TaxTMI Updates e-Newsletter
Feb 16,2024

Revival of GST registration subject to compliance - filing of belated returns with payment of tax, interest and fee - prohibition on adjustment of tax dues from unutilized Input Tax Credit - scrutiny and approval of Input Tax Credit before utilisation - requirement to declare correct value of supplies for periods after cancellation - directions to GST Network to enable filing and payment on the portal

Revival of GST registration subject to compliance - filing of belated returns with payment of tax, interest and fee - prohibition on adjustment of tax dues from unutilized Input Tax Credit - scrutiny and approval of Input Tax Credit before utilisation - requirement to declare correct value of supplies for periods after cancellation - Cancellation of the petitioner's GST registration was not left unassailable; registration to be restored on fulfillment of specified conditions. - HELD THAT: - The Court, following the precedent in Suguna Cutpiece v. Appellate Deputy Commissioner (ST)(GST), directed restoration of the petitioner's GST registration on compliance with specified pre-conditions. The petitioner must file returns for periods prior to cancellation and pay the tax dues along with interest and the fee for belated filing within the time stipulated by the Court. Payment of such tax, interest and fee cannot be made or adjusted from any unutilized or unclaimed Input Tax Credit; any unutilized Input Tax Credit shall not be utilized until it is scrutinised and approved by a competent officer. The petitioner must also file returns and pay GST for periods subsequent to cancellation by declaring the correct value of supplies. Only Input Tax Credit approved after departmental scrutiny shall be allowed to be utilised to discharge future tax liabilities. Upon payment of tax, penalty and uploading of returns in accordance with these directions, the registration shall stand revived forthwith. [Paras 4, 5, 6]

Registration to be revived upon filing of stipulated returns and payment of tax, interest and fees, subject to non-utilisation of unapproved Input Tax Credit until departmental scrutiny and approval.

Directions to GST Network to enable filing and payment on the portal - The respondents were directed to take administrative steps to permit electronic compliance by the petitioner on the GST portal. - HELD THAT: - The Court directed the respondents to instruct the GST Network, New Delhi, to make necessary changes in the architecture of the GST web portal so as to allow the petitioner to file returns and pay tax, penalty and fee. This administrative measure is to be completed within thirty days from receipt of the order to facilitate compliance and revival of registration as directed. [Paras 5]

Respondents to arrange portal modifications through GST Network within thirty days to enable the petitioner to file returns and pay dues.

Final Conclusion: Writ petition disposed by directing conditional revival of GST registration on compliance with filing of belated returns and payment of tax, interest and fees, with restrictions on utilisation of unapproved Input Tax Credit and a direction to respondents to facilitate electronic filing and payment through GST Network within thirty days.

Revision under Section 108 - Refund of unutilised Input Tax Credit - Amendment to Rule 89(5) and retrospective operation - Levy of interest under Section 50(3) - Imposition of penalty - Requirement of a speaking order and recording of reasons

Revision under Section 108 - Amendment to Rule 89(5) and retrospective operation - Refund of unutilised Input Tax Credit - Requirement of a speaking order and recording of reasons - Validity of initiating and sustaining revision proceedings against the refund order under Section 108 in the facts of this case - HELD THAT: - The Court noted that the petitioner claimed refund of unutilised input tax credit arising from inputs and input services and that the refund had earlier been partly sanctioned. Although the State relies on the amended Rule 89(5) (whose retrospective operation and validity have been upheld by earlier orders of this Court and by the Supreme Court), the impugned revision order contains no findings dealing with the petitioner's specific contention that the refund order did not warrant revision under Section 108. In the absence of reasons addressing that objection, the Court found the revision order vulnerable to interference and therefore quashed the impugned order and remanded the matter for fresh consideration on merits with a direction to afford the petitioner a reasonable opportunity of hearing. [Paras 6, 7]

Impugned revision order quashed and matter remanded for reconsideration with opportunity of hearing; reconsideration to be completed within two months.

Levy of interest under Section 50(3) - Requirement of a speaking order and recording of reasons - Levy of interest under Section 50(3) as ordered in the impugned revision order - HELD THAT: - The petitioner contended that interest was not leviable under Section 50(3) in the circumstances and that the revision order fails to record reasons on this point. The Court observed that although the contention was noticed, the respondent did not engage with it or record reasons for rejecting it. For that reason the question of levy of interest was not finally adjudicated on merits and requires fresh consideration in a speaking order after affording opportunity to the petitioner. [Paras 6, 7]

Levy of interest not finally sustained; remanded for fresh consideration and speaking reasons after hearing within the stipulated period.

Imposition of penalty - Requirement of a speaking order and recording of reasons - Validity of imposition of penalty in respect of the refund claim - HELD THAT: - The petitioner argued that the refund claim was bona fide under the applicable law and that imposition of penalty was therefore unjustified; the impugned order recorded the contention but did not give reasons rejecting it. The Court held that in absence of engagement with and reasons for rejecting the petitioner's plea, the matter of penalty could not be regarded as finally decided and must be reconsidered by the authority in a speaking order after affording a hearing. [Paras 6, 7]

Imposition of penalty set aside for fresh consideration; remanded to authority to decide with reasons after hearing within two months.

Final Conclusion: The impugned revision order is quashed and the matter remanded for fresh consideration on the questions of validity of revision under Section 108, levy of interest under Section 50(3), and imposition of penalty; the respondent shall afford a reasonable opportunity including personal hearing and pass a speaking order dealing with the objections within two months of receipt of this order.

Power of inspection, search and seizure - seizure under Section 67(2) of the CGST Act - definition of 'goods' excluding money - reading 'things' ejusdem generis with 'documents' and 'books' - seizure limited to items useful or relevant to proceedings under the Act - return of seized goods where no notice within six months

Seizure under Section 67(2) of the CGST Act - definition of 'goods' excluding money - reading 'things' ejusdem generis with 'documents' and 'books' - Whether the Officers had power under Section 67(2) of the CGST Act to seize cash/money found during search - HELD THAT: - Section 67(2) empowers seizure of goods liable for confiscation or documents, books or things which in the officer's opinion are useful or relevant to proceedings under the Act. The CGST Act expressly defines 'goods' to exclude money. The Court adopts a contextual and purposive reading that the word 'things' must take colour from the preceding words 'documents' and 'books' and is aimed at items that contain information or records useful for proceedings under the Act. A broad, unguided construction that would subsume money is impermissible because search and seizure powers are drastic and must be confined to the intended purpose of detecting evasion of tax and collecting material relevant to such proceedings. Applying these principles, money that does not constitute stock-in-trade or evidence useful or relevant to GST proceedings cannot be treated as 'goods' or as a 'thing' within Section 67(2) so as to justify seizure under the CGST Act. [Paras 18, 19, 23, 24]

Cash/money does not fall within 'goods' under the CGST Act and the power under Section 67(2) cannot be exercised to seize money in the circumstances of this case; the seizure/resumption of cash was illegal and arbitrary.

Seizure limited to items useful or relevant to proceedings under the Act - return of seized goods where no notice within six months - power of inspection, search and seizure - Whether the continued retention of the seized cash is justified and whether it must be returned - HELD THAT: - Investigation disclosed no evidence that the seized cash represented sale proceeds of unaccounted goods or that it was otherwise useful or relevant to GST proceedings. The statutory scheme provides that seized goods must be returned if no notice is given within six months of seizure (Section 67(7)), subject to limited extension. The officers' taking of possession was coercive and not voluntary, and no requisition under the Income Tax provisions (Section 132A) has been made to justify continued custody. In these circumstances, there is no legal basis for continued retention of the cash by the respondents, and the statutory return mechanism applies. [Paras 25, 26, 28, 29, 30]

The continued retention of the cash is unjustified; respondents are directed to remit the proceeds of the fixed deposit (with interest) to the bank accounts of the persons/entities from whose possession the cash was seized, while preserving the respondents' right to initiate proceedings in accordance with law.

Final Conclusion: Writ petitions allowed: seizure/resumption of cash on 04.10.2021 under Section 67(2) of the CGST Act was illegal as money is excluded from 'goods' and the cash was not shown to be relevant to GST proceedings; respondents directed to remit the fixed deposit proceeds with interest to the bank accounts of the persons/entities from whose possession the cash was taken, without prejudice to initiation of any lawful proceedings.

Extension of limitation under Section 73(10) by Notification issued under Section 168A - force majeure as defined in the Explanation to Section 168A - challenge to recovery of ineligible input tax credit by issuance of Show Cause Notice - interim relief - proceedings may continue but no final order till returnable date

Interim relief - proceedings may continue but no final order till returnable date - challenge to recovery of ineligible input tax credit by issuance of Show Cause Notice - Petition for interim protection against final adjudication pursuant to the impugned Show Cause Notice. - HELD THAT: - The Court considered the petition seeking interim protection against the Demand-cum-Show Cause Notice issued pursuant to Notification extending the limitation for issuance of orders under sub-section (9) of Section 73 relating to the Financial Year : 2018-2019, and noted the Explanation to Section 168A defining force majeure. The Court also took note of interim orders passed by other High Courts providing protection to similarly situated noticees. Balancing those aspects, the Court directed that the petitioner shall file its reply to the Show Cause Notice by 15.03.2024. Pending the returnable date, the adjudication proceedings initiated pursuant to the Show Cause Notice may continue, but no final order shall be passed in respect of that notice until the returnable date. [Paras 9]

Reply to the Show Cause Notice to be filed on or before 15.03.2024; proceedings may continue but no final order shall be passed till the returnable date.

Final Conclusion: Notice issued; matter posted to 15.03.2024. Interim direction permits filing of reply by that date and restrains passing of any final order pursuant to the impugned Show Cause Notice until the returnable date.

E-way bill - place of supply - technical/clerical error - penalty under Section 129 - presumption of intention to evade tax - goods accompanied by invoice and bilty - burden on department to establish intention

E-way bill - place of supply - technical/clerical error - penalty under Section 129 - presumption of intention to evade tax - goods accompanied by invoice and bilty - burden on department to establish intention - Whether the penalty imposed under Section 129 of the Act could be sustained where four out of eight e-way bills incorrectly recorded the place of supply (registered office) but the invoices and bilties correctly recorded the factory destination and the error was a clerical/typographical mistake. - HELD THAT: - The Court found that although four e-way bills contained an incorrect address, the incorrect address was not anonymous but the registered office of the petitioner and all eight invoices and eight bilties correctly recorded the destination. Where goods are accompanied by relevant invoices and bilties and the incorrect entries are typographical or clerical, a presumption of intention to evade tax does not automatically arise. A presumption of evasion may be raised in cases of wholesale disregard of the Rules (for example, absence of invoice or e-way bill), but such a presumption is rebuttable and the department must point to evidence of intention. On the facts, no evidence of intention to evade tax was found and the mistake on the part of suppliers in auto-populating the principal place of business was a plausible explanation. Consequently, imposition of the harsh penalty under Section 129 was without basis in law and liable to be quashed. [Paras 8, 9, 11, 12, 13]

Impugned penalty order dated February 14, 2020 and the order in appeal dated October 13, 2020 are quashed and set aside; writ petition allowed.

Final Conclusion: Penalty imposed under Section 129 of the Uttar Pradesh Goods and Services Tax Act, 2017 was quashed where the incorrect place of supply in some e-way bills amounted to a clerical/typographical error, invoices and bilties correctly recorded the destination, and no intention to evade tax was shown.

Cancellation of GST registration with retrospective effect - objective satisfaction for retrospective cancellation - natural justice - opportunity to object to retrospective cancellation - consequences of retrospective cancellation on input tax credit - rejection of application for cancellation without cogent reasons

Cancellation of GST registration with retrospective effect - objective satisfaction for retrospective cancellation - natural justice - opportunity to object to retrospective cancellation - consequences of retrospective cancellation on input tax credit - Validity of cancellation order insofar as it canceled the petitioner's GST registration retrospectively from 11.09.2017 - HELD THAT: - The Court held that cancellation of registration with retrospective effect under Section 29(2) cannot be applied mechanically or subjectively; the proper officer must record objective satisfaction and consider consequences before fixing a retrospective date. The impugned order canceled registration retrospectively without adducing material showing why a retrospective date was warranted and without putting the petitioner on notice of retrospective effect, thereby denying an opportunity to object. The Court observed that retrospective cancellation has consequences (including impact on recipients' input tax credit) which the proper officer is required to consider. Applying these principles, the Court modified the cancellation order so that it operates from the date of the petitioner's cancellation application, namely 16.01.2021. [Paras 9, 11, 12, 15]

Cancellation order quashed insofar as it operates retrospectively from 11.09.2017 and instead shall operate with effect from 16.01.2021.

Rejection of application for cancellation without cogent reasons - natural justice - adequacy of reasons in administrative orders - Validity of the order dated 27.01.2021 rejecting the petitioner's application for cancellation on the ground of an 'unsatisfactory reply' without specifying cogent reasons - HELD THAT: - The Court found that the order rejecting the petitioner's application employed a template form and failed to specify any particular or cogent reasons why the reply was unsatisfactory. Such non-specific rejection deprived the petitioner of clarity as to the basis of the decision. The absence of particulars rendered the rejection vulnerable to judicial scrutiny. [Paras 6, 7]

The rejection was found to be unsatisfactory in reasoning; in consequence the cancellation is modified in line with the Court's directions.

Procedural compliance - furnishing details in response to notice - recovery of tax, penalty and interest in accordance with law - Directions regarding further proceedings after modification of the cancellation date - HELD THAT: - The petitioner was directed to furnish all requisite details called for in the notice dated 18.01.2021 to enable the respondents to ascertain whether any demand is liable to be raised. The Court clarified that respondents are not precluded from pursuing recovery of any tax, penalty or interest due in accordance with law. These directions preserve the department's right to proceed while protecting the petitioner from retroactive cancellation without notice. [Paras 16, 17]

Petitioner to furnish required details; respondents may take steps for recovery of any tax, penalty or interest in accordance with law.

Final Conclusion: The petition is allowed in part: the retrospective cancellation from 11.09.2017 is set aside and the GST registration is cancelled effective 16.01.2021 (date of the petitioner's application); petitioner must supply required particulars called for by the department and the department remains entitled to recover any tax, penalty or interest in accordance with law.

