TaxTMI Updates e-Newsletter
Feb 18,2026

Principles of natural justice - Undue haste in administrative action - Arbitrary exercise of power - Violation of Article 14 of the Constitution - Rectification u/s 161 of the GST Act - Adjudication u/s 74 of the GST Act - Limitation as mixed question of law and fact - HELD THAT:-It is ex facie on record that from the Order-in-Original dated 19.12.2025, the authority has finalized the Demand-cum-Show Cause Notice and passed adjudication order under Section 74 of the GST Act.

This Court is of the considered view that the authority has passed order with undue haste, thereby caused serious prejudice to the petitioner. Since there has been flagrant violation of principles of natural justice, the order impugned, i.e., 19.12.2025 cannot be held to be sustained.

Adherence to principles of natural justice is for doing substantive justice and not for completing a mere ritual of hearing without possibility of any change in the decision of the case on merits.

When the present cases are considered in the light of the above exposition of law, the order impugned being perceived as outcome of arbitrary exercise of power offending Article 14 of the Constitution of India as undue haste shown by the Proper Officer is patent on the face of the record.

Writ petitions allowed; impugned Order-in-Original dated 19.12.2025 quashed for breach of principles of natural justice and undue haste; petitioner permitted to file reply within seven days and the authority directed to afford personal hearing and pass a fresh adjudication within fifteen days, with limitation and rectification issues to be considered afresh.

Moratorium under the Insolvency and Bankruptcy Code - maintainability of proceedings during moratorium - claim submission before the Resolution Professional - denial of opportunity of hearing - non-application of mind - remand for fresh hearing - extended period of limitation under proviso to Section 74(1) of the CGST Act -HELD THAT:- As regards the reply dated 23rd July 2025 submitted in response to the Show Cause Notice dated 24th June 2025, a specific ground has been raised qua the declaration of the moratorium and the maintainability of the proceedings against the petitioner, in view of the statutory protection provided under the provisions of the IBC.

The least that was expected of the respondents was to deal with the said issue in its order impugned. A specific ground was raised in defence by the present petitioner regarding the very maintainability of the Show Cause Notice, that too on the basis of statutory protection. The respondent, in our opinion, was duty-bound to deal with the same and the failure to do so, amounts to a denial of the opportunity of hearing.

In such an eventuality, not only the objection raised by the respondents that the petitioner has an alternate remedy and that, as such, the writ petition is not maintainable, is liable to be overruled, but we also have to hold that the impugned order suffers from non-application of mind.

That being so, we deem it appropriate to quash and set-aside the impugned order dated 23rd December, 2025 passed by the respondents.

Service by electronic communication/email - non-receipt due to agent/chartered accountant's negligence - condonation of delay in filing statutory appeal - limited scope of judicial interference under Article 226 - notices uploaded on GST Portal (Additional Notices and Orders Tab) - HELD THAT:-In the present case, it is admitted by petitioner that notices as well as impugned order dated 28.08.2024 had been sent on the e-mail address, which was made available by petitioner to the Department. Case set up is that CA of petitioner was negligent in not bringing this to notice of petitioner. Once the Department has discharged its duty, show cause notices were duly served on e-mail address, so provided by petitioner. There is no ground for interference. It is specifically mentioned in impugned order dated 28.08.2024 that firstly ASMT-10 dated 17.12.2021 was issued. No reply was submitted on behalf of petitioner and thereafter show cause notice in Form DRC-01 was issued on 22.05.2024. Subsequent thereto, three more opportunities were afforded with the matter being adjourned each time. It is further noted that despite due opportunity being afforded neither any reply was filed nor amount in question deposited.

No merit in the arguments raised for petitioner that additionally the show cause notice(s), intimation and orders were uploaded on ‘Additional Notices and Orders Tab’ on the GST Portal, due to which the same did not come to knowledge of petitioner. This is clearly an afterthought and with reference to certain writ petitions which are now pending before this Court in this respect.

No ground is made out for any interference at this stage.

Show cause notice - cancellation of GST registration - deciding on grounds not pleaded in the show cause notice - circular trading - opportunity to reply / right to be heard - remand for fresh proceedings with detailed reasons - HELD THAT:- Factual position as above in respect to issuance of show cause notice dated 16.06.2021 for cancellation of petitioner’s registration on the premise of it having been obtained by means of fraud willful mis-statement/ suppression of facts and passing of order dated 16.06.2021 cancelling petitioner’s registration on the ground of it being involved in circular trading etc. is a matter of record and not denied.

It is a settled position that a show cause notice is the foundation of further proceedings. An opportunity has to be afforded to the noticee to answer and show cause but in case a particular issue has not even been mentioned in the show cause notice, the assessee/noticee has no occasion to respond. Thus, to pass an order on the basis of a premise which has not even been put to the assessee in the show cause notice is clearly unjustified. Such an order is unsustainable.

Writ petition allowed.

Detention, seizure and release of goods in transit - Payment under protest - Section 129(5) deeming provision - Duty to pass a reasoned/speaking order under Section 129(3) - Right to appeal u/s 107 - Principles of natural justice and opportunity of hearing - Remand for fresh consideration - HELD THAT:- It is the case of Department that transaction in question is in clear violation of Section 31 read with Rule 46 and Section 80 read with Rule 138 of GST Act. Once amount in question had been deposited by petitioner accepting its liability, penalty was correctly imposed and order dated 06.05.2025 passed.

It is pertinent to note that in the instant case, petitioner admittedly deposited the amount in question vide form GST DRC-03 dated 06.05.2025 under protest.

It is apparent that petitioner made deposit of amount under protest with a view to have the vehicle released at the earliest without prejudice to its right to contest the proceedings. As per show cause notice, which was issued on 06.05.2025 itself, it is specifically stated therein that petitioner may appear before concerned Officer on 13.05.2025 at 11.00 a.m. and that reply if any, should be filed within the stipulated date. However, impugned order was passed on 06.05.2025 itself under Section 129(3) of HGST Act alongwith the observation that no objection has been filed by the noticee and penalty proposed has been agreed to and paid vide DRC-03 dated 06.05.2025. In view of the fact that it is specifically mentioned in DRC-03 that payment was being made under protest, there was no occasion for Proper Officer to have passed order dated 06.05.2025 with the observations as above. It is opposed to record that penalty proposed has been accepted and thus paid. It was clearly deposited under protest. We also take note of the fact that it is the case of Department itself that order dated 06.05.2025 could not be uploaded purportedly due to some technical glitch but it was manually served upon authorized representative of petitioner.

It is an admitted position that assessee in this case has deposited the amount in question under protest, therefore, it cannot be said that it has agreed to the proposed penalty or accepted the same.

Accordingly, set aside and the matter is remanded to Proper Officer to be decided afresh after taking into consideration the reply/objection filed by petitioner and after giving an opportunity of hearing in accordance with law.

Principles of natural justice - efficacious alternative remedy - maintainability of writ petition under Article 226 - statutory remedy u/s 107 of the CGST Act, 2017 -HELD THAT:- A bare perusal of intimation dated 11.12.2025 clearly reveals it to be absolutely clear and succinct informing the date of personal hearing to be 15.12.2025 and it is further stated that in the event of non appearance, matter shall be decided on merit. There is no ambiguity or confusion therein.

At this stage, we do not find any ground whatsoever to cause interference in this writ petition in exercise of jurisdiction under Article 226 of Constitution of India in view of an efficacious alternative remedy of appeal available to petitioner under Section 107 of the Central Goods and Services Tax (CGST) Act, 2017.

It is a settled position that interference by this Court in such like matters has to be minimal and actuated only with in exceptional and extraordinary circumstances. No such circumstance has been pointed out before us. Gainful reference in this regard can be made to judgments of Hon’ble the Supreme Court in Union Bank of India v. Satyawadi Tandon and Others [2010 (7) TMI 829 - SUPREME COURT] and Kakinada and ors. Vs. M/s Glaxo Smith Kline Consumer Health Care [2020 (5) TMI 149 - SUPREME COURT]

Writ petition is accordingly dismissed with liberty to petitioner to avail statutory remedy available to it in accordance with law while raising all available pleas.

Advance Ruling - manufacturer of tapioca and sago from the tapioca tubers -Definition of advance ruling u/s 95 - Supply of goods or services undertaken or proposed to be undertaken by the applicant - Application liable for rejection - Binding nature of advance ruling - HELD THAT:- During the manufacture of the products, they are also getting the residue as by-product. The applicant is supplying their manufactured products and the by-products to their customers.

Though the applicant is in the same line of business, they have stated that they have not heard of such commodity used as a raw material for the manufacture of ‘sago’. Therefore, he approached this AAR to know whether any commodity in the name of ‘sago pulp’ exists in the tariff and if yes have asked for the HSN code and GST rate for the said raw material.

In the instant case, the applicant had sought clarification on the queries not related to his supply of goods or services but by some other manufactures who are in the same line of business. Therefore, the applicant’s queries would not fall within the definition of ‘advance ruling’ and hence, the application is liable for rejection.

The members during the personal hearing also have appraised the applicant that the queries on which advance ruling sought by them were not related to neither supply of goods nor supply of service as mandated under section 95 of the CGST/SGST Act, 2017 and would not come under the purview of the Advance Ruling. The applicant acknowledged the legal position stated by the members.

No ruling is issued in this case, as the question put forth by the applicant does not fall under the scope of the definition of ‘Advance Ruling’ defined under Section 97(a) of the CGST/TNGST Acts, 2017.

Fixed establishment - scope of supply - distinct persons - composite supply - admissibility of advance ruling under Section 97(2) - HELD THAT:- We find that they are engaged in the business of precast concrete construction. The applicant makes concrete structures in its own premises by a process known as “Precasting” and then transports the structures to its customers' sites for manoeuvring/ assembling them into buildings. From the submissions made by the applicant, it is clear that they build precast structures such as beams, columns, wall panels, solid slabs, hollow slabs, staircases, cladding walls etc at the applicant's premises located in Tirupur. These precast structures are then transported to the construction site, within the state or outside the state. The superstructure of the building is then constructed from the precast structures.

The customer of the applicant provides a temporary office for the personnel of the applicant at the construction site. These personnel, 6 to 7 in numbers, are present at the construction site to assemble the precast structure into superstructure of a building. This assembling is entirely a mechanised process carried out with the help of cranes. Further, it is also submitted by the applicant that the total value for the contract is provided for in the agreement on a composite basis for all the activities including production of the precast structures, transportation up to the construction site and its erection into a building.

Whether the applicant is required to obtain registration in the states in which it is executing works contract using precast structures manufactured at its principal place of business in Tirupur, when it has no “fixed establishment” in such state? - HELD THAT:- The applicant is registered in Tirupur District of Tamil Nadu State with GSTIN 33AADCT6964E1ZA. Now the applicant is required to erect a building at a construction site situated in another state using the structures precasted at their Tirupur factory and transported to the construction site.

The question is in relation to registration of a premise. This is covered under Section 97 (2)(f) of the CGST Act, 2017 and hence is admissible.

As per the definition, a “fixed establishment” means a place (other than the registered place of business) which is characterised by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services, or to receive and use services for its own needs (Section 2(50) of the CGST Act, 2017 refers).

In the instant case, the applicant has a sufficient degree of permanence at the construction site in the other state and also human and technical resources are being put to use there. Therefore, the applicant's claim that they do not have a fixed establishment at the construction site is not acceptable. As they are having a fixed establishment in the other state, they are required to get registered in the state where the construction site is located.

