TaxTMI Updates e-Newsletter
Feb 10,2024

Levy of Goods and Services Tax on royalty/seigniorage - taxable event of 'supply' under GST - nature of royalty (tax or not) - adjudication and interim suspension pending higher constitutional determination

Nature of royalty (tax or not) - levy of Goods and Services Tax on royalty/seigniorage - Whether recovery of GST on royalty/seigniorage should be permitted to proceed pending the decision of the Nine Judge Constitution Bench on the nature of royalty. - HELD THAT: - The writ petitions challenge imposition of GST on royalty/seigniorage, raising the foundational question whether royalty constitutes a 'service' (taxable 'supply') or is a tax. The court recorded that divergent views exist in Supreme Court precedent and that the matter is pending before a Nine Judge Constitution Bench which has framed questions on the true nature of royalty. In view of the substantial and dispositive character of that reference and the interim protection granted by the Supreme Court in related proceedings, the High Court directed that there shall be no recovery of GST on royalty until the Constitution Bench decides the issue. This preserves the parties' positions without adjudicating the substantive question on merits, which is left for the higher forum to resolve. [Paras 8, 9]

No recovery of GST on royalty/seigniorage shall be made until the Nine Judge Constitution Bench decides the nature of royalty.

Adjudication and interim suspension pending higher constitutional determination - procedure for objections to show cause notices - How authorities should proceed with pending show cause notices and adjudication in cases where petitioners challenge levy of GST on royalty. - HELD THAT: - For petitions challenging show cause notices the court directed petitioners to file objections/representations within four weeks of receipt of the order. Upon receipt, the authorities are to proceed with adjudication on merits, after affording a reasonable opportunity of hearing. However, any orders of adjudication are to be kept in abeyance until the Nine Judge Constitution Bench decides the issue on the nature of royalty. Thus adjudicatory proceedings are to be conducted but execution/recovery is stayed pending the higher court's decision. [Paras 9]

Petitioners to submit objections; authorities to adjudicate on merits but keep adjudication orders in abeyance until the Constitution Bench decides the nature of royalty.

Challenge to classification notifications and administrative circulars - preservation of contentions for later proceedings - Whether challenges to the impugned notification and CBIC circular are to be finally decided in these petitions. - HELD THAT: - The court declined to decide the validity of the notification and the CBIC circular at this stage, observing that their fate is materially linked to the outcome of the Nine Judge Constitution Bench reference. Petitioners are permitted to act upon the notification and circular after the Constitution Bench delivers its decision, and all contentions are left open to be raised in appropriate proceedings thereafter. No adjudication on the merits of those instruments was undertaken by the High Court. [Paras 5, 9]

Challenges to the notification and circular are left open; petitioners may proceed after the Constitution Bench decision and may raise all contentions in appropriate proceedings.

Final Conclusion: Writ petitions disposed by interim directions: petitioners to file objections to show cause notices; authorities to adjudicate on merits but keep orders and any recovery of GST on royalty/seigniorage in abeyance until the Nine Judge Constitution Bench determines the nature of royalty; challenges to the notification and circular left open for decision after the Constitution Bench's judgment.

Rules of natural justice - service by electronic mode - cancellation of registration - obligation to check statutory portal - opportunity of personal hearing - revival of registration

Cancellation of registration - obligation to check statutory portal - service by electronic mode - Whether the petitioner, whose GST registration was cancelled w.e.f. 28.2.2022, was obliged to monitor the GST portal and is deemed to have received e-mode show cause notices issued thereafter - HELD THAT: - The Court found it undisputed that the petitioner's registration under the UPGST Act, 2017 was cancelled on 13.4.2022 with effect from 28.2.2022 and that there was no contention by the revenue that the registration was ever revived or that the petitioner sought revival. In that factual matrix the Court held that the petitioner was not under an obligation to visit the GST portal to receive show cause notices issued by e-mode in September 2022, June 2023 and October 2023. The court treated the lack of revival as determinative of the obligation to monitor the online portal and rejected any implied duty to check e-communications after cancellation. [Paras 1, 2]

Petitioner was not obligated to check the GST portal and cannot be deemed to have received e-mode notices after cancellation of registration.

Rules of natural justice - opportunity of personal hearing - Whether the adjudication order dated 17.10.2023 must be set aside for failure to comply with the rules of natural justice and what remedial direction should follow - HELD THAT: - The Court recorded that no physical or offline notice was served on the petitioner before the impugned order was passed. Given that essential requirements of the rules of natural justice had not been fulfilled, the Court set aside the adjudication order dated 17.10.2023. Procedurally, the Court directed that the impugned order itself be treated as notice; the petitioner was granted four weeks to submit a final reply and, subject to such compliance, the authority was directed to pass a fresh order after affording an opportunity of personal hearing, preferably within three months. The Court also declined to keep the petition pending or to call for counter-affidavit or to relegate the petitioner to alternative remedies in view of the peculiar facts. [Paras 3, 4, 5]

Impugned order dated 17.10.2023 set aside for breach of natural justice; order to be treated as notice, petitioner to file final reply within four weeks, and fresh order to be passed after personal hearing.

Final Conclusion: Writ petition disposed of by setting aside the adjudication order for non-compliance with natural justice; petitioner granted four weeks to file final reply and the authority directed to afford personal hearing and pass a fresh order expeditiously.

Transition of tax deducted at source credit into Input Tax Credit - refund of tax paid under protest - scope of refund under Section 54 of the CGST Act - rejection of refund claim for being filed under wrong category - remand for fresh consideration of refund claim - claim for refund of amounts allegedly paid erroneously

Rejection of refund claim for being filed under wrong category - scope of refund under Section 54 of the CGST Act - Impugned order rejecting the petitioner's refund claim solely because the application was filed under the category 'Any Others' was unsustainable and required interference. - HELD THAT: - The Court found that the impugned order dismissed the refund claim on the limited ground that the application was filed under the category 'Any Others' and that such rejection was unreasoned. The Court observed that sub section (1) of Section 54 of the CGST Act is broad enough to embrace claims for refund of tax or interest if filed within the statutory period, and that a refund claim cannot be rejected merely because it does not fall within categories set out in Circular No.125/44/2019 GST. For these reasons the order lacked adequate reasons and could not stand; the Court therefore quashed the order and directed reconsideration in accordance with law, including taking into account the Court's own decision in DMR Constructions and other precedents, after affording the petitioner a reasonable opportunity. [Paras 6, 7]

Impugned order quashed; refund application to be reconsidered in accordance with law after affording opportunity to the petitioner and a fresh order to be passed within two months.

Transition of tax deducted at source credit into Input Tax Credit - refund of tax paid under protest - remand for fresh consideration of refund claim - Entitlement of the petitioner to refund on merits in respect of amounts paid under protest (including whether transitioned TDS credit could be set off as ITC) was not finally adjudicated and was remanded for fresh consideration. - HELD THAT: - Although the petitioner contended that it was entitled to transition credit accumulated under the TNVAT Act and thereby claim refund of amounts paid under protest, the Court did not decide the substantive merit of that contention. Having identified deficiencies in the impugned order, the Court remanded the matter for fresh consideration so that the respondent may examine the claim on merits, having regard to this Court's judgment in DMR Constructions and other relevant precedents, and after giving the petitioner a reasonable opportunity to be heard. [Paras 7]

Issue remanded for fresh consideration and decision in accordance with law within two months after giving the petitioner an opportunity.

Final Conclusion: The order rejecting the refund claim for being filed under the wrong category is quashed; the refund application is remitted to the respondent for reconsideration in accordance with law (including the Court's decision in DMR Constructions and other precedents) after affording the petitioner an opportunity, and a fresh order is to be passed within two months.

Mens rea for evasion of tax - penalty under Section 129(3) of the Uttar Pradesh Goods and Service Tax Act, 2017 - non-filling of Part B of the E-Way Bill as a technical defect - effect of IGST paid at import on levy under the Act - return of security deposited upon quashing of detention/penalty orders

Penalty under Section 129(3) of the Uttar Pradesh Goods and Service Tax Act, 2017 - non-filling of Part B of the E-Way Bill as a technical defect - mens rea for evasion of tax - Whether the penalty imposed under Section 129(3) was sustainable where Part B of the E-Way Bill was not filled at the time of interception but was completed immediately thereafter and there was no mens rea to evade tax. - HELD THAT: - The Court found that the omission to fill Part B of the E-Way Bill constituted only a technical defect which was rectified by the petitioner immediately after interception. In the factual matrix before the Court there was no element of mens rea to evade tax. The learned counsel relied upon earlier decisions of this Court in M/s Hindustan Herbal Cosmetics v. State of U.P. and Others and M/s Falguni Steels v. State of U.P. and Others , which the Court treated as establishing that mens rea to evade tax is a necessary ingredient for imposition of penalty in such circumstances. Applying that principle to the present facts, the Court concluded that the penal order could not be sustained where the non-compliance was technical and remediable and there was no intention to evade tax.

Penalty under Section 129(3) quashed as unsustainable in absence of mens rea where Part B omission was technical and was rectified.

Effect of IGST paid at import on levy under the Act - Whether any further tax was leviable under the Uttar Pradesh GST Act in respect of goods on which IGST had been paid at the time of import. - HELD THAT: - The Court observed that IGST at the rate applicable had already been discharged to the customs authorities when the goods were imported from China. On that basis, the Court held that no further tax was leviable under the State Act in respect of the same goods. This factual conclusion was treated as determinative of the substantive tax liability, reinforcing the absence of any tax-evasion motive in the case.

No further levy under the Act where IGST had already been paid at import; therefore no tax evasion found.

Return of security deposited upon quashing of detention/penalty orders - Appropriate consequential relief upon quashing the impugned detention and penalty orders. - HELD THAT: - Having quashed the orders of detention and penalty dated October 25, 2018 and the appellate order dated January 27, 2020, the Court directed consequential relief. The Court ordered that the security furnished by the petitioner be returned within four weeks from the date of the order, thereby restoring the petitioner to the position prior to the impugned orders.

Impugned orders quashed; security to be returned within four weeks.

Final Conclusion: The writ petition is allowed; the detention/penalty order dated October 25, 2018 and the appellate order dated January 27, 2020 are quashed and set aside, and the security deposited by the petitioner shall be returned within four weeks.

Validity of e-way bill where Part B was initially unfilled but subsequently updated - detention and penalty under Section 129 of the Act - presumption of tax evasion based on circumstantial fact - mens rea to evade tax - obligation on authorities to consider explanation before imposing penalty

Validity of e-way bill where Part B was initially unfilled but subsequently updated - detention and penalty under Section 129 of the Act - mens rea to evade tax - Whether detention of goods and levy of penalty under Section 129 could be sustained where Part B of the e-way bill was not filled at interception but was updated thereafter and there was no material showing intention to evade tax - HELD THAT: - The Court found that, although Part B of the e-way bills was not filled at the moment of interception, the petitioner had generated the invoices and subsequently updated Part B on the same day and produced the updated documents to the authority. There was no discrepancy between the invoice and the goods - description, quantity and value matched - and no other material was placed on record indicating an intention to evade tax. The authorities relied solely on the short distance between the origin and destination (about 75 kilometres) to infer potential multiple trips and tax evasion. The Court held that such a presumption based purely on distance, absent any independent evidence indicating mens rea, amounts to surmise and conjecture and is legally impermissible. Imposition of detention and penalty under Section 129 must be founded on materials indicating an intention to evade tax; mere non filling of Part B, cured by subsequent update and coupled with matching invoice and goods, does not justify the penalty or detention. The authority is under an obligation to consider the explanation and available documentary evidence before confirming demand and penalty. [Paras 5, 6, 7, 8]

Detention order and penalty imposed under Section 129 quashed and set aside for lack of material showing intention to evade tax; authorities erred in relying solely on distance to draw a presumption of evasion.

Obligation on authorities to consider explanation before imposing penalty - presumption of tax evasion based on circumstantial fact - Whether the appellate authority was justified in dismissing the statutory appeal without accepting the petitioner's explanation and documentary compliance - HELD THAT: - The Court observed that the appellate authority rejected the petitioner's explanation and confirmed the demand only on the factual aspect that Part B was not filled at interception and on the speculative inference drawn from the short distance. The appellate authority failed to consider that the defect was remedied before the detention order and that the accompanying invoice matched the goods. The Court reiterated that orders under Section 129 should follow some investigation or material indicating intention to evade tax; absent such material, appellate confirmation of detention and penalty is unsustainable. [Paras 6, 7, 8]

Impugned appellate order confirming detention and penalty set aside for failure to consider the petitioner's explanation and for resting the finding on conjecture.

Final Conclusion: Writ petition allowed; order levying penalty and appellate order dated 18.5.2019 quashed and set aside. Consequential reliefs to follow and security directed to be returned to the petitioner within four weeks.

Interim stay on final adjudication - extension of time for issuance of show cause notice under State GST law - requirement of GST Council approval for notifications affecting State levy - connection and consolidation of writ petitions for common adjudication - procedural directions for filing of affidavits

Interim stay on final adjudication - preclusion of passing final order without leave of court - Interim protection restraining respondents from passing any final order in proceedings pursuant to the impugned notice. - HELD THAT: - Having regard to the interim order granted in the lead matter and the pendency of connected proceedings, the Court allowed continuation of procedural steps in the departmental proceedings but expressly prohibited the respondents from passing any final order pursuant to the impugned notice dated 5.1.2024 except with leave of the Court. This preserves the parties' rights pending consideration of connected substantive challenges in the lead petition while allowing factually necessary steps to continue short of final adjudication. [Paras 8]

Proceedings in pursuance of the impugned notice may continue, but no final order shall be passed except with leave of the Court.

Connection and consolidation of writ petitions for common adjudication - procedural directions for filing of affidavits - Petitions were directed to be connected with the lead writ and timetable fixed for filing of counter and rejoinder affidavits. - HELD THAT: - The Court ordered that the present petition be connected with Writ Tax No.1256 of 2023 for joint consideration. All respondents were granted six weeks to file counter affidavits and the petitioner two weeks thereafter to file rejoinder affidavits. The matter is to be listed after compliance with this timetable, enabling consolidated adjudication of the common questions raised in the connected matters. [Paras 5, 6, 7]

Petition connected with lead matter; respondents to file counter affidavits in six weeks and petitioner to file rejoinder in two weeks; matter to be listed thereafter.

Extension of time for issuance of show cause notice under State GST law - requirement of GST Council approval for notifications affecting State levy - Challenges to the validity of the impugned notifications and the contention that the show cause notice is time barred were not finally adjudicated in this order but placed for consideration in the lead petition. - HELD THAT: - The petition raises substantive questions concerning the validity of Notification No.09/2023 (31.3.2023), the subsequent notifications impugned, the alleged lack of parallel State notification under the UP GST Act, and the contention that the issuance of a show cause notice was time barred due to impermissible extensions. The Court refrained from deciding these merits in the present order and referred the controversy for determination in the lead writ, noting that those questions require consideration in the connected proceedings. [Paras 2, 3, 4]

Substantive challenges to the notifications and the time bar plea are to be considered in the lead petition; no final adjudication on these merits in the present order.

