TaxTMI Updates e-Newsletter
Feb 17,2023

Right to personal hearing - opportunity of hearing where an adverse decision is contemplated - violation of principles of natural justice - Section 75(4) of the GST Act, 2017 - requirement to grant personal hearing prior to adverse assessment - quashing and remand for fresh consideration

Right to personal hearing - opportunity of hearing where an adverse decision is contemplated - Section 75(4) of the GST Act, 2017 - requirement to grant personal hearing prior to adverse assessment - violation of principles of natural justice - quashing and remand for fresh consideration - Whether the impugned assessment could be sustained despite no personal hearing being afforded when an adverse decision was taken under the assessment proceedings. - HELD THAT: - The Court held that Section 75(4) of the GST Act, 2017 mandates that an opportunity of personal hearing must be granted where an adverse decision is contemplated against the person chargeable with tax or penalty, irrespective of whether the person has requested a hearing. The High Court agreed with earlier decisions of the Court applying the same principle and found on the facts that no personal hearing was afforded to the petitioner while an adverse assessment and penalty were imposed. The omission amounted to a breach of the principles of natural justice. As the statutory requirement of hearing was not complied with and an adverse order was passed, the assessment order could not be sustained and had to be quashed and remitted for fresh consideration in accordance with law, with directions to afford the petitioner personal hearing before passing the final order. [Paras 4, 5, 6, 7, 8]

Impugned assessment order dated 28.12.2022 quashed for failure to grant personal hearing as mandated by Section 75(4); matter remanded to respondent for fresh consideration after granting personal hearing and observing principles of natural justice, with time-bound direction for disposal.

Final Conclusion: The assessment order for AY 2021-2022 is quashed for violation of the statutory right to personal hearing under Section 75(4) of the GST Act, 2017 and remitted to the assessing authority for fresh consideration after granting the petitioner a personal hearing and observing principles of natural justice; the authority directed to pass final orders within the stipulated period.

Maintainability of writ petition where statutory remedy exists - principles of natural justice - provisional release under Section 129(1) of the Goods and Services Tax Act, 2017 - provisional release under proviso to Section 129(6) of the Goods and Services Tax Act, 2017 - availability of statutory appeal under Section 107 of the Goods and Services Tax Act, 2017

Maintainability of writ petition where statutory remedy exists - availability of statutory appeal under Section 107 of the Goods and Services Tax Act, 2017 - Whether the writ petition is maintainable when a statutory remedy of appeal under Section 107 of the GST Act, 2017 is available. - HELD THAT: - The Court noted that a statutory appellate remedy under Section 107 is admittedly available to the petitioner and that the petitioner has not availed that remedy but has chosen to approach the High Court by way of writ. The petitioner's explanation for filing the writ - namely, that continued detention would cause heavy loss - was acknowledged, but the existence of the statutory remedy and the fact that reasons were given by the respondent in the impugned order led the Court to hold that the writ petition could not be entertained in lieu of the statutory appeal. The Court therefore confined relief to allowing the petitioner to invoke the statutory appellate process and prescribed timelines for expeditious consideration to prevent prejudice to the petitioner. [Paras 10, 11, 13, 14, 19]

Writ petition not entertained on merits; petitioner directed to file statutory appeal under Section 107 within two weeks and the appellate authority directed to decide the appeal in accordance with law.

Principles of natural justice - Whether the respondent violated principles of natural justice in passing the detention and penalty order. - HELD THAT: - The Court examined the procedure adopted by the respondent, noting that the petitioner was issued show cause, given an opportunity to reply, and that the reply was considered before passing the impugned order. The respondent also referred to a governmental circular in its reasoning. As the record showed that the petitioner had an opportunity to be heard and that reasons were furnished, the Court found no breach of principles of natural justice warranting interference by writ jurisdiction at the admission stage. [Paras 6, 7, 13]

No violation of principles of natural justice found; no writ relief on that ground.

Provisional release under Section 129(1) of the Goods and Services Tax Act, 2017 - Provision for provisional release of detained goods and conveyance and the manner of its consideration when an appeal is filed. - HELD THAT: - Recognising the risk of deterioration of the detained goods and the petitioner's willingness to furnish security or deposit the penalty amount under protest, the Court directed that the petitioner may file an application under Section 129(1) before the statutory Appellate Authority seeking provisional release. The Court mandated that upon filing of such application the Appellate Authority shall consider and pass final orders on the application within one week from receipt, taking into account the petitioner's offer to furnish security or deposit the penalty without prejudice to its main appeal. This direction does not decide the merits of provisional release but requires expeditious fresh consideration by the appellate forum. [Paras 12, 14, 19]

Application for provisional release under Section 129(1) to be considered and decided by the statutory Appellate Authority within one week of its receipt.

Provisional release under proviso to Section 129(6) of the Goods and Services Tax Act, 2017 - Whether the proper officer should consider an application for provisional release under the proviso to Section 129(6) and the timeline for such consideration. - HELD THAT: - The Court observed that the proviso to Section 129(6) empowers the proper officer to release the vehicle on payment of a stipulated penalty (as noted in the order). In order to prevent further prejudice to the petitioner, the Court directed the proper officer (respondent) to entertain and decide any application made under the proviso to Section 129(6) for provisional release on payment of the prescribed penalty. The directive was for expeditious disposal within one week from receipt of such application, thereby leaving the merits to the officer's evaluation but mandating prompt consideration. [Paras 16, 17, 19]

Respondent directed to consider and decide any application under the proviso to Section 129(6) for provisional release within one week of receipt.

Final Conclusion: Writ petition disposed of by declining to entertain the petition in place of the statutory appeal; petitioner permitted to file appeal under Section 107 within two weeks and to apply for provisional release under Section 129(1) before the Appellate Authority (to be decided within one week), and the proper officer directed to consider any application under the proviso to Section 129(6) within one week.

Regular bail - economic offences causing loss to the Government exchequer - prima facie involvement and complicity - fabrication of firms and misuse of identity documents - use of bogus Input Tax Credit via paper transactions - gravity and seriousness of the offence

Regular bail - prima facie involvement and complicity - gravity and seriousness of the offence - Whether the petitioner is entitled to grant of regular bail in view of the material on record and the nature of the allegations. - HELD THAT: - Petition under Section 439 Cr.P.C. seeking regular bail was considered against the prosecution case that the petitioner, in connivance with co-accused, floated paper firms, prepared forged documents and misused identity documents to register firms and claim bogus Input Tax Credit, causing substantial loss to the Government exchequer. Investigation disclosed non existence of business at the registered address, absence of physical or bank transactions supporting purported sales/purchases, recovery of identity document copies from the petitioner and disclosure statements implicating the petitioner. The court evaluated these materials and observed that the pointing finger of accusation rests on the petitioner and that the offences are economic in nature with significant revenue loss. Having regard to the gravity and seriousness of the alleged offences and the prima facie evidence of the petitioner's complicity, the court found no ground to grant the concession of regular bail. The court emphasised the need to check such frauds and treated the matter as one warranting denial of bail on the material before it.

Prayer for regular bail dismissed.

Final Conclusion: On consideration of the material on record, the nature and gravity of the allegations of fabrication of firms, misuse of identity documents and utilisation of bogus Input Tax Credit causing loss to the public exchequer, and the prima facie involvement of the petitioner, the High Court declined to grant regular bail and dismissed the petition.

Requirement of Part A of FORM GST DRC-01A under Rule 142(1A) - Validity of proceedings initiated without mandatory notice - Opportunity of hearing and fair procedure - Effect of subsequent reminders on lack of initial notice - Section 74(9) of the Central Goods and Service Tax Act - adjudication for tax recovery - Quashing of impugned order with liberty to initiate fresh proceedings

Requirement of Part A of FORM GST DRC-01A under Rule 142(1A) - Validity of proceedings initiated without mandatory notice - Opportunity of hearing and fair procedure - Effect of subsequent reminders on lack of initial notice - Proceedings and the impugned order under Section 74(9) were void for want of issuance of the Part A FORM GST DRC-01A notice as required by Rule 142(1A), and could not be cured by subsequent reminders. - HELD THAT: - At the time proceedings were initiated the unamended Rule 142(1A) mandated issuance of a Part A FORM GST DRC-01A communicating details of tax, interest and penalties before any order under Section 74 could be passed. In the present case no such Part A notice was issued. The Court held that absence of the mandatory communication deprived the petitioner of the requisite opportunity to place its case and thus vitiated jurisdiction. Subsequent reminders sent thereafter do not cure the inherent defect of initiation without the statutorily required notice. The view aligns with earlier decisions dealing with identical pre-amendment facts where show cause notices lacking Part A compliance were set aside and matters were remitted for fresh action in accordance with law. Consequently the impugned order was quashed but respondents were granted liberty to initiate fresh proceedings complying with the statutory procedure. [Paras 2, 5, 6]

Impugned order quashed for failure to issue the mandatory Part A FORM GST DRC-01A; matter remitted with liberty to initiate fresh proceedings in accordance with law.

Final Conclusion: Writ petition allowed; the order under challenge is quashed for want of the mandatory Part A notice under Rule 142(1A), but respondents may commence fresh proceedings observing the statutory requirements and providing the petitioner a fair opportunity.