Whether the transportation of material used in erection of the precast structures in the construction sites in other states, amounts to supply in the absence of consideration and in the absence of two different parties involved? - HELD THAT:- The applicant, who is registered in the state of Tamil Nadu, has supplied goods or services to their construction site situated in another state. It is already confirmed that the applicant has an establishment in the other state where construction site is situated. In this scenario, the activity undertaken by the applicant, i.e. supply of goods or services without consideration falls in Schedule I and consequently under the scope of supply as per Section 7 of the CGST Act, 2017. Even though the activity undertaken by the applicant does not involve two different parties, as per clauses 4 and 5 of Section 25 of the CGST Act, 2017, the applicant is considered as a distinct person.

Thus, it is clear that even when there is no consideration and in the absence of involvement of two different parties, the transportation of material used in erection of the precast structures in the construction sites in other states amounts to supply.

In the instant case, it is clear that the questions raised by the applicant are not covered under the issues mentioned under Section 97(2) supra. We further find that all the questions from Sl. No. (d) to (k) seek an answer on the procedural requirements, which are outside the scope of Authority for Advance Ruling. Therefore, we are of the opinion that no ruling is required to be pronounced on the issues that are not covered under Section 97(2) of the CGST Act 2017. Thus, the questions from Sl. No. (d) to (k) of the instant application are liable for rejection in terms of Section 98(2) of the CGST Act 2017.

Entitlement to input tax credit is subject to Section 16(1) - constructing commercial buildings and leasing them to various tenants - blocked credit - construction of immovable property on his own account - plant and machinery - functionality test - used or intended to be used in the course or furtherance of business -phrase “including when such goods or services or both are used in the course or furtherance of business” - HELD THAT:- The lease of immovable property is a taxable supply under the GST Act. The Applicant discharges GST liability on the rental income earned from the property. For the construction of the said building, the applicant has incurred expenses on various goods and services, including construction materials such as cement, sand, steel, aluminium, wires, plywood, paints, lifts, escalators, air conditioning plants, contractor services, architect fees, etc. The Applicant wishes to claim ITC on such inputs and input services used in the construction of the building intended to be rented out. The applicant has sought for Advance Ruling as to the eligibility to claim Input Tax Credit (ITC) on goods and services used for construction of an immovable property (commercial building) which is intended to be used for the purpose of letting out on rental basis and on which output GST in charged.

Accordingly, it becomes clear that the embargo in relation to availment of ITC in the instant case revolves very much around clause (d) of Section 17(5) of the Act, ibid, which restricts ITC availment on receipt of any goods or service or both, when made for construction of an immovable property ‘on his own account’.

As per Section 17(5)(d) of CGST Act, 2017 Input Tax Credit is not available in respect of goods or services or both received for construction of an immovable property (other than Plant and Machinery) on his own account including when such goods or services or both are used in the course of furtherance of business. The interpretation is very clear that the provisions seeks to block credit when an immovable property is being constructed on own account. The said provision can be interpreted by the said phrase “on own account” which seeks to block input credit in respect of an immovable property “which is intended for the purposes of leasing out”.

Now coming to the phrase “including when such goods or services or both are used in the course or furtherance of business”, it has to be seen as to what is the meaning and purpose of this phrase. It is obvious that the goods and services referred to in the said phrase refers to the goods and services received by a taxable person for construction of an Immovable property and therefore the plain and simple meaning is that if such goods and services for construction of an immovable property which is used in the course or furtherance of business, then that is also covered under the ‘blocked credit’, category.

The applicant is not eligible to claim Input Tax Credit (ITC) on goods and services used for construction of an immovable property (commercial building) which is intended to be used for the purpose of letting out on rental basis.

Classification of goods or services - time and value of supply - admissibility of input tax credit / refund - requirement of registration under GST - transfer of title as supply of goods - scope of supply - Schedule III para 7 - application of Schedule II para 1(a) - advance ruling jurisdiction u/s 97(2) - binding effect of advance ruling - HELD THAT:- We note from the details submitted, that the applicant purchases goods from Spain/USA for wholesale price & sell it to Party B (raising the invoice) with some marginal profit. Once they received INR from Party B for purchasing of goods, then the applicant will pay the vendor called Party C (purchaser from Spain/USA) through USD. Then the Party C will take order from the applicant and deliver the goods in S&B Warehouse which is in USA. There labelling of products work will take place and further the products will be delivered to Party B Amazon Warehouse for sales. After that depending upon the order in US Amazon, the selected products will be delivered to customers through Amazon delivery executives (under the name of Party B). We find that the goods being dealt with by the applicant does not come in to India and there is no foreign currency realization in to India.

Transaction under Negative List of GST Act means, are they required to register under GST Law? - HELD THAT:-There is no Negative List under GST Act, and only exemption notifications are available separately for goods and services. However, it is to be stated here that Schedule III of CGST Act, 2017 deals with activities or transactions which can neither be treated as supply of goods nor treated as supply of services.

Therefore, under the applicant’s business model, transfer of title happens when the applicant raises invoice on Party B (located in India). As such, the transaction between applicant and Party B is ‘supply of goods’, even though goods are sourced from and delivered to a place, both located outside India. We therefore, come to understand that in the instant case, the ‘supply of goods’ takes place between two persons in India, and only the movement of goods take place outside India. Further, it is to be noted that under para 7 of Schedule III, GST is not applicable if goods do not enter India, only in respect of those cases where a “Supply of goods” takes place from a place in the non-taxable territory to another place in the non-taxable territory. Hence, Para 7 of Schedule III is not applicable to the instant case, as ‘Supply’ takes place from one person in the taxable territory to another person in the taxable territory.

Therefore, as the supply is between two units within the taxable territory i.e., supplier and receiver are in India, GST is applicable as per Para 1(a) of Schedule II of CGST Act, 2017. Hence, registration under GST and payment of taxes under GST is required to be carried out in the instant case.

In view of the above, we rule as under:

Classifying the goods and services under HSN and rate of GST could not be done as the specific details of the goods and services dealt with are not furnished by the applicant.

Question on clarification as to the category under which the applicant’s transaction would fall is not covered under any of the issues on which the Advance Ruling can be sought under Section 97(2) of CGST/TNGST Act, 2017 and as such, is liable for rejection.

‘Time and value of goods or services’ could not be ‘Classified’ as requested by the applicant and that the same is liable to be determined by the applicant in line with the provisions of Section 12, 13 & 15 of CGST Act 2017.

As the supply is between two units within the taxable territory i.e. supplier and receiver are in India, GST is applicable as per Para 1(a) of Schedule II of CGST Act, 2017. Hence, registration under GST is required to be carried out.

Reopening of assessment u/s 147 - reasons to believe -Non disposal of objections

Ld' A.S.G. has pointed out that arising from the common impugned order another Special Leave Petition (C) filed was dismissed 2026 (1) TMI 375 - SC ORDER]

As decided by HC [2025 (4) TMI 544 - GUJARAT HIGH COURT] AO has failed to consider the objections of the petitioner in the true perspective and in absence of any material pertaining to the details relating to the petitioner, so as to prove that income has escaped assessment, we are of the opinion that there is no link between the material and the reasons recorded, resulting into dis-satisfaction on the part of the AO

HELD THAT:- Special Leave Petition is dismissed.

Nature of receipt - capital receipt or a revenue receipt - subsidy on the excise duty paid, which the respondent-assessee received under the excise duty exemption provided by the Central Government - HELD THAT:- This issue is covered by the judgment of Hon’ble the Supreme Court rendered in Ponni Sugars & Chemicals Limited [2008 (9) TMI 14 - SUPREME COURT ]wherein it has been categorically held that Sales Tax & Excise Duty refund or the subsidy which is linked to Capital Investment made, is a capital receipt.

We also do not find any substance in alternative argument that such subsidy should be reduced from the block of assets.

On going through the facts available on record, we are of the considered opinion that since the subsidy which the respondent-assessee had received under the scheme of 2001 was in the nature of capital receipt independent of the cost of any asset, the only correlation with the asset was in the sense that an industry was supposed to make a particular investment. Otherwise, there was no nexus with the excise duty paid with the cost of the cost of a particular machine.

Hence, the contention of the appellant-Department that the subsidy so received should be reduced from the block of assets is untenable in law.

We have this view because, the subsidy was not in the nature of capital investment subsidy and it was in the form of reimbursement of the excise duty paid by the unit. Unless the subsidy is directly linked to the cost of purchase of the particular asset, the same cannot be reduced from the block of assets. Decided in favour of assessee.

Withholding certificate issued u/s 197 - tax withholding certificate at the rate of 15% has been issued, as against petitioner’s request for issuance of ‘NIL’ rate certificate - assessee is a company incorporated in the United Kingdom - HELD THAT:- We are conscious of this fact that the orders under Section 197 are in the nature of advance tax and the tax if deducted from the payments made to the payee can ultimately be refunded, in case the same are not exigible to tax, but if such argument of the Revenue is to be accepted, then, the whole purpose of the provision u/s 197 of the Act of 1961 would be frustrated.

Considering that the application was filed on 20.06.2025; the impugned order came to be passed on 21.08.2025 and that by the time the matter has ripened for hearing today (10.02.2026), more than 80% of the period is already over, and during this period the petitioner-company has transacted in India and its tax has been deducted.

Such being the position, we not only set aside the impugned order dated 23.06.2025 (passed on 21.08.2025), certificate dated 21.08.2025 and direct the competent authority to issue a certificate at NIL rate for AY 202627 within fifteen days from today, we also direct him to continue to issue certificate(s) at ‘NIL’ rate for each subsequent year within thirty days of the application being filed by the petitioner.

Reopening of assessment - ‘reason to believe’ - reliance on objection raised by the audit party on the issue of adding back the corporate expenses qua some of the combined cycle gas power plants - disallowance on exemption u/s 80-IA - HELD THAT:- There is no gainsaying the fact that the reassessment proceedings have been kick-started pursuant to the objection raised by the audit party on the issue of adding back the corporate expenses qua some of the combined cycle gas power plants and also the fact that during scrutiny proceedings and reassessment proceedings under Section 143(3) AO had already conducted threadbare inquiry and disallowed the exemption.

Although, he disallowed the exemption under Section 80-IA of the Act of 1961 on different counts and maybe he did not think it appropriate to disallow the exemption on the ground of corporate expenses being added back as opined by the audit party, but in any case the same was an opinion of the audit party. The initiation of the reassessment proceedings on the basis of audit party’s objection or opinion can at the best be construed to be an opinion of expert. The audit objection is, therefore, nothing but an opinion and consequently, the initiation of reassessment proceedings too is nothing more than a change of opinion.

Having gone through the first assessment order and taking note of the fact that the issue of allowability of exemption under Section 80-IA of the Act of 1961 had been thoroughly examined by the AO from various angles rather all angles which the AO could conceive, if for one reason or the other, the AO could not envisage this fact or had omitted to consider it while rejecting or partially rejecting respondent’s claim, the same cannot confer a right upon the AO to invoke provisions of Section 147/148 of the Act of 1961.

The Income Tax Department could have perhaps taken recourse to proceedings under Section 263 of the Act of 1961 on such count subject of course to the statutory inhibitions, but resorting to the provisions of Section 147/148 of the Act of 1961 was impermissible in law. Revenue appeal dismissed.

Validity of reopening of assessment - prior approval of the specified authority u/s 151 of the Act under the new regime -income escaping assessment is less than ₹50,00,000/- - Scope of TOLA in extending time limits for sanction under section 151

HELD THAT:- It is noted that in the new regime, if the income escaping assessment is more than ₹50,00,000/-, a reassessment notice can be issued after the expiry of three years from the end of the relevant assessment year only after obtaining prior approval of the Principal Chief Commissioner or the Principal Director General or the Chief Commissioner or the Director General. It is also noted that if the income escaping assessment is less than ₹50,00,000/-, no reassessment notice can be issued after the expiry of three years, as per section 151(1)(b) of the Act.