Cancellation of GST registration with retrospective effect - Exercise of power to cancel registration with retrospective effect under Section 29(2) of the Central Goods and Services Tax Act, 2017 - Requirement of objective satisfaction for retrospective cancellation - Need for notice and opportunity before retrospective cancellation - Consequences of retrospective cancellation on input tax credit

Cancellation of GST registration with retrospective effect - Requirement of objective satisfaction for retrospective cancellation - Need for notice and opportunity before retrospective cancellation - Validity of retrospective cancellation of the petitioner's GST registration to 01.07.2017 where petitioner had applied for cancellation effective 31.03.2020 and was not put on notice of retrospective effect. - HELD THAT: - The Court held that while Section 29(2) empowers the proper officer to cancel registration from such date including a retrospective date, the power cannot be exercised mechanically. The officer's satisfaction to fix a retrospective date must be based on objective criteria and not mere subjective satisfaction; non-filing of returns for a period does not ipso facto justify cancelling registration retrospectively for periods during which returns were filed and compliance existed. Further, because the Show Cause Notice did not indicate that cancellation would be with retrospective effect, the petitioner had no opportunity to object to a retrospective cancellation. In these circumstances, the order cancelling registration retrospectively from 01.07.2017 was unsustainable and was required to be modified to the date on which the petitioner ceased business, namely 31.03.2020. [Paras 12, 13, 14, 15, 16]

Order of cancellation modified to operate with effect from 31.03.2020 instead of 01.07.2017.

Procedure following modification of cancellation - Recovery of tax, penalty or interest - Obligations of the petitioner and rights of respondents following modification of the cancellation date. - HELD THAT: - The Court directed the petitioner to furnish requisite details in respect of the notice dated 12.09.2020 so that the respondents may ascertain whether any demand is leviable. The Court clarified that the respondents remain entitled to take steps for recovery of any tax, penalty or interest due in accordance with law. These directions preserve the respondents' right to verify compliance and to recover liabilities while giving effect to the modified effective date of cancellation. [Paras 17, 18]

Petitioner to furnish required details; respondents not precluded from recovering any tax, penalty or interest in accordance with law.

Final Conclusion: Writ petition allowed; the cancellation order is modified so that GST registration of the petitioner stands cancelled with effect from 31.03.2020. Petitioner must furnish particulars called for in the 12.09.2020 notice and the authorities may proceed to assess and recover any tax, penalty or interest as per law.

Review petition -Nature of expenses - apportioning the licence fee as partly revenue and partly capital - variable licence fee paid by the assessees under the New Telecom Policy, 1999 to Department of Telecommunications (“DoT”) - Allowability of revenue expenses u/s 37 or capital in nature [to be amortised u/s 35ABB] - Payment of royalty - distinction between a payment made to acquire a right, and payment of royalty in a broad sense - As decided in BHARTI HEXACOM LTD. [2023 (10) TMI 786 - SUPREME COURT] single transaction cannot be split up, in an artificial manner into a capital payment and revenue payments by simply considering the mode of payment. Such a characterisation would be contrary to the settled position of law - High Court of Delhi [2013 (12) TMI 1115 - DELHI HIGH COURT] was not right in apportioning the expenditure incurred towards establishing, operating and maintaining telecom services, as partly revenue and partly capital by dividing the licence fee into two periods

HELD THAT:- Having carefully gone through the Review Petition, the order under challenge and the papers annexed therewith, we are satisfied that there is no error apparent on the face of the record or any merit in the Review Petition, warranting reconsideration of the order impugned.

The Review Petition is, accordingly, dismissed.

Deduction of tax at source - Section 194C - in pursuance of a contract - contractor - specified person - Section 196 - Article 289 - assessee in default - Section 201 - penalty under Section 271C - show cause notice requirements - reasonable cause for failure to deduct

Section 194C - deduction of tax at source - in pursuance of a contract - contractor - specified person - Whether payments of External Development Charges (EDC) made to HSVP fall within the ambit of Section 194C and attract obligation to deduct TDS. - HELD THAT: - The Court held that Section 194C imposes an obligation on any person responsible for paying a sum to a resident carrying out work pursuant to a contract between that resident (contractor) and a specified person; it does not require privity of contract between the payer and the contractor. Reading the HDRUA, the Rules and the bilateral licence forms together shows owners/developers were obliged to make payments in favour of HSVP for external development works which HSVP carried out pursuant to an arrangement with the State (a 'specified person'). The DTCP communications acknowledge that HSVP executed EDW for the State and received EDC (prior to FY 2017-18) and that funds were routed through DTCP. Following the Supreme Court's approach in Shree Choudhary Transport, the Court accepted that the existence of a contract or arrangement may be gleaned from conduct and statutory scheme even if not reduced to a formal contract. Given the statutory scheme, the licence terms (Form LC IV D) and the acknowledged arrangement between HSVP and the State, payments made by the petitioners to HSVP for EDW were payments to a contractor pursuant to an arrangement with a specified person and therefore Section 194C was attracted. [Paras 61, 62, 63, 64, 88]

EDC payments to HSVP are covered by Section 194C and the petitioners were under an obligation to deduct TDS when making those payments.

Section 196 - Article 289 - deduction of tax at source - Whether EDC payments should be treated as payments to the State (thereby exempt under Section 196 / Article 289) so as to negate the obligation to deduct TDS. - HELD THAT: - The Court rejected the petitioners' contention that payments were to the Government within the meaning of Section 196. The statutory and judicial distinction between a State and a statutory authority was emphasised: a body corporate established by State legislation (such as HSVP) has a separate legal personality and its income is not automatically the income of the State. The Court relied upon the principles in Adityapur Industrial Area and A.P. SRTC to conclude that HSVP, being a statutory authority with its own fund and assets, cannot be equated with the Government for exemption under Section 196. The fact that DTCP quantified or routed payments, or that EDC could be recoverable as arrears of land revenue, does not convert HSVP into the State for purposes of Section 196. [Paras 69, 70, 71, 72, 73]

EDC payments cannot be treated as payments to the State for exemption under Section 196; Section 196 does not apply to bar TDS liability in these circumstances.

Show cause notice requirements - Section 201 - assesse in default - penalty under Section 271C - reasonable cause for failure to deduct - Validity of show cause notices and consequences of failure to deduct tax (declaration as assessee in default, interest and penalty) and appropriate disposal of pending proceedings. - HELD THAT: - The Court observed that show cause notices must specify the precise statutory provision and factual basis so the noticee knows the charge to be met; vagueness may render a notice quashable. Nevertheless, having heard merits and parties fully and given that Section 194C was expressly raised in respondents' pleadings, the Court declined widespread relief on the ground of defective notices. The Court reiterated legal principles that (a) a payer's obligation to deduct under Chapter XVII B is strict and not discretionary; (b) certificates under Sections 197/197A are the statutory route to avoid or reduce deduction; and (c) penalties may be avoided where the payer proves reasonable cause under Section 273B or where the recipient has already paid tax on the income. Applying Eli Lilly, Singapore Airlines and related precedents, the Court quashed several final orders under Section 201 and directed that proceedings where final orders have not been passed may be revived and concluded afresh in accordance with this judgment; in specified writs the final orders under Section 201 and consequential penalties under Section 271C were set aside with liberty to respondents to retry following the principles laid down. [Paras 87, 89, 91, 92, 93]

Show cause notices must be particularised but because petitioners were heard on merits the Court declined wholesale quash; certain final orders under Section 201 and penalties were quashed and the respondents are permitted to revive or decide pending show cause proceedings afresh in accordance with this judgment, subject to verification whether recipients have paid tax and whether reasonable cause exists.

Final Conclusion: The writ petitions are dismissed insofar as the primary contention that EDC payments are not subject to TDS: the Court holds that payments of External Development Charges to HSVP fall within Section 194C and the petitioners were obliged to deduct tax at source. Section 196 (exemption as payment to the State) is rejected. Certain final orders under Section 201 and penalties (as identified in the judgment) are quashed and the respondents are permitted to reopen or conclude pending show cause proceedings afresh in accordance with the legal principles stated, including verification whether recipients have paid tax and consideration of reasonable cause for non-deduction.

Weighted deduction under Section 35(2AB) - approval and recognition by prescribed authority - expenditure on scientific research incurred prior to approval - interpretation of Rule 6(7A) regarding quantification of expenditure - Form 3CM and Form 3CL certification of eligible expenditure - beneficial construction of taxation provision

Weighted deduction under Section 35(2AB) - expenditure on scientific research incurred prior to approval - interpretation of Rule 6(7A) regarding quantification of expenditure - beneficial construction of taxation provision - Expenditure incurred for creation of an in house R&D facility prior to DSIR recognition/approval is eligible for weighted deduction under Section 35(2AB) and is not cut down to expenditure incurred only after grant of approval. - HELD THAT: - The Court held that Section 35(2AB) and Rule 6 speak of expenditure "so incurred" and of quantification of expenditure "incurred ... during the previous year," which presupposes expenditure already made and not confined to amounts outlaid after formal approval. Reading the statutory provisions to restrict eligibility only to post approval expenditure would be contrary to the object of the provision to incentivise creation of R&D facilities and would be irrational, since approval is a preparatory step for certifying and quantifying expenditure rather than a fetter on what may have already been incurred. The Court accepted the reasoning in Claris Lifesciences Ltd. that neither the Act nor the Rules indicate that the date of approval is the cut off for eligibility. The DSIR Guidelines (notably Clause 5(v)) themselves contemplate claims for qualifying expenditure from the commencement of the preceding financial year where subsequent recognition is obtained. Consequently, the respondent's construction limiting weighted deduction to expenditure incurred only after 27 February 2019 was held unsustainable. [Paras 20, 21, 22, 23, 24]

The limitation of eligibility to expenditure incurred only after DSIR approval (27 February 2019) is quashed; expenditure incurred prior to approval (including in FY 2018-19) may be considered for weighted deduction under Section 35(2AB).

Form 3CM and Form 3CL certification of eligible expenditure - approval and recognition by prescribed authority - interpretation of Rule 6(7A) regarding quantification of expenditure - Whether the communications of the respondent restricting approval period should be set aside and appropriate forms reissued to reflect eligibility from 1 April 2018. - HELD THAT: - In view of the legal conclusions on eligibility, the Court found the impugned communications of 28 February 2020 and 11 May 2020 unsustainable. The Court directed quashing of those communications and ordered issuance of an amended Form 3CM to be read as effective from 01 April 2018. The Court further directed the prescribed authority to frame Form 3CL afresh specifying the expenditure incurred by the petitioner in Financial Year 2018 19 commencing from 01 April 2018 for computation of weighted deductions, and to examine and verify the Form 3CLA already submitted. [Paras 25, 26]

Communications dated 28 February 2020 and 11 May 2020 quashed; amended Form 3CM to be issued effective 01 April 2018 and Form 3CL to be prepared afresh specifying expenditure for FY 2018 19, with verification of the submitted Form 3CLA.

Final Conclusion: Writ petition allowed. The respondent's communications limiting eligibility to post approval expenditure are quashed; DSIR is directed to issue an amended Form 3CM effective 01 April 2018 and to furnish a fresh Form 3CL quantifying expenditure for FY 2018 19 (to be verified against the submitted Form 3CLA) for computation of weighted deduction under Section 35(2AB).

Objections before Dispute Resolution Panel - Duty of Assessing Officer to act in conformity with directions of DRP - Quashing of assessment and consequential notices where DRP reference pending

Objections before Dispute Resolution Panel - Quashing of assessment and consequential notices where DRP reference pending - Final assessment order dated 30.12.2023 and consequential notices were set aside because the assessee had filed objections before the DRP and the DRP reference remained pending. - HELD THAT: - The court accepted the petitioner's stand that objections were filed with the DRP and that the DRP is the forum to consider those objections. The Assessing Officer himself recorded that the objections were available on the ITBA portal. Given that Section 144C contemplates the DRP's consideration and that the AO's final order must be in conformity with the DRP's directions, the court found it appropriate to quash the final assessment order and the associated notices issued on 30.12.2023 and to set aside those proceedings so that the DRP may first decide the reference and the AO may thereafter act in accordance with law. The court also observed that the AO would not be faulted for having passed the order but must re-consider the matter after the DRP's decision.

Final assessment order dated 30.12.2023 and the notice of demand and penalty notices issued the same date are quashed and set aside.

Duty of Assessing Officer to act in conformity with directions of DRP - Proceedings remitted to Assessing Officer to take further steps after the DRP passes its order on the reference filed by the petitioner. - HELD THAT: - The court directed that, since the DRP reference is pending, the AO shall await the DRP's decision and then take steps in accordance with the DRP's views and applicable statutory provisions. The order contemplates a fresh assessment process in conformity with the DRP's directions; the remit is for the purpose of ensuring that the AO applies the DRP's conclusions and issues any further orders in accordance with law.

Matter remitted to the Assessing Officer to proceed after the DRP passes its order, and the AO shall consider the views of the DRP while passing a fresh assessment order.

Final Conclusion: The petition is allowed: the final assessment order and the demand and penalty notices dated 30.12.2023 for Assessment Year 2021-2022 are quashed; the Assessing Officer is directed to take further steps only after the Dispute Resolution Panel disposes of the reference, and to act in conformity with the DRP's directions.

Compliance with Section 148A of the Income tax Act - Requirement of a speaking order under Section 148A(d) - Supply of information and annexures with show cause notice under Section 148A(b) - Prior approval of specified authority for actions under Section 148A - Exception to alternative remedy where fundamental jurisdictional or natural justice defect exists

Compliance with Section 148A of the Income tax Act - Requirement of a speaking order under Section 148A(d) - Supply of information and annexures with show cause notice under Section 148A(b) - Prior approval of specified authority for actions under Section 148A - Impugned order passed under Section 148A(d) was in accordance with the procedure mandated by Section 148A and applicable guidelines - HELD THAT: - The Court examined the statutory scheme introduced by Finance Act, 2021 and the CBDT guidelines which require that before issuing notice under Section 148 the AO (i) may conduct enquiry with prior approval of the specified authority, (ii) serve a show cause notice under Section 148A(b) enclosing the information and supporting documents relied upon, (iii) consider the assessee's reply, and (iv) pass a reasoned/speaking order under Section 148A(d) with prior approval within the prescribed time. In the present case the show cause material was supplied only on 27.06.2022, the AO's order reproduced the earlier reply but failed to consider the additional reply dated 14.06.2022 and did not deal with the objections raised therein. For these reasons the order under Section 148A(d) did not comply with the mandatory procedure and the requirement of a speaking order considering the material on record and the assessee's replies. [Paras 14, 15, 18]

Impugned order under Section 148A(d) quashed for non compliance with the procedure; consequential reassessment proceedings set aside and matter remitted for fresh action in accordance with law.