Appeal time-limit under Section 107 of the West Bengal Goods and Services Tax Act, 2017 - extension of limitation by Appellate Authority under Section 107(4) - condonation of delay in filing appeal

Appeal time-limit under Section 107 of the West Bengal Goods and Services Tax Act, 2017 - extension of limitation by Appellate Authority under Section 107(4) - condonation of delay in filing appeal - Admission of an appeal delayed by 36 days beyond the period of three months plus one month prescribed under Section 107(1) and (4) of the West Bengal GST Act, 2017. - HELD THAT: - The Court noted that Section 107(1) prescribes a three month period for filing appeals to the Appellate Authority and Section 107(4) permits the Appellate Authority to allow presentation of the appeal within a further period of one month if satisfied that sufficient cause prevented timely filing. In the present case the delay was 36 days beyond the three months plus one month. Having heard counsel and observing the Appellate Authority's limited but existing power to extend time under Section 107(4), together with the negligible period of delay and the petitioner's asserted ignorance of the statutory time limit, the Court directed that the Appellate Authority should admit the appeal for consideration on merits. The Court imposed a condition that the petitioner take steps in terms of the appeal by 11th January, 2023. The Court expressly refrained from deciding the merits and confined its intervention to admission despite the delay.

The petition succeeds to the extent that the Appellate Authority is directed to admit the appeal despite the 36 days' delay, subject to the petitioner taking steps by 11th January, 2023.

Adjudication on merits - appellate determination by Appellate Authority - Whether the High Court decided the substantive merits of the appeal or left the merits for determination by the Appellate Authority. - HELD THAT: - The Court made clear that it has not gone into the merits of the matter. Having directed admission of the appeal for being heard despite delay, the Court remitted the matter to the Appellate Authority to decide the facts and the law as it may think fit. The Appellate Authority is therefore to undertake adjudication on the merits afresh in accordance with law.

Merits not adjudicated by this Court and the matter is remitted to the Appellate Authority for decision on facts and law.

Final Conclusion: Writ petition disposed by directing the Appellate Authority to admit the delayed appeal (36 days beyond three months plus one month) subject to the petitioner taking requisite steps by 11th January, 2023; the substantive merits are left open for fresh decision by the Appellate Authority.

Interim order. Notice issued returnable on 3.2.2023; respondent to file reply before the returnable date with a copy served 24 hours in advance.

Penalty levied u/s 271(1)(C) - assessee has furnished inaccurate particulars of income in the garb of fictitious cash sales and thereby claimed exemption u/s 80-IC - As held by HC [2022 (7) TMI 1017 - HIMACHAL PRADESH HIGH COURT] AO as well as the Appellate Authority, rightly gave finding of fact that the cash sales putforth by the respondent were not genuine and the respondent had introduced its unaccounted income in the garb of cash sales. The Tribunal erred in deleting the penalty levied u/s 271(1)(c) - HELD THAT:- We do not find any good ground and reason to interfere with the impugned judgment/order and hence, the special leave petition is dismissed.

Reopening of assessment - reason to believe - reopening after four years - requirement of failure to disclose fully and truly all material facts - failure to disclose fully and truly all material facts - change of opinion - tangible material

Reopening of assessment - reopening after four years - requirement of failure to disclose fully and truly all material facts - reason to believe - Validity of reopening assessment beyond four years where the Assessing Officer records 'failure to disclose' but does not identify the undisclosed material facts - HELD THAT: - The Court held that for reassessment beyond four years the Assessing Officer must satisfy both limbs: (i) have reason to believe that income chargeable to tax has escaped assessment and (ii) where a s.143(3) assessment had been completed, that the assessee failed to disclose fully and truly all material facts necessary for assessment. A bald or conclusory statement of such failure is insufficient. The reasons recorded must disclose the specific material fact(s) not disclosed by the assessee and demonstrate a live link between the identified undisclosed material and the belief that income has escaped assessment. The reasons in the present case merely asserted failure to disclose without identifying any particular fact which, if disclosed, would have prevented escapement; therefore the jurisdictional requirement for reopening beyond four years was not met. [Paras 6, 7, 8]

Reopening beyond four years is invalid where the reasons do not specify what material facts were undisclosed; the notice and order in the present case are unsustainable on this ground.

Tangible material - change of opinion - reopening of assessment - Whether the Assessing Officer possessed new tangible material or merely sought a reappraisal of the same material leading to a change of opinion in respect of deduction claimed under Section 80P - HELD THAT: - The Court examined the reasons and the record and found no reference to any new information or tangible material obtained after the original s.143(3) assessment. The Assessing Officer relied on material already considered during the assessment proceedings (including queries under s.142(1) and the materials placed on record then) and attempted a fresh consideration of the same claim. Absent any new tangible material or change in law, such reassessment amounts to impermissible review or change of opinion. Established authorities require a live link between the reasons recorded and new material; that link is absent here. [Paras 11, 12, 13]

Reopening was an impermissible change of opinion in the absence of new tangible material; the notice and the order upholding reopening are quashed.

Final Conclusion: The writ petition is allowed; the notice dated 30th March, 2021 under Section 148 and the order dated 10th March, 2022 are quashed as the Assessing Officer failed to satisfy the jurisdictional requirements for reopening beyond four years and relied on a mere change of opinion without any new tangible material.

Rectification and recall of Tribunal order under Section 254(2) - limitation for filing application under Section 254(2) (six months) - right to have an appeal disposed of on merits even in absence of the assessee - remand for fresh decision on merits

Rectification and recall of Tribunal order under Section 254(2) - right to have an appeal disposed of on merits even in absence of the assessee - Impugned orders setting aside the appellant's appeal for non-appearance and dismissing the miscellaneous application for rectification under Section 254(2) were liable to be set aside and the appeal restored for adjudication on merits. - HELD THAT: - The Court applied the principle that an appeal ought ordinarily to be disposed of on merits, relying on the mandate in CIT v. S. Cheniappa Mudaliar, and observed that extinguishing the right to have an appeal heard would leave the appellant remedyless. On that basis the High Court set aside the ITAT orders dated 13.07.2015 and 26.09.2022 which had resulted in dismissal for want of prosecution and refusal of the rectification application, and directed that the appeal be heard on merits. The order directs the ITAT to decide ITA No. 206/Ind/2013 after hearing all concerned, expeditiously and preferably within three months from receipt of the certified copy. [Paras 8, 10, 11, 13]

Impugned orders set aside; appeal restored and remanded to the ITAT for adjudication on merits.

Limitation for filing application under Section 254(2) (six months) - remand for fresh decision on merits - Effect of the statutory limitation under Section 254(2) on an application for rectification was considered but the appellant's right to have the appeal heard was protected by ordering fresh adjudication on merits. - HELD THAT: - The Court noted the amendment to Section 254(2) prescribing a six months period for filing an application for amendment/rectification and recorded that the ITAT had dismissed the miscellaneous application as time-barred. However, having regard to the established principle that appeals should, where appropriate, be decided on merits and not result in extinguishment of remedy, the High Court exercised supervisory review to set aside the orders and remand the main appeal for hearing. The Court did not leave the matter dismissed on the basis of limitation but directed a fresh hearing, thereby ensuring the appellant's substantive right is adjudicated. [Paras 6, 7, 8]

Although Section 254(2) prescribes a limitation period, the orders rejecting the rectification and dismissing the appeal were set aside and the matter remanded for fresh decision on merits.

Final Conclusion: The High Court allowed the appeal, set aside the ITAT orders dated 13.07.2015 and 26.09.2022, and remanded ITA No. 206/Ind/2013 to the ITAT for decision on merits after hearing the parties, preferably within three months from receipt of the certified copy.

Registration under section 12AA - cancellation of registration for non-compliance with notices - continuity of pre-existing registration during statutory transition - effect of TOLA and judicial extensions on limitation and procedural compliance - remedy of vacating administrative rejection where no adverse finding on activities

Registration under section 12AA - cancellation of registration for non-compliance with notices - effect of TOLA and judicial extensions on limitation and procedural compliance - continuity of pre-existing registration during statutory transition - Validity of the order rejecting the application and treating the application as filed under section 12AA(1)(b)(ii) for failure to furnish documents and whether the assessee's prior registration and the TOLA/judicial extensions justify continuity of registration for the intervening period. - HELD THAT: - The Tribunal found that the assessee held an earlier valid registration under section 12A/12AA which had not been cancelled, and that confusion created by the Finance Act, 2020 and subsequent TOLA (together with extensions by higher courts during the COVID period) constituted sufficient cause for non-response to notices calling for documents. There was no adverse finding on the assessee's activities or merits of eligibility on record. In these circumstances, denying the benefit of registration for the intervening period solely on a technical ground of non-compliance with the notices (issued during the extended/uncertain period) was impermissible. The Bench declined the Revenue's request to remand for fresh compliance because the department subsequently granted registration to the assessee for later years and there were no contra-indications on the record requiring fresh adjudication. Having considered the statutory transition and extensions, and the absence of any controverting finding on merits, the Tribunal concluded that the rejection under section 12AA(1)(b)(ii) could not be sustained and the order was to be vacated.

