TaxTMI Updates e-Newsletter
Feb 25,2023

Refund under Rule 89(5) - inverted duty structure - validity of refund sanction where exporter omitted name and GSTIN but later corrected - quashing and remand for fresh adjudication - opportunity of hearing and filing of additional documents on appeal - judicial review under Articles 14 and 226

Refund under Rule 89(5) - validity of refund sanction where exporter omitted name and GSTIN but later corrected - quashing and remand for fresh adjudication - opportunity of hearing and filing of additional documents on appeal - Whether the appellate order setting aside the refund sanction should be quashed and the matter remitted to the Appellate Authority for fresh decision after permitting the petitioner to place on record corrected documents - HELD THAT: - The Court noted that the refund was initially sanctioned by the Assistant Commissioner under Rule 89(5) after examining the factual aspects of the transactions, although the Exporter had initially failed to mention the petitioner's name and GSTIN in the shipping bill. Subsequently, at the request of the petitioner, the Exporter submitted a corrected form. The Appellate Authority's order reversing the refund did not consider the corrected form and the related factual material. In these circumstances the High Court held that the impugned appellate order could not stand: the correct course was to quash that order and remit the appeal for de novo consideration. The petitioner was permitted to file additional documents and an affidavit in support of the refund claim. The Appellate Authority was directed to decide the appeal afresh after examining all documents and giving the parties an opportunity of hearing, with all issues left open for its determination. [Paras 10, 11]

Impugned appellate order quashed; CGST appeal revived and remitted to the Appellate Authority for fresh decision after permitting filing of additional documents and granting opportunity of hearing; all issues kept open.

Final Conclusion: The petition is allowed to the extent that the appellate order dated 1.5.2020 is quashed and the CGST appeal is revived and remitted to the Appellate Authority to decide afresh on merits after permitting the petitioner to file additional documents and granting an opportunity of hearing; all issues are left open for fresh adjudication.

Principles of natural justice - validity of show cause notice - sufficiency of reasons in a notice - right to be heard - cancellation of GST registration - remand for fresh consideration

Validity of show cause notice - sufficiency of reasons in a notice - principles of natural justice - right to be heard - The show cause notice dated 25.04.2022 did not disclose any intelligible reason and was therefore inadequate to afford the petitioner a meaningful opportunity to respond. - HELD THAT: - The show cause notice contained only the terse statement that the "Firm suspended under Section 29(2)(a) of CGST Act 2017 or Delhi SGST Act" without disclosing facts or material on which the adverse action was proposed. The court held that a show cause notice must indicate the reasons for the proposed adverse action so as to enable the noticee to effectively answer the allegations; a vague notice that fails to disclose the basis of the proposed cancellation does not meet this requirement and thereby infringes the principles of natural justice and the right to be heard. The court recorded that the notice dated 25.04.2022 was bereft of any reason capable of eliciting a meaningful response from the petitioner and was therefore defective. [Paras 6, 7]

The show cause notice dated 25.04.2022 was held to be vague and inadequate for want of reasons and, on that basis, deficient under the principles of natural justice.

Cancellation of GST registration - remand for fresh consideration - right to be heard - The cancellation order dated 19.07.2022 was set aside and the matter remanded for fresh consideration after affording the petitioner an opportunity to file a response to the show cause notice and be heard. - HELD THAT: - Having found the show cause notice defective for want of adequate reasons, the court did not adjudicate on the merits of the allegations or on whether the communication from the Directorate justified cancellation or suspension of refunds. Instead, the court set aside the impugned cancellation order and remitted the matter to the adjudicating authority to consider the case afresh. The petitioner was granted liberty to file its response to the show cause notice within one week, and the authority was directed to consider that response, afford the petitioner an opportunity of hearing, and pass a fresh order. The court expressly reserved all rights and contentions and clarified that it had not examined the substantive merits of the underlying communication. [Paras 12, 13, 14, 15]

Impugned cancellation order set aside; matter remanded for fresh consideration after giving the petitioner an opportunity to respond and be heard.

Final Conclusion: The petition was allowed: the show cause notice was held to be vague and violative of natural justice; the cancellation order dated 19.07.2022 was set aside and the matter remitted to the adjudicating authority to consider afresh after permitting the petitioner to file its response and be heard; the court did not decide the merits of the alleged grounds for cancellation.

Maintainability of writ petition in presence of an arbitration agreement - arbitration clause - challenge to executive formula for determination of GST liability - Section 142(10) of the Goods and Services Tax Act, 2017

Maintainability of writ petition in presence of an arbitration agreement - arbitration clause - Writ petition is not maintainable in respect of disputed refund claims which fall for resolution under the arbitration clause of the contract. - HELD THAT: - The Court found that the agreement between the parties contains Clause 34 providing for arbitration of disputes arising out of the agreement. Where the amount claimed is disputed, the contractual remedy of arbitration is available and appropriate. The petitioner's grievance in respect of disputed sums therefore ought to be agitated before the arbitrator as per the contractual mechanism, rather than in writ proceedings. The Court observed that the record indicates a dispute over the quantum claimed and that the existence of the arbitration clause renders the writ remedy inappropriate for resolution of such disputes.

