TaxTMI Updates e-Newsletter
Jan 19,2023

Quashing of detention proceedings - Order under Section 129(3) of the U.P. Goods and Services Tax Act, 2017 - Challenge by statutory appeal rather than writ - Refund claim contingent on setting aside a tax demand

Quashing of detention proceedings - Challenge by statutory appeal rather than writ - Order under Section 129(3) of the U.P. Goods and Services Tax Act, 2017 - Refund claim contingent on setting aside a tax demand - Maintainability of writ petition seeking quashing of proceedings for detention of goods and interim refund where an order under Section 129(3) has been passed and a statutory appeal remedy exists. - HELD THAT: - The petition sought quashing of proceedings arising from detention of a goods-carrying vehicle (notice dated February 13, 2018) and sought that refund proceedings be concluded before any final order. The respondents state that the petitioner failed to furnish an explanation and that an order under Section 129(3) of the U.P. Goods and Services Tax Act, 2017 was passed on February 18, 2018. The Court held that, in view of the order already having been passed, the petitioner had an adequate statutory remedy by way of appeal under the Act and therefore the writ petition did not survive. The Court further observed that once a demand has been raised pursuant to the competent authority's order, there is no basis for an order of refund unless and until that order is set aside.

Petition dismissed; petitioner to pursue statutory appeal and no refund is available unless the impugned order is set aside.

Final Conclusion: Writ petition dismissed as the impugned order under Section 129(3) was already passed and an adequate remedy by appeal under the U.P. Goods and Services Tax Act, 2017 was available; refund cannot be directed while the demand stands unless the order is set aside.

Cancellation of registration - system-generated order - non-application of mind - suo motu cancellation - limitation for filing appeal under Section 107(1) of the Central Goods and Services Tax Act, 2017 - remand for fresh consideration - condition precedent of depositing tax, interest and fine before appellate consideration - opportunity to comply with tax regime

Cancellation of registration - system-generated order - non-application of mind - suo motu cancellation - Validity of the order of cancellation of GST registration dated 16.09.2019 in view of internal contradictions and absence of application of mind. - HELD THAT: - The Court found the cancellation order to contain contradictory statements: it refers to a reply dated 12.09.2019 and yet records that no reply was filed, demonstrating that the officer proceeded without proper application of mind and appears to have relied on a system-generated template. Orders cancelling registration affect registrants seriously and must be framed with care and clear reasoning. Given these defects, the Court concluded that the cancellation order could not stand and set it aside, remitting the matter for reconsideration on merits. [Paras 7, 8, 11, 13]

The cancellation order dated 16.09.2019 is set aside and the matter is remitted for fresh consideration on merits.

Limitation for filing appeal under Section 107(1) of the Central Goods and Services Tax Act, 2017 - remand for fresh consideration - condition precedent of depositing tax, interest and fine before appellate consideration - opportunity to comply with tax regime - Validity of the Appellate Authority's order dated 29.09.2022 dismissing the appeal as time-barred and the procedure to be followed on remand. - HELD THAT: - Although the Appellate Authority had dismissed the appeal on the ground of limitation, the High Court, having set aside the underlying cancellation order for want of application of mind, remitted the matter to the Appellate Authority to examine the case on merits. The Court directed that before the Appellate Authority proceeds, the petitioner shall be called upon to deposit the tax, along with interest and fine; only after satisfaction that the deficit amount is deposited shall the Appellate Authority proceed to consider and pass appropriate orders. The Court emphasised that taxpayers willing to comply should be given an opportunity to regularise their position. [Paras 9, 12, 13]

The order dated 29.09.2022 is set aside; the matter is remitted to the Appellate Authority to decide on merits after the petitioner deposits the tax, interest and fine as directed.

Final Conclusion: Impugned orders dated 16.09.2019 and 29.09.2022 are set aside; the matter is remitted to the Appellate Authority to be decided on merits after the petitioner deposits the outstanding tax, interest and fine, failing which the Appellate Authority shall act as deemed fit.

Transition of accumulated input tax credit in terms of Section 140 of the Central Goods and Services Tax Act, 2017 - Input Service Distributor (ISD) credit transition - instruction dated 05.07.2018 inconsistent with judicial decisions - typographical error in court order - scope of review petition against interlocutory/operative directions - reliance on Supreme Court decision in Union of India v. Filco Trade Centre Pvt. Ltd.

Transition of accumulated input tax credit in terms of Section 140 of the Central Goods and Services Tax Act, 2017 - Input Service Distributor (ISD) credit transition - instruction dated 05.07.2018 inconsistent with judicial decisions - typographical error in court order - reliance on Supreme Court decision in Union of India v. Filco Trade Centre Pvt. Ltd. - Whether the review petition against paragraph 3 of the order dated 10.10.2022 ought to be entertained and the earlier directions permitting transition of accumulated ISD credit required review. - HELD THAT: - The court recorded that paragraph 3 of the earlier order contained a typographical error in the date of an instruction, but the proceedings had in fact referred to the impugned communication dated 04.02.2019 and the instruction dated 05.07.2018. The challenge to the instruction dated 05.07.2018 was within the knowledge of the applicant and the impugned communication itself referred to that instruction. The court noted that earlier decisions relied on in the order dated 19.09.2022 and reiterated in the order dated 10.10.2022 had allowed petitioners to transition accumulated credit under Section 140, and that the instruction dated 05.07.2018 was not aligned with those judicial decisions. The relief in the writ petition was therefore granted on the basis of the settled legal position as declared by those judgments, including the Supreme Court decision in Filco Trade Centre Pvt. Ltd., and not by concession. In light of these conclusions, there was no ground to review the earlier order directing transition of the accumulated ISD credit. [Paras 4, 5, 6, 7, 8]

Review petition dismissed; order dated 10.10.2022 is not reviewed and stands affirmed insofar as it permitted transition of the accumulated ISD credit.

Final Conclusion: The review application is closed; the earlier directions permitting transition of accumulated ISD credit in accordance with the cited judicial decisions (including the Supreme Court decision in Filco Trade Centre Pvt. Ltd.) are upheld and no review is called for.

Notice u/s 201 - failure to deduct or pay -period of limitation - HELD THAT:- As considering the fact that the liability of the recipient in the subject-matter of Appeal before the High Court and to avoid any further question, which may arise on limitation, we confirm the impugned judgment and order passed by the High Court [2022 (2) TMI 345 - BOMBAY HIGH COURT] quashing and setting aside the order u/s 201 we also direct that the matter be remitted to the AO(TDS) at the stage of issuance of show cause notice u/s 201 so that after the decision of the High Court in the pending Appeal, the same can be proceeded further in accordance with law and on merits.

Disallowance u/s 36(1)(va) being employee's contribution to provident fund and ESI - same were not deposited in the respective fund within the stipulated time - HELD THAT:- As appellant submits that the issue involved in this appeal is squarely answered in favour of the Revenue by a three Judge Bench of this Court in Checkmate Services Private Limited [2022 (10) TMI 617 - SUPREME COURT]

In view of the above, the impugned judgment passed by the High Court of Judicature at Bombay is set aside and the Appeal is allowed in terms of the cited decision.

Detachable warrants as capital asset - cost of acquisition of detachable warrants - taxable long-term capital gain on sale of detachable warrants - acceptance of valuation by assessee binding on tax authorities - no remand where assessee has accepted valuation

Detachable warrants as capital asset - cost of acquisition of detachable warrants - taxable long-term capital gain on sale of detachable warrants - acceptance of valuation by assessee binding on tax authorities - Detachable warrants attached to Part C of debentures had a conceivable cost of acquisition and the sale proceeds were subject to capital gains tax, the accepted valuation being treated as the cost. - HELD THAT: - The Tribunal and the C.I.T. (Appeals) held that the detachable warrants had an independent existence and a part of the cost of the debenture was attributable to the warrant. That valuation had been previously fixed at Rs.2.175/- and, importantly, the assessee itself stated it was agreeable to accepting that valuation for the relevant assessment year. Given the assessee's acceptance, the authorities were directed to recompute capital gains after allowing that cost. The Court examined the precedents relied upon by the assessee and found them distinguishable on facts or inapplicable (including decisions addressing goodwill or transactions affected by later amendments). Consequently, there was no need to remand the matter to the Assessing Officer for fresh inquiry where the assessee had accepted the valuation, and the Tribunal's affirmation of the C.I.T. (Appeals) was a reasonable and possible view on the material before it. [Paras 11, 14, 15]

The finding that the detachable warrants had an attributable cost of acquisition (accepted at Rs.2.175/-) and that the sale gave rise to taxable capital gain is affirmed.

Final Conclusion: Appeal dismissed; the order of the Income Tax Appellate Tribunal in ITA No.154/Ahd/2002 dated 09.04.2007 is affirmed and the substantial question of law is answered in favour of Revenue.

Rectification under Section 154 - credit of Tax Deducted at Source (TDS) in cases of amalgamation and demerger - modification of income-tax department software to reflect TDS/TCS credit - communication of computation of tax demand

Rectification under Section 154 - Rectification applications filed under Section 154 and their effect on the petitioners' prayer. - HELD THAT: - The Court recorded that rectification orders under Section 154 of the Income Tax Act, 1961 have already been passed in respect of the petitioners' returns. As a result, the petitioners' prayer seeking rectification no longer survives and requires no further adjudication by this Court.

Prayer for rectification under Section 154 dismissed as not surviving because rectification orders have already been passed.

Communication of computation of tax demand - Obligation of the Income Tax authority to communicate the computation of the outstanding tax demand shown on the income-tax portal for petitioner no.1. - HELD THAT: - Petitioner no.1 was shown an outstanding demand on the income-tax portal and contended ignorance of how that amount was computed. The Court considered this a matter warranting clarification. It directed respondent no.1 to communicate the computation of the amount reflected as outstanding against petitioner no.1 within two weeks, thereby ensuring transparency and enabling the petitioner to take further steps if necessary.

Respondent no.1 directed to communicate the computation of the outstanding tax demand against petitioner no.1 within two weeks.

Credit of Tax Deducted at Source (TDS) in cases of amalgamation and demerger - modification of income-tax department software to reflect TDS/TCS credit - Whether the Income Tax Department should be directed to modify its software to reflect TDS/TCS credit of erstwhile transferor companies in cases of sanctioned schemes of amalgamation, demerger or arrangement. - HELD THAT: - The petitioners sought a direction for modification of the department's software so that credit of TDS/TCS appearing in the Form 26AS of erstwhile companies is shown in the accounts of successor entities post-sanction of schemes. The Court did not order an immediate software modification; instead it directed respondent no.1 to consider whether it is feasible to modify its software to show such credit in similar cases where schemes of amalgamation, demerger or arrangement are sanctioned. The direction is administrative and confined to consideration of feasibility, not a mandate to implement a particular technical solution.

Respondent no.1 directed to consider the feasibility of modifying its software to display TDS/TCS credit in cases of sanctioned amalgamation, demerger or arrangement.

Final Conclusion: The petition is disposed of: rectification claims under Section 154 do not survive as orders have been passed; respondent no.1 is directed to communicate the computation of the outstanding tax demand against petitioner no.1 within two weeks; and respondent no.1 is directed to consider the feasibility of modifying its software to reflect TDS/TCS credit in cases of sanctioned amalgamation, demerger or arrangement.

