TaxTMI Updates e-Newsletter
Jan 19,2026

Maintainability of petition - availability of alternative remedy - difference in the quantity of goods - appellants could not produce any bill of supply or tax invoice - no proof of payment either full or in part was produced - it was held by High Court that 'while affirming the order passed by the learned Single Bench and directing the appellants to file a statutory appeal within a period of 15 days from the date of receipt of the server copy of this order, it is held that upon the goods being sold and the successful bidder remitting the amount, the amount shall be retained by the department preferably in an interest bearing account and shall abide by the ultimate orders that may be passed by the appellate authority. As observed, the appellants will also be entitled to participate in the auction to be called for by the respondents authority.'

HELD THAT:- The learned counsel appearing for the respondents is awaiting appropriate instructions from the authority concerned.

List next week.

Seeking release of detained consignment - appellant is the owner of the consignment or not - perishable goods - Appellant is ready and willing to furnish amount of penalty imposed by way of a security to the authority - HELD THAT:- In the facts and circumstances of the present case, document of title to the consignment was seized with the goods. The document of title seized suggests ownership of the appellant in respect of the seized consignment - there is no contrary claim by any of the parties with regard to the seized consignment. It is the Circular dated December 31, 2018 of the authorities itself that lays the issue of ownership of the consignment at rest with the appellant being treated as the owner of the seized consignment as documents of title were accompanying the seized goods.

In M/s. JJ Traders [2025 (12) TMI 1535 - CALCUTTA HIGH COURT], the Court directed release of the goods and the conveyance taking into account the perishable nature of the areca nuts seized by directing furnishing of security in terms of the Section 129(1)(a) of the Act of 2017 and furnishing security for the balance sum determined under Section 129(1)(b) of the Act of 2017 in the form of a bank guarantee. Factual scenario in the present case is different. No one before us is claiming release of the vehicle.

In S.N. Trading Company & Anr. [2025 (11) TMI 1940 - SC ORDER], Hon’ble Supreme Court during consideration of a Special Leave Petition sought various information from the appellant with regard to the ownership of the seized consignment. As noted above, the ownership of the seized consignment in the facts and circumstances of the present case is not in dispute.

In such facts and circumstances, considering the perishable nature of the seized consignment and taking the appellant as the owner of the seized consignment and the offer of the appellant to secure the amount claimed as against the owner of the consignment, the appellant is directed to deposit the sum of Rs. 5,23,264/- with the respondent authorities within a period of 7(seven) days from date by way of a bank draft or equal instrument.

Appeal disposed off.

Maintainability of petiiton - availability of alternative remedy - Constitutional validity of Rule 39(1)(a) of the Central Goods and Services Tax Rules 2017 - Final Audit Report and SCN in violation of principles of natural justice or not - levy of penalty u/s 122(1)(ix) of the CGST Act, 2017 - distribution of accumulated ITC in the last month (March 2018-2019) instead of distributing it month wise - proceedings barred by time limitation or not - delegated legislation has exceeded the authority conferred by the parent enactment or not.

Validity of Rule 39(1)(a) of the CGST Rules 2017 - HELD THAT:- Section 20 of the CGST Act lays down the statutory framework governing the distribution of Input Tax Credit by an Input Service Distributor (ISD), and does not stipulate any time limit within which such distribution is required to be effected. Prior to 01.04.2025, it merely provides that the credit ‘shall be distributed in such manner as may be prescribed’. Rule 39(1)(a) of the CGST Rules, during the relevant period, however, mandates that the credit available for distribution in a particular month shall be distributed in that very month - Rule 39(1)(a) travels beyond the scope of the parent provision, by introducing a mandatory time limit for distribution, which is not contemplated under Section 20 of the Act.

A plain and textual reading of Section 20 of the CGST Act reveals that the legislature has consciously confined the delegated power to regulate the procedural mechanism of distribution and has not contemplated the imposition of any time limit for such distribution. In the absence of any express or implied statutory mandate authorising the prescription of a limitation period, the rule-making authority cannot, under the guise of prescribing the “manner”, introduce a substantive restriction which has the effect of extinguishing a vested statutory entitlement.

This Court finds substance in the reliance placed by the petitioner on the decision of the Hon’ble Supreme Court in Sales Tax Officer v. K. I. Abraham [1967 (4) TMI 114 - SUPREME COURT], wherein it has been authoritatively held that a rule-making authority cannot introduce a period of limitation in the absence of any such prescription in the parent statute.

It is trite law that when the parent statute does not provide for a limitation period, the rule-making authority cannot introduce a time restriction by invoking general rule-making powers, particularly where such restriction results in extinguishment of a statutory right, as this would amount to rewriting the statute and is impermissible in law - Further, once ITC is lawfully availed in terms of the Act, it crystallizes into a vested statutory right. Any curtailment thereof through delegated legislation, bereft of express legislative sanction and unsupported by a rational nexus to the statutory objective, cannot be sustained. Such arbitrary deprivation offends Article 14 of the Constitution.

Violation of principles of Natural Justice - HELD THAT:- On perusal of the record, it is relevant to note that the petitioner had sought reasonable time to respond to the spot memos dated 07.12.2023 and 15.12.2023, citing bona fide difficulties in collating voluminous data pertaining to the FY 2017–18 and 2018– 19, compounded by year-end statutory compliance obligations. Notwithstanding the said request, the respondent-authorities declined to grant any extension and proceeded to conclude the audit in undue haste - It is evident that the audit objections were finalized and the matter was also placed before the Monthly Monitoring Committee Meeting (MMCM) without prior notice to the petitioner and without affording an opportunity of being heard to the petitioner, thereby depriving the petitioner company to present its explanation or clarify its position. This action is in clear derogation of the fundamental principles of natural justice.

Time Limitation - HELD THAT:- It is pertinent to note that the proceedings pertain to the FY 2017–18 and 2018–19, whereas the show-cause notice was issued on 30.01.2024 which is clearly beyond the normal period of limitation as prescribed under Section 73 of the CGST Act, 2017. The respondents have sought to invoke the extended period of limitation under Section 74 of the CGST Act on the allegation of ‘suppression’. However, such invocation does not appear to be sustainable, inasmuch as the record indicates that the particulars of distribution of ITC were duly disclosed by the petitioner in its periodical returns in Form GSTR-6 and were available to the department on the common GST portal. In circumstances, where the relevant facts are within the knowledge of the tax authorities, the allegation of ‘suppression’ is legally untenable.

In this regard, reference may be made to the Judgment of the Supreme Court in Pushpam Pharmaceuticals Company v. CCE [1995 (3) TMI 100 - SUPREME COURT], wherein it was held that suppression cannot be alleged when the facts are known to both the parties.

Availing of alternative remedy - respondents argued that the petitioner should avail the alternative remedy of replying to the show-cause notice - HELD THAT:- It is settled law that the existence of an alternative statutory remedy does not operate as an absolute bar to the exercise of writ jurisdiction under Article 226 of the Constitution of India, particularly in cases where the vires of a statutory provision is under challenge or where there is a manifest violation of the principles of natural justice. Thus, there are no merit in the objection raised by the respondents and holds that the writ petition is maintainable.

Thus, Rule 39(1)(a) of the CGST Rules, 2017, to the extent it mandates that Input Tax Credit available for distribution in a month shall be distributed in the same month, is declared ultra vires Section 20 of the CGST Act, 2017, and is hereby struck down - The Final Audit Report dated 22.01.2024 and the show-cause notice dated 30.01.2024, along with all consequential proceedings are hereby quashed and set aside. Petitioner may claim refund of any amount deposited in connection with the impugned proceedings as per law.

Petition allowed.

Classification of goods - rice bran oil - petitioner has purchased a rice bran oil on payment of 5% tax and had re-packed the same and sold as Deepam Oil (lamp oil) - to be classified under Customs Tariff Heading 1515 90 40 or under heading 1518 00 40? - HELD THAT:- The High Court is refrained from giving any opinion on the classification. Cases relating to classification has to be decided by the authorities under the hierarchy of Original Authority and Appellate Authority under the Act. This is to ensure that there is some uniformity in the classification, and that there are no conflicting views from different High Courts under Article 226 of the Constitution of India.

That apart, several disputed questions of fact arises for consideration. Therefore, it is the fitness of things as they stand, it is advisable not to venture to give an opinion on the classification of the product in question. Therefore, this Writ Petition is liable to be dismissed. However liberty is given to the petitioner to file an appeal before the Appellate Authority within 30 days from the date of receipt of a copy of this order.

Petition disposed off.

Profiteering - respondent has already passed the benefit of the ITC to its home buyers - contravention of provisions as contained under Section 171 of Central Goods Services Tax, 2017 - HELD THAT:- In view of the fact that the DGAP has admitted that the respondent has already passed the benefit of the ITC to its home buyers to the tune of Rs. 91,45,350. It is also to be taken into consideration that in the Para 26 of the report. It is mentioned that total amount of Rs 3,12,78,937 is required to be passed on to 1,104 eligible home buyers. The amount mentioned in the concluding part of the report of the DGAP prima facie appears to be erroneous - Now the respondent is required to pay an amount of Rs. 3,12,78,937 along with applicable interest to the eligible home buyers.

The respondent is directed to pay the amount of interest to the eligible home buyers, as applicable, on the aforesaid amount in terms of the provision under Section 133(3)(B) of the CGST Act, 2017 - it is directed that the entire amount be refunded within three months to the eligible home buyers. The respondent is further directed to submit compliance report to the jurisdictional GST commissioner and DGAP.

The matter is disposed of.

Transfer u/s 127 - transfer of jurisdiction of assessee from the assessing authority at Panchkula to the assessing authority at Central Circle-II, Chandigarh - HELD THAT:- Having regard to the observation in the transfer order that assessee has given no objection for centralization of the case with Central Circle-II, Chandigarh, the argument that notice was bad for want of jurisdiction cannot be accepted.

No good reason to interfere with the order passed by the High Court [2025 (10) TMI 433 - PUNJAB AND HARYANA HIGH COURT]

Taxation of capital gains from the sale of shares of a Singapore-based entity deriving substantial value from its Indian operations - Income deemed to accrue or arise in India - Place of Effective Management [“POEM”] as determinative of residence - fulcrum of the DTAA with respect to capital gains taxation -Transactional involvement of the relevant investment entities based in Mauritius - relationship between treaty provisions and domestic tax law - India-Mauritius DTAA - provisions relating to General Anti-Avoidance Rules (GAAR) - scope of Amendment to Section 90 – GAAR override and TRC requirements - Limitation of Benefits (LOB) clause

Assessees approached the Authority for Advance Rulings [“AAR”] seeking an advance ruling on question on gains arising to the assessees (private companies incorporated in Mauritius) from the sale of shares held by them in Flipkart Pvt. Ltd (a private company incorporated in Singapore) to Fit Holdings S.A.R.L. (a company incorporated in Luxembourg) would be chargeable to tax in India under the Act read with the DTAA between India and Mauritius as answered that the applications preferred by the assessees relate to a transaction or issue which is prima facie designed for the avoidance of income tax and therefore, rejected the same as being hit by the threshold jurisdictional bar to maintainability, as enshrined in proviso (iii) to Section 245R(2).

High Court [2024 (9) TMI 26 - DELHI HIGH COURT] allowed the writ petitions and quashed the AAR’s order after holding that the assessees were entitled to treaty benefits and that their income would not be chargeable to tax in India.