The order dated 04.03.2021 rejecting the application under section 12AA(1)(b)(ii) is vacated and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, vacated the CIT(E)'s order dated 04.03.2021 rejecting the assessee's application under section 12AA(1)(b)(ii) for the intervening period, holding that the prior registration remained effective and that TOLA and judicial extensions furnished sufficient cause for non-compliance; remand was refused as subsequent registration had been granted and no adverse findings existed.

Unexplained cash receipts - corroboration of third party seized material - use of documents found in premises of third party - deletion of additions for lack of corroborative evidence - protective assessment - validity of notice under section 153C

Unexplained cash receipts - corroboration of third party seized material - use of documents found in premises of third party - deletion of additions for lack of corroborative evidence - Deletion of the addition of Rs. 2.50 crores as unexplained cash in AY 2014-15 was upheld. - HELD THAT: - The Tribunal agreed with the CIT(A) that the addition was based solely on material (pen drive and statements) seized from a third party and on the third party's statement, neither of which was corroborated by any independent or documentary evidence found at the assessee's premises. The assessee produced evidence that the loan transaction between the lender and Durga Marketing Corporation was effected and recorded through banking channels (RTGS) and that the impugned amount was reflected in the books of Durga Marketing Corporation. The third party's versions were contradictory and were subsequently retracted. The CIT(A) correctly applied the principle that documents or loose sheets found in a third party's premises cannot be used against an assessee without independent corroboration, and thus the addition could not be sustained. The Tribunal noted the inconsistency that, if the assessee had indeed given cash as alleged, he would not have been shown as paying interest to that party, which further undermined the addition. The Tribunal therefore found no reason to interfere with the deletion of the addition. The judgment refers to earlier authorities including Principal Commissioner of Income Tax vs. Adamine Construction (P) Ltd and Commissioner of Income Tax vs. Sant Lal in support of the requirement of corroboration before using third party material against an assessee. [Paras 6, 7]

Appeal of the Revenue dismissed in respect of AY 2014-15 and the CIT(A)'s deletion of the addition of Rs. 2.50 crores upheld.

Protective assessment - deletion of additions for lack of corroborative evidence - unexplained cash receipts - validity of notice under section 153C - Deletion of the protective addition of Rs. 2.50 crores and the related deletion of cash interest in AY 2015-16 was upheld. - HELD THAT: - The Tribunal endorsed the CIT(A)'s approach in the subsequent assessment year: the protective assessment for receipt of the same alleged cash amount could not be sustained in the absence of corroborative material from the assessee's premises. Given that the primary addition for payment was deleted for lack of evidence, the protective addition (being duplicative) and the cash interest addition were also correctly deleted. The Tribunal observed that the AO had not produced independent documentary evidence linking the seized third party material to the assessee and that the CIT(A)'s direction to delete the protective addition and the interest followed logically from the findings in the earlier year. Grounds in the assessee's cross objections challenging notices under section 153C did not require separate adjudication because the Revenue appeals were dismissed in favour of the assessee. [Paras 11, 12]

Appeal of the Revenue dismissed in respect of AY 2015-16; protective addition and related interest deletion upheld.

Final Conclusion: Both Revenue appeals for AY 2014-15 and AY 2015-16 are dismissed; the additions of the alleged Rs. 2.50 crores (and related cash interest) were deleted for lack of corroborative evidence linking third party seized material to the assessee, and the assessee's cross objections require no separate adjudication in view of this result.

Reopening of assessment - treatment of return filed in response to notice under section 148 - notice under section 143(2) for completion of reassessment - nullity of reassessment order for failure to comply with mandatory notice requirement - jurisdictional validity of reassessment proceedings

Notice under section 143(2) for completion of reassessment - treatment of return filed in response to notice under section 148 - nullity of reassessment order for failure to comply with mandatory notice requirement - Validity of the reassessment proceedings in view of absence of any notice under section 143(2) after the return was treated as filed in response to the notice under section 148. - HELD THAT: - The assessee informed the Assessing Officer by letter dated 02.08.2010 that the return originally filed under section 139 should be treated as the return filed pursuant to the notice issued under section 148; accordingly the date of filing of the return in response to section 148 was held to be 02.08.2010. The Tribunal examined the assessment record and observed that no notice under section 143(2) was issued and served after 02.08.2010; the only notice dated 26.07.2010 pre-dated the treated filing and did not refer to any return for which clarification was sought. The Revenue could not point to any subsequent compliance or service of a section 143(2) notice. In absence of issuance/service of the mandatory section 143(2) notice after the return was treated as filed in response to section 148, the reassessment proceedings were held to be vitiated and the assessment order rendered null and void. Because the Tribunal quashed the assessment on this procedural/ jurisdictional ground, it declined to examine the merits of the additions. [Paras 5, 6, 7, 8]

The reassessment is quashed as void for want of any notice under section 143(2) after the return was treated as filed pursuant to the notice under section 148; appeal allowed.

Final Conclusion: The assessment for A.Y.2003-04 is quashed for lack of any notice under section 143(2) after the return was treated as filed in response to the section 148 notice; the appeal is allowed and the Tribunal did not decide the merits.

Penalty under section 271(1)(c) - furnishing of inaccurate particulars of income - bona fide mistake and absence of deliberate default - reliance on auditor's working - onus of proof in penalty proceedings - adverse inference for failure to produce evidence or vendor details - scaling down of penalty to minimum rate

Penalty under section 271(1)(c) - furnishing of inaccurate particulars of income - bona fide mistake and absence of deliberate default - reliance on auditor's working - Whether penalty under section 271(1)(c) is sustainable for the alleged wrong claim of depreciation of Rs. 15,31,989/-. - HELD THAT: - The Tribunal found that the depreciation was claimed on the basis of computations made by the assessee's auditors and that the assessee consistently ran profits year to year so that any reduction of depreciation in one year would affect subsequent years. Applying the settled principle that section 271(1)(c) is attracted only where there is deliberate default or intention to furnish inaccurate particulars, the Tribunal held the claim to be a bona fide inadvertent claim acted upon auditor's advice. Reliance was placed on precedents treating auditor-advised or bona fide mistakes as not attracting penalty. Accordingly, the levy of penalty on this count was deleted. [Paras 23, 24, 25, 26, 29]

Penalty deleted insofar as it related to the wrong claim of depreciation of Rs. 15,31,989/-.

Penalty under section 271(1)(c) - adverse inference for failure to produce evidence or vendor details - onus of proof in penalty proceedings - scaling down of penalty to minimum rate - Whether penalty under section 271(1)(c) is sustainable for disallowance of depreciation of Rs. 2,09,559/- where purchase invoices were not produced. - HELD THAT: - The Tribunal accepted that the assessee failed to produce original or duplicate bills and also did not provide vendor details which would have enabled verification. Consequently, an adverse inference was properly drawn against the assessee and imposition of penalty was justified on this count. However, the Tribunal held that the AO's choice of levy at 111.5% exceeded the minimum permissible rate and directed that the penalty be scaled down to the minimum rate of 100%. [Paras 28, 29]

Penalty sustained for the disallowance relating to missing purchase bills but reduced from 111.5% to 100%.

Final Conclusion: The appeal is partly allowed: penalty under section 271(1)(c) is deleted in respect of the wrong claim of depreciation (first count), while the penalty in respect of disallowed depreciation for missing invoices (second count) is sustained but reduced to the minimum rate of 100% for Assessment Year 2012-13.

Depreciation on computer software - classification of licensed software as intangible asset v. computer software for depreciation - literal interpretation of Appendix I entries in a taxing statute - no distinction between system software and application software for prescribed depreciation rate - precedential effect of earlier Tribunal/bench decisions in the assessee's own case

Depreciation on computer software - classification of licensed software as intangible asset v. computer software for depreciation - no distinction between system software and application software for prescribed depreciation rate - literal interpretation of Appendix I entries in a taxing statute - precedential effect of earlier Tribunal/bench decisions in the assessee's own case - Depreciation at 60% was allowable on the SAP licensed software claimed by the assessee for AY 2015-16; the Revenue's contention that the software is an intangible asset eligible only for 25% was rejected. - HELD THAT: - The Tribunal upheld the CIT(A)'s allowance of 60% depreciation on the licensed SAP software, following binding earlier decisions of the ITAT in the assessee's own cases for preceding assessment years. The Tribunal applied the principle of literal construction of Appendix I entries in a taxing statute: Entry for "computers including computer software" read with the Appendix note defining "computer software" requires recognising items falling within that description for the higher depreciation rate. The claimed factual distinction between system software and application (utility) software was held to be immaterial in law, since both fall within the Appendix definition and the Tribunal's consistent earlier decisions; reliance placed on the Madras High Court decision that specific entries in the Appendix must not be ignored in favour of a general entry for intangible assets. Having regard to these precedents and the Appendix interpretation, the Tribunal found no basis to treat the licensed SAP software as falling under the general intangible-assets entry attracting 25% depreciation and therefore directed allowance at 60%. [Paras 3, 5, 7]

Revenue's ground challenging allowance of 60% depreciation was rejected and the assessee's claim for depreciation at 60% on the impugned software for AY 2015-16 was sustained.