Petition dismissed insofar as it seeks adjudication of disputed refund claims; petitioner directed to pursue remedy under Clause 34 (arbitration), except as expressly admitted by the State.

Challenge to executive formula for determination of GST liability - Section 142(10) of the Goods and Services Tax Act, 2017 - Challenge to sub-paragraph 2 of paragraph 2 of the Government Order (formula for GST calculation) was not sustained: the petitioner did not plead a specific statutory contravention and Section 142(10) does not prescribe a mode of calculation. - HELD THAT: - The petitioner relied during argument upon Section 142(10) of the Act of 2017, contending that the Government Order's formula conflicted with that provision. The Court noted that the writ petition and the reliefs did not specify how the Government Order contravened any particular provision of the Act. Further, sub-section (10) of Section 142 merely states that supplies pursuant to pre appointed day contracts are liable to tax under the Act; it does not prescribe any formula or mode of calculation. The petitioner therefore failed to demonstrate that the impugned formula violated Section 142(10) or any other provision of the Act. In the absence of pleaded and argued statutory violation, the challenge to the formula could not be sustained.

Challenge to the said paragraph of the Government Order dismissed for want of merit and for failure to demonstrate statutory contravention.

Final Conclusion: Writ petition dismissed. Disputed refund claims must be pursued before the arbitrator under the contract's Clause 34; the Court did not find merit in the belated statutory challenge to the Government Order's formula under Section 142(10). The admitted amount acknowledged by the State remains excepted from the requirement of arbitration.

Validity of show cause notice - Principles of natural justice - Cancellation of GST registration - Requirement of statutory authority/NOC for revocation

Validity of show cause notice - The impugned show cause notice dated 22.09.2022 was legally defective and could not be treated as a show cause notice. - HELD THAT: - The show cause notice merely alleged "Non-compliance of any specified provisions in the GST Act or the Rules made thereunder as may be prescribed" without specifying the provision or factual basis for the proposed cancellation. The purpose of a show cause notice is to enable the noticee to meet the allegations on which adverse action is proposed. A notice that does not disclose any allegation or grounds that are capable of being meaningfully answered is bereft of reasons and issued mechanically without application of mind. Consequently, it cannot be regarded as a valid show cause notice. [Paras 8, 9, 10]

The impugned show cause notice is invalid.

Principles of natural justice - Cancellation of GST registration - The order cancelling the petitioner's GST registration dated 11.10.2022 was passed in violation of principles of natural justice and is liable to be set aside. - HELD THAT: - The registration was cancelled on the ground that the petitioner neither appeared for personal hearing nor submitted a reply to the defective show cause notice. Given that the show cause notice did not furnish any intelligible allegations, the petitioner's failure to respond is explicable and the cancellation based on non-response is unsustainable. A cancellation order premised on a procedurally invalid show cause notice amounts to a breach of natural justice. Therefore the cancellation order cannot stand and must be quashed. The court nevertheless left open the respondents' right to initiate fresh action in accordance with law. [Paras 11, 15, 17]

The cancellation order dated 11.10.2022 is set aside for breach of natural justice.

Requirement of statutory authority/NOC for revocation - There is no statutory requirement that a taxpayer obtain an NOC from any authority to move an application for revocation of cancellation of GST registration. - HELD THAT: - The communication produced by the petitioner indicated a demand that a 'proper NOC from Anti-Evasion Head-Quarter' be obtained before the revocation application could be processed. The court observed that no statutory provision mandates that a taxpayer must secure such an NOC to file or prosecute an application for revocation of cancellation. Requiring a taxpayer to obtain an extraneous NOC before processing a revocation application is not supported by the statute. [Paras 13, 14]

No statutory requirement exists for obtaining an NOC before filing or processing a revocation application.

Final Conclusion: The petition is allowed: the show cause notice dated 22.09.2022 and the cancellation order dated 11.10.2022 are set aside. The respondents are, however, free to initiate fresh proceedings in accordance with law.

Non-speaking order - Violation of principles of natural justice - Cancellation of GST registration - Quashing of show-cause notice - Revival of registration - Fresh notice in accordance with law

Non-speaking order - Violation of principles of natural justice - Cancellation of GST registration - Quashing of show-cause notice - Revival of registration - Validity of the show-cause notice dated 09.05.2022 and the order of cancellation dated 04.06.2022 - HELD THAT: - The show-cause notice was vague, did not disclose particulars or any document substantiating the allegation that the taxpayer was non-functioning, and the cancellation order was cryptic and non-speaking. The authority failed to record reasons, refer to the contents of the show-cause and the taxpayer's response, and thereby did not observe the principles of natural justice. Given that cancellation carries penal and pecuniary consequences, the procedural lapses rendered the notice and the order unsustainable. The Court therefore quashed the show-cause notice and the consequential order and directed that the GST registration be revived forthwith. [Paras 5, 6, 7]

Show-cause notice dated 09.05.2022 and cancellation order dated 04.06.2022 quashed; GST registration revived.