Final Conclusion: The petition was connected with the lead writ for consolidated adjudication; respondents were given time to file their affidavits and the petitioner to file rejoinder; departmental proceedings may continue but no final order shall be passed without leave of the Court; substantive questions on validity of the notifications and time bar are reserved for consideration in the lead matter.

Invalid show cause notice for lack of particulars - absence of identification of issuing officer - right to opportunity of hearing before retrospective cancellation - retrospective cancellation of GST registration requires objective satisfaction - prospect of fresh proceedings consistent with statutory requirements

Invalid show cause notice for lack of particulars - absence of identification of issuing officer - Show Cause Notices and impugned order were invalid for not specifying particulars of alleged invoices/credits and for failing to identify the issuing officer, depriving the petitioner of effective notice. - HELD THAT: - The Show Cause Notice merely recited a standard template allegation that invoices or bills were issued without supply and that there was wrongful availment/utilization of input tax credit or refund, but did not identify any specific invoice, transactions, or quantify the alleged wrongful availment. The notices also required personal attendance before the 'undersigned' without naming or designating the officer issuing the notice. For the petitioner this resulted in lack of clarity whether the allegation was issuance of invoices without supply or wrongful availment of input tax credit, and deprived the petitioner of a proper opportunity to meet specific charges. For these reasons the notices and the consequential cancellation order are bereft of required particulars and identification and are not sustainable. [Paras 3, 4, 5, 9, 10]

Show Cause Notices and the impugned cancellation order are invalid and unsustainable for want of particulars and identification of the issuing officer, and for denying effective notice.

Retrospective cancellation of GST registration requires objective satisfaction - right to opportunity of hearing before retrospective cancellation - Cancellation of GST registration with retrospective effect cannot be mechanically applied and requires objective satisfaction and consideration of consequences; retrospective cancellation without material or notice is unsustainable. - HELD THAT: - While the statute permits cancellation from a retrospective date if the proper officer deems it fit, such satisfaction must be based on objective criteria and not applied mechanically. Mere non-filing of returns for some period does not justify retrospective cancellation covering periods when the taxpayer was compliant. The consequences of retrospective cancellation, including denial of input tax credit to recipients, are relevant considerations that the proper officer must contemplate. Here there was no material on record justifying retrospective effect, nor was the petitioner put on notice that retrospective cancellation was contemplated, denying an opportunity to contest that specific consequence. [Paras 6, 7, 8, 9]

Retrospective cancellation requires objective satisfaction and prior notice; cancellation in this case with retrospective effect is unsustainable in absence of such material and notice.

Prospect of fresh proceedings consistent with statutory requirements - Impugned Show Cause Notices and cancellation order are set aside, but respondents are permitted to proceed afresh in accordance with law, including issuing a proper show cause notice, providing opportunity of hearing, and pursuing recovery if warranted. - HELD THAT: - Given the defects in the notices and the order, the court set aside both the Show Cause Notices and the cancellation order. The respondents are not precluded from taking further action; they may re-initiate proceedings, including cancellation with retrospective effect, provided any such action is preceded by a proper Show Cause Notice disclosing particulars, identification of the issuing officer, opportunity for hearing, and is supported by objective material. Respondents also remain entitled to pursue recovery of any tax, penalty or interest in accordance with law. [Paras 11, 12, 13, 14]

Set aside; respondents may take fresh action in accordance with law after issuing proper notice and granting opportunity of hearing, and may pursue recovery where lawfully due.

Final Conclusion: The Show Cause Notices and the cancellation order are set aside as unsustainable for want of particulars, officer identification and notice of retrospective cancellation; liberty granted to respondents to re-open proceedings in accordance with law, including issuance of proper Show Cause Notice, opportunity of hearing and recovery steps as permissible.

Cancellation of GST registration with retrospective effect - objective satisfaction required for retrospective cancellation under Section 29(2) - opportunity to be heard on retrospective cancellation - consequences of retrospective cancellation on recipients' input tax credit - obligation to file returns and disclose stock after cessation or death of proprietor

Cancellation of GST registration with retrospective effect - objective satisfaction required for retrospective cancellation under Section 29(2) - consequences of retrospective cancellation on recipients' input tax credit - Whether cancellation of the firm's GST registration with retrospective effect to 01.07.2017 was justified. - HELD THAT: - The Court held that cancellation of registration with retrospective effect cannot be mechanically imposed; the proper officer must have an objective basis for deeming retrospective cancellation fit under the statutory power. Mere non filing of returns for a period does not warrant cancelling registration retrospectively to cover periods when returns were filed and compliance existed. The Court observed that retrospective cancellation has broader consequences, including denial of input tax credit to the firm's customers, and the proper officer is required to take such consequences into account before ordering retrospective cancellation. In the present case there was no material on record to show non compliance by the deceased proprietor during the earlier period, and hence retrospective cancellation to 01.07.2017 was not warranted. [Paras 6, 7, 8]

Retrospective cancellation to 01.07.2017 was unjustified and set aside.

Opportunity to be heard on retrospective cancellation - Whether the show cause notice gave the noticee an opportunity to object to retrospective cancellation. - HELD THAT: - The Court found that the show cause notice did not inform the noticee that retrospective cancellation was contemplated, thereby denying the noticee an opportunity to object to that particular relief. Absence of notice on the specific consequence of retrospective cancellation vitiated the exercise insofar as it affected past periods. [Paras 9]

Lack of notice regarding retrospective cancellation rendered that aspect of the proceeding unsustainable.

Obligation to file returns and disclose stock after cessation or death of proprietor - Treatment of registration and compliance obligations following the proprietor's death. - HELD THAT: - Given that the legal heir does not intend to continue the business, the Court modified the impugned order to treat the registration as cancelled prospectively with effect from the date of death of the proprietor, and directed the legal heir to furnish requisite returns for transactions and disclose details of stock remaining at the time of death. The Court left open the respondents' statutory remedies for recovery of any tax, interest or penalty in accordance with law. [Paras 5, 10, 11]

Registration treated as cancelled with effect from 13.04.2021; legal heir directed to file outstanding returns and disclose stock; respondents may pursue recovery in law.

Final Conclusion: The petition succeeds to the extent that retrospective cancellation with effect from 01.07.2017 is set aside; registration is to be treated as cancelled from 13.04.2021 (date of proprietor's death), the legal heir must file requisite returns and disclose stock, and respondents remain free to recover any tax, interest or penalty in accordance with law.

Pre-deposit requirement for filing appeal - formality of prescribed form versus alternative payment mode - condonation of delay - remand for consideration on facts - opportunity of hearing

Pre-deposit requirement for filing appeal - formality of prescribed form versus alternative payment mode - condonation of delay - opportunity of hearing - Validity of rejection of appeals solely on the ground that the prescribed pre-deposit Form APL-01 was not used and whether the delay condoning petitions and factual explanation for payment through Form GST DRC-03 required fresh consideration - HELD THAT: - The petitioners intended to prefer statutory appeals but, alleging a technical glitch in the official web-portal, made the prescribed 10% pre-deposit through Form GST DRC-03 which was accepted by the portal, instead of using Form APL-01. The impugned orders rejected the appeals primarily on the ground that the pre-deposit was made in the wrong format, without recording consideration of the delay condoning petitions filed by the petitioners. Whether the payment route adopted was compelled by a technical glitch and whether the filing delay is explicable are questions of fact and surrounding circumstances. Those factual aspects and the delay condoning applications fall to be considered by the competent appellate authority in the first instance after affording an opportunity of hearing. Consequently, the High Court found that the matter required fresh consideration by the respondent No. 2 and that the rejection on the narrow ground of formality, without addressing the condonation pleas and factual explanation, could not stand. [Paras 5, 6]

Impugned rejection orders set aside; matters remanded to respondent No. 2 to consider the delay condoning petitions and the factual justification for payment through Form GST DRC-03, after hearing the petitioners, and to pass appropriate orders expeditiously.

Remand for consideration on facts - opportunity of hearing - Interim administrative direction in light of attachment of bank accounts and urgency pleaded by petitioners - HELD THAT: - The petitioners stated that following rejection of their appeals, bank accounts were attached for enforcement of assessment orders and pressed urgency. The Court directed the petitioners to appear before respondent No. 2 on the specified date so that respondent No. 2 would take up the matters on that day, thereby facilitating early consideration of the remanded matters. The direction is procedural, aimed at prompt disposal by the authority to which the matters were remanded. [Paras 7]

Petitioners to appear before respondent No. 2 on 08.02.2024 and respondent No. 2 to take up the matters on that day for expeditious consideration.

Final Conclusion: The High Court set aside the impugned rejection orders and remanded the matters to respondent No. 2 for fresh consideration of the delay condoning petitions and the factual circumstances surrounding the pre-deposit made through Form GST DRC-03, directing that the petitioners be heard and that the authority decide the matters expeditiously; petitioners were directed to appear before respondent No. 2 on 08.02.2024.

Principles of natural justice: notice with reasons and opportunity of hearing - Requirement of speaking orders and disclosure of evidence relied upon before cancellation of registration - Quashing and remand to Assessing Officer at show-cause notice stage - Suspension of registration pending disposal of show-cause notice - Inability of revenue to exercise suo moto revisional power where appeal has been dismissed

Principles of natural justice: notice with reasons and opportunity of hearing - Requirement of speaking orders and disclosure of evidence relied upon before cancellation of registration - Impugned orders cancelling GST registration and appellate orders were quashed for failure to furnish reasons and for denial of opportunity of hearing, in violation of principles of natural justice. - HELD THAT: - The Court found that cancellation orders were passed without assigning reasons and that petitioners were not given an opportunity to be heard; this contravened the directions earlier issued in M/s. Aggrawal Dyeing & Printing (supra) which require detailed show cause notices, disclosure of material relied upon and speaking orders after hearing. Because procedural fairness was not observed, the Court did not adjudicate merits but held that the impugned cancellation orders and the appellate orders upholding them cannot stand and must be set aside so that the authorities may issue proper show cause notices and decide the matter after providing opportunity to the petitioners to reply and be heard. [Paras 4, 5, 6, 9, 12]

Impugned cancellation orders and the appellate orders were quashed and set aside for breach of natural justice and for failing to disclose reasons and material; the Court declined to go into merits.

Quashing and remand to Assessing Officer at show-cause notice stage - Suspension of registration pending disposal of show-cause notice - Inability of revenue to exercise suo moto revisional power where appeal has been dismissed - Matters remanded to the Assessing Officer at the show cause notice stage with specified timelines; registration to remain suspended until disposal; revisional power under the Act could not be exercised after dismissal of appeal. - HELD THAT: - The Court directed that, since the Appellate Authority had dismissed the appeals, the revenue could not proceed by exercising suo moto revisional power and therefore the proper course was to remand the matters to the Assessing Officer at the show cause notice stage. The Court prescribed procedural timelines: provision of detailed reasons within two weeks, two weeks for the petitioners to file written replies, a personal hearing and passage of a reasoned order within four weeks of the hearing. Meanwhile the registration of the petitioners shall remain suspended until the show cause notices are decided. The Court emphasised adherence to the timeline by both sides and left merits to be decided by the authorities in accordance with law. [Paras 10, 11]

Cases remanded to the Assessing Officer at show cause stage with timelines for reasons, reply, hearing and decision; registrations to remain suspended pending disposal; revisional power could not be invoked in the circumstances.

Final Conclusion: Writ petitions were partly allowed: impugned cancellation orders and appellate orders were quashed for breach of natural justice and remitted to the Assessing Officer at show cause notice stage with directions to furnish reasons, afford opportunity of hearing and pass speaking orders within prescribed timelines; registration(s) to remain suspended until disposal; Court did not decide merits.

Principles of natural justice - cancellation of GST registration - show cause notice containing reasons - speaking order - opportunity of hearing - suo-motu revision under Section 108

Principles of natural justice - show cause notice containing reasons - speaking order - cancellation of GST registration - Cryptic or one line show cause notices and cancellation orders that do not disclose reasons are procedurally impermissible and offend the principles of natural justice. - HELD THAT: - Relying upon the earlier decision in M/s. Aggrawal Dyeing & Printing (summarised in the judgment), the Court held that authorities must provide all material particulars and reasons in the show cause notice and in the final order so that the dealer can effectively respond. The Court recorded that despite the earlier directive, respondent authorities continued to issue cryptic notices and non speaking orders; such practice requires correction because reliance on evidence or reports not previously communicated to the dealer would take the dealer by surprise and breach the duty to afford a fair opportunity of hearing. The Court therefore sustained the petitioners' challenge to cancellation orders insofar as they contain no reasons, without entering into the merits of the underlying cancellations. [Paras 2, 3, 4]

The impugned practice of issuing cancellation orders without reasons is unacceptable; petitioners' challenge on grounds of violation of natural justice is upheld and such orders cannot stand without being regularised in accordance with the Court's directions.

Suo-motu revision under Section 108 - opportunity of hearing - show cause notice containing reasons - Respondent authorities are directed to initiate suo motu revision under Section 108 of the GST Act in respect of cancellation orders lacking reasons, and to follow a specified timetable for notice, reply and reconsideration. - HELD THAT: - The Court recorded the respondents' undertaking and directed exercise of revisionary power under Section 108 to revisit impugned cancellation orders that do not contain reasons. The authorities were ordered to issue notices initiating revision on or before 15.02.2024, such notices to include reasons for initiating revision and, where applicable, the reasons for cancellation if not previously supplied. Petitioners were directed to file detailed replies within two weeks of receipt of the revision notice. After hearing and considering the replies, the authorities shall pass appropriate speaking orders in accordance with law within four weeks from the date of hearing. The Court disposed the petitions without adjudicating merits, granting liberty to revive if the schedule is not adhered to. [Paras 9, 10, 12, 13, 14]

Authorities shall issue revision notices and provide an opportunity to reply and be heard, and thereafter pass reasoned speaking orders within the stipulated timelines; petitions disposed without entering into merits subject to revival in case of non compliance.

Final Conclusion: Writ petitions disposed without adjudication on merits; courts directed respondent authorities to comply with the Agrawal Dyeing & Printing guidelines by issuing reasoned show cause notices and speaking orders, to initiate suo motu revision under Section 108 for the impugned cancellations, and to adhere to the prescribed timelines for notice, reply and final order, with liberty to revive in case of non compliance.