Issuance of a second notice under Section 148 without disposing the return filed in response to the first notice - Limitation for completion of reassessment under Section 153(6)(i) - Effect of return filed in response to a notice under Section 148 - assessment proceedings remain pending and preclude a fresh notice for the same year - Obligation to dispose objections and pass a reasoned and speaking order before initiating fresh proceedings for the same assessment year

Issuance of a second notice under Section 148 without disposing the return filed in response to the first notice - Limitation for completion of reassessment under Section 153(6)(i) - Obligation to dispose objections and pass a reasoned and speaking order before initiating fresh proceedings for the same assessment year - Second notices under Section 148 issued after expiry of the one year period under Section 153(6)(i), without disposal of the returns and objections filed in response to the first notices for the same assessment years, are not legally valid. - HELD THAT: - The Court held that when a return is filed in response to a notice under Section 148, the assessment proceedings opened by that notice remain pending and the assessing officer cannot issue a fresh notice for reopening the same assessment year without first disposing of the return and the objections by passing a reasoned and speaking order. The limitation framework in Section 153(6)(i) operates such that permitting the assessing officer to allow the one year period to lapse on the first notices and thereafter issue second notices for the same years would be contrary to the statutory scheme and established authorities. The Division Bench decisions and earlier precedents recognising that a return filed pursuant to a reopening notice precludes issuance of a subsequent reopening notice for the same year were applied. On the facts, the assessing officer failed to complete the reassessments or dispose the objections within the one year period and impermissibly issued second notices; accordingly those notices and consequential proceedings were held illegal.

Impugned second notices under Section 148 and all subsequent proceedings in respect of assessment years 2012-13 and 2013-14 quashed.

Final Conclusion: The writ petition is allowed: the second notices under Section 148 issued in respect of AYs 2012-13 and 2013-14, and all consequential proceedings, are quashed because the assessing officer should have disposed of the returns and objections arising from the first notices and completed reassessment within the period prescribed by Section 153(6)(i).

Interest on securities - accrual basis v. due basis - Accrual of interest - Mercantile system of accounting - Precedent of High Court and Supreme Court decisions

Interest on securities - accrual basis v. due basis - Accrual of interest - Mercantile system of accounting - Precedent of High Court and Supreme Court decisions - Income from interest on securities is to be computed on due basis where the instrument stipulates interest payable on a specified date, and not on accrual basis for the assessment year 1994-95. - HELD THAT: - The Court examined whether interest credited by the assessee to profit and loss account on a due basis could be taxed on an accrual basis. It followed the reasoning of the Bombay High Court in Director of Income Tax v. Credit Suisse First Boston (Cyprus) Ltd and subsequent decisions, holding that where an instrument specifies interest payable on a particular date, interest does not accrue prior to that date and therefore cannot be treated as accrued de die in diem. The Court noted that the Supreme Court dismissed the revenue's challenge to the Bombay High Court decision in the related appeals and concurred with the view that interest accrues only on the date it becomes due as per the terms of the security. Applying that principle to the facts before it, the Court answered the substantial question of law in favour of the assessee and against the revenue. [Paras 11, 12]

Substantial questions of law answered in favour of the assessee; appeal allowed.

Final Conclusion: The appeal is allowed: interest on securities for AY 1994-95 is to be taxed on due basis where the security stipulates payment on a specified date, and the substantial questions of law are answered in favour of the assessee.

Validity of notice under Section 148A(b) of the Income Tax Act - Requirement to articulate basis for reopening assessment - Setting aside notice and order for failure to disclose reasons for escapement of income - Power to issue fresh notice with accompanying material and specified timeline

Validity of notice under Section 148A(b) of the Income Tax Act - Requirement to articulate basis for reopening assessment - Setting aside notice and order for failure to disclose reasons for escapement of income - The notice issued under Section 148A(b) and the consequential notice under Section 148, and the order under Section 148A(d), were invalid insofar as they failed to articulate how income chargeable to tax had escaped assessment and were therefore set aside. - HELD THAT: - The communication relied upon by the Assessing Officer merely recorded a survey report and a table of share transactions involving the petitioner in F.Y. 2014-15 and F.Y. 2015-16; it did not explain how those transactions resulted in escapement of income. The Court held that the notice under Section 148A(b) should have clearly set out the allegations and the basis on which the AO formed an opinion of escapement. Because the requisite articulation was absent, the impugned notices and the order under Section 148A(d) could not be sustained and were set aside. The Court therefore annulled the notices and the order for want of the necessary reasoning and disclosure of basis in the notice. [Paras 8, 10, 11]

Impugned notices under Sections 148A(b) and 148 and the order under Section 148A(d) set aside for failure to articulate basis for reopening.

Power to issue fresh notice with accompanying material and specified timeline - Requirement to provide material supporting basis for reopening - The Assessing Officer was granted liberty to issue a fresh notice under Section 148A(b) provided the AO clearly articulates the basis for believing income has escaped and accompanies the notice with available supporting material; timelines for issuance and response were prescribed. - HELD THAT: - Having set aside the defective notices, the Court permitted the AO to commence the statutory process afresh. The fresh notice must, within two weeks of service of the order, be issued and must clearly state how, in the AO's view, income chargeable to tax has escaped assessment; it must be accompanied by whatever material or information is available to the AO. The petitioner is to be given three weeks from receipt of that notice to respond, after which the AO may proceed in accordance with law. The order therefore remands the matter for fresh consideration confined to issuance of a properly reasoned notice accompanied by supporting material and adherence to the prescribed timelines. [Paras 11, 12]

Liberty granted to AO to issue fresh Section 148A(b) notice with supporting material within two weeks and to allow petitioner three weeks to respond; matter remitted for further action as per law.

Final Conclusion: The writ petition was allowed: the notices under Section 148A(b) and Section 148 and the order under Section 148A(d) were quashed for failure to articulate the basis of escapement of income; the Assessing Officer may issue a fresh, clearly reasoned notice with accompanying material within two weeks and must grant the petitioner three weeks to respond, after which the AO may proceed in accordance with law.

Reallocation of expenditure/income on account of royalty between operational unit and corporate office - utilisation of technical know-how by the Jammu Unit - deduction under Section 80-IB in respect of sub-licence fee and netting of royalty received against royalty paid - remand to the Tribunal for fresh adjudication

Utilisation of technical know-how by the Jammu Unit - reallocation of expenditure/income on account of royalty between operational unit and corporate office - The question whether the Jammu Unit had utilised the technical know-how and, consequentially, whether expenditure/income on account of royalty should be allocated to the Jammu Unit or the Corporate Division is to be reexamined by the Tribunal. - HELD THAT: - The coordinate Bench in Pr. Commissioner of Income Tax vs Montage Enterprises Pvt. Ltd. held that the core question requiring fresh examination is whether the Jammu Unit utilised the technical know-how provided under the MoUs; until that factual and legal question is decided, the question of allocation of royalty expenditure or income between the Jammu Unit and the Corporate Office cannot be finally determined. This Court has applied those operative directions to the present appeals and has remitted the matters to the Tribunal for fresh adjudication on that core issue. No final opinion on merits has been expressed by this Court on the allocation question; the matter is directed to be revisited by the Tribunal in the factual matrix of the present appeals. [Paras 9, 11, 12]

Issue remanded to the Tribunal for fresh adjudication whether the Jammu Unit utilised the technical know-how and accordingly whether royalty-related expenditure/income should be allocated to the Jammu Unit or the Corporate Division.

Deduction under Section 80-IB in respect of sub-licence fee and netting of royalty received against royalty paid - The question of entitlement to deduction under Section 80-IB in respect of sub-licence fee, including the netting of royalty received against royalty paid, is remitted to the Tribunal for consideration after the factual determination on utilisation of technical know-how. - HELD THAT: - The coordinate Bench recorded that because the primary issue relating to utilisation of technical know-how by the Jammu Unit remains open, the Tribunal did not decide the Revenue's cross-appeal on netting of royalty for computation of deduction under Section 80-IB. The appellate directions permit the assessee to press its cross-appeal before the Tribunal if there is an adverse factual finding on the primary issue. This Court has adopted those directions for the present appeals and has therefore remitted the Section 80-IB entitlement issue for fresh consideration by the Tribunal, leaving open the question of deduction pending the Tribunal's factual determination. [Paras 9, 11, 12]

Issue remitted to the Tribunal for fresh consideration of the assessee's entitlement to deduction under Section 80-IB (including netting of royalty received against royalty paid), to be decided after the factual inquiry on utilisation of technical know-how.

Final Conclusion: Appeals disposed of by applying the operative directions of the coordinate Bench in the Montage Enterprises Pvt. Ltd. matter; the issues of utilisation of technical know-how, allocation of royalty-related expenditure/income, and entitlement to deduction under Section 80-IB are remitted to the Tribunal for fresh adjudication, with the parties directed to appear before the Tribunal on the specified date.

Notice under Section 148A(b) of the Income Tax Act, 1961 - procedural fairness in re-assessment proceedings - right to receive material relied upon as 'Information' before initiation of re-assessment - remand for fresh consideration after disclosure and opportunity to respond

Procedural fairness in re-assessment proceedings - right to receive material relied upon as 'Information' before initiation of re-assessment - notice under Section 148A(b) of the Income Tax Act, 1961 - remand for fresh consideration after disclosure and opportunity to respond - Impugned notice dated 22.07.2022 and order under Section 148A(d) set aside because material relied upon by the Assessing Officer as 'Information' was not furnished to the petitioner, warranting fresh consideration after disclosure and opportunity to respond. - HELD THAT: - The petitioner challenged the impugned notice and order solely on the ground that the documents and ledger accounts constituting the 'Information' on which re-assessment was initiated were not provided to him, thereby depriving him of an opportunity to meet the material. The Assessing Officer possessed several documents (including ledger accounts) which were used as Information but were conceded not to have been furnished to the petitioner and on which the petitioner had no occasion to respond. In these circumstances the Court found that the appropriate remedy was to set aside the impugned notice and order and direct the Assessing Officer to furnish all documents considered as Information, permit the petitioner to file a response, and thereafter pass such order as may be appropriate after considering that response. The Court expressly refrained from expressing any opinion on the merits of the allegation that income had escaped assessment. [Paras 14, 15, 16]

Impugned notice and order set aside; Assessing Officer directed to furnish all documents relied upon as Information within two weeks, petitioner to respond within one week thereafter, and Assessing Officer to pass a fresh order within four weeks of receipt of the response; no expression of opinion on merits.

Final Conclusion: The writ petition is allowed to the extent that the impugned notice and order are set aside and the matter is remitted to the Assessing Officer for fresh adjudication after disclosure of the Information and providing the petitioner an opportunity to respond; the Court has not adjudicated the merits of the charge that income had escaped assessment.

