was examined; the Tribunal noted the financial statements showed reduced revenue and substantial expenses resulting in losses (para 9), which did not support a finding of fraudulent initiation. Given the admitted claim and active participation in CIRP, and absence of proved fraud or other sufficient grounds, there was no basis to recall the admission order. [Paras 5, 9, 10, 18]
No merit in the appeal; order rejecting recall of admission upheld and appeal dismissed.
Final Conclusion: The Tribunal condoned the delay in filing the appeal but found no merit in the challenge to the Adjudicating Authority's rejection of the application to recall the admission of CIRP; the AA's findings that the allegations of fraudulent initiation were unsubstantiated and that the admitted claim must be dealt with under the IBC were upheld and the appeal dismissed.
1. ISSUES PRESENTED and CONSIDERED
The judgment considered the following core legal questions:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Assignment to Omkara
Issue 2: Res-Judicata
Issue 3: Profitability of Corporate Debtors
Issue 4 & 5: Cash Management Agreement (CMA)
Issue 6: Debt Service Reserve Amount (DSRA)
Issue 7: Default Finding
Issue 8: Misuse of ECLGS Funds
Issue 9 & 10: Proving Default
3. SIGNIFICANT HOLDINGS
The judgment underscores the importance of thoroughly examining financial arrangements and agreements before initiating insolvency proceedings, ensuring that all relevant factors and evidence are considered to determine genuine financial distress.
Maintainability of section 7 petition - initiation of CIRP - assignment of debt - in accordance with the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 as well as the Circulars issued by the Reserve Bank of India or not - applicability of principle of res-judicata - Corporate Debtors, who are running five star JW Marriott Hotel and Crown Plaza Hotel are profitable Companies earning substantial profits or not - denial of existence of Cash Management Agreement - requirement to consider amount transferred to Lenders under Cash Management Agreement towards servicing of debt for returning a finding of default by the Corporate Debtor - obligation to maintain DSRA reserve as per Loan Agreement.
Whether Assignment dated 27.12.2022 made in favour of Omkara Assets Reconstruction Pvt. Ltd. by the Lenders was not in accordance with the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 as well as the Circulars issued by the Reserve Bank of India, the account of Corporate Debtor having never declared as NPA or SMA? - HELD THAT:- The Assignment dated 27.12.2022 made by the Lenders in favour of Omkara was challenged by GSTAAD before the High Court of Karnataka at Bengaluru in GSTAAD HOTELS PVT. LTD. VERSUS UNION OF INDIA, RESERVE BANK OF INDIA, NATIONAL CREDIT GUARANTEE TRUSTEE COMPANY LTD, PHL FININVEST PVT. LTD, PIRAMAL ENTERPRISES LIMITED, PIRAMAL CAPITAL AND HOUSING FINANCE LTD (PIRAMAL FINANCE) , FORMERLY KNOWN AS DEWAN HOUSING FINANCE LTD., OMKARA ASSETS RECONSTRUCTION PRIVATE LIMITED, IDBI TRUSTEESHIP SERVICES LIMITED [2024 (2) TMI 1504 - KARNATAKA HIGH COURT]. The High Court has dismissed the Writ Petition. Copy of which order has been brought on record by the Appellant in its rejoinder affidavit. The challenge before the High Court of Karnataka of the Assignment by the Appellant was basically on the ground that accounts of CD having not been declared as NPA or SMA, the Lenders could not have assigned the debt in favour of Omkara. Violation of Circulars issued by Reserve Bank of India was relied before the High Court. The High Court held that assignment is not violative of Master Circular issued by the Reserve Bank of India. It was held that there is no statutory aberration and dispute between private parties for enforcement of a private agreement would not get the audience of the High Court under Article 226 of the Constitution of India - The prayer of the Appellant before the High court having not been accepted, questioning the assignment dated 27.12.2022, we are of the view that no fault can be found in the assignment at this stage.
Whether due to dismissal of Section 7 Application filed on behalf of the Lenders, as withdrawn on 13.12.2022 and 22.12.2022, the Section 7 Application filed by Omkara Assets Reconstruction Pvt. Ltd. Being Company Petition (IB) 291 of 2023 and 290 of 2023 were not maintainable and were hit by principle of res-judicata? - HELD THAT:- The earlier Section 7 Applications being CP(IB)No.1292 of 2021 and CP(IB) No.1287 of 2021 were filed by IDBI Trusteeship Ltd. on behalf of the Lenders alleging default on 15.04.2021 and 15.05.2021. The default in the aforesaid proceedings was default of Loan Agreement dated 27.12.2017. Section 7 Application, which has given rise to present Appeal has been filed alleging default of ECLGS-1 and ECLGS-2. In the earlier Section 7 Application initiated by IDBI Trusteeship Ltd., the ECLGS Facilities were not subject of consideration, nor the Applications were founded on any default under ECLGS Facility. Hence, we are of the view that the Applications – CP(IB) No.291/MB/2023 and CP(IB)No.290/MB/2023, cannot be held to be barred by the principle of res-judicata. There are no substance in the submission of the Appellant that proceedings under Section 7 initiated by Omkara is barred by principle of res-judicata.
Whether the Corporate Debtors, who are running five star JW Marriott Hotel and Crown Plaza Hotel are profitable Companies earning substantial profits? - HELD THAT:- Both the Hotels were running Hotels and earning revenue and payments were made to the Lenders even during Covid-19 period and thereafter. The Lenders, who have given finances to the Corporate Debtor for a Project, are also obliged to support the Corporate Debtor in running the business and extend their helping hand to the Corporate Debtor. The object of IBC is insolvency resolution. There are substance in the submissions of the Appellant that JW Marriott Hotel and Crown Plaza Hotel, which are run by the Corporate Debtors were profitable Companies, earning substantial profits.
Whether the Adjudicating Authority committed error in returning finding in paragraph 11 of the impugned order that due to denial of existence of Cash Management Agreement, the arguments of the Corporate Debtor on the basis of servicing of debt as per Cash Management Agreement, cannot be accepted? - Whether the Adjudicating Authority was obliged to consider the amount transferred to Lenders under Cash Management Agreement towards servicing of debt for returning a finding of default by the Corporate Debtor? - HELD THAT:- It is clear that CMA between the parties was one of the most relevant Agreement to regulate the debt repayment. The CMA also imposed certain obligations on the Lenders and for finding out default on the part of the CD, CMA and consequent repayment under the CMA was required to be examined by the Adjudicating Authority. The Adjudicating Authority simply on mere denial of Omkara to the existence of CMA has rejected the submission of the Appellant. The observation of the Adjudicating Authority that CD could not prove existence of CMA by any correspondence between the parties is also without any basis. The CMA was duly contemplated into a Loan Agreement and was actually executed between the parties - The Adjudicating Authority is required to consider Section 7 Application afresh, after taking into consideration various clauses of the CMA and consequently remittance of the amount towards repayment of the loan in the Retention Account.
Whether Lenders were obliged to maintain DSRA reserve as per Loan Agreement dated 26.12.2017, which amount was required to be appropriated towards payment of principal & interest due under Loan Agreement & ECLGS-I and ECLGS- II? - HELD THAT:- The mere fact that no submission was advanced by the CD before the Adjudicating Authority on DSRA, cannot be a ground to preclude the Appellant to raise the submission in this Appeal. The DSRA was contemplated to be utilized for shortfall in any repayment and maintenance of debt service reserve and it was the obligation of the Lender. Hence, it is not open for the Lender to say that they had no obligation to maintain any DSRA and the submission advanced on behalf of the Appellant on DSRA has to be rejected. It is not persuaded to accept the submission of learned Counsel for the Respondent with regard to DSRA. The submission of the Appellant is that amount of Rs. 8 crores was undisbursed and was kept as reserved amount, which was to be utilized for shortfall in any repayment of interest/ principal. The said aspect of the matter was also needs to be looked into by the Adjudicating Authority before returning any finding of default - The Lenders were obliged to maintain Debt Service Reserve (“DSRA”) amount as per the Loan Agreement dated 26.12.2017, which amount was required to be appropriated towards payment of principal and interest due under the Loan Agreement.
Whether the finding of the Adjudicating Authority in paragraph 8 that it is undisputed fact that the defaults in payment of Loan amount exists, are sustainable the Corporate Debtor having disputed the default in the pleadings and arguments before the Adjudicating Authority? - HELD THAT:- Although, it is undisputed that loan amount exists, but the finding that there is default in payment has been challenged by the Counsel for the Appellant. It is useful to notice that in the very next sentence, the Adjudicating Authority has observed “The Ld. Counsel for the Corporate Debtor argued that no default has actually taken place”. When the Corporate Debtor has submitted before the Adjudicating Authority that no default has actually taken place, the observation of the Adjudicating Authority that it is undisputed that there are defaults in payment thereof, cannot be sustained. In the Appeal, the Appellant has made various submissions challenging the finding of default and it is submitted by the Appellant that no default was committed by the Appellant towards Loan Agreement and ECLGS-1 and ECLGS - The Corporate Debtor had disputed the default before the Adjudicating Authority itself. Thus, it cannot be accepted that default by the CD is undisputed fact.