Fresh notice in accordance with law - Cancellation of GST registration - Whether the competent authority may initiate fresh proceedings for cancellation - HELD THAT: - The Court left open the prosecutorial power of the competent authority to revisit the question of cancellation, but constrained such power by requiring any fresh notice or proceedings to be issued and conducted in accordance with law, with adequate particulars and observing principles of natural justice. The order therefore does not decide the merits of cancellation on facts but permits fresh initiation subject to compliance with legal and procedural requirements. [Paras 5]

Competent authority permitted to issue a fresh notice for cancellation, strictly in accordance with law.

Final Conclusion: The petition is allowed: the show-cause notice and cancellation order are quashed, the GST registration is revived forthwith, and the authority may, if justified, issue a fresh notice for cancellation in accordance with law.

Constitution of Appellate Tribunal - extension of limitation for filing appeal - protective declaration to stay recovery proceedings - writ jurisdiction under Article 226 - clarificatory trade circular and its operative effect

Constitution of Appellate Tribunal - extension of limitation for filing appeal - clarificatory trade circular and its operative effect - Whether non-constitution of the State GST Appellate Tribunal causes prejudice to taxpayers and whether the time for filing appeals is extended by the Trade Circular dated 26 May 2020. - HELD THAT: - The Court recorded and accepted the Circular issued by the Commissioner of State Tax dated 26 May 2020 as a clarificatory instruction that, in view of the non-constitution of the Appellate Tribunal, the prescribed time limit to make application to the Appellate Tribunal will be counted from the date on which the President or the State President enters office. The Circular further advises that appellate authorities may dispose pending appeals expeditiously and contains operative guidance on the computation of limitation. The Court held that in light of the Circular there is, at present, no prejudice occasioned to taxpayers by reason of the non-availability of the State GST Tribunal because the time for filing appeals is effectively extended as stated in Clause 4.3 of the Circular. [Paras 6, 7]

Time for filing appeals to the Appellate Tribunal is to be counted from the date the President or State President enters office as clarified by the Trade Circular; non-constitution of the Tribunal does not presently cause prejudice in view of that extension.

Protective declaration to stay recovery proceedings - clarificatory trade circular and its operative effect - Whether filing the prescribed declaration under the Circular preserves taxpayers from recovery proceedings and what interim course the Court will adopt in pending writ petitions. - HELD THAT: - The Circular requires a taxpayer, after disposal of the first appeal, to submit a declaration in Annexure-I to the jurisdictional tax officer stating intention to file an appeal to the Appellate Tribunal; if such declaration is filed within the stipulated period recovery proceedings will not be initiated and protective measures set out in Clause 5 will apply. The Court noted many protectively filed writ petitions but observed that where such declarations have been filed there is no present prejudice. The Court permitted petitioners who had not yet filed the declaration to do so within 15 days and treated any such filing as without prejudice to other contentions. In consequence, the Court declined to keep the writ petitions pending and disposed of them while keeping contentions open. [Paras 5, 7, 8, 9]

Filing the declaration in terms of the Circular prevents initiation of recovery proceedings pending the contingency in Clause 4.3; petitioners are permitted to file the declaration within 15 days and the writ petitions are disposed of without prejudice to substantive contentions.

Writ jurisdiction under Article 226 - clarificatory trade circular and its operative effect - Whether further judicial intervention is required in light of administrative measures and suggested procedural steps to reduce writ litigation. - HELD THAT: - While keeping all contentions open, the Court considered practical administrative measures to reduce writ petitions arising from the non-constitution of the GST Tribunal. The Court suggested that the State incorporate the stipulations of Clauses 4.3 and 5 of the Circular into the orders passed by the First Appellate Authority so taxpayers receive clear notice of the extended time limit and the protective mechanism, and further recommended that, as a matter of indulgence, a 15-day opportunity be given for filing the declaration before initiating recovery. The learned AGP undertook to place these suggestions before the State Commissioner of State Tax. Having recorded these clarifications and suggestions, the Court disposed the petitions while leaving substantive challenges open for future adjudication when the contingency occurs. [Paras 10, 11, 12]

No further interim judicial relief is required now; administrative incorporation of the Circular's clauses into appellate orders and a 15-day indulgence before recovery are directed as suggestions to the State to reduce writ inflow; petitions disposed while keeping contentions open.

Final Conclusion: The writ petitions challenging orders of the State Tax Authorities were disposed of: the Trade Circular dated 26 May 2020 extends the time for filing appeals to the Appellate Tribunal until the President/State President assumes office and provides for a protective declaration to defer recovery; petitioners may file the prescribed declaration within 15 days if not already filed; administrative measures suggested to the State aim to reduce further writ litigation; substantive challenges are left open for adjudication when appeals before the Tribunal become possible.

