TaxTMI Updates e-Newsletter
Feb 05,2026

Challenge to show cause notice - adjudication under the Central Goods and Services Tax framework for alleged tax evasion - disputed factual issues requiring adjudication - interference with initiated adjudication proceedings - natural justice - right to cross-examine witnesses - reliability and rebuttal of documentary RUDs - HELD THAT:-The present petition has been filed at the very initiation of the adjudication proceedings. Suffice to note, no final conclusion has been drawn by the adjudicating authority. Since the petitioner proposes to dispute the show cause notice, it may never be compelled to deposit proposed amounts before adjudication.

At present, the statements of the recipients have been recorded during investigation. Thus, it appears that the revenue seeks to rely on those witnesses. It goes without saying that if such course is adopted, the petitioner would be given adequate opportunity to cross-examine such witnesses before any adverse inference is drawn on the strength of their statements and due compliance would be offered to the rules of the natural justice enshrined under the Act. As to the other material (RUDs) relied by the revenue, the petitioner would have a right to rebut the reliability of such documents as also to doubt the inferences that may be drawn on the strength of those documents.

The issue would have to be thrashed out both on facts and on law. Such exercise may be carried out more efficiently and effectively in the course of adjudication. For that reason interference claimed is declined.

Cancellation of GST registration for non-filing of returns - Revocation of cancellation of GST registration upon payment of statutory dues - Restoration of GST registration - Duty to intimate outstanding statutory dues before revocation - Public revenue interest in statutory compliance - HELD THAT:- Assessee had approached the statutory appellate authority for redressal of their grievances which however, was rejected by the appellate authority. This Court is therefore of the view that since similar such orders have been passed by this Court as well as other Co-ordinate Benches, it will serve no purpose to keep the present writ petition pending. This present writ petition can also be disposed of in terms of similar orders as had been done by the orders passed in W.P(C).

Accordingly, the impugned order dated 19.04.2024 is hereby interfered with and set aside. It is directed that the Respondent No. 3, namely Superintendent of Central Goods & Services Tax, Guwahati will intimate the petitioner the total outstanding statutory dues, if any, standing in the name of the petitioner till the date of cancellation of his GST registration. Upon such intimation, if any such outstanding statutory dues under GST are required to be paid, the same shall be deposited by the petitioner without fail. Upon such payment of statutory dues under the GST by the petitioner, the respondent authority will pass appropriate orders and revoke the cancellation by restoring the GST registration of the petitioner.

Accordingly, the writ petition stands disposed of.

Entitlement to input tax credit despite limitation u/s 16(4) - retrospective operation of amendment inserting Section 16(5) - quashment of assessment orders insofar as they are based solely on limitation - restraint on recovery proceedings premised only on limitation - departmental liberty to proceed on merits in cases of fraudulent/excess ITC claims - directions for de-freezing bank accounts and refund or adjustment of amounts - HELD THAT:- The impugned original order dated 28.03.2024 is quashed insofar as it relates to the claim made by the petitioner for ITC which is barred by limitation in terms of Section 16 (4) of the CGST Act, 2017 but, within the period prescribed in terms of Section 16 (5) of the said Act.

Therefore, the respondent-Department is restrained from initiating any proceedings against the petitioners by virtue of the impugned order based on the issue of limitation.

The liberty is granted to the petitioner to move a separate application for refund, if any, and the respondent-Department shall consider and decide the same on its own merits and in accordance with law.

In view of the fact that the impugned order is quashed, the respondent-Department is directed to de-freezure of the concerned petitioner bank account, if any, which have been freezed in furtherance of the impugned order, by sending intimation to the concerned bankers.

In the event, in the interregnum, i.e. during the pendency of this Writ Petition, if any orders are proposed to be passed towards recovery, same shall be dropped immediately upon production of the order copy by the petitioners, in whichever case, where, there is no interim order.

It is also made clear that if at all, if there is any tax amounts collected from the petitioner based on the impugned assessment order from the cash ledgers/credit ledgers of the petitioner concerned, the same shall be refunded to them or by means of orders of this Court or even in the absence of any order from this Court, if any amount is deposited either in the cash ledgers/credit ledgers of the petitioner concerned, the same is permitted to be utilized/adjusted by the petitioners towards payment of future tax.

If there is any challenge related to issues such as discrepancies in availing the ITC/wrong availment of ITC/excess claim of ITC/Fake ITC claim, as the case may be, or such other issues, liberty is be granted to the respondent-Department to proceed against the assessee/petitioner in furtherance of the impugned order in accordance with law.

Accordingly, the present Writ Petition is allowed on the aforesaid terms.

Requirement of quantification in show cause notice u/s 75(7) - liability for interest on short-paid tax u/s 75(9) - quashing of adjudication order for demand beyond grounds or amounts specified in notice - HELD THAT:- Upon a perusal of the order passed under Section 73(9) of the Act, 2017, it is clear that the interest liability is for a period starting from 2020–21, which was very well known to the authorities when they issued the show cause notice on November 13, 2024. Having not quantified the amount of interest till the date of issue of the show cause notice would definitely be in contravention of the provisions of Section 75(7) of the Act, 2017.

The contention of the GST authorities that Section 75(9) of Act, 2017 would apply and the interest on the short paid tax would be payable even though not specified in the order has no application in the present case, as it deals with the situation wherein the interest liability is not quantified in the order passed and not in the show cause notice.

Thus, we are of the view that the impugned order and the impugned show cause notice cannot stand and are accordingly quashed and set aside.

It is left open to the authorities to issue a fresh show cause notice in accordance with law and proceed accordingly.

Writ petition is, accordingly, disposed of.

Provisional attachment - expiry of provisional attachment after one year u/s 83(2) - operational effect of provisional attachment - requirement of specific order to attach a bank account - HELD THAT:- It is claimed by him that since the said account is clubbed with the PAN Card Number which is referred to in the order of provisional attachment dated 3rd June, 2024, the said account also stood provisionally attached.

From the record, we hardly find any justifiable material including that of an order under Section 83 of Act thereby attaching the said Savings Bank Account.

Even if the Form, which is provided under the Act, provides for the provisional attachment of the aforesaid Savings Bank Account, we are left with no other option to hold that even for the attachment of the said Savings Bank Account as well, the period of one year has also lapsed.

We hereby declare that the provisional attachment ordered on 3rd June, 2024, vide the impugned order under Section 83 of the Act, in relation to M/s Aanya Traders bearing Bank A/c No. 135605500936, IFSC Code : ICIC0006295 with the ICICI Bank Ltd., Garg Plaza, 5 Community Centre, Sector-8, Rohini, Delhi – 110085 and Savings Bank Account No. 072401004328; IFSC Code: ICIC0000724 in relation to the petitioner, is non-operational under the provisions of Section 83(2) of the Act.

We deem it appropriate to partly allow the petition in view of the above terms. Accordingly, the petition along with pending applications, if any, stands disposed of.

Benefit of Circular No.224/18/2024-GST - pre-deposit u/s 112 - undertaking / intimation to appellate authority treated as compliance - prohibition on recovery pending filing of appeal - refund of amount recovered after withholding pre-deposit - HELD THAT:- Though the petitioner would contend that the tax liability cannot be enforced by way of recovery by virtue of Para No.6 of the Circular, learned HCGP would contend that for the circular to be made applicable, two preconditions that required to be fulfilled are that (i) the taxpayer must make a deposit of an amount of pre-deposit as contemplated u/s 112 of the CGST Act and (ii) must provide an undertaking to the proper officer. It is only when these two conditions are fulfilled, the condition in would come into play.

Taking note of the submissions made by both sides, it is not in dispute that the petitioner has furnished an intimation to the appellate authority as per Annexure-D within a period of 7 days from the communication of summary of demand at Annexure-C. Insofar as the question of pre-deposit, though certain contentions have been raised, petitioner submits that keeping open the legal question of requirement of pre-deposit, in the present case he would concede for the amount of pre-deposit to be retained with the revenue and would accept an order whereby the remaining amount is refunded.

Taking note of the facts as well as the contents of Annexure-D, it would be appropriate to dispose of the writ petition by treating the intimation at Annexure-D to be sufficient for the purpose of para No. 6 in the peculiar facts of the present case.

Accordingly, the respondent - Authorities are directed to refund the amount recovered pursuant to summary of demand at Annexure-C after withholding the pre-deposit amount as contemplated under Section 112 of the CGST Act. It is clarified that insofar as the amount directed to be refunded, petitioner foregoes the claim of any interest on the same.

Writ petition is accordingly allowed.

Cancellation of GST registration - misuse of Input Tax Credit - wrongful availment of Input Tax Credit without proof of physical movement and genuineness of transactions - camouflaging of transactions by multiple registrations at same premises - right of opportunity to be heard -HELD THAT:- The facts on record reveal that the petitioner obtained GST registration only on 05.04.2022. On the said date, there was already another GST registration for the same premises standing in the name of a partnership firm, namely Tvl. Gaurau Metal.

Thus, it is evident that the transactions of the said firm were intended to camouflage the transactions of the petitioner’s firm, with a view to pass on illegitimate Input Tax Credit availed on the strength of invoices said to have been raised on the petitioner by M/s. Shree Padmavathi Metal and Alloys.

There is no justification for obtaining registration for the same premises in the name of the petitioner’s firm and in the name of the partnership firm, namely Tvl. Gaurau Metal. Therefore, the impugned order passed by the second respondent / Appellate Authority, affirming the order of the first respondent, does not merit any interference.

Therefore, the writ petition is liable to be dismissed and is accordingly dismissed with liberty to respondents to take steps to recover the tax and penalty which were purportedly passed on to the customer.

Disallowance of management fees paid to ATS as being ‘excessive’ and ‘unreasonable’ - Post-scrutiny, the AO disallowed the expenses concerning management fees paid to ATS as being ‘excessive’ and ‘unreasonable’ - This amount was then added to the income of the respondent/assessee. As decided by HC [2024 (1) TMI 68 - DELHI HIGH COURT] Onus laid on the respondent/assessee was indeed discharged.

HELD THAT:- We find no good ground to interfere with the impugned judgment and order.

Accordingly, the special leave petition is dismissed on delay as well as on merits.

Issuance of notice u/s 143(2) beyond prescribed time - determination of undisclosed income for a block period - Scope of statutory expression “served” in Section 143(2) - proceedings initiated u/s 158BD

HELD THAT:- The expression “served” necessarily refers to the date on which the assessee actually receives the notice, and mere issuance of notice within the prescribed period without actual service, does not make the proceedings proper.

The Hon’ble Supreme Court in the case of Hotel Blue Moon’s case [2010 (2) TMI 1 - SUPREME COURT] used the word “issued”, which while reiterating the requirement of the proceedings to be drawn consequent upon search mandates issuance of notice u/s. 143(2) of the Act in general form, but the Hon’ble Apex Court has not interpreted the said provision and held that that issuance of notice under Section 143(2) is mandatory in strict sensu lato, failing which the proceedings drawn would be vitiated for such non-compliance, and also in the various judicial precedents referred in the foremost paras, it has been categorically held that notice u/s. 143(2) should be served on the assessee within the prescribed period.

If the contention of the learned Senior Standing Counsel that issuance of notice alone within the limitation period is sufficient compliance with the provision u/s 143(2), without actual service of the same, is accepted, there is every possibility that issuance of notice can also be antedated, thereby defeating the legislative intent behind such enactment to avoid such arbitrary action on the part of the authorities, as the drafters of the statute have clearly intended to see that the notice u/s. 143(2) of the Act must not only be issued but also duly served upon the assessee.

In the instant case, since the notice under Section 143(2) was admittedly served beyond the statutory period, the infirmity goes to the root of the matter. Such non-compliance is neither procedural in nature nor curable, and consequently, the entire proceedings stand vitiated and are liable to be set aside. Decided against Revenue

Validity of rectification order passed by the Settlement Commission -power of the Settlement Commission to reopen concluded orders -Finality of settlement proceedings

HELD THAT:- The Hon’ble Supreme Court in the case of Brij Lal [2010 (10) TMI 8 - SUPREME COURT] has inter alia held that the Settlement Commission cannot re-open its concluded proceedings by invoking Section 154 of the Act so as to levy interest under Section 234B.

Hon’ble Supreme Court has clearly opined that the Settlement Commission cannot reopen its concluded proceedings by invoking Section 154.

In the present case, the settlement proceedings were concluded by the Settlement Commission by passing an Order on 30th November 1999. This order was passed under Section 245D(4) of the I.T. Act. Once these proceedings are concluded, the Settlement Commission could not have invoked Section 154 seeking to rectify the Order dated 30th November 1999 and calling upon the Petitioner to pay interest under Section 234B from the date of intimation under Section 143(1) upto 30th November 1999.

No hesitation in holding that the Settlement Commission could not have invoked the powers under Section 154 to rectify the Order dated 30th November 1999. Hence, the rectification order dated 23rd March 2004 is hereby quashed and set aside. Consequently, demand notice issued pursuant to the rectification order will also have to go and accordingly is quashed and set aside.

Argument of the Revenue that, notwithstanding the aforesaid, the Petitioner ought to be called upon to pay interest from the date of intimation u/s 143(1) upto the date of the admission order passed by the Settlement Commission under Section 245D(1) - Settlement Commission cannot reopen its concluded proceedings by invoking Section 154 of the Act so as to levy interest under section 234B. In other words, the Supreme Court has put a quietus to the matter by holding that, where proceedings are already concluded they are not to be re-opened by invoking Section 154. If we were to accept this argument of the Revenue, it would effectively be doing something indirectly what is proscribed by the Supreme Court directly.

In these circumstances, we are unable to agree with the submission of the Revenue that the Petitioner ought to be directed to pay interest from the date of intimation u/s 143(1) till 22nd August 1996 [the date of the admission order passed by the Settlement Commission]. WP allowed.

Validity of order passed u/s 92CA(1) as barred by limitation - statutory period of limitation u/s 153(2) r/w 153(4) and Section 92CA(1) - difference between approval and reference - When was the reference to the Transfer Pricing Officer (TPO) made pursuant to Section 148 notice dated 24.02.2020? - Whether the reference to the 1st Respondent Transfer Pricing Officer (TPO) can be said to be time barred in view of the limitation u/s 153(2)?

HELD THAT:- In view of the proviso to Section 153(2) of the Income Tax Act, 1961, where a notice u/s 148 is served on or after 01.04.2019, the period available for completion of assessment stands extended to twelve months i.e. till 31.03.2020.

In the present case, the notice u/s 148 was served on 24.02.2020. Therefore, the limitation for completing the assessment would have expired ordinarily on 31.03.2021, it being twelve months contemplated under the proviso to Section 153(2) of the Income Tax Act, 1961.

If the reference was made before the expiry of last date under Section 152(2) of the Income Tax Act, 1961 period for completing the Assessment gets extended by another 12 months in terms of Section 153(4) of the Income Tax Act,1961.

The screenshot available along with the typed set of papers also indicates that a proposal was made by the AO / 2nd Respondent to PCIT/CIT for reference to Transfer Pricing Officer (TPO) on 08.02.2021 and approval was granted by the Commissioner of Income Tax (CIT) on 10.02.2021.

Reference was made by the AO / 2nd Respondent to the DC/ACIT TPO -1 Hyderabad only on 11.01.2022. It was later transmitted to the Deputy Commissioner of Income Tax / 1st Respondent on 13.01.2022.

A notice was issued on 13.01.2022 to the petitioner u/s 92CA(2) of the Income Tax Act, 1961 to produce the documents. In response to the notice the petitioner has raised the preliminary objection vide letter dated 18.01.2022. The aforesaid preliminary objection was disposed of vide letter dated 21.01.2022 of the by the 1st Respondent.

After approval was granted to the 2nd Respondent Assessing Officer to make a reference to Transfer Pricing Officer (TPO) by the Principal Commissioner of Income Tax. On 10.02.2021, a reference should have been made under Section 92CA (1) of the Income Tax Act, 1961 on or before 31.03.2021 i.e. within the time prescribed for completing an Assessment u/s 153(2) of the Income Tax Act, 1961.

Last date to pass Assessment Order would have ordinarily expired on 31.03.2021. However, during this period the country was still under the lock down due to outbreak of COVID-19 pandemic. Thus the last date for passing the Assessment Order would have expired on 30.06.2021, due to TOLA ordinance/ TOLA, 2020.

The impugned order itself records that a reference under Section 92CA(1) of the Income Tax Act, 1961 in the case of the petitioner was received from the DC/ACIT TPO -1 Hyderabad only on 13.01.2022 and that as per the order sheet details available on ITBA portal, the DC/ACIT TPO -1 Hyderabad had received the case from AO-Technical Unit on 11.01.2022 and the case was referred for determination of the Arm’s Length Price (ALP) in respect of all the transactions reported in Form No.3CEB filed by the petitioner for the Assessment Year 2017-2018.

Thus, the impugned order of the Transfer Pricing Officer (TPO) passed under Section 92CA(3) of the Income Tax Act,1961 on 27.01.2022 after issuing a show cause notice to the petitioner on 25.01.2022, pursuant to which the draft assessment order has been passed on 28.02.2022, is without Jurisdiction.

Since the reference was not made within the period of limitation under Section 153(2) of the Income Tax Act, 1961, it is without jurisdiction.

Attachment order issued by the Tax Recovery Officer in respect of the immovable property - proclamation of sale was issued in Form No.I.T.C.P.13 - Limitation period under Rule 68B - principal ground on which the petitioner challenges the proclamation of sale is that the limitation period of three years prescribed in Rule 68B of the Second Schedule of the I-T Act expired

HELD THAT:- It is clear from the language of Section 261 that an unsuccessful party to an appeal before the High Court may request for a certificate of appeal to the Hon’ble Supreme Court in terms thereof. If the petitioner had requested for such certificate and been granted the same, a statutory appeal could have been filed without applying for special leave.

Without resorting to this option, the petitioner opted to directly apply for special leave before the Hon’ble Supreme Court.

Undoubted position is that the assessment order could have been set aside, modified or revised by the Hon’ble Supreme Court. Consequently, it cannot be said that the order attained finality until the Hon’ble Supreme Court dismissed the special leave petition on 15.05.2015.

15th May 2015 falls within the financial year 2015-16, which ends on 31.03.2016. Therefore, the limitation period should be reckoned from 31.03.2016 and would run up to 31.03.2019. The documents on record disclose that the impugned proclamation of sale was issued on 12.06.2018, which is within the said limitation period. On account of this conclusion, the judgments relied upon by learned counsel for the petitioner, including the judgments of this Court in Noorudhin and T.Subramanian[2001 (3) TMI 35 - MADRAS HIGH COURT] will not come to her rescue.

Implications of not taking action to sell the immovable property within the prescribed period of limitation - Under Rule 65B(4), the statute incorporates a legal fiction providing for the attachment order being vacated. It should be noted that Part III of the Second Schedule is confined to the attachment and sale of immovable property and does not otherwise curtail the right of the Tax Department to recover the dues mentioned in the certificate issued u/s 222.

As petitioner contended that the second certificate issued and the attachment made pursuant thereto is confined to a sum of Rs. 6,13,294/- and that any recovery pursuant to said tax certificate should be confined to the said amount. This contention is meritorious but does not carry the petitioner very far in view of the earlier conclusion that the proceedings pursuant to the first certificate are within the period of limitation.

WP fails.

Scope and applicability of Section 281 of the I-T Act - Procedure for recovery under the Second Schedule (Rule 2, Rule 11, Rule 16, Rule 51) - Certain transfers to be void - Tax Recovery Officer's jurisdiction to determine claims under the Second Schedule - Effect of attachment relating back to date of service of Rule 2 notice

HELD THAT:- As is noticeable from the text of the amended Section 281(1) in comparison to the pre-amended version, the qualification or condition that the transfer should be "with the intention to defraud the revenue" has been deleted by the amendment. Consequently, it is no longer necessary for revenue to establish that the transfer was made with the intention to defraud the revenue.

In the case at hand, the third respondent filed the return of income for AY 2011-12 on 08.02.2012. The case was selected for scrutiny and a notice under Section 143(2) of the I-T Act was issued to the third respondent on 31.07.2012. Since the self-assessment of the assessee was not accepted, a proceeding under the I-T Act had commenced. Pursuant thereto, the assessment order under Section 143(3) was issued on 31.03.2014 and the Rule 2 notice was issued on 24.02.2016 and served on the third respondent on 26.02.2016. Thus, Section 281(1) operated only up to 26.02.2016.

Creation of mortgage in favour of the petitioner - The award records that all the respondents were set ex parte and that the entire claim of Rs. 42,94,056/- was allowed along with interest on the principal sum at 24% per annum from the date of claim until the date of realisation with costs of Rs. 2,19,480/-. The award also records that the immovable assets of the third respondent and second respondent therein, respectively, which are described in schedules, were attached by orders dated 05.05.2022 and 24.05.2022, respectively. The schedule of the property of the third respondent, as described therein, tallies with the schedule of the MoDT and with the property attached under order dated 21.04.2022 of the TRO.

In order to enforce the award, it appears from documents filed by the petitioner that E.P. No.812 of 2023 was filed against the three judgment debtors. This execution petition is directed only against the property of E. Vimala Devi and has no bearing on these proceedings. Whether any separate execution petition was filed against the asset of the third respondent cannot be gleaned from the documents on record. Against this factual matrix, turn to the Second Schedule to the I-T Act and consider the implications of actions taken thereunder.

Scope and applicability of the Second Schedule to the I-T Act - A combined reading of Rules 2 and 4 of the Second Schedule shows, the relevant date is the date of service of such notice and not the date of issuance thereof. Therefore, the contention of learned counsel for the petitioner cannot be countenanced.

Because the mortgage was created after service of the Rule 2 notice, the mortgagor/third respondent was required to obtain the permission of the TRO before doing so as per Rule 16(1). In the absence of such permission, he was not competent to mortgage the property. The implications of such mortgage call for consideration next.

Rule 16(2) provides that any private transfer or delivery of the property attached shall be void as against all claims enforceable under the attachment. Significantly, Rule 16(2) does not declare that any transfer of attached property is void ab initio or even void. Instead, the declaration is limited to being void as against claims enforceable under the attachment. The consequences would be clear from the following illustration.

Assuming an assessee in default owes the Income Tax Department a sum of Rs. 6 crore, whereas the relevant property has a market value of Rs. 10 crore. If the transfer by way of mortgage is construed as being void ab initio, no interest in the property would pass to the mortgagee. Therefore, if the property were to be sold, the mortgagee would not be entitled to even the surplus over and above the Income Tax Department's dues of Rs. 6 crore. On the other hand, if the transfer were to be construed as void only against the claims enforceable under the attachment, the mortgagee would still be entitled to enforce the mortgage in respect of the available surplus of Rs. 4 crore. In my view, the text of Rule 16(2) leads to the conclusion that any transfer, including by way of mortgage, would be void only against claims enforceable under the attachment, but not otherwise.

Adjudication of the validity of the mortgage - whether the TRO was entitled to adjudicate on the validity of the mortgage? - TRO has drawn reference to Rule 51 of the Second Schedule and concluded that the mortgage is void ab initio. Even after the amendment to Section 281(1), the TRO does not have the power to adjudicate on the validity of the instrument of transfer in favour of a third party. To that extent, the order impugned herein calls for interference. Consequently, the declaration that the mortgage in favour of the petitioner is void ab initio is set aside.

The sequitur to the above conclusion is, however, not that the attachment by the revenue is invalid or that the proceedings by the TRO to recover arrears is invalid.

Surplus, if any, shall be retained by the TRO and paid to the petitioner after confirming that proceedings under the Chit Funds Act, 1982 have attained finality. It should be borne in mind, in this regard, that the award was issued ex parte and that the statute provides for an appeal. The execution proceedings initiated by the petitioner before the civil court may be proceeded with because it pertains to the asset of E. Vimala Devi, but no civil court shall issue any process against the attached property. Any such process for the execution of a decree would contravene Rule 16(1) of the Second Schedule of the I-T Act.

This writ petition is disposed of on the following terms:

(i) The order dated 21.04.2022 is set aside partly to the extent that it declares that the mortgage in favour of the petitioner is void ab initio.

(ii) The TRO is entitled to bring the attached immovable property for sale in accordance with the Second Schedule of the I-T Act.

(iii) The TRO is entitled to appropriate the sale proceeds towards the amount mentioned in the certificate issued under Section 222 of the I-T Act.

(iv) If a surplus were to be available after the above mentioned appropriation, the TRO shall pay such surplus to the petitioner or the third respondent, as the case may be, on the basis of the final, conclusive and binding verdict in proceedings initiated by the petitioner against inter alia the third respondent under the Chit Funds Act, 1982.

(v) It is open to the petitioner to take steps to enforce the award in ARC No.377 of 2021 against the assets of Vimal Enterprises or E. Vimala Devi, but not against the assets of the third respondent, including the attached asset.

Reopening of assessment u/s 147 - Reasons to believe -live nexus with the formation of belief that income has escaped assessment - Addition u/s 68 - treatment of alleged bogus long term capital gains.

HELD THAT:- AO must have a tangible information which has a live nexus with the formation of belief that income has escaped assessment. If we peruse the reasons, then it would reveal that there is no information possessed by the AO. He was not even aware which scrips were purchased. How much was the purchase price, whether these were purchased through account Payee Cheques/RTGS or otherwise.

AO was not even aware who was the Broker and how these Contract Notes were held to be bogus. Simpliciter, some information was uploaded on the Insight Portal by the Investigation Wing, which without cross-verifying with the record of the assessee, AO has treated it as gospel truth and formed the reasons.

There is no background material available with the AO for formation of belief that income has escaped assessment. In other words, there is no live nexus between tangible material possessed by the AO vis-a-vis formation of belief that income has escaped assessment. Accordingly, the re-opening of assessment is bad in the eyes of law - Appeal of the assessee is allowed.

Reopening of assessment u/s 147 - Assessee is a non-filer - unexplained funds - addition u/s. 56(2)(vii)(b) difference between the stamp duty value of the transaction as well as the amount of consideration paid.

HELD THAT:- Evidence either in the Assessment Order or in the order of the Ld. CIT(A) that Assessee was either questioned about the difference between the stamp duty value and the transaction value. No doubt, the Assessee did not prefer any objection before the Ld. Dispute Resolution Panel but in the statement of facts, the Assessee has mentioned that the sum of Rs. 7,00,000/- is 10 years old transaction and therefore the Assessee being a non-resident could not obtain the information.

Even before the CIT(A), the Assessee was granted 4 opportunities.

CIT(A) categorically mentions that she has perused the statement of facts and therefore disposes of the Appeal in paragraph no. 4.4 for non-prosecution.

CIT(A) has to decide the Appeal on the merits of the case as per information available on record. She has neither applied the facts stated in the Assessment Order not the facts stated in the statement of facts.

Undoubtedly, the Assessee has failed to submit the information about Rs. 7,00,000/- paid to the builder. The Ld. Assessing Officer, also despite having the sale deed in his possession, did not record the date on which the Assessee has paid Rs. 7,00,000/-. He also did not call for the bank statement from HDFC bank wherein the Assessee claims to have paid money for obtaining bank draft of Rs. 3,24,240/-.

Thus admittedly, the Assessee being a non-resident deserves one more opportunity of hearing for the addition and further as the Assessee has not at all been questioned with respect to the addition u/s. 56(2)(vii)(b) in the interest of justice,restore the whole issue back to the file of the Ld. Assessing Officer with a direction to the Assessee to substantiate the sources of payment and also explain before the Ld. Assessing Officer with respect to the difference between stamp duty value and the registration value. Also find that the difference between the stamp duty value and the transaction value is less than 10%.

Appeal filed by the Assessee is allowed for statistical purposes.

Deduction claimed u/s 80P(2)(d) - interest income earned from deposits maintained with Co-operative Banks - assessee is a co-operative housing society duly registered under the Maharashtra State Co-operative Society Act

HELD THAT:- As in Pathare Prabhu Co–operative Housing Society [2023 (7) TMI 1272 - ITAT MUMBAI] held that interest income earned from investment with Co-operative Bank is eligible for deduction under section 80P(2)(d) of the Act.

Thus, we direct the AO to grant a deduction under section 80P(2)(d) of the Act to the assessee in respect of the interest income earned from deposits made with the Co-operative Banks - Appeals by the assessee are allowed.

Registration under section 12AB - charitable purpose as defined in section 2(15) - use of funds for non charitable conferences and hospitality negating charitable character - Medical Council code prohibiting acceptance of gifts, travel and hospitality from pharmaceutical companies - approval under section 80G contingent on registration under section 12AB

Registration under section 12AB - charitable purpose as defined in section 2(15) - use of funds for non charitable conferences and hospitality negating charitable character - Medical Council code prohibiting acceptance of gifts, travel and hospitality from pharmaceutical companies - Validity of refusal to grant registration under section 12AB to the society - HELD THAT: - The Tribunal examined financial statements, supporting documents and submissions for the three years ending March 2022 to March 2024 and found that grants of approximately forty lakhs from pharmaceutical companies resulted in only a meagre expenditure on identifiable charitable activity (sponsoring medicines for type 1 diabetic children). The bulk of receipts were applied to conferences, seminars and related hospitality (five star venues, entertainment, travel, professional fees and event management), which the Tribunal held are not charitable expenditures within the meaning of charitable purpose as defined in section 2(15). The Tribunal also relied on the Medical Council code (MCI Regulations 2002 and later uniform code references) that prohibits doctors accepting gifts, travel and hospitality from pharmaceutical companies; finding that the pattern of expenditures indicated networking and possible quid pro quo promotion rather than bona fide charitable activity. No evidence of genuine CME events with accredited professional purpose or appropriate disclosure/channeling through approved institutions was shown. On these facts the Tribunal agreed with the Commissioner (Exemptions) that the activities were negligible in charitable content and that funds were expended for purposes outside the scope of section 2(15), justifying refusal of registration under section 12AB. [Paras 6, 7, 8, 9, 12]

Application for registration under section 12AB refused; the Tribunal upheld the Commissioner's rejection.

Approval under section 80G contingent on registration under section 12AB - registration under section 12AB - Entitlement to approval under section 80G in view of refusal of registration under section 12AB - HELD THAT: - The Tribunal applied the bedrock requirement that approval under section 80G is conditional upon registration under section 12AB (as mandated by the statute). Having upheld the refusal of registration under section 12AB on merits for the stated tax periods, the Tribunal held that the statutory precondition for 80G approval was not met. Consequently the Commissioner's denial of approval under section 80G was sustained on merits. [Paras 13, 15]

Application for approval under section 80G declined for lack of registration under section 12AB and on the merits.

Final Conclusion: Both appeals are dismissed: registration under section 12AB was rightly refused because receipts were predominantly used for non charitable conferences and hospitality inconsistent with section 2(15) and MCI norms, and approval under section 80G was rightly declined as the statutory precondition of registration under section 12AB was not satisfied.

Assessment order passed u/s 143(3) r.w.s. 144C(3) r.w.s. 144B -Final assessment order passed without giving effect to Dispute Resolution Panel directions - HELD THAT:- As final assessment order passed by the AO u/s. 143(3) r.w.s. 144C(3) r.w.s 144B of the Act without incorporating the directions of the DRP is bad in law and null and void for the reason that even as on today the TPO did not carry out any exercise and pass any order as directed by the DRP.

Since the TPO did not pass any order as per the directions of the DRP till date, the Tribunal cannot extend the time limit for passing any such order by setting aside the order of the AO for incorporating any such order to be passed by TPO in future.

Therefore, respectfully following the decision of ESPN Star Sports Mauritius S.N. C. E. T. Compagnie V. Union of India [2016 (4) TMI 45 - DELHI HIGH COURT] and Global One India Private Limited [2019 (12) TMI 503 - ITAT DELHI] we hold that the final assessment order passed by the AO u/s. 143(3) r.w.s.144C(3) r.w.s. 144B which was passed without incorporating the direction of the DRP is bad in law, null and void. Decided in favour of assessee.

Disallowance u/s.14A r.w.r. 8D - as submitted assessee did not earn any exempt income on such investments - Whether in the absence of dividend income earned the investments shall be considered for the purpose of disallowance u/r 8D? - HELD THAT:- We find merit in the submissions of assessee that only the dividend yielding investments shall have to be considered for the purpose of making disallowance under rule 8D. We also find that the Tribunal sustained the computation of disallowance suo-moto made by the assessee for the A.Y. 2014-15 and 2016-17 which excluded dividend yielding investments.

Thus, reversing the order of the CIT(A) we direct the AO to delete the additional disallowance u/s.14A r.w.r. 8D made while computing income of the assessee. The grounds raised by the assessee are allowed.

Allowability of ESOP expenditure - CIT(A) was correct in law in holding that the ESOP expenses are admissible as deduction as covered in the case of CIT Vs. Lemon Tree Hotels Ltd. [2015 (11) TMI 404 - DELHI HIGH COURT] and also in the assessee’s own case for the A.Y.2012-13 [2021 (10) TMI 1010 - ITAT DELHI]

Additional claim for medical reimbursement and leave travel allowance which was not claimed by the assessee in the return of income - In our considered view the appellate authority has all the powers to admit additional claim even though such claim is not made in the return of income which was otherwise not made in the return of income. Thus, we see no infirmity in the order passed by the Ld. CIT(A) in admitting additional claim for medical reimbursement and leave travel allowance. Thus, the ground of appeal of the revenue is rejected.

Rectification u/s 154 after settlement under DTVSV Scheme - After settling the issues/disputes under DTVSV Scheme, a notice u/s.154 was issued by the AO proposing to enhance the income of the assessee assessed u/s.143(3) on account of late depositing of employee’s contribution to PF - HELD THAT:- As decided in the case of Satish Kumar Dhingra [2024 (8) TMI 1245 - DELHI HIGH COURT] that when the assessee received Form No.5 pursuant to declaration made under DTVSV Act for settlement of disputed liability determined, under provisions of DTVSV Act any income Tax authority could not reopen or revise the assessment.

Disallowance made u/s.14A r.w.r. 8D under book profits u/s.115JB - We observe that the issue has been decided in the case of Vireet Investments Private Ltd. [2017 (6) TMI 1124 - ITAT DELHI] wherein it has been held that the computation under clause (f) of Explanation 1 to Section 115JB (2) is to be made without restoring to computation as contemplated under section 14A of the Act r.w.r. 8D of IT Rules.Thus, we direct the AO to delete the additional disallowance made u/s.14A r.w.r. 8D while computing the profits under normal provision of the Act as well as books profits u/s.115JB of the Act.

Scope of amendment to section 14A brought in by Finance Act, 2022 - We observed that Hon’ble Delhi High Court in Era Infrastructure India Limited [2022 (7) TMI 1093 - DELHI HIGH COURT] held that the amendment to section 14A is for removal of doubts and cannot be presumed to be retrospective even whether such language is used if it alters or changes the law as it earlier stood. The ground of the appeal of the assessee is allowed.

Validity of the assessment order on the ground of limitation as per the provisions of section 144C(13) r.w.s. 153 - Limitation for passing final assessment order - Interplay of Sections 144C and 153 - HELD THAT:- Limitation for passing the final assessment order under section 144C(13) of the Act is to be seen only with reference to the timeline specified u/s. 144C of the Act only without referring to provisions of section 153 of the Act.

We find that identical submissions were made by the Department before the Hon’ble Madras High Court in the case of Roca Bathroom Products P. Ltd. [2022 (6) TMI 848 - MADRAS HIGH COURT]rejected the arguments of the Department and held that provisions of section 144C and 153 of the Act are mutually inclusive as both contain provisions relating to section 92CA of the Act and are inter-dependent and are overlapping. Hence, the period of limitation for passing the final assessment order u/s. 144C(13) of the Act has to be determined with reference to section 144C r.w.s 153 of the Act.

In view of the ratio laid down in the case of Roca Bathroom Products Pvt. Ltd (supra) and Teva Pharmaceutical & Chemical Industries India Private Limited [2026 (1) TMI 1123 - ITAT DELHI] in order to follow the principals of consistency as mere keeping the captioned Appeal pending in the Tribunal will not serve any purpose, by respectfully following those binding precedents, we hold that the impugned Final Assessment Order passed u/s 143(3) r.w.s. 144C(13) of the Act dated 27/05/2024 pertaining to Assessment Year 2020-21 is barred by limitation as per Section 153 r.w. Section 144C of the Act. Accordingly, the impugned Final Assessment Order is hereby quashed.

Since above issue of Limitation is pending adjudication before the Hon'ble Supreme Court in case of Shelf Drilling Ron Tappmeyer Ltd. [2023 (9) TMI 1529 - SC ORDER] and to be reached finality by the Larger Bench of the Hon'ble Supreme Court, we grant liberty to the parties to get the present Appeal revived for adjudication of the other issues on merits if the decision of the Hon'ble Supreme Court on this issue necessitates modification of this order.

Validity of the assessment order on the ground of limitation as per the provisions of section 144C(13) r.w.s. 153 - Limitation for passing final assessment order - Interplay of Sections 144C and 153 - HELD THAT:- Limitation for passing the final assessment order u/s 144C(13) of the Act is to be seen only with reference to the timeline specified u/s. 144C of the Act only without referring to provisions of section 153 of the Act.

We find that identical submissions were made by the Department before the Hon’ble Madras High Court in the case of Roca Bathroom Products P. Ltd. [2022 (6) TMI 848 - MADRAS HIGH COURT]rejected the arguments of the Department and held that provisions of section 144C and 153 of the Act are mutually inclusive as both contain provisions relating to section 92CA of the Act and are inter-dependent and are overlapping. Hence, the period of limitation for passing the final assessment order u/s. 144C(13) of the Act has to be determined with reference to section 144C r.w.s 153 of the Act.

In view of the ratio laid down in the case of Roca Bathroom Products Pvt. Ltd (supra) and Teva Pharmaceutical & Chemical Industries India Private Limited [2026 (1) TMI 1123 - ITAT DELHI] in order to follow the principals of consistency as mere keeping the captioned Appeal pending in the Tribunal will not serve any purpose, by respectfully following those binding precedents, we hold that the impugned Final Assessment Order passed u/s 143(3) r.w.s. 144C(13) of the Act dated 27/05/2024 pertaining to Assessment Year 2020-21 is barred by limitation as per Section 153 r.w. Section 144C of the Act. Accordingly, the impugned Final Assessment Order is hereby quashed.

Since above issue of Limitation is pending adjudication before the Hon'ble Supreme Court in case of Shelf Drilling Ron Tappmeyer Ltd. [2023 (9) TMI 1529 - SC ORDER] and to be reached finality by the Larger Bench of the Hon'ble Supreme Court, we grant liberty to the parties to get the present Appeal revived for adjudication of the other issues on merits if the decision of the Hon'ble Supreme Court on this issue necessitates modification of this order.

Disallowance of claim towards gratuity expense - as argued such claim is duly allowable in view of provisions of section 40A(7) and 43B -discharge of liability by transfer to related concern -

CIT(A) has analyzed the gratuity expenditure claimed by the assessee and he has allowed to the extent of actual payment made by the assessee to the employee Mr. Neelesh Singh, however rejected the claim related to other employee Mr. Ajay Bhatnagar, who was transferred to another concern.

HELD THAT:- CIT(A) is of the view that mere transfer of the gratuity liability does not fall under the category of actual payment. It is only a journal entry, therefore, the assessee has not discharged the relevant payment. After considering the submissions, we are of the view that there is a liability relating to the gratuity in relation to Mr. Ajay Bhatnagar he provided the regular services to the assessee till he was transferred.

The relevant employee was transferred to another concern and the relevant liability to pay gratuity which was due to the employee was also transferred to the other concern.

No doubt the gratuity was not due to such transferred employee however the services of the particular employees were also utilized by the assessee, it was due to the employee, however instead of making payment to the transferred employee, the assessee has transferred the above said gratuity amount due to such employee to the other concern that being the case the liability of the assessee was discharged and accordingly, the assessee has passed the transfer entry in its books of accounts and accordingly, claimed the same as expenditure for such discharge of the liability.

In the case of transfer of employee the relevant employee renders services to the new transferred entity along with the services provided by him in the old concern. The gratuity is accordingly accumulated due to continue of the services. Therefore on the part of the assessee, the assessee has to discharge its liability either to make payment directly to the relevant transferred employee or transfer the liability to the other concern. In this case, the assessee has transferred the liability to the other concern and claimed the relevant gratuity as its expenditure, therefore, we are inclined to agree with the submissions of the assessee. Assessee appeal allowed.

Time-bar / limitation of revenue demand - Misclassification of imported Natural Rubber Latex - classification of imported goods under tariff headings - burden of proof on the revenue for classification challenge - effect of the post-clearance audit -self-assessment regime and facilitation under ACP / AEO - wilful misstatement / requirement of positive act and intention - HELD THAT:-As per the General Rules for the Interpretation (GIR) of the First Schedule to the Customs Tariff Act, 1975, for legal purposes, classification of imported shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to Rule 2 to 6 of the GIR. Thus Rule 1 of the GIR provides that the classification of goods shall be determined according to the terms of the headings of the tariff and any relative Section notes or Chapter notes. Rules 2 to 6 provide the general guidelines for classification of goods under the appropriate sub-heading. Hence in the event that the goods cannot be classified solely on the basis of GIR 1, and if the headings and legal notes do not otherwise require, the remaining Rules 2 to 6 may then be applied in sequential order. We find that tariff heading 4001 2910 makes a specific reference to ‘Hevea’ under the heading ‘Natural rubber in other forms’. Hence there could have been genuine divergence of views involving interpretation of law on the classification of the goods between the appellant and revenue.

Although we have noted our dissatisfaction with the manner in which the rival parties have presented the factual matrix, we observe that the impugned order places particular emphasis on the importer-appellant’s status as an ACP client. It is pertinent to record that the erstwhile ACP scheme has, with effect from 23.08.2011, been subsumed into the Authorized Economic Operator (AEO) programme. The underlying objective of both schemes is to extend assured facilitation to importers who possess a consistent record of compliance and fulfil the prescribed eligibility criteria. Such accreditation is conferred only upon select importers and exporters who have demonstrably exhibited adherence to the statutory requirements administered by the Customs authorities. In this backdrop, the appellant’s declarations and past clearances warranted a more rigorous and careful scrutiny by the adjudicating authority. An importer enjoying ACP/AEO status, having been previously verified as compliant and maintaining an unblemished record, stands to forfeit that status—and the statutory facilitation attendant upon it—if subsequently found to have engaged in conduct resulting in revenue loss.

It is therefore incumbent upon the authorities to ensure that any charge of misconduct is weighed with circumspection and supported by cogent, credible evidence before it is affirmed. Furthermore, the allegation of wilful misstatement does not turn upon the correctness of the classification adopted by the assessee.

We find that the impugned order has not distinguished the products of the earlier period to be different. Nor can a genuine divergence of views involving interpretation of law on the classification of the goods be ruled out. Hence when the burden of proving the classification is on the department and no negative intention on the part of the appellant could be established, a charge of wilful misstatement, suppression of fact etc cannot be sustained. The SCN is hence time barred.

Thus, we do not examine the issue on merits in the light of the Constitutional Court judgments cited above.

We accordingly set aside the impugned order and allow the appeals on the issue of time bar. The appellant is eligible for consequential relief as per law. The appeal is disposed of accordingly.

Time barred - limitation- extended period under Section 28(4) - Show Cause Notice under Section 124 - provisional assessment - first check - classification of goods - Tariff Heading / CTH - burden of proof on the Revenue - mis-declaration / suppression / fraud - confiscation u/s 111(m) - penalty u/s 112(a) and 114A - interest u/s 28AA - Accessories (Condition) Rules, 1963 - HELD THAT:- We find that a coordinate Bench of this Tribunal in Dr. Rai Memorial Cancer Institute [2022 (2) TMI 153 - CESTAT CHENNAI], examined the import of a similar ‘True Beam’ Linear Accelerator, which was also subject to examination before clearance and struck down the SCN for having been issued beyond the normal period. Even in the case of MIOT Hospitals [2023 (9) TMI 464 - CESTAT CHENNAI] related to the import of Linear Accelerator where the appellant had not challenged the department’s classification, it was found that the appellant had declared all particulars and merely because of a change in classification by the department, redemption fine and penalty could not be imposed. This also support the submission of the appellant that there was a genuine dispute on classification prevalent during the said time. Having found the SCN time-barred, we do not feel it necessary to examine the judgments supporting the case on classification, fine, penalty etc. submitted by revenue.

In the circumstances we find that the SCN has been issued beyond the normal period and is hence liable to be struck down on that score. We hence do not examine the issue on merits in the light of the Constitutional Court judgments in B.V. Jewels [2004 (9) TMI 104 - SUPREME COURT] and Monsanto Manufacturer [2014 (4) TMI 505 - ALLAHABAD HIGH COURT]

Accordingly, we set aside the impugned order and allow the appeal. The appellant is eligible for consequential relief as per law. The appeal is disposed of accordingly.

Reverse burden of proof - presumption u/s 123 - confiscation u/s 111(d) - penalty u/s 112(a) - natural justice - right to cross-examination - procedure u/s 138B - admissibility of statements u/s 108 - proper officer - Proof of illicit importation - HELD THAT:- The appeal in this case relates to the charge of smuggling of gold, which is nothing but importing goods clandestinely, without payment of duty. Such goods fall within the definition of “prohibited goods”, under Section 2(33) of the Customs Act. These activities threaten national economic interests.

There is seen to be a non-adherence of the principles of natural justice in this case, more so in a case involving reverse burden of proof. However, this is a curable defect. Considering the gravity of the charge and the need for the appellant to defend himself, it is hence felt necessary that the matter should be remanded to the file of the Original Authority to follow the procedure set out in section 138B of the Customs Act 1962. He should afford an opportunity to the appellant, in terms of the section, to cross examine the remaining persons whose statements were relied upon in the SCN and had been requested by the appellant for cross-examination but were not permitted by the Ld. A.A.. This view is also supported by the recent judgment of the Hon’ble Allahabad High Court in Commissioner Of Customs (Preventive) Lucknow Vs Shri Sarad Chand Agrahari @ Sharad Chand Agrahari [2026 (1) TMI 1496 - ALLAHABAD HIGH COURT], that set aside a CESTAT order which had invalidated customs adjudication proceedings on the ground that cross-examination under Section 138B of the Customs Act was not provided.

We hence remand the matter to the Original Authority to decide the issue afresh in denovo proceedings after following the procedure set out in section 138B of the Customs Act 1962. The appellant is at liberty to advance arguments both orally and in writing on the merits of the case. All contentions are left open. The appellant should also cooperate with the adjudicating authority in completing the process expeditiously and in any case within ninety days of receipt of this order. The appeal is disposed of accordingly.

Threshold requirement for allottees under the second proviso to Section 7(1) - Existence of financial debt and corresponding default for initiation u/s 7 - Joint/group insolvency proceedings against related corporate debtors - Effect of registration under Rule 28 of the NCLT Rules, 2016 on amendment/substitution of parties in a returned petition - Requirement of tripartite sublease/occupancy certificate for lawful delivery of possession in leasehold real estate projects - Whether the threshold limit of 100 allottees prescribed by the second proviso to Section 7(1) of the Code stood fulfilled in the case on hand - HELD THAT:- ‘Handing over/Taking over of possession’ letters issued by Bhasin Ltd. in favour of allottees, recording delivery of possession of particular units, have been placed on record. However, we find that some of those letters pertain to the 1st floor of the building, with which the petitioning allottees in the company petition have no concern. Those letters, therefore, do not further the case of the appellants. A letter was issued in relation to a unit on the 7th floor in favour of one Sheetal Badhwar but the undertaking of that allottee records that the sublease deed with the UPSIDA was yet to be executed. Further, notional possession letters were also issued to allottees, which are of no significance whatsoever. These so-called letters of actual delivery of physical possession, in our considered opinion, have no legal import given the categorical stipulation by the UPSIDA in its allotment letter and also the lease deeds that physical possession should not be delivered to allottees without execution of the tripartite sublease deeds.

Though we would have ordinarily restricted the scope of enquiry in this regard to documents prior to the date of admission of the company petition and which formed part of the record before the NCLT, we may note that the appellants secured an interim order from the NCLAT on 07.12.2023 by claiming that the construction was complete and that the units were ready to occupy. This interim order continued to operate for nearly two years thereafter. It was during the pendency of the proceedings that the NCLAT undertook the exercise of verifying this claim of the appellants and appointed an Observer to visit the premises and submit a report as to the situation actually obtaining. It was pursuant thereto that the Observer’s Report dated 15.05.2025 came to be filed before the NCLAT leading to the dismissal of the appeals on 29.10.2025. We are, therefore, of the opinion that this report also warrants examination.

Viewed thus in totality, the contention of the appellants that the construction was completed in all respects and possession was delivered to some of the petitioning allottees is found to be without merit and factual foundation. Notwithstanding the letters and documents sought to be relied upon in that regard, the ground reality is otherwise. Neither has the construction been completed nor could possession of units be delivered to the allottees without fulfilling all necessary formalities in that regard after completion of the building in all respects.

On the above analysis, we hold that the company petition instituted under Section 7 of the Code against both the corporate debtors by the allottees of 103 units was maintainable on all counts. The petitioning allottees duly established their financial debt and also the default in connection therewith, inasmuch as the units for which they had paid valuable consideration were not made ready and delivered to them till date. We, accordingly, find no error having been committed either by the NCLT in admitting the company petition or by the NCLAT in confirming the same in appeal. Hence, Civil Appeal are bereft of merit and deserve to be dismissed.

Admission of Section 7 application - debt and default - acknowledgement of debt by OTS proposals - limitation and extension by Supreme Court suo motu order - representation of corporate debtor and power under NCLT Rules (Rule 120) - effect of interim deposit on continuation of CIRP and exclusion of period - HELD THAT:- There is no dispute with regard to the sanction of the loan, agreement entered with the Corporate Debtor by the Financial Creditor. Counsel for the Respondent has referred to letters written on behalf of the Appellant on 09.05.2016 and 26.05.2016.

The Corporate Debtor was already represented and filed reply under Section 7 application represented through a Counsel. Present was not the case where Counsel representing could have been allowed to be displaced by the Adjudicating Authority in excise the power of under Rule 120 as claimed by the Appellant. The Corporate Debtor has also filed the reply which has been noticed and considered by the Adjudicating Authority. The Adjudicating Authority being satisfied of the debt and taking note of various OTS proposals given by the Corporate Debtor admitting its liability, had not committed any error in admitting Section 7 application in the CIRP proceeding.

IRP submitted that in view of the interim order operating from 10.04.2025, no further steps except collation of claims were made by the IRP. We are of the view that the Adjudicating Authority by giving valid reasons and findings admitted Section 7 application, which does not warrant any interference by this Court in excise of our Appellate Jurisdiction.

Appellant submitted that the amount which was deposited under the order of the Court has already lapsed and no further steps have to be taken. However, the Appellant submits that no direction needed with regard to deposited amount. The period from 10.04.2024 till date shall be excluded from the CIRP period. The IRP shall now proceed further in the CIRP in accordance with law.

Appeal is dismissed subject to above.

Maintainability of Section 7 application - exclusion of "financial service provider" from the definition of "corporate person" - financial service provider - effect of cancellation of registration of NBFC on exclusion u/s 3(7) - admission of Section 7 application upon finding of debt and default - HELD THAT:- There can be no dispute to the proposition as submitted by the Counsel for the Appellant that the NBFC is not a corporate person within the meaning of Section 3(7) hence it is excluded from Section 3(7) of the IBC, 2016. Section 7 of the IBC provides for initiation of the corporate insolvency resolution process by a Financial Creditor. Section 6 provides who can initiate proceedings against any corporate person.

From the cancellation the registration of the Corporate Debtor as NBFC by the RBI w.e.f. 18.09.2018, the Corporate Debtor no longer continues as a Financial Service Provider. When Corporate Debtor does not continue as a Financial Service Provider, the exclusion as provided under Section 3(7) shall not be applicable and it shall not be open to the Appellant to contend that the Section 7 application was not maintainable.

The present is not a case where the Corporate Debtor was continuing as Financial Service Provider on the date when application under Section 7 was filed. The certificate cancelling registration has been brought on record by the Respondent in this Appeal therefore is no longer any issue which require determination, as to the Corporate Debtor being a Financial Service Provider. We, thus, are of the view that the above Judgment in no manner help the Appellant in the present case.

The Adjudicating Authority after having found the debt and default has rightly admitted Section 7 application. We do not find any error in the order admitting Section 7 application. The Appeal is dismissed.

Claims based on assessments conducted during moratorium are inadmissible in CIRP - moratorium u/s 14 - clean slate doctrine - extinguishment of nonincorporated claims on approval of a resolution plan - commercial wisdom of the Committee of Creditors - inclusion of claims in the Information Memorandum - directory nature of procedural claim forms - Whether a lower pay out towards Provident Fund dues can be approved in the resolution plan. Perusal of the facts, show that on the basis of the analysis of books of accounts, no amount is shown to be payable as Provident Fund dues. - HELD THAT:- The resolution professional had noted the claim of the EPFO even though it was not filed in the prescribed format. And it was included in the Information Memorandum and the SRA had also acted upon that, therefore the facts of the case are distinguishable and the judgment cited by the Appellant will not be of any assistance to it.

Perusal of the records reveal that even though the RP had advised the Appellant to file the claim in appropriate format, the Appellant had not filed them in those formats. Despite that Resolution Professional had included the claims in the Information Memorandum and the SRA has also provided for some amount for the EPFO.

We find that in this case, it is not the case that the RP had not taken note of the claim of the EPFO. But RP included the claim in the Information Memorandum and also the SRA had made necessary provisions.

Whether a lower pay out towards Provident Fund dues can be approved in the resolution plan. - We do not find anything which is contrary in the facts and circumstances of the case as the RP and also the Suspended Director had cooperated with the EPFO in its inquiry and assessment. But the moot point is that assessment cannot be done, once the moratorium comes into existence and therefore the cited case is also of no assistance.

In this case, we find that there is no record to suggest that the Provident Fund was deducted contemporaneously by the CD and as no such record existed with the CD. An assessment was made later on by the EPFO basis which a demand has been made and such an assessment is not allowed under the moratorium existing. We have clearly noted the legal position that when the claim on the basis of assessment, which has been made subsequent to initiation of moratorium, is hit by Section 14, sub-section (1) of the IBC, we are of the view that no such claim can be admitted in the CIRP. Therefore, we find that the Appeal filed by the Appellant does not merit intervention for setting aside the impugned order dated 28.03.2025.

Accordingly, the Appeal is hereby dismissed.

Competency of Adjudicating Authority u/s 16 - extension of FEMA to Exclusive Economic Zone - export under FEMA and Regulation 3 - prior approval for countertrade / netting off under Regulation 14C - vicarious liability of managing director u/s 42(1) - penalty u/s 13(1) and absence of mens rea requirement - doctrine of lex non cogit ad impossibilia - HELD THAT:- The doctrine of lex non cogit ad impossibilia has been invoked by the Appellants to contend that they could not have complied with the requirements under the Customs Act, 1962 at the time of the export of the four vessels which were being used as fishing trawlers in the EEZ. The vessels which were mortgaged in favour of the foreign collaborating Company were returned to the collaborating partner because the foreign crew faced difficulties in their engagement when the trawlers were berthed in Indian ports due to regulatory issues raised by different government authorities. Hence, the Letters of Permissions issued by the Ministry of Agriculture for operation of foreign fishing vessels in the EEZ were surrendered.

It is established that the Appellant Company was the exporter of the fishes which were caught in the EEZ, over which the sovereign rights of India cannot be questioned in view of the aforementioned Notifications issued for extension of the Customs Act, 1962 to the EEZ. It is also evident that the delivery of these fish consignment were being made to a buyer in Japan. Even though the consignment of fishes were transferred in the High Seas through M/s Ocean Grace which acted as the intermediary in between, the application of the Customs Act, 1962 for such consignment is beyond pale of doubt. It cannot be denied that the said consignments had bearing on foreign exchange transactions and therefore the provisions of FEMA and of Regulation thereunder had to be complied with. The said modus adopted by the Appellants makes it glaring that the retention of the charges of fish baits etc. by the Ocean Grace and the deduction thereof from the proceeds remitted to the Appellants was in contravention of the provisions of FEMA and in particular Regulation 14C of the said Regulations as the Appellants had failed to take prior approval of the RBI. The reasons for failure to take prior approval of the RBI, even though the modus appears to have been well known in advance to the Appellants, is not clear. We therefore find that the charge of contravention of Regulation 14 C is established against the Appellants.

Thus, there is nothing in the Section which can indicate directly or indirectly requirement of mens rea. Words like “willful”, “deliberately”, “intentionally” etc. are missing.

The Appellants have also pleaded to make the penalties proportionate. Since on evaluation of the gravamen of the charges, it is argued that the penalty has been imposed for the inadvertent failure to obtain the prior approval of the RBI before deducting the payment made for the charges relating to bait etc. from the realization of export proceeds. It is also argued that charge relating to Regulation 6 of the Foreign Exchange Management (Borrowing and Lending) Regulations, 2000 has been compounded for Rs.1,00,000/- by the RBI.

Thus, the ends of justice shall be met on reduction of the penalty on the Appellant Company to Rs. 8,00,000/- and the penalty on the individual Appellant is reduced to Rs. 20,000/-. The amounts of pre-deposit already made shall be adjusted towards the reduced penalties.

Accordingly, the Appeals, filed by Shri Pentapati Lakshman Swamy, are partly allowed.

Contravention of Section 3(b) of FEMA, 1999 - Dealing in foreign exchange through authorised dealers / prior permission of Reserve Bank of India - Proportionality of penalty and appellate discretion to reduce penalty - Effect of delay and inability to recover penalty on quantum of penalty - HELD THAT:- The allegation of contravention of Section 3(b) of the Act of 1999 has been made because of the payment towards import of diamonds from a firm of Congo by way of adjustments out of the money earned by Mr. Pravin Kumar Ratnabhai Ajudiya outside Indian and thereby aforesaid was taken to be contravention of the Act because it was without the approval of the RBI or was not routed through authorized dealer. I, however, find that in the custom case, the matter was decided in the favour of the appellant though it was in reference to the different sets of statutory provisions and accordingly reference of the allegation was also in pursuance to the Customs Act but fact remains that this matter is old by 14 years by now and otherwise appellants have already paid 50% of the penalty in pursuance to the order passed by this Tribunal on the application for waiver of condition of pre-deposit.

The penalty amount should be reduced to the amount already paid by the appellant to settle the old matter by more than 14 years. It is even taking note of the facts of the case of M/s Chetak Gems Pvt. Ltd. where the allegations were again for the contravention of the provisions of the Act of 1999 in view of the fact that M/s Chetan Gems Pvt. Ltd. remitted USD 1,64,474 to M/s KWB Congo as import advance for the import of rough diamonds. The import did not actually happen therefore M/s KWB directed the payment of the amount to the M/s Chetan Gems via other firm. This was created by web chain to set up the transaction of one party against the other and in the process, the respondent found contravention of the provisions of the Act of 1999, however, taking into consideration the overall case, I am of the opinion that penalty amount even in the case of M/s Chetak deserved to be reduced to the amount already paid to satisfy the conditions of pre-deposit. It is looking to the fact that appellant did not contest the appeal on the allegations for the contravention of Section 3(b) of the Act of 1999 and other provisions but prayed to make penalty amount to be proportionate.

Accordingly, the Impugned Order is interfered only for reducing penalty which is made 50% of the penalty imposed by the Adjudicating Authority and finally maintained by the Special Director (Appeals) reducing it in the case of Mr. Pravin Kumar Ratnabhai Ajudiya while maintaining it for other appellants.

The appeals are disposed of with the aforesaid.

Power of High Court u/s 447 of the BNSS to transfer criminal cases - Committal of scheduled offence to a Special Court u/s 44(1)(c) of the PML Act - Special Court jurisdiction and non-application of the Sessions-division proviso for transfers between Special Courts - Application of Cr.P.C./BNSS provisions to proceedings under the PML Act - Impossibility of joint trial of scheduled offences and offences under the PML Act - HELD THAT:- On a perusal of Section 44(1)(c) of the PML Act, it is evident that the same is an enabling provision inasmuch as the authority who filed complaint under the PML Act to request for committal of a case where cognizance for the schedule offences under the PML Act was taken by a court other than the PML Act court, so as to get committal of the case involving scheduled offence also to the PML Act court.

It is not in dispute that joint trial of a case involving scheduled offence and PML Act offences is an outright impossibility. That is to say, only after finding the accused guilty for the scheduled offence/offences, on conclusion of trial, the trial of an accused, who involved in the PML Act offence is possible. Be it so, in view of Section 44(1)(c) of PML Act, the authority who filed complaint under the PML Act may seek committal of a case, for which cognizance was taken for the scheduled offence by a Special Court other than the PML Act court. The learned Special Public Prosecutor appearing for the CBI vehemently canvassed that in view of Section 44(1)(c) of the PML Act, the provisions of BNSS could not be invoked by an accused seeking transfer of a case pending, where the cognizance for the scheduled offences was taken by another Special Court. In fact, even though Section 44(1)(c) of the PML Act provides so, that doesn’t exclude the right of any other aggrieved persons to file a transfer petition by invoking the relevant provisions of BNSS, as pointed out by the learned Standing Counsel for the E.D. Therefore, this Court is of the view that, for valid reasons, the person other than the authority who filed a complaint under the PML Act also can seek transfer of a case involving scheduled offences, to the PML Act court, when the court where the complaint alleging commission of PML Act offence is pending also is notified under the PC Act as well as under the PML Act.

Therefore, the contention raised by the learned Special Public Prosecutor for the CBI that, the petitioner, who is the accused in both cases, has no right to file a transfer petition by invoking the provisions of BNSS, could not be accepted.

A party who wants to transfer a case from one Special Court to another Special Court can directly approach the High Court without approaching a Sessions Court, and such a course of action is legally permissible in terms of Section 447 of BNSS. Therefore, this contention raised by the learned Special Public Prosecutor for CBI is not acceptable.

In the instant case, the transfer sought is from a CBI court to another CBI court and both the courts are Special Courts notified under the PC Act as well as under the PML Act. Therefore, there is no harm in permitting trial of both the cases by the same Judge. Thus in the interest of justice, such a prayer is liable to be allowed.

In the result, this Transfer Petition stands allowed.

Anticipatory bail u/s 45 PMLA - twin test of Section 45 PMLA (reasonable grounds for believing not guilty and no likelihood of committing offence while on bail) - custodial interrogation and its necessity in complex money-laundering investigations - presumption u/s 24 PMLA regarding proceeds of crime - economic/socio-economic offences constitute a distinct class for bail considerations - balance between Article 21 personal liberty and investigatory needs - layered money-laundering, mule accounts and transnational syndicate - risk of destruction of evidence, tampering and bribing of officials - HELD THAT:- It is not a case of mere dealing in cryptocurrency, which per se is not a crime in this country and liability of the accused persons is confined to paying tax on the crypto transactions. The present cases exhibit a vast intricate mesh of movement of money, fraudulently extracted out of pocket of gullible investors, who appear to be primarily belonging to middle class. It is hard earned money of the victims, whose only fault was that they wanted their money to multiply through investments, and this basic desire (or call it human weakness) of theirs was exploited by some fraudsters, alluring them to invest in various schemes, which were actually fraudulent. It is not a simple case of the accused/applicants investing in cryptocurrency.

The DoE has analysed more than 900 HDFC bank accounts to find that same mobile phone numbers were linked to multiple bank accounts which were used to transact on PYYPL platform. In a number of cases, same email IDs were used for multiple bank accounts transacting on PYYPL platform. Almost 68 bank accounts linked to 30 mobile phone numbers transacted in total amount of Rs. 100 crores uploaded to the PYYPL platform. About 10 mobile phone numbers were found connected with 32 bank accounts, which collectively uploaded more than Rs. 78 crores to the PYYPL platform and 7 of those 10 mobile phone numbers belong to the accused/applicants and were found to be linked with HDFC bank and IndusInd bank, through which the accused/ applicants were allegedly operating to launder proceeds of crime. The accused/applicants were allegedly found to have transacted more than Rs. 65 crores on PYYPL platform. Further details have been elaborated in the Prosecution Complaint and for present purposes, the above brief extract has been culled out only to reflect at the expanse of the investigation being carried out presently.

As observed by the Supreme Court in the case of P. Chidambaram vs Directorate of Enforcement [2019 (9) TMI 286 - SUPREME COURT], at times, grant of anticipatory bail may hamper investigation, of which arrest is a significant part which intends to secure several purposes including information leading to discovery of relevant information. The court must strike a balance between right of an individual to personal freedom and right of the investigating agency to interrogate the accused as regards the material collected and to obtain more information which could lead to recovery of further information. Therefore,

Find substance in the argument advanced on behalf of DoE that it would not be possible for the investigators to effectively interrogate the accused/applicants if they have pre-arrest protection in their pocket. Of course, liberty of an individual is sacrosanct, but the court cannot brush aside the requirement to carry out meaningful interrogation and investigation in the larger interest of economy of the country.

Merely because at initial stages when the accused/applicants were not under any judicial protection against arrest the DoE opted not to arrest them, does not mean that the need now expressed by DoE to conduct custodial interrogation is unjustified. As described above, now circumstances have changed, in the sense that fresh complaints have been pouring in; that the accused/applicants allegedly assaulted the investigating officers; that the accused/applicants have been allegedly found bribing the local police to settle cyber fraud complaints; that the accused/applicants have allegedly destroyed the electronic evidence; and that role of the bank officials also has to be unearthed. In the backdrop of these changed circumstances, the DoE cannot be deprived of an opportunity to conduct custodial interrogation.

Merely because the investigator does not want to arrest the accused, it cannot be said that the accused is entitled to anticipatory bail. Whether or not to arrest, is in the exclusive domain of the investigator. When it comes to deciding the grant or denial of anticipatory bail, the settled parameters have to operate, which in cases under PMLA would include the twin conditions.

There is no material on the basis whereof this court can satisfy itself that there are reasonable grounds for believing that the accused/applicants are not guilty of the offences they are charged with and/or they are not likely to commit any offence while on bail. In fact, even the other regular parameters applicable to the bail applications in conventional crimes would not approve of grant of anticipatory bail to the accused/applicants. Therefore, both these anticipatory bail applications are dismissed.

Scope of investigation under PMLA (ED not to re-investigate predicate offence) - reason to believe for provisional attachment - provisional attachment u/s 5(1) - confirmation of attachment u/s 8(1) - burden of proof u/s 24 - proceeds of crime - property or value thereof / property equivalent in value - undisclosed income and afterthought ITRs as defence -HELD THAT:-Allegations made in the FIR and/or Police report under Section 173 CrPC. The ED has to confine its inquiry/investigation qua the remaining four points mentioned above. Accordingly, we are of the view that ED is not required to conduct any investigation for the predicate offence. ED can only point out any glaring mistake, or lacunae in the said investigation conducted by police/CBI, which may come to its knowledge while conducting the investigation under PMLA. However, ED cannot arrive at different conclusion qua the predicate offence and quantum of fraud/POC, while conducting investigation for PMLA, as it is not a supervisory investigating agency. Thus, this contention is decided against the appellant, as no independent investigation is required to be made by the ED, to assess the quantum of DA.

Proceeds of crime by commission of crime/predicate offence - There is ample evidence available from the investigation against the appellant no.1 and his family members that they do not have regular and genuine source of income as claimed by them from agricultural, diary and business, except the salary of appellant no.1. The appellant no.1 has not declared the extra income and acquisition of properties, either in his property returns to his department as per State CS Conduct Rules, or in his ITRs, as pointed out by Ld. counsel for the respondent ED. Thus, question of giving any benefit with respect to undisclosed income does not arise. Moreover, the contention of extra undisclosed income and exaggerated valuation report regarding cost of construction needs to be subjected to examination & cross-examination of the appellants, alongwith documentary evidence during the criminal trials in charge-sheet and prosecution complaint cases. Appellants can also take the said plea, before the trial courts at the stage of consideration of charges, if charges are yet to be framed. We are handicapped to express any view on the quality of investigation conducted by the respective agencies, as this Appellate Tribunal cannot usurp the said powers, in absence of any charge-sheet and prosecution complaint before us.

We are satisfied with the Ld. Counsel for the Respondent ED that during investigation, it is revealed that the impugned properties were acquired by the Appellants though unaccounted cash, which was in-fact the proceed of crime. The said unaccounted cash deposits in the various bank accounts and thereafter acquisition of the properties by the Appellants clearly reflects that POC was layered in the form of acquired properties in the name of all the family members, as Appellants failed to explain the sources of said cash deposits. Ld. Counsel for Respondent ED during the arguments pointed out that there is total cash deposit of Rs. 25,29,000/- in the account of Shri Ramadhar Ram Rs. 12,85,900/- in the account of his wife Anita Devi and Rs. 36,37,500/- into the saving account of his son Bikash Kumar. During investigation, it was also revealed that Bikash Kumar was not running any business during the check period as alleged. On scrutiny, it was revealed that Bikash Kumar had invested Rs. 2,45,000/- in 08 plots of land purchased in cash and kept the documents with different persons. The proof regarding capital for starting business with Rs. 4 Lakh from his mother is also proceeds of crime, as he could not produce any documentary evidence to prove the source or mode of investment by his mother. Thus, the business was also started using the proceeds of crime. The statement of Bikash Kumar regarding cost of construction of approx. Rs. 17 Lakh is also apparently false, as the Valuation Report filed by Respondent ED clearly reveals the cost of the house as Rs. 28,00,441/-. In the aforesaid construction, Bikash Kumar himself admitted to have invested Rs. 13 Lakh taken from his father in the construction of the house during the check period, and the same was sold off for Rs. 45 Lakhs and purchased a new plot in the name of his wife Pinki Kumar. This clearly reflects the purchase of the plot from the proceeds of crime of Ramadhar Ram.

The perusal of the definition of “proceeds of crime” given under Section 2(1) (u) of the Act of 2002, reveals three limbs of the definition out of which first part refers to the property acquired or derived directly or indirectly by a person relating to the criminal activity to a scheduled offence. The second part includes “the value of any such property”. The second part is generally mixed with third part for giving interpretation.

In the light of the aforesaid, second limb of the definition of “proceeds of crime” has been applied to attach the property of equivalent value. Thus, this ground raised by the appellants cannot be accepted.

Appeals are hereby dismissed being devoid of any merits.

Interpretation of statutory phrase "where it is possible to do so" - Relegation to alternative appellate remedy - Permissibility of filing statutory appeal after dismissal - Entitlement of Appellate Authority to decide appeals on merits - Dismissal of Special Leave Petition - HELD THAT:- We do not find any valid grounds to interfere with the view taken by the High Court in the impugned order. The Division Bench of the High Court has correctly interpreted the expression “where it is possible to do so” found in Section 73(4B)(b) of the Finance Act, 1994, and interpreted in paragraphs 4 and 5 of the impugned order. In our view, the High Court has also correctly relegated the petitioner to avail the appellate remedy before the Appellate Authority in terms of the provisions referred to in para 6 of the impugned order.

Consequently, we dismiss this special leave petition leaving it open for the petitioner to avail the alternative remedy as permitted by the High Court.

The petitioner is permitted to file the statutory appeal within a period of four weeks. If any such appeal is filed, the Appellate Authority shall entertain the appeal on merits.

Refund of unutilised Input Tax Credit - export of services - nexus between input service and output service - retrospective amendment substituting "used for" for "used in" - Rule 5 of the Cenvat Credit Rules / Export of Service Rules (refund formula) - TRU circular - simplified refund scheme - Rule 14 (recovery of wrongly availed Cenvat credit) not invoked - HELD THAT:- We find that the issue of nexus/correlation is no longer an issue in view of the retrospective amendment to Notification No. 5/2006 with effect from 14th March 2006 where the earlier words “used in” were substituted by the words “used for”. The TRU circular also makes it clear that this amendment was brought about to simplify the scheme of refunds and that the new scheme did not require the kind of correlation that was needed between exports and input services used in such exports. The Board’s Circular of 2010, which was issued prior to the retrospective amendment coming into force, also made it clear that the words “used in” in Notification No. 5/2006, as it existed, had to be read harmoniously with Rule 2 (l), which defined and included within its ambit all services used in or in relation to the manufacture of final products and includes services used directly or indirectly. It was clarified that Rule 2 gave wide scope to the input services for provider of output services by including within its ambit services “used… for providing an output service” and clarified that the wordings of the notification and Rule 2(l) must be read harmoniously.

The CESTAT, in its order, has also referred to the aforesaid facts and has rightly concluded that no nexus was required between input services and output services.

No substantial question of law arises in the above appeals. We, accordingly, uphold the order of the CESTAT and reject these twenty-six appeals filed by the revenue.

Manufacture as defined u/s 2(f) - exemption of textile processing from service tax by notification - extended period of limitation invoked for suppression of facts - suppression of facts with intent to evade payment of tax - reverse charge mechanism for service tax -penalty for failure to obtain registration u/s 77(1)(a) of the Finance Act, 1994 - HELD THAT:-We hold that the activity of ‘textile processing’ undertaken by the appellant amounts to 'manufacture' as defined under section 2(f) of the central Excise Act, 1944, for the period prior to 30.06.2012. Therefore, the demand of Service Tax confirmed vide the impugned order for the activity of ‘textile processing’ for the period from 2011-12 and 2012-13 (up to 30.06.2012) is set aside. The interest demanded and penalty imposed in respect of this demand is also set aside.

The demands in respect of ‘renting of immovable property’ and ‘renting of machinery’, are confirmed. However, the matter is remanded back to the adjudicating authority for the purpose of re-quantification. The appellant is liable to pay the final tax demand confirmed, along with applicable interest. They are also liable to pay penalty equal to the Service Tax demand confirmed after re-quantification. However, if the tax due along with interest and penalty is paid within 30 days from the date of issue of the order of confirmation, then the said penalty shall stand reduced to 25% of the Service Tax payable.

The demands confirmed in the impugned order under the categories of ‘goods transport agency service’, ‘security charges’ and ‘labour charges’ under reverse charge mechanism are set aside. The demand of interest and imposition of penalties in respect of these services are also set aside.

The demand confirmed in the impugned order under the category of ‘legal charges’ is not contested and hence, the said demand is upheld.

We uphold the penalty imposed on the appellant under Section 77(1)(a) of the Finance Act, 1994.

The appeal is disposed of in the above manner.

Distribution of CENVAT credit by Input Service Distributor (ISD) -Mens rea requirement for demand - Validity of credit in recipient's hands where invoices are raised in head office - Scope and applicability of Rule 7 of the CENVAT Credit Rules, 2004 (pre-1.4.2012) - Non-applicability of proviso to Rule 3(4) where credit is availed on ISD invoices - Revenue's jurisdiction to question correctness of credit at the recipient unit - HELD THAT:- The Rule 7 does not provide that the CENVAT Credit availed by the branch should be booked for in their books of account. We find that no provision which is not provided in the rules, can be brought/read into the impugned issue. We find that Rule 7 of the CENVAT Credit Rules, 2004, during the period prior to 01.04.2012, though applied by the Revenue for subsequent period.

We further find that the issue is no longer res integra and has been settled by this Tribunal in the case of CCE, Chandigarh-I vs. M/s Brillion Consumer Products Pvt Ltd. [2024 (10) TMI 6 - CESTAT CHANDIGARH]

Thus, we find that neither the impugned SCNs nor the impugned order can be sustained in the eyes of law and thus, are liable to be set aside. Accordingly, we set aside the impugned order and allow all the three appeals of the Appellants with consequential relief, if any, as per law.

Refund of duty u/s 11B and interest u/s 11BB - interest on delayed refunds - statutory rate and commencement - characterisation of amounts deposited - refund of duty versus pre-deposit u/s 35F /interest u/s 35FF - precedential scope of Sandvik Asia and subsequent Supreme Court decisions on interest/compensation for delayed refunds - HELD THAT:-The Show Cause Notice was adjudicated by the Commissioner, Customs & Central Excise, Noida vide Order-in-Original No.01/Commissioner/Remission/2013-14 dated 10.07.2013 against the party, confirming the demand of Central Excise Duty of Rs. 40.97.341/- along with interest & the demand of interest on the CENVAT credit of Rs. 41,01,620/-already reversed by the party. It was also held that remission of duty on 'semi-finished goods' is not covered under Rule 21 as duty is chargeable on the 'finished goods' when manufacture is complete and final products are manufactured. Regarding 'finished goods' destroyed in fire, it was held that surveyors report was not provided to substantiate the averment of the party that insurance claim filed by them did not include the element of excise duty on the goods destroyed.

All the refunds which are filed under the Central Excise Act, 1944 in terms of the decision of Hon’ble Supreme Court in case of Mafatalal Industries [1996 (12) TMI 50 - SUPREME COURT] and the above provisions whether of the duty, interest or any deposit made are governed by the provision of Section 11B of the Act. The interest thus gets governed by the provisions of Section 11BB as has been held by Hon’ble Supreme Court in case of Ranbaxy Laboratories Ltd. [2011 (10) TMI 16 - SUPREME COURT]

There has been exception carved out only for determination of relevant date for determining the period for which interest is to be paid in respect of deposit made as per Section 35F for filing the appeal before an appellate authority. Section 35FF provides that interest would be paid from the date of deposit made under Section 35F.

The impugned order exactly holds and allows the interest @ 6% as prescribed by the Notification issued under the provisions of Section 11BB and hence cannot be faulted with. Any claim of interest @ 12% will be contrary to extant provisions of Section 11BB and cannot be allowed.

No merits in the appeal. - Appeal is rejected.

Cenvat credit- reversal obligation under Rule 6(3) of the Cenvat Credit Rules, 2004 - 5% reversal on clearances of exempted goods - limitation on credit for services used for both dutiable and exempted goods - penalty u/s 11AC - Whether the appellant had reversed the amount of Rs.55,70,416/- being the 5% value of the exempted goods in terms of Rule 6(3) of the CCR, 2004 - HELD THAT:- We find that as per Para 9 of the Audit Note dated 27.11.2011, show-cause notice was issued to them wherein it was alleged that the appellant had availed cenvat credit on input services other than those listed under Rule 6(5) of the CCR, 2004 during the relevant period August 2009 to March 2011 and consequently, it was pointed out that an amount of Rs.55,70,146/- is required to be paid being 5% of the value of the exempted goods valued at Rs.11,14,02,929/-. The appellant in their reply before the learned Commissioner and as well as before us has categorically submitted that during the said period, they have not availed cenvat credit on common input services used in the manufacture of exempted goods not listed under Rule 6(5) of the CCR 2004.

No contrary evidence has been brought on record by the Revenue to indicate the amount of 5% on value of exempted goods was not reversed by the appellant.

On the contrary, the disputed amount of Rs.55,70,146/- paid by the appellant has been appropriated in the order. In these circumstances, we do not find merit in the impugned order imposing penalty equal to the amount paid and also confirming interest when the amount is reversed on the same date after availing the credit. In the result, the confirmation of demand of interest and imposition of penalty are set aside and appeal is disposed of accordingly.

Extended period of limitation - fraud or collusion - wilful mis-statement or suppression of facts - intent to evade payment of duty - penalty u/s 11AC - self-assessment and duty disclosure obligations - remand to the original adjudicating authority for de-novo adjudication - HELD THAT:- The SCNs invoked extended period of limitation on the ground that the respondents did not maintain proper records of the job work, never disclosed the work to the department, never obtained a central excise registration, never paid any duty nor filed any returns. The investigation commenced on the basis of an information from the Income Tax department which revealed the entire activities and the duty liability.

The undisputed legal position is that to invoke extended period of limitation, fraud or collusion or wilful mis-statement or suppression of facts or violation of the Act or Rules with an intent to evade must be established. Suppression of facts does not merely mean omission of something which one was supposed to declare but the positive act of suppression with an intent.

According to the Revenue, the respondents had not only suppressed the values of their job work goods but had also violated all the Rules which required them to take registration, pay duty and file returns. All this was done, according to the Revenue, so as to keep their turnover within the SSI exemption when in fact, they had crossed the limits if the value of goods cleared through job work was also considered.

According to the respondents, they had entertained a belief that no duty was payable and therefore did not obtain registrations, pay duty or file returns.

We note that in the first round of litigation, the Commissioner (Appeals) had also dropped the entire demand which decision was reversed by the Final Order of this Tribunal. We, therefore, find that it is perfectly possible for the respondents also to have entertained a belief that no duty was payable. If they were under such a belief, they obviously had no reason to pay duty, take registration or file returns.

Thus, we find that the demand for extended period of limitation were correctly dropped by the Commissioner (Appeals). Consequently, the Commissioner (Appeals) also set aside the penalty under section 11AC.

Accordingly, both impugned orders are upheld and both appeals are dismissed. The cross objections filed by the respondents are also disposed of accordingly.

Delegation of revisional power - suo motu revision - revision on application - orders passed by delegatee deemed to be orders of the Commissioner - prohibition on successive revisions - Whether a revision order passed u/s 86 of the West Bengal Value Added Tax Act, 2003 by a Joint Commissioner, acting as a delegatee of the Commissioner, can be subjected to further revision u/s 85 of the said Act by a Senior Joint Commissioner, who also functions as a delegatee of the Commissioner. - HELD THAT:- The fact that a Senior Joint Commissioner occupies a higher administrative position than a Joint Commissioner does not alter the legal position. Both officers exercise delegated authority derived from the same superior source, namely the Commissioner. In the absence of an express statutory provision, one delegatee cannot revise or sit in appeal over the exercise of delegated power by another delegatee when such power is exercised on behalf of the Commissioner himself.

Once an order has been subjected to revision under Section 86, it cannot thereafter be revised under Section 85 of the Act of 2003. Permitting such a course of action would result in an impermissible cycle of successive revisions. An order revised under Section 86 could subsequently be revised under Section 85, which, in turn, could again be subjected to revision under Section 86, thereby creating an endless and circular process. The statutory scheme of the Act clearly does not contemplate or permit such repetitive and unending re-revision.

Accordingly, it must be held that an order passed under Section 86 by a Joint Commissioner acting as a delegatee of the Commissioner cannot be subjected to further revision under Section 85 by a Senior Joint Commissioner. Section 85 does not authorise revision of an order which, in law, is deemed to be an order of the Commissioner himself.

Thus, this Court is of the opinion that though the learned Judge in his order dated April 10, 2023, framed a wrong issue and dismissed the review application, the order of the Senior Joint Commissioner, Commercial Taxes dated January 7, 2015, cannot be sustained for the reasons indicated above. Therefore, this Court is not inclined to entertain this review application, and accordingly, R.V.W.O. along with I.A. is dismissed.

Entitlement to sales tax deferment during subsistence of final eligibility certificate - cancellation of final eligibility certificate - prospective effect - recovery of tax where dealer collected tax during deferment period - promissory estoppel against the State - HELD THAT:- Admittedly there was a final eligibility certificate issued and the said final eligibility certificate was cancelled only from 24.11.2003 and beyond 24.11.2003 there is no dispute for the subsequent period that the respondent Company has committed any default. From the year 1993 till 2003, the respondent Company had a final eligibility certificate with it. Further, the respondent Company also in view of the final eligibility certificate having been issued had not collected sales tax from its customers.

In the teeth of the undisputed factual matrix of the case, and taking into consideration the view expressed by the unified High Court of Andhra Pradesh in the earlier round of litigation, the findings arrived at by the STAT, the relevant portion of which is reproduced in the preceding paragraphs, cannot be said to be without jurisdiction, bad in law, perverse, or contrary to the evidence on record. Accordingly, we find no merit in the instant batch of Tax Revision Cases filed by the petitioner - State, and the well-reasoned order of the STAT does not warrant any interference.

Therefore, instant batch of Tax Revision Cases, thus fail and are accordingly, dismissed. The question of law stands answered in favour of the respondent and against the petitioner – State.

1As a sequel, miscellaneous petitions pending if any, shall stand closed. However, there shall be no order as to costs.

Arbitrability of disputes involving alleged fraud affecting the arbitration agreement - partnership dispute in which appellant claims entry into the firm by virtue of a document whose execution is stoutly denied and is alleged to be forged -Reference to arbitration u/s 8 - Appointment of arbitrator u/s 11 - Interim relief u/s 9 and prima facie findings - Non-arbitrability where arbitration clause is alleged to be forged or fabricated - Supervisory jurisdiction under Article 227 and limits on reappreciation of evidence - HELD THAT:- While findings in Section 9 proceedings are undoubtedly prima facie in nature, such findings, when they attain finality, cannot be ignored in subsequent proceedings founded on the very same issue. The prima facie satisfaction recorded by the High Court regarding the doubtful existence of the arbitration agreement was, therefore, a relevant consideration while examining applications under Sections 8 and 11 of the Act.

The cumulative effect of the aforesaid circumstances lends considerable credence to contention of the appellant that the Admission Deed is not genuine. At the very least, the Admission Deed is under grave cloud of doubt, requiring a detailed and full-fledged inquiry. In the present case, arbitration clause does not exist independently but is embedded in the document whose existence is seriously disputed. Arbitration, it bears reiteration, is founded upon consent. A party may be bound by the arbitral process only if it is first shown, even at a prima facie level, that such a party had agreed to submit disputes to arbitration. Where the arbitration agreement itself is alleged to be forged or fabricated, the disputes ceases to be merely contractual and strikes at the very root of arbitral jurisdiction. A controversy of this nature falls squarely within the category of disputes that are generally recognized as non-arbitrable.

Both the Trial Court and the First Appellate Court had concurrently held that the allegations of fraud in the present case were serious and that the respondent no. 1 had failed to produce the original Admission Deed or a certified copy thereof, as required under Section 8(2) of the Act. The aforesaid findings were not perfunctory, but were grounded in the material on record and in the statutory requirements.

The supervisory jurisdiction of the High Court under Article 227 of the Constitution is not an appellate jurisdiction in disguise, and it does not permit reappreciation of evidence. The High Court, while exercising jurisdiction under Article 227 of the Constitution, was not justified in dislodging the concurrent findings and directing reference of the dispute to arbitration, particularly when the very existence of the arbitration agreement was under serious doubt.

Conversely, the High Court was correct in dismissing the respondent no. 1’s application under Section 11 of the Act. When the existence of the arbitration agreement itself is in serious dispute and requires adjudication, appointment of an arbitrator would be premature and legally impermissible.

The appeal challenging the High Court's refusal to appoint an arbitrator is dismissed; the appeal challenging the High Court's direction to refer the suit to arbitration is allowed.

Requirement of direct evidence of execution and issuance of cheque - presumptions under Section 139 of the Negotiable Instruments Act - role and competency of a company to prosecute through an authorised representative - inadmissibility of secondary hearsay evidence based solely on company records

Requirement of direct evidence of execution and issuance of cheque - presumptions under Section 139 of the Negotiable Instruments Act - Conviction under Section 138 of the Negotiable Instruments Act was unsustainable because the complainant failed to prove the execution and issuance of the cheque. - HELD THAT: - The complainant did not produce substantive evidence to establish that the cheque was executed and issued by the accused. The witnesses for the complainant (PW1 and PW2) had no direct knowledge of the transaction: PW1 became conversant only by perusing company records and PW2 did not depose to execution or issuance. The person who filed the complaint as an alleged power of attorney holder was not shown to have witnessed the transaction and the power of attorney was not produced; when examined he stated he was not fully aware of the transactions and relied on information from documents. Production of company records and evidence from persons who acquired knowledge only from those records cannot substitute for direct evidence of execution. The court emphasised that statutory presumptions under Sections 118 and 139 arise only after execution is proved; where the complainant fails to discharge the initial burden of proving execution, no presumption arises and the prosecution fails at the threshold. [Paras 8, 9, 10, 11, 12]

Conviction and sentence under Section 138 of the NI Act set aside for failure of the complainant to prove execution and issuance of the cheque; accused set at liberty.

Role and competency of a company to prosecute through an authorised representative - inadmissibility of secondary hearsay evidence based solely on company records - A company may prosecute through an authorised representative, but such representative must have witnessed or possess direct knowledge of the transaction; reliance solely on records or on a representative who lacks direct knowledge is insufficient to prove execution. - HELD THAT: - The judgment reiterates that a juristic person acts through human agency and an authorised representative can initiate and give evidence in proceedings under Section 138. However, the authorised person must either have witnessed the transaction or possess direct knowledge of the cheque's execution. A witness who became associated with the company after the transaction and gives evidence merely from company documents cannot establish execution. Therefore, where the complaint is filed by a power of attorney holder whose authority is not produced and who disclaims direct knowledge, the prosecution's evidentiary foundation is inadequate. [Paras 8, 9, 10]

Evidence given by an authorised representative who lacks direct knowledge and where the power of attorney is not produced is inadequate to prove the offence; conviction cannot stand.

Final Conclusion: The High Court allowed the criminal revision, set aside the conviction and sentence under Section 138 of the Negotiable Instruments Act, and directed that the accused be set at liberty because the complainant failed to prove execution and issuance of the cheque and did not discharge the initial burden necessary to attract statutory presumptions.

Dishonour of cheque - Offence u/s 138 of Negotiable Instruments Act- Notice and demand requirement - Vicarious liability of company officer u/s 141 - Proof of issuance and dishonour of cheque and service of statutory notice - Interference with conviction and sentence on revision - HELD THAT:- In the case in hand, complainant has specifically stated that the 2nd accused is the Managing Director of the 1st accused company and he was in charge and responsible for the day-to-day affairs of the company and was managing the business of the 1st accused company at the relevant time. Revision petitioner/A2 is the signatory to Exts.P2 to P4 cheques and it was he who issued Ext.P2 to P4 cheques to the complainant.

The complainant has succeeded in establishing that the revision petitioner/2nd accused in his capacity as the Managing Director of the 1st accused company and who was in charge of the day-to-day affairs of the company issued Exts.P2 to P4 cheques in partial discharge of the amount due to the complainant company. It also stands established that Exts.P2 to P4 cheques issued by the accused were dishonoured due to insufficient funds in the account of the accused and in spite of Ext.P6 notice, accused failed to pay the amount covered by the cheques.

The learned Magistrate and the learned Sessions Judge have appreciated the facts, evidence and law in its correct perspective. Hence, this Court find no reasons to interfere with the finding rendered by the learned Magistrate and the learned Sessions Judge that the accused have committed the offence punishable under Section 138 of the N.I Act.

The sentence against the 2nd accused/revision petitioner as modified by the Sessions Court do not warrant any interference by this Court and accordingly, the conviction and sentence passed against the accused stand confirmed.

The revision petition is devoid of any merit and accordingly, it stands dismissed.