Whether out of amount sanctioned by Lenders under ECLGS- I and ECLGS-II of Rs. 98 crores + Rs. 65 crores = Rs. 163 crores, the Lenders have used the amount of about Rs. 140 crores to service its own debts and dues contrary to Agreement dated 30.12.2020 and 21.03.2022 and Adjudicating Authority rightly rejected the submission of Corporate Debtor on ground of end use Certificate issued by Corporate Debtor? - HELD THAT:- The Adjudicating Authority has relied on the end use Certificate, which was required to be furnished by the Corporate Debtor, as per the Agreement dated 30.12.2020. It is true that end use Certificate was submitted by the CD as per the Agreement. The Appellant has referred to the Bank statements to show that amounts after receipt of the loan under the ECLGS Facility, was directly transferred from Retention Account to the Loan Account on the same day. Even though no end use Certificate was given by the CD, but when categorical submission before the Adjudicating Authority was raised that amount out of Rs. 163 crores, which has been received by the CD under ECLGS-1 and ECLGS-2 and amount of about Rs. 140 crores have been utilized for servicing the debt by the Lenders, the question was required to be considered by the Adjudicating Authority and merely on the point of end use Certificate, the said argument was not required to be rejected - the findings returned by the Adjudicating Authority in paragraph 12 of the order, rejecting the submission of the Appellant that ECLGS credit proceeds were used towards servicing of interest outstanding on the Loan Account not approved.
Whether Corporate Debtor has committed default towards ECLGS-1 sanctioned on 30.12.2020 as per date of default 15.11.2022? - HELD THAT:- The finding returned by the Adjudicating Authority regarding default, thus is without considering of the materials on the record and are unsustainable. We have already held that DSRA was also required to be looked into, which has not even adverted to by the Adjudicating Authority. The Adjudicating Authority is required to consider the default of ECLGS and loan account, afresh, after considering the relevant materials on record, including the observations as made in this order.
Whether the Financial Creditors have been able to prove default under the Loan Agreement dated 26.12.2017 and the ECLGS-II sanctioned on 21.03.2022? - HELD THAT:- The default under the Loan Agreement dated 26.12.2017 could not have been pronounced without considering the CMA and amounts transferred by the Lenders to the Retention Account. The Adjudicating Authority having not examined and considered the CMA, no default with regard to Loan Agreement dated 26.12.2017 can be pronounced. Paragraph 16, itself indicates that with regard to ECLGS-2, repayment has to take place from 05.04.2024. In paragraph 16, the Adjudicating Authority has not returned any finding that there is a default with regard to ECLGS-2. Thus, the finding of the Adjudicating Authority is only with regard to ECLGS-1, which we have already dealt above. We, thus, are of the view the default with regard to ECLGS Facility could not have been pronounced by the Adjudicating Authority, without considering the CMA and amounts transmitted to Retention Account - Adjudicating Authority is required to consider the default under the loan account afresh. There being no finding of default regarding ECLGS-2 by the Adjudicating Authority, no further consideration is required with regard to ECLGS-2.
Conclusion - i) No fault can be found in the assignment at this stage. ii) There are no substance in the submission of the Appellant that proceedings under Section 7 initiated by Omkara is barred by principle of res-judicata. iii) Both the Hotels were running Hotels and earning revenue and payments were made to the Lenders even during Covid-19 period and thereafter. iv) The Adjudicating Authority committed error while holding in paragraph-11 that due to denial of existence of Cash Management Agreement, the submission of the Appellant on the basis of Cash Management Agreement, cannot be accepted. v) The Adjudicating Authority was obliged to consider the amounts transferred to Lenders under the Cash Management Agreement towards servicing of debt for returning the finding of default by the Corporate Debtor. vi) The Lenders were obliged to maintain Debt Service Reserve (“DSRA”) amount as per the Loan Agreement dated 26.12.2017, which amount was required to be appropriated towards payment of principal and interest due under the Loan Agreement. vii) The Corporate Debtor had disputed the default before the Adjudicating Authority itself. Thus, it cannot be accepted that default by the CD is undisputed fact. viii) The amounts sanctioned by Lenders under ECLGS-1 and ECLGS-2 of Rs. 98 crores and Rs. 65 crores, whether the said amount was used by the Lenders for servicing its own debts or dues, contrary to the Agreement dated 30.12.2020 and 21.03.2022, was required to be considered by the Adjudicating Authority and the said argument raised on behalf of the CD, could not have been brushed aside on the ground that end use Certificate was given by the CD. ix) The Adjudicating Authority is required to consider the default of ECLGS and loan account, afresh, after considering the relevant materials on record, including the observations as made in this order. x) Adjudicating Authority is required to consider the default under the loan account afresh. There being no finding of default regarding ECLGS-2 by the Adjudicating Authority, no further consideration is required with regard to ECLGS-2.
The impugned order is set aside - appeal allowed.
Issues: (i) Whether the amounts advanced to the corporate debtor constituted financial debt disbursed against the consideration for the time value of money, and whether default in repayment was established so as to sustain the Section 7 admission; (ii) Whether the appeal had become infructuous in view of subsequent developments, including approval of the resolution plan, and whether any interference was warranted on merits.
Issue (i): Whether the amounts advanced to the corporate debtor constituted financial debt disbursed against the consideration for the time value of money, and whether default in repayment was established so as to sustain the Section 7 admission.
Analysis: The record contained disbursement details, bank statements, ledger entries, audited balance sheets and Form 26AS reflecting the advances and interest component. The balance sheets of the corporate debtor, signed by its directors, recorded the liability, which amounted to acknowledgement of debt. The materials established that the funds were advanced as loan and not merely as an equity investment, and the corporate debtor had failed to repay the outstanding amount despite demand.
Conclusion: The issue was answered against the appellants and in favour of the respondent. The financial debt and default stood established, and the admission of the Section 7 petition did not suffer from infirmity.
Issue (ii): Whether the appeal had become infructuous in view of subsequent developments, including approval of the resolution plan, and whether any interference was warranted on merits.
Analysis: By the time the appeal was heard, the same corporate debtor had already been dealt with in connected proceedings, and the resolution plan had been approved in subsequent litigation. In that background, the appeal against the admission order no longer served any effective purpose. Even otherwise, the merits of the record supported the finding of debt and default.
Conclusion: The issue was answered against the appellants. The appeal was infructuous and also lacked merit.
Final Conclusion: The appellate challenge failed in its entirety, and the admission order under Section 7 was left undisturbed.
Ratio Decidendi: Audited balance sheets, ledger entries and allied financial records acknowledging liability can establish acknowledgement of debt and support a Section 7 insolvency application where disbursement and default are otherwise proved; a later supervening resolution process may also render the challenge to the admission order infructuous.
Maintainability of petition filed u/s 7 of IBC - default in payment of its financial debts - financial debt or not - HELD THAT:- It is evident that no party raised the issue of the pendency of this Section 7 Appeal in the other case before the coordinate Bench.
The petition u/s 7 of IBC, 2016 had been filed by Respondent No.1 against Corporate Debtor for default in payment of its financial debts, which fell due on 16.03.2020, when Corporate Debtor despite demand, failed to repay the loan amount along with interest accrued therein. Audited Financial Statement of the Corporate Debtor, duly signed by all its directors including Appellants for the financial year commencing from 2012-2013 up till 2016-2017 are on record, which clearly reflects the loan amount given by Respondent No.1 into the account of Corporate Debtor. In the present case, Financial Creditor had placed material i.e disbursement details, bank account statement indicating disbursement, ledger statement, audited balance sheet of the Corporate Debtor since the Financial Year 2012-2013 to 2016-2017 and 26AS, which confirms that Financial Creditor had provided Loan to the Corporate Debtor and the Corporate Debtor acknowledged the same financial debt and committed default in repayment of the financial debt.
Further Financial Creditor / Respondent No.1 gets support from the case of Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal & Anr [2021 (4) TMI 753 - SUPREME COURT], wherein the Hon'ble Apex Court has held that entries in balance sheets will amount to acknowledgement of debt under Section 18 of the Limitation Act, 1963 for the purposes of filing of an Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
Conclusion - The transaction was a financial debt, the Corporate Debtor defaulted on repayment. The debt and default has been established.
There are no infirmity in the orders of the Adjudicating Authority - appeal dismissed.
Issues: (i) Whether the applicant was entitled to bail on the ground that he was sick or infirm within the proviso to Section 45(1) of the Prevention of Money-laundering Act, 2002. (ii) Whether prolonged incarceration and delay in commencement of trial justified release on bail under Article 21 of the Constitution of India.
Issue (i): Whether the applicant was entitled to bail on the ground that he was sick or infirm within the proviso to Section 45(1) of the Prevention of Money-laundering Act, 2002.
Analysis: The medical material placed on record showed serious and continuing ailments, including chronic kidney disease, uncontrolled diabetes, peripheral neuropathy, disability, and need for regular physiotherapy and assistance in daily activities. The Court treated the applicant's present medical condition as material and found that the sickness was not a mere routine ailment but one of sufficient seriousness to attract the statutory proviso.