Exception to alternative remedy where fundamental jurisdictional or natural justice defect exists - Whether the writ petition was maintainable despite the availability of statutory/appellate remedies - HELD THAT: - The Court considered the respondent's plea of alternative remedy by appeal but held that where a statutory provision mandates a particular procedure and that procedure has not been followed, the defect goes to the root of jurisdiction to initiate proceedings. Relying on recognised contingencies permitting writ jurisdiction despite alternative remedies (including violation of principles of natural justice or proceedings being without jurisdiction), the Court found that the present case fell within those exceptions because the mandatory procedure under Section 148A and the guidelines was not complied with. [Paras 16, 17]

Writ petition entertained and allowed despite availability of alternative remedy; challenge to initiation of proceedings permitted.

Final Conclusion: The order dated 26.07.2022 passed under Section 148A(d) is quashed for failure to comply with the mandatory procedure and to pass a speaking order after considering the assessee's replies; consequential reassessment proceedings are set aside and the matter is remitted to the respondent to proceed afresh by issuing notice under Section 148A(b) in accordance with law. The writ petition is allowed.

Requirement of recording of satisfaction under Section 158BD before proceeding against a person other than the searched person - Transmission of seized records to the Assessing Officer having jurisdiction as a machinery provision - Validity of assessment completed under Section 158BC where mandatory pre requisite under Section 158BD is not complied with - Admissibility of seized books and cash book entries to establish availability of cash - Presumption of ownership of seized cash and burden to prove source

Requirement of recording of satisfaction under Section 158BD before proceeding against a person other than the searched person - Validity of assessment completed under Section 158BC where mandatory pre requisite under Section 158BD is not complied with - Assessment proceedings under Section 158BC were invalid for want of a satisfaction note under Section 158BD - HELD THAT: - The Court held that Section 158BD is a mandatory machinery provision which requires the Assessing Officer to record satisfaction that undisclosed income belongs to a person other than the searched person before transmitting seized records to the Assessing Officer having jurisdiction over that other person. Reliance was placed on the principles explained in Commissioner of Income Tax v. Calcutta Knitwears that a satisfaction note is a sine qua non and may be recorded at the time of initiating proceedings under Section 158BC, during the assessment, or immediately after completion of those proceedings, but in any event must be recorded by the officer exercising jurisdiction over such other person. In the present case the respondent conceded that no satisfaction note was recorded either before, along with, or after the assessment; hence the proceedings initiated under Section 158BC were held to be patently illegal and without jurisdiction. [Paras 11, 12, 14, 15, 16]

Proceedings and assessment under Section 158BC are invalid and cannot be sustained for want of the mandatory satisfaction note under Section 158BD.

Admissibility of seized books and cash book entries to establish availability of cash - Presumption of ownership of seized cash and burden to prove source - Addition of the seized cash in the assessee's hands was perverse in view of seized books, corroborative statements and attendance of payors under Section 131 - HELD THAT: - The Court found that the seized cash was expressly claimed by the assessee as belonging to his three entities and that the cash book and other books of those entities, seized during search, reflected sufficient closing cash balances corresponding to the amounts claimed. Parties who were alleged payors appeared on notices under Section 131 and confirmed the transactions. The assessing officer's rejection of this evidence on the vague ground that the payors "failed to clearly and specifically evidence the source of the payments" was held to disregard cogent material on record. Given the books of account seized during search, the statements of the assessee and his father and the confirmations from payors, there was no occasion to make the addition of the seized sum in the hands of the assessee; the Tribunal's upholding of that addition was accordingly perverse. The CIT(A) rightly allowed the appeal on these facts. [Paras 7, 8, 9, 10, 16]

Addition of the seized cash to the assessee's income was reversed as perverse; the assessee's explanation supported by seized books and statements was accepted.

Final Conclusion: The appeal is allowed: the Tribunal's order upholding the block assessment (01.04.1989 to 09.09.1999) is set aside because the Assessing Officer failed to record the mandatory satisfaction under Section 158BD and, on the merits, the addition of the seized cash in the assessee's hands was perverse and rightly disallowed by the CIT(A).

Draft assessment under Section 144C - Objection before Dispute Resolution Panel - Finalisation of assessment by assessing authority despite pending DRP proceedings - Directions of Dispute Resolution Panel and consequential duty on assessing authority - Remand for fresh consideration to give effect to DRP directions - Availability of alternative remedy and writ jurisdiction under Article 226

Draft assessment under Section 144C - Objection before Dispute Resolution Panel - Whether the assessing authority was correct in recording that no objection was filed to the draft assessment order when the assessee had filed objection before the Dispute Resolution Panel. - HELD THAT: - The Court found on the record that the petitioner, a non-resident assessee, filed objections to the draft assessment order within the 30-day period before the Dispute Resolution Panel (DRP). The assessing authority's contrary finding that no objection had been filed was contrary to the material available on the web portal and to the procedural requirement that objections to a draft under Section 144C could be filed before the DRP. The assessing authority could not, by a technical reading or presumption that an additional filing before the assessing authority was required, treat the objection as nonexistent when it had been lodged before the DRP in the prescribed manner. The finding in the final assessment that no objection had been filed was therefore palpably incorrect and vitiated the assessment order. [Paras 2, 3, 5, 7]

Assessing authority's recording that no objection was filed is incorrect; that finding vitiates the assessment order.

Directions of Dispute Resolution Panel and consequential duty on assessing authority - Remand for fresh consideration to give effect to DRP directions - Whether the assessment should be set aside and remitted to the assessing authority for consideration in accordance with the DRP's directions. - HELD THAT: - The DRP, having considered the objections, issued directions after the assessing authority had already finalised the assessment on an incorrect premise. Given that the DRP is empowered under Section 144C to direct the assessing authority and that the assessing authority must finalise the assessment in accordance with DRP directions, the Court set aside the impugned assessment order. The matter is remanded to the assessing authority to consider Exhibit P-4 (the DRP direction) and to pass a fresh assessment order in accordance with law. Although the respondents urged that an appeal under the relevant appellate provisions was available and that the writ was not maintainable, the Court proceeded to correct the manifest error in the assessment by setting it aside and directing remand for compliance with the DRP directions. [Paras 4, 7, 9]

Assessment order set aside and remitted to the assessing authority to consider the DRP's directions and pass a fresh assessment in accordance with law.

Final Conclusion: Impugned assessment order quashed for erroneous finding that no objection to the draft assessment had been filed; matter remitted to the assessing authority to give effect to the Dispute Resolution Panel's directions and to pass a fresh assessment order in accordance with law (Assessment Year 2014-15).

Principle of natural justice (audi alteram partem) - addition under Section 68 treated as income of the assessee - opportunity to file explanation and supporting documents - remand for fresh assessment limited to specified creditors

Principle of natural justice (audi alteram partem) - addition under Section 68 treated as income of the assessee - Whether additions under Section 68 in respect of loans from five specified persons are vitiated for want of notice to the petitioner and breach of the principle of natural justice - HELD THAT: - The show cause notice identified 22 lenders while the assessment order made additions in respect of loans from 28 persons. Transactions of five persons - Basatin Antony, George K C, Rosamma Mathew, Lisha K Thayil and Suji Jospeh - were not put to notice so the petitioner had no occasion to tender explanations or documentary evidence regarding those specific loans. The court held that making additions under Section 68 in respect of those five transactions without affording the petitioner an opportunity to explain amounted to a breach of the audi alteram partem principle. Having found lack of notice and denial of opportunity in respect of these five creditors, the assessment is vitiated to that extent and cannot stand without fresh consideration after giving the petitioner a chance to file responses and supporting documents. [Paras 6, 7, 9]

Additions in respect of the five specified lenders are set aside as vitiating the assessment order insofar as those additions are concerned.

Remand for fresh assessment limited to specified creditors - opportunity to file explanation and supporting documents - Remedial direction to the assessing authority and scope of remand - HELD THAT: - The matter is remitted to the assessing authority for passing a fresh assessment order limited to the five creditors whose transactions were not put to notice. The petitioner is directed to file a single response with supporting documents in respect of those five transactions; the respondents must activate the electronic link and permit upload of the petitioner's explanation. No opportunity is granted in respect of other creditors. The assessing authority shall consider the petitioner's submissions and pass a fresh assessment; meanwhile, no recovery pursuant to the impugned assessment order shall be effected. [Paras 9, 10]

Writ petition disposed; matter remanded for fresh assessment limited to the five named creditors with directions to provide one opportunity to the petitioner to file responses and to refrain from recovery pending fresh assessment.

Final Conclusion: The court set aside the additions made in respect of loans from five named persons for lack of notice and breach of natural justice, and remanded the matter to the assessing authority to afford the petitioner one opportunity to file explanations and supporting documents in respect of those five transactions and to pass a fresh assessment order; no recovery to be effected till the fresh assessment is completed.

Arm's length principle - Most Appropriate Method - Transactional Net Margin Method (TNMM) - Comparable Uncontrolled Price (CUP) method - Working capital adjustment - Directions of the Dispute Resolution Panel (DRP) - Consistency in transfer pricing methodology

Directions of the Dispute Resolution Panel (DRP) - Working capital adjustment - Whether the Assessing Officer complied with the DRP's directions concerning working capital adjustment and what remedy is required. - HELD THAT: - The Tribunal examined the DRP directions (para 2.1) which required computation of the mean of the working capital adjustment for the comparables retained. The AO's final order (para 5 of the assessment order) partially implemented the DRP directions but omitted the working capital adjustment. The Tribunal found that the AO had erred in not giving effect to the DRP direction on working capital and that the omission could not be sustained. In consequence, the Tribunal directed the AO/TPO to consider all the DRP directions, including computation of the working capital adjustment, while drafting the final assessment order. The relief is framed as a remit to the AO/TPO for compliance rather than a substantive adjudication on the quantum of adjustment. [Paras 6]

Partly allow; remit to AO/TPO to consider and give effect to the DRP's directions on working capital adjustment.

Most Appropriate Method - Transactional Net Margin Method (TNMM) - Comparable Uncontrolled Price (CUP) method - Consistency in transfer pricing methodology - Whether the assessee could change the benchmarking method from TNMM (adopted in the TP report and other years) to CUP for AY 2012-13. - HELD THAT: - The Tribunal noted that an assessee may change the method adopted in the TP study if the alternative satisfies the requirements of the Rules. However, where there is no change in facts or circumstances and the assessee has consistently used TNMM in preceding and succeeding years, the Tribunal held that consistency must be respected absent reasons to deviate. The assessee failed to demonstrate any change in facts that would justify adopting CUP; reliance on an earlier final order for a different year was not sufficient to displace the method chosen for the year under appeal. Consequently, the request to substitute CUP for TNMM was rejected. [Paras 8]

Dismiss grounds seeking adoption of CUP; uphold TNMM as the Most Appropriate Method for AY 2012-13.

Arm's length principle - Multiple/prior year data for comparables - Adjustments for abnormal loss, under utilisation of capacity, and non operating/extraordinary expenses - Whether the objections to the TPO/DRP findings - relating to use of single year data, peculiar economic conditions, abnormal business loss, under utilisation of capacity, treatment of non operating/extraordinary expenses, and working capital differences - warranted reversal of the transfer pricing adjustment. - HELD THAT: - The Tribunal reviewed the DRP's specific findings (DRP order dated 31/10/2016) that the assessee failed to demonstrate that use of earlier years' data would yield more reliable results, and that the alleged peculiar conditions, abnormal loss, under utilisation, and extraordinary/non operating expenses were not shown to be unique to the assessee or absent in comparables. The assessee did not produce supporting material before the DRP or the Tribunal to substantiate these contentions. On this basis, the Tribunal upheld the DRP's rejection of these objections and declined to disturb the transfer pricing adjustment on these grounds. (The working capital point was, however, separately remitted as indicated.) [Paras 10]

Reject objections regarding multiple year data, peculiar economic conditions, abnormal loss, under utilisation, and non operating/extraordinary expenses; uphold DRP's conclusions except that working capital directions are to be implemented as remitted.

Final Conclusion: The appeal is partly allowed for statistical purposes by directing the AO/TPO to give effect to the DRP's working capital directions; the assessee's challenge to the use of TNMM and other substantive objections were rejected and the transfer pricing adjustment is otherwise upheld for AY 2012 13.

Revisionary jurisdiction under section 263 of the Income Tax Act - erroneous and prejudicial to the interests of revenue - taxability of interest under section 28 of the Land Acquisition Act - characterisation of interest as part of enhanced compensation versus income from other sources - effect of Finance (No.2) Act, 2009 amendments on taxability of interest - reliance on binding precedent and scope of revisional power

Revisionary jurisdiction under section 263 of the Income Tax Act - erroneous and prejudicial to the interests of revenue - Whether the revisional order passed by the Principal Commissioner of Income Tax under section 263 setting aside the assessment on the ground of lack of enquiry and that the assessment was erroneous and prejudicial to revenue is sustainable. - HELD THAT: - The Tribunal held that the record evidences that the Assessing Officer issued enquiries under sections 143(2) and 142(1), sought specific information on receipt of compensation and interest, and accepted the assessee's explanation that interest under section 28 of the Land Acquisition Act formed part of enhanced compensation and was exempt under section 10(37) following the Supreme Court decision in Ghanshyam HUF. The mere absence of elaborate discussion in the assessment order does not establish lack of enquiry. An incorrect application of law or an arguable view does not ipso facto render an order erroneous and prejudicial; where two reasonable views exist and the AO adopts one, revisional jurisdiction under section 263 cannot be invoked. Applying these principles to the facts, the Tribunal concluded that the PCIT's finding of lack of enquiry and consequent exercise of revisionary power was unsustainable. [Paras 10, 11, 16, 17]

Revisionary order under section 263 is not sustainable and is quashed as the AO had made requisite enquiries and adopted a debatable but tenable view.