HELD THAT:- Though it prima facie appears as if the assessees acquired the capital gains before the cut-off date, i.e., 01.04.2017, it is to be noted that the proposal for transfer of investments commenced only on 09.05.2018. A Share Purchase Agreement was executed between Walmart International Holdings Inc., a Delaware Corporation described as the “purchaser”; the shareholders of Flipkart Singapore identified in Schedule I thereto and collectively described as the “sellers”; and Fortis Advisors LLC, a Delaware limited liability company described as the “sellers' representative”.

As per the Share Purchase Agreement, the sale of shares held by the assessees was approved by the Board in its meeting held on 04.05.2018. The subject appears to have arisen for discussion in the meeting held on 12.06.2018, when the Board took note of Walmart’s offer to purchase a controlling stake in Flipkart Singapore for USD 16 billion, and the assessees considered selling 74% of their stake therein and closing the transaction, which occurred after the cut-off date prescribed under Rule 10U(1)(d).

In the alternative, even if GAAR is held to be inapplicable, the Revenue invoked the JAAR, grounded in the doctrine of substance over form, consistently recognised in Indian jurisprudence, including McDowell and Vodafone. As contended that JAAR continues to operate in parallel with GAAR and empowers Indian authorities to deny treaty benefits in cases involving treaty abuse or conduit structures. The Revenue further contended that the respondents themselves acknowledged the applicability of this doctrine by safeguarding against such scrutiny in the Share Purchase Agreement and by furnishing detailed documentation regarding control and management, thereby conceding that mere possession of a TRC is not sufficient. Thus, the Revenue’s position proceeds in a logical sequence.

We find force in these contentions and agree with them for the following reasons: First, taxability is established under Section 9(1)(i); second, the availability of treaty relief is contested by challenging the residency claim in view of the prima facie finding that effective management and control were not in Mauritius, the scope of Article 13, and the applicability of Circular No. 789 and Azadi Bachao Andolan [2003 (10) TMI 5 - SUPREME COURT] in the current factual context; third, GAAR and, in the alternative, JAAR are invoked to pierce the structure and deny treaty benefits where the transaction lacks genuine commercial substance. Though several specific questions were raised by the Revenue, including interpretation of the Mauritius Financial Services Act, the nature of GBLs, and the role of the LOB clause, these issues merely reinforce the three-tier framework for determining taxability in the present case.

The Vodafone judgment [2012 (1) TMI 52 - SUPREME COURT] provides crucial insight into this issue. It implies that business intent behind a transaction serves as strong evidence of whether the transaction is deceptive or an artificial arrangement. The commercial motive behind a transaction often reveals its true nature.

In the present case, the respondents seek exemption from the Indian Income tax while, at the same time, contending that the transaction is also exempt under Mauritian law, which runs contrary to the spirit of the DTAA and presents a strong case for the Revenue to deny the benefit as such an arrangement is impermissible. Here again, it may be stated that this stand would again strengthen the reasoning that whether the sale is of shares of an Indian company then, will not be germane for consideration because only if the assessee is liable to pay tax in Mauritius, he can derive benefit under the provision under Article 13(c) of the DTAA as amended. Section 96(2) places the onus on the taxpayer to disprove the presumption of tax avoidance. This represents a significant shift in the burden of proof. In the case at hand, there is clear and convincing prima facie evidence to demonstrate that the arrangement was designed with the sole intent of evading tax, and the assessees have failed to furnish sufficient material to rebut this presumption. Though it is permissible in law for an assessee to plan his transaction so as to avoid the levy of tax, the mechanism must be permissible and in conformity with the parameters contemplated under the provisions of the Act, rules, or notifications. Once the mechanism is found to be illegal or sham, it ceases to be “a permissible avoidance” and becomes “an impermissible avoidance” or “evasion”. The Revenue is, therefore, entitled to enquire into the transaction to determine whether the claim of the assessees for exemption is lawful.

CONCLUSION - In our view, once it is factually found that the unlisted equity shares, on the sale of which the assessees derived capital gains, were transferred pursuant to an arrangement impermissible under law, the assessees are not entitled to claim exemption under Article 13(4) of the DTAA. Revenue has proved that the transactions in the instant case are impermissible tax-avoidance arrangements, and the evidence prima facie establishes that they do not qualify as lawful. Consequently, Chapter X-A becomes applicable. The applications preferred by the assessees relate to a transaction designed prima facie for tax avoidance and were rightly rejected as being hit by the threshold jurisdictional bar to maintainability, as enshrined in proviso (iii) to Section 245R(2). Accordingly, capital gains arising from the transfers effected after the cut-off date, i.e., 01.04.2017, are taxable in India under the Income Tax Act read with the applicable provisions of the DTAA. The judgment of the High Court therefore deserves to be set aside.

Bogus capital loss - transactions of purchase and sale of penny stocks -Fictitious capital loss - ITAT deleted said disallowance - HELD THAT:- We find that the allegation labelled against the assessee by the appellant/department does not find any direct substantial evidence or proof regarding the logical process which has been inferred through reasoning from the totality of the attending facts and circumstances surrounding the allegations/charges made and labelled against the assessee and as such, we find no question of law, much less substantial questions of law arising for consideration in this appeal.

Accordingly, the appeal fails and is dismissed.

Initiation of proceedings u/s 148(A) and 148 by the Jurisdictional Assessing Officer (JAO) - Faceless Assessment - Initiation of proceedings under Sections 148A and 148 - Jurisdiction of the Jurisdictional Assessing Officer to initiate proceedings u/s 148A and 148 after the Faceless Scheme came into force -

HELD THAT:- The legal issue as regards the lack of jurisdiction on the part of JAO to initiate the proceedings post implementation of the Faceless Scheme is no longer res integra as it has been held in the case of Kankanala Ravindra Reddy [2023 (9) TMI 951 - TELANGANA HIGH COURT] the impugned notices issued and the proceedings drawn by the respondent-Department is neither tenable, nor sustainable. The notices so issued and the procedure adopted being per se illegal, deserves to be and are accordingly set aside/quashed. As a consequence, all the impugned orders getting quashed, the consequential orders passed by the respondent-Department pursuant to the notices issued under Sections 147 and 148 would also get quashed

The writ petitions are allowed on the jurisdictional ground: notices and proceedings initiated under Sections 148A and 148 by the Jurisdictional Assessing Officer after the Faceless Scheme came into force are set aside and consequential orders quashed, subject to the liberty reserved to the Revenue to pursue further action as indicated by this Court.

Penalties imposed u/s. 271E and 271D - quantum additions had already been deleted - HELD THAT:- Since the additions forming the very basis of the penalty proceedings are deleted, the very foundation of the penalties collapse. The penalties cannot thus be sustained independently. The law mandates that the Assessing Officer must record satisfaction regarding the alleged violation of sections 269SS and 269T of the Act in the assessment order itself for valid initiation of penalty proceedings under sections 271D and 271E of the Act.

When such an assessment order is annulled or set aside by a higher authority, the satisfaction recorded therein also ceases to exist, rendering the penalty proceedings invalid. In view of the above, we find no infirmity in the orders passed by the learned CIT(Appeals) deleting the impugned penalties. Accordingly, both the appeals filed by the Revenue are dismissed.

Extrapolation of income - extrapolation of figures as found recorded in document found during survey action - Assessee was subjected to survey action u/s 133A wherein list of 35 employees was found from the cabin of cashier of the assessee-company - These employees were shown to have been paid salary of Rs. 2,54,115/- for the month of July, 2017 but HR Manager admitted that the list was list of bogus employees

HELD THAT:- Survey addition has to be made strictly in accordance with the incriminating material only. The document found during the survey is the very foundation of the impugned addition. Unless corroboration was done by AO to support the extrapolation, no presumption could be made that similar payment was made by the assessee during the rest of the months also.

The extrapolation is in contradiction to the decision of this Tribunal in Gurdip Cycle Industries [2024 (7) TMI 1279 - ITAT CHANDIGARH] which has been rendered, inter-alia, after considering the decision of VM Spinning Mills [2011 (9) TMI 82 - PUNJAB & HARYANA HIGH COURT] as well as various other decisions holding the field. In these decisions, addition on the basis of extrapolation has been held to be unsustainable. Respectfully following the same, we direct Ld. AO to restrict the impugned addition to the extent of Rs. 2,54,115/- only. The same would be taxable u/s 69C r.w.s. 115BBE of the Act. Appeal stand partly allowed.

TP Adjustment - AMP expenses by following the Bright Line Test - whether BLT is not an appropriate benchmarking approach?

HELD THAT:- As decided in Louis Vuitton India Retail Pvt. [2025 (5) TMI 2130 - ITAT DELHI] allowed the appeal of the assessee wherein the assessee had challenged the adjustment made in respect of AMP expenses by the TPO by applying the Bright Line Test.

We agree with the submission of the assessee that the adjustment made by the AO by applying Bright Line Test, in respect of AMP expenses is not sustainable in the eyes of law. We, therefore, delete the adjustment / addition made by the AO and allow the grounds of the appeal.

Validity of Reassessment proceedings - requirement of notice under section 143(2) - treatment of belated return as non est - as argued by assessee no notice u/s.143(2) issued although belated income tax return in response to 148 notice was filed by the assessee

HELD THAT:- Assessment framed was without issuing any notice u/s. 143(2) on 29.3.2022. We noted that as per reasons mentioned in the assessment order of not issuing notice u/s. 143(2) is that “The assessee was required to file the return of income latest by 30.4.2021. Having failed to do so, there is no option but to treat the said return as nonest and proceed with passing the order as contemplated in Section 144 of the Act.”

Income tax return was filed much before the completion of assessment. Hence, the action of the AO in treating the return as nonest is not sustainable in the eyes of law. Since no notice u/s. 143(2) issued although belated income tax return in response to notice u/s. 148 notice filed, re-assessment without issuing notice u/s. 143(2) is without jurisdiction and deserve to be quashed. See SHRI JAI SHIV SHANKAR TRADERS PVT. LTD. [2015 (10) TMI 1765 - DELHI HIGH COURT] and ALPINE ELECTRONICS ASIA PTE LTD. [2012 (1) TMI 100 - DELHI HIGH COURT] - Appeal of the assessee is allowed.

Admissibility of electronic evidence under section 65B of the Indian Evidence Act, 1872 - Chain of custody of digital evidence - Validity of digital forensic certificate and hash integrity - Use of digital evidence in income-tax assessment proceedings - Addition under section 69 as income from undisclosed investment

Admissibility of electronic evidence under section 65B of the Indian Evidence Act, 1872 - Chain of custody of digital evidence - Validity of digital forensic certificate and hash integrity - Whether the digital image (recovered from a third party's mobile device and reproduced in the assessment order) satisfied the legal requirements for admissibility and veracity under section 65B and related procedural safeguards - HELD THAT: - The Tribunal found that, although a certificate purporting compliance with section 65B(4) was produced, the certificate as reproduced in the assessment order was silent on several material particulars required to establish veracity and integrity. The CBDT Manual's procedural prescriptions (including clear identification of devices, documented chain of custody, annexed digital evidence collection forms, hash values linked to extraction and later retrieval, and record of handing over of master/working copies) were not followed or explained in the assessment order. The certificate did not mention IMEI for the relevant device, did not show presence of search officers during creation of master/working copies, and there was no explanation of how the master/working copies reached the Assessing Officer for inclusion in the show-cause/assessment. The assessee had retracted statements that were relied upon, which increased the need for strict adherence to safeguards. Given these lacunae, the digital image lacked the required legal sanctity and sufficient veracity to be admitted as conclusive electronic evidence under the statutory and administrative framework governing digital evidence. [Paras 16, 18, 19, 21, 22]

The digital image/electronic evidence did not meet the statutory and procedural safeguards and therefore lacked the requisite admissibility and veracity.