Conclusion: The applicant fell within the proviso to Section 45(1) and was entitled to bail on medical grounds.
Issue (ii): Whether prolonged incarceration and delay in commencement of trial justified release on bail under Article 21 of the Constitution of India.
Analysis: The applicant had remained in custody for about 18 months, charge had not been framed, and there was no realistic prospect of the trial commencing or concluding in the near future. The Court held that such inordinate delay, coupled with the absence of early trial progress, engaged the constitutional guarantee of a speedy trial and weakened the rigor of the bail restrictions.
Conclusion: Prolonged incarceration and delay in trial also justified grant of bail in favour of the applicant.
Final Conclusion: Bail was granted because the applicant satisfied the medical exception under the special statute and the continued pre-trial detention was found incompatible with the right to speedy trial.
Ratio Decidendi: A person need not suffer a life-threatening illness to qualify as "sick or infirm" under the proviso to Section 45(1) of the Prevention of Money-laundering Act, 2002, and prolonged pre-trial incarceration without near-term trial prospects may independently support bail consistently with Article 21.
Seeking grant of bail under section 439 of the Code of Criminal Procedure, 1973 - Whether the applicant/accused, Amar Sadhuram Mulchandani, has made out a prima facie case for release on bail under Section 439 of the Code of Criminal Procedure, 1973, considering his medical condition under the proviso to Section 45(1) of the Prevention of Money Laundering Act, 2002? - HELD THAT:- Considering the medical record before this Court, coupled with the fact that since the time of arrest, till the last medical report received from Sir J.J. Hospital, it appears that the accused is suffering from various ailments, due to passing of time disease became chronic and uncontrolled. Accordingly, accused is sick.
The judgment in the matter of Manish Sisodia Vs. Directorate of Enforcement [2024 (8) TMI 614 - SUPREME COURT], the Hon’ble Apex Court has dealt with the issue of delay in commencement of the trial and has held that it violates Article 21 of the Indian Constitution and has granted bail to the said accused. In this matter, applicant/accused is in custody since 18 months and no sign of trial to start in near future and not possible of it to conclude in a short span of time. Punishment under PML Act, 2002 is maximum 7 years. Accused has already being in custody since 18 months. Long period of incarceration without chance of trial being commencing in near future itself dilutes the rigorous of twin condition of PML Act, 2002. In view of my aforesaid discussions, as applicant/accused is sick, therefore, his case squarely falls within proviso given beneath section 45(1) of PML Act, 2002. As there is inordinate delay in commencement of the trial, therefore, accused is entitled for release on bail under section 45 of PML Act, 2002.
Conclusion - The applicant's medical conditions and the delay in trial commencement both justified granting bail.
Bail application allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal issues presented and considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Exemption from Service Tax for Cleaning & Grading and Handling & Transportation Activities
Issue 2: Time-barred Demand and Penalties
3. SIGNIFICANT HOLDINGS
Exemption from service tax - Business Auxiliary services or not - Cleaning & Grading service - Handling & Transportation service - extended period of limitation - HELD THAT:- The cleaning and grading of agricultural produce is held to be covered under production and processing of goods. It is observed that the production and processing of goods for, or on behalf of, the client if provided in relation to agricultural is exempted from whole amount of tax vide Notification No. 19/2005 dated 07.06.2005 which amended the previous Notification No. 14/2004 dated 10.09.2004 with respect to exemption to specified services in relation to Business Auxiliary Service - Circular No. 143/12/2011 dated 26/5.2011 which clarifies that the agricultural produce when subject to processing if retain their essential characteristics at the output stage, the process undertaken on or behalf of client should be considered as covered by the expression ‘in relation to the agriculture’.
Cleaning and grading service - HELD THAT:- The cleaning and grading activity was for few of the agricultural products which were warehoused by the appellants for their clients and that this activity did not change the essential characteristics of the agricultural product stored /warehoused by the appellant, the activity has to considered as the one in relation to the agriculture which is exempted from payment of tax - The Hon’ble Apex Court in the case of COMMISSIONER OF CUSTOMS, CENTRAL EXCISE & SERVICE TAX VERSUS M.L. AGRO PRODUCTS LTD. ETC. ETC. [2018 (7) TMI 1581 - SC ORDER] has held that threshing and redrying of tobacco leaves, being an activity “in relation to agriculture” is covered under entry “production of goods on behalf of client in relation to agriculture” which is entitled for exemption under Notification No. 14/2004-S.T. Hence, Service Tax is not payable C.B.E. & C. Circular No. 143/12/2011-S.T. dated 26- 5-2011, also clarifies the same. Thus even with the introduction of negative list, said activity remained non-taxable.
Handling and transportation charges - HELD THAT:- The cargo handling service under section 65 (21) means loading, unloading, packing, or unpacking of cargo and includes cargo handling service provided for freight in special container service provided by a container freight terminal or any other terminal meant to be transported by any means of transportation namely truck, rail, ship or aircraft buy the authorities likecontainer cooperation India, Airport Authority of India, in Land Container Depot, Container Freight Station etc. The department clarification no. B11/1/2002 -TRU dated 1.08.2002 clarifies that the cargo handling services provided in relation to storage of agricultural produced are covered under storage and warehousing services and have been exempted from the levy of service tax. In view thereof, the handling and transport of agricultural produce was also not taxable even prior 1.07.2012 hence the demand is held to have been wrongly confirmed.
Conclusion - The two activities are held to be part of one service i.e. storage and warehousing of agricultural produce. The said composite activity is out of service tax net for pre as well as post negative list period, hence it is held that even partial demand of Rs.3,66,314/- has wrongly been confirmed by the adjudicating authority below.
Appeal allowed.
Issues: Whether the refund of Service Tax claimed under Notification No. 41/2007-S.T. could be denied on limitation or procedural grounds, notwithstanding the extension of time prescribed by Notification No. 32/2008-S.T., and whether the exporter remained entitled to the refund of input services used in connection with export of goods.
Analysis: The refund claims arose from taxable input services used for export of goods under Notification No. 41/2007-S.T., and the rejection rested principally on the ground that some invoices were issued beyond the original sixty-day period. The extended period of six months introduced by Notification No. 32/2008-S.T. was treated as a beneficial extension applicable retrospectively, and the denial of refund merely for non-compliance with the original procedural timeline was held unjustified. The reasoning also relied on the view that the refund claim was not a dead claim and that the substantive entitlement to refund could not be defeated by procedural lapse where service tax payment and use in export were not in dispute.
Conclusion: The refund was held admissible, and the limitation-based rejection was set aside in favour of the assessee.
Ratio Decidendi: A beneficial extension of the refund-filing period under a tax exemption notification operates retrospectively to validate pending refund claims, and substantive refund entitlement cannot be defeated solely by procedural non-compliance where the underlying export-linked service use is established.
Refund of service tax paid - services used in connection with the export of goods under Notification No. 41/2007-S.T. dated 06.10.2007 - applicability of time limitation - procedural lapse of filing refund claims beyond the prescribed sixty days - HELD THAT:- The refund has been rejected on the procedural ground that the Appellant has filed the refund claim for a particular quarter wherein some of the bills and invoices were dated subsequent to the quarter ending date which is beyond the time limit of 'sixty days' prescribed under Notification No. 41/2007-S.T. dated 06.10.2007. In some cases, the exports had also been made prior to the date of invoice. Accordingly, the ld. adjudicating authority has rejected the refund claims on the ground that these input services could not be related to the goods exported in that quarter.
In this regard, it is observed that the Government has realized the difficulties faced by exporters and issued the Notification No. 32/2008-S.T. dated 18.11.2008, extending the time limit of sixty days for filing the refund claim to six months. This beneficial Notification can be applied retrospectively so as to allow refund applications filed within the period of six months from the quarter ending date. The substantial benefit of refund cannot be denied merely on account of non-fulfilment of procedural conditions prescribed under the said Notification.
This view has been taken by this Tribunal in the case of COMMISSIONER OF CGST & CENTRAL EXCISE, JAMSHEDPUR VERSUS M/S RUNGTA MINES LTD. [2023 (9) TMI 1093 - CESTAT KOLKATA] wherein it has been held that the extension of the time limit for filing the refund claim from “60 days” to “six months” being a piece of beneficial legislation, has to be considered as a retrospective amendment.
Conclusion - The Appellant is eligible for the refund of input services as claimed by them, as provided under Notification No. 41/2007-S.T. dated 06.10.2007.
Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The judgment primarily addresses the following legal issues:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Limitation on Service Tax Demand for FY 2013-14
Issue 2: Invocation of Extended Limitation Period
Issue 3: Service Tax on Corporate Guarantees
Issue 4: Service Tax on Advances and Legal Services
3. SIGNIFICANT HOLDINGS
The judgment provides a detailed analysis of the limitations and conditions under which the extended period for service tax demands can be invoked, emphasizing the necessity for clear evidence of intent to evade tax. It also clarifies the non-taxability of corporate guarantees without consideration, aligning with the Supreme Court's decision in Edelweiss Financial Services Ltd.