Effect of Finance (No.2) Act, 2009 amendments on taxability of interest - characterisation of interest as part of enhanced compensation versus income from other sources - reliance on binding precedent and scope of revisional power - Whether the amended provisions introduced by the Finance (No.2) Act, 2009 altered the character of interest under section 28 of the Land Acquisition Act so as to make the Assessing Officer's reliance on Ghanshyam HUF unsustainable and require reassessment as income from other sources. - HELD THAT: - The Tribunal analysed the legislative history and judicial decisions and observed that the 2009 amendments (inserting provisions for taxation of certain interest as income in the year of receipt) were intended to address the ruling in Rama Bai concerning year of taxation, not to overturn the Supreme Court's ratio in Ghanshyam HUF regarding the character of interest under section 28. The Tribunal further noted that the Punjab & Haryana High Court decision in Mahender Pal Narang was rendered on its particular facts and did not displace the Supreme Court precedents; reliance on that decision by the revisional authority was misplaced. Consequently, the AO's view, founded on Ghanshyam HUF that interest under section 28 can form part of compensation and be exempt under section 10(37), remained a tenable view. [Paras 12, 13, 14, 15]

The 2009 amendments do not compel treating interest under section 28 as necessarily taxable as income from other sources in the facts of this case; the AO's characterisation based on Ghanshyam HUF is a tenable view and does not render the assessment erroneous.

Reliance on proposal by successor assessing officer - validity of initiation of proceedings under section 263 - Whether initiation of proceedings under section 263 was void-ab-initio because it was based on a proposal of the successor Assessing Officer and an unsigned show cause notice. - HELD THAT: - The Tribunal noted the existence of a proposal by the successor AO and the appellant's contention regarding an unsigned show cause notice. However, it found on the record that the Principal Commissioner did not mechanically act on the proposal but examined the assessment records and the assessee's submissions. The Tribunal did not rest the decision on procedural infirmities relating to the proposal or the signature of the notice; instead it concluded on the merits that the PCIT's exercise of revisional power was unjustified because the AO's action was not shown to be erroneous or prejudicial. [Paras 8, 11]

The initiation based on a proposal was not treated as vitiating the proceedings; the revisional order was quashed on substantive grounds rather than on the basis that initiation was void-ab-initio.

Final Conclusion: The Tribunal allowed the assessee's appeal, quashed the order of the Principal Commissioner under section 263 and held that the assessment for AY 2018-19, in which the AO accepted the assessee's view that interest under section 28 of the Land Acquisition Act formed part of exempt compensation, was not shown to be erroneous or prejudicial to revenue; the revisional exercise was therefore unsustainable.

Arm's Length Price - Transactional Net Margin Method (TNMM) as Most Appropriate Method - Comparability analysis for selection of transfer pricing comparables - Notional interest on intra group receivables as an international transaction - Working capital adjustments in TNMM - Treatment of liabilities written back as operating income - Classification of foreign exchange loss as operating cost for mark up computation

Comparability analysis for selection of transfer pricing comparables - Transactional Net Margin Method (TNMM) as Most Appropriate Method - Exclusion of three specified Indian companies from the TPO's comparable set for computation of ALP. - HELD THAT: - The Tribunal examined the functions, assets and risks of Kitex Garments Ltd, Kewal Kiran Clothing Ltd and Virat Industries Ltd against the operational profile of the assessee, finding each to be functionally different. Kitex and Virat were engaged in manufacturing (holding substantial inventories and manufacturing end products) and Kewal Kiran operated a diversified, brand owner/manufacturer model. Each of these companies subcontracted processing work and therefore could not be treated as comparable to a captive processing/service provider. For these reasons the Tribunal directed the AO/TPO to exclude these three companies from the comparable set and allowed the related grounds of appeal. [Paras 10]

Kitex Garments Ltd, Kewal Kiran Clothing Ltd and Virat Industries Ltd are to be excluded from the comparables; grounds 4.1 to 4.8 allowed.

Treatment of liabilities written back as operating income - Whether liabilities written back (waiver of prior years' air freight liabilities) are operating income for mark up purposes. - HELD THAT: - The Tribunal accepted the assessee's evidence that the written back liabilities arose from prior years' operating expenditure (air freight) and were waived by the associated enterprise. Applying accounting principles and following the Bombay High Court decision relied upon by the assessee, the Tribunal held that such written back liabilities, being reversals of amounts earlier charged to operating cost, must be included as operating income in the impugned year for computation of the mark up. [Paras 12]

Liabilities written back in the impugned year are operating income and shall be included for mark up computation.

Classification of foreign exchange loss as operating cost for mark up computation - Whether the assessee's foreign exchange loss is an operating item for determination of the operating profit mark up. - HELD THAT: - The Tribunal found that the assessee's foreign exchange loss arose from transactional exposure (not hedging) and is therefore a transactional loss that should be considered an operating cost for mark up purposes. The Tribunal endorsed the reasoning of earlier tribunal decisions relied upon by the Revenue and found no infirmity in treating the foreign exchange loss as operating in nature. [Paras 16]

Foreign exchange loss is operating in nature and is to be treated as an operating cost for mark up computation; the assessee's ground on this point is dismissed.

Working capital adjustments in TNMM - Notional interest on intra group receivables as an international transaction - Transactional Net Margin Method (TNMM) as Most Appropriate Method - Whether a separate upward adjustment for notional interest on overdue intra group receivables is permissible when TNMM is the MAM and working capital differences are (or can be) reflected in comparables. - HELD THAT: - The Tribunal followed its earlier decision in Devi Sea Foods and held that receivables are included within the definition of international transaction. However, where TNMM is the MAM, the net margin ought to reflect working capital differences; if working capital adjustments have been or will be made consistently between the tested party and comparables, a separate notional interest adjustment on overdue receivables cannot be justified. The Tribunal therefore directed the AO/TPO to consider appropriate working capital adjustments and to allow the assessee a further opportunity to submit working papers; if such adjustments already capture the impact, no separate upward adjustment for notional interest should be made. [Paras 20, 21, 22]

Receivables are an international transaction; AO/TPO to examine working capital adjustments and, if TNMM and such adjustments already capture the impact, delete any separate notional interest adjustment on overdue receivables; ground allowed for statistical purposes and remitted for computation.

Comparability adjustments for extraordinary or non recurring expenses - Working capital adjustments in TNMM - Admissibility and treatment of certain expenses (provisions for doubtful debts, warranties, doubtful deposits, miscellaneous written off expenditure and extraordinary expenses) for mark up computation - directed remand for verification. - HELD THAT: - The Tribunal noted that the assessee had not furnished adequate details before the TPO to establish the extraordinary nature of certain expenses. Applying principles of natural justice, the Tribunal directed the AO/TPO to provide the assessee another opportunity to produce details and documentation supporting the claim that specific expenditures were extraordinary or non recurring and to determine their allowability for mark up computation and any comparability adjustments. The issue was therefore not finally decided on merits but remitted for fresh consideration upon production of supporting materials. [Paras 14, 18]

Assessee to produce particulars of the disputed expenses and working capital documentation; AO/TPO to reconsider and decide under law - ground allowed for statistical purposes and remitted for verification.

Final Conclusion: The appeal is partly allowed. The Tribunal directed exclusion of Kitex Garments Ltd, Kewal Kiran Clothing Ltd and Virat Industries Ltd from the comparable set; held that liabilities written back are operating income; upheld treatment of foreign exchange loss as operating; remitted specified matters (extraordinary expenses, working capital adjustments and related notional interest computation) to the AO/TPO for fresh consideration after the assessee furnishes requisite details; other general or consequential grounds were not adjudicated.

Statement recorded under section 132(4) of the Income tax Act, 1961 - retracted confessional statement and its evidentiary value - addition based solely on retracted statement without corroborative seized material - correlation of disclosure with incriminating material found during search - treatment of disclosed amount as business income and not as unexplained credit under section 115BBE

Statement recorded under section 132(4) of the Income tax Act, 1961 - retracted confessional statement and its evidentiary value - addition based solely on retracted statement without corroborative seized material - Validity of the addition of undisclosed income made by the Assessing Officer solely on the basis of a voluntary disclosure recorded under section 132(4) which was subsequently retracted, in the absence of corroborative incriminating material. - HELD THAT: - The Tribunal examined the statement recorded from the group's key person during search and the subsequent retraction supported by an affidavit. The Assessing Officer made the impugned addition without referring to any incriminating document or other material linking the seized material to the alleged surrendered income. The Tribunal applied settled principles that a statement under section 132(4) is admissible but not conclusive, and that a retracted statement loses probative force unless supported by independent corroborative evidence. The Tribunal relied on the CBDT circulars directing that confessions during search should not be the sole basis for additions and on precedents holding that additions cannot be sustained solely on uncorroborated retracted statements. On the facts, since no live link between seized material and the disclosed amount was established and only the retracted statement was relied upon, the addition was untenable.

The deletion of the addition made on the basis of the retracted statement is upheld and the revenue's grounds challenging that deletion are dismissed.

Statement recorded under section 132(4) of the Income tax Act, 1961 - addition based solely on retracted statement without corroborative seized material - correlation of disclosure with incriminating material found during search - Applicability of the lead case decision to the appeal filed by the revenue in the companion matter (Leade Liquor Manufacturing Pvt. Ltd.) where facts and treatment were identical except for quantum. - HELD THAT: - The Tribunal noted that the factual matrix in the companion appeal was identical: an initial disclosure during search was subsequently retracted and no incriminating material was specifically referred to by the Assessing Officer to sustain the higher surrendered amount. Applying the same legal principles and the reasoning adopted in the lead matter, the Tribunal found no justification for the addition where it rested solely on a retracted statement without corroboration.

The revenue's appeal in the companion matter is dismissed and the CIT(A)'s deletion is sustained, mutatis mutandis.

Treatment of disclosed amount as business income and not as unexplained credit under section 115BBE - correlation of disclosure with incriminating material found during search - Whether the sum of Rs. 75 lakhs (surrendered and shown as an extraordinary item in profit and loss account) was correctly treated by the Assessing Officer as an unexplained credit taxable under section 115BBE. - HELD THAT: - The Tribunal observed that the assessee, a private limited company, had disclosed the amount in its accounts and offered it as income. There was no reference by the revenue to any seized or incriminating material linking the amount to unexplained credits. In the absence of any such material and given the assessee's regular business character and the manner of disclosure, the Tribunal held that the amount could only be treated as business income rather than an unexplained credit attracting the special taxation provision.

The Assessing Officer erred in treating the sum as an unexplained credit under section 115BBE; the assessee's cross objection is allowed.

Final Conclusion: The Tribunal dismissed the revenue's appeals and upheld the CIT(A)'s deletions of additions made solely on the basis of retracted statements recorded under section 132(4) in the absence of corroborative seized material; the companion appeal was disposed of similarly; the assessee's cross objection was allowed by holding that the disclosed sum was business income and not an unexplained credit taxable under section 115BBE.

Validity of return filed pursuant to notice under section 148 despite belated filing - requirement of notice under section 143(2) as sine qua non for framing assessment under section 143(3) - non-est assessment/nullity for want of mandatory notice - challenge to jurisdictional validity of primary proceedings in collateral/revisionary proceedings - power under section 263 to revise an assessment which is void ab initio

Validity of return filed pursuant to notice under section 148 despite belated filing - Return filed by the assessee in response to notice under section 148, though belated, is not rendered non-Est merely by delay and cannot be treated as invalid where it has been acknowledged, e-verified and acted upon by the Assessing Officer. - HELD THAT: - The Tribunal accepted the coordinate-bench reasoning in Smt. Amina Ismile Rangari and noted that filing beyond the stipulated time under a s.148 notice leads to characterization as a belated filing but does not extinguish the status of the document as a return filed pursuant to the notice. The return in the present case was acknowledged, subsequently e-verified and the AO acted upon it; accordingly the belated filing did not ipso facto render the return non-Est. [Paras 23]

Return filed on 01.06.2019 in response to notice under s.148 is not a non-Est return.

Requirement of notice under section 143(2) as sine qua non for framing assessment under section 143(3) - non-est assessment/nullity for want of mandatory notice - An assessment completed under section 143(3) read with section 147 without issuance of the mandatory notice under section 143(2) is invalid and to be treated as non-Est. - HELD THAT: - Applying the binding principle in ACIT v. M/s Hotel Blue Moon and consistent coordinate-bench precedents, the Tribunal held that issuance of notice under s.143(2) is mandatory (not merely procedural) for framing an assessment under s.143(3). In the present facts the AO did not issue a notice under s.143(2); accordingly the assessment framed under s.143(3) r.w.s.147 is invalid/nullity. [Paras 24]

Assessment under s.143(3) r.w.s.147 completed without notice u/s 143(2) is invalid (non-Est).

Challenge to jurisdictional validity of primary proceedings in collateral/revisionary proceedings - Assessee is permitted to challenge the jurisdictional validity of the impugned assessment order during appellate proceedings arising out of an order under section 263. - HELD THAT: - Relying on the ratio that jurisdictional defects can be urged whenever the order is relied upon in subsequent proceedings, the Tribunal followed the coordinate-bench decision in Maruti Clean Coal & Power Ltd. and related authorities to hold that an assessee may contest the validity of the primary assessment order in the collateral/revisionary proceedings to test the legal foundation of such subsequent proceedings. [Paras 25]

Assessee can challenge validity of the assessment order in appellate proceedings against the section 263 order.

Power under section 263 to revise an assessment which is void ab initio - non-est assessment/nullity for want of mandatory notice - The Principal Commissioner cannot validly invoke section 263 to revise an assessment which is void ab initio; a non-Est assessment cannot serve as a lawful foundation for revision under section 263. - HELD THAT: - Drawing on the reasoning of the Tribunal in Maruti Clean Coal & Power Ltd. and other authorities, the Tribunal observed that collateral proceedings derive their validity from the primary order; if the primary assessment is itself a nullity (non-Est), subsequent revision under s.263 based on that invalid order is without jurisdiction. Applying that principle to the present case, where the assessment was held invalid for want of s.143(2) notice, the s.263 order was held unsustainable and set aside. [Paras 26, 27, 28]

Order passed by the Principal Commissioner under section 263 is not sustainable and is set aside because it was based on an assessment held to be non-Est.

Final Conclusion: The assessee's appeal is allowed. The Tribunal held that (i) the belated return filed in response to the s.148 notice was not by itself non-Est, (ii) the assessment completed under s.143(3) r.w.s.147 without issuance of notice u/s 143(2) is invalid (non-Est), (iii) the assessee may challenge the jurisdictional validity of the primary assessment in collateral proceedings, and (iv) consequently the revisionary order passed u/s 263 on the basis of that non-Est assessment lacked jurisdiction and is set aside.

