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Issues: Whether, if the petitioner has made the pre-deposit required under Section 112(8) of the Act of 2017, the respondent GST authorities are obliged to treat recovery proceedings as stayed under Section 112(9) and refund any amounts recovered in excess of statutory pre-deposits at appellate stages.
Analysis: The Court considered the petitioner's contention that a sum equivalent to the statutory pre-deposit under Section 112(8) of the Act of 2017 was deposited and that, consequently, recovery should not have been effected. The judgment frames the legal framework by reference to the pre-deposit obligations under Section 107(6) and Section 112(8) and the stay of recovery mandated by Section 112(9). The Court did not adjudicate the factual question whether the pre-deposit was actually made but directed that the petitioner be permitted to make an appropriate representation to the GST authorities setting out the payment and that the authorities verify the same. The Court required the GST authorities, if satisfied that the statutory pre-deposit was made, to give effect to Section 112(9) and to refund any sums recovered beyond the cumulative amounts required to be deposited under Section 107(6) and Section 112(8).
Conclusion: The petitioner is entitled to have his representation considered and, if the GST authorities are satisfied that the pre-deposit under Section 112(8) has been made, the stay under Section 112(9) must be respected and any sums recovered in excess of the cumulative pre-deposits under Section 107(6) and Section 112(8) shall be refunded (in favour of the assessee).
Pre-deposit u/s 112(8) - stay of recovery upon payment u/s 112(9) - pre-deposit pursuant to Section 107(6) - refund of excess recovery - representation and verification by the revenue authority - HELD THAT:- Since, it is the petitioner’s contention that the petitioner has made the pre-deposit in terms of Section 112(8) of the said Act of 2017 and therefore, no recovery ought to have been made, the petitioner should be afforded an opportunity to make appropriate representation before the respondent/ GST Authorities indicating to them that payment has been made by the petitioner towards satisfaction of the provisions of Section 112(8) of the said Act of 2017.
To be precise any sum that may have been recovered from the petitioner beyond or in excess of the amounts required to be deposited by the petitioner at the two appellate stages i.e. under Section 107(6) and under Section 112(8) of the said Act of 2017 taken cumulatively, shall be refunded.
It is made clear that this court has not gone into the merits of the petitioner’s contention and the respondent GST Authorities shall be free to take an informed decision in the matter. The respondent GST Authorities shall also be free to call for any clarification from the petitioner that may be required for the purpose of verification of the petitioner’s contentions.
WPA stands disposed of.
Issues: Whether the Order-in-Original passed against the petitioner should be set aside and the show-cause proceedings reopened where a no due certificate and cancellation of registration had been issued in favour of the erstwhile company that underwent amalgamation.
Analysis: The existence of a no due certificate and cancellation of registration raised a substantive question about the validity of proceedings conducted against the petitioner. The petitioner undertook to deposit the entire amount stated in the impugned Order-in-Original within two weeks and to submit a reply to the show-cause notice along with written submissions. On that basis, the impugned Order-in-Original was quashed and a direction given to the authority to evaluate the petitioner's claim afresh after allowing an opportunity of hearing, subject to the deposit and submission of reply and written submissions. The authority was directed to communicate its fresh order within three months and to refund the deposit if the show-cause notice was discharged; otherwise the deposit could be adjusted against any liability.
Conclusion: The petition is partly allowed by quashing and setting aside the impugned Order-in-Original dated December, 2025, subject to the petitioner depositing the entire amount within two weeks and submitting the reply and written submissions, and by directing the respondent authority to pass a fresh order after giving an opportunity of hearing and communicating the order within three months.
Ratio Decidendi: Where a no due certificate and cancellation of registration raise a real issue as to liability, an impugned order may be quashed and the matter remitted for fresh adjudication with directions for deposit and an opportunity of hearing to the affected party.
Quashing of administrative order - opportunity of hearing - conditional relief by deposit - remand for fresh adjudication - refund or adjustment of deposited amount - HELD THAT:- In response to the Court’s query, the learned counsel for the petitioner submits that the entire liability under the order impugned shall be discharged by depositing the amount with the authority which has passed the impugned order within a period of two weeks from today, provided that the petitioner should be offered an opportunity of hearing after considering its reply. The learned counsel for the petitioner further informs that within two weeks along with the deposit not only the reply to the show-cause notice will be submitted but also written submissions shall also be made before the said authority.
Accepting the said statement coming from the learned counsel for the petitioner as an undertaking to this Court, we deem it appropriate to allow the present petition. We hereby, quash and set aside the impugned Order-in- Original passed by the respondent authority which is produced at Annexure P-2 to the petition dated December, 2025.
Writ petition partly allowed.
Issues: Whether rejection of the petitioner's application for refund of taxes paid twice can be sustained on the ground of limitation under Section 54 of the Central Goods and Services Tax Act, 2017.
Analysis: The record establishes that identical tax amounts were discharged twice for the same transactions - once by utilising the credit ledger and later by utilising the cash ledger - and supporting payment evidence and bank details were placed before the authority. Where an amount has been paid and retained without authority of law, Article 265 of the Constitution of India precludes the State from retaining such funds. Precedents recognise that claims for refund of amounts paid under a mistake of law are not necessarily governed by the statutory limitation prescribed for refunds under the special law and that the Limitation Act and principles relating to discovery of mistake may govern such claims. An order of rejection must be judged by the grounds stated in that order and cannot be sustained by fresh or different reasons raised subsequently.
Conclusion: The rejection of the refund application solely on the ground that it was filed beyond the period prescribed under Section 54 of the Central Goods and Services Tax Act, 2017 is unsustainable. The impugned order rejecting the refund is quashed and set aside; the petitioner is permitted to file a fresh refund application within a fortnight and the authority shall decide it in accordance with law and the discussions above, failing which interest as directed shall accrue.
Refund of tax paid under mistake - Article 265 of the Constitution - limitation u/s 54 - restitution of tax deposited twice - relevant date for refund -HELD THAT:- It is demonstrably manifest from aforesaid discussions that retaining the amount paid in excess of tax liability by the State is hit by inhibition enshrined in Article 265 of the Constitution of India. The finding of Joint Commissioner of State Tax, CT&GST Circle, Cuttack-I East, Cuttack in his Order dated 22nd October, 2025 unequivocally accepted that the petitioner has made an excess payment of tax to the tune of Rs. 12,03,290/- (CGST of Rs. 6,01,645/- + OGST of Rs. 6,01,645/-) as the deposits were made once by way of utilising Credit Ledger and thereafter under mistaken notion by using Cash Ledger. However, discharge of tax liability having been accepted in the proceeding under Section 74 of the GST Act vide Order dated 08.11.2024, there is no warrant for the authority concerned to retain the amounts found to have been deposited twice and reject the application for refund claimed by the petitioner.
The reason ascribed to by the Proper Officer in rejecting the application taking into account Clause (d) of Paragraph (2) of Explanation to Section 54 is apparently flimsy and inapplicable to the fact-situation of present case. The specious plea of the authority to reject the application for refund that it was filed beyond period stipulated under Section 54 of the GST Act pales into insignificance on the anvil of Article 265 of the Constitution of India.
Thus, refund claimed in respect of tax paid erroneously or under mistaken notion cannot be denied solely on the ground of limitation stipulated in Section 54 of the GST Act.
In the result, the writ petition is allowed.
Issues: Whether the communication rejecting condonation of delay in receipt of remittance for export of services under Rule 96A(1)(b) of the Central Goods and Services Tax Rules, 2017, constitutes a valid order and whether the matter requires reconsideration after affording an opportunity of hearing.
Analysis: The impugned instrument is a communication/notification of a purported decision rather than a reasoned order passed by the competent authority. The record shows a note by a subordinate officer with the Commissioner s endorsement but no contemporaneous order recorded after consideration of the petitioner s grounds or after affording an opportunity of hearing. The legal framework under Rule 96A(1)(b) of the Central Goods and Services Tax Rules, 2017 permits consideration of applications for condonation of delay in relation to receipt of remittance; such consideration requires a decision rendered in accordance with principles of fair procedure, including giving the affected party an opportunity to be heard and recording reasons for acceptance or rejection of the application. Procedural irregularity is exacerbated where the authority has not addressed the substantive grounds raised by the applicant.
Conclusion: The impugned communication does not amount to a valid order; the matter is remitted to the competent authority to decide the application for condonation of delay afresh in accordance with law after affording the applicant an opportunity of hearing and after recording reasons for the decision.
Condonation of delay in receipt of export remittance - remittance in convertible foreign exchange against export of services - Rule 96A(1)(b) of the Central Goods and Services Tax Rules, 2017 - communication cannot substitute for a reasoned order - duty to afford opportunity of hearing and pass a reasoned order - remand for fresh consideration - HELD THAT:- A perusal of impugned “order” dated 24.05.2022 indicates that the same is only a communication and intimation of order, purportedly passed by Excise and Taxation Commissioner rejecting petitioner’s application/ representation. This is admittedly a communication sent by Additional Excise and Taxation Commissioner (GST) for Excise and Taxation Commissioner, Panchkula.
Department was called upon to produce copy of the order which was actually passed by Excise and Taxation Commissioner. In compliance thereof, original record has been produced before us today.
It is apparent that no order has been passed by Excise and Taxation Commissioner in accordance with law after considering the facts, circumstances and issues involved after affording an opportunity of hearing to petitioner.
Keeping in view the admitted position, matter is remitted to the Excise and Taxation Commissioner to consider the same after affording due opportunity to petitioner in accordance with law and taking into consideration all the grounds as raised by petitioner.
Issues: (i) Whether the proceedings are barred by limitation and whether the time limit in Rule 133 of the Central Goods and Services Tax Rules, 2017 is directory or mandatory; (ii) Whether the Respondent indulged in profiteering by failing to pass on the benefit of GST rate reduction from 18% to 5% w.e.f. 15.11.2017; (iii) Whether interest and penalty can be imposed on the Respondent for the period of violation.
Issue (i): Whether the time limit under Rule 133 of the Central Goods and Services Tax Rules, 2017 is directory or mandatory and whether the proceedings are barred by limitation.
Analysis: The Tribunal examined precedent including P. T. Rajan v. T.P.M. Sahir and relevant High Court decisions which treat statutory timelines for administrative action as directory where no consequence for non-adherence is prescribed. The anti-profiteering provisions were noted to be beneficial in nature aimed at consumer protection, and Rule 133 contains no consequence for lapse of the six month period for final order.
Conclusion: The time limit in Rule 133 of the Central Goods and Services Tax Rules, 2017 is directory; the proceedings are not barred by limitation. This conclusion is against the Respondent.
Issue (ii): Whether the Respondent increased base prices on 15.11.2017 and thereby failed to pass on the benefit of the GST rate reduction under Section 171 of the Central Goods and Services Tax Act, 2017.
Analysis: The Tribunal compared pre- and post-rate-reduction base prices furnished by the Respondent and observed that base prices of the identified products were increased on the very date the reduced tax rate became effective. The Respondent's claim of increased operational costs and loss of input tax credit was considered but found unsubstantiated by cogent documentary evidence. The Tribunal applied the settled principle that a presumption arises that a supplier must pass on rate reductions to consumers, and that this presumption is rebuttable only by clear, cogent and unequivocal evidence substantiating cost increases.
Conclusion: The Respondent indulged in profiteering by not passing on the benefit of the reduction in GST rate from 18% to 5% w.e.f. 15.11.2017, and the DGAP's recomputed profiteered amount is accepted. This conclusion is in favour of the Revenue and against the Respondent.
Issue (iii): Whether interest and penalty can be imposed on the Respondent for the period of violation.
Analysis: The Tribunal noted that imposition of interest under Rule 133(3)(c) of the Central Goods and Services Tax Rules, 2017 was introduced by Notification No. 31/2019-Central Tax dated 28.06.2019 and therefore interest can only be levied from 28.06.2019 onwards. It also noted that Section 171(3A) (penalty) came into force w.e.f. 01.01.2020 and cannot be applied retrospectively to the period of investigation ending 30.09.2019.
Conclusion: Interest is payable by the Respondent on the profiteered amount from 28.06.2019 until deposit; penalty under Section 171(3A) of the Central Goods and Services Tax Act, 2017 cannot be imposed for the period covered by the investigation. The interest conclusion is in favour of the Revenue; the penalty conclusion is in favour of the Respondent.
Final Conclusion: The DGAP's recomputed investigation report dated 14.10.2022 is accepted; the Respondent is directed to deposit the profiteered amount and to pay interest at 18% from 28.06.2019 until deposit, with 50% of the amount (and interest) to be deposited in the Central Consumer Welfare Fund and 50% in the Maharashtra Consumer Welfare Fund.
Ratio Decidendi: Under Section 171 of the Central Goods and Services Tax Act, 2017 a reduction in tax rate must be passed on to recipients by way of commensurate reduction in price and a supplier who increases base prices coincident with the rate reduction bears the burden to rebut the presumption of profiteering with cogent, clear and unequivocal evidence; timelines in Rule 133 of the Central Goods and Services Tax Rules, 2017 are directory where no consequence for lapse is prescribed, and interest and penalty provisions operate only prospectively from their respective effective dates.