Final Conclusion: Appeal dismissed; the order of the CIT(A) allowing depreciation at 60% on the licensed SAP software for AY 2015-16 is affirmed.

Special audit u/s 142(2A) -order u/s 142(2A) was never communicated or even uploaded on the portal - HELD THAT:- We dispose of the present appeal with a direction that the purported order directing special audit u/s 142(2A) will not be given effect to and will be treated as not passed, as it was never communicated to the appellant-assessee - with the consent of the learned counsel for the appellant-assessee, we extend the time for passing the assessment order till 31.12.2023.

If the AO desires special audit u/s 142(2A) he can either rely upon the earlier notice or issue a fresh notice. In case the assessing officer relies upon the earlier notice, it will be so indicated and communicated to the appellant-assessee. In either case, hearing as per law will be given. An order u/s 142(2A) if passed, will be communicated to the appellant-assessee, who will be at liberty to challenge the order in accordance with law. If any special audit is directed or ordered to be conducted, will get extended as per the provisions of the 1961 Act.

Stay of demand - pre-deposit requirement - application of mind - financial hardship/ability to pay - best judgment assessment - natural justice

Stay of demand - application of mind - natural justice - pre-deposit requirement - Validity of rejection of stay application by revenue authorities solely on the ground of non-deposit of 20% of disputed demand without giving reasons and without considering petitioner's plea of financial hardship. - HELD THAT: - The Court held that the Assessing Officer and the Principal Commissioner rejected the petitioner's stay application by simply relying on non-payment of 20% of the disputed demand without applying their minds to the petitioner's pleaded financial hardship and the explanations on merits regarding bank deposits, sale proceeds and other items. Such one-line rejections exhibit non-application of mind and denial of natural justice because the authorities were required to briefly state the assessee's case, consider financial viability and give reasons whether deposit should be insisted upon. Earlier decisions of this Court were applied to require that the authority indicate reasons, including consideration of financial stringency and prima facie view on questions in appeal, before demanding a substantial pre-deposit. [Paras 14, 16]

Rejection of the stay application on the sole ground of non-payment of 20% was set aside and the Principal Commissioner was directed to reconsider the stay request with reasons.

Pre-deposit requirement - financial hardship/ability to pay - stay of demand - Appropriate interim direction in view of petitioner's financial position and the material placed before the Court pending adjudication of the appeal on merits. - HELD THAT: - Instead of remanding the matter for fresh consideration, and having regard to the petitioner being a government-owned corporation and the material placed, the Court exercised its discretion to prescribe a reduced pre-deposit. The Court balanced the petitioner's projected financial hardships with the revenue's interest in recovery and directed that at least 10% of the demanded amount be deposited. The petitioner undertook to deposit Rs.30 lakhs immediately; the Court accepted that as part of the 10% requirement and ordered a timeline for completion of the 10% deposit and expedited hearing of the appeal on merits. The Court clarified that merits of the appeal remain open. [Paras 17, 18, 19]

Petitioner to deposit Rs.30 lakhs within two weeks and the balance so as to make up 10% of the demanded amount within four weeks in total; subject to such deposit, stay of the demand notices ordered and the appeal to be heard on merits.

Final Conclusion: The writ succeeds. The impugned order refusing stay on the sole ground of non-deposit of 20% is set aside; the Principal Commissioner to hear the appeal on merits subject to the petitioner depositing Rs.30 lakhs within two weeks and the balance so as to complete 10% of the demanded amount within four weeks, and meanwhile stay of the demand notices is ordered.

Reopening of assessment - principles of natural justice - provision of satisfaction note and approval for reopening - production of documents relied upon for reasons to reopen - personal hearing with advance notice - directions in Tata Capital Financial Services Limited - quash and remand for de novo consideration

Reopening of assessment - principles of natural justice - production of documents relied upon for reasons to reopen - Impugned notice under Section 148, order rejecting objections, assessment order, notice of demand and penalty notice were passed without furnishing documents relied upon for reopening and without granting an effective hearing, contrary to principles of natural justice. - HELD THAT: - The Assessing Officer issued a notice under Section 148 and thereafter rejected the petitioner's objections and passed an assessment order without furnishing the satisfaction note of the Principal Commissioner, the appraisal report relied upon, and statements recorded during the search and seizure which were specifically referred to in the reasons. The Assessing Officer also refused the petitioner's repeated requests for a hearing (including by video conference) and did not deal with the petitioner's specific submissions while disposing of objections. These omissions amount to non-compliance with this Court's established directions in Tata Capital Financial Services Limited (requiring production of the approval form/satisfaction note and relevant documents and a proper hearing) and constitute a violation of the audi alteram partem principle and Article 14 insofar as the decision-making was arbitrary and mechanical. For these reasons the court concluded that the impugned orders cannot stand. [Paras 16, 17]

Impugned orders dated 31.03.2021 (Section 148 notice), 22.03.2022 (order rejecting objections), 31.03.2022 (assessment order), notice of demand dated 31.03.2022 and penalty notice dated 31.03.2022 are quashed and set aside.

Provision of satisfaction note and approval for reopening - personal hearing with advance notice - quash and remand for de novo consideration - directions in Tata Capital Financial Services Limited - Whether the matter should be remanded for fresh consideration after furnishing the documents and granting an opportunity of hearing in accordance with this Court's directions. - HELD THAT: - The court directed that all documents forming the basis of the reasons for reopening - including the satisfaction note/order of the Principal Commissioner granting approval, the appraisal report from DDIT (Inv), bank statements of the paper concern and statements recorded under Section 131 - must be furnished to the petitioner. The Assessing Officer is to comply with the specific directions set out in Tata Capital Financial Services Limited: reproduce/produce the approval form or relevant portions, enclose referenced documents (redacting irrelevant parts), deal with each objection with reasons, and grant a personal hearing with at least seven working days notice. After furnishing the material and hearing the petitioner, the Assessing Officer shall proceed to pass orders afresh. [Paras 18]

Matter remanded to the Assessing Officer for de novo consideration after furnishing the stated documents and after affording an opportunity of hearing in accordance with the directions in Tata Capital Financial Services Limited.

Final Conclusion: The writ petition is allowed: impugned orders quashed and set aside; the matter is remanded to the Assessing Officer to furnish the satisfaction note, appraisal report and other documents relied upon, to comply with the directions in Tata Capital Financial Services Limited (including grant of a personal hearing with adequate notice), and thereafter to decide the objections and proceedings afresh. No costs.

Faceless Assessment Scheme / E-Assessment Scheme, 2019 - mandatory service of show-cause notice-cum-draft assessment order - opportunity to be heard / principles of natural justice in faceless assessment - quashing of assessment for non-compliance of mandatory procedure - faceless assessment procedure under Section 144B of the Act - territorial jurisdiction under Article 226 - cause of action arising within the State

Mandatory service of show-cause notice-cum-draft assessment order - opportunity to be heard / principles of natural justice in faceless assessment - quashing of assessment for non-compliance of mandatory procedure - Validity of the assessment dated 06.02.2021 in the absence of prior service of show-cause notice-cum-draft assessment order and opportunity to the assessee under the faceless assessment procedure. - HELD THAT: - The Court examined the E-Assessment Scheme, 2019 and the procedure summarized in the notification of 13.08.2020 and found that the Scheme contemplates issuance of a draft assessment order and, where modification prejudicial to the assessee is proposed, service of a show-cause notice-cum-draft assessment order and an opportunity to respond before finalisation. The faceless assessment framework requires that the National e-Assessment Centre examine draft orders and, if modifications prejudicial to the assessee are proposed, serve a notice calling upon the assessee to show cause; only thereafter may the assessment be finalised. Non-service of the draft assessment order and denial of the opportunity to be heard amount to a breach of the mandatory procedure and principles of natural justice in the faceless regime. Applying these principles to the facts, the Court found the assessment order of 06.02.2021 to be passed in clear breach of the mandatory procedure and therefore liable to be interfered with and set aside. [Paras 6, 8, 12, 15]

Assessment dated 06.02.2021 quashed and set aside for failure to serve the show-cause notice-cum-draft assessment order and for denial of opportunity of hearing; respondent permitted to proceed afresh in accordance with the faceless assessment procedure.

Territorial jurisdiction under Article 226 - cause of action arising within the State - Maintainability of the petition before the Gujarat High Court despite the assessing officer being located in Rajasthan. - HELD THAT: - The Court considered the contention that territorial jurisdiction lies in Rajasthan because the PAN was with the ITO, Ward-1, Churu. It noted that the assessee operates and resides in Ahmedabad, had sought transfer of PAN/jurisdiction to Ahmedabad, and that part of the cause of action arose in Gujarat. Relying on the principle that even a small fraction of cause of action arising within the State suffices for territorial jurisdiction under Article 226, the Court held that the petition is maintainable before the Gujarat High Court and rejected the preliminary objection regarding territorial jurisdiction. [Paras 12, 14, 15]

Petition is maintainable before the Gujarat High Court; preliminary objection on territorial jurisdiction overruled.