Bogus purchases - accommodation entries - profit element embedded in purchases - corroboration of exports and sales for limiting disallowance

Bogus purchases - accommodation entries - corroboration of exports and sales for limiting disallowance - profit element embedded in purchases - Whether the addition on account of purchases alleged to be bogus could be restricted to the profit element embedded in such purchases rather than disallowing the entire purchase value - HELD THAT: - The Tribunal accepted that export sales recorded by the assessee were genuine and not disputed by the revenue, and that production and exports could not have occurred without purchases. The Tribunal agreed with the approach of the CIT(A) that where sales are established, entire disallowance of purchases may not be justified and only the profit embedded in such purchases should be brought to tax. After reviewing earlier decisions and a coordinate bench order estimating profit at specified percentages, the Tribunal found it appropriate on the facts of the case to estimate the embedded profit at 12.5% of the disputed purchases. The Tribunal noted the Department's reliance on seized tally and other material pointing to accommodation-entry arrangements, but held that given the acceptance of exports and corresponding sales the fair course was to tax the profit element rather than disallow 100% of the purchases. Consequently the addition was determined on the basis of the profit element assessed at 12.5%. [Paras 20, 21, 22, 23]

Addition on account of alleged bogus purchases restricted to the profit element estimated at 12.5% of the disputed purchases; Revenue appeals dismissed and assessee appeals partly allowed.

Final Conclusion: On the facts, where exports and corresponding sales were held to be genuine, the Tribunal restricted the addition arising from purchases found linked to accommodation-entry providers to the profit embedded in those purchases, fixed at 12.5%, thereby dismissing the Revenue's appeals and partly allowing the assessee's appeals.

Dependent Agency Permanent Establishment (DAPE) - Arm's length remuneration - Attribution of profits to a permanent establishment - Tax neutrality of a DAPE where agent is paid arm's length remuneration - Bilateral Advance Pricing Agreement (BAPA) - Restoration of TDS credit after verification - Prematurity of penalty proceedings - Interest consequential to assessment outcome

Dependent Agency Permanent Establishment (DAPE) - Attribution of profits to a permanent establishment - Bilateral Advance Pricing Agreement (BAPA) - Arm's length remuneration - Deletion of addition made by the Assessing Officer treating Micro Focus India Pvt. Ltd. as DAPE of the assessee and attributing business profits to the assessee - HELD THAT: - The Tribunal followed coordinate-bench decisions in the assessee's own case and authoritative precedents holding that where an Indian agent/associated enterprise has been remunerated at arm's length, nothing further survives for taxation in the hands of the foreign enterprise on account of a DAPE. The coordinate-bench reasoning, applied to the facts and the BAPA covering the relevant years, leads to the conclusion that the addition computed by the AO cannot be sustained. The Tribunal observed no material to show inadequacy of the agent's remuneration or that the transfer-pricing analysis failed to reflect functions, assets and risks so as to warrant attribution of additional profits to a DAPE; therefore the addition was deleted and grounds 4-8 allowed. [Paras 8, 9]

Addition deleted; grounds 4-8 allowed.

Dependent Agency Permanent Establishment (DAPE) - Tax neutrality of a DAPE where agent is paid arm's length remuneration - Whether existence of DAPE requires adjudication in view of deletion of addition - HELD THAT: - Having held that no additional profits are attributable to the DAPE because the agent has been paid arm's length remuneration, the Tribunal treated the question of existence of DAPE as academic for the purpose of tax consequence and left the factual question open. The Tribunal therefore did not decide the existence issue on merits. [Paras 10]

Existence of DAPE rendered academic and left open.

Restoration of TDS credit after verification - Short grant of TDS credit claimed by the assessee - HELD THAT: - The Tribunal restored the issue to the file of the Assessing Officer with a direction to grant TDS credit in accordance with law after conducting necessary verification. [Paras 12]

Issue restored to AO for verification and grant of TDS credit.

Prematurity of penalty proceedings - Validity of initiation of penalty proceedings under section 270A - HELD THAT: - The Tribunal found initiation of penalty proceedings premature and dismissed the ground challenging initiation as such. [Paras 13]

Penalty proceedings dismissed as premature.

Interest consequential to assessment outcome - Levy of interest under sections 234A and 234B - HELD THAT: - The Tribunal held that charging of interest under sections 234A and 234B is consequential to the assessment outcome and accordingly treated the ground as allowed for statistical purposes. [Paras 14]

Interest issue treated as consequential and allowed for statistical purposes.

Final Conclusion: The appeal is partly allowed: the addition attributable to the DAPE is deleted (grounds 4-8 allowed) following coordinate-bench authority and BAPA-related reasoning; the question of existence of DAPE is rendered academic and left open; the TDS-credit issue is remitted to the AO for verification and grant of credit; initiation of penalty proceedings is dismissed as premature; and interest consequences are dealt with as consequential to the assessment.

Summary order. Civil Appeal dismissed; delay condoned; pending applications, if any, disposed of.

Certificate of Origin - Preferential duty benefit under AIFTA/Notification - Regional Value Content (RVC) - Government-to-Government verification - Burden of proof on department after production of prescribed document - Rejection of certificate in absence of supplier cost data

Certificate of Origin - Government-to-Government verification - Preferential duty benefit under AIFTA/Notification - Burden of proof on department after production of prescribed document - Whether benefit of the concessional Customs duty under the relevant notification could be denied where the Certificate of Origin was issued and verified by Malaysian authorities but the Indian investigating agency could not obtain underlying supplier cost data. - HELD THAT: - The Tribunal found that the Certificate of Origin had been verified through the Government-to-Government channel and Malaysian authorities neither doubted the genuineness of the certificate nor its contents. The inability of Indian authorities to obtain underlying cost data from the Malaysian supplier is a matter between governments and cannot be visited upon the importer who produced the prescribed certificate. Once the importer produced the relevant prescribed document entitling it to preferential treatment, the onus to disprove the claim shifted to the department. In the absence of cost data from the Malaysian side, the department could not legitimately reject the certificate and deny the preferential benefit; if the treaty or verification process required disclosure of cost data, that deficiency ought to have been pursued with the Malaysian Government rather than used as a ground to deny the appellant relief. The Tribunal therefore held that the burden remained on the department to discharge its onus after production and verification of the certificate by Malaysian authorities. [Paras 6]

Benefit under the notification could not be denied; the rejection of the Certificate of Origin on grounds of non-availability of supplier cost data was not sustainable and the appeal is allowed with consequential relief.

Final Conclusion: The appeal is allowed; the appellant is entitled to the concessional duty benefit on the basis of the Certificate of Origin verified by Malaysian authorities and the order of the lower authorities rejecting the certificate and imposing duty, interest and penalty is set aside with consequential relief.

Country of Origin Certificate - benefit under a preferential tariff agreement - government to government verification of origin - burden of proof for claiming preferential duty - confidentiality of supplier cost data - rejection of certificate for lack of cost data - obligation on customs to verify origin upon production of prescribed document

Country of Origin Certificate - government to government verification of origin - burden of proof for claiming preferential duty - confidentiality of supplier cost data - obligation on customs to verify origin upon production of prescribed document - Whether the appellant was disentitled to claim preferential duty benefit by relying on the certificate of origin when Malaysian authorities had verified the certificate but cost structure data was not provided - HELD THAT: - The Tribunal held that the certificate of origin produced by the appellant was duly verified through a government to government process and the Malaysian authority did not doubt the genuineness or contents of the certificate. The adjudicatory authorities placed the entire burden on the appellant to produce the manufacturer's cost data despite the appellant having produced the prescribed certificate. The absence of supplier cost data, which is generally confidential and a matter between foreign manufacturer and its government, cannot be visited upon the importer where the prescribed documentary proof of origin has been furnished and verified. If the agreement between governments required disclosure of cost data, it was for Indian authorities to pursue that with the Malaysian Government; failure of the department to obtain further verification or underlying cost data does not justify rejecting a verified certificate presented by the importer. Accordingly, once the appellant produced the prescribed certificate and it was verified by Malaysian authorities, the onus shifted to the department to disprove origin rather than to insist on confidential cost particulars from the appellant. [Paras 6, 7]

The appeal is allowed; rejection of the certificate for non production of cost data was not justified and the appellant is entitled to consequential relief.

Final Conclusion: The Tribunal allowed the appeal, holding that a duly produced and government verified certificate of origin cannot be rejected merely because supplier cost structure details (confidential commercial data) were not furnished by the importer; the department could not shift the burden back on the appellant and must accept the verified certificate with consequential relief.

Regulation 10(n) of CBLR, 2018 - obligations of Customs Broker to verify IEC, GSTIN, identity and functioning of client - Presumption of genuineness of certificates issued by Government officers and limits of Customs Broker's duty - Verification by reliable, independent, authentic documents, data or information; physical inspection not mandated - Revocation of Customs Broker licence, forfeiture of security and imposition of penalty - test of compliance with Regulation 10(n)

Regulation 10(n) of CBLR, 2018 - obligations of Customs Broker to verify IEC, GSTIN, identity and functioning of client - Verification by reliable, independent, authentic documents, data or information; physical inspection not mandated - Presumption of genuineness of certificates issued by Government officers and limits of Customs Broker's duty - Revocation of Customs Broker licence, forfeiture of security and imposition of penalty - test of compliance with Regulation 10(n) - Whether the Customs Broker violated Regulation 10(n) of CBLR, 2018 so as to justify revocation of licence, forfeiture of security and imposition of penalty. - HELD THAT: - The Tribunal held that Regulation 10(n) requires a Customs Broker to verify correctness of IEC and GSTIN and to verify identity and functioning of the client at the declared address by using reliable, independent, authentic documents, data or information. Verification of certificates issued by Government officers (IEC, GSTIN) is satisfied if the Customs Broker ensures that such registrations were in fact issued by the concerned officers (for example by online verification or comparison with original documents); the Customs Broker is not required to investigate or re weigh the correctness of actions taken by the issuing Government authorities. The obligation to verify identity and functioning can be discharged by independent, reliable and authentic documents, data or information and does not mandate physical inspection of premises or continuous surveillance of the client. The Tribunal relied on the principle that courts presume genuineness of certificates issued by Government officers (Section 79, Evidence Act) and on earlier Tribunal and High Court pronouncements applying the same construction. In the present case there was no record that IEC/GSTIN were forged or invalid, and the appellant had relied on authentic documents; therefore, the findings of violation of Regulation 10(n) were unsustainable and could not support revocation, forfeiture and penalty. [Paras 9, 10, 11, 13]

Impugned order revoking the Customs Broker licence, forfeiting the security deposit and imposing penalty set aside; appeal allowed with consequential relief, if any.

Final Conclusion: The Tribunal held that the Customs Broker had fulfilled the verification obligations under Regulation 10(n) by relying on authentic IEC/GSTIN and other reliable documents/data; physical inspection was not a mandatory requirement, and in absence of any evidence of forged or invalid registrations the revocation, forfeiture and penalty could not be sustained, accordingly the impugned order was set aside and the appeal allowed.

Regulation 10(n) of CBLR, 2018 - obligations of Customs Broker to verify IEC and GSTIN - verification of identity and functioning by independent, reliable and authentic documents, data or information - presumption as to genuineness of government-issued certificates - no obligation on Customs Broker to conduct physical inspection or continuous surveillance of client premises - natural justice (disclosure of relied-upon documents)

Regulation 10(n) of CBLR, 2018 - obligations of Customs Broker to verify IEC and GSTIN - verification of identity and functioning by independent, reliable and authentic documents, data or information - no obligation on Customs Broker to conduct physical inspection or continuous surveillance of client premises - presumption as to genuineness of government-issued certificates - Whether the appellant violated Regulation 10(n) of CBLR, 2018 so as to justify revocation of customs broker licence, forfeiture of security deposit and imposition of penalty - HELD THAT: - Regulation 10(n) obliges a Customs Broker to verify the correctness of IEC and GSTIN and to verify identity and functioning of the client at the declared address by using reliable, independent, authentic documents, data or information. Verification of IEC and GSTIN may be satisfied by confirming that such registrations were issued by the competent government officers (for example by online verification or inspection of the documents) and does not require the Customs Broker to re investigate or to ensure the correctness of actions of the issuing government authorities. The obligation to verify identity and functioning can be discharged by independent, reliable and authentic documents, data or information and does not mandatorily require physical inspection of the client's premises or continuous surveillance. The Tribunal relied on the principles of presumption of genuineness of government-issued certificates and earlier precedents which hold that it would be unduly onerous to cast on the Customs Broker a duty to verify the correctness of government registrations beyond establishing that they were validly issued. In the absence of any material on record showing that IEC, GSTIN or other KYC documents were forged or obtained by fraud, the requirement under Regulation 10(n) stands satisfied by documentary/data verification and the mere non traceability of exporters on subsequent checks by other authorities does not alone prove breach by the Customs Broker. Applying these principles to the facts, the Tribunal found no basis to uphold revocation of licence, forfeiture and penalty. [Paras 10, 11, 12, 13]

The findings that the appellant violated Regulation 10(n) are unsustainable; the revocation of licence, forfeiture of security deposit and imposition of penalty are set aside.

Final Conclusion: The appeal is allowed; the impugned order revoking the customs broker licence, forfeiting the security deposit and imposing penalty is set aside, with consequential relief, if any.

Classification of goods - burden of proof on the Revenue in classification - re-determination of classification during finalization of provisional assessment - query memo as a tool in assessment - limitations of Explanatory Notes and HSN at the six digit level for national eight digit tariff items - distinction between ores and concentrates and Note 4 deeming for excise - inadmissibility of relying on supplier web site or post import certificates without analysis - eligibility for exemption from additional duty dependent on correct tariff item

Re-determination of classification during finalization of provisional assessment - query memo as a tool in assessment - classification of goods - Finalization of provisional assessment cannot validly re determine classification merely by a query memo without following requisite procedural rigour. - HELD THAT: - The Tribunal held that while a query memo is a permissible instrument to seek clarification, revision of classification in finalizing a provisional assessment requires adherence to the procedural prescriptions and cannot be effected by a general communication of doubts. Where an assessing officer proposes an alternative classification or intends to reject declared particulars, specific notice of the intention to adopt an alternative must precede shifting of onus; mere querying and subsequent re classification without a clear show cause or formal proposal is inadequate. The impugned finalization relied upon the query memo as prelude to re classification but did not exhibit the required procedural certainty for adopting an alternative tariff item. [Paras 4, 5]

Re determination of classification in this case was procedurally defective and could not sustain the final assessment.

Burden of proof on the Revenue in classification - classification of goods - The duty to establish an alternative classification lay on the Revenue and was not discharged. - HELD THAT: - Relying on settled precedent, the Tribunal emphasised that chargeability and classification rest with the Revenue to prove if it seeks to classify goods under a different tariff item than that declared by the importer. The adjudicating authorities failed to adduce adequate evidence or to articulate a reasoned case under the General Rules for Interpretation of the Import Tariff to justify treating the imported material as falling under the tariff item for 'concentrates'. The absence of a show cause notice setting out the case for classification under tariff item 2601 1150 further undermined the Revenue's attempt to shift the onus. [Paras 5]

The Revenue did not discharge the burden of proof for re classification; the finding against the appellant on this ground is unsustainable.