Bail under Section 439 Cr.P.C. - tax evasion involving wrongful availment of Input Tax Credit - Section 132(1)(i) of the Central Goods and Services Tax Act, 2017 - punishment threshold exceeding five hundred lakh rupees - application of D.K. Basu guidelines - deposit as a condition for grant of bail

Bail under Section 439 Cr.P.C. - tax evasion involving wrongful availment of Input Tax Credit - Section 132(1)(i) of the Central Goods and Services Tax Act, 2017 - punishment threshold exceeding five hundred lakh rupees - deposit as a condition for grant of bail - application of D.K. Basu guidelines - Whether bail should be granted to the petitioner arrested for alleged wrongful availment and passing of inadmissible Input Tax Credit and offences under Section 132(1)(c),(f),(k),(l) of the CGST Act, 2017, and on what conditions. - HELD THAT: - The petitioner was arrested on 04.11.2022 and remains in judicial custody; the challan has been presented and no investigation is pending. The offences attract Section 132(1)(i) consequences where the amount involved exceeds the five hundred lakh rupees threshold, making the offences serious and likely to result in a trial of considerable duration. Having noted precedent where the grant of bail was made subject to substantial deposit, and without expressing any opinion on merits, the Court balanced the gravity of the allegations and the prolonged pre-trial custody against the absence of further investigative need and the possibility of extended detention. In view of the totality of facts and circumstances, the Court exercised its discretion under Section 439 Cr.P.C. to grant bail but imposed a monetary condition to secure public interest and the prosecutorial claim; accordingly the petitioner was directed to deposit a sum with the respondent Department before attestation of bail bonds, and to furnish bail bonds and sureties for appearance at trial.

Bail under Section 439 Cr.P.C. granted to the petitioner on condition of deposit of Rs. 3 crores before the respondent Department and execution of a personal bond of Rs.2,00,000 with two sureties of Rs.1,00,000 each to the satisfaction of the trial court; trial court to record receipt of the deposit prior to attesting bail bonds.

Final Conclusion: The bail application is allowed; the petitioner is ordered released on the specified bond and sureties, subject to depositing Rs. 3 crores with the respondent Department under protest and the trial court recording the receipt of such deposit before attesting the bail bonds.

Freezing of bank account under the CGST Act restricting withdrawals - refund of input tax credit - order under Section 83 of the CGST Act as justification for blocking - operation of bank account subject to a minimum credit balance - availability of statutory remedies against administrative blocking

Freezing of bank account under the CGST Act restricting withdrawals - refund of input tax credit - operation of bank account subject to a minimum credit balance - Extent to which the respondents may block the petitioner's bank account and the petitioner's entitlement to operate the account. - HELD THAT: - The Court confined the impugned action to a freeze of the petitioner's bank account only to the extent of a credit balance of Rs.50 lacs; the petitioner is not entitled to withdraw amounts so as to reduce the account balance below Rs.50 lacs. The petitioner may operate the bank account and is entitled to withdraw any amount in excess of a credit balance of Rs.50 lacs. This limitation was imposed in view of the respondents having taken action in relation to refund of input tax credit and earlier releases, and to balance the competing contentions about alleged irregularities while permitting limited use of the account. [Paras 5]

Bank account frozen to the extent of a credit balance of Rs.50 lacs; petitioner may withdraw amounts in excess of that balance.

Order under Section 83 of the CGST Act as justification for blocking - availability of statutory remedies against administrative blocking - Whether the respondents' reasons for blocking were placed before the Court and the procedural posture following issuance of an order under Section 83. - HELD THAT: - The Court noted that the respondents have since passed an order under Section 83 of the CGST Act and that the counter-affidavit filed in the Court may be treated as the reasons for the action taken. The petition was disposed of in light of the respondents having issued the statutory order. The Court expressly reserved all rights and contentions of the petitioner to pursue statutory remedies, thereby leaving open the substantive challenge to the blocking for determination through available statutory processes. [Paras 6, 7, 8]

Respondents' counter-affidavit to be regarded as reasons for the action; petition disposed of with liberty to the petitioner to pursue statutory remedies.

Final Conclusion: The petition was disposed of by confining the freeze on the petitioner's bank account to ensure a minimum credit balance of Rs.50 lacs (permitting withdrawals above that balance), treating the counter-affidavit as the stated reasons for the action under Section 83 of the CGST Act, and leaving open the petitioner's statutory remedies.