Use of digital evidence in income-tax assessment proceedings - Addition under section 69 as income from undisclosed investment - Whether the addition of alleged undisclosed cash component under section 69 can be sustained when it rests primarily on the impugned digital image and related retracted statements - HELD THAT: - The Tribunal applied the consequence of the inadmissibility and defective provenance of the electronic evidence to the assessment. The Assessing Officer's addition under section 69 relied substantially on the digital slip/image and the assessee's earlier recorded statement (which had been retracted). In the absence of legally reliable digital evidence and given the retraction, the Tribunal held that the foundational evidentiary support for treating the alleged cash component as income was deficient. The Board's Manual and the principles governing admissibility of electronic records were emphasised to show that where digital evidence is relied upon to make a conclusive addition, compliance with collection, certification and chain-of-custody safeguards is essential; failure to comply undermines the validity of the addition. [Paras 3, 8, 22, 23]

The addition under section 69 could not be sustained because it rested on electronic evidence that lacked required veracity; the corresponding grounds were allowed.

Final Conclusion: Both appeals are allowed: the Tribunal held that the electronic evidence reproduced in the assessment order lacked the requisite statutory/procedural safeguards (including adequate chain of custody and properly documented digital-forensic certification) and, as the addition under section 69 rested on that defective evidence and retracted statements, the addition could not be sustained.

Validity of reassessment proceedings - valid statutory prior approval of the prescribed authority as per section 151 - whether the purported approval u/s. 151 of the Act is illegal, bad in law and also without application of mind?

HELD THAT:- We find that in the instant case approval for issue of notice u/s. 148 was granted in a mechanical manner by the PCIT-8, New Delhi by only making mentioned the word “Approved” which is bad in law and resultantly the re-assessment proceedings initiated based on such approval is bad in law.

Approval granted by the PCIT-8, New Delhi for issuance of notice u/s. 148 of the Act is not valid. Therefore, respectfully following the aforesaid binding precedents of CAPITAL BROADWAYS PVT. LTD [2024 (10) TMI 311 - DELHI HIGH COURT] and MEENAKSHI OVERSEAS PVT. LTD [2015 (12) TMI 1905 - DELHI HIGH COURT] we allowed the legal ground raised by the assessee and quash the reassessment accordingly - Appeal of the assessee is allowed.

Addition on account of on-monies received on sale of unit - unexplained income of the assessee - Year of assessment - assessee was following ‘Project Completion Method’ - assessee is a partnership firm which was formed to carry on business of real estate development - assessee was in receipt of cash advances from the doctors towards sale of part of commercial building being developed - whether the advance received by the assessee in cash during the relevant AY 2016-17 is taxable in the relevant year itself or not? - CIT(A) had held that, the cash receipts was in the nature of ‘advances’ and as per the established method of accounting, the same was required to be offered to tax, in the year in which the project was completed, as the assessee was following ‘Project Completion Method’ - HELD THAT:- Having gone through the order of the Ld. CIT(A), we countenance his reasoning for holding that, the impugned sum was in the nature of ‘advance’ and therefore, could not be taxed in the relevant AY 2016-17 but, only in the year in which project was completed. The Ld. CIT(A) is found to have relied on the decisions of Dhanvarsha Builders & Developers Pvt. Ltd. [2005 (10) TMI 276 - ITAT PUNE-A] and Fort Projects Pvt. Ltd. [2011 (7) TMI 1180 - ITAT KOLKATA] to arrive at his conclusion. Decided against revenue.

Addition by way of unaccounted payment for purchase of property - HELD THAT:- When the addition on account of unexplained payments has been deleted in the hands of the purchasers, then the consequential corresponding addition made by the AO in the hands of the assessee-seller had no legs to stand on. As noted that AO relied on the statements of Doctors to saddle the addition in the hands of assessee, without giving a copy of the same to assessee, which omission was found by Ld CIT(A) to have vitiated the impugned addition by relying on judicial precedent that such an action would violate Natural Justice [Refer Mari Gold Papers (P) Ltd [1995 (6) TMI 99 - CEGAT, NEW DELHI]]. We find that in the grounds of appeal, the Revenue has not assailed such a finding of Ld CIT(A), hence such a finding of First Appellate Authority crystallizes and the observation made in the impugned order that in the absence of providing the statements recorded during the investigation, the addition based solely on such statements cannot be sustained, cannot be faulted and we give our imprimatur to it. We thus see no reason to interfere with the order of Ld. CIT(A) deleting the impugned addition.

Disallowance of proportionate interest expenditure in relation to interest free advances given by the assessee firm - nexus between the deployment of own funds towards interest-free advances - AO is found to have observed that, the assessee had advanced interest free loans to five (5) parties found that the assessee had sufficient own funds to cover the interest-free advances and therefore held the interest disallowance to be unwarranted - CIT(A) found that the assessee had sufficient own funds to cover the interest-free advances and therefore held the interest disallowance to be unwarranted - HELD THAT:- It is seen that the assessee’s own capital of Rs. 9,89,24,909/- was far in excess of the interest-free advances of Rs. 86,00,000/- and therefore it could be safely presumed that the interest-free advances were made out of own funds and not the borrowings of the assessee. We do not agree with the Ld. DR that the assessee was required to demonstrate direct nexus between the deployment of own funds towards interest-free advances. As long as the amount of interest-free advances is sufficiently covered by the noninterest bearing funds of the assessee, the question of disallowance of interest paid on borrowings does not arise. The case of the assessee finds support from the decision of the Hon’ble Supreme Court in the case of CIT Vs Reliance Industries Ltd [2019 (1) TMI 757 - SUPREME COURT]

Having regard to the position of own surplus funds and interest-free advances, we agree with the Ld. AR that the presumption is that the interest-free advances were given out of own funds and therefore the Ld. CIT(A) had rightly deleted the impugned disallowance.

Deemed rental income on the unsold units lying in closing stock of the assessee - As relying on M/s. Inorbit Malls Pvt., Ltd [2022 (10) TMI 1150 - ITAT MUMBAI] we see no reason to interfere with the order of CIT(A) holding that the AO was correct in applying Section 22 of the Act and adding deemed rent for the unsold properties of the assessee in the relevant AY 2017-18. We thus dismiss these grounds of the assessee.

Validity of the reassessment initiated u/s 147 - HELD THAT:- It is seen that, the re-assessment was initiated on the basis of audit objection raised by the Revenue audit and the AO is found to have independently examined the same and thereafter recorded his reasons to believe that income chargeable to tax in AY 2017-18 had escaped assessment. CIT(A) further observed that, the AO had followed the prescribed procedure by furnishing reasons for reopening and considered the appellant’s objections before proceeding with the reassessment and therefore there is no legal infirmity in the action of the AO which would render the reassessment order invalid. Since, no infirmity could be pointed out in the impugned action, we see no reason to interfere with the impugned action of Ld. CIT(A) dismissing this legal plea of the assessee. Accordingly, Ground No. 2 is dismissed.

Disallowance on account of non-deduction of TDS under the provisions of section 194A read with section 40(a)(ia) - Non deduction of TDS on interest payment - AR, relying on the first proviso to Section 201(1) of the Act and second proviso to Section 40(a)(ia) of the Act, has argued that, the payee was a regular income-tax filer who had included the interest income in their income-tax return and paid taxes thereon, and therefore there could be no disallowance u/s. 40(a)(ia) - HELD THAT:- Though in principle we agree with the submission of the assessee, but we find that the Ld. AR was unable to furnish any evidence or requisite form to substantiate this claim. In the fitness of the matters and fair play, we consider it fit to set aside the issue back to the file of the AO to verify whether the payee i.e. IIFL-HFC had included interest income received from the assessee, in their return of income for AY 2017-18 and paid taxes thereon, which fact may be verified by the AO from the payee IIFL-HFC or the assessee may furnish the prescribed Form 26A from the payee. Needless to say, the assessee shall be afforded sufficient opportunity of hearing to provide the requisite details / evidences before the AO. This ground of appeal is therefore allowed for statistical purposes.

Addition u/s 68 - unexplained cash credit - Sums credit in earlier years - assessee was unable to substantiate the low rent received or the genuineness of the deposit - HELD THAT:- Impugned sum had been received and credited in the books from tenant in Bangalore long back and that the amount represented opening balance of liability brought forward from earlier years. Having regard to this contemporaneous fact, there is merit in the assessee’s plea that, the rigors of section 68 can be applied only to sums found credited in the books of accounts in that particular year, and not those which were credited in earlier years. Hence, according to us, the lower authorities had erred in invoking and applying the provisions of Section 68 to the opening balance of liabilities brought forward from earlier years. The case of the assessee is found to be supported by the decision of the Hon'ble Bombay High Court in the case of Ivan Singh [2020 (2) TMI 850 - BOMBAY HIGH COURT] wherein deleted the addition made u/s 68 of the Act on account of sums which were credited in earlier years and had been brought forward in balance-sheet in the relevant year.

Method of accounting - addition made by re-computing the income of the assessee from the real-estate project by applying the percentage completion method as against the plea of the assessee that it has been regularly following project completion method - HELD THAT:- The projects in question were commenced much prior to 1st April 2016 and therefore having regard to the transitional provisions which state that for the projects, which commenced on or before 31.03.2016 but not completed by the said date, the revenue shall be recognized based on the method regularly followed by the person prior to the previous year beginning from the 1st day of April 2016. As observed earlier, the assessee since its inception has been regularly following project completion method and therefore, in view of the aforesaid transitional provisions, the AO was unjustified in changing and applying the percentage completion method. We thus countenance the Ld. CIT(A)’s findings deleting the impugned addition by holding that, the assessee was legally allowed to follow its regular method i.e. project completion method, in respect of projects which had commenced prior to 1st April 2016.

Double taxation - Our above view is further aided by the admitted fact that the assessee had subsequently offered the entire profits from the project(s) under the completed contract method in the immediately subsequent AY 2018-19 i.e., the year in which the project was completed, and the same was accepted and assessed by the same AO. It is seen that, the same AO also did not adjust the purported income brought to tax in AY 2017-18 by applying percentage completion method in that year. This subsequent action of the AO, according to us, corroborates the assessee’s case that, the AO’s approach of making addition by following percentage completion method in AY 2017-18 was erroneous and effectively led to double taxation of the same profits, which is not permissible in law. Decided against revenue.

Application for recognition u/s 80G(5) in Form No. 10 AB rejected - assessee's application in form No. 10AB for registration u/s 12AB was rejected by the order of even date - charitable activity u/s 2(15) - dominant object - Predominant or primary Object test for "Charitable Purposes" - main activity of the assessee was generation of power from the solar plant at Tumkur district, Karnataka which is run by its hundred percent shareholder Infosys Ltd, the power generation by the assessee is also sold to Infosys Ltd at agreed rates - As per revenue the assessee's activity of generation of power is not a charitable activity under the category 'preservation of environment' and thus does not fall under the definition of section 2(15) of the Act.

HELD THAT:- Predominant or primary Object test for "Charitable Purposes" is that benefit must enure to the public or a section/ class of the public, it is also not necessary that all persons universally benefit from the activities mentioned in section 2 (15) of the Act. Benefit to sufficiently wide or defined section of public will suffice so long as private gain to a particular person is not the dominant object. Naturally, incidental benefit to individuals does not disentitle the assessee claiming it to be for "Charitable Purposes".