Faceless assessment procedure under Section 144B of the Act - remand for reassessment following compliance with mandatory procedure - Whether the revenue may proceed after quashing the assessment and the scope of further action. - HELD THAT: - Having quashed the defective assessment, the Court made clear that the revenue is at liberty to proceed afresh but must follow the statutory faceless assessment procedure strictly, including issuance of the prior show-cause notice-cum-draft assessment order and affording the assessee opportunity to respond and, if requested, personal hearing. The Court granted a limited timeline for the respondent to initiate the compliant process and directed cooperation from the petitioner. [Paras 9, 15]

Respondent permitted to initiate assessment proceedings anew in accordance with the applicable faceless assessment procedure within four weeks; petitioner to cooperate.

Final Conclusion: Petition allowed. The assessment order dated 06.02.2021 is quashed and set aside for failure to serve the mandatory show-cause notice-cum-draft assessment order and for denial of opportunity to be heard; the Gujarat High Court is territorially competent to entertain the petition; the revenue is permitted to re proceed in accordance with the faceless assessment procedure (including service of draft/show cause and opportunity of hearing) within four weeks.

Notice under section 148 as a jurisdictional notice - invalidity of notice issued to a deceased person - legal representative deemed to be an assessee under section 159(2)(b) - section 292B not available to cure jurisdictional defect of notice to a dead person - requirement to issue fresh notice to legal representative within limitation - extension of the principle to notices under section 153C

Notice under section 148 as a jurisdictional notice - invalidity of notice issued to a deceased person - section 292B not available to cure jurisdictional defect of notice to a dead person - legal representative deemed to be an assessee under section 159(2)(b) - Validity of the notice dated 13.04.2021 issued under section 148 to the deceased assessee for AY 2013-14 - HELD THAT: - The Court held that a notice under section 148 is a jurisdictional notice and a valid notice is a condition precedent to the Assessing Officer assuming jurisdiction under section 147. A notice issued to a dead person is invalid unless the legal representative, without objection, submits to the jurisdiction. Section 159(2)(b) permits proceedings to be taken against a legal representative only insofar as a proceeding which could have been taken had the deceased survived; therefore, where no valid notice was issued to the legal representative, proceedings initiated on the basis of a notice addressed to the deceased cannot be continued. Section 292B, which saves notices from certain defects, does not cure the want of a jurisdictional notice in such circumstances. Applying these principles to the facts, the legal heir promptly informed the department of the death and objected to continuation; he did not file a return in response to the impugned notice and did not waive the requirement of a valid notice. Consequently the notice issued to the deceased is without jurisdiction and must be quashed, subject to the Assessing Officer being at liberty to issue a fresh notice to the legal representative within the limitation period, if any. [Paras 18, 19, 21, 22, 23]

The notice under section 148 issued to the deceased is invalid and the proceedings pursuant thereto cannot be continued.

Extension of the principle to notices under section 153C - invalidity of notice issued to a deceased person - requirement to issue fresh notice to legal representative within limitation - Whether the principle that a notice issued to a dead person is invalid applies to a notice under section 153C - HELD THAT: - The Court applied the same legal principle to notices issued under section 153C. It observed that where a notice under section 153C is issued to a dead person and the legal heir informs the department of the death and objects, the department cannot rely on the dead notice to assume jurisdiction. The department, upon learning of the death, could and should have issued a valid notice to the legal heir within the prescribed time; failure to do so renders continuation on the basis of the earlier notice impermissible. Thus notices under section 153C addressed to a deceased person are likewise unsustainable unless the legal representative submits to the proceedings or a fresh valid notice is issued within limitation. [Paras 24, 25]

The same rule applies to notices under section 153C; a notice issued to a dead person is not sustainable and a fresh notice to the legal representative is required subject to limitation.

Final Conclusion: The petition is allowed; the impugned notice dated 13.04.2021 reopening assessment for AY 2013-14 issued to the deceased is quashed and set aside, with liberty to the Assessing Officer to issue a fresh notice to the legal representative within the period permitted by law.

Income from house property vs. business income for property held as stock-in-trade - Exclusion from chargeability where property is occupied by the owner "for the purpose of business" - Notional rent on unsold units held as stock-in-trade - Deduction under section 80IB(10) - entitlement and proportionate disallowance on breach - Allocation of interest between eligible and non-eligible units - Revision under section 263 - erroneous and prejudicial to the interests of Revenue

Income from house property vs. business income for property held as stock-in-trade - Exclusion from chargeability where property is occupied by the owner "for the purpose of business" - Notional rent on unsold units held as stock-in-trade - Whether annual letting value of unsold flats/bungalows held as stock-in-trade for a builder is chargeable as Income from house property or excluded as property occupied for the purpose of business and therefore treated as business income. - HELD THAT: - The Tribunal held that section 22 charges annual value of buildings to tax as Income from house property but contains an exception where the property (or part) is occupied by the owner for the purposes of any business the profits of which are chargeable to tax. The four cumulative conditions for exclusion - ownership and occupation by the assessee, carrying on a business, occupation being for the purpose of that business, and profits thereof being chargeable to tax - are satisfied where a builder retains unsold units in physical possession and control to hold them from ready stage to sale. The expression "for the purpose of business" is broad and does not require the business to be carried on from the specific premises; a nexus with the business suffices. Consequently, the unsold flats/bungalows were held to be occupied for the purpose of the assessee's business and thus excluded from chargeability under section 22. The subsequent statutory amendment (Finance Act, 2017) that treats annual value as nil for stock-in-trade for a limited period is prospective (applicable from AY 2018-19) and does not affect AY 2014-15. On these grounds the revision under section 263 was vacated insofar as it sought to charge notional rent for AY 2014-15. [Paras 6, 8, 10, 12, 15]

No notional rent under the head Income from house property is leviable for the unsold units held as stock-in-trade for AY 2014-15; the AO's assessment is not erroneous or prejudicial on this count and the CIT's revision is vacated.

Deduction under section 80IB(10) - entitlement and proportionate disallowance on breach - Whether deduction under section 80IB(10) must be disallowed in entirety because two flats were sold to one person, or whether a proportionate disallowance already made in an earlier assessment precludes fresh full denial for AY 2014-15. - HELD THAT: - The Tribunal noted that the assessee had admitted sale of two flats in violation of a condition and that a proportionate disallowance was made in the assessment for AY 2012-13. Once the earlier assessment made the proportionate disallowance, the same cannot be re-agitated to deny the deduction in full for AY 2014-15. The view of the CIT to withdraw the entire deduction was held not in accordance with law; appellate and High Court authority endorses proportionate disallowance rather than complete denial when part of the claim is ineligible. Accordingly, the CIT's direction to withdraw the full deduction was set aside. [Paras 16, 17]

Full denial of deduction under section 80IB(10) is not justified; proportionate disallowance already made in the earlier year precludes revising the assessment for AY 2014-15 to deny the deduction in entirety.

Income from house property vs. business income for property held as stock-in-trade - Whether rental income of Rs.1,52,000 shown as business income should have been offered as Income from house property. - HELD THAT: - Having held that income in relation to stock-in-trade of buildings is to be considered under the head Profits and gains of business or profession (unless statutory provision provides otherwise), the Tribunal rejected the CIT's contention that the rental receipt should be treated as income from house property. The earlier reasoning on stock-in-trade income governed this conclusion. [Paras 18, 19]

The rental income was correctly offered as business income; the CIT's view that it should be Income from house property is not sustainable.

Allocation of interest between eligible and non-eligible units - Whether interest of Rs.13,99,944 claimed against Atharwa Vatika project (a non-80IB(10) unit) was wrongly allowed so as to reduce the income of the eligible project. - HELD THAT: - The assessee maintained consolidated and separate profit and loss accounts and furnished details showing the loan was taken for and interest incurred on the Atharwa Vatika project only. The Tribunal found no infirmity in these particulars and noted that the interest pertained to the non-eligible unit; there was no reason to allocate such interest to the eligible unit. The CIT recorded no material contradiction to the assessee's explanation but proceeded with his view without justification. Therefore the Tribunal held the revision on this ground unsustainable. [Paras 20, 21]

The deduction of interest relating to the non-eligible Atharwa Vatika project cannot be interdicted; the CIT was not justified in revising the assessment on this count.

Final Conclusion: All grounds on which the Pr.CIT invoked revision under section 263 were found without merit in relation to AY 2014-15; the impugned revisionary order is set aside and the assessee's appeal is allowed.