Physical verification of business premises - Rule 25 of the Central Goods and Services Rules, 2017 - Requirement of presence of person and uploading of verification report with photographs in FORM GST REG-30 - Requirement of opportunity of hearing before cancellation of GST registration - Fresh inquiry and issuance of show-cause notice in accordance with law

Physical verification of business premises - Rule 25 of the Central Goods and Services Rules, 2017 - Requirement of presence of person and uploading of verification report with photographs in FORM GST REG-30 - Whether the inspection of the petitioner's premises complied with Rule 25 of the 2017 Rules and whether the show-cause notice and cancellation premised on that inspection were sustainable. - HELD THAT: - The Court found that Rule 25 mandates physical verification of the place of business in the presence of the person and uploading of the verification report along with photographs in FORM GST REG-30 within fifteen working days. The inspection in question was conducted without affording the petitioner an opportunity to be present, and no photographs were taken or uploaded. Because the impugned show-cause notice and the subsequent cancellation order were premised on that inspection, and the procedural requirements of Rule 25 were not complied with, the show-cause notice and the cancellation could not be sustained. The court therefore set aside the show-cause notice and the cancellation order while reserving the parties' rights. [Paras 10, 11, 13, 14]

Impugned show-cause notice and cancellation order set aside for non-compliance with Rule 25 and failure to afford opportunity and to upload required verification material.

Requirement of opportunity of hearing before cancellation of GST registration - Fresh inquiry and issuance of show-cause notice in accordance with law - Whether the respondents may undertake further inquiry and, if satisfied, issue a fresh show-cause notice and proceed in accordance with law. - HELD THAT: - The Court clarified that its order setting aside the impugned show-cause notice and cancellation does not preclude the respondents from making further inquiries. If the respondents, after conducting lawful inquiries consistent with Rule 25 and affording opportunity of hearing, conclude that the petitioner is not carrying on business, they are at liberty to issue a fresh show-cause notice setting out reasons and to proceed according to law. The Court expressly refrained from expressing any view on the factual question whether the petitioner was carrying on business on the relevant date. [Paras 15, 16]

Respondents permitted to make further lawful inquiries and, if appropriate, issue a fresh show-cause notice and proceed in accordance with law; no expression on underlying factual merits.

Final Conclusion: The petition is allowed: the impugned show-cause notice dated 27.09.2022 and the cancellation order dated 02.11.2022 are set aside for non-compliance with Rule 25 and failure to afford the petitioner an opportunity; respondents may conduct further lawful inquiries and, if warranted, issue a fresh show-cause notice and proceed in accordance with law.

Transitional credit under GST - filing and revision of TRAN 1 and TRAN 2 - verification of transitional credit claims by tax authorities - reflection of allowed transitional credit in the Electronic Credit Ledger - precedence of Supreme Court directions over earlier High Court orders

Filing and revision of TRAN 1 and TRAN 2 - transitional credit under GST - Appellant entitled to file or revise TRAN 1 and TRAN 2 forms to claim transitional credit in accordance with the directions of the Hon'ble Supreme Court dated 22nd July, 2022. - HELD THAT: - The High Court dismissed the intra Court appeal by applying and following the comprehensive directions issued by the Hon'ble Supreme Court in Union of India & Anr. v. FILCO Trade Centre Pvt. Ltd. & Anr. dated 22.07.2022. Those directions permit the opening of a common portal for filing/revision of TRAN 1 and TRAN 2 for a specified limited period and allow any registered taxpayer to file or revise relevant forms irrespective of earlier writ petitions or ITGRC decisions. In view of the Supreme Court's order, the appellant is granted liberty to file appropriate revised TRAN 1/TRAN 2 returns and to avail transitional credit subject to the verification process directed by the Supreme Court. The High Court observed that earlier observations by the learned Single Bench which might impede availing benefit are superseded and vacated to the extent inconsistent with the Supreme Court's directions.

Liberty granted to the appellant to file/revise TRAN 1 and TRAN 2 and claim transitional credit as per the Supreme Court's directions.

Verification of transitional credit claims by tax authorities - reflection of allowed transitional credit in the Electronic Credit Ledger - Procedure for verification of claims and subsequent treatment of allowed transitional credit upheld as per Supreme Court directions. - HELD THAT: - The Court applied the Supreme Court's mandate that concerned officers shall have a 90 day period after the filing window to verify the veracity of transitional credit claims, pass appropriate orders on merits after granting reasonable opportunity, and thereafter ensure that allowed transitional credit is reflected in the Electronic Credit Ledger. The High Court directed that these procedural steps govern further action by the respondents and that GSTN must ensure portal functionality as required by the Supreme Court order. Consequently, the departmental verification and accounting steps are to be followed in accordance with those directions.

Respondents to verify claims within the timeframe and reflect allowed transitional credit in the Electronic Credit Ledger in accordance with the Supreme Court's directions.

Final Conclusion: The appeal and connected application are disposed of by permitting the appellant to file or revise TRAN 1/TRAN 2 and claim transitional credit in accordance with the Hon'ble Supreme Court's order dated 22.07.2022; earlier inconsistent observations by the Single Bench are vacated and the respondents are directed to verify and, if allowed, reflect the credit in the Electronic Credit Ledger as per the Supreme Court's procedure.