In the present facts and circumstances of the case, the income alleged to have escaped assessment is ₹10,25,756/- and the notice issued under the new regime is beyond the period of three years. Accordingly, as per section 151(1)(b) of the Act, the notice issued on 30/07/2022 is bad in law.

Appropriate authority who could sanction the said notice, issued beyond a period of three years, should have been the Principal Chief Commissioner or the Principal Director General or the Chief Commissioner or the Director General. In the present facts of the case, the said notice has been approved by the Principal Commissioner, which again does not satisfy the condition prescribed under section 151(ii)(b) of the Act.

This Tribunal is, thus, of the opinion that non-compliance with the provisions of section 151 renders the notice issued under section 148 of the Act dated 30/07/2022 to be bad in law and, hence, the same deserves to be quashed and set aside. As a consequence, the reassessment proceedings initiated thereafter also become bad in law. Assessee appeal allowed.

TP Adjustment -appropriate tested party for determining arm's length price - TPO/AO applying the differential margin of 8.76% (difference between assessee is 11.70% and TPOs 2.94%) on the entire operating revenue of jewellery division - HELD THAT:- We find that in subsequent assessment year, the TPO himself accepted the DTA unit as tested party in his order dated 27.01.2025, copy of which is already placed on record at page no. 229-230 of paper book. Otherwise, such facts are not in dispute.

We further find that, during TP proceedings, the assessee rectified its error and made a prayer to treat Diamond division as tested party as the same is least complex in the transaction chain. We also find merit in the submission of ld A.R. of the assessee that it is a settled position in transfer pricing regulations that a functional analysis is the primary determination for identifying the least complex entity. The tested party must be participant whose assets employed, risk assumed and the functions performed are the most easily identifiable and standard.

We find that in PCIT Vs Almatis Alumina (P) Ltd [2022 (2) TMI 1063 - CALCUTTA HIGH COURT] held that Indian transfer pricing guidelines issued by the Institute of Chartered Accountant of India wide guidance note on report under section 92E by ICAI and transfer pricing guidelines issued by OECD do not prohibited foreign AE to be a tested party, therefore, where assessee company was a more complex entity when compared to its foreign AE, said foreign AE could be selected as a tested party.

We find that the diamond division unit of assessee is least complex entity as its activities are mainly buying, assortment and sales, it has a very modest assessed base consisting of modest workforce and performing routine sorting and sales functions. Such party has been accepted by TPO himself in subsequent assessment year for AY 2022-23.

Addition u/s 68 - bogus LTCG - inclusion of a scrip in an investigation report as a penny stock - Onus to prove - HELD THAT:- In the present case, the Revenue has failed to rebut the evidentiary value of the documents produced by the assessee or to demonstrate that the impugned transactions were non-genuine. There is no material to show that the consideration received on sale of shares had flown back to the assessee in any manner or that the assessee was a beneficiary of any pre-arranged scheme. In the absence of any cogent incriminating evidence against the assessee and having regard to the consistency and verifiability of the evidences placed on record, it is held that the observations of the authorities below are not sustainable in law.

It is a settled position of law that suspicion, however strong, cannot take the place of proof. Mere inclusion of a scrip in an investigation report as a penny stock, in the absence of any material demonstrating the Assessee’s involvement in price manipulation or accommodation entry arrangements, is insufficient to justify an addition. The burden cast upon the Assessee to establish the genuineness of the transaction stands duly discharged by the documentary evidences placed on record, and the Revenue has failed to rebut the same with any cogent material.

Addition made u/s 68 in respect of the sale proceeds of shares is not sustainable and deserves to be deleted. Decided in favour of assessee.

Penalty u/s 271(1)(c) - Defective notice - whether the penalty was for ‘concealment of income’ or ‘for furnishing of inaccurate particulars of income’ - allegation of non specification of clear charge - HELD THAT:- As decided in M/s Sahara India Life Insurance Company Limited, [2019 (8) TMI 409 - DELHI HIGH COURT] wherein it was held that whether notice issued by the Ld. AO did not specify under which limb of section 271(1)(c) penalty proceedings had been initiated i.e., whether for ‘concealment of income’ or ‘for furnishing of inaccurate particulars of income’, the penalty notice issued would be bad in law

We are of the view that the penalty notices issued without striking-off the irrelevant limb by the Ld. AO were invalid. Accordingly, respectfully following the above decision of the Jurisdictional High Court, we, hereby, quashed penalty imposed by the Ld. AO, u/s 271(1)(c) of the Act. Assessee appeal allowed.

Additions u/s 68 - unexplained credits - lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer u/s 131 - HELD THAT:- Share capital of the assessee company remained the same and no fresh shares were issued not any application money was received during the year under appeal, therefore, the allegation of the lower authorities that the sum as received against the issue of share capital is contrary to the facts on records.

As observed that not only assessee explained the nature of credits as consideration received from the sale of shares but also filed their confirmations, Bank statement, audited financial statements, copy of ITR acknowledgement and share transfer deeds. It is further seen that the assessee not only prove the source in the hands of the buyer but further prove the source of source of the funds received by the assessee company.

Assessee has proved creditworthiness of the buyers by submitting their relevant bank statement, financial statements and ITR’s. AO has not proved that any cash has been deposited prior to transfer of sale consideration to the assessee. Even though assessee was not required to prove sources of source, however, bank statements submitted clearly reflects such sources which is not doubted by A.O. nor any inquiry has been made by A.O. for concluding that sale consideration received by appellant is not genuine.

It is clear that the assessee has furnished source of source and if the AO has any doubts with respect to the source of source in the hands of the buyers, it could have made further enquiries from all such parties by issue summons u/s 133(6) of the Act however, the AO choose to issue summons u/s 133(6) to only four parties out of which one is loan creditor from whom reply was received and rest three are buyer of shares who had not responded. It is observed by us, that the ld. CIT(A) despite of fact that no enquiry was made from the remaining three loan creditors, had deleted the addition.

It is trite law that suspicion, howsoever strong, cannot take the place of proof as held in Umacharan Shaw & Bros. [1959 (5) TMI 11 - SUPREME COURT]

As assessee has been able to establish the genuineness of transaction and creditworthiness of the buyers. Accordingly, we delete the additions made u/s 68 - Decided in favour of assessee.

TP Adjustment - selection of MAM - CUP method OR TNMM method - CIT(A) determining the royalty payment under CUP method - HELD THAT:- CIT-DR fairly admitted Remand Report filed by the TPO, ALP of royalty payment is to be determined following TNMM method. Ld. CIT-DR could not place on record that the earlier order passed by this Tribunal was challenged before Higher Judicial Forum. Whereas the TPO himself has admitted TNMM method is most appropriate method bench-marking the royalty payment. Therefore we do not find any infirmity in the order passed by the CIT(A). Thus the Grounds of appeal raised by the Revenue is devoid of merits and liable to be dismissed.

Deduction u/s 80-IC -Quantum of profits earned from the Unit eligible for claiming deduction u/s 80-IC vis-a-vis profits from the non-eligible Unit - AO alleges that assessee has shown higher profits from the eligible unit whereas comparatively lower profits were declared from other units though the product manufactured remained the same at both the units and the major buyer is also common in both the Units

HELD THAT:- Claim of the assessee is that due to excise duty element, the basic cost of the goods sold is less in new unit as compared to old unit which could not be accepted due to the fact when the assessee charged Excise Duty on the products manufactured and sold, it is entitled to avail CENVAT credit on the input of raw material. Therefore, the element of Excise Duty is largely compensated through the adjustment of CENVAT credit on the inputs.

The other reason for fall in G.P rate was stated as declined in the consumption of raw material in the eligible unit and the cost incurred on repair and maintenance was less in eligible unit which is also not acceptable since that both the units are managed and controlled by same management and therefore, the major raw material must be bought for both the units simultaneously and the cost would remain the same. Moreover undisputedly, there is no material difference in the quality of product manufactured in both the units.

Unit-2 i.e. non-eligible unit had started production in the year under appeal therefore, the expenses towards repair and maintenance would be comparatively lower as compared to old unit which was in production for past more than 08 years.

Thus, there must be some element of profit of Unit-2 which has been suppressed and assessee has shown better results in Unit-1 to claim higher amount of deduction u/s 80- IC.

Accordingly, we direct the AO to apply Net profit rate of 5.83% i.e. average rate of net profit rate of year under appeal and of preceding two years as against the net profit rate of 3.64% of immediately preceding year applied by the AO to compute the amount of profits from eligible unit and further direct the AO to re-compute the amount of deduction u/s 80-IC from eligible unit by applying net profit rate of 5.83 % and disallowed the remaining amount - Appeal of the assessee is partly allowed.

Disallowance of deduction u/s 54F - no evidences were filed by the assessee in support of the claim that all the other properties owned by the assessee as on the date of transfer and alleged as residential properties were commercial in nature - additional evidences submitted by assessee - HELD THAT:- Before us, assessee filed additional evidences in the shape of identity proofs and affidavits of the tenants wherein they all have stated that they occupied certain portion of the properties owned by the assessee and used by them for their business purposes and were not used for residential purposes. The assessee prayed that these additional evidences be accepted and deduction u/s 54F be allowed.

On careful consideration all these facts and the additional evidences now filed before us, it is observed that none of the said evidence was filed before the lower authorities and are crucial to decide the very nature of the property given on rent by the assessee.

If the same are utilized for commercial purposes and none of the unit was used for residential purposes, the claim of the assessee u/s 54F of the Act cannot be denied. Since these documents were not available with the lower authorities, the veracity of the same remained unexamined.

Since these documents are crucial to decide the issue in hand, therefore, this issue is remanded back to the file of the AO with the direction to examine the claim of the assessee - Grounds raised by the assessee are allowed for statistical purposes.

Unexplained on-money paid in cash for the acquisition of the new property - Reliability on loose documents - Revenue relied on cash seized from a third person (Mr. Nadim Ahmad Khan), a draft sale deed and a loose paper recovered from his possession to infer that the assessee had paid undisclosed 'on money' and made an addition.

AO has made no inquiry whatsoever with respect to the transaction of sale of property with the seller. The assessee further claimed that Shri Nadim Ahmad Khan was never acted as broker in the transaction and solely because he was a property broker, AO had alleged that he was a broker soliciting the deal of purchase of property by the assessee. It is also a fact that the loose paper was found with Shri Nadim Ahmad Khan and not with the assessee and except the loose paper, Revenue has failed to bring any corroborative evidence to hold that such cash was the money of the assessee. Further, no other evidence was available on record for payment of balance amount of INR 13 Lakhs in cash by the assessee to the seller of the property.

As the draft Sale Deed found with Shri Nadim Ahmad Khan was not signed by any person, he has never stated that cash was given by the assessee and further no corroborative evidence was brought on record to presume that such cash was assessee undisclosed money. The presumption u/s 132(4A) of the act cannot be drawn against the assessee and it is settled law that presumption u/s 132(4A) is available against the person from whom possession, documents are seized. Therefore, no addition could be made in the hands of the assessee.