There is no benefit to the public at large or a section of a public at all. The dominant object of the whole of the exercise is to get the power for Infosys Limited through captive solar power plant shown as CSR activity and then made an attempt to claim the benefit of section 11, 12 of the Income tax Act by obtaining registration u/s 12 AB of The Act and further to obtain recognition u/s 80G (5) of the Act.

In common parlance it is not different from the case that a donor sets up school for his own children and claim it as 'Educational activity", a company setting up a hospital exclusively for its own promoters / employees and claiming it as medical relief, setting up an own yoga centre for himself and claiming it as 'Yoga' etc. Putting a solar panel over one's house is also preservation of environment, but these are not charitable purposes as these do not have dominant object of benefit to others i.e., public at large. These are benefit to self. In all these cases there is no public benefit at large.

As per the rule, any activity designed exclusively for the benefit of employees shall be considered as an “activity benefitting employees” and will not qualify as permissible CSR expenditure. The spirit behind any CSR activity is to benefit the public at large and the activity should be non-discriminatory to any class of beneficiaries. However, any activity which is not designed to benefit employees solely, but the public at large, and if the employees and their family members are incidental beneficiaries, then, such activity would not be considered as “activity benefitting employees” and will qualify as eligible CSR activity.".

We also uphold that the ld CIT(E) has looked at the object and purposes as well as the genuineness of the activity from the angle that whether such activity can be said to be for Charitable Purposes. He holds that it is a commercial venture and for the sale of Power to Infosys Limited only. Decided against assessee.

Addition u/s 69A - unexplained money - cash deposited by the Appellant burden of proof - assessee failed to discharge the onus of satisfactorily explaining the nature and source of cash deposit during the demonetization period

HELD THAT:- Neither the entire addition made by the Ld.AO nor the contention of the assessee that he had sufficient cash available with him, can be accepted outright. So far as various judicial precedents relied on by the Ld.AR are concerned, the applicability thereof would depend upon the peculiar facts of each case which in our considered view, are distinguishable in the present case in hand, specifically when the cash is deposited during the demonetization period.

Thus, we are of the considered view that the amount of 50% of the total cash deposited during the demonetization period can reasonably be estimated as available to the assessee for making the cash deposits during the demonetization period. Appeal raised by the assessee are accordingly partly allowed.

Unexplained investment u/s 69A - addition made as cash book does not reflect the cash payments and also copy of the drawings account ledger was not produced - assessee argued addition made u/s. 69A is not correct since the cash payments were made out of the drawings - HELD THAT:- As perused the monthly summary of drawings account as well as the ledger account of the drawings account in which the cash withdrawals were duly reflected and in the narration it was also mentioned that the withdrawal was used to purchase the site. Even though the ledger of the drawings account were available with the assessee, the same was not produced before the AO.

As considered the said documents and also the financial statements submitted by the assessee and found that the assessee had source for effecting the said purchases which is from the drawings account of the assessee’s proprietary concern. Therefore, we are satisfied that there are evidences for the withdrawal of the cash and therefore there are enough source available with the assessee for making the cash payments for purchasing the property.

Anyhow this drawings ledger account was not produced before the AO and therefore we remit this issue to the file of the AO for considering the documents filed before us and to take a decision in accordance with law, after hearing the assessee. We also permit the assessee to produce any other evidences, if available to be produced before the AO in support of their contention.

Net profit determination - addition by estimating profit at 8% of turnover, despite the Appellant having already declared 7%, which aligns with industry standards - AO had mainly relied on the statement given by the assessee and the non-retraction of the said statement. We do not think that the AO can estimate the net profit based on the statement when the assessee is having the audited books of accounts. As considered the comparable statement given by the assessee in the industries similarly situated and their profit margins ranges from 4.07 to 6.57%. In fact, in the present case, the assessee had declared a higher margin of 7% which in our view is a reasonable margin arrived by the assessee. We do not find that the inclusion of the other expenses would be a reason for estimating the net profit at 8% instead of 7%. We have also found that based on the search and survey operations, no incriminating materials were seized or impounded except the regular books of accounts maintained by the assessee.

Adoption of net profit at 8% instead of 7% by the AO which was confirmed by the Ld.CIT(A) is not in order and also without any basis. We, therefore set aside the order of the lower authorities and allow the appeal filed by the assessee.

Revision u/s 263- order erroneous and prejudicial to the interest of the revenue test - disallowance u/s. 14A r.w.r. 8D in respect of expenses incurred for earning exempt income and disallowance u/s 36(1)(iii) for alleged diversion of interest-bearing funds not made by AO - HELD THAT:- Various Hon'ble High Courts & Tribunals have held that no disallowance u/s. 14A of the Act is to be done in absence of exempted income.

As regards applicability of disallowance u/s. 14A in view of the CBDT Circular No. 05/2014 dated 11/02/2014 even where taxpayer in a particular year has not earned any exempt income from investment held that disallowance u/s. 14A cannot exceed the exempted income after specifically considering therein the CBDT Circular No. 05/2014 dated 11/02/2014.It is the settled position of the law that the CBDT circular cannot override the High Court/Supreme Court decisions.

Disallowance u/s 36(1)(iii) of the Act for interest in respect of capital borrowed. we find that loans and advances given to Agrima Consultants International Ltd and Reeti Investments Private Limited are not given during the year under consideration but were given many years ago - the question of diversion of interest-bearing funds of current year as interest free advance or loan does not arise and correspondingly, the question of disallowance of interest shall also not arise.

Further, it will also be evident from the Audited Balance Sheet of the company that the company has plenty of own interest free funds in the form of Share Capital and Reserves & Surplus amounting to Rs. 41,638.78 Lakhs which are more than the loans and deposit amount and it a settled position of the law that the interest free advances, if any, are to be considered as made out of interest free funds and not otherwise.

Thus, AO has not committed any error while passing the assessment order and the issued raised subsequent to passing of order are also devoid of any merits. Therefore, such an order cannot be said to be erroneous and prejudicial to the interests of revenue on merits so as to justify revision action u/s. 263 of the Act- Appeal filed by the assessee is allowed.

Maintainability of writ petition - Benami Transactions - Provisional attachment order - release of the property at the interim stage - action against the property of the corporate debtor in relation to an offence committed prior to the commencement of CIRP - ejusdem generis - Non-obstante clause / overriding effect - HELD THAT:- It is seen that the appeal before the tribunal was filed by the erstwhile management. Though the very same entity is before me, its composition has undergone a fundamental change. As a result of the approval of the resolution plan, a new management has taken over. They seek the benefit under Section 32A of the Code. This issue cannot be decided by the Appellate Tribunal. The said Tribunal having been established under Section 30 of the Benami Act cannot travel beyond its four corners. The present management may not be in a position to even withdraw the appeal since it was filed by the erstwhile management. This writ petition cannot therefore be termed as not maintainable on the ground that there is pursuit of parallel remedies by the same party on the same cause of action.

There has been no sale of the property. The composition of management of the purchaser-company alone has changed and that too under the aegis of the NCLT. The change in management has been through a statutorily approved process. Thus, there has been no transfer of the property within the meaning of Section 2(29) of PBPT Act, 1988. Hence, Section 57 has no application.

Though Section 3 of the Act prohibits benami transactions, Section 4 of the Act states that no suit, claim or action to recover a property held benami is maintainable. In other words, the beneficial owner or the person claiming to be the real owner of the property cannot maintain a suit for recovery of the property. It is like a coin dropped in a temple hundiyal. Once dropped, no recovery. Likewise, a defence that the property is being held benami is also not allowed. This is sufficient indication that statute does recognize that the benamidar is the holder of the property. The benamidar is entitled to hold the property even against the beneficial or real owner but subject to a overriding consideration i.e, the Central Government can confiscate the same. Till the Central Government confiscates the same, the property is very much the property of the benamidar.

IBC came into force only in the year 2016. The Prohibition of Benami Property Transactions Act was enacted way back in the year 1988. Thus, when the parliament enacted IBC 2016, it was conscious that benami transactions stood prohibited. If the parliament intended that benami properties should not be saved, they would have definitely introduced some limiting expression or qualifying word in Section 32A. No such expression is found in Section 32A of the Code. When Section 32A talks about the property of the corporate debtor, it includes and encompasses all the properties of the corporate debtor whatever be their character.

Even though the petitioner assails the validity of the impugned attachment orders, it is not open to me to quash the same. They have been validly passed. It is declared that by virtue of the impugned attachment proceedings, no action can be taken against the subject properties. Viewed in this manner, the petitioner cannot be accused of pursuing parallel remedies. The Resolution Plan approved by NCLT will act as an impregnable fire wall.

This writ petition is allowed on these terms

Jurisdictional validity of seizure of goods and vehicle - Reason to believe- preventive customs powers in border-proximate inland areas - deference to officer's prima facie satisfaction - judicial restraint in probing sufficiency of belief - burden of proof under Section 123 - show-cause and post-seizure procedure under Section 124 - HELD THAT:- Preventive customs powers under Section 110 extend to inland areas proximate to borders for anti-smuggling, interception at Gaighata-Thakurnagar Road activates jurisdiction, as in Tirupati Trading Corporation v. Collector of Customs [1998 (8) TMI 161 - CALCUTTA HIGH COURT], where detention of prohibited goods (sandalwood) on reasonable belief of misdeclaration/concealment was upheld despite procedural claims. Sections 111(b)/(d)/121 apply pending tests, domestic trade claim rebuttable post-notice under Section 124, duly responded to despite summons.

Having heard the learned counsel for the parties and perusal of the records this Court is of the view that the appeal lacks merit and warrants dismissal. The appeal is dismissed because “reasons to believe” under Section 110(1) of the Customs Act, 1962 requires only the officer's prima facie satisfaction based on material available at the time of seizure, without necessitating a detailed analysis or dissection of those reasons by the court.

Courts assess whether a proper officer formed a reasonable belief from contemporaneous circumstances, such as the interception near the Indo-Bangladesh border and route deviation, which aroused suspicion of smuggling. Mere absence of detailed reasons in the seizure memo does not invalidate the action if prima facie grounds exist on record, as affirmed in precedents like Mohanlal [1987 (3) TMI 111 - SUPREME COURT]

Allegations of corruption did not, on the material before the Court, justify interference with the Customs Act proceedings or a direction for immediate action under the Prevention of Corruption Act; available remedies were to be pursued through appropriate channels.

No jurisdictional defect arises, as preventive powers extend inland near borders, distinguishing from cases of pure roving enquiry.

Thus, the impugned order is upheld, and the appeal fails on merits.

Provisional release of seized goods - imported goods by camouflaging them with TPU laminated fabric - importer mis-utilised AEO (Authorized Economic Operator) status -Transaction value - Classification and valuation of imported goods - Sampling and testing standards (IS/ASTM) - Mis-declaration and fraud - intention to evade payment of duty -requirement of a bond and a bank guarantee - HELD THAT:- We find that while the adjudicating authority is well within his right to impose conditions for provisional release of the goods, the said conditions should not be so impracticable and harsh so as to kill the importer’s business itself as held by various decisions as above. It has to be borne in mind that no two cases can be identical and a single fact can differentiate one case from the other. Therefore, any decision following the other cases would lead to disastrous results. Therefore, a considered decision needs to be taken based on the facts and circumstances of the case before hand. The appellants claim that there are certain inadequacies in the investigation, sampling, testing and the valuation of the goods as pointed out by the appellant.