Anti-profiteering u/s 171 - Directory character of procedural time-limits - Burden to rebut presumption of passing on tax benefit - Computation of profiteered amount - Imposition of interest from date of statutory notification - Non-retroactivity of penalty u/s 171(3A) -
Directory character of procedural time-limits - HELD THAT:- We are of the considered view that the anti-profiteering provisions are in the nature of beneficial legislation. The provisions are aimed at protecting the interests of the consumers and ensuring that the commensurate benefit of rate reduction or input tax credit is ultimately passed to the consumer. The time limit of six months prescribed under Rule 133 of CGST Rules are directory in nature. Therefore, the present proceedings are not barred by limitation.
Burden to rebut presumption of passing on tax benefit - Anti-profiteering u/S 171 - HELD THAT:- Admittedly, the Respondent increased the base price of 6’’ Aloo Patty and 6’’ Hara Bhara Kabab on 15.11.2017. Vide Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017, applicable rate of GST on supply of restaurant service was reduced from 18% to 5% w.e.f. 15.11.2017. Suffice to say the increase in base prices of the aforesaid products coincided with the very date on which reduced rate of tax of 5% became effective.
Thus, we are of the view that the Respondent increased the base price of 6’’ Hara Bhara Kabab and 6” Aloo Patty on 15.11.2017, on the date when the notification for reduction in rate of tax came into force. As a result, the Respondent had indulged in profiteering by not passing on the benefit of reduction of rate of tax to the consumers by way of commensurate reduction in prices in terms of Section 171 of the CGST Act.
Imposition of interest from date of statutory notification - HELD THAT:- The interest clause is inserted vide Notification No. 31/2019-Central Tax, dated 28.06.2019 w.e.f. 28.06.2019. Accordingly, the imposition of interest on the Respondent, can only be made with effect from 28.06.2019, and not for any period prior thereto, as also held by this Tribunal in DGAP v. Proctor & Gamble Group [2025 (9) TMI 732 - GSTAT NEW DELHI]
Since the period of violation is 15.11.2017 to 30.09.2019, the Respondent shall be liable to pay interest under Rule 133(3)(c) of the CGST Rules from 28.06.2019 till the date the profiteered amount as calculated by the DGAP is deposited.
Non-retroactivity of penalty under Section 171(3A) - HELD THAT:- Since the provisions of Section 171(3A) of the CGST Act for imposition of penalty have come into force w.e.f. 01.01.2020 whereas the period of investigation 01.07.2017 to 30.09.2019, hence the penalty prescribed under the above Section cannot be imposed on Respondent retrospectively.
Accordingly, the report of the DGAP dated 14.10.2022 is accepted.
The Respondent is directed to deposit the profiteered amount along with the interest @18% from 28.06.2019 to 30.09.2019. 50% of the profiteered amount along with the interest shall be deposited in the Central Consumer Welfare fund and remaining 50% amount along with the interest shall be deposited in Maharashtra Consumer Welfare fund.
Issues: (i) Whether M/s Safety Controls & Devices Limited, registered in Uttar Pradesh, is required to obtain separate GST registration in the State of Rajasthan for executing a turnkey works contract at a project site in Rajasthan; (ii) Tax treatment of inward supplies where goods are (a) made in Uttar Pradesh and shipped to the site in Rajasthan and (b) made in Rajasthan and shipped to the site in Rajasthan.
Issue (i): Whether the applicant must obtain GST registration in Rajasthan despite having a registered place of business in Uttar Pradesh and no fixed establishment in Rajasthan.
Analysis: Section 22(1) of the CGST Act, 2017 requires registration in the state from where taxable supplies are made when turnover exceeds the threshold. Section 2(71) of the CGST Act, 2017 defines the location of the supplier of services as the place of business for which registration has been obtained or, where applicable, the fixed establishment elsewhere. The facts show that the applicant has no office or fixed establishment in Rajasthan and performs contractual, billing and management activities from its registered office in Uttar Pradesh. The supply (construction) occurs at the immovable property in Rajasthan but the supplier's location for registration purposes is the principal place of business in Uttar Pradesh.
Conclusion: The applicant is not required to obtain a separate GST registration in Rajasthan solely because the construction activity (place of supply) is located in Rajasthan; the location of the supplier is Uttar Pradesh.
Issue (ii): Tax treatment of inward supplies: (a) supplies made from Uttar Pradesh and shipped to the site at Rajasthan; (b) supplies made from Rajasthan and shipped to the site at Rajasthan.
Analysis: Section 10(1) of the IGST Act, 2017 governs place of supply for goods involving movement. Where movement of goods terminates for delivery to the recipient in Rajasthan (goods sent from Uttar Pradesh to Rajasthan), such movement constitutes an interstate supply liable to IGST. Where goods are supplied and delivered within Rajasthan (supplier located in Rajasthan and delivery within Rajasthan), CGST and SGST apply. The record lacks documentary evidence (invoices) to determine the specifics of inward supplies in the instant case, preventing a conclusive ruling on facts-dependent tax liability.
Conclusion: (a) As a matter of principle, goods moved from Uttar Pradesh to the Rajasthan site are interstate supplies liable to IGST. (b) Goods supplied and delivered within Rajasthan are liable to CGST and SGST. The authority does not conclusively determine specific inward-supply tax liability for the case due to absence of documentary evidence.
Final Conclusion: The application is partly allowed: the authority rules that the applicant, having no fixed establishment in Rajasthan and with principal place of business in Uttar Pradesh, is not required to obtain separate registration in Rajasthan for the turnkey contract; on the tax treatment of inward supplies the authority states the applicable legal principles but declines to give a conclusive factual determination for lack of documentary evidence.
Ratio Decidendi: For registration purposes under Section 22 of the CGST Act, 2017 and the definition in Section 2(71) of the CGST Act, 2017, the supplier's location is the place of business for which registration is obtained or the fixed establishment; absence of a fixed establishment in the state of supply means no separate registration is required in that state solely by reason of the place of supply being located there.
Location of the supplier of services - requirement of registration in the State from where taxable supply is made - place of supply for works contract - inter state supply liable to IGST - intra state supply subject to CGST and SGST -
Location of the supplier of services - requirement of registration in the State from where taxable supply is made - HELD THAT:- Section 22(1) of the CGST Act, 2017 provides that every supplier shall be liable to be registered in the State from where he makes taxable supply of goods or services or both, provided his aggregate turnover exceeds the threshold limit. Further, Section 2(71) defines “location of the supplier of services” as the place of business for which registration has been obtained or, in case of fixed establishment elsewhere, the location of such establishment.
In the instant case, the applicant has neither established any office nor any fixed establishment in the State of Rajasthan. All contractual, billing, and management activities are conducted from the registered office at Lucknow, Uttar Pradesh. Hence, the “location of supplier” shall be Uttar Pradesh, and the applicant is not required to obtain registration in Rajasthan merely because the place of supply (i.e., the construction site) is located there.
Tax treatment of inward supplies - HELD THAT:- Since the location of supplier is in Uttar Pradesh and the place of supply is in Rajasthan and it is observed that the applicant has not furnished copies of invoices or related documentary evidence for examination. Therefore, the question cannot be conclusively answered. However, as a matter of principle, if the inward supply involves movement of goods from Uttar Pradesh to Rajasthan, it will be treated as an interstate supply liable to IGST. Conversely, if both supplier and recipient are located within Rajasthan and delivery is made within the State, CGST and SGST shall apply.
Issues: Whether the services supplied by various suppliers to the Board of Secondary Education, Rajasthan in relation to conduct of examinations (printing of answer sheets, question papers, OMR sheets, mark-sheets, online form filling, annual maintenance of examination computers, operator services, result processing, transportation of exam material) are exempt under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 read with Explanation (iv) to paragraph 3 and Circular No. 151/07/2021-GST dated 17.06.2021.
Analysis: The Authority examined Section 95 and Section 97(2)(b) of the CGST Act and found the application maintainable following appellate directions; Explanation (iv) to paragraph 3 of Notification No. 12/2017-Central Tax (Rate) treats Central and State Educational Boards as educational institutions for the limited purpose of conduct of examinations. Entry No. 66(b)(iv) of Notification No. 12/2017-Central Tax (Rate), as amended by Notification No. 2/2018 and clarified by Notification No. 14/2018, exempts services provided to an educational institution by way of services relating to admission to, or conduct of, examination by such institution. Circular No. 151/07/2021-GST provides relevant administrative guidance. On the facts, the services listed are directly connected with and exclusively used for the conduct of examinations by the Board; the Board therefore falls within the limited definition of educational institution for these purposes and the supplied services fall within Entry No. 66(b)(iv) exemption as amended and clarified.
Conclusion: The listed services received by the Board of Secondary Education, Rajasthan are exempt from GST under Entry No. 66(b)(iv) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 read with Explanation (iv) to paragraph 3 and Circular No. 151/07/2021-GST; ruling in favour of the applicant (assessee).
Applicability of exemption under Notification No. 12/2017 to services relating to conduct of examination - Central and State Educational Boards treated as educational institutions for limited purpose of conduct of examination - Maintainability of application for advance ruling by a recipient of services - Advance ruling u/s 95 read with Section 97(2)(b) - applicability of a notification - HELD THAT:- It is noted that earlier, the Authority for Advance Ruling, Rajasthan, vide its Order No. RAJ/AAR/2022-23/09 dated 17.06.2022, had rejected the application on the ground of maintainability under Section 95 of the CGST Act, holding that the applicant was a recipient and not a supplier of services.
Entry No. 66(b)(iv) of Notification No. 12/2017-CT (Rate) exempts services “to an educational institution, by way of services relating to admission to, or conduct of examination by, such institution. “Further, Explanation (iv) to paragraph 3 explicitly treats Central and State Educational Boards as educational institutions for the limited purpose of conducting examinations.
Thus, RBSE qualifies as an educational institution for the limited purpose of conducting examinations. Consequently, services provided to RBSE which are integral and directly connected with the conduct of examinations are only eligible for exemption under Entry No. 66(b)(iv).
Accordingly, all the services mentioned in the application dated 9.2.2022 by the applicant are found to be in relation to the conduct of examination and hence are covered under the exemption available vide Entry No. 66(b)(iv) of Notification No. 12/2017-CT (Rate), as amended. Thus, the applicant is entitled to exemption from GST on the services enumerated in the application, as these are directly connected with the conduct of examinations by the Board of Secondary Education, Rajasthan.
Issues: Whether the seized jewellery, including jewellery claimed by third parties and jewellery sought by the assessee against an already furnished bank guarantee, was liable to be released in terms of the CBDT circular governing release of seized assets, and whether the revenue could insist upon an enhanced bank guarantee because of delay in release and increase in gold prices.
Analysis: The CBDT circular issued under Section 119(2) of the Income-tax Act, 1961 prescribed a specific procedure and fixed timelines for release of seized jewellery against adequate security. Once the assessee unconditionally accepted ownership and valuation, obtained approval for release, and furnished a bank guarantee covering the valuation assessed by the department's valuer, the competent authority was required to release the jewellery within the stipulated period. The delay in release was attributable to the revenue and was explained only on vague administrative grounds. Such delay could not be used to prejudice the petitioners by demanding a higher bank guarantee on the basis of subsequent increase in gold prices. As regards the jewellery claimed by petitioner Nos. 3 and 4, the revenue had no objection to its release once ownership affidavits were furnished and the assessee expressed no objection.
Conclusion: The seized jewellery claimed by petitioner Nos. 3 and 4 was directed to be released on the filing of the requisite affidavits, and the remaining seized jewellery was directed to be released to the assessee against the bank guarantee already furnished, subject to the required ownership and no-objection affidavits.
Final Conclusion: The writ petition succeeded, and the revenue was bound to release the seized jewellery in accordance with the CBDT circular without insisting on an enhanced security amount caused by its own delay.
Ratio Decidendi: Where the department has approved release of seized jewellery and the assessee has furnished security sufficient to cover the valuation then obtained, the revenue cannot, because of its own delay, insist upon a higher bank guarantee on account of later price escalation; the circular's release timelines are binding and must be followed.
Release of the seized assets/jewellery - Seeking release of 33 seized jewellery items - procedure for release of assets, including jewellery, seized by the Income Tax Authorities in the course of search operations conducted by it - ownership v/s possession - timelines for release of seized assets prescribed by CBDT circular
HELD THAT:- In the CBDT circular issued under Section 119(2) of the Income Tax Act, 1961, ensures release of the seized assets, on furnishing of adequate security by the assessee, without delay and particularly in the case of jewellery, the valuation of which remains volatile, the afore timelines also ensures predictability.
As in terms of the timelines given in the CBDT circular dated 16.10.2023 the 33 seized jewellery items should have been released within 15 days thereafter. Admittedly, the delay in such release is not attributed to either of the petitioners. Rather, such delay is accepted by the respondent authorities on account of “administrative reasons” which stand of theirs remains unexplained and vague, thus arbitrary. Such delay is also beyond the timelines prescribed in the CBDT circular dated 16.10.2023 which would at least be binding on the respondent authorities. Therefore, for the increase in the market value of the jewellery in question during the afore period of delay, the petitioners cannot be put to prejudice.
