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Issues: Whether the Special Leave Petition should be entertained despite a delay of 676 days and whether interference with the High Court's order is warranted on merits.
Analysis: The Court noted a gross unexplained delay of 676 days in filing the Special Leave Petition and examined whether such delay could be condoned. Independently, the Court considered the merits of the challenge to the High Court's order and found no reason to interfere. The combined effect of the unexplained delay and absence of merit led the Court to refuse relief.
Conclusion: The Special Leave Petition is dismissed on the grounds of delay and on merits; decision is in favour of the Respondent.
Condonation of delay - delay of 676 days - HELD THAT:- There is a gross delay of 676 days in preferring the present Petition which has not been satisfactorily explained by the petitioner(s). - No good reason to interfere with the impugned order [2023 (6) TMI 685 - JHARKHAND HIGH COURT] passed by the High Court. - Special Leave Petition is, therefore, dismissed on the ground of delay as well as merits.
Issues: Whether an assessment/order passed under Section 74 of the Tamil Nadu Goods and Services Tax Act for the year 2024-2025 is valid where Section 74 was omitted by a 2024 amendment and assessment should instead proceed under Section 74A.
Analysis: The impugned order was examined to determine the statutory basis invoked. The record shows the respondent issued the order under Section 74 despite Section 74 having been omitted by a 2024 amendment. The respondent conceded the use of the incorrect provision. Given the omission, the procedural and substantive requirements for assessment must follow the provision that remains in force, namely Section 74A, and the action taken under the omitted provision cannot stand as a valid assessment. The appropriate remedial course is to treat the impugned order as a show cause notice and permit the assessee to reply, followed by fresh consideration and personal hearing under the correct statutory provision.
Conclusion: The impugned order passed under Section 74 is set aside; the order is to be treated as a show cause notice, the petitioner permitted to file reply/objection within six weeks, and the respondent directed to issue a 14-day notice fixing personal hearing and thereafter pass appropriate orders on merits under the correct provision (Section 74A).
Invalidity of assessment issued under omitted provision - Requirement to invoke substituted provision - Writ jurisdiction of the High Court - Omission by 2024 amendment - HELD THAT:- On a perusal of the records, it is seen that the respondent has passed the impugned order under Section 74 of TNGST Act instead of Section 74A of the TNGST Act. As rightly contended by the learned counsel appearing for the petitioner, already Section 74 of the TNGST Act was omitted by a 2024 amendment, the impugned order is liable to be set aside.
Accordingly, the impugned order dated 04.09.2025 passed by the respondent is set aside. The petitioner is directed to treat the impugned order as show cause notice and file their reply/objection along with the required documents, if any, to the said show case notice, within a period of six weeks from the date of receipt of a copy of this order. On filing of such reply/objection by the petitioner, the respondent shall consider the same and issue a 14 days clear notice, by fixing the date of personal hearing, to the petitioner and thereafter, pass appropriate orders on merits and in accordance with law, after hearing the petitioner, as expeditiously as possible.
Writ Petition is disposed of.
Issues: Whether a minimum gap of three months between issuance of notice under Section 73(2) and passing of final order under Section 73(10) of the Central Goods and Services Tax Act, 2017 is mandatory.
Analysis: The Court examined the language and purpose of Section 73(2) and Section 73(10) of the CGST Act along with related provisions including Sections 73(3) and 73(5) and Section 75. Section 73(10) prescribes an outer limit of three years for passing an adjudication order; Section 73(2) requires that the notice under sub-section (1) be issued at least three months prior to that outer limit. The three-month period is intended to secure procedural safeguards: service of a statement of proposed demand, opportunity to reply and be heard, option for self-assessment and payment within 30 days to avoid penalty, and reasonable time to seek adjournments for personal hearing. Prior decisions of other High Courts interpreting these provisions were considered. On the facts, the notice dated 15-5-2024 and order dated 9-7-2024 demonstrated a gap of about one month and 24 days, falling short of the mandatory three-month period.
Conclusion: The three-month gap between issuance of the notice under Section 73(2) and the final order under Section 73(10) is mandatory. The impugned show cause notice dated 15-5-2024 and the order dated 9-7-2024 are quashed and set aside. The matter is remanded for fresh consideration in accordance with law.
Ratio Decidendi: Where statutory provisions require a minimum period between issuance of a show cause notice and the outer limit for passing an adjudication order, that minimum period is mandatory to secure procedural protections including the right to be heard and the option of self-assessment and payment; failure to maintain the prescribed minimum period renders the notice and ensuing order unsustainable.
Mandatory three months gap between issuance of show cause notice and passing of adjudication order - Outer time-limit for adjudication -principles of natural justice and right to personal hearing - High Court adjudication - Right to personal hearing - HELD THAT:- The rationale behind three month’s time is to afford meaningful opportunity of hearing to the persons like the petitioner. If this time is shortened, the requirement of sub-sections (3) and (5) of Section 73 of CGST Act, which provide for service of a statement upon the noticee, giving all the details of the demand proposed to be raised and option to the assessee by paying tax by doing a self-assessment and to pay the amount, will not be achieved. The another reason is when there is a possibility of an adverse order being passed against tax payer, the facility of obtaining at least three adjournments for personal hearing etc. will be rendered otiose, if the assessment is to be done within the time lesser than three months which will fall short of giving reasonable opportunity of hearing. Thus, the protection guaranteed under the provisions of the CGST Act will not be extended, if the gap of three months between the issuance of notice and passing final order is not maintained.
Thus, we hold that it is mandatory to keep gap of three months between issuance of notice and passing final order under subsection (2) read with sub-section (10) of Section 73 of the CGST Act.
In the present case, the notice has been issued on 15-5-2024 and final order has been passed on 9-7-2024. Thus, there was time gap of about one month 24 days. The order impugned is, therefore, unsustainable.
The petition is, accordingly, partly allowed. Show cause notice dated 15-5-2024 and order dated 9-7-2024 issued by respondent no. 5 are quashed and set aside.
Issues: Whether the underlying principle of Section 14 of the Limitation Act, 1963 applies to exclude the period during which a rectification application filed under Section 161 of the UP GST Act, 2017 remained pending, thereby rendering an appeal under Section 107 of the UP GST Act, 2017 within time.
Analysis: The statutory scheme of the UP GST Act prescribes a three month period for filing first appeals under Section 107(1) and a limited one month power of condonation under Section 107(4). Section 161 permits rectification of errors apparent on the face of record within specified time-limits. Section 14 of the Limitation Act operates to exclude from computation of limitation the time during which a party in good faith and with due diligence prosecutes another proceeding which is prosecuted in a forum unable to entertain it; it is a principle advancing the cause of justice. Where a rectification application under Section 161 is filed within the period prescribed and prosecuted bona fide, the running of limitation for filing an appeal is put in abeyance for the pendency of that application and that period must be excluded under the Section 14 principle. The exclusion does not apply where the rectification application itself is filed beyond the statutory period for rectification. Applying these legal principles to the facts, the rectification application was filed within time and remained pending; therefore the pendency period is excluded from computation of limitation for the appeal.
Conclusion: The principle of Section 14 of the Limitation Act applies to exclude the duration of the bona fide, in-time rectification application under Section 161 from the limitation period for filing the appeal under Section 107; accordingly the appeal was within limitation and the decision is in favour of the assessee.
Principle underlying Section 14 of the Limitation Act - exclusion of time during bona fide proceedings prosecuted with due diligence - rectification of errors apparent on the face of record - appeals to Appellate Authority u/s 107 of the UP GST Act, 2017 - power to condone delay u/s 107(4) - rectification remedy u/s 161 - HELD THAT:- Once the power to condone delay has been specifically provided under Section 107(4) of the Act, that is a special Act, it amounts to necessary and automatic exclusion of the general principle contained in Section 5 of the Limitation Act.
To the extent the statute creates a forum but permits exercise of its jurisdiction only in certain circumstances and not in others, it cannot be said that the application filed by the petitioner was so misconceived to begin with that it may be readily inferred therefrom-either it was not in 'good faith' or that it was not 'bona fide'. Therefore, that conclusion, if reached, would be harsh and may result in unnecessarily restricting natural full applicability of the underlying principle contained in Section 14 of the Limitation Act. That would itself obstruct the cause of justice.
The statutory remedy to seek rectification of our order being in addition to the statutory remedy to file an appeal, at first, limitation to seek either or both those remedies, starts running, simultaneously. If no application is filed under Section 161 of the Act to seek rectification (of a mistake in such order), upto three months, the limitation to seek rectification would expire at the end of three months. In that case, simultaneously, the normal period of limitation to file first appeal against such order would also have run continuously and concurrently and, therefore, it would also be exhausted, simultaneously. If, however, before expiry of three months, an application is filed under Section 161 of the Act, to seek rectification in that order, the running of limitation (to file appeal against such order), would be put in abeyance from the date of filing of such application, upto the date when that application is decided.
To the extent that application is filed 'bona fide' in 'good faith' and is pursued, that principle would apply, without doubt. The only exception to that principle may be-where the application seeking rectification of a mistake is itself filed beyond the period of limitation prescribed under Section 161 of the Act. There no such benefit may arise. Here, that application was filed within the time prescribed under the said provisions.
Consequentially, and without exception, the duration of that application (filed by the petitioner seeking rectification of mistake in the adjudication order dated 23.4.2024), having remained pending, has to be excluded from the limitation to file appeal, as running of limitation remained in abeyance, during pendency of application filed under Section 161 of the Act. Here, that period must be excluded. Thus, the appeal was filed within two months and nine days from the date of the ex-parte adjudication order. The period of limitation being three months, the appeal filed was well within limitation.
Writ petition is allowed.
Issues: (i) Whether supply of a complete set of components of an electric three-wheeler vehicle (e-rickshaw) in Completely Knocked Down (CKD) form, necessary and sufficient for assembly of the finished vehicle, should be classified as the finished vehicle itself and what is the applicable rate of GST; (ii) Whether such supply should be classified as a set of parts and what is the applicable rate of GST.
Issue (i): Whether a CKD consignment of e-rickshaw that includes motor and any three of the four major components (transmissions, axles, chassis, controller) in proportionate numbers qualifies as supply of the finished vehicle and the GST rate applicable.
Analysis: The classification is governed by HSN classification under the Customs Tariff Act and the interpretative Rule 2(a) of the GIRs which permits incomplete or unassembled articles to be classified as complete articles where they possess the essential character of the finished article. The Office Order C.No. VIII/ICD/TKD/6AG/104/2013/pt Dated 12.03.2014 identifies five components that confer essential character to an e-rickshaw; judicial authorities have applied the essential character test to CKD consignments. The Authority applies the essential character test to the facts, requiring motor plus any three of the listed other components in proportionate numbers for assembly.
Conclusion: A CKD consignment that includes motor and any three of the four major components (transmissions, axles, chassis, controller) in proportionate numbers is to be classified as the finished e-rickshaw and is taxable at 2.5% CGST + 2.5% SGST under HSN 87038040.
Issue (ii): Whether a CKD consignment that does not include the motor or is missing any two of the other four major components should be classified as parts and the GST rate applicable.
Analysis: Applying the same essential character test under Rule 2(a) and the Office Order, absence of the motor or absence of any two of the other essential components means the consignment lacks the essential character of the finished vehicle. Such consignments are classifiable as parts/accessories under the relevant tariff entries and carry the rates applicable to those parts as enumerated.
Conclusion: Where the CKD supply lacks the motor or is missing any two of the other four major components in proportionate numbers, the supply is to be classified as components/parts of e-rickshaw and is taxable at 9% CGST + 9% SGST under the relevant entries.
Final Conclusion: The classification and GST rate for CKD consignments of e-rickshaws depends on whether the consignment satisfies the essential character test under Rule 2(a) GIRs read with the referenced Office Order; consignments meeting the specified component threshold are treated as finished vehicles at the lower rate while others are treated as parts at higher rates.
Ratio Decidendi: For HSN and GST classification, an unassembled CKD consignment must be treated as the finished vehicle where, as presented, it possesses the essential character of the finished article under Rule 2(a) GIRs; for e-rickshaws this requires motor plus any three of transmissions, axles, chassis and controller in proportionate numbers.
Essential character - Rule 2(a) of the General Rules for the Interpretation of the Harmonised System - Completely Knocked Down (CKD) - classification as finished vehicle - classification as parts/components - classification under HSN / Customs Tariff
Essential character - Rule 2(a) of the General Rules for the Interpretation of the Harmonised System - Completely Knocked Down (CKD) - classification as finished vehicle - classification under HSN / Customs Tariff - Whether a CKD consignment of e-rickshaw components should be classified as the finished vehicle and the applicable GST rate - HELD THAT: - The Authority applied the 'essential character' test under Rule 2(a) GIRs and the administrative Office Order C.No. VIII/ICD/TKD/6AG/104/2013/pt dated 12.03.2014 (as accepted in judicial decisions) which identifies five components that confer the essential character of an e-rickshaw: transmission, motor, axles, chassis and controller. The Authority held that a CKD consignment will be regarded as the finished e-rickshaw where it includes the motor and any three of the other four major components in proportionate numbers sufficient to assemble the finished vehicle. Where that test is satisfied, the consignment has the essential character of the complete vehicle and must be classified under the HSN entry for electrically operated vehicles (HSN 87038040), attracting GST at 2.5% CGST + 2.5% SGST as per the Schedule and Notification cited. [Paras 4]
CKD consignment containing motor plus any three of the four components (transmissions, axles, chassis, controller) in proportionate numbers is to be classified as the finished e-rickshaw and taxed at 2.5% CGST + 2.5% SGST (HSN 87038040, serial no. 441 of Schedule I).
Essential character - Rule 2(a) of the General Rules for the Interpretation of the Harmonised System - Completely Knocked Down (CKD) - classification as parts/components - classification under HSN / Customs Tariff - Whether a CKD consignment of e-rickshaw components should be classified as parts and the applicable GST rate when the essential character test is not met - HELD THAT: - Relying on the same Rule 2(a) analysis and the Office Order guidance, the Authority held that where the CKD supply does not include the motor, or is missing the motor plus any two of the other four major components (so that the essential character of the vehicle is not established), the consignment cannot be treated as the finished vehicle. In such cases the supply is to be treated as components/parts of an e-rickshaw and classified under the respective tariff entries for parts and accessories, attracting GST at 9% CGST + 9% SGST as enumerated in the decision. [Paras 4]
CKD consignments failing the essential character test (absence of motor, or motor plus two other major components) are to be treated as parts/components and taxed at 9% CGST + 9% SGST under the relevant entries for parts and accessories.
Final Conclusion: The Authority ruled that classification of a CKD consignment of e-rickshaw components depends on the Rule 2(a) 'essential character' test: consignments containing motor plus any three of the four specified major components in proportionate numbers are to be treated as finished e-rickshaws (GST 2.5% CGST + 2.5% SGST), whereas consignments not meeting that test are to be treated as parts/components (GST 9% CGST + 9% SGST).
Issues: Whether appellants, who were released on interim bail under earlier orders but did not physically surrender after withdrawal of that benefit and who continued to appear before the Trial Court, are entitled to grant of regular bail during trial.
Analysis: The appellants were earlier released on interim bail and later, after withdrawal of the interim-bail direction, did not physically surrender but regularly appeared before the Trial Court. The record shows appearances before the Trial Court and no material indicating violation of bail conditions, involvement in unlawful activities, or obstructive conduct during the period of interim release. The justice of incarceration at this stage was examined in light of the appellants' conduct of cooperation with the trial process and absence of any adverse material relating to breach of bail terms.
Conclusion: The appeals are allowed and the appellants are directed to be released on bail subject to furnishing bail bonds to the satisfaction of the Trial Court and subject to such terms and conditions as the Trial Court may impose; failure to appear or breach of conditions will entitle the Trial Court to cancel bail.
Regular bail - interim bail - operating a network of fictitious firms by obtaining GST registrations in the names of their associates and relatives - issue fake bills and invoices - constructive custody - non-surrender - grant and cancellation of bail - cooperation in trial and prohibitions on tampering with witnesses - HELD THAT:- Even though the appellants were released on interim bail due to a benefit extended by this Court, keeping in view the conduct of the appellants in regularly appearing before the Trial Court and the fact that nothing has come forward showing that they have involved themselves in unlawful activities or have violated any of the bail conditions during the period of their release on interim bail, no meaningful purpose would be served by directing their incarceration at this stage.
We, therefore, direct that the appellants be released on bail subject to furnishing of bail bonds to the satisfaction of the Trial Court and subject to such terms and conditions as may be imposed by it.
The appellants shall appear before the Trial Court on the dates fixed, unless exempted; and should the appellants fail to appear on any date without justifiable cause or breach any of the terms and conditions for grant of bail, the Trial Court shall be at liberty to cancel the bail.
We clarify that the observations made in this order and grant of bail will not be treated as findings on the merits of the case.
Appeals are allowed.