Penalty under Section 271C for failure to deduct tax at source - limitation and time-bar for initiation and completion of penalty proceedings - section 275(1)(c) limitation on passing penalty order - reasonable time for initiation of proceedings (NHK Japan Broadcasting principle) - deletion of penalty as time-barred

Penalty under Section 271C for failure to deduct tax at source - limitation and time-bar for initiation and completion of penalty proceedings - reasonable time for initiation of proceedings (NHK Japan Broadcasting principle) - Levy of penalty under Section 271C was time-barred as proceedings were initiated after an unreasonable delay - HELD THAT: - The Tribunal held that initiation of penalty proceedings many years after the end of the relevant year amounted to initiation beyond a reasonable period and supported deletion of the penalty. The decision applied the principle in CIT v. NHK Japan Broadcasting and other jurisdictional authorities which recognise that where no specific limitation is prescribed for initiation, action must be taken within a reasonable period (as illustrated by the four year benchmark in the cited authorities). Having regard to the facts and precedents relied upon by the Tribunal, the initiation of penalty proceedings after the long delay indicated in the record rendered the proceedings belated and liable to be quashed.

Penalty under Section 271C deleted on the ground that initiation of proceedings was belated and beyond a reasonable time.

Section 275(1)(c) limitation on passing penalty order - limitation and time-bar for initiation and completion of penalty proceedings - Penalty order was barred by limitation under Section 275(1)(c) as it was passed after the statutory six month period from initiation - HELD THAT: - The Tribunal accepted that, for the purpose of Section 275(1)(c), the relevant date for commencement of the limitation period is the date on which the authority recommended/initiation of penalty proceedings. Applying the ratio of the cited Delhi High Court decisions (Mahesh Woods Products and PCIT v. Rishikesh Buildcon), the limitation period began to run from the date of the recommendation/initiation recorded in the file. Because the penalty order was passed after the expiry of the six month period prescribed by Section 275(1)(c), the order was found to be barred by limitation and therefore unsustainable.

Penalty order set aside as barred by Section 275(1)(c) since it was passed after the statutory six month period from initiation.

Final Conclusion: The Tribunal set aside the orders of the authorities below and deleted the penalty levied under Section 271C as time barred; the consequential stay application became infructuous and was dismissed.

Deduction under section 54 (exemption for capital gains reinvestment) - Ownership and beneficial interest in joint property - Source of funds and investment attribution - Restriction of exemption pro rata where investment is by joint owners

Deduction under section 54 (exemption for capital gains reinvestment) - Ownership and beneficial interest in joint property - Source of funds and investment attribution - Restriction of exemption pro rata where investment is by joint owners - Whether the deduction claimed under section 54 could be restricted to 50% because the new residential property was acquired jointly with the assessee's son and significant payments were made from the son's funds - HELD THAT: - The Tribunal noted that the assessee sold an old property and received sale proceeds, but payments for the new flat were made from a joint account in which substantial credits (Rs. 1,52,57,686) had accrued from the assessee's son between 05/04/2013 and 06/09/2013. The assessee had no other source to make the payments prior to receiving the sale proceeds; the payments for the JP Greens flat were therefore made from the joint account and traceable to the son's income. Although section 54 does not expressly require the new house to be purchased solely in the name of the assessee, where the new property is acquired jointly and the contribution towards acquisition is from another person, the benefit of exemption must be apportioned according to ownership/contribution. Applying these facts, the AO and the CIT(A) correctly restricted the assessee's claim to 50% of the exemption and made the addition to the assessee's total income. The Tribunal found no legal infirmity in this reasoning and confirmed the orders below. [Paras 8, 9, 10]

The restriction of the section 54 exemption to 50% and the addition of the remaining amount to the assessee's income are upheld.

Final Conclusion: The appeal is dismissed; the additions made by the Assessing Officer and confirmed by the CIT(A) (restriction of the section 54 exemption to 50% on account of joint acquisition and contribution by the son) are upheld.

Claim of TDS credit reflected in Form 26AS - rectification under section 154 - declaration under Rule 37BA - processing under section 143(1) - assignment of TDS credit to partnership firm - remand for fresh adjudication - condonation of delay in filing appeal on account of Supreme Court extension/grace period

Condonation of delay in filing appeal on account of Supreme Court extension/grace period - Delay in filing the appeal was condoned. - HELD THAT: - The Tribunal noted that the impugned NFAC order was dated 28.12.2021 and the appeal was filed on 19.04.2022, resulting in a delay. The assessee placed on record the Supreme Court order extending the period for filing judicial proceedings during the COVID-19 pandemic and a further grace period; the appeal fell within that grace period. In view of the extension and grace period, the Tribunal found the delay excusable and condoned it, thereby admitting the appeal for adjudication on merits. [Paras 2]

Delay in filing the appeal condoned and appeal admitted.

Claim of TDS credit reflected in Form 26AS - rectification under section 154 - processing under section 143(1) - declaration under Rule 37BA - assignment of TDS credit to partnership firm - remand for fresh adjudication - Whether the TDS credit of Rs.2,21,000 credited in the assessee's PAN but pertaining to a sale by the partnership firm should be allowed or otherwise adjudicated afresh. - HELD THAT: - The Tribunal recorded that the TDS in question was deducted on sale consideration of an asset owned by the partnership firm and was credited to the assessee's PAN; the partnership firm included the capital gain in its return and no sale consideration was shown in the individual return. The CPC denied the credit in the automated intimation under processing of the return and rejected the assessee's rectification under section 154. NFAC held that credit is allowable only in the hands of the person in whose hands the income is assessable and observed that the assessee had not filed the declaration under Rule 37BA to transfer the credit to the firm. The Tribunal found that while the TDS related to the firm's transaction and the sale deed was executed by the assessee in a representative capacity, it was not clear from the record whether any tax liability had been finally determined against the firm and that the matter required fresh consideration. Consequently the Tribunal restored the matter to the file of the assessing officer for fresh adjudication, directing the assessee to file the appropriate application under section 199 read with Rule 37BA with the required declaration and for the assessing officer to decide the claim in accordance with law after giving the assessee a fair opportunity. [Paras 7]

Matter remanded to the assessing officer for fresh adjudication on the TDS credit claim; assessee to file application under section 199 read with Rule 37BA and AO to decide in accordance with law after opportunity.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and remitted the question of allowance of the TDS credit (credited to the assessee's PAN but relating to a partnership firm's sale) to the assessing officer for fresh consideration; the assessee was directed to file the requisite application/declaration under section 199 read with Rule 37BA and the AO to decide the claim after giving a fair opportunity.

Classification of land as agricultural or capital asset - entitlement to exemption under Section 54B - valuation under Section 50C and adoption of circle rate - admissibility of additional evidence under Rule 46A - duty to make local enquiries / verification of revenue records - reopening of assessment under Section 147

Classification of land as agricultural or capital asset - entitlement to exemption under Section 54B - valuation under Section 50C and adoption of circle rate - Status of the land sold (agricultural or non agricultural) and consequent entitlement to exemption under Section 54B; correctness of adopting circle rate under Section 50C for computing capital gains. - HELD THAT: - The Tribunal recorded that while the Assessing Officer and CIT(A) treated the land as non agricultural (capital asset) principally because the sale deed described the purpose as residential and the registering authority charged stamp duty at circle rates for non agricultural/residential property, contemporaneous revenue records (khasra/khatauni and fasli entries) indicated agricultural use, standing crops and irrigation. The papers also disclosed a prior proceeding under the Uttar Pradesh Jamindari Abolition and Land Reforms Act in which conversion of part of the survey number to non agricultural use had been recorded. The Tribunal found that the AO did not make necessary local enquiries or seek clarifications to determine whether the portion sold by the assessee (as co owner) had itself been converted to non agricultural use, and that the CIT(A) erred in refusing to admit further evidence which could establish whether conversion applied to the assessee's share. Given these lacunae, the Tribunal held that the question whether the land sold fell within Section 2(14)(iii) (agricultural land) and whether the assessee is therefore entitled to exemption under Section 54B could not be finally determined on the existing record. Accordingly, the matter requires fresh adjudication after admission and consideration of the additional evidence and local verification; if the assessee's share was not converted to non agricultural use, the fact that the deed stated residential purpose or that the registering authority assessed stamp duty at circle rate would not be decisive against the assessee's claim to Section 54B relief. [Paras 9, 10, 11, 12, 13]

Issue remanded to the file of the CIT(A) for admission of additional evidence, local/verificatory enquiries and fresh decision on whether the portion sold by the assessee was converted to non agricultural use and, consequentially, on entitlement to exemption under Section 54B and applicability of Section 50C valuation.

Admissibility of additional evidence under Rule 46A - duty to make local enquiries / verification of revenue records - Whether the CIT(A) should have admitted the additional evidence filed under Rule 46A and whether the AO/CIT(A) should have carried out local enquiries to clarify conversion and title issues. - HELD THAT: - The Tribunal observed that the assessee sought to place on record affidavits, revenue records, orders and purchase deeds which were relevant to show that the portion sold by the assessee was not himself converted to non agricultural use. The CIT(A) declined to admit those documents on the ground that they had not been produced before the AO. The Tribunal held that, given the AO's failure to make necessary enquiries despite co ownership and apparent conflicting entries in revenue records, the CIT(A) ought to have allowed the assessee to produce additional evidence for verification of the pivotal factual controversy. The Tribunal found it inappropriate to conclude the issue without permitting such evidence and without directing verification from revenue authorities as to whether conversion orders applied to the assessee's share. [Paras 12, 13]

CIT(A)'s refusal to admit the additional evidence is set aside for reconsideration; CIT(A) is directed to admit and consider the Rule 46A evidence and to undertake or direct appropriate local enquiries/verification before passing fresh order.

Reopening of assessment under Section 147 - valuation under Section 50C and adoption of circle rate - Whether the AO was justified in reopening the assessment and making additions adopting circle rate under Section 50C without requisite factual verification. - HELD THAT: - The Tribunal noted that the AO invoked Section 147 on belief that income had escaped assessment and adopted circle rate under Section 50C to compute capital gains. However, the Tribunal recorded that the AO did not make adequate enquiries to reconcile the revenue records, co ownership anomalies and conversion entries before treating the land as non agricultural and applying Section 50C. In view of the outstanding factual issues and the need to examine additional evidence and carry out local verification, the Tribunal concluded that the question of validity of the reopening and the correctness of the Section 50C adoption could not be finally resolved without fresh adjudication after the directed inquiries. [Paras 2, 3, 12]

The adoption of circle rate under Section 50C and the additions made pursuant to the reopening are directed to be reconsidered by the CIT(A) after admission of additional evidence and required local verification; the AO's and CIT(A)'s orders are not sustained in finality and are remitted for fresh decision.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes, set aside the contested findings to the extent indicated and restored the matter to the file of the CIT(A) with directions to admit and consider the additional evidence under Rule 46A, carry out necessary local enquiries/verification regarding conversion and co ownership, and pass a fresh order dealing with classification of the land, claim under Section 54B and the applicability of Section 50C.