Invocation of extended period of limitation - demand confirmed for the Financial Year 2013-14 is beyond the period of 5 years so as to be time barred or not - extended period of limitation upto five years beyond the normal period of thirty months could have been invoked.
Whether the demand confirmed for the Financial Year 2013-14 is beyond the period of 5 years so as to be time barred? - HELD THAT:- It needs to be noted that out of the total confirmed demand of Rs. 2,40,96,546/-, the demand of Rs. 2,24,43,944/- is with respect to the Financial Year 2013-14. For the respective half yearly periods for the Financial Year 2013-14, the period of five years would expire on 25.10.2018 and 25.04.2019. The show cause notice that was issued on 11.10.2019 was clearly beyond the period of five years - The service tax demand of Rs. 2,24,43,944/- is clearly barred by limitation and, therefore, could not have been confirmed - the demand of interest and penalty for the amount of service tax confirmed for the Financial Year 2013-14 is beyond the period of limitation.
Whether the extended period of limitation upto five years beyond the normal period of thirty months could have been invoked in the facts and circumstances of the case? - HELD THAT:- It is noticed that after excluding the service tax liability confirmed for the period 2013-14, only the service tax liability for the periods 2016-17 and 2017-18 would be within the normal period of limitation. - There has to be a deliberate attempt to evade payment of excise duty. The show cause notice must specifically deal with this aspect and the adjudicating authority is also obliged to examine this aspect in the light of the facts stated by the assessee in reply to the show cause notice.
In Easland Combines, Coimbatore vs. Collector of Central Excise, Coimbatore [2003 (1) TMI 107 - SUPREME COURT] the Supreme Court observed that for invoking the extended period of limitation, duty should not have been paid because of fraud, collusion, wilful statement, suppression of fact or contravention of any provision. These ingredients postulate a positive act and, therefore, mere failure to pay duty which is not due to fraud, collusion or wilful misstatement or suppression of facts is not sufficient to attract the extended period of limitation.
In the present case, the show cause notice merely alleges that as the appellant did not disclose proper value of taxable services in the ST-3 returns, payment of service tax amounting to Rs. 2,40,96,546/- escaped assessment resulting in contravention of various provision of the Finance Act and the Rules with intention to evade payment of service tax. Mere suppression of facts is not enough to invoke the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act. The suppression has to be with an intent to evade payment of service tax and for this purpose the show cause notice must specifically allege why the assessee has suppressed facts with intent to evade payment of service tax - The extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act, therefore, could not have been invoked in the facts and circumstances of the case.
The demand for service tax on legal services of Rs. 3,105/- was upheld, while other demands were set aside.
Conclusion - Mere suppression of facts is not enough to invoke the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act - The extended limitation period requires evidence of intent to evade tax; corporate guarantees without consideration are not taxable.
Appeal allowed in part.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Justification of Penalties under Sections 76, 77, and 78
Issue 2: Service Tax Liability Prior to Section 66A
Issue 3: Simultaneous Penalties under Sections 76 and 78
Issue 4: Relief under Section 80 for Reasonable Cause
3. SIGNIFICANT HOLDINGS
Levy of penalties under Sections 76, 77 and 78 of the Finance Act, 1994 - service tax liability for services received from outside India applies for the period prior to the insertion of Section 66A of the Finance Act, 1994, i.e., before 18.04.2006 - HELD THAT:- During the relevant period, the applicability of Section 66A was not clear as to whether service tax is to be paid on the services received from out-side India. The said controversy was set at rest by the Hon’ble Bombay High Court in the case of INDIAN NATIONAL SHIPOWNERS' ASSOCIATION VERSUS UNION OF INDIA [2009 (3) TMI 29 - BOMBAY HIGH COURT]. By relying upon the said decision of Hon’ble Bombay High Court, the learned Commissioner has also given the benefit and confirmed the demand only for the period from 18.04.2006 to 31.12.2006 which the appellant has already paid alongwith the interest.
It has been held by the Hon’ble Punjab & Haryana High Court in the case of M/S CITY CABLE, BATHINDA VERSUS COMMISSIONER OF CENTRAL EXCISE, LUDHIANA [2016 (2) TMI 961 - PUNJAB AND HARYANA HIGH COURT] that simultaneous penalty under Sections 76 and 78 is not warranted.
Conclusion - There was no intention to evade the service tax, therefore, imposition of penalties is not warranted.
Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Classification of Services
Issue 2: Demand for Period Prior to 01.06.2007
Issue 3: Invocation of Extended Period of Limitation
Issue 4: Taxability of Services in Respect of Roads
3. SIGNIFICANT HOLDINGS
Classification of services - Works Contract Service or Erection, Commissioning & Installation Service? - suppression of facts or not - invocation of extended period of limitation.
HELD THAT:- In the present case, it is admitted fact that the contracts awarded to the appellant are composite in nature because the department has itself extended the benefit of abatement @67% in terms of Notification No. 1/2006-ST dated 01.03.2006. We also find that this issue is no more res integra and the Tribunal in various decisions has consistently held that once the alleged service falls under the category of ‘Works Contract Service’, the same cannot be taxed under ‘Erection, Commissioning & Installation Service’. In this regard, we may refer to the decision of this Tribunal in the case of BAJRANG LAL GUPTA VERSUS CCE- GURGAON [2023 (6) TMI 246 - CESTAT CHANDIGARH], wherein the identical issue was involved and the Tribunal after considering the submissions and ratios of the various decisions, has held 'even for the period after 01.006.2007, various decisions of the Tribunal have consistently held that the composite contract or works contract service even after 01.06.2007 cannot be taxed under Construction of Complex Service under Section 65 (105) (zzh) read with Section 65 (30a) of the Finance Act, 1994.' - thus, rendering of service in respect of roads is also not exigible to service tax being specifically excluded from the definition of ‘Works Contract Service’.
Invocation of Extended period of limitation - HELD THAT:- The invocation of extended period in the present case is also not warranted because the appellant had a bona fide belief that no service tax was liable on him as he was providing the services to various government departments and the services were not being used for the purpose of business or commerce.
Conclusion - i) Composite contracts should be classified under 'Works Contract Service' post-01.06.2007, and services related to roads are excluded from service tax. ii) Extended period of limitation is not invoked.
Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Qualification of Insurance Service as "Input Service"
Issue 2: Entitlement to CENVAT Credit
Issue 3: Applicability of the Negative List
3. SIGNIFICANT HOLDINGS
CENVAT Credit of service tax paid to Deposit Insurance And Credit Guarantee Corporation for insuring deposits - HELD THAT:- The Larger Bench in M/S STATE BANK OF PATIALA VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, CHANDIGARH-II [2024 (11) TMI 1410 - CESTAT CHANDIGARH (LB)] has observed 'The insurance service provided by the Deposit Insurance Corporation to the banks is an “input service” and CENVAT credit of service tax paid for this service received by the banks from the Deposit Insurance Corporation can be availed by the banks for rendering “output services”.'
Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions addressed in the judgment are as follows:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Classification of Dumpers and Tippers as Inputs
Issue 2: Validity of Adjudicating Authority's Decision
3. SIGNIFICANT HOLDINGS
CENVAT Credit - inputs - mining services - demand for reversal of Cenvat credit on dumpers and tippers was correct - HELD THAT:- There is no dispute about the fact that the earthmoving equipments such as dumpers and tippers are being used by the respondent to provide the output services of mining. The demand has been dropped considering these dumpers and tippers to be covered under the definition of inputs given under 2(k) of the Cenvat Credit Rules, 2004 to mean there is no dispute about the fact that earth moving equipments such as dumpers are being used by the respondent to provide output service. The dumpers even if classifiable under Chapter 87, can be considered within the definition of inputs, as per Rule 2(k) of the Cenvat Credit Rules, 2004.
Exclusion clause of this definition applies to light diesel oil, high speed diesel oil, motor spirit and motor vehicles. It is observed that despite this definition, the dumpers and tippers are held to not to be considered as motor vehicle by Hon’ble Apex Court in the case of Belani Ores Ltd. Etc. Vs. State of Orissa Etc. [1974 (9) TMI 115 - SUPREME COURT] wherein it has been observed 'The mere fact that there is no fence or barbed wire around the leasehold premises in not conclusive. There is evidence to show that the public are not allowed to go inside without prior permission, there are gates and a check on ingress andegress is kept by guards who also ensure that no authorised persons have access to the mining area.'
Hon’ble Apex Court in the case of Boving Fouress Ltd. Vs. Commissioner of Central Excise, Chennai [2006 (8) TMI 189 - SUPREME COURT] has held that the principle laid down by Tribunal in one case if accepted by the department, the department is not entitled to raise the same point in other cases. It cannot pick and choose the issues. The demand was ordered to be set aside by Hon’ble Apex Court in the said case on this sole ground.
Conclusion - The dumpers and tippers used exclusively in mining operations qualify as inputs under Rule 2(k) of the Cenvat Credit Rules, 2004, allowing for Cenvat credit eligibility.
There are no reason to differ with the findings in the impugned order considering the dumpers and tippers used by the respondent while rendering the Mining Services, as inputs. For which the Cenvat credit is held to have rightly been availed - appeal of Revenue dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal question considered in this judgment is whether the value of sprouts sold by the appellant should be included in the assessable value of "Malt" for the purpose of calculating excise duty when the "Malt" is cleared to the principal manufacturer, M/s. United Breweries Limited (UBL), during the specified period.