We direct the release of 901.030 grams of jewellery to petitioner Nos. 3 and 4 but only after petitioner No. 1 has furnished an affidavit that he has no objection to such release and petitioner Nos. 3/ 4 have also filed affidavit(s) claiming its ownership. So far the 33 seized jewellery items, the release of which is sought by petitioner No. 1 is concerned, these jewellery items shall also be forthwith released to petitioner No. 1 against the bank guarantee already furnished by him on 03.01.2025. However, before the release of such jewellery the respondent authorities shall require petitioner No. 1 to file an affidavit claiming its ownership as also an affidavit from petitioner No. 2 that she has no objection to the release of such jewellery to petitioner No. 1.
Issues: Whether the Assessing Officer had jurisdiction to pass the Assessment Order dated 17.03.2025 and consequential penalty orders in respect of Assessment Year 2022-23 despite a search under Section 132/132A having been conducted on 26.11.2024, in light of the abatement provision contained in Section 158BA(2) read with the definition of "block period" in Section 158B of the Income-tax Act, 1961.
Analysis: Section 158BA(1)-(2) and the definition of "block period" in Section 158B newly frame a special Chapter XIV-B procedure limiting assessments to "total undisclosed income" discovered by search/requisition; subsection (2) provides that pending assessments relating to assessment years falling in the block period shall abate. The statutory scheme in Chapter XIV-B must be read as a whole to determine the scope of abatement and the conditions for exercise of jurisdiction under that Chapter. The factual record, including the panchnama, shows the search was conducted in relation to juristic persons/entities and not specifically against the petitioner in his individual status; the assessment framed on 17.03.2025 arose from scrutiny (CASS) of the petitioner's individual return and does not, on the pleadings, demonstrate that any "total undisclosed income" of the petitioner was discovered in the search or that incriminating material relating to his individual undisclosed income was found. The petitioner did not establish that Chapter XIV-B conditions for abatement of the pending (re)assessment were satisfied or that the assessment in question was confined to undisclosed income as a result of the search. In absence of those material facts, and having regard to the statutory distinction between assessments of "total income" (e.g., Section 153A context) and "total undisclosed income" under Chapter XIV-B, the exercise of extraordinary writ jurisdiction to quash or hold the assessment abated would require resolution of disputed factual questions which the petitioner has not established before this Court.
Conclusion: Issue decided against the petitioner; the Assessing Officer had jurisdiction to proceed with assessment and consequential penalty orders in the circumstances pleaded, and the writ petition seeking abatement under Section 158BA(2) is not maintainable on the record before the Court.
Block assessment - definition of “block period” in Section 158BA - definition clause with “means ..includes”, glance at definition of “block period” contained in Section 158B - relevant “Previous Year” - As contented since the assessment under Section 143 was pending as on the date of search u/s 132 or requisition being made u/s 132A, in view of sub-section (2) of Section 158BA of Chapter XIV-B of the IT Act the Assessing Officer ceases to have jurisdiction to proceed with pending assessment and, therefore, the Assessment Order should be treated abated.
HELD THAT:- Taking aid of the analysis of the terms “Assessment Year”, “Previous Year” and “Financial Year”, the expression “preceding the previous year” contained in Section 158B assumes significance. The said expression “preceding the Previous Year” refers to any Financial Year that comes before the Previous Year relevant to a particular Assessment Year.
Reading Section 158BA of the IT Act as amended by virtue of the Finance (No. 2) Act, 2024 and the Finance Act, 2025, leaves no scope for ambiguity that pending proceedings under any other Chapter of the IT Act on the date of initiation of search or making requisition shall abate and shall be deemed to have been abated so far as it relates to “Assessment Year falling in the block period”.
Thus this Court finds that provisions of Section 158BA(2) of the IT Act is attracted when the Assessment Year falls in the ken of definition of the term “block period” as defined under Section 158B.
(Re)assessment under Section 143(3) read with Section 260 and Section 144B of the IT Act pertaining to Assessment Year 2022-23 falls within the meaning of definition of “block period” envisaged in Section 158B, so that pending (re)assessment on the date of initiation of the search under Section 132, or making of requisition under Section 132A, as the case may be, would stand abated by operation of law.
As is ex facie from Panchanama that the search was commenced on 26.11.2024 and concluded on 28.11.2024, the assessment pending under Section 143 of the IT Act with respect to “six Assessment Years preceding the Previous Years” would abate. But with caveat, other conditionalities contained in Chapter XIV-B of the IT Act are required to be satisfied.
In absence of material to demonstrate that the search of petitioner (individual status) under Section 132 of IT Act was conducted with respect to his “total undisclosed income” as envisaged under Chapter XIV-B for the Assessment Year falling within the ken of “block period”, this Court is afraid to accede to the contentions of the petitioner and relief claimed in the writ petition merely based on provision contained in sub-section (2) of Section 158BA.
Nothing is brought on record to suggest that the petitioner’s “undisclosed income” is subject matter of search along with companies-entities whose names appeared in the Panchnama. No iota of evidence would evince to depict that the search of said companies-entities resulted in discovery of “total undisclosed income” and that too it included any portion of his income remained undisclosed in the return furnished for the Assessment Year 2022-23 in his individual status. It is only on fulfilment of conditions laid in the provisions contained in Chapter XIV-B that the Assessing Officer gets clothed with the jurisdiction to proceed to make assessment of total undisclosed income for the block period if any incriminating material is found. Therefore, the Assessing Officer is said have jurisdiction to proceed with under the provisions of Chapter XIV-B of the Act.
Hence, this writ Court is loathe in exercising extraordinary jurisdiction by entertaining the writ petition under Articles 226 and 227 of the Constitution of India on the disputed questions of fact and does not find reasonable ground to show indulgence in the matter as the case of the petitioner does not fall within the parameters discussed in Commissioner of Income Tax Vrs. Chhabil Dass Agarwal,[2013 (8) TMI 458 - SUPREME COURT]
Ergo, no case is made out by the petitioner to invoke power under Article 226 of the Constitution of India to intermeddle with the Assessment Order dated 17.03.2025 passed under Section 143(3) read with Sections 260 and 144B of the Income Tax Act, 1961 pertaining to the Assessment Year 2022-23 on the anvil of provisions of Section 158BA(2) of the Income Tax Act, 1961, simpliciter. WP dismissed.
Issues: (i) Whether the certificate dated 28.01.2026 issued under Section 195 should be treated as a 'Nil' rate certificate instead of a 5.25% certificate; (ii) Whether the competent authority is obliged to issue 'Nil' rate certificates for the financial year 2025-26 and subsequent years on the petitioner's applications, and under what conditions that obligation may be displaced.
Issue (i): Whether the certificate dated 28.01.2026 issued under Section 195 should be treated as a 'Nil' rate certificate instead of a 5.25% certificate.
Analysis: The competent authority issued a 5.25% certificate after an earlier order in the petitioner's favour; the authority's action was found to be bona fide but contrary to the earlier decision which recorded no taxability and remitted for any residual consideration. The Court exercised remedial powers to correct the certificate in view of the prior finding of no taxability and to avoid undermining that finding while warning the authority about future care.
Conclusion: The certificate dated 28.01.2026 shall be treated as a 'Nil' rate certificate and the competent authority is directed to issue an amended/rectified 'Nil' rate certificate within seven days of production of a web-copy of this order.
Issue (ii): Whether the competent authority is obliged to issue 'Nil' rate certificates for the financial year 2025-26 and subsequent years on the petitioner's applications, and under what conditions that obligation may be displaced.
Analysis: Considering the prior order in the petitioner's case and the need for procedural clarity, the Court directed that 'Nil' rate certificates be issued for FY 2025-26 and for subsequent years on timely application, subject to the competent authority's power to arrive at a contrary conclusion upon recording a specific finding of the existence of a permanent establishment (including virtual PE) after issuing notice to the petitioner. The Court required honest disclosure and cooperation by the petitioner for subsequent applications.
Conclusion: The competent authority shall issue 'Nil' rate certificates within 30 days of application for FY 2025-26 and subsequent years unless it records a finding of permanent establishment after issuing notice; the petitioner must fully and truly disclose relevant facts and cooperate with any such notice.
Final Conclusion: The order corrects the impugned certificate to a 'Nil' rate and establishes a forward-looking procedure requiring the competent authority to grant 'Nil' rate certificates expeditiously on application, while preserving the authority's power to revisit taxability on specified and notified grounds.
Ratio Decidendi: Where a competent authority's certificate under Section 195 conflicts with a prior court finding of no taxability, the court may direct rectification to a 'Nil' rate and prescribe a limited procedural framework for future certificates, permitting departure only upon a recorded finding of permanent establishment after notice to the applicant.
Certificate u/s 195 - 'Nil' rate certificate instead of a 5.25% certificate - HELD THAT:- In light of the submission of Respondent Competent Authority might have issued the certificate of 5.25% tax bona fidely, we do not propose to come heavily against the respondent, however, we warn him to be careful in future. Instead of setting-aside and remanding the matter to the competent authority to issue a certificate at ‘Nil’ rate, we hereby order that the certificate dated 28.01.2026 which the respondent has issued to the petitioner shall be treated to be a certificate of ‘Nil’ rate instead of certificate of 5.25%.
On furnishing a copy of this order, the competent authority shall forthwith issue amended/rectified certificate of ‘Nil’ rate within a period of seven days of producing a web-copy of this order.
We issue the following additional directions:
(i) The competent officer or any other authority who is supposed to consider the petitioner’s application u/s 195 of the Act of 1961, shall issue a certificate of ‘Nil’ rate of tax not only for the Financial Year 2025-26 (AY 2026-27), but also for the subsequent years in case an application is filed. The certificate(s) shall be issued within 30 days of the day when application is filed.
(ii) The competent authority dealing with petitioner’s subsequent application(s) under Section 195 of the Act of 1961 shall not be bound by direction given in clause(i) above, if he comes to a conclusion and records a finding that the petitioner is having a PE in India and the transactions which the company has carried out in India are liable to be taxed in India. However, before recording such finding, a notice in this regard shall be issued to the petitioner.
(iii) It will also be required from the petitioner to disclose truly and fully, all facts in its applications to be filed each year.
Issues: Entitlement to a certificate at NIL rate of tax under Section 197 of the Income-tax Act, 1961 in respect of the Matching solution services covered by the distribution agreement.
Analysis: The petitioner sought NIL withholding in respect of the Matching solution services on the basis that the receipts were not chargeable to tax in India and did not fall within fee for included services under Article 12(4) of the India-US Double Taxation Avoidance Agreement. The agreements and the legal position were considered on a prima facie basis, and the issue was found to be covered in favour of the petitioner. The Court also noted that the competent authority had no sustainable basis to deny NIL rate for this component.
Conclusion: The petitioner was held entitled to a certificate at NIL rate for the Matching solution services, and the impugned order was set aside to that extent.
Certificate u/s 197 subject to withholding tax at rate of 15% -entitlement to a certificate at ‘NIL’ rate - petitioner is a non-resident company incorporated under the laws of United States of America as provides a wide range of products including foreign exchange related Matching solutions, real-time financial data, etc. The petitioner also provides a number of support services to its group companies - HELD THAT:- On prima-facie consideration of the nature of the agreements and the law available on the subject so also the order passed in the case of Financial and Organisation Limited [2026 (2) TMI 815 - DELHI HIGH COURT] we are of the view that the petitioner is entitled to a certificate at ‘NIL’ rate qua the first agreement relating to Matching Solution services.
Second agreement of Support services is concerned, both the parties have their own points to canvass, which requires consideration but since substantial part of the period is already over (almost ten and a half months), we leave this issue to be decided at appropriate stage or in an appropriate case, given that the amount for the entire year was Rs. 67 lacs which is not substantial, if the remaining period is taken into account.
Such being the position, though we set aside the impugned order dated 22.07.2025, certificate dated 11.07.2025, but direct the competent authority to issue a certificate at NIL rate within fifteen days from today so far as Matching solution is concerned. 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, for Matching solution.
Directions:
i. The competent authority is directed to issue a certificate at ‘NIL’ rate so far as the agreement in relation to Matching solution is concerned, for which the petitioner has entered into an agreement(s) for an amount of Rs. 65,97,09,956/-.
ii. So far as the second agreement qua Support services (for Rs. 67,40,636/-) is concerned, the certificate at 15% be issued for this year.
iii. With respect to support services or any other services, the competent authority shall be free to take decision as deemed appropriate in accordance with law.
iv. The competent officer or any other authority who is supposed to consider the petitioner’s subsequent application(s) under Section 197 of the Act of 1961, shall issue a certificate of ‘NIL’ rate of tax not only for the Financial Year 2025-26 (AY 2026-27), but also for the subsequent years in case an application for Matching solution services is filed. The certificate(s) shall be issued within 30 days of the application being filed by the petitioner.
v. The competent authority shall not be bound by direction given in clause (iv) above, if he comes to a conclusion and records a finding that the petitioner is having Permanent Establishment in India or the transactions which the company has carried/ is carrying out in India are liable to taxed in India. However, before recording such finding, a notice in this regard shall be issued to the petitioner.
vi. It will also be required from the petitioner company to disclose truly and fully all facts in its application(s) to be filed each year.