Condonation of delay - reliance on professional advice - processing of return under section 143(1) - treatment as Association of Persons/Taxation of AOP - registration under section 12AA and retrospective application of sections 11 and 12 via proviso to section 12A(2) -

Condonation of delay - reliance on professional advice - Whether the delay of 561 days in filing the appeal before the CIT(A) ought to have been condoned. - HELD THAT: - The Tribunal examined the assessee's undisputed plea that the delay arose because the assessee, represented by a chartered accountant, was advised to adopt a 'wait and watch' approach and only filed the appeal after recovery proceedings commenced on the advice of a different consultant. The CIT(A)'s refusal to condone delay rested on the remark that a professional is expected to know procedure; however that observation did not dispute the factual position that the assessee had acted on professional advice. Relying on authority and principles that a litigant should not be prejudiced for bona fide reliance on expert advice and that meritorious cases should not be thrown out on technical grounds, the Tribunal held that the facts justified condonation and that the appeal should have been decided on merits rather than rejected for delay. Consequently the Tribunal concluded that the CIT(A) ought to have condoned the delay and allowed the appeal to be adjudicated on merits. [Paras 11, 12, 16]

Delay in filing the appeal is condoned and the appeal should be adjudicated on its merits.

Processing of return under section 143(1) - treatment as Association of Persons/Taxation of AOP - registration under section 12AA and retrospective application of sections 11 and 12 via proviso to section 12A(2) - - Whether the adjustment made by the Assessing Officer in the intimation under section 143(1) by disallowing the basic exemption claimed and applying marginal rate, should be examined on merits in view of subsequent registration under section 12AA and the second proviso to section 12A(2). - HELD THAT: - The Tribunal noted that the return was processed under section 143(1), the Assessing Officer treated the trust as unregistered and applied maximum marginal rate, disallowing the basic exemption claimed by the assessee. The assessee obtained registration under section 12AA on 30-07-2018 and relied on the second proviso to section 12A(2) which makes sections 11 and 12 applicable to earlier assessment years pending on the date of registration, provided objects and activities remain the same. The Tribunal observed that assessment proceedings were pending before the ITAT and that on a prima facie view the assessee had a meritorious case deserving consideration rather than rejection on technical grounds. In the interest of justice the Tribunal set aside the matter to the file of the Assessing Officer for fresh adjudication in accordance with law so that entitlement to exemptions under sections 11/12 (as claimed) and the correct tax treatment can be examined afresh. [Paras 5, 13, 14, 15, 17]

The matter is set aside to the Assessing Officer for fresh adjudication on merits with regard to the claimed exemption and tax treatment in light of registration under section 12AA and the proviso to section 12A(2).

Final Conclusion: The Tribunal condoned the delay in filing the appeal and, in the interest of justice, set aside the matter to the Assessing Officer for fresh adjudication on the merits (including consideration of registration under section 12AA and applicability of sections 11 and 12), and allowed the appeals for statistical purposes.

Validity of reopening under section 148/147 - Failure to disclose fully and truly material facts (proviso to Section 147) - Change of opinion versus tangible material test - Live link between information and formation of belief for reopening

Failure to disclose fully and truly material facts (proviso to Section 147) - Validity of reopening under section 148/147 - Whether the proviso to Section 147 requiring failure to disclose fully and truly all material facts necessary for assessment was satisfied so as to permit reopening beyond four years. - HELD THAT: - The Court examined the reasons recorded by the Assessing Officer and held that where an assessment under section 143(3) has been completed, the Assessing Officer must in the reasons recorded indicate that the assessee failed to disclose fully and truly all material facts necessary for assessment. The reasons furnished in this case made no allegation or finding that the petitioner had failed to disclose such material facts; consequently the jurisdictional condition in the proviso to Section 147 was not satisfied. Reliance on precedent established that the reasons must disclose the Assessing Officer's mind and the specific facts not disclosed by the assessee which justified reopening. The absence of any such statement rendered the notice under section 148 arbitrary and unsustainable. [Paras 11, 12, 14, 20]

Reopening beyond four years was invalid because the Assessing Officer did not record any finding of failure by the assessee to disclose fully and truly all material facts; the notice under section 148 is set aside on this jurisdictional ground.

Change of opinion versus tangible material test - Live link between information and formation of belief for reopening - Whether the information relied upon by the Assessing Officer constituted new tangible material and whether the reassessment amounted to an impermissible change of opinion. - HELD THAT: - The Court found that the material cited in the reasons (transactional figures and information from the Investigation Wing) did not demonstrate that such material was not available to or considered by the Assessing Officer during the original scrutiny assessment. The petitioner had been queried during assessment and had furnished replies and documents, indicating that the issues were before the Assessing Officer when the assessment under section 143(3) was completed. Absent verification by the Assessing Officer that the information was newly discovered and a clear live link showing how that information led to a belief that income escaped assessment, the reassessment amounted to a change of opinion. Established authorities require the presence of tangible material and a live link in the reasons; those requirements were not met here. [Paras 15, 16, 17, 18, 19]

Reassessment is also unsustainable on the ground that it represents a mere change of opinion without fresh tangible material or a demonstrated live link between new information and the formation of belief that income had escaped assessment.