Revision u/s 263 - PCIT was of the opinion that the Trust has not been created or established solely for the benefit of the relative of the individual and hence an amount received by the Trust should be brought to tax under the head "Income from other sources" as provided in section 56(2)(X)(a) - HELD THAT:- Trust was not created or established solely for the benefit of relative of the individual in view of the fact that as per clause 1.6 of the deed the beneficiaries means such other persons as are added under clause 6 and clause 6 states that the Trustee may, at any time during the Trust Period, declare that any person or class of persons (whether or not in existence or ascertained) or Charity shall be added to the class of Beneficiaries. Therefore, PCIT is of the view that any person or class of persons (whether or not in existence or ascertained) or charity, mentioned in the clause 6.1 does not fall under the meaning of relatives.

The clause empowers the trustee to add any person or class of persons (whether or not in existence or ascertained) or charity to the class of beneficiaries. Thus, the benefits are not restricted to the relatives only. In the aforesaid circumstances, the Principal Commissioner of Income-tax held the view that the matter was not enquired or verified by the Assessing Officer. We are also of the considered opinion that these crucial aspects were neither enquired by the AO nor examined in accordance with law which renders the order of the AO to be erroneous & prejudicial to the income tax administration as a whole.

We are also of the considered opinion that the Assessing Officer is not expected to put blinkers on his eyes and mechanically accept what the assessee claims before him. It is his duty to ascertain the truth of the facts stated and the genuineness of the claims made in the return when the circumstances of the case are such as to provoke inquiry.

The Commissioner may consider an order of the AO to be erroneous not only when it contains some apparent error of reasoning or of law or of fact on the face of it but also when it is a stereo-typed order which simply accepts what the assessee has stated in his return and fails to make enquiries or examine the genuineness of the claim which are called for in the circumstances of the case. In taking the aforesaid view, we are supported by the decisions of in Rampyari Devi Saraogi [1967 (5) TMI 10 - SUPREME COURT], Smt. Tara Devi Aggarwal [1972 (11) TMI 2 - SUPREME COURT]

As rightly contended by the ld. CIT DR, there is no express view/opinion of the Assessing Officer, surely it also cannot be said that the same is a plausible view. Thus under the facts & circumstances discussed above, it was a reasonably fit case for exercising revisionary jurisdiction u/s 263 of the Act. After all, the Principal Commissioner of Income-tax gave another chance to the assessee to furnish the necessary supportive evidence of its claim and explain why the proposed addition should not be made to income.

Appeal filed by the assessee trust is dismissed.

Revision u/s 263 - disallowance/ addition made in respect of deduction claimed on account of R&D expenditure - HELD THAT:- A careful analysis of observations of PCIT make it clear that his opinion regarding the allocation of R&D expenses between eligible or non-eligible undertakings is merely based on presumption that such expenses may have direct or indirect relationship with the eligible undertakings.

Thus, the view expressed by PCIT to revise the assessment order is in the realm of conjectures and surmises and not based on any concrete evidence. On the contrary, materials on record demonstrate that after conducting full-fledged enquiry and proper appreciation of facts and materials on record, the AO has taken a conscious and considered decision to allow the deduction claimed towards R&D expenses. Merely because the decision taken by the AO is not to the liking of revisionary authority or not acceptable to him, that will not make the assessment order erroneous and prejudicial to the interest of Revenue.

In case of ‘Zandu Pharmaceuticals Works Ltd. [2012 (9) TMI 620 - BOMBAY HIGH COURT] while interpreting the expression ‘derived from’ has observed that there must not only be a direct nexus between the profit and gains and industrial undertaking but there must also be a direct nexus between the industrial undertaking and the expenses, which are sought to be apportioned/attributable to it. In the facts of the present appeal, learned PCIT himself was doubtful regarding the existence of direct nexus between the R&D expenses and eligible undertaking, therefore, he has used to words “direct or indirect nexus”.

Revisionary authority has exercised jurisdiction u/s. 263 of the Act merely based on audit objection - Though, neither in the show cause notice issued u/s. 263 of the Act or in the order passed under that provision, learned PCIT has referred to the audit objection, however, in the assessment order passed in pursuance to the directions of learned PCIT, the AO has clearly and in no uncertain terms stated that the audit objection has suggested for disallowance of deduction u/s. 10AA of the Act on account of non-allocation of R&D expenses to SEZ units.

The aforesaid observation of the Assessing Officer in the order giving effect to the directions of learned PCIT, prima facie, demonstrates that the genesis of the revisionary proceeding for disallowance of a part of R&D expense was based on audit objection. Thus, the decision to invoke the provisions of Section 263 qua the issue of disallowance of R&D expense is not an independent decision of learned PCIT but is greatly influenced by the audit objection. That being the case, the exercise of power u/s. 263 in our considered opinion is vitiated, hence, unsustainable. Accordingly, we quash and set aside the impugned order passed u/s. 263 of the Act and restore the order of assessment order of AO.

Assessee appeal allowed.

Unexplained money u/s 69A - question of proving innocence comes only when charge is established - proof of possession of money - assessee has received money from 636 investors and also taken money from investors and neither gave property in return or nor the money back - reliance on Resolution Professional's report before NCLT as basis for tax addition

HELD THAT:- We observed that assessee is only an employee of the group entity who was performed the duty of a Manager and he may have facilitated the funds received by the group entities. From the record we observed that assessee has resigned from the position on 10.05.2017 and the same was accepted by the EIL HRD team on 11.05.2017.

Apart from that there is no evidence brought on record by the AO to establish that assessee has received such huge amount from the investors and there is no report on which bank account, the above said amounts were received from 636 investors. Nothing was brought on record how the assessee has received such huge amount. Secondly there is no possibility that the investors will remit the amount to the individual account of the assessee when they invest such huge amount in the group entities. That being the case merely relying on the PR submissions before NCLT without establishing the involvement of the assessee for misappropriation of funds, even the company had not taken any action against the assessee.

Group Companies have not taken any action to recover if at all misappropriation of funds made by the assessee. From the assessment record CIT(A) has established that assessee has submitted all relevant information which was also submitted before the AO and CIT(A) established that Assessing Officer has not carried on any investigation before completing the assessment. Decided against revenue.

Benami transaction - Provisional Attachment Order (‘PAO’) - consideration payment by the beneficial owner for its future benefit - conversion of land from agricultural to non-agricultural - piece of land purchased and registered in the name of benamidars - definition of "benami transaction" u/s 2(9)(A) - exception of fiduciary capacity - prospective application of the Amendment Act 2016 - HELD THAT:- It is no doubt that the Apex Court in the case of Ganpati Dealcom [2022 (8) TMI 1047 - SUPREME COURT] applied the amending Act of 2016 with prospective application but that judgment has been recalled by the order dated 18.10.2024. Thus, the issue no more remains open for debate at this stage. It is, however, necessary to refer the order of this Tribunal in the case of Prism Scan [2024 (1) TMI 203 - APPELLATE TRIBUNAL FOR SAFEMA AT NEW DELHI] when referring the judgment in the case of Ganpati Dealcom (supra), the definition of ‘benami transaction’ under Section 2(9)(A) of the Act of 1988 was given interpretation with its prospective application. The word ‘ held’ used in the provision of Section 2(9)(A) of the Act of 1988 was given interpretation and is applicable to this case. The land in dispute was existing in the name of benamidars as on date of the amendment and even subsequently for some years, as admitted by the appellants himself.

Even if we consider the Amending Act of 2016 to be prospective in nature, the definition of Section 2(9)(A) of the Act of 1988 would apply to the case because the transaction may have taken place prior to amendment but private appellants were holding the property on 01.11.2016 and even subsequently for considerable period.

The clarification given in the cases where the property was held by the benamidar even after the amendment would be covered by the order in the case of Prism scan (supra). Thus, even the third argument raised by the appellants cannot be accepted.

We do not find perversity in the order passed by the Adjudicating Authority to cause interference in the impugned order. The Adjudicating Authority found that even Shri Kaluram Berva was neither an employee of the beneficial owner nor appointed as an agent of the beneficial owner. His name was used for the purchase of agricultural land because he was falling under the Scheduled Caste category and thus land could have been registered in his name. It is further with the finding that the transaction took place to the benefit of the beneficial owner. Thus, the ingredients of Section 2(9)(A) of the Act of 1988 were fulfilled.

No merit in any of the arguments raised by the appellants. Accordingly, appeals fail and are dismissed.

Valuation of seized goods for fixing penalty ceiling - market survey based valuation - binding effect of statements recorded under Section 108 of the Customs Act - burden of proof under Section 123 of the Customs Act - confiscation under Section 111(d) of the Customs Act - penalty under Section 112(b)(i) of the Customs Act - right to cross-examination in customs proceedings - maintainability of appeals under Section 130 of the Customs Act (question of law requirement) - Whether the valuation of the goods can be said to be sustainable in law in absence of there being any legal material to infer the value of each cigarette stick to be Rs. 14? - HELD THAT:- We have carefully perused the order in original passed by the Joint Commissioner of Customs (Preventive) Delhi on 20th November, 2019. The order in original has in detail and minutely, considered the entire gamut of the matter. The order in original not only considers the sanctity of Punchnama, the statement of witnesses recorded under Section 108 of the Customs Act including that of the appellant but also provides a critical analysis of such statement qua the case put forth by the appellant.

Once the respondent has issued a show cause notice on the point of the cost of a cigarette stick based on the market value, the burden shifts on the appellant to demonstrate that the evaluation, as was reached to, was incorrect or improper and he should have substantiated his contention to that effect. It appears that the appellant was in complete denial mode of the entire story of the respondent about the seizure of the goods which were illegally brought in the country.

We have already recorded a specific finding that not only the order in original is passed by the competent authority based on the detailed show cause notice, the entire adverse material based on which the show cause notice was issued being made available to the appellant so also sufficient opportunity of hearing was given. The appellant, in our opinion, has raised completely vague and non-specific plea not only before the authorities below but also failed to establish his case based on the statutory provisions.

The appellant was expected to discharge his burden by demonstrating that the goods were not properly valued.

As a sequel of above, having regard to the statutory mandate prescribed under Section 130 of the Customs Act, the present appeal can be said to be maintainable only in case if there involves any question of law.

We have already recorded a specific finding that not only the order in original is passed by the competent authority based on the detailed show cause notice, the entire adverse material based on which the show cause notice was issued being made available to the appellant so also sufficient opportunity of hearing was given. The appellant, in our opinion, has raised completely vague and non-specific plea not only before the authorities below but also failed to establish his case based on the statutory provisions.

Having regard to the law laid down by the Apex Court in the various judgments such as State of Haryana Vs. Rajmal & Anr [2011 (11) TMI 844 - SUPREME COURT]; Radhakishan Vs. State of UP [1962 (9) TMI 61 - SUPREME COURT], on the issue of seizure and the effect thereof, the impact of Section 108 and 123 of the Customs Act and the bindingness of the statement, so also having regard to the law laid down by the Apex Court in the matter of Commissioner of C.Ex., Madras Vs. Systems and Components Pvt. Ltd. [2004 (2) TMI 65 - SUPREME COURT], the non-consequential ground or the failure of the appellant to demonstrate prejudice for not cross examining the witnesses, the statements were recorded under Section 108 of the Customs Act and in view of the law laid down by the Apex Court in the matter of Kanungo & Company Vs. Collector of Customs & Ors [1972 (2) TMI 35 - SUPREME COURT], wherein it is held that the right to cross examination is not an absolute right, the effect of statement recorded under Section 108 of the Customs Act, we are of the view that no question of law is involved in the present appeal.

That being so, the appeal lacks merit and stands dismissed accordingly.