Issues: Whether the certificate under Section 197 of the Income-tax Act, 1961, fixing deduction at 0.1%, was justified where the petitioner's airline operation income was treated as exempt under the India-UK treaty read with Section 90 and the basis of outstanding demand was found to be incorrect.
Analysis: The certificate was founded substantially on an incorrect assumption that demands for earlier assessment years were outstanding on the ITBA portal. Once that basis was found to be erroneous, the remaining material showed that the petitioner's airline operation income was not exigible to tax, while taxable ancillary services such as ground handling and engineering were already being subjected to tax. The record also showed that NIL certificates had been issued earlier, including for part of the same financial year, and the authority's departure from that approach lacked a sustainable basis.
Conclusion: The certificate fixing deduction at 0.1% was unjustified and was liable to be set aside; the petitioner was entitled to a NIL rate certificate.
Final Conclusion: Relief was granted by quashing the impugned order and directing issuance of a NIL-rate certificate for income from airline operations, with future certificates to follow the same position unless the law or transaction profile changes.
Ratio Decidendi: A certificate under Section 197 of the Income-tax Act, 1961 must rest on accurate facts and a rational assessment of taxable income; where the underlying basis is erroneous and the relevant income is not presently chargeable, a NIL-rate certificate cannot be denied on an unsustainable premise.
Validity of the certificate at the rate of 0.1% issued u/s 197 - disputed services fall under Airline services, which are essentially “Operation of Airline & Cargo Service” which is exempted under Article 8 of the India-UK Treaty read with Section 90 - HELD THAT:- We are of the view that the main reason which appears to have prevailed in the mind of the competent authority for issuing certificate at 0.1% is the fact that there were outstanding demand for assessment years 2013-14, 2014-15, 2015-16 and 2016-17 as per the ITBA portal which has turned out to be an incorrect fact, else he himself has observed that operation of Airline Services is exempt.
It is true that the rate of 0.1% appears to be very low or negligible but given the volume of transactions which the petitioner undertakes in India (about Rs.4000 Crores per year) even this 0.1% turns out to be substantial for an Airline company. It is not in dispute that so far as the Ground Handling and Engineering services or any other service, which are taxable in India are concerned, the petitioner-company is obliged to pay the tax and has been paying the same.
Petitioner’s assessment has been made and so far as airline services qua which the certificate was demanded is concerned, no tax was found to be payable.
If the facts of the present case are considered from another perspective, viz certificate at NIL rate has been issued for the last fifteen-sixteen years and even for part of current financial year, a certificate at .1% cannot be countenanced, as the same reflects non-application of mind by the competent authority on the one hand and shows inconsistent approach of the officers of the country and thus portrays unhealthy picture of the bureaucracy.
Allow the writ petition and set aside the impugned order and certificate and competent authority is directed to issue a certificate at NIL rate within a period of seven days from today.
Issues: Whether the Settlement Commission/competent authority was justified in rejecting the assessee's settlement application under Section 245C(1) of the Income-tax Act, 1961 for alleged failure to make full and true disclosure in respect of Rs. 80 crores claimed as undisclosed income linked to inflated refinery loss.
Analysis: The assessee submitted a confidential enclosure detailing the manner in which the additional income was derived, describing the process of inflating refinery loss and correlating stock in trade with the claimed undisclosed income. The authority's rejection recorded that full and true particulars and evidential materials were not disclosed, but did not adequately examine the detailed explanation provided by the assessee. Given that rejection under Section 245C(1) carries consequences including interest, penalty and potential prosecution, the authority was required to closely scrutinize and verify the manner in which the undisclosed income was shown to have been derived before concluding there was no full and true disclosure. The record shows that, on the remaining amounts, the revenue accepted eligibility for settlement.
Conclusion: The rejection cannot stand without a detailed re-scrutiny of the materials tendered by the assessee; the matter is remitted to the competent authority for fresh consideration of the settlement application keeping in view the detailed disclosures made by the assessee. The writ appeal is allowed and the impugned orders are set aside.
Rejection of settlement application for non-disclosure - question of changing the stand by converting the undisclosed portion of income into the income under Section 69B of the Act is beyond the scope of settlement proceedings - full and true disclosure as per mandate of law as contained in Section 245C(1)
HELD THAT:- Since the present case relates to the period prior to the abolition of the scheme of settlement u/s 245C of the Act, the provisions contained in Section 245C are applicable. A perusal of the provisions contained in Section 245C(1) makes it clear that a prayer for settlement could be made giving full and true disclosure of income which has not been disclosed; the manner in which the said income has been derived; the additional amount of income tax payable on such income; and other particulars as may be prescribed.
The order passed by the authority rejecting the application, however, says that full and true particulars of the materials and evidences have not been disclosed with regard to the manner in which the undisclosed income i.e. Rs. 80 Crores was derived.
We are of the view that the assessee has submitted details of the manner in which the undisclosed income i.e. Rs. 80 Crores was derived. According to the assessee, the stock in trade is directly related to Rs. 80 Crores which in turn was result of inflation of refinery loss, which perhaps the assessee was not correct in claiming as such, and this appears to be only a device not to disclose an income which the assessee otherwise had accumulated.
The aforesaid aspect, in our view, was not taken into consideration in a proper manner by the competent authority. Since the rejection of the application for settlement not only results in imposition of interest, penalty, but also in prosecution, we are of the view that the competent authority was required to closely examine and scrutinize the manner in which income was derived, as was stated by the assessee in his application dated 16.10.2018.
Interest of justice would be served if the competent authority scrutinizes in detail the manner in which the assessee derived undisclosed income of Rs. 80 Crores. We make it clear that even according to the revenue, as far as the remaining Rs. 70 Crores is concerned, the writ petitioner is already eligible for settlement.
Issues: Whether the assessment for the relevant year 2015-16 could be validly reopened by issuance of notices under Section 148 and Section 142(1) after the expiry of four years from the end of the assessment year.
Analysis: The Court examined the statutory scheme governing reassessment after four years, particularly the first proviso to Section 147 of the Income-tax Act, 1961 and Explanation 1 thereto, which permit reopening only if income has escaped assessment by reason of failure to file a return in response to specified notices or failure to disclose fully and truly all material facts. The petitioner had obtained a court order for reduction of capital and had furnished to the assessing officer, during the original scrutiny assessment, the certified order, minutes, ledger entries, remittance certificates, share certificates and tax residence certificates of non-resident shareholders, and a tabulation of amounts paid to shareholders. The Court contrasted such specific documentary responses with the generic production of books contemplated by Explanation 1 and concluded that the materials provided constituted specific disclosure of the capital reduction and payments made out of the securities premium account. The Court found no basis to treat the reassessment as falling within the limited exceptions in the first proviso; reopening appeared to result from a change of opinion or information from the investigation wing rather than any established failure by the assessee to disclose material facts.
Conclusion: The notices under Section 148 and Section 142(1) issued for reopening the assessment are quashed and the writ petition is allowed; the reassessment does not satisfy the conditions of the first proviso to Section 147 and is not justified.
Reopening of assessment u/s 147 - notice was issued after the expiry of four years - alleged set off in respect of carried forward loss, undervaluation of shares or alternatively repayment from and out of the securities premium account being treated as deemed dividend - petitioner approached this Court u/ss100 to 105 of the Companies Act, 1956, for reduction of capital.
HELD THAT:- The equity share capital was reduced under the capital reduction order and that such reduction was effected by returning an aggregate of 7,27,153 equity shares of Rs. 10/- each constituting 64.388% of the issued and paid up share capital of the company at the rate of Rs. 76.98/- per equity share. The resolutions also makes it clear that payment was being made by utilizing the amount lying in the securities premium account as on 31.03.2014 to the extent of Rs. 66.98 per share.
There is considerable correspondence between the petitioner and the assessing officer prior to the issuance of the original assessment order pursuant to a scrutiny assessment. It is pertinent to refer to material correspondence. By letter dated 08.06.2017, the petitioner was asked to provide a note on expenditure incurred in foreign currency and to explain if any shares were issued in that year. By reply dated 24.11.2017, the petitioner provided a copy of the ledger account relating to capital reduction during financial year 2014-15. The ledger account provides particulars of the shareholders who were paid towards reduction of capital.
The petitioner has also annexed the certificate of registration of the order confirming the reduction of capital issued by the Registrar of Companies. Reference should also to be made to letter dated 28.11.2017 from the petitioner providing an explanation for the large outward remittances due to reduction of capital during the year. Three remittance certificates towards repayment to the capital investors during the year were enclosed.
As an enclosure to letter dated 27.12.2017, the petitioner has provided in tabular form the amounts paid to each shareholder during the reduction of capital exercise including a break-up of the face value and premium. The relevant share certificates were also annexed to this communication. Along with the share certificates, the tax residence certificate of the non-resident shareholders were also provided.
In the face of the above evidence, unable to conclude that the petitioner failed to disclose fully and truly all material facts necessary for assessment. This is not a case of failure to file the return either.
Thus specific queries were put to the petitioner in several communications and such queries were responded to specifically by providing the documents requested for by the assessing officer. Therefore, Explanation (1) to Section 147 does not come to the aid of the respondent. Consequently, conclude that the reopening of assessment does not satisfy the requirements of the first proviso to Section 147 as applicable - Assessee appeal allowed.
Issues: Whether the delay of 61 days in filing Form 10B for Assessment Year 2018-2019 should be condoned under Section 119(2)(b) of the Income-tax Act, 1961 so that the petitioner can claim benefits under Sections 11 and 12 of the Income-tax Act, 1961.
Analysis: Relevant provisions include Section 119(2)(b) and Section 44AB of the Income-tax Act, 1961, and the substantive entitlement under Sections 11 and 12. The impugned order rejected the condonation application noting absence of supporting evidence; however a marginal delay of 61 days is recorded and the petitioner had filed the audit report under Section 44AB. The respondent authority acted under Circular No. 2/2020 dated 03.01.2020; that circular does not bind the High Court. Consistent judicial practice supports granting discretionary relief to trusts/institutions entitled to substantive tax benefits where delay is procedural and marginal. In view of these factors, the delay is amenable to condonation under the statutory discretion conferred by Section 119(2)(b), and further processing of the return is necessary to give effect to entitled benefits.
Conclusion: The delay in filing Form 10B for AY 2018-2019 is condoned; the respondent is directed to process the Return of Income afresh in accordance with the intimation and rectification order, and the writ petition is allowed.
Final Conclusion: The petitioner's substantive entitlement to tax benefits under Sections 11 and 12 is preserved by condoning a marginal procedural delay, and administrative action is directed to give effect to that entitlement.
Ratio Decidendi: A marginal procedural delay in filing Form 10B does not defeat a trust's substantive entitlement under Sections 11 and 12 where discretionary condonation under Section 119(2)(b) is appropriate to prevent denial of substantial benefits.
Condonation of delay in filing Form 10B - assessee trust’s explained that there was a natural disaster in the village during that year and hence could not finalise the books of accounts and filing of form 10B was delayed - HELD THAT:- In the instant case, there is procedural violation in filing Form 10B within the prescribed time as is required u/s 44A of the Income Tax Act, 1961, which comes in the way of petitioner getting substantial benefit under the Act. The 1st Respondent cannot be found fault as the 1st Respondent is bound by Circular No.2/2020 dated 03.01.2020. However, the said Circular is not binding on this Court.
The consistent view taken of this court under similar circumstances is to extend the benefit u/s 11 and 12. Such benefit cannot be denied to a trust or an institution for a mere procedural irregularity. If such a trust or an institution is otherwise entitled to substantial benefit.
Since there is only a marginal delay of 61 days in filing Form 10B by the petitioner, the substantial benefit of Section 11 and 12 of the Income Tax Act, 1961 cannot be denied. Therefore, the delay in filing Form 10B deserves to be condoned and is accordingly condoned to the petitioner.
Issues: Whether the assessment under Section 143(3) and consequential penalty under Section 271AAD(1)(i) of the Income-tax Act, 1961 are sustainable where the petitioner sought documents and cross-examination but failed to specifically identify persons for cross-examination and did not avail earlier opportunities to copy seized materials.
Analysis: The assessment standard is based on preponderance of probabilities. The petitioner did not respond to the notices under Section 143(2) and Section 142(1) by obtaining the seized materials within the time prescribed and instead sought cross-examination without naming the persons whose statements were relied upon. The request for cross-examination at the late stage, without specifying the points or persons and without having first availed the opportunity to copy seized documents, was treated as unsustainable. In view of the substantial tax and penalty consequences, the matter was remitted for fresh consideration allowing the petitioner an opportunity to apply for relevant documents, file a composite reply to the earlier notices, and be heard; a conditional pre-deposit was directed before de novo proceedings.
Conclusion: The impugned assessment under Section 143(3) and penalty under Section 271AAD(1)(i) are quashed and the matter is remitted for fresh adjudication. Relief is granted to the petitioner in part pending compliance with directions including deposit of Rs. 25,00,000 and filing of a composite reply; if the petitioner fails to comply, the respondent may proceed under Section 144 of the Income-tax Act, 1961.