Reopening of assessment - change of opinion - reasons to believe - fresh tangible material - bogus accommodation entries - remand report and verification of evidences - maintainability of reassessment

Reopening of assessment - change of opinion - reasons to believe - fresh tangible material - Validity of reopening the assessment under Section 147/148 in March 2017 - HELD THAT: - The Tribunal found that the Assessing Officer had called for and received detailed information on purchases in response to a notice under Section 142(1) dated 27.09.2012 and had recorded in the original assessment order under Section 143(3) that the details were verified and placed on record. The Assessing Officer also had, in April 2013, an intimation from ITO Ward-9(2) about suspicious transactions of the supplier but had earlier limited a prior reassessment in 2014 to share capital issues without acting on that intimation. The reasons recorded in March 2017 purported to rely on information from the ITO but omitted the earlier date, thereby mis-stating that the information was newly received. On these facts the satisfaction for reopening was tainted by arbitrariness and amounted to a mere change of opinion rather than being founded on any new tangible material justifying reopening. Consequently the reassessment initiated in March 2017 was held to be without lawful basis. [Paras 8, 11]

Reopening under Section 147/148 in March 2017 quashed as based on change of opinion and tainted reasons to believe.

Bogus accommodation entries - remand report and verification of evidences - maintainability of reassessment - Sustainability of the addition of Rs. 23,71,061/- as bogus purchases on merits - HELD THAT: - The Tribunal noted that on remand the Assessing Officer furnished a report (dated 30.03.2019) stating that ledger accounts, invoices, bank statements and physical evidence showed the purchases from the supplier to be in order. The supplier's own assessment order which had earlier made protective additions was subsequently revised on appeal with deletion of the protective additions relating to sales to the present assessee. Despite this, the CIT(A) relied on the supplier's initial intimation and sustained the addition. The Bench held that the remand verification report and the appellate outcome in the supplier's case undermined the foundation for treating the purchases as bogus, and that the CIT(A)'s reliance on the intimation without giving weight to the remand findings was unsustainable. [Paras 12]

Addition treated as unsustainable and deleted; appellate finding upholding the addition set aside.

Final Conclusion: The assessee's appeal is allowed; the reassessment order and the appellate order sustaining the addition are set aside.

Reopening of assessment under section 147/148 - Reasons to believe and tangible material - Borrowed satisfaction arising from reliance on investigation report - Independent application of mind by the Assessing Officer - Validity of reassessment proceedings

Reopening of assessment under section 147/148 - Reasons to believe and tangible material - Borrowed satisfaction arising from reliance on investigation report - Independent application of mind by the Assessing Officer - Validity of reassessment proceedings - Whether the reassessment proceedings initiated by issuance of notice under section 148 and assumption of jurisdiction under section 147 were valid where the Assessing Officer acted mainly on an investigation report without independent enquiry or application of mind. - HELD THAT: - The Tribunal applied settled principles that the Assessing Officer must form a prima facie belief, based on tangible material, that income has escaped assessment; reasons recorded must demonstrate a nexus between that material and the belief and must not be mere conclusions reproducing an investigation report. On scrutiny of the reasons recorded in the present case, the AO principally recited information about transactions and reproduced findings from the Investigation Wing without enclosing or paraphrasing the critical parts of the investigation report, without stating what in that material led to the belief, and without conducting preliminary enquiries to test the information. The reasons repeatedly commence from conclusions that the assessee engaged in managed trading and took bogus long term capital gains, but the basis for those conclusions is not disclosed; there is no discernible independent application of mind and the satisfaction appears to be a "borrowed satisfaction". Following the precedent authorities cited, the Tribunal found that the necessary link between material and reason to believe was absent, the reopening power was exercised on an inadequate foundation, and therefore the notice under section 148 and consequent reassessment were vitiated. As a result, the Tribunal declined to adjudicate the merits of the substantive additions, treating them as academic. [Paras 18, 19, 20, 21, 22]

Reopening under section 147/148 quashed for want of independent reasons and application of mind; reassessment proceedings set aside and appeal allowed.

Final Conclusion: The Tribunal set aside the notice issued under section 148 and the reassessment completed under section 143(3) r/w 147 for A.Y. 2013-14 on the ground that the Assessing Officer relied on the Investigation Wing's report without independent enquiry or demonstrable application of mind; the substantive additions were not adjudicated as they became academic. All three identical appeals allowed.

Classification of automatic data processing machines (ADP) - interpretation of the term 'portable' in tariff entries - contextual/trade meaning of tariff descriptions - use of HSN explanatory notes as an aid to classification - self-assessment and burden of proof on customs authorities

Interpretation of the term 'portable' in tariff entries - classification of automatic data processing machines (ADP) - use of HSN explanatory notes as an aid to classification - contextual/trade meaning of tariff descriptions - self-assessment and burden of proof on customs authorities - Whether the Concerned Goods fall within 'portable' ADPs under Tariff Item 8471 30 10 or are classifiable under Tariff Item 8471 50 00 - HELD THAT: - The Court held that 'portable' must be interpreted in the context of ADPs and trade usage, not by isolated dictionary meanings or weight alone. The explanatory HSN note is a permissible guide but does not make operability without external power a mandatory condition. Drawing on technical and trade literature, the Court formulated a twofold test for portability of ADPs: (i) ability to be carried around easily, taking into account weight, dimensions and necessary accessories for safe use and transport; and (ii) suitability for daily transit by a consumer, including durability and availability of protective conveyance (paras 16-19). Applying this test to the Concerned Goods, the Court found they require constant external power, have large diagonal displays (minimum 18.5 inches), are non foldable, need stands or mounting and lack protective cases for daily transit, rendering them unsuitable for ordinary daily carriage despite weighing under 10 kg (paras 10, 17-22). Consequently, they are not 'portable' within subheading 8471 30 and thus are not classifiable under Tariff Item 8471 30 10. The Court further noted that under the self assessment regime the revenue bears the burden of proof to reclassify imports, which was not discharged (para 23). [Paras 20, 21, 22, 23, 24]

Concerned Goods are not 'portable' ADPs and are to be classified under Tariff Item 8471 50 00; the customs authorities failed to discharge their burden to reclassify under 8471 30 10.

Final Conclusion: Appeals allowed; impugned orders classifying the goods under Tariff Item 8471 30 10 set aside and the goods are to be valued and assessed under the initially declared Tariff Item 8471 50 00; consequent relief to follow.

Seizure under Section 110 of the Customs Act, 1962 - provisional release under Section 110A of the Customs Act, 1962 - import of mis-declared goods in violation of the Foreign Trade (Development and Regulation) Act, 1992 - liability to pay demurrage and detention charges - exemption/remission of demurrage and other charges under Section 53

Seizure under Section 110 of the Customs Act, 1962 - provisional release under Section 110A of the Customs Act, 1962 - Disposition of the petition seeking release of the imported consignments - HELD THAT: - The Court recorded that a formal seizure order in respect of the consignments was passed on 09.02.2022 and that a Show Cause Notice for adjudication was issued on 11.08.2022. The Court further noted that the request for provisional release had been considered and that an order dated 20.09.2022 provisionally releasing the consignment had been passed. The question whether the goods ought to be finally confiscated or other action taken will be determined in the adjudication proceedings on the Show Cause Notice. Given the existence of the seizure order, the subsequent issuance of the Show Cause Notice and the grant of provisional release, the writ petition seeking direction for release was rendered susceptible to disposal without granting the specific reliefs sought. [Paras 8, 12]

Petition disposed after noting that the consignments had been seized (09.02.2022), a Show Cause Notice issued (11.08.2022), and that provisional release had been ordered (20.09.2022); final determination to follow adjudication.

Liability to pay demurrage and detention charges - exemption/remission of demurrage and other charges under Section 53 - Claim for direction to respondents to pay or waive demurrage and detention charges - HELD THAT: - Relying on the Apex Court's reasoning in the cited decision, the Court observed that the delay in clearance could not be attributed solely to the Department since the petitioner had failed to respond to letters and summonses. In those circumstances the petitioner could not be granted a writ directing the respondents to pay demurrage or detention charges. The Court noted the importers remain free to seek exemption or remission of demurrage and related charges from the competent authority in accordance with the applicable provision referred to in the precedent. [Paras 13, 14]

Direction for respondents to pay or waive demurrage and detention charges refused; petitioner may approach the competent authority for exemption/remission.

Final Conclusion: Writ petition disposed: the Court recorded that the consignments were seized (09.02.2022), a Show Cause Notice issued (11.08.2022), and that provisional release was granted (20.09.2022); no writ direction to respondents to pay or waive demurrage/detention charges was issued, petitioner may seek exemption/remission before the competent authority and final questions to be decided in adjudication proceedings.

Change of cut-off marks after commencement of selection process - prohibition on altering selection criteria midway - entitlement to consideration under the same parameters as those governing the initiated selection - issuance of customs broker licence subject to verification of qualifying marks

Change of cut-off marks after commencement of selection process - prohibition on altering selection criteria midway - Increase of the oral examination cut-off from 50 to 60 after the selection process had commenced was impermissible. - HELD THAT: - The Court applied the principle that once a selection process has commenced under a particular regulatory framework, the parameters governing assessment cannot be changed mid-process to the detriment of candidates who have already been placed in the process. The Single Judge's findings (paras 16-19) were accepted: candidates issued call letters and entitled to appear in the oral examination could not be retroactively subjected to a higher cut-off which was not communicated to them prior to their appearance. Changing the cut-off after initiation would have the effect of altering the criteria of consideration and was thus held to be impermissible. [Paras 16, 17, 18, 19]

The alteration of the oral examination cut-off from 50 to 60 after the selection process commenced was not permissible; candidates must be assessed on the criteria applicable when their candidature was initiated.

Entitlement to consideration under the same parameters as those governing the initiated selection - issuance of customs broker licence subject to verification of qualifying marks - Petitioner is entitled to grant of customs broker licence if he has attained the qualifying marks (50%) in the oral examination; licence to be issued after verification. - HELD THAT: - Relying on the consolidated ruling in the earlier writ petitions (paras 16-22) and the petitioner's representation that RTI replies show he scored 50, the Court directed that the petitioner should be granted the licence provided verification confirms he secured 50% or above in the oral examination. The Court thus gave effect to the principle that candidates assessed under the original cut-off are entitled to relief and directed administrative action to issue the licence upon ministerial verification of the qualifying score. [Paras 7, 8, 22]

The petitioner shall be issued the customs broker licence if verification confirms he attained 50% or more in the oral examination; the direction in the earlier judgment in favour of similarly placed candidates is applied to the petitioner.

Issuance of customs broker licence subject to verification of qualifying marks - Verification of the petitioner's oral examination score is to be undertaken as a limited ministerial exercise within a specified timeframe. - HELD THAT: - The Court did not re-adjudicate the merits of the examination scoring but directed a limited verification to ascertain whether the petitioner scored 50% or above in the oral examination. This is a confined administrative verification (not fresh adjudication of merit) to give effect to the legal finding that the cut-off could not have been increased mid-process. The verification is to be completed within two weeks and the licence issued within four weeks thereafter (para 8). [Paras 8]

Respondent to verify within two weeks that the petitioner scored 50% or above in the oral examination and, on such verification, to issue the customs broker licence within four weeks.

Final Conclusion: Writ petition allowed: the Court applied the settled principle that selection criteria cannot be altered midway, directed a ministerial verification of the petitioner's oral examination score within two weeks, and ordered issuance of the customs broker licence within four weeks if the petitioner is shown to have secured 50% or more.