2. ISSUE-WISE DETAILED ANALYSIS
Relevant legal framework and precedents:
The legal framework involves the interpretation of Section 11A(1) of the Central Excise Act, 1944, concerning the demand of duty short paid, along with Sections 11AA and 11AC, which pertain to interest and penalties. The Central Excise Valuation Rules, 2000, and the precedent set by the Supreme Court in M/s. Ujagar Prints Ltd. are also relevant. Additionally, a CBEC Circular No.619/10/2002-CX and a previous Tribunal decision in the appellant's case are considered.
Court's interpretation and reasoning:
The court examined the Malt Agreement dated 18.02.2011, specifically paragraph 6, which states that thin and sprout by-products accrue to the benefit of the manufacturer (the appellant). The court reasoned that since the appellant retained the proceeds from the sale of sprouts, these proceeds should be included in the value of the "Malt" for excise duty purposes. The court relied on the Supreme Court's decision in M/s. Ujagar Prints Ltd., which supports the inclusion of additional values in the assessable value for excise duty.
Key evidence and findings:
The key evidence includes the cost certificates provided by the cost accountants, which did not initially include the value of sprouts in the cost of production. The court also considered the Malt Agreement, which explicitly allowed the appellant to benefit from the sale of sprouts. The Tribunal's previous decision against the appellant on a similar issue was also a significant factor.
Application of law to facts:
The court applied the legal principles from the Central Excise Act and relevant precedents to the facts, determining that the appellant's retention of proceeds from the sale of sprouts constituted a value addition to the "Malt." Therefore, this value should be included in the assessable value for excise duty calculation.
Treatment of competing arguments:
The appellant did not appear for the hearing, and no competing arguments were presented in their absence. The court proceeded to decide the case based on the appeal papers and the Authorized Representative's submissions for the Department, which supported the inclusion of the sprout value in the assessable value.
Conclusions:
The court concluded that the value of sprouts sold by the appellant must be included in the assessable value of the "Malt" for excise duty purposes. The appeal was dismissed, affirming the decision of the lower authorities.
3. SIGNIFICANT HOLDINGS
Preserve verbatim quotes of crucial legal reasoning:
"By considering the overall facts and circumstances of the case, we are of the view that appellant has sold the sprouts outside to the third party and retained the sale proceeds, then the value is required to be added to that of the goods, the malt supplied to the principal manufacturer and it attracts excise duty."
Core principles established:
The judgment reinforces the principle that any value addition or profit retained by a manufacturer from by-products or ancillary sales should be included in the assessable value for the purpose of calculating excise duty.
Final determinations on each issue:
The court affirmed the lower authority's decision to include the value of sprouts in the assessable value of "Malt" and dismissed the appeal, upholding the excise duty demand along with interest and penalties.
Demand of duty short paid under Section 11A(1) of Central Excise Act, 1944 along with interest and penalty under Section 11AA and 11AC of the Act respectively - whether the value of sprouts sold by the appellant is to be included in the assessable value of the “Malt” and the duty is payable while clearing the same to “UBL”? - HELD THAT:- Both the Authorities observed that the sprouts arose during the processing of “Barely‟ for manufacture of “Barely Malt‟, which was sold by the appellant and the sole proceeds were retained by them. The profit earned on the sale of sprouts, therefore, has been part of the value of the “Barley Malt‟ manufactured and cleared by the appellant on job work to the principal manufacturer. In view of the decision of the Supreme Court in UJAGAR PRINTS ETC. ETC. VERSUS UNION OF INDIA & OTHERS [1989 (1) TMI 124 - SUPREME COURT] also the clarification issued by the CBEC in Circular No.619/10/2002-CX dated 19.02.2002, where the Tribunal had rejected the appeal of the appellant on the issue of inclusion of the value of the sprouts, the Adjudicating Authority had confirmed the demands.
There are no reason to interfere with the impugned order and hence, the same is affirmed - appeal dismissed.
1. ISSUES PRESENTED and CONSIDERED
The judgment primarily revolves around two core legal questions:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Whether the difference between the financial statement and ER-1 returns is sufficient proof of alleged clandestine removalRs.
Issue 2: Based on said difference, whether appellant is liable to pay duty on the differential amountRs.
3. SIGNIFICANT HOLDINGS
Clandestie removal - difference between balance sheet and ER-1 return - demand of clandestine manufacture or clearance confirmed purely on assumption and presumption - Invocation of Extended period of limitation.
Whether the difference between the financial statement and ER-1 returns is sufficient proof of alleged clandestine removal? - HELD THAT:- The entire case of Revenue is based upon the audit objection which is based on the comparison of entries made in the statutory records vis-à-vis the balance sheet. It is observed that the appellant has explained the differences by referring to the number of their final product as entered in ER-1 returns as also on balance sheet. Apart from that it is found that there is virtually no evidence on record to indicate and establish clandestine manufacture and removal of goods. It is well settled law that the onus to prove clandestine activities is upon the Revenue and the same is required to be discharged by production of positive evidences. Such a demand cannot be confirmed on assumptions and presumptions - This Tribunal in the case of Sharma Chemical Vs. CCE [2000 (12) TMI 161 - CEGAT, KOLKATA] has held that noting in the private records may raise suspicion but for confirming the charge of clandestine removal based on those records, there must be corroborative evidence in the form of installed capacity, raw material, utilization, labour employed, power consumed, goods actually manufactured and packed etc.
Similar have been the findings of Hon’ble High Court of Allahabad in their another decision titled as Commissioner of C.Ex., Meerut-I Vs. R.A. Castings Pvt. Ltd. [2010 (9) TMI 669 - ALLAHABAD HIGH COURT] holding that the income shown in balance sheets unless and until is linked to some other clinching evidence, cannot be the proof of clandestine removal of goods, has been upheld by Hon’ble Apex Court in the case of Commissioner Vs. R.A. Castings Pvt. Ltd. [2011 (1) TMI 1302 - SC ORDER]. In light of this discussion, the department has failed to prove the allegations of clandestine removal of goods and noticed difference in the balance sheet compared with the ER-1 return is the presumptory basis of raising the said allegation - the findings in the impugned order to this aspect are therefore liable to be set aside.
Based on said difference whether appellant is liable to pay duty on the differential amount? - HELD THAT:- It is a settled principle of law that service tax can be levied only when there is a clear identification of service provider, service recipient and consideration paid for the same. In the absence of any such evidence of the service recipient and the service provided, service tax cannot be demanded and confirmed. For this reason, it is not open for the Department to raise demands on the basis of other statutory returns like Income Tax Returns or balance sheets without proving that such service has been rendered by the assessee and consideration thereof has been received. Similarly, no service tax demand can be raised and confirmed on the basis of notional income.
Section 32(2) of Indian Evidence Act, 1872 also permits acceptance of such document without a formal proof. The recent decisions of the Tribunal, as follows, have also held that the difference between the financial statements of the assessee and the returns cannot be the sole basis of the demand confirmed.
Invocation of Extended period of limitation - HELD THAT:- The show cause notice has been issued invoking the provision of sub-section (1) of Section 73 of Finance Act, 1994. It has already been observed that the demand has been confirmed on the basis of assumptions and that the no evidence has been produced by the department to support the allegations to suggest any positive action of the appellant to have any intent to evade the duty - Since, the burden was upon the department to prove the allegations which remains undischarged. The extended period of limitation and the provision of Section 73(1) of Central Excise Act, 1944 has wrongly been invoked.
Conclusion - i) The department failed to prove clandestine removal and that the demand based on financial discrepancies was unsustainable. ii) The extended period of limitation and the provision of Section 73(1) of Central Excise Act, 1944 has wrongly been invoked. iii) The show cause notice itself is barred by time. In fact, the imposition of penalty is also liable to be set aside.
Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal question in this appeal is whether the Appellant (Revenue) can recover the sanctioned refund amount of Rs. 88,37,167/- that was granted to the Respondent under the CENVAT Credit Rules.
2. ISSUE-WISE DETAILED ANALYSIS
Issue: Recovery of Sanctioned Refund Amount
Relevant Legal Framework and Precedents:
The legal framework primarily involves the CENVAT Credit Rules and the Central Excise Act, 1944. Specifically, Section 5 of the CENVAT Credit Rules allows a manufacturer to utilize CENVAT credit for the payment of excise duty on final products cleared for home consumption or to claim a refund if such adjustment is not possible. The Notification No. 5/2006 CE (NT) dated 14.03.2006 outlines the conditions for such refunds.
Precedents cited include decisions from the Tribunal in M/s. Tri Dos Laboratories Ltd Vs. CCE and High Court decisions in M/s. Dynamic Technologies Ltd Vs. Union of India and M/s Honda SIEL Power Products Vs. Union of India, which emphasize that recovery of refunds can only be made upon modification of the Order-in-Appeal and not through protective show cause notices or invoking Section 11A for erroneous refunds.
