TaxTMI Login
Just a moment...
By creating an account you can:
of 45
Press 'Enter' after typing page number.
of 45Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of 45Press 'Enter' after typing page number.
of 45Press 'Enter' after typing page number.
All Daily Newsletter
of 45Press 'Enter' after typing page number.
All Daily Newsletter
Join Channel
Note
Bookmark
Share
Don't have an account? Register Here
1. ISSUES PRESENTED and CONSIDERED
The core legal issue in this judgment revolves around the jurisdiction of State GST officers to issue authorizations and show cause notices under the Central Goods and Services Tax Act (CGST Act). Specifically, the question is whether officers appointed under the State Goods and Services Tax Act (SGST Act) or the Union Territory Goods and Services Tax Act (UTGST Act) can be considered "proper officers" for the purposes of the CGST Act in the absence of a specific notification issued by the Government on the recommendation of the GST Council.
2. ISSUE-WISE DETAILED ANALYSIS
Relevant legal framework and precedents:
The relevant legal framework is primarily Section 6 of the CGST Act, which addresses the authorization of officers of State tax or Union territory tax as proper officers in certain circumstances. Section 6(1) stipulates that officers appointed under the SGST Act or UTGST Act are authorized as proper officers for the purposes of the CGST Act, subject to conditions specified by the Government through a notification based on the GST Council's recommendations.
The petitioner relied on the judgment of the Madras High Court in Tvl. Vardhan Infrastructure v. Special Secretary, which held that in the absence of a notification for cross-empowerment, proceedings initiated by the State GST Authority are without jurisdiction.
Court's interpretation and reasoning:
The Kerala High Court interpreted Section 6(1) of the CGST Act as providing a legislative mandate for cross-empowerment of officers from the SGST/UTGST to function as proper officers under the CGST Act. This empowerment is unqualified unless the Government specifies conditions through a notification. The court found that the statutory mandate inherently allows for cross-empowerment and does not require a notification to be effective unless conditions are to be imposed.
Key evidence and findings:
The court considered the reference order of the learned Single Judge and the judgment of the Madras High Court, along with the opinion expressed by the GST Policy Wing of the Central Board of Indirect Taxes and Customs, which clarified that no separate notification is required unless conditions are to be imposed.
Application of law to facts:
The court applied Section 6(1) of the CGST Act to conclude that the officers of the SGST/UTGST are already empowered to act as proper officers under the CGST Act. The absence of a specific notification does not invalidate the jurisdiction of these officers unless conditions are specified by the Government.
Treatment of competing arguments:
The court acknowledged the competing argument presented by the petitioner, supported by the Madras High Court decision, but found it unpersuasive. The court emphasized the legislative intent of Section 6(1) to provide cross-empowerment without the necessity of a notification unless conditions are imposed.
Conclusions:
The court concluded that the proceedings initiated by the State GST officers are within jurisdiction under the CGST Act. The absence of a notification does not negate their authority as proper officers.
3. SIGNIFICANT HOLDINGS
Preserve verbatim quotes of crucial legal reasoning:
"The provisions of Section 6 (1) of the CGST Act make it abundantly clear that the cross-empowerment of the Officers of the SGST/UTGST Department to function as proper officers under the CGST Act is through the legislative mandate under Section 6 (1) of the CGST Act."
Core principles established:
The judgment establishes that Section 6(1) of the CGST Act inherently provides cross-empowerment of State and Union Territory GST officers as proper officers under the CGST Act, without the need for a specific notification unless conditions are to be imposed.
Final determinations on each issue:
The court upheld the jurisdiction of State GST officers to issue authorizations and show cause notices under the CGST Act, dismissing the writ petition. The petitioner is advised to pursue statutory remedies against the show cause notice.
Cross-empowerment under Section 6(1) of the CGST Act - jurisdiction of State GST officers to exercise powers as proper officers under the CGST Act - notification only required to impose conditions on cross-empowerment - protection against parallel proceedings under Section 6(2)(b) of the CGST Act
Cross-empowerment under Section 6(1) of the CGST Act - jurisdiction of State GST officers to exercise powers as proper officers under the CGST Act - necessity of a notification to confer or qualify authority - Whether officers appointed under the SGST/UTGST Acts are presently authorised to act as proper officers for the purposes of the CGST Act without a prior notification under Section 6(1) and whether proceedings issued by such officers are without jurisdiction in the absence of a notification. - HELD THAT: - The Court held that Section 6(1) of the CGST Act effectuates cross-empowerment by legislative mandate: officers appointed under the State or Union Territory GST Acts are authorised to be proper officers for the purposes of the CGST Act subject to such conditions as the Government may, on the recommendation of the GST Council, specify by notification. The statutory text presently operates as an unqualified empowerment; a notification is required only if the Government intends to qualify or impose conditions on that empowerment. The Court accepted the prima facie view expressed by the learned Single Judge and agreed with reasoning in Indo International Tobacco Ltd. that Section 6 is designed to avoid multiple jurisdictions and to enable a single officer to pass comprehensive orders under both Central and State GST laws. The contrary view in Tvl. Vardhan Infrastructure was noted but rejected insofar as it treats absence of a notification as rendering State officers devoid of jurisdiction; instead, absence of a notification does not negate the statutory cross-empowerment. The Court consequently found no jurisdictional infirmity in the issuance of the impugned authorisation and show cause notice by State GST officers, while leaving open the petitioner's statutory remedies to contest the notice on merits. [Paras 5, 6]
Cross-empowerment under Section 6(1) is presently operative and does not require a prior notification to confer jurisdiction; notification is necessary only to impose conditions; the writ petition is dismissed.
Final Conclusion: Reference answered by upholding the Single Judge's prima facie view: officers appointed under the SGST/UTGST Acts are authorised as proper officers under the CGST Act without a prior notification unless the Government, on the recommendation of the GST Council, issues a notification to impose conditions; writ petition dismissed, petitioner free to pursue statutory remedies against the show cause notice.
1. ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Imposition of Penalty under Section 129
Issue 2: Procedural Irregularities and Quashing of Impugned Order
3. SIGNIFICANT HOLDINGS
Imposition of a penalty under Section 129 of the GST - failure to register an additional place of business - E-way bill and the invoices were generated only after the detention was made on 15.03.2022 at about 10.25 a.m. - HELD THAT:- The excuse of the petitioner that the additional place of business at Sothupakkam Village, Redhills, Chennai was not registered by the petitioner and that the same was only the procedural irregularities can be accepted as there is only technical and venial breach of the provisions.
That apart, order of detention was made in Form GST MOV-06 dated 15.03.2022 at about 10.25 a.m and it was followed by a Notice issued under Section 129(3) of the respective enactments in Form GST MOV-07. The Eway bill which has been filed by the petitioner along with the typed set of papers indicates that it has been generated on the previous date i.e., on 14.03.2022 at about 6.28 p.m.
There appears to be a procedural irregularities committed by the petitioner inasmuch as the transaction covered by the goods seized / detained vide Detention Order dated 15.03.2022 in Form GST MOV-06 was pertaining to the same goods covered by the aforesaid invoice dated 14.03.2022 and the E-way bill dated 14.03.2022 - Unless there was a variance between quantity in the invoice and the E-way bill and the actual seizure made, the question of imposing penalty under Section 129(3) of CGST Act, 2017 would be harsh under the given facts and circumstances of the case.
Conclusion - Procedural irregularities without fraudulent intent do not warrant harsh penalties under Section 129 of the GST enactments. The impugned order is quashed due to the procedural nature of the irregularities and the absence of fraudulent intent.
Petition allowed.
Outcome: The review petitions were dismissed on the ground of delay as well as on merits, and no costs were imposed.
Maintainability of review petition(s) - delay of 305 days in filing the review petition(s) - HELD THAT:- The review petition(s) is/are dismissed both on the ground of delay as well as on merits.
Issues: Whether the assessment order was liable to be set aside for want of service of notice and non-compliance with natural justice, and whether the petitioner could be relegated to alternative remedy.
Analysis: The registration under the UPGST regime had already been cancelled and had not been revived. In that situation, it was found that the petitioner was not bound to access the GST portal for e-mode notices. No physical or offline notice had been shown to have been issued or served before the impugned order. In these peculiar facts, keeping the writ petition pending or directing the petitioner to an alternative remedy was found unnecessary, as the essential requirement of natural justice had not been satisfied.
Conclusion: The order dated 29.04.2024 was set aside and the matter was remitted for fresh adjudication after treating the impugned order as notice, permitting a reply and personal hearing. The relief was thus granted in favour of the petitioner.
Final Conclusion: The impugned adjudication was annulled for breach of natural justice, and the matter was sent back for fresh decision after hearing the petitioner.
Ratio Decidendi: Where registration stood cancelled and no effective physical notice was served, an adjudication based only on portal communication could not stand if it deprived the noticee of a real opportunity of hearing.
Cancellation of registration - service of notice by electronic mode - revival of registration - rules of natural justice - opportunity of personal hearing - fresh adjudication after compliance
Cancellation of registration - service of notice by electronic mode - revival of registration - Validity of electronic service of show cause notices for 2018-19 where the petitioner's registration had been cancelled and not revived - HELD THAT: - The Court found that the petitioner's registration under the UPGST Act, 2017 was cancelled on 4.10.2019 with effect from 24.9.2019 and that there was no contention or material that the registration had ever been revived or that the petitioner had sought revival. In those circumstances the petitioner could not be obliged to monitor the GST portal for e-mode show cause notices issued in relation to 2018-19 prior to the later adjudication order. The respondents did not contend that any physical or offline notice had been issued or served before the impugned order. On these facts, electronic notices placed on the portal could not be treated as effective service on the petitioner who was not a registered taxable person at the relevant time. [Paras 1, 2, 3]
Electronic service on the GST portal was not sufficient where the petitioner's registration had been cancelled and not revived; therefore the petitioner was not obligated to check the portal for notices relating to 2018-19.
Rules of natural justice - opportunity of personal hearing - fresh adjudication after compliance - Remedial directions where adjudication proceeded without affording the essentials of natural justice - HELD THAT: - The Court held that, given the absence of effective service and the failure to afford the petitioner the essentials of natural justice, the adjudication could not stand. The impugned order dated 29.04.2024 was set aside. The Court directed that the impugned order itself shall be treated as a notice and the petitioner be permitted to file its final reply within four weeks. Thereafter a fresh order is to be passed after affording an opportunity of personal hearing, and such fresh adjudication should be completed expeditiously, preferably within three months from receipt of the petitioner's reply. The petition was disposed of with these directions rather than relegating the petitioner to alternative remedies. [Paras 4, 5, 6]
Impugned order set aside for breach of natural justice; petitioner to file final reply within four weeks and fresh adjudication to follow after personal hearing, preferably within three months.
Final Conclusion: Writ petition allowed to the extent indicated: the order dated 29.04.2024 is set aside for want of compliance with natural justice; petitioner to be treated as served, to file final reply within four weeks, and respondents to decide afresh after personal hearing, preferably within three months.
1. ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Justification of GST Refund
Issue 2: Validity of the Single Judge's Order
Issue 3: Procedural Requirements under Section 54
Issue 4: Absence of Credit Note
3. SIGNIFICANT HOLDINGS
Refund of the GST amount paid - GST paid on an advance for a contract that was later rescinded due to non-performance by the supplier - HELD THAT:- Admittedly, the contract in question having been breached by the other party thereto, the Assessee has recovered the amount by encashing the bank guarantee. The amount remitted to the Exchequer by way of GST component in contemplation of discharge of contract by execution could not have been retained by the State when the contract failed. It is as simple as that. Levy of tax is on the transaction; if transaction fails what is paid in advance needs to be refunded. The learned Single Judge has structured the impugned judgment on this inarticulate premise, which cannot be faltered.
The vehement submission of learned AAG that no refund can be granted as a matter of course, unless the requirement of Sec. 54 of Karnataka Goods and Service Tax Act, 2017, appears to be very attractive at the first blush. However, a deeper examination shows it otherwise. Sec. 54 (1) of the Central GST Act, 2017 is in pari material with the said provision of the State Act.
The Apex Court in OSWAL CHEMICALS AND FERTILIZERS LIMITED vs. COMMISSIONER OF CENTRAL EXCISE, BOLPUR [2015 (4) TMI 352 - SUPREME COURT] construed the term ‘any person’ employed in Sec. 11B of the Central Excise Act, 1944 to include even the purchaser of goods and therefore purchasers too can seek refund of Central Excise Duty. The same analogy applies to the case of Respondent-Assessee.
The Revenue could not have declined the refund on the ground that Credit Note was not issued by the other party to the contract ie., the vendor, upon whom essentially the duty to pay tax rested inasmuch as the question of issuing such a note would not arise since goods were never delivered and that there was a gross breach of contract because of which it was rescinded and the price paid in advance was retrieved by encashing the bank guarantee.
Conclusion - The tax should not be retained by the state when the underlying transaction fails. The appellant shall refund or cause to be refunded the GST amount to the Respondent-Assessee within a period of eight weeks.
Appeal dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Applicability of Section 153A in the absence of incriminating material
Issue 2: Addition of Rs. 4,30,00,000/- under Section 68
3. SIGNIFICANT HOLDINGS
The appeal was disposed of with directions to the CIT(A) to examine the Assessee's challenge to the addition under Section 68 on merits, while the applicability of Section 153A was concluded in favor of the Revenue.