Suspension and cancellation of Importer-Exporter Code - Requirement of notice in writing and reasonable opportunity of representation under Section 8 - Non-speaking order - Restoration of IEC pending fresh compliance with statutory procedure - Treatment of subsequent show cause notice as a Section 8 notice for fresh adjudication

Requirement of notice in writing and reasonable opportunity of representation under Section 8 - Non-speaking order - Validity of the suspension of the petitioner's Importer-Exporter Code in light of the procedural requirements of Section 8 of the FTDR Act. - HELD THAT: - Section 8(1) mandates that before suspending or cancelling an IEC the Director General or an authorised officer must give a notice in writing stating the grounds on which such action is proposed and must afford a reasonable opportunity to make a representation in writing (and, if desired, to be heard). The show cause notice dated 11.05.2022 did not set out the grounds for suspension and merely proposed placing the IEC "under DEL", and the order dated 31.08.2022 is non-speaking and does not disclose any grounds for suspension. For these reasons the suspension was effected without compliance with the mandatory procedure under Section 8 and is legally infirm. [Paras 7, 8, 9, 10]

The suspension of the petitioner's IEC is set aside because it was made without issuing a proper Section 8 show cause notice and without a speaking order.

Restoration of IEC pending fresh compliance with statutory procedure - Treatment of subsequent show cause notice as a Section 8 notice for fresh adjudication - Appropriate remedial course and further procedure to be followed by the respondents after finding the suspension procedurally defective. - HELD THAT: - In view of the procedural infirmity the Court directed restoration of the petitioner's IEC forthwith. The show cause notice dated 15.11.2022, which sets out grounds including proposed penal action, is to be treated also as a notice under Section 8 calling upon the petitioner to show cause why its IEC should not be suspended or cancelled. The petitioner is granted two weeks to respond to that notice; the respondents are required to consider the response and pass a speaking order within four weeks thereafter. All rights and contentions of the petitioner are reserved. [Paras 14, 15, 16, 17, 18]

Order dated 31.08.2022 set aside; IEC restored; 15.11.2022 notice treated as a Section 8 notice; petitioner permitted two weeks to reply and respondents directed to pass a speaking order within four weeks.

Final Conclusion: The petition is allowed: the suspension order is quashed for non-compliance with the mandatory show cause and hearing procedure under Section 8 of the FTDR Act; the IEC is restored and the respondents are directed to proceed afresh treating the 15.11.2022 notice as a Section 8 notice, permitting two weeks' response and requiring a speaking order within four weeks.

Mandatory pre-deposit under Section 129E of the Customs Act - territorial jurisdiction of the Customs Act and applicability to offences committed within India - penalty for improper import/export and liability of abettors under Sections 112 and 114 - penalty for use of false and incorrect material under Section 114AA - conditioning of statutory right of appeal by legislative amendment

Mandatory pre-deposit under Section 129E of the Customs Act - conditioning of statutory right of appeal by legislative amendment - Dismissal of appeals as non-maintainable for non-compliance with the amended pre-deposit requirement under Section 129E. - HELD THAT: - The appeals filed before CESTAT were subject to the amended provision of Section 129E (substituted w.e.f. 1.10.2014) which made deposit of 7.5% of the duty demanded or penalty imposed a mandatory condition precedent to entertain an appeal. The first proviso (discretion to dispense with deposit) available under the earlier regime was expressly removed by the amendment. The Court applied the principle that a statutory right of appeal may be conditioned by subsequent legislation applicable to appeals filed on or after the date of enforcement of the amendment, and relied on the reasoning in Chandra Sekhar Jha and this Court's decisions interpreting corresponding amendments. Since the appellants had not complied with the mandatory pre-deposit, CESTAT correctly dismissed the appeals as defective and non-maintainable; the question of jurisdiction could only be considered if the appellants first met the statutory pre-deposit requirement. [Paras 20, 21, 22, 23, 34]

Appeals dismissed as non-maintainable for failure to comply with the mandatory pre-deposit requirement under the amended Section 129E.

Territorial jurisdiction of the Customs Act and applicability to offences committed within India - penalty for improper import/export and liability of abettors under Sections 112 and 114 - penalty for use of false and incorrect material under Section 114AA - Whether Customs Authorities had jurisdiction to confiscate goods and impose penalties on the appellants (foreign-incorporated companies and their director). - HELD THAT: - The impugned adjudication found that the diversion of imported gold jewellery from SEZ units into the domestic market, and the related attempt to improperly export misdeclared goods, were acts committed within the territorial limits of India. The Customs Act (even before the 2018 amendment extending extraterritorial reach) applies to offences committed within India. The statutory scheme imposes penalties on 'any person' who does or omits an act rendering goods liable to confiscation or who abets such acts; consequently liability extends beyond the importer/exporter to persons who aided or abetted the wrongdoing. The adjudicating authority's findings that the appellants conspired with and benefitted from the diversion, mis-declarations and clandestine removal of goods from SEZ units attracted Sections 111, 112, 113, 114 and 114AA. Given these findings and the fact that the appellants had submitted to jurisdiction by responding to notices and filing appeals (albeit without the required pre-deposit), the challenge to jurisdiction was held to be without merit. [Paras 27, 28, 31, 32, 33]

Customs Authorities had jurisdiction to confiscate the goods and impose penalties on the appellants for acts committed within India, and the jurisdictional challenge failed.

Final Conclusion: The appeals are dismissed: (i) three appeals were correctly held non-maintainable for failure to comply with the mandatory pre-deposit under the amended Section 129E, and (ii) the Customs Authorities had jurisdiction to confiscate the goods and impose penalties on the appellants for wrongdoing committed within India; no substantial question of law arises.

Directory versus mandatory nature of statutory timelines - mandatory timeline under Regulation 17(7) of the Customs Brokers Licensing Regulations, 2018 - interim relief by way of stay of revocation of licence - finding of inquiry officer that allegations are not proved - judicial review of administrative revocation proceedings

Interim relief by way of stay of revocation of licence - finding of inquiry officer that allegations are not proved - Grant of interim stay of the impugned order revoking the petitioner's customs broker licence. - HELD THAT: - The Court found that the petitioner had established a prima facie case for interim relief: the Inquiry Officer had recorded that allegations under Regulation 10(m), (n) and (q) were 'not proved' and only Regulation 10(d) was partially proved; the Tribunal had set aside the permanent suspension; and there existed authoritative contrary views on the mandatory nature of the timeline under Regulation 17(7). In view of these factors and the nature of the dispute, the Court granted an interim stay of the order of revocation dated 11th July, 2022 until 30th April, 2023 or until further order, and directed interlocutory steps for continuation of the main adjudicatory process.

Impugned order of revocation dated 11th July, 2022 is stayed until 30th April, 2023 or until further order; respondents to file affidavit-in-opposition within four weeks and petitioner to reply within two weeks; matter listed for final hearing in March, 2023.

Directory versus mandatory nature of statutory timelines - mandatory timeline under Regulation 17(7) of the Customs Brokers Licensing Regulations, 2018 - judicial review of administrative revocation proceedings - Whether the 90 day time limit in Regulation 17(7) for passing a final order is directory or mandatory is a pure question of law to be decided on affidavits at final hearing. - HELD THAT: - The Court held that the question of the character of the timeline under Regulation 17(7) is a pure point of law requiring authoritative determination and should be heard on affidavits. The Court noted conflicting judicial views (including a Division Bench of the Delhi High Court holding the timelines mandatory and other precedents taking a different view) and observed that the present petition raises that legal issue for final adjudication rather than deciding it at the interim stage. Consequently the interpretation of Regulation 17(7) was not finally decided in this order and reserved for the final hearing.

Issue of whether the timeline in Regulation 17(7) is mandatory or directory is reserved for final hearing on affidavits.

Final Conclusion: Interim stay granted of the revocation order dated 11th July, 2022 until 30th April, 2023 or further order; respondents directed to file affidavit in opposition and the substantive legal question regarding the mandatory or directory nature of Regulation 17(7) is to be adjudicated at the scheduled final hearing.

Condonation of delay - Company Fresh Start Scheme, 2020 - waiver of additional fees for overdue filings - Scheme for condonation of delay for companies restored on the Register of Companies between 01 December 2020 and 31 December 2020 - exercise of powers under section 460 read with section 403 of the Companies Act, 2013 - filing of AOC-4 and MGT-7 - extension of timelines due to COVID-19

Condonation of delay - Company Fresh Start Scheme, 2020 - waiver of additional fees for overdue filings - filing of AOC-4 and MGT-7 - Claim for permitting belated filing of AOC-4 and MGT-7 without payment of additional fee/penalty under CFSS-2020 or subsequent reliefs - HELD THAT: - The Court noted that MCA had issued General Circulars and launched the Company Fresh Start Scheme, 2020, subsequently extended, and further issued the January 15, 2021 scheme allowing waiver of additional fees for companies restored between 01.12.2020 and 31.12.2020 with a last filing date of 31.03.2021. The petitioner relied on an alleged portal crash on 31.12.2020 and placed an AOC-4 and a screenshot of a tweet on record. The Court found no material on record to show that the forms were completed or that any attempt was made to upload them within the prescribed or extended timelines. The Court observed that the petitioner did not avail the benefit of the schemes by the extended deadlines and that a subsequent representation (dated 03.07.2021) requesting waiver did not change this factual position. In the absence of evidence of timely or diligent attempt to file within the relevant windows, the petitioner was not entitled to the relief of filing without additional fee or penalty. The Court therefore refused the prayer for condonation/waiver but clarified that the petitioner remains free to file the forms in accordance with law, including payment of any applicable additional fees or penalties. [Paras 11, 12, 14, 15, 17]

Petition dismissed; no relief for belated filing without additional fee or penalty, petitioner may file forms subject to law and applicable fees/penalties.

Final Conclusion: Writ petition dismissed for lack of merit; petitioner may nevertheless file the required e-forms in accordance with law, including payment of any applicable additional fee or penalty.

Right of an auction-purchaser under the IBC to commence afresh on a clean slate - Nexus requirement for recovery of outstanding dues from a new and subsequent consumer - Deemed termination and Regulation 4.6.4 as pre-condition for grant of a new connection - Scope of discontinuance under Section 56(1) of the Electricity Act, 2003 - Interplay and potential conflict between the Electricity Act/State Supply Code and the Insolvency and Bankruptcy Code - Vires challenge to delegated legislation under Article 14 - Applicability of Section 10, Code of Civil Procedure - parallel proceedings and stay

Right of an auction-purchaser under the IBC to commence afresh on a clean slate - Scope of discontinuance under Section 56(1) of the Electricity Act, 2003 - Whether the respondent (DVC) could insist upon clearance of outstanding electricity dues of the erstwhile consumer as a pre-condition for granting a new electricity connection to the auction-purchaser who acquired the premises in liquidation - HELD THAT: - The Court found that at the time of the auction sale and at the time the petitioner sought a new connection there were no subsisting electricity 'dues' from the petitioner because the contract with the erstwhile consumer had ceased by operation of the Supply Code and the assets had been sold in liquidation. Section 56(1) permits discontinuance only until "such charge or other sum" due from the consumer is paid; the expression "due from him" excludes liability of an intending or unrelated purchaser. An auction-purchaser who acquires property post-liquidation and who had no nexus with the defaulting consumer is entitled to start afresh; electricity dues do not operate as a charge on the property and do not automatically pass to the purchaser. In absence of any proven nexus, the licensee could not lawfully condition grant of a new connection on payment of the erstwhile consumer's outstanding dues. The insistence by the DVC upon prior payment of those dues was therefore held to be beyond law and liable to be set aside. [Paras 85, 86, 105, 106, 107]

The DVC cannot insist upon clearance of the erstwhile consumer's outstanding electricity dues as a pre-condition for granting a new connection to the auction-purchaser; the writ petitioners are entitled to a new connection without payment of those alleged outstanding dues.