Limitations of Explanatory Notes and HSN at the six digit level for national eight digit tariff items - distinction between ores and concentrates and Note 4 deeming for excise - classification of goods - Explanatory Notes and HSN cannot be imported beyond their limited international role to displace national eight digit tariff distinctions or to justify re classification absent clear national criteria; tax policy driven segregation at tariff item level cannot be effected by administrative conjecture. - HELD THAT: - The Tribunal explained that Explanatory Notes are not part of the First Schedule and primarily operate to interpret headings up to the six digit HSN level; national expansion to eight digit tariff items reflects sovereign tax policy and, where the Central Government has segregated ores and concentrates for differential treatment, objective criteria for such distinction must be applied. The adjudicatory authorities impermissibly sought to use Explanatory Notes (and scientific gloss) to re classify the imports without demonstrating how the imported material met any national objective criteria for 'concentrates' under the eight digit tariff. The Court also cautioned against allowing tax rate considerations or domestic excise deeming (Note 4) to substitute for the proper classification exercise under Customs law. [Paras 19, 20, 21, 22]

Reliance on Explanatory Notes and policy considerations did not justify the tax driven re classification adopted by the authorities.

Inadmissibility of relying on supplier web site or post import certificates without analysis - evidence of classification - Classification cannot be founded on supplier web site information or on a certificate produced post importation without subjecting the imported goods to appropriate analysis or conformity testing. - HELD THAT: - The Tribunal found the assessing authorities erred in treating public domain descriptions of the supplier's activities and generic certifications as determinative of the nature of the specific consignments. Absent physical analysis, testing or adherence to acceptable/prescribed standards to establish that the consignments had undergone 'special treatments' amounting to conversion into 'concentrates', reliance on website material and belated certificates was speculative and insufficient for classification. The authorities did not evaluate the goods' physical characteristics, post import transactions, or other objective indicia (such as fineness, grade increase, or processing specific to the consignments) before denying the exemption. [Paras 9, 26]

The impugned classification based on supplier website and after the fact certificate without analysis is impermissible.

Eligibility for exemption from additional duty dependent on correct tariff item - classification of goods - The appellant's classification as declared was upheld and, consequently, the claimed exemption from additional duty was allowed. - HELD THAT: - Applying the foregoing conclusions - that procedural safeguards for re classification were not followed, that the Revenue failed to discharge the burden of proof, that Explanatory Notes and web based material could not supplant objective analysis, and that no adequate basis was shown to treat the imported material as 'concentrates' - the Tribunal held that the classification adopted by the appellant was not incorrect. In consequence, the appellant was entitled to the exemption from additional duty under the notification relied upon. [Paras 27]

The impugned order is set aside; the appellant's classification is sustained and the exemption from additional duty follows; appeals allowed.

Final Conclusion: The Tribunal set aside the finalization of provisional assessments that re classified the imported material as 'concentrates', holding the re classification procedurally and evidentially deficient, and restored the appellant's declared classification and entitlement to the exemption from additional customs duty.

Related party under Section 5(24)(h) - related party under Section 5(24)(m) - participation in policy making - provision of essential technical information - actions of a common director not ipso facto attributable to the company - joint representation and authority of multiple managing directors - inclusion in Committee of Creditors and voting rights

Related party under Section 5(24)(h) - actions of a common director not ipso facto attributable to the company - joint representation and authority of multiple managing directors - Whether the Appellant is a related party of the Corporate Debtor under Section 5(24)(h). - HELD THAT: - The Tribunal held that Section 5(24)(h) requires proof that a director, partner or manager of the corporate debtor is accustomed to act on the advice, directions or instructions of the person alleged to be a related party. Mere common directorship does not automatically satisfy this test. The record showed that the actions relied upon were those of Mr. Rembert Biemond in his capacity as director of the corporate debtor and that the appellant, being a German company with three managing directors, must ordinarily act through joint authority of two managing directors. There was no material to demonstrate that the corporate debtor acted on advice, directions or instructions of the appellant, or that Mr. Biemond was functioning on behalf of the appellant rather than as a director of the corporate debtor. The Adjudicating Authority therefore erred in treating acts of Mr. Biemond as the appellant's directions under Section 5(24)(h). [Paras 12]

Section 5(24)(h) does not apply; the Appellant is not a related party on that basis.

Related party under Section 5(24)(m) - participation in policy making - provision of essential technical information - Whether the Appellant falls within Section 5(24)(m) by participating in the corporate debtor's policy making or by providing essential technical information. - HELD THAT: - Section 5(24)(m) contains several alternative tests (including participation in policy making and provision of essential technical information). The Tribunal found no pleaded or evidentiary material showing that the appellant participated in the corporate debtor's policy making or provided/received essential technical information. The appointment of Mr. Biemond to the corporate debtor's board predated the incorporation of the appellant and he was nominated by a foreign investor; there was no evidence that the appellant nominated directors, controlled policy decisions, or supplied essential technical information. The Adjudicating Authority's conclusions conflated Mr. Biemond's actions as a director of the corporate debtor with actions of the appellant, without supporting material to satisfy the tests in sub clauses (i) or (iv) of Section 5(24)(m). [Paras 13, 14, 15]

Section 5(24)(m) does not apply; the Appellant is not a related party on that basis.

Inclusion in Committee of Creditors and voting rights - Whether, in consequence of the findings on related party status, the Appellant should be included in the Committee of Creditors with voting rights proportionate to its admitted claim. - HELD THAT: - Since the Tribunal concluded that the appellant is not a related party under the provisions relied upon by the Adjudicating Authority, the basis for excluding the appellant from the CoC and denying voting rights fell away. The appellate court set aside the impugned order rejecting the appellant's application and directed the interim resolution professional to include the appellant in the CoC and grant voting rights proportionate to the amount of the claim admitted in the CIRP. Costs were directed to be borne by the parties themselves. [Paras 18]

Allow the application: include the Appellant in the Committee of Creditors and grant voting rights proportionate to the admitted claim.

Final Conclusion: The impugned order holding the appellant to be a related party under Section 5(24)(h) and 5(24)(m) was set aside. The appeal is allowed; the IRP is directed to include the appellant in the Committee of Creditors and grant voting rights proportionate to the admitted claim. Parties to bear their own costs.

Verification and substantiation of claims by the Resolution Professional - scope of powers of the Resolution Professional - administrative functions not adjudicatory - duty of the Resolution Professional to prepare list of creditors and verify claims - entitlement of the Resolution Professional to call for additional evidence to establish correctness of a claim - limits on Adjudicating Authority and Appellate Tribunal in determining civil contractual validity

Verification and substantiation of claims by the Resolution Professional - entitlement of the Resolution Professional to call for additional evidence to establish correctness of a claim - duty of the Resolution Professional to prepare list of creditors and verify claims - Whether the RP acted within statutory powers in seeking further evidence and ultimately rejecting the appellant's claim for want of substantiation. - HELD THAT: - The Tribunal held that while the RP lacks adjudicatory powers, the CIRP Regulations expressly enable the RP to call for substantiation of claims and to verify every claim within the prescribed timeline. Regulation 10 empowers the RP to call for such evidence as he deems fit and Regulation 13 imposes a duty to verify claims and maintain an updated list of creditors. The RP's role in preparing the Information Memorandum requires reasonable diligence; hence he cannot 'rubber stamp' claims without verification. The record shows repeated communications from the RP requesting documents evidencing performance of services, and the RP consistently treated the claim as pending verification. The appellant supplied a composite invoice and limited promotional clippings which were skeletal and did not substantiate services across the period claimed. In these circumstances, the RP was entitled to seek further proof and to keep the claim unadmitted when adequate evidence was not furnished despite multiple opportunities. [Paras 19, 20, 22, 23, 27]

The RP acted within his statutory powers in seeking and relying on substantiation; rejection of the claim for want of adequate proof was justified.

Scope of powers of the Resolution Professional - administrative functions not adjudicatory - limits on Adjudicating Authority and Appellate Tribunal in determining civil contractual validity - Whether the Adjudicating Authority or this Tribunal could properly determine the validity/tenability of the Consultancy Agreement or whether such determination lay outside their functional remit. - HELD THAT: - The Tribunal reiterated that the RP does not have adjudicatory powers (as recognised in Swiss Ribbons) and that the determination of contractual validity is essentially a civil dispute. The judgment observed that commenting on the Agreement's format or holding it 'nebulous' falls outside the RP's and the Tribunal's province. Nevertheless, this limitation does not preclude the RP from seeking additional information to verify claims. Thus, while the propriety or legality of the Agreement cannot be finally adjudicated in the CIRP claim verification exercise, the RP may require evidence to satisfy himself of the claim's genuineness before admission. [Paras 16, 24]

Determination of contractual validity is beyond the RP's and Tribunal's adjudicatory role; however, seeking evidence for verification does not amount to adjudication and is permissible.

Duties of the Resolution Professional to act with diligence and fairness - consequences of failure of claimant to supply adequate proof - Whether the RP acted mala fide or with wilful negligence in the handling and rejection of the appellant's claim. - HELD THAT: - On the facts, the RP repeatedly sought documents and gave opportunities; the appellant failed to provide detailed substantiation of services despite multiple requests and an express direction from the Adjudicating Authority to reconsider the claim. The available documentary material (a single composite invoice and sparse media clippings) was insufficient and the RP's skepticism was reasonable. The Tribunal found no prima facie evidence of wilful negligence or mala fides by the RP; rather, the RP discharged his duty to exercise due care in verification to protect the integrity of the Information Memorandum and the CIRP process. [Paras 23, 26, 27]

No mala fide or wilful negligence found; the RP acted fairly and with due diligence in seeking substantiation and in rejecting the claim for lack of adequate proof.

Final Conclusion: The impugned order rejecting the appellant's claim for want of adequate substantiation is affirmed. The RP was entitled to seek further evidence and to withhold admission of the claim when satisfactory proof of services was not furnished; there is no merit in the appeal and it is dismissed.

Existence of proceeds of crime - money laundering offence under Section 3 of the PMLA Act - pre-condition of linkage between assets and scheduled offences - clause (ii) of sub section (1) of Section 45 of the PMLA Act - grant of bail in PMLA cases - special court to impose conditions while granting bail

Existence of proceeds of crime - pre-condition of linkage between assets and scheduled offences - money laundering offence under Section 3 of the PMLA Act - clause (ii) of sub section (1) of Section 45 of the PMLA Act - grant of bail in PMLA cases - Prima facie absence of material linking the appellant's assets or alleged unaccounted money to the predicate (scheduled) offences and satisfaction of the statutory bail ground under clause (ii) of sub section (1) of Section 45 of the PMLA Act. - HELD THAT: - The Court examined the complaint under the PMLA Act and found that it does not state facts indicating that the proceeds of crime, as defined, were derived or obtained by the appellant from criminal activity relating to the scheduled offences. Since the existence of proceeds of crime is a condition precedent to an offence of money laundering under Section 3, the absence of any prima facie linkage between the appellant's assets and the predicate offences means that the statutory requirement for denial of bail under clause (ii) of Section 45(1) is not made out. On the material before it the Court held that the requirements of clause (ii) of Section 45(1) are satisfied in favour of the appellant and, accordingly, bail is warranted pending disposal of the complaint. [Paras 4, 5]

The appellant is entitled to be enlarged on bail pending disposal of the complaint under the PMLA Act.

Special court to impose conditions while granting bail - grant of bail in PMLA cases - Procedure to be followed by the Special Court upon the appellant's production and limitations of the Supreme Court's observations. - HELD THAT: - The Court directed that the appellant shall be produced before the Special Court within one week. The Special Court is at liberty to impose appropriate terms and conditions while granting bail, and the Enforcement Directorate shall be heard before finalising those terms. The Supreme Court emphasised that its observations were limited to the question of grant of bail and left all other issues arising out of the complaint open, explicitly disavowing any adjudication on the role of other accused or on merits of the complaint. [Paras 6, 7, 8]

The Special Court shall consider appropriate conditions while granting bail; the Enforcement Directorate to be heard; other issues in the complaint remain open.

Final Conclusion: The appeal is allowed: on the material before the Court there is no prima facie linkage of the appellant's assets to the scheduled offences, the statutory bail ground in clause (ii) of Section 45(1) is satisfied, and the appellant is to be produced before the Special Court for grant of bail subject to appropriate conditions to be fixed after hearing the Enforcement Directorate; all other issues are left open.

Anticipatory bail under Section 438 Cr.P.C. - rigours of Section 45 of the Prevention of Money Laundering Act, 2002 - economic offences constitute a class apart - interference with investigation by grant of pre arrest bail - absconding and risk of fleeing from justice

Anticipatory bail under Section 438 Cr.P.C. - rigours of Section 45 of the Prevention of Money Laundering Act, 2002 - economic offences constitute a class apart - absconding and risk of fleeing from justice - interference with investigation by grant of pre arrest bail - Grant of anticipatory bail to the applicant in proceedings under the Prevention of Money Laundering Act, 2002. - HELD THAT: - The Court examined the application for pre arrest relief under Section 438 Cr.P.C. in the context of allegations of money laundering arising from a large scale economic fraud ('Bike Bot' scheme). It applied the well established principle that anticipatory bail is an extraordinary remedy to be sparingly exercised, particularly in economic offences which impact the public interest and require thorough investigation. The Court held that where an application for anticipatory bail is made in connection with PMLA offences, the substantive rigours of Section 45 of the PMLA must be borne in mind even if relief is sought under Section 438 Cr.P.C. The material before the Court showed receipt and onward transfer of large sums from the accused companies to the applicant, provisional attachment of the property alleged to be proceeds of crime, filing of complaint and cognizance under Sections 3 and 4 PMLA, ongoing investigation including overseas inquiries, and that the applicant had not complied with summons and was absconding. In view of the nature and gravity of the accusations, the stage and complexity of investigation, the risk of frustrating investigation by pre arrest protection, the applicant's criminal antecedents and the attachment of assets as alleged proceeds of crime, the Court concluded that the twin conditions and policy concerns underlying Section 45 weigh against grant of anticipatory bail. The Court therefore found it not a fit case for exercise of discretion to grant anticipatory bail. [Paras 11, 16, 26, 27]

Anticipatory bail application is rejected.