Final Conclusion: The petition is allowed: the order rejecting objections to the notice dated 8 February 2022 and the notice under section 148 dated 31 March 2021 (assessment year 2014-15) are set aside because the proviso to Section 147 was not satisfied and the reassessment amounts to a change of opinion without fresh tangible material or a live link in the reasons recorded.

Instructions to subordinate authorities - Power under Section 119(2)(b) to condone delay and admit claims after expiry of time to avoid genuine hardship - Duty to decide pending application expeditiously

Power under Section 119(2)(b) to condone delay and admit claims after expiry of time to avoid genuine hardship - Duty to decide pending application expeditiously - Respondent No.1 - Central Board of Direct Taxes to decide the applications dated 02.01.2023 made under Section 119(2)(b) of the Income tax Act for condonation of delay in filing returns for AY 2018-19 and AY 2019-20 within a stipulated period. - HELD THAT: - The Court did not adjudicate the merits of the petitioner's claim for condonation of delay under Section 119(2)(b), but observed that Section 119 empowers the Board to authorise subordinate authorities to admit applications after the prescribed period to avoid genuine hardship. The parties were at consensus that the Board should consider the pending applications; the respondent authorities had no objection to the matter being placed before the Board for adjudication. In view of the foregoing and without entering into the substantive merits, the matter was relegated to the Board for a reasoned decision on the applications dated 02.01.2023 within six weeks from receipt of the order. The Court left open the liberty of either party to contest the outcome as permissible under law. [Paras 23, 24]

The Board is directed to take up and decide the applications made on 02.01.2023 under Section 119(2)(b) for AY 2018-19 and AY 2019-20 within six weeks from receipt of this order; merits not adjudicated by this Court.

Final Conclusion: Writ petition disposed by directing respondent authorities to place and decide theSection 119(2)(b) applications dated 02.01.2023 relating to AY 2018-19 and AY 2019-20 within six weeks; the Court did not decide the substantive claim for condonation of delay and preserved parties' rights to challenge the Board's decision.

Reopening assessment beyond four years where failure to disclose fully and truly material facts is prerequisite - Change of opinion doctrine preventing reassessment - Reason to believe must be based on tangible material and have a live link with the formation of belief - Validity of reassessment proceedings to be tested on the reasons recorded - Presumption of application of mind where assessment is completed under Section 143(3)

Reopening assessment beyond four years where failure to disclose fully and truly material facts is prerequisite - Validity of reassessment proceedings to be tested on the reasons recorded - Reopening the assessment for AY 2012-13 beyond four years was invalid for want of the mandatory finding that the assessee had failed to disclose fully and truly material facts necessary for assessment. - HELD THAT: - The Court held that where reassessment is sought beyond four years from the end of the relevant assessment year, the assessing officer must, in addition to having a reason to believe that income has escaped assessment, record satisfaction that the assessee failed to disclose fully and truly all material facts necessary for assessment. The validity of the reassessment proceedings must be judged by the reasons recorded, which cannot be supplemented later. A bare reading of the reasons recorded in this case shows no assertion or finding that the petitioner failed to disclose any material fact; the reasons speak only of information about cash trail allegations concerning third parties and do not identify any non disclosure by the petitioner. Consequently the jurisdictional prerequisite for reopening beyond four years was not satisfied and the notice was liable to be quashed on this ground. [Paras 13, 14, 16, 21, 23]

Reopening notice quashed for failure to record the requisite finding of non disclosure of material facts when reopening beyond four years.

Change of opinion doctrine preventing reassessment - Reason to believe must be based on tangible material and have a live link with the formation of belief - Presumption of application of mind where assessment is completed under Section 143(3) - Reopening amounted to an impermissible change of opinion because the issue of receipt from sale/redemption of shares had been raised and considered in the original scrutiny assessment. - HELD THAT: - Applying the principle that an assessing officer cannot use reassessment as a device to review or change an earlier opinion, the Court found that the petitioner had disclosed the transaction (redemption/sale of preference shares) in its return, books, auditor's note and in response to a specific query raised during scrutiny. An order under Section 143(3) had been passed after these matters were on record, which gives rise to a presumption that the assessing officer applied his mind to the issue. Authorities relied upon establish that where a query was raised in assessment and the assessee replied, the matter is deemed to have been considered and a subsequent reopening on the same ground would amount to change of opinion unless fresh tangible material with a live link is shown. The reasons recorded do not disclose any such fresh tangible material linking the petitioner to undisclosed income; therefore the reassessment is impermissible as a change of opinion. [Paras 17, 19, 21, 22, 23]

Reassessment set aside as manifesting an impermissible change of opinion in respect of a matter already considered in the original assessment.

Final Conclusion: The petition is allowed; the notice dated 29 March 2019 seeking reopening of assessment for AY 2012-13 and consequent orders and communications are quashed and set aside.