Nexus requirement for recovery of outstanding dues from a new and subsequent consumer - Deemed termination and Regulation 4.6.4 as pre-condition for grant of a new connection - Interplay between Regulation 3.4.2 and Regulation 4.6.4 of the Supply Code - Whether Regulation 3.4.2 or Regulation 4.6.4 applies to an auction-purchaser seeking a new connection and the effect of the nexus requirement - HELD THAT: - The Court analysed the two provisions and held that Regulation 3.4.2 governs 'new and subsequent consumers' (intending consumers) and conditions recovery of outstanding dues on proof of a nexus between the previous defaulting consumer and the new consumer, with the onus lying on the licensee. Regulation 4.6.4 operates in the distinct field of an existing "consumer" whose agreement is deemed terminated (after 180 days) and requires clearance of outstanding dues for grant of a new service to such a consumer. The definition of 'consumer' in Section 2(15) of the 2003 Act (present tense) excludes intending applicants. Thus, where an innocent third party (such as an auction-purchaser) with no nexus acquires the same premises, Regulation 3.4.2 (with its nexus-onus) is the applicable provision and Regulation 4.6.4 does not apply. Absent proof of nexus by the licensee, recovery from the new applicant is not permissible. [Paras 75, 76, 77, 78, 92]

Regulation 3.4.2 applies to intending/new and subsequent consumers and requires the licensee to prove nexus; Regulation 4.6.4 applies to existing consumers whose agreements are deemed terminated. In the petitioner's case no nexus was established, hence Regulation 3.4.2 did not permit recovery from the petitioner and Regulation 4.6.4 did not apply.

Vires challenge to delegated legislation under Article 14 - Interplay and potential conflict between the Electricity Act/State Supply Code and the Insolvency and Bankruptcy Code - Whether Regulation 4.6.4 of the Supply Code is unconstitutional or operative in conflict with the IBC and whether it must be read down - HELD THAT: - The Court held that Regulation 4.6.4, when read harmoniously with Regulation 3.4.2 and the scheme of the Supply Code and the 2003 Act, does not violate Article 14 or other constitutional provisions. The regulations operate in distinct spheres (existing consumers versus intending consumers), and no arbitrary classification or disproportionate exercise was shown. On the question of conflict between the Electricity law/regulations and the IBC, the Court observed that the IBC is a separate special regime; however, in the present factual matrix the IBC did not extinguish the question because the NCLT had concluded that the electricity disconnection did not arise out of the CIRP. Even so, the absence of a statutory provision to transfer the electricity liability to the auction-purchaser (and the existence of the nexus requirement) meant there was no conflict requiring reading down; consequently the impugned regulation was not declared ultra vires. [Paras 93, 94, 103, 104, 105]

Regulation 4.6.4 is not unconstitutional and need not be read down; there is no demonstrable conflict of the Supply Code with the IBC that would invalidate Regulation 4.6.4 in the facts of this case.

Applicability of Section 10, Code of Civil Procedure - parallel proceedings and stay - Whether the writ petition should be stayed under Section 10 CPC because of parallel proceedings before the NCLT/NCLAT - HELD THAT: - The Court found that the writ petition and the proceedings before the NCLT/NCLAT are not directly and substantially the same. The NCLT/NCLAT proceedings concern matters within the IBC (whether the dues arose from the CIRP and distribution under Section 53), whereas the writ challenges enforcement of remedies under the Electricity Act and the Supply Code and the exercise of regulatory/regulatory policy powers by the licensee/commission. The issues and remedies in the two fora are different, and the outcome of one would not operate as res judicata on the other; therefore Section 10 CPC was not attracted and no stay was warranted. [Paras 95, 96, 97, 98, 99]

The writ petition will not be stayed under Section 10 CPC; parallel fora were not pursuing directly and substantially the same matter.

Final Conclusion: Writ petition allowed. The DVC's claim that the petitioners must first clear the erstwhile consumer's alleged outstanding electricity dues before a new connection is granted is set aside; the DVC is directed to raise a revised quotation excluding those alleged outstanding dues and to provide the new electricity connection to the petitioners upon their compliance with other formalities within the time-frame specified by the Court.

Proceeds of crime - provisional attachment under the Prevention of Money Laundering Act - predicated/scheduled offence as a necessary substratum for money laundering - closure report / acceptance of closure by trial court - Enforcement Case Information Report (ECIR) and its quashing

Proceeds of crime - provisional attachment under the Prevention of Money Laundering Act - predicated/scheduled offence as a necessary substratum for money laundering - closure report / acceptance of closure by trial court - Enforcement Case Information Report (ECIR) and its quashing - Whether provisional attachment orders dated 14 February 2022 and 20 June 2022 and the attendant ECIRs can survive after the predicate/scheduled offence proceedings have been closed by acceptance of the CBI closure report by the Trial Court. - HELD THAT: - The Court applied the legal principle articulated by the Supreme Court in Vijay Madanlal Choudhary that the offence under Section 3 of the PMLA is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence, and that a subsisting registered/pending criminal complaint or inquiry is the necessary substratum for treating property as proceeds of crime. While an authorised officer may provisionally attach property under Section 5 in appropriate cases, the attachment cannot continue where the predicate/scheduled offence has been finally negated, discharged or closed. The Trial Court in the predicate FIR accepted the CBI closure report and recorded that no criminality could be ascertained on the available documents. In light of the binding ratio that PMLA proceedings cannot stand in the absence of a subsisting scheduled offence, the Court held that the ECIRs and the provisional attachment orders lost their legal foundation and were liable to be quashed. [Paras 24, 25, 26]

Impugned provisional attachment orders dated 14 February 2022 and 20 June 2022 and the ECIRs are quashed; writ petitions are allowed.

Final Conclusion: The High Court quashed the provisional attachment orders and the ECIRs challenged in the petitions on the ground that the predicate/scheduled offence proceedings had been closed by acceptance of the CBI closure report by the Trial Court, removing the necessary substratum for treating the properties as proceeds of crime under the PMLA; petitions allowed and pending applications disposed of.

Effect of cessation of predicate offence on proceedings under PMLA - Quashing of ECIR following acceptance of a closure report - Consequences of acquittal in the predicate offence for attachment and appellate proceedings under PMLA - Judicial recusal and bench composition - Urgent listing as administrative prerogative of the Chief Justice

Quashing of ECIR following acceptance of a closure report - Effect of cessation of predicate offence on proceedings under PMLA - ECIR No.CEZO/01/2017 was quashed and the Special Leave Petition and related application disposed of because a closure report in respect of the predicate offence had been accepted, leading to the proceedings not surviving. - HELD THAT: - The Solicitor General informed the Court that a closure report in relation to the predicate offence had been accepted. The Court proceeded on that basis and held that where the predicate offence has effectively ceased by acceptance of a closure report, the consequent proceedings under the Prevention of Money Laundering Act arising from that predicate offence cannot survive. Applying that position to the present facts, the Court quashed the ECIR No.CEZO/01/2017 and disposed of the Special Leave Petition and the pending application accordingly.

ECIR No.CEZO/01/2017 quashed; the application and Special Leave Petition disposed of.

Consequences of acquittal in the predicate offence for attachment and appellate proceedings under PMLA - Criminal appeals filed by the Adjudicating Authority under PMLA were disposed of because there was acquittal in respect of the predicate offence and the attachment based proceedings therefore did not survive. - HELD THAT: - The Solicitor General fairly represented that the proceedings before the Court arose from an order of attachment connected to the predicate offence, and that there had been an acquittal in relation to that predicate offence. The Court treated that representation as determinative of the continuance of the PMLA appeals and held that when the predicate offence is acquitted, related attachment and appellate proceedings under PMLA cannot subsist. Consequent upon this legal consequence, the appeals by the Adjudicating Authority were disposed of. The trial court record was directed to be returned to the trial court.

Appeals by the Adjudicating Authority under PMLA disposed of; trial court record to be sent back to the trial court.

Judicial recusal and bench composition - Urgent listing as administrative prerogative of the Chief Justice - A recusal by one Judge was recorded and the Court observed that urgent listing is a matter for the Chief Justice; a Bench comprising one of the present Judges could not be a Member in the related matter. - HELD THAT: - The Court noted that in an earlier SLP one of the Judges had recused. On that basis, it recorded that listing the matter before a Bench including the recused Judge would be impermissible, and observed that requests for urgent listing fall within the administrative discretion of the Chief Justice of India. These observations govern the composition for further hearing and the procedure for urgent listing.

Recusal recorded; matter not to be listed before the recused Judge; urgent listing is for the Chief Justice to determine.

Final Conclusion: Proceedings under PMLA arising from the predicate offence do not survive where the predicate offence has been closed by acceptance of a closure report or where the predicate offence has resulted in acquittal; accordingly the ECIR was quashed, the Special Leave Petition and related application were disposed of, the PMLA appeals were dismissed as not surviving, and the trial court record was returned to the trial court; recusal and listing observations were recorded.

Summary order. Appeals filed by the Adjudicating Authority (PMLA) disposed of as proceedings arising from an attachment do not survive in view of acquittal in respect of the predicate offence; trial court record to be returned to the trial court.

Erection, commissioning or installation service - abatement under Notification No. 1/2006-ST - explanation including value of "any other material sold" during provision of erection/installation service - Works Contract Service - transfer of property in goods involved in execution of contract - thermal insulation as a taxable category under works contract

Erection, commissioning or installation service - abatement under Notification No. 1/2006-ST - explanation including value of "any other material sold" during provision of erection/installation service - Eligibility of the appellant for benefit of Notification No. 1/2006-ST (abatement) for services involving supply and application of thermal insulation materials. - HELD THAT: - The Tribunal held that the exemption entry for erection, commissioning or installation service is not confined to contracts supplying plant, machinery, equipment or structures alone but also extends to "any other material sold by the commissioning and installation agency, during the course of providing erection, commissioning or installation service" as contemplated in the explanation to the notification. On the facts there was no dispute that the appellant acted as a commissioning/installation agency and supplied and applied thermal insulation materials (listed in the record) and paid sales tax/VAT on those goods. Consequently, the conditions of the notification were satisfied and the appellant was eligible for the abatement under Notification No. 1/2006-ST. [Paras 5]

Appellant is eligible to the benefit of Notification No. 1/2006-ST and the denial of abatement in the impugned order was incorrect.