Court's Interpretation and Reasoning:
The Tribunal noted that the Respondent had utilized CENVAT credit amounting to Rs. 4,02,70,471/- for clearance of finished goods for home consumption, while the refund claim for exports was Rs. 1,23,04,383/-. The Appellant's argument was that the Respondent did not meet the conditions of the relevant notification, making the refund improper. However, the Tribunal found that the Respondent held CENVAT credit at the relevant time and was entitled to a refund as per the rules, given that the credit was unutilized.
Key Evidence and Findings:
The Tribunal acknowledged that the Respondent had CENVAT credit available and had applied for a refund of the unutilized amount. The Adjudication authority had sanctioned Rs. 88,37,166/- despite the available credit for exports being Rs. 1,23,04,383/-. This discrepancy formed the basis of the Revenue's appeal.
Application of Law to Facts:
The Tribunal applied Section 5 of the CENVAT Credit Rules, confirming that the Respondent was entitled to a refund of the unutilized credit. The Tribunal emphasized that the proceedings initiated by the Revenue were unsustainable given the legal provisions and the precedents set by higher judicial authorities.
Treatment of Competing Arguments:
The Tribunal considered the Revenue's argument that the conditions of the notification were not met. However, it found the Respondent's reliance on prior decisions and legal provisions more persuasive. The Tribunal noted that the Revenue's appeal was untenable, especially since the Commissioner (Appeals) had already dismissed similar grounds and the decision had been accepted in review.
Conclusions:
The Tribunal concluded that the Revenue's appeal was unsustainable and dismissed it, upholding the refund sanctioned to the Respondent.
3. SIGNIFICANT HOLDINGS
Verbatim Quotes of Crucial Legal Reasoning:
"We find that it is an admitted fact that the Respondent was holding CENVAT credit in their account at the relevant time... the entire proceedings initiated against the Respondent are unsustainable."
Core Principles Established:
The Tribunal reinforced the principle that recovery of refunds can only occur through modification of the Order-in-Appeal, not through protective show cause notices or invoking Section 11A for erroneous refunds. It also emphasized the adherence to CENVAT Credit Rules for refund claims.
Final Determinations on Each Issue:
The Tribunal determined that the appeal by the Revenue lacked merit and dismissed it, affirming the Respondent's entitlement to the sanctioned refund amount of Rs. 88,37,167/-.
Recovery of sanctioned refund that was granted to the Respondent under the CENVAT Credit Rules - HELD THAT:- It is an admitted fact that the Respondent was holding CENVAT credit in their account at the relevant time and as per Section 5 of the CENVAT Credit Rules, if any input is used in manufacture of final product, which is cleared for export under Bond or letter of undertaking, the CENVAT Credit in respect of such input shall be allowed to be utilized by the manufacturer towards payment of duty of excise on any final product cleared for home consumption and where for any reason such adjustment is not possible, the manufacturer shall be allowed refund of such amount subject to such safe guards, conditions and limitations as prescribed in the relevant notification. The Respondent had applied for refund of unutilized CENVAT credit amounting to Rs.1,23,04,382/- and Adjudication authority as per the order dated 16.06.2009 sanctioned only Rs. 88,37,166/- though the Appellant admits that the CENVAT credit available against the goods exported during the same period was Rs. 1,23,04,383/-.
Conclusion - The entire proceedings initiated against the Respondent are unsustainable. Refund is allowed.
Appeal of Revenue dismissed.
1. ISSUES PRESENTED and CONSIDERED
The legal judgment primarily revolves around the following core issues:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Qualification of Activities as "Manufacture"
Issue 2: Classification of Earthmoving Machines as "Automobiles"
Issue 3: Retrospective Application of Amendment
3. SIGNIFICANT HOLDINGS
The judgment emphasizes the importance of precise classification and the prospective nature of legislative amendments, reinforcing the need for clear legislative language to avoid retrospective imposition of duties.
Process amounting to manufacture or not - activity of packing/ repacking, labeling/ re-labeling of machine parts undertaken by the appellants - classification of earthmoving machines - to be classified as automobiles or not - HELD THAT:- This Bench in the case of Donaldsons India Filter Systems Pvt. Ltd. [2024 (7) TMI 544 - CESTAT CHANDIGARH] held that 'the amendment carried out w.e.f. 29.04.2010 makes it abundantly clear that a legislature did not intend to tax the parts, components and assemblies of earthmoving equipment etc. under the Head “Automobiles”; therefore, to this extent, the demand for the period prior to 29.04.2010 cannot be sustained.'
It is further found that Commissioner, Pune vide his Order dated 13.07.2012 observed that 'the activities of packing and repacking of parts, components and assemblies of earth moving machinery falling under Chapter Heading 8429. manufactured by the assessee, have been made liable to Central Excise duty retrospectively, with effect from 29-04-2010, in view of the retrospective amendment made in the Third Schedule to the Central Excise Act, 1944, by inserting Entry 100A in the said Schedule vide Section 73 read with Twelfth Schedule to the Finance Act, 2011. The Finance Act. 2011, got assent of the Hon'ble President of India, on 08-04-2011 and hence the said retrospective amendment came into force only on 08-4- 2011.
Conclusion - i) The word 'automobile' has not been defined in the Central Excise Act," and thus, common parlance and dictionary definitions should guide its interpretation. ii) The amendment made in the Third Schedule to the Central Excise Act by Finance Act, 2011 w.e.f. 29.04.2010 by adding serial no. 100A to the Third Schedule is prospective in nature. iii) Earthmoving machines involved in the present appeals are not 'automobiles.
The impugned orders cannot be sustained and are liable to be set aside - Appeal allowed.
Issues: Whether the appeal stood abated after approval of the resolution plan under the Insolvency and Bankruptcy Code, 2016.
Analysis: Once the resolution plan had been approved by the adjudicating authority, the claims not forming part of the plan stood frozen and ceased to survive. In view of the binding effect of the approved resolution plan on stakeholders and the settled position that no proceedings can be continued in respect of extinguished claims, the appellate tribunal treated the matter as no longer open for adjudication and became functus officio in relation to the appeal.
Conclusion: The appeal stood abated and was disposed of accordingly.
Recovery of fraudulently availed Cenvat Credit in terms of Rule 14 of CC Rules read with proviso (1) to Section 11A of CEA - Whether approval of a Resolution Plan by the NCLT extinguishes the claims of all creditors, including statutory authorities, and abates ongoing proceedings related to such claims? - HELD THAT:- The identical matter has been considered by two coordinate benches of the Tribunal; Mumbai Bench in the case of M/s Jet Airways (India) Limited vs. Commissioner of Service Tax-IV [2023 (5) TMI 767 - CESTAT MUMBAI] and Hyderabad Bench in the case of Icomm Tele Ltd. vs. Commissioner of Central Tax, Puducherry [2023 (10) TMI 1344 - CESTAT HYDERABAD].
It is pertinent to refer the findings of Mumbai Bench of the Tribunal in the case of M/s Jet Airways (India) Limited which was disposed of vide its order [2023 (5) TMI 767 - CESTAT MUMBAI] and it was ordered that the appeals stand abated once the Resolution Plan has been approved by NCLT and the CESTAT has become functus officio in the matters relating to this appeal.
Conclusion - Once the Resolution Plan has been approved by the NCLT, thereafter, the present appeal stands abated as the CESTAT has become functus officio in the matter relating to the present appeal.
The appeal filed by the appellant is disposed of as abated.
1. ISSUES PRESENTED and CONSIDERED
The core legal issue in this case revolves around the valuation of 'physician samples' manufactured by the appellant and sold on a principal-to-principal basis to other pharmaceutical manufacturers/brand owners. Specifically, the question is whether the transaction value adopted by the appellant for excise duty purposes, under Section 4 of the Central Excise Act, 1944, is appropriate, given that the samples are intended for free distribution to physicians.
2. ISSUE-WISE DETAILED ANALYSIS
Relevant Legal Framework and Precedents
The legal framework primarily involves the Central Excise Act, 1944, particularly Section 4, which deals with the valuation of excisable goods based on transaction value. The appellant argued that the transaction value should be accepted as per Section 4, supported by precedents such as the Supreme Court's decision in CCE, Surat Vs. M/s Sun Pharmaceutical Industries Ltd.
Court's Interpretation and Reasoning
The court considered the appellant's argument that the transaction value, as per the contract with other pharmaceutical manufacturers, should be the basis for excise duty calculation. The appellant cited several precedents where similar issues were adjudicated, emphasizing the applicability of Section 4 when a transaction value exists between the manufacturer and the distributor.
Key Evidence and Findings
The appellant provided evidence of contracts and transaction values agreed upon with other pharmaceutical manufacturers. The appellant also referenced a Board Circular clarifying that physician samples are not required to have a Maximum Retail Price (MRP) since they are not meant for sale. The court found these arguments and evidence compelling, noting the consistency with the Supreme Court's ruling in Sun Pharmaceutical Industries Ltd.
Application of Law to Facts
The court applied Section 4 of the Central Excise Act, 1944, to the facts, determining that the transaction value between the appellant and the distributors should be the basis for excise duty. The court rejected the department's view that the absence of a sale to end consumers invalidated the transaction value.