Freedom to carry on trade under Article 19(1)(g) - Reasonable restriction under Article 19(2) - Equality before law and reasonable classification under Article 14 - Judicial restraint in review of economic policy - Power of the Board/CBIC to prescribe separate procedure u/s 143 AA of the Customs Act, 1962 - Validity of administrative circulars and admissibility of explanatory reasons in counter affidavits (distinction from orders requiring reasons) - Canalisation of administrative functions through a Public Sector Undertaking (MSTC) as a permissible administrative measure - HELD THAT:- Administrative Circulars such as the Circular dated 3 December 2018 cannot be expected to contain detailed reasons for their issuance, and insistence on every such administrative or executive circular having to contain such reasons may well paralyze administrative functioning. In the case of such circulars, therefore, the only requirement is for the authority issuing the circulars to set out the reasons for their issuance before the Court in the event of a challenge, which would, in ordinary course, be in counter-affidavit. It is, thereafter, for the Court to satisfy itself that the reasons cited are germane, and dispel any possibility of arbitrariness or caprice in the issuance of the circular.

We, therefore, reject Dr. Bajpai’s submission that the reasons for issuance of the Circular dated 3 December 2018 cannot be seen by the Court, predicated on the law declared in Mohinder Singh Gill.

It is obvious that the CBIC is entitled to assert that the Circular dated 3 December 2018 was issued in exercise of the power conferred by Section 143-AA of the Act. It goes without saying that the mere fact that the Circular may not make specific reference to Section 143-AA does not estop the CBIC from tracing the power for its issuance to the said provision. If the power to issue the Circular is to be found in Section 143-AA, the fact that Section 143-AA does not find especial mention in the Circular cannot invalidate it.

It is not, therefore, as if the Circular dated 3 December 2018 permanently throttles the trade or vocation of auctioneers. As it stands, in our view, the Circular more than amply constitutes a reasonable restriction, within the meaning of Article 19(2) of the Constitution of India, engrafted in economic and public interest, and is, therefore, also constitutionally valid. The plea of infraction of Article 19(1)(g) of the Constitution, therefore, also fails.

CVC Circular No. 06/07/18, dated 11 July 2018 is, again, equally extraneous to the controversy at hand. The CVC has, by the said Circular, disapproved award of contracts on nomination basis without adequate justification. The Circular dated 3 December 2018 does not award any contract on nomination basis. Besides, we have already held the measures, that the Circular puts in place, including the requirement of e-auction of uncleared goods through the MSTC, to be adequately justified.

We also agree with the learned Single Judge that the appellant was effectively aggrieved, not by any detriment to public interest caused by the Circular dated 3 December 2018, but by the fact that private auctioneers lost the opportunity of auctioning uncleared and unclaimed goods within a year of their importation. Clearly, the writ petition was not prompted by any desire to safeguard public interest, but to preserve the right of the petitioner, which, according to the petitioner, the Circular dated 3 December 2018 illegally violated. Of course, there cannot be any embargo on such a right being asserted in a Court of law, as the right to freedom of trade, guaranteed by Article 19(1)(g) of the Constitution, is precious and inviolable. Like all fundamental rights, however, it is not absolute, but is subject to reasonable restrictions under Article 19(2). The Circular dated 3 December 2018, to our mind, eminently satisfies the requirements of Article 19(2).

We, therefore, are unable to find any infirmity either in the Circular dated 3 December 2018 issued by the CBIC or the impugned judgment dated 5 September 2022 of the learned Single Judge.

The appeal is accordingly dismissed, without costs.

Classification of imported goods - waste and scrap - Section Note 8 to the Schedule 1 of Customs Tariff Act - evidentiary standard for reclassification - revaluation of goods - reliance on expert/chartered engineer report - HELD THAT:- The original authority and the appellate authority have given a go-bye to the relevant section and chapter notes particularly those defining waste and scrap.

The impugned orders grossly ignored the fact that the impugned goods are not usable as prime material as sought to be classified by the department. It is not the case of the department that they have concrete evidence to establish that the imported goods were ‘alloy steel bars’.

We find force in the argument of the appellants that the appellate authority concludes that the impugned goods are not ‘waste and scrap’ only on the basis of the composition as given by the chartered engineer. At the same time, the authorities grossly ignored the categorical finding given by the chartered engineer that the goods are of specifications and cannot be used for the original intended purpose. Under the circumstances, when the impugned goods of metal are to be used for the purposes of scrap only. The department has not given any reliable evidence to assume that the impugned goods are not scrap. Therefore, the classification arrived at by the authorities and the consequential re-valuation are not sustainable under law. Accordingly, the impugned order is liable to be set aside. Thus, we set aside the impugned order and allow the appeals with consequential relief, if any, as per law.

Imposition of penalty u/s 114A - wilful mis-statement or suppression of facts - Self-assessment and reassessment - Benefit of exemption notification - HELD THAT:- Evidently, penalty under this section can be imposed if non-payment or short payment of duty is by reason of collusion or any wilful mis-statement or suppression of facts. This is not such a case. The appellant self-assessed Bills of Entry as per its understanding that it was eligible to the benefit of the exemption notification. In fact, it is still of that belief but in order to buy peace and settle the matter, it is not pressing for setting aside the demand of duty and interest. The remedy against self-assessment is re-assessment. Self-assessment, even if it is incorrect, cannot by itself, be termed as collusion, wilful mis-statement or suppression of facts. No facts were suppressed or mis-stated by the appellant. The appellant entertained the belief (which it still entertains) that it was eligible to the notification. Viewing it from any angle, the penalty under section 114A of the Act cannot be justified.

The appeal is allowed and the impugned order is modified to the extent of setting aside the penalty imposed on the appellant under section 114A. The appellant will be entitled to consequential relief.

Spectrum as a natural resource held in public trust - Spectrum licensing rights as an intangible asset - Ownership versus control of state-granted privileges - Exclusion of non owned assets from insolvency estate under the IBC - Harmonious construction of special statutory regimes (telecom statutes) and the IBC - Regulatory supremacy in spectrum trading and licence transfer - Whether telecom service providers (TSPs), called upon to pay the license dues by the Department of Telecommunication (DoT) can invoke moratorium on the basis of voluntary corporate insolvency resolution process under Insolvency and Bankruptcy Code, 2016 (IBC) for restructuring of their assets - HELD THAT:- A plain reading of the Spectrum Trading Guidelines demonstrates that the Central Government, as Licensor, has retained comprehensive supervisory and corrective control over spectrum trading. Guideline 10 expressly reserves to the Government the power to take appropriate action, including annulment of a trading arrangement, where undertakings furnished by the seller or buyer at the stage of prior intimation are found to be false, misleading, incomplete, or not in conformity with the Spectrum Trading Guidelines or the licence conditions. This power is not confined to scrutiny at the threshold but also extends to subsequent discovery of non-compliances. The Guideline thus safeguards the Government’s role as licensor, controlling access to spectrum at every time. Guideline 11 further reinforces this control by mandating that all outstanding dues of the seller be cleared prior to conclusion of any spectrum trading agreement, and by transferring liability for dues arising up to the effective date of trade to the buyer thereafter. Significantly, it vests discretion in the Government to recover any subsequently discovered dues from either or both parties, jointly or severally. These provisions collectively establish that spectrum trading is not a private commercial arrangement, but a part of the privilege vested in the Central Government under Section 4. Trading is conditional subject to adherence to financial and regulatory obligations owed to the State.

IBC includes only those tangible or intangible assets within the insolvency framework over which the Corporate Debtor has ownership rights, including all rights and interests therein as recorded in the Balance Sheet.

The framework of IBC is clear in excluding assets over which the corporate debtor has no ownership rights. Mere recognition of spectrum licensing rights as an intangible asset by TSPs in the Financial Statements is not conclusive of their ownership, as it only represents control over future economic benefits. Even assuming that licensing of spectrum rights is one among the bundle of rights, in the absence of transfer of title over the spectrum, no ownership rights are created in TSPs either in the spectrum or in its right to use as governed by licensing conditions. Hence, under the IBC framework, spectrum licensing rights is not a part of the pool of assets for insolvency or liquidation.

Identification of True Legal Province of Spectrum: Reconciliatory Interpretation of Two Statutory Regimes - The scope and ambit of IBC is to speed up the process providing for insolvency[Innoventive Industries Ltd. v. ICICI Bank & Anr. [2017 (9) TMI 58 - SUPREME COURT], and achieving maximisation of value of the asset of the entity undergoing CIRP. The focus is on the company. On the other hand, Telegraph Act, Wireless Telegraphy Act and TRAI Act forms a complete and exhaustive code for all matters relating to telecom sector. This includes declaration of the nature of the rights and liabilities arising out of holding and using spectrum. Powers of the Union includes restructuring the telecom sector through policy decisions by introducing reforms, provisioning bailout packages for stabilizing the sector, prescribing conditions for grant of license, enabling treatment of spectrum as an asset in the books of account of TSP to raise loans, enable spectrum trading and power to prescribe consequence of failure to pay the dues and also the power to recover the dues. The regulatory jurisdiction for telecommunication sector through TRAI extends to making recommendations to Union in the field enumerated in (i) to (viii) of Section 11(1)(a) of the TRAI Act and to discharge the functions as laid down in (i) to (ix) of Section 11(1)(b). Taken together, the Union as the owner and trustee of spectrum on the one hand and TRAI as the regulator on the other, occupy the entire province of telecommunications.

The statutory regime under IBC cannot be permitted to make inroads into telecom sector and re-write and restructure the rights and liabilities arising out of administration, usage, and transfers of spectrum which operate under exclusive legal regime concerning telecommunications. The disharmony caused by applying IBC to the telecom sector which operates under a different legal regime was never intended by the Parliament.

Statutory interpretation adopted by the corporate debtors for applying IBC to the material resource of the nation, the spectrum by referring to it as an asset in its books of account, the License Agreement, Tripartite Agreement, or the Spectrum Trading Guidelines is like the tail wagging the dog. Statutory interpretation cannot be based on a myopic approach of reading the definition clauses out of its context. Merely because spectrum can be treated as an “asset” on the basis of certain attributes, such as possession and usage, lease and assignment, claim and liability or credit and debt, the entirety of the telecom sector cannot be brought under the sweep of IBC. The two statutes have different subjects to deal with, different purposes to subserve, different laws to abide, protect different rights and create different liabilities. It is necessary for the constitutional courts to recognise their respective provinces and to ensure that they operate with harmony and without conflict.

Conclusion: -

We hold that Spectrum allocated to TSPs and shown in their books of account as an “asset” cannot be subjected to proceedings under Insolvency and Bankruptcy Code, 2016.

Limitation under Article 137 of the Limitation Act, 1963 - acknowledgement in writing u/s 18 of the Limitation Act, 1963 - application u/s 7 of the Insolvency and Bankruptcy Code, 2016 - compliance with Form I - effect of debt restructuring and working capital consortium agreements on date of default - scope of adjudicating authority's power on admission of Section 7 once default is established - pendency of parallel proceedings and allegation of mala fide purpose in filing CIRP - HELD THAT:- In our view, a conjoint reading of sub-sections (1), (2) and (5) of Section 7 makes it clear that an application under Section 7 of a financial creditor for initiating CIRP of CD hinges on a default on part of CD of financial debt of an amount exceeding the specified threshold. The Form prescribed for making the application inter alia serves the purpose of bringing out the necessary ingredients for presentation of an application under Section 7(1) of IBC. The purpose of providing the date of default is to show that the debt is due and payable i.e., it has not become time barred. Therefore, in our view, if the application is substantially in conformity with the prescribed Form and discloses the necessary ingredients for making an application under sub-section (1) of Section 7 and provides the relevant materials/ information to substantiate those ingredients, the purpose of adhering to the Form is served, and such application is not liable to be rejected under clause (b) of sub-section (5) of Section 7 of IBC on the ground of any insignificant omission or error in the application. The aforesaid view finds support from use of the expression ‘may’ before ‘reject’ in Section 7(5)(b) of IBC. This means that if the Adjudicating Authority is satisfied from the materials placed before it in the application that all the necessary ingredients are satisfied for presentation of an application under Section 7(1) of IBC, it may not reject the application for an insignificant omission or non-adherence to the Form.