Addition in non-abated assessment under the search and seizure regime - absence of incriminating documents seized during search - substantial question of law - binding precedent of a Division Bench

Addition in non-abated assessment under the search and seizure regime - absence of incriminating documents seized during search - substantial question of law - binding precedent of a Division Bench - Whether an addition made in an assessment completed under the search and seizure provisions could be sustained in absence of any incriminating documents seized during the search, and whether that question raised a substantial question of law warranting admission under Section 260A. - HELD THAT: - The Court noted that the Assessing Officer made additions in an assessment completed under the search and seizure provisions without any incriminating documents being found in the search. The identical question had been considered and resolved by a Division Bench of this Court in earlier appeals (Principal Commissioner of Income Tax v. Gahoi Foods Private Ltd.), where it was held that in the given facts no illegality arose from the impugned order so as to give rise to a substantial question of law. Applying that binding precedent, the Court found no reason to take a different view in the present appeal. As the substantial question of law asserted by the appellant had been dealt with by the Division Bench and no conflicting legal principle was shown, the appeal did not disclose a substantial question of law meriting admission under Section 260A.

Appeal dismissed for lack of any substantial question of law; impugned additions not held to raise a question warranting admission in view of the Division Bench precedent.

Final Conclusion: In view of a binding Division Bench decision dealing with the identical question and the absence of any conflicting legal principle, the appeal under Section 260A is dismissed for want of any substantial question of law concerning additions made in an assessment completed after search where no incriminating documents were seized.

Double taxation of the same receipt - treatment of cash receipts as undisclosed income vis-a -vis characterization as loan or deposit - penalty under Section 271D for contravention of Section 269SS - principle that once an amount is assessed as income it cannot simultaneously be treated as a loan attracting penal provisions

Treatment of cash receipts as undisclosed income vis-a -vis characterization as loan or deposit - penalty under Section 271D for contravention of Section 269SS - double taxation of the same receipt - Whether amounts treated by the Assessing Officer as undisclosed income could also be the basis for imposing penalty under Section 271D for alleged contravention of Section 269SS. - HELD THAT: - The Court accepted the view recorded by the CIT(A) and the Tribunal that the Assessing Officer had treated the amounts spent by the company on personal expenses of promoters/directors as the assessee's undisclosed income. Once the amounts were assessed as income in the hands of the assessee for the same assessment year, the same sums could not be simultaneously characterized as deposits or loans and used to invoke the penal provision under Section 271D for alleged breach of Section 269SS. The Court relied on precedents where revenue could not on one hand treat a sum as undisclosed income and on the other proceed under the provisions penalizing cash deposits/loans, observing that such dual treatment would amount to taxing the same income twice in the same year. No contrary legal proposition was shown to displace this reasoning, and the deletions and quashing of the penalty were held to be justified.

The appeal is dismissed and the orders deleting additions and setting aside the penalty are upheld.

Final Conclusion: The Revenue's appeal is dismissed; the orders below holding that amounts assessed as undisclosed income cannot concurrently be treated as deposits/loans to attract penalty under Section 271D (for alleged breach of Section 269SS) are upheld for AY 2015-2016.

Section 148A(b) notice - Section 148A(d) order - Section 148 notice - escaped income - application of mind - opportunity of hearing - requirement to furnish material supporting assessment of escaped income - threshold under Section 149(1)(b)

Section 148A(b) notice - Section 148A(d) order - application of mind - escaped income - Validity of the Section 148A(b) notice and the order under Section 148A(d) in view of a material misalignment as to the amount of escaped income and alleged non-application of mind. - HELD THAT: - The Court noted a discrepancy between the amount of escaped income stated in the Section 148A(b) notice and the amount recorded in the case-related information received from the insight portal; the petitioner had drawn this discrepancy to the Assessing Officer's attention in the reply dated 06.06.2022. Although the AO's subsequent order under Section 148A(d) adjusted the escaped income to the lower figure appearing in the portal, the Court found that the AO had not applied his mind to the inconsistency between the inputs and the notice. For this reason the Court concluded that the impugned order and the consequent notice under Section 148 were not sustainable and set them aside. The Court observed that if the escaped income is the lower figure, the revenue must cross the statutory threshold under Section 149(1)(b); if the revenue persists with the higher figure, the AO must disclose the material on which that figure is based. [Paras 11, 12, 15, 16]

Impugned Section 148A(d) order and consequent Section 148 notice set aside for lack of application of mind; AO given liberty to proceed afresh after complying with directions.

Requirement to furnish material supporting assessment of escaped income - opportunity of hearing - threshold under Section 149(1)(b) - Directions and scope of fresh proceedings upon remand to the Assessing Officer. - HELD THAT: - The Court permitted the AO to recommence proceedings afresh but imposed procedural safeguards. Before taking further steps the AO must furnish the relevant material or information on which he relies to quantify the escaped income, and must afford the petitioner (or his authorised representative) adequate opportunity of hearing. The Court explained