Assessment u/s 153A - unexplained income u/s 68 - incriminating material was found during the operations conducted u/s 132 or not?HELD THAT:- CIT(A) had decided the Assessee’s appeal confined to the question whether Section 153A was applicable in the given facts CIT(A) had not decided the Assessee’s challenge to the addition u/s 68. Thus, clearly the question whether the said addition had been rightly made by the AO did not arise for consideration of the learned ITAT notwithstanding that the ground to the aforesaid effect was raised by the Revenue.
Thus, in effect, the Assessee’s challenge to the addition u/s 68 had remained unaddressed by CIT(A) but had been affirmed by ITAT, without the same arising from the order passed by CIT(A).
ITAT has clearly erred in entering into the said controversy without CIT(A) rendering any finding on merits in regard to the petitioner’s appeal. The question of law as framed is decided in favor of the Assessee and against the Revenue.
We consider it apposite to set aside the impugned order passed by ITAT to the limited extent that ITAT had determined the merits of the addition u/s 68 and restore the Assessee’s appeal before CIT(A) on the grounds that were not decided by the CIT(A).
Validity of reopening of assessment against the ex-promoters -notice u/s 148 against petitioner company after the approval of the resolution plan for a period prior to closing - liability of previous management - As decided by HC [2024 (5) TMI 57 - BOMBAY HIGH COURT] section 148 r/w Section 147 of the Act only deals with a situation where any income chargeable to tax has escaped assessment for any assessment year. We are unable to fathom as to how the provisions of Section 148 of the Act can be applied for collection of evidences of third party, ex-promoters etc., and we say this because there are separate provisions under Section 133(6) of the Act in which, such evidences can be collected.
HELD THAT:- In view of the observations made in paragraph nos. 3 and 4 of the order impugned before us, we are not inclined to interfere.
Special Leave Petition is, accordingly, dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Justification of the Rejection of Waiver Application
Issue 2: Consideration of Financial Hardship and Circumstances Beyond Control
Issue 3: Cooperation in Inquiry and Recovery Proceedings
Issue 4: Violation of Natural Justice
3. SIGNIFICANT HOLDINGS
Rejection of Application for waiver of interest u/s 220 (2A) - HELD THAT:- In this case, the Petitioner has failed to make out any case with the non-payment of the tax demanded in time was under circumstances beyond the control of the Petitioner. In this case, the Chief Commissioner has exercised the powers reasonably, and the feeble contention about violating natural justice lacks force.
Chief Commissioner has applied his mind to the relevant circumstances, and his approach cannot be considered unreasonable. The impugned order is reasoned, and the reasons cannot be considered irrelevant. Relevant material on record was considered. Even the factual findings are supported by the material on records, and there is no perversity.
The decision in Chander Prakash Jain [2015 (5) TMI 687 - ALLAHABAD HIGH COURT] is based on peculiar facts that are not comparable to those in the present case. Besides, that case did not involve the exercise of powers u/s 220 (2A) of the IT Act.
This Court does not exercise appellate jurisdiction in such matters. Considering the limited scope of judicial review, no case is made to interfere with the impugned order. All three preconditions must coexist before a waiver order can be made u/s 220 (2A) of the IT Act. No merit in this Petition.
1. ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Exercise of Writ Jurisdiction
Issue 2: Rectification Application
Issue 3: Pre-notice Requirement
3. SIGNIFICANT HOLDINGS
Writ jurisdiction of the High Court to challenge an intimation u/s 143(1) - AO's failure to adjudicate the rectification application under Section 154, due to the pending writ petition - HELD THAT:- If the officer was of the view that our ad-interim order amounts to restraining himself from adjudicating this issue in regular assessment proceedings, then, he should have approached this Court for clarification. We are clear that at no stage we had restrained the Respondents from adjudicating this issue in regular assessment proceedings.
Petitioner had made an application on 31 July 2023 for rectification of the intimation. The said application of the Petitioner was never decided by the AO on the ground that issue of Section 143 (1) adjustment is pending before this Court. We once again clarify that we had not restrained the Respondents from passing any order to decide the rectification application filed by the Petitioner on 31 July 2023. We fail to understand that in the absence of any restraint order by this Court the stand of the Respondents not to adjudicate the rectification application is misconceived. The officer ought to have adjudicated this rectification application in accordance with law.
The intimation under challenge is an appealable u/s 246A (1) (a) of the IT Act - In Section 246A there is no provision of mandatory pre-deposit for admitting and entertaining the appeal, and therefore, the contention of Mr. Sheth that the intimation raises a huge demand of Rs.6600 crores, and therefore, the remedy of appeal is not efficacious remedy, is rejected. Certainly the Petitioner has the remedy of making an application for stay of the demand and any order passed thereon, if the Petitioner is aggrieved, can be challenged in accordance with law. Therefore, although huge demand is raised, but in the absence of any pre-deposit for admitting and entertaining the appeal, this Court cannot interfere with the impugned intimation in writ proceedings.
Order: - Petitioner is at liberty to challenge the impugned intimation by filing an appeal within a period of four weeks from the date of uploading of the present order. Respondent No. 2 is directed to decide the rectification application dated 31 July 2023 within a period of two weeks from the date of uploading the present order.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Validity of the Notice under Section 148
Issue 2: Time Bar and Jurisdictional Validity
Issue 3: Approval by Joint Commissioner
Issue 4: Impact of TOLA
3. SIGNIFICANT HOLDINGS
Reopening of assessment - benefit of the new regime - scope of provisions of TOLA applicable for reopening an assessment pertaining to AY 2015-16 - validity of reassessment notices issued after the promulgation of Finance Act, 2021 - pecuniary quantification of income which had allegedly escaped assessment - whether grant of approval u/s 151 would have to be in consonance with the extended time limits which came to be introduced by TOLA - HELD THAT:- As is manifest by virtue of GKN Driveshafts [2002 (11) TMI 7 - SUPREME COURT] the respondents were placed under an obligation to communicate the reasons for formation of opinion of income having allegedly escaped assessment to the assessee and providing him an opportunity to object to the commencement of a reassessment action on jurisdictional grounds. It was this procedural safeguard, as formulated in GKN Driveshafts, which finds resonance in clauses (b) and (d) of Section 148A of the Act.
The respondents had substantially complied with the principles underlying Section 148A (b) and (d) by providing an opportunity to the petitioner to question the assumption of jurisdiction under Section 148. We are thus of the firm opinion that, notwithstanding a formal communication having not been addressed to the petitioner of the 09 April 2021 notice being liable to be treated as one under Section 148A (b), the impugned notice and the consequential proceedings are not liable to be faulted on this score.
Validity of approval for reassessment granted by the Joint Commissioner was valid u/s 151 - The “reasons to believe” which were provided to the writ petitioner had pegged the escaped assessment at INR 46,17,000/- and thus ex facie falling below the threshold prescribed by Section 149 (1) (b). The Supreme Court in Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] has categorically held that an action of reassessment commenced post 01 April 2021 would have to be compliant with the pecuniary threshold which now applies. Tested on that basis it becomes apparent that the impugned action would not sustain on this score.
Supreme Court in Rajeev Bansal had merely alluded to the time frames within which approval could be sought and obtained and that being regulated by the extended timelines which TOLA had introduced. However, Rajeev Bansal cannot possibly be construed or read as affirming the authority of a Joint Commissioner to accord approval or the said authority being viewed as the competent authority for the purposes of grant of approval post 01 April 2021.
We thus come to conclude that the reassessment action impugned before us in this petition cannot be sustained basis the pecuniary threshold as comprised in Section 149 (1) (b) as well as on the action having not been approved by the competent authority under Section 151.
We allow the instant writ petition and quash the impugned notice digitally signed referrable to Section 148 and the order thereon. Decided in favour of assessee.
1. ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Justification for Reopening the Assessment
Issue 2: Disclosure of Material Facts
Issue 3: Due Process in Providing Reasons and Addressing Objections
Issue 4: Appropriateness of Relying on Explanation 1 to Section 147
3. SIGNIFICANT HOLDINGS
Reopening of assessment u/s 147 - notice beyond a period of four years - reasons to believe - HELD THAT:- On a perusal of the reasons recorded, there is no allegation as to what are the material facts which the petitioner failed to disclose at the time of his assessment. Mere reproducing the wordings of the proviso does not satisfy the jurisdictional condition which the AO is required to satisfy prior to reopening the case. Having said so, the reasons themselves record that the same is based on the case records of the petitioner.
Therefore, if based on these case records which case records are filed by the petitioner- assessee during the course of the assessment proceedings and are forming part of the assessment records, if a reopening is sought to be done after a period of four years then that would be wholly without jurisdiction in the absence of satisfaction of the condition prescribed in first proviso to Section 147 of the Act. The reasons recorded clearly proves that condition as per first proviso are not satisfied.
In the reasons recorded there is no mention as to what are the material facts which the petitioner-assessee ought to have disclosed and which came to the notice of the AO post the assessment order from any source outside the assessment records.
Co-ordinate Bench of this Court in the case of Hindustan Lever Ltd. [2004 (2) TMI 41 - BOMBAY HIGH COURT] have observed that the reasons should disclose as to which fact or material was not disclosed by the assessee fully which was necessary for assessment so as to establish the vital link between the reasons and evidence. Mere mentioning that there was a failure to disclose fully and truly material facts does not confer jurisdiction on the Assessing Officer to reopen the case after the expiry of four years.
The original assessment of the petitioner was selected for limited scrutiny which was converted into complete scrutiny to examine the transactions of capital gains. The petitioner in the course of the assessment proceedings gave the details of long term capital gain and short term capital loss including the date of acquisition and date of transfer. The petitioner also gave details of loss on transfer of mutual funds. It is only after examining all the details relating to capital gain and capital loss that an assessment order came to be passed u/s 143 of the Act.
In our view, based on these very details, the present proceedings have been initiated which is impermissible since it does not satisfy the pre-condition prescribed under the first proviso to Section 147 of the Act, it would amount to review of the assessment order which is not permissible. Decided in favour of assessee.
1. ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Entertaining the Writ Petition Despite Alternate Remedy
Issue 2: Jurisdiction of the Assessment Order
Issue 3: Violation of Judicial Precedents
Issue 4: Efficacy of Alternate Remedy
3. SIGNIFICANT HOLDINGS
Validity of assessment order passed u/s 143 (3) r.w.s. 144B - scope of an appeal u/s 260A - scope of alternate remedy - HELD THAT:- In Greatship (India) Limited [2022 (9) TMI 896 - SUPREME COURT] the Hon’ble Supreme Court did not approve the decision of the High Court to entertain the Writ Petition under Article 226 of the Constitution challenging the assessment order given the statutory alternate remedies available under the Maharashtra Value Added Tax 2002 and the Central Sales Tax Act, 1956. The Court held that the assessee showed no valid reasons to bypass the statutory remedy of appeal and that the Supreme Court has consistently taken the view that when an alternate remedy is available, judicial prudence demands that the courts refrain from exercising its jurisdiction under constitutional provisions.
For all the above reasons, we decline to entertain this Petition. However, we leave it open to the Petitioner to avail the alternate remedy of appeal by clarifying that we have not examined the rival contentions on merits. If the Petitioner does institute an appeal, the Appellate Authority must note that the Petition was filed on 10 April 2024 and has been pending in this Court to date.
1. ISSUES PRESENTED and CONSIDERED
The judgment addresses the following core legal questions:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Prima Facie Case for Full Stay of Demand
Issue 2: Financial Incapacity to Pay 20% of Demand
3. SIGNIFICANT HOLDINGS
The judgment emphasizes the need for substantial evidence to support claims for a stay of demand and clarifies that procedural delays without substantiation do not justify such relief. The court's decision is focused on ensuring that the legal principles regarding unexplained expenditure and the necessity of evidence in financial incapacity claims are upheld.
Prima facie case for grant of stay of demand - stay of demand pending appeal - assessment additions based on search and seizure and incriminating material - requirement to deposit a percentage of disputed demand for grant of stay - non-genuine purchases / unexplained expenditure
Prima facie case for grant of stay of demand - assessment additions based on search and seizure and incriminating material - stay of demand pending appeal - Whether the petitioner has made a prima facie case for grant of a full stay of the demand for AY 2021-22 pending disposal of appeal. - HELD THAT: - The Court examined the assessment order and noted that the Assessing Officer recorded detailed reasons, including results of search action, incriminating documents, recorded statements and investigation, for treating purchases as non-genuine. Those findings establish material on which additions were made. The petitioner's reliance on earlier coordinate-bench decisions was not supported by any judgment on the same facts. Given that the additions rest on specific investigative material rather than a mere rejection of gross profit, the Court held that the petitioner had not demonstrated a prima facie case warranting dispensation of the deposit requirement or a complete stay of the demand. The Court emphasised that the question of genuineness of purchases is a fact-specific inquiry and refusals to grant full stay in such circumstances do not amount to interference with the merits now pending in appeal. [Paras 12, 13, 14, 15]
No prima facie case for a full stay of the demand; refusal to grant complete stay upheld.
Requirement to deposit a percentage of disputed demand for grant of stay - financial incapacity to pay deposit - Whether the petitioner demonstrated financial inability to pay 20% of the demand so as to justify exemption from the deposit condition. - HELD THAT: - The Court observed that the petitioner did not produce any material or documents establishing financial incapacity to make the deposit directed by the PCIT. The record showed repeated applications aimed at delaying recovery and non-compliance with earlier directions to be heard and to file replies. In the absence of any evidence of inability to pay, the Court found no reason to relieve the petitioner from the requirement of depositing 20% of the demand as directed by the revenue authorities. [Paras 12, 13, 16]
Petitioner failed to show financial inability to pay 20% of the demand; deposit requirement stands.