Validity of assessment order passed - Penalty u/s 271AAD(1)(i) - assessee’s request for cross-examination at the fag end of the assessment proceedings without availing the opportunities provided for copying of the seized materials - HELD THAT:- The income tax assessment is based on ‘preponderance of probabilities. If there is a preponderance of such probability, the demand will be confirmed against the assessee by the Department, following the due process of law.
In this case, the petitioner has not co-operated with the department by requesting the documents which formed the basis of the conclusion in the impugned order. Instead, the petitioner sought for the cross-examination of a person without naming them. Therefore, there is no merit in these writ petitions. As such, these writ petitions are liable to be dismissed.
Considering the fact that the petitioner is imposed with a huge tax liability, the impugned orders are quashed and the case is remitted back to the respondent to pass a fresh order. One more opportunity is granted to the petitioner to apply for the relevant documents and to file a proper reply to the notices that preceded the impugned orders within the time to be fixed by the respondent.
Issues: (i) Whether additions made on account of alleged non-genuine purchases from three suppliers can be sustained in full; (ii) Whether the disallowance of brokerage and commission expenditure of Rs. 14,18,330/- can be sustained.
Issue (i): Whether purchases aggregating to Rs. 34,08,966/- from three parties should be treated as wholly non-genuine and added to the assessee's income.
Analysis: Books of account were not rejected; quantitative details of purchases and corresponding sales were maintained and accepted; declared turnover and gross profit rate (approx. 6.5%) were not disturbed; notices issued under section 133(6) to certain suppliers were returned unserved and Sales Tax Department listings raised doubt about those suppliers; no material established that payments returned to the assessee or that goods were not received; distinguishable precedents where full additions were sustained involved rejected books or clear cash trail; where sales are accepted and records maintained, taxing entire purchases would amount to taxing gross receipts without allowing cost of goods sold.
Conclusion: Addition restricted. The addition is directed to be sustained only in respect of purchases from two suppliers whose notices were returned unserved, limited to 6.5% of their purchase amounts, and the balance addition is deleted.
Issue (ii): Whether the entire commission and brokerage expenditure of Rs. 14,18,330/- can be disallowed for want of independent verification of the payees.
Analysis: Commission payments were supported by ledger accounts, brokerage bills, bank statements showing payments through banking channels and TDS deduction; books of account were not rejected and turnover was accepted; no material demonstrated that commission payments returned to the assessee or that recipients were fictitious; Assessing Officer did not produce adverse evidence establishing sham payments or carry out independent enquiries with recipients.
Conclusion: Disallowance deleted. The disallowance of Rs. 14,18,330/- is deleted and the ground of appeal relating to commission and brokerage is allowed.
Final Conclusion: The appeal is partly allowed by restricting the purchases addition to 6.5% of specified purchases from two suppliers and by deleting the entire disallowance of commission and brokerage expenditure.
Ratio Decidendi: Where books of account are not rejected, quantitative records and accepted sales exist, and no material shows payments returning to the assessee or a cash trail, the appropriate remedy for unverifiable purchases is to estimate and tax the profit element (using normal gross profit rate) rather than disallowing the entire purchase amount.
Non-genuine purchases - Estimation of income -Burden of proof for genuineness of purchases - HELD THAT:- While the genuineness of the specific parties may remain doubtful, the purchases as such cannot be treated as wholly non-existent. The business of the assessee is not in dispute. The sales have been accepted. The addition, therefore, has to be restricted to the possible profit element embedded in such purchases.
Having regard to the nature of the assessee’s business, the gross profit rate declared at 6.5%, and in the absence of any material to indicate that the payments made to the suppliers have been received back in cash or through any circuitous route, we are of the considered view that the ends of justice would be adequately met by restricting the addition only in respect of purchases from M/s Nisha Enterprises and M/s Reliable Metal (India), in whose cases the notices issued under section 133(6) were returned unserved by the postal authorities with the remark “Left”.
In the peculiar facts of the case, such estimation at 6.5% would reasonably account for the possible profit element embedded in the purchases from the said two parties and the likelihood of inflation in purchase price, without resulting in an unjust taxation of the entire purchase value.
Disallowance of commission and brokerage expenditure - AO has disallowed the entire commission expenditure on the ground that the assessee failed to establish the genuineness and business expediency of the payments as except for ledger accounts, bills and bank payment details, no independent supporting evidence was furnished and that the assessee did not produce the commission agents for verification - HELD THAT:- Once the assessee has furnished primary evidence such as ledger accounts, brokerage bills, bank statements and proof of deduction of tax at source, the onus stands substantially discharged. AO has not carried out any independent enquiry with the recipients nor has any adverse material been brought on record to demonstrate that the payments were sham or bogus. Mere non-production of the parties, in the absence of any contrary evidence, cannot by itself justify disallowance of the entire expenditure.
Commission expenditure constitutes a small percentage of the turnover and is not shown to be excessive or disproportionate. The Revenue has not established that the expenditure was not incurred wholly and exclusively for the purposes of business. We find no justification for sustaining the disallowance.
Issues: (i) Whether, in view of assessee's failure to substantiate purchases and reconcile sundry creditors, the Tribunal may direct adoption of net income at 8% of turnover based on the benchmark rate in section 44AD despite section 44AD not being directly applicable; (ii) Whether the Assessing Officer's disallowance of purchases and addition for unreconciled sundry creditors can be sustained or require separate adjudication when books are found unreliable; (iii) Whether addition under section 40(a)(ia) for short/non-deduction of TDS is sustainable.
Issue (i): Whether net income may be adopted at 8% of turnover based on the benchmark rate in section 44AD despite that provision being inapplicable on facts.
Analysis: The assessee failed to produce purchase invoices, parties and other documents to establish genuineness of purchases and reconcile sundry creditors; auditors recorded unreconciled balances; adopting the benchmark rate was applied as an estimate to arrive at reasonable net profit instead of disallowing entire purchases; the adoption was used as an estimation tool considering totality of facts and distortion that would follow from treating entire purchases as disallowed.
Conclusion: The adoption of net income at 8% of turnover as an estimation measure is upheld in favour of Revenue.
Issue (ii): Whether the Assessing Officer's disallowance of Rs. 3,85,60,697 and addition of Rs. 6,99,000 for unreconciled sundry creditors require separate sustainment or are replaced by the estimation adopted.
Analysis: The assessee did not substantiate the disputed purchases or reconcile sundry creditors before the AO; given the inability to verify the book results and the auditor's qualification, the adjudicatory authority adopted an estimation approach to avoid distorting taxable income; the AO's wholesale disallowance and addition were addressed by directing an estimated profit rate instead of maintaining the full additions.
Conclusion: The separate disallowance of purchases and addition for unreconciled sundry creditors are not sustained as discrete additions; the estimation at 8% replaces those full additions, and this outcome is upheld in favour of Revenue.
Issue (iii): Whether the addition of Rs. 10,30,490 under section 40(a)(ia) for short/non-deduction of TDS is justified.
Analysis: Statutory requirement to deduct TDS is independent of audit remarks; the assessee failed to show contrary material that TDS deduction was proper or inapplicable for the specific payments where shortfall existed; the appellate authority computed the correct disallowance after examining payments and shortfalls.
Conclusion: The addition under section 40(a)(ia) of Rs. 10,30,490 is sustained in favour of Revenue.
Final Conclusion: The Tribunal dismissed the assessee's appeal, affirming the appellate authority's estimation of income at 8% of turnover and upholding the section 40(a)(ia) addition; the estimation approach was applied to replace the AO's full disallowances and additions arising from unverifiable purchases and unreconciled creditors.
Ratio Decidendi: Where the assessee fails to substantiate purchases and reconcile sundry creditors and the books are found unreliable, the adjudicating authority may adopt a reasonable estimation of taxable income using a benchmark presumptive rate as a fair method of assessment and decline to sustain wholesale disallowance, while independently upholding additions under statutory provisions such as section 40(a)(ia) when TDS shortfall is established.
Addition being unsubstantiated claim of expenses by disallowing the purchases - estimation of income - HELD THAT:- In the instant case the assessee has neither produced the details nor made any attempt to produce the parties along with various documents as asked by the AO.
Merely stating that due to change in management the assessee could not file the requisite details before the AO cannot be a ground to accept certain purchases whose authenticity remains doubtful. Although the provisions of section 44AD of the Act are not applicable to the facts of the case, however, CIT(A) / NFAC in our opinion has considered the rate prescribed u/s 44AD of the Act while adopting the same in the case of the assessee for arriving at a reasonable profit instead of disallowing the entire purchase added by the AO.
Since the AO in the instant case has disallowed the entire purchases and also made addition on account of unreconciled sundry balances and since the CIT(A) / NFAC after considering the totality of the facts of the case and inability of the assessee to substantiate the genuineness of the purchases and reconciliation of sundry balances has directed the AO to adopt the profit rate of 8%, therefore, we do not find any infirmity in the order of the CIT(A) / NFAC on this issue.
Disallowance u/s 40(a)(ia) - We not find any infirmity in the order of the CIT(A) / NFAC. Merely because the accounts of the assessee are audited and the statutory auditor as well as the tax auditor have not passed any comments with respect to non-compliance of TDS provisions, the same in our opinion cannot absolve the assessee from the statutory requirement of deduction of tax at source. Since the assessee in the instant case has failed to deduct TDS u/s 40(a)(ia) of the Act, therefore, in absence of any contrary material brought to our notice, the amount sustained by the CIT(A) / NFAC under the facts and circumstances of the case is justified. The ground raised by the assessee is accordingly dismissed.
Issues: (i) Whether the delay in filing appeals before the National Faceless Appeal Centre (NFAC) was sufficiently explained so as to warrant condonation; (ii) Whether non-filing of audit report in Form No.10B within the due date or omission to mention details of registration/approval disentitles the assessee to exemption under Sections 11 and 12 of the Income-tax Act, 1961 and to approval under Section 80G(5)(vi).
Issue (i): Whether the delay in filing appeals before NFAC was sufficiently explained to condone the delay.
Analysis: The assessee is a registered society dependent on office-bearers and external professionals for tax compliance. The reasons for delay include non-receipt of intimations under Section 143(1) due to reliance on a deceased person who handled filings and a change in professional assistance; an affidavit from the secretary explaining these facts was placed on record. The Tribunal recognised that strict observations about self-responsibility of an individual appellant are not directly applicable to a trust/corporate entity that relies on office bearers and professionals. The Tribunal also noted precedent holding that exceptional circumstances (including death of the person handling compliance) can justify delayed action.
Conclusion: The delay in filing appeals before NFAC was satisfactorily explained and is condoned; the appeals on delay grounds are allowed in favour of the assessee.
Issue (ii): Whether non-filing of Form No.10B within the due date or omission to mention registration/approval details disentitles the assessee to exemption under Sections 11 and 12 and approval under Section 80G(5)(vi).
Analysis: The Tribunal applied settled law that filing of Form No.10B is a procedural requirement and directory in nature; non-filing before the due date does not automatically lead to disallowance under Sections 11 and 12. The Tribunal relied on higher authority precedent upholding that Form No.10B is procedural. With respect to omission of registration/approval details for AY 2021-22, the Tribunal noted precedence that active original registration under Section 12AA protects the assessee. Given these legal positions, the Tribunal found no substantive basis to sustain denial of exemption on these procedural grounds.
Conclusion: Denial of exemption for the years under consideration on account of non-filing of Form No.10B within the due date or omission of registration details cannot be sustained; conclusions are in favour of the assessee on merits.
Final Conclusion: The appeals are allowed; the impugned orders of the Commissioner of Income-tax (Appeals) dismissing the appeals on delay and denying exemption on procedural non-compliance are set aside, and the matters are restored to the Assessing Officer for fresh consideration of Form No.10AB and the returns on merits.
Ratio Decidendi: Procedural requirements such as filing of Form No.10B are directory and failure to file within the due date does not warrant automatic disallowance under Sections 11 and 12 of the Income-tax Act, 1961; sufficient justification for delay in institutional taxpayers (including reliance on office-bearers or professionals and exceptional events) warrants condonation of delay.
Denial of exemption u/s 11 and 12 and approval u/s 80G(5) - prescribed Form u/s 10B has not been filed within the due date - delay filling appeal before NFAC - HELD THAT:- We find that as with regard to issue of delay in filing of Form No. 10B relevant to AY: 2017-18 to AY: 2020-21 the law is settled that directions are directory and there cannot be disallowance u/ s 11 & 12 of the Act for non-filing of audit report in Form 10B, before due date. Hon’ble Supreme Court in CIT(Exemption) Vs. Anjana Foundation [2024 (10) TMI 664 - GUJARAT HIGH COURT] has dismissed the SLP of the department on the ground of delay as well as merits thereby sustaining the impugned orders of the Tribunal and Hon’ble High Court of Gujarat wherein it was held that filing of Form 10B is procedural requirement.
Then with regard to not mentioning of details of registration/approval relevant to AY: 2021-22 the Coordinate Bench in Shambhu Dayal Modern School [2024 (8) TMI 681 - ITAT DELHI] has held that when original registration u/s 12AA is still active the same protects assessee.