Thus, we will consider the issues posited above.

Whether the application under Section 7 of IBC was liable to be dismissed for lack of material particulars regarding the debt and date of default, as required by Form I prescribed by the 2016 Rules? - HELD THAT:- In the present case, there is no dispute about the existence of financial debt and default. The dispute is as regards the date of default. Date of default assumes importance because it is the factor which determines whether the application under sub-section (1) of Section 7 is within limitation or not. The argument on behalf of the appellant that the application does not specify the exact date of default but only the date on which the debt was declared NPA and, therefore, was liable to be rejected, in our view, is misconceived as the application was comprehensively amended pursuant to the order of this Court in the earlier round of litigation. The amended application was taken on record by the order of NCLAT dated 15.07.2021. Once the amended application was accepted on record, it became part of the record and had to be considered.

The amended application and the documents placed gave the material particulars of how the debt was restructured and fresh working capital consortium agreements were entered into. In that context, the dates on which the accounts were declared NPA were portrayed as the date(s) of default. These NPA dates were 28.5.2014, 30.6.2014, 10.10.2014 and 31.12.2014 for SBI, PNB, Corporation Bank and UCO Bank respectively. The application also disclosed that on 30.09.2015, CD’s debt was disclosed in the balance sheets of the year ending 31.03.2014 and 31.03.2015, signed by one of its directors /officers.

What is important here is that CD and the creditors undertook a debt restructuring exercise and in connection therewith various Working Capital Consortium agreements were executed and signed acknowledging the existing debt, thereby giving it a fresh lease of life. In that context, as to when the initial default had occurred lost its relevance because, by virtue of the restructuring exercise and subsequent agreements, the existing debt got a fresh lease of life. In such circumstances, the disclosure of NPA date(s) as the date(s) of default was justified which, coupled with acknowledgment in the balance sheets, served the purpose of indicating that the debt was not time barred as on 25.04.2018 i.e., the date of presentation of the Section 7 application. We are therefore of the view that the amended application under Section 7 disclosed all the material particulars to fulfill the ingredients of an application under Section 7(1) of IBC. Issue No.(i) is decided in the aforesaid terms.

Whether the Section 7 application was within limitation - HELD THAT:- No error in the view taken by NCLAT that such acknowledgement had the effect of extending the period of limitation by three years starting from 30.09.2015. Insofar as the claim that acknowledgment was not made within three years from the date of default is concerned, suffice it to say that from time-to-time various Working Capital Consortium Agreements were executed between CD and the Banks. As many as four such agreements i.e., dated 18.03.2010, 30.03.2011, 18.04.2013 and 21.03.2014, were set up in the amended application to indicate that CD availed fresh credit facilities and in the process acknowledged its past liability. In such circumstances, NCLAT was correct in holding that the acknowledgment was within the period of limitation and, therefore, the period of limitation would run till 29.09.2018. In consequence, the Section 7 application filed on 25.04.2018 was within the period of limitation as prescribed by Article 137.

In our view, how a bank classifies its debt for managing its balance sheet is not a factor determining the starting point of limitation more so, when the debt is restructured and is acknowledged in fresh working capital consortium agreements entered for availing credit facilities. What is relevant is that by virtue of execution of these working capital consortium agreements the banks got a fresh lease of life for their dues and based on those agreements, new NPA date(s) became relevant as starting point for computing limitation.

In Axis Bank Limited v. Naren Seth and another [2023 (9) TMI 821 - SUPREME COURT], this Court held that a one-time settlement proposal of the debtor can constitute a valid acknowledgment. Likewise, in Dena Bank [2021 (8) TMI 315 - SUPREME COURT]this Court held that an offer for one-time settlement of a live claim, made within the period of limitation, can be construed as an acknowledgment to attract Section 18 of 1963 Act. In light thereof, if CD had entered into various working capital consortium agreements with the Banks while availing further credit facilities and in the process acknowledged its past debt, it would constitute a valid acknowledgment for extending the limitation period. Thus, the NPA dates, based on subsequent working capital consortium agreements, coupled with acknowledgment of debt(s) in the balance sheets signed on 30.09.2015, extended the limitation period up to 29.09.2018, within which the Section 7 application came to be filed.

As a result, there was no bar for NCLAT to return a fresh finding regarding the date on which the account was declared NPA. In consequence, we do not find any error in the finding returned by NCLAT that the Section 7 application was within limitation. Issue is decided accordingly.

Whether the application under Section 7 of IBC was for an oblique purpose - HELD THAT:- In addition, it is submitted on behalf of the appellant that a counterclaim of Rs. 1500 crores was set up, which was more than the outstanding debt, and therefore, the application under Section 7 of IBC was submitted to avoid the consequences of those proceedings.

We do not find any substance in the aforesaid plea as initiation of proceedings by a financial creditor under other statutes does not bar filing of an application under the provisions of IBC. Moreover, mere pendency of a counterclaim for damages against a financial creditor will not operate as a bar on the right of the financial creditor to invoke the provisions of IBC.

Besides, mere allegations about commission of offences by officers of the financial creditor cannot stifle proceedings under IBC, particularly when those offences have no bearing on the existence of the financial debt. Issue No. is decided in terms above.

In conclusion, we find no merit in the appeal. The same is dismissed. Interim order, if any, is discharged.

Applicability of Section 10A of the Insolvency and Bankruptcy Code - maintainability of company petition based on threshold amount - recoverability of contractual interest in insolvency proceedings - evidential value of invoices, purchase orders and ledger entries - HELD THAT:- A bare perusal of Part IV of the Insolvency Petition would show an amount of Rs. 1,00,42,977/- was an amount claimed to be in default as on 29.12.2020 but the date of default on which the default had occurred is stated to be 19.04.2019, hence beyond the purview of Section 10A of the Code. We also are not inclined to accept the argument of the appellant that Invoice No.4-174 to 4-179 stood paid and bare perusal of ledger at page 70 of appeal paper book does not support the submission of the appellant. The amount of interest claimed came to be Rs. 37,16,274/- and, therefore, the outstanding amount was shown to be Rs. 1,37,59,251/- as on 29.12.2020 in Part IV.

We have also gone through reply filed by the Respondent No.1 and the documents annexed viz invoices of the year 2019 from Pages No.105 till 209 as well as corresponding purchase orders from Pages No.20 to 104 and we find all such invoices have been duly signed on behalf of the Corporate Debtor/R-2 and as per invoices an interest @ 24% per annum was to be charged after the due date of the bill viz 60 days from the purchase order.

The statement of account relied upon by Respondent No.1/the Operational Creditor is at Pages No.82 and 83 of the appeal paper book and the said statement duly reveals the date of invoices, invoices number, invoices amounts, due dates and the interest charged, as per the terms agreed between the parties per invoices and accompanying purchase order(s) and thus amount due came to be more than Rs. 1 crore at the time of filing the petition.

Thus we do not find any illegality in the impugned order. The appeal has no merit and accordingly it is dismissed.

Approved scheme of arrangement - binding nature of sanctioned scheme - jurisdiction u/s 7 of Insolvency and Bankruptcy Code - discretionary admission ('may') u/s 7 - novation of debt upon sanction of scheme - non-disclosure of material fact before adjudicating authority - stay and recall of sanction order pending appellate challenge - Whether the Ld. NCLT ought to have exercised jurisdiction under Section 7 of the Code, when a Scheme of Arrangement was already in existence, as approved by the Ld. Single Judge of the Punjab & Haryana High Court on 23.07.2019 itself.

HELD THAT:- Admittedly the scheme was initially accepted by the requisite majority of creditors, including the Respondent No.1 (SASF). Admittedly the Hon’ble High Court had sanctioned the scheme on 23.07.2019 i.e. much prior to the impugned admission order dated 02.07.2024. Thus admittedly at the time of admission of the petition, a sanctioned scheme, as approved, was already in existence. Section 391(3) of the Companies Act, 1956 makes an approved scheme binding on all the parties, including Respondent No.1 and it cannot resile. Further Section 391(6) of the Companies Act, 1956 provides for stay of all coercive action against the sanction of the scheme of arrangement. Admittedly in its order dated 10.10.2022 in CPP 14/2022 the Hon’ble Division Bench noted there was a consent of 75% of the creditors under the Scheme.

Now the withdrawal of the consent or default is an issue pending before the Ld. Division Bench of High Court and it was not appropriate for Ld. Adjudicating Authority to over-reach such jurisdiction. Per force, as the scheme of arrangement was sanctioned on 23.07.2019 there existed a novation of contract and the debt stood resolved per Suresh Kr Reddy Vs Canara Bank and others [2023 (5) TMI 570 - SUPREME COURT]

The mandate of Section 7 of the Code is to explore a resolution for the benefit of the company and it had already taken place under a sanctioned scheme, when it stood sanctioned vide order dated 23.07.2019. Such a rehabilitation was in line with the object of the Insolvency Code. Admittedly the insolvency proceedings are not recovery proceedings and SASF, the predecessor of M/s Omkar viz Respondent No.1 had admittedly settled at Rs.459.36 lakhs under the scheme of arrangement and now in its insolvency petition is claiming an inflated amount of Rs.154 crores.

Admission under Section 7 set aside on grounds that a sanctioned scheme existed prior to admission.

Stay and recall of sanction order pending appellate challenge - discretionary admission ('may') under Section 7 - HELD THAT:- We are of the considered view as the objections to the scheme are still pending in APP No.14/2022 before the Hon’ble Division Bench of Punjab & Haryana High Court and as the order of recall in CP No. 89/2009 stands stayed in APP No. 14/2022 much prior to the passing of the impugned order and as the Respondent No.1 ought to have disclosed the factum of sanctioning of scheme before the Ld. NCLT; hence in these circumstances the Ld. NCLT ought to have at least waited till disposal of App No. 14/2022 pending before Ld. Division Bench of Punjab & Haryana High Court, now listed for 19.08.2025. Thus in this case we set aside the order of admission under Section 7 of IBC passed by Ld. NCLT, though keeping the petition filed under Section 7 of IBC pending and only after the APP No. 14/2022 is disposed of, the Ld. NCLT should have a fresh look in the matter in the light of the order passed in APP No. 14/2022 (supra).

The appeal is disposed of in terms of the above.

Admission u/s 7 of the Insolvency and Bankruptcy Code - acknowledgement of debt by one-time settlement (OTS) - restoration of company petition - restoration under Rule 11 of the NCLAT Rules - fraudulent misrepresentation in OTS - proof of debt and default - appointment of interim resolution professional and imposition of moratorium - HELD THAT:- In our opinion, it is classic case of fraud played by the CD upon the FC when it made the financial creditor believe that it is ready and willing to settle the dispute on a particular amount which was accepted by the FC and filed the application under Section 12A of the Code for withdrawal of the petition but once the petition was withdrawn, the post-dated cheques given by the CD were all bounced because of the insufficient funds and the settlement fell flat on the ground. The conduct of the CD in the past was the same when repeated opportunities were given to it to make the payment of the dues of the Bank/FC by accepting the OTS Scheme but the amount involved was never paid by the CD which is enough to show that it never had any intention to pay its debts despite the fact that repeated opportunities were given and at one point of time even the application filed under Section 7 was allowed to be withdrawn on the misrepresentation of the CD that it will pay of all its debts. We do not appreciate the conduct of the CD at all.