Breach of principles of natural justice - opportunity of hearing before passing confiscation order - confiscation and penalty proceedings under Section 130 of the Gujarat Goods and Services Tax Act, 2017 - detention of goods and conveyance under Section 129(6) of the GST Act - remand for fresh hearing and verification - release of goods and conveyance on appropriate conditions

Breach of principles of natural justice - confiscation and penalty proceedings under Section 130 of the Gujarat Goods and Services Tax Act, 2017 - remand for fresh hearing and verification - release of goods and conveyance on appropriate conditions - Validity of the order dated 11th December 2023 (Form GST MOV-11) for confiscation of goods and conveyance in light of the absence of opportunity of hearing to the petitioner. - HELD THAT: - The Court found that the impugned confiscation order was passed without providing the petitioner an opportunity of hearing, thereby resulting in a breach of the principles of natural justice. In consequence, the Court did not decide the merits of the confiscation or the factual contentions raised by the parties. Instead, the Court quashed and set aside the order dated 11th December 2023 and remanded the matter to the respondent authority to grant a fresh opportunity of hearing in accordance with law. The petitioner is permitted to raise all contentions earlier advanced before the authority and may apply for release of the goods and conveyance subject to such conditions as the authority may impose in accordance with law. The authority is required to complete the exercise within four weeks from receipt of the order. The Court expressly refrained from expressing any view on the substantive correctness of the confiscation, tax, fine or penalty, leaving those issues open for adjudication by the authority on remand. [Paras 8, 9, 10]

Impugned order dated 11th December 2023 (Form GST MOV-11) quashed and set aside for breach of natural justice; matter remanded for fresh hearing and appropriate decision, with liberty to the petitioner to raise all contentions and apply for release of goods and conveyance under such conditions as may be lawfully imposed.

Final Conclusion: The petition is disposed of by quashing the Form GST MOV-11 order dated 11th December 2023 for want of opportunity of hearing and remanding the matter to the respondent authority to grant a fresh hearing and decide afresh within four weeks; merits are left open.

Right to inspection/disclosure of documents - show cause notice - opportunity of hearing - request for production of documents - adjudication after furnishing documents - right to file meaningful reply

Show cause notice - right to inspection/disclosure of documents - request for production of documents - right to file meaningful reply - opportunity of hearing - adjudication after furnishing documents - Entitlement of the petitioner to the materials on which the show cause notices (Exts. P3 and P4) are based and the procedure to be followed before adjudication. - HELD THAT: - The court accepted that Exts. P3 and P4 are show cause notices and that the petitioner must, at the first instance, appear before the issuing officer and show cause against the proposals. The court further held that the petitioner is entitled to the materials on the basis of which the notices were issued because without those materials a proper reply cannot be filed. The petitioner may, on the appointed date, submit a request specifying the documents required; the officer is directed to consider that request and to supply the requested documents within a reasonable time. After service of the requested documents on the petitioner, the petitioner shall be granted a further period of two weeks to file a reply to the show cause notices. Thereafter the competent officer shall adjudicate the matter in accordance with law after affording an opportunity of hearing to the petitioner. [Paras 4, 5]

Petitioner to appear on the designated date, request specified documents; officer to supply documents within reasonable time; petitioner to have two weeks thereafter to reply; adjudication to follow with opportunity of hearing.

Final Conclusion: Writ petition disposed directing appearance on the fixed date, provision of requested documents by the officer within a reasonable time, grant of two weeks to file reply after receipt of documents, and adjudication thereafter in accordance with law with opportunity of hearing.

Detention and seizure of goods - release of seized goods on payment of fine under Section 67(6) of the Central Goods and Services Tax Act, 2017 - adjudication under Section 130 of the Central Goods and Services Tax Act, 2017

Detention and seizure of goods - release of seized goods on payment of fine under Section 67(6) of the Central Goods and Services Tax Act, 2017 - adjudication under Section 130 of the Central Goods and Services Tax Act, 2017 - Consideration of the petitioners' representation dated 15 December 2023 for release of the seized goods on payment of fine/penalty during pendency of adjudication proceedings. - HELD THAT: - The petition sought quashing of the detention order dated 11 December 2023 and release of the vehicle and goods. The Court did not adjudicate the merits of the detention or quash the detention order. Instead, the Court directed the respondent authorities to consider the representation dated 15 December 2023 - which requests release of the goods on payment of fine and penalty as may be permissible under Section 67(6) - while the adjudication under Section 130 proceeds, and to decide that representation within two weeks. No substantive determination was made on whether the detention was justified or on the merits of the petitioners' entitlement to release absent payment; the relief granted was a mandate to consider and decide the pending representation within a specified time. [Paras 3, 4, 5]

Respondent authorities directed to consider the representation dated 15 December 2023 and decide it within two weeks; petition disposed accordingly.

Final Conclusion: The petition seeking quashing of the detention and release of goods was disposed by directing the respondent authorities to consider and decide the petitioners' representation for release on payment of fine/penalty under Section 67(6) within two weeks, without adjudicating the merits of the detention.

Validity of notice under Section 153C of the Income tax Act - Requirement and provision of the satisfaction note before proceeding against an "other person" - Scope of writ jurisdiction at the notice stage - Objections and remedies to be pursued before the Assessing Officer during assessment proceedings

Validity of notice under Section 153C of the Income tax Act - Requirement and provision of the satisfaction note before proceeding against an "other person" - Scope of writ jurisdiction at the notice stage - Challenge to notice dated 09.06.2022 under Section 153C for A.Y.2014-15 and to notice dated 11.12.2023 under Section 142(1) on the ground that no satisfaction note was in existence or provided at the relevant time - HELD THAT: - The Court found that the petitioner could not establish that no satisfaction note had been recorded by the Assessing Officer prior to issuance of the Section 153C notice. Although the satisfaction note was not initially supplied with the 09.06.2022 notice, it was subsequently served on the petitioner (after which the petitioner received the Section 142(1) notice and filed a return). The petition was filed only after issuance of the Section 142(1) notice. In these circumstances the High Court declined to interfere at the notice stage and relied upon the principle that, ordinarily, writ jurisdiction should not be exercised to quash statutory notices where the aggrieved person can reply and seek remedy under the statutory scheme (as reflected in the Apex Court authority relied upon by the Revenue). The Court therefore held that absence of initial supply of the satisfaction note did not warrant interference in limine where a satisfaction note existed and the statutory forum and procedures remained available to the petitioner. [Paras 9, 10, 11, 12]

Writ petitions challenging the Section 153C notice dated 09.06.2022 and the Section 142(1) notice dated 11.12.2023 on the ground of non provision of the satisfaction note are not maintainable at this stage and are not interfered with.

Objections and remedies to be pursued before the Assessing Officer during assessment proceedings - Merits of satisfaction and linkage of seized material to the assessee - Whether the petitioner may raise substantive objections (including that no incriminating material was found and that the satisfaction note lacks material foundation) and whether the Assessing Officer should be influenced by the court's observations - HELD THAT: - The Court expressly left open all substantive objections for determination by the Assessing Officer during the course of assessment proceedings. The petitioner was permitted to raise contentions that no incriminating material linking him to the seized material was found during the search, and that any satisfaction recorded lacked prima facie material foundation. Simultaneously, the Court clarified that its observations in the order do not constitute any opinion on the correctness of the merits and that the Assessing Officer must frame the assessment without being influenced by the Court's remarks. [Paras 13, 14]

Petitioner is at liberty to raise all objections before the Assessing Officer; the Assessing Officer shall decide on the merits in the assessment proceedings and shall not be influenced by the Court's observations.

Final Conclusion: Writ petitions challenging the notices are dismissed without adjudicating the merits; the petitioner may raise all objections before the Assessing Officer during assessment proceedings, the Assessing Officer must decide the matters on merits unimpressed by the court's observations, and the request for a four week stay to approach the Apex Court is refused.

Deduction under section 80HHC - Adjusted book profits - Computation under section 115JA/115JB (MAT) - Remand for recomputation - Right to hearing on recomputation

Deduction under section 80HHC - Adjusted book profits - Computation under section 115JA/115JB (MAT) - Remand for recomputation - Additional grounds (Grounds 10-12) relating to computation and allowance of deduction under section 80HHC were remitted to the file of the Assessing Officer for fresh computation. - HELD THAT: - The Tribunal observed that the assessee sought admission of additional grounds contending that the deduction under section 80HHC should be computed by reference to adjusted book profits for the purpose of MAT (sections 115JA/115JB) and raised related contentions on carry forward loss/unabsorbed depreciation and consequential interest. Relying on the decision of the Supreme Court in CIT v. Bhari Information Technology Systems Pvt. Ltd. and the Special Bench decision in Dy. CIT v. Syncome Formulations (I) Ltd., the Tribunal accepted the legal proposition that where section 115JA/115JB applies the deduction under Chapter VI-A (including section 80HHC) is to be worked out on the basis of adjusted book profits. Applying those precedents, the Tribunal concluded that the additional grounds escaped earlier adjudication and directed that Grounds 10-12 be remitted to the Assessing Officer for computation of deduction under section 80HHC in accordance with the aforesaid authorities; the assessee is to be given a reasonable opportunity of hearing in the set-aside proceedings. [Paras 7]

Grounds 10-12 are remitted to the Assessing Officer for recomputation of deduction under section 80HHC on the basis of adjusted book profits for the purposes of sections 115JA/115JB, with an opportunity of hearing to the assessee.

Final Conclusion: The appeal is allowed for statistical purposes; Grounds 10-12 concerning the computation and allowance of deduction under section 80HHC are set aside and remitted to the Assessing Officer for fresh computation in accordance with the decisions of the Supreme Court and the Special Bench of the Tribunal, and the assessee shall be afforded a reasonable opportunity of hearing.

Revision under section 263 - erroneous and prejudicial to the interests of revenue - adequacy of inquiry by the Assessing Officer - comparison of cost of acquisition with sale consideration - treatment of foreign dividend under section 115BBD

Revision under section 263 - erroneous and prejudicial to the interests of revenue - adequacy of inquiry by the Assessing Officer - comparison of cost of acquisition with sale consideration - Whether the revisionary order under section 263 was justified on the ground that the assessment was erroneous and prejudicial to revenue for alleged anomaly in figures relating to sale of unlisted preference shares - HELD THAT: - The Tribunal found that the principal error relied upon by the ld.Pr.CIT was reached by improperly comparing the cost of acquisition of unlisted preference shares as shown in the audited balance sheet with the sale consideration reflected in the computation of income. The comparison between cost and sale consideration cannot, as such, establish any anomaly in the amounts of shares shown as sold. The assessee demonstrated from the computation of income that the cost of acquisition used for computing capital gains tallied with the figure taken from the balance sheet, and explained the difference between sale consideration and cost as arising from realized foreign exchange loss which was reflected in the profit & loss account and appropriately dealt with in the computation (added back where necessary). The ld.Pr.CIT's subsequent reliance on absence of documentary evidence regarding whether shares were sold to related parties or intimation to ROC was neither the anomaly pointed out in the show-cause nor shown to have any bearing on computation of income; the ld.Pr.CIT did not explain how non-production of such evidence would render the assessment erroneous and prejudicial to revenue. For these reasons the Tribunal held that there was no error in the assessment order on this issue and set aside the ld.Pr.CIT's revision on this ground. [Paras 10, 11, 12, 13]

Ld.Pr.CIT's order under section 263 setting aside the assessment on account of alleged anomaly in sale of preference shares is unsustainable and is set aside.

Revision under section 263 - erroneous and prejudicial to the interests of revenue - adequacy of inquiry by the Assessing Officer - treatment of foreign dividend under section 115BBD - Whether the revisionary order under section 263 was justified on the ground that dividend income from a foreign company was not returned to tax - HELD THAT: - The Tribunal observed that the assessee had, in fact, offered the foreign dividend to tax in the computation of income under section 115BBD and that this position was discernible from the computation itself which formed part of the assessment record. The ld.Pr.CIT's finding that the assessee failed to produce supportive evidence before him was answered by the fact that the computation clearly showed the dividend being excluded from business profits and thereafter returned to tax as foreign dividend. The ld.DR did not controvert these factual contentions. Consequently, there was no failure of inquiry by the AO that rendered the assessment erroneous and prejudicial to revenue on this issue. [Paras 14, 15]

Ld.Pr.CIT's revision under section 263 insofar as it alleges non-return of foreign dividend to tax is unsustainable.

Final Conclusion: The revisionary order passed by the ld.Pr.CIT under section 263 is set aside in respect of both the alleged anomaly in sale of unlisted preference shares and the alleged non return of foreign dividend; the assessee's appeal is allowed.

Change of charging provision from section 68 to section 69A amounts to enhancement requiring notice under section 251(1)(a) - appellate authority cannot introduce a new source of income in appeal - distinction between unexplained cash credit and unexplained money in aggregation provisions - concurrent jurisdiction of the first appellate authority is subject to the limitation that it cannot introduce new sources of income

Change of charging provision from section 68 to section 69A amounts to enhancement requiring notice under section 251(1)(a) - appellate authority cannot introduce a new source of income in appeal - distinction between unexplained cash credit and unexplained money in aggregation provisions - Whether the Commissioner (Appeals) was within his powers to confirm the addition by applying section 69A when the Assessing Officer had made the addition under section 68 without issuing enhancement notice under section 251(1)(a). - HELD THAT: - The Tribunal held that sections dealing with aggregation of income differ in language and legal effect; section 68 treats unexplained cash credit as chargeable to income while sections 69 to 69C deem unexplained money or investments to be the income for the year. The Assessing Officer had examined the matter and made the addition under section 68 after considering the assessee's explanation and evidence; the first appellate authority, however, substituted the charging provision and confirmed the addition under section 69A. By doing so the CIT(A) effectively introduced a different legal basis (a new source/characterisation) for taxing the amount without issuing a specific enhancement notice as contemplated by section 251(1)(a). The Tribunal agreed with the assessee that such change amounted to enhancement by introducing a new source of income which the appellate authority is not competent to do in view of binding precedents that confine the appellate authority's powers where a new source is introduced in appeal. Reliance on the broad co-terminus powers of the appellate authority was held misplaced since those powers do not extend to introducing a new source of income in the appeal; the AO had already examined and decided the issue under section 68 and the CIT(A) could not lawfully reframe it as section 69A without following the statutory enhancement procedure. [Paras 12, 15, 19, 21, 22]

The change of section by the CIT(A) from section 68 to section 69A amounted to impermissible enhancement by introducing a new source without notice, and the CIT(A)'s action is not sustainable.

Final Conclusion: The appeal is allowed; the Tribunal set aside the confirmation under section 69A and sustained the view that the CIT(A) exceeded his powers by changing the charging provision without issuing enhancement notice, accordingly the assessee's appeal is allowed.

Transfer pricing adjustment to be restricted to associated enterprise transactions - Functional, asset and risk (FAR) analysis for comparables - Comparability of government-owned company - Transactional Net Margin Method (TNMM) and treatment of intra-group service fees as operating cost - Bright line and benefit tests not as alternative TP methods - Operating revenue composition for tested party margin (inclusion of commission and reversal of provisions) - Section 14A disallowance - applicability of Rule 8D and pragmatic estimation - Remand for de novo verification of FAR and segmental profitability - Consequential nature of interest and penalty appeals - Allowability of education cess after retrospective amendment

Transfer pricing adjustment to be restricted to associated enterprise transactions - TP adjustment in the trading segment is to be restricted to transactions with associated enterprises and not applied to all transactions. - HELD THAT: - The Tribunal found that the TPO had initially quantified a proportionate adjustment limited to AE transactions but the DRP extended the adjustment to all transactions. Relying on authoritative precedent, including Hindustan Unilever Ltd., the Bench held that application of arm's length price must be confined to AE-related transactions. The Tribunal allowed the ground and restored the principle that TP adjustments should be restricted to AE transactions only, rejecting the DRP's approach of applying the adjustment to entire operating costs/transactions of the tested party. [Paras 18]

Allowed; TP adjustment restricted to AE transactions.