Treatment of Competing Arguments
The department argued that the valuation method was improper because the samples were intended for free distribution. However, the court found this reasoning flawed, emphasizing that the transaction between the manufacturer and distributor was the relevant consideration, not the ultimate distribution of the samples.
Conclusions
The court concluded that the transaction value adopted by the appellant was appropriate and in line with legal precedents. The appeals were allowed, and the court granted consequential relief to the appellant.
3. SIGNIFICANT HOLDINGS
Preserve Verbatim Quotes of Crucial Legal Reasoning
The court cited the Supreme Court's reasoning: "The transaction in question was between the assessee and the distributors. Between them, admittedly, price was charged by the assessee from the distributors. What ultimately distributors did with these goods is extraneous and could not be the relevant consideration to determine the valuation of excisable goods."
Core Principles Established
The judgment reaffirmed the principle that the transaction value between a manufacturer and distributor is the appropriate basis for excise duty valuation, even if the goods are ultimately distributed for free. The decision clarified that the end-use of goods does not affect the applicability of Section 4 when a transaction value exists.
Final Determinations on Each Issue
The court determined that the appellant's method of adopting transaction value under Section 4 was valid. The appeals were allowed, and the court ordered consequential relief in accordance with the law.
Method of valuation - Section 4 or Section 4A of the Central Excise Act - Valuation of the 'physician samples' manufactured by the Appellant and sold on principal to principal basis to other pharmaceutical manufacturers/brand owners of such products - extended period of limitation - HELD THAT:- The issue is no more res integra. The Hon’ble Supreme Court in the matter of CCE, Surat Vs. M/s Sun Pharmaceutical [2015 (12) TMI 670 - SUPREME COURT], wherein it was categorically held that 'The transaction in question was between the assessee and the distributors. Between them, admittedly, price was charged by the assessee from the distributors. What ultimately distributors did with these goods is extraneous and could not be the relevant consideration to determine the valuation of excisable goods. When we find that price was charged by the assessee from the distributors, the show cause notice is clearly founded on a wrong reason. The case would squarely be covered under the provisions of Section 4(1)(a) of the Act. In view thereof, the Central Excise Rules would not apply in the instant case.'
Extended period of limitation - HELD THAT:- In the absence of any allegation regarding suppression of facts or fraud, invoking the extended period of limitation is also unsustainable.
Conclusion - The valuation of physician samples sold on a principal-to-principal basis should be based on transaction value under Section 4, not Section 4A. The extended period of limitation requires evidence of fraud or suppression, which was absent in this case.
Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Determination of Assessable Value under Rule 10A(iii) and Rule 8
Issue 2: Applicability of Previous Tribunal Decision
3. SIGNIFICANT HOLDINGS
Determination of assessable value for the completed vehicles under Rule 10A(iii) read with Rule 8 of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000, when the vehicles are used captively by the Defense Establishment and not sold - HELD THAT:- In the appellant’s own case, on the identical issue, for the previous period, the Principal Bench of the Tribunal in M/S PERFECT MECHANICAL INDUSTRIES VERSUS C.C.E. DELHI IV [2015 (5) TMI 525 - CESTAT NEW DELHI], has considered the issue and has held 'The Department seeks to demand duty on 110% of the fabrication charges by invoking Rule 8 of the Central Excise Valuation Rules. Rule 8 of the Central Excise Valuation Rules is applicable only when the goods manufactured by a manufacturer are captively consumed by him or by some other manufacturer on his behalf but this is not the case here as the appellant after manufacturing the complete vehicle by constructing the body on the duty paid chassis received by them, returned the complete vehicles to M/s Ashok Leyland / vehicle factory Jabalpur, who in turn supplied those vehicles to the Armed Forces.'
Conclusion - The appellant was not liable for additional duty based on inflated assessable value calculations under Rule 10A(iii) and Rule 8.
Appeal allowed.
Issues: Whether the respondent's order amounted to contemptuous non-compliance with the earlier writ judgment by disregarding the finding that the petitioner was entitled to the amended scheme, and whether the Court could direct recall of the impugned order and pass restorative directions in contempt jurisdiction.
Analysis: The earlier writ judgment had conclusively held that the petitioner could not be deprived of the benefit of the amended scheme that came into force on 23.02.1995, and had remitted the matter only for reconsideration of the rectification application in accordance with law and natural justice. The impugned order dated 08.09.2016 was found to have reiterated the very conclusion already rejected by the Court and to have affirmed the earlier order that had been annulled, instead of addressing the limited remit of the remand. While the Court noted that contempt jurisdiction does not sit in appeal over the merits of the underlying dispute, it can examine whether the operative directions of the earlier judgment were obeyed and may adopt restitutive measures to cure the breach.
Conclusion: The impugned order was held to be in defiance of the earlier judgment, though the Court stopped short of recording a finding of wilful disobedience. The respondent was directed to recall the order dated 08.09.2016 and pass a fresh order strictly in accordance with the earlier judgment within four weeks.
Final Conclusion: The contempt petition resulted in corrective directions to secure compliance with the prior writ judgment, but the Court did not finally adjudicate contempt liability and kept the matter pending for further compliance.
Ratio Decidendi: In contempt proceedings, the Court may examine whether its operative directions have been obeyed and may issue restorative directions to secure compliance, but it does not re-adjudicate the underlying dispute or substitute appellate review for the merits of the earlier order.
Contempt petition alleging disobedience of the judgment ALOK CHITRA MANDIR VERSUS DY. COMMISSIONER (ADMN.) & ORS [2014 (4) TMI 1329 - RAJASTHAN HIGH COURT] - application of the petitioner under Rule 32 of the Rajasthan Entertainment & Advertisement Tax Rules, 1957 - validity of Section 9A of the Entertainment Tax Act, 1957 upheld - HELD THAT:- A bare perusal of Court vide judgment ALOK CHITRA MANDIR makes it clear that the Court, in specific terms, held that the petitioner could not have been deprived of the benefit of the amended scheme which came into effect from 23.02.1995 and further, the contention of the department that the petitioner would be governed by the old un-amended scheme could not be accepted.
Vide the judgment, the Deputy Commissioner was only directed to decide whether the petitioner assessee would be entitled to any refund of the amount of compensation of Entertainment Tax already paid by it in excess. The Deputy Commissioner was directed to examine the application of the petitioner for rectification of the mistake in terms of Rule 32 of the Rules of 1957. The same was to be done keeping into consideration the fact whether the petitioner had realized tax in terms of the old un-amended scheme or not, that is, whether the doctrine of unjust enrichment would come into play because of which the petitioner would not be entitled for refund of the compensation amount as paid in excess.
However, a bare perusal of the order impugned dated 08.09.2016 makes it clear that the Deputy Commissioner, in total contravention to the finding as recorded by the Court in judgment ALOK CHITRA MANDIR, again held that the petitioner would not be entitled to the benefit of the amended scheme and therefore, affirmed the order dated 05.04.1995. In the specific opinion of this Court, the said approach of the Deputy Commissioner clearly amounts to the defiance of the judgment ALOK CHITRA MANDIR.
However, a perusal of the order dated 08.09.2016 makes it clear that no such consideration has been made by the authority. True it is that in contempt jurisdiction the Court is not required to consider as to what the judgment or order should have contained but then definitely, it has to consider the directions issued in the judgment/order. Evidently, in the judgment dated 04.04.2014, there was a specific finding recorded by the Court that the petitioner shall be entitled to the benefit of the amended scheme and once the said finding had been recorded by the Court, the Authority i.e., the respondent-contemnor could not have again adjudicated the same issue and recorded a finding totally contrary to the finding as recorded by the Court.
Conclusion - There appears to be no justifiable reason to deprive the petitioner assessee from benefit of the amended scheme which came into offing w.e.f. 23rd of February 1995. The respondent-contemnor is hereby directed to recall its contemptuous order dated 08.09.2016 and pass a fresh order strictly in compliance of the judgment ALOK CHITRA MANDIR VERSUS DY. COMMISSIONER (ADMN.) & ORS [2014 (4) TMI 1329 - RAJASTHAN HIGH COURT].
Let the matter be listed on 10.02.2025.
Issues: Whether a subsequent charge and revenue mutation entry created by the sales tax authorities for tax dues could survive against a prior charge held by the secured creditor and the auction purchaser under the SARFAESI framework.
Analysis: The property had already been sold through proceedings under the Securitisation And Reconstruction of Financial Assets And Enforcement of Security Interest Act, 2002, and the bank's charge was prior in point of time. The Court applied the settled principle that, in the context of secured recovery under the SARFAESI Act and the Recovery of Debts and Bankruptcy Act, 1993, statutory tax dues cannot override the rights of a secured creditor where the subsequent State charge is inconsistent with the prior secured interest. On that basis, the later sales tax and VAT-related charge entries could not displace the purchaser's title or continue to burden the property.
Conclusion: The subsequent sales tax charge did not survive and the impugned attachment and consequential revenue entries were quashed.
Final Conclusion: The petitioner's title was held to prevail over the later State revenue charge, and the property was directed to be from the sales tax encumbrance.