We find that NFAC has observed that delay is not well explained because associates persons, staff as well as CA’s are only for assistance purpose and whole responsibility of income tax proceedings pertains only to the ‘appellant’. We are of the considered view that these observations made in a given set of circumstances may be relevant in the case of an individual, however, assessee is a corporate body or otherwise a trust which certainly has to completely dependon its office bearers or professional and if there is sufficient justification that any of the persons so associated for tax compliances has failed to discharge duty or due to any exceptional circumstances. like in the present case death of concerned person, assessee’s interest could not be represented, then assessee should be benefitted. More so, in case like this where intimation u/s 143(1) of the Act was passed.
In the light of aforesaid the grounds are sustained and the impugned order of ld. CIT(A) are set aside. The issues are restored on the merits to the files of Assessing Officer to consider the Form 10AB and returns of the assessee and proceed to pass fresh assessment orders. The appeals are allowed in aforesaid terms.
Issues: (i) Whether the notice issued under Section 148 (dated 25.07.2022) for assessment year 2014-15 is time barred and the consequent reassessment order is invalid; (ii) Whether the notices issued under Section 148 (dated 23.07.2022) for assessment years 2016-17 and 2017-18 are invalid for being granted approval by an authority not competent under Section 151; (iii) Whether the notice and reassessment for assessment year 2019-20 are invalid for want of jurisdiction because the officer who issued the notice lacked pecuniary/territorial jurisdiction and there was no transfer order under Section 127.
Issue (i): Whether the notice under Section 148 dated 25.07.2022 for AY 2014-15 was issued beyond the surviving period available after the deemed notice under Section 148A(b) and is therefore time barred.
Analysis: The decision applies the legal framework established by the Hon'ble Supreme Court in Rajeev Bansal and Ashish Agarwal and the interplay with the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). Under that framework a notice originally issued under the old regime is deemed to be a show cause notice under Section 148A(b); time for the assessing officer to complete action is limited to the surviving period calculated from the original issuance date up to 30.06.2021 as extended by TOLA, with exclusions for the period of stay and two weeks allowed for the assessee to reply. Once the assessee filed its first reply on 01.06.2022, the surviving period of 15 days expired on 16.06.2022 and the assessing officer was required to complete the Section 148A(d) action and issue any fresh Section 148 notice within that surviving period. The AO issued Section 148 on 25.07.2022 which is beyond the surviving period; therefore the notice was issued after the time limit prescribed by the combined scheme of Section 149 read with TOLA and the controlling Supreme Court decisions.
Conclusion: The Section 148 notice dated 25.07.2022 for AY 2014-15 is time barred and the consequent reassessment order is quashed. (In favour of the assessee)
Issue (ii): Whether Section 148 notices dated 23.07.2022 for AYs 2016-17 and 2017-18 are invalid because the approval under Section 151 was granted by an authority not competent under the amended statute.
Analysis: Section 151 as substituted by the Finance Act, 2021 prescribes the specified authority whose approval is required where more than three years have lapsed from the end of the relevant assessment year. The approval for issuing notices after the three-year period must come from the Principal Chief Commissioner/Principal Director General or, where applicable, the Chief Commissioner/Director General. The record shows that approval was granted by Pr. Commissioner of Income-tax (Pr.CIT) whereas the statutory scheme required approval from the higher specified authority for notices issued after expiry of three years. Reliance on Rajeev Bansal and supportive High Court/Tribunal precedents confirms that defective or improper sanction vitiates the jurisdiction to issue a reassessment notice.
Conclusion: The Section 148 notices for AYs 2016-17 and 2017-18 issued on 23.07.2022 after approval by an authority not competent under Section 151 are invalid and the consequent reassessments are quashed. (In favour of the assessee)
Issue (iii): Whether the reassessment for AY 2019-20 is invalid because the officer who issued the Section 148 notice lacked pecuniary/territorial jurisdiction and there was no transfer order under Section 127.
Analysis: CBDT Instruction No. 1/2011 allocates pecuniary jurisdiction; where returns declare income below the specified threshold the ITO (not ACIT) retains jurisdiction absent a proper transfer order under Section 127. The record does not show any Section 127 transfer to vest jurisdiction in ACIT, Circle-43(1). Precedent of the jurisdictional High Court and coordinate benches holds that initiation of reassessment by an officer without pecuniary/territorial jurisdiction vitiates the notice and assessment since jurisdictional conditions cannot be cured by consent or subsequent steps.
Conclusion: The reassessment for AY 2019-20 based on a notice issued by an officer lacking jurisdiction (and with no Section 127 transfer) is invalid and the assessment order is quashed. (In favour of the assessee)
Final Conclusion: The Tribunal allowed the assessee's appeals and quashed the reassessment notices and consequent assessment orders for the decided assessment years on the grounds of time bar, defective statutory approval, and lack of jurisdiction, resulting in the appeals being allowed in favour of the assessee.
Ratio Decidendi: Where a reassessment notice is deemed under Section 148A(b) and TOLA applies, any fresh Section 148 notice must be issued within the surviving period computed under Section 149 read with TOLA; further, a Section 148 notice issued after expiry of the surviving period, issued with defective sanction under Section 151, or issued by an officer lacking pecuniary/territorial jurisdiction (absent a valid Section 127 transfer) is invalid and vitiates the reassessment.
Reopening of assessment u/s 147 - Period of limitation - scope of new regime - TOLA - surviving period - HELD THAT:- In the instant case, fresh notice u/s 148 of the Act under the amended law was issued beyond the period of limitation i.e. after the expiry of surviving period as prescribed in the case of Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] In the present case, the notice u/s 148 of the Act was issued on 25.07.2022 and reply in response to notice u/s 148A(b) was filed by the assessee on 01.06.2022 thus, the surviving period of 15 days expired on 16.06.2022.
Thus, we hold that the notice issued u/s 148 on 25.07.2022 is barred by limitations and is invalid notice and consequent reassessment order passed u/s 147 r.w.s.144 r.w.s.144B is thus, quashed.
Assumption of jurisdiction approval from an authority competent to grant approval u/s 151 or not? - In the present case for both the assessment years, the notices u/s 148 have been issued on 23.07.2022 i.e., after expiry of three years from the end of relevant assessment years, therefore, sanction/approval for issue of notice u/s 148 must be obtained from Principal Chief Commissioner of Income-tax or Principal Director General or Chief Commissioner or Director General however, the same was granted by Pr.CIT, Delhi-15.
Notices u/s 148 for both the assessment years were issued on 23.07.2023 after obtaining the approval from Pr.CIT on 21.7.2023 thus, the approval was defective and consequent notices issued u/s 148 based on defective approval were invalid. Thus, the consequent orders passed by both the Assessment Years are quashed. Accordingly, Grounds of appeal of the assessee are allowed.
Jurisdiction to pass re-assessment order u/s 148 - territorial jurisdiction over the assessee - HELD THAT:- As per CBDT instruction No. 1/2011 dt. 31.1.2011, the territorial jurisdiction over the assessee lies with the ITO as the income of the assessee was below Rs. 20.00 lacs. It is an admitted position that in the present case, the notice u/s 148 was issued by the AO who was not having jurisdiction over the assessee thus, the reassessment order passed on wrong assumption of jurisdiction in the case of assessee is invalid.
As following the judgements of Vimal Gupta [2017 (10) TMI 1670 - DELHI HIGH COURT] and Sapna Rastogi [2024 (8) TMI 1517 - ITAT DELHI] the re-assessment order passed is without jurisdiction as the notice u/s 148 was issued by the AO having no jurisdiction over the assessee and there was no order passed u/s 127 of the Act for transfer of jurisdiction.
Issues: (i) Whether consultancy services receipts were taxable in India as fees for included services under the India-USA DTAA; (ii) whether support services receipts were taxable in India as fees for included services under the India-USA DTAA; (iii) whether subscription fee for access to the NPS Prism Platform was taxable as royalty under the Act and the India-USA DTAA; (iv) whether settlement of past disputes under the Vivad Se Vishwas Scheme could be treated as tacit acceptance of taxability in later years; and (v) whether credit for tax deducted at source on interest income was to be granted.
Issue (i): Whether consultancy services receipts were taxable in India as fees for included services under the India-USA DTAA.
Analysis: The consultancy services were examined against Article 12(4)(a) and Article 12(4)(b) of the India-USA DTAA. The services were held to be advisory and consultancy in nature, not technical services. Even otherwise, the decisive test was whether technical knowledge, skill, know-how or experience was made available to the Indian entity so that it could apply the same independently. The record did not show any such making available, and the services continued on a recurring basis, which supported the absence of transfer of usable technical capability.
Conclusion: The consultancy receipts were not chargeable as fees for included services and the addition was deleted in favour of the assessee.
Issue (ii): Whether support services receipts were taxable in India as fees for included services under the India-USA DTAA.
Analysis: The support services were tested on the same treaty standard. The core requirement remained the make available condition under Article 12(4)(b). The long-running nature of the arrangement showed that the Indian recipient remained dependent on the foreign service provider, which negatived any conclusion that technical knowledge, know-how or skill had been transferred so as to enable independent use.
Conclusion: The support services receipts were not fees for included services and the addition was deleted in favour of the assessee.
Issue (iii): Whether subscription fee for access to the NPS Prism Platform was taxable as royalty under the Act and the India-USA DTAA.
Analysis: The subscription arrangement was examined to determine whether it involved use of, or right to use, copyright. Mere access to a platform or copyrighted material was distinguished from transfer of copyright itself. On the facts, the subscribers obtained use of the platform and not any copyright interest or right to exploit copyright.
Conclusion: The subscription fee did not constitute royalty and the addition was deleted in favour of the assessee.
Issue (iv): Whether settlement of past disputes under the Vivad Se Vishwas Scheme could be treated as tacit acceptance of taxability in later years.
Analysis: The statutory framework of the Vivad Se Vishwas Scheme and the CBDT circular clarified that a declaration under the scheme does not amount to conceding the tax position or to acquiescence on the disputed issue. A past settlement therefore could not be used as an admission against the assessee for subsequent years.
Conclusion: The argument of tacit acceptance was rejected and the assessee succeeded on this ground.
Issue (v): Whether credit for tax deducted at source on interest income was to be granted.
Analysis: It was accepted that credit could not be denied merely because the deduction was not reflected in Form 26AS if supporting proof was available. At the same time, the corresponding interest income had to be brought to tax while working out the correct liability, and the Assessing Officer was directed to verify the proof and give effect accordingly.
Conclusion: Direction was issued to consider the TDS proof and corresponding income while computing the correct tax liability, resulting in partial relief to the assessee.
Final Conclusion: The additions relating to consultancy services, support services, and subscription fee were deleted, the Vivad Se Vishwas objection failed, and limited relief was granted on the TDS-credit issue, leaving the appeal partly allowed.
Fees for Included Services (FIS) under Article 12(4)(a)/(b) of the India-USA DTAA - consultancy services - as argued that Article 12(4)(a) of DTAA does not apply to the facts of the present case regarding the impugned amount of consultancy services - HELD THAT:- Respectfully following the decisions rendered in earlier years by the ITAT [2023 (9) TMI 106 - ITAT DELHI] AY 2018-19 it is held that no addition can be made as held while providing such services, the American Company is not making available to the Indian Company, any technical expertise, knowledge or skill etc. but is merely transferring commercial information to the Indian Company by utilizing technical skill. Thus, keeping in perspective the aforesaid factors as well as the ratio laid down in the judiciary precedents cited before us, we have no hesitation in holding that the receipts in dispute are not in the nature of FIS under Article 12(4)(b) of India-USA DTAA.
Addition made being receipts on account of support services - Issue covered in favour of assessee AY 2020-21 and 2021-22 [2025 (8) TMI 1776 - ITAT DELHI] held that services rendered are not in relation to any manufacturing activity. In this view of the matter, the receipts cannot be treated as FIS under Article 12(4)(b) of the tax treaty. The Assessing Officer is directed to delete the addition.
Subscription fee - Issue covered in favour of the assessee by the ITAT’s order in assessee’s own case for AY 2021-22 [2025 (8) TMI 1776 - ITAT DELHI] as held the services provided by the assessee under the subscription agreement cannot be construed as right to exploit a copyright, but merely such services provide use of 'copyrighted article’. We therefore hold that the subscription receipts do not constitute ‘royalty’ in terms of the DTAA and consequently are not taxable in India.
TDS amount was not reflected in Form 26AS hence, the assessee excluded the corresponding income while filing its return of income - At this stage the assessee wants credit for the Tax Deducted at Source (TDS). It deserves to be held that while in principle the assessee deserves credit for Tax Deducted at Source but it is also clear that the corresponding income should be offered for tax also. Accordingly, we direct that the AO would take into consideration the TDS proof available with the assessee and would also consider the corresponding income and thereby ensure that the correct tax liability of the assessee is worked out.
Issues: Whether the Customs Broker breached obligations under Regulation 10(d) of the Customs Brokers Licensing Regulations, 2018 (and corresponding Regulation 11(d) of the 2013 Regulations) such as to justify revocation of the broker's licence, forfeiture of the security deposit and imposition of penalty.