Final Conclusion: Application for anticipatory bail in respect of charges under the Prevention of Money Laundering Act, 2002 is refused after applying the standards for economic offences, the rigours of Section 45 PMLA and having regard to abscondence, risk to investigation and the materials on record.

Quasi-judicial function - administrative adjudication - composition of adjudicating authority - bench constitution - single-member and two-member benches - reading statutory provisions as a whole - checks and balances by appellate remedies

Quasi-judicial function - composition of adjudicating authority - bench constitution - single-member and two-member benches - reading statutory provisions as a whole - Power under Section 8 of PMLA need not be exercised only by a member having experience in the field of law; a Bench constituted under Section 6 may consist of a single member who need not necessarily be the member from the field of law. - HELD THAT: - The Adjudicating Authority under Section 6 read with Section 8 performs functions that are quasi judicial since it determines questions affecting persons' rights and is required by Section 8(2) to consider replies, hear parties and record findings. However, the statutory scheme must be read as a whole. Section 6(2) prescribes that the Adjudicating Authority shall consist of a Chairperson and two Members with the proviso regarding fields of experience, while Section 6(5)(b) expressly empowers the Chairperson to constitute Benches with one or two Members and Section 6(7) permits transfer to a two Member Bench where necessary. There is no provision in the statute requiring that every Bench must include the Member having experience in law. To read Section 6 as mandating that only a legal member may exercise powers under Section 8 would render subsections authorising single member Benches and the transfer provisions nugatory. The presence of appellate fora - an Appellate Authority presided by a retired Chief Justice under Section 25 and further appeal to the High Court under Section 42 - provide institutional checks. Decisions of other High Courts upholding single member Benches in this context are noted and persuasive. Applying established principles of statutory interpretation, the Court concluded that the adjudicatory powers under Section 8 can validly be exercised by a Bench comprising a single Member whether or not that Member is the one specified as having experience in law. [Paras 11, 15, 23, 26]

The contention that Section 8 powers can be exercised only by a Member experienced in law is rejected; the Adjudicating Authority may validly exercise Section 8 powers through Benches constituted under Section 6(5) including single member Benches.

Final Conclusion: The Single Judge's order quashing the provisional order of attachment and show cause notice is set aside; the intra court appeal is allowed and there shall be no order as to costs.

Benefit of approver/pardon - protection under proviso to Section 132 of the Evidence Act - tender of pardon under Section 306 Cr.P.C. and grant of pardon under Section 307 Cr.P.C. - offence under Section 3 of the PMLA as grounded on proceeds of crime derived from a scheduled offence - PMLA prosecution contingent on existence of a registered scheduled offence

Benefit of approver/pardon - PMLA prosecution contingent on existence of a registered scheduled offence - Validity of the Special Court's discharge of the accused (Raj Gopal Kankani) on account of his having been made an approver in the CBI proceedings - HELD THAT: - The High Court examined the relationship between the CBI proceedings (scheduled offence) and the complaint under the PMLA. Relying on the material on record and the principle that the ED's case was premised on the evidence and materials generated in the CBI matter, the Court held that the accused, having been made an approver in the CBI case and having furnished the materials on which the PMLA complaint was based, could not be treated as an accused in the PMLA proceedings. The Court accepted that insofar as the PMLA complaint is dependent on the CBI charge-sheet and the approver's disclosures, the approver is entitled to the legal benefit attendant on his status and the discharge was therefore in accordance with law. [Paras 41, 42, 43, 44, 46]

Discharge of the accused by the Special Court is affirmed; the accused is not to be implicated as an accused in the PMLA complaint but is to be treated in the light of his status as an approver.

Offence under Section 3 of the PMLA as grounded on proceeds of crime derived from a scheduled offence - PMLA prosecution contingent on existence of a registered scheduled offence - Whether the offence under Section 3 of the PMLA is independent of, or can proceed without, a registered scheduled offence on which the proceeds of crime are based - HELD THAT: - The Court analysed the statutory scheme and recent authority relied upon by the petitioner which recognises that while money laundering is an independent offence concerning processes connected with proceeds of crime, the prosecution under Section 3 is necessarily linked to proceeds that are derived from a scheduled offence. The Court concluded that the PMLA prosecution in the present matter rested on materials and evidence generated in the CBI case; consequently, if the foundational scheduled-offence case cannot be sustained (or the person is an approver in that case), the PMLA complaint cannot be maintained merely on a notional basis. [Paras 35, 36, 37, 41, 42]

The Court held that the PMLA offence in this matter is directly connected to and contingent upon the scheduled-offence case; the PMLA prosecution cannot proceed independent of the CBI materials on which it is founded.

Protection under proviso to Section 132 of the Evidence Act - tender of pardon under Section 306 Cr.P.C. and grant of pardon under Section 307 Cr.P.C. - Whether the approver is entitled to statutory protections (immunity under Section 132 proviso and procedural safeguards under Sections 306/307 Cr.P.C.) in the connected PMLA proceedings - HELD THAT: - The Court considered the doctrine that an accomplice/approver examined as a witness is protected by the proviso to Section 132 of the Evidence Act against prosecution based on answers given as witness, and noted the procedures for tendering pardon under Sections 306 and 307 Cr.P.C. Applying these principles to the facts, the Court found that the opposite party, having become an approver and having given evidence in the CBI matter, attracts the immunity and procedural protections which preclude his being proceeded against in the dependent PMLA complaint on the basis of the same disclosures. [Paras 38, 40, 41, 43]

The approver is entitled to the protection of the proviso to Section 132 and the benefit of pardon provisions; those protections support the Special Court's discharge order in the PMLA proceedings.

Final Conclusion: The revision is dismissed and the order dated 03.10.2019 of the Special Judge (CBI) / Special Judge PMLA in ML Case No. 02 of 2017 discharging the accused is affirmed; connected applications disposed of and interim reliefs vacated.

Regular bail - PMLA trial vis-a -vis predicate offence; simultaneous trial expectation - medical grounds for grant of bail - role of custody duration in bail analysis under PMLA read with Section 439 Cr.P.C. and Section 45 PMLA - prima facie material and pivotal role in laundering of crime proceeds - no change of circumstances to justify enlargement on bail - direction to expedite trial

Regular bail - prima facie material and pivotal role in laundering of crime proceeds - custody duration and incarceration - medical grounds for grant of bail - simultaneous trial expectation - Grant of regular bail to the petitioner in the PMLA prosecution - HELD THAT: - The petition for regular bail was refused. The Court held that the petitioner could not be equated with certain co-accused who had been granted bail because, on the prosecution case, the petitioner is the principal accused and prima facie appears to be the kingpin in laundering proceeds of large-scale illegal mining; co-accused who obtained bail were distinguished by lesser roles or different stages of arraignment. Trial was at an early stage - charge framed on 03.03.2023 and only ten of 42 witnesses examined - and there was prima facie material indicating the petitioner's pivotal role. Medical grounds were considered: the petitioner's chronic illnesses and hospital treatment were noted and medical care is being provided, but the Court found these did not constitute a change of circumstances sufficient to outweigh the incriminating material and the stage of trial. The Court observed that while simultaneous conclusion of the scheduled-offence trial and the money laundering trial is desirable to avoid anomalous results, Section 44 Explanation (i) does not make the money laundering trial dependent on disposal of the scheduled-offence trial; thus the nascent stage of the PMLA trial and the prima facie evidence were decisive against bail. Reliance on detention period and authorities relating to prolonged incarceration was considered but found inapplicable on the facts: no such exceptional comparative punishment or delay that would compel bail was established. Consequently the Court found no change of circumstances warranting enlargement on regular bail.

Bail application rejected; no change of circumstances shown to grant regular bail.

Direction to expedite trial - right to speedy trial - Whether the trial should be expedited - HELD THAT: - Although bail was refused, the Court directed the learned Trial Court to expedite the trial. The Court referred to prevailing judicial guidance that trials should be conducted within reasonable outer limits so that prolonged detention does not result from delay, and emphasised the need for timely completion of proceedings in the interest of justice.

Trial to be expedited by the Trial Court.

Final Conclusion: The petition for regular bail under the PMLA was dismissed: the petitioner, viewed as the principal accused with prima facie material against him and given the nascent stage of the trial, did not demonstrate a change of circumstances warranting bail; the Trial Court was directed to expedite trial proceedings.

Constitutionality of administrative Adjudicating Authority - distinction between administrative and judicial functions - requirement of judicial members for bodies with trappings of a Court - principles of natural justice in administrative adjudication - validity of single member Benches under a multi member authority

Constitutionality of administrative Adjudicating Authority - distinction between administrative and judicial functions - requirement of judicial members for bodies with trappings of a Court - principles of natural justice in administrative adjudication - Validity of Section 6 insofar as Adjudicating Authority may be constituted with members from administration, finance/accountancy and Indian Legal Service and need for Judicial Officers to man the Authority - HELD THAT: - The Court held that the Adjudicating Authority under Section 6 of the PMLA performs an original, administrative function - forming an initial opinion or 'reason to believe' and confirming provisional attachments or retention pending trial - rather than finally determining the lis between parties. Although the Authority is vested with powers akin to a civil court for discovery, summons and compelling production of documents (Section 11), those powers serve the administrative inquiry to ensure fairness and truth; ultimate determination of rights and final confiscation or release is made by the Special Court after trial. Therefore the presence of judicial trappings or procedural formalities does not convert the Authority into a judicial or quasi judicial Tribunal requiring members who are or were Judicial Officers. The legislative scheme, appellate remedies to an Appellate Tribunal and Special Court oversight were material to the conclusion that Sections 6(2) and 6(3)(a)(ii) are not unconstitutional for permitting members from administration, finance/accountancy or Indian Legal Service. [Paras 7]

Section 6 is not illegal for not requiring Judicial Officers/persons qualified to be appointed as Judicial Officers to constitute the Adjudicating Authority.

Validity of single member Benches under a multi member authority - harmonious construction of statutory provisions regarding Benches - discretion of Chairperson to constitute Benches and transfer matters - Validity of power in Section 6(5)(b) for the Chairperson to constitute Benches with one or two Members, including Single Member Benches possibly without a legal member - HELD THAT: - The Court construed Section 6 as creating a single Adjudicating Authority with three members drawn from specified fields, while allowing the Chairperson discretion to constitute Benches (single or two member) depending on the needs of particular matters. This power is to be exercised in harmony with the requirement of expertise in Section 6(2); the statute and its provisos (including transfer/referral to larger Bench where necessary) permit the Chairperson or a Bench to refer matters to a two/three member Bench. Precedents on similar provisions were held instructive; the existence of a power to form Single Member Benches does not render Section 6 self contradictory or manifestly arbitrary. [Paras 8]

The Chairperson's power to constitute Single Member or Two Member Benches under Section 6(5)(b) is not unconstitutional.

Final Conclusion: Writ Petition dismissed for lack of merit; no order as to costs.

Technical Testing and Analysis Service - Works Contract Service - classification of service for service tax - benefit under VCES - extended period

Technical Testing and Analysis Service - Works Contract Service - classification of service for service tax - Whether the services rendered by the appellant fall within Technical Testing and Analysis Service or within Works Contract Service and thus liable to differential service tax - HELD THAT: - The Tribunal examined the contract descriptions and documents on record and found that the scope of work varies between contracts (e.g., descriptions such as 'radiography job at IOCL Gujarat Refinery', 'radiography jobs in Gujarat Refinery', 'PWHT work for shiplift structure', supply of 'radiography equipment, chemicals and other essential materials' and provision of 'Radiographer/Technician'). A conjoint reading of the statutory definition of Works Contract shows it applies where activities like construction, erection, installation, repair, maintenance or similar are undertaken. The Bench observed that prima facie some engagements might constitute Technical Testing and Analysis Service, but the impugned order failed to examine the scope of work in each contract separately. Because the descriptions differ across work orders, classification cannot be conclusively determined on the record before the Tribunal and requires fresh scrutiny by the adjudicating authority of each contract's scope to determine the correct classification for service tax purposes. [Paras 5]

Impugned classification set aside and the question of whether the services fall under Technical Testing and Analysis Service or Works Contract Service is remanded to the original adjudicating authority for fresh examination of each contract.

Benefit under VCES - classification of service for service tax - Whether the appellant's claim of having availed benefit under the VCES scheme for periods prior to March 2012 affects liability and requires examination - HELD THAT: - The appellants stated in their memorandum that they availed the benefit of the Voluntary Compliance Encouragement Scheme for amounts prior to 31.12.2012 and thereafter paid duty under protest while availing cenvat credit on input services. The Tribunal noted that the impugned order did not consider the impact of the VCES claim on the demand and that this factual and legal consequence must be examined by the adjudicating authority while re-adjudicating the matter. [Paras 6]

The question of the impact of the appellant's VCES claim on the demand is remanded to the original adjudicating authority for fresh adjudication.

Final Conclusion: The impugned order is set aside and the matter is remanded to the original adjudicating authority for fresh adjudication: (a) to examine the scope of each contract and decide whether the services are Technical Testing and Analysis Service or Works Contract Service, and (b) to consider the effect of the appellant's claimed benefit under VCES for the periods prior to March 2012.

Pre-deposit under Section 35F of the Central Excise Act - Requirement of e-payment through ICEGATE as per CBIC Circular No.1070/3/2019-CX - Remand for de novo adjudication - Service tax recovery based on Income Tax returns - Exemption for work contract services to Government under Circular No.25/2012-ST

Pre-deposit under Section 35F of the Central Excise Act - Requirement of e-payment through ICEGATE as per CBIC Circular No.1070/3/2019-CX - Whether the appeal could proceed after the appellant made the requisite pre-deposit for filing the appeal before the Tribunal - HELD THAT: - The appellant had originally made a partial pre-deposit which the Commissioner treated as non-compliant with the revised e-payment procedure and dismissed the appeal. The appellant thereafter produced a challan dated 13 May 2023 showing payment of the complete 10% pre-deposit required to pursue the appeal before this Tribunal. Having regard to the subsequent compliance with the pre-deposit requirement, the Tribunal found no impediment to the exercise of appellate jurisdiction and declined to allow the procedural defect to bar consideration on merits. The Tribunal therefore set aside the impugned order and permitted the appeal to proceed by remanding the matter for adjudication on merits. [Paras 5, 6]

Impugned order set aside; appeal allowed by way of remand since the appellant has complied with the pre-deposit requirement.