Ratio Decidendi: A subsequent statutory charge for tax dues cannot prevail over a prior secured creditor's charge and sale under the SARFAESI regime, and consequential mutation entries based on such subordinate charge cannot be sustained.
Challenge to order of attachment passed by the respondent-authority under the provision of the Gujarat Sales Tax Act, 1961 - priority of charges - charge created by the Sales Tax Department over the property has precedence over the charge created by the bank under SARFAESI Act - HELD THAT:- In case of Partners of Siddheshwar Tax Fab & Ors vs. State of Gujarat and ors [2024 (7) TMI 1547 - GUJARAT HIGH COURT], this Court held 'the charge in respect of the property in question created for sales tax dues or VAT dues is of no avail and has no efficacy in law in view of the provisions of SARFAESI Act and the RDB Act. The property in question was sold by respondent no.6-Bank under the provisions of SARFAESI Act and the petitioners were successful purchasers and the sale certificate is issued and sale deed is also executed by which the petitioners have become absolute owners of the property and therefore considering the existing position of law, the charge created by the respondent State over the property in question in the year 2018, cannot be sustained and is accordingly quashed and set aside and as a consequence the mutation entries in revenue records also stands deleted.'
Conclusion - The respondent-authorities are directed to remove the charge over the property in question as it is not in dispute that the respondent-Bank has created the charge prior in point of time and hence, as per the settled legal position, the charge created by the Sale Tax Department subsequently in the Year 2017-18 would not survive and accordingly, mutation entry in the revenue record stands deleted.
Petition disposed off.
Issues: Whether the order rejecting input tax credit under Section 19(5)(c) of the Tamil Nadu Value Added Tax Act, 2006 could be sustained in the light of the earlier decision covering the same issue and the pending challenge before the Supreme Court.
Analysis: The impugned rejection was made pursuant to a remand order, but the legal issue was already covered by earlier decisions of the High Court dealing with the same statutory provision. The Court accepted the submission that, in view of the pending special leave petition, the Revenue's position should not be foreclosed. At the same time, the Court preserved the Department's right to revisit the issue after the Supreme Court's decision. The writ jurisdiction was therefore exercised to set aside the impugned order while safeguarding the Revenue's future contention.
Conclusion: The rejection of the petitioner's claim was set aside and the matter was disposed of in favour of the petitioner, with the Department's right to reconsider the issue kept open for the future.
Input Tax Credit (ITC) - Section 19(5)(c) of the Tamil Nadu Value Added Tax Act, 2006 - writ petitions under Article 226 - restraint where alternative efficacious remedy is available - doctrine of laches in exercise of constitutional writ jurisdiction - power of the revenue to revisit/reconsider assessment/orders - precedential effect of Division Bench decisions pending challenge before the Supreme Court
Input Tax Credit (ITC) - Section 19(5)(c) of the Tamil Nadu Value Added Tax Act, 2006 - Validity of the impugned order dated 30.10.2024 rejecting the petitioner's claim of ITC by invoking Section 19(5)(c) of the Act. - HELD THAT: - The Division Bench approach in W.A.Nos.1260 of 2017 (Commercial Taxes Department v. M/s. Everest Industries Limited) and subsequent intra-court decisions were held to cover the issue. Having regard to those decisions and the line of authorities discussed, the High Court found that the impugned order invoking Section 19(5)(c) could not be sustained in the present proceedings. The court therefore set aside the impugned order while preserving the statutory and departmental rights to revisit the matter in the light of any further orders of the Hon'ble Supreme Court. The court referenced the principles governing exercise of Article 226 jurisdiction - including restraint where an alternative efficacious remedy exists, and the role of laches - but applied the Division Bench ratio to conclude that the impugned order must be set aside and the departmental right to reconsider preserved. [Paras 5]
Impugned order rejecting ITC under Section 19(5)(c) set aside.
Power of the revenue to revisit/reconsider assessment/orders - precedential effect of Division Bench decisions pending challenge before the Supreme Court - Whether the Department's right to revisit or reconsider the issue invoking Section 19(5)(c) is preserved. - HELD THAT: - Although the impugned order was set aside, the Court expressly preserved the Department's right to revisit or reconsider the matter in accordance with law and subsequent pronouncements of the Hon'ble Supreme Court. The order thus does not preclude the revenue from taking action consistent with any future binding pronouncement of the Supreme Court or in accordance with statutory provisions; the Court limited its interference to setting aside the specific order under challenge while leaving open departmental remedies. [Paras 5, 6]
Department's right to revisit/reconsider invoking Section 19(5)(c) is preserved.
Final Conclusion: Writ petition allowed in part: the impugned order dated 30.10.2024 rejecting the ITC claim under Section 19(5)(c) is set aside, while the Department's statutory right to revisit or reconsider the issue (including in light of any orders of the Hon'ble Supreme Court) is preserved; writ petition disposed of with no costs.
Issues: (i) whether the consideration received on auction of unredeemed pledged goods formed taxable turnover in the hands of the assessee, (ii) whether penalty under Section 12(3)(a) of the Tamil Nadu General Sales Tax Act, 1959 was leviable for non-filing of returns, (iii) whether the tax rate had been wrongly applied uniformly for all assessment years despite different applicable rates for different periods, and (iv) whether the assessee was entitled to an opportunity to object to the quantification of penal interest.
Issue (i): whether the consideration received on auction of unredeemed pledged goods formed taxable turnover in the hands of the assessee
Analysis: The auction sale of unredeemed goods was held to be part of the assessee's business activity and the consideration realised through the auctioneers was treated as turnover of the assessee fund. The earlier Supreme Court ruling on pawn brokers was applied to hold that sale of unredeemed goods is liable to sales tax and that the auctioneer's separate status does not alter the taxability of the transaction in the hands of the fund.
Conclusion: The issue was decided against the assessee and the auction consideration was held taxable in its hands.
Issue (ii): whether penalty under Section 12(3)(a) of the Tamil Nadu General Sales Tax Act, 1959 was leviable for non-filing of returns
Analysis: Penalty was held to follow automatically where returns were not filed. The assessment was based on actual sale consideration obtained from the auctioneers, and not on best judgment assessment. The objection that penalty under Section 12(3)(a) could arise only in a best judgment assessment was rejected.
Conclusion: The issue was decided against the assessee and the levy of penalty was confirmed.
Issue (iii): whether the tax rate had been wrongly applied uniformly for all assessment years despite different applicable rates for different periods
Analysis: It was accepted that the applicable rate differed between the relevant periods and that the assessing authority had erroneously applied a flat 4% rate for all the assessment years in question. A correction of the demand was directed on that aspect.
Conclusion: The issue was decided in favour of the assessee and the demand was directed to be rectified by applying the correct period-wise rate.
Issue (iv): whether the assessee was entitled to an opportunity to object to the quantification of penal interest
Analysis: The demand of penal interest was not held invalid in principle, but the assessee was found entitled to file objections on the period to which the interest related. The assessing authority was directed to consider those objections and pass orders after hearing the assessee.
Conclusion: The issue was decided in favour of the assessee to the limited extent of granting an opportunity on the quantification of penal interest.
Final Conclusion: The main challenge to taxability and penalty failed, but the assessment was required to be corrected on the applicable rate of tax and the assessee was given a hearing on the period-wise quantification of penal interest.
Ratio Decidendi: Sale proceeds arising from auction of unredeemed pledged goods constitute taxable turnover of the person carrying on the underlying business, and penalty for non-filing of returns under the relevant provision is automatic without requiring a best judgment assessment.
Levy of penalty under Section 12(3)(a) of the Tamil Nadu General Sales Tax Act, 1959 - Taxability of the consideration received on sale of unredeemed articles by the auctioneers in terms of the Tamil Nadu General Sales Tax Act, 1959 - assessee's contention at the stage of assessment was that it is the auctioneer that would be so liable - HELD THAT:- The levy of penalty under Section 12 (3) (a), in the case of non-filing of returns, is, in our view, automatic. Admittedly, in the present case, the petitioner has not filed the returns and hence, the basis of assessment would be irrelevant - in any event, the assessing authority has rightly proceeded to assess the actuals of the sale consideration as obtained from the auctioneers and hence there is no question of best judgment assessment. This argument of the petitioner is hence rejected and levy of penalty under Section 12 (3) (a) is confirmed.
Since the petitioner has raised a dispute in respect of the period for which the amounts have remained unpaid (relating to the levy of penal interest alone), let objections be submitted in writing before the assessing authority within a period of two (2) weeks from date of receipt of a copy of this order.
Upon receipt of the objections, if any, petitioner will be heard and orders will be passed in respect of the quantification of the penal interest to be demanded, if any. It is made clear that there is no flaw in the demand of penal interest per se and it is only in respect of the period to which the interest relates, that the assessee is extended an opportunity. The reduction in rate of tax dealt with under paragraph 3 will be taken note of at this juncture and a revised demand prepared.
Conclusion - i) The petitioner is liable for sales tax on auction turnover. ii) The penalty under Section 12(3)(a) is confirmed due to non-filing of returns.
Petition dismissed.
TaxTMI 