Penalty for concealment of income versus furnishing inaccurate particulars of income under Section 271(1)(c) - requirement of specific notice identifying the limb of Section 271(1)(c) - violation of principles of natural justice by non specific penalty notice - distinctness of penalty proceedings from assessment proceedings

Penalty for concealment of income versus furnishing inaccurate particulars of income under Section 271(1)(c) - requirement of specific notice identifying the limb of Section 271(1)(c) - violation of principles of natural justice by non specific penalty notice - distinctness of penalty proceedings from assessment proceedings - Whether the penalty of Rs. 1,39,31,919/- imposed under Section 271(1)(c) was sustainable where the notice did not specify whether it was for concealment of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal accepted the CIT(A)'s factual finding that the Assessing Officer's notice and assessment order did not specify which limb of Section 271(1)(c) the penalty proceedings concerned. Reliance was placed on the Karnataka High Court decision in CIT v. Manjunatha Cotton & Ginning Factory and the Delhi High Court's acceptance of that view in Pr. Comm. of Income Tax v. M/s Sahara India Life Insurance Co. Ltd, which hold that a notice must specifically state the grounds (concealment or inaccurate particulars) so that the assessee knows the case to be met and to avoid offending principles of natural justice. The Tribunal observed that penalty proceedings are independent of assessment proceedings and that initiating penalty on one limb but finding guilt on another is impermissible. The Revenue did not rebut the CIT(A)'s finding or produce evidence to the contrary. In view of the defective notice and the established precedent, the penalty order could not be sustained and deletion was affirmed. [Paras 5, 6, 7]

The deletion of the penalty imposed under Section 271(1)(c) was affirmed because the penalty notice failed to specify the limb of the provision, thereby violating principles of natural justice; the Revenue's grounds are rejected.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and affirmed the CIT(A)'s deletion of the penalty, holding the penalty order unsustainable for want of a specific notice identifying whether it related to concealment or furnishing inaccurate particulars of income.

Special law prevails over general law (Generalia specialibus non derogant) - right to be searched before a gazetted officer or magistrate under the Customs Act - presumption under the Customs Act where goods are seized in reasonable belief of smuggling - custody and chain of custody of seized goods - examination of accused under Section 313 of the Code of Criminal Procedure

Presumption under the Customs Act where goods are seized in reasonable belief of smuggling - Applicability of the statutory presumption in Section 123 of the Customs Act where seizure was not effected in accordance with Customs procedure - HELD THAT: - The Court found that Section 123 applies only where goods are seized under the Customs Act. The seizure in the present case was effected by police without compliance with the procedure prescribed by Section 102 of the Customs Act. Consequently Section 123 could not be invoked to shift the burden of proof onto the accused. The Trial Court erred in treating the statutory presumption as available when the requisite Customs-mode of seizure was not followed, and this aspect was not considered by the lower courts. [Paras 7]

Section 123 presumption does not apply because the seizure was not made under the Customs Act procedure.

Right to be searched before a gazetted officer or magistrate under the Customs Act - special law prevails over general law (Generalia specialibus non derogant) - Whether police conduct of search and seizure without informing the accused of his statutory right under the Customs Act vitiates the prosecution - HELD THAT: - The Court emphasised the principle that a special statute governs procedure for searches under the Customs Act and that general police powers cannot be allowed to supersede statutory safeguards. The officer who intercepted the accused was under an obligation to inform him of the statutory right to be taken before a gazetted customs officer or magistrate; this right was not afforded. Non-observance of the special procedure entrenched in the Customs Act amounted to a fatal infirmity in the prosecution, since the accused was deprived of statutory protections. [Paras 8, 9]

Police failure to follow Customs Act procedure and to inform the accused of his right vitiates the proceedings; the special law's procedure must be followed.

Examination of accused under Section 313 of the Code of Criminal Procedure - Effect of the Trial Court's failure to put incriminating evidence to the accused under Section 313 Cr.P.C. - HELD THAT: - The Court held that examination under Section 313 is procedural and substantive, not a formality, and is intended to afford the accused a real opportunity to explain incriminating circumstances appearing in the prosecution evidence. The record showed that incriminating material was not put to the accused under Section 313, depriving him of the chance to meet the case against him. This lacuna amounted to a denial of fair trial and prejudiced the accused. [Paras 10]

Failure to comply with Section 313 Cr.P.C. is a serious procedural defect that renders conviction unsustainable.

Custody and chain of custody of seized goods - Whether defects in preservation, handing over to Customs, and absence of expert testimony defeated proof of the nature and identity of the seized articles - HELD THAT: - The Court noted delays in handing the seized items to Customs, absence of Malkhana entries or custodian evidence for the interregnum, disparity between samples reportedly forwarded for chemical examination and what was received, and that the chemical examiner and the goldsmith were not examined to face cross-examination. These deficiencies undermined the prosecution's proof regarding the nature and provenance of the seized yellow metal, and contributed to the conclusion that the case was not proved beyond reasonable doubt. [Paras 4, 6, 10]

Defects in chain of custody and failure to produce/examine experts undermined the prosecution's proof of the seized articles' character.

Final Conclusion: The criminal revision is allowed: the appellate conviction is set aside; the accused is to be released from bail upon execution of bond under Section 437A Cr.P.C.; and the allegedly recovered articles, which the accused disclaims, may be confiscated to the State.

Natural justice - administrative action involving civil consequences - renewal of registration under Regulation 10(8) of the Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 - right to hearing before non-renewal of an established license - quashing of administrative order and remand for fresh decision

Natural justice - administrative action involving civil consequences - right to hearing before non-renewal of an established license - Non-renewal of the Petitioner's authorised-courier registration after long-standing renewal attracts the rules of natural justice and required an opportunity of hearing before refusal. - HELD THAT: - The Court held that where administrative action produces civil consequences-here the non-renewal of a registration that had been repeatedly renewed over about 25 years and in which substantial business investment was made-the rules of natural justice apply and an opportunity to be heard must be given unless expressly excluded by statute. Regulation 10(8) makes renewal conditional on satisfactory performance and absence of complaints, thereby making renewal dependent on factual satisfaction; refusal of renewal in such circumstances is not a mere administrative act immune from the requirements of hearing. Applying the Division Bench authority in A.S. Vasan and sons, the Court found that the Petitioner suffered serious civil consequences from non-renewal and therefore was entitled to an opportunity to explain before the impugned orders were made. Consequently, the impugned orders taken without giving such opportunity had to be set aside. [Paras 8, 9, 10, 11, 14]

The decision refusing renewal was quashed for failure to afford an opportunity of hearing; the Petitioner was entitled to be heard before a fresh decision on renewal.

Renewal of registration under Regulation 10(8) of the Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 - quashing of administrative order and remand for fresh decision - The impugned non-renewal orders were set aside and the matter was remitted for fresh consideration after affording hearing, with specified timelines. - HELD THAT: - The Court revived the pending renewal application by quashing the orders dated 19 August 2019 and 30 September 2019. It directed Respondent No.2 to fix a date within two weeks for the Petitioner's representative to be heard and required the Commissioner to decide the renewal in accordance with Regulation 10 within three weeks after the hearing, treating the Commissioner's earlier affidavit opinion as a prima facie view of the respondents. The Court made clear that these directions were limited to ensuring compliance with principles of natural justice and did not express any opinion on the merits, leaving the substantive determination open to the Commissioner. [Paras 13]

Impugned orders quashed; application revived and remitted for fresh decision after hearing within the stipulated timelines; merits to be decided afresh by the Commissioner.

Maintainability of appeal - Maintainability of the Tribunal appeal was not decided and is left open. - HELD THAT: - Having concluded that the impugned orders must be set aside for lack of hearing, the Court did not adjudicate the contested question of whether the departmental non-renewal decision constituted an administrative act immune from appellate scrutiny. The question of maintainability of the appeal before the Appellate Tribunal was expressly kept open for determination in the appropriate forum. [Paras 12]

Maintainability of the appeal is left open and not decided.

Final Conclusion: Writ petition allowed: the non-renewal orders dated 19 August 2019 and 30 September 2019 are quashed; the Petitioner's renewal application is revived; Respondent No.2 to afford hearing within two weeks and decide the renewal under Regulation 10 within three weeks thereafter, the Court reserving any view on merits and leaving the question of appeal maintainability open.

Rejection of declared value under Rule 12 of the Customs Valuation Rules - Re-determination of assessable value under Rule 5 of the Customs Valuation Rules - Transaction value and Customs valuation - Consent to waiver of show cause notice and personal hearing - Estoppel by acceptance of reassessed value - Minimum Import Price and classification of goods as restricted - Confiscation under Section 111(m) and 111(o) of the Customs Act, 1962 - Penalty under Section 112(a) of the Customs Act, 1962

Consent to waiver of show cause notice and personal hearing - Estoppel by acceptance of reassessed value - Effect of the appellant's written request to waive issuance of show cause notice and personal hearing and subsequent acceptance/payment of reassessed value. - HELD THAT: - The Tribunal recorded that the importer, by letter dated 09.09.2020, expressly asked that the show cause notice and personal hearing be waived and stated readiness to pay duty as per assessment. Having waived the procedural rights in writing and paid the enhanced duty without protest at the time of clearance, the importer could not subsequently contend violation of principles of natural justice or challenge the reassessed value. The adjudicating authorities relied on contemporaneous data in reassessing value and the appellant placed before the Tribunal earlier instances where higher values had been accepted by it. Precedents were held to support that consent to enhancement and payment estops the importer from later contesting the reassessment. Hence, no fault was found in proceeding without issuing the show cause notice once waiver was made and the differential duty was accepted. [Paras 15, 16, 21, 22, 23]

The waiver of show cause notice and personal hearing by the appellant and its acceptance/payment of the reassessed duty precluded a successful challenge on natural justice or on valuation grounds.