Works Contract Service - transfer of property in goods involved in execution of contract - thermal insulation as a taxable category under works contract - Whether the activity of supplying and applying thermal insulation materials falls within the statutory definition of Works Contract Service and is leviable as such. - HELD THAT: - The Tribunal examined the definition of Works Contract Service as inserted w.e.f. 1-6-2007 and noted that clause (a) expressly includes thermal insulation among specified categories. The definition requires that transfer of property in goods involved in execution of the contract be leviable to tax as sale of goods; on the facts the appellant had paid VAT/sales tax on the goods used in the thermal insulation works. In view of the statutory wording and the factual position of payment of sales tax, the impugned activity qualifies as Works Contract Service. [Paras 5]

The activity undertaken by the appellant is a Works Contract Service and the revenue's classification to that effect is upheld.

Final Conclusion: The impugned order confirming demand of service tax on the appellant is set aside: the appellant was eligible for the abatement under Notification No. 1/2006-ST in respect of the thermal insulation works, and the activity qualifies as Works Contract Service; appeal allowed with consequential relief as per law.

Reverse charge liability - revenue neutrality on tax paid and Cenvat credit - abatement for new construction versus repair and maintenance - penalty for late filing of returns under Section 77 r/w Rule 7C - penalty under Section 78 - interest on delayed payment of service tax under Section 75 - remand for recalculation and credit of deposited challans

Reverse charge liability - revenue neutrality on tax paid and Cenvat credit - Whether the demand raised on appellant on account of reverse charge liability for rent paid to its Director should be sustained. - HELD THAT: - The Tribunal found that the tax alleged to be payable under reverse charge in respect of rent paid to the Director had already been paid by the appellant and was eligible for Cenvat credit, rendering the situation revenue neutral. On appreciation of the factual position, the Tribunal allowed the ground and set aside the demand relating to rent paid to the Director.

Demand of Rs. 2,90,628/- on reverse charge basis in respect of rent paid to the Director is set aside as revenue neutral.

Abatement for new construction versus repair and maintenance - Whether the demand for short payment of service tax on account of wrongly availed higher abatement should be sustained. - HELD THAT: - The Tribunal examined the scope of work under the relevant work orders and accepted that, despite the nomenclature 'repair and maintenance', the contractual scope involved dismantling, removal and complete re-construction with supply of materials and measurement-based billing. On that factual and contractual appraisal the appellant was held to have executed new construction and thus to have legitimately availed the higher abatement applicable to new work. The demand founded on alleged wrong abatement was therefore not sustained.

Demand of Rs. 24,44,446/- on account of alleged wrong/higher abatement is set aside.

Penalty for late filing of returns under Section 77 r/w Rule 7C - Whether the penalty imposed for delayed filing of half-yearly returns should be sustained or reduced. - HELD THAT: - While the returns were filed suo moto and the delays were explained by adverse business conditions, the adjudicating authority had imposed maximum penalty without recording a finding of deliberate default. The Tribunal, having regard to the facts including earlier filing of returns prior to issuance of the show cause notice, exercised its appellate power to reduce the quantum of penalty.

Penalty under Section 77 r/w Rule 7C reduced to Rs. 2,000 per return (total Rs. 6,000).

Penalty under Section 78 - Effect of setting aside the substantive tax demand on the penalty under Section 78. - HELD THAT: - Because the substantive demands which formed the basis for the penalty under Section 78 were set aside on merits, the incidental penalty under Section 78 also falls and stands set aside.

Penalty under Section 78 set aside consequent to setting aside the underlying demand.

Interest on delayed payment of service tax under Section 75 - remand for recalculation and credit of deposited challans - Whether the interest demand under Section 75 was correctly calculated and maintainable given the appellant's contention of credited challans and limitation. - HELD THAT: - The Tribunal held that interest under Section 75 is payable for delayed payment of service tax but noted that three challans deposited by the appellant had not been considered in the computation by the lower authority. Those amounts were admitted to have been deposited but were not given credit for tax or interest, and no finding was recorded below. The Tribunal therefore directed a remand to the Adjudicating Authority to verify the referenced challans and to recalculate interest after giving appropriate credit; the question of extended limitation was noted but recalculation on verification was directed.

Interest computation remanded to the Adjudicating Authority for recalculation after verification and giving credit for the deposited challans.

Final Conclusion: The appeal is allowed in part: demands in respect of reverse charge on rent and alleged wrong abatement are set aside; penalty under Section 78 is set aside; penalty under Section 77 r/w Rule 7C is reduced to Rs. 2,000 per return (total Rs. 6,000); interest under Section 75 is remanded for recomputation after verification of deposited challans and giving due credit.

Recovery of erroneous refund under Section 11A - adjudication and refund under Section 11B - finality of refund orders and bar to collateral revival - entitlement under Notification No. 5/98-return to buyer vs. refund to ultimate owner - requirement under Notification No. 4/97 - proof of refund to individual taxi owners - imposition of penalty under Section 11AC - penalty under Rule 209A for dealers aiding in fraudulent claims - remand for verification of payment evidence

Recovery of erroneous refund under Section 11A - adjudication and refund under Section 11B - finality of refund orders and bar to collateral revival - Validity of invoking Section 11A to recover refunds after an adjudication and final refund order under Section 11B - HELD THAT: - The Tribunal held that once a refund application is adjudicated under Section 11B and the refund order attains finality (no appeal taken by revenue), the amount so refunded cannot be treated as an 'erroneous refund' for purposes of recovery under Section 11A. The Tribunal applied the reasoning in Eveready and subsequent High Court decisions that Section 11B constitutes a complete code for refund claims, and that revival of a final refund order by resort to Section 11A is impermissible; the proper course for the Department was to avail remedies under the revisional/appeal provisions (Section 35E/appeal) prior to permitting any revival. On this basis the show-cause proceedings based on Section 11A were held unsustainable to the extent they sought to set aside refund orders which had become final. [Paras 4]

Demand under Section 11A could not be sustained in respect of refunds which had been validly adjudicated and had attained finality under Section 11B; those parts of the impugned order premised on revival of final refund orders are set aside.

Entitlement under Notification No. 5/98-return to buyer vs. refund to ultimate owner - requirement under Notification No. 4/97 - proof of refund to individual taxi owners - remand for verification of payment evidence - Extent to which refund claims under Notification No. 5/98 and No. 4/97 could be subjected to verification and demand in remand adjudication - HELD THAT: - The Tribunal reiterated its earlier coordinate-bench finding that Notification No. 5/98 requires proof only of 'return' to the buyer (i.e., the manufacturer's buyer/dealer) and does not mandate evidence of payment to the ultimate taxi owner; therefore refund claims correctly allowed under Notification No. 5/98 by Assistant/Deputy Commissioners could not be reopened on the ground that the amounts were not ultimately passed to taxi owners. By contrast, claims under Notification No. 4/97 still require proof of refund to the individual taxi owners and may be disallowed if such proof is absent. On sample verification the Tribunal set aside demands in respect of the large majority of claims allowed under 5/98, upheld only three claims filed under 4/97 (aggregate amount indicated in the order), and held that at most a small portion of the demand could be sustained. [Paras 4]

Refunds sanctioned under Notification No. 5/98 that had been allowed by the proper sanctioning authorities were to be sustained; only refund claims falling under Notification No. 4/97 (where proof to individual taxi owners was not produced) could be disallowed - accordingly the demand was restricted to the limited claims under 4/97 identified in the order.

Imposition of penalty under Section 11AC - penalty under Rule 209A for dealers aiding in fraudulent claims - finality of refund orders and bar to collateral revival - Validity of penalties imposed on the manufacturer and dealers for alleged fraudulent refund claims - HELD THAT: - Because the demand based on revival of final refund orders under Section 11A was held unsustainable in respect of adjudicated refunds, the Tribunal found that the basis for imposing penalties on the manufacturer under Section 11AC and on the dealers under Rule 209A (to the extent premised on alleged fraudulent withholding of refunded amounts) could not be sustained. The Tribunal also noted that the coordinate-bench order interpreting Notification 5/98 had attained finality and that penalties predicated on collateral inquiries into matters irrelevant to 5/98 were not justified. Having undertaken sample verification and found the documentary proofs for the bulk of claims satisfactory, the Tribunal set aside the penalties imposed on the appellants (manufacturing unit and dealers). [Paras 4]

Penalties imposed on the appellants (manufacturer and dealers) were not sustained and are set aside.

Final Conclusion: The appeals are allowed: the recovery proceedings under Section 11A could not be sustained against amounts adjudicated and refunded under Section 11B (particularly under Notification No. 5/98), the demand was limited to those few claims properly falling under Notification No. 4/97 without proof of refund to individual taxi owners, and the penalties imposed on the manufacturer and dealers are set aside.

Denial of Cenvat credit on Education Cess and Secondary & Higher Education Cess - Scope of show cause notice - Eligibility for Cenvat credit - Verification of unutilized Cenvat balance on transition to GST - Penalty under Rules 26 of the Central Excise Rules, 2002

Denial of Cenvat credit on Education Cess and Secondary & Higher Education Cess - Scope of show cause notice - Eligibility for Cenvat credit - Denial of Cenvat credit in respect of Education Cess and Secondary & Higher Education Cess was within the scope of the show cause notice and rightly confirmed on merits that the appellant was not eligible for such credit. - HELD THAT: - The show cause notice expressly proposed demand of Cenvat credit including Education Cess and Secondary & Higher Education Cess alongside basic excise duty. The Tribunal examined the notice and found the proposal at serial (i) specifically recited amounts for BED, Education Cess and SHE Cess, thereby putting the appellant on notice that credit of these levies was disputed. On the merits there was no controversy that the appellant was not eligible to claim Cenvat credit for the Education Cess and SHE Cess paid by the 100% EOU. Having regard to the explicit language of the show cause notice and the appellant's ineligibility on merits, the adjudicating authority's denial of credit was not beyond the scope of the notice and was rightly sustained. [Paras 4]

Demand of Cenvat credit in respect of Education Cess and Secondary & Higher Education Cess was within the show cause notice and the denial of such credit was sustained.

Verification of unutilized Cenvat balance on transition to GST - The claim regarding accumulation and lapse of unutilized Education Cess credit on switching over to the GST regime was not finally adjudicated and is left to be examined at recovery. - HELD THAT: - The appellant asserted that there was a substantial unutilized balance of Education Cess credit at the time of transition to GST and that such balance had lapsed, which would affect recoverability. The Tribunal recorded that this factual contention requires verification in the course of recovery proceedings and declined to make any conclusive finding on the contention in the present appeal. Consequently, the matter was left open for examination when the confirmed amount is being recovered. [Paras 5]

Claim of unutilized Education Cess credit at transition to GST to be examined during recovery; no final finding in the appeal.