Issues: Whether anticipatory bail ought to be granted to the applicant in respect of offences under the Chhattisgarh Goods and Services Tax Act, 2017.
Analysis: The allegation was of evasion under Section 132 of the Chhattisgarh Goods and Services Tax Act, 2017. The material placed before the Court indicated that the offence was not punishable with death or life imprisonment and that the maximum sentence prescribed was five years. The applicant was found to have cooperated with the investigation, and the Court found no likelihood of tampering with evidence or influencing witnesses. The applicant's readiness to comply with conditions, including furnishing bond and appearing as required, was also taken into account.
Conclusion: Anticipatory bail was granted to the applicant.
Anticipatory bail - offence not punishable with death or life imprisonment - no likelihood of tampering with evidence or influencing witnesses - cooperation with investigation - High Court jurisdiction under Section 482 of the Bhartiya Nagarik Suraksha Sanhita, 2023 - Chhattisgarh Goods and Services Tax Act, 2017 - HELD THAT:- From the material collected thus far, it appears that After considering the submissions of both the applicant and the State, this Court finds that the alleged offence under Section 132 of the GST Act, 2017 is not punishable with death or life imprisonment, and the maximum sentence prescribed is five years. The applicant has fully cooperated with the investigation, and there is no likelihood of tampering with evidence or influencing witnesses. Considering the applicant’s willingness to abide by all conditions imposed by the Court, including furnishing personal bond, regular appearance, and non-interference with evidence or witnesses therefore, grant anticipatory bail to the Applicant.
Accordingly, the instant MCRCA is allowed and it is directed that in the event of arrest of the applicant – Sagar Jumnani, on executing a personal bond and one surety in the like sum to the satisfaction of the arresting Officer/competent CGST authority, he shall be released on bail on the conditions.
Issues: Whether the impugned order dated 06.01.2023 imposing interest and penalty for delay in filing GSTR-3B returns for the period April-2020 to March-2021, which duplicates an earlier order for the same period, results in double taxation and is liable to be quashed.
Analysis: Two distinct orders were shown to have been passed by different authorities in respect of delay in filing GSTR-3B for the same period, resulting in overlapping demands for interest and penalty. The duplicate proceedings produce double taxation for the same delay period. The respondent accepted the factual position. In these circumstances, the later order is unsustainable as it duplicates an earlier demand and subjects the same taxable event to repeated recovery.
Conclusion: The impugned order dated 06.01.2023 is quashed and the writ petition is allowed.
Duplication of proceedings - double taxation - delay in filing GSTR-3B returns -penalty and interest - quashing of order - writ petition - HELD THAT:- In the case on hand, two different orders were passed by two different Authorities for imposing delay in filing the GSTR-3B returns pertaining to very same period, viz., April 2020 to March 2021. Hence, it is clear that there is duplication of proceedings, which leads to double taxation. When such being the case, as rightly contended by the petitioner, the impugned order passed by the respondent is not sustainable in law and hence, the same is liable to be quashed. Accordingly, the impugned order dated 06.01.2023 is hereby quashed.
In the result, this writ petition is allowed.
Issues: Whether the assessment order passed under Section 63 of the GST Act and the appellate order under Section 107 can be sustained where an ex-parte assessment was made against an unregistered person due to reliance on portal data and mistaken identity with a registered person, without affording opportunity of hearing.
Analysis: The assessment proceeded on the basis of a temporary GSTIN and data retrieved from WAMIS and other portals which linked turnover entries to the petitioner. The authorities treated the petitioner as unregistered and passed an ex-parte assessment without effective participation by the petitioner. Subsequent clarification from the Superintending Engineer established that the transactional returns related to a different person who is registered under GST and shares an identical name. The authorities conceded that confusion arose from identical names and reliance on uploaded portal data. In these circumstances the assessment and appellate orders rest on a factual mistake and were rendered without affording the petitioner an opportunity to explain or produce clarifying information.
Conclusion: The impugned assessment order dated 12.11.2021 under Section 63 and the appellate order dated 16.02.2024 under Section 107 cannot be sustained and are quashed and set aside; the writ petition is allowed in favour of the assessee.
Ex-parte assessment - Mistaken identity of taxpayer / misattribution of turnover - Reliance on third-party portal data (WAMIS and Income-Tax portal) - Writ jurisdiction of the High Court - HELD THAT:- It is clarified by learned Standing Counsel with reference to letter dated 13.01.2026 that the return in the GST Act filed by the Office of Superintending Engineer was with respect to transaction of a person who happens to be registered under the GST Act assigned with GSTIN 21CFDPD1998GIZO with the identical name as that of the petitioner. Learned Standing Counsel conceded that the present assessment order being passed against a person who remained unregistered under the GST Act under an impression that though he had turnover as uploaded in the WAMIS against Srikant Das. He submitted that confusion arose as the names of both the registered and unregistered persons are identical.
In view of such conceded position and taking note of written instruction(s) of Joint Commissioner of CT & GST, CT & GST Circle, Ganjam-II as furnished by learned Standing Counsel, the impugned order dated 12.11.2021 passed under Section 63 of the GST Act by the Additional CT & GST Officer, Ganjam-II Circle, Ganjam and the appellate order dated 16.02.2024 passed by the Joint Commissioner of State Tax (Appeal), Territorial Range, Ganjam, Berhampur cannot be sustained.
Hence, the aforesaid orders vide Annexures-2 and 3 are hereby quashed and set aside. The Writ Petition is allowed accordingly. Pending Interlocutory Application(s), if any, shall stand disposed of.
Issues: Whether the writ petition seeking quashing of orders passed under the GST Act is maintainable when a statutory appellate forum is available and functional and the petitioner can seek remedy before the Goods and Services Tax Appellate Tribunal by complying with the statutory conditions for filing an appeal.
Analysis: The availability of a statutory right of appeal and the functioning of the appellate forum were examined in the context of the petitioner's challenge to the adjudication and appellate orders under the GST Act. Relevant statutory timelines, notifications and user advisory facilitating filing of appeals before the Appellate Tribunal were considered. The statutory requirement to deposit specified amounts as a condition precedent to filing an appeal under the GST provisions was noted. The appropriateness of exercising writ jurisdiction when an effective alternate remedy exists and is operational was applied to the facts.
Conclusion: The petitioner is relegated to the statutory appellate forum and directed to file appeal before the Goods and Services Tax Appellate Tribunal after complying with the deposit and procedural requirements; the writ petition is disposed of accordingly.
Ratio Decidendi: When a statutory appellate remedy is available and the appellate forum is functional, writ jurisdiction should not be exercised to bypass the statutory remedy; the petitioner must avail the appellate process after satisfying the conditions prescribed by the statute and applicable notifications.
Violation of principles of natural justice - opportunity of personal hearing - writ jurisdiction under Articles 226 and 227 of the Constitution of India - relegation to alternative statutory remedy and maintainability of writ - Goods and Services Appellate Tribunal u/s 112 - requirement of pre-deposit for filing appeal - HELD THAT:- It is no longer res integra that the Writ Court can be approached assailing an order for which the forum of appeal is provided and the same is entertainable in the event the forum is not made functional or constituted as the person cannot be rendered remediless. Equally it is true that if conditions are attached to filing an appeal before such forum, the Writ Court shall ensure strict compliance thereof as a person cannot steal a march taking a shelter that there is no inhibition in the writ Court in entertaining the writ petition and passing an order taking departure from the said statutory provision.
Since the forum has already been provided in the statute, which is now made functional and the period for filing the appeal has been specified in the above Notification/Circular/Order, it would not be proper for the Writ Court to keep such writ petitions pending as the dispute raised by the petitioner in the instant writ petition can be adjudicated by the said forum and, therefore, the writ petition is disposed of with the directions.
This Court makes it clear that we have not expressed any opinion on the merits on the Orders impugned in the writ petition. As a result of disposal of the writ petition, pending Interlocutory Application(s), if any, shall stand disposed of.
Issues: (i) Whether the impugned assessment order should be set aside and the matter remanded because no opportunity of personal hearing was afforded as required under Section 75(4) of the GST law and whether the alternative remedy under Section 107 is efficacious.
Analysis: Section 75(4) mandates that an opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated. The question whether the appellate remedy is efficacious requires examining the relative positions of the authority passing the order and the Appellate Authority; where the authority that refused the advance ruling is superior to the Appellate Authority, the alternative remedy may not be effective in the circumstances. The record shows no personal hearing was afforded and the availability of statutory appeal did not render that defect harmless given the comparative hierarchy and the advance-ruling context.
Conclusion: The impugned order is set aside and the matter is remanded to the assessing authority to reconsider the case afresh after affording an opportunity of personal hearing under Section 75(4) of the GST law. The decision is in favour of the assessee.
Opportunity of hearing - ITC claim - procedure prescribed under the GST Act and without giving any opportunity of personal hearing as contemplated u/s 75(4) - efficacy of alternative remedy / maintainability of writ despite alternative remedy - superiority of advance ruling authority over appellate authority - High Court writ jurisdiction under Article 226 - HELD THAT:- Section 75(4) of the GST Act makes it clear that an opportunity of hearing shall be granted where a request is received. Admittedly, in this case, an opportunity of personal hearing is not afforded to the petitioner. When it comes to the effective alternative remedy, this Court finds force in the argument of the learned counsel appearing for the petitioner that, when the authority who has refused the advance rulings is superior to the Appellate Authority, in the facts and circumstances, it cannot be termed as an effective alternative.
The writ petition is disposed of by setting aside the order dated 12.11.2025 passed by the respondent.
Issues: (i) Whether the challenge to the tax demand confirmed for the tax period 2018-2019, insofar as it concerns alleged belated availment of Input Tax Credit under Section 16(4) and the effect of subsequent statutory amendments, is maintainable; (ii) Whether the levy of interest under Section 50(1) read with Section 75(12) for late filing of GSTR-3B returns is liable to interference.
Issue (i): Whether the surviving demand relating to alleged violation of Section 16(4) stands covered or impacted by the insertion of Sections 16(5) and 16(6) by Finance (No.2) Act, 2024 and rectification of earlier orders, and whether duplication/overlap of demands is prevented.
Analysis: The Court noted that part of the earlier demand for 2018-2019 was rectified by the impugned order dated 17.03.2025 following an application for rectification and that the statutory landscape was altered by the insertion of Sections 16(5) and 16(6) by Finance (No.2) Act, 2024 with retrospective effect. The Court relied on the principles concerning overlapping proceedings and duplication of demands as summarised in the cited precedent, which requires inter-authority communication and protection against show-cause notices duplicating liabilities already covered by an existing notice.
Conclusion: The Court held that the duplication/overlap concern has been addressed and that the surviving demand relating to alleged Section 16(4) violation is governed by the statutory amendments and the rectification effected; this aspect does not merit interference in the writ petition and is not in favour of the petitioner.
Issue (ii): Whether interest charged under Section 50(1) read with Section 75(12) for late filing of GSTR-3B returns is liable to be set aside.
Analysis: The Court observed that interest was levied on account of belated payment of tax and late filing of returns, and that there was no basis in the petition to interfere with the statutory imposition of interest for late filing.
Conclusion: The Court held that there is no scope for interference with the levy of interest; this aspect is decided against the petitioner.
Final Conclusion: The writ petition is dismissed as the petitioner has not established grounds to disturb the surviving demand related to alleged belated availment of Input Tax Credit and the statutory interest charged for late filing of returns; connected petitions are closed.
Ratio Decidendi: Where an earlier demand has been rectified and statutory amendments govern the availability of Input Tax Credit, and where interest is statutorily leviable for late filing, a writ petition will not ordinarily interfere with the surviving tax demand or with the statutory levy of interest absent demonstrable illegality or failure to follow the safeguards against duplication of proceedings.
Belated availment of Input Tax Credit - Duplication/overlap of demand and consolidation of proceedings - Interest for late filing of GSTR-3B and belated payment of tax - Statutory retrospective amendment - Writ jurisdiction under Article 226 - Interplay between Central and State tax authorities and guidelines on overlapping inquiries - HELD THAT:- Prima facie, the issue, as far as Section 16(4) violation is concerned, stands covered by statutory intervention in view of insertion of Section 16(5) and 16(6) by way of Finance (No.2) Act, 2024, dated 16.08.2024, w.e.f. 27.09.2024 vide SO 4523(E) w.r.e.f 01.07.2017. The demand that was confirmed by the Order dated 29.05.2024 for the tax period 2018-2019, which was also covered by the Order-In-Original No. 09/2024- GST dated 19.04.2024, has now been rectified by the impugned Order dated 17.03.2025, pursuant to an application filed on 27.08.2024 to rectify the Order dated 29.05.2024.
Thus, the surviving demand is only on account of the difference in the amount confirmed by the Central Authority by Order-In-Original No. 09/2024-GST dated 19.04.2024 on account of the alleged violation of Section 16(4) of the respective GST Act and on account of the interest due and payable by the petitioner for late filing of GSTR-3B returns. The interest has been levied under Section 50(1) read with Section 75(12) of the respective GST enactments.
As far as the payment of interest is concerned, there is no scope for interference, as interest is due and payable by the petitioner on account of belated payment of tax and late filing of returns in GSTR-3B. Therefore, this writ petition is liable to be dismissed.
Accordingly, this Writ Petition is dismissed.
Issues: (i) Whether the Special Leave Petition is liable to be dismissed for inordinate delay of 512 days in filing without sufficient cause; (ii) Whether the Special Leave Petition merits interference on merits.
Issue (i): Whether the SLP is barred by inordinate delay lacking sufficient cause.
Analysis: The Court examined the period of delay and the absence of sufficient cause and recorded that the delay of 512 days was inordinate and no adequate explanation was furnished to justify condonation of delay.
Conclusion: The SLP is dismissed on the ground of inordinate delay and lack of sufficient cause; decision is in favour of the Assessee.
Issue (ii): Whether the SLP is maintainable on merits and warrants interference.
Analysis: The Court considered the merits of the petition and found no substance warranting interference with the impugned order.
Conclusion: The SLP is dismissed on merits; decision is in favour of the Assessee.
Final Conclusion: The Special Leave Petition is dismissed both on the ground of delay and on merits; pending applications, if any, are disposed of.
Ratio Decidendi: A Special Leave Petition with an inordinate unexplained delay may be dismissed for want of sufficient cause, and where no substantive merit is shown, interference is refused.
Validity of orders passed u/s.201 as barred by limitation -time limits prescribed in case where deductee is a non-resident - “reasonable time limit” when no time limit has been prescribed by the Parliament in case of non-residents?
HC [2024 (4) TMI 1367 - KARNATAKA HIGH COURT] answered substantial questions of law in favour of the Assessee.
HELD THAT:- There is an inordinate delay of 512 days in filing the special leave petition for which no sufficient cause has been shown Even otherwise we do not see any merit in this special leave petition. Hence, the special leave petition is dismissed both on the ground of delay as well as on merit.
Outcome: Delay condoned. The Special Leave Petition was dismissed, and pending applications were disposed of.
Validity of reopening of assessment - approval of specified authority u/s 151 - three (3) years had elapsed from of the end of the relevant AY
HC [2024 (1) TMI 759 - DELHI HIGH COURT] decided the impugned notices and orders in each of the above-captioned writ petitions are quashed on the ground that there is no approval of the specified authority, as indicated in Section 151(ii) of the Act.
HELD THAT:- Having heard the learned counsel appearing for the petitioners and having gone through the materials on record, we find no good ground to interfere with the impugned order passed by the High Court.
Special Leave Petition is, accordingly, dismissed.
Reopening of assessment u/s 147 - change of opinion - claims regarding lease payments, foreign currency transactions, and depreciation on goodwill - HC [2025 (2) TMI 545 - GUJARAT HIGH COURT] concluded that notice issued u/s 148 is hereby quashed and set aside.
HELD THAT:- Having heard the learned counsel appearing for the petitioners and having gone through the materials on record, we find no good ground to interfere with the impugned order passed by the High Court.
Special Leave Petition is, accordingly, dismissed.
Outcome: Delay condoned. The Special Leave Petition was dismissed and the pending applications were disposed of.
Validity of revision order u/s 263 - ITAT set aside the CIT’s order passed under Section 263 of the Act also confirmed by HC - HELD THAT:- Having heard the learned counsel appearing for the petitioner and having gone through the materials on record, we find no good ground to interfere with the impugned order passed by the High Court.
Special Leave Petition is, accordingly, dismissed.
Issues: (i) Whether sums recovered by an employer from employees as contribution to provident/ESI funds are income under Section 2(24)(x) and whether deduction under Section 36(1)(va) is available only if such sums are credited to the relevant fund on or before the statutory due date; (ii) Whether the non-obstante clause in Section 43B applies to employees' contributions for the purpose of allowing deduction on deposit by the due date of filing of return under Section 139(1).
Analysis: The Court recorded that High Courts are divided: one line treats employees' contributions as employer's income under Section 2(24)(x) and permits deduction under Section 36(1)(va) only if credited by the statutory due date specified under the relevant fund enactments; another line treats employees' and employer contributions as governed by Section 43B, allowing deduction if deposited by the due date for filing returns under Section 139(1). The Court referred to the conflicting authorities and observed that Explanation 5 to Section 43B and distinctions drawn in previous cases warrant consideration.
Conclusion: The Court did not decide the issues on merits but issued notice and listed the matter for further hearing returnable in four weeks; Dasti permitted.
Final Conclusion: The dispute concerning (i) the treatment of employees' contributions as income and the temporal condition for deduction under Section 36(1)(va) and (ii) the applicability of Section 43B is referred for adjudication by the Court; no final decision on the merits has been rendered in this order.
Employer's contributions u/s 36(1)(iv) and employees’ contributions covered u/s 36(1)(va) r/w Section 2(24)(x) -Distinction between employer's contribution and employees' contribution - Applicability of non-obstante clause of Section 43B - 'due date' for crediting employees' contribution - two School of thoughts as regards the interpretation of the words “due date” -Whether non-obstante clause in Section 43B cannot be applied to employees' contributions governed by Section 36(1)(va)?
HELD THAT:- As per Section 2(24)(x), any amount recovered by the employer from the employees towards their contribution to any provident or superannuation fund or any other fund set up under the provisions of the ESI Act, 1948 or any other fund for the welfare of the employees is income.
Section 36(1)(va) of the Act says that any sum so received by the assessee - employer from his employees to which provisions of Section 2(24)(x) applies, the assessee - employer shall be entitled to deduction while computing income under Section 28, if such sum is credited by the assessee - employer to the employees account before the due date.
The Explanation to Section 36(1)(va) says that the 'due date' means the date by which the assessee-cemployer is required to credit the employees contribution in the relevant fund under any Act, Rule, Order or Notification issued thereunder.
There are two School of thoughts as regards the interpretation of the words “due date”.
A combined reading of the Section 2(24)(x) and that Section 36(1) (va) of the Act, prima facie is indicative that any sum received by the assessee - employer from any of his employees as contribution towards PF & ESI is the income of the assessee under Section 2(24)(x) and it continues to be so, unless it is credited by the assessee - employer to the employee's account in the relevant fund on or before the due date specified under the relevant PF, ESI Act.
The employee's contribution towards PF, ESI received by the assessee - employer is his income under Section 2(24)(x) and if he wants to have it deducted from his income under Section 36(1)(va), he must credit the same to the employee's account in the relevant fund on or before the due date specified under the relevant PF,ESI Act.
The other view is that there is no difference between employees and employer contribution to PF, ESI and both would be guided by the provisions of Section 43B of the Act so as to allow deduction in the hands of the assessee - employer if the contributions are deposited on or before the due date of filling of return under Section 139(1) of the Income Tax Act, 1961.
In view of the conflicting opinion, as referred to above, we would like to look into this issue.
Issue notice, returnable in four weeks.
Validity of re-assessment order when the deduction claimed by the assessee is prohibited under the Income-tax Act - change of opinion - jurisdictional parameters for reopening assessment - maintainability of appeal on substantial question of law - HC [2025 (3) TMI 1587 - BOMBAY HIGH COURT] held that this appeal does not involve any substantial question of law because the jurisdictional parameters for reopening the assessment were clearly not fulfilled.
ITAT has correctly pointed out that specific queries were raised and responded to. No reassessment proceedings could have been initiated based merely on a change of opinion on the same material.
HELD THAT:- We are not inclined to interfere with the impugned judgment and order of the High Court; hence, the special leave petition is dismissed.
Outcome: Delay condoned. Special leave petition dismissed. Pending application(s), if any, disposed of.
TCS u/s 206C - compounding fees received from illegal miners/transporters of minerals - Scope of Mines and Minerals (Development and Regulation) Act, 1957/ ‘the MMDR Act’ - offenders who do illegal mining or transportation/storage without having lease or license or have not entered into the contract for transfer of right in Mines or Quarry and from whom Compounding Fine is collected as per provisions under Rule 71(5) of the Chhattisgarh Minor Mineral Rules, 2015 -
As decided by HC [2025 (6) TMI 2041 - CHHATTISGARH HIGH COURT] ITAT is completely unjustified in holding that compounding fee/fine (TCS) would be chargeable u/s 206C(1C) of the IT Act by relying upon the definition contained in Section 2(47) of the IT Act. Accordingly, we are unable to uphold the judgment & order passed by the ITAT relying on Section 2(47) of the IT Act.
HELD THAT:- We are not inclined to interfere with the impugned judgment and order of the High Court; hence, the special leave petition is dismissed.
Application for condonation of delay u/s 264(3) - delay of seven (7) years in preferring the revision petition before PCIT against the rejection of its application for rectification - as decided by HC [2025 (9) TMI 1737 - TELANGANA HIGH COURT] sufficient cause made out for explaining such inordinate delay on the part of the assessee - HELD THAT:- We are not inclined to interfere with the impugned judgment and order of the High Court; hence, the special leave petition is dismissed.
Outcome: The Special Leave Petitions were dismissed and the interlocutory application(s), if any, were disposed of.
Income deemed to accrue or arise in India - business connection in India within the provision of section 9(1)(i) - permanent establishment (PE) in the form of the Indian Subsidiary or not - Payment of royalty on the use of software - profits can be attributed to the PE or not? - consideration for licensing fee for right to use of software taxability as 'Royalty' within the definition of 'Royalty' as defined in Explanation 2 to section 9(1)(vi) of the Income Tax Act, 1961?
ITAT and HC [2025 (1) TMI 1754 - DELHI HIGH COURT] held no business connection of assessee in India anddid not have any a permanent establishment (PE) and amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, liable to be answered against the Revenue
HELD THAT:- We are not inclined to interfere with the impugned judgment(s) and order(s) passed by the High Court.
Special Leave Petitions are dismissed and the accompanying interlocutory application(s), if any, stands disposed of.
Outcome: The appeals and special leave petitions were dismissed as not pressed on withdrawal by the appellant following settlement.
Deduction u/s 80P - contention of the revenue that the appellant society having granted registration under the Kerala Co-operative Societies Act, 1969 and the Rules as a "Miscellaneous Society" and therefore assessee cannot be treated as a society engaged in collective disposal of labour of its members and therefore is not eligible/entitled for the deduction u/s 80P(2)(a)(vi) - HC [2021 (12) TMI 103 - KERALA HIGH COURT] held questions are answered in favour of the Revenue and against the assessee.
HELD THAT:- As appellant(s) has instructions from his client(s), not to press these appeals/SLP and withdraw the same in the wake of settlement arrived at with the department.
The appeals/SLP accordingly, stand dismissed as not pressed.
Failure to furnish the return - Offence U/s 276CC of the Income Tax Act, 1961 - The accused/Assessee has not rendered any valid and cogent reasons for filing the Income Tax Return for the Assessment year, 1994-95 after the lapse of 7 months - respondent had applied for the compounding of the offence before the filing of the complaint against her in Court
HELD THAT:- Pursuant to this Court’s orders [2025 (8) TMI 1766 - SC ORDER] and [2025 (10) TMI 1353 - SC ORDER] respectively, the appellant has moved an application showing his willingness to compound the offence to which, the respondent-Authority has positively responded and resultantly the offence in question has been compounded vide order dated 20.01.2026.
A copy of the said order has been produced before this Court by learned ASG, Mr. Satya Darshi Sanjay, appearing for the respondent and the same is made a part of the records of the present appeal. Learned counsel for the parties submit that as the offence has been compounded, nothing survives in the appeal.
In view of the above, we dismiss the appeal as having become infructuous.
Issues: Whether the Revenue could invoke clause (ix) of the explanation to Section 153B of the Income-tax Act, 1961 to claim extension of limitation on the basis of a reference made to the FT&TR Division under the India-Hong Kong exchange-of-information protocol.
Analysis: The relevant treaty provisions were compared with the earlier India-Swiss protocol and it was found that the Hong Kong protocol permitted disclosure only of information preceding the effective date, provided the information was foreseeably relevant for a fiscal year or taxable event following that date. On that construction, the request could not cover the assessment year in question, which fell outside the permissible temporal scope of the treaty mechanism. Since the reference itself was not valid for the relevant assessment year, the Revenue could not derive the benefit of the extended limitation period under clause (ix) of the explanation to Section 153B.
Conclusion: The reference to FT&TR was impermissible for the relevant assessment year and the limitation period was not extended; the finding in favour of the assessee was sustained.
Final Conclusion: The appeals failed and the Tribunal's view that the assessment orders were time-barred was upheld.
Ratio Decidendi: A foreign-tax-information reference can extend limitation under Section 153B only when the treaty provision relied upon authorises disclosure for the relevant fiscal year or taxable event; if the request falls outside that temporal reach, the Revenue cannot claim extension of time.
Exchange of Information - Advantage of extension of limitation period by a year, as provided in clause (ix) of the explanation to Section 153(B) - Limitation and time-barred assessments- Scope of treaty between India and Swiss Confederation - reference to the Foreign Tax and Tax Research Division (FT&TR) relying on Article 26 of the IndiaHong Kong treaty, so as to enable assessment for AY 2017-18 - information relatable to the fiscal year
HELD THAT:- Close and comparative reading of the relevant parts, which have been bolded by us, reveals that the treaty between India and Swiss Confederation, provides that the protocol will be applicable for information that relates to any fiscal year beginning on or after the first day of January of the year next following the date of its signature.
The expression therefore, means that the Article 26 of Treaty of India and Swiss Confederation would apply to any information relatable to the fiscal year, after 01.01.2011 (date of amendment being 30.08.2010) meaning thereby 01.04.2011.
Clause 5(c) of the Protocol to Article 26 of the treaty between India and Hong Kong, which came into force on 30.11.2018 provides that the information can be provided for a fiscal year or taxable event falling after such date. Hence, the information can be elicited for a transaction having taxable event after 01.04.2019 or at best after 30.11.2018.
If the aforesaid Clause 5(c) of Article 26 of the treaty between India and Hong Kong is taken into account, it clearly postulates that the Income Tax Department can elicit any information relevant to Financial Year 2019-20 or for the Assessment Year 2020-21 in respect of the transaction taking place after 01.04.2019 or a transaction qua which the taxable event is 01.12.2018.
As an upshot of the discussion foregoing, we are of the considered view that the AO could not demand any information for the Assessment Year 2017-18.
Hence, may be for different reason that has been recorded by the Tribunal, the reference made to FT&TR was improper and impermissible in the eye of law. Therefore, the AO cannot get the advantage of extension of limitation period by a year, as provided in clause (ix) of the explanation to Section 153(B) of the Act of 1961.
To this limited extent only, the judgment of this Court rendered in the case of Sneh Lata Sawhney [2025 (5) TMI 1338 - DELHI HIGH COURT] is relevant regardless of the covenants. Appeal fails.
Issues: Whether the interest expenditure of Rs. 1,06,32,156 claimed by the assessee is allowable as deduction under section 57(iii) of the Income-tax Act, 1961 against interest income.
Analysis: The Tribunal examined the factual and documentary material admitted during the first appellate proceedings, including confirmations, ledger accounts and computation of income, and the remand report called from the Assessing Officer. The Tribunal noted that interest income from loans advanced to M/s Ariha Diamonds Jewellery Pvt. Ltd. was disclosed and offered to tax, and that borrowings used to fund those advances attracted interest which was paid by the assessee. Having considered the statutory test under section 57(iii) and the authorities on intent and nexus, the Tribunal found that the material on record established a direct and proximate nexus between the interest paid and the interest income earned; the Assessing Officer had not challenged the genuineness of the income or expenditure in the remand proceedings; and the denial of deduction solely for lack of documentary linkage was not sustainable in view of the admitted evidence and remand process.
Conclusion: The disallowance of interest expenditure of Rs. 1,06,32,156 under section 57(iii) is set aside and the appeal is allowed in favour of the assessee.
Ratio Decidendi: Deduction under section 57(iii) is allowable where the expenditure is incurred wholly and exclusively for the purpose of earning income from other sources and a direct/proximate nexus between the expenditure and such income is established; admission of relevant evidence and absence of adverse findings in remand proceedings preclude rejection of the claim merely for lack of formal documentary linkage.
Disallowing deduction of interest expenditure claimed under the head “Income from Other Sources” u/s 57(iii) -interest income arose out of loans and advances given by the assessee to one company - intention evident - intention and nexus of the expenditure with the income-earning activity.
HELD THAT:- The factual substratum unmistakably establishes that there existed a direct nexus between interest received and interest paid.
Once the AO has not doubted either the genuineness of the interest income received or the genuineness of the interest expenditure paid by the assessee to various lenders, the denial of deduction under section 57(iii) solely on the premise of alleged lack of nexus becomes unsustainable on both facts and in law.
The essence of section 57(iii) lies in whether the expenditure has been laid out wholly and exclusively for the purpose of making or earning income under the head “Income from Other Sources”.
In the present case, the assessee has demonstrated that the borrowings were utilised for advancing loans to the company from which interest income was earned, and the net interest income has been duly subjected to tax.
CIT(A) has proceeded to uphold the disallowance on the footing that the assessee failed to furnish documentary proof regarding usage of borrowed funds and failed to demonstrate a direct link between borrowed funds and the interest-earning loan.
Such a conclusion is contrary to the material placed on record, particularly when the confirmations, ledger accounts and computation of income collectively establish a proximate and live nexus between the interest expenditure and the interest income.
Once the additional evidences were admitted and a remand report was called for, and in the absence of any adverse finding by the Assessing Officer in the remand proceedings doubting the genuineness of the transactions, it was not open to the learned CIT(A) to reject the claim merely on conjectural grounds.
It is also well-settled in the case of CIT v. Rajendra Prasad Moody [1978 (10) TMI 133 - SUPREME COURT] that the expression “for the purpose of making or earning such income” in section 57(iii) does not require that the income should in fact have been earned in the relevant year, and what is relevant is the intention and nexus of the expenditure with the income-earning activity. In the present case, not only is the intention evident, but the income has in fact been earned and taxed. Therefore, the reliance placed by the learned CIT(A) on the said judgment to deny the deduction is wholly misplaced - Appeal of the assessee is allowed.
Issues: (i) Whether imposition of penalty under section 271AAC(1) read with section 274 of the Income-tax Act, 1961 is maintainable while the assessee's quantum appeal raising a substantial question of law is pending disposal before the High Court; (ii) Whether the penalty order is invalid on the ground that penalty proceedings were initiated without recording a valid satisfaction as required.
Issue (i): Whether imposition of penalty under section 271AAC(1) r/w section 274 is maintainable pending disposal of a substantial question of law admitted by the High Court.
Analysis: The Tribunal noted that the High Court of Delhi has admitted a substantial question of law in the assessee's quantum appeal (order dated 27.03.2025) covering relevant assessment years. The Tribunal treated the admission of the substantial question as making the imposition of penalty debatable and recognised the pendency of the High Court proceeding as material to the appropriateness of continuing with penalty adjudication at this stage. The Tribunal considered the parties' requests and the departmental representative's suggestion to keep the appeal pending until the High Court decision.
Conclusion: The Tribunal set aside the penalty order and the appellate order upholding it, holding that imposition of penalty is not maintainable at this stage and directing that the Assessing Officer may initiate penalty proceedings after the substantial question of law is decided by the High Court. The conclusion is in favour of the assessee.
Issue (ii): Whether the penalty order is invalid for lack of recorded satisfaction prerequisite to initiation of penalty proceedings under section 271AAC(1) r/w section 274.
Analysis: The Tribunal recorded the assessee's contention that initiation of penalty proceedings required recording of a valid satisfaction, which was alleged to be absent. While noting this ground, the Tribunal's operative decision was driven by the pendency of the substantial question of law before the High Court and the debatable nature of the penalty; the Tribunal therefore set aside the penalty order without finally adjudicating the correctness of the recorded satisfaction issue, leaving the Assessing Officer liberty to proceed afresh after the High Court decision.
Conclusion: The Tribunal did not uphold the penalty; it set aside the penalty order and appellate order without making a final finding on the recorded-satisfaction point. The practical effect is favourable to the assessee.
Final Conclusion: The appeal is allowed and both the Assessing Officer's penalty order dated 29.11.2023 and the Commissioner (Appeals)' order dated 13.06.2025 are set aside; the Assessing Officer may initiate fresh penalty proceedings after the High Court decides the admitted substantial question of law.
Ratio Decidendi: Where a substantial question of law raised in the assessee's quantum appeal has been admitted by the High Court and is pending, continuation or final adjudication of penalty proceedings under section 271AAC(1) r/w section 274 may be set aside as debatable pending the High Court's decision, permitting the assessing authority to reconsider initiation of penalty proceedings thereafter.
Levy of penalty u/s 271AAC(1) r.w.s. 274 - Hon'ble High Court of Delhi pertaining to assessment years 2013-14 to 2019-20 has admitted the question of law.
HELD THAT:- In view of above material facts especially pendency of appellant’s quantum appeal before the Hon'ble High Court of Delhi on substantial question of law. The orders of Ld. CIT(A) and penalty order are set aside. Ld. AO will be at liberty to initiate penalty proceedings after decision of substantial question of law by the Hon'ble Delhi High Court. Appeal of filed by the assessee is allowed.
Issues: (i) Whether the securitisation trust was a revocable trust within the meaning of sections 61 to 63 of the Income-tax Act, 1961; (ii) whether the trust could be assessed as an Association of Persons and whether section 164 applied; (iii) whether the income of the trust was taxable in its own hands or in the hands of the Security Receipt Holders.
Issue (i): Whether the securitisation trust was a revocable trust within the meaning of sections 61 to 63 of the Income-tax Act, 1961.
Analysis: The trust deed provided a mechanism for revocation of contributions by the Security Receipt Holders, with re-transfer of the trust fund and extinguishment of the security receipts on revocation. The statutory expression "revocable transfer" is wide and does not require unilateral or unconditional revocation. A collective or conditional mechanism for re-transfer is sufficient to attract section 63.
Conclusion: The trust was held to be revocable within the meaning of sections 61 to 63 of the Income-tax Act, 1961.
Issue (ii): Whether the trust could be assessed as an Association of Persons and whether section 164 applied.
Analysis: The trust was constituted under the securitisation framework and not by persons voluntarily joining together in a common enterprise. There was no common volition or joint management among the Security Receipt Holders, and the beneficiaries were identifiable with reference to the trust deed and contribution records. Once the transfer was held revocable, the special charging scheme under sections 61 to 63 displaced the attempt to apply section 164.
Conclusion: The trust could not be assessed as an Association of Persons and section 164 was inapplicable.
Issue (iii): Whether the income of the trust was taxable in its own hands or in the hands of the Security Receipt Holders.
Analysis: The statutory scheme and the governing trust deed treated the securitisation structure as a pass-through arrangement. Consistent co-ordinate bench decisions on identical trust deeds had already held that such income is not assessable in the hands of the trust.
Conclusion: The income was not taxable in the hands of the trust and was taxable in the hands of the Security Receipt Holders.
Final Conclusion: The Revenue's challenge failed, the deletion of the addition was sustained, and the trust's pass-through treatment was affirmed.
Ratio Decidendi: Under sections 61 to 63 of the Income-tax Act, 1961, a trust deed containing a structured right of revocation and re-transfer creates a revocable transfer even if revocation is collective or conditional, and such a securitisation trust cannot be taxed as an Association of Persons or under section 164 when the beneficiaries are identifiable.
Revocable OR Vocable trust - Status of a trust/AOP- Entitlement of benefit of section 61 to 63 of the I.T. Act not being revocable trust - treatment as Association of Persons - addition made on account of business income, income from other sources, disallowances of Protection preservation, Insurance Expenses and Management Charge and interest income - Whether assessee is not are vocable trust since contributors have practically no over the income arising out of the activities of the fund and the contribution can be revoked only with the consent of the contributors holding 75% of the units?
Whether the assessee trust is liable to be assessed as an Association of Persons, whether the trust is revocable or irrevocable for the purposes of sections 61 to 63 of the Income-tax Act, 1961, and consequently whether the income can be brought to tax in the hands of the trust by invoking section 164 of the Act? - HELD THAT:- On a plain reading of Clause 5.2 of the Trust Deed, we find that the Security Receipt Holders are expressly conferred a right to revoke their contributions during the subsistence of the trust. Upon such revocation, the entire Trust Fund stands re-transferred to the Security Receipt Holders or their designees in proportion to their holdings, the scheme itself stands dissolved, the trustee ceases to act as trustee, and the Security Receipts stand extinguished. These provisions clearly satisfy both limbs of section 63(a), namely -
i. a provision for re-transfer of assets, and
ii. a right to re-assume power over the assets, albeit through a structured and collective mechanism.
The contention of the Revenue that revocation requiring consent of a specified percentage of holders negates revocability has been expressly rejected by the Co-ordinate Bench. As decided in ITO-21 (3) (2) MUMBAI VERSUS M/S SCHEME A1 OF ARCIL CPS 002 XI TRUST [2020 (9) TMI 465 - ITAT MUMBAI] categorically rejected the precise objection raised by the Revenue in the present case, namely that revocation being conditional would render the transfer irrevocable.
Section 63 does not mandate unilateral or unconditional revocation, and that a revocation mechanism embedded in the governing instrument is sufficient. Collective revocation does not dilute the revocable character of the transfer. The learned CIT(A), in our view, has rightly relied upon decision in ITO v. Scheme A1 of ARCIL CPS 002 XI Trust (Supra).
Assessing Officer has further sought to assess the assessee as an Association of Persons, invoking section 164 on the premise that beneficiaries are indeterminate and that the trust carries on business with a profit motive. We are unable to agree with this approach.
Firstly, the formation of the assessee trust is statutorily mandated under the SARFAESI Act and RBI Guidelines. The trust is not a voluntary association of persons coming together for a common purpose, but a regulatory vehicle created for securitisation. The trustee functions independently and exclusively in accordance with the Trust Deed. There is no joint management, no sharing of responsibilities, and no common volition among Security Receipt Holders so as to constitute an AOP.
Secondly, the beneficiaries are clearly identifiable with reference to the Trust Deed, Offer Documents and contribution records, and their respective shares are determinable in proportion to Security Receipts held. Merely because the names of beneficiaries are not set out in the Trust Deed itself does not render the trust indeterminate. This position is well settled by judicial precedents relied upon by the assessee and accepted by the learned CIT(A).
Thirdly, once it is held that the trust is revocable, section 164 has no independent application. Sections 61 to 63 override section 164 in cases of revocable transfers. The Assessing Officer’s attempt to apply section 164, therefore, proceeds on an incorrect legal premise.
The issue before us is no longer res integra. The Mumbai Benches of the Tribunal, in a series of decisions involving ARCIL securitisation trusts with identical trust deeds, have consistently held that such trusts are revocable within the meaning of section 63, income is not taxable in the hands of the trust, and the trust cannot be assessed as an AOP.
The legislative intent to treat securitisation trusts as pass-through entities is further reinforced by later amendments and CBDT clarifications. The Finance Bill, 2016 expressly recognised securitisation trusts, including those set up by ARCs, as vehicles through which income is to be taxed in the hands of investors and not the trust.
In view of the foregoing discussion, we hold as under:
1. The assessee trust is a revocable trust within the meaning of sections 61 to 63 of the Act.
2. The income arising from the trust is not chargeable to tax in the hands of the trust, but in the hands of the Security Receipt Holders.
3. The assessee cannot be assessed as an Association of Persons, and section 164 has no application to the facts of the case.
4. The learned CIT(A) has correctly appreciated the statutory scheme, the Trust Deed, and the binding judicial precedents, and has rightly deleted the addition made by the Assessing Officer.
Issues: (i) Whether delay in filing should be condoned; (ii) Whether notice should be issued and the matter listed for further consideration.
Issue (i): Whether delay in filing should be condoned.
Analysis: The Court considered the application for condonation of delay and granted relief allowing the petition to proceed despite the delay. The order records the condonation without detailed reasoning.
Conclusion: Delay condoned in favour of permitting the petition to proceed.
Issue (ii): Whether notice should be issued to the opposite party and the matter listed for further consideration.
Analysis: The Court considered submissions on the substantive question (including reference to Section 3(12) of the Customs Tariff Act and related authorities) and directed issuance of notice to the respondent, waived service on respondent No.1, and listed the matter for further consideration on a specified date. Parties were directed to complete pleadings and file a short note of submissions with case law compilation.
Conclusion: Notice issued; service waived on respondent No.1; matter listed for further consideration.
Final Conclusion: The Court has granted interim procedural reliefs (condonation of delay and issuance of notice) and directed further proceedings; no substantive or final adjudication on the fiscal question has been made.
Condonation of delay - delay in filing of case-law - Legislation by reference - power to levy IGST includes levy of interest and penalty - interpretation of taxation statute - constitutional interpretation - HELD THAT:- Attention to Section 3(12) of the Customs Tariff Act prior to its amendment by Finance Act 2 of 2024 (extracted at page 21 of the paper-books). The learned Additional Solicitor General contends that in view of this provision, there is a legislation by reference. Hence, the power to levy IGST would also encompass the power to levy interest and penalty. The learned Additional Solicitor General refers to the judgment of the Constitution Bench in Ujagar Prints & Ors. v. Union of India & Ors. [1988 (11) TMI 106 - SUPREME COURT] and, more particularly, paragraphs 85,88,95 and 96.
In response, learned counsel for the respondents relies on the dismissal of the Special Leave Petition in the case of Union of India & Ors. v. Mahindra & Mahindra [2023 (8) TMI 135 - SC ORDER] as well as the judgment of this Court in CCE Ahmedabad v. Orient Fabrics Limited [2003 (11) TMI 75 - SUPREME COURT] and more particularly, paragraphs 5,6,7 and 20 thereof. Considering the nature of issue involved, we are inclined to issue notice.
Learned Advocate, instructed by M/s. Trilegal Advocates accepts notice on behalf of the respondent No. 1. Hence, service of notice is waived on respondent No. 1.
Issues: (i) Whether this High Court has territorial jurisdiction to entertain writ petitions challenging non-transmission/non-processing of shipping bills for MEIS benefits where the Regional Authority (DGFT, Jaipur) is located in Rajasthan; (ii) Whether petitioners entitled to have MEIS benefit claims considered despite inadvertent clerical/electronic error in marking the shipping bill (option N instead of Y) and whether they can be allowed to resubmit/modify the online option for processing by the Regional Authority.
Issue (i): Whether the writ petitions are maintainable before the Rajasthan High Court on territorial jurisdiction grounds.
Analysis: The forwarding role of the Customs officer in Gujarat under the online EDI scheme is ministerial; the ultimate authority to adjudicate entitlement to MEIS benefits lies with the Regional Authority of DGFT located at Jaipur. The petition pleads that part cause of action arises in Rajasthan because the Regional Authority is the competent body to process and adjudicate the MEIS claims.
Conclusion: Territorial jurisdiction objection is overruled; the writ petitions are maintainable before the Rajasthan High Court.
Issue (ii): Whether petitioners can have their MEIS claims considered despite an inadvertent omission/clerical error in the online declaration and be permitted to resubmit/convert the option from N to Y for processing by DGFT RA Jaipur.
Analysis: Precedent from multiple High Courts supports allowing claims where substantive entitlement exists and denial arises from technical or ministerial electronic/default errors. Section 149 (customs amendment/rectification mechanism) and the electronic filing framework (EDI) permit correction of such inadvertent errors and transmission to the Regional Authority for adjudication. The petitioners have shown that the omission was inadvertent and that other uploaded particulars manifest intention to claim MEIS benefits; the competent authority (RA Jaipur) is directed to process the corrected/resubmitted applications in accordance with law.
Conclusion: Petitioners are entitled to resubmit/convert the online option from N to Y and have their MEIS claims processed by the Joint Director General of Foreign Trade/Regional Authority at Jaipur; writ petitions allowed on merits in favour of the petitioners.
Final Conclusion: The petitions are allowed: territorial jurisdiction is proper in Rajasthan and substantive relief is granted permitting curative resubmission and processing of MEIS claims by the competent Regional Authority; no costs awarded.
Ratio Decidendi: Where a substantive entitlement to export incentive exists, denial based solely on an inadvertent electronic or clerical omission in the online declaration is not justified; such ministerial/technical lapses are rectifiable and the competent Regional Authority must consider corrected/resubmitted claims under the statutory and policy framework governing MEIS.
Territorial jurisdiction under Article 226 cause of action arising where Regional Authority sits - Merchandise Exports from India Scheme (MEIS) entitlement despite technical or ministerial error - Inadvertent clerical error / electronic default in EDI filing and correction - Customs officer as forwarding authority / ministerial role of Customs in transmission of shipping bills - Regional Authority of DGFT as competent authority to adjudicate MEIS claims - Foreign Trade Policy 2015-2020 - Chapter 3, Handbook of Procedures procedure for claiming MEIS - HELD THAT:- No manner of doubt in the facts that the Custom Officer at Gujarat is merely a forwarding authority of the application in question. Once it is digitally signed and uploaded online, it has to be forwarded to the concerned Regional Authority of the DGFT for taking further appropriate action on the same.
Clearly in order to seek the benefit of the scheme, the Competent Authority being the Regional Authority, Jaipur part cause of action, if not all, arises in the State of Rajasthan.
There is tacit admission in the reply, as above, on the part of the respondents. Had the application been filed before the Customs Officer opting ‘Y’, in that event, Regional Authority would have had the further jurisdiction to deal with the matter. Thus, these writ petitions can be entertained by this Court.
Furthermore, it is not even the case of the respondents that this court is denuded of its territorial jurisdiction qua the respondent No.4 i.e., the Joint Director of Foreign Trade, who is Regional Authority being located at Jaipur, which is in Rajasthan.
The Regional Authority being the final Competent Authority to adjudicate on the matter, we see no reason why the instant set of writ petitions cannot be entertained. Accordingly, it is so ruled and the preliminary objection is found to be not maintainable and over ruled.
Speaking on merits, learned counsel for the petitioners would rely on judgments rendered by the different High Courts i.e. the Madras High Court, Gujarat High Court, Bombay High Court and Kerala High Court and submits that all of them have been unison in opining that a benefit, if otherwise a person or entity is entitled, once the substantive condition stands satisfied, cannot be denied due to technical errors or any ministerial default and/or any lacunae caused either by electronic system or human inadvertence.
On being confronted with the ratio rendered in the judgments ibid, the respondents would submit that as per the principle enunciated therein, there is no dispute that they hold the field even as on today. None of these judgments have been challenged in the Supreme Court, he would respond on a court query.
Thus, we see no reason why the benefit thereof be not given to the petitioners therein.
Accordingly, these writ petitions are allowed with a direction to respondent No.4 i.e. DGFT that the petitioners be allowed to resubmit their online applications to seek benefit of Merchandise Export of India Scheme by converting their option from N to Y and the same be thereafter processed by the Competent Authority i.e. Joint Director of Foreign Trade/Regional Authority at Jaipur in accordance with law.
Issues: Whether paragraph No.6 of the impugned communication restricting an F-card holder to the issuing customs division and preventing him from representing the applicant for a customs broker licence in another customs jurisdiction is legally valid.
Analysis: Regulation 4(2) of the Customs Brokers Licensing Regulations, 2018 prescribes that an application for a licence shall be made to the authority having jurisdiction over the area where the applicant intends to carry on business. The challenge concerns a restriction placed on an F-card holder's ability to represent a company outside the division where the F-card was issued. The respondents did not dispute that an F-card holder may represent interests across jurisdictions subject to CBLR, 2018, while requiring compliance with other identified deficiencies. The impugned paragraph imposes a categorical restriction confining practice to the issuing division which is not supported by the statutory framework and is therefore beyond the authority conferred by the Regulations.
Conclusion: Paragraph No.6 of the impugned communication is set aside as being without authority under law; the remaining deficiencies identified in the communication continue to apply and the petitioner has undertaken to comply with them.
F-card holder's right to represent - Customs brokering licence - territorial jurisdiction of application - Administrative restriction without authority - Compliance with CBLR, 2018
F-card holder's right to represent - Customs brokering licence - territorial jurisdiction of application - Administrative restriction without authority - Compliance with CBLR, 2018 - Validity of paragraph No.6 of the impugned communication dated 17.10.2025 which restricted an F-card holder to the Coimbatore jurisdiction and prevented him from representing the petitioner before Chennai Customs for the purpose of obtaining a customs brokering licence. - HELD THAT: - The Court accepted the uncontested position that an F-card holder is entitled, under the CBLR, 2018, to represent the interest of a party before customs authorities beyond the jurisdiction where the F-card was issued. The respondents' communication imposing a restriction confining Mr. G. Venkatesan to the Coimbatore jurisdiction (paragraph No.6) was held to be without authority under law and therefore arbitrary. The Court noted the petitioner's undertaking to comply with the other deficiencies in the impugned communication (paragraph Nos.1 to 5) and limited its interference to setting aside only the territorial restriction contained in paragraph No.6, leaving the remaining deficiencies to be complied with in accordance with CBLR, 2018. [Paras 7, 8]
Paragraph No.6 of the impugned communication dated 17.10.2025 is set aside as being without authority; other deficiencies noted in paragraph Nos.1 to 5 remain to be complied with under CBLR, 2018.
Final Conclusion: The writ petition is disposed of by setting aside the territorial restriction in paragraph No.6 of the impugned communication; the petitioner and the F-card holder must comply with the other deficiencies under CBLR, 2018, and the petition is closed with no order as to costs.
Issues: Whether the seized gold bar was liable to confiscation as smuggled goods and whether the burden under Section 123 of the Customs Act, 1962 was attracted on the facts of the case.
Analysis: The gold bars were found to have moved through a documented domestic chain of transactions, with purchase traced from M/s. Kundan Care Products Ltd. to M/s. J.J. House Pvt. Ltd. and then to M/s. Dutta Bullion Mart. The revenue did not produce corroborative evidence to establish that the particular gold bar was of foreign origin or had entered the country through an illicit route. In such circumstances, the statutory burden under Section 123 arises only when there is a reasonable belief that the goods are smuggled, which was not established here. The absence of cross-examination of the principal witness and the lack of supporting material further weakened the case for confiscation.
Conclusion: The gold bar was not proved to be smuggled goods, Section 123 of the Customs Act, 1962 was inapplicable, and the confiscation and penalty were not sustainable. The appeal was rejected.
Smuggling - Burden of proof in customs proceedings - smuggled nature of the gold -Confiscation of goods - Penalty under customs law - Admissibility and reliance on statement when cross-examination not permitted - Proof of domestic chain of transaction / lawful acquisition - HELD THAT:- From the grounds of appeal, we find that the main ground raised by the Revenue is that the Ld. Commissioner of Customs (Appeals) has failed to appreciate the fact that the burden of proof under Section 123 of the Customs Act, 1962 was not discharged by the Respondent. In this regard, we observe that the burden of proof shifts to the Respondent only when there is a reasonable belief that the gold in question was of smuggled in nature.
In the present case, the Revenue has admitted that the gold was originally purchased from M/s. Kundan Care Products Ltd., under tax invoices. Thus, the evidence available on record confirms the purchase of the gold from domestic sources. Thus, we hold that the provisions of Section 123 of the Customs Act, 1962 are not applicable to the facts and circumstances of the present case.
Admittedly, the facts regarding the sale of the gold bar itself indicates that the respondent has purchased the same from domestic sources. We also find that the Department has not produced any evidence to substantiate its allegation that the said gold bar no. 151551 is of foreign origin. Therefore, in the absence of any corroborative evidence by the Revenue to establish the smuggled nature of the gold bar in question, we hold that the gold in question cannot be held liable for confiscation.
Ld. Commissioner of Customs (Appeals), Custom House, Kolkata has passed the impugned order dated 16.08.2021 setting aside the Order-in-Original dated 05.03.2020 and ordered for unconditional release of the gold bar bearing no. 151551 weighing 999.900 grams in favour of the Respondent. We fully agree with the above findings given by the Ld. Commissioner (Appeals) and do not find any reason to differ with the same.
Accordingly, we uphold the impugned order passed by the Ld. Commissioner (Appeals) and reject the appeal filed by the Revenue.
Issues: (i) Whether manganese ore subjected to washing, removal of waste, crushing and sizing ceased to be ore and became concentrate so as to deny exemption from countervailing duty under Notification No. 12/2012-CE; (ii) Whether interest was payable on the duty demand in the facts of provisional assessment.
Issue (i): Whether manganese ore subjected to washing, removal of waste, crushing and sizing ceased to be ore and became concentrate so as to deny exemption from countervailing duty under Notification No. 12/2012-CE.
Analysis: The imported goods were not run-of-mine ore but had undergone processing before shipment. The relevant chapter note deems conversion of ores into concentrates as manufacture, and the adjudicatory record showed screening, sizing, crushing and removal of overburden and foreign matter. In the light of the deeming provision, the HSN explanation and the strict construction applicable to exemption notifications, the processes were treated as converting the ore into concentrate. The claimed exemption was therefore held unavailable.
Conclusion: The issue was decided against the appellants and in favour of the Revenue.
Issue (ii): Whether interest was payable on the duty demand in the facts of provisional assessment.
Analysis: The order records that, following the applicable statutory position and the earlier coordinate decision relied upon, interest becomes payable where duty remains unpaid after the relevant liability is determined, and the provisional character of assessment did not exclude such consequence on the facts found.
Conclusion: The issue was decided against the appellants and in favour of the Revenue.
Final Conclusion: The exemption claim failed, the duty demand was sustained, and the appeals did not succeed.
Ratio Decidendi: Where goods of Chapter 26 are subjected to processing that removes foreign matter and improves the ore into concentrate, the deeming provision treating conversion of ore into concentrate as manufacture excludes the goods from an ore-only exemption notification.
Conversion of ores into concentrates - imported consignments characterised as Manganese Ore - entitlement to exemption from Countervailing Duty (CVD) under Notification No.12/2012-CE (S. No.56) - deeming provision in Chapter Note 4 to Chapter 26 - manufacture as defined in section 2(f) - classification under Chapter Heading 2602 (Manganese ores and concentrates) - HELD THAT:- Admittedly, the ore has been supplied in terms of contract and certain specifications stipulated by the appellants. It is not an ore in the form, which has emerged in the mine i.e., Run of Mine (ROM) Ore. There is also a clear finding of the adjudicating authority based on evidence on record that process of screening and sizing, etc., has been carried out on ROM ore before it is shipped to the appellants. Even crushing of ore and removal of overburden i.e., stone etc., has taken place. The issue is whether these are normal process or special process.
We find that similar issue has been dealt by this Tribunal in the case of M/s Sarda Energy & Minerals Ltd & Ors Vs CC, [2026 (1) TMI 532 - CESTAT HYDERABAD], wherein, in the similar set of facts and admitted positions, it was held that the subject processes undertaken on ROM ore has resulted into emergence of concentrate, keeping in view the chapter note and HSN explanation, which is a distinct excisable goods in view of deeming provisions.
Even on the issue of interest in the facts of the case, it was held that in terms of statutory provisions, which are quite clear that when there is delay in payment of duty due, applicable interest is required to be paid. Thus, following the said order, we find in the facts of the case, the appellants would not be eligible for exemption claimed by them at the time of import in respect of impugned goods.
We, therefore, do not find any merit in the appeals filed by the appellants and accordingly, the appeals are dismissed.
Issues: Whether invocation of the extended period of limitation and imposition of penalties under Sections 112(a) and 114AA of the Customs Act, 1962 is sustainable where the importer correctly described the imported goods in the Bills of Entry but claimed an incorrect tariff classification in bona fide belief, and whether such conduct amounts to misdeclaration attracting retrospective duty and penalties.
Analysis: The Tribunal examined the sample Bills of Entry, commercial invoice and accompanying documents and found that the description of the goods as lithium-ion battery (reference number BT.00603.041 BTY PACK LI+6C Sanyo (Battery), (computer parts)) was correctly and fully disclosed. Applying the established legal principle that where full and correct particulars as to the nature of goods are disclosed, a mistaken classification made in bona fide belief does not constitute misdeclaration warranting invocation of the extended period, the Tribunal relied on precedents which hold that wrong classification alone, without suppression or dishonest intention, cannot sustain extended period demands or penalties. The Tribunal also considered the impact of self-assessment/ACP/RMS procedures and held that mere facilitation under such schemes does not, by itself, convert a bona fide classification error into suppression or misdeclaration capable of attracting extended limitation or penal provisions.
Conclusion: Invocation of the extended period of limitation and imposition of penalties under Section 112(a) and Section 114AA are not sustainable in the present case; the goods were correctly described and the classification error was bona fide, therefore the demand under extended period and penalties are set aside and the appeal is allowed in favour of the appellant.
Misdeclaration - Classification of goods - invocation of the extended period of limitation - imposition of penalties under Sections 112(a) and 114AA - Self-assessment / Accredited Client Programme (ACP) / RMS - Bona fide belief - Appropriation of duty - HELD THAT:- On going through the sample Bill of Entry for the relevant period enclosed with the paper book, we find that the appellant had declared the description of the product as ‘BT.00603.041 BTY PACK LI+6C Sanyo (Battery), (computer parts)’ and the commercial invoice enclosed at page 53 of the paper book conforms to the battery reference number indicating that there is no misdeclaration as far as the description of the imported goods are concerned.
In these circumstances, we find that the ratio laid down by the Hon’ble Supreme Court in the case of Northern Plastic Ltd. [1998 (7) TMI 91 - SUPREME COURT] is squarely applicable to the facts of the present case. Their Lordships held that when an appellant provides full and correct particulars as regards the nature and size of the goods, it is difficult to believe that they have misdeclared with a dishonest intention for evading payment of CVD. Consequently, their Lordships held that the appellant had not misdeclared the imported goods either by making a wrong declaration as regards to the correct classification of the goods or by claiming benefit of an exemption which are not found to be applicable to the imported goods.
Thus, we are of the view that the correct classification of the impugned goods is CTH 85076000 / 85078000; however, invocation of extended period of limitation is bad in law in absence of misdeclaration of the description of the goods; merely declaring classification under incorrect heading of the Customs Tariff Act, later changed by the Department would not invite penal provision. Consequently, imposition of penalty under Section 112(a) and Section 114AA of the Customs Act, 1962 also cannot be sustained, which are set aside. Appeal is disposed of accordingly.
Issues: Whether the revocation of the CHA licence and forfeiture of the security deposit could be sustained when the inquiry report was prepared without examining the relevant records and without affording a fair opportunity to the appellant.
Analysis: The inquiry report itself showed that the inquiry officer had called for the connected documents from Chennai Customs but had not received them, yet proceeded to record findings against the appellant. The resulting decision was based on an incomplete inquiry and on material that had not been properly verified. Since the appellant could not effectively defend the allegations without the underlying records, the process suffered from a serious breach of fair hearing requirements. The Tribunal also noted that a previous adverse finding in another matter could not dispense with the department's obligation to independently prove the present case.
Conclusion: The revocation and forfeiture order was not sustainable and the appeal was allowed in favour of the appellant.
Revocation of Customs House Agent licence - Forfeiture of security deposited - Violation of principles of natural justice - Reliance on inquiry report without relevant records - Burden of proof - Procedural fairness -Requirement of independent proof in each adjudication - HELD THAT:- During the investigation, the concerned inquiry officer gave his conclusion without examining or verifying the relevant records. The inquiry officer committed a serious error in the inquiry and taking any action on the basis of such inquiry amounts to a grave legal error. It can also be concluded that the inquiry officer must not have provided copies of such records either because when he himself did not receive the records then how could he have given them to the appellant and also how the appellant could have defended himself. Thus, the principles of natural justice have not been followed and the appeal deserves to be allowed on this ground alone.
It is true that appellant was found guilty in that matter, however, merely being found guilty in any other case, cannot be the basis for holding him guilty in the present case. The department must prove the case against the individual independently in each case, which they failed to do so in the present appeal.
Therefore, in view of our findings and observations above, the appeal is allowed with consequential relief, if any, as per law.
Issues: (i) Whether the imported manganese ore, after crushing, screening, sizing and related processes, continued to qualify as ore eligible for exemption under Notification No. 4/2006-CE or had to be treated as concentrate under Chapter Note 4 to Chapter 26; (ii) whether interest was chargeable on the differential duty arising from the denial of exemption.
Issue (i): Whether the imported manganese ore, after crushing, screening, sizing and related processes, continued to qualify as ore eligible for exemption under Notification No. 4/2006-CE or had to be treated as concentrate under Chapter Note 4 to Chapter 26.
Analysis: The imported goods were not treated as run-of-mine ore but had undergone processes undertaken to meet contractual specifications, including screening, sizing, crushing and removal of waste. In the light of the deeming provision in Chapter Note 4 to Chapter 26, the process of converting ore into concentrate is treated as manufacture. Once such a legal fiction applies, concentrates are distinct from ores and do not fall within an exemption notification confined to ores. The prior circular and earlier decisions relied upon by the appellant were distinguished on the footing that they did not displace the statutory effect of the deeming provision in the facts found.
Conclusion: The exemption was rightly denied and the imported goods were liable to be treated as concentrate, against the assessee.
Issue (ii): Whether interest was chargeable on the differential duty arising from the denial of exemption.
Analysis: The differential duty was held payable on the imported goods after denial of exemption, and the Tribunal applied the statutory consequence that delayed payment of duty carries interest.
Conclusion: Interest was chargeable, against the assessee.
Final Conclusion: The appeal failed in full, and the denial of exemption together with the consequential duty liability and interest was sustained.
Ratio Decidendi: Where a statutory deeming provision treats conversion of ore into concentrate as manufacture, an exemption limited to ores cannot be extended to concentrates, and the legal consequence of delayed duty payment includes interest where duty is found payable.
Classification of ores versus concentrates - conversion of ores into concentrates amounts to manufacture - strict construction of exemption notification - Notification No.4/2006-CE dt.01.03.2006 - applicability of interest for delayed duty - recovery of differential duty - HELD THAT:- In this case, admittedly, the ore has been supplied in terms of contract and certain specifications stipulated by the appellant. It is not an ore in the form which has emerged in the mine i.e., Run of Mine (ROM) Ore. There is also a clear finding of the adjudicating authority based on evidence on record that process of screening and sizing, etc., has been carried out on ROM ore before it is shipped to the appellant. Even crushing of ore and removal of overburden i.e., stone etc., has taken place.
We find that similar issue has been dealt by this Tribunal in the case of M/s Sarda Energy & Minerals Ltd & Ors Vs CC, Visakhapatnam [2026 (1) TMI 532 - CESTAT HYDERABAD], wherein, in the similar set of facts and admitted positions, it was held that the subject processes undertaken on ROM ore has resulted into emergence of concentrate, keeping in view the chapter note and HSN explanation, which is a distinct excisable goods in view of deeming provisions.
Even on the issue of interest in the facts of the case, it was held that in terms of statutory provisions, which are quite clear that when there is delay in payment of duty due, applicable interest is required to be paid. Thus, following the said order, we find in the facts of the case, the appellants would not be eligible for exemption claimed by them at the time of import in respect of impugned goods. We, therefore, do not find any merit in the appeal filed by the appellant and accordingly, the appeal is dismissed.
Issues: Whether the penalty imposed on the customs house agent (co-noticee) under Section 112(a) of the Customs Act, 1962 is sustainable where the Tribunal has held the goods not liable for confiscation under Section 111 and set aside the penalty on the importer for erroneous classification.
Analysis: The decision examines applicability of Sections 111 and 112(a) of the Customs Act, 1962 in cases of erroneous classification. The Tribunal's earlier final order held that where the import corresponds to the declared description and value but involves an erroneous classification, the provisions justifying confiscation under Section 111 do not apply; consequently, penalty under Section 112(a) was held unsustainable against the importer. The issue addressed is whether a co-noticee (customs house agent) can be penalised under Section 112(a) when the principal noticee's penalty and confiscation finding have been set aside on the ground of mere erroneous classification. The reasoning applies the principle that liability for penalty under Section 112(a) cannot be sustained against a co-noticee when the foundational finding of confiscation and corresponding penalty against the importer has been quashed for being based on erroneous classification.
Conclusion: The penalty imposed on the customs house agent under Section 112(a) is set aside; the appeal is allowed with consequential relief in accordance with law.
Confiscation and penalty for erroneous classification - Liability of customs house agent as co-noticee - Section 111 of the Customs Act, 1962 - HELD THAT:- Since the goods have already been held by this Tribunal to be not liable for confiscation u/s. 111 ibid, the penalty imposed on the appellant herein – CHA u/s.112 (a) ibid also cannot be sustained. The appellant, being a co-noticee and not the importer, cannot be visited with penalty when the same has been set aside for the main noticee by this Tribunal [2019 (10) TMI 460 - CESTAT MUMBAI].
Accordingly the impugned order, so far as it relates to imposition of penalty on the appellant u/s. 112(a) ibid, is hereby set aside. The Appeal is allowed with consequential relief, if any, in accordance with law.
Issues: (i) Whether the Flexible Printed Circuit (FPC) Board is classifiable under Tariff Item 8534 00 00 (Printed Circuits) of the Customs Tariff Act, 1975 or under Tariff Item 8517 71 00 (Aerials and parts) of the Customs Tariff Act, 1975.
Analysis: The Authority examined the product specification and manufacturing process and applied the legal framework comprising Note 8 to Chapter 85 and the HSN Explanatory Notes defining "printed circuits" as circuits formed on an insulating base by printing/etching processes, including passive components but excluding active elements. The Authority also applied Note 2(a) to Section XVI and the General Rules of Interpretation (GRI), which require classification under a specific chapter heading when the goods fall within it, and the rule preferring a specific description (GRI 3(a)) over a general one. Evidence on record establishes that the FPC is an unpopulated flexible printed circuit fabricated by etching on Flexible Copper Clad Laminate (FCCL), lacks active signal-processing components, and is imported unpopulated. Departmental submissions that the FPC functions in an antenna system were considered but held insufficient to displace classification under 8534 because the product does not itself transmit, amplify, or modulate signals and thus fits the definition of printed circuits. Precedents and foreign rulings were noted as persuasive only. The Authority also addressed maintainability under Section 28E(b) and held that an advance ruling can be issued in respect of goods prior to importation even if the import activity is ongoing.
Conclusion: The Flexible Printed Circuit (FPC) Board is classifiable under Tariff Item 8534 00 00 of the Customs Tariff Act, 1975. The applicant's request for an advance ruling is allowable.
Classification of goods - Flexible Printed Circuit (FPC) Board - parts suitable for use with aerials - classifiable under Tariff Item 8534 00 00 (Printed Circuits) Or under Tariff Item 8517 71 00 (Aerials and parts) - General Rules of Interpretation (GRI) Rule 1 - Note 8 to Chapter 85 - Note 2(a) to Section XVI - HSN Explanatory Notes - advance ruling - HELD THAT:- The importer has already imported FPC Board on commercial level and it is an ongoing activity. During personal hearing on being asked the importer has clarified that after changes made in Section 28E(b), there is no requirement of a 'proposed activity' and ruling can be obtained on ongoing activities also and it will be applicable prospectively. The same stand has been taken by Authority of Advance Ruling in earlier case also. In view of above, there is no bar in issuing advance ruling for any ongoing activity and ruling can be obtained in respect of any good prior to its importation or exportation clearly denote that such ruling will have prospective effect in respect of the goods for which ruling is obtained.
It is pertinent to note that Note 8 to Chapter 85 unequivocally defines "printed circuits" as circuits obtained by forming conductor elements on an insulating base-through processes such as etching, plating-up, or film-circuit techniques-comprising passive components (e.g., conductors, resistors, capacitors) while expressly excluding active elements (e.g., semiconductors).
Furthermore, Note 2(a) to Section XVI mandates that parts classifiable under a specific heading within Chapter 84 or 85 (such as CTH 8534) must invariably be classified under that heading, precluding their classification as parts of another apparatus (e.g., CTH 8517). This legal principle is sacrosanct and admits of no exception.
In the instant case, the applicant has furnished comprehensive technical specifications, product catalogues, and corroborative documentation pertaining to the "FPC Board."
Merely on the ground that earlier product was being classified differently, the applicant cannot seek change in classification. The law position is settled in this regard that there is no estoppel against assessee in claiming change in classification of goods. In this regard, I rely upon Tribunal judgement in case of Crompton Greves Vs CEE Aurangabad [1996 (8) TMI 190 - CEGAT, NEW DELHI] The above said case was affirmed by Hon'ble Supreme Court [2001 (12) TMI 869 - SC ORDER] I rely on above case law and hold that the applicant can claim change in classification on merit. In this case after due examination on merit; it is my considered view that FPC Board incontestably falls within the ambit of CTH 8534 00 00, which encompasses circuits formed on insulating bases through diverse printing techniques.
Thus, it is my considered and unequivocal conclusion that the "Flexible Printed Circuit (FPC) Board" is rightly classifiable under Tariff Item 8534 00 00 of the Customs Tariff Act, 1975
Outcome: Special Leave Petition dismissed on the ground of delay and on merits, with the question of law kept open.
Condonation of delay - HELD THAT:- There is a gross delay of 406 days in filing the Special Leave Petition which has not been satisfactorily explained by the petitioners. Even otherwise, we see no reason to interfere with the impugned order [2024 (8) TMI 408 - BOMBAY HIGH COURT] passed by the High Court.
Special Leave Petition is, therefore, dismissed on the ground of delay as well as merits.
Issues: (i) Whether the personal guarantee had been validly invoked before filing the Section 95 application. (ii) Whether the Section 95 application was incomplete or non-maintainable for want of invocation of guarantee and for non-filing of the personal guarantor's income-tax returns.
Issue (i): Whether the personal guarantee had been validly invoked before filing the Section 95 application.
Analysis: The guarantee deed contemplated a written demand by the lender to the guarantor for payment of the lessee's dues. The record showed a legal notice dated 07.12.2020 addressed to both the corporate debtor and the personal guarantor, recalling the outstanding amount and demanding payment from the guarantor as well. That notice preceded the Rule 7 notice dated 14.12.2020. The reasoning that only the Rule 7 notice could be considered was incomplete because it did not examine the earlier legal notice, which satisfied the contractual mode of invocation.
Conclusion: The guarantee was validly invoked before the Section 95 application was filed.
Issue (ii): Whether the Section 95 application was incomplete or non-maintainable for want of invocation of guarantee and for non-filing of the personal guarantor's income-tax returns.
Analysis: Once the legal notice of 07.12.2020 was treated as the invocation notice, the foundational objection to maintainability failed. The absence of income-tax returns did not render the application defective because the prescribed form required disclosure of annual income to the extent known, and not compulsory filing of returns. The interim moratorium under Section 96 commences on filing of a valid Section 95 application, and the objection that no moratorium arose therefore could not stand.
Conclusion: The Section 95 application was maintainable and not defective on the grounds accepted by the Adjudicating Authority.
Final Conclusion: The impugned order rejecting the Section 95 petition could not be sustained. The petition and connected applications stood revived for fresh consideration under the insolvency framework.
Ratio Decidendi: Where the guarantee deed requires a written demand, a pre-Rule 7 legal notice expressly demanding payment from the personal guarantor can validly invoke the guarantee, and the omission to annex income-tax returns does not by itself make a Section 95 application non-maintainable unless the prescribed form or the statute makes such filing mandatory.
Invocation of personal guarantee - maintainability of application u/s 95 - interim-moratorium u/s 96 - completion of Section 95 application and documentary requirements - jurisdiction of the Adjudicating Authority and power to pass orders u/s 100 - HELD THAT:- In the present case the Financial Creditor has relied on the legal notice dated 07.12.2024 and the Adjudicating Authority did not advert to the said legal notice and has held the Section 95 application as non-maintainable on the ground that demand notice cannot be said to be notice for invocation. We thus are of the view that the very basis of the order of the Adjudicating Authority rejecting section 95 application is unfounded.
Section 96 contemplates commencement of interim moratorium on filing of application under Section 94 or 95. We, thus, are not persuaded to accept the submission of learned counsel appearing for the Auction Purchaser that application filed by the Financial Creditor was defective and interim moratorium will not commence from filing of the application.
In Arvind Dham’s case [2024 (4) TMI 1146 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI - LB] appeal was filed by the Personal Guarantor against order dated 28.02.2024 by which Section 95(1) application filed by the State Bank of India was admitted under Section 100. In the above judgment, this Tribunal has held that when application under Section 95 was filed before the Adjudicating Authority it has no jurisdiction to entertain the application, therefore, interim moratorium shall not commence.
The finding of non-maintainability was set aside; the guarantee was held invoked by the legal notice dated 07.12.2020, the Section 95 petition was not defective for want of Income-Tax returns, and interim moratorium under Section 96 therefore operated from the date of filing.
The Appellate Tribunal allowed the appeal of the Financial Creditor, set aside the Adjudicating Authority's order dismissing the Section 95 petition, revived the company petition and related interlocutory applications, and directed the Adjudicating Authority to pass fresh orders under Section 100 expeditiously.
Issues: (i) Whether the relevant market should be defined as the provision of common user coal terminal services in and around Kamarajar Port excluding Krishnapatnam Port; (ii) Whether Chettinad International Coal Terminal Pvt. Ltd. (CICTPL) held a dominant position in the relevant market during the relevant period; (iii) Whether CICTPL abused its dominant position by imposing mandatory coordination and liaisoning charges through third-party entities.
Issue (i): Whether the relevant geographic market is confined to in and around Kamarajar Port or includes Krishnapatnam Port.
Analysis: Consideration was given to transport costs, plant proximity, consumer preferences of fixed-location thermal power producers, hinterland analysis (captive versus contestable), sample user data collected by the DG, and comparative port volumes. Evidence showed most affected power producers were located near Kamarajar Port, significant transport cost disadvantages existed for alternative ports, and the DG's supplementary analysis delineated a distinct hinterland for Kamarajar Port. The CCI's inclusion of Krishnapatnam rested on overlapping usage and larger aggregate volumes, but the DG's focused analysis on end-user locations and switching behaviour indicates limited practical substitutability for the fixed consumers at issue.
Conclusion: The relevant geographic market is confined to the provision of common user coal terminal services in and around Kamarajar Port; Krishnapatnam Port is excluded for the purpose of assessing market power as applied to the aggrieved users.
Issue (ii): Whether CICTPL was dominant in the defined relevant market during the relevant period.
Analysis: Market shares, number and strength of competitors within the defined geographic market, presence of only one common-user coal berth at Kamarajar Port, high entry barriers, user dependence due to transport economics, and growth of traffic at CICTPL despite tariff increases were examined. DG supplementary findings showed CICTPL was the sole common-user provider at the port and that sizable proportions of relevant users coal volumes were handled at CICTPL, supporting an ability to operate independently of competitive forces within the defined market.
Conclusion: CICTPL held a dominant position in the relevant market during the relevant period.
Issue (iii): Whether CICTPL abused its dominant position by imposing mandatory coordination and liaisoning charges through third-party entities.
Analysis: The findings reviewed include user responses to DG enquiries showing many importers treated the charges as mandatory, documentary evidence of links between the third-party entities and the Chettinad Group, the absence of transparent commercial justification for the services, and the fact that such charges were collected outside published tariffs thereby avoiding port revenue sharing. The DG and the CCI recorded that the charges were effectively mandatory; when combined with a finding of dominance, imposition of such mandatory, non-transparent third-party charges amounts to conduct that imposes unfair conditions and diverts commercial value from the competitive tariff framework.
Conclusion: CICTPL abused its dominant position by imposing mandatory coordination and liaisoning charges through related third-party entities, amounting to an appreciable adverse effect on competition.
Final Conclusion: The impugned order that excluded Krishnapatnam Port from the relevant market assessment and declined to treat CICTPL as dominant is set aside; the matter is remitted to the Commission for fresh consideration consistent with the corrected market definition, the finding of dominance, and examination of abuse and remedies after hearing the parties and considering further investigation if necessary.
Ratio Decidendi: For assessing dominance and abuse under Section 4, the relevant market must be defined with regard to end-use, transport costs, and consumer-specific substitutability; where a single common-user terminal services a distinct local hinterland and users are transport-cost constrained, that terminal can possess dominance, and imposition of mandatory, opaque third-party charges by related entities constitutes abuse.
Increase of coal handling charges by the PORT (CICTPL) - Relevant product market - relevant geographic market - market definition - substitutability - hinterland analysis - transport costs - abuse of dominant position - dominant position - appreciable adverse effect on competition - coordination and liaisoning charges - Competition Commission of India - Director General investigation - National Company Law Appellate Tribunal -whether the CICTPL was dominant in the relevant market in terms of Section 2(r) of the Act and if so whether the CICTPL has abused its position of dominance violating section 4 of the Act. - HELD THAT:- Since, the CICTPL is an only player, it automatically become dominant as stipulated under Section 2(r) of the Act. We have already analysed in great detail the reason for the same by treating relevant market only to CICTPL at Kamarajar Port and excluding Krishnapatnam Port. Therefore, we do not agree with the findings of the CCI on this aspect and concur with the finding of the DG in supplementary report holding the CICTPL to be dominant player.
Once we have given our finding on the aspect of relevant market as well as the CICTPL, being the dominant player in the relevant market, we are left to decide only the final point i.e., whether the CICTPL was involved in abuse of its dominant position violating Section 4 of the Act, having AAEC on the Appellant.
It is the case of the Appellant that coordination and liasoning charges were imposed by three entities, namely, (a) Breeze Enterprises Pvt. Ltd. (BEPL), (b) Original Innovative Logistics (India Pvt. Ltd.) (OIPL) and (c) Futuristic Handling Services Pvt. Ltd. (FSHPL) which were shadow entities of the CICTPL. We also note that it is the case of the Appellant that the CICTPL was required to give 52.33% of its gross revenue to the KPL/ Respondent No. 3 and to avoid such payments, the CICTPL created these entities.
The CICTPL has further argued that no financial benefits have flown back to the CICTPL from any of these three entities which is undisputed facts. The CICTPL stated that there was no force or compulsion for the Appellant to use these services of three entities and these services were voluntary in nature. The CICTPL as further pleaded that no evidence has been shown by Appellant in this connection making the CICTPL responsible for making mandatory so-called mandatory co-ordination & Liasoning Charges.
On this issue, we take into consideration that both the DG and the CCI have agreed that these charges were mandatory in nature. The CCI although did not agree to the Appellant contention that this was abusive practice violating Section 4 of the Act, but the CCI treated these Act as “Opportunistic” not falling in the definition of abuse of dominance position. The CICTPL was not found as dominant by the CCI in the Impugned Order in relevant market.
The DG has taken into consideration the submissions made by the members of the Appellant and submission made by the CICTPL along with other stakeholders. The DG called them for interaction during its investigation. The DG noted that out of 9 power producers, 5 stated that coordination and liasoning charges were mandatory and they were made to pay the charge during relevant period. Similarly, out of non-IP producer entities like Zuari Cement also submitted to the DG that they were also made to such payments and they also treated such charges exclusive as mandatory. Similarly, five out of nine importers of non-IP trader’s category agreed to have mandatorily paid coordination and liasoning charges. These important included Adani Enterprises Limited and Sakthi Energy etc.
The CCI prima-facie agreed to findings of the DG. The CCI in its analysis in para 110 of its report indicated that once the CICTPL has been found to be non-dominance in the relevant market, the examination of abusive conduct on point of the CICTPL was not required under the provision of the Act. However, the CCI indicated that for sake of completeness, the CCI has gone ahead to examine this aspect also. The CCI indicated that coordination and liasoning charges do not exists as of today. The CCI have noted the various finding on this issue given by the DG in main and supplementary investigation report (which we have already noted in our earlier preceding discussion).
The CCI taken into consideration every deponent before the DG who confirmed during main as well as supplementary investigation by the DG that the coordination liasoning charges were mandatory during 2011-12 to 2014-15. The CCI found that coordination & liasoning charges were paid by Appellant members as well as by non-informant members through three entities and were mandatory in nature.
The CCI stated that there seem to be no reason why user would pay additional charges to third party for availing services which ought to have been provided by the CICTPL. The CCI also noted that there was no economic sense for any importer to pay separate charge for coordination and liasoning charges to third party service provider and these charges were rather imposed upon users. The CCI also taken into consideration the DG’s finding regarding the relationship between these three entities with the Chettinad Group and held that the DG has successfully established the linkage even the no flow of funds from these companies to the CICTPL was found. The CCI also agreed that observation of the DG that these companies are not officially as part of Chettinad Group and however, the affairs and conduct of these three entities were manged and controlled by employees of the Chettinad Group. However, the CCI in para 128 of the Impugned Order treated conduct of the CICTPL as being “opportunistic” and not abusive since, the CICTPL was not held to be dominant in the Impugned Order by the CCI. It tantamount that had the CCI treated the CICTPL as the dominant player in the relevant market, then the said conduct of the CICTPL charging coordination and liasoning charges through three entities would have been treated as abusive.
We tend to agree with the findings of the DG which has been concurred by the CCI that the coordination and liasoning charges was collected during relevant period through 2011-12 to 2014-15, relevant period by these three entities were mandatory in nature. We also concur with the finding of the DG and the CCI that the Chettinad Group and group were found to be in control in conduct of affairs of these three entities collecting Coordination & Liasoning charges. This tantamount to abuse of its dominant position by the CICTPL.
Keeping all the facts into view and circumstances of this case and for the reason mentioned herein before, the Impugned Order passed by the CCI does not stand the test of law and is required to be set aside. We set-aside the Impugned Order accordingly. The appeal is hereby allowed and the matter is remanded back to the CCI for deciding it afresh in accordance with law after providing an opportunity of being heard to the parties including all fresh evidence.
In view of our comprehensive finding as above, the Impugned Order is set aside.
Issues: Whether the accused applicants were entitled to discharge under Section 227 of the Code of Criminal Procedure, 1973 in the absence of a subsisting predicate offence and identifiable proceeds of crime for the alleged offence of money laundering.
Analysis: The complaint under the Prevention of Money Laundering Act, 2002 was founded on the predicate offences arising from the two underlying criminal cases. The discharge orders in those predicate cases had held that the prosecution had not made out a prima facie case and, on that basis, no offence was found to have been committed. The Court treated those findings as meaning that no proceeds of crime had been generated from the scheduled offences. Relying on the statutory scheme of Sections 2(u), 3 and 4 of the Prevention of Money Laundering Act, 2002 and the principle that money-laundering is dependent on property derived or obtained as a result of criminal activity relating to a scheduled offence, the Court held that in the absence of subsisting predicate offences and proceeds of crime, the prosecution under the Act could not survive. The Court also noted that the attachment orders had been set aside and that the discharge orders in the predicate offences had attained finality.
Conclusion: The accused applicants were entitled to discharge and no charge could be framed against them for the alleged offence under the Prevention of Money Laundering Act, 2002.
Final Conclusion: The proceedings were terminated at the stage of charge, and all applicants stood discharged from the money-laundering case.
Ratio Decidendi: Money-laundering under the Prevention of Money Laundering Act, 2002 cannot be sustained unless there exists property constituting proceeds of crime derived or obtained from a subsisting scheduled offence; where the accused stand finally discharged in the predicate offence and no proceeds of crime survive, prosecution under the Act fails.
Proceeds of crime - scheduled offence - offence of money-laundering - discharge under Section 227 Cr.P.C. - benefit of discharge/acquittal in predicate offence - Appellate Tribunal for SAFEMA orders on attachment - HELD THAT:- Having regard to the mandate of law, no trial can proceed against the accused persons who are discharged from the case of predicate offence. Also when there are specific findings that there was no generation of proceeds of crime, no question arises of layering or siphoning of the proceeds of crime further. Therefore, the role attributed to the rest of the accused in PMLA case comes to an end. They cannot be prosecuted for the offence of money laundering, when there is no more a case of generation of crime proceeds in existence.
To prosecute the accused for the offence of money laundering under PMLA, the existence of scheduled (predicate) offence is must. Existence of predicate offence can only established by proceeds of crime, of which layering or siphoning is possible. As such the very foundation of offence of money laundering is the crime proceeds of the predicate offence. In the absence of subsisting predicate offence and existence of “proceeds of crime”, within the meaning of Section 2(1)(u) of the Act, no offence under section 3 read with 4 of PMLA can be made out. The prosecution under PMLA without existence of the proceeds of crime related to the predicate offence is akin to a tree without roots, devoid of legal sustenance and incapable of surviving judicial scrutiny.
The prosecution i.e. ED had traced proceeds of crime and its siphoning, and attached the properties which were allegedly acquired or purchased out of the proceeds of crime of the predicate offence. As observed in para Supra, the Appellant Tribunal of SAFEMA has set aside all the provisional and confirmed attachment orders with the observation that those properties cannot be said to have been acquired using the proceeds of crime. As such, at present no property is under attachment in the present case. It is necessary to note here that the said orders of the Appellate Tribunal have also not been challenged by the prosecution.
The orders of discharge of accused in the predicate offence have reached finality. The orders of release of the attached properties have also reached finality. Under these circumstances, continuation of the PMLA proceedings for the offence under section 3 r/w 4 becomes a dead-wood.
At this juncture, it is necessary to note that discharge applications are not filed by all the accused in the case. Further, discharge applications of accused no.31 Prashant Chamankar, accused no.38 Vinodkumar Goenka and No. 48 D. B. Realty were rejected by this Court before passing of the order of discharge of accused persons in the cases of predicate offences. The Revision Petitions against the orders of this Court are pending before the Hon’ble High Court and for this reason, at this stage, no effective orders could be passed in respect of accused nos.31, 38 and 48. Some of the accused have not filed application for discharge. Therefore, no orders could be passed about continuation of proceedings against them. However, it is necessary to discharge all the applicants from the charge of the offence of money laundering.
Issues: Whether services rendered in the construction of private railway sidings for commercial use fall within Notification No. 17/2005-S.T. and are exempt from service tax.
Analysis: The notification exempts site formation, excavation, earthmoving, demolition and similar services when provided in the course of construction of railways. On a plain reading, the notification does not distinguish between Government railways and private railways, nor does it exclude railway infrastructure laid for commercial purposes. In construing a fiscal exemption, the text must be read as it stands, without adding words or limitations not expressed. The definition of railway in the Railways Act, 1989 was considered, but the notification itself controlled the scope of exemption and contained no express restriction to railways for public carriage only. The object of the notification was to encourage infrastructure projects, and railway sidings laid for industrial or commercial use were treated as part of railway infrastructure for that purpose.
Conclusion: Services rendered in relation to construction of private railway sidings are covered by the exemption and service tax is not payable.
Ratio Decidendi: An exemption notification for railway construction must be given its plain meaning, and in the absence of an express exclusion, services rendered for construction of private or commercially used railway infrastructure cannot be denied exemption by reading in a restriction not found in the notification.
Exemption under Notification No. 17/2005-S.T. - construction of railways - no distinction between public and private railways for the purpose of the notification - interpretation of fiscal statute / strict compliance with exemption notification -Whether services of site formation, excavation and allied works rendered in the course of construction of railway sidings for private/commercial entities fall within the exemption granted by Notification No.17/2005 and are not liable to service tax. - HELD THAT:- It is a settled position of law that while interpreting a fiscal statute, the same has to be read in its plain and unambiguous terms, and neither addition of words nor omission of words in the statutory text is permissible. It is equally well settled that, in order to claim the benefit of an exemption notification, strict compliance with the conditions stipulated therein is required.
On a plain reading of Notification No. 17/2005, it is unambiguously clear that the Central Government has exempted services such as site formation and clearance, excavation and earth moving, demolition, and other similar activities, when provided to any person by any other person in the course of construction of roads, airports, railways, transport terminals, bridges, tunnels, dams, ports and other infrastructure projects, from the whole of service tax leviable thereon under Section 66 of the Finance Act. The notification thus grants exemption to services rendered in connection with a host of infrastructure projects from the levy of service tax.\
It is also relevant to note that at the time of issuance of the notification, it was within the knowledge of the authorities that railway lines are also laid for commercial purposes. Despite such knowledge, no distinction was made in the notification. The intention of the Central Government, as can be gathered from the plain language employed, was to grant exemption to services rendered in relation to infrastructure, in the present case, railways.
Therefore, so long as the services are provided in relation to the construction of railways, the notification exempts such services from the whole of service tax leviable thereon. The interpretation adopted by the Commissioner amounts to reading words into the notification, which is impermissible in law. The Tribunal, by following the decision of the CESTAT, Mumbai Bench, involving an identical nature of work and the very same notification, has rightly held that service tax is not payable on the construction of private railway sidings.
Having regard to the object of issuing the notification, which is to encourage the construction of various infrastructure projects, one such being railways, any distinction between railways meant for public carriage of passengers or goods and those laid for commercial use is impermissible.
Thus, we find no reason to differ from the findings recorded by the CESTAT. The substantial questions of law are answered in favour of the assessee and against the Revenue. Accordingly, the appeal filed by the Revenue stands dismissed.
Issues: Whether the appellant is entitled to refund of service tax, interest and penalty paid voluntarily during departmental inquiry for FY 2014-15 and 2015-16, or whether the voluntary payment and intimation under Section 73(3) of the Finance Act, 1994 concludes proceedings and precludes refund.
Analysis: The issue is governed by Section 73(3) of the Finance Act, 1994 which permits a person to pay service tax on his own ascertainment and inform the Central Excise Officer, and provides that on receipt of such information no notice under subsection (1) shall be served in respect of the amount so paid; the proviso preserves the officer's right to determine any short payment and recover it with the limitation period counted from receipt of the information. The appellant paid service tax with interest and penalty during the course of an inquiry and informed the department seeking closure under Section 73(3) and relying on departmental instructions. Prior Tribunal precedent was applied to hold that once proceedings are concluded by voluntary payment and intimation under Section 73(3), the issue stands closed, the department cannot issue a notice in respect of the amount so paid, and the assessee cannot later seek refund of that amount. The appellant's reliance on the Delhi High Court decision cited was found factually distinguishable and inapplicable.
Conclusion: The voluntary payment and intimation under Section 73(3) concludes the proceedings and precludes the refund claim; appeal dismissed. (In favour of Revenue)
Refund of service tax paid on alleged incorrect liability - voluntary payment u/s 73(3) of the Finance Act, 1994 - Reverse charge mechanism - bar on issuance of show cause notice after voluntary payment - place of provision of services and taxability under Place of Provision of Services Rules, 2012 - HELD THAT:- There is no illegality or irregularity in the impugned order passed by the learned Commissioner. In the impugned order, the learned Commissioner has observed that the service tax amount for which refund is claimed by the appellant came to be paid by them during the course of an enquiry initiated against them by the department. The appellant paid the service tax involved in the impugned transactions alongwith interest and penalty and informed the same to the department vide their letter dated 29.08.2019 and requested that in terms of provision of Section 73(3) of Chapter 5 of Finance Act, 1994 and as per the instructions contained in Board’s letter F. No. 137/46/2015-Service Tax dated 18.08.2015.
There is no merit in the appeal filed by the appellant and the impugned order passed by learned Commissioner (Appeals) is in accordance with the provisions of Section 73(3) of the Finance Act, 1994 and no interference is called for. Therefore, the appeal is liable to be dismissed and the impugned order passed by learned Commissioner is liable to be upheld.
Appeal is dismissed and the impugned order is upheld.
Issues: (i) Whether the demand of service tax was barred by limitation, including invocation of the extended period, in the absence of suppression or intent to evade; (ii) Whether the value of free issue materials was includible in the assessable value for service tax purposes under Notification No. 23/2009-ST dated 07.07.2009.
Issue (i): Whether the demand of service tax was barred by limitation, including invocation of the extended period, in the absence of suppression or intent to evade.
Analysis: The appellant had filed regular ST-3 returns and the relevant return had been scrutinised by the department without any objection regarding non-inclusion of free issue materials. The subsequent demand originated from audit, and the appellant had responded and later paid tax in the manner pointed out. On these facts, the record did not support suppression of facts or any intention to evade tax. The notice was also issued by invoking the extended period, and the demand could not be sustained on that basis.
Conclusion: The demand was time-barred and the invocation of the extended period was unsustainable, in favour of the assessee.
Issue (ii): Whether the value of free issue materials was includible in the assessable value for service tax purposes under Notification No. 23/2009-ST dated 07.07.2009.
Analysis: The amendment to Notification No. 23/2009-ST did not justify inclusion of the value of materials supplied free of cost by the service recipient in the taxable value. The decision of the Larger Bench in Bhayana Builders, as affirmed by the Supreme Court, was treated as governing the issue. The governing principle was that the value of free supply goods has no bearing on the contract value or the taxable value of services, and therefore cannot be added to the assessable value.
Conclusion: The value of free issue materials was not includible in the assessable value, in favour of the assessee.
Final Conclusion: The demand of service tax, along with the related interest and penalty, was held unsustainable and the appeal succeeded with consequential relief.
Ratio Decidendi: For service tax valuation, free supply materials provided by the recipient are not part of the taxable value, and a demand founded on extended limitation cannot stand absent suppression of facts or intent to evade tax.
Demand of service tax - Non-inclusion of value of free supply materials in assessable value - limitation and extended period of limitation - invocation of proviso to Section 73(1) - audit objection and absence of suppression - Notification No. 23/2009-ST - Work Contract Service - HELD THAT:- The appellant have no intention to evade the payment of service tax and they have complied with the audit as soon as the issue was pointed out to them. Thus, we find merit in the submission of the appellant that they have no intention to evade the payment of service tax by excluding the value of free supply materials in the assessable value.
It is observed the said notice was issued for the period 2009-10 to 2011-12 under ‘Section 73(1)’ of the said Act and not under the ‘proviso’ to Section 73(1) of the said Act, which is required in case of demands raised for the extended period. It is also pertinent to note that the notice was issued after one year and five month from the date of audit. Therefore, the demand raised without invoking the proviso to Section 73(1) of the said Act, is barred by limitation. We also take note of the fact that during the relevant period when the notice was issued, the notice for normal period could be issued for a maximum period of 18 months from the relevant date. Thus, we hold that the demand confirmed by invoking extended period of limitation in the impugned order is not sustainable and hence we set aside the same.
From the facts of the case, we observe that the decision of the Larger Bench of the Tribunal in the case of Bhayana Builders (P) Ltd. [2013 (9) TMI 294 - CESTAT NEW DELHI-LB] is squarely applicable in this case. Further, it is seen that the above decision of the Larger Bench has been affirmed by the Hon’ble Apex Court [2018 (2) TMI 1325 - SUPREME COURT], wherein it has been laid down that the value of free supply materials is not includable in the assessable value.
Thus, by relying on the decision cited supra, we hold that the value of free supply materials is not includable in the assessable value for determining the service tax liability of the appellant. Accordingly, we hold that the demand of Service Tax confirmed in the impugned order is not sustainable on merits, Consequently, we set aside the same.
As the demand of Service Tax against the appellant is not sustained, the question of demanding interest or imposing penalty does not arise.
In the result, we set aside the impugned order and allow the appeal filed by the appellant, with consequential relief, if any, as per law.
Issues: (i) Whether refund of tax paid due to a mistake of law can be denied; (ii) Whether the authorities were right to deny refund by ignoring binding precedents of higher Courts and Tribunals; (iii) Whether failure to follow judicial precedents amounts to judicial indiscipline.
Issue (i): Whether refund of an amount of tax paid due to a mistake of law is maintainable.
Analysis: The impugned orders rejected the refund claims on the ground that the appellant was not liable under RCM and that the claim was time-barred. Earlier orders for a different period had held the tax paid under RCM on rent paid to a director qualified as input service and refundable. Authorities and Tribunal took contrary views for the present periods despite the tax having been paid under a mistake of law. Established precedents recognise refund where tax was paid under a mistake of law and require consideration of such claims notwithstanding limitation objections in appropriate circumstances.
Conclusion: Refund is maintainable in respect of tax paid under a mistake of law; the denial of refund on that ground is not sustainable.
Issue (ii): Whether the authorities were justified in denying refund by ignoring higher Court and Tribunal precedents.
Analysis: A prior final order for the same assessee and the same legal question had held the tax to be eligible as input service and refundable. The later Tribunal order declined refund for the present periods, citing limitation and liability under RCM, without following the earlier binding view. The statutory provisions and precedent permit revival of claims and consideration of refund under Section 11B where appropriate.
Conclusion: The authorities and Tribunal erred in disregarding binding precedents; the prior sanction of refund should be restored.
Issue (iii): Whether not following judicial precedents constitutes judicial indiscipline warranting interference.
Analysis: The decision under challenge departed from an earlier final order on an identical legal question for the same appellant without adequate justification. Consistent application of binding precedent is required to maintain judicial discipline and predictable adjudication of statutory refund claims.
Conclusion: The departure from binding precedent amounts to judicial indiscipline; interference is warranted to restore the earlier refund sanction.
Final Conclusion: The appeals are allowed, the Tribunal orders setting aside the refund sanction are set aside, and the refund orders of the adjudicating authority are restored; the legal effect is that refund sanctioned previously is reinstated for the amounts determined to have been paid under mistake of law.
Ratio Decidendi: Tax paid under a mistake of law is refundable and a tribunal or authority must follow binding precedents when they resolve the same legal question; limitation under Section 11B does not automatically bar refund claims properly founded on a mistake of law.
Refund of tax paid under mistake of law - prepublication and exporting such services out of India - Cenvat credit / input service - Reverse Charge Mechanism (RCM) - Re-credit and refund procedure - judicial discipline and binding effect of precedents - HELD THAT:- It is an admitted fact that already CESTAT vide its Final Order No.41582 of 2017 dated 10.08.2017 held that the appellant was indeed eligible input credit on the service tax paid by them under RCM basis on rent paid to Director. Therefore, based on the said order, the Original Authority has allowed the claim of refund. However, in these proceedings, the same CESTAT, in Appeal Nos.40789 and 40790 of 2019 had taken a contrary view. Therefore, the authorities were wrong in rejecting the legitimate claim by citing the procedural lapses and it was hit by limitation. The Tribunal ought to have followed the principal of final order passed in No.41548 / 2017 dated 10.08.2017 for the same appellant for the different period.
Further, the authorities took a stand that the payments were only due from the Director and hence the same would not qualify as input service for the appellant and the authorities have merely passed the claim stating that the claim was not eligible for refund. It is well settled law that when the tax paid under mistake of law is bound to be refunded and cannot be rejected.
This Court in a case of 3E Infotech v. Cestat Chennai [2018 (7) TMI 276 - MADRAS HIGH COURT] held that The application under Section 11B cannot be rejected on the ground that is barred by limitation, provided for under Section. The claim for return of money must be considered by the authorities”.
Therefore, from the above judgments it is clear that the issue as to whether the limitation prescribed under Section 11B of Central Excise Act applies to a refund claimed in respect of service tax paid under a mistake of law is no longer res integra. Therefore, the Tribunal has erred in passing the impugned order merely rejecting the refund claim despite the fact that the tax was paid under mistake of law.
Despite the interpretations of the authorities, the claim is eligible for refund. If it is considered an input service that is used by the appellant, the tax for the same has been rightly discharged by the appellant and hence must be granted credit as input service. Further, if the service tax has been rendered only to the Director in their individual capacity, the tax is not payable by the appellant as per law, it is liable to be refunded as it has been paid under mistake of law. Therefore, the Tribunal, by ignoring the precedents laid down by the higher Forums, passed the order, thereby it amounts to violation of the core principle of Judicial Disciple. Therefore, all the substantial questions of law are answered in favour of the appellant.
Appeals allowed; the Tribunal's orders are set aside and the orders of the adjudicating authority sanctioning the refund are restored, on the ground that tax paid under a mistake of law and qualifying as input service is refundable and cannot be defeated by limitation or departure from binding precedents.
Issues: Whether cleaning and sanitation services provided by the appellant to Government hospitals are exempt from service tax under Notification No. 25/2012-ST dated 20.06.2012 and whether the extended period of limitation and penalties can be invoked where exemption is interpretational.
Analysis: The factual matrix shows contracts for cleaning, sanitation and waste disposal entered into with a Government-run medical hospital. Section 65B(51) defines taxable services and Section 66B prescribes levy; Notification No. 25/2012-ST (as substituted by Notification No. 6/2014-ST) exempts services provided to Government, a local authority or a governmental authority by way of activities relating to water supply, public health, sanitation conservancy, solid waste management or slum improvement and up-gradation. The Court examined the scope of the agreement (cleaning of premises, toilets, drainage, disposal of normal and bio-waste) and compared it with the functions described in the exemption entry, concluding these services fall within sanitation conservancy and related activities covered by the notification. The Tribunal relied on co-ordinate bench decisions (held up by the Supreme Court) that applied the same notification to cleaning and housekeeping services provided to Government hospitals, and on authority that where the question is one of interpretation of an exemption notification, invocation of the extended period for raising demand is not appropriate in absence of fraud, suppression or wilful misstatement. Given no evidence of fraud or suppression and that the Superintendent legitimately entered the contract on behalf of the Government hospital, the extended period and penalties under the Finance Act could not be sustained. The absence of meritorious tax liability negates the imposition of penalties.
Conclusion: The cleaning and sanitation services provided by the appellant to Government hospitals are exempt under Notification No. 25/2012-ST as substituted by Notification No. 6/2014-ST; extended period of limitation is not invocable for this interpretational issue and penalties cannot be sustained. Appeals allowed in favour of the assessee.
Exemption under Notification No. 25/2012-ST- cleaning and sanitation services provided to Government Hospital - Interpretation of exemption notification - public health and sanitation conservancy - taxable service u/s 65B(51) - extended period of limitation (invocation for interpretational issue) - penalty u/s 77 and Section 78 - Notification No. 6/2014-ST - Whether the cleaning and sanitation services provided by the appellant to Government Hospital would fall under the taxable service and exempted from the service tax vide Notification No. 25/2012-ST - HELD THAT:- The Superintendent of the Government Hospital being Head of the hospital had entered into agreement on behalf of the Government with the appellant for providing such services and therefore Superintendent is empowered for such agreement.
The services are eligible for tax exemption and the issue involved is interpretation of the notification benefit to the services of cleaning and sanitation provided by the appellant to Government Hospital.
Thus, extended period of limitation is not invocable. There is no any fraud, collusion or wilful default or any type of suppression of facts. Therefore, question of invocation of limitation does not arise. Hon’ble Supreme Court in the case of Principal Commissioner of Customs Vs Felox Technologies India Pvt Ltd [2025 (4) TMI 1251 - SC ORDER], wherein, held that the issue of eligibility of benefit of exemption being interpretational in nature, extended period of limitation could not have been invoked for raising duty demand.
There is no tax liability on merits. Since, no any tax liability therefore, imposing of penalty cannot be sustained.
Therefore, we find that the impugned order cannot be sustained and appeals must be allowed and accordingly we set aside the impugned order.
Issues: Whether the Police Department, while providing security on request and recovering charges fixed under the governing police law and credited to the Government treasury, could be treated as a person engaged in the business of providing security so as to attract service tax under Security Agency Services.
Analysis: The service in question was found to be part of the police force's statutory and sovereign obligations for public security, peace and order. The charges were levied under the relevant police law and notifications, and the amounts collected were deposited in the Government treasury. The binding CBEC circular further clarified that amounts recovered by a sovereign or public authority for performing statutory functions are not liable to service tax where the prescribed conditions are satisfied. On these facts, the police department was not regarded as a person engaged in the business of providing security, and the activity did not fall within the taxable definition.
Conclusion: Service tax was not leviable on the security charges collected by the Police Department, and the demand was unsustainable.
Levy of service tax - Security Agency Services - service tax can be demanded from the Police Department (appellant) in relation to certain security services provided to some individual and institutions, pursuant to certain Government circulars as well as court directives or otherwise - HELD THAT:- The similar issue come up before Co-ordinate Bench in the case of Superintendent of Police Vs Commissioner of Central Goods and Service Tax, Excise and Customs, Indore [2023 (12) TMI 1487 - CESTAT NEW DELHI].
The Tribunal examined the scope of SAS and relied on certain judgments including the judgment of Superintendent of Police, Swai Madhopur Vs Commissioner of Central Excise, Jaipur [2019 (11) TMI 250 - CESTAT NEW DELHI] where it was held that a perusal of the definition of “Security Agency” shows that it has to be “any person engaged in the business of providing security”. Police provide security as a part of their statutory obligations. In most cases they do not charge any fee for such security but in some cases they charge a fee as determined by the State Government. Merely because they are charging a fee, Police do not become “person engaged in the business of providing security”. As per clarification issued by the CBEC Circular No. 89/07/2006-ST dated 18/12/2006 charges recovered by any sovereign or public authority for carrying out any statutory function will not be liable for service tax fees if three conditions are fulfilled.
The Co-ordinate Benches of this Tribunal in catena of judgments have taken similar views that merely because the Police may charge a fee, it would not become a person engaged in the business of providing security and therefore service tax can be charged under the aforesaid category. In this regard, reliance is also placed on the judgment of Tribunal in the case of Commander Punjab Home Guards and Ors. Vs Commissioner of Central Excise and Service Tax, Ludhiana and Ors. [2024 (11) TMI 1224 - CESTAT CHANDIGARH] - the Tribunal framed the question as to whether the State Police represented by Superintendent of Police would be covered within the definition of Security Agency Services and thereafter examined various circulars/instructions etc., and scope of definition of the service as well as modalities for providing such security to came to the conclusion that such services are statutory functions.
The impugned order cannot be sustained and appeal must be allowed.
Issues: Whether interest at a higher rate than 6% (specifically 12%) is payable to the appellant on sanctioned rebate/refund amounts withheld for an abnormal delay of over 12 years, and if so, the rate and period for which such interest is payable.
Analysis: The Tribunal examined applicability of Section 11BB (and related provisions) of the Central Excise Act, 1944 concerning payment of interest on delayed refunds and considered authorities recognising entitlement to higher interest where refunds are unreasonably delayed. The Tribunal noted that Section 11BB provides for interest where duty ordered to be refunded is not refunded within three months, but that judicial decisions (including Supreme Court and various High Courts) have awarded higher interest rates (commonly 12%) in cases of long and unjustified withholding of refunds. The Tribunal reviewed prior decisions of this Tribunal and the Apex Court (including Surinder Singh / subsequent Supreme Court authority, Sandvik Asia Ltd., and ITC Ltd.) and relevant government notifications fixing interest rates under different sections; it considered that in cases of abnormal delay and where the appellant suffered hardship, equitable considerations and precedent support awarding interest at 12% per annum. Having regard to the facts of extraordinary delay (over 12 years), the pattern of judicial decisions, and applicable statutory notifications, the Tribunal concluded that interest at 12% per annum is appropriate for the period for which the amount was withheld.
Conclusion: The appellant is entitled to interest at the rate of 12% per annum on the sanctioned rebate/refund amount for the period specified under Section 11BB of the Central Excise Act, 1944; this conclusion is in favour of the assessee.
Interest on delayed refund/rebate of excise duty - abnormal/inordinate delay in sanction of rebate/refund - Unjust enrichment - equitable relief and compensation for wrongful withholding - Article 300A of the Constitution of India - Whether interest at higher rate is liable to be paid on the amount of rebate claims sanctioned after a delay of 12 years in accordance with the provisions of Section 11BB of the Central Excise Act, 1944 or otherwise. - HELD THAT:- It is pertinent to discuss that the provisions of Section 11B of the Central Excise Act, 1944 is equally applicable relating to rebate of duty of excise as per Explanation ‘A’ to the said section. I find that under Section 11BB interest is required to be paid from the expiry of 3 months period from the date of application for rebate of duty.
In this case payment of interest under Section 11B of the Central Excise Act, 1944 @6% is not justified as there is abnormal delay of more than 12 years in sanctioning due rebate claim. In series of judgments, it has already been held that if there is abnormal delay in sanctioning rebate/refund claim, interest at higher rate is required to be paid. In this context, reference is made to the decision of Hon’ble Delhi High Court in the case of Surinder Singh [2006 (11) TMI 12 - HIGH COURT, DELHI] which was subsequently upheld by the Hon’ble Supreme Court vide decision reported as [2016 (10) TMI 566 - SUPREME COURT]. In this decision it has been categorically held that petitioner is entitled to @12% interest for the delayed refund of the Central Excise duty. In this case delay of rebate was for the period of 11.06.1999 to 12.06.2003. The ratio of the above decision is squarely applicable in the present case also and accordingly the Appellant is entitled to interest @ 12% on the sanctioned amount of rebate claim amounting to Rs.2,38,88,596/-.
Appeal filed by the Appellant is allowed with consequential relief.
Issues: (i) Whether Cenvat credit on input services could be denied merely because the credit was not distributed through input service distributor registration and the services were used in the course of job work and manufacturing activities. (ii) Whether the extended period of limitation and penalty were invocable on the facts of the case.
Issue (i): Whether Cenvat credit on input services could be denied merely because the credit was not distributed through input service distributor registration and the services were used in the course of job work and manufacturing activities.
Analysis: Rule 7 of the Cenvat Credit Rules, 2004 governs distribution of input service credit, but non-registration as an input service distributor was treated as a procedural lapse where the records were maintained and the services were used in relation to manufacture of dutiable final products. The services were found to have been used in or in relation to the manufacture of cables, and the unit structure and job-work arrangement did not dislodge the availability of credit. The decision also relied on the principle that substantial credit benefit cannot be denied for a procedural irregularity when the factual nexus and records are available for verification.
Conclusion: The denial of Cenvat credit was not justified and the assessee was entitled to the credit.
Issue (ii): Whether the extended period of limitation and penalty were invocable on the facts of the case.
Analysis: The record showed earlier audits and prior scrutiny of the same activity, and the Department was aware of the unit structure and the nature of the services. In these circumstances, the elements of suppression of facts and wilful misstatement were not established. Once the substantive demand failed and the alleged irregularity was held to be procedural, the basis for penalty on the company's officer also did not survive.
Conclusion: The extended period was not invocable and penalty was not sustainable.
Final Conclusion: The demand was unsustainable on merits and on limitation, so the assessee succeeded in resisting the proposed recovery and connected penalty action.
Ratio Decidendi: Non-registration as an input service distributor, by itself, does not disentitle an assessee to Cenvat credit when the credit is otherwise supported by records and the services are used in relation to manufacture of dutiable final products; limitation and penalty cannot be sustained absent suppression or wilful misstatement.
Distribution of Cenvat credit on input services - Eligibility of input service credit where unit performs job work - Ineligibility of credit attributable to exempted goods - Registration as Input Service Distributor - Substantial benefit not to be denied for procedural irregularity - Personal penalty on company officer - Invocation of extended period of limitation - Classification of job work notification under Central Excise Rules - Rule 7 of Cenvat Credit Rules, 2004 - Notification No. 214/1986-CE - Circular No. 1063/2/2018-CX - HELD THAT:- Rule 7 of Cenvat Credit Rules, 2004 prescribes procedure for distribution of credit on input services used by Head office / depots and units. Cenvat Credit on input service may be based on the turnover of the manufacturing units. Department’s allegation that respondent taken credit on exempted goods and services. Respondent stated that Unit-II was exclusively doing job work for Unit-I up to November, 2011, without any other manufacturing activity on its own and entire credit was taken at unit-I at the relevant period. All the input services mentioned in the impugned invoices were used in or in relation to the manufacture of final products on which Central Excise duty was paid.
The services utilized in unit-II is paid by the manufacturer i.e., registered office. Unit-II has no independence existence and it is an extension of unit-I and some part of job work activity takes place as observed by Learned Commissioner. Therefore, no any ambiguity in the impugned order relating units.
Hon’ble Gujarat High Court in the case of Commissioner of Central Excise Vs Dashion Ltd., [2016 (2) TMI 183 - GUJARAT HIGH COURT] held that Nothing in statutory rules to disentitle an unregistered input services distributor from availing Cenvat Credit.
There is no any allegation that input services are not used in or in relation to the manufacture of final goods.
Even, CBEC issued Circular No. 1063/2/2018-CX dated 16.02.2018 accepted the order of Supreme Court, High Courts and CESTAT holding that substantial benefit cannot be denied because of procedural irregularity and non registration of ISD is only a procedural irregularity for which substantial benefit of Cenvat Credit cannot be denied when all the necessary records have been maintained by the respondent.
All the records were produced to the audit parties during the earlier audits and they were thoroughly audited and certified. Therefore, it is not a case of suppression, willful mis-statement. In these situations extended period was not invocable.
It is settled law that when the company is not liable, personal penalties on the employees of the company cannot be imposed.
There is no any illegality or irregularity in the impugned order. Therefore, appeal is liable to be dismissed.
Issues: (i) Whether CAS-4 costing procedure is applicable for determining assessable value of scrap cleared to sister units and whether the Revenue's appeal against dropping of demand is sustainable; (ii) Whether the demand of duty, interest and penalty for the relevant period can be sustained in view of revenue neutrality and prior Tribunal orders on identical issue.
Issue (i): Applicability of CAS-4 costing procedure to determine assessable value of scrap cleared to sister units and validity of Revenue's appeal against dropping of demand.
Analysis: The Tribunal examined whether scrap generated in the course of manufacture qualifies as 'goods manufactured' for application of CAS-4 costing, noting that CAS-4 addresses detailed costing elements (raw material, labour, overheads) applicable to manufactured goods. The Tribunal observed that scrap is a by-product generated incidentally in manufacture and that applying CAS-4 parameters to scrap is not practicable. The Tribunal also considered that the receiving unit, being part of the same corporate entity, avails CENVAT credit, making the net effect revenue neutral.
Conclusion: The CAS-4 procedure is not applicable to scrap; the Revenue's appeal is dismissed and the adjudicating authority's order dropping the demand is upheld in favour of the assessee.
Issue (ii): Sustainability of demand of duty, interest and penalty in view of revenue neutrality and prior Tribunal findings.
Analysis: The Tribunal reviewed prior orders of the same appellant where identical issues were decided in favour of the appellant on the ground of revenue neutrality, and considered whether extended period of limitation, interest and penalty could be invoked when there was no mala fide intent and the receiving unit claimed CENVAT credit. The Tribunal found the cited precedents squarely applicable to the period in question and that there was no financial benefit to the appellant from the alleged undervaluation.
Conclusion: The demand of duty, interest and penalty is not sustainable; the appeal filed by the assessee is allowed with consequential relief as per law.
Final Conclusion: On the issues decided, the Tribunal concludes that scrap cleared to sister units cannot be valued using CAS-4 costing and that where CENVAT credit to the receiving unit neutralises revenue impact, demands including extended period, interest and penalty do not survive; accordingly, the Revenue's appeal is dismissed and the assessee's appeal is allowed.
Ratio Decidendi: Where goods constitute incidental scrap/by-product and the receiving sister unit within the same corporate entity avails CENVAT credit resulting in revenue neutrality, detailed CAS-4 costing is not applicable and demands based on alleged undervaluation, including extended period, interest and penalty, are not sustainable.
Value to be adopted for clearance to sister unit - treatment of scrap as by-product and manufactured goods - revenue neutrality where CENVAT Credit is availed by receiving unit - applicability of CAS-4 costing standard - extended period of limitation and consequences on interest and penalty - HELD THAT:- The CAS 4 Costing standard is specifically meant for the goods manufactured, wherein the various costs under different headings like cost of the raw material, labour cost, electricity cost, machinery cost, etc., are all required to be considered to arrive at the CAS 4 value. As to how these parameters can be used in respect of scarp is beyond our comprehension. On this ground itself, the Revenue’s appeal fails. Further, the adjudicating authority has correctly interpreted the provisions to hold that when CENVAT Credit is available to the other unit of the same company, the situation would be that of revenue neutrality. Hence, we find no reason to interfere with the impugned order. Accordingly, we dismiss the appeal filed by the Revenue. The Cross-Objection filed by the Respondent- Bharat Roll also gets disposed of.
We find that the goods cleared by the appellant are the inputs for the receiving units. The receiving units are taking the CENVAT Credit. Therefore, this is clear case of revenue neutrality, with the appellant not gaining any financial benefit by the purported undervaluation of the goods.
In the present case, the Show Cause Notice was issued on 05th May, 2011 for the period from April 2006 to March 2010. Therefore, the ratio laid down in the cited Final Order i.e., Final Order [2024 (3) TMI 1425 - CESTAT KOLKATA], is squarely applicable. Accordingly, we allow the appeal filed by the appellant.
Appeal filed by Revenue is dismissed. The Cross-objection filed by M/s. Bharat Roll gets disposed of.
TaxTMI 