Rejection of declared value under Rule 12 of the Customs Valuation Rules - Re-determination of assessable value under Rule 5 of the Customs Valuation Rules - Transaction value and Customs valuation - Validity of rejection of declared transaction value and redetermination of assessable value on the basis of contemporaneous import data. - HELD THAT: - The Tribunal reiterated that Rule 12 permits the proper officer to raise doubts about a declared value where reasonable grounds exist and, if doubts persist, to treat transaction value as undeterminable and proceed sequentially under Rules 4-9. Explanation (iii)(a) to Rule 12 contemplates rejection where identical or similar goods were assessed at significantly higher values contemporaneously. The adjudicating authority examined contemporaneous data (NIDB/import data) and, finding similar goods assessed at higher values, proceeded under Rule 5 to determine value of similar goods sold for export to India at or about the same time. The reassessed values were shown to be supported by contemporaneous assessments and earlier transaction acceptances by the appellant, and therefore the rejection and re-determination were not arbitrary. [Paras 14, 18, 19, 21]

Rejection of the declared value under Rule 12 and re-determination of assessable value under Rule 5 on the basis of contemporaneous import data was valid and upheld.

Minimum Import Price and classification of goods as restricted - Confiscation under Section 111(m) and 111(o) of the Customs Act, 1962 - Whether goods could be confiscated under Sections 111(m) and 111(o) for being imported below the Minimum Import Price and thereby contravening policy conditions. - HELD THAT: - The adjudicating authorities found that the declared unit prices were below the Minimum Import Price prescribed in the ITC(HS) Import Policy, which rendered the items 'restricted' for import. Section 111(o) applies to goods exempted subject to conditions or prohibited unless conditions are observed; section 111(m) applies where goods do not correspond in value or particulars with the entry made. Given misdeclaration of value and import in breach of the policy condition, the Additional Commissioner recorded confiscation as permissible under Sections 111(m) and 111(o). The Tribunal found no error in these findings, noting that the misdeclaration and MIP violation were established in the adjudication. [Paras 4, 7, 29]

Confiscation under Sections 111(m) and 111(o) was justified on the findings of under-declaration of value and contravention of the Minimum Import Price policy condition.

Penalty under Section 112(a) of the Customs Act, 1962 - Confiscation under Section 111(m) and 111(o) of the Customs Act, 1962 - Validity of imposition of penalty under Section 112(a) consequent to confiscation findings. - HELD THAT: - Section 112(a) provides for penalty where an act or omission renders goods liable to confiscation under Section 111. Since the authorities validly held that the goods were liable to confiscation under Section 111(m)/(o) on account of misdeclaration and import in breach of policy, the imposition of penalty under Section 112(a) followed as a legal consequence. The Tribunal upheld the penalty as correctly imposed. [Paras 30, 31]

Penalty under Section 112(a) was rightly imposed as the goods were held liable to confiscation under Section 111.

Final Conclusion: The Tribunal dismissed the appeal: the appellant's waiver of show cause notice and acceptance/payment of reassessed duty precluded challenge on natural justice and valuation grounds; rejection and re-determination of declared value on contemporaneous data under the Valuation Rules was valid; the goods were liable to confiscation for breach of Minimum Import Price and misdeclaration; and penalty under Section 112(a) was rightly imposed.

CENVAT credit utilization for payment of duty on inputs removed as such or after partial processing - Removal of inputs after partial processing not constituting manufacture for denial of credit - Adjustment of rebate/PLA against CENVAT credit on export of final products

CENVAT credit utilization for payment of duty on inputs removed as such or after partial processing - Removal of inputs after partial processing not constituting manufacture for denial of credit - Whether CENVAT credit taken on inputs used only for galvanization (conversion of C.R. Coils into G.P. Coils) could be disallowed on the ground that the process did not amount to 'manufacture'. - HELD THAT: - The Court upheld the Tribunal's conclusion that the CENVAT Credit Rules permit utilization of CENVAT credit for payment of duty where inputs are removed as such or after being partially processed. Sub rule (3) of Rule 3, together with sub rules (4) and (5), contemplates that where inputs on which credit was taken are removed as such or after partial processing the manufacturer must pay duty equal to the leviable duty and such amount becomes eligible as CENVAT credit. The legal characterisation of the galvanization process as not amounting to 'manufacture' under Section 2(f) does not, by itself, justify denial of credit when the statutory scheme expressly permits removal of inputs after partial processing on payment/adjustment of duty. Reliance on the decisions referred to by the Tribunal (including the approach in Delta Corporation and earlier Tribunal precedents) supports the view that where duty paid on cleared goods exceeds the credit availed, no additional liability arises and credit cannot be denied merely because no further manufacturing as defined under the Act took place.

Demand for disallowance of CENVAT credit on the ground that galvanization did not amount to manufacture was rejected and the Tribunal's allowance of credit was upheld.

Adjustment of rebate/PLA against CENVAT credit on export of final products - CENVAT credit eligible for adjustment where duty on cleared goods exceeds credit availed - Whether rebate claimed on export and adjustment through the Public Ledger Account (PLA) could be allowed against the CENVAT credit availed on inputs. - HELD THAT: - The Court endorsed the Tribunal's reasoning that the exporter is entitled to claim rebate of duty paid on inputs and final products as per the Rules, and where duty paid on the cleared goods (after galvanization) exceeded the CENVAT credit availed, that duty could be adjusted against the claimed credit. The statutory scheme permits such adjustment and, accordingly, the recovery of rebate from PLA against the CENVAT credit was not sustainble to the extent the duty paid on final products covered the credit.

The Tribunal's conclusion to permit adjustment of the rebate/PLA against the available CENVAT credit (given that duty on cleared goods exceeded credit) was upheld.

Final Conclusion: The appeal is dismissed. The High Court affirmed the Tribunal's view that CENVAT credit could not be disallowed merely because the process amounted only to galvanization and not 'manufacture', and that theRules permit utilization/adjustment of CENVAT credit where inputs are removed as such or after partial processing, including adjustment against export rebate where duty on cleared goods exceeded credit availed.

Refund of unutilised Cenvat credit of Krishi Kalyan Cess - remand to adjudicating authority for de novo adjudication - obligation of the Tribunal to dispose appeals on merits - keeping appeals pending pending decision of a higher court - disposal of appeals by granting liberty to re approach after higher court verdict

Remand to adjudicating authority for de novo adjudication - refund of unutilised Cenvat credit of Krishi Kalyan Cess - Validity of the CESTAT order remanding the petitioner's refund claim for de novo adjudication on account of a related matter pending before the Apex Court. - HELD THAT: - The Tribunal remanded the appeal to the adjudicating authority because a Larger Bench judgment of the Bombay High Court (challenged before the Supreme Court) was pending in SLP. The High Court held that remanding the matter for de novo adjudication in these circumstances was impermissible. The court observed that the pendency of a related matter before the Apex Court did not justify the Tribunal's abdication of its duty to decide the appeal on merits or, alternatively, to keep the appeal pending until the higher court's decision. Reliance was placed on the approach adopted in earlier decisions of this Court where remands or disposals with liberty to re approach were disapproved as causing harassment, multiplicity of proceedings and creating uncertainty as to finality of tax recovery or refund. The Court noted that the Tribunal could either await the higher court's decision if a foreseeable outcome was expected, or decide the appeals on merits after hearing both sides; remand for de novo adjudication without such justification was not an appropriate course. [Paras 6, 8, 9]

The CESTAT order remanding the petitioner's refund claim to the adjudicating authority for de novo adjudication is impermissible and is set aside; the matter is to be decided by the Tribunal on merits without further delay.

Obligation of the Tribunal to dispose appeals on merits - keeping appeals pending pending decision of a higher court - disposal of appeals by granting liberty to re approach after higher court verdict - Proper course for the Tribunal when a related question is pending before a higher court: decide on merits or keep appeals pending, rather than disposing with liberty to re approach. - HELD THAT: - The Court reiterated that the Tribunal, being a statutory forum, is obliged to dispose of appeals on merits and should not adopt a practice of disposing appeals merely to show statistical disposal. Where a related question is pending before a higher court, the Tribunal has two proper options: await the higher court's decision if a ruling is likely in the near foreseeable future, or decide the appeals on merits after hearing both parties. Disposing appeals by granting liberty to re approach after the higher court's verdict, without final determination, was criticised as causing multiplicity of proceedings, uncertainty as to finality, and potential harassment to the parties. The Court therefore directed the Tribunal to decide the appeal on merits while keeping open all contentions of both sides, rather than adopting the impugned mode of disposal. [Paras 7, 8]

The Tribunal must either keep the appeal pending till the higher court's decision or decide it on merits; the practice of disposing with liberty to re approach is disapproved and the appeals are to be decided on merits without further loss of time.

Final Conclusion: The petition is disposed of by setting aside the CESTAT order of remand; the Tribunal is directed to decide the petitioner's refund claim of accumulated unutilised Cenvat credit of Krishi Kalyan Cess on merits (keeping all contentions open) without further delay.