Penalty under Rules 26 of the Central Excise Rules, 2002 - The penalty imposed on the employee (Shri Suresh Nair) under Rules 26 of the Central Excise Rules, 2002 was not sustainable and was set aside. - HELD THAT: - The Tribunal noted that the question of correct calculation of Cenvat credit on invoices issued by the 100% EOU was an issue genuinely in dispute; there was no basis to attribute mala fides to the employee or to hold him personally liable where he derived no benefit from the alleged irregularity. In view of these peculiarly factual circumstances and absence of mala fide conduct, imposition of penalty on the employee could not be sustained and was therefore quashed. [Paras 6]

Penalty on Shri Suresh Nair under Rules 26 of the Central Excise Rules, 2002 is set aside.

Final Conclusion: The Tribunal affirmed the demand and denial of Cenvat credit for Education Cess and SHE Cess as within the show cause notice and correctly determined the appellant's ineligibility; the appellant company's appeal was dismissed, the individual employee's penalty was set aside, and the claimant's contention regarding unutilized credit at the time of transition to GST was left for verification during recovery.

Levy of NCCD under Section 136 of the Finance Act, 2001 - Levy of interest for delayed deposit of duty - Section 11AA - interest liability conditioned on determination under Section 11A or voluntary default - Condition precedent for levy of interest - No voluntary default - Electronic payment requirement - Portal glitch / non-acceptance of payment attributable to Revenue

Section 11AA - interest liability conditioned on determination under Section 11A or voluntary default - Portal glitch / non-acceptance of payment attributable to Revenue - No voluntary default - Whether interest under Section 11AA is payable where NCCD deposit was delayed because the Government portal did not accept payment and there was no determination under Section 11A nor any voluntary default by the assessee. - HELD THAT: - The Tribunal examined the statutory contour of Section 11AA and concluded that interest for delayed deposit is payable only where the statutory conditions are satisfied - namely, either payment is made voluntarily after default or the amount is paid after determination of duty under Section 11A. In the present case the record establishes that there was no determination under Section 11A and that the assessee repeatedly disclosed NCCD liability in returns and attempted payment but was prevented by a portal error showing "PV report pending". The Adjudicating Authority found no element of deliberate non-payment, suppression or fraud and noted correspondence and qualified remarks in returns explaining the inability to deposit. The Tribunal treated the portal malfunction and the Revenue's inaction in rectifying it as wholly attributable to the Department, and held that Revenue cannot invoke Section 11AA to levy interest where the prerequisite conditions are absent and the delay resulted from non-acceptance of payment by the Revenue's portal. Consequently, the demand of interest could not be sustained. [Paras 10, 11]

No interest under Section 11AA is payable for the delayed deposit of NCCD where there was no determination under Section 11A and the delay was due to the Revenue's portal failure preventing payment; the demand of interest is set aside.

Final Conclusion: Impugned order confirming demand of interest is set aside and the appeal is allowed; the appellant is entitled to consequential benefits in accordance with law.

Remand for fresh consideration - failure to appreciate evidence on record - revision under the Tripura Value Added Tax Act, 2004 - setting aside revisional order - directions to pass a reasoned order

Remand for fresh consideration - failure to appreciate evidence on record - directions to pass a reasoned order - Whether the order passed by the Commissioner of Taxes in Revision Case No.01/CH-VIII/2020 should be set aside and remanded for fresh consideration on account of non-appreciation of documents and infirmity in reasoning. - HELD THAT: - The Court found that the Revisional authority did not properly appreciate the documents on record and failed to apply mind while upholding the assessment order. In view of the admitted deficiency in consideration, the appropriate remedial course is to set aside the revisional order and remand the matter to the Revisional authority for fresh adjudication. The Court directed that the Revisional authority shall decide the matter in accordance with law and pass a reasoned order within a specified timeframe, thereby ensuring that the revision is decided on merits after proper appreciation of evidence. [Paras 6, 7]

Impugned revisional order dated 12.02.2021 set aside; matter remanded to the Commissioner of Taxes for fresh consideration and a reasoned decision preferably within three months.

Final Conclusion: The revision petition is allowed; the revisional order dated 12.02.2021 is set aside and the matter remanded to the Revisional authority for fresh consideration with a direction to decide the revision by a reasoned order preferably within three months. The assessment order remains subject to that reconsideration.

Interpretation of paragraph 4(vi)(b) of the Operational Guidelines of the National AYUSH Mission - Procurement of government contracts - Article 14 - non-arbitrariness in public procurement - Tendering/public auction as the preferred method for award of public contracts - Exceptional circumstances permitting private negotiation/nomination - Equality of treatment among specified suppliers (IMPCL, PSUs, State pharmacies and co-operatives) - Good Manufacturing Practices (GMP) compliance as procurement prerequisite

Interpretation of paragraph 4(vi)(b) of the Operational Guidelines of the National AYUSH Mission - Equality of treatment among specified suppliers (IMPCL, PSUs, State pharmacies and co-operatives) - Paragraph 4(vi)(b) does not confer a superior or exclusive status on IMPCL and places IMPCL, other Central/State PSUs, pharmacies under State Governments and co-operatives on an equal footing as sources for procurement. - HELD THAT: - The 2019 notification of the Ministry of AYUSH supersedes earlier communications that recommended procurement only from IMPCL. Paragraph 4(vi)(b) uses the disjunctive 'or' and requires that 'at least 50%' of the grant-in-aid be used to procure medicines from any of the listed establishments, subject to GMP compliance. There is no textual indication of gradation or monopoly in favour of IMPCL; the provision contemplates quality assurance to be achieved from all listed sources. The Court rejected the contention that prior Ministry letters afford IMPCL exclusive pre-eminence, noting lack of material to show IMPCL as the sole producer of assured quality medicines. [Paras 25, 29]

Paragraph 4(vi)(b) must be read as placing the listed suppliers on equal footing; it does not vest IMPCL with exclusive procurement entitlement.

Procurement of government contracts - Article 14 - non-arbitrariness in public procurement - Tendering/public auction as the preferred method for award of public contracts - Exceptional circumstances permitting private negotiation/nomination - Awarding the procurement contract solely to IMPCL by nomination, to the exclusion of other entities specified in paragraph 4(vi)(b), was arbitrary and violative of Article 14; public procurement should ordinarily be by a transparent process such as tendering, subject to limited exceptions. - HELD THAT: - Government contracts involve expenditure from the public exchequer and are subject to the non-arbitrariness standard under Article 14. While tendering/open auction is the preferred method to ensure transparency, economy and fair competition, the State may deviate only in exceptional circumstances (for instance exclusivity of source, emergencies), and such deviation must be justified by cogent material. The appellant failed to demonstrate that IMPCL was the only source capable of ensuring requisite quality or that exceptional circumstances existed to justify nomination. Consequently, nomination of IMPCL to the exclusion of other eligible GMP-compliant units was arbitrary. [Paras 21, 30, 31]

The award by nomination to IMPCL, excluding other eligible suppliers, is arbitrary and contrary to Article 14; procurement must henceforth be made by a free and transparent procedure such as tenders unless exceptional circumstances are established by cogent material.

Tendering/public auction as the preferred method for award of public contracts - Exceptional circumstances permitting private negotiation/nomination - Tendering is a preferred but not an absolute constitutional requirement; departures from competitive procurement are permissible only when reasonable, non-arbitrary and justified by exceptional circumstances. - HELD THAT: - Authoritative precedents recognise that while competitive methods (tender/auction) are ordinarily required to ensure transparency and fairness under Article 14, the State retains administrative discretion to adopt other procurement methods in exceptional situations (e.g., emergencies, single-source supply, absence of bidders). Such departures must be tested for arbitrariness and fairness on the facts of each case. The Court applied this principle to hold that the State may procure without tender only upon demonstration of exceptional circumstances supported by cogent material. [Paras 16, 17, 18, 19, 20]

Competitive tendering is the norm but not an inexorable constitutional mandate; deviations are permissible only in exceptional, non-arbitrary circumstances supported by material justification.

Final Conclusion: The appeals are dismissed. The procurement of Ayurvedic medicines by the State exclusively from IMPCL by nomination was arbitrary and violative of Article 14; henceforth procurement must ordinarily be through a transparent process such as tenders, with deviation permitted only upon demonstration of exceptional circumstances by cogent material. Applications for intervention are dismissed.

Moratorium under Section 14(1) of the Insolvency and Bankruptcy Code, 2016 - vicarious liability under Section 141 of the Negotiable Instruments Act - arraignment of the company as an accused for prosecution under Section 141 - distinction between corporate debtor and natural persons during corporate insolvency resolution process

Moratorium under Section 14(1) of the Insolvency and Bankruptcy Code, 2016 - distinction between corporate debtor and natural persons during corporate insolvency resolution process - arraignment of the company as an accused for prosecution under Section 141 - Whether the moratorium under Section 14(1) IBC bars prosecution under Sections 138/141 of the Negotiable Instruments Act and its effect on corporate and non corporate debtors named in Section 141. - HELD THAT: - Relying on the three Judge decision in P. Mohanraj and subsequent Supreme Court authorities, the court held that the statutory moratorium in Section 14(1) IBC operates only in respect of the corporate debtor and creates a legal impediment to initiation or continuation of proceedings under Sections 138/141 against the corporate debtor during the corporate insolvency resolution process. That statutory bar does not extend to the natural persons specified in Section 141 of the N.I. Act, who remain statutorily liable under Chapter XVII. Applying this principle to the facts, the court concluded that the complaint could not be quashed solely on the ground of the moratorium. However, in deference to the moratorium, the court directed that prosecution against the corporate debtor (the 1st petitioner/accused) be kept in abeyance until the moratorium proceedings are finalized, while allowing prosecution to proceed against the natural persons (accused Nos.2 to 7). [Paras 9, 10, 17]

Moratorium under Section 14(1) IBC applies only to the corporate debtor; prosecution against the corporate debtor is deferred pending moratorium proceedings, while prosecution against the natural person accused may proceed.

Vicarious liability under Section 141 of the Negotiable Instruments Act - prosecution of directors during corporate insolvency resolution process - What are the essentials to fasten vicarious liability under Section 141 of the N.I. Act and whether the complaint's averments suffice. - HELD THAT: - The court followed the Supreme Court's exposition that vicarious liability under Section 141(1) arises where a person is in overall control of the day to day business, and under Section 141(2) where the offence is committed with the consent, connivance or attributable to neglect of a director, manager, secretary or other officer - liability in criminal law cannot be grounded merely on civil liability. Applying these principles to the complaint, the court found specific averments that (i) accused Nos.2 to 7 are persons in charge and responsible for conduct of the company's business, (ii) the cheque was executed and issued for and on behalf of the company by the 2nd accused as per directions of accused Nos.3 to 7. Those averments satisfy the requisite pleading of control/role and consent/connivance such that questions of fact raised by the accused are matters for trial and not for quashal at this stage. [Paras 13, 14, 15, 16]

The complaint contains the necessary averments to fasten vicarious liability under Section 141 and accordingly cannot be quashed on that ground; factual contentions are for trial.

Final Conclusion: The petition to quash the complaint is dismissed. The moratorium under Section 14(1) IBC applies only to the corporate debtor and therefore prosecution against the corporate debtor is deferred pending moratorium proceedings, while prosecution against the individual directors/natural persons may continue; the complaint pleads sufficient averments to attract vicarious liability under Section 141 of the N.I. Act, and factual disputes are left to trial.