Analysis: The Tribunal examined the impugned order and the inquiry record and found that only the single charge under Regulation 10(d)/11(d) was confirmed while charges under Regulations 10(e)/11(e) and 10(f)/11(f) were dropped by the licensing authority. The Tribunal identified contradictions in the licensing authority's findings-on one hand criticising the broker for failing to verify eligibility and notify authorities, and on the other treating the matter as involving interpretation of exemption notifications discoverable only by departmental examination. The Tribunal noted that the port customs authorities had previously cleared similar consignments under the exemption and that the original offence report's penal action against the broker was dropped; the importer paid differential duty when challenged. The Tribunal also considered delay in inquiry and noted litigation-related causes and prior authority holding timelines to be directory. Precedent was applied to the effect that a bona fide classification or claim of exemption based on importer documents and past clearances cannot be equated with a mis-declaration warranting revocation. On this basis the Tribunal concluded that the record did not support fastening primary liability on the broker for the ineligible exemption claim and that the licensing authority had not applied mind consistently in sustaining the single charge.
Conclusion: The impugned order confirming violation of Regulation 10(d)/11(d) and revoking the broker's licence, forfeiting the security deposit and imposing penalty is unsustainable; the appeal is allowed in favour of the appellant and the impugned order is set aside.
Obligations of a Customs Broker under CBLR (Regulation 10/11) - Duty to advise client and report non-compliance (Regulation 10(d)/11(d)) - Standard of liability of a Customs Broker for importer's claim of exemption - Principles of natural justice in disciplinary inquiry - Directory nature of timelines under CBLR - Effect of prior adjudication under the Customs Act on CBLR proceedings - HELD THAT:- From the facts of the case, it is evident that appellant CB have duly filed seventeen B/Es as per the documents given by the importer and after informing the importer about the correct classification of the imported goods and applicable duty thereon, by preparing the check lists and sending it to them before finally filing the B/Es.
In the instant case, the non-payment of duty by the importer, on account of claim made for ineligible notification benefit during the disputed period 21.10.2016 to 04.09.2017, was found by the department only on the basis of specific intelligence developed by the Air Preventive Unit/R&I Division of the Commissioner of Customs, Air Cargo Complex, Mumbai when similar import took place vide B/E No.3100605 dated 04.09.2017, and hence the appellants CB cannot be found fault for the reason that they did not advise their client importer to comply with the provisions of the Act of 1962. Further, as the duty exemption benefit for imported goods were hitherto have been extended, by the very same customs authorities at the port of import during the relevant point of time, the appellants CB could not have brought it to the notice of the Deputy Commissioner of Customs (DC) or Assistant Commissioner of Customs (AC). Thus, we are of the considered view that the violation of Regulation 10(d)/ 11(d) ibid, as concluded in the impugned order is not sustainable.
As the Hon’ble Supreme Court had held in the case of Northern Plastic Limited [1998 (7) TMI 91 - SUPREME COURT] holding that the declaration of the description of goods given correctly and fully in the Bill of Entry/classification declaration laying claim to some exemption was in the nature of a claim made on the basis of the belief entertained by the appellant and therefore, cannot be said to be a mis-declaration for the purpose of Customs Act.
Thus, we are of the considered view that the conclusion arrived by the Principal Commissioner of Customs (General) on this issue in the impugned order is not supported by any evidence or factual detail, to fasten the liability for claiming ineligible notification benefit on the part of the appellant CB, and thus the impugned order stating that the appellant CB have violated Regulation 10(d) ibid is not sustainable.
No merits in the impugned order passed by the learned Principal Commissioner of Customs (General), Mumbai in revoking the license of the appellant; and for forfeiture of security deposit, inasmuch as there is no violation of regulations 11(d)/10(d) of CBLR, 2013/2018, and the findings in the impugned order is contrary to the facts on record.
Therefore, by setting aside the impugned order, we allow the appeal in favour of the appellant.
Issues: Whether penalty under Section 112(b) of the Customs Act, 1962 can be sustained against the customs house agent for alleged knowledge of incorrect classification and denial of SAFTA benefit.
Analysis: The Tribunal examined the relevance of the CHA's stated understanding of the goods' composition and its effect on classification and entitlement to SAFTA benefit. The Tribunal considered the scientific nature of classification based on composition and noted subsequent authoritative decision-making addressing the permissible nickel composition for the claimed classification and SAFTA eligibility. In light of that legal position, the previously relied-upon inference of culpable knowledge by the CHA was found to be unsupported, and the classification basis relied upon to impose penalty could not be sustained.
Conclusion: Penalty under Section 112(b) of the Customs Act, 1962 set aside; decision is in favour of the assessee.
Classification of goods - knowledge of the CHA - penalty u/s 112(b) - SAFTA eligibility - reliance on precedent - HELD THAT:- Learned advocate states that in the matter involving classification with composition and other factors of a scientific nature involved, it cannot be stated that the personal knowledge of the CHA will matter to dispute the classification of his client. He further state that as of date, the knowledge exhibited by the CHA stands unsustainable in law as seen in the light of decision of M/s. Shah Foils Ltd. Vs. C.C, Mundra [2024 (5) TMI 336 - CESTAT AHMEDABAD], wherein Double Bench of this Tribunal has held that 1% Nickel cannot disallow the product to become ineligible for the benefit of SAFTA. The decision, inter alia, also indicates that it is not mandatory to have Nickel content of 4.5% to 12% or otherwise. It was his contention that whatever was stated by the CHA and held against him has also been disproved in the aforesaid decision which has held that even 1% Nickel content can still justify the classification as claimed by the appellant’s client. If that be so, no knowledge of any wrong doing as now is available on record seen in the light of aforesaid decision, it cannot be inferred that the CHA while doing his duty as such in any manner did anything to attract the provisions of 112(b) of Customs Act, 1962 and therefore the penalty as has been imposed cannot sustain.
Matter is accordingly decided and penalty imposed 112(b) is set aside with consequential relief.
Issues: Whether J3 grade stainless steel coils imported by the appellants were subject to any restriction or prohibition and whether the re assessment/regularization fee (RF) and penalties imposed by Customs were justified.
Analysis: The Tribunal examined prior decisions of the Tribunal and Division Bench specifically addressing J3 grade stainless steel, which record that the product is permitted for import and not subject to restriction or prohibition. Those decisions were treated as binding precedent for the facts of these cases, rendering the question no longer res integra. Applying those precedents to the present facts, the imposition of RF and penalties was examined in light of the finding that the goods were permissible imports; accordingly, the impugned RF and fines lacked legal justification. The Tribunal therefore set aside the RF and penalty and granted consequential relief to the appellants.
Conclusion: The appeals are allowed; the finding that J3 grade stainless steel coils were not restricted/prohibited is affirmed and the re assessment/regularization fee and penalties imposed by Customs are set aside in favour of the appellants.
Import restriction/prohibition - Permissibility of J3 Grade stainless steel imports - Reliance on precedent - Res Integra - Setting aside of penalty and RF - Consequential relief - HELD THAT:- Learned AR states that the issue is no more res Integra and stands decided by following decisions of Shri. Khatu Shyam Sales and Tubes LLP [2026 (2) TMI 302 - CESTAT AHMEDABAD] as well as the decision of vide Final Order No. 10085/2026 dated 12.02.2026 - D. Bhatia & Company Vs. Commissioner of Customs, Mundra [2026 (2) TMI 748 - CESTAT AHMEDABAD], which was specifically on J3 Grade of Stainless Steel and both of which are permitted by the concerned Ministry to be imported, without any hinder as has been allegation of breach of various sections against these importer by the Customs department.
Considering the decisions pointed out by the learned advocate given by the Division Bench and this Court, it is clear that the issue is no more res Integra and on merits the matter is in favour of the party. If that be so, no penalty and RF can be justified, same are set aside with consequential relief.
Appeals allowed.
Issues: (i) Whether the demand of service tax confirmed on receipts for FY 2015-16 and FY 2016-17 is sustainable where the services relate to construction of road and canal claimed to be exempt under Notification No. 25/2012-ST dated 20.06.2012; (ii) Whether interest, penalties and late fee levied under provisions of the Finance Act, 1994 and Rule 7C are sustainable.
Issue (i): Whether the demand of service tax on receipts for FY 2015-16 and FY 2016-17 is sustainable when services relate to construction of road and canal exempted by Notification No. 25/2012-ST dated 20.06.2012.
Analysis: The dispute concerns receipts reflected in Form 26AS for FY 2015-16 and FY 2016-17 and their linkage to work orders and execution dates. The authorities below confirmed part of the demand by treating certain receipts as taxable while dropping demand for amounts directly supported by work orders executed in the impugned years. The Tribunal examined the reconciliation submitted by the appellant showing that payments received against the Head Works Division, Agra Canal, Okhla New Delhi work order (WO No.54/SE-III/2014-15 dated 28.02.2015) were reflected in Form 26AS during the impugned years and that the services in question fall within the exemptions at Serial Nos. 12(d) and 13(a) of Notification No. 25/2012-ST dated 20.06.2012. The Tribunal found that the authorities below confirmed demand merely on the basis of Form 26AS reconciliation without adequately examining whether the services were taxable or exempt and without properly appreciating the reconciliation and work order documentation submitted by the appellant.
Conclusion: The demand of service tax of Rs. 47,96,616/- confirmed by the authorities for FY 2015-16 and FY 2016-17 is set aside in favour of the assessee.
Issue (ii): Whether interest under Section 75, penalties under Sections 77 and 78 of the Finance Act, 1994 and late fee under Rule 7C are sustainable.
Analysis: The Tribunal assessed whether ingredients for imposition of penalties and interest were made out and whether there was suppression or willful misstatement with intent to evade tax. Having found that the demand itself was not sustainable and that there was no ingredient of suppression or willful misstatement, the Tribunal considered the justification for interest and penalties.
Conclusion: Interest under Section 75, penalty under Section 77, penalty under Section 78, and late fee under Rule 7C are set aside in favour of the assessee.
Final Conclusion: The Tribunal allowed the appeal, setting aside the confirmed service tax demand and all consequential interest, penalties and late fees, with the net legal effect that the proceedings did not result in any tax, interest or penalty liability against the assessee for the impugned period.
Ratio Decidendi: Receipts for construction of road and canal services provided to government/local authorities, when established by reconciliation with work orders and evidence and falling within Serial Nos. 12(d) and 13(a) of Notification No. 25/2012-ST dated 20.06.2012, are exempt from service tax and cannot form the basis for confirming tax, interest or penalties where authorities fail to examine the exempt nature of the services.
Exemption under Notification No.25/2012 ST (Sr. No.13(a) and 12(d)) - service tax demand based on third party Form 26AS / TDS data - reconciliation of receipts with work orders - confirmation of demand without examining taxability or exemption - penalty for suppression or willful misstatement -HELD THAT:- Admitted the fact that that Appellant has provided services of Road & Canal construction to Government and Local Authorities which were exempted from the levy of service tax under Sr. No. 13(a) and 12(d) of Notification No. 25/2012-ST dated 20.06.2012 respectively.
The authorities below have confirmed/upheld the demand merely on the basis of reconciliation of value of service received for the work orders prior to the impugned period but failed to substantiate & without examining whether such services were taxable or exempt, confirmed the demand of service tax only on the basis of reconciliation of payment received as per Form 26AS statement.
The impugned order and Order-In-Original suffers from various legal infirmities for which the same is liable to be set aside and the consequential demand of service tax is also liable to be set aside.
The demand including interest under Section 75, penalty under Section 77 for ₹20,000/-, and late fee under Rule 7C for ₹60,000/- are also unjustified and are accordingly set aside.
No ingredient of suppression, willful misstatement etc. with an intent to evade payment of Service Tax, and accordingly, the penalty imposed under Section 78 of the Finance Act, 1994 is set aside.
Appeal is allowed in the above terms.
Issues: Whether the appeal preferred under Section 35G of the Central Excise Act, 1944 properly lies to the High Court or, having regard to the questions involved, falls to be preferred to the Supreme Court under Section 35L of the Central Excise Act, 1944.
Analysis: Sections 35G and 35L of the Central Excise Act, 1944 set out the jurisdictional criteria for appeals to the High Court and to the Supreme Court respectively. Section 35G permits an appeal to the High Court where the High Court is satisfied that the case involves a substantial question of law, subject to certain exclusions. Section 35L provides for appeals to the Supreme Court from High Court judgments delivered under section 35G and includes matters involving determination of taxability or excisability. The materials and submissions were examined in light of these provisions to determine the appropriate forum for appellate remedy.
Conclusion: The matter falls to be preferred to the Supreme Court under Section 35L of the Central Excise Act, 1944; accordingly the appeal under Section 35G is dismissed and no interference is made in favour of the appellant (revenue).
Maintainability of an appeal to the High Court u/s 35G - requirement of a substantial question of law for admission u/s 35G - appeal to the Supreme Court u/s 35L(2) - determination of taxability or excisability as falling within Chapter appeals - HELD THAT:- On perusal of Sections 35G and 35L of the Central Excise Act, 1944, in our opinion, this appeal should be preferred before the Hon’ble Supreme Court under Section 35L Sub-section (2) of the Act.
The appeal preferred by the department is dismissed.