Validity of C-Forms issued under the Central Sales Tax Rules - retrospective cancellation of declaration forms - binding precedent - entitlement to concessional rate on inter state sales against C Form

Validity of C-Forms issued under the Central Sales Tax Rules - retrospective cancellation of declaration forms - entitlement to concessional rate on inter state sales against C Form - binding precedent - Whether the benefit of concessional rate of tax on inter state sales against C Forms already issued and acted upon can be denied by retrospective cancellation of those C Forms. - HELD THAT: - The Court applied its earlier decisions including Jain Manufacturing (India) Pvt. Ltd. v. Commissioner Value Added Tax & Anr., holding that C Forms which have been issued and utilised cannot be cancelled retrospectively so as to deny the benefit already claimed. The petitioner's sales in the 1st and 2nd quarters of FY 2016 17 were supported by C Forms; although the online verification for the first two quarters was not available, the determinative legal principle is that retrospective cancellation of declaration forms is impermissible. The Court noted that while some other orders of this Court have been stayed by the Supreme Court in separate Special Leave Petitions, the respondents did not appeal the decision in Jain Manufacturing, which remains binding on this Court. Applying that binding precedent, the Court held that the benefit of the C Forms in question cannot be retrospectively withdrawn and, therefore, the concessional rate cannot be denied on the basis of cancellation proceedings initiated subsequently against the purchasing dealer. [Paras 12, 13]

The benefit of the C Forms cannot be denied by retrospective cancellation; the petition is allowed.

Final Conclusion: The writ petition is allowed: relying on binding precedent that C Forms already issued and acted upon cannot be retrospectively cancelled, the Court held that the petitioner's entitlement to the concessional rate against the C Forms could not be denied and granted relief accordingly.

Pre-deposit requirement for entertainment of appeal - retrospective application of statutory amendment to pending appeals - abatement of appeal for non-compliance with pre-deposit - failure to afford hearing / principles of natural justice - restoration of abated appeals and adjudication on merits

Retrospective application of statutory amendment to pending appeals - pre-deposit requirement for entertainment of appeal - Whether the amendments (Ninth and Tenth) to the Goa Value Added Tax Act made the pre-deposit requirement applicable to the petitioner's appeals. - HELD THAT: - The Court found that at the time the petitioner instituted its appeals (29.08.2016) there was no requirement to predeposit the undisputed dues or ten per cent of the disputed dues. The Ninth Amendment substituted a provision imposing such pre-deposit but, as worded, applied only to appeals instituted under the specified sub section and therefore did not, by itself, apply to the petitioner's appeals. The subsequent Tenth Amendment, published on 31.08.2017, substituted the expression so as to make the pre deposit requirement applicable to "this section" and was given retrospective effect; consequently the pre deposit obligation as enacted by the Ninth Amendment became applicable to appeals pending under Section 35. Thus the amended statutory regime, as a matter of law, operated to require the pre deposit for pending appeals once the Tenth Amendment took effect. [Paras 4, 5, 6, 7, 10]

The Court held that the Ninth Amendment did not by itself apply to the petitioner's appeals as originally instituted, but the Tenth Amendment rendered the pre deposit requirement applicable retrospectively to pending appeals.

Abatement of appeal for non-compliance with pre-deposit - failure to afford hearing / principles of natural justice - restoration of abated appeals and adjudication on merits - Whether the impugned orders declaring the petitioner's appeals abated for non deposit should be set aside and the appeals restored for hearing. - HELD THAT: - The impugned orders declared the appeals abated for want of deposit of ten per cent of the disputed amount and were passed without affording a factual opportunity of hearing, although a notice is said to have been issued. The petitioner, before instituting the present petition, deposited the ten per cent of the disputed amount (on 18.05.2021), thereby complying with the statutory requirement albeit after the prescribed period. Having regard to the peculiar facts - that the appeals were originally instituted when no pre deposit was required and that the petitioner has now complied with the deposit requirement - the Court exercised its discretion to afford the petitioner an opportunity to have the appeals heard on merits. Accordingly the Court set aside the abatement orders and directed restoration and disposal of the appeals on merits and in accordance with law. [Paras 8, 9, 11, 12, 13]

Impugned orders dated 04.08.2020 were set aside; Appeal Nos. 62/2016 and 63/2016 were restored and directed to be disposed of on merits after the petitioner files an authenticated copy of the order and appears as directed.

Final Conclusion: The Court set aside the orders declaring the appeals abated, restored the two appeals to the files of the Assistant Commissioner/Appellate Authority, directed the petitioner to appear and file an authenticated copy of the order, and ordered that the appeals be decided on merits in accordance with law; no costs were awarded.

Reopening of assessment - limitation under section 27(1) of the TNVAT Act, 2006 - deemed assessment under section 22(2) of the TNVAT Act, 2006 - principles of natural justice - show cause notice and right to personal hearing - remand for fresh consideration

Reopening of assessment - limitation under section 27(1) of the TNVAT Act, 2006 - deemed assessment under section 22(2) of the TNVAT Act, 2006 - Whether the reopening of assessments impugned by the assessment orders was within the statutory period of limitation and therefore maintainable. - HELD THAT: - The Court noted the dates of deemed assessment under section 22(2) and the dates on which the Show Cause Notices were issued and the impugned orders were passed. It observed that the reopening complained of did not fall within the six year period contemplated by section 27(1) from the date of the deemed assessment. However, because the impugned orders did not consider the petitioner's contentions and the petitioner was not afforded an opportunity of hearing, the Court did not finally adjudicate the limitation defence on merits. Instead, the Court directed that the first respondent shall, on remand, consider the limitation contention when passing fresh orders after serving the Show Cause Notices and affording an opportunity to reply and to be heard. [Paras 6, 8]

The question of limitation was not finally decided on merits but directed to be considered afresh by the first respondent when reconsidering the matter on remand.

Principles of natural justice - show cause notice and right to personal hearing - remand for fresh consideration - Whether the impugned assessment orders are vitiated for non compliance with principles of natural justice for failure to furnish Show Cause Notices and to grant personal hearing. - HELD THAT: - The Court found that the petitioner did not receive the Show Cause Notices relied upon by the respondents and that no personal hearing was afforded before the impugned orders were passed. Since the impugned orders did not address the petitioner's contentions and the petitioner was denied an opportunity to submit a detailed reply or to be heard, the orders were held to be vitiated by breach of natural justice. The Court quashed the assessment orders and remanded the matters to the first respondent with directions to furnish copies of the Show Cause Notices, permit the petitioner to file detailed replies, and grant a personal hearing before passing final orders on merits and in accordance with law. [Paras 7, 8]

Impugned assessment orders quashed for breach of natural justice and remanded for fresh consideration after service of Show Cause Notices, opportunity to reply and a personal hearing within three months.

Final Conclusion: Impugned assessment orders dated 30.11.2022 are quashed; matters remanded to the first respondent to reconsider and pass final orders on merits after supplying the Show Cause Notices to the petitioner, permitting a detailed reply, addressing the limitation plea and other contentions, and granting a personal hearing within three months of service of the notices.

Penalty under Section 51(7) of the Punjab Value Added Tax Act, 2005 - detention under Section 51(6) of the Punjab Value Added Tax Act, 2005 - job work / transit of goods - genuine documents and invoices - evasion of tax - inter state sale with Central Sales Tax paid

Penalty under Section 51(7) of the Punjab Value Added Tax Act, 2005 - genuine documents and invoices - Validity of the penalty imposed under Section 51(7) on the ground of alleged improper or non genuine documents issued by the vendor. - HELD THAT: - The Court examined the invoices, purchase order and attendant documents and found that the vendor had invoiced 127 pieces in the name of the appellant and Central Sales Tax had been paid at the time of purchase. The purchase order specifically contemplated delivery of castings to the job-worker for fettling while invoiced to the appellant. On the material on record there was no proof that the invoices were not genuine or that there was any attempt to divert the goods for local sale in Punjab. In the absence of any material indicating tax evasion, the imposition of the penalty under Section 51(7) could not be sustained. [Paras 8]

Penalty under Section 51(7) set aside for lack of material to show non genuineness of documents or tax evasion.

Detention under Section 51(6) of the Punjab Value Added Tax Act, 2005 - job work / transit of goods - inter state sale with Central Sales Tax paid - evasion of tax - Whether the goods were legitimately in transit for job work and not intended for sale in Punjab such as to justify detention and consequent penal action. - HELD THAT: - The Court recorded that the undisputed facts showed 117 pieces were sent to the job-worker for fettling and the remaining 10 pieces were also in transit to the same premises; the invoices reflected the transaction between vendor and appellant and CST had been paid. The mere absence of a written agreement with the job worker or the inadvertent unloading at the job worker's premises did not establish an intention to sell locally. There was no material to indicate the goods were meant to be used or sold in Punjab or that officials had been shown documents intending to mislead; consequently detention and penal consequences premised on an inference of local sale or evasion were unsustainable. [Paras 8]

Detention and resulting penal consequences were unjustified because the goods were in transit for job work and there was no evidence of intention to sell in Punjab or to evade tax.

Final Conclusion: The appeal is allowed; the order of the Tax Tribunal dated 11.01.2016 upholding the penalty is set aside because the materials show the consignments were in transit for job work, invoices were in order and there was no evidence of tax evasion or non genuine documentation.