In so far as the admission of the application is concerned, it is suffice to mention that the CD has not denied its liability (debt) and default committed by it in non-payment of amount due because of which opportunities were given to the CD to make the payment by way of OTS despite the fact that the account of the CD was classified as NPA as far back as on 12.04.2016.

Thus, once the debt and default are proved beyond any doubt, the application filed under Section 7 has rightly been admitted by the Tribunal.

We do not find any error in the impugned order. The appeal is found to be totally without any merit and the same is hereby dismissed though without any order as to costs.

Exemption from payment of Service Tax - horticulture services such as upkeep of gardens by watering, sweeping, fertilization, spraying of insecticides, etc. - differences between Form 26AS and ST-3 returns - Exemption from Service Tax for agricultural/horticulture services - Extended period/limitation for recovery where issue is one of interpretation - Taxability of manpower supply services (partial taxable value) - Penalty not warranted in absence of deliberate suppression or wilful misstatement - HELD THAT:- On perusal of the invoices, it is evident that the appellant was engaged in horticulture activities such as garden maintenance, watering, and allied services. I find that the issue is no longer res integra.

The ratio of Tribunal in the case of CCE & ST Ahmedabad-III v. Murlidhar Horticulture Pvt. Ltd.[2019 (3) TMI 1435 - CESTAT AHMEDABAD] is squarely applicable to the facts of the present case. Thus, hold that no Service Tax is payable on the turnover of Rs. 40,16,924/-. The appellant succeeds both on merits as well as on account of time bar to this extent.

Turnover relating to manpower supply services - HELD THAT:- Appellant has partly discharged the tax liability during the relevant period. However, there remains a short payment of Rs. 12,870/-. I hold that the plea of limitation is not acceptable in respect of this amount, since this emanates from improper calculation of the tax by the appellant and they have been paying the Service Tax in the normal course for rendering this service. At the same time, I do not find any evidence on record establishing deliberate suppression or wilful misstatement with intent to evade payment of tax. Therefore, while the appellant is liable to pay Service Tax of Rs. 12,870/- along with applicable interest, imposition of penalty is not warranted. Hence, I set aside the penalty on this amount of Service Tax.

The appellant shall be entitled to consequential relief of pre-deposit, after adjustment of payable Service Tax of Rs.12,870/- along with applicable interest.

Business Auxiliary Service - sale of goods under multi-level marketing (MLM) model - reliance on Form 26AS/Income Tax Returns as sole basis for service tax demand - requirement of corroborative evidence to establish rendition of taxable service - extended period of limitation not invocable where demand is based solely on third party data - HELD THAT:-The Show Cause Notice dated 08.10.2015 has been issued for the period 2010–11 to 2011–12. It is also evident that the notice was issued primarily on the basis of Income Tax Returns and Form 26AS, wherein the amount was reflected as service income. In respect of demands made based on the Form 26AS and IT Returns.

The Tribunal in the case of Tabassum Enterprises vs. C, CGST & CX [2019 (6) TMI 684 - CESTAT NEW DELHI] has clearly held that extended period of limitation is not invocable where the Show Cause Notice is issued solely on the basis of third-party data without proper verification and without establishing suppression or willful misstatement.

In the present case, there is no cogent evidence brought on record to establish suppression of facts or intent to evade payment of tax so as to justify invocation of the extended period. Therefore, the demand is also hit by limitation.

Thus, the impugned order is set aside both on merits as well as on account of limitation.

Appeal is allowed with consequential relief, if any, in accordance with law.

Eligibility for the exemption benefit of Entry No. 12A of Notification No. 25/2012-ST -Retrospective exemption - refund u/s 102 of the Finance Act, 1994 (as inserted by Finance Act, 2016) - construction for public use versus commercial purpose (profit motive test) - passing on of tax / incidence of tax - distinction between refund under Section 102 and ordinary tax refund regimes - Whether the appellant’s claim of refund on construction of parking facility for local authority has rightly been rejected or not? - HELD THAT:- There is difference between activity/service rendered for business or commerce and the government activities rendered for public welfare.

In the instant case, the parking’s constructed by the government are claimed to be run for the public used/welfare in public interest under the Constitution of India, Article 243W and hence, cannot be treated as a commercial concern.”

As already observed, the regulation of parking of private vehicles is otherwise covered under constitutional duty of municipalities and as per clause 45 and 253 of the Rajasthan Municipalities Act, 2009, such activities are not meant for commerce. The decision of Krishi Upaj Mandi Samiti [2022 (2) TMI 1113 - SUPREME COURT] is held not applicable to the facts and circumstances of the present case. Construction of educational institutes/schools is specifically exempted under clause 12A(b)(i) of Notification No. 25/2012 dated 20.06.2012. As a result of above discussion, it is held that the appellant was rendering service to the government, local bodies of civil construction for parking lots as well as for the educational establishment which were not meant for commerce. Merely for a small fee being collected from the users of the parking, the said activity cannot be termed as commercial as was held in Shalimar Corp. Ltd. [2019 (5) TMI 663 - CESTAT ALLAHABAD], wherein the construction of public parking was held to be an activity rendered for the government towards its discharge of public function. Issue stands thus decided in favour of the appellant.

Passing on of tax / incidence of tax - HELD THAT:- Admittedly, the Chartered Accountant of the appellant has given certificate, the incidence has not been passed on. It was also brought on record that the tax charged and collected from Director Local Bodies, Jaipur was refunded by way of issue of credit notes for the equivalent amount. No evidence has been produced by the department to falsify the said certification/declaration. It is the settled principle that Chartered Accountant Certificate is a sufficiently admissible document for the proof of the content therein. I draw my support from the decision in the case of Akasaka Electronics Ltd. v. Commissioner of Central Excise/Customs, Mumbai [2015 (10) TMI 2612 - CESTAT MUMBAI]

Thus, it is held that the grounds for rejecting the impugned refund claim are wrongly been invoked in the present case. Those are not relevant to the facts and circumstances of the present case (as discussed above). It is therefore held that the order rejecting refund claim of the service tax paid for construction of parking lots for Rajasthan Municipal Corporation is liable to be set aside. Thus Issue also stands decided in favour of the appellant.

Thus, the order under challenge is hereby set aside and the appeal is allowed.

Demands for service tax are only based on the reimbursements shown in their books of accounts - Management, maintenance or repair service - service means any activity carried out by a person for another for consideration - reimbursable expenses not includible in taxable value - suppression and extended period of limitation -HELD THAT:- No dispute that the amounts received by the appellant are reimbursable expenses incurred by them. It is also an admitted fact that no invoices/bills were raised towards warranty service to their customers in India. The Commissioner’s assumption that “Therefore, it is evident that the 'intention of parties in the present case was to provide the warranty service to the end customers who had purchased Machines/IT products from IBM India”, is totally misplaced since the service tax cannot be levied unless there is a consideration received for the service being rendered and not by deriving intention of the parties based on the Agreement.

We find that whether it is prior to 01.07.2012 or after 01.07.2012, there has to be a service rendered by the appellant for which consideration has to be received. From the discussions and perusal of the Distribution Agreement, we do not find any service being rendered by the appellant to IBM Singapore, for which the payments have been received instead we find that the show-cause notices itself admit that these are reimbursable expenses relating to salaries, transport, etc., and the reimbursable expenses cannot be levied to service tax is settled by the Hon’ble Supreme Court’s decision in the case of Intercontinental Consultant and Technocrats Pvt. Ltd. [2018 (3) TMI 357 - SUPREME COURT].

Thus, we do not find any reason to sustain the demands for both the periods.

Suppression and extended period of limitation - HELD THAT:- We find that the second show-cause notice cannot invoke suppression as it is a settled principle of law as laid down in the case of Nizam Sugar Factory vs. CCE, [2006 (4) TMI 127 - SUPREME COURT] It is also to be noted that since no consideration was received from the customers during the warranty period, the question of reflecting any of these services in their ST-3 returns does not arise. Moreover, whenever third-party services were rendered, service tax has been paid by such vendors and therefore, they cannot be the source of the ST-3 returns filed by the appellant. Accordingly, we do not find any suppression of facts, which can be justified. Therefore, we are not inclined to sustain the above impugned orders neither on merit nor on limitation, hence, the impugned orders are set aside.

Appeals are allowed with consequential relief.

Service of adjudication order - completeness requirement - commencement of limitation from date of complete service - computation of limitation expressed in months as calendar months - condonation of delay u/s 85(3A) of the Finance Act, 1994 - Demand of service tax along with interest and penalties against the Appellant by invoking extended period of limitation -Whether the appeal filed by the Appellant before the Commissioner (Appeals) was barred by limitation or not. - HELD THAT:- When the right to challenge crystallizes on a date when the complete copy is made available to the assessee, the date 27.10.2023, when incomplete copy of adjudication order was provided to the Appellant cannot be treated as the date of service of order. I further find that the Appellant has contended before Commissioner (Appeals) that the complete copy of adjudication order was made available to him only on 07.12.2023, which contention has not been rejected in the impugned order and therefore, 07.12.2023 is treated as the date of service of order in the present case.

Once the order was served on the Appellant on 07.12.2023, the limitation period for filing appeal commences from 08.12.2023 as provided under Section 12 of the Limitation Act, 1963. Appeal to Commissioner (Appeals) has been provided under Section 85 of the Finance Act, 1994.

Thus, since Section 85(3A) uses the expression ‘month’ in contrast to ‘days’, the two months period from 08.12.2023 elapsed on the corresponding date of corresponding month i.e. on 08.02.2024 and similarly the period of month under proviso to Section 85(3A) elapsed on 08.03.2024 i.e. the date on which the appeal was presented by the Appellant. Thus, the conclusion is that the appeal presented by the Appellant on 08.03.2024 was not barred by limitation but was presented within the condonable period and the Commissioner (Appeals) erred in law in rejecting the same.

Having reached this conclusion, normally this Tribunal would have remanded back the matter to the Commissioner (Appeals) to consider the delay condonation application on merits. However, since the matter pertains to the period 2016-17 and the reasons given by the Appellant explaining the delay are not disputed in the impugned order and the same are otherwise found acceptable, hence in the interest of justice the delay in filing of appeal is condoned and the Commissioner (Appeals) is directed to decide the appeal on merits, preferably within a period of three months from today.

Thus, the present appeal is allowed by way of remand to learned Commissioner (Appeals) for decision on merits.

Benefit of threshold exemption - mixed question of law and fact - raising plea at the first available opportunity - bonafide belief - penalties for failure to register and non-payment of service tax - remand to adjudicating authority - HELD THAT:- The issue involved is in very narrow compass. Commissioner (Appeals) has himself has observed that appellant has before him claimed benefit of threshold exemption which should not be allowed for the reason that this plea was never taken before the Original Adjudicating Authority. Appellant had produced the copy of his ITR and 26AS for the previous year i.e. 2014-15, showing the total receipts which is below the threshold exemption limits as provided.

Without disturbing the findings recorded in para-5.5 of the impugned order that this plea was never taken before the Original Authority, hence could not be taken in the appellate proceedings, I find sufficient reason to hold that appellant was having a bonafide belief for not getting registered and non-payment of service tax by the due date.

Taking note of the fact that appellant was having a bonafide belief, I do not find any reason why penalties imposed upon the appellant under Section 77, 77(1A), 77 (1C), 77 (1d) & 78 of the Finance Act, 1994 should be upheld. Accordingly, the penalties imposed upon the appellant under the said Section are set aside.