We find that the peculiar facts of the case are that:

The goods are not per se prohibited; the importer is not a flyby night operator; they are in the business for more than 30 years and were importing regularly at the Port in question and in other Ports;

The Appellant had imported similar goods on an earlier occasion vide Bill of Entry No. 9387015 dated 23.11.2023 and CRCL New Delhi refused to conduct testing claiming lack of facility for conducting tests especially “FITR Analysis”; the said consignments have been cleared after getting the same tested from Textile Committee; In the instant case, the opinion of Textile Committee has not been taken;

CRCL has not addressed all the queries raised by the importer and have not tested all the parameters as per Indian or International standards;

The Academic and Professional competence of the Chartered Engineer to evaluate the goods and the source of the methodology he adopted are forthcoming.

Revenue seeks to assess most of the impugned goods on per square meter basis. However, for the purposes of Bond, BG, they consider the total value.

Appellant’s averment that the impugned goods cannot be actually sold in the market at the value arrived at by the Revenue cannot be discarded.

The adjudicating authority himself finds that the investigation is in progress.

We find that the interest of justice and also the interest of Revenue will be safeguarded by seeking a bond for the full value of the goods and Bank Guarantee to the extent of 30% of the duty estimated. We further find that the other conditions for the provisional release, as ordered by the Commissioner of Customs, need not be interfered with. Accordingly, the appeal is partly allowed subject the appellant complying with the above directions, the goods shall be released within a period of two weeks.

Re-importation of goods - levy of customs duty on re-importation - destruction of goods - remission of duty - abandonment of goods - adjudicating authority - Notification No.52/2003-Cus - Board Circular No.60/1999-Cus - Foreign Trade Policy - Non-payment of duty on destruction within EOU framework - Whether the said drugs could have been re-imported without payment of applicable customs duty or otherwise. - HELD THAT:- Admittedly, the drugs were re-imported after its refusal by the KEMSA, however, at the time of re-import, the CDSCO/ Drugs Controller General of India (DCGI) was informed by the appellant that the goods had less than 60% shelf life and consequently the said organization observed that the re-import could not be used and has to be destroyed. In terms of Rule 31 of the Drugs and Cosmetics Rules, 1945, no drug can be imported, which is having less than 60% residual shelf life on the date of import. Therefore, the import itself was restricted and it was allowed only for the purpose of destruction.

It is also on record that the respondents had sought permission to re-import these drugs for destruction on the grounds that the said drugs were having shelf life of less than 60%. The No-Objection was given for reimport for destruction only with condition that no part of consignment of the imported drugs shall be used for domestic purposes under any circumstances. However, while there is no case for any improper import once the permission was granted by CDSCO/DGCI, the fact remains that no duty was paid at the time of clearance of goods from customs area.

The goods, which are manufactured in the 100% EOU are also eligible for non-payment of duty if intended for destruction. However, what is to be seen is that at the time of import, even if it was made for destruction after being cleared from the customs area in the factory of the importer, the fact remains that there was no provision under which the duty itself would have been waived at the time of clearance. The proper course would have been that at the time of import, the proper value of the goods should have been arrived at and applicable duty should have been demanded. The respondents could have also availed themselves of the provisions under section 23, which provides for remission of duty on lost, destroyed or abandoned goods. The provisions under section 23(2) of the Customs Act clearly provide for relinquishing the title to the goods and in that case, the importer will not be liable to pay duty thereon.

Therefore, for the limited issue of whether duty was payable at the time of clearance by the respondents on the re-imported goods, we find that the department has made out a case and this aspect has not been clearly examined by the adjudicating authority. We also note that there is a clear permission for import of said goods for the purpose of destruction only by the competent authority. Therefore, there could not be any penalty etc., for violation of any restrictions as regards importation of said goods under Drugs and Cosmetics Act read with Customs Act.

We, therefore, allow the appeal filed by the department by way of remand to the adjudicating authority to decide the issue in view of our observations above.

Interim Rules of Origin - Certificate of Origin (COO) - Import of gold jewellery as per the procedure under notification 101/2004-Cus(N.T.) - local value addition of 22% to the non-originating gold - preferential tariff concessions for the Early Harvest Scheme -burden of proof in exemption claims - reversal of burden under Section 123 of the Customs Act, 1962 - remand for de novo adjudication - breach of natural justice - Notification No.85/2004-Cus - Notification No.101/2004-Cus (N.T.) - HELD THAT:- We find that the goods in question are jewellery made of gold, the import of which has been a subject of special treatment both under the Customs Act and the Foreign Trade Policy. While in the normal case discharge of the burden of proof as regards the allegations made in the SCN vests with the department, in the case of availing an exemption notification, the burden shifts to the importer as per the Hon’ble Supreme Court’s judgment in Dilip Kumar and Co.[2018 (7) TMI 1826 - SUPREME COURT (LB)]. Further as pointed out by revenue the fact that Section 123 of the CA, 1962 reverses the standard burden of proof, on the person, in the case of gold, makes this burden even more strict. Further the department has also submitted that when sufficient evidence is adduced the onus of proof shifts to the importer and adverse inference could be drawn against them if they fail to substantiate their case.

While the department submits that it is left with no option but to issue the SCN and decide the matter within time limits if the details sought for from the overseas administration is not forth coming. Thus, there is a breach of the provisions of the principles of natural justice. This being a curable defect it is felt that the matter requires to the decided afresh on merits. The SCN has also been issued in this matter so as to remove the hurdle of time bar protecting revenue’s interest.

We remand the matter to the Original Authority to re-examine the issue after making available the outcome of the reference made to the designated authority of kingdom of Thailand, as mentioned in the impugned order, if any or state otherwise. Documents relied upon in the impugned order which the appellant lists and states have not been supplied to them, should be made available, if requested. This would help make all relevant facts available.

We accordingly remand the matter to the Original Authority to decide the issue afresh in denovo proceedings after supplying the documents as stated above.

The appeal is disposed of on the aforesaid terms.

Classification of goods - "Annuloplasty Band/Ring" is classifiable under CTI 9021 39 00 (other artificial parts of the body) or under CTI 9021 90 90 (other appliances which are worn or carried, or implanted in the body, to compensate for a defect or disability) - Specificity principle (GRI 3(a)) - Seeking advance ruling - Explanatory Notes (WCO) - HELD THAT:- On examination of the product under consideration viz."Annuloplasty Bands/Ring", observe that the product under consideration is intended to replicate the natural movement and flexibility of the heart valve annulus, remaining permanently implanted to facilitate proper valve function by supporting effective opening and closure. The annuloplasty ring is surgically implanted around the valve annulus to reinforce and reshape it, enabling effective valve function. It does not replicate or substitute the anatomical structure of the valve but instead providing structural support and reinforcement to the existing valve annulus by facilitating optimal valve repair. Its function is therefore therapeutic rather than structural replacement. The device is a self- contained implantable medical appliance and is not intended to act as an artificial part of the body in the sense contemplated under CTI 9021 31 00 or 9021 39 00.

The advantages of annuloplasty is preserving the native valve with lower risk of anticoagulation and the product under consideration are devices used in heart valve repair surgery to restore the normal size and shape of a valve annulus (the fibrous ring supporting a heart valve), most commonly for the mitral and tricuspid valves. I find, therefore, that the goods "Annuloplasty Bands/Ring", is not a prosthetic substitute replacing a heart valve but a therapeutic implant providing structural support and reinforcement to the existing valve annulus by facilitating optimal valve repair while the native heart valve continues to exist around it which fails the anatomical replacement test under CTI 9021 31 00 and 9021 39 00.

Therefore, the goods "Annuloplasty Bands/Ring", is not a prosthetic substitute replacing a heart valve but a therapeutic implant providing structural support and reinforcement to the existing valve annulus by facilitating optimal valve repair while the native heart valve continues to exist around it which fails the anatomical replacement test under CTI 9021 31 00 and 9021 39 00.

Accordingly, reject the applicant's claim for classification under 9021 39 00, on the basis that 'Annuloplasty Bands/Ring' neither replaces nor substitutes the geometry or structure of a body organ or segment but rather therapeutically structural support and reinforcement to the existing valve annulus.

The product satisfies the legal scope of CTI 9021 90 90 as it is implanted in the body and providing only the structural support and reinforcement to the existing valve annulus but it does not replace anatomy and the same is not covered by preceding single- dash entries CTI 9021 10 to 39.

Although the Harmonized System is aligned globally at the six-digit level, the Indian tariff at the eight-digit CTI level, along with the accompanying legal notes and interpretative principles, diverges in material respects. Moreover, none of the cited rulings pertain to product under consideration. In view of above, the functional analogy sought to be drawn cannot override the explicit tariff language or the primary classificatory criterion under Heading 9021, which is the replacement or anatomical substitution of a defective body part, a condition not satisfied in the present matter. Accordingly, while the foreign rulings have been duly noted, they do not hold persuasive value for classifying the Solitaire AB Stent as an artificial part of the body under Indian CTI 9021 39 00.

In view of the foregoing analysis, I am of the considered view that the goods viz. "Annuloplasty Bands/Ring", proposed to be imported by the Applicant, merits classification under Tariff Heading 9021 and specifically under CTI 9021 90 90.

Classification of goods - "Onyx Embolization System" classifiable under subheading 9021 39 00 (other artificial parts of the body) Or under subheading 9021 90 90 (other appliances implanted in the body to compensate for a defect or disability) -General Rules for the Interpretation (GRI) of the Harmonized System - Essential character / most specific description - Explanatory Notes to Heading 9021 - Customs Authority for Advance Rulings - HELD THAT:- It is a well-settled principle of law that the classification of goods under the Customs Tariff Act, 1975 is governed by the General Rules for the Interpretation of the Import Tariff (GRI). Rule I of the GRI mandates that "classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes". Only where the terms of the headings or the relevant notes do not determine the classification, does recourse lie to the subsequent rules.

The Explanatory Notes to Heading 9021 further clarifies that the scope of the heading is restricted to appliances which wholly or partially replace defective parts of the body or compensate for a defect or disability. In particular, the Notes specify that "artificial parts of the body" include items such as artificial limbs, joints, ocular fittings, dental fittings and similar devices that replicate or substitute natural anatomical structures, usually resembling them in form or function. They further elaborate that this heading also covers certain implantable appliances designed to compensate for physiological deficiencies, such as pacemakers, speech aids for persons without vocal cords, and electronic aids for the blind.

On examination of the product under consideration viz. "Onyx Embolization system", I observe that the fundamental purpose of the Onyx system is to occlude and block abnormal blood vessels by stopping blood flow from within the vascular structure. This is different from replacing or restoring normal anatomical structure of the vessels. The system blocks an existing abnormal vessel rather than substituting for a missing or removed structure implanted within an existing blood vessel. Its function is therefore therapeutic rather than structural replacement. The device is a self-contained implantable medical appliance and is not intended to act as an artificial part of the body in the sense contemplated under CTI 9021 31 00 or 9021 39 00.

The instant Onyx system does the conceptual opposite, it intentionally occupies the vascular defect cavity to induce thrombosis and terminate flow without substituting any anatomical segment. Therefore, the goods "Onyx system", is not a prosthetic substitute replacing a blood vessel or aneurysm wall segment but a therapeutic implant causing deliberate intravascular occlusion while the native blood vessel continues to exist around it, which fails the anatomical replacement test under CTI 9021 31 00 and 9021 39 00.

Accordingly, reject the applicant's claim for classification under 9021 39 00, on the basis that the Onyx embolization system neither replaces nor substitutes the geometry or structure of a body organ or segment but rather therapeutically occludes a vascular defect cavity without anatomical substitution.

The goods viz. "Onyx embolization system", is covered under the umbrella of Heading 9021 at the four-digit level, being a device implanted to compensate a defect. This is not contested. For selecting the correct single-dash and eight-digit classification, I observe that competing entries must be at the same hierarchical level. I find that, by elimination, CTI 9021 3100 and CTI 9021 39 00, are not applicable. Now, I examine the scope under 9021 90 90.

The functional analogy sought to be drawn cannot override the explicit tariff language or the primary classificatory criterion under Heading 9021, which is the replacement or anatomical substitution of a defective body part, a condition not satisfied in the present matter. Accordingly, while the foreign rulings have been duly noted, they do not hold persuasive value for classifying the Onyx embolization system as an artificial part of the body under Indian CTI 9021 39 00.

In view of the foregoing analysis, I am of the considered view that the goods viz. "Onyx embolization system", proposed to be imported by the Applicant, merits classification under Tariff Heading 9021 and specifically under CTI 9021 90 90.

Controversy was pertaining to the shares and its transfers, which were alleged to be based upon fraudulent documents - Challenge to proceedings u/s 59, 213, 241 & 242 of the Companies Act, 2013, read with Rule 11 of the NCLT Rules of 2016 - it was held by High Court that 'There are no infringement of any of the legal rights of the Appellant, thus it doesn't call for any interference by this Appellate Tribunal in the exercise of its appellate jurisdiction.'

HELD THAT:- There are no reason to interfere with the impugned judgment. The Civil Appeal is hence dismissed.

Jurisdictional error -Undue hardship- Impossibilium Nulla Obligatio Est - waiver of pre-deposit under the Second Proviso to Section 19(1) - contravention of Sections 7 and 8 - Non-Performing Assets (NPA) - fundamental equilibrium between the State’s prerogative to secure revenue and the citizen’s right to an effective appellate remedy - Whether the Appellate Tribunal, after having factually arrived at a finding of 'undue hardship' and 'poor financial condition,' committed a jurisdictional error by treating the 10% limit in the Third Proviso to Section 19(1) of FEMA as a mandatory minimum deposit, thereby rendering the statutory right of appeal illusory and the order perverse?

HELD THAT:- The expression “undue hardship” is not merely “hardship,” but a burden “out of proportion to the nature of the requirement itself”. For an NPA declared entity with no liquid assets, a multi-million-rupee deposit is, prima facie, an undue hardship. As the Hon’ble Supreme Court cautioned in Monotosh Saha vs. Special Director, ED [2008 (8) TMI 9 - SUPREME COURT], the Tribunal must ensure that the remedy of appeal is not rendered “illusory.” If a condition for appeal is impossible to fulfil, the right to appeal is effectively snatched away.

By acknowledging “poor financial condition” while simultaneously demanding Rs.2.20 Crore from an NPA-classified entity, the Tribunal “took away with the left hand what it gave with the right.” By treating the 10% ceiling as a mandatory minimum despite a finding of hardship, the Tribunal failed to exercise its jurisdiction meaningfully.

We are of the firm opinion that when a Tribunal finds an appellant is indigent, it must explore the “Middle Path.” Safeguarding Revenue does not always necessitate a liquid cash deposit. The Second Proviso allows the Tribunal to impose “such conditions as it may deem fit,” which includes alternative securities like Indemnity Bonds or Corporate Guarantees. These mechanisms secure the interest of the State without choking the Appellant's access to justice.

Thus, we find that the substantial question of law is answered in the affirmative, in favor of the appellant.

Violation of Section 8(1) of FERA - Liability of joint account holder - Appellant not receive the copy of the SCN, as well as that of the Call Notices for personal hearing - Due diligence and caution expected of authorised dealers - Service by affixation under Rule 10(c) of Adjudication and Appeal Rules, 1974 - Penalty under Section 50 of FERA - Exchange Control Manual guidelines - HELD THAT:- We find that the Respondent Directorate has informed of the service of the notices through affixation on the property in Rajouri Garden, New Delhi, in accordance with Rule 10 (c) of Adjudication and Appeal Rules, 1974 r/w (3) & (4) of Section 49 of FEMA, as per Panchnama drawn at the last known address on 01.07.2004 and 12.07.2004. We also infer even from the pleadings of the Appellant that the property in Rajouri Garden, New Delhi continues to be owned by the Appellant. In view of this, we are unable to appreciate that why the Appellant could not have the necessary arrangement in place for communication of the notices addressed to her or to her Late Husband. In any case she is not prejudiced by the delayed communication of the Impugned Order, as the delay has been condoned.

There is nothing on record to show that she was the active participant in the said violation. Even the submissions of the BOB did not specify that the pay-in-slips were bearing her signature as deposit holder. However, the repeated use of the two accounts which she jointly held with her Late Husband for the purpose of illegal deposits of foreign exchange cannot be ignored. It is also buttressed from the fact that the noticee banks did not exercise due caution and diligence and have been penalized. In view of the facts and the circumstances of the present case, the ends of justice will be met on reduction of penalty on the Appellant.

Thus, we partly allow the Appeal.

Foreign exchange to the bank accounts of the overseas suppliers - authenticity of the evidence obtained from the seized pen drive - veracity of the documents retrieved from the pen drive, as well as which corroborated the statements - Contravention of Section 3(d) of FEMA - Admissibility of electronic evidence as primary evidence and requirements of Section 65B of the Indian Evidence Act - Presumption as to documents under Section 39 of FEMA - Liability of officers and directors under Section 42(1) and 42(2) of FEMA - Proportionality and quantum of penalty -pre-deposits of the penalties - HELD THAT:- From the record of the case that the actual financial arrangement for credit of amounts to the overseas suppliers through the non-banking channel was made by not only Shri T Gopi, but also by Shri D Madanraj the Marketing Director of the Appellant Company. In fact, both of them have admitted having submitted the invoices to the Bank (Authorised Dealer) of the amounts less than the true value. Therefore, the financial transactions had been indulged in by the two aforementioned individual Appellants to transfer foreign exchange to the overseas suppliers over and above the payments made through the Bank.

The individual Appellant Shri T Gopi was not only responsible for the conduct of the business of the Company, but was also active in indulging in the contravention. Thus, the charge under Section 3(d) of FEMA, in terms of Section 42(1) and (2) of FEMA is established against him. With respect to the individual Appellant Shri D Madanraj, the investigations have revealed that he indulged in working out arrangements with the overseas suppliers, so as to suppress the true value of the goods imported from them and then to accept the unauthorized payments made through the financial transactions worked out in India.

Therefore, the charge of the contravention of Section 3(d) of FEMA, in terms of Section 42(2) of FEMA is established against him. The Ld. AA has made a finding in the Impugned Order that the individual Appellant Shri S Murugadoss, the Technical Director of the Appellant Company was not responsible for the day-to-day conduct of the business of the Company, but he has admitted possessing knowledge about the under invoicing and remittance of the balance amount to the overseas suppliers through the unauthorized channel. Therefore, the charge of the contravention of Section 3(d) of FEMA, in terms of Section 42(2) of FEMA is also established against him.

The penalty imposed is too harsh and may be made proportionate. To meet the ends of justice, we reduce the penalty amount on the Appellant Company to Rs. 13,00,000/- and also reduce the penalty amount on the individual Appellants Shri T. Gopi (Managing Director), Shri D. Madanraj (Director) and Shri S. Murugadoss (Director) to Rs. 2,50,000/- each. The amounts paid as pre-deposits of the penalties shall be adjusted towards the reduced penalties.

Thus, we partly allow the Appeals.

Third party payments for export transactions - Pre-deposit of penalty -Contravention of Regulation 3(2) of Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000 - Directorial liability under Section 42(1) of FEMA, 1999 - Authorised Dealer banks' obligations - Bona fides and FATF norms - Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000 - FEMA Notification No. 14/2000-RB dated 3 May 2000 - RBI A.P. (DIR Series) Circular No.70 dated 08.11.2013 - RBI Circular No.100 dated 04.02.2014 - HELD THAT:- On reading of the provisions of the Regulation 3 (2), it is clear that payment for the export from India had to be made in a currency appropriate to the place of final destination of the export consignment. Such final destination had to be mentioned in the declaration form. The requirement for receiving payment in that currency which is appropriate to the final destination is irrespective of the residence of the buyer of the export consignment. It therefore follows that such destination required to be declared by the exporter would be the one as indicated by the buyer of the export consignment. There is thus no mention about such payment arising from any person other than the buyer and hence the provision for payment from the third party is not even visualised. We also observe that the Appellants have failed to produce any statutory provision, notification or circular as to demonstrate it otherwise.

On perusal of the RBI Circular dated 08.11.2013, it is evident from the title itself that it provided for third party payments for exports/import transactions. - It is with the experience of a few months that further liberalization was made on 04.02.2014, whereby the cautious approach prescribed for the banks was not completely discarded as the banks were still required to be satisfied with the bona fides of the transaction, as well as keep the norms stipulated by the FATF in view. We therefore conclude that the contravention of Regulation 3 (2) of the aforementioned Regulations 2000 had occurred for the export consignments made before 08.11.2013 for which payments for the export proceeds had been received from third party.

In so far as the two individual Appellants are concerned, we concur with the findings made in the Impugned Order. The two individual Appellants have admitted signing the commercial invoices relating to the impugned export consignments. While it may be true that Late Shri Jagdish Prasad Khemka may have been responsible for the export business of the Appellant Company, it cannot be denied that the two individual Appellants participated in the process of the export consignments for which questionable receipt of payments from the third parties had happened.

We find that the ends of justice will be met with the reduction of penalty on the Appellant Company to the amount of Rs. 15,00,000/-. The amounts of penalty of Rs. 3,00,000/- each imposed on the two individual Appellants are maintained, being merely 0.2% of the amount of contravention involved. The pre-deposits of the penalty amount shall be adjusted against the penalties.

Regularisation by ex-post-facto approval of the competent authority- transaction relating to transfer of shares - validation of past contraventions - Company moved Form FC TRS to the RBI through the Authorized Dealer Bank - HELD THAT:- The fact that both the press release dated 23.09.2010 and the letter dated 20.06.2016 specify that the approval to the said transaction is Ex- post-facto, it implies that the failure to obtain the prior approval has been dispensed with and regularized by the Competent Authority. We therefore conclude that the contravention of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 cannot hold good by any of the parties involved. The penalties on the Appellant Shri Joju Baby and on the Appellant Shri Kunjukutty Aniyankunju cannot be sustained.

With respect to the contravention of Section 3(c) of FEMA held against the Appellant Shri Joju Baby, we find that the Appellant could not explain the source of funding of shares. The Ex-post-facto approval does not exempt the necessity to comply with the other requirements of FEMA as stipulated in the letter dated 20.06.2016. We therefore maintain the penalty on the Appellant Shri Joju Baby for the said contravention.

We find that the Order dated 08.02.2019 of this Tribunal has disposed of the Application for waiver of the pre-deposit of the penalty amount with direction to make deposits as pre-deposit. The said amount of pre- deposit shall be adjusted towards the penalty imposed on the Appellant Shri Joju Baby for the said contravention.

We partly allow the Appeal.

Money Laundering - seeking modification of the interim bail condition, confining the petitioner to the jurisdiction of the Trial Court in Kolkata - HELD THAT:- The prayer of the petitioner for modification of the interim bail condition, confining the petitioner to the jurisdiction of the Trial Court in Kolkata, is allowed and he is allowed to reside in his permanent residence at New Delhi. However, it is made clear that the petitioner shall cooperate with the further proceedings before the Trial Court, and make his appearance as and when, it is required.

This order is subject to the final order to be passed in the bail application pending before the High Court.

SLP disposed off.

Levy of service tax - Event Management Service - Fee paid by the appellant to the personalities/speakers, through their booking agents - applicability of reverse charge mechanism - invocation of extended period of limitation with interest and penalty - period of demand between October, 2009 and March, 2012.

Scheme of taxability - HELD THAT:- It is not in dispute that during such period prior to 1.7.2012, the Service Tax was leviable only on the positive list of services as enumerated in Section 65(105) of Chapter V of the Finance Act. If the services strictly fall within such list, then they are taxable and if not, then no tax can be imposed on such service - The expressions “event management” and “event manager” respectively occurring in Section 65(105)(zu) are defined under Section 65(40) and Section 65(41) of the Finance Act respectively - The impugned levy of Service Tax can be sustained only if the service in question falls within the four corners of “event management” by an “event manager”.

Whether the provision covers the service in question? - HELD THAT:- The entire submission of the revenue focuses on the aspect as to whether a “principal-agent” relationship is established between the speaker and the booking agent. However, we are of the view that this is wholly irrelevant for the present controversy. The issue is not whether the relationship between the speaker and the booking agent is that of “principal-agent” or not. The issue is whether the contract constitutes “event management service”. As discussed, the contract is for booking of speaker and not for event management and therefore, the levy of tax on such contract under the category of “Event Management Service” should fail.

The further argument of the revenue that, without the speaker the event would be devoid of any significance and therefore, the service in question is an “Event Management Service”, also deserves to be rejected. That the presence of the speaker is essential for the event cannot be disputed. However, whether the service of the speaker or the agent on behalf of the speaker can be considered to be “event management service” is altogether a different issue. The speaker does not plan, promote, organize or present the event. Thus, the speaker, is neither an “event manager” nor does he provide an “event management service”.

Principle of strict interpretation of taxing statute well established - HELD THAT:- The principle of strict interpretation of a taxing statute, particularly in the context of charging provisions, is well established - reference made to the recent decision in the case of Shiv Steels v. State of Assam [2025 (9) TMI 993 - SC ORDER] wherein this Court observed 'In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of law. If the revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter.'

Circular dated 8.8.2002 also supports the assessee - HELD THAT:- The reliance placed by the assessee on Circular dated 8.8.2002 is also well founded - what is sought to be covered is the service of management or organizing of the event, and the revenue cannot be allowed to stretch the application of such a clause beyond its contours.

Levy fails even on application of common parlance test - HELD THAT:- What is stated in the circular is also the common parlance understanding of “event management”. The common parlance test has been applied by this Court for determining classification under sales tax statutes on various occasions. While deciding whether “charcoal” would be included in “coal” it was observed by this Court in the case of Commissioner of Sales Tax v. Jaswant Singh Charan Singh [1967 (2) TMI 65 - SUPREME COURT] where it was held that 'A sales tax statute, being one levying a tax on goods, must, in the absence of a technical term or a term of science or art, be presumed to have used an ordinary term as coal according to the meaning ascribed to it in common parlance. Viewed from that angle both a merchant dealing in coal and a consumer wanting to purchase it would regard coal not in its geological sense but in the sense as ordinarily understood and would include “charcoal” in the term “coal”.'

Even if this test of interpretation of sales tax statutes is applied for interpreting the clause for imposing Service Tax, the contract in question cannot be considered to be commonly understood as that of event management. The expressions ‘event management’ and ‘event managers’ is commonly understood in the sense of appointing someone to manage or organize the event. Individual contract for booking of persons required for participation in the event are not commonly understood as “event management” contracts.

The impugned judgment and order passed by the Tribunal is hereby set aside - appeal allowed.

Classification Of goods - Works contract service - drilling and blasting and site-preparation services - exempt service under Notification No.25/2012-ST - transitional provisions u/s 174(2)(e) of the CGST Act, 2017 - Imposition for suppression and extended period of limitation - suppression and failure by the appellant to discharge service tax liability - HELD THAT:- Since the Appellant failed to register, file returns, and suppressed the extent of their taxable activities, the demand confirmed under the extended period of limitation and the imposition of penalties for suppression of facts are legally justified.

We note that the said issue is no more res-integra and stands covered by this Tribunal’s decision in M/s. Navdeep Traders [2023 (5) TMI 12 - CESTAT NEW DELHI] held that " undisputedly, the assessee – respondent was purchasing explosives from the authorized seller under a license for being used for the blasting purposes at customer’s site. Though the assessee was not selling the explosive to the mine blaster and was issuing the same for execution of mining works but there is no simultaneous denial to the fact that the assessee was issuing bills to the customer in which they were charging for the explosive material and blasting service separately and that the assessee was paying applicable VAT on the explosive material. From the entire above discussion dominant intention test to ascertain the factum of sale no more holds a good law. "

We respectfully follow the ratio of the aforesaid judgment and set-aside the impugned order. The appeal stands allowed accordingly.

Short payments - Extended period of limitation under the proviso to Section 73(1) - Suppression of facts - Fraud / Collusion / Wilful misstatement - discrepancies between income-tax returns and ST-3 returns - HELD THAT:- It is evident that the records of the appellant were duly audited earlier and the matter in respect of short payments was also adjudicated against the appellant. In such circumstances a show cause notice could not have been issued by invoking extended period of limitation.

This Tribunal has in number of decisions held that extended period of limitation could not have been invoked for making the demand when the appellant was registered and was duly audited, audit cannot said to be a fishing exercise and whatsoever remain could not have been covered by a subsequent show cause notice by invoking extended period of limitation.

Hon’ble Supreme Court has in the case of Stemcyte India Therapeutics Pvt. Ltd. [2025 (7) TMI 1007 - SUPREME COURT] held that- " it is evident that the appellant neither suppressed nor concealed any material facts from the Department. On the contrary, they were in constant communications with the Department, seeking clarifications on whether their services were exempt from the levy of service tax. As already held by us, the show cause notice issued by the Department is time-barred. Therefore, the imposition of penalties is not warranted. "

Thus I do not find any merits in the impugned order and the same is set aside.

Appeal is allowed.

Composite indivisible works contract - Free supply materials - gross value for charging service tax - Extended period of limitation - Apportionment of goods and services - Prospective operation of statutory explanation - failure to assess due service tax and pay the same and non-filing of ST-3 returns for the service -Whether activity of construction of shopping mall by the appellant is classifiable under “Civil and Industrial Construction Service or under Works Contract Service”? - HELD THAT:- There was no charging section specifically for levying service tax only on works contract, and measure of tax with service element derived from gross amount charged for the works contract less value of property in goods transferred in execution of works contract. Therefore, composite contracts which cannot be vivisected have to be dealt with under Works Contract service which is liable to be taxed w.e.f. 01.06.2007 and not prior to that, as there was no such scheme to levy service tax before enactment of Finance Act, 2007 which specifically made such contracts liable to service tax.

We hold that indivisible composite contract awarded to the appellant in this case, is leviable to service tax under works contract service only w.e.f 01.06.2007. For the prior period, it will not be leviable to service tax as held by the lower authorities under civil or industrial construction service. Accordingly, we hold that the demand of service tax against the appellant is sustainable only for the period with effect from 01.06.2007.

As regards Rule 3(2), we find that the appellant had wrongly taken Cenvat credit of Rs.2,866/- in August 2007 which they on their own, paid in 2011 and thus, it can be taken as non availment of Cenvat Credit by the appellant. As the appellant satisfies both the rules, we hold that they are eligible to pay service tax under Works Contract (Composition Scheme For Payment of Service Tax) Rules, 2007.

Regarding free supply materials, we find that CBIC vide Circular No. No.150/1/2012-ST dated 08.02.2012 has clarified that the meaning of the expression, “Gross Amount” appearing in Rule 3(1) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 is qualified by the explanation inserted in the said Rule w.e.f. 07.07.2009. Since, explanation is clarificatory and prospective in nature, inclusion of value of free of cost supplies of goods and services in or in relation to the execution of Works Contract in the gross amount for the purpose of payment of service tax on Works Contract in the Composition Scheme, is a legal requirement only w.e.f. 07.07.2009 when the explanation became part of Rule 3(1). It therefore clarifies that where execution of Works Contract has commenced prior to 07.07.2009, or where any payment (except payment through credit or debit) has been made towards a Works Contract prior to 07.07.2009, then in those cases, gross amount for the purpose of payment of service tax does not include the value of free of costs supplies. In view of the above, of service tax on free supply steel valued at Rs. 2,56,67,261/- is not legally correct and therefore, the same is set aside.

As regards invocation of extended period of limitation, we find that this issue has been discussed in detail by both the lower authorities. The appellant was awarded a Contract for construction of mall in July 2006 and the work began in October-2006. They neither approached the department for clarification whether their activity is liable to service tax nor did they obtain registration and filed ST-3 returns. They took registration in July, 2007 when department, initiated investigation against them on the basis of credible intelligence.

We therefore, agree with the lower authorities that the appellant has suppressed his turn over from the department with intent to evade payment of service tax and therefore, proviso to Section 73(1) has correctly been invocated for demanding the service tax for the larger period. For the same reasons, we also uphold penalty on the appellant under Section 78 of the Finance Act, 1994.

Thus, we deem it fit to remit the matter to the Adjudicating Authority to redetermine service tax liability on the appellant by extending the benefit of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. He shall also redetermine penalty amount on the appellant under Section 78 of the Finance Act,1994.

We uphold penalty of Rs.5,000/- under Section 77(2) of the Finance Act, 1994 for failure to file ST-3 returns in time and also for delayed payment of service tax. We however, set aside penalty on the appellant under Section 76 of the Finance Act, 1994 as penalty under Section 78 is held imposable.

Appeal is disposed of by remand in above terms.

Demand of service tax -extended period of limitation under proviso to Section 73(1) of the Finance Act, 1994 - Suppression of facts with intent to evade payment of service tax - penalty for suppression under Section 78 of the Finance Act, 1994 - interest on confirmed demand under Section 75 of the Finance Act, 1994 - reverse charge liability on GTA services - requirement to file ST-3 returns and self assessment of service tax - production of additional evidence before Commissioner - HELD THAT:- It is settled position in law that when two authorities deciding the matter in separate proceedings record a concurrent finding of fact, then the appellate authority in second appeal, should not disturb the finding of fact till it can be shown to be perverse.

Admittedly appellant has not disclose the value of the services received and provided in their ST-3 returns filed for the relevant period. They have suppressed the values of the services received and provided and had deliberately declared lower value to evade the payment of due taxes. From the ST-3 returns it is evident that the appellant was well aware of his liability to pay the service tax and the method of computation of the same. In fact it is also observed that the appellant payment of service tax during the period of dispute was not in harmony with the ST-3 return filed. Thus it is evident that appellant had deliberate intention to suppress the value in the ST-3 return to evade the payment of due service tax.

No merits in the submissions made for the reason of none invocation of extended period of limitation. The clear case made out against the appellant is of suppression of taxable value in the ST-3 return with intend to evade payment of service tax.

Demand of service tax confirmed for interest is also confirmed. As, upheld the demand of service tax by invoking the extended period of limitation, penalty imposed under Section 78 is also justified, in view of the decision of Hon’ble Supreme Court in the case of M/s Rajasthan Spinning & Weaving Mills Ltd. [2009 (5) TMI 15 - SUPREME COURT].

Classification of service - local short-distance transportation/shifting (with incidental loading/unloading) - to be classified under the category of Goods Transport Agency services or Cargo Handling Services? - HELD THAT:- The issue is no more res-integra in view of the decision of this Tribunal in the case of M/s S.K. Mineral Handling Private Limited Vs. CGST & Central Excise, Bhubaneswar II [2021 (9) TMI 1585 - CESTAT KOLKATA], wherein this Tribunal has observed that 'the demands of Service Tax on transportation charges is not sustainable.'

In view of the above decision of this Tribunal in the case of M/s S.K. Mineral Handling Private Limited, the appellant is not liable to pay service tax under Cargo Handling Services. Therefore, the demand of service tax confirmed against the appellant is dropped.

The appeal filed by the appellant is allowed with consequential relief, if any.

Extended period of limitation - undervaluation of goods - stock transfer to related units - contravention of provisions of Section 4(1)(b) of the Central Excise Act, 1944 read with Rule 8 and Rule 9 of the Valuation Rules - Revenue Neutrality - it was held by CESTAT that 'Accordingly, relying on the decision of this Tribunal in the case of Hindalco Industries [2023 (5) TMI 720 - CESTAT KOLKATA], it is held that it is a revenue neutral situation. No demand is sustainable against the appellant.'

HELD THAT:- Delay condoned - appeal admitted.

Denial of refund claims of the duty paid on clearance of Fatty Acids, Gums & Waxes, generated as waste products during the manufacture of Refined Rice Bran Oil - applicability of principles of unjust enrichment - HELD THAT:- The only ground raised by the Revenue in the grounds of appeal is that this issue has been decided by the Tribunal in favour of the department in the case of CCE vs. A.G. Fats Ltd & others [2011 (7) TMI 968 - CESTAT, NEW DELHI] which has held that the said by-products are dutiable as they have distinct commercial identity and value.

This issue was again considered by the Tribunal in various cases and finally, in the Respondents’ own case, M/S RICELA HEALTH FOODS LTD., M/S J.V.L. AGRO INDUSTRIAL LTD., M/S KISSAN FATS LIMITED VERSUS CCE, CHANDIGARH, ALLAHABAD [2018 (2) TMI 1395 - CESTAT NEW DELHI - LB], the Larger Bench of the Tribunal has held that these products generated during the manufacture of the final product, are exempted from payment of duty.

Unjust enrichment - HELD THAT:- The Respondents have produced the CA Certificate showing as to how much duty has been passed on the buyers and how much duty has been borne by themselves separately, which has been noted by the learned Commissioner (Appeals) also in the impugned OIAs. Though the learned Commissioner (Appeals) has directed the department to determine the extent of duty of incidence that has not been passed by the Respondents to its customers, within 15 days from the receipt of the impugned OIAs, but no contrary evidence has been brought forward by the department, therefore, the allegation of unjust enrichment is not sustainable in the present case.

There are no merits in the appeals filed by the Revenue, hence, the same are dismissed.

Validity of assessment proceedings - audit and the subsequent inspections and assessment carried out were all without proper authorization - HELD THAT:- From the operative portion of the judgment in the case of SRI BALAJI FLOUR MILLS VERSUS COMMERCIAL TAX OFFICER II, CHITTOOR AND OTHERS [2010 (12) TMI 1117 - ANDHRA PRADESH HIGH COURT], it is apparent that for want of authorization as is required under the provisions of APVAT Act, the entire proceedings initiated from the stage of audit would get vitiated. The High Court is therefore inclined to allow the writ petition on this ground alone that the entire proceedings, being without proper authorization being verified by the decision of this High Court in the case of M/s. Balaji Flour Mills.

The next issue to be considered would be in the light of the vitiation of entire proceedings and the order dated 16.11.2008 passed by respondent No.1. The High Court is again inclined to follow the order passed by the High Court in the case of M/s. Balaji Flour Mills wherein also after setting aside the proceedings of the State authorities which was without authorization, the matters stood remitted back to the concerned authorities from the stage of its vitiation, which in the instant case would be the stage of audit.

So far as the aspect whether it would be the petitioner No.1 would be liable to pay the tax or would it be the petitioner No.2 i.e., M/s. Viceroy Hotels Limited, this aspect also is left open to be decided by the authorities after scrutinizing the contract agreement entered into between the petitioner No.1 and petitioner No.2 dated 02.01.2006 - Needless to mention that since petitioner No.2 has already paid tax of Rs.2,23,16,321/- to the Department, in addition the petitioner No.1 also at the time of the admission of the writ petition had, in terms of the order of the High Court, paid another Rs.1,00,00,000/-. Any further claim to be raised on either side would only be done on finalization of proceedings.

The petition is allowed.

Execution of persons who were arrayed as respondents in the consumer complaints but ultimately against whom no notice was issued and the complaints did not proceed - execution on the premise that they were directors/promoters of the judgment-debtor company - HELD THAT:- It is trite that a decree cannot, by process of execution, be employed to shift or enlarge liability so as to bind persons who were neither parties to the decree nor otherwise legally liable thereunder. Where the judgment debtor is a company, the liability of its shareholders or joint venture partners remains confined to the extent of their shareholding or to such guarantees or undertakings as may have been expressly furnished by them - In the present case, the appellant has neither pleaded nor established that the respondents 2 to 9 had furnished any guarantee or surety in respect of the investment made in the project, nor has any material been placed on record to attract the application of Section 14(3) of the IBC.

Once a moratorium has been declared against the judgment debtor company, i.e., ACIPL, the modes of execution contemplated under Section 71 of the Consumer Protection Act, 20196 including attachment and sale of movable or immovable property, attachment of bank accounts, or withdrawal of decretal amounts from the accounts of the judgment debtor, stand interdicted. Execution proceedings cannot, therefore, be permitted to continue indirectly against the respondents 2 to 9, who are neither judgment debtors nor guarantors, and against whom no independent liability under the order allowing the complaints has been established.

The approach adopted by the NCDRC is completely agreed upon, that the CP Act envisages a complete adjudicatory process founded on service of notice, pleadings, opportunity to contest, leading of evidence, and recorded findings of fact and law. These are not mere procedural formalities but substantive safeguards that precede the fastening of liability. In the present case, no such adjudicatory exercise was undertaken qua the respondents 2 to 9. There are no pleadings attributing any personal role to them, no evidence led to establish individual culpability, and no findings returned fixing personal liability. In the absence of these foundational elements, execution proceedings cannot be utilised as a surrogate forum to impose liability where none has been adjudicated.

Importantly, the order did not determine or declare any personal liability of the respondents 2 to 9. On the contrary, this Court expressly left it open to them to raise all objections as to executability and clarified that the question whether they are otherwise liable to comply with the order was required to be decided by the NCDRC in accordance with law. The order dated 17th January, 2024, therefore, merely removed the moratorium-related impediment and did not expand the scope of the order or fasten liability upon the directors.

The impugned order of the NCDRC, which examines the issue of executability against the respondents 2 to 9 on its own merits and declines to proceed against them in the absence of any legal or factual basis for personal liability, cannot be said to be inconsistent with the order of this Court - the NCDRC committed no error of law or jurisdiction in declining to execute the order against persons who were admittedly not parties to the complaints.

Appeal dismissed.

Dishonour of cheque - ingredients of the offence under Section 138 of the N.I. Act -Absence of prima facie case - Abuse of process of law - Vicarious liability under Section 141 - High Court's powers under Article 226 of the Constitution and Section 482 Cr.P.C. - HELD THAT:- In the present case, the allegations do not make out a prima facie case against the petitioner.

Hence, in view of the principle laid down by the Honourable Apex Court in Bhajan Lal’s [1992 (12) TMI 234 - SUPREME COURT] and also in Pawan Kumar Goel’s case [2022 (11) TMI 855 - SUPREME COURT], held that " The Honourable Apex Court held that necessary averments ought to be contained in a complaint before a person can be subjected to criminal process. It was further held that liability under Section 141 of the N.I. Act is sought to be fastened vicariously on a person connected with the company, the principal accused being the company itself. So far as signatory of the cheque, which is dishonoured, is concerned, he is clearly responsible for the incriminating act and will be covered under Section 141(2) of the N.I. Act. Thus, the order of the High Court of Allahabad was upheld by the Honourable Apex Court. "

Thus, the continuation of proceedings against the petitioner herein would be an abuse of process of law.

Accordingly, the Criminal Petition is allowed and the proceedings are hereby quashed against the petitioner herein.

Dishonour of a cheque on account of alteration made in the cheque amount - allegation is that the cheque in question is forged and that the act of forgery has been committed by the respondent - HELD THAT:- The issue as to in what contingencies the offence under Section 138 of the Negotiable Instruments Act would be constituted upon dishonour of a cheque has been deliberated upon by the Supreme Court in the case of M/s Lakshmi Dyechem v. State of Gujarat & Ors. [2012 (12) TMI 106 - SUPREME COURT]. It has been held that 'Dishonour on account of such changes that may occur in the course of ordinary business of a company, partnership or an individual may not constitute an offence by itself because such a dishonour in order to qualify for prosecution under Section 138 shall have to be preceded by a statutory notice where the drawer is called upon and has the opportunity to arrange the payment of the amount covered by the cheque. It is only when the drawer despite receipt of such a notice and despite the opportunity to make the payment within the time stipulated under the statute does not pay the amount that the dishonour would be considered a dishonour constituting an offence, hence punishable.'

Thus, it is clear that so long as an act or omission on the part of the drawer of the cheque is intended to prevent the cheque being honoured, the dishonour would become an offence under Section 138 of the Negotiable Instruments Act. Therefore, in a situation where the drawer of a cheque intentionally appends a different signature on the cheque, which does not match with his specimen signature available in the bank, the offence under Section 138 of the Negotiable Instruments Act would be constituted against the drawer. Similarly, in a case where a drawer intentionally, with a view to prevent the honour of the cheque, makes overwriting/alterations in the cheque, either in the amount mentioned in the cheque or in the date mentioned therein, without authenticating these overwritings or alterations, the offence under Section 138 of the Negotiable Instruments Act would get attracted - Section 87 of the Negotiable Instruments Act provides that any material alteration of a negotiable instrument renders the same void as against one who is a party thereto at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties. An alteration in the amount mentioned in the cheque qualifies to be a material alteration within the meaning of Section 87 of the Negotiable Instruments Act.

In the present case, the alteration which has been made in the cheque pertains to the amount mentioned therein and, as such, it is a material alteration. However, the question remains as to who was responsible for making this alteration. If the said alteration has been made by the accused-drawer of the cheque with a view to defeat the proposed proceedings under Section 138 of the Negotiable Instruments Act against him, he cannot be absolved of his liability for prosecution but if such alteration has been made by payee of the cheque with a view to take undue benefit, the situation may be different. The issue as to which of the parties has made alteration in the cheque, is a question of fact which can be determined only during trial of the case.

Thus, it is clear that the issue as to whether the alterations made in the cheque, which is subject matter of the impugned complaint, have been made at the instance of the petitioner or at the instance of the respondent, can be determined only after trial as the same is a question of fact which cannot be gone into in the present proceedings - It is also pertinent to note here that in the present case, as per the allegations made in the complaint, the petitioner, despite having received the demand notice informing him that the cheque had been dishonoured on account of the reason that the alterations have not been authenticated did not choose to respond to the said notice.

The petition is dismissed leaving it open to the petitioner to project the contentions raised by him in the present petition before the learned trial Magistrate at the appropriate stage during trial of the case.