Remand for de novo adjudication - Service tax recovery based on Income Tax returns - Exemption for work contract services to Government under Circular No.25/2012-ST - Adjudication on the merits of the service tax demand raised on the basis of information from the Income Tax Department and the claim of exemption for government work contract services - HELD THAT: - The Tribunal did not decide the substantive controversy on whether the services rendered by the appellant were taxable or exempt, nor did it rule on the validity of assessing service tax on the basis of figures in the Income Tax returns. Observing that neither the adjudicating authority nor the Commissioner (Appeals) had considered the case on merits, the Tribunal remanded the matter to the adjudicating authority for fresh adjudication de novo. The appellant was permitted to place all relevant documents and raise all points, including reliance upon Circular No.25/2012-ST and precedents relied upon, for consideration by the adjudicating authority. [Paras 5, 6]

Matter remanded to the adjudicating authority for de novo consideration of the merits; no adjudication on the substantive taxability or exemption in this order.

Final Conclusion: The impugned order is set aside and the appeal is allowed by way of remand; the matter is sent back to the adjudicating authority for de novo consideration of the service tax demand for April 2016 to March 2017, the appellant being free to place relevant documents and raise all contentions.

MRP valuation under Section 4A - Applicability of Packaged Commodities Rules to industrial/institutional consumers - Extended period of limitation and proviso to Section 11A(1) - Penalty under Section 11AC - Determination of Retail Sale Price Rules, 2008 - retrospective application - List price as MRP under reasonable/best judgment

Extended period of limitation and proviso to Section 11A(1) - Penalty under Section 11AC - MRP valuation under Section 4A - Show Cause Notice barred by limitation and demand (including penalty) cannot be sustained - HELD THAT: - The Tribunal found the demand arose from a change of opinion on legal interpretation and the appellant had a bona fide belief that MRP need not be affixed for MCCBs meant for industrial/institutional customers (manifested by stickers and compliance with ER 1 returns). There was no evidence of deliberate suppression or intent to evade duty. The Tribunal relied on precedent and the appellant's own prior favorable decisions (including a final CESTAT, Mumbai order on limitation and penalty) showing the controversy was not free from doubt. In these circumstances the ingredients necessary to invoke the extended period under the proviso to Section 11A(1) were not established and the penalty under Section 11AC could not be sustained. Consequently the Show Cause Notice issued for the period under adjudication is time barred and the demand does not survive. [Paras 10, 11]

Show Cause Notice for the period 01.04.2007 to 27.05.2008 is barred by limitation; appeal allowed and consequential relief granted.

Final Conclusion: The appeal is allowed on the ground of limitation: the demand (and penalty) raised for the period 01.04.2007 to 27.05.2008 is time barred and does not survive, with consequential relief as per law.

Assessable value - Transaction value - Incidental charges not includible in assessable value where they represent a profit element - Excise duty leviable on manufacture and not on dealer's profit - Appropriation of excess collections

Assessable value - Transaction value - Incidental charges not includible in assessable value where they represent a profit element - Excise duty leviable on manufacture and not on dealer's profit - Whether excess insurance charges collected by the appellant, over and above the insurance premium actually paid, form part of the assessable value liable to excise duty - HELD THAT: - The Tribunal applied the ratio of the Hon'ble Supreme Court in Baroda Electric Meters Ltd., which held that where amounts collected (such as equalised freight) exceed the actual expenditure incurred and the difference represents a profit element or appropriation, that excess cannot be included in the assessable value for excise duty. The underlying principle is that excise duty is a tax on manufacture and not on profits made by a dealer on services or transportation; amounts representing profit are therefore not exigible to excise. Applying that principle to the facts - namely, that insurance charges collected in excess of premiums paid represented appropriation/profit - the appellate authority erred in holding such excess to be part of the assessable value. Consequently the Order-In-Original which had dropped the demand is to be restored.

Impugned Order-In-Appeal set aside; Order-In-Original dated 25.01.2017 restored and appeal allowed.

Final Conclusion: Appeal allowed; the Commissioner (Appeals) was in error in including the excess insurance collections in the assessable value. The Order-In-Original dropping proceedings is restored with consequential relief, if any, in accordance with law.

Transaction value under Section 4(3)(d) of the Central Excise Act - Assessable value - Place of removal - Freight/transportation charges not includible in transaction value - Transfer of ownership at factory gate - Pre-delivery inspection and acceptance at seller's premises - Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Rule 5

Freight/transportation charges not includible in transaction value - Transaction value under Section 4(3)(d) of the Central Excise Act - Place of removal - Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Rule 5 - Transfer of ownership at factory gate - Whether separately charged freight/transportation from factory to buyer's premises is includible in the assessable transaction value for central excise duty. - HELD THAT: - The Tribunal found that the respondent manufactured and supplied goods under contracts where buyers carried out pre-delivery inspection and acceptance at the respondent's factory, and transport was arranged by the respondent and charged separately in invoices. Relying on the ratio of the Hon'ble Supreme Court and this Bench's precedent, and applying Rule 5 of the Central Excise Valuation Rules, 2000, the Tribunal held that where transfer of ownership and delivery occur at the factory gate, transportation charges incurred after removal to buyer's premises are post-clearance expenses and are not includible in the transaction value. The decision notes that invoices separately reflected freight and sales tax, and that the price of goods depended on transaction value exclusive of freight. Consequently, the place of removal is the factory gate and freight to buyer's premises is excluded from assessable value.

Freight/transportation charges charged separately for carriage from factory to buyer's premises are not includible in the transaction/assessable value; transfer of ownership occurs at the factory gate.

Final Conclusion: The Tribunal sustained the order of the Commissioner (Appeals) setting aside the Order-in-Original; the Revenue's appeal is rejected and the demand and penalty confirmed in the OIO were not upheld to the extent that freight was included in assessable value.

Maintainability of writ petition challenging assessment - writ jurisdiction under Article 227 - assessment under Section 25(1) of the KVAT Act - remedy of statutory appeal under Section 55 of the KVAT Act - use of income-tax return as evidence in VAT assessment - failure to produce books and consequence of non-cooperation

Assessment under Section 25(1) of the KVAT Act - use of income-tax return as evidence in VAT assessment - failure to produce books and consequence of non-cooperation - Validity of the assessment completed under Section 25(1) of the KVAT Act based on the Income tax return obtained from Income Tax authorities when the dealer did not produce books or reply to notices. - HELD THAT: - The assessing authority initiated proceedings under Section 25(1) after an intelligence report and issued notices requiring production of books; the dealer failed to produce records or file objections. The State Tax Officer obtained the dealer's income tax return from Income Tax authorities, relied on the sales and services figure disclosed therein to propose assessment and served the proposed order with opportunity to file objections and for personal hearing. The dealer did not avail the opportunity. The High Court held that the impugned order is not shown to be without jurisdiction or violative of express law merely because the assessing officer used the Income tax return as evidence in absence of co operation by the dealer; the court declined to examine merits of the assessment in writ jurisdiction. [Paras 2, 3, 7]

The assessment was not set aside on jurisdictional grounds; the court declined to interfere with the merits of the assessment completed on the evidence obtained and non cooperation of the dealer.

Maintainability of writ petition challenging assessment - writ jurisdiction under Article 227 - remedy of statutory appeal under Section 55 of the KVAT Act - Whether the writ petition challenging the assessment is maintainable in view of the availability of the statutory appeal remedy. - HELD THAT: - The court observed that the petitioner had statutory remedy by way of appeal under Section 55 of the KVAT Act and that a writ under Article 227 is limited to jurisdictional or legal infirmities. As the petitioner did not demonstrate that the assessment order was without jurisdiction or contrary to express statutory provision, the writ was not maintainable to re open the merits of assessment which are amenable to the statutory appellate process. [Paras 5, 7]

The writ petition is not maintainable and cannot be used as a substitute for the statutory appeal; the petition was dismissed.

Final Conclusion: Writ petition dismissed for lack of jurisdictional infirmity in the assessment order; petitioner may pursue the remedy of appeal under the KVAT Act if so advised.

Classification under Entry No. 109 of Schedule II Part A - meaning of "stone" for tax classification - exclusion of glazed stone, marble and marble chips - distinction between processed and unprocessed stone - legislative intent in taxation statutes

Classification under Entry No. 109 of Schedule II Part A - meaning of "stone" for tax classification - distinction between processed and unprocessed stone - exclusion of glazed stone, marble and marble chips - Granite stone blocks and pieces fall within the term "stone" in Entry No. 109 and are taxable at the rate applicable to that entry; processed stones may be excluded while unprocessed stones are included. - HELD THAT: - Entry No. 109 expressly includes the word "stone" while specifically excluding glazed stone, marble and marble chips. The absence of any specific exclusion of granite in the amendment of 31.03.2011 indicates that the Legislature did not intend to exclude granite from the scope of "stone" in that entry. Accepting the revenue's contention would require excluding numerous items that would ordinarily be termed "stone", which is not permissible. The Tribunal's interpretation that stones not processed in any manner fall within Entry No. 109, whereas processed stones that have undergone some procedure may fall outside it, coheres with the explicit exclusion of glazed stone and is a permissible construction. There is therefore no warrant to interfere with the Tribunal's well-reasoned classification and tax-rate conclusion.

Revision petition dismissed; Tribunal's classification and tax-rate determination affirmed.

Final Conclusion: The High Court dismissed the revision, upholding the Tribunal's conclusion that granite stone blocks and pieces, being within the ordinary meaning of "stone" and not specifically excluded, are taxable under Entry No. 109 at the rate applied by the Tribunal; processed stones may be excluded depending on the extent of processing.

Summoning order under Section 138 of the Negotiable Instruments Act - Existence of legally enforceable debt or liability at the time of cheque drawal - Comparative signature examination and prima facie forgery - Judicial mind and requirement of speaking reasons in issuance of process - Scope of inherent jurisdiction of High Court under Section 482 Cr.P.C. - Compoundability of offences under Section 138 and predominance of civil wrong

Summoning order under Section 138 of the Negotiable Instruments Act - Existence of legally enforceable debt or liability at the time of cheque drawal - Comparative signature examination and prima facie forgery - Judicial mind and requirement of speaking reasons in issuance of process - Validity of the trial court's summoning order dated 22.07.2022 in Complaint Case No.83520 of 2021 under Section 138 N.I. Act - HELD THAT: - The High Court found that the trial court failed to appreciate material on record and summoned the applicants in a mechanical manner without proper application of judicial mind. On prima facie comparison of signature samples, including the signature on the sale deed and those on the two cheques, the Court observed sufficient dissimilarities and accepted that the signatures on the cheques did not match the specimen signatures of applicant No.2; a forensic report was placed on record corroborating this view. The Court also noted that the alleged authorization was time limited and that, as per the complainant's own case, the sale occurred after the date on which the cheques were drawn, negating existence of an existing legally enforceable debt or liability at the time of drawal. The Court reiterated the settled legal position that Section 138 punishes dishonour of a cheque drawn in discharge of an existing debt or liability and must be strictly construed; proviso conditions must be satisfied for valid prosecution. Considering the uncontroverted materials and relevant authorities, the High Court concluded that the ingredients necessary to sustain a prosecution under Section 138 were prima facie not made out and that continuing the prosecution would be an abuse of process of court. [Paras 27, 28, 29, 33, 39]

Impugned summoning order dated 22.07.2022 is set aside and the prosecution insofar as it stems from that order is quashed.

Scope of inherent jurisdiction of High Court under Section 482 Cr.P.C. - Remand for fresh consideration by trial court - Disposition of the matter and directions to the trial court following quashing of the summoning order - HELD THAT: - While exercising inherent jurisdiction under Section 482 Cr.P.C. to prevent abuse of process and secure ends of justice, the High Court set aside the impugned order but remanded the matter to the trial court for fresh consideration. The trial court was directed to pass a fresh order within four months, taking into account the Court's observations regarding signature dissimilarity, absence of established debt/liability at the time of cheque drawal, and the need to apply judicial mind and record reasons when issuing process. The remand is for reconsideration in light of the discussions and authorities cited, not for reopening factual issues already determined to be dispositive at the prima facie stage. [Paras 40]

Proceedings are remitted to the trial court with direction to pass a fresh order within four months after taking into account the High Court's observations and referred judgments.

Final Conclusion: The High Court allowed the petition under Section 482 Cr.P.C., set aside the trial court's summoning order dated 22.07.2022 in the Section 138 complaint, recorded reasons including prima facie forgery and lack of existing debt at cheque drawal, and remitted the matter to the trial court to pass a fresh order within four months in light of the observations and authorities cited.

Vicarious liability - offence under Section 138 of the Negotiable Instruments Act - arraignment of the company/firm as a prerequisite for proceeding under Section 141 - demand notice requirement for dishonour of cheque

Vicarious liability - offence under Section 138 of the Negotiable Instruments Act - demand notice requirement for dishonour of cheque - arraignment of the company/firm as a prerequisite for proceeding under Section 141 - Legality of maintaining prosecution under Section 138 read with Section 141 of the NI Act when the cheque was drawn on the partnership firm's account but the criminal complaint and demand notice were addressed only to the partners without impleading the partnership firm. - HELD THAT: - Where a cheque is issued from a partnership firm's account and signed by partners, the partners' liability is vicarious and flows under the scheme of Section 141. For prosecution under Section 141 (which extends to firms by definition), the company/firm must be arraigned as an accused because vicarious liability requires that the primary corporate/firm entity be proceeded against and other persons be brought in by virtue of their relationship. The complainant bears the primary burden to make specific averments necessary to fasten vicarious liability. A demand notice within the statutory time framed by Section 138 must be served on the drawer; absence of such notice to the partnership firm when the cheque was drawn on the firm's account constitutes a material defect in the complaint. The courts below erred in permitting an amended memo of parties to be taken on record so as to cure the absence of prior notice or initial non-impleading of the firm; an after-the-fact amendment cannot remedy the fundamental requirement of impleading the firm and issuing the demand notice to it. Reliance on precedent establishes that arraignment of the company/firm is imperative and vicarious liability must be specifically pleaded and proved; consequentially the complaint, in the absence of notice and impleading of the firm, is unsustainable.

Complaint under Section 138 read with Section 141 was quashed for non-impleading of the partnership firm and failure to serve the requisite demand notice on the firm; amended memo could not cure this material defect.

Final Conclusion: The petition is allowed; the revisional order and the summoning order are set aside and the criminal complaint under Section 138 read with Section 141 of the NI Act is quashed for failure to implead the partnership firm and for absence of the statutory demand notice to the firm.