In view of the above modification rest of the impugned order is upheld.

Classification of services - Goods Transport Agency service - category of "Mining of minerals, oil or gas service, as defined u/s 65 (105) (zzzy) of the Finance Act, 1994 - category of ‘Mining Service’ - effect of department's acceptance of tax paid by service recipient - demand of service tax - HELD THAT:- A careful perusal of the definitions mentioned, reveals that the term "Mining" refers to the process related to extraction of minerals from the earth. It also includes the infrastructure created for mining of minerals, oil or gas. Thus, we observe that the activities related to the extraction of minerals from the earth and the subsequent processes such as washing, refining, would only be included within the scope of ‘mining service' and not each and every activity performed within the mining area would be covered under it’s ambit. Thus, we observe that the Ld. Adjudicating Authority has erred in giving an extended meaning to the phrase "in relation to” and included the post mining activities of transportation also within the ambit of ‘mining service’. In support of this view, we rely upon the decision of the Hon'ble Bombay High Court in the case of INDIAN NATIONAL SHIPOWNER'S ASSOCIATION VS. UNION OF INDIA [2009 (3) TMI 29 - BOMBAY HIGH COURT]

In the present case, we observe that the appellant had entered into a contract with MCF, by means of four work orders, to transport coal to the prescribed destinations. On perusal of the work orders, we observe that the most indispensable element of the said work orders were to transport coal. Given the very essence of the work orders, we observe that the said activities undertaken by the appellant are rightly classifiable under the category of the taxable service namely, "Goods Transport Agency” service. It is very clear that the nature of the work involved in the said work orders is that of transportation of goods (i.e. coal) by road. We also observe that the appellant is a goods transport agency who has entered into contract with MCF for transportation of coal. Thus, we hold that the activities undertaken by them are appropriately classifiable under the category of "Goods Transport Agency”, for which the liability of payment of service tax is on the recipient of service, which is MCF in this case.

In support of the above view, we also refer the C. B. E. & C. Circular F No. 232/2/2006-CX.4 dated 12.11.2007 which specifically states that handling and transportation of coal/mineral from pit head to a specified location within the mine/factory or for transportation outside the mine are chargeable to service tax under the relevant taxable services, ie., "Cargo Handling service" and "Goods Transport by Road”.

Thus, we hold that the demand of service tax from the appellant under the category of ‘mining service’ is not sustainable and hence we set aside the same.

As the demand of service tax is not sustained, the question of demanding interest or imposing penalty does not arise.

In the result, we set aside the impugned order and allow the appeal filed by the appellant with consequential relief, if any, as per law.

Service Tax demand based on Form 26AS vis-a -vis ST-3 returns - comparison of statutory returns insufficient without evidence - identification of service, service provider, service recipient and consideration - onus of proof on Revenue - non-taxability of bank interest (deductions u/s 194A) for Service Tax - dropping of demand after verification and acceptance of assessee's explanations -HELD THAT:- Admittedly, in this case, the demand of Service Tax has been raised in the Show Cause Notice, of Rs.15,57,64,877/- against the respondent, on the basis of the difference observed between Form 26AS obtained from the Income Tax Department and the S.T.- 3 Returns filed by the respondent before the Revenue. The respondent explained the said difference through a comparative chart, and after comparison, it was concluded by the ld. adjudicating authority that the respondent has paid Service Tax more than the amount payable by them.

While demanding Service Tax from the respondent, tax was demanded in respect of amounts deducted under Section 194A of the Income Tax Act, which deduction represents interest receipts from the bank. The total amount shown is Rs.5,41,51,213/-.

On which also Service Tax has been demanded. In effect, while issuing the Show Cause Notice, mind was not applied to the extent as to whether on interest income, Service Tax is chargeable or not.

As the ld. adjudicating authority has dropped the demand after consideration of the calculation sheet submitted by the respondent, in view of that, the ground raised by the Revenue that the ld. adjudicating authority has not made any independent enquiry before dropping the demand is not sustainable.

Thus, we find that the ld. adjudicating authority has rightly dropped the demand raised against the respondent, after due verification of the records. Consequently, we do not find any infirmity in the impugned order.

In the result, we affirm the impugned order and dismiss the appeal filed by the Revenue.

Refund of unutilized Cenvat Credit as on 30.06.2017 - interpretation of Section 142(3) of the CGST Act, 2017 - refundability of Education Cess and Secondary and Higher Education Cess, Additional Duty/Surcharge and NCCD - cash refund in lieu of inability to carry forward Cenvat Credit under transitional provisions - HELD THAT:- Appellant is seeking to place reliance on the decision in the matter of Bharat Heavy Electricals Ltd. (Excise & Taxation Division) Versus Commissioner of Central Goods Service Tax, Eentral Excise and Customs, Bhopal (Madhya Pradesh) [2019 (4) TMI 1896 - CESTAT NEW DELHI]. In which, inter alia, relying on the decision of Union of India Vs. Slovak Indian Trading Co. Pvt. Ltd. [2006 (7) TMI 9 - KARNATAKA HIGH COURT], the assessee was found eligible for cash refund of the certain amount lying of the Cenvat Credit balance as on 30.06.2017. Similarly, he also seeks to rely on the decision of Toyota Kirloskar Motors Pvt. Ltd. Vs. Pr. Commissioner of Central Tax, Pune GST-I [2025 (6) TMI 1006 - CESTAT MUMBAI], in which it was held that proviso to Section 11B(2) of the Central Excise Act, 1944 cannot be read to state that the refund of unutilized Cenvat Credit has not been provided under Rule 5 of the Cenvat Credit Rules, 2004. Therefore, in substance, cash refund on Cenvat Credit of Education Cess and Secondary and Higher Education Cess that remained unutilized in Cenvat account as on 30.06.2017 and could not be carried forward under transform provision was permitted as cash refund. The decision quoted in relation to Cess which is also one of the issue shall in equal force apply to the Cenvat Credit unavailed as on 30.06.2017.

Following the above decision, as there is no resistance except reiterating the order of the lower authority by the AR, appeal is allowable.

Validity of sub rule (3A) of Rule 8 of the Central Excise Rules, 2002 to the extent of prohibiting payment of duty by utilizing CENVAT credit - Payment of duty by utilizing CENVAT credit during the default period to be treated as valid payment - Liability to pay interest for delayed payment under sub rule (3) of Rule 8 - Confiscation and penalty under Rule 25(1) of the Central Excise Rules not invokable where duty was paid by CENVAT credit - Imposition of penalty under Rule 27 as alternative where wrong provision cited does not vitiate proceedings - Limitations on adjudicating authority going beyond scope of show cause notice - HELD THAT:- As discussed, provisions of Rule 8 have been contravened by the party for which we hold them liable to penalty under Rule 27 of the Central Excise Rules, 2002. Though, Rule 27 has not been invoked in this case, there are a number of decisions where it has been held that mentioning wrong provision or not mentioning provision does not vitiate the proceedings.

Accordingly, we set aside penalty of Rs. 5 Lakh imposed on the appellant under Rule 25 of the Central Excise Rules, 2002 and instead, impose a penalty of Rs. 5000/- under Rule 27 of the said Rules.

Coming to the department’s appeal, it has been pleaded that the learned adjudicating authority has failed to confiscate the excisable goods cleared by the respondent during the period of default which were without payment of duty.

As discussed and as held by the Hon’ble Gujarat High Court in the case of M/s. Indsur Global Ltd.[2014 (12) TMI 585 - GUJARAT HIGH COURT] and further upheld by the Hon’ble Supreme Court, portion of Rule 8 (3A) of the Central Excise Rules, 2002 to the extent "payment of duty without utilizing the Cenvat Credit till an assessee pays the outstanding amount including interest” is held to be ultra virus. This means that duty paid by the party by utilizing Cenvat Credit during default period is also to be considered as payment of proper Central Excise Duty. Therefore, Rule 25(1) is not invokable in this case for confiscating excisable goods cleared during the default period. Thus, appeal filed by Revenue is not allowable and hence, the same is dismissed.

Similarly, when payment of duty by utilizing Cenvat Credit has been held proper as discussed above, allowing the credit by the Learned Commissioner has become infructuous. However, we agree with the view of the department that learned Commissioner should not have gone beyond the scope of the show cause notice.

The appeal of the party is partially allowed and the appeal filed by the revenue is dismissed.

Evasion of tax - penalty u/s 14B(7)(ii) of PGST - requirement of intention to evade - effect of reporting goods at Information Collection Center (ICC) on allegation of evasion - scope of appeal u/s 68 of Punjab Value Added Tax Act, 2005 - HELD THAT:- We are of the considered opinion that there is no factual or legal infirmity in the impugned order passed by learned Tribunal. The respondent-dealer presented goods along with documents before ICC Banur. ETO, ICC duly entered goods in the record and issued ST-XXIV-A. The goods were not detained by ETO, ICC whereas were subsequently detained while in transit. Had there been intention to evade tax, the dealer might have not reported the goods at ICC. The Tribunal has rightly noticed this fact and concluded that dealer cannot be alleged to have attempted to evade payment of tax merely because there is handwritten entry or cutting in the invoice with respect to GR or truck number. It is undisputed that goods were found in the same truck and with GR which was disclosed in the invoice. In these circumstances, it cannot be concluded that there was evasion of tax. Penalty under Section 14B(7)(ii) of PGST can be imposed in case of intention to evade payment of tax.

Thus, we are of the considered opinion that the instant appeals deserve to be dismissed and accordingly dismissed.

Initial of defect in authorization for instituting a complaint u/s 138 of the Negotiable Instruments Act, 1881 - Curable defect - company acts through natural persons - representation of a company by an authorised employee - prima facie material for taking cognizance - dismissal at threshold for lack of authorization is too hasty - quashing u/s 482 CrPC not warranted where factual disputes exist - HELD THAT:- In TRL Krosaki Refractories Ltd. [2022 (2) TMI 1112 - SUPREME COURT],the Apex Court has held that in cases under Section 138 of the NI Act, the complainant necessarily should be the company which should be represented by an employee who is authorized and prima facie in such a situation, the indication in the complaint and the sworn statement to the effect that the complainant company is represented by an authorized person who has knowledge would be sufficient.

The Apex Court further held that if at all there is any serious dispute with regard to the person prosecuting the complaint not being authorized or if it is to be demonstrated that the person who filed the complaint has no knowledge of the transaction, it would be open for the accused to dispute the position and establish the same during the course of the trial and the Magistrate would not be justified in dismissing the complaint at the threshold on the question of authorization. It was further held that in such circumstances, entertaining a petition under Section 482 to quash the order taking cognizance by the Magistrate would be unjustified when the issue of proper authorization can only be an issue for trial.

Further, it has been clearly held in MMTC Limited [2001 (11) TMI 837 - SUPREME COURT] that the initial absence of a Board Resolution or authorization for filing a complaint under Section 138 N.I Act is a curable defect and not a ground to quash the proceedings and that a company acts through natural persons and subsequent ratification validates the complaint.

Thus, it is abundantly clear that any initial defect as regards authorization at the time of initiation of the complaint is a curable defect which can be subsequently cured during the course of the trial or even at the appellate stage as held by the Supreme Court in George Joseph & Another [2014 (10) TMI 1088 - KARNATAKA HIGH COURT]

No infirmity in the impugned order of the Magistrate permitting the complainant to adduce additional evidence to bring on record the subsequent resolution of the Board of Directors and General Power of Attorney authorizing the complainant to institute the complaint.

Accordingly, the instant criminal petition is found to be devoid of merit and is dismissed accordingly.