TaxTMI Updates e-Newsletter
Feb 08,2024

Mens rea to evade tax - penalty under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 - expired E Way Bill as a technical violation - requirement of E Way Bill - consideration of documentary evidence including e Invoices, E Way Bills, mechanic's letter and FASTag

Mens rea to evade tax - penalty under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 - expired E Way Bill as a technical violation - requirement of E Way Bill - Whether imposition of penalty under Section 129(3) was justified where one of two E Way Bills had expired but there was no evidence of intention to evade tax and the goods were otherwise accompanied by matching e Invoices and documents - HELD THAT: - The Court held that mens rea to evade tax is an essential element for imposing penalty under Section 129(3). The authorities had recorded only the expiry of one E Way Bill (ten days prior to detention) but failed to demonstrate any intention on the part of the petitioner to evade tax. The vehicle carried two e Invoices and two E Way Bills, the consignor/consignee and description of goods were not in dispute, and there was evidence (mechanic's letter and FASTag movement chart) indicating the vehicle had broken down and the movement of goods. The authorities did not consider these documents nor show repeated misuse of the E Way Bill. In these circumstances the Court found the violation to be technical and insufficient, without requisite mens rea, to sustain the penalty; reliance was placed on the Court's earlier decisions recognizing that mere absence or expiry of documentation, without intent to evade tax, does not attract penalty. [Paras 4, 5]

Penalty under Section 129(3) quashed insofar as it was imposed for the technical violation of an expired E Way Bill in the absence of any intention to evade tax.

Consideration of documentary evidence including e Invoices, E Way Bills, mechanic's letter and FASTag - refund of tax and penalty deposited - Relief to be granted consequent to quashing of the penalty and related order - HELD THAT: - Having set aside the impugned penalty and appellate orders, the Court directed restoration of the petitioner by ordering refund of the amount of tax and penalty deposited. The Court required the respondents to effect the refund within a specified short period, giving substantive relief to the petitioner after concluding that the penalty could not be sustained. [Paras 5, 6]

Respondents directed to refund the tax and penalty deposited by the petitioner within four weeks; writ petition allowed.

Final Conclusion: The High Court quashed the penalty order dated January 16, 2023 and the appellate order dated January 30, 2023, holding that a technical expiry of one E Way Bill, without evidence of mens rea to evade tax and in the presence of supporting documentary evidence, did not justify imposition of penalty; the respondents were directed to refund the tax and penalty deposited within four weeks.

Mens rea for imposition of penalty in tax matters - technical error in E Way Bill not amounting to tax evasion - quashing of assessment and appellate orders for absence of culpable intention - refund of tax deposit following quashal of orders

Mens rea for imposition of penalty in tax matters - technical error in E Way Bill not amounting to tax evasion - Imposition of tax/penalty for a consignment where the only defect was an incorrect consignee address in the E Way Bill and there was no mens rea for tax evasion. - HELD THAT: - The Court found that, aside from the erroneous consignee address in the E Way Bill, the invoice contained the correct address, the goods matched the invoice description and all other materials were intact. The authorities failed to demonstrate any culpable intention or mens rea on the part of the petitioner to evade tax. Relying on its settled view that mens rea is a sine qua non for imposition of penalty, the Court held that a mere technical error in the E Way Bill does not justify penal consequences or findings of tax evasion. The reasoning is applied directly to set aside the impugned orders which were founded solely on the technical mistake without proof of intent to evade tax. [Paras 3, 4]

The impugned findings of tax evasion/penalty based solely on the incorrect consignee address in the E Way Bill are unsustainable and are quashed.

Quashing of assessment and appellate orders for absence of culpable intention - refund of tax deposit following quashal of orders - Relief to be granted upon quashal of the orders including refund of the amount deposited by the petitioner. - HELD THAT: - Having quashed the original and appellate orders for lack of mens rea and because the imposition was based on a technical defect, the Court directed that the orders dated September 8, 2019 and February 22, 2020 be set aside. Consequential relief follows: the amount deposited by the petitioner is to be refunded within one month from the date of the order. The writ petition was allowed on that basis. [Paras 5, 6]

The original and appellate orders are quashed; the deposited amount must be refunded to the petitioner within one month and the writ petition is allowed.

Final Conclusion: The writ petition is allowed: the orders of September 8, 2019 and February 22, 2020 are quashed for want of mens rea where only a technical error in the E Way Bill existed, and the amount deposited by the petitioner shall be refunded within one month; consequential reliefs to follow.

Cancellation of GST registration - non-filing of returns as a sole ground for cancellation - opportunity of hearing / audi alteram partem - lack of application of mind / arbitrariness (Article 14) - remand for fresh adjudication after filing of reply

Cancellation of GST registration - non-filing of returns as a sole ground for cancellation - lack of application of mind / arbitrariness (Article 14) - Validity of the order cancelling the petitioner's GST registration which recorded cancellation on the ground of non-submission of reply to a show cause notice. - HELD THAT: - The Court held that cancellation of registration cannot be sustained where the impugned order assigns no reasons and is passed solely because a reply to the show cause notice was not filed. Such an order manifests absence of application of mind and fails the test of Article 14 of the Constitution. The petitioner's grievance that he was not heard was accepted and the High Court placed the petitioner on the same footing as in the earlier decision in Writ Tax No.147 of 2022 (Chandra Sarin), where similar cancellation was set aside for want of reasoned consideration and hearing. Consequently, the cancellation order dated 17.03.2023 was set aside.

Order cancelling GST registration set aside for want of reasoned consideration and denial of hearing; cancellation quashed.

Opportunity of hearing / audi alteram partem - remand for fresh adjudication after filing of reply - Procedure to be followed on remand and relief granted to the petitioner for filing reply and obtaining fresh decision. - HELD THAT: - The Court directed that the petitioner be permitted to appear before the authority within three weeks with a reply to the show cause notice and certified copies of the present order and the judgment in Chandra Sarin. On such appearance, the respondents are required to give the petitioner an opportunity of hearing and to pass a fresh order after considering the defence raised. The direction constitutes a remand for de novo consideration limited to providing hearing and applying mind to the materials and submissions.

Petitioner permitted to file reply and seek fresh adjudication; respondents to proceed to pass fresh order after giving opportunity of hearing.

Final Conclusion: The petition is allowed: the cancellation order dated 17.03.2023 is set aside; the petitioner may file a reply and appear within three weeks, and the authority shall afford hearing and pass a fresh order in accordance with law.

Principles of natural justice - opportunity of personal hearing - onus to establish purchase and receipt of goods - input tax credit genuineness - alternative statutory remedy by way of appeal

Principles of natural justice - opportunity of personal hearing - Whether the impugned orders violated principles of natural justice by not providing a reasonable opportunity of hearing to the petitioner. - HELD THAT: - The Court examined the intimation, show cause notice and reminder notice on record and noted that the show cause notice expressly offered personal hearing and that a reminder notice fixed a personal hearing date. Although the hearing date preceded the last date for submission of reply, nothing prevented the petitioner from attending the hearing and subsequently filing a reply. The petitioner did not avail the opportunity. On these facts the Court concluded that principles of natural justice were not breached. [Paras 10]

No violation of principles of natural justice was found.

Onus to establish purchase and receipt of goods - input tax credit genuineness - alternative statutory remedy by way of appeal - Whether the impugned assessment orders require judicial interference on merits despite the petitioner not producing supporting documents to establish purchases and receipt of goods. - HELD THAT: - The Court observed that the intimation and show cause notice recorded findings of the Intelligence Wing alleging circular transactions, low tax paid ratio and non existence of the declared godown, and that the petitioner in reply asserted that supporting documents were with the accountant who was out of station. Under the statutory scheme the registered person bears the obligation to establish purchases and receipt of goods. The petitioner failed, despite opportunity, to produce invoices, e way bills, lorry receipts or other supporting documents. Although the assessing officer's order did not separately traverse each conclusion of the Intelligence Wing, the order rested on the absence of documentary proof of genuineness of ITC. Given the availability of a statutory appeal, the Court declined to exercise discretionary writ jurisdiction to adjudicate the merits and left the matter to the appellate process. [Paras 11, 12]

No interference on merits; petitioner left to pursue statutory appeals which the Court directed be received and decided on merits if filed within the specified time.

Final Conclusion: Writ petitions dismissed; no breach of natural justice found and no interference with the assessment orders on merits because the petitioner failed to produce requisite documentary proof of purchases and receipt of goods; liberty granted to challenge the orders by way of statutory appeals, which the appellate authority is directed to receive and decide on merits if filed within the time permitted by this order.

Right to personal hearing under Section 75(4) of the Uttar Pradesh Goods and Services Tax Act, 2017 - violation of natural justice by passing adverse order without hearing - reversal of refund without affording opportunity to respond - adjournment application requiring consideration before rejecting - remand for fresh adjudication after grant of hearing

Right to personal hearing under Section 75(4) of the Uttar Pradesh Goods and Services Tax Act, 2017 - violation of natural justice by passing adverse order without hearing - reversal of refund without affording opportunity to respond - Order dated 22.11.2023 reversing refund set aside for being passed in violation of the petitioner's statutory right to be heard; matter remitted for fresh decision after hearing. - HELD THAT: - The impugned order reversing the refund for January, 2021 was preceded by a notice fixing 16.11.2023 as the first date and an adjournment application uploaded by the petitioner on 15.11.2023. The revenue authority rejected the adjournment and proceeded to pass the adverse order without affording any opportunity of personal hearing. Section 75(4) confers a right to be heard before an adverse order is passed; denial of that right amounted to a violation of natural justice. The Court observed that the record itself acknowledges the adjournment application but no reasons were assigned for its rejection. In these circumstances the order could not be sustained and the Court remitted the matter for fresh adjudication, directing that the petitioner be permitted to file a detailed reply within two weeks, that a hearing be fixed with at least fifteen days' notice, and that the authority decide the matter expeditiously, preferably within one month of the hearing. [Paras 3, 5, 6, 7, 9]

Impugned order dated 22.11.2023 set aside; matter remitted for fresh adjudication after affording the petitioner an opportunity of hearing and filing a detailed reply, with directions on notice period and expedition.

Final Conclusion: Writ petition allowed; order reversing refund quashed for breach of the statutory right to be heard and remitted to the respondent for fresh decision after hearing the petitioner in accordance with the directions given.

Revocation of GST registration - cancellation of GST registration - Electronic Credit Ledger balance - deposit of shortfall and interest before revocation - restoration of registration subject to statutory compliance

Revocation of GST registration - deposit of shortfall and interest before revocation - Direction to consider revocation of the petitioner's cancelled GST registration upon payment of the identified shortfall and interest. - HELD THAT: - The Court directed respondents to consider the petitioner's pending revocation application and took note of the departmental instruction that the petitioner's Electronic Credit Ledger showed a short balance for the relevant period. The respondents informed the Court that the shortfall amounted to Rs. 9,520/- for 194 days and that interest of Rs. 911/- was payable before revocation could be allowed. The petitioner undertook to deposit the said amount within two days. On deposit of the identified shortfall and interest, the respondents are to proceed with the revocation application and revoke the cancellation of GST registration, subject to completion of other statutory compliances required when registration is restored. [Paras 3, 4, 5]

Petition disposed directing deposit of the shortfall and interest and mandating respondents to proceed with revocation and restoration in accordance with law.

Cancellation of GST registration - restoration of registration subject to statutory compliance - Proceeding on the revocation application was remitted to the respondents for consideration and action consistent with the Court's directions. - HELD THAT: - The Court did not quash the cancellation order or set aside the show-cause notice or the appellate order on merits. Instead, the matter of revocation was left to the respondents to decide upon receipt of the payment undertaken by the petitioner. The Court emphasised that restoration, if ordered, would be subject to the petitioner satisfying all statutory requirements applicable at the time of restoration. [Paras 2, 4, 5]

Revocation application remitted to respondents for consideration and disposal after compliance with the payment and statutory formalities.

Final Conclusion: Writ petition disposed by directing the petitioner to deposit the identified shortfall and interest forthwith; on such deposit the respondents are to proceed with the revocation application and, if satisfied and subject to statutory compliances, restore the GST registration.

Service of notice by electronic communication under Section 169 - Non-pari materia of Rule 52 (TNGST Rules, 1959) and Section 169 (GST Acts) - Obligation on revenue to adopt alternative modes of service where e-mail communication is not responded to - Principles of natural justice in paperless assessment proceedings - Remand for fresh consideration on merits

Non-pari materia of Rule 52 (TNGST Rules, 1959) and Section 169 (GST Acts) - Service of notice by electronic communication under Section 169 - Applicability of precedents under Rule 52 of TNGST Rules, 1959 to Section 169 of the respective GST enactments and the statutory recognition of e-mail as a mode of service - HELD THAT: - The Court found that although the respective GST enactments are pari materia, Rule 52 of the T.N. GST Rules, 1959 and Section 169 of the GST Acts are not exactly pari materia and decisions under the former cannot be straightaway applied to the latter. Section 169(1)(c) expressly recognises service by e-mail to the address provided at registration (or as amended), and the provision is a progressive, technology-integrative measure intended to modernise tax administration. Consequently, statutory recognition of e-mail as a mode of service under Section 169 is valid and distinct from the modes contemplated under Rule 52 of the earlier regime. [Paras 11, 14, 15, 16, 17]

Section 169's provision for service by e-mail is statutorily recognised and decisions under Rule 52 (TNGST Rules, 1959) cannot be directly applied to Section 169.

Obligation on revenue to adopt alternative modes of service where e-mail communication is not responded to - Principles of natural justice in paperless assessment proceedings - Whether the departmental reliance on e-mail service alone, without further steps when no response is received, violates principles of natural justice and what remedial practice should be followed - HELD THAT: - The Court acknowledged that many small traders and assessees may be technologically challenged and might not notice or respond to communications sent to registered e-mail IDs or the common portal. To prevent ex parte decisions and safeguard natural justice, the Court held that if a notice sent to the designated/registered e-mail ID under Section 169(1)(c) is not responded to by the assessee, it is incumbent on the department, as a matter of prudence, to serve at least one further notice by any of the other modes enumerated in Section 169(1) so as to ensure effective communication. This approach balances the statutory recognition of electronic service with the need to avoid rigid administration that could render decisions arbitrary or susceptible to challenge. [Paras 19, 20, 21, 22, 23]

Where e-mail service under Section 169(1)(c) elicits no response from the assessee, the department should, before proceeding to pass adjudicatory orders, serve at least one further notice by any other mode prescribed in Section 169(1) to meet principles of natural justice.

Remand for fresh consideration on merits - Appropriate remedy in the present case and consequential directions - HELD THAT: - Given the respondent passed the impugned order without the petitioner having had a meaningful opportunity to reply to notices communicated through the common portal/email, the Court set aside the impugned order and remitted the matter to the respondent for fresh adjudication on merits. The Court directed that the quashed order shall be treated as corrigendum to the notices, required the petitioner to file a reply within 30 days of receipt of the order, and stipulated that the respondent should pass a fresh order preferably within 45 days from receipt. The Court further provided that if the petitioner fails to file the reply within the prescribed time, the order shall automatically stand vacated and the respondent may proceed as if the writ petition was dismissed. [Paras 24, 25, 26, 27]

Impugned order quashed; matter remitted for fresh consideration on merits with specified timelines and conditional consequences if the petitioner fails to reply.

Final Conclusion: The Court upheld the statutory validity of electronic service under Section 169 while holding that reliance on e-mail alone, where no response is received, may offend natural justice; consequently the impugned assessment order for AY 2018-2019 was quashed and the matter remitted for fresh adjudication with directions for further service and timelines, failing which the relief granted will stand vacated.

Grant of regular bail - prima facie satisfaction at bail stage - non-entanglement with detailed evidence at bail stage - severity of prescribed punishment not determinative of bail - imposition of conditional bail

Grant of regular bail - prima facie satisfaction at bail stage - severity of prescribed punishment not determinative of bail - non-entanglement with detailed evidence at bail stage - Applicant entitled to be enlarged on regular bail - HELD THAT: - The Court, while noting that the investigation was complete and a charge-sheet had been filed and that the applicant had been in custody since 12.10.2023, held that on a prima facie view and without entering into detailed appreciation of evidence, this was a fit case for exercising discretion in favour of bail. The Court observed that the nature of allegations (alleged availment of Input Tax Credit on the basis of forged and fictitious records) and the quantum of alleged fraud were matters of trial and that the severity of the punishment prescribed (imprisonment for five years) would not, by itself, preclude grant of bail. Reliance was placed on the settled principle that at the bail stage the court should not undertake a detailed scrutiny of evidence but should satisfy itself prima facie that bail can be allowed consistent with law. Applying these principles, the Court exercised its discretion to grant regular bail to the applicant.

Application under Section 439 Cr.P.C. allowed and applicant ordered to be released on regular bail subject to conditions.

Imposition of conditional bail - reporting to investigating agency - restrictions on travel and passport surrender - trial court's power to modify bail conditions - Bail to be subject to specified conditions and ancillary directions - HELD THAT: - The Court directed release on execution of a personal bond with one surety and imposed conditions to prevent misuse of liberty and interference with the prosecution or investigation. Conditions included surrender of passport, prohibition on leaving the State without prior permission, monthly appearance before the Directorate General of GST Intelligence for six months, furnishing and not changing residence without permission, and the usual caveat that the applicant would not be released if required in connection with any other offence. The Court also left it open for the trial Court to delete, modify or relax any of the conditions in accordance with law and clarified that the trial Court shall not be influenced by the preliminary observations made by this Court while granting bail.

Grant of bail made subject to execution of bond and the specified conditions; lower Court empowered to alter conditions and to act on any breach.

Final Conclusion: Bail application allowed; applicant enlarged on regular bail on furnishing bond and surety and compliance with specified conditions, with liberty to the trial Court to modify conditions and a direction that its trial proceedings remain uninfluenced by the High Court's prima facie observations.

Grant of bail on furnishing bond and sureties - bail conditioned upon deposit of security amount - identification and verification of sureties - personal appearance during investigation - surrender of passport as bail condition - prohibition on tampering with evidence and absconding - consequences of breach including re-arrest and registration of FIR under Section 229-A IPC

Grant of bail on furnishing bond and sureties - bail conditioned upon deposit of security amount - identification and verification of sureties - personal appearance during investigation - surrender of passport as bail condition - prohibition on tampering with evidence and absconding - consequences of breach including re-arrest and registration of FIR under Section 229-A IPC - Petitioner granted bail on specified conditions including deposit of a security amount, execution of bond with sureties, identification measures for sureties, daily attendance, surrender of passport and prohibitions against tampering and absconding, with specified consequences for breach. - HELD THAT: - The petitioner, arrested and remanded in connection with alleged GST offences, sought bail. The Court, after hearing and perusal of the record, accepted the petitioner's offer to deposit a sum of Rs.50,00,000 by demand draft within two weeks and observed the prosecution's concurrence with that proposal. In exercise of its discretion to regulate bail, the Court ordered release on executing a bond for Rs.10,000 with two sureties, each for like sum, subject to the condition that proof of the deposit be produced at the time of executing the bond and that the Magistrate accept the sureties on such deposit being made. To ensure the identity and reliability of the sureties, the Court directed affixation of photographs and left thumb impressions on the surety bond and permitted the Magistrate to obtain copies of Aadhar card or bank pass book. Further conditions imposed were daily appearance before the respondent at 5.00 p.m. until further orders, surrender of passport to the respondent, and prohibitions against tampering with evidence or witnesses and absconding. The Court also made clear that breach of any condition would entitle the Magistrate/Trial Court to take appropriate action as if the bail had been granted by that Court, and that absconding could lead to registration of a fresh FIR under Section 229-A IPC. These conditions were imposed as the determinative basis for permitting bail while safeguarding the progress of investigation and trial.

Bail granted to the petitioner on the stated conditions, including deposit of Rs.50,00,000 within two weeks, execution of bond with two sureties, identification measures for sureties, daily attendance, surrender of passport, and restrictions against tampering and absconding, with consequences for breach.

Final Conclusion: Bail application allowed on conditions: petitioner to deposit the specified security within two weeks, execute bond with two verified sureties and comply with attendance, passport surrender and non-tampering/ non-absconding conditions; breach entitles authorities to take appropriate action including re-arrest and FIR under Section 229-A IPC.

Failure to comply with mandatory procedure under Section 73(5) and (8) of the CGST Act - scrutiny of returns under Section 61 of the CGST Act and Rule 99 of the CGST Rules - time limit for issuance of show cause notice and for passing order under Section 73(2) and Section 73(10) of the CGST Act - opportunity to pay tax within thirty days to avoid penalty

Scrutiny of returns under Section 61 of the CGST Act and Rule 99 of the CGST Rules - failure to comply with mandatory procedure under Section 73(5) and (8) of the CGST Act - opportunity to pay tax within thirty days to avoid penalty - Validity of show cause notice and assessment order in view of non compliance with the statutory procedural requirement to allow the assessee time to pay tax within thirty days so as to avoid penalty. - HELD THAT: - The Court held that Section 61/Rule 99 contemplates a period for scrutiny and for seeking explanation, and Sections 73(5) and 73(8) envisage a thirty day period from issuance of the show cause notice for the person chargeable with tax to pay the tax with interest and thereby avoid penalty. In the present case the show cause notice (Ext.P3) was issued the day after the scrutiny notice (Ext.P2), thereby denying the appellant the statutory opportunity to make payment within thirty days and to conclude proceedings under Section 73(8). This amounted to non compliance with the mandatory procedural safeguards and a breach of the statutory scheme which vitiated the assessment proceedings. [Paras 5, 6]

Exts. P5 and P6 were quashed insofar as they were founded on proceedings in which the mandatory procedure under Sections 73(5) and 73(8) was not complied with.

Time limit for issuance of show cause notice and for passing order under Section 73(2) and Section 73(10) of the CGST Act - Effect of the limitation period expiring on the power to pass a fresh order after quashing the defective assessment. - HELD THAT: - The Court noted that the extended terminal date for passing the order under Section 73(9) expired on 31/12/2023. Because the existing order (Ext.P5) was procedurally defective and any fresh order cured of that defect could not be passed after the terminal date, the defect was not curable by remand. The learned Single Judge's direction permitting the respondents to rectify the lapse was therefore impermissible, as the statutory time bar precluded any fresh adjudication beyond the specified date. [Paras 4, 6]

No fresh order under Section 73(9) could be validly passed after 31/12/2023; consequently the defective orders could not be saved by remand and were liable to be set aside.

Final Conclusion: Writ appeal allowed; the High Court set aside Exts. P5 and P6 (the assessment and its summary) as procedurally invalid for failure to afford the statutory opportunity under Sections 73(5) and 73(8), and because the limitation for passing a fresh order expired on 31/12/2023, precluding any valid rehearing or fresh assessment.

Interim stay - restriction on appellate authority's power to condone delay - limitation extension by notification under Section 148 - deposit as condition for interim relief - security for recovery

Interim stay - deposit as condition for interim relief - security for recovery - Interim relief pending challenge to validity of Section 107(4) of the CGST/RGST Act, 2017 and notification dated 02.11.2023. - HELD THAT: - The High Court recorded that the petitioner has questioned the validity of Section 107(4) and the notification dated 02.11.2023 and is prepared to make a deposit. Respondent was granted time to file instructions and reply. As an interim measure and until the next date, the Court directed that if the petitioner deposits 12.5% of the amount of the 'tax in dispute' within one week, recovery or action in respect of the remaining amount pursuant to the demand dated 21.07.2023 shall remain stayed. For the balance amount, the petitioner must furnish solvent security to the satisfaction of the Assistant Commissioner, State Tax, Circle-D, Ward-2, Jodhpur Zone-I. The order was passed in the presence of counsel for the respondents, who remain free to seek vacation of the interim order after filing their response.

Interim stay granted on conditions: deposit of 12.5% within one week and submission of solvent security for the remaining amount; respondents permitted to seek vacation after filing reply.

Final Conclusion: Writ petition listed for further hearing on 21.02.2024; interim relief granted conditionally by stay of recovery subject to deposit and security, without adjudication on the merits of the challenge to Section 107(4) or the impugned notification.

Transaction value - discount versus subsidy - post-supply discount exclusion under Section 15(3)(b) - subsidy includible in value under Section 15(2)(e) - effect of supplier's credit notes on input tax credit reversal - de-novo adjudication on remand - administrative circulars not binding on courts

Transaction value - discount versus subsidy - Whether discounts or post supply volume incentives received by the petitioner from its supplier form part of the petitioner's transaction value for levy of GST - HELD THAT: - The Court held that transaction value for the petitioner is the price actually paid or payable by the petitioner for its supplies and that discounts given to the petitioner by its supplier do not, by themselves, form part of the petitioner's transaction value on resale. A discount qualifies as part of transaction value only if it is in substance a subsidy from a third party (other than Central/State Governments) and is disguised as a discount; only then would the subsidy element be includible in the transaction value. Absent such a subsidy linkage, the discounted price at which the petitioner sells to its customers is determinative of the petitioner's transaction value and the supplier's grant of discount cannot be intermingled with the petitioner's independent supply transaction. [Paras 47, 48, 51, 52, 53]

Discounts/incentives received by the petitioner from its supplier do not form part of the petitioner's transaction value for GST unless they are subsidies from a third party disguised as discounts.

Post-supply discount exclusion under Section 15(3)(b) - effect of supplier's credit notes on input tax credit reversal - Whether the conditions of Section 15(3)(b) operate to exclude post supply discounts from the supplier's transaction value and the relevance of those conditions to the petitioner - HELD THAT: - The Court explained that Section 15(3)(b) governs exclusion of post supply discounts from the supplier's transaction value where (i) the discount is established by an agreement entered into at or before the time of supply and specifically linked to relevant invoices, and (ii) input tax credit attributable to the discount has been reversed by the recipient. Those conditions affect the supplier's valuation and the supplier's entitlement to exclude such discounts; they do not automatically render the petitioner liable to add the supplier's discount to the petitioner's own transaction value. Thus Section 15(3)(b) is relevant for determining the supplier's valuation position, not for conflating two independent transactions. [Paras 49, 50, 51]

Section 15(3)(b) conditions determine exclusion of post supply discounts from the supplier's transaction value; they do not justify adding the supplier's discount to the petitioner's transaction value unless the statutory conditions or subsidy linkage are satisfied.

Administrative circulars not binding on courts - Whether Board circulars relied upon by the respondent are binding on the High Court - HELD THAT: - The Court noted the circulars issued by the Board explaining treatment of various discounts and clarifications but held that such administrative circulars are not binding on the courts, citing the principle in Collector of Central Excise v. Dhiren Chemical Industries. Consequently, the circulars cannot fetter the Court's exercise of writ jurisdiction or the legal conclusions reached on statutory interpretation. [Paras 36]

Board circulars may guide field officers but are not binding on the Court for determination of legal questions in writ proceedings.

Article 226 jurisdiction and alternate remedy - Whether the writ petitions are maintainable despite the existence of alternative appellate remedy under the GST enactments - HELD THAT: - Although normally the Court would refrain from entertaining writs against assessment orders where an effective alternative remedy exists, the Court found this to be a fit case for exercise of its jurisdiction under Article 226 because the dispute was one of pure law (interpretation of valuation provisions) and not contested on facts. Accordingly the Court entertained the petitions and proceeded to decide the legal issues. [Paras 32, 33]

Writ petitions were entertained despite availability of alternate remedy; the Court exercised jurisdiction to decide the legal questions and quash the impugned orders.

De-novo adjudication on remand - Relief to be granted and appropriate further course of action after quashing impugned orders - HELD THAT: - The Court quashed the impugned assessment orders as unsustainable in law insofar as they sought to add supplier discounts to the petitioner's transaction value, and directed that the matters be remitted to the respondent for fresh adjudication on merits. The respondent was directed to pass de novo orders in accordance with law and the procedural regime applicable at the time the notices were issued, within three months of receipt of the order. [Paras 54]

Impugned orders quashed and matters remitted for de novo consideration; respondent to decide afresh in accordance with law within three months.

Final Conclusion: Writ petitions allowed. Impugned assessment orders quashed to the extent they treated supplier discounts as forming part of the petitioner's transaction value; matters remitted to the respondent for fresh adjudication in accordance with law and procedure prevailing when notices were issued, to be completed within three months. No costs.

Classification of goods under HSN headings - taxability of animal feed supplements and additives - distinction between HSN 2309 and HSN 2936/2931 - remand for fresh consideration on merits

Classification of goods under HSN headings - distinction between HSN 2309 and HSN 2931 - taxability of organo-inorganic compounds - Minwa and Minwa plus do not fall under HSN 2309/exemption notification and are classifiable under HSN 2931 and taxable at the applicable rate. - HELD THAT: - The impugned assessment records that Minwa and Minwa plus contain calcium, magnesium, potassium, phosphorus, aluminium and strontium and are used to stabilise alkalinity and control pH fluctuations by being directly applied to shrimp pond water. The first respondent's detailed findings explain that the products' primary purpose is to maintain water quality and not to serve as feed, supplements or additives mixed into shrimp feed. On this factual and classificatory basis the products are rightly characterised as organo-inorganic compounds within Chapter 29/HSN 2931 and are not covered by the exemption notification applicable to aquatic feed and feed supplements under HSN 2309. The Court agreed with these conclusions and found that the impugned order is correct insofar as it holds Minwa and Minwa plus outside the scope of HSN 2309 and taxable under HSN 2931. [Paras 8]

The assessment insofar as it taxes Minwa and Minwa plus under HSN 2931 is sustained.

Taxability of animal feed supplements and additives - distinction between HSN 2309 and HSN 2936 - remand for fresh consideration on merits - The question whether Bio Pro-Enhac falls within HSN 2309/exemption or within HSN 2936 was not finally decided and is remanded for fresh consideration. - HELD THAT: - Although the first respondent concluded that Bio Pro-Enhac falls under HSN 2936, that conclusion was materially based on the taxpayer's failure to provide detailed percentage composition of components. The impugned order did not adequately address or analyse the petitioner's reliance on precedents holding that feed supplements and additives may fall within the exemption for animal feed (HSN 2309). Because the order did not engage with the cited authorities or fully examine the contention that BioproEnhac, despite differences in form and processing, functions as a feed supplement covered by the exemption, the Court found the matter required re-examination. The Court set aside the assessment to the extent it concerns Bio Pro-Enhac and directed the assessing authority to afford the petitioner an opportunity of hearing and to decide the product's classification and taxability afresh in accordance with law. [Paras 8, 9, 10]

Impugned finding on Bio Pro-Enhac set aside; matter remitted to the assessing officer for fresh adjudication on merits after hearing.

Final Conclusion: Writ petition partly allowed: the assessment order dated 07.02.2023 is upheld insofar as it taxes Minwa and Minwa plus under HSN 2931; it is set aside insofar as it classifies Bio Pro-Enhac under HSN 2936 and that issue is remanded to the assessing authority for fresh consideration and decision on merits after affording opportunity of hearing.

Advance ruling - maintainability of application for advance ruling - jurisdiction of Advance Ruling Authority - supply of goods or services "being undertaken" (present continuous) - completed supply - self-assessed tax - reverse charge mechanism

Advance ruling - maintainability of application for advance ruling - supply of goods or services "being undertaken" (present continuous) - completed supply - self-assessed tax - Application for advance ruling held not maintainable and rejected as it relates to completed supplies on which tax was already self-assessed and paid - HELD THAT: - The Authority examined Section 95(a) (definition of 'advance ruling') and Section 97(2) and found that advance rulings may be sought in relation to supplies of goods or services 'being undertaken' or 'proposed to be undertaken' by the applicant. The phrase 'being undertaken' was interpreted as the present participle denoting an ongoing or continuous supply. The application before the Authority concerned statutory levies for licences and certificates in respect of which the applicant had already discharged tax under the reverse charge mechanism and therefore related to completed supplies on which tax was self-assessed. Since the questions did not concern supplies that were ongoing or proposed but were about past/completed transactions, the matter lay beyond the jurisdiction of the Authority to decide by way of advance ruling. Consequent to this conclusion, the application was rejected under the Authority's powers under Section 98(2). [Paras 9, 10, 11, 12]

Application rejected as beyond the jurisdiction of the Advance Ruling Authority because it pertains to completed supplies on which tax has already been self-assessed; rejected under Section 98(2).

Final Conclusion: The Advance Ruling Authority dismissed the application as not maintainable and rejected it under Section 98(2) since the questions related to completed supplies with tax already self-assessed, and therefore did not concern supplies 'being undertaken' or 'proposed to be undertaken' within the Authority's jurisdiction.

Death of sole respondent - discharge of accused - abatement of criminal appeal - Wilful failure to furnish return - sanction for prosecution - requirement of application of mind - proviso to section 35-B - prosecutability threshold based on tax payable - definition of Assessing Officer and vesting of jurisdiction -

HELD THAT: - The Court recorded that the sole respondent has died. The impugned order shows that the sole respondent had been discharged. In view of the respondent's death and the prior discharge, the criminal appeal cannot proceed and therefore stands abated. The consequence of abatement is disposal of the appeal.

The criminal appeal is abated and disposed on account of the death of the sole respondent who had been discharged.

Revision u/s 263 - Erroneous and prejudicial to the interests of Revenue - Requirement of reasons and minimal enquiry by revisional authority - Prohibition on outsourcing Section 263 proceedings to the AO -Scope of supervisory power of revisional authority

HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court [2017 (9) TMI 1238 - DELHI HIGH COURT]. Hence, the Special Leave Petition is dismissed. However, the question of law is left open.

Reliance on documents seized during search as basis for additions - reliance on statements of third parties without opportunity of cross-examination - violation of principles of natural justice - right to cross-examine - requirement of corroborative evidence for additions based on seized loose papers/diaries

HELD THAT:- It is informed that similar petition being SLP (C) has already been dismissed vide order [2018 (3) TMI 1610 - SC ORDER]. Hence, the Special Leave Petition is dismissed.

Pending application(s), if any, shall stand disposed of.

TDS u/s 194C - Disallowance u/s 40(a)(ia) - payment of transportation of goods - sub-contracting - scope of the term 'Work' - ITAT deleted addition - whether the provisions of Section 194C of the Act can be invoked only if any single payment exceeds ₹ 50,000/- or can be invoked if the aggregate of payment in an assessment year exceeds ₹ 50,000/-.

As decided by HC [2015 (10) TMI 825 - KARNATAKA HIGH COURT] Tribunal has diverted itself from addressing the core issue, that is whether the assessee has paid any sums, the aggregate of which exceeds ₹ 50,000/- in the assessment year to any single entity. Tribunal has not addressed itself to any of the findings of fact rendered by the Assessing Authority - It does not render any reasoning to unsettle the finding of the original authority, that even the agreement can also be an oral and that the transactions with the lorry owners/transporters is within the purview of the provisions of the Act as it amounts to carriage of goods other than the railways and decided issue in favour of the revenue.

HEKD THAT:- Leave granted.

Show cause notice under Section 148A - reassessment under Section 148 - discretion to conduct enquiry under Section 148A(a) ('if required') - consideration of assessee's reply under Section 148A(c) - opportunity of hearing / audi alteram partem under Section 148A(b)

Show cause notice under Section 148A - reassessment under Section 148 - discretion to conduct enquiry under Section 148A(a) ('if required') - consideration of assessee's reply under Section 148A(c) - Validity of the notice dated 28.03.2023 under Section 148A and the order dated 10.04.2023 proposing reassessment for AY 2019-2020 - HELD THAT: - The Court noted that the question is no longer res integra and applied earlier precedents which interpret the steps required under Section 148A. The Court accepted that clause (a) of Section 148A permits the Assessing Officer a discretion to conduct an enquiry 'if required' before issuing a notice; clause (b) requires giving an opportunity to be heard; clause (c) mandates taking the assessee's reply into account; and clause (d) requires passing a reasoned order before proceeding under Section 148. Applying those principles to the material on record, the Court did not quash the notice or the order as a matter of law but observed that the Assessing Officer must follow the statutory scheme and take into account the assessee's submissions. The Court therefore refrained from adjudicating the merits of escapement of income on the present record and left factual/contention issues open for adjudication in accordance with law. [Paras 7, 9]

The petition is not allowed to the extent of quashing the notice/order on the present basis; the validity question is left to be considered in accordance with the statutory procedure which requires taking the assessee's reply into account.

Opportunity of hearing / audi alteram partem under Section 148A(b) - consideration of assessee's reply under Section 148A(c) - reassessment under Section 148 - Direction to Revenue regarding procedure to be followed before proceeding with reassessment - HELD THAT: - Relying on the precedent that the Assessing Officer's powers under Section 148A(a) to conduct an enquiry are discretionary, the Court directed that the Assessing Officer must follow the due procedure laid down in Section 148A: provide an adequate and reasonable opportunity of hearing, take the assessee's reply into account and pass a reasoned order before proceeding under Section 148. All contentions raised by the parties were kept open for consideration when the Revenue proceeds in accordance with law. The Court thereby required the revenue authority to afford the assessee an effective opportunity to contest the notice and to consider the explanations before any reassessment action is taken. [Paras 10, 11]

Revenue to follow the statutory procedure under Section 148A, extend an adequate and reasonable opportunity to the assessee to contest the notice, and consider all contentions; the matter is left open for fresh consideration in accordance with law.

Final Conclusion: The writ petition is disposed of by directing the revenue to comply with the procedural mandates of Section 148A - in particular to afford an adequate and reasonable hearing and to take the assessee's reply into account before proceeding under Section 148; all contentions are kept open and the petition is discharged.

Reopening of assessment under Section 148 and decision under Section 148A(d) - Escaped assessment test and applicability of Section 149(1)(b) - Application of Section 50C (and provisos) to valuation on date of transfer - Consequences of non-filing of regular return under Section 139 - Requirement of prior approval under Section 151 and procedural compliance for issuing notice - Remand to Assessing Officer for fresh adjudication on escaped income

Reopening of assessment under Section 148 and decision under Section 148A(d) - Requirement of prior approval under Section 151 and procedural compliance for issuing notice - Validity of the impugned order under Section 148A(d) and issuance of notice under Section 148 for Assessment Year 2016-2017 - HELD THAT: - The Court examined the impugned order dated 31.03.2023 and the material placed before the Assessing Officer. It observed that the officer recorded reasons under Section 148A(b) and had obtained prior approval of the Principal Chief Commissioner as recorded in the impugned order. The petitioner had not filed a regular return for the Assessment Year 2016-2017. The Court noted that the order under Section 148A(d) did not amount to a final adjudication on merits but was a procedural step authorising issuance of notice under Section 148. Given these circumstances, the Court held there was no demonstrable error in the impugned order that warranted interference, and that the petitioner remained free to present his contentions before the Assessing Officer in response to the notice. [Paras 11, 12, 21, 23, 24]

Impugned order under Section 148A(d) and the notice under Section 148 are not interfered with; the writ petition is dismissed insofar as it assails that order.

Application of Section 50C (and provisos) to valuation on date of transfer - Escaped assessment test and applicability of Section 149(1)(b) - Consequences of non-filing of regular return under Section 139 - Whether determination of escaped income (including invocation of Section 50C/56(2)(vii)(b) and satisfaction of the 'over 50 lakhs' threshold) should be finally adjudicated by the Court at the writ stage - HELD THAT: - Although the petitioner advanced contentions on the applicability of the provisos to Section 50C and on the correct date/value to be taken (agreement date versus date of transfer), the Court observed that no regular return had been filed for AY 2016-2017 and that these factual and legal contentions are matters fit for determination by the Assessing Officer on the record. The Court declined to decide the merits of valuation and the threshold question under Section 149(1)(b) at the writ stage, preferring that the Assessing Officer consider all relevant facts and law afresh in the statutory proceedings. [Paras 15, 18, 23, 24, 26]

Merits concerning application of Section 50C/related provisos and satisfaction of the escapement threshold are not adjudicated by this Court and are remitted to the Assessing Officer for fresh consideration.

Remand to Assessing Officer for fresh adjudication on escaped income - Nature and scope of further proceedings to be conducted by the Assessing Officer - HELD THAT: - The Court directed the Assessing Officer to take into consideration all relevant facts and the petitioner's responses before concluding whether any income had escaped assessment for Assessment Year 2016-2017. The Court gave a time-bound direction for the Assessing Officer to pass appropriate orders within three months from receipt of the judgment. This preserves the procedural rights of the petitioner to file a detailed reply to the notice issued under Section 148 and for the Assessing Officer to decide on merits. [Paras 24, 25, 26]

Proceedings remitted to the Assessing Officer to adjudicate escapement on merits; Assessing Officer to pass appropriate orders within three months.

Final Conclusion: Writ petition dismissed. The High Court declined to quash the order under Section 148A(d) or the notice under Section 148; factual and legal questions regarding valuation, applicability of Section 50C/provisos and whether income has escaped assessment for Assessment Year 2016-2017 are remitted to the Assessing Officer for fresh decision, to be completed within three months.

Deduction under Section 80HHF - Definition of "film software" and allied software - Certification by the Board of Film Certification - Burden on assessee to establish export qualifies as software export

Certification by the Board of Film Certification - Deduction under Section 80HHF - Certification from the Board of Film Certification is not necessary to examine applicability of Section 80HHF. - HELD THAT: - The court held that the question whether a certificate from the Film Censor Board was necessary is wholly irrelevant for determining entitlement to deduction under Section 80HHF. The order so states after hearing counsel and records that the certification requirement does not form part of the determinative statutory tests applied under Section 80HHF in the facts of this case. [Paras 2]

Certification by the Board of Film Certification is irrelevant to the applicability of Section 80HHF in this matter.

Definition of "film software" and allied software - Burden on assessee to establish export qualifies as software export - Deduction under Section 80HHF - The exported "Discs" did not, on the record, qualify as film software or other categories contemplated by Section 80HHF and the assessee failed to establish entitlement to the deduction. - HELD THAT: - After extracting the statutory definition of the various categories covered by Section 80HHF, the court noted that the provision contemplates export or transfer of specified categories such as film software, television software, music software and telecast rights. The appellant failed to establish before the authorities that the materials exported (described as "Discs") fell within any of those categories. The appellate proceedings and the fresh assessment considered the statutory tests and the AO and CIT(A) concluded that the conditions of Section 80HHF were not fulfilled; the High Court found no merit in the challenge to those findings. [Paras 3, 6, 7]

Assessee did not satisfy the statutory requirements for deduction under Section 80HHF in relation to the exported Discs; the claim was rightly disallowed.

Final Conclusion: The appeal is dismissed. The court held that certification by the Board of Film Certification was irrelevant to the Section 80HHF enquiry and that the assessee failed to prove that the exported Discs qualified as film/software exports entitling them to the deduction for AY 2000-01.

Opportunity of being heard - personal hearing as component of audi alteram partem - statutory interpretation of Section 148A of the Income Tax Act - consideration of reply to show-cause notice - effectiveness of procedural notice versus oral hearing

Opportunity of being heard - consideration of reply to show-cause notice - personal hearing as component of audi alteram partem - Whether issuance of the show-cause notice under Section 148A(b) alone suffices as providing the statutory opportunity of being heard, or whether an effective opportunity requires consideration of the assessee's reply and grant of a personal hearing before passing an order under Section 148A(d). - HELD THAT: - The Court construed Section 148A as a multipart statutory process: service of a show-cause notice is the initial step to confine issues, but the obligation to provide an opportunity of being heard does not end with mere issuance of that notice. The statutory scheme contemplates (a) service of the show-cause notice specifying time to reply, (b) consideration of any reply furnished, and (c) a decision based on material available including the assessee's reply. For the opportunity to be effective, the assessee must have a realistic chance to persuade the adjudicating officer of its position; this, the Court held, ordinarily requires a personal hearing so that oral submissions can supplement and clarify written replies. The Court emphasised a pragmatic, functional approach to natural justice and relied on the object of Section 148A to ensure fairness; acceptance of the Revenue's contention that issuance alone suffices would render consideration of replies meaningless and frustrate the statutory object. The Court also noted that legislative amendment easing prior-approval requirements for granting hearings reinforced the interpretation that personal hearing is integral to an effective opportunity of being heard. [Paras 9, 10, 11, 14]

Service of the show-cause notice alone does not discharge the obligation to provide an opportunity of being heard; an effective opportunity requires consideration of the reply and, ordinarily, a personal hearing before passing an order under Section 148A.

Statutory interpretation of Section 148A of the Income Tax Act - effectiveness of procedural notice versus oral hearing - Whether the decisions relied upon by the Revenue, which interpreted statutory provisions not mandating personal hearings, compel a like interpretation of Section 148A. - HELD THAT: - The Court examined precedents cited by the Revenue and distinguished them on their facts and statutory language. Specifically, where earlier decisions treated issuance of notice as sufficient, those cases concerned statutes that did not provide for an opportunity of being heard or personal hearing; the Court found them inapplicable because Section 148A expressly contemplates providing an opportunity of being heard and the consideration of any reply. Consequently, the cited authority could not be used to construe Section 148A as not requiring an effective personal hearing where necessary to vindicate fairness and the statute's object. [Paras 13]

Authorities interpreting other statutory schemes that did not envisage an opportunity of being heard are distinguishable and do not support the Revenue's contention that Section 148A does not require an effective opportunity including personal hearing.

Final Conclusion: The High Court held that Section 148A entitles the assessee to an effective opportunity of being heard which ordinarily includes consideration of the reply and grant of a personal hearing; the Revenue's reliance on precedents construing different statutes was rejected, and the writ appeal was dismissed.

Assessment under Section 153A - abatement of pending assessments - reopening of completed assessments under Section 153A requires incriminating material seized - Assessing Officer's power to compute total income for six years under Section 153A - nexus between seized material and additions in reassessment under Section 153A

Assessment under Section 153A - abatement of pending assessments - reopening of completed assessments under Section 153A requires incriminating material seized - nexus between seized material and additions in reassessment under Section 153A - Validity of assessment passed under Section 153A read with Section 143(3) where original assessment for 2002-03 stood completed before initiation of Section 153A proceedings - HELD THAT: - The High Court held that where an assessment for an assessment year stood completed prior to the search and the initiation of proceedings under Section 153A, that completed assessment does not abate under the proviso to Section 153A. Section 153A empowers the Assessing Officer to issue notices and compute the total income afresh for the six years preceding the relevant year, and pending assessments abate; but completed assessments can be reopened under Section 153A only if the search uncovers incriminating material or other post-search material having a relevant nexus with undisclosed income. Absent such incriminating material having relevance or nexus to the alleged undisclosed income, the completed assessment cannot be set aside merely because Section 153A proceedings were initiated. Applying these principles to the facts, the Court agreed with the Tribunal's conclusion that the assessment for 2002-03 had been completed before the Section 153A proceedings and that reassessment of that completed assessment could be permitted only if incriminating material seized during the search justified reopening; accordingly the matter was remitted to the Assessing Officer to proceed only if such material exists.

Assessment for 2002-03, being completed before the search, did not abate and could be reopened under Section 153A only on account of incriminating material seized having relevant nexus; reassessment was remanded to the Assessing Officer for action only if such material is available.

Final Conclusion: The appeal is dismissed; the Tribunal's conclusion in favour of the assessee is upheld and the matter remitted to the Assessing Officer to proceed with reassessment of AY 2002-03 only if incriminating material with relevant nexus was seized.

Violation of principles of natural justice by defective service of notice - Validity of notice under section 142(1) and compliance with prescribed response period under SOP - Consequential nullification of proceedings founded on an invalid notice and remand for fresh consideration - Resort to best judgment assessment under section 144 rendered premature if initial notice is invalid

Violation of principles of natural justice by defective service of notice - Validity of notice under section 142(1) and compliance with prescribed response period under SOP - Annexure J1 notice under section 142(1) is invalid for non-compliance with the SOP and defective service, and must be set aside. - HELD THAT: - The court examined the standard operating procedure which ordinarily requires a 15-day response period (reducible to 7 days for subsequent notices) and found that annexure J1, issued on March 10, 2022 with a response time till March 14, 2022, afforded less than the minimum prescribed period. The notice was also not sent to the e mail ID updated in the Department records. In view of these defects, the notice violated principles of natural justice. The court held that the validity of annexure J1 is determinative because subsequent proceedings proceeded on the assumption that there was no reply to that notice. [Paras 6, 7, 8, 9]

Annexure J1 is set aside on the ground of violation of principles of natural justice.

Consequential nullification of proceedings founded on an invalid notice and remand for fresh consideration - Resort to best judgment assessment under section 144 rendered premature if initial notice is invalid - All orders and proceedings consequent to the invalid annexure J1 (including show-cause under section 144 and assessment/penalty/demand orders) are quashed and the matter is remanded for fresh consideration from the stage after annexure J1. - HELD THAT: - Having set aside annexure J1 for want of fair opportunity and defective service, the court treated the subsequent show-cause notice and assessment, penalty and demand orders (annexures A1 to A11 and J2) as consequential and unsustainable. The court observed that had a proper response to annexure J1 been filed and considered, resort to best judgment assessment under section 144 may not have been necessary. The matter is therefore remitted to the stage post-annexure J1 with liberty to the petitioner to file a response within two weeks of receipt of the certified copy of the order, and with directions to enable the petitioner's e-mail portal for service. [Paras 8, 9]

All consequential orders are set aside and the matter is remanded for fresh consideration; petitioner permitted to respond within two weeks and e-mail portal to be enabled.

Final Conclusion: The notice under section 142(1) (annexure J1) was quashed for breach of natural justice and SOP; all consequential assessment, penalty and demand orders were set aside and the matter remanded to the stage post-annexure J1 with liberty to the petitioner to file a response within two weeks and for the Department to enable electronic service; all other contentions left open.

Duty to deduct tax at source on interest at the time of credit or payment under Section 194A(1) - Limited exemption for interest on compensation awarded by Motor Accident Claims Tribunal under Section 194A(3)(ix) - No spreading over of interest income; taxation occurs on credit or payment - Remedy by refund from the Income Tax Department where tax has been duly deducted and credited - Effect of amendment by Act 20 of 2015 (with effect from 01.06.2015) removing TDS on interest on MACT awards

Duty to deduct tax at source on interest at the time of credit or payment under Section 194A(1) - Limited exemption for interest on compensation awarded by Motor Accident Claims Tribunal under Section 194A(3)(ix) - No spreading over of interest income; taxation occurs on credit or payment - Whether the Tribunal could direct the insurer to refund amounts of TDS deducted from interest awarded by the MACT for periods prior to 01.06.2015. - HELD THAT: - The Court held that Section 194A(1) requires deduction of tax at source by a person responsible for paying interest at the time of credit or payment, and the exemption in sub-section (3)(ix) applies only where the aggregate interest credited or paid in the financial year does not exceed the monetary threshold. Consequently, interest cannot be 'spread over' different years for the purpose of avoiding TDS; taxation and the duty to deduct arise on credit or payment. Where TDS has been correctly deducted and credited to the Income Tax Department, the appropriate course for the claimant is to seek refund from the Income Tax Department rather than to compel the insurer to refund amounts already paid to the tax authorities. The Tribunal erred in directing the insurer to refund TDS amounts for periods prior to 01.06.2015, contrary to binding decisions of this Court and the statutory scheme. [Paras 6, 7, 8, 9]

Tribunal order directing refund of TDS by the insurer for periods prior to 01.06.2015 is set aside; insurer had duty to deduct TDS on interest at the time of credit or payment and claimants must resort to refund from the Income Tax Department.

Effect of amendment by Act 20 of 2015 (with effect from 01.06.2015) removing TDS on interest on MACT awards - Legal consequence of the substitution of Section 194A(3)(ix) by Act 20 of 2015 effective from 01.06.2015. - HELD THAT: - The Court noted that the amended provision (effective 01.06.2015) excludes TDS on interest credited by way of interest on compensation awarded by the MACT. With the substitution coming into force from 01.06.2015, no TDS can be deducted on the interest component of MACT awards arising on or after that date. [Paras 9]

From 01.06.2015 onwards, on account of the statutory amendment, TDS cannot be deducted on the interest component of MACT awards.

Maintainability of application before the Tribunal where applicant died and substitution occurred - Whether the application before the Tribunal should be restored or remain closed in view of substitution and the Court's decision on the refund issue. - HELD THAT: - Although substitution applications were filed and the substituted legal representative was brought on record before this Court, once the question of refund by the insurer was answered against the claimant, the Court found the application before the Tribunal unsustainable. The Court therefore declined to restore the application and closed it as not maintainable. [Paras 2, 10]

The application before the Tribunal shall remain closed as not maintainable and need not be restored.

Final Conclusion: Writ petition allowed; Tribunal order dated 09.02.2018 directing the insurer to refund TDS deducted on interest for periods prior to 01.06.2015 set aside; claimants must seek refund from the Income Tax Department where TDS was duly deducted and credited; from 01.06.2015 the statutory amendment precludes deduction of TDS on the interest component of MACT awards; the application before the Tribunal is closed as not maintainable.

Disallowance under section 14A - computation under Rule 8D(2)(iii) based on investments yielding exempt income - retrospective application of statutory explanation - prospective applicability of amendment as held by a coordinate High Court - judicial hierarchy and binding precedent

Computation under Rule 8D(2)(iii) based on investments yielding exempt income - disallowance under section 14A - Computation of disallowance under Rule 8D(2)(iii) is to be made by considering only those investments which yielded tax exempt dividend income during the relevant year. - HELD THAT: - The Tribunal examined earlier High Court decisions holding that where tax exempt income was not derived, no disallowance under section 14A would be attracted and that for computation under Rule 8D(2)(iii) the average value should be restricted to investments yielding non taxable income. The Assessing Officer had adopted the average of all investments, including those not yielding exempt dividends. Respecting the principle of judicial hierarchy, the Tribunal followed the decision of the Hon'ble Delhi High Court relied upon by the assessee that limits the Rule 8D(2)(iii) computation to investments which actually yielded exempt income, and directed the Assessing Officer to compute the disallowance accordingly. [Paras 5, 6]

Appeal allowed in part; AO directed to compute Rule 8D(2)(iii) disallowance considering only investments yielding tax exempt income.

Retrospective application of statutory explanation - prospective applicability of amendment as held by a coordinate High Court - judicial hierarchy and binding precedent - The Explanation inserted to section 14A by the Finance Act, 2022 was held by the Tribunal to be prospective as per the Hon'ble Delhi High Court, and that decision was applied by the Tribunal following judicial hierarchy. - HELD THAT: - The Tribunal noted conflicting views: some benches and decisions treated the Explanation as clarificatory and retrospective, while the Hon'ble Delhi High Court in PCIT v. Era Infrastructure held that the Explanation operates prospectively w.e.f. AY 2022 23. In the absence of a contrary decision of the Jurisdictional High Court or Supreme Court, the Tribunal applied the Delhi High Court ruling as the binding higher court precedent and thereby treated the amendment as prospective for the purposes of the appeal. [Paras 5, 6]

Tribunal applied the Delhi High Court's view of prospective applicability and allowed the appeal on that basis.

Final Conclusion: The appeal is partly allowed: the Assessing Officer is directed to compute disallowance under Rule 8D(2)(iii) by taking the average of only those investments which yielded tax exempt income, the Tribunal applying the Hon'ble Delhi High Court's ruling that the Explanation to section 14A is prospective (w.e.f. AY 2022 23) in accordance with judicial hierarchy.

Revision under section 263 - Erroneous and prejudicial to the interests of revenue - Change of opinion - Reassessment under section 147/148 - Requirement of inquiry/verification by the Assessing Officer - Two views doctrine - Condonation of delay

Condonation of delay - Condonation of five days' delay in filing the appeal - HELD THAT: - The assessee sought condonation of a five day delay on account of his mother's illness from COVID 19 and filed an affidavit in support. The Revenue objected but left the matter to the Tribunal. Applying the test of "sufficient cause" and having regard to the short delay and the circumstances narrated, the Tribunal found merit in the application and, following the principles in Collector, Land Acquisition v. Mst. Katiji, condoned the delay and admitted the appeal. [Paras 3]

Delay of five days in filing the appeal is condoned and the appeal is admitted.

Revision under section 263 - Erroneous and prejudicial to the interests of revenue - Change of opinion - Requirement of inquiry/verification by the Assessing Officer - Two views doctrine - Validity of the Principal Commissioner's order under section 263 setting aside the assessment dated 14.12.2017 for AY 2011-12 - HELD THAT: - The Tribunal examined whether the PCIT established that the AO's order was "erroneous in so far as it is prejudicial to the interests of the revenue". The record showed reassessment was completed after issuing specific queries (notably the notice dated 05.12.2017) and the assessee responded with documentary material which the AO considered before passing the assessment. The PCIT's observations directed further verification of third party trading data and broker ledgers, but did not point to material not placed before or considered by the AO nor demonstrate that the AO's conclusion was unsustainable in law. The PCIT effectively sought re examination of issues on which the AO had already applied his mind, amounting to a change of opinion rather than a conclusion of error prejudicial to revenue. The Tribunal also relied on the principle that where two views are possible and the AO has taken a plausible view after enquiries, section 263 cannot be invoked merely because a superior officer prefers a different view (as applied in coordinate decisions cited by the assessee). Following these considerations and the reasoning of the Tribunal in Aishwarya Rai Bachchan (coord.) on similar facts, the Tribunal held that the PCIT's order under section 263 was not sustainable and quashed it. [Paras 8, 9]

The PCIT's revision under section 263 is quashed; the assessment dated 14.12.2017 is left undisturbed.

Final Conclusion: The Tribunal condoned the five day delay and, on merits, allowed the appeal by quashing the PCIT's order under section 263 for AY 2011 12, holding that the PCIT's action amounted to impermissible change of opinion where the Assessing Officer had already applied his mind and completed reassessment.

Revisionary powers under section 263 - erroneous and prejudicial to the interest of revenue - requirement of recorded satisfaction of error before exercise of revisionary jurisdiction - assessing officer's failure to make enquiries does not ipso facto render an order erroneous

Revisionary powers under section 263 - erroneous and prejudicial to the interest of revenue - assessing officer's failure to make enquiries does not ipso facto render an order erroneous - Whether the Principal Commissioner of Income Tax validly exercised revisionary jurisdiction under section 263 where he accepted the assessee's explanations and documents but set aside the assessment because those materials were not placed before the Assessing Officer - HELD THAT: - The Tribunal found that the PCIT in his order noted and accepted the assessee's explanations and supporting documents in respect of interest accrued but not paid to PFC, claim of bad debts and provision for leave encashment (recorded as being in order at paragraph 4.2). Despite this, the PCIT held the assessment to be erroneous on the sole ground that the Assessing Officer did not examine those materials during the assessment proceedings. The Tribunal applied the statutory test in section 263 that revisionary powers can be exercised only where an order is "erroneous in so far as it is prejudicial to the interests of the revenue" and reiterated that absence of inquiries by the AO does not, by itself, make the assessment order erroneous when the revisional authority is satisfied on the merits of the claims. The Tribunal referred to the settled principle that section 263 requires an actual error affecting revenue and that a revisional exercise is not justified where the revisional authority itself finds no error in the substantive allowance. Applying these principles, the Tribunal held that the PCIT had recorded satisfaction with the assessee's claims and therefore lacked a basis to exercise revisionary jurisdiction merely because the AO had not earlier made enquiries; accordingly the exercise of power under section 263 was unsustainable and liable to be set aside (paras 4.2, 9, 11-13). [Paras 4, 9, 11, 13]

Order passed by the Principal Commissioner of Income Tax under section 263 is set aside and the assessee's appeal is allowed.

Final Conclusion: The Tribunal set aside the PCIT's revisionary order under section 263 because the revisional authority itself accepted the assessee's explanations and documents and therefore there was no recorded error prejudicial to revenue that would justify exercise of revisionary jurisdiction; appeal allowed.

Penalty under sections 271D and 271E - dumb (deaf and dumb) documents and evidentiary value of seized loose papers and computer printouts - burden of proof on revenue to establish movement of money for contravention of section 269SS/269T - presumption under section 132(4A) subject to rebuttal - right to confront and cross-examine witnesses whose statements are relied upon - requirement of independent/corroborative evidence to establish cash loan or repayment - violation of principles of natural justice by relying on statements without opportunity of cross-examination

Penalty under sections 271D and 271E - dumb (deaf and dumb) documents and evidentiary value of seized loose papers and computer printouts - burden of proof on revenue to establish movement of money for contravention of section 269SS/269T - requirement of independent/corroborative evidence to establish cash loan or repayment - Deletion of penalties imposed under sections 271D and 271E was legally sustainable as the material relied upon by the JCIT did not establish the requisite default of taking/repaying loan in cash. - HELD THAT: - The Tribunal examined the seized tally data and loose papers and agreed with the view that these were dummy/training entries and loose jottings which do not, by themselves, disclose actual receipt or repayment of money. The authorities below failed to conduct independent inquiries (for example, to summon or examine alleged lenders) or to produce positive evidence of movement of money; the entries were often partial, inconsistent and susceptible to other explanations. The court emphasised that the statutory offence under sections 269SS/269T (and consequential penalty under 271D/271E) requires proof of loan or repayment of money and cannot be founded on mere book entries or inferences. The presumption under section 132(4A) is rebuttable and even where such presumption arises, the essential ingredient of actual movement of money must be established by independent evidence. In these circumstances the CIT(A)'s deletion of the penalties was held to be correct and the Revenue's appeals were dismissed. [Paras 7, 8, 9]

Penalties under sections 271D and 271E deleted - orders of CIT(A) upheld.

Right to confront and cross-examine witnesses whose statements are relied upon - presumption under section 132(4A) subject to rebuttal - violation of principles of natural justice by relying on statements without opportunity of cross-examination - Reliance on the statement of Shri G.C. Patidar (recorded under section 132(4)) without allowing cross-examination, and without addressing his subsequent retraction/affidavit, rendered the use of that statement infirm. - HELD THAT: - The Tribunal noted that the assessing authority heavily relied on the statement of Shri G.C. Patidar while not dealing with or attempting to rebut his subsequent affidavit retracting that statement. Where a statement recorded during search is made the basis of adverse findings, the assessee is entitled to confront and cross-examine the maker of the statement; denial of that opportunity vitiates the use of the statement. Given the AO did not summon or examine the alleged lenders or address the retraction, and in view of authorities emphasising the necessity of giving opportunity to cross-examine, the reliance on the statement without such procedural safeguards amounted to a breach of natural justice and undermined the additions/penalties founded upon it. [Paras 7, 8, 9]

Statement relied upon could not sustain the penalties in absence of opportunity for cross-examination; reliance on it was impermissible.

Final Conclusion: The Tribunal dismissed the Revenue's appeals and upheld the CIT(A)'s deletion of penalties under sections 271D and 271E for AY 2009-10 and 2010-11, holding that the seized tally data and loose papers were dumb documents which did not establish movement of money and that reliance on a retracted statement without affording cross-examination violated principles of natural justice.

Deemed export - duty drawback - interest on delayed refund - clarificatory circulars and retrospective effect - Section 27A of the Customs Act - interest on delayed refund - Section 75A of the Customs Act - interest on drawback - Policy Interpretation Committee decision and administrative precedent

Deemed export - duty drawback - clarificatory circulars and retrospective effect - Policy Interpretation Committee decision and administrative precedent - Entitlement of the respondent to duty drawback as a case of deemed export - HELD THAT: - The Court held that supply of goods to the World Bank funded project fell within the Exim Policy, 1992-1997 definition of 'deemed export' and was therefore eligible for benefits under the Duty Drawback Scheme. The language of the Exim Policy and the 1995 Rules made the entitlement clear; the subsequent DGFT circulars of 20.08.1998 and 05.12.2000 were clarificatory, resolving doubts about applicability to civil construction projects rather than creating a new right. The minutes of the Policy Interpretation Committee meeting of 07.10.2002 and the subsequent DGFT letter of 01.11.2002 applied that clarification to the respondent and did not indicate that the benefit was a one off concession; accordingly the refund granted was consistent with entitlement under the policy and rules. [Paras 27, 28, 33, 34, 38]

Respondent was entitled to duty drawback as a deemed export under the Exim Policy 1992-1997 and the Drawback Rules; the DGFT's later letters and committee decision applied that entitlement and were not mere concessions.

Interest on delayed refund - Section 27A of the Customs Act - interest on delayed refund - Section 75A of the Customs Act - interest on drawback - Entitlement, period and rate of interest payable on delayed refund of duty drawback - HELD THAT: - On a conjoint reading of Sections 27A and 75A of the Customs Act and the Drawback Rules, where drawback is not paid within the prescribed period the claimant is entitled to interest from the date following expiry of that period until payment. The Court accepted that the claim applications filed in 1996 triggered the period for computing interest, and that interest accrues where refund was belated. The applicable rate at the relevant time was the rate fixed by the Central Government under Section 27A; the Central Board's notification No.32/1995 (NT)-Customs dated 26.05.1995 had fixed that rate at fifteen percent. Although the High Court had not elaborated the basis for fifteen percent, the Court found that rate to be the rate fixed by the Central Government at the relevant point of time and upheld award of interest at fifteen percent from the date after expiry of three months from receipt of the applications until payment. [Paras 36, 37, 38]

Respondent entitled to interest on delayed refund from the date after expiry of three months from receipt of each refund application until payment, at the rate of fifteen percent per annum as fixed by the Central Government.

Final Conclusion: The appeal is dismissed. The Court upholds the High Court's conclusion that the respondent was entitled to duty drawback as a deemed export and to interest on the belated refund at fifteen percent per annum from the date after expiry of three months from receipt of the refund applications filed in 1996 until payment; no costs.

Retrospective concessional basic customs duty - deemed exemption - applicability of tariff rate to imports cleared after 15.01.2003 - error apparent on the face of the record

Retrospective concessional basic customs duty - deemed exemption - applicability of tariff rate to imports cleared after 15.01.2003 - Import of fresh garlic under import licences issued by Central Government and cleared after 15.01.2003 is deemed to be exempt from customs duty in excess of 30% ad valorem with effect from 15.01.2003. - HELD THAT: - The Court considered paragraph 14.10 (Finance Bill, 2011 / Third Schedule) which provides for a retrospective concessional basic customs duty of 30% to fresh garlic imports by the cooperative federations cleared after 15.1.2003, and the Office Memorandum dated 02.02.2024 which records that, notwithstanding Section 25(1) of the Customs Act, such imports are deemed to have been exempted from so much of duty as is in excess of 30% ad valorem from 15th January 2003. In light of the notification and the subsequent Office Memorandum giving effect to the concessional rate retrospectively, the Court held that the petitioner's imports fall within the scope of the deemed exemption and are consequently covered by the 30% concessional duty with retrospective effect. [Paras 5, 6, 8]

Imports of fresh garlic by the petitioner cleared after 15.01.2003 are deemed exempt, on and from 15th January 2003, from customs duty in excess of 30% ad valorem.

Error apparent on the face of the record - restoration of writ petition - Whether the earlier order dated 19.07.2018 should be recalled for having overlooked the retrospective concession; the order was recalled and the writ petition restored. - HELD THAT: - The Court found that the earlier disposal dated 19.07.2018 did not take into account the retrospective concession effected by paragraph 14.10 and the Office Memorandum; this omission amounted to an error apparent on the face of the record. On that basis the Court exercised review jurisdiction to recall the earlier order and restored the writ petition to its original number to enable adjudication in conformity with the retrospective concessional treatment. [Paras 7, 9]

Order dated 19.07.2018 recalled for error apparent on the face of the record and the writ petition restored to its original number.

Final Conclusion: The review petition succeeds: the earlier order is recalled for failing to consider the retrospective concession and the petition is restored; the petitioner's imports of fresh garlic cleared after 15.01.2003 are deemed exempt from customs duty insofar as it exceeds 30% ad valorem with effect from 15th January 2003.

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to override other laws - First charge under the Customs Act and saving of SARFAESI Act - Priority of secured creditor over Crown debts in absence of statutory preference

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to override other laws - First charge under the Customs Act and saving of SARFAESI Act - Validity of the Directorate of Revenue Intelligence letter dated 2 November 2015 as an embargo on the petitioner bank proceeding under the SARFAESI Act - HELD THAT: - The Court held that the impugned communication, which directed the bank not to take any decision on the debtor's property while investigation was in progress, could not operate as an embargo on the petitioner's action under the SARFAESI Act. Section 142A of the Customs Act recognizes a first charge for customs dues but expressly saves the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Section 35 of the SARFAESI Act gives that Act overriding effect over inconsistent provisions of other laws. A cumulative reading of these provisions shows that recovery proceedings initiated under the SARFAESI Act could not be impeded by the respondent invoking Section 142A. The Court relied on the view in Bank of India v. Rajendra Vitthal Shinde & Ors. that while customs authorities may have a claim, the SARFAESI remedy and the bank's priority under it are preserved, subject to the bank accounting for any balance to other claimants as law requires. [Paras 8, 9, 10, 11]

The Court quashed the DRI communication dated 2 November 2015 and held that the petitioner is entitled to proceed with its SARFAESI actions against respondent No. 2.

Priority of secured creditor over Crown debts in absence of statutory preference - Whether quashing the impugned letter affects respondent No. 1's substantive rights to pursue claims under the Customs Act - HELD THAT: - The Court clarified that quashing the investigatory communication does not foreclose the substantive contentions or recovery rights of respondent No. 1 under the Customs Act. The Court expressly kept open all contentions of the customs authority as to any recovery against the named parties and noted that the impugned communication was issued at the stage of investigation and that final orders (if any) are subject to independent challenge. Thus, while the bank may proceed with SARFAESI measures, the customs authority's claims remain available to be adjudicated in accordance with law. [Paras 12, 13, 14]

All contentions of respondent No. 1 under the Customs Act are left open and unaffected by the order permitting the bank to proceed under the SARFAESI Act.

Final Conclusion: The writ petition is allowed: the Directorate of Revenue Intelligence communication dated 2 November 2015 is quashed and set aside; the petitioner-bank is permitted to continue SARFAESI proceedings against respondent No. 2; the customs authority's substantive claims are expressly kept open for adjudication by the appropriate forum.

Penalty under Section 114(i) of the Customs Act for attempt to export prohibited goods - liability of a Customs Broker for attempted smuggling requiring positive role or abetment - obligation under Customs Brokers Licensing Regulations (Regulation 11(n)) to verify exporter credentials - necessity of mens rea or active complicity for imposition of penal consequences - distinction between regulatory action under Customs Brokers Regulations and penal action under the Customs Act

Penalty under Section 114(i) of the Customs Act for attempt to export prohibited goods - liability of a Customs Broker for attempted smuggling requiring positive role or abetment - necessity of mens rea or active complicity for imposition of penal consequences - Imposition of penalty under Section 114(i) on the appellant Customs Broker - HELD THAT: - The Tribunal found that the adjudicating authority did not record any specific finding that the appellant had performed any act or omission which rendered the goods liable to confiscation or that the appellant had conspired, abetted or supplemented efforts to smuggle red sanders. The record showed the container was factory sealed and seals were intact at interception; there was no finding of knowledge, connivance or any beneficial consideration to the appellant. Vague allegations of negligence or failure to verify client identity, without evidence of an active role or mens rea, are insufficient to invoke penal provisions under Section 114(i). The Tribunal further noted that regulatory breaches under the Customs Brokers Licensing Regulations had been dealt with separately and attained finality, and cannot substitute for a necessary finding of active complicity required for penal liability under the Customs Act. Applying these principles, the Tribunal held that imposition of the penalty could not be sustained. [Paras 7, 8, 9, 10, 11]

The penalty imposed under Section 114(i) was quashed and the appeal allowed.

Obligation under Customs Brokers Licensing Regulations (Regulation 11(n)) to verify exporter credentials - distinction between regulatory action under Customs Brokers Regulations and penal action under the Customs Act - Whether violation of Regulation 11(n) of the Customs Brokers Licensing Regulations suffices to sustain penalty under Section 114(i) - HELD THAT: - The Tribunal recorded that the adjudicating authority's findings principally related to non-adherence to Regulation 11(n) (failure to verify exporter credentials) and general observations as to the role of Customs Brokers. Those regulatory findings had been the subject of separate proceedings before the Tribunal which resulted in caution and other regulatory measures. The Tribunal emphasised that regulatory breaches under the CBLR and penal liability under the Customs Act are distinct; a finding under Regulation 11(n) alone, without evidence of active participation in the substitution or attempted export of prohibited goods, cannot sustain a penalty under Section 114(i). [Paras 6, 9, 10]

Regulatory violation under Regulation 11(n) does not, by itself, justify penal action under Section 114(i); the penalty was therefore set aside.

Final Conclusion: The Tribunal quashed the adjudicating authority's imposition of the penalty under Section 114(i) on the appellant Customs Broker for attempted export of red sanders, concluding that no positive role, abetment or mens rea was established and that regulatory findings under the Customs Brokers Regulations could not substitute for the requisite proof of active complicity; appeal allowed with consequential relief.

Payment under protest - limitation for refund claims - section 27(1B)(b) of the Customs Act - finality of tribunal order - doctrine of merger - unjust enrichment

Payment under protest - limitation for refund claims - section 27(1B)(b) of the Customs Act - finality of tribunal order - doctrine of merger - Whether a refund claim filed about twenty months after this Tribunal's final order is time barred notwithstanding that duty had been paid 'under protest' prior to adjudication. - HELD THAT: - The Tribunal held that the CESTAT final order dated 04.11.2013 attained finality as no further appeal was filed, and that a subsisting 'protest' cannot co exist with a later order which vacates that protest. Once the matter was finally decided by the Tribunal, the protest stood vacated and the legal position merged with the superior authority's order. The phrase 'save as otherwise provided in this section' in section 27(1B) must be read so that the exemption for payments made under protest applies only while a valid, subsisting protest exists; it does not preserve the protest in perpetuity after a final order has been passed. The Tribunal applied the doctrine of merger to conclude that the second proviso to section 27(1) (which excludes the one year limitation where duty is paid under protest) ceases to operate once the protest is vacated by a binding order, and section 27(1B)(b) (computing limitation from the date of the court/tribunal order) governs the period for filing refund claims. Following the Supreme Court decisions cited in the judgment (including Mafatlal Industries Ltd. and Dena Snuff (P) Ltd. ) and the coordinate decisions relied upon by the Tribunal (including Redington India Ltd. and Sai Exports ), the Tribunal found the refund application filed on 08.07.2015-about twenty months after the Tribunal's final order-was barred by the limitation prescribed in section 27(1B)(b) and therefore liable to be rejected. The Tribunal also rejected the appellant's contention that the amount was merely a deposit not attracting the provisions of section 27, and noted that the claim for absence of unjust enrichment supported by a certificate did not cure the failure to file within the statutory period once the exclusion for a subsisting protest no longer applied. [Paras 10, 12, 15, 17, 18]

The refund claim filed about twenty months after the Tribunal's final order is time barred; the appeal is dismissed and the impugned order upholding rejection of the refund is affirmed.

Final Conclusion: The Tribunal dismissed the appeal and upheld the Commissioner (Appeals) order rejecting the refund claim as time barred under section 27(1B)(b) of the Customs Act, holding that the earlier payment 'under protest' did not preserve a perpetual exemption from the one year limitation once the Tribunal's final order vacated the protest.

Exemption under Notification No. 104/94-Cus - Breach of condition of exemption and liability to duty/confiscation - Assessment and valuation following principles of natural justice - Remission where goods are destroyed on port - Penalty under Section 114A requiring malicious intent - Duty recovery under Section 28 of the Customs Act, 1962

Exemption under Notification No. 104/94-Cus - Breach of condition of exemption and liability to duty/confiscation - Duty recovery under Section 28 of the Customs Act, 1962 - Benefit of Notification No.104/94 cannot be retained where its condition to re-export within six months (or obtain extension) is breached; in absence of remission the containers are liable to duty and confiscation consequences flow. - HELD THAT: - The Tribunal upheld that the appellant had availed the benefit of Notification No.104/94 but failed to re-export the containers within the prescribed six months and did not seek remission or an extension from competent authority. In those circumstances there was a breach of the exemption condition and, in principle, duty was payable and confiscation consequences could arise. The Tribunal noted that import can be complete on entry into territorial waters and that remission provisions apply where goods are destroyed on port, but no remission had been sought here. Accordingly the department was entitled in principle to demand duty for the breach of the notification, and the impugned findings upholding demand were sustained in principle, subject to the valuation and assessment issue addressed separately. [Paras 8]

Duty liability for breach of the notification is sustained in principle and confiscation consequences are not precluded; the substantive demand stands subject to reassessment on valuation and procedure.

Assessment and valuation following principles of natural justice - Remission where goods are destroyed on port - Assessment of duty based on valuation is not sustained without transparent valuation and opportunity to comment; matter remanded for fresh valuation and assessment after affording natural justice. - HELD THAT: - The Tribunal found that the valuation underpinning the demand was neither conducted with full transparency nor furnished to the appellants for comment. Although duty could be payable in principle, valuation must be determined in accordance with law and after observance of natural justice. The Tribunal therefore allowed the appeal by way of remand for proper valuation and reassessment, permitting the appellants to be heard on the valuation report and ensuring assessment conforms to statutory valuation provisions and procedure. [Paras 8]

Matter remanded for fresh valuation and reassessment after following due process and affording the appellants an opportunity to comment.

Penalty under Section 114A requiring malicious intent - Penalty under Section 114A cannot be sustained where malicious intent is not established, particularly in light of the supervening fire incident; penalty dispensed with. - HELD THAT: - The Tribunal observed that Section 114A demands a finding of malicious intent to sustain the penalty. Given the factual backdrop of containers being damaged by fire after importation and the absence of a finding of malafide or deliberate contravention, the imposition of penalty under Section 114A was not justified. Accordingly the Tribunal set aside/dispensed with that penalty in the facts of the case. [Paras 8]

Penalty under Section 114A is quashed/dispensed with for lack of requisite malicious intent.

Final Conclusion: Appeal allowed in part: duty liability for breach of the exemption notification is upheld in principle, valuation and assessment are remanded for fresh determination after observance of natural justice, and penalty under Section 114A is set aside. Appeal disposed accordingly.

Mis-declaration of weight in import - Trade practice of chargeable weight versus gross/net weight - Exemption of EOU imports under LoP/Notification for manufacture in bond - Burden on revenue to prove clearance of imported goods from EOU - Confiscation and penalty not sustainable without proof of clearance

Mis-declaration of weight in import - Trade practice of chargeable weight versus gross/net weight - Burden on revenue to prove clearance of imported goods from EOU - Confiscation and penalty not sustainable without proof of clearance - Whether duty, interest and penalty can be sustained on the basis of alleged mis-declared weight where department relies on CHA records showing higher weighment but fails to prove that any excess imported material was cleared from the EOU and not used in manufacture. - HELD THAT: - The Tribunal accepted the appellants' explanation that industry trade practice is to show a 'chargeable weight' for commercial purposes which may not correspond to gross or net physical weight and noted precedents recognising that practice. The department's case rested on CHA records (arrival/dispatch, LR and transfer registers and weighment slips) showing discrepancies between bill of entry declared weight and CHA weighment, but no documentary or direct evidence was produced to show that any alleged excess material was removed from the EOU premises or not consumed in manufacture. No check-weighment at the EOU or records of excess production/clearance were placed on record. In these circumstances, applying earlier Tribunal decisions which hold that duty cannot be demanded in absence of proof of clearance of imported goods, the demand, interest and penalties founded on the asserted excess weight were unsustainable. The Tribunal therefore set aside the impugned demand and penalties on this basis. [Paras 6, 7]

Demand of customs duty, interest and penalties based on alleged excess weight set aside for want of proof that excess imported material was cleared from the EOU and not used in manufacture.

Exemption of EOU imports under LoP/Notification for manufacture in bond - Trade practice of chargeable weight versus gross/net weight - Whether EOUs are entitled to duty-free treatment for inputs authorised under LoP/Notification and whether FTP/HBP restrictions or the policy circular exclude that entitlement. - HELD THAT: - The Tribunal observed that EOUs operate effectively as bonded premises and imports authorised by the LoP/letter of approval are to be treated as authorisations for all purposes under the FTP/HBP. The policy circular cited by the department excludes certain units but, as pleaded by the appellants and supported by the LoP/HBP provisions, the unit's imports authorised by the Development Commissioner fall within the duty-free regime applicable to EOUs. Combined with the accepted trade practice regarding chargeable weight, this reinforced the conclusion that the department had not established a case for duty or confiscation. [Paras 2, 6]

Imports authorised under the LoP for the EOU are within the duty-free regime for manufacture in bond and the department's reliance on FTP/circular restrictions did not sustain a contrary result in the absence of positive evidence of clearance.

Final Conclusion: Appeal allowed; impugned demand, interest and penalties set aside because the revenue failed to prove that any alleged excess imported marble was cleared from the EOU and not used in manufacture, and trade practice together with LoP authorisation supports duty-free treatment of the imports.

Change of Customs exemption notification under Section 149 of the Customs Act, 1962 - Availability of beneficial notification at the time of import - Approbate and reprobate doctrine in claims for customs benefit - Distinguishing precedential applicability of Commissioner of Customs v. Indian Rayon & Industries Ltd. - Claiming a beneficial notification at a later stage if eligible at the time of import (Share Medical Care principle)

Change of Customs exemption notification under Section 149 of the Customs Act, 1962 - Availability of beneficial notification at the time of import - Change of notification in the bill of entry is permissible and the appellant was eligible for change to Notification No. 94/1996-Cus. - HELD THAT: - The Tribunal held that, in principle, changing the exemption notification invoked in the bill of entry is permissible under Section 149. The determinative criterion is whether the alternate beneficial notification was legally available to the importer at the time of import. On the facts, there was no dispute that Notification No. 94/1996-Cus (as amended) was applicable to the import in question and the goods were meant for re-export; therefore the appellant satisfied the availability criterion and was eligible for the change of notification. [Paras 4, 5]

Change of notification permitted and appellant eligible for Notification No. 94/1996-Cus; appeal allowed.

Distinguishing precedential applicability of Commissioner of Customs v. Indian Rayon & Industries Ltd. - Approbate and reprobate doctrine in claims for customs benefit - Reliance on Indian Rayon (supra) by lower authorities was misplaced and the decision in that case is distinguishable on facts. - HELD THAT: - The Tribunal examined Indian Rayon and noted that the Supreme Court there denied a change because, at the time of import, the only notification available to the importer was the earlier notification under which benefit had been taken; crucially, the alternate entry relied upon did not apply to the particular export schemes involved and the relevant amendment had not yet been made. By contrast, the present bills of entry were filed after the amendment which made Notification No. 94/1996-Cus available for the imports in question. Accordingly, the doctrine that an importer who avails a notification cannot thereafter repudiate its conditions (approbate and reprobate) did not preclude relief here because the alternate notification was available at import; thus Indian Rayon was distinguishable and its categorical application by the lower authorities was incorrect. [Paras 4]

Indian Rayon (supra) not applicable on the facts; reliance on it by lower authorities was misplaced.

Claiming a beneficial notification at a later stage if eligible at the time of import (Share Medical Care principle) - Availability of beneficial notification at the time of import - A beneficial notification may be claimed at a later stage provided it was available and the importer was eligible under it at the time of import. - HELD THAT: - The Tribunal relied on the principle in Share Medical Care that a beneficial notification can be claimed subsequently if, notwithstanding the passage of time, the notification was legally available and the importer satisfied its eligibility at the time of import. Applying that principle to the present facts, and given the availability of Notification No. 94/1996-Cus as amended when the bills of entry were filed, the appellant was entitled to claim the alternate exemption despite having initially invoked Notification No. 158/95-Cus. [Paras 4]

Share Medical Care principle applies; appellant entitled to claim Notification No. 94/1996-Cus.

Final Conclusion: Impugned order set aside; appeal allowed and appellant held eligible for alternate exemption under Notification No. 94/1996-Cus (matter decided on the grounds that the alternate notification was available and applicable at the time of import and earlier reliance on Indian Rayon was wrongly applied).

Transaction value - re-determination of customs value based on NIDB data / similar imports - Customs Valuation (Determination of Price of Imported Goods) Rules - curable defect - non-affixation of MRP/RSP on packaged commodities - violation of port of entry restrictions - imposition of penalty under the Customs Act for breach of import conditions

Transaction value - re-determination of customs value based on NIDB data / similar imports - Customs Valuation (Determination of Price of Imported Goods) Rules - Enhancement of declared import value by re-determination based solely on values declared by other importers / NIDB data - HELD THAT: - The Tribunal found that the adjudicating authority re-determined the transaction value of the imported deodorants by relying on values declared by other importers and NIDB data without providing any basis or contemporaneity for those imports. The Bench noted absence of material showing amounts over and above invoice value were actually paid in respect of the appellant's transaction and observed that NIDB data alone is not sufficient for re-determination of customs value. Applying the established approach under the Customs Valuation Rules, the Tribunal set aside the enhancement of value made by the lower authority. [Paras 9]

Enhancement of declared value on the basis of NIDB data / other import declarations set aside; declared transaction value upheld.

Curable defect - non-affixation of MRP/RSP on packaged commodities - Standards of Weights & Measures (Packaged Commodities) Rules, 1977 - Whether non-affixation of MRP/RSP on imported packages amounted to a contravention warranting confiscation or denial of release - HELD THAT: - The Tribunal observed that representative samples had been given No Objection by the Assistant Drug Controller and treated the absence of MRP/RSP on packages as a curable defect. Relying on prior decisions cited by the appellant, the Bench held that this omission did not constitute a ground for confiscation under the Packaged Commodities rules and did not justify sustaining the penalties and measures imposed by the lower authorities. [Paras 9]

Defect of non-affixation of MRP/RSP is curable and does not sustain confiscation or the penalties imposed on that ground.

Violation of port of entry restrictions - imposition of penalty under the Customs Act for breach of import conditions - Whether import through Tuticorin (which at the time was not an authorised port) amounted to a violation and what penalty should follow - HELD THAT: - The Tribunal found that at the relevant time Tuticorin was not an authorised port for import of the impugned cosmetics and therefore there was a violation of port restriction. Taking into account that the goods were not prohibited, that an NOC for the samples had been granted, and other defects were curable or unsustainable, the Bench exercised its powers to impose a limited penalty for the port restriction breach and to set aside other penalties and the fine previously imposed. [Paras 10]

Penalty imposed for port restriction violation under the Customs Act in a reduced amount; all other penalties and fine dropped.

Final Conclusion: The appeal is allowed in part: the re-determination of value based on NIDB / other import declarations is set aside and defects as to MRP/RSP treated as curable; a limited penalty is imposed for import through an unauthorised port and all other penalties and the fine imposed by the adjudicating authority and Commissioner (Appeals) are dropped.

Duty and limited scope of a Customs Broker under Section 146 - Regulation 10(b) of CBLR, 2018 - transacting business personally or through authorised employee - Regulation 10(d) of CBLR, 2018 - duty to advise or report clients' post-clearance misconduct - Regulation 10(e) of CBLR, 2018 - due diligence in information supplied to client - Regulation 10(n) of CBLR, 2018 - verification of identity/KYC of client and reliance on IEC - Presumption of prior KYC/verification attached to grant of IEC - Proportionality in disciplinary action - revocation, forfeiture and penalty

Regulation 10(b) of CBLR, 2018 - transacting business personally or through authorised employee - Duty and limited scope of a Customs Broker under Section 146 - No contravention of Regulation 10(b) was proved against the appellant. - HELD THAT: - The Tribunal accepted that Shri Sanjeev Maggu never acted on behalf of the appellant at the Customs Station but only on behalf of the importer firms, and that the appellant either personally or through his authorised employees transacted with Customs. On a plain reading, Regulation 10(b) requires that the Customs Broker transact business personally or through an authorised employee; there is no material to show that the appellant failed to do so. The decision in D.S. Cargo and the High Court reasoning that the sine qua non for attracting Regulation 10(b) was absent is applied to the present facts, leading to the conclusion that Regulation 10(b) was not contravened.

Finding of violation of Regulation 10(b) set aside; no contravention established.

Regulation 10(d) of CBLR, 2018 - duty to advise or report clients' post-clearance misconduct - Duty and limited scope of a Customs Broker under Section 146 - No violation of Regulation 10(d) was established against the appellant in respect of post-clearance diversion of warehoused goods. - HELD THAT: - The Tribunal followed the High Court's reasoning that the role of a Customs Broker under Section 146 is limited to clearance at the Customs Station and ordinarily ends once goods reach the bonded warehouse. The wrongdoing - diversion of goods from the bonded warehouse into the domestic market - occurred after the appellant's professional role had ceased, and there is no allegation that the appellant advised, abetted or assisted in that diversion. Regulation 10(d) cannot be read to impose a general duty on the broker to report all subsequent misconduct of the importer; liability is confined to non-compliances evident in documents submitted by the broker during clearance. Applying these principles, the finding of contravention of Regulation 10(d) is untenable on the facts.

No contravention of Regulation 10(d); prior finding set aside.

Regulation 10(e) of CBLR, 2018 - due diligence in information supplied to client - Regulation 10(e) was not contravened by the appellant on the facts of the case. - HELD THAT: - Regulation 10(e) requires the Customs Broker to exercise due diligence in communicating correct information to a client in relation to clearance work, and does not extend to acts or omissions of the importer after clearance. There is no finding that the appellant supplied incorrect information to the importer or abetted diversion of goods. Reliance on precedent (including Kunal Travels principles) supports that a broker is not an inspector of the importer and is entitled to rely on IEC and documents provided by the client. Consequently, the Tribunal found no basis to sustain a violation of Regulation 10(e).

No contravention of Regulation 10(e) established.

Regulation 10(n) of CBLR, 2018 - verification of identity/KYC of client and reliance on IEC - Presumption of prior KYC/verification attached to grant of IEC - There was no blatant violation of Regulation 10(n) by the appellant warranting revocation of licence on the facts presented. - HELD THAT: - Regulation 10(n) requires verification of the client's identity and supporting documents. The appellant verified the IEC on the DGFT website, sent speed-post letters to the declared addresses and received KYC responses; there is no dispute as to the validity of the IEC or that the importer firms existed and participated in investigation. The High Court's reasoning in D.S. Cargo - that an IEC carries a presumption of prior verification by competent authorities and that a broker is not obliged to conduct intrusive background checks - was applied. Given that the firms were functional and IECs valid, and that the inquiry officer had exonerated the appellant, the record did not justify treating alleged forged documents as amounting to a blatant breach of Regulation 10(n) that would merit revocation.

Finding of violation of Regulation 10(n) set aside; no sufficient breach proved to justify revocation.

Proportionality in disciplinary action - revocation, forfeiture and penalty - Revocation of licence and forfeiture of security deposit were disproportionate; penalty was retained. - HELD THAT: - Having applied the High Court's decision in D.S. Cargo and noting that the appellant had been out of work since the order of revocation (more than five years), the Tribunal held that revocation and forfeiture were excessively harsh as punitive measures in the circumstances. The inquiry officer's exculpatory findings and the absence of culpability on the substantive regulatory breaches weighed in favour of relief from the most severe sanctions. However, the adjudicating authority's imposition of a monetary penalty was not disturbed and was upheld.

Revocation of licence and forfeiture of security deposit set aside; monetary penalty upheld; appeal partly allowed.

Final Conclusion: Applying the High Court's reasoning in D.S. Cargo to the same factual matrix, the Tribunal found no contravention of Regulations 10(b), 10(d), 10(e) and 10(n) of CBLR, 2018 by the appellant that would justify revocation of the customs broker licence; accordingly the revocation and forfeiture of the security deposit were set aside as disproportionate, while the monetary penalty imposed was retained and the appeal was partly allowed.

Classification of goods - application of Chapter Note 2 of Chapter 27 - test report evidentiary value - method of testing - sampling - applicability of test results only to tested samples - customs valuation - enhancement based on consent letters - due process under Section 14 and Customs (Determination of Value) Rules - mis-declaration of country of origin - absence of mala fide and no revenue benefit - penalty and redemption fine - proportionality and consequential relief

Classification of goods - application of Chapter Note 2 of Chapter 27 - test report evidentiary value - method of testing - Rubber Processing Oil (RPO) is classifiable under Chapter Heading 27101990 and not under Chapter Heading 27079900 as held by the Revenue. - HELD THAT: - The department relied on Customs House Laboratory test reports and Chapter Note 2 to treat aromatic constituents as predominant and hence classify the goods under Chapter 27079900. The Tribunal found the Customs laboratory reports unacceptable on their face because the prescribed BIS/ASTM method of testing was not adopted or stated in the reports. A supplier's quality certificate and an accredited Geo Chem report contradicted the Customs report, showing aromatic content lower than non aromatic content. The Tribunal also relied on its earlier decision in identical facts (Amit Petrolubes and Sah Petroleum Ltd. as discussed) where RPO was held to fall under CTH 27101990. For these reasons the departmental classification under 27.07 fails and the RPO is correctly classifiable under 27101990. [Paras 4]

The classification of the imported RPO under Chapter Heading 27101990 is accepted; departmental classification under 27079900 is set aside.

Sampling - applicability of test results only to tested samples - test report evidentiary value - Test reports of the Customs laboratory are applicable only to the specific samples tested and cannot be automatically extended to all containers/ drums not tested. - HELD THAT: - The investigating authority sent only a limited number of samples from numerous containers; the Tribunal applied the established ratio that chemical test reports can be relied upon only for the products/samples actually tested. In consequence, departmental reliance on those limited test results cannot justify classification of the entire consignment not subjected to testing. [Paras 4]

The departmental claim based on test reports applies only to goods corresponding to the tested samples; it cannot be generalized to the entire cargo.

Customs valuation - enhancement based on consent letters - due process under Section 14 and Customs (Determination of Value) Rules - Enhancement of declared value based solely on consent letters of directors is unsustainable and set aside for failure to follow the due process under valuation provisions. - HELD THAT: - The Tribunal held that where there is doubt about declared value the statutory procedure under Section 14 read with the Customs Valuation Rules must be followed. The lower authorities enhanced value merely on the basis of directors' consent letters without adopting contemporaneous transactions or applying prescribed valuation methods; reliance on such hearsay statements is impermissible. Precedents including Guru Rajendra Metal Alloy and the Supreme Court authority in Century Metals were applied to reject enhancement founded only on consent letters. [Paras 4]

Enhancement of the assessable value based solely on consent letters is set aside; the valuation enhancement does not survive.

Mis-declaration of country of origin - absence of mala fide and no revenue benefit - penalty and redemption fine - proportionality - No penalty or confiscation is sustainable for alleged mis-declaration of country of origin where the importer has not derived any advantage and acted on supplier documents; consequential personal penalties are also untenable. - HELD THAT: - The Tribunal observed that the appellants declared country of origin based on documents from the supplier and did not claim any preferential rate of duty; there was no evidence of mala fide or active involvement by the importer in manipulating origin certificates. Reliance was placed on prior Tribunal decisions (including Agarwal Industrial and related authorities) holding that innocent importers who suffered no revenue benefit cannot be penalised for supplier mis declarations. Given the setting, redemption fines and penalties imposed on the corporate importers and individual directors were not sustainable. [Paras 4]

Penalties and redemption fines imposed for alleged mis-declaration of country of origin are set aside and personal penalties on individuals are not to continue.

Final Conclusion: The impugned order is set aside in its entirety; appeals are allowed with consequential relief. Classification of the imported RPO is held under CTH 27101990, valuation enhancement based on consent letters is rejected, test results are confined to the samples tested, and penalties/redemption fines (including personal penalties) are not sustained.

Conversion of DFIA shipping bill to Drawback (DBK) shipping bill - amendment of shipping bill under Section 149 of the Customs Act, 1962 - time limit prescribed by Board Circular No.36/2010-Cus and its legal sanctity - procedural circular versus statutory provision

Conversion of DFIA shipping bill to Drawback (DBK) shipping bill - time limit prescribed by Board Circular No.36/2010-Cus and its legal sanctity - amendment of shipping bill under Section 149 of the Customs Act, 1962 - Legality of rejecting the appellant's request to convert DFIA shipping bills to Drawback (DBK) shipping bills on the sole ground of time-bar under Board Circular No.36/2010-Cus - HELD THAT: - The Tribunal found no dispute on the substantive entitlement for conversion except the question of limitation imposed by Board Circular No.36/2010-Cus. The Court relied on Section 149 of the Customs Act, 1962 which permits amendment of documents presented at the customs house and does not prescribe any time limit for such amendment; consequently a time limit cannot be imposed on the assessee by a Board circular where no statutory time limit exists. The order reviews and follows earlier appellate decisions treating the three month timeline in the circular as procedural and not binding on the exporter, and it notes that rejection solely on that circularary time bar is unauthorized. Applying this reasoning to the facts where DGFT had issued NOC/cancellation and no imports were effected under the DFIA, the Tribunal held that there was no lapse on the part of the appellant and that the conversion could not be refused for non compliance with the circularary timeline. The Tribunal therefore set aside the impugned order and allowed the appeal, subject to consequential adjudication of eligibility and quantum by the appropriate customs authorities. [Paras 4, 5]

Rejection of the conversion request on the ground of limitation under Board Circular No.36/2010-Cus is illegal; the impugned order is set aside and the appeal is allowed, directing conversion of DFIA shipping bills to Drawback shipping bills with consequential reliefs as per law.

Final Conclusion: The Tribunal held that the three month time limit in Board Circular No.36/2010-Cus cannot operate to bar conversion of DFIA shipping bills to Drawback shipping bills where Section 149 permits amendment and no statutory time limit exists; the impugned refusal on the ground of the circularary time bar was set aside and the appeal allowed, with consequential relief to be given in accordance with law.

Cross-examination of witnesses - principles of natural justice - evidentiary value of a panchnama - onus and duty of Revenue to produce cogent evidence - imposition of penalty under Section 114 of the Customs Act

Cross-examination of witnesses - principles of natural justice - evidentiary value of a panchnama - Whether de novo adjudication could proceed without affording the appellant the cross-examination of the panch witnesses to the panchnama dated 19/20-1-2013 - HELD THAT: - The Tribunal found that the CESTAT had remanded the matter for fresh adjudication expressly directing that cross-examination of the Panch witnesses be afforded. The Commissioner, although attempting service and fixing dates, proceeded to decide the matter on record when the Panch witnesses sent letters saying they could not attend for personal/economic reasons and that they agreed with the panchnama. The Tribunal held that such behind the back confirmations do not substitute for in court cross examination; cross examination is the procedural means to test genuineness and credibility of the panchnama and its witnesses. The Commissioner's conclusion treating the panchnama as genuine without enabling cross examination was therefore contrary to the remand direction and violative of the principles of natural justice and evidence. Reliance on analogous authorities was noted where failure of witnesses to appear for cross examination rendered their statements and related panchnamas of no evidentiary value. The impugned order passed without complying with the remand directions could not be sustained. [Paras 4]

The adjudication without affording cross examination of the panch witnesses was held to be improper and contrary to the remand directions and principles of natural justice; the Commissioner's reliance on the panchnama without cross examination was rejected.

Imposition of penalty under Section 114 of the Customs Act - onus and duty of Revenue to produce cogent evidence - Whether the penalty of Rs. 14,00,000 imposed on the appellant should be sustained - HELD THAT: - Having found that the impugned adjudication was vitiated for failure to afford cross examination as directed on remand, and noting that the appellant's prayer in the appeal sought setting aside of the penalty, the Tribunal concluded that no merits existed in the impugned order as against the appellant. In consequence, and in view of the procedural infirmity and the Revenue's failure to justify the order in compliance with the remand direction, the penalty imposed under the adjudication was set aside insofar as it related to the present appellant. [Paras 4, 5]

The penalty imposed on the appellant was set aside and the appeal was allowed to the extent of the relief sought.

Final Conclusion: The Tribunal set aside the impugned adjudication insofar as it affected the present appellant, holding that the Commissioner erred in deciding the case without affording cross examination of the panch witnesses as directed on remand; accordingly, the penalty imposed on the appellant was set aside and the appeal allowed to the extent prayed for.

Classification as textile products for technical uses under Heading 5911 - Application of Chapter and Section Notes and Explanatory Notes in tariff classification - General Interpretative Rules (titles, GIR 1 and rule of specific over general under GIR 3) - Exclusion of textile materials from Chapter 39

Classification as textile products for technical uses under Heading 5911 - Exclusion of textile materials from Chapter 39 - Application of Explanatory Notes and Chapter Notes - Rule of specific over general (GIR 3) - Classification of Main MIC Dust Protective Net under Sub heading 59119090 of the Customs Tariff Act, 1975 - HELD THAT: - The Authority accepted the applicants' factual description that the Dust Protective Net is a small, rectangular mesh made of woven PET fabric with a protective film and is used as a technical filtering/protective aid for mobile phone speakers. Applying the Section and Chapter Notes and Explanatory Notes, the Authority held that references to "plastics" in Chapter 39 do not apply to materials regarded as textile materials of Section XI and that Note 1 to Chapter 59 confines the expression "textile fabrics" to woven fabrics of Chapters 50-55 (and specified headings), which includes woven PET fabrics. Note 8 to Chapter 59 and the Explanatory Notes to Heading 5911 encompass textile products and articles cut to shape and used for technical purposes (including filtering/straining cloth and flat woven fabrics used for technical purposes), provided they do not fall in any other heading of Section XI. The Authority rejected the department's contention that the product should be classified under Chapter 39/Heading 3926 on the basis that the product is a textile article made of synthetic fibre (PET) and thus excluded from Chapter 39. The Authority applied the interpretative hierarchy embodied in GIR 1 and the principle of preference for the more specific heading (GIR 3), concluding that the specific description in Heading 5911 governs over the more general description in Heading 3926. On that basis, and after considering submissions, comments and explanatory material, the Authority concluded that the goods merit classification under Sub heading 59119090. [Paras 6, 8, 9]

Main MIC Dust Protective Net is classifiable under Customs Tariff Sub Heading 59119090.

Final Conclusion: Advance ruling: the Main MIC Dust Protective Net, as described, merits classification under Sub heading 59119090 of the First Schedule to the Customs Tariff Act, 1975.

Eligibility for exemption under Sr. No. 448H of Notification No. 50/2017-Cus. - classification under CTH 8414 80 30 - suitability for use - exclusion for goods suitable for use in motor vehicles under Headings 8702, 8703, 8704 and 8711 - absence of on-highway/off-highway distinction in tariff and notification

Eligibility for exemption under Sr. No. 448H of Notification No. 50/2017-Cus. - classification under CTH 8414 80 30 - suitability for use - exclusion for goods suitable for use in motor vehicles under Headings 8702, 8703, 8704 and 8711 - Whether turbochargers (CTH 8414 80 30) that are suitable for use only in off-highway equipment are eligible for exemption under Sr. No. 448H of Notification No. 50/2017-Cus. - HELD THAT: - The Authority noted that turbochargers are specifically classifiable under CTH 8414 80 30 and that Sr. No. 448H grants exemption to goods of CTH 8414 80 (except 8414 80 11) provided they are not suitable for use in motor vehicles falling under Headings 8702, 8704, 8703 or 8711. The tariff and notification do not themselves distinguish turbochargers by on-highway or off-highway use. Several vehicle headings cited in the exclusion (for example 8704) may include items designed for off-highway use (such as dumpers), and other off-highway vehicles (e.g. certain quad bikes, dune buggies) may be classifiable under headings listed in the exclusion. Consequently, the determinative criterion under the notification is whether the turbocharger is suitable for use in goods covered by those motor-vehicle headings, not a general on-highway/off-highway label. Because the tariff does not differentiate turbochargers by such use and because some off-highway vehicles fall within the excluded headings, the applicant cannot, on the basis of a claimed off-highway use alone, be categorically entitled to the benefit. The notification benefit is available only where the turbocharger is suitable for use in goods other than those falling under Headings 8702, 8703, 8704 and 8711. [Paras 7, 8, 9]

The application is dismissed insofar as a categorical ruling was sought; turbochargers will obtain the exemption under Sr. No. 448H only if they are not suitable for use in goods falling under Headings 8702, 8703, 8704 or 8711.

Final Conclusion: The Authority held that exemption under Sr. No. 448H cannot be granted on the basis that the turbochargers are 'off-highway' alone; the benefit applies only when the turbocharger is not suitable for use in motor vehicles under Headings 8702, 8703, 8704 or 8711, and the application is disposed accordingly.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - Limited power of revenue authorities to assess but not to recover during moratorium - Scope of Section 33(5) of the Insolvency and Bankruptcy Code - Prohibition on declaring administrative/tax assessment void ab initio by adjudicating authority under IBC - Overriding effect of the Insolvency and Bankruptcy Code under Section 238

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - Scope of Section 33(5) of the Insolvency and Bankruptcy Code - Limited power of revenue authorities to assess but not to recover during moratorium - Power of the National Company Law Tribunal under Section 33(5) IBC to declare a tax assessment order void ab initio - HELD THAT: - The High Court held that Section 14 imposes a moratorium which restricts enforcement or recovery proceedings but does not prohibit assessment or determination of the quantum of tax or other levies. Reliance on the ratio in V M Deshpande and Sundaresh Bhatt establishes that revenue authorities may assess or reassess duties or levies but cannot proceed to recovery in breach of the moratorium. The Court concluded that the NCLT, exercising powers under Section 33(5) of the IBC, has no jurisdiction to declare an assessment order void ab initio or non est in law; such a declaration went beyond the limited supervisory or gatekeeping role under the IBC and encroached upon powers akin to a constitutional court. Consequently the impugned NCLT order purporting to declare the assessment null was unsustainable and was set aside. [Paras 6]

The NCLT lacked power under Section 33(5) IBC to declare the assessment order void ab initio; the NCLT order is set aside.

Remand for fresh consideration - Procedure for filing claims and permissions during insolvency/liquidation - Disposition of the application seeking permission to prefer an appeal against the assessment order - HELD THAT: - Having set aside the NCLT's declaration that the assessment was void, the Court did not decide the merits of the 2nd respondent's application for leave to file an appeal. Instead, the matter was remitted to the NCLT to decide IA(IBC) 331/KOB/2022 in IBA/38/KOB/2019 on its own merits in accordance with law. The remand requires the Tribunal to consider the application afresh without treating the assessment order as void ab initio and while respecting the limits imposed by the IBC on enforcement during moratorium/liquidation. [Paras 7]

Matter remitted to the NCLT to consider the 2nd respondent's application for permission to file an appeal afresh and decide it at an early date.

Final Conclusion: Impugned NCLT order declared unsustainable and set aside; assessment order for 2015-16 not voided by the NCLT, and the application for permission to prefer an appeal is remitted to the NCLT for fresh consideration in accordance with law.

Exemption of services provided by an individual advocate from service tax - Designated officer acting without jurisdiction - Breach of principles of natural justice (inadequate or post-facto hearing) - Quashing of an Order in Original passed contrary to binding notifications

Exemption of services provided by an individual advocate from service tax - Designated officer acting without jurisdiction - Quashing of an Order in Original passed contrary to binding notifications - Whether the Order in Original confirming service tax demand against the petitioner was without jurisdiction because services of an individual advocate are exempt from levy of service tax under the Notifications dated 20th June, 2012, and whether the order should be quashed on that ground. - HELD THAT: - The Court examined Notification No. 25/2012 and Notification No. 30/2012 dated 20th June, 2012, which exempt services provided by an individual advocate or a firm of advocates (by way of legal services) from levy of service tax and set the extent of tax payable by such service as 'Nil'. The Designated Officer was pointedly informed during proceedings that service tax was not leviable on an individual advocate under the Notifications, but that contention was not considered before passing the impugned Order in Original. Because the impugned order was rendered contrary to the binding notifications and the Designated Officer thus acted without jurisdiction, the Court found that no useful purpose would be served by remanding the matter to the Designated Officer. Consequently, the impugned order was quashed and set aside as being passed without jurisdiction and contrary to the Notifications of 20th June, 2012. [Paras 7, 8, 10]

Impugned Order in Original set aside as passed without jurisdiction because it was contrary to the Notifications of 20th June, 2012 exempting services provided by an individual advocate from service tax.

Breach of principles of natural justice (inadequate or post-facto hearing) - Whether there was a breach of the principles of natural justice in passing the impugned order. - HELD THAT: - The Court recorded that the petitioner appears not to have been granted an appropriate opportunity of hearing before the Order in Original was passed; the petitioner had sent a detailed letter after the personal hearing drawing attention to non receipt of the show cause notice and asserting the statutory exemption. The Court found substance in the contention of a breach of natural justice, noting that the Designated Officer did not consider these contentions before passing the order. While the lack of jurisdictional foundation was the principal ground for quashing, the inadequacy of the hearing supported interference. [Paras 6]

Court found substance in the contention of breach of natural justice (inadequate opportunity/hearing) and treated it as a supporting basis for interference with the impugned order.

Final Conclusion: Writ petition allowed: the Order in Original dated 26th October, 2023 confirming service tax demand and imposing interest/penalties was quashed and set aside as passed without jurisdiction and contrary to the Notifications dated 20th June, 2012; the Court also recorded deficiency in the opportunity of hearing. No costs.

Set off of pre-deposit under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - calculation of relief under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - entitlement to sixty per cent relief where tax dues are relatable to amount in arrears not exceeding fifty lakhs - deduction of pre-deposit when issuing statement indicating amount payable under the Scheme

Entitlement to sixty per cent relief where tax dues are relatable to amount in arrears not exceeding fifty lakhs - calculation of relief under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Quantification of relief available under the SVLDRS Scheme in respect of a confirmed tax liability which had attained finality and whether the petitioner was entitled to 60% relief thereby requiring payment of 40% of the confirmed tax. - HELD THAT: - The Court found that the tax liability as confirmed by the Assistant Commissioner and affirmed on appeal had attained finality and therefore fell within the definition of "amount in arrears" under Chapter V of the Finance Act, 2019. For amounts in arrears of fifty lakhs or less, the Scheme grants sixty per cent relief, on which basis the petitioner was required to pay forty per cent of the confirmed tax. Applying that principle to the confirmed tax amount, the Court computed the petitioner's liability as forty per cent of the confirmed tax figure and recorded that the petitioner was accordingly entitled to relief up to sixty per cent, resulting in a reduced payable amount prior to consideration of any pre-deposit set off. [Paras 15, 16, 17]

The petitioner was entitled to sixty per cent relief under the SVLDRS Scheme for the confirmed tax that had attained finality, requiring payment of forty per cent of the confirmed tax as the base amount before adjustment for pre-deposit.

Set off of pre-deposit under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - deduction of pre-deposit when issuing statement indicating amount payable under the Scheme - Whether the amount pre-deposited by the petitioner during the proceedings ought to be deducted from the amount payable under the SVLDRS Scheme and the correct computation after such deduction. - HELD THAT: - Relying on the statutory condition that any pre-deposit paid at any stage of appellate proceedings or as a deposit during enquiry, investigation or audit shall be deducted when issuing the statement indicating the amount payable (as set out in the Scheme), the Court held that the petitioner's pre-deposit is available for set off. Applying Section 124(2) of the Finance Act, 2019, the Court deducted the pre-deposit from the forty per cent payable amount and recalculated the net payable. The Court observed that both the petitioner's Form SVLDRS-1 and the respondent's Form SVLDRS-3 contained incorrect quantified amounts and set out the corrected computation, resulting in a net payable lower than that determined by the Designated Committee. [Paras 18, 19, 20, 21]

The pre-deposit paid by the petitioner was deductible under the Scheme and, after deduction, the correctly computed net amount payable by the petitioner is lower than the amount determined in the impugned SVLDRS-3.

Calculation of relief under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Directions regarding payment of the corrected amount and interest consequent to the Court's computation under the Scheme. - HELD THAT: - Having recalculated the net amount payable after applying the sixty per cent relief and deducting the pre-deposit, the Court directed the petitioner to pay the corrected sum within thirty days together with interest at 12% from the expiry of the Scheme period. The Court also provided for adjustment where the petitioner had already paid a portion of the amount and ordered settlement of the case under Chapter V of the Finance Act, 2019 upon compliance with its directions. [Paras 22]

The petitioner was directed to pay the corrected net amount with interest within the time prescribed; on payment, the petitioner's case shall be settled under Chapter V of the Finance Act, 2019.

Final Conclusion: The writ petition is allowed in part: the Court held that the petitioner was entitled to sixty per cent relief under the SVLDRS Scheme (for an amount in arrears not exceeding fifty lakhs), that the pre-deposit paid by the petitioner is deductible under the Scheme, that the earlier Form calculations were incorrect, and directed payment of the corrected net amount with interest within thirty days, after which the matter will be settled under Chapter V of the Finance Act, 2019.

Classification of service as construction of residential complex versus works contract service - taxability of construction of residential complex prior to 01.07.2010 - bar on reclassification under Section 65A - liability for tax collected but not deposited under Section 73A - tax on goods transport agency services under reverse charge

Taxability of construction of residential complex prior to 01.07.2010 - classification of service as construction of residential complex versus works contract service - Demand in respect of construction of residential complex for periods prior to July 2010 and reclassification to works contract service - HELD THAT: - The Tribunal's earlier finding that the services in question fall under the head "construction of residential complex" and that taxability in relation to transactions between developer and purchaser is effective only from 01.07.2010 has been accepted. The adjudicating authority correctly declined to reclassify the service as "works contract service"; such reclassification is impermissible in view of the statutory bar in Section 65A when two equally applicable classifications exist. As the change of head of service was rejected, the consequential differential demand arising from treating the activity as works contract does not survive and was rightly dropped. [Paras 14]

Demands for periods prior to June/July 2007 and the large differential demand arising from reclassification to works contract service were dropped; classification retained as construction of residential complex.

Liability for tax collected but not deposited under Section 73A - Demand under Section 73A for alleged tax collected but not deposited for the period 16.06.2005 to 30.09.2011 - HELD THAT: - The Commissioner undertook reconciliation between the amounts proposed in the show cause notice and actual deposits and found that the SCN had included values not liable to service tax (projects below 12 units, projects not commenced, projects transferred to another service provider). The assessee produced challans showing payment. On that basis the adjudicating authority correctly concluded there was no case for recovery under Section 73A and dropped the demand and any penalty. [Paras 15]

The Section 73A demand was dropped after reconciliation; no penalty imposed.

Tax on goods transport agency services under reverse charge - Small demand relating to GTA service - HELD THAT: - The adjudicating authority accepted that the amount relating to GTA service had been paid prior to issuance of the show cause notice and had been appropriated in the original order. The Tribunal observed that this minor demand was not a live controversy and the amount stands confirmed and appropriated in accordance with law. [Paras 15]

The GTA-related amount remains confirmed and appropriated; no interference.

Final Conclusion: The revenue appeal is dismissed. The Tribunal upholds classification of the services as construction of residential complex (with taxability effective from 01.07.2010), dismisses the reclassification to works contract and the resulting differential demand, accepts the dropping of the Section 73A demand after reconciliation, and leaves the minor GTA-related appropriation unaltered; the assessee is entitled to consequential benefits as per law.

Business Auxiliary Service - classification of services - service provider-client relationship - consideration - Section 65A classification rule - extended period of limitation - penalty under Section 76, 77 and 78 - CENVAT Credit admissibility - reimbursement of expenses - literal interpretation of taxing statute

Business Auxiliary Service - classification of services - service provider-client relationship - literal interpretation of taxing statute - Whether the services rendered by the appellant to SIFCL during 01.07.03 to 31.07.06 were classifiable as Business Auxiliary Service - HELD THAT: - The Tribunal upheld the adjudicating authority's conclusion that the appellant rendered taxable Business Auxiliary Services to SIFCL. Applying the definition of Business Auxiliary Service as it existed during the relevant period and the principle that taxing statutes must be given their plain meaning, the Tribunal found that the MOU and the commercial reality established a service provider-client relationship and that the appellant performed promotional, collection and agency functions on behalf of SIFCL. Even if acceptance of deposits were not treated as a service, the appellant's activities fell within independent or auxiliary entries (including collections, billing and provision of services on behalf of the client). The Tribunal further applied Section 65A to prefer more specific entries where applicable and rejected the appellant's argument that later-introduced 'support services' entry in 2006 retroactively alters classification for the earlier period. [Paras 4]

Services were correctly classifiable as Business Auxiliary Service for the relevant period and liable to service tax.

Reimbursement of expenses - value of taxable service - Deduction of reimbursable/actual out-of-pocket expenses from the gross receipts for valuation - HELD THAT: - The Tribunal accepted that reimbursable expenses, if genuinely reimbursement on actuals, are deductible from the gross amount for determination of taxable value. However, the adjudicating authority had disallowed the claimed deductions for lack of 'clinching' documentary evidence. The Tribunal directed that the appellant be permitted to produce documentary evidence and remanded the matter to the original authority to re-determine taxable value after verifying admissibility of the claimed reimbursements in accordance with precedent. [Paras 4, 5, 22]

Remanded for fresh determination: Commissioner to reassess taxable value after allowing appellant to substantiate reimbursable expenses; admissibility to be decided in remand.

CENVAT Credit admissibility - procedural compliance - Whether CENVAT credit on input services was admissible to the appellant for the period in dispute - HELD THAT: - The Tribunal upheld the adjudicating authority's finding that CENVAT credit could not be allowed because the appellant had not complied with the procedural conditions prescribed by the CENVAT Credit Rules (registration, documentary proof and Rule 9 requirements). The burden of proof for availment of CENVAT credit lies on the claimant and, absent the requisite records and compliance, credit could not be granted at this stage. [Paras 4, 22]

CENVAT credit not admissible in the impugned adjudication absent statutory compliance and documentary proof.

Extended period of limitation - suppression of facts - Whether the extended period of limitation could be invoked for the demand - HELD THAT: - On the facts and conduct of the appellant (no registration, no returns, failure to disclose material facts and no engagement with the proper jurisdictional officer), the Tribunal agreed with the adjudicating authority that there was conscious suppression of material facts with intent to evade tax. The letter relied upon by the appellant to a non-jurisdictional officer did not establish bona fide belief or adequate disclosure to the proper authority. In those circumstances the extended period for issuance of demand was rightly invoked. [Paras 4, 22]

Extended period of limitation invokable; the demand is not time-barred.

Penalty under Section 76, 77 and 78 - mandatory penalty where extended period invoked - Validity of penalties and interest imposed under the Finance Act for the assessed period - HELD THAT: - The Tribunal sustained the imposition of interest under the relevant provision and penalties under Sections 76 and 77 as penalties for statutory contraventions. It further held that penalty under the provision analogous to Section 78 (penalty for suppression with intent to evade) is attracted where extended limitation is invoked and such penalty is mandatory once the statutory conditions are established. The Tribunal observed that computation of tax and consequential penalties must be revisited after remand for admissible reimbursements, but the liability to penalties and interest stands. [Paras 4, 5, 22]

Penalties and interest upheld; quantum to be recomputed by original authority after remand on reimbursement issue.

Final computation and remand - Whether the appeal required any further relief and the appropriate disposal - HELD THAT: - The Tribunal partly allowed the appeal only to the extent of directing remand for verification of reimbursable expenses and recalculation of taxable value, tax, interest and penalties. It directed the original authority to finalise the recomputation within three months and to allow the appellant to produce documentary evidence in support of reimbursement claims. All other findings of liability, limitation and penalty were affirmed. [Paras 5]

Appeal partly allowed; matter remanded to Commissioner for recomputation after verification of reimbursable expenses within three months.

Final Conclusion: The Tribunal affirmed that the appellant's activities during 01.07.03 to 31.07.06 were taxable as Business Auxiliary Services, upheld invocation of the extended limitation and the imposition of interest and penalties, rejected the appellant's claim to CENVAT credit for lack of compliance, but remanded the issue of reimbursable expenses for fresh verification and directed recomputation of tax, interest and penalties by the adjudicating authority within three months.

Condonation of delay in filing appeals - Statutory time limit for appeals to the Commissioner (Appeals) - Proviso empowering Commissioner (Appeals) to allow additional period - Review application under Section 84 and limitation for filing appeal consequent upon review - Competence of appellate authority to admit appeal filed beyond prescribed extended period

Condonation of delay in filing appeals - Statutory time limit for appeals to the Commissioner (Appeals) - Proviso empowering Commissioner (Appeals) to allow additional period - Review application under Section 84 and limitation for filing appeal consequent upon review - Competence of the Commissioner (Appeals) to condone delay in filing an appeal beyond the extended statutory period applicable under Sections 84 and 85 of the Finance Act, 1994 - HELD THAT: - The Tribunal analysed the interaction between Section 84 (review/order directing application to Commissioner (Appeals)) and Section 85 (time-limit and proviso) of the Finance Act, 1994. It held that Section 84 requires any application pursuant to a review order to be made within the periods specified (three months and one month respectively) and that the power to condone delay is contained only in the proviso to Section 85 which permits the Commissioner (Appeals) to allow an additional period of one month beyond the initial three months (i.e. 90 + 30 days). There is no statutory authority for the Commissioner (Appeals) to condone delay beyond that 30-day extension. Applying this principle to the facts, the review order dated 20.05.2014 was not within three months of the original order dated 14.02.2014, and the appeal against the review order was filed on 07.07.2014 which exceeded the permissible 90+30 day period. Consequently the Commissioner (Appeals) had no competence to entertain and condone the delayed appeal beyond the prescribed period. [Paras 7, 8, 9]

Order of the Commissioner (Appeals) was without competence for having condoned delay beyond the statutorily permitted period and is set aside.

Renting of Immovable Property Service made taxable retrospectively - Confirmation of demand for the normal assessment period - Effect of setting aside appellate order on original adjudication - Validity of confirmation of demand for the normal period and effect of setting aside the Commissioner (Appeals) order on the demand for the extended period - HELD THAT: - The Tribunal noted that it was not in dispute that the assessee rendered renting of immovable property services which were held taxable with retrospective effect. The original adjudicating authority had confirmed the demand only for the normal period. Because the Commissioner (Appeals) order confirming the entire demand (including the extended period) was set aside for want of competence to condone delay, the consequence is that the demand as confirmed by the original authority for the normal period remains intact. The appellate enhancement in respect of the extended period cannot stand in view of the appellate order being quashed for lack of jurisdiction to admit the delayed appeal. [Paras 6, 9]

Demand for the normal period remains confirmed by the original order; the part of the Commissioner (Appeals) order confirming demand for the extended period is set aside as the appeal was incompetently entertained.

Final Conclusion: The Commissioner (Appeals) lacked statutory competence to condone filing of the appeal beyond the prescribed 90+30 day period; accordingly the Commissioner (Appeals) order is set aside. The demand as confirmed by the original adjudicating authority for the normal period continues to stand; the enhancement for the extended period cannot be sustained.

Prospective operation of tax amendments - valuation of services between associated enterprises - inclusion of amounts credited to suspense account in taxable value - applicability of amendments from 10.05.2008 - extended period of limitation under proviso to Section 73(1) - interest and penalties consequential on confirmed demand

Prospective operation of tax amendments - inclusion of amounts credited to suspense account in taxable value - applicability of amendments from 10.05.2008 - Amendments to Explanation (c) to Section 67 and to Rule 6 taking effect from 10.05.2008 cannot be applied retrospectively to tax periods prior to their coming into force. - HELD THAT: - The Tribunal held that the contention of the appellant that the amendments operate prospectively is well founded. The disputed levy sought to treat amounts shown as outstanding (including entries to suspense account) as exigible to service tax only from the date the statutory amendments came into force; the Tribunal found the controversy squarely covered in favour of the appellant by the decision in Principal Commissioner of GST, Delhi vs McDonalds India Pvt Ltd , and applied that authority to conclude that the amendments could not be applied to periods before 10.05.2008. Having adopted that legal position, the Tribunal allowed the appellant's plea that tax not be demanded for amounts outstanding prior to the operative date of the amendment.

Demand based on treating outstanding amounts (including suspense account entries) as taxable prior to 10.05.2008 set aside.

Valuation of services between associated enterprises - extended period of limitation under proviso to Section 73(1) - interest and penalties consequential on confirmed demand - The order confirming demand, interest and penalties founded on the retrospective application of the amendment was unsustainable and was set aside. - HELD THAT: - Because the Tribunal concluded that the amendment could not be applied to the period prior to its effective date, the consequential show-cause notice invoking the extended period of limitation and proposing interest and penalties could not be sustained. The Tribunal therefore quashed the impugned Order in Original which confirmed tax, interest and imposed penalty, and directed that the appellant be given consequential benefits in accordance with law.

Order in Original confirming tax, interest and penalties set aside and appellant granted consequential relief.

Final Conclusion: Appeal allowed; impugned order confirming demand, interest and penalties quashed and set aside in view of the prospective operation of the amendments effective 10.05.2008 as applied following Principal Commissioner of GST, Delhi vs McDonalds India Pvt Ltd ; appellant entitled to consequential benefits.

Summary order. Civil Appeal dismissed on the ground of low tax effect as covered by Circular No. 17 of 2019 dated 08.08.2019 issued by the Department of Revenue, Ministry of Finance; pending applications disposed of.

CENVAT credit entitlement for inputs used for generation of electricity for captive use - definition of "input" under the CENVAT Credit Rules - substituted definition of "input" w.e.f. 01.04.2011 - captive use - wheeling of electricity - Maruti Suzuki ratio on inputs used within the factory

CENVAT credit entitlement for inputs used for generation of electricity for captive use - definition of "input" under the CENVAT Credit Rules - substituted definition of "input" w.e.f. 01.04.2011 - wheeling of electricity - Maruti Suzuki ratio on inputs used within the factory - Whether the appellant is entitled to CENVAT credit of duty paid on inputs used for generation of electricity in its CPP, notwithstanding that a portion of such electricity was wheeled through TANGEDCO for use by sister units at different locations, for the period September 2012 to May 2013. - HELD THAT: - The Court examined the 2002 Rules and the substituted definition of "input" effective 01.04.2011. Under the earlier definition the place of use ('within the factory of production') was material; Maruti Suzuki applied that test and denied credit to the extent electricity was cleared outside the factory for a price. The substituted Rule (clause (iii)) expressly covers "all goods used for generation of electricity or steam for captive use" and contains no stipulation as to the place of use. On the admitted facts - the CPP set up at substantial cost, electricity wheeled gratis to sister units through a transparent wheeling arrangement with TANGEDCO, utilization within the group, and the ability for departmental verification - the Court held that the term 'captive' qualifies generation and not the location of use. Consequently, electricity captively generated qualifies as an input wherever used by the assessee for the purposes of the substituted definition. Maruti Suzuki was distinguished on its facts and the earlier definition. Applying the substituted Rule to the period in question, the appellant was entitled to succeed. [Paras 31, 32, 33, 34]

Appeals allowed; appellant entitled to CENVAT credit for the inputs used to generate electricity for captive use for the period Sep, 2012 to May, 2013; no order as to costs.

Final Conclusion: On the facts and for the period Sep, 2012 to May, 2013 the substituted definition of "input" (w.e.f. 01.04.2011) covers goods used for generation of electricity for captive use irrespective of the location of consumption; the appellant's appeals are allowed and there shall be no order as to costs.

Limitation bar on refund of Cenvat credit - Applicability of Section 11B to refund claims under Rule 5 of the Cenvat Credit Rules - Effect of acceptance of returns on refund adjudication - Remand for reconsideration after opportunity of hearing

Limitation bar on refund of Cenvat credit - Applicability of Section 11B to refund claims under Rule 5 of the Cenvat Credit Rules - Effect of acceptance of returns on refund adjudication - Remand for reconsideration after opportunity of hearing - CESTAT orders setting aside Commissioner (Appeals) directions on refund claims for the specified assessment years were set aside and the matter remitted to the Original Authority for fresh consideration. - HELD THAT: - The High Court noted that the Original Authority rejected the assessee's refund claims solely on the ground of limitation and that both the Commissioner (Appeals) and the CESTAT did not advert to the disputed legal questions, including the applicability of Section 11B to refund claims under Rule 5 of the Cenvat Credit Rules and the consequence of acceptance of returns. The Court observed that there are competing precedents (including mPortal and Suretex) of equal strength and that lower authorities had not addressed the applicability of the said provisions or the effect of accepted returns in relation to refund adjudication. In view of this absence of adjudication on these determinative legal points and the presence of accumulated Cenvat credit, the Court considered it necessary that the Original Authority re-examine the claims after hearing the parties and decide in accordance with law, keeping all contentions open. [Paras 11]

Orders Nos. 20437/2018 and 20465/2018 dated 15.03.2018 are set aside and the matter is remitted to the Deputy Commissioner, Division-A, Service Tax Commissionerate-II, Bengaluru, for reconsideration in accordance with law after giving the assessee an opportunity of hearing; all contentions kept open; no costs.

Final Conclusion: The CESTAT orders are quashed and the refund claims for A.Y. 2011-12, 2012-13 and 2013-14 are remitted to the Original Authority for fresh adjudication after hearing, with all legal contentions (including limitation, applicability of Section 11B to Rule 5 claims and effect of accepted returns) left open for determination.

Quashing and setting aside of an adjudication order - right to cross-examination of witnesses relied upon by revenue authorities - opportunity of personal hearing - remand to adjudicating authority for fresh consideration - directions for expeditious adjudication

Quashing and setting aside of an adjudication order - remand to adjudicating authority for fresh consideration - The impugned adjudication order dated 4-9-2020 was quashed and set aside and the matter remitted to the adjudicating authority. - HELD THAT: - The High Court, following its earlier decision in a co-noticee's case dated 15-2-2023, held that the impugned order before it deserved to be quashed and set aside. The court remitted the matter to the adjudicating authority to restore proceedings to the stage where the authority must afford the petitioner the opportunity envisaged in the earlier order. The court applied the precedent and directed that the same remedial course be followed in the present petition, resulting in vacation of the impugned order and remand for fresh consideration. [Paras 3, 4]

Impugned order quashed and set aside; matter remitted to the adjudicating authority for further proceedings.

Right to cross-examination of witnesses relied upon by revenue authorities - opportunity of personal hearing - directions for expeditious adjudication - The adjudicating authority must provide the petitioner an opportunity of personal hearing, consider the question of cross-examination of witnesses relied upon by the authority, and conclude the adjudication within the directed timelines. - HELD THAT: - Relying on the prior order, the court directed that the adjudicating authority shall afford the petitioner a personal hearing within two weeks from receipt of the order and that the petitioner must cooperate without seeking further adjournment. Thereafter the adjudicating authority is to decide the issue of permitting cross-examination of the witnesses relied upon by the authority within two weeks. The process of adjudication is to be expedited and all concerned instructed to cooperate. These directions were applied to the present petitioner as mandatory steps upon remand. [Paras 3, 4]

Adjudicating authority to grant personal hearing within two weeks, decide cross-examination within two weeks thereafter, and expedite the entire adjudication process.

Final Conclusion: The petition is allowed: the impugned order dated 4-9-2020 is quashed and set aside and the matter is remitted to the adjudicating authority with directions to grant personal hearing, consider cross-examination within prescribed short timelines, and expedite the adjudication.

Application of Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 - sequential application of valuation rules under CVR (Rules 3 to 7) - related party valuation under Rule 7 of CVR - valuation of DTA clearances by a 100% EOU under the proviso to Section 3 read with Customs valuation rules - limitation and extended period for recovery - suppression of facts and intent to evade duty

Sequential application of valuation rules under CVR (Rules 3 to 7) - related party valuation under Rule 7 of CVR - application of Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 - Legality of the demand founded on valuation adopted by applying Rule 7 of CVR directly for goods cleared to DTA to a related party. - HELD THAT: - The Tribunal found that the Department did not follow the sequential methodology prescribed by the Customs Valuation Rules and proceeded straightaway to apply Rule 7 to determine assessable value. The judgment of the Hon'ble Supreme Court in Anilkumar Anand was applied to hold that the statutory valuation rules must be applied in sequence and that omission to do so renders the valuation grievance liable to be set aside. Although the parties were related and Rule 7 would be relevant if reached, the assessing process itself was legally improper because Rules 3 to 5 (and the sequential scheme) were not first considered before invoking Rule 7. Consequently the valuation on which the demand was based was contrary to law. [Paras 13, 14]

Valuation adopted by directly applying Rule 7 without sequential application of the Customs Valuation Rules is contrary to law; the demand founded on such valuation cannot be sustained.

Limitation and extended period for recovery - suppression of facts and intent to evade duty - valuation of DTA clearances by a 100% EOU under the proviso to Section 3 read with Customs valuation - Whether the demand was barred by limitation and whether the extended period was properly invoked on a finding of suppression with intent to evade duty. - HELD THAT: - The record showed that an earlier audit objection (for the earlier period) had been raised and the appellant had replied, acknowledging the related party relationship and contending that Customs Valuation Rules (not Central Excise Valuation Rules) applied; no show cause notice issued within the normal period thereafter. The Tribunal accepted that there was no positive act disclosed to establish suppression with intent to evade duty and that the Department failed to establish grounds for invocation of the extended period. The adjudicating authority's inference of suppression was held to be vague and unsupported. On this basis the demand for the period covered by the impugned show cause notice was held to be time barred. [Paras 16, 17]

The demand is barred by limitation; extended period not attracted as suppression with intent to evade was not established.

Final Conclusion: The impugned order confirming demand, interest and penalty is set aside on the ground of limitation and the appeal is allowed with consequential reliefs as per law.

Dismissal for default/non-prosecution - adjournment for sufficient cause - limits on adjournments under Section 35C(1A) - action on appeal for appellant's default under Rule 20 - condemnation of mechanical/repeated adjournments and duty of advocates

Limits on adjournments under Section 35C(1A) - condemnation of mechanical/repeated adjournments and duty of advocates - Whether the appeal ought to be adjourned beyond the statutorily permitted number of adjournments - HELD THAT: - The Tribunal applied the statutory ceiling in Section 35C(1A) that no adjournment shall be granted more than three times to a party during the hearing. Reliance was placed on Supreme Court jurisprudence condemning routine and mechanical adjournments and emphasising the duty of advocates and tribunals to prevent dilatory tactics which undermine speedy justice. The appellant had been repeatedly absent on multiple listed dates and afforded opportunities but made no request for adjournment; there was therefore no sufficient cause to extend time beyond the statutory limit. [Paras 4]

No justification found for adjourning the matter beyond three times; adjournment beyond the statutory limit refused.

Dismissal for default/non-prosecution - action on appeal for appellant's default under Rule 20 - Whether the appeal should be dismissed for non-prosecution under Rule 20 of the CESTAT Procedure Rules, 1982 - HELD THAT: - Rule 20 permits the Tribunal to dismiss an appeal for default where the appellant does not appear on the day fixed for hearing. Given the appellant's persistent non-appearance on the listed hearing dates and absence of any application for adjournment or demonstration of sufficient cause, the Tribunal exercised its discretion under Rule 20. The Tribunal also noted the obligation to set aside a dismissal only where sufficient cause for non-appearance is subsequently shown; no such cause was indicated in the record. [Paras 5]

Appeal dismissed for non-prosecution under Rule 20 of the CESTAT Procedure Rules, 1982.

Final Conclusion: The Tribunal refused further adjournments beyond the statutory maximum and dismissed the appeal for non-prosecution under Rule 20, relying on the statutory limit on adjournments and authoritative condemnation of routine adjournments; no issue was remanded.

Zero-rated supplies and refund of unutilised input tax credit - time-limit for refund claims under Section 18(3) of the TNVAT Act - definition of "input" including capital goods - administrative circulars and their effect on limitation - remand for factual adjudication of refund claims

Zero-rated supplies and refund of unutilised input tax credit - time-limit for refund claims under Section 18(3) of the TNVAT Act - definition of "input" including capital goods - administrative circulars and their effect on limitation - Whether the petitioner's claim for refund of unutilised ITC on capital goods was barred by limitation and whether the claim was maintainable in view of the provisions of the TNVAT Act and the Commissioner's circulars. - HELD THAT: - The Court noted that the statutory definition of "input" in Section 2(23) and the zero rating provision in Section 18 expressly cover capital goods. Documents on record (proceedings dated 19.02.2013) show that the petitioner made refund claims within the 180 day period prescribed by sub section (3) of Section 18 and that the assessing officer had deferred settlement of ITC claims on capital goods, recording that they would be settled later. The Court found that processing of such claims was impeded by Circular No.22, which was subsequently superseded by Circular No.12 clarifying entitlement to refund. Given that the delay in settlement resulted from the departmental circular that was in force at the material time, the petitioner could not be faulted for delayed processing and the impugned rejection on limitation grounds is unsustainable. The Court therefore held that the refund claims are not to be rejected on the basis of the limitation plea raised in the impugned order. [Paras 5, 6]

The impugned order rejecting the refund claim as time barred is unsustainable and set aside insofar as limitation is concerned.

Remand for factual adjudication of refund claims - administrative circulars and their effect on limitation - Whether the refund claim requires remand for factual determination and the scope of such remand. - HELD THAT: - Although the Court concluded that limitation cannot be used to sustain the rejection, it observed that entitlement to refund requires examination of records relating to availing of ITC and export of goods on a zero rated basis - factual determinations unsuitable for adjudication by the Court in writ proceedings. Accordingly, the matter was remanded to the assessing officer for reconsideration on merits. The Court directed that the assessing officer shall not reopen the issue of limitation and that the claim be decided after affording a reasonable opportunity to the petitioner within a maximum period of two months. [Paras 7, 8]

The matter is remanded to the assessing officer for fresh consideration and disposal on merits; limitation shall not be gone into and the claim shall be decided within two months after giving the petitioner a reasonable opportunity.

Final Conclusion: The impugned order rejecting the petitioner's refund claim is quashed insofar as it rests on limitation; the claim is remitted to the assessing officer for fresh adjudication on merits (without revisiting limitation) and to be disposed of within two months after affording the petitioner a reasonable opportunity.

Power of seizure under Section 67 of the West Bengal Value Added Tax Act, 2003 - appointment of Sales Tax Officer under Section 6(1) by Notification No.792-F.T. dated 31.03.2005 - delegation by the Commissioner under Section 3(4) of the VAT Act - requirement of written delegation under Section 6(2) of the VAT Act

Power of seizure under Section 67 of the West Bengal Value Added Tax Act, 2003 - appointment of Sales Tax Officer under Section 6(1) by Notification No.792-F.T. dated 31.03.2005 - requirement of written delegation under Section 6(2) of the VAT Act - delegation by the Commissioner under Section 3(4) of the VAT Act - Whether the Sales Tax Officer who seized the books of accounts had power to do so under Section 67 of the VAT Act in the absence of a written delegation by the Commissioner. - HELD THAT: - The Court held that the State Government, by Notification No.792-F.T. dated 31.03.2005 issued under sub section (1) of Section 6, appointed Commercial Tax Officers as Sales Tax Officers to assist the Commissioner and to exercise jurisdiction under the Act. Sub section (2) of Section 6 operates in two limbs: powers conferred or prescribed by the Act, or powers delegated in writing by the Commissioner under Section 3(4). The power of seizure is prescribed by Section 67. A Sales Tax Officer duly appointed under Section 6(1) by the State Government through the stated notification is therefore empowered to exercise the seizure power under Section 67 without any separate order of delegation in writing by the Commissioner. Consequently, the Single Judge's conclusion that seizure was invalid for want of a written delegation by the Commissioner was incorrect and amounted to a misreading of the scheme of Sections 3 and 6 and the notification appointing Sales Tax Officers. [Paras 7, 8, 9, 10, 11]

The seizure was valid because the Sales Tax Officer was empowered under Section 6(1) read with the Notification to exercise the power of seizure under Section 67; the Single Judge's order quashing the seizure is set aside and the writ petition is dismissed.

Final Conclusion: The intra court appeal is allowed: the Single Judge's judgment dated 17.02.2016 quashing the seizure is set aside, the writ petition is dismissed, and the Sales Tax Officer's seizure under Section 67 is held to be within his powers as conferred by the State Government appointment.

Regular bail under Section 439 Cr.P.C. - investigation completed and final report under Section 173 Cr.P.C. - involvement in multiple FIRs not by itself a bar to bail - parity with similarly situated co-accused in granting bail - abuse of process by invoking penal provisions where special fiscal enactment may apply

Regular bail under Section 439 Cr.P.C. - investigation completed and final report under Section 173 Cr.P.C. - parity with similarly situated co-accused in granting bail - Petitioner entitled to be released on regular bail during the trial - HELD THAT: - The petitioner, who has been in custody since 28.06.2023, faces an FIR in which the investigation has been completed and a final report under Section 173 Cr.P.C. has been filed while none of the 18 prosecution witnesses have been examined. The Court noted that similarly situated co-accused have been granted regular bail by coordinate orders. Relying on the settled principles and the ratio in the cited precedents, the Court declined to decide the merits and directed release of the petitioner on furnishing bail/surety bonds to the satisfaction of the trial court, without prejudice to the prosecution proceeding to trial. [Paras 5, 7]

Petitioner ordered to be released on regular bail during trial on furnishing bail/surety bonds to the satisfaction of the Trial Court/IlIaqa Magistrate

Involvement in multiple FIRs not by itself a bar to bail - parity with similarly situated co-accused in granting bail - Accused's involvement in other criminal cases cannot be the sole ground to refuse bail - HELD THAT: - The Court observed that mere involvement in multiple cases is not determinative for denial of bail and applied the principle laid down by the Supreme Court in the cited authorities that participation in other criminal proceedings alone cannot be the sole basis to withhold bail. The Court therefore did not treat the pendency of other FIRs as a bar to granting bail to the petitioner, subject to the trial court's satisfaction with bail conditions. [Paras 6]

Presence in other criminal cases not a sole ground to deny bail; bail granted notwithstanding such involvement

Final Conclusion: Bail granted: petitioner released on regular bail during trial on furnishing bail/surety bonds to the satisfaction of the Trial Court/IlIaqa Magistrate; observations are without prejudice to the merits of the prosecution and trial court to proceed unimpaired.

Priority of a secured creditor over Government revenues, taxes and dues upon enforcement of a security interest - effect of registration of security interest with CERSAI on inter se priority - requirement of departmental registration of attachment under Chapter IV A of the SARFAESI regime - enforcement of security interest under the SARFAESI Act and consequent sale of secured assets - liability of taxing authority to the consequences of non registration of its claim

Priority of a secured creditor over Government revenues, taxes and dues upon enforcement of a security interest - enforcement of security interest under the SARFAESI Act and consequent sale of secured assets - Whether an attachment by the Sales Tax Department can prevail over the rights of a secured creditor who has registered its security interest with CERSAI and enforced the security under the SARFAESI Act. - HELD THAT: - The Court applied the Full Bench's conclusions in Janta Jalgaon Sahakari Bank (supra), holding that where a secured creditor has complied with the statutory regime (including registration with CERSAI) and enforces its security under the SARFAESI Act, the dues of the secured creditor take priority over dues claimed by the State/department. The Full Bench reasoned that Parliament's use of the term 'priority' in the SARFAESI amendments was deliberate to ensure the secured creditor's precedence over governmental dues, and that common law and statutory principles do not accord the Crown or State an overriding claim over a prior perfected security. On that basis the impugned attachment by the Sales Tax Department could not be sustained against the petitioner's registered security interest, and the petition was allowed. [Paras 15, 16, 17]

Attachment by the Sales Tax Department cannot prevail over the petitioner's registered security interest; petition allowed.

Effect of registration of security interest with CERSAI on inter se priority - requirement of departmental registration of attachment under Chapter IV A of the SARFAESI regime - liability of taxing authority to the consequences of non registration of its claim - Whether non registration of the department's claim/attachment with CERSAI affects the enforceability or priority of that attachment against a prior registered security interest. - HELD THAT: - Relying on the Full Bench's exposition, the Court noted that Chapter IV A obliges a department that professes a claim after enforcement by a secured creditor to register its claim with CERSAI, and any attachment subsequent to the registered security interest is subject to the prior registered claim. The judgment records that the petitioner had registered the security interest with CERSAI and that the Sales Tax Department had not effectively secured its claim by registration; accordingly the Department's attachment could not override the petitioner's priority. The Court directed that after appropriation of the secured creditor's dues, any surplus be remitted to the Department and left open the Department's remedies against the obligors. [Paras 12, 15, 18]

Non registration by the Department with CERSAI renders its attachment subordinate to the secured creditor's registered claim; Department may pursue other remedies but cannot claim priority over the secured creditor from the sale proceeds.

Final Conclusion: Writ petition allowed: the attachment by the Sales Tax Department stood set aside insofar as it sought priority over the petitioner's CERSAI registered security; petitioner to appropriate its dues from sale proceeds and remit any surplus to the Department, which remains free to pursue other legal remedies.

Profit a prendre - transfer of property in goods - sale of goods - turnover - taxability under the KVAT Act - definition of Agriculturist under the KVAT Act - license fee versus sale

Profit a prendre - transfer of property in goods - sale of goods - turnover - taxability under the KVAT Act - definition of Agriculturist under the KVAT Act - license fee versus sale - Receipts under the slaughter-tapping agreements are taxable under the KVAT Act as consideration for sale of latex and are not merely licence fees or a grant of a profit a prendre. - HELD THAT: - The court found that the agreements granted permission to the third party to tap the petitioner's rubber trees and to appropriate the latex obtained, and contained no provision governing distribution of extracted latex after expiry of the licence. For the purposes of the KVAT Act this amounted to a transfer of property in the latex from the petitioner to the third party and the consideration received was for the latex obtained and not merely for the right to collect. The Karnataka decision in Muninagalah (concerning tamarind collection under a forest grant) was held distinguishable on facts since that case involved a government grant to collect from specified forest areas and the agreement there was in substance a profit a prendre, whereas the present agreements related to latex from trees owned and cultivated by the petitioner company. Further, the petitioner-company could not claim exclusion as an agriculturist under the KVAT Act because the statutory definitions excluded companies; accordingly the receipts fall within the statutory concept of turnover liable to tax. Applying these conclusions, the assessing authority's finding of sale (and the subsequent appellate confirmations) was upheld. [Paras 6]

Tribunal's order affirmed; the questions of law raised by the petitioner are answered against the assessee and in favour of the revenue.

Final Conclusion: The High Court dismissed the revisions, holding that the amounts received under the tapping agreements constitute consideration for sale of latex taxable under the KVAT Act and are not merely licence fees or grants of a profit a prendre; the orders of the assessing authority, the first appellate authority and the Tribunal are affirmed.

Natural justice - service of notice - personal hearing - opportunity to file reply - setting aside order and remand

Natural justice - service of notice - personal hearing - opportunity to file reply - Impugned order passed without physical service of notices and without affording the petitioner an opportunity to file a reply or personal hearing - HELD THAT: - The Court found that notices dated 24.12.2021, 24.03.2023 and 15.05.2023 and the assessment order dated 25.05.2023 were uploaded on the respondents' web portal but were not physically served on the petitioner, resulting in the petitioner being unaware of those communications. Given the absence of a filed reply and the lack of any personal hearing, the Court held that passing an order under such circumstances violated the principles of natural justice. For these reasons the impugned order could not be sustained and was liable to be set aside. [Paras 6, 7]

Impugned order set aside for violation of natural justice; matter remitted for fresh consideration after affording opportunity to file reply and for personal hearing.

Setting aside order and remand - opportunity to file reply - personal hearing - Remand directions and timeline for fresh adjudication - HELD THAT: - While setting aside the assessment order, the Court remitted the matter to the respondents for fresh disposal. The petitioner was directed to file a reply to the show cause notice dated 24.03.2023 within 21 days from receipt of the order, and the respondents were directed to dispose of the matter after providing sufficient opportunities to the petitioner, including a personal hearing. The respondents undertook to comply if the Court directed so. [Paras 8]

Matter remitted to respondents; petitioner to file reply within 21 days and respondents to provide adequate opportunity for hearing before final disposal.

Final Conclusion: Impugned order dated 25.05.2023 set aside for breach of natural justice; matter remitted to respondents with directions to permit the petitioner to file a reply within 21 days and to afford sufficient opportunity, including personal hearing, before deciding the matter afresh.

Forfeiture of earnest-money deposit under Rule 9(5) of the SARFAESI Rules - Section 73 of the Indian Contract Act, 1872 - Section 74 of the Indian Contract Act, 1872 - overriding effect of the SARFAESI Act (Section 35) - application of other laws in addition (Section 37 of the SARFAESI Act) - doctrine of unjust enrichment - reading-down a statutory provision - concept of earnest-money and forfeiture

Forfeiture of earnest-money deposit under Rule 9(5) of the SARFAESI Rules - Section 73 of the Indian Contract Act, 1872 - Section 74 of the Indian Contract Act, 1872 - overriding effect of the SARFAESI Act (Section 35) - application of other laws in addition (Section 37 of the SARFAESI Act) - Whether the principles of Sections 73 and 74 of the Indian Contract Act, 1872 apply to forfeiture under Rule 9(5) of the SARFAESI Rules - HELD THAT: - The Court held that the SARFAESI Act and its Rules constitute a special enactment directed at speedy recovery of secured debts and that Rule 9(5) - a statutory provision for forfeiture of the 25% deposit on default by the successful auction purchaser - is part of that special scheme. Rules validly framed under the Act become part of the statute and, given Sections 35 and 37 read harmoniously, only laws that occupy the same field as the SARFAESI Act apply in addition. The legislature consciously provided statutory forfeiture in Rule 9(5) rather than leaving consequences to the general law of contract; therefore Sections 73 and 74 of the Contract Act (general law on compensation and liquidated damages) do not govern forfeiture under Rule 9(5). The Court emphasised the practical rationale that, at the time of a forfeiture decision, the secured creditor cannot reliably compute future loss and that applying the Contract Act's damages regime would frustrate the auction mechanism and permit gaming by collusive bidders. The Court also noted prior precedents of this Court holding that Rule 9(5) is a legislative measure integral to the SARFAESI regime and that challenges to forfeiture lie to the appropriate tribunals under the Act.

Sections 73 and 74 of the Indian Contract Act do not apply to forfeiture under Rule 9(5) of the SARFAESI Rules; Rule 9(5) is a statutory consequence within the special SARFAESI scheme and governs forfeiture.

Forfeiture of earnest-money deposit under Rule 9(5) of the SARFAESI Rules - concept of earnest-money and forfeiture - doctrine of unjust enrichment - Whether forfeiture of the entire earnest-money deposit under Rule 9(5) amounts to unjust enrichment of the secured creditor - HELD THAT: - The Court held that forfeiture of the 25% deposit under Rule 9(5) is a statutory consequence of the auction process and, when imposed in terms of the Rules, does not constitute unjust enrichment. The deposit is paid pursuant to a public auction process under a statute, not by private bargain, and the secured creditor's retention pursuant to the statutory provision cannot be characterised as inequitable in the sense required to invoke the doctrine of unjust enrichment. The Court reiterated that equity cannot supplant a clear statutory provision: when the law prescribes forfeiture as the consequence of default in the auction-sale regime, supervening events (such as a later sale at a higher price) do not automatically render the statutory forfeiture an unjust enrichment requiring restitution.

Forfeiture under Rule 9(5) does not, as such, amount to unjust enrichment and retention of the deposited amount pursuant to the statutory forfeiture is not impermissible on that ground.

Forfeiture of earnest-money deposit under Rule 9(5) of the SARFAESI Rules - reading-down a statutory provision - exceptional circumstances and judicial interference - Whether the rule should be read down or the forfeiture set aside on the facts of this case as an exceptional circumstance warranting interference - HELD THAT: - The Court rejected the High Court's invocation of 'reading down' to import Section 73's principle into Rule 9(5). Reading down is a tool to preserve constitutionality or make a provision workable when otherwise invalid or unconstitutional; it is not available simply because a provision has harsh consequences. Rule 9(5)'s plain statutory consequences are deliberate to preserve the auction mechanism and prevent gaming. The Court further held that judicial interference with forfeiture orders should be rare and limited to very exceptional circumstances (for example, the COVID-19 pandemic example in Alisha Khan). On the facts, the respondent's reasons for non-payment (demonetisation, delay in obtaining documents, requests for extensions) did not amount to such exceptional circumstances: the bank had granted a 90 day extension, documents were provided, and the auction terms clearly warned of forfeiture. Consequently, the High Court erred in setting aside the enhanced forfeiture and in reading down Rule 9(5).

No reading down of Rule 9(5) was warranted and no exceptional circumstances existed on the facts to set aside the forfeiture; interference was not justified.

Final Conclusion: The High Court's judgment setting aside the appellate tribunal's enhancement of forfeiture and reading down Rule 9(5) was set aside. The appeals by the Bank are allowed, the High Court order dated 27.10.2021 is quashed, and the DRT proceeding is dismissed; parties to bear their own costs.