Functional, asset and risk (FAR) analysis for comparables - Remand for de novo verification of FAR and segmental profitability - Comparability of government-owned company - Whether Telecommunication Consultants India Ltd. (TCIL) is to be excluded as a comparable, and related FAR/segmental profitability verification. - HELD THAT: - The TPO rejected TCIL as persistent loss making; the DRP excluded it on the ground that it is a government company. The Tribunal observed that TCIL had been used as a comparable in other assessment years of the assessee and that the DRP had not examined objections on persistence of losses. The Bench directed that the PLI/profitability should be considered only for the trading activity of TCIL and remitted the matter to the TPO/AO for de novo FAR analysis and verification whether TCIL is a persistent loss-making comparable for all three years; if found so, it should be excluded. The remand requires year wise FAR consideration and segmental profitability scrutiny. [Paras 23]

Remitted to TPO/AO for de novo FAR analysis and verification of persistent loss making status; no final exclusion ordered.

Functional, asset and risk (FAR) analysis for comparables - Whether Adtech Systems Ltd. and Zicom Electronic Security Systems Ltd. are comparable to the assessee's trading segment. - HELD THAT: - After examining the companies' financial statements and business descriptions, the Tribunal found both Adtech and Zicom operate primarily in trading/supply and integration of electronic security products with negligible service or manufacturing inputs for the relevant year, and their traded product functions were sufficiently similar to the assessee's traded electronic instruments. The Tribunal rejected the assessee's challenge to these comparables and held they are functionally comparable under TNMM. [Paras 31, 35, 36]

Assessee's challenge rejected; Adtech and Zicom retained as comparables.

Operating revenue composition for tested party margin (inclusion of commission and reversal of provisions) - Whether commission income and reversal of provisions for doubtful debts should be included in operating revenue for computing the tested party's margin in the trading segment. - HELD THAT: - The Tribunal examined the linkage of commission receipts to the trading segment and found that the assessee could not demonstrate the nature of services rendered in relation to AE sales to third parties; consequently, commission income was not shown to be part of the trading segment and cannot be included in operating revenue for margin computation. Regarding reversal of provisions, the Tribunal directed the AO to examine whether the 'provision no longer required' had been treated as operating expenditure in earlier years; if so, it should be treated as operating revenue, and remitted that factual verification to the AO. [Paras 40, 41]

Commission income excluded from trading operating revenue; question of provision reversal remitted to AO for verification.

Transactional Net Margin Method (TNMM) and treatment of intra-group service fees as operating cost - Bright line and benefit tests not as alternative TP methods - Whether Global Sales and Marketing Activity Fees (GSMAF) and Management Fees (MF) should be treated as operating cost and benchmarked under TNMM rather than being separately tested by benefit/bright line tests. - HELD THAT: - The Tribunal followed coordinate bench and High Court decisions in the assessee's own case and related precedent, holding that where multiple and diversified international transactions (receipts and payments) exist, payments such as GSMAF and MF should be treated as part of operating cost and allocated in ratio to turnover of other international transactions and the ALP determined under TNMM. The Tribunal rejected the TPO/DRP approach of applying benefit or bright line tests to declare the ALP nil or otherwise, and allowed the assessee's grounds on this point. [Paras 46, 47]

Allowed; GSMAF and MF to be considered part of operating cost and benchmarked under TNMM as directed.

Section 14A disallowance - applicability of Rule 8D and pragmatic estimation - Extent of disallowance under section 14A where Rule 8D computations are inapplicable due to absence of opening/closing investment balances. - HELD THAT: - The AO had computed a disallowance under Rule 8D; the Tribunal observed that when opening and closing values of investments are nil, Rule 8D computational provisions fail. Following a coordinate bench decision in the assessee's own case, the Tribunal restricted the disallowance under section 14A to 10% of the exempt dividend income as a pragmatic estimate to meet section 14A's requirement and directed AO to recompute accordingly. [Paras 51, 52]

Disallowance under section 14A restricted to 10% of exempt dividend income; AO to compute.

Consequential nature of interest and penalty appeals - Whether challenges to interest under sections 234A/234B/234C and penalty proceedings are independently adjudicated in the appeal. - HELD THAT: - The Tribunal recorded that grounds relating to interest (grounds 18-19) and penalty (ground 20) are consequential to the primary adjustments. Accordingly, these issues were not separately decided on merits in the present order but treated as consequential. [Paras 53]

Consequential; not separately adjudicated in this order.

Remand for de novo verification of FAR and segmental profitability - Remand directions regarding verification of whether a comparable is persistent loss-making and segment-wise PLI computation. - HELD THAT: - The Tribunal remitted the question of TCIL's comparability to the TPO/AO to carry out de novo FAR analysis and assess trading-segment profitability year-wise. The remand instructs that if TCIL is found to be persistent loss-making for all three years for the trading segment, it should be excluded; otherwise it may be retained. The Tribunal thus left the factual determination to be revisited by the assessing authorities with specified guidance. [Paras 23]

Remitted to TPO/AO for fresh consideration on FAR and persistence of losses; no final finding on merits in this order.

Allowability of education cess after retrospective amendment - Allowability of education cess and secondary and higher education cess as deduction under section 37(1). - HELD THAT: - The Tribunal rejected the assessee's ground seeking deduction of education cess paid, noting that retrospective amendment and the Supreme Court authority in Chambal Fertilizers & Chemicals Ltd. establish that education cess cannot be claimed as business expenditure. The ground was dismissed. [Paras 55]

Dismissed; education cess not allowable under section 37(1).

Leave to raise DTAA / DDT question reserved - Claim for refund of excess dividend distribution tax paid vis-a -vis treaty rate for non-resident shareholder. - HELD THAT: - The assessee sought refund on the ground that DDT paid should be restricted to the treaty rate. The Tribunal observed that the issue is being considered by a Special Bench in related litigation and accordingly left the matter open, preserving the assessee's right to contest before the appropriate forum. [Paras 54]

Left open / reserved for determination by appropriate forum; no adjudication in this order.

Final Conclusion: The appeal is partly allowed. The Tribunal (i) held that TP adjustment in the trading segment must be restricted to associated enterprise transactions; (ii) retained Adtech and Zicom as comparables but remitted the question of TCIL's comparability for de novo FAR/segmental profitability verification by the TPO/AO; (iii) excluded commission income from trading operating revenue while remitting the provision reversal question to the AO for verification; (iv) directed that GSMAF and MF be treated as operating cost and benchmarked under TNMM; (v) restricted the section 14A disallowance to 10% of exempt dividend income; (vi) treated interest and penalty grounds as consequential; (vii) left the DDT/treaty refund issue open; and (viii) dismissed the claim for deduction of education cess.

Academic question - precedent and stare decisis - exercise of jurisdiction under Article 136 of the Constitution of India - Carry forward of unabsorbed depreciation - revisionary powers under Section 263 of the Income Tax Act -

HELD THAT- The impugned judgment records that the question before the High Court [2018 (4) TMI 140 - BOMBAY HIGH COURT] was rendered academic, in view of the decision of the same High Court in the case of Commissioner of Income Tax v. Hindustan Unilever Limited. [2018 (10) TMI 1611 - SC ORDER]

It is not in dispute that the decision in the case of Hindustan Unilever Limited was challenged by the present petitioner by filing Special Leave Petition (Civil)No.22381 of 2017 and this Court by the order dated 29th October, 2018 has dismissed the said Special Leave Petition and connected matters.

Hence, in view of what is recorded in paragraph 4 of the impugned judgment, no case for interference is made out in exercise of our jurisdiction under Article 136 of the Constitution of India. The Special Leave Petition is accordingly dismissed.

Penalty under section 271(1)(c) - Computation of book profit under section 115JB - Effect of section 115JB(5) on levy of penalty - Block of assets and allowance of depreciation - Excess depreciation and conformity with accounting standards - Bad debts and foreign exchange fluctuation in income computation

HELD THAT:- We are not inclined to interfere with the judgment(s) and order(s) passed by the High Court [2017 (5) TMI 1606 - RAJASTHAN HIGH COURT]. The special leave petition is dismissed.

Reopening of assessment under Section 148 read with proviso to Section 147 - failure to truly and fully disclose material facts - change of opinion - assessment under Section 143(3) as fetter on reopening beyond four years - distinctness of assessment years and MAT computation

Reopening of assessment under Section 148 read with proviso to Section 147 - failure to truly and fully disclose material facts - Validity of notice dated 31st March 2021 under Section 148 for AY 2015-16 in view of the proviso to Section 147 - HELD THAT: - The Court held that the proviso to Section 147 bars reassessment beyond four years where an assessment under Section 143(3) has been made unless there is failure by the assessee to truly and fully disclose material facts. A reading of the reasons recorded shows that the AO's basis for reopening was drawn from the assessee's own filed records and computation. The court found no omission by the assessee to disclose primary facts and concluded that the reasons were an attempt to overcome the proviso rather than a demonstration of nondisclosure. Reliance was placed on the principle that where primary facts were before the AO at the original assessment, mere subsequent discovery of an alleged error does not justify reopening; such a situation is a change of opinion and cannot sustain reassessment. The Court therefore held the reopening notice to be invalid and set it aside. [Paras 6, 7, 8, 9, 10]

Notice under Section 148 for AY 2015-16 quashed as there was no failure to truly and fully disclose material facts and the reopening amounted to impermissible change of opinion.

Change of opinion - assessment under Section 143(3) as fetter on reopening beyond four years - distinctness of assessment years and MAT computation - Whether the AO's reliance on matters already examined in the original assessment and on purported MAT computation issues justified reopening - HELD THAT: - The Court noted the AO admitted that the issues relied upon were examined during the original assessment. The reasons recited alleged factual error discovered subsequently, but the Court held that such post hoc reliance on the same primary material amounts to a change of opinion, which is not a permissible ground for reassessment. The Court also observed the AO's contentions about MAT computation and treatment of losses were essentially alternative inferences from the same material facts, and the duty of the assessee is limited to disclosing primary facts; drawing of legal inferences is for the assessing authority. Consequently, the AO's action was not a valid exercise of the reassessment power. [Paras 6, 8, 9]

Reopening premised on matters already considered in the original assessment is a change of opinion and cannot sustain reassessment; the AO's MAT-related contentions did not convert primary facts into undisclosed material.

Final Conclusion: Writ petition allowed; notice dated 31/3/2021 under Section 148 for AY 2015-16, the objection order dated 25/3/2022 and consequential proceedings quashed on the ground that there was no failure to truly and fully disclose material facts and the reassessment proceeded from an impermissible change of opinion.

Re-opening of assessment under Section 148 read with Section 147 - proviso to Section 147 - failure to truly and fully disclose material facts - change of opinion doctrine - consideration of queries and replies in original assessment

Re-opening of assessment under Section 148 read with Section 147 - change of opinion doctrine - consideration of queries and replies in original assessment - proviso to Section 147 - failure to truly and fully disclose material facts - Validity of the notice dated 31st March 2021 under Section 148 read with Section 147 for A.Y. 2014-15 - HELD THAT: - The Assessing Officer recorded reasons alleging that two flats were sold and sale consideration was not offered to tax, but the material before the AO included the assessee's reply and agreements for sale submitted during the original assessment proceedings. The Court found that the AO had raised specific queries during assessment and the assessee had responded (including filing the agreement for one of the flats), so the matters relied upon for reopening were matters already placed before and considered by the AO. The Court applied the settled principle that re-opening based merely on a subsequent change of opinion by the AO, where the issue was raised and answered in original proceedings, does not constitute valid reasons to believe that income has escaped assessment. Consequently, the proviso to Section 147, which permits reopening after four years only where there was failure to truly and fully disclose material facts, was not attracted because the record showed that the transactions and the assessee's explanations had been before the AO and considered. The finding in the reasons recorded that certain agreements were not placed before the AO was factually incorrect in part (one agreement had been filed), reinforcing that the re-opening was premised on a change of opinion rather than fresh tangible material establishing escapement of income. [Paras 3, 6, 7]

Impugned notice under Section 148 and the order disposing objections quashed as the reopening amounted to impermissible change of opinion and the proviso to Section 147 was not attracted.

Final Conclusion: Writ petition allowed; notice dated 31.03.2021 issued under Section 148 and the order disposing objections dated 17.01.2022 are quashed and set aside, and consequential proceedings are stayed.

Reopening of assessment under Section 147/148 - failure to truly and fully disclose all material facts - change of opinion as not a ground for reopening - consideration of issues during original assessment - treatment of interest income from short-term parking as revenue receipt

Reopening of assessment under Section 147/148 - failure to truly and fully disclose all material facts - change of opinion as not a ground for reopening - consideration of issues during original assessment - treatment of interest income from short-term parking as revenue receipt - Validity of the notice issued under Section 148 read with Section 147 for AY-2013-14 on the ground that income chargeable to tax had escaped assessment by reason of failure to truly and fully disclose material facts. - HELD THAT: - The reasons recorded for reopening relied on the assessee's accounting treatment of interest income (treating interest on loans/short-term deposits as capital/business receipt and netting it against interest expense and capitalising balance to WIP) and on omission in computation of a provision alleged to be inadmissible. The material in the reasons was drawn from assessment records and the queries on those issues had been raised and replied to during the original assessment proceedings. The assessing officer had reworked WIP in the original assessment, indicating consideration of the relevant accounting and tax aspects. Applying the principle that where a query is raised in assessment proceedings and the assessee replies, the matter is deemed to have been considered by the AO, the court held that the impugned notice reflects only a change of opinion of the AO. A mere change of opinion does not furnish reasons to believe that income chargeable to tax has escaped assessment and therefore does not justify reopening under Section 147/148. Consequently, the notice and the order disposing objections were liable to be quashed. [Paras 6, 7, 8, 9]

Notice dated 27.03.2021 under Section 148 and the order disposing objections dated 14.01.2022 set aside as reopening was based on mere change of opinion and there was no failure to truly and fully disclose material facts.

Final Conclusion: Writ petition allowed; notice under Section 148 dated 27.03.2021 and the order disposing objections dated 14.01.2022 quashed and writ disposed.