Issues: (i) Whether interest on the refunded amount is payable from the date of deposit or from the date immediately after the expiry of three months from filing the refund application; (ii) Whether interest at 12% per annum is payable instead of 6% per annum.
Issue (i): Whether interest commences from date of deposit or from the date after three months from filing the refund application.
Analysis: The question depends on whether the refunded amount is a "duty" within Section 11B/11BB of the Central Excise Act, 1944 or a revenue deposit. Section 11BB prescribes interest on delayed refunds of duty from the date after three months from receipt of the refund application. Where an amount was paid under protest during investigation and prior to any adjudication or quantified demand, it does not acquire the character of "duty" and remains a deposit. Judicial precedents and binding High Court authority have held that Sections 11B/11BB apply only to refunds of duty and not to refunds of revenue deposits; therefore the commencement rule in Section 11BB cannot be imported into cases of revenue deposits.
Conclusion: Issue (i) is answered in favour of the appellant; interest is payable from the date of deposit because the refunded amount is a revenue deposit and not "duty" under Section 11B/11BB.
Issue (ii): Whether interest at 12% per annum is payable instead of 6% per annum.
Analysis: There is no statutory rate prescribed for interest on refund of revenue deposits under the Central Excise Act. In absence of a statutory prescription, judicial practice and principles of equity govern the rate. Tribunal precedent, affirmed by the Hon'ble High Court, has awarded 12% per annum on refunds of revenue deposits as appropriate where no statutory rate is provided and where amounts were retained without lawful authority.
Conclusion: Issue (ii) is answered in favour of the appellant; interest at 12% per annum is payable on the refunded amount from the date of deposit until actual refund, with adjustment for interest already sanctioned.
Final Conclusion: The impugned appellate order denying interest from the date of deposit and awarding interest at 6% per annum is set aside; the matter is resolved by treating the refund as that of a revenue deposit, with interest awarded at 12% per annum from date of deposit until actual payment, and consequential reliefs directed to be given by the authority.
Ratio Decidendi: Where an amount is paid under protest during investigation and prior to any adjudication or quantified demand, it is a revenue deposit and not "duty" under Section 11B/11BB of the Central Excise Act, 1944; consequently Sections 11B/11BB do not govern commencement or rate of interest for such refunds and judicially determined interest (12% per annum) may be awarded in the absence of a statutory rate.
Characterisation of payment as duty or revenue deposit - Interest on delayed refunds - Commencement point for interest where refund relates to revenue deposit - Rate of interest on refund of revenue deposit - Applicability of Section 11B/11BB to refunds of revenue deposits - Principle against unjust enrichment and Article 265 -
Characterisation of payment as duty or revenue deposit - HELD THAT:- Once it is accepted that no duty was legally payable, the amount deposited under protest cannot be treated as “duty” so as to attract the provisions of sections 11B and 11BB of the Central Excise Act.
The issue is no longer res integra in view of the decision of this Tribunal in Parle Agro [2021 (5) TMI 870 - CESTAT ALLAHABAD], which has been affirmed by the Hon’ble Allahabad High Court. It has been conclusively held therein that Section 11B/11BB of the Central Excise Act applies only to refunds of duty and has no application to refunds of revenue deposits. Consequently, the restriction contained in Section 11BB regarding commencement of interest after expiry of three months from the date of filing of the refund application cannot be imported into cases involving refund of revenue deposits.
Therefore, the Appellate Authority, while passing the Impugned OIA, has failed to examine the applicability of Section 11BB of the Central Excise Act in the correct legal perspective and has mechanically denied interest from the date of deposit by treating the amount as duty, without recording any finding as to how the amount acquired the character of duty.
Rate of interest on refund of revenue deposit - Principle against unjust enrichment and Article 265 - HELD THAT:- This issue is squarely covered by the decision of this Tribunal in M/s Parle Agro [2021 (5) TMI 870 - CESTAT ALLAHABAD] wherein, after examining the statutory scheme and the absence of any prescribed rate of interest for refund of revenue deposits, this Tribunal held that interest at the rate of 12% per annum is appropriate. The aforesaid decision of this Tribunal has been expressly affirmed by the Hon’ble Allahabad High Court in Principal Commissioner, Central Goods and Service Tax v. M/s Parle Agro Private Limited (supra). The Hon’ble High Court has approved the grant of interest at the rate of 12% per annum in cases involving refund of revenue deposits, thereby lending authoritative approval to the said rate.
Appellant, wherein interest at the rate of 12% per annum has been granted on refund of amounts deposited during investigation or adjudication, on the ground that such amounts were not legally payable as duty or tax. Therefore, the reliance of the Revenue on the provisions of Section 11BB of the Central Excise Act and the corresponding Notification No. 67/2003-C.E. (N.T.) dated 12.09.2003, which prescribe a rate of interest at 6% per annum on delayed refunds of duty, are wholly inapplicable in the Appellant’s case, since the amount retained was never legally due as duty and was wrongfully withheld without authority of law.
Accordingly, answered in favour of the Appellant, holding that interest of INR 59,37,701/- on the refunded amount is payable to the Appellant at the rate of 12% per annum from the date of deposit till the date of actual refund. Since the Impugned OIA has already sanctioned interest amounting to INR 2,72,786/-, the Revenue is directed to sanction and disburse the balance interest of INR 56,64,915/- to the Appellant, in accordance with law.
Appeal is allowed, and the Impugned Order-in-Appeal No.29-CE/APPL-MRT/MRT/2023-24/ dated 08.02.2025, to the extent challenged by the Appellant, is set-aside, with consequential reliefs to the Appellant, as per law.
Issues: Whether, where CVD and SAD paid under the erstwhile law were admissible as CENVAT credit but could not be availed or transitioned after the appointed day, the claim for cash refund of such CVD and SAD is maintainable under Section 142(3) and Section 142(6) of the Central Goods and Services Tax Act, 2017.
Analysis: The Tribunal examined the interplay between the erstwhile CENVAT regime (including Rule 3 and Rule 9 of the CENVAT Credit Rules, 2004) and the transitional provisions contained in Sections 140 to 142 of the Central Goods and Services Tax Act, 2017. It noted that CVD and SAD paid pursuant to regularisation under the Customs Tariff Act, 1975 were admissible as CENVAT credit under the pre-GST law but, after implementation of GST from the appointed day, there existed no mechanism to transition or utilise that credit where duties were paid after the appointed day. The Tribunal held that Sections 142(3) and 142(6) operate to preserve accrued rights by mandating that claims for refund of CENVAT credit or duty paid under the existing law shall be disposed of under the existing law and any amount eventually accruing shall be paid in cash where such credit was not carried forward under GST. The Tribunal rejected reliance on the conditions of Section 11B(2) of the Central Excise Act, 1944 to deny a refund that is specifically permitted by the CGST transitional provisions, observing that denial would extinguish a vested right, offend legitimate expectation, and impose an impossibility on the claimant who could not perform the transitional act of carrying forward credit. The Tribunal also relied on consistent judicial precedents where refunds of CVD and SAD in analogous circumstances were granted, and directed refund with interest under Section 11BB of the Central Excise Act, 1944 within the stipulated period.
Conclusion: The appellant is entitled to cash refund of the CVD and SAD paid, under Section 142(3) and Section 142(6) of the Central Goods and Services Tax Act, 2017, with interest as per Section 11BB of the Central Excise Act, 1944; the impugned order is set aside and the appeal is allowed.
Refund of unutilised CENVAT credit under transitional provisions - Section 142(3) and 142(6) - cash refund of CVD and SAD - non-availability of transitional credit (TRAN-1) and impossibility of performance - prohibition on denying refund by invoking Section 11B(2) - doctrine of lex non cogit ad impossibilia - legitimate expectation and Articles 14 and 265 of the Constitution - interest u/s 11BB - HELD THAT:- In the present case, we find that the appellant is eligible for availing the CENVAT Credit of CVD and SAD paid by them under Rule 3 of the CENVAT Credit Rules, 2004 and there is no dispute on the eligibility of availment of the credit. However, post implementation of GST w.e.f. 01.07.2017, there existed no mechanism to avail or transition such credit, though the duties were paid under the existing law. We observe that Sections 140 to 142 of the CGST Act, 2017 were enacted to safeguard accrued rights, including refunds of CENVAT credit. Sections 142(3) and 142(6) specifically provide that refund claims relating to CENVAT credit, duty or tax paid under the existing law, filed before, on or after the appointed day, shall be processed under the provisions of the existing law and any admissible amount shall be refunded in cash, provided such credit was not carried forward under GST.
It is a fact on record that the appellant filed the refund claim on 09.01.2023, well after the appointed day, for CVD and SAD paid under the earlier regime, which it was otherwise entitled to avail as CENVAT credit under the Central Excise Act, 1944. Considering the fact that the excise law had been repealed, and availing such credit through returns or carrying it forward through TRAN-1 was impossible, by relying on the decisions cited supra, we hold that the appellant is eligible for the cash refund of the CVD and SAD paid by them as per section 142(6) of the CGST Act.
Accordingly, the jurisdictional Assistant Commissioner is to grant refunds of the amount of SAD & CVD paid by the appellant, as reflected in the Show Cause Notice and also in the impugned Order-in-Appeal. Such refunds shall be granted along with interest as provided under section 11BB of the Central Excise Act, 1944, within a period of three months from the date of receipt of this order.
Thus, we set aside the impugned order and allow the appeal filed by the appellant, with consequential relief, if any, as per law.
Issues: (i) Whether the disputed MS frame parts and transformer tanks were correctly classifiable under CTH 85049010 as parts of transformers or under CTH 73269099 as articles of iron and steel; (ii) Whether the extended period of limitation could be invoked and penalty sustained.
Issue (i): Whether the disputed MS frame parts and transformer tanks were correctly classifiable under CTH 85049010 as parts of transformers or under CTH 73269099 as articles of iron and steel.
Analysis: The goods were manufactured against specific purchase orders and drawings supplied by the buyers, and the buyer certificates as well as the independent professional certificate supported the position that the items were exclusively used in transformer manufacture. The cited precedent on transformer tanks and frames supported treatment of such items as parts of transformers. On the facts, the goods were not mere general articles of iron and steel but components made for use in transformers.
Conclusion: The classification under CTH 85049010 was correct and the contrary classification under CTH 73269099 was not sustainable.
Issue (ii): Whether the extended period of limitation could be invoked and penalty sustained.
Analysis: The periodic returns disclosed the classification adopted by the appellant, and the department was aware of the clearances from the beginning. In the absence of suppression or concealment, the demand could not be raised by invoking the extended period. Since the classification dispute failed in favour of the Revenue, the penalty and demand based on the disputed classification also could not survive.
Conclusion: The extended period of limitation was not invokable and the penalty was not sustainable.
Final Conclusion: The appellant succeeded on merits and on limitation, and the impugned order was set aside with consequential relief.
Ratio Decidendi: Goods manufactured to specific buyer drawings and exclusively used as transformer components are classifiable as parts of transformers, and where the classification adopted is fully disclosed to the department, the extended period cannot be invoked absent suppression of facts.
Classification of goods -MS frame parts, tanks and gland plates - classifiable as parts of electrical transformers under Chapter 85 (CTH 85049010) or as articles of iron and steel under CTH 73269099 -Commercial identity test for tariff classification - Extended period of limitation under excise law - HELD THAT:- We find that the issue of classification of transformer tanks and frames and availability of Notification No. 160/86-CE of the goods was dealt with by CESTAT Bangalore in the case of Deccan Structural Systems [1999 (8) TMI 323 - CEGAT, NEW DELHI], wherein it was held that transformer tanks, frames, transformer radiators, etc. are parts of transformers and revenue has not disputed their classification under CTH 8504 of the Central Excise Tariff Act 1985. In this case, buyers have given purchase orders but also supplied drawings for manufacture of MS tanks, Ms frame parts and Gland plate as parts of transformers so as to fit in with a particular capacity of electrical transformer.
We therefore, are of the view that the goods manufactured by the appellant are parts of transformers and not the articles of iron and steel. The say of the appellant is also supported by the certificate given by both the buyers who have certified that the goods so procured from the appellant have been used in the manufacture of transformer and not elsewhere. The certificate given by the independent Chartered accountant reinforces the above.
We agree with the contention of the appellant and hold that the goods manufactured by the appellant are correctly classified under CTH 85049010.
Extended period of limitation under excise law - HELD THAT:- The appellant has clearly shown in their ER-1 returns that they are clearing MS frame parts and MS tanks for transformer under CTH 85049010 and paid excise duty @ 10%. Therefore, manufacture of MS frame parts and MS tanks for transformer and it’s clearance under CTH 85049010 was in the knowledge of the department right from the beginning and it was never questioned by the revenue authorities. During audit conducted during April to June, 2007, this point was raised by the officers which culminated in present demand. When all the facts were in the knowledge of the department, invocation of extended period of limitation is not available to Revenue.
As discussed above, we hold that the appellant has correctly classified their finished goods under CTH 85049010 and therefore, we find no reason to interfere with classification of these goods. The appellant therefore, succeeds both on the merit as well as on limitation. Accordingly, we set aside the impugned order with consequential relief, if any as per law.
TaxTMI 