Final Conclusion: Writ petition dismissed; orders of the ACIT and PCIT refusing a full stay of demand and directing deposit of 20% in respect of AY 2021-22 are not interfered with; observations confined to stay application and not to merits of assessment.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Entitlement to a Writ of Mandamus for Information
Relevant legal framework and precedents: The petitioner sought a Writ of Mandamus under the provisions of the Income Tax Act, 1961, which generally requires a clear legal right and a corresponding duty on the part of the respondent to act.
Court's interpretation and reasoning: The court found that the petition was "entirely misconceived" and noted that the prayer clause (a) was "blissfully vague." The court emphasized that despite several requests, the petitioner failed to specify the precise nature of the information sought or the information allegedly denied.
Key evidence and findings: The petitioner referred to reports by the Serious Fraud Investigation Office (SFIO) and a committee constituted by the court, but the court found the references insufficiently detailed to warrant the relief sought.
Application of law to facts: The court highlighted that the petitioner was engaging in a "roving and fishing enquiry" and failed to utilize available legal provisions such as interrogatories under the Civil Procedure Code or the Right to Information Act, 2005, to obtain the information.
Treatment of competing arguments: The respondents argued that the petition was vague and lacked specificity. The court agreed, noting the petitioner's failure to disclose details of the pending suit in which they were a defendant.
Conclusions: The court concluded that the petition was not maintainable due to its vagueness and the petitioner's failure to pursue alternative remedies. The court dismissed the petition with exemplary costs.
Issue 2: Maintainability of the Petition
Relevant legal framework and precedents: The maintainability of a writ petition requires clarity in the relief sought and the exhaustion of alternative remedies.
Court's interpretation and reasoning: The court criticized the petitioner for filing a vague petition and not pursuing available remedies under the Right to Information Act, 2005. It noted that the petitioner made an averment of having no alternative remedy "with utmost casualness."
Key evidence and findings: The court found that the petitioner did not provide sufficient details about the pending suit or why the information was necessary for their defense.
Application of law to facts: The court applied the principle that a writ of mandamus requires a clear legal right and duty, which was not demonstrated by the petitioner.
Treatment of competing arguments: The petitioner argued the necessity of the information for their defense in a pending suit, but the court found this argument unsubstantiated due to the lack of detail and specificity.
Conclusions: The court concluded that the petition was not maintainable due to its lack of specificity and the petitioner's failure to utilize alternative legal remedies.
3. SIGNIFICANT HOLDINGS
Preserve verbatim quotes of crucial legal reasoning: The court stated, "The Prayer clause (a) is blissfully vague," and referred to the petition as "entirely misconceived."
Core principles established: The court reaffirmed the necessity for specificity in legal petitions and the importance of exhausting alternative remedies before seeking a writ of mandamus.
Final determinations on each issue: The court dismissed the petition with costs, emphasizing the vagueness of the petition and the petitioner's failure to pursue alternative remedies. The petitioner was ordered to pay Rupees One Lakh to the Government KEM Hospital, Parel, within four weeks and file proof of payment by 17 February 2025.
Writ of Mandamus directing the respondents to furnish information regarding the action taken on letters addressed by the petitioner or any suo moto action initiated by the respondents - Regarding prayer clause (a), he refers to the report of the Serious Fraud Investigation Office (SFIO) and Committee constituted by this Court - HELD THAT:- We believe this petition is entirely misconceived and warrants dismissal by the imposition of exemplary costs.
Prayer clause (a) is blissfully vague. Despite several requests, we were not shown the precise nature of the information sought by the petitioner and the information denied to the petitioner. Considerable Judicial time was occupied in this exercise.
The petitioner has not bothered to disclose details of the pending suit in which the petitioner is impleaded as a defendant. There are sufficient provisions in the Civil Procedure Code for obtaining information like interrogatories etc., assuming that such information is relevant.
Petitioner has not explained why the petitioner did not seek such information under the Right to Information Act, 2005. An averment is made that the petitioner has no other alternate and efficacious remedy. This averment is made with utmost casualness and without assuming any serious responsibility.
Respondents filed their affidavit on 19 April 2021. In 2025, we are informed that the petitioner is satisfied with the respondent's action in the context of prayer clause (b), which we thought was the main relief in this petition. Still, this petition was not moved and has been pending for all these years.
We dismiss this petition with costs of Rupees One Lakh payable to the Government KEM Hospital.
1. ISSUES PRESENTED and CONSIDERED
The core legal question addressed in this judgment is whether Section 115JB of the Income Tax Act, 1961, applies to the assessee, an electricity company, for the assessment year 2006-07. Specifically, it examines whether the Minimum Alternate Tax (MAT) provisions under Section 115JB are applicable to companies engaged in the generation and distribution of electricity before the amendment introduced by the Finance Act, 2012.
2. ISSUE-WISE DETAILED ANALYSIS
Relevant Legal Framework and Precedents
Section 115JB of the Income Tax Act, 1961, mandates that companies pay tax on their book profits if such tax exceeds the tax computed under normal provisions. The section requires companies to prepare their profit and loss accounts in accordance with Parts II and III of Schedule VI of the Companies Act, 1956. However, companies engaged in electricity generation and distribution are governed by special statutes, which mandate a different accounting framework.
Precedents include the Kerala High Court's decision in Kerala State Electricity Board v. Deputy Commissioner of Income-tax, which held that MAT provisions were inapplicable to electricity companies prior to the 2012 amendment. The Bombay High Court in Commissioner of Income-tax-LTU v. Union Bank of India reached a similar conclusion for banking companies.
Court's Interpretation and Reasoning
The court analyzed the applicability of Section 115JB to electricity companies, emphasizing the discrepancy between the accounting requirements under the Companies Act and those under special statutes governing electricity companies. The court noted that the amendment introduced by the Finance Act, 2012, addressed this discrepancy by allowing companies to prepare accounts according to their governing statutes, but this amendment was prospective.
Key Evidence and Findings
The court relied on the legislative history and the explanatory memorandum accompanying the Finance Act, 2012, which clarified that the amendment was intended to align the Income Tax Act with the Companies Act. The court also considered previous judicial decisions that supported the non-applicability of MAT to electricity companies before the amendment.
Application of Law to Facts
The court applied the legal framework to the facts, concluding that the machinery provisions of Section 115JB were inoperable for electricity companies prior to the 2012 amendment. This inoperability rendered the charging section unenforceable for such companies during the relevant assessment year.
Treatment of Competing Arguments
The Revenue argued that the amendment was clarificatory and that the Kerala High Court's decision was distinguishable. However, the court found these arguments unpersuasive, particularly in light of the Supreme Court's dismissal of appeals against similar decisions in favor of electricity companies.
Conclusions
The court concluded that Section 115JB did not apply to the assessee for AY 2006-07, as the statutory framework and judicial precedents supported the view that the MAT provisions were inapplicable to electricity companies before the 2012 amendment.
3. SIGNIFICANT HOLDINGS
Preserve Verbatim Quotes of Crucial Legal Reasoning
The court emphasized: "The amended Section 115JB of the Act takes into account the anomaly discussed in preceding paragraphs, insofar as the applicability of Section 115JB of the Act to electricity companies, etc. is concerned, and aims to resolve the same by including the electricity companies, etc. within its ambit by way of sub-section 2(b)."
Core Principles Established
The judgment establishes that the MAT provisions under Section 115JB, as they stood prior to the 2012 amendment, do not apply to electricity companies due to the inoperability of the machinery provisions for such companies.
Final Determinations on Each Issue
The court affirmed the decision of the Income Tax Appellate Tribunal, holding that Section 115JB was inapplicable to the assessee for the relevant assessment year, and dismissed the Revenue's appeal.
Applicability of Minimum Alternate Tax under Section 115JB - book profit deemed to be total income - accounts prepared under regulatory Acts vis-a -vis Schedule VI of the Companies Act - inoperability of machinery provisions negating charging section - prospective effect of amendment to Section 115JB (Finance Act, 2012)
Applicability of Minimum Alternate Tax under Section 115JB - accounts prepared under regulatory Acts vis-a -vis Schedule VI of the Companies Act - inoperability of machinery provisions negating charging section - Whether Section 115JB applied to an electricity company for the period relevant to AY 2006-07. - HELD THAT: - Section 115JB creates a legal fiction treating book profit as 'total income' where tax under normal provisions is less than the prescribed percentage of book profit, and sub section (2) prescribes that the profit and loss account be prepared in accordance with Parts II and III of Schedule VI to the Companies Act, 1956 with the same accounting policies and standards as those laid before the company under section 210. Section 211 of the Companies Act, 1956 expressly permits companies engaged in generation or supply of electricity to prepare their balance sheet and profit and loss account in accordance with the provisions of the special Act governing them, not under Schedule VI. Because an electricity company is required to prepare accounts under its regulatory statute, it cannot simultaneously comply with the mandate of sub section (2) as it stood for the relevant period; this renders the machinery provision inoperable and, following the established principle that a charging provision cannot operate without workable machinery, Section 115JB was inapplicable to electricity companies for the period in question. The legislative amendment by Finance Act, 2012 (and the accompanying Memorandum) later bifurcated sub section (2) to permit companies subject to the proviso to section 211 to use accounts prepared under their governing Act for computing book profit, but this amendment was prospective and effective from assessment year 2013-14. The Court further noted that the High Court decisions applying this principle were affirmed by the Three Judge Bench of the Supreme Court on 16.08.2022, reinforcing that Section 115JB did not apply to electricity companies for AY 2006-07. [Paras 26, 27, 34, 36, 37]
Section 115JB was not applicable to the assessee (an electricity company) for AY 2006-07; the ITAT's deletion of additions to book profit under Section 115JB is upheld.
Final Conclusion: The ITAT's order deleting additions made to enhance book profit under Section 115JB in respect of AY 2006-07 is affirmed and the Revenue's appeal is dismissed.
Issues: Whether the writ petition challenging the assessment order should be entertained despite the availability of a statutory appeal on the ground of alleged inadequate opportunity and breach of natural justice.
Analysis: The petitioners' assertion that no alternate efficacious remedy was available was found to be incorrect because the assessment order itself indicated a statutory appellate remedy. The Court also noted non-disclosure of the Chartered Accountant's adjournment request and held that the grievance was not of complete denial of opportunity but only of inadequate time, which could be raised in appeal. In the circumstances, the Court saw no reason to depart from the usual rule requiring exhaustion of statutory remedies.
Conclusion: The writ petition was not entertained and the petitioner was left to pursue the statutory appellate remedy.
Breach of principles of natural justice - no adequate time was granted to the petitioner to submit a reply - HELD THAT:- The petitioner has not bothered to disclose any details of its Chartered Accountant’s request dated 16 March 2024 and the reasons set out therein in this petition. The contention about the difficulty of taking screenshots, etc., does not inspire confidence.
We are satisfied that this relevant adjournment request was not disclosed because the petitioner realised that this disclosure would be inconvenient to the case of an alleged breach of principles of natural justice, which was being projected before us. Such non-disclosure, or rather suppression, cannot be appreciated.
Thus, the petitioner made a patently incorrect statement about the availability of an alternate remedy and was not very candid with the Court. Besides, this is not a case of any patent breach of principles of natural justice. The petitioner does not allege the absence of any opportunity; rather, the petitioner’s grievance concerns inadequate opportunity.
The issue of inadequate opportunity could always have been raised in an appeal against the assessment order. Even now, the petitioner is at liberty to raise such contention in an appeal, should the petitioner choose to institute an appeal. However, we are satisfied that no case is made out to depart from the usual practice of requiring the petitioner to exhaust the alternate and statutory remedies available in the facts of this case.
We decline to entertain this petition, leaving it to the petitioner to challenge the assessment order in accordance with the law since we have not examined its merits.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Validity of Notice Issued in the Name of a Non-Existent Company
Issue 2: Impact of Supreme Court's Ruling in Union of India & Ors. v. Ashish Agarwal
Issue 3: Validity of Subsequent Proceedings Based on the Notice
3. SIGNIFICANT HOLDINGS
Reopening of assessment against non non-existent company - Validity of notices issued under the unamended Section 148 post-01.04.2021 -Scope of new provision section 148A - notice was issued in the name of company which prior to the issuance of the notice stood amalgamated with the petitioner company - HELD THAT:- In the present case, a notice dated 29.07.2022 was issued u/s 148 of the Act after following the procedure as set out in Section 148A of the Act and in terms of the decisions of in Union of India & Ors. v. Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT]The said notice is in the name of the petitioner and, therefore, cannot be faulted on account of the impugned notice having been issued in the name of a non-existent company.
The reassessment proceedings in respect of AY 2014-15 are now being continued pursuant to the notice dated 29.07.2022 issued u/s 148 and not the impugned notice, which is to be construed as a notice u/s148A (b) of the Act.
The contention that the proceedings are vitiated on account of the fact that the impugned notice was issued in the name of a non-existent company is unmerited. Petition dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions addressed in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Continuation or Standalone Notice
Issue 2: Validity of the Second Notice under Section 149(1)(a)
Issue 3: Validity of the Impugned Order and Subsequent Notice
3. SIGNIFICANT HOLDINGS
Validity of reopening of assessment beyond period of limitation - initial notice was preceded by other notice issued under Section 148A (b) - notice issued u/s 148A(b) is a continuation of the first notice or a standalone notice? - HELD THAT:- The information on which the first notice (notice dated 31.03.2024) is based, is not the information on which the second notice dated 18.04.2024 is premised. The information, which according to the AO, was suggestive of the petitioner’s income escaping assessment for the AY 2020-21, as set out in the second notice, is completely different from the information as set out in the first notice.
The transactions in respect of which it is alleged that the petitioner’s income may have escaped assessment as set out in the second notice, is not the transaction which had led the AO to issue the first notice.
There is considerable merit in the petitioner’s contention that the second notice issued under Section 148A(b) of the Act must be viewed as a standalone notice and not in continuation of the first notice dated 31.03.2024.
The short note filed on behalf of the Revenue also states that the notice dated 18.04.2024 (the second notice) issued under Section 148A(b) of the Act pertains to the commission income in connection with the search conducted on the JM Jain Group on 28.05.2022. It is relevant to note that the first notice (notice dated 31.03.2024) referred to lose papers and documents found during the course of search action in respect of “SBP Group”. Plainly, the information as mentioned in the second notice cannot be said to be in continuation of the information as referred to in the first notice.
There is no dispute that if the second notice (notice dated 18.04.2024) issued under Section 148A (b) of the Act is considered as a standalone notice, the same would be beyond the period as stipulated under Section 149 (1) (a) of the Act as was in force at the material time. This is because the amount of income, which is alleged to have escaped income, is less than Rs. 50,00,000/- and a period of more than three years have elapsed from the end of the relevant assessment year (AY 20-21).
The impugned order passed under Section 148A (d) of the Act as well as the notice issued u/s 148A(b) of the Act, is set aside. Decided in favour of assessee.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Validity of Notice Issued to a Deceased Person
Issue 2: Validity of Assessment Proceedings and Orders
3. SIGNIFICANT HOLDINGS
Reassessment notice issued against the dead-assessee - HELD THAT:- It is not in dispute that the impugned notice has been issued upon the late husband of the petitioner and therefore, the same would be without jurisdiction as it is now also evident from the additional documents placed on record including the Screenshot from the Income Tax Portal of the compilation wherein, the Email address had been updated as per the Adhar Card of the late husband of the petitioner.
Thus, the averments made by the respondent-Assessing Officer justifying the action of issuing the notice on the Email address available on the record cannot be accepted.
Thus, the petition deserves to be allowed by holding that the impugned notice which was issued against the dead-assessee cannot be sustained. Decided in favour of assessee.
1. ISSUES PRESENTED and CONSIDERED
The legal judgment addresses the following core issues:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Validity of Reopening Assessment under Section 148
Issue 2: Entitlement to Deduction under Section 80P(2)(d)
3. SIGNIFICANT HOLDINGS
Reopening of assessment u/s 147 - Disallowance of deduction claimed u/s 80P (2) (d) - HELD THAT:- When the issue which is sought to be raised for disallowance of the deduction claimed by the assessee u/s 80P (2) (d) of the Act which is on the interest income earned by the petitioner from the fixed deposit kept with the Cooperative Bank is held in favour of the petitioner of this Court in case of Ashwinkumar Arban Co-operative Society Ltd. [2024 (11) TMI 971 - GUJARAT HIGH COURT] it cannot be said that this is a fit case to reopen the assessment in the facts of the case.
Petition succeeds and is accordingly allowed. Impugned order passed u/s 148A (d) as well as notice are hereby quashed and set aside.
Issues: (i) Whether the impugned transactions and properties fell within the definition of a benami transaction under the Prohibition of Benami Property Transactions Act, 1988; (ii) whether an agreement to sell and part payment created any interest, title, or charge in favour of the alleged benamidars so as to treat the properties as benami property.
Issue (i): Whether the impugned transactions and properties fell within the definition of a benami transaction under the Prohibition of Benami Property Transactions Act, 1988.
Analysis: The appellate record showed that the alleged benamidars had made only partial advances to the builder under agreements to sell and that the sale deeds had not been executed. The essential ingredients of benami holding were not established, because the properties had not been transferred to or held by the alleged benamidars, and the material also did not establish that the consideration was proved to have been provided by the alleged beneficial owner. The finding of the adjudicating authority that no nexus with the alleged beneficial owner had been proved was affirmed.
Conclusion: The transactions were not proved to be benami and the properties were not liable to be treated as benami property.
Issue (ii): Whether an agreement to sell and part payment created any interest, title, or charge in favour of the alleged benamidars so as to treat the properties as benami property.
Analysis: Under Section 54 of the Transfer of Property Act, 1882, a contract for sale does not by itself create any interest in or charge on immovable property. Since only part consideration had been paid and no registered sale deed had been executed, ownership continued with the builder. The alleged benamidars therefore acquired no title or proprietary interest capable of supporting the benami case.
Conclusion: An agreement to sell and part payment did not create any interest, title, or charge in the properties in favour of the alleged benamidars.
Final Conclusion: The appeal failed because the essential ingredients of benami holding were not established and the impugned order required no interference.
Ratio Decidendi: An agreement to sell does not by itself create any interest or charge in immovable property, and a benami finding cannot be sustained unless the property is shown to be held by the alleged benamidar for consideration provided by another person with clear evidentiary nexus.
Benami Transactions - beneficial owner of subject property Whether alleged Benamidars and the Beneficial Owner constitute "Benami Transactions" under the Prohibition of Benami Property Transactions Act, 1988 (PBPTA)? - HELD THAT:- It is an admitted fact that only partial payments have been made by the alleged Benamidars to the interested party M/s ICON Constructions. These partial payments were made on signing of Agreement of Sale.
Adjudicating Authority has not held the impugned property as Benami as the title therein was yet to be transferred to the alleged Benamidars in view of sale having not been completed due to partial payments made by the alleged Benamidars.
There is nothing on record which could have let the Ld. Adjudicating Authority to provisionally attach any other property for which it could have carried reason to believe to hold that as Benami Property.
Out of the total sale consideration of Rs.471.54 Lakhs for all the impugned properties only Rs.173.00 Lakhs was paid by the 8 alleged Benamidars. The interested party M/s ICON Constructions has also maintained that none of the Benamidars acquired any rights, interest and title to the impugned properties. Therefore M/s ICON Constructions continue to remain owner and in possession of the impugned properties. M/s ICON Constructions maintained that they had rented the commercial units to tenants for which they received the rental income. In view of this, the applicability of Section 2 (9) (A) is doubtful as neither the impugned properties were transferred to the alleged Benamidars nor the impugned properties were held by the alleged Benamidars.
Even if we accept that there were cash infusions into the bank accounts of the alleged Benamidars, there is no evidence on record as to show that such infusions were made by the Beneficial Owner.
Thus we find that neither the properties which have been provisionally attached are Benami nor the transactions which have occurred with respect to the impugned properties are Benami. We are therefore unable to interfere with the Impugned Order.
Issues: (i) Whether an agreement to sell, coupled with partial payment, created any interest, title, or charge in the proposed purchaser so as to support the attachment under the benami law; (ii) Whether the property and transaction in question satisfied the ingredients of a benami transaction under the Prohibition of Benami Property Transactions Act, 1988.
Issue (i): Whether an agreement to sell, coupled with partial payment, created any interest, title, or charge in the proposed purchaser so as to support the attachment under the benami law.
Analysis: A contract for sale does not by itself create any interest in or charge on immovable property. Title in property of the relevant value passes only by a registered instrument, and mere part payment under an agreement to sell does not divest ownership from the seller. The Tribunal applied this settled position to hold that the proposed purchaser had not acquired ownership or a proprietary interest capable of sustaining the impugned attachment.
Conclusion: The answer is in the negative. The agreement to sell did not create any interest, title, or charge in the proposed purchaser.
Issue (ii): Whether the property and transaction in question satisfied the ingredients of a benami transaction under the Prohibition of Benami Property Transactions Act, 1988.
Analysis: The Tribunal found that the property had not been transferred to or held by the alleged benamidar, and that the record did not establish that the beneficial owner had provided the funds for the transaction in the manner required to attract the statutory definition. On the material before it, the Tribunal held that the statutory ingredients of benami ownership were not proved, and the provisional attachment and its confirmation could not stand.
Conclusion: The answer is in the negative. The transaction and property were held not to be benami, and the confirmation of attachment was set aside.
Final Conclusion: The appeals succeeded and the impugned attachment order was annulled because the transaction was not established to be benami and the agreement to sell did not confer any proprietary interest on the proposed purchaser.
Ratio Decidendi: An agreement to sell does not create any interest in immovable property, and a transaction can be treated as benami only when the statutory ingredients, including holding of property in another name with the requisite beneficial funding, are proved on the record.
Prohibition of Benami Property Transactions - beneficial owner of subject property - HELD THAT:- We note that out of the total sale consideration of Rs.2.35 Crores for the impugned property only Rs.1.94 Crores was paid by the alleged Benamidar. The interested party M/s North Star Homes has also maintained that the Benamidar has not acquired any rights, interest and title to the impugned property.
Therefore M/s North Star Homes continue to remain owner and in possession of the impugned property.
The applicability of Section 2 (9) (A) is doubtful as neither the impugned property was transferred to the alleged Benamidar nor the impugned property was held by the alleged Benamidar. Even if we accept that there were cash infusions into the bank accounts of the alleged Benamidar, there is no evidence on record as to show that such infusions were made by the Beneficial Owner.
We find that neither the property which has been provisionally attached is Benami nor the transaction which has occurred with respect to the impugned property is Benami. We therefore set aside the Impugned Order.
Issues: Whether the imported goods were correctly classified as complete e-rickshaw components under Rule 2(a) of the General Rules for the Interpretation of the Customs Tariff Act, 1975, whether the declared value could be rejected and enhanced under the valuation rules, and whether confiscation, redemption fine and penalty were sustainable.
Analysis: The imported consignments consisted of parts and components declared for e-rickshaw use. The Tribunal followed its earlier decision on identical facts and held that the goods did not have the essential character of a fully finished e-rickshaw, particularly because the imported items did not include the battery-driven propulsion necessary for classification under the heading invoked by the Department. The Tribunal also accepted that the lower authority had rejected the transaction value and enhanced the assessable value without recording adequate reasons or following the prescribed valuation procedure, and that this violated the principles of natural justice. As the alleged misdeclaration of description, classification and value was not established, the consequential confiscation and penalties could not stand.
Conclusion: The classification adopted by the Commissioner (Appeals) was upheld, the value enhancement was held unsustainable, and the orders setting aside confiscation, redemption fine and penalty were sustained.
Final Conclusion: The departmental challenge failed and the impugned appellate orders were maintained in full.
Ratio Decidendi: Imported goods can be treated as an incomplete or unfinished article under Rule 2(a) only when, as presented, they possess the essential character of the finished article, and rejection of transaction value must be supported by recorded reasons and compliance with the prescribed valuation procedure.
Classification of imported goods declared as components and parts of Electric Tricycle / E-Rickshaw - to be classified under CTH 87089900 or under CTH 87038040 as complete E-Rickshaws in CKD condition? - benefit under Notification No. 50/2017-Cus. dated 30.06.2017 [Serial No. 528] - rejection of declared value - enhancement of declared value - confiscation - redemption fine -penalty - HELD THAT:- The issue is covered by the decision of this Tribunal in the case of COMMISSIONER OF CUSTOMS (PORT) KOLKATA VERSUS M/S. TWINKLE TRADECOM PRIVATE LIMITED [2024 (5) TMI 472 - CESTAT KOLKATA] wherein the Tribunal has observed 'The goods imported as such, by the respondent, if assembled together, will not provide the basic function of propulsion as required for the classification under CTH 8703. Accordingly, we uphold the findings of the ld. appellate authority in the impugned order and hold that the goods imported would not constitute a fully finished e-rickshaw as it did not have all essential components for a fully finished e-rickshaw.'
It was also held that 'Regarding enhancement of value, we observe that the Ld. Commissioner (Appeals) has relied on the judgment of COMMISSIONER OF CUSTOMS (GENERAL & CFS) , MUMBAI VERSUS RADHEY SHYAM RATANLAL [2017 (5) TMI 322 - CESTAT MUMBAI] and observed that the enhancement of values was done without providing any logical reasons.'
Conclusion - The classification as parts, classified under CTH 87089900upheld - duty exemption granted - value enhancement is rejected - confiscation and penalties annulled.
The appeals filed by the Revenue are dismissed.
Seeking provisional release of the goods - release of various models of second hand Highly Specialised Equipment digital Multifunction Print, Copying & Scanning Machines, imported by the petitioner - authorization for importing multi-functional device - it was held by High Court that 'it is ordered that let the respondent authorities pass an order on the application filed by the petitioners for provisional release of the goods subject to the conditions.'
HELD THAT:- It is not inclined to interfere with the order passed by the High Court, it is made clear that provisional release of the goods shall be subject to final orders to be passed by the Department concerned in the adjudication proceedings under the provisions of the Act.
The Special Leave Petitions are disposed of.
Issues: Whether the seized imported second-hand digital multifunction printing and copying machines were liable to be provisionally released, and on what conditions.
Analysis: The writ petition concerned seizure of imported used machinery and sought provisional release of the goods. The Court treated the present case as materially comparable to earlier proceedings involving similar imported second-hand goods and noted that the Department had no meaningful answer to the distinction sought to be drawn. On that basis, the Court found it appropriate to direct provisional release. The relief was made conditional upon intimation and payment of additional customs duty within the stipulated time and furnishing of a bank guarantee equivalent to 10% of the total price of the goods. The release was also made expressly without prejudice to the rights and contentions of the parties and subject to the outcome of the pending adjudication under the Customs regime and the applicable foreign trade and registration framework.
Conclusion: The goods were directed to be provisionally released in favour of the petitioner, subject to the specified payment and security conditions.
Seeking a direction to quash and set aside the Seizure Memo - seizure of used and second-hand Digital Multifunction Printing and Copying Machines of the Petitioner - HELD THAT:- It would be in the fitness of things if the Department is directed to provisionally release the old and used Digital Multifunction Printing and Copying Machines which form the subject matter of Bill of Entry No.8536253 dated 30th October 2023, subject to certain terms and conditions.
Respondent No. 4, the Commissioner of Customs, shall intimate to the Petitioner, the additional customs duty payable on or before 29th January 2025. Once the additional customs duty is intimated to the Petitioner, the same shall be paid by the Petitioner within seven days from the date of receipt of the said intimation.
Petition disposed off.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the court in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Justification of Confiscation under Current Legal Framework
Issue 2: Alignment of Baggage Rules with Market Conditions
Issue 3: Revisiting the Baggage Rules
3. SIGNIFICANT HOLDINGS
Confiscation of jewellery - redemption fine and personal penalty under the Customs Act - Baggage Rules, 2016 - jewellery excluded from "personal effects" - clearance free of duty for returning residents subject to weight and value limits - declaration requirement for jewellery exceeding prescribed limits - balancing prevention of gold smuggling with protection of bona fide travellers from harassment - administrative reconsideration of legislative rules by CBIC
Baggage Rules, 2016 - jewellery excluded from "personal effects" - clearance free of duty for returning residents subject to weight and value limits - declaration requirement for jewellery exceeding prescribed limits - Legal position under the Baggage Rules and related CBIC guidance in respect of carriage of jewellery by travellers to India - HELD THAT: - The Court recorded and accepted the position, as reflected in the Baggage Rules, 2016 and the CBIC Guide for Travellers, that "personal effects" expressly excludes jewellery, and that jewellery brought by a passenger returning after residence abroad for over one year may be cleared free of duty only within the specific weight and value limits prescribed by Rule 5. The Declaration Form and CBIC guidance treat gold and gold jewellery beyond those prescribed limits as dutiable or prohibited unless declared; where declaration is made, an undertaking is to be given and duty consequences follow. The Court also observed that the Declaration Form and the Baggage Rules do not clearly communicate the declaration position to travellers, and that application of the rules has resulted in seizures even in small quantities where passengers use the green channel. These findings identify (i) the statutory/textual position under the Baggage Rules and CBIC guidance, and (ii) practical concerns about lack of clarity of the declaration regime and seizures of jewellery in the green channel. [Paras 9, 10, 11, 12, 13]
The Court recorded the applicable legal position under the Baggage Rules and CBIC guidance, including the limits for duty-free clearance and the requirement for declaration where jewellery exceeds those limits, and noted practical concerns about clarity and seizures.
Balancing prevention of gold smuggling with protection of bona fide travellers from harassment - administrative reconsideration of legislative rules by CBIC - Appropriate remedial course to address the misalignment between prescribed baggage limits and current market realities and operational difficulties - HELD THAT: - Having noted that the value caps in Rule 5 (and related guidance) appear out of tune with current gold market prices and that rigid application may lead to harassment of bona fide travellers while smuggling remains a concern, the Court directed an administrative reconsideration. The matter is referred to the Chairman, CBIC for reconsideration of the Baggage Rules, 2016, to be undertaken in coordination with other departments or Ministries as required, with a report to be filed before the Court by the next date of hearing. This constitutes an order for administrative review and does not decide the merits of the petitioner's challenge to the confiscation or penalties imposed in the impugned orders; the adjudication on those orders remains part-heard. [Paras 15, 16, 17, 18, 19]
The Court directed that the Baggage Rules, 2016 be reconsidered by the CBIC (in coordination with other departments as necessary) and ordered a report to be placed before the Court; the adjudication of the petition remains part-heard.
Final Conclusion: Notice issued to respondents; respondents to file reply within four weeks and rejoinder within four weeks; matter referred to the Chairman, CBIC for reconsideration of the Baggage Rules, 2016 with a report to be filed, and the matter is directed to be listed on the specified dates as a part-heard matter.
1. ISSUES PRESENTED and CONSIDERED
The core legal question presented in this case is:
Whether the word "and" as appearing in Custom Tariff Item (CTI) 8517 (iv) is to be read in a disjunctive manner and thus be viewed as referring to separate products, specifically in the context of exemption eligibility for Wireless Access Points (WAPs) operating solely on Multiple Input/Multiple Output (MIMO) technology under the amended Notification No. 24/2005-Cus.
2. ISSUE-WISE DETAILED ANALYSIS
Relevant legal framework and precedents:
The legal framework revolves around the interpretation of the exemption clause in the amended Notification No. 24/2005-Cus, which lists "MIMO and LTE Products" under Serial No. 13 (iv) as excluded from customs duty exemption. The interpretation of "and" in legal texts is crucial, as it determines whether products using either MIMO technology or LTE standard separately, or only those combining both, are excluded from the exemption.
Court's interpretation and reasoning:
The court analyzed the language of the notification, emphasizing the importance of the conjunction "and" in the phrase "MIMO and LTE Products." It concluded that "and" should be interpreted conjunctively, meaning the exclusion applies only to products that incorporate both MIMO technology and LTE standards. The court referenced linguistic principles and prior legal precedents to support this interpretation, emphasizing the need for plain and unambiguous reading of statutory language.
Key evidence and findings:
The court examined the structure of the notification, noting that wherever the government intended to specify products individually, terms like "products" or "equipment" followed the respective technology or feature. The absence of the word "products" after "MIMO" but its presence after "LTE" in the exclusion entry suggested a combined reference to products using both technologies. The court also considered the broader context of international agreements like the Information Technology Agreement (ITA), which India is a signatory to and which aims to eliminate customs duties on specified IT products.
Application of law to facts:
The court applied the principle of strict interpretation of tax exemptions, concluding that the phrase "MIMO and LTE Products" should be read to mean products that use both MIMO technology and LTE standards. As the WAPs imported by the respondent utilized only MIMO technology without LTE, they were deemed eligible for the exemption from customs duty.
Treatment of competing arguments:
The Revenue argued for a disjunctive interpretation of "and," suggesting that the phrase should cover products using either MIMO or LTE independently. The court rejected this argument, noting that if the intention was to exclude products using either technology independently, the phrase "MIMO or LTE Products" could have been used. The court also dismissed the Revenue's reliance on subsequent amendments to the notification as clarificatory, stating that such amendments apply prospectively and do not affect the interpretation of the notification during the relevant period.
Conclusions:
The court concluded that the phrase "MIMO and LTE Products" in the notification applies solely to products combining both technologies. Therefore, the WAPs imported by the respondent, which operated solely on MIMO technology, were entitled to the exemption from customs duty.
3. SIGNIFICANT HOLDINGS
Preserve verbatim quotes of crucial legal reasoning:
"The word 'and' is a conjunctive and is used to connect and join. The dictionary meaning of 'and' is as follows:... In the present case, there is no such ambiguity or absurdity. In our view, when all the four entries of Serial No. 13 are analyzed, it would lead to only one conclusion that the word 'and' is to be read in a conjunctive manner only, and the phrase 'MIMO and LTE Products' would refer to only those products which have both MIMO technology and LTE standard."
Core principles established:
The court reaffirmed the principle that statutory language, especially in tax exemptions, should be interpreted according to its plain and ordinary meaning. The use of "and" as a conjunctive term was emphasized, and the court highlighted the importance of considering the broader legislative and international context in interpreting exemption notifications.
Final determinations on each issue:
The court determined that the WAPs imported by the respondent, which utilized MIMO technology but not LTE standards, were entitled to the exemption from customs duty under the amended Notification No. 24/2005-Cus. The appeal filed by the Revenue was dismissed, and the order of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) was upheld.
Interpretation of statute - the word "and" as appearing in Custom Tariff Item (CTI) 8517 (iv) is to be read in a disjunctive manner - exemption eligibility for Wireless Access Points (WAPs) operating solely on Multiple Input/Multiple Output (MIMO) technology under the amended Notification No. 24/2005-Cus. - whether the WAPs, which work on MIMO technology, imported by the respondent would qualify for an exemption from Basic Customs Duty? - HELD THAT:- In the present case, there is no such ambiguity or absurdity. In our view, when all the four entries of Serial No. 13 are analysed, it would lead to only one conclusion that the word “and” is to be read in conjunctive manner only, and the phrase “MIMO and LTE Products” would refer to only those products which have both MIMO technology and LTE standard.
The Notification No. 25/2005, and one Notification No. 57/2017-Customs were amended and the phrase “MIMO and LTE Products” were substituted with ‘(i) MIMO products; (ii) LTE products’, and that these amendments were clarificatory in nature, is concerned, notably, an amendment in the Notification No. 57/2017-Customs was brought vide Finance Act, 2021 which is clarificatory in nature, and, clarifies Serial No. 20 of the said notification. It states that the subject entry will now be read as ‘(i) MIMO products; (ii) LTE products’. Similar change was brought in Notification No. 25/2005 by virtue of Notification No. 05/2021-Customs.
The clarification is brought about in the Statute when there is ambiguity and disputes arise due to such ambiguities. The fact that a clarification is needed to be brought about in the subject entry by the Finance Act, 2021 would point out towards the inherent ambiguity experienced in its interpretation and application which prompted and necessitated the subject amendment and clarification - exclusion clause (iv) of Serial No. 13 of the amended Notification No. 24/2005, which reads as ‘MIMO and LTE products’, would have to be read in its original form applying the law and rules of interpretation of statutes, especially as applicable in cases of taxation.
Conclusion - The phrase “MIMO and LTE Products” in Serial No. 13 (iv) of the amended Notification No. 24/2005 applies solely to products combining MIMO technology and LTE standards. The exclusion clause cannot be stretched to encompass products featuring either one of the two technologies. Accordingly, the WAPs imported by the respondent, which employ MIMO technology but not the LTE standards, are entitled to the exemption from Basic Customs Duty.
The Question of Law is accordingly answered in favour of the assessee, and against the Revenue - The appeal is accordingly dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions addressed in the judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
a) Breach of Timeline under CBLR, 2018
b) Breach of Provisions under Regulations 10(d) & 10(e) of CBLR, 2018
3. SIGNIFICANT HOLDINGS
Breach of the timeline prescribed under the Customs Brokers Licensing Regulations, 2018 (CBLR) for the suspension or revocation of the customs broker license - breach of the provisions under regulations 10(d) & 10(e) of CBLR, 2018 by the customs broker.
Whether, in the given facts of the case, there has been any breach of time line prescribed under CBLR, 2018 for suspension or revocation of license granted under CBLR? - HELD THAT:- The Coordinate Bench at Delhi in the case of Rishad Shipping & Clearing Agency Ltd Vs CCE & CGS, Indore [2020 (3) TMI 270 - CESTAT NEW DELHI] held time line as mandatory after examining conflicting decisions of various High Courts and Tribunals. It was observed that there are two sets of decisions, where the Delhi High Court and Madras High Court have held that time limit prescribed for issuance of notice within 90 days from the date of receipt of offence report is mandatory in nature and the Bombay High Court and Kolkata High Court have held that issuance of notice within stipulated time limit is not mandatory but directory in nature.
Since in this case we have already found that department itself was describing the time line provided in CBLR as sacrosanct, hence we rely on the judgments of Hon’ble High Court of Delhi and Madras, wherein, it was held that time line prescribed in the CBLR is mandatory and since in the present appeal the SCN has been admittedly issued beyond 90 days, thus, on this count itself, the SCN is not tenable and subsequent revocation of license based on this SCN is also liable to be set aside.
Whether, in the given facts of the case, there is any breach of the provisions under regulations 10(d) & 10(e) of CBRL, 2018? - HELD THAT:- As can be seen from Regulation 10(d), the customs broker is required to advice his client to comply with the provisions of the Act and in case of non-compliance, he is required to bring the matter to the notice of Deputy Commissioner of Assistant Commissioner of Customs. In this case, it is apparent that the client was the same appellant company but in the capacity of importer. Therefore, there is nothing on record that they had not advised their client about the statutory provisions - the charges leveled against the appellant under Regulation 10(d) are not tenable, in the facts of the case. Moreover, exactly what provisions of the Act or other allied Acts or Rules were not advised by the appellant to his client is also not forthcoming in the charges leveled against the appellant in the SCN. Therefore, unless there is a very clear ground about the charges leveled, the appellant would not get an opportunity to defend his case - A general reliance on the entire SCN, without elaborating which parts were relied upon for establishing the breach of regulation 10(d) by the customs broker, would not be correct. Thus, the charges under regulation 10(d) are not sustainable.
Similarly, the provisions under regulation 10(e) is also very clear, which essentially provides for that the customs broker needs to exercise “due diligence” in communicating correct information to his client with reference to any work relating to clearance of cargo. Nothing in the SCN dt.13.03.2024 is showing as to what wrong information was provided by the appellant, in their capacity as customs broker to the appellant, acting as importer. Merely because they are the same company, it could not be presumed that everything which was known to the company, as importer was also known to the appellant, as customs broker, unless detailed evidence is brought on record - at the first opportunity itself the customs broker has in fact, tried to ascertain the correctness of information and had filed the Bill of Entry based on all the documents which were otherwise found to be genuine. This, in itself, would suffice that they had exercised reasonable due diligence. It is also to be noted that out of 17 obligations, the department would charge only on two counts i.e., 10(d) & 10(e) and therefore, in respect of other obligations, they were not found to be noncompliant. Thus, to invoke 10(e) in this case without substantial evidence directly implicating them in positive manner in smuggling of goods, is not tenable.
Conclusion - The time line prescribed in the CBLR is mandatory and since in the present appeal the SCN has been admittedly issued beyond 90 days, thus, on this count itself, the SCN is not tenable and subsequent revocation of license based on this SCN is also liable to be set aside. The mandatory nature of the timeline for issuing SCNs under CBLR was affirmed. The necessity for substantial evidence to support charges under regulations 10(d) and 10(e) was emphasized.
The impugned order revoking the license of the appellant as well as forfeiture of security deposit and imposition of penalty for violation of 10(d) and 10(e) of CBLR is set aside - the impugned order is not sustainable on account of delay in issuing SCN as well as on account of non-substantiating the grounds for invoking regulations 10(d) & 10(e).
Appeal allowed.
Issues: Whether the imported Optical Power Ground Wire Fibre Cable was classifiable under Heading 8544 or Heading 9001, and whether the exemption under Notification No. 24/2005-Cus was available.
Analysis: The classification turned on the actual physical nature of the imported goods, particularly whether the fibres were individually sheathed. The record did not contain the sample test report or other clinching evidence of the product's characteristics, although such evidence was necessary given the competing tariff entries and the departmental circular on misclassification of optical fibre cables. The burden lay on the Revenue to establish the proposed classification, and classification could not rest on assumptions, public-domain catalogues, or end-use considerations where the tariff description itself did not adopt an end-use test. In the absence of superior evidence and without proof that the goods satisfied Heading 9001, the Revenue failed to discharge its burden.
Conclusion: The goods were not shown to be classifiable under Heading 9001, and the impugned order denying the appellant's claim could not stand. The issue was decided in favour of the assessee.
Final Conclusion: The classification adopted by the lower authorities was set aside, and the appeal succeeded with consequential relief.
Ratio Decidendi: Where tariff classification depends on a product's physical characteristics, the Revenue must prove those characteristics with reliable evidence, and classification cannot be sustained on assumptions or inferior proof when better evidence is available.
Classification of imported Optical Power Ground Wire Fibre Cable (OPGW) and its accessories - to be classified under the Customs Tariff Heading 8544 and the accessories under CTH 853670 respectively or under CTH 9001 and heading 7616 respectively? - applicability of Boards instruction contained in Circular 12/2006-Cus dated 28/02/2006 issued from F No 528/8/2006-Cus(TU) - HELD THAT:- The circular states that the optical fibres of Heading 8544 are made of individually sheathed fibres, whereas cables of Heading 9001 are not individually sheathed and specifically excluded products of 8544. This alert was all the more reason to preserve clinching evidence of the product by drawing samples and seeking the opinion of an expert. This critical evidence is missing in the present case. The goods have also been cleared for home consumption and are not available for examination. It is seen that the imports were made against a contract with TNEB. It was very likely that the contract would specify the product description and requirement which could have been used as a reference point. However, the same has also not been relied upon in the impugned order.
While seeking to classify a product it was for the departmental authorities to gather the product specification / literature, process of manufacture, compliance to a recogonised standard, contract copy and if required even a test report/ opinion from the appropriate authority and make it a part of the SCN. Classification cannot be made by assumptions and presumptions however so nuanced the order may be, when OPGW available in the market can be both sheathed and unsheathed, as recogonised in the Boards circular above. Moreso when it is this characteristic which is critical for the products classification. Further ultimate usage of a product is not relevant for classification, when the tariff entry refers to no such end use.
The rule of best evidence states that, so long as higher or superior evidence could have been produced or may be reached, no inferior proof shall be submitted in relation to it. Hence in this case there can be no substitute for going by the actual physical characteristics and description of the impugned goods. Further it is not even the case of revenue that the goods were shown to be manufactured adhering to a recogonised standard that incorporates the characteristics relevant for the classification. Revenue has hence failed to prove its case on the classification of the goods under Tariff Heading 9001 and the impugned order merits to be set aside.
Conclusion - The classification of goods must be based on actual physical characteristics, and authorities must provide conclusive evidence to support their claims. The absence of such evidence undermines the validity of the classification and any consequent denial of exemptions. The classification under Heading 9001 was not justified, and the exemption denial was incorrect.
Appeal disposed off.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Justification for Categorizing Claims as "Put Under Adjudication"
Relevant Legal Framework and Precedents: The claims management process under the Insolvency and Bankruptcy Code (IBC) distinguishes between verification and adjudication of claims. The CMA's role is limited to verifying claims based on the documents provided, not adjudicating them.
Court's Interpretation and Reasoning: The Tribunal noted that the CMA consistently maintained that the claims for loss of rent were not supported by any contractual obligation in the Agreement with Maytas. The CMA emphasized that such claims would require adjudication, which is beyond its jurisdiction.
Key Evidence and Findings: The Agreement did not contain provisions for reimbursing rent or other costs related to alternative accommodations. The CMA's correspondence with the appellants clarified that adjudication was necessary to determine the reasons for the delay and the corresponding damages.
Application of Law to Facts: The Tribunal found that the CMA acted within its mandate by categorizing the claims as requiring adjudication, as the Agreement did not provide a basis for the claims made.
Treatment of Competing Arguments: The appellants argued that the CMA should have verified the claims based on the Agreement's provisions for delay compensation. However, the Tribunal agreed with the CMA that the claims involved unliquidated damages, requiring adjudication.
Conclusions: The Tribunal concluded that the CMA was justified in placing the claims in the "put under adjudication" category, as the claims involved issues beyond mere verification.
Issue 2: Maintainability of Claims Without Adjudication
Relevant Legal Framework and Precedents: Under the IBC, claims must be substantiated with relevant proof, and the CMA's role is to verify, not adjudicate, claims.
Court's Interpretation and Reasoning: The Tribunal noted that the Agreement provided for specific compensation for construction delays, but the appellants' claims exceeded these provisions and included items not covered by the Agreement.
Key Evidence and Findings: The CMA's responses highlighted the lack of contractual provisions for the claimed damages, such as loss of rent, which were not explicitly covered by the Agreement.
Application of Law to Facts: The Tribunal found that the claims for damages required adjudication due to their nature as unliquidated damages, which were not explicitly agreed upon in the contract.
Treatment of Competing Arguments: The appellants contended that the CMA should have accepted the claims based on the Agreement's delay compensation clause. However, the Tribunal found that the claims were broader and required judicial determination.
Conclusions: The Tribunal upheld the CMA's decision to reject the claims as non-maintainable without adjudication, given the absence of contractual provisions for such claims.
Issue 3: Error by the Adjudicating Authority in Affirming CMA's Decision
Relevant Legal Framework and Precedents: The Adjudicating Authority's role is to ensure that claims are processed according to the IBC framework, which limits the CMA's role to verification.
Court's Interpretation and Reasoning: The Tribunal agreed with the Adjudicating Authority's finding that the claims involved unliquidated damages, which required adjudication.
Key Evidence and Findings: The Tribunal noted the lack of evidence supporting the appellants' claims for additional damages beyond the Agreement's provisions.
Application of Law to Facts: The Tribunal found that the Adjudicating Authority correctly applied the IBC framework in affirming the CMA's decision.
Treatment of Competing Arguments: The appellants argued that the Adjudicating Authority's decision left them remediless. However, the Tribunal found that the claims required adjudication in a competent court.
Conclusions: The Tribunal found no error in the Adjudicating Authority's decision to affirm the CMA's rejection of the claims as non-maintainable without adjudication.
3. SIGNIFICANT HOLDINGS
Preserve Verbatim Quotes of Crucial Legal Reasoning: "The claims on account of delayed delivery of flat and mental agony is in nature of unliquidated damages and there is no agreement between the parties for payment of the same, hence the same cannot be admitted."
Core Principles Established: The CMA's role is limited to verifying claims based on existing contractual provisions, and claims involving unliquidated damages require adjudication in a competent court.
Final Determinations on Each Issue: The Tribunal upheld the CMA's decision to categorize the claims as requiring adjudication and found no error in the Adjudicating Authority's affirmation of this decision. The appeals were dismissed, with no costs awarded.
Verification of claims versus adjudication of claims - limited mandate and non-adjudicatory role of the Claims Management Advisor - liquidated damages under contract - claim categorised as 'put under adjudication' - need for adjudication where contractual scope for quantification is absent - verification of proof of claim under CIRP Regulations
Verification of claims versus adjudication of claims - limited mandate and non-adjudicatory role of the Claims Management Advisor - need for adjudication where contractual scope for quantification is absent - liquidated damages under contract - Whether the Claims Management Advisor was justified in categorising the appellants' delay-related claims as 'put under adjudication'. - HELD THAT: - The Agreement between the purchasers and the original developer expressly provided for a specified measure of compensation for delay in Clause 7(d), but did not provide for reimbursement of alternative accommodation rent or loss of rent as a basis for quantification. The CMA repeatedly explained that reimbursement of rent was not a contractual commitment recorded between the parties and that determination of whether delay was due to causes within or beyond the developer's control (and thereby the proper quantification of damages) would require adjudication. The statutory framework for claims management under the IBC and the CIRP Regulations confines the CMA to verification and collation of claims and does not vest adjudicatory powers in the CMA. Given that key components of the appellants' claim depended upon issues (reason for delay, entitlement to rental reimbursement, and quantification based on evidence beyond the contract terms) that could only be resolved by an adjudicatory process, the CMA was within its competence and duty to classify those components as 'put under adjudication' rather than admit or quantify them. There is no misdirection in the Adjudicating Authority's concurrence with that classification or in holding that claims in the nature of unliquidated damages, where no contractual provision exists for payment, cannot be admitted by the CMA without adjudication. [Paras 16, 17]
The CMA was justified in placing the delay-related claims in the 'put under adjudication' category; the Adjudicating Authority's rejection of the application was correct.
Final Conclusion: Appeals dismissed. The decision of the Adjudicating Authority upholding the CMA's classification of the claims as requiring adjudication is affirmed.
1. ISSUES PRESENTED and CONSIDERED
The judgment primarily revolves around two core legal issues:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Approval of Proposal to Unwind Transactions
Issue 2: Rejection of IFIN's Claim by IRP
3. SIGNIFICANT HOLDINGS
Recovery of dues - Approval of decision of New Board to collapse/ unwind the transactions whereby IL&FS Financial Services Ltd. (IFIN) has provided loans to third parties - rejection of IFIN's claim by the Interim Resolution Professional (IRP) of Attivo Economic Zone (Mumbai) Pvt. Ltd. in the Corporate Insolvency Resolution Process (CIRP) - HELD THAT:- One of the steps, which has been contemplated is an Agreement between IL&FS and third party borrowers for collapsing the Agreement and the orders were sought only with respect to collapsing the Agreement, when Agreement is entered. Admittedly, there is no Agreement, which claimed to have been admitted / entered with regard to Respondent Nos.8 to 12 of IA No.3169 of 2023 and objections having been raised with regard to Respondent Nos.8 to 12 by SIFL , claiming that amount advanced to IL&FS entities by third party borrowers, like Respondent Nos.8 to 12 was the amount given by the SIFL and not by third party borrowers. Hence, the said transactions with IL&FS entities, cannot be collapsed.
For issuing any directions as prayed by the Applicant with regard to Respondent Nos.8 to 12, a deeper and thorough consideration is required with regard to transactions with third party borrowers as well as lending money to IL&FS entities. Present Applications, are not the appropriate proceedings to grant declaration as prayed by the Applicant and direct for collapsing the third party Agreements and transactions entered with Respondent Nos.3 to 12. It is made clear that the said issues can be gone into and examined by NCLT in the pending proceedings and appropriate decisions can be taken with regard to borrowing with respect to Respondent Nos.8 to 12.
Conclusion - The proposal to unwind transactions allowed with the exception of certain respondents - the IRP's rejection of IFIN's claim set aside, restoring its status in the CIRP.
Application allowed in part.
1. ISSUES PRESENTED and CONSIDERED
The legal judgment primarily revolves around the following core issues:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Statutory Threshold Limit
Issue 2: Inclusion of Interest Component
Issue 3: Section 10 A Period Claims
Issue 4: Pendency of Commercial Suit
3. SIGNIFICANT HOLDINGS
In conclusion, the Appellate Tribunal upheld the Adjudicating Authority's decision to dismiss the Section 9 Petition, finding it non-maintainable on multiple grounds, including the lack of a valid interest claim, exclusion of Section 10 A period claims, and the pendency of a commercial suit.
Dismissal of Section 9 Petition against the Respondent on the ground that debt claimed is below the threshold limit and the interest amount is disputed - interest component claimed by the Appellant can be included as part of the operational debt under Section 5(21) of the IBC or not - claims and counter claims of the threshold limit under Section 4 of the IBC - Exclusion of Claims falling within the Section 10 A period - Pendency of Commercial Suit between the parties.
Claims and counter claims of the threshold limit under Section 4 of the IBC - HELD THAT:- Section 5(21) of IBC Code provides that: operational debt means a claim in respect of the provision of goods or services including employment or a debt in respect of the 4[payment] of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority; of the IBC restricts claims to those arising from goods or services, and interest is recoverable only when expressly agreed upon by the parties. In the absence of such agreement, the interest component cannot be considered part of the operational debt. Consequently, without interest the outstanding principal amount alone is Rs 60,44,800/- and is well below the threshold of Rs 1 crore specified under Section 4 of the IBC.
No interest can be charged against the supply of goods and services for delayed payments until and unless there is an express agreement between the parties - there are justification in the claim of the Respondent that the interest claim was unilaterally imposed and lacked any contractual basis.
Exclusion of Claims falling within the Section 10 A period - HELD THAT:- The Respondent has placed his reliance on the judgment of this Tribunal in DECOR PAPER MILLS LTD. VERSUS MAHASHAKTI PLASTO PVT. LTD. [2024 (11) TMI 1412 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI [LB]] which establishes that invoices falling within the 10 A period must be excluded from default claims. Therefore, the Application filed by the Appellant under Section 9 is not maintainable on this count also, as the default amount is below the statutory threshold - it is to be noted that even if the dispute relating to invoices falling within 10 A period is not raised by the Respondent, as is being argued by the Appellant, it is not a bar as it is the duty of the Adjudicating Authority to scrutinise whether the invoices are barred by law or not.
Pendency of Commercial Suit between the parties - HELD THAT:- The Appellant filed a Commercial Suit for the same claim on 01.05.2023, prior to issuing the Demand Notice on 23.08.2023. The Corporate Debtor had in his reply to the demand notice had clearly brought out the existence of pre-existing dispute as well as the pendency of this suit. Due to a pre-existing dispute between the parties, such a petition cannot be entertained under Section 8 of the Code. Therefore, the Appeal is not maintainable on this count also.
Conclusion - The debt claim was below the statutory threshold; interest was not contractually justified; claims within the Section 10 A period were excluded; the pending commercial suit barred the insolvency application.
Section 9 Petition is not maintainable on multiple counts - appeal dismissed.
Outcome: Time was sought for further hearing, the counter affidavit was directed to be filed, and the matter was listed on a subsequent date.
Money Laundering - seeking time - applicability of rigours of clause (ii) of sub-Section (1) of Section 45 of the PMLA - HELD THAT:- The counter affidavit to be filed by 10th January, 2025.
List the Petition on 15th January, 2025.
Summary order. Civil Appeal dismissed for delay of 138 days in filing which was not satisfactorily explained; question of law left open; pending applications disposed of.
Condonation of delay in filing appeal - Extended period of limitation - Petitioner’s liability for payment of the service tax on works contracts executed during the period of 2014-15 to 2017-18 - It is the petitioner’s case that in terms of Section 129 of the Finance (No. 2) Act, 2019, no proceedings can be initiated in respect of service tax for the period 2014-15 to 2017-18 and no further demands can be raised - It was held by High Court that 'NOIDA does not require to be registered under any Act as a body corporate, as it has been constituted by the Uttar Pradesh Industrial Area Development Act, 1976 as a body corporate. Thus, clearly the Revenue has misunderstood the response received from NOIDA as is reflected in the impugned show cause notice.'
HELD THAT:- There is a delay of 330 days in filing the Special Leave Petition which has not been satisfactorily explained. Even otherwise, on going through the Special Leave Petition and there are no merit in the same.
The Special Leave Petition is, therefore, dismissed on the ground of delay as well as on merits.
Issues: Whether the petitioner was entitled to avail the Sabka Vishwas (Legacy Dispute Resolution) Scheme benefits after paying the balance amount beyond the stipulated time, and whether the attachment and recovery measures taken by the Department were liable to be set aside.
Analysis: The declaration under the Scheme was filed and a Form-3 statement was issued, but the amount payable under the statement had to be remitted within the time prescribed under the Scheme and the extensions granted by the relevant notifications. The petitioner did not make payment within that period. The amounts later credited were recovered by the Department in recovery proceedings under Section 87 of the Finance Act, 1994 and were not voluntary payments made by the petitioner within the Scheme timeline. The Scheme required compliance with its conditions in toto, and the later recovery could not be treated as satisfaction of the Scheme requirement. The reliance placed on the decision concerning COVID-related legal impediment was found inapplicable because the inability there arose from a statutory bar, which was absent here.
Conclusion: The petitioner was not entitled to the Scheme benefit on the basis of belated payment, and the recovery and attachment action was upheld.
Final Conclusion: The writ petition failed because the Scheme conditions were not complied with within the prescribed time, and subsequent departmental recovery did not revive the petitioner's entitlement to the statutory amnesty.
Ratio Decidendi: A declarant under the Sabka Vishwas Scheme must satisfy the payment requirement within the prescribed period, and amounts recovered later in coercive recovery proceedings cannot be treated as payment made under the Scheme.
Validity of payment under the Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS), 2019, made after the due date - attachment of the petitioner's property - HELD THAT:- As per the SVLDRS 2019, the petitioner filed Sabka Vishwas Scheme application on 02.10.2019 and subsequently SVLDRS Form-3 was issued by the designated committee for payment. The petitioner had to pay an amount of Rs. 35,23,866/- by the due date i.e. by 30.06.2020. But he failed to pay the said amount by the said date. The plea taken by the petitioner was that due to COVID-19 pandemic, as the business was completely closed, they could not generate any funds, could not make payment within the said time. However, as per the petitioners they accumulated funds and paid a sum of Rs. 15,00,000/- on 07.01.2021 and Rs. 20,23,866/- on 01.03.2021 and completed the payment of balance amount.
Thus, the amounts recovered were not payments made by the petitioner within the stipulated period, but subsequently by the Department in the process of recovery of arrears. As the petitioner could not comply the terms as mentioned in the scheme and had not made the payments within the stipulated period, the petitioner could not avail the benefit offered under the said scheme. The petitioner was required to follow the provisions of the scheme in toto and to pay the amount determined under SVLDRS Form-3 within the stipulated time in terms of Section 127 (4) of the Finance Act, 1994. The recovery made by the Department under Section 87 of the Finance Act, 1994 could not be considered as payment made by the petitioner under SVLDRS scheme.
Since there was a legal impediment because of which the petitioner therein could not comply with the requirement, interference was made. This is trite that a singular different fact/point may change the precedential value of a judgment.
Conclusion - As the petitioner was having interest in the firm and became Managing Partner of the firm after entering the reconstituted partnership deed dated 26.09.2015, there is no need to interfere with the attachment order passed by the Department against the petitioner. As such, there are no merit in the contention of the learned Senior Counsel for the petitioner to raise the attachment order and to allow the petition.
Petition dismissed.
1. ISSUES PRESENTED and CONSIDERED
The appellate tribunal considered the following core legal questions:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Taxability of Miscellaneous Income
Issue 2: Imposition of Penalty
3. SIGNIFICANT HOLDINGS
In conclusion, the appellate tribunal dismissed the department's appeal, emphasizing the necessity of evidence for tax demands and upholding the original adjudicating authority's decision to drop the service tax demand on the miscellaneous income. The tribunal's decision reinforces the requirement for clear evidence when alleging tax evasion and supports the principle that assumptions cannot replace factual proof in tax matters.
Levy of service tax - miscellaneous income of Rs. 6 crores declared by the respondent to the Income Tax Department - imposition of penalty under Section 78(1) of the Finance Act, 1994 - HELD THAT:- The present demand was proposed based on the statement of the director of the respondent where he simply stated that the amount disclosed to IT department was received from construction services. Apparently and admittedly, the respondent was providing various taxable services the said statement is not admissible in evidence till corroborated by any documentary evidence. Subsequent to the impugned order also the department has not produced any evidence to prove that the respondent had generated said disputed income / amount disclosed to IT department on account of providing taxable services. The proposal of demand of service tax on the income declared under survey to IT department cannot otherwise sustain. The proposal was purely on the basis of assumption and presumption. Hence, there are no infirmity in the part of the order challenged by the department.
Conclusion - Such a serious charge of evasion of service tax requires the Department to produce sufficient and tangible corroborative evidences and it cannot simply be based on presumptions and assumptions. The original adjudicating authority's decision to drop the demand for service tax on the miscellaneous income upheld, finding no evidence to support the department's claims.
The appeal filed by the department is hereby dismissed.
Issues: Whether the refund claims for service tax paid inadvertently were barred by unjust enrichment and whether the claim was maintainable in view of the decision relied upon by the Revenue.
Analysis: The service recipient had not reimbursed the service tax to the appellant, as the underlying services were not liable to service tax and the tax had been paid inadvertently. On these facts, the incidence of tax had not been passed on, so the bar of unjust enrichment did not apply. The decision relied upon by the Revenue was held to be inapplicable to refund claims under the service tax regime.
Conclusion: The refund claims were held to be maintainable and the appellant was held entitled to refund.
Refund of service tax paid - rejection on the ground that appellant has failed to pass the bar of unjust engagement - HELD THAT:- As it is evident from the record that service recipient has not remitted any Service Tax towards the services rendered by the appellant. In that circumstances the appellant has passed the bar of unjust engagement, therefore, bar of unjust engagement is not applicable to the facts of this case.
Larger Bench of this Tribunal in the case of M/S VIAVI SOLUTIONS INDIA PVT. LTD. VERSUS THE COMMISSIONER OF CGST, GURGAON-I [2024 (6) TMI 187 - CESTAT CHANDIGARH] wherein it has been held that in case of refund claims filed under Service Tax laws, the decision of ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV [2019 (9) TMI 802 - SUPREME COURT (LB)] is not applicable as the same is related with the cases of Customs. In that circumstances the decision of ITC Ltd. is not applicable to the facts of the case.
The appellant is entitled to claim the refunds - Appeal allowed.
Issues: Whether the demand of duty and the penalties could be sustained on the basis of GEQD-retrieved data and third-party records alleging higher royalty and clandestine manufacture and clearance of TMT bars.
Analysis: The demand was founded essentially on computer printouts and alleged royalty entries recovered from third-party premises, without independent corroboration of actual excess manufacture or clearance. There was no evidence of excess consumption of electricity, procurement of raw materials outside the books, use of transporters, identification of buyers, or flow-back of sale proceeds. The electronic printouts themselves were treated as inadmissible, and the absence of lawful control over the computers and devices further weakened their evidentiary value under the statutory rule governing computer-generated records. In the absence of cross-examination of relied-upon witnesses and in the absence of positive proof linking the appellant to any clandestine activity, the allegation remained unsupported by tangible evidence.
Conclusion: The demand of duty and the consequential penalties were not sustainable and were set aside in favour of the assessee.
Final Conclusion: The appeal succeeded, and the impugned demand and penalties were annulled for want of reliable, corroborated evidence of clandestine removal.
Ratio Decidendi: A charge of clandestine removal cannot be sustained on uncorroborated third-party computer records or assumptions of higher royalty; the Revenue must prove actual manufacture and clearance by tangible, admissible evidence, including corroboration of inputs, electricity, transport, buyers, and proceeds.
Clandestine removal - evasion of huge amount of tax by suppressing the amount of royalty paid by the franchisee units - suppression of production of finished product - admissible and corroborative evidences or not - Levy of penalties.
HELD THAT:- The fact that the Appellant ever paid a higher amount of royalty to M/s KIL is not factually correct and established, the fact that the Appellant manufactured and cleared the higher quantity of goods corresponding to such alleged higher payment of royalty is not established or proved.
Further, there is neither any evidence of any excess consumption of electricity nor any evidence whatsoever and howsoever with regard to any clandestine procurement of raw materials or of production of any excess TMT Bars, use of labour, transporter, etc. No evidence regarding buyers of such alleged clandestine manufactured goods or any receipt of consideration against such alleged clandestinely manufactured goods. Thus, without adducing any evidence in support of such facts, a charge of clandestine removal cannot be sustained merely on assumption and presumption due to such alleged higher amount of royalty recorded by M/s KIL, where even correctness and truthfulness of such recording itself is not established.
Reliance in this regard is placed upon the following judgment of the Hon’ble Allahabad High Court in M/S. CONTINENTAL CEMENT COMPANY VERSUS UNION OF INDIA & OTHERS [2014 (9) TMI 243 - ALLAHABAD HIGH COURT], wherein the Court categorically stated 'no case is made out for extra so-called clandestine sale of the Portland Cement to the said parties. We are satisfied that the first appellate authority has rightly deleted the addition and cancel the penalties.'
The above-mentioned judgment of the Hon’ble High Court has been relied by the Tribunal in the matter of M/S GIRIRAJ IROSTEEL COMPANY PVT. LTD., SHRI SUNIL KUMAR AGARWAL, SHRI PURUSHOTTAM RATHI VERSUS COMMISSIONER OF CENTRAL EXCISE [2019 (12) TMI 542 - CESTAT ALLAHABAD], wherein the facts were similar to the present case framed based on the same facts of alleged recording of higher royalty by M/s KIL and the Tribunal set aside the demand by holding 'manufacture of such quantity of goods on which Central Excise duty of around Rs. 5.5 crores was demanded is not established. Since Central Excise duty is on manufacture and manufacture is not established, therefore, there is no basis for demand of Central Excise duty to the tune of Rs. 5,58,89,762/-. Since the demand is not sustainable the penalty is on the appellants are not sustainable.'
It is a well settled law that resumption of loose slips or private records resumed from the third party, or statements recorded behind the back of the Appellant cannot be made the basis of confirming demand on the Appellants unless the same are proved to be linked to the Appellant. Further, even it is assumed such entries existed, but that does not prove that the Appellant in fact made any such higher amount of payment in absence of any corroborative evidence - once such printout is not admissible in evidence then nothing survived in this case to hold clandestine clearance of the goods by the Appellant.
In absence of cross examination of witnesses, the documents recovered as well as their statements cannot be relied upon against the Appellant in view of decision of Hon'ble Allahabad High Court in the case of COMMISSIONER OF CENTRAL EXCISE, MEERUT-I, MEERUT & ANOTHER VERSUS M/S PARMARTH IRON PVT. LTD., BIJNOR. [2010 (11) TMI 109 - ALLAHABAD HIGH COURT], wherein it has been held that 'there is no requirement in the Act or Rules, nor do the principles of natural justice and fair play require that the witnesses whose statements were recorded and relied upon to issue the show cause notice, are liable to be examined at that stage. If the Revenue choose not to examine any witnesses in adjudication, their statements cannot be considered as evidence. However, if the Revenue choose to rely on the statements, then in that event, the persons whose statements are relied upon have to be made available for cross-examination for the evidence or statement to be considered.'
Penalty on Director - HELD THAT:- The Appellant has simply appeared as a proxy of Mr. Navin Jain to submit documents. He has neither any authorization by the Company to tender a statement nor any summons were issued to the Appellant under Section 14 of the Central Excise Act, 1944. The DGCEI, Kanpur in most cryptic manner simply to fulfil their formalities, recorded a statement of the person, who did not even have any authority letter even from Mr. Navin Jain, who was main director looking after overall work.
Penalty on Appellant No.3 - HELD THAT:- The clinching evidence of the nature of purchase of raw material, use of electricity, sale of final products, clandestine removal and the more flowback of funds are required to be established in the case of clandestine removal. Such aspects have not been investigated into and therefore, the judgement of Hon’ble Allahabad High Court in the case of M/S. CONTINENTAL CEMENT COMPANY VERSUS UNION OF INDIA & OTHERS [2014 (9) TMI 243 - ALLAHABAD HIGH COURT] is applicable to the facts of the present case. The penalty imposed is set aside.
Conclusion - Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. The demands and penalties cannot be based on assumptions or insufficient evidence. The entire demand alleging clandestine removal is not sustainable and accordingly the entire demand confirmed against the Appellant is set aside. As the demand of duty is not sustainable, therefore, no penalty can be imposed.
Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Legality of ISD Invoices Issuance
Relevant legal framework and precedents:
The case revolves around the interpretation of Rule 7 of the CENVAT Credit Rules, 2004, and Notification No. 36/2001-CE (NT). The Tribunal also referenced the judgment in Sunbell Alloys Co. of India Ltd. V/s Commr. of C. Ex., Belapur.
Court's interpretation and reasoning:
The Tribunal examined whether the CMU, being a separate legal entity, could receive CENVAT credit distributed by the ISD of Parle Biscuits Pvt. Ltd. The Tribunal found that the Larger Bench ruling in Krishna Food Products was applicable, supporting the legality of such distribution.
Key evidence and findings:
The Tribunal noted the comprehensive manufacturing role of the CMU, which undertook the entire manufacturing process for Parle Biscuits Pvt. Ltd., including packaging and dispatch.
Application of law to facts:
The Tribunal applied the provisions of the CENVAT Credit Rules to the facts, acknowledging that the CMU was engaged in manufacturing activities on behalf of the principal manufacturer and that the distribution of credit was proportionate to the turnover.
Treatment of competing arguments:
The Department argued that the CMU was not eligible for the credit as it was not a manufacturing unit of the ISD. However, the Tribunal found the appellant's argument, supported by the Larger Bench decision, more persuasive.
Conclusions:
The Tribunal concluded that the issuance of ISD invoices by Parle Biscuits Pvt. Ltd. to its CMU was legal and correct.
Issue 2: Entitlement to CENVAT Credit
Relevant legal framework and precedents:
The Tribunal considered the provisions of Rule 2(m) and Rule 7 of the CENVAT Credit Rules, 2004, as well as the amendments post-01.04.2016.
Court's interpretation and reasoning:
The Tribunal emphasized that CENVAT is a beneficial scheme designed to prevent the cascading effect of taxes. It found that even under the unamended rules, the distribution of credit to manufacturing units, including job workers, was permissible.
Key evidence and findings:
The Tribunal noted that the input services, such as advertising and sales promotion, were used in the manufacture of the final products, justifying the distribution of credit.
Application of law to facts:
The Tribunal applied the rules to the appellant's situation, recognizing that the credit was distributed based on the turnover and was related to the manufacturing activities undertaken by the CMU.
Treatment of competing arguments:
The Department's argument that the CMU was not entitled to the credit was dismissed based on the Tribunal's interpretation of the rules and the Larger Bench's decision.
Conclusions:
The Tribunal concluded that the appellant was entitled to avail CENVAT credit for input services attributed to the goods on which excise duty was paid.
3. SIGNIFICANT HOLDINGS
Preserve verbatim quotes of crucial legal reasoning:
"CENVAT is a beneficial scheme with the stated purpose of allowing CENVAT credit of all taxes paid on inputs and services so as to avoid cascading effect of taxes and duties."
Core principles established:
Final determinations on each issue:
In conclusion, the Tribunal allowed the appeal, setting aside the impugned order, and granted consequential relief to the appellant.
Admissibility of CENVAT Credit passed on through ISD invoices - input service of advertisement /sale promotion - HELD THAT:- The issue herein is squarely covered in favour of the Appellant by the Larger Bench ruling of this Tribunal in the case of Krishna Food Products [2021 (5) TMI 906 - CESTAT NEW DELHI (LB)]. Under similar facts and circumstances, the Division Bench of this Tribunal held that 'This issue is whether the appellant would, irrespective of the answer to the first issue, be entitled to avail CENVAT credit when input service is attributed to the goods on which excise duty is paid and includes the cost of services on which credit was taken.'
Conclusion -The issuance of ISD invoices by Parle Biscuits Pvt. Ltd. to its CMU was legal and correct. The appellant was entitled to avail CENVAT credit for input services attributed to the goods on which excise duty was paid.
Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Entitlement to Refund under Rule 10A
Issue 2: Nature of Transaction - Sale or Job Work
Issue 3: Liability of Body-Builders under Rule 10A
Issue 4: Valuation under Rule 10A vs. Rule 6
Issue 5: Entitlement to Interest on Refund
3. SIGNIFICANT HOLDINGS
Refund of the duty paid under Rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - HELD THAT:- This case is no longer res integra having been decided by the Tribunal in the case of Audi Automobiles [2009 (5) TMI 426 - CESTAT, NEW DELHI] and a number of cases involving one of the bodybuilders. Following this decision, this Bench has decided the case involving M/S SITA SINGH & SONS P. LTD., M/S SML ISUZU LTD. VERSUS CCE, DELHI-IV [2016 (7) TMI 346 - CESTAT CHANDIGARH] on more than one occasion against the appellants.
CESTAT in the case of Audi Automobiles [2009 (5) TMI 426 - CESTAT, NEW DELHI] held that 'it is apparent that the said firms had cleared the goods in relation to the body fabricating and mounting on the chassis which were supplied to the said firms free of cost by the manufacturer of chassis. Being so, the activity for the purpose of valuation would squarely fall under Rule 10A and not under Rule 6. We, therefore, do not find any illegality in the impugned order as far as the demand of duty and interest payable thereon from the appellants.'
Conclusion - The transactions involving job work on behalf of a principal manufacturer fall under Rule 10A for valuation purposes, and the principal manufacturer bears the duty liability.
Appeal dismissed.
Issues: (i) Whether the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 is a general law so that Section 29(2) of the Limitation Act, 1963 does not apply to appeals under Section 74; (ii) Whether Section 5 of the Limitation Act, 1963 can be invoked to condone delay in filing an appeal under Section 74(1) of the 2013 Act beyond the further period of sixty days prescribed in its proviso.
Issue (i): Whether the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 is a general law so that Section 29(2) of the Limitation Act, 1963 does not apply to appeals under Section 74.
Analysis: The classification of a statute as general or special depends on the context and the subject under consideration. Even if the 2013 Act is a general law in relation to land acquisition, it becomes a special law when it prescribes a distinct limitation regime for appeals under Section 74. The court rejected the contention that the 2013 Act's general character excluded Section 29(2) altogether.
Conclusion: The contention was rejected. For limitation purposes under Section 74, the 2013 Act operates as a special law.
Issue (ii): Whether Section 5 of the Limitation Act, 1963 can be invoked to condone delay in filing an appeal under Section 74(1) of the 2013 Act beyond the further period of sixty days prescribed in its proviso.
Analysis: Section 74(1) allows an appeal within sixty days and the proviso permits filing within a further period not exceeding sixty days on sufficient cause being shown. That structure was held to be an express exclusion of Section 5 of the Limitation Act, 1963. The statutory phrase "not exceeding sixty days" was treated as the outer limit, and permitting any further condonation would render those words otiose. The court relied on the scheme of Section 74 and authorities construing similar limitation provisions in special statutes.
Conclusion: Section 5 of the Limitation Act, 1963 is inapplicable beyond the total period of 120 days. The delay could not be condoned.
Final Conclusion: The delay applications failed because the appellate remedy under Section 74 is confined to the statutory outer limit, after which the High Court lacks power to extend time. The appeals, being time-barred beyond that limit, could not be entertained.
Ratio Decidendi: Where a special statute prescribes an appeal within a fixed period and then allows condonation only up to a further specified period by using limiting words such as "not exceeding", the legislature is taken to have expressly excluded Section 5 of the Limitation Act, 1963 beyond that outer limit.
Power of Bombay High Court to condone the delay in filing appeals beyond the period stipulated under Section 74(1) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 - interpretation of Section 74 of the 2013 Act - express exclusion to the applicability of Section 5 of the Limitation Act, 1963 - HELD THAT:- As per the provisions of Section 29(2) of the Indian Limitation Act, 1908 if there was any delay in filing an appeal under a special or local law, one could not take the aid of Section 5 to condone the delay. Under the Limitation Act, 1963, there is a complete departure from this position. Under the Limitation Act, 1963, where any special or local law prescribes for any suit, appeal or application, a period of limitation different from the Schedule of said Act, for the purposes of determining any period of limitation for any suit, appeal or application prescribed by such special or local law, the provisions contained in Sections 4 to 24 shall apply, unless and to the extent they are expressly excluded by the language of such special or local law. In other words, Section 5 of the Limitation Act, 1963 would apply [unlike under Section 29(2)(b) of the Indian Limitation Act, 1908], unless expressly excluded by the language of the concerned special or local law.
The question that remains is whether in the language used in Section 74 of the 2013 Act there is an express exclusion to the applicability of Section 5 of the Limitation Act, 1963. On perusing the provisions of Section 74, it is clear that when the said section is read as a whole, the inescapable conclusion is that Section 5 of the Limitation Act, 1963 cannot be invoked for condoning the delay beyond the total period of 120 days as stipulated in Section 74(1) read with its proviso. If the legislature had in fact intended that Section 5 of the Limitation Act, 1963 would apply to an appeal to be filed under Section 74(1) of the 2013 Act, the legislature would not have inserted the proviso to Section 74(1) which [after the initial period of sixty days to file an appeal under Section 74(1)], gives power to the High Court to condone the delay for a further period not exceeding sixty days.
The proviso to Section 74(1) specifically stipulates that the High Court shall have the power to condone the delay, after the initial period of sixty days, for a further period not exceeding sixty days. This would most definitely amount to an express exclusion to the applicability of Section 5 of the Limitation Act, 1963, to an appeal to be filed under Section 74(1) of the 2013 Act. To hold that the High Court can entertain an appeal even beyond the extended period [as stipulated in the proviso to Section 74(1)] would render the words “not exceeding sixty days” wholly otiose.
On reading the proviso to Section 74(1) of the 2013 Act, and which is not only almost identical to the provisions of 125 of the Electricity Act, 2003, but also similar to the provisions of Section 421(3) of the Companies Act, 2013, the inescapable conclusion is that the proviso to Section 74 (1) expressly excludes the applicability of Section 5 of the Limitation Act, 1963. Once this is the case, there are no power to condone the delay beyond the maximum period of 120 days as stipulated in Section 74(1) read with its proviso, by resorting to the provisions of Section 5 of the Limitation Act, 1963.
Conclusion - There are no hesitation in holding that beyond the total period of 120 days as stipulated in Section 74(1) [read with its proviso] of the 2013 Act, this Court has no power to condone the delay. Since, admittedly in the facts of the present case, both the applications [seeking condonation of delay] filed by the Appellant are beyond the total period of 120 days.
Both the applications seeking a condonation of delay are hereby dismissed.
1. ISSUES PRESENTED and CONSIDERED
The judgment primarily revolves around the following core legal questions:
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Justification of the Deposit Condition under Section 148 of the NI Act
Issue 2: Discretionary Nature of Section 148 of the NI Act
3. SIGNIFICANT HOLDINGS
Dishonour of Cheque - whether condition imposed by the Sessions Judge, requiring the applicant to deposit 20% of the fine amount under Section 148 of the Negotiable Instruments (NI) Act, is justified? - HELD THAT:- Having gone through the provision of Section 148 of the N.I. Act and after taking into consideration the observations recorded by the Hon’ble Supreme Court in ASHOK KUMAR VERSUS STATE OF UTTARAKHAND & ANR. [2023 (11) TMI 1338 - SC ORDER], this Court is of the considered view that in normal circumstances, the Appellate Court may be justified in imposing the condition of deposit, as provided in Section 148 of the N.I. Act, and only in those cases, where imposing the condition of deposit is unjust or which may deprive the accused/appellant to pursue his appeal, an exception can be drawn by deviating from the normal procedure.
In such view of the matter, this Court is of the firm opinion that the Case Law relied upon by learned counsel for the applicant in the case of Ashok Kumar is not applicable in the facts and circumstances of the present case.
Conclusion - The Court finds that no special circumstance exists in the present case, and the condition of deposit of 20% compensation will neither be unjust nor it will amount to deprivation of the right of appeal to the applicant.
Application dismissed.
TaxTMI 