Reopening of assessment - reason to believe under Section 147 - Validity of notice under Section 148 - Deductibility of advertising and sales promotion expenses under Section 37(1) - Effect of benefit to third party on allowability of business expenditure - Limitation/proviso to Section 147 - failure to truly and fully disclose material facts - Limits of admissible material for justifying reassessment - reasons recorded as the touchstone

Reopening of assessment - reason to believe under Section 147 - Validity of notice under Section 148 - Whether the Assessing Officer had any basis to form a belief that income chargeable to tax had escaped assessment and whether the notices under Section 148 are valid. - HELD THAT: - The court examined the reasons recorded by the Assessing Officer and concluded that the sole basis for reopening was an intention to disallow certain advertisement and sales promotion expenditures as not pertaining to the assessee's business. Applying the established test, the court held that issuance of a notice requires a genuine reason to believe and a live link between material and the belief. The recorded reasons were insufficient and could not have led a prudent person to form the requisite belief that income had escaped assessment. Consequently, the reopening notices and the order rejecting objections were without a reasonable foundation and invalid. [Paras 14, 16, 25, 26]

Notices dated 28th March 2014 under Section 148 and the order dated 29th September 2015 were quashed for lack of any reasonable basis to form a belief of escapement of income.

Deductibility of advertising and sales promotion expenses under Section 37(1) - Effect of benefit to third party on allowability of business expenditure - Whether advertisement, sales promotion and related expenditures incurred by the petitioner are deductible under Section 37(1) even if they also benefited the foreign principal or were incurred at its direction. - HELD THAT: - Relying on binding principles, the court held that expenditures incurred voluntarily for promoting the assessee's business and to earn profits are deductible if they satisfy statutory tests, even though a third party may also benefit. The fact that the foreign principal benefited, or that some expenditures were incurred as directed by the principal, does not automatically negate nexus with the assessee's business or justify disallowance. The facts admitted by the assessee and the commercial nexus between promotion and increased sales supported deductibility; therefore, the Assessing Officer had no basis to treat such expenditure as not for the assessee's business. [Paras 15, 17, 18, 19]

The advertising and sales promotion expenditures are relatable to the petitioner's business and their disallowance did not furnish a valid foundation for reopening.

Limits of admissible material for justifying reassessment - reasons recorded as the touchstone - Whether the Assessing Officer (or the Court) may justify reopening by referring to material beyond the reasons recorded in the reopening note. - HELD THAT: - The court held that validity of reopening must be judged on the reasons recorded, because sanction under Section 151 and the objection/answering process proceed from those reasons. Permitting the Revenue to justify reopening by resort to extraneous material would render the statutory requirement of recording reasons illusory. While courts may call for records to verify facts mentioned in the reasons, they cannot supplement the recorded reasons with external material to validate a reopening. [Paras 21, 22, 23, 24]

Reopening cannot be validated by material beyond the reasons recorded; the reasons themselves must establish a reasonable belief of escapement.

Limitation/proviso to Section 147 - failure to truly and fully disclose material facts - Whether reopening after the four-year period (post expiry of four years) was permissible under the proviso to Section 147 where there was no allegation of failure to truly and fully disclose material facts. - HELD THAT: - For the petition in which reopening was sought after four years and an assessment under Section 143(3) had been completed, the proviso to Section 147 permits reopening only upon failure to truly and fully disclose material facts. The recorded reasons did not allege any such failure. Consequently, the reopening in that petition was also invalid on the additional ground that the proviso's condition was not satisfied. [Paras 29]

The notice issued beyond four years was invalid because the proviso to Section 147 was not attracted in the absence of any allegation of failure to truly and fully disclose material facts.

Final Conclusion: The writ petitions were allowed: the notices dated 28th March 2014 under Section 148 and the order dated 29th September 2015 were quashed for lack of reasonable basis to form a belief of escapement of income; the advertising and sales promotion expenditures were held to be relatable to the assessee's business and could not justify reassessment; and the reopening beyond four years was invalid as the proviso to Section 147 did not apply.

Effect of order of tribunal or court in respect of business reorganisation - modified return - business reorganisation - successor - assessment on the basis of modified/ consolidated return - quash and remand for fresh assessment

Effect of order of tribunal or court in respect of business reorganisation - modified return - assessment on the basis of modified/ consolidated return - business reorganisation - successor - Assessment proceedings after sanction of a scheme of amalgamation must be based on the modified (consolidated) return filed by the successor under Section 170A. - HELD THAT: - The Court examined Section 170A as inserted by Finance Act, 2022 (and as amended) and held that where a business reorganisation is sanctioned by a court or tribunal the successor is required to furnish a modified return within six months from the end of the month in which the sanction order is issued, and any assessment after such sanction should be on the basis of that modified return. The NCLT Chennai sanctioned the amalgamation on 18.04.2022 with an appointed date of 01.04.2020; accordingly the scheme became effective from 01.04.2020 and the petitioner, as successor, was entitled to file a modified consolidated return. Notices under Section 143(2) and other provisions were issued after the effective date of the merger. In these circumstances the consolidated/modified return should have been the basis of the scrutiny assessment rather than separate reliance on pre-amalgamation standalone returns. The Court therefore concluded that the statutory scheme and the facts required assessment to proceed on the consolidated return filed by the successor. [Paras 9, 11, 13, 14]

Assessment must be founded on the modified consolidated return filed under Section 170A after the NCLT sanction; the impugned assessment could not properly proceed on mixed reliance on pre-amalgamation standalone returns.

Consolidated return - quash and remand for fresh assessment - assessment on the basis of modified/ consolidated return - Whether the impugned assessment order is vitiated by reliance on inconsistent materials and by being concluded hastily, and what corrective relief should follow. - HELD THAT: - On examination of the assessment record the Court found the Assessing Officer had relied at different places on the petitioner's standalone return, the transferor company's standalone return and the consolidated return for different purposes. The Court held that such piecemeal approach is impermissible when the scheme had become effective and a modified consolidated return was available. Further, the Court noted rapid conclusion of the assessment soon after receipt of the reply to a detailed show cause notice (relating to numerous proposed additions), and pointed to demonstrable discrepancies in the assessment order which indicated hasty drafting and decision. For these reasons the Court found the impugned assessment order unsustainable not on subsidiary factual disputes but because the AO did not proceed on the statutorily mandated consolidated return and the order was proceeded with in a hurried manner. [Paras 15, 16]

Impugned assessment order dated 31.12.2022 is quashed and the matter is remanded for fresh consideration; respondents may consider the consolidated return (now uploaded) and issue fresh notices and make reassessment in accordance with law.

Final Conclusion: Writ petition allowed: the assessment order dated 31.12.2022 is quashed and the matter is remanded for fresh proceedings; respondents may proceed to issue fresh notices and reassess on the basis of the consolidated/modified return filed under Section 170A. There shall be no order as to costs.

Violation of principles of natural justice - unexplained investment under Section 69B of the Income Tax Act - remand for fresh consideration and opportunity of hearing - alternate remedy and its exception for violation of natural justice

Violation of principles of natural justice - alternate remedy and its exception for violation of natural justice - Whether the assessment order suffered from violation of principles of natural justice such as to justify entertaining writ jurisdiction despite the availability of an alternative statutory remedy. - HELD THAT: - The Court found that the sequence of notices and communications produced uncertainty and led the appellant reasonably to believe that the department had accepted its explanation except for a specific shortfall. In particular, the notice dated 16.08.2022 called for explanation only in respect of a narrowed figure, which induced the appellant to limit its reply to that figure and not to further address the larger head of excess stock. This procedural incompleteness resulted in denial of a fair opportunity to explain the source of the larger stock amount and thus amounted to a breach of the principles of natural justice. Although alternative statutory remedies exist, the rule of alternate remedy yields where there is a breach of natural justice; having found such a breach, the Court held that interference under Article 226 was warranted. [Paras 7, 8]

The impugned assessment order is vitiated by violation of the principles of natural justice; the writ petition was maintainable notwithstanding availability of an alternative remedy.

Unexplained investment under Section 69B of the Income Tax Act - remand for fresh consideration and opportunity of hearing - What relief should follow from the finding of procedural infirmity in relation to the addition treating excess stock as unexplained investment under Section 69B. - HELD THAT: - In view of the identified denial of opportunity, the appropriate remedy was not to decide the accounting merits afresh in this Court but to remit the matter to the assessing authority for reconsideration. The assessing authority is directed to grant the appellant one more opportunity to present explanation and evidence specifically in respect of the excess stock treated as unexplained investment and thereafter to pass a fresh order on merits. The Court refrained from entering into accounting or valuation questions and limited its role to correcting the procedural defect by ordering re-hearing and fresh decision by the tax authority. [Paras 9]

Matter remitted to the assessing authority with direction to afford a further opportunity of hearing to the appellant and to pass fresh orders within 12 weeks from receipt of the judgment.

Final Conclusion: The impugned assessment order is set aside for violation of natural justice; the matter is remitted to the assessing authority to grant a further opportunity to the appellant to explain the excess stock treated as unexplained investment under Section 69B and to pass fresh orders within 12 weeks; writ appeal disposed of with no costs.

Clubbing of income under Section 64(1)(ii) - Finality of assessment and estoppel by acceptance of return in scrutiny assessment under Section 143(3) consequent to search under Section 153A

Clubbing of income under Section 64(1)(ii) - Finality of assessment and estoppel by acceptance of return in scrutiny assessment under Section 143(3) consequent to search under Section 153A - Whether income returned and accepted in the hands of the assessee's wife in scrutiny assessments arising from search can be clubbed and taxed in the hands of the assessee under the clubbing provisions. - HELD THAT: - The Tribunal noted that the wife's income, including business income, was declared in returns filed consequent to the search and was accepted by the Department by passing scrutiny assessment orders under Section 143(3) read with Section 153A for the impugned years. Having accepted that income as belonging to the wife in those assessments, the Department could not take a contrary view and re tax the same receipts in the hands of the husband by invoking the clubbing provision. The acceptance of the wife's returns by scrutiny assessment gives finality to that determination and operates to preclude the Revenue from now treating the declared income as unaccounted and clubbing it in the husband's hands. Applying this principle, the Tribunal set aside the clubbing additions made in the assessments of the assessee for the years in question. [Paras 8, 9]

Additions by way of clubbing of the wife's income in the hands of the assessee are deleted and the appeals are allowed.

Final Conclusion: All appeals for AYs 2013-14 to 2019-20 are allowed: the clubbing additions confirmed by the lower authorities are set aside because the income was returned and accepted in the wife's scrutiny assessments, precluding its taxation again in the husband's hands.

Fee under section 234E - prospective operation of statutory amendment - continuing default doctrine - jurisdiction of Assessing Officer under section 200A

Fee under section 234E - prospective operation of statutory amendment - jurisdiction of Assessing Officer under section 200A - Validity of levy of fee under section 234E on TDS returns relating to periods prior to 01.06.2015 where the returns were filed before 01.06.2015 but processed and intimated after 01.06.2015. - HELD THAT: - The Tribunal examined whether the Assessing Officer/CPC could lawfully levy fee under section 234E while processing TDS returns after 01.06.2015 in respect of quarters that ended before 01.06.2015 but whose returns were filed before 01.06.2015. Applying earlier decisions of the Bench, the Tribunal held that the amendment empowering the AO under section 200A to compute and intimate fee under section 234E has prospective effect from 01.06.2015. Where the return was filed prior to 01.06.2015 and there was no continuing default beyond that date, the power to levy could not be exercised retrospectively to charge fee for the pre-01.06.2015 period. On the facts, the TDS returns for the relevant quarters were filed on 02.01.2015 and 03.01.2015 (both before 01.06.2015) and therefore did not constitute continuing default; accordingly the fees levied for those pre-01.06.2015 periods were not sustainable and were directed to be deleted. [Paras 8, 9, 11, 12]

Fee under section 234E charged while processing the assessees' TDS returns for periods prior to 01.06.2015 deleted; appeals allowed.

Continuing default doctrine - jurisdiction of Assessing Officer under section 200A - fee under section 234E - Scope of AO's jurisdiction to levy fee under section 234E where TDS returns are filed or processed after 01.06.2015 and the principle governing levy for the period from 01.06.2015 to actual filing date. - HELD THAT: - The Tribunal restated the legal test that where a TDS return is filed and processed after 01.06.2015, the AO, having acquired jurisdiction under the amended section 200A w.e.f. 01.06.2015, may levy fee under section 234E for the period from 01.06.2015 up to the actual date of filing if there is default continuing into that period. The Tribunal contrasted this with cases where filing occurred before 01.06.2015 (no continuing default) and therefore no retrospective levy. Although this principle was discussed and applied by reference to prior Bench decisions, in the present appeals the facts did not establish continuing default after 01.06.2015 and therefore the principle did not operate to sustain any part of the fee. [Paras 10, 11]

Where return is filed and processed after 01.06.2015, AO may levy fee under section 234E for the delay continuing after 01.06.2015; not applicable where filing occurred before 01.06.2015 without continuing default.

Final Conclusion: Both appeals allowed; fees levied under section 234E while processing the assessees' TDS returns for periods prior to 01.06.2015 are deleted.

Dumping - price undercutting - price depression - impact assessment - material injury - protection of the domestic industry as a whole - prima facie observations - Adjudicating Authority's independent assessment - remand for reconsideration

Impact assessment - material injury - Adjudicating Authority's independent assessment - Adjudicating Authority to re-consider and independently assess the impact of dumped imports on the domestic industry and the existence of material injury. - HELD THAT: - The Court recorded that aside from findings of dumping and price effects, a separate and significant impact assessment is required before recommending Anti Dumping Duty. The Tribunal had remitted the matter for reconsideration of impact/ injury. The High Court directed that the Adjudicating Authority shall consider the impact assessment based on the data already on record in relation to para (ii) of Annexure II of the 1995 Rules and para 40 of the Tribunal's order, treating the Tribunal's observations as prima facie only. The Adjudicating Authority is to make an independent determination of whether the dumped imports caused material injury and whether that injury is significant enough to warrant imposition of duty, uninfluenced by the Tribunal's observations. [Paras 5, 8, 9, 11]

Matter remitted to the Adjudicating Authority to re consider and independently assess impact and material injury, treating the Tribunal's observations as prima facie.

Dumping - price undercutting - price depression - prima facie observations - Status of the Tribunal's findings on dumping, price undercutting and price depression in the remand proceedings. - HELD THAT: - The Court noted that the Adjudicating Authority had returned a positive finding on dumping and that the Tribunal had observed there was price undercutting and price depression (para 38 of the Tribunal's order). The petitioner accepted that the Tribunal's observations may be treated as prima facie so that the Adjudicating Authority retains a role to independently determine impact and the necessity of duty. The High Court directed that such observations of the Tribunal are to be treated as prima facie and not as conclusive and binding on the Adjudicating Authority, which must make its own uninfluenced decision on whether dumping caused price depression and significant impact. [Paras 4, 6, 9, 10, 11]

Tribunal's findings on dumping, price undercutting and depression to be treated as prima facie only; Adjudicating Authority to determine these matters independently.

Final Conclusion: The appeal is disposed of by remitting the matter to the Adjudicating Authority to re consider impact and material injury based on the record, treating the Tribunal's observations as prima facie and making an independent, uninfluenced determination; all parties' rights and contentions are reserved.

Mandatory BIS certification for imported goods - removal of import-condition by DGFT notification - provisional release on execution of end-use bond and legal undertaking for actual user - infructuousness of proceedings upon subsequent statutory change - final assessment of Bills of Entry without insisting on prior certification

Mandatory BIS certification for imported goods - removal of import-condition by DGFT notification - infructuousness of proceedings upon subsequent statutory change - The requirement to submit a mandatory BIS certificate for import of Hexane as contended in the petitions - HELD THAT: - The Court recorded that the respondents placed on record DGFT Notification No. 24/2015-2020 dated 04.08.2022 deleting the policy condition that import of Hexane, Food Grade must conform to IS 3470 for the relevant HS Code. In view of that notification the policy requirement which formed the basis of the petitions no longer subsists. The Court therefore held that the grievance in the writ petitions challenging the insistence on mandatory BIS certification has become infructuous and there is no live controversy on that condition. [Paras 5, 6, 8]

Requirement of mandatory BIS certificate for the imported Hexane no longer subsists in view of DGFT Notification dated 04.08.2022; the petitions challenging that requirement are rendered infructuous.

Provisional release on execution of end-use bond and legal undertaking for actual user - final assessment of Bills of Entry without insisting on prior certification - Whether bonds furnished pursuant to the interim order should be released and the Bills of Entry finally assessed without insisting on the BIS certificate - HELD THAT: - The Court noted that pursuant to its interim order dated 05.05.2022 the petitioners had executed end-use bonds and legal undertakings and provisional assessments/out-of-charge had been granted. Having recorded the subsequent DGFT notification removing the mandatory BIS requirement and communications from customs that Bills of Entry have been finally assessed accordingly, the Court directed that the bonds furnished pursuant to the interim order be released and that the Bills of Entry be finally assessed without insisting on the now-removed mandatory BIS certificate. [Paras 4, 6, 8]

Bonds furnished pursuant to the interim order are ordered to be released and the Bills of Entry are to be finally assessed without insisting on mandatory BIS certification as per the DGFT notification.

Final Conclusion: The petitions challenging the requirement of mandatory BIS certification for the imported Hexane have become infructuous in view of DGFT Notification No. 24/2015-2020 dated 04.08.2022; bonds furnished under the interim order are directed to be released and the Bills of Entry finally assessed without insisting on the BIS certificate. Notices discharged; no order as to costs.

Option of re-export for prohibited or restricted imports - confiscation under Section 111(d) of the Customs Act, 1962 - penalty under Section 112 of the Customs Act, 1962 - requirement of prior import clearance and DGCA/DGFT permissions for restricted UAS/UAV imports - bonafide non commercial import as mitigating factor in imposing penalty

Option of re-export for prohibited or restricted imports - confiscation under Section 111(d) of the Customs Act, 1962 - Permission to re-export the imported RCRCM Typhoon glider in lieu of upholding confiscation - HELD THAT: - The Tribunal accepted that the imported goods were restricted and that the appellant had not obtained the mandatory prior clearances/licence (DGFT/DGCA) required for UAS/UAV imports. Relying on the Tribunal's earlier decision in Global Enterprises, where goods liable to confiscation were permitted to be re exported rather than being consummately confiscated, the Bench held that re export could be allowed in the present facts. The appellant had imported the glider for static display in his clinic and not for commercial sale; taking that background and the precedent into account, the Tribunal exercised its discretion to set aside the operative effect of confiscation and permit re export of the goods instead of enforcing absolute confiscation under Section 111(d).

Re export of the imported glider is permitted and the order of absolute confiscation under Section 111(d) is modified accordingly.

Penalty under Section 112 of the Customs Act, 1962 - bonafide non commercial import as mitigating factor in imposing penalty - Whether personal penalty under Section 112 should be sustained or mitigated - HELD THAT: - Although improper importation attracting liability to confiscation ordinarily invites penalty under Section 112, the Tribunal considered the appellant's bona fide non commercial purpose (static display) and overall circumstances. Applying the mitigating principle and the deterrence rationale discussed in the precedent, the Tribunal reduced the personal penalty to the amount already paid by the appellant rather than upholding the full penalty imposed by the adjudicating authority.

Penalty under Section 112 is reduced to the amount already paid by the appellant.

Final Conclusion: The appeal is allowed in part: the order of absolute confiscation is modified to permit re export of the imported glider, and the personal penalty under Section 112 is reduced to the amount already paid; otherwise the impugned order is affirmed to that extent.

Computation of cesses where aggregate customs duty is nil - permissibility of debiting cesses from MEIS/SEIS duty credit scrips - extended period of limitation under Section 28(4) of the Customs Act, 1962 - penalty under Section 114A and Section 114AA of the Customs Act, 1962 - penalty under Section 117 vis a vis penalties under Customs Broker Licensing Regulations (CBLR)

Computation of cesses where aggregate customs duty is nil - Whether cesses leviable as a percentage of aggregate customs duty are payable when the aggregate customs duty is 'Nil'. - HELD THAT: - The Tribunal accepted the appellants' contention that where the basic customs duty assessed and collected is zero by virtue of exemption (such as imports against MEIS/SEIS scrips), cesses which are leviable only as a percentage of the aggregate customs duty cannot be computed and therefore are also 'Nil'. The Tribunal relied upon and followed earlier decisions of the Bombay High Court and CESTAT Mumbai holding that SWS/EC/SHEC computed as a percentage of customs duty will be nil where the aggregate customs duty is nil. Applying that principle to the facts, because the bill of entry showed BCD as zero under the applicable exemption, the EC, SHEC and SWS calculated as a percentage of that duty would also be zero and could not have been validly collected. [Paras 3, 8]

Cesses based on the aggregate customs duty are nil where the aggregate customs duty is nil; the impugned cess demands cannot stand on that basis.

Permissibility of debiting cesses from MEIS/SEIS duty credit scrips - remand for factual and statutory examination - Whether the cesses (EC, SHEC, SWS) could permissibly be discharged by debiting MEIS/SEIS duty credit scrips or were required to be paid in cash. - HELD THAT: - The Tribunal observed that precedent (including the Madras High Court decision in Gemini Edibles) has held that debiting of cesses from export scrips may not be permissible absent specific provision allowing such dispensation and that export incentive schemes are sensitive to WTO/subsidy considerations. While the Tribunal agreed with the legal proposition that cess computed on a nil total duty is nil, it found that the narrower question whether cesses could be debited from scrips (rather than paid in cash) required detailed examination of the statutory language, inclusion of any CVD/IGST components, and the specific notifications and machinery provisions applicable to each case. For these reasons that discrete question was not finally adjudicated on merits but remanded to the Commissioner for fresh and thorough consideration, including attendant questions of limitation and penalties in light of the remand findings. [Paras 8]

Remanded to the Commissioner for fresh consideration of whether cesses could be discharged by debiting MEIS/SEIS scrips (including examination of CVD/IGST components and the precise statutory/notification language); related issues of limitation and penalty to be decided on remand.

Extended period of limitation under Section 28(4) of the Customs Act, 1962 - Whether the department was justified in invoking the extended period of limitation to confirm the duty demands. - HELD THAT: - The Tribunal noted that passing of an order under Section 47 is not a mere formality and observed the appellants' contention that there was no case for invocation of the extended period. The impugned order had invoked the extended period to confirm the entire duty demand, but the Tribunal found that no part of the duty demand fell within the normal period of limitation and held there was no case made out for invoking the extended period in the present appeals. [Paras 5]

No case for invocation of the extended period of limitation; the extended period invocation was unsustainable on the facts presented.

Penalty under Section 114A and Section 114AA of the Customs Act, 1962 - Sustainability of penalties under Section 114A and Section 114AA for alleged debiting of cesses from scrips and alleged suppression or wilful mis statement. - HELD THAT: - The Tribunal held that penalty under Section 114A is not sustainable where the EDI system permitted payment by debiting the scrips and there was no suppression of facts; further, Section 114AA (introduced by amendment) was held inapplicable on the material before the Tribunal because the facts did not establish the sort of fraudulent export transaction to which Section 114AA was directed. The Tribunal noted that Section 114AA was intended to target fraudulent export transactions and relied on precedents to observe that the provision was not invokable in the present circumstances. [Paras 5, 6]

Penalties under Section 114A and Section 114AA are not sustainable on the facts of these appeals.

Penalty under Section 117 vis a vis penalties under Customs Broker Licensing Regulations (CBLR) - Whether the penalty imposed under Section 117 on the customs broker (M/s. Narendra Forwarders P Ltd) was sustainable in view of applicable CBLR penalties. - HELD THAT: - The Tribunal found that the breach of the specific sub regulation of Regulation 10 was not established, that the CHA was not required to advise on assessment aspects unless solicited, and that there was no record of action under the CBLR, 2018. The Tribunal reasoned that where a specific penalty provision under the CBLR exists for violations of the Regulations, the matter ought not to be relegated to the residual penal provision under Section 117 of the Customs Act. On this basis the Tribunal set aside the penalty under Section 117. [Paras 10]

Penalty under Section 117 on M/s. Narendra Forwarders P Ltd set aside; appeal allowed.

Final Conclusion: The appeal of Louis Dreyfus Company India Pvt. Ltd. is allowed insofar as the Tribunal held that cesses computed as a percentage of aggregate customs duty are nil where the aggregate customs duty is nil; however, the question whether such cesses could permissibly have been discharged by debiting MEIS/SEIS scrips (and related specifics including CVD/IGST components, limitation and penalties) is remanded to the Commissioner for fresh consideration. The appeal of M/s. Narendra Forwarders P Ltd is allowed and the penalty under Section 117 is set aside.

Acceptability of laboratory test reports - reliability of revenue laboratory lacking requisite testing facilities - binding nature of Board Circulars on forwarding of samples and laboratory empanelment - classification of imported calcite powder

Acceptability of laboratory test reports - reliability of revenue laboratory lacking requisite testing facilities - binding nature of Board Circulars on forwarding of samples and laboratory empanelment - classification of imported calcite powder - Whether the test reports of the revenue laboratories (CRCL Vadodara/CRCL Delhi/Kandla) could be relied upon for classification of the imported calcite powder when those laboratories did not have facilities to test the product, and consequent correctness of the re-classification by the revenue. - HELD THAT: - The Tribunal found on the record and by reference to the Board Circulars that at the relevant time the revenue laboratories relied upon did not possess facilities to test calcite/precipitated calcium carbonate. In that factual matrix the test reports from those laboratories cannot be accepted as a basis for classification. Board Circulars identifying items which revenue laboratories could not test and prescribing forwarding to other empanelled laboratories are binding on departmental officers and require field formations to ensure non-availability of facilities in jurisdictional labs before relying on their reports. Following earlier decisions of the Tribunal applying these Circulars and rejecting test reports from unequipped revenue laboratories, the impugned reliance on the departmental chemical reports was held unsustainable. Once the departmental test reports were discarded, there was no independent cogent evidence to sustain the revenue's re-classification; the appellant's declared classification was accepted.

Impugned orders setting aside the appellant's classification are annulled; the test reports of the revenue laboratories are rejected for lack of requisite testing facilities and the appeal is allowed.

Final Conclusion: The Tribunal set aside the re-classification by the revenue, rejected the departmental laboratory reports on the ground that the laboratories were not equipped to test the product at the relevant time in terms of the Board Circulars, and allowed the appeal with consequential relief.

Penalty for abetment and connivance under Section 114 of the Customs Act, 1962 - duty of customs broker to verify exporter's documents and genuineness - customs valuation - market survey and re-determination of assessable value - confiscation of drawback claim versus partial allowance - proportionality of penalty

Penalty for abetment and connivance under Section 114 of the Customs Act, 1962 - proportionality of penalty - Imposition and quantum of penalty on the customs broker under Section 114 in respect of mis-declaration and inadmissible drawback claims. - HELD THAT: - The adjudicating authority held that the customs broker had received export documents from an unauthorised/unconnected person and, having earlier cleared consignments for the same exporter, connived with the exporter to facilitate inadmissible drawback claims. The Tribunal accepted that recourse to Section 114 was not inappropriate because the broker admitted receipt of documents from an unconnected person and bears responsibility for filing declarations in the shipping bill. However, the Tribunal found no evidence that the broker was cognisant of the constituent fabric or purchase value of the goods prior to export and noted the absence of any finding that earlier consignments were misdeclared. The confiscation of the entire claimed drawback and the magnitude of the penalty were therefore held to be unduly harsh and disproportionate to the proven role of the broker. In the exercise of appellate jurisdiction, the Tribunal reduced the penalty to a nominal amount to meet the ends of justice while recognising the impropriety in the broker's conduct in failing to verify documents. [Paras 5, 6, 7]

Penalty under Section 114 upheld as available in law but, being disproportionate in the circumstances, reduced to Rs.10,000.

Duty of customs broker to verify exporter's documents and genuineness - customs valuation - market survey and re-determination of assessable value - Whether the broker had knowledge of mis-declaration of fabric or value and the legal effect of having received documents from an unconnected person. - HELD THAT: - The Tribunal noted that the test reports established the goods were of cotton despite declaration as manmade fibre and that market survey complied with the valuation rules to re-determine assessable value. There was no material to show the broker was involved in procurement or was aware of the fabric composition or purchase price; the facts became unchallengeable only because the exporter failed to defend. Nevertheless, the broker's admission that documents were received from an unauthorised person, and the fact that they had verified IEC online but continued to clear consignments despite inconsistency in the person presenting documents, imposed on them a duty of caution to verify the veracity of declarations. That failure justified liability under Section 114 but did not establish positive knowledge of fabric or value. [Paras 5, 6]

No evidence that the broker was cognisant of the fabric or purchase value, but admission of receipt of documents from an unconnected person imposed a duty to verify and supports penal liability in law (subject to proportionality).

Final Conclusion: The Tribunal affirmed that liability under Section 114 could be invoked against the customs broker for failing to verify documents received from an unauthorised person, but, finding no proof of knowledge of fabric or value and that the penalty imposed was disproportionate, reduced the penalty to Rs.10,000 and disposed of the appeal.

Penalty under Section 112(b)(2) of the Customs Act, 1962 - classification as prohibited goods due to absence of proper documents - re-quantification of penalty considering role as carriers and financial capacity - irrelevance of duty quantification for prohibited goods - limitation on penalty where duty evaded is not quantified (10% of duty or Rs.5,000 rule)

Penalty under Section 112(b)(2) of the Customs Act, 1962 - classification as prohibited goods due to absence of proper documents - irrelevance of duty quantification for prohibited goods - Liability for penalties upheld and goods treated as prohibited due to lack of proper documents. - HELD THAT: - The Tribunal held that the seized gold, being transported without proper documents, is to be categorised as prohibited goods and liable for confiscation. On that basis the submission that penalties should be limited to 10% of quantified duty or Rs.5,000 where duty is not quantified was rejected. The Tribunal noted repeated offending and the fact that each appellant carried numerous gold bars without documentation, and accepted the Revenue's contention that prohibited goods cannot be redeemed by quantifying duty for purposes of imposing or limiting penalties. These findings record that the appellants are liable to penalties under Section 112(b)(2) of the Customs Act, 1962. [Paras 9]

Findings of liability under Section 112(b)(2) sustained and the seized gold held to be prohibited goods because of absence of proper documents; the contention limiting penalty to 10% of duty or Rs.5,000 where duty not quantified is rejected.

Re-quantification of penalty considering role as carriers and financial capacity - Quantums of penalty on the seven appellants were re-quantified downward in view of their role as carriers and their financial capacity. - HELD THAT: - Although liability was sustained, the Tribunal took a mitigating and humane approach in quantifying penalties because the appellants were not main noticees (neither buyers nor sellers) but likely carriers receiving small sums. The Tribunal therefore re-quantified the penalties imposed by the Adjudicating Authority to lower amounts for each appellant, applying a disciplinary but moderated exercise of the penalty power to reflect the appellants' roles and means. The Tribunal recorded prior authority and the pending higher court proceedings in relation to other noticees but proceeded to fix specific reduced penalties for these seven appellants. [Paras 11]

Penalties re-quantified to reduced amounts for each appellant taking into account their status as carriers and their likely financial incapacity.

Re-quantification of penalty considering role as carriers and financial capacity - Noting of remand of penalty quantification in respect of other noticees by the High Court. - HELD THAT: - The Tribunal recorded that two other noticees had obtained an order from the Calcutta High Court remanding their matters to the Tribunal for re-quantification of penalties; this factual position was taken into account while deciding the present appeals, but the present appellants' penalties were independently re-quantified on merits. The remand of the other noticees remains for fresh consideration as directed by the High Court. [Paras 10]

Acknowledgement that the High Court has remanded the penalties of two other noticees to the Tribunal for re-quantification; those matters remain subject to fresh consideration.

Final Conclusion: The Tribunal upheld liability under Section 112(b)(2) and the classification of the seized gold as prohibited goods due to absence of documents, rejected the submission limiting penalty to 10% of duty or Rs.5,000 where duty is not quantified, and re-quantified the penalties against the seven appellants to reduced amounts in view of their role as carriers and their financial capacity; the appeals are disposed accordingly, while remand of two other noticees by the High Court remains to be addressed.

Transfer of winding up proceedings to the National Company Law Tribunal (NCLT) - Compulsory transfer in view of the Insolvency and Bankruptcy Code and the Companies (Transfer of Pending Proceedings) Rules, 2016 - Doctrine against duplicity of concurrent proceedings between fora - Wilful disobedience as essential element of contempt - Standard of proof in contempt proceedings - mental element and proof beyond reasonable doubt - Insolvency proceedings and moratorium affording defence against contempt and winding up

Transfer of winding up proceedings to the National Company Law Tribunal (NCLT) - Compulsory transfer in view of the Insolvency and Bankruptcy Code and the Companies (Transfer of Pending Proceedings) Rules, 2016 - Doctrine against duplicity of concurrent proceedings between fora - Insolvency proceedings and moratorium affording defence against concurrent winding up - Winding up petitions pending before the High Court were to be transferred to the NCLT. - HELD THAT: - The petitions were at an inceptive stage with no provisional liquidator appointed and no substantive or irreversible orders passed. The enactment of the IBC and the Companies (Transfer of Pending Proceedings) Rules, 2016 (notably Rule 5) require transfer of pending winding up petitions that have not reached an advanced or irreversible stage to the NCLT to be dealt with under the Code. The Supreme Court's guidance that nascent winding up proceedings ought to be transferred to the NCLT to avoid duplicity and in view of the beneficial scheme of the Code was applied. Further, an insolvency application against the respondent had already been admitted by the NCLT and the appeal was pending before the NCLAT, making concurrent proceedings undesirable. For these reasons the High Court concluded that the petitions should be transferred so that claims are pursued before the NCLT and consistency between fora is maintained. [Paras 18, 19, 21, 23, 24]

The company petitions were transferred to the NCLT; claimants are at liberty to pursue their claims before the NCLT and the Court directed transmission of electronic records to the Registrar NCLT.

Wilful disobedience as essential element of contempt - Standard of proof in contempt proceedings - mental element and proof beyond reasonable doubt - Inability to pay due to insolvency not amounting to wilful contempt - Effect of initiation of insolvency proceedings on contempt liability - Contempt petition against the director was dismissed for lack of wilful disobedience. - HELD THAT: - The Court applied the well-established principle that contempt requires proof of deliberate, conscious and intentional disobedience, entailing a mental element and, in quasi criminal contempt proceedings, proof beyond reasonable doubt. The respondent demonstrated that non payment resulted from business failure and ongoing insolvency processes, efforts to revive the company and attempts to arrange funds, and that no assets had been transferred to third parties. Given these compelling circumstances and the admitted insolvency proceedings/appointment of an Interim Resolution Professional, the Court found the plea of inability to pay to be a sustainable defence negating wilfulness. Reliance was placed on the stated legal tests for wilfulness and on authorities holding that inability to pay arising from insolvency does not necessarily constitute contempt. [Paras 35, 36, 38, 39]

The contempt petition was dismissed for failure to establish wilful and intentional disobedience; all pending applications were disposed of.

Final Conclusion: The High Court directed transfer of the inceptive winding up petitions to the NCLT for adjudication under the IBC and Rules of 2016 to avoid duplicative proceedings, and dismissed the contempt petition against the director for lack of wilful disobedience, permitting the claimants to pursue remedies before the NCLT.

Twin conditions for bail under Section 45 of PMLA - No bail unless court is satisfied there are reasonable grounds for believing accused is not guilty and is not likely to commit an offence while on bail - Distinction between ECIR and FIR; ED may file complaint without prior registration of ECIR - Economic offences constitute a separate class for bail considerations - Statutory presumption regarding proceeds of crime under the PMLA

Twin conditions for bail under Section 45 of PMLA - No bail unless court is satisfied there are reasonable grounds for believing accused is not guilty and is not likely to commit an offence while on bail - Statutory presumption regarding proceeds of crime under the PMLA - Economic offences constitute a separate class for bail considerations - Distinction between ECIR and FIR; ED may file complaint without prior registration of ECIR - Whether the applicant is entitled to regular bail in the PMLA prosecution - HELD THAT: - The High Court applied the mandatory twin conditions of Section 45 of the PMLA and the related jurisprudence of the Apex Court (as cited) and found on a prima facie appraisal of the record that those conditions are not satisfied. The court relied on the prosecution material, statements under Section 50 of the PMLA and the complaint to note that the applicant, through his companies, had engaged in paper/bogus sales and purchases without movement of goods, had failed to produce transport or supporting documents when requested, and had admitted to paper transactions. The court recorded that the applicant's entities showed large volumes of sales and purchases between 2013-14 and 2016-17, subsequent journal voucher adjustments, diversion of funds to accounts controlled by the applicant, and transfers intended to conceal and siphon funds - facts which, at this stage, render the statutory presumption and twin-condition test unsatisfied. The court also accepted the prosecution's submission that ECIR is an internal document distinct from an FIR and that the ED is not obliged to register an ECIR before filing a complaint; accordingly, the contention that multiple ECIRs had to be clubbed into a single complaint did not assist the applicant. The High Court declined to re-open detailed scrutiny of ledger entries or documents for assessing genuineness on a bail application, observing that cognizance had already been taken by the Trial Court. Applying settled principles that economic offences are to be viewed as a separate class in bail considerations and having regard to the gravity and nature of the allegations, the court concluded that the twin conditions under Section 45 are not met and bail ought not to be granted. [Paras 12, 13, 14, 15, 16]

Bail application dismissed; twin conditions under Section 45 PMLA not satisfied and applicant not entitled to bail at this stage

Final Conclusion: The bail application is dismissed; the High Court found on a prima facie appraisal of the material that the mandatory twin conditions of Section 45 PMLA are not satisfied and refused to enlarge the applicant on bail (observations confined to the bail application and not a determination on merits).

Dismissal of Special Leave Petition - refusal to interfere with High Court judgment - leaving question of law open for future consideration

Dismissal of Special Leave Petition - refusal to interfere with High Court judgment - Whether the Special Leave Petition against the High Court's judgment should be entertained or whether interference is warranted. - HELD THAT: - The Court heard the parties and, having considered the facts and circumstances presented, declined to interfere with the impugned judgment and order of the High Court. No substantive legal principle was decided beyond the exercise of appellate discretion to refuse intervention in this petition; the Court therefore dismissed the Special Leave Petition. The order records that the High Court's determination will be left undisturbed in these proceedings.

Special Leave Petition dismissed; impugned High Court judgment and order not interfered with.

Leaving question of law open for future consideration - Disposition of any unsettled question of law arising from the underlying proceedings. - HELD THAT: - While dismissing the Special Leave Petition, the Court expressly refrained from deciding an identified question of law and stated that that question would be kept open for consideration in another case. The Court did not adjudicate the legal issue on merits in this petition and left it available for determination in appropriate future proceedings.

Question of law not decided in these proceedings and kept open for consideration in another case.

Final Conclusion: The Special Leave Petition is dismissed and the impugned High Court judgment and order are left undisturbed; an identified question of law is left open for consideration in another case. Pending applications, if any, are disposed of.

Summary order. Delay condoned; appeal dismissed for lack of merit.

Classification of service as "selling of space or time slots" for advertisement - classification of service as "advertising agency" service - negative list exclusion for sale of advertising space - burden of proof on the revenue to establish taxable service and evasion - proviso to Section 73(1) - extended period of limitation - penalty under Section 78 for willful mis-statement or suppression - late fee and obligation to file ST-3 returns when not liable to pay tax

Classification of service as "selling of space or time slots" for advertisement - classification of service as "advertising agency" service - negative list exclusion for sale of advertising space - burden of proof on the revenue to establish taxable service and evasion - Whether the services rendered by the appellant during 01.10.2012 to 30.09.2014 were taxable "advertising agency" services or non-taxable "selling of space for advertisement" covered by the negative list. - HELD THAT: - The Tribunal found that the appellant's receipts and commercial practice corresponded to renting/displaying advertisement on hoardings, billboards and similar sites for specified periods, with invoices describing display or "display charges" and charging on a monthly/rental basis. There was no evidence that the appellant engaged in making, preparing or advising on advertisement material - activities which, on authorities relied upon by the Tribunal, mark out an "advertising agency" service. Non-mentioning of a non-taxable service in registration (ST-2) was held not to be dispositive. The adjudicating authority had relied on ST-2/ST-3 descriptions and statements to classify the activity as taxable, but the Tribunal held that the revenue failed to discharge the burden of proof to show the appellant provided taxable advertising agency services or had attempted to evade tax; invoices and statements supported the appellant's case that the service was selling of space, covered by the negative list for the period in question. Precedents where display-only activities were held to be sale of space were applied. Accordingly the demand treating the appellant's exempted selling-of-space service as taxable advertising-agency service was held improper and unsustainable. [Paras 13, 14, 15]

Demand of service tax for the period 01.10.2012 to 30.09.2014 confirmed as advertising-agency service is set aside; the services are held to be "selling of space for advertisement" covered by the negative list for that period.

Proviso to Section 73(1) - extended period of limitation - penalty under Section 78 for willful mis-statement or suppression - late fee and obligation to file ST-3 returns when not liable to pay tax - Whether extended period, penalties under Section 78 (including penalty on partner) and late fee were leviable in view of the Tribunal's classification of the activity and the filing/registration facts. - HELD THAT: - Having held the demand unsustainable on merits, the Tribunal concluded that invocation of extended period and imposition of penalty under Section 78 (and Section 78A on the partner) could not stand. The Tribunal noted that there was no material to establish willful suppression or intent to evade tax. As to late fee, the Tribunal observed that where a person is not liable to pay service tax (including by reason of being covered by a negative-list exemption) ST-3 returns need not be filed as per departmental circular; accordingly the late fee demand for the period when the service was exempted was not maintainable and late fee was restricted to the amount properly payable. [Paras 15, 16]

Penalties under Section 78 on the appellant and Section 78A on the partner are set aside; extended-period demand and interest/penalties tied to the unsustainable demand are set aside; late fee liability restricted as recorded by the Tribunal.

Final Conclusion: The Tribunal allowed the appeal partly: it set aside the service-tax demand and interest for the period 01.10.2012 to 30.09.2014 by holding the services to be "selling of space for advertisement" (negative-list), quashed the penalties under Section 78 (and Section 78A on the partner) and restricted the late fee as indicated, with consequential reliefs.

Extended period of limitation - departmental confusion as bar to extended limitation - defect for non specification of clause in show cause notice - negative list regime from 01.07.2012 - maintainability of demand where incorrect service category is charged

Extended period of limitation - departmental confusion as bar to extended limitation - Extended period of limitation invoked in the show cause notice is not invokable. - HELD THAT: - The Tribunal found on the record that the Revenue issued show cause notices treating the same activity under different service categories (Business Auxiliary Service and Cargo Handling Service), demonstrating departmental confusion as to the correct classification. Further, the Department had prior knowledge of the activity (a communication dated 20.06.2010) and yet did not initiate proceedings then. In these circumstances the Tribunal held that the extended period of limitation could not be invoked to sustain the demand. [Paras 6, 7, 13]

Extended limitation not invokable and demand prior to 01.07.2012 is barred by limitation.

Defect for non specification of clause in show cause notice - The show cause notice is defective for not specifying the particular clause of Business Auxiliary Service charged. - HELD THAT: - The Tribunal observed that the demand was framed under the broad category of Business Auxiliary Service without invoking any particular clause thereof. Such failure to specify the exact clause renders the show cause notice defective and undermines the validity of the demand framed on that basis. [Paras 8]

Show cause notice defective for lack of specification of the clause under Business Auxiliary Service.

Negative list regime from 01.07.2012 - maintainability of demand where incorrect service category is charged - Demand for the period post 01.07.2012 is not maintainable as it was not framed under the negative list regime applicable from that date. - HELD THAT: - The Tribunal noted that with effect from 01.07.2012 the negative list regime came into force and the services falling in that regime must be charged accordingly. In the present case no demand was raised against the appellant under the negative list regime for the post 01.07.2012 period; instead the demand was framed under Business Auxiliary Service. Relying on the principle that post 01.07.2012 provisions must be applied as per the negative list, and on earlier Tribunal precedent to like effect, the Tribunal held that demands for the post 01.07.2012 period framed under the wrong statutory regime are not maintainable. The Tribunal also rejected the Revenue's reliance on the Apex Court decision on rectification of mistaken citations as inapplicable to the present facts where no demand under the correct regime was made. [Paras 9, 10, 11, 12, 13]

Demand for the period after 01.07.2012 is not maintainable for failure to invoke the negative list regime.

Final Conclusion: Impugned order set aside; appeal allowed and demand (both on limitation and on lack of proper charging under the negative list / defective show cause notice) is not sustainable, with consequential reliefs to the appellant.

Condonation of delay - sufficiency of reasons for condonation - dismissal for delay

Condonation of delay - sufficiency of reasons for condonation - dismissal for delay - Application for condonation of delay in filing the appeal was dismissed and the appeal was dismissed for want of condonation. - HELD THAT: - The Court recorded that there was a gross delay of 334 days in filing the appeal. After hearing the appellant's senior counsel, the Court found that the reasons advanced for condoning the delay were not sufficient in law to justify condonation. In consequence, the application seeking condonation of delay was dismissed and, therefore, the Civil Appeal was dismissed. The Court expressly left open any question of law to be advanced in another appropriate case. [Paras 2, 3, 4]

Application for condonation of delay dismissed; Civil Appeal dismissed for want of condonation.

Final Conclusion: The application for condonation of delay was dismissed on account of a gross delay of 334 days and inadequate reasons; consequently the Civil Appeal was dismissed, with liberty to raise any question of law in another appropriate case.

Inclusion of value of free materials supplied by principal manufacturer in assessable value for job work - application of the ratio of International Auto Ltd contingent upon principal manufacturer having discharged duty on the total value of the final product - requirement of verification of payment of duty by the principal manufacturer before applying precedent - remand for verification of material fact

Inclusion of value of free materials supplied by principal manufacturer in assessable value for job work - application of the ratio of International Auto Ltd contingent upon principal manufacturer having discharged duty on the total value of the final product - requirement of verification of payment of duty by the principal manufacturer before applying precedent - Whether the respondent is liable to include the value of free material supplied by the principal manufacturer for job work in the assessable value, and whether reliance on International Auto Ltd is permissible without verifying payment of duty by the principal manufacturer. - HELD THAT: - The Tribunal noted that International Auto Ltd permits exclusion of the value of materials supplied to a job worker only where the principal manufacturer has discharged duty on the total value of the finished product (including the value of such supplied material). The Adjudicating Authority had applied International Auto Ltd but merely assumed, without verification, that the principal manufacturer had paid duty on the total value when clearing the finished goods. Because the applicability of the precedent is fact-dependent, and the record does not contain a verified finding that duty was discharged by the principal manufacturer on the entire value, reliance on International Auto Ltd is not appropriate without such verification. Consequently, the matter must be returned for fresh consideration limited to verifying whether the principal manufacturer has paid duty on the total value of the final product (including the value of materials supplied to the job worker) and then deciding liability of the respondent accordingly. [Paras 4, 5]

Impugned order set aside and matter remitted to the Adjudicating Authority to verify whether the principal manufacturer discharged duty on the total value of the finished product and to pass a fresh order in light of that verification.

Final Conclusion: The appeal is allowed by way of remand: the impugned order is set aside and the adjudicating authority is directed to verify whether the principal manufacturer discharged duty on the total value of the final product (including value of materials supplied to the job worker) and thereafter pass a fresh order applying the correct precedential ratio.

Claim for refund under Section 11B of the Central Excise Act, 1944 - obligation to refund where duty paid in excess - Consumer Welfare Fund versus payment to claimant - incidence of duty and non-passing of burden

Claim for refund under Section 11B of the Central Excise Act, 1944 - obligation to refund where duty paid in excess - Consumer Welfare Fund versus payment to claimant - Whether, under Section 11B(2) of the Central Excise Act, 1944, the authority could reject the appellant's refund claim after having found that duty paid was in excess of due, when the excess amount was not credited to the Consumer Welfare Fund. - HELD THAT: - The Tribunal noted that the original authority had itself found that the appellant had paid central excise duty in excess of the amount due. Sub section (2) of Section 11B permits the Assistant/Deputy Commissioner, if satisfied that duty paid is refundable, to either credit the amount to the Consumer Welfare Fund or, by operation of the proviso, pay the amount to the applicant where the excess is relatable to certain categories including where the manufacturer has not passed on the incidence of duty. The order in original did not credit the amount to the Consumer Welfare Fund; having found excess duty was paid, the authority therefore had only the statutory alternative of directing payment to the claimant. There is no provision in Section 11B permitting rejection of a refund claim once the authority is satisfied that duty was paid in excess and the sum has not been so credited to the Fund. The appellate authority's endorsement of the original order was therefore erroneous. The Tribunal applied these statutory provisions to the record and directed refund to the appellant. [Paras 4, 5]

The impugned order rejecting the refund claim was set aside and the Deputy/Assistant Commissioner was directed to pay the refund to the appellant within 30 days of production of a certified copy of the Tribunal's order.

Final Conclusion: Appeal allowed; where an authority finds duty was paid in excess and the excess has not been credited to the Consumer Welfare Fund, Section 11B(2) permits only credit to the Fund or payment to the claimant - rejection of the claim in such circumstances was quashed and refund was directed.

Penalty under Rule 26 of the Central Excise Rules, 2002 - clandestine removal - liability of company director for penalty - mens rea - onus of corroborative evidence

Penalty under Rule 26 of the Central Excise Rules, 2002 - clandestine removal - liability of company director for penalty - mens rea - onus of corroborative evidence - Whether penalty under Rule 26 can be imposed on the appellants, former directors, for alleged clandestine removal in absence of evidence assigning active role or mens rea to them - HELD THAT: - The Tribunal found that the appellants were directors of the company during the alleged period but had resigned before the investigation and no independent corroborative evidence was produced to show their active involvement in clandestine removal. The adjudicating order imposed penalties merely on the basis of directorship without specific findings or allegations of particular acts or mens rea on the part of the appellants. Relying on the principle that Rule 26 requires a person to have been in possession of, or concerned in dealing with excisable goods which he knows or has reason to believe are liable for confiscation, the Tribunal observed that mere overall charge or directorship, without evidence of personal culpability or intention to evade duty, is insufficient to sustain penalty. The Tribunal further relied on its prior approach in similar decisions [Rakesh Singhal , J. Mitra & Co. Ltd. v. CCE, New Delhi ] rejecting imposition of penalty on directors in absence of proof of mens rea or specific acts, and held that penalty cannot be sustained on the present facts. [Paras 6, 7]

Penalty under Rule 26 cannot be imposed on the appellants in absence of evidence showing their active involvement or mens rea; impugned penalties set aside.

Final Conclusion: Appeals allowed; penalties of Rs.10.00 Lakhs each imposed on the appellants under the impugned order are set aside for lack of evidence of personal involvement or intention.

Clandestine clearance of goods - parallel invoices as basis for demand - corroboration of recovered documents - denial of cross examination and principles of natural justice (Section 9D) - reliability of statements of employees relied upon for adjudication

Parallel invoices as basis for demand - corroboration of recovered documents - reliability of statements of employees relied upon for adjudication - Sustainability of demand founded on rough papers, parallel invoices and statements recovered/recorded during search without independent corroboration. - HELD THAT: - The Tribunal held that the departmental case was built primarily on rough papers and three parallel invoices recovered during investigation and on inculpatory statements of the appellant's employees. The Managing Director gave a contradictory statement and the department did not examine the buyers named in the parallel invoices, the transporters, nor made any effort to ascertain the authorship of those invoices. In the absence of such corroborative inquiry or independent evidence linking the seized documents to clandestine removals, the Tribunal found the demand unsustainable. It applied the settled principle that mere existence of two sets of invoices, without positive corroborative evidence, is insufficient to establish clandestine removal and to uphold a duty demand. [Paras 6, 7, 8]

Demand confirmed on the basis of the seized rough papers, parallel invoices and employees' statements set aside for lack of corroboration and positive evidence.

Denial of cross examination and principles of natural justice (Section 9D) - reliability of statements of employees relied upon for adjudication - Effect of non grant of opportunity to cross examine departmental witnesses whose statements were relied upon. - HELD THAT: - The Tribunal found that the appellants were not permitted to cross examine the employees whose statements were relied upon to allege clandestine clearance. Relying on Section 9D of the Central Excise Act and the view in the cited Apex Court authority, the Tribunal held that denial of cross examination where the statement is used against the assessee violates the principles of natural justice. Consequently, the statements could not sustain the demand in the absence of opportunity to test them. [Paras 6]

Penalties and demands based on the untested statements were invalidated and set aside for violation of natural justice.

Final Conclusion: Impugned adjudication confirming duty demand and imposing penalties set aside; appeals allowed with consequential relief in favour of the appellants.

Procedure under Section 9D of the Central Excise Act for admissibility of statements - reliability of private note books and entries as proof of clandestine manufacture and clearance - corroborative evidence requirement for establishing clandestine manufacture and removal - confiscation of unaccounted goods found in factory premises in absence of mens rea or evidence of clandestine removal

Procedure under Section 9D of the Central Excise Act for admissibility of statements - Statements recorded during investigation were inadmissible for corroboration where the statutory procedure under Section 9D was not complied with and witnesses relied upon were not produced for cross-examination. - HELD THAT: - The Tribunal found that the adjudicating authority relied upon statements of certain buyers, a raw material supplier and a director without complying with the procedure prescribed by Section 9D and without offering the assessee the opportunity to cross-examine the makers of those statements. The authorities did not record any reason justifying denial of cross-examination or the invocation of the clause permitting admission in the interest of justice. In view of precedent and the statutory scheme, reliance on such untested statements renders them legally unsustainable as corroborative evidence for confirming duty or imposing penalties. [Paras 4]

Statements relied upon without compliance with Section 9D and without permitting cross-examination are inadmissible and cannot sustain the demand.

Reliability of private note books and entries as proof of clandestine manufacture and clearance - corroborative evidence requirement for establishing clandestine manufacture and removal - Entries in the seized private note books, without independent corroboration and in the face of numerous affidavits and excluded entries, are insufficient to establish clandestine manufacture and clandestine clearances of 'Tar Catchers'. - HELD THAT: - The Tribunal examined the two seized note books and observed that entries were vague, did not specify quantities, values or clear transactional details and that 15 entries were excluded by the Revenue while 107 persons whose names appeared filed affidavits denying purchases. Only five buyers were contacted and no independent evidence was produced regarding procurement of raw materials, transportation, production staff statements, or recovery of cash. The Tribunal reiterated the settled principle that allegations of clandestine manufacture and removal are quasi criminal in nature and require positive, tangible and corroborative evidence from independent sources; mere private jottings cannot, by themselves, support such charges. The Revenue's investigation was held to be sketchy and selective, and a pick and choose approach to evidence was rejected. [Paras 4]

The note books and the limited statements do not constitute reliable or sufficient corroboration to sustain the charges of clandestine manufacture or clearance; the demand based on them cannot be upheld.

Confiscation of unaccounted goods found in factory premises in absence of mens rea or evidence of clandestine removal - Seizure and confiscation of finished goods lying within the factory and not entered in statutory records is not justified in the absence of evidence of clandestine removal or mens rea to remove goods without payment of duty. - HELD THAT: - Applying settled decisions, the Tribunal observed that mere non entry in RG 1 or production records does not automatically attract confiscation under the Rules where the goods are found within the factory and there is no material indicating intent or steps to clandestinely remove them. The adjudicating authority produced no evidence of attempts to remove the goods, and the appellant's explanation (including SSI/exemption context and other explanations) was not disproved by independent evidence. Precedent requires both unaccounted production and corroborative evidence of clandestine clearance for confiscation; absent such evidence, confiscation cannot be sustained. [Paras 4]

Confiscation of the two Tar Catchers found in the factory is set aside for lack of evidence of clandestine removal or mens rea.

Final Conclusion: All impugned orders are set aside; the appeals are allowed and the confirmed demands and confiscation are quashed, with consequential reliefs as per law.

Concessional rate of duty under Notification 9/2000 - option to avail exemption and its irrevocability for the remaining part of the financial year - computation of value of clearances for the Rs.100 lakhs slab - exclusion of clearances on which normal duty was paid from slab computation - entitlement of SSI unit to choose concession for some clearances and pay normal duty for others - precedent of Larger Bench in Kinjal Electricals Pvt. Ltd. interpreting similar notification

Concessional rate of duty under Notification 9/2000 - computation of value of clearances for the Rs.100 lakhs slab - exclusion of clearances on which normal duty was paid from slab computation - option to avail exemption and its irrevocability for the remaining part of the financial year - precedent of Larger Bench in Kinjal Electricals Pvt. Ltd. interpreting similar notification - Value of clearances on which normal duty was paid is to be excluded while computing the value of clearances for entitlement to concessional rates under Notification 9/2000 for the financial year 2000-01. - HELD THAT: - The Tribunal held that a SSI unit which has validly exercised the option to avail benefit under Notification 9/2000 for a financial year cannot be said to have withdrawn that option mid-year by choosing, in respect of selected clearances, to pay normal duty. The slab entitlement up to the first Rs.100 lakhs must be computed by reference only to those clearances where the concessional rate was actually availed. Clearances on which normal duty was paid without availing the notification are to be excluded from the slab computation. This conclusion follows the Larger Bench decision in Kinjal Electricals Pvt. Ltd., which upheld the right of an assessee to not claim exemption for some products while claiming it for others under a similar notification. Applying that principle, the demand of differential duty was found unsustainable and, consequentially, the penalty (which depended on the demand) did not arise. [Paras 6, 7, 8]

Demand of duty confirmed in the impugned order is not sustainable; penalty consequently does not arise.

Final Conclusion: The impugned Order-in-Appeal is set aside and the appeal is allowed; the demand of duty and the penalty confirmed below are quashed for Financial Year 2000-01.

Interest on delayed payment of cess - application of Central Excise provisions to Oil Cess under Section 15(4) of the Oil Industry (Development) Act, 1974 - statutory requirement for substantive provision to levy interest - precedential effect of tribunal and high court decisions on identical question

Interest on delayed payment of cess - statutory requirement for substantive provision to levy interest - application of Central Excise provisions to Oil Cess under Section 15(4) of the Oil Industry (Development) Act, 1974 - No interest is payable under Section 11AB of the Central Excise Act, 1944 on belated payment of Oil Cess levied under the Oil Industry (Development) Act, 1974. - HELD THAT: - The Tribunal examined whether the borrowing clause in Section 15(4) of the OID Act, which makes provisions of the Central Excise Act and Rules applicable for levy and collection of Oil Cess, renders Section 11AB (interest on delayed payment) automatically applicable to Oil Cess. Relying on earlier decisions of the Tribunal (C.C.E. & S.T., Dibrugarh v. Oil And Natural Gas Corporation Ltd.) affirmed by the Gauhati High Court, the Tribunal held that there is no substantive provision in the OID Act itself for levy of interest on delayed payment of cess. The determinative legal principle applied is that interest can be levied only if the taxing statute contains a substantive provision empowering such levy; mere borrowing for collection does not import an interest provision where the parent statute (OID Act) lacks it. Following the cited precedents, the Tribunal concluded that Section 15(4) does not provide for payment of interest and therefore demands of interest under Section 11AB could not be sustained. [Paras 8, 9]

The demand for interest under Section 11AB on delayed payment of Oil Cess is unsustainable; appeal dismissed.

Final Conclusion: Following earlier Tribunal and High Court rulings, the Tribunal affirms that interest cannot be charged on belated payment of Oil Cess because Section 15(4) of the OID Act does not provide for levy of interest; the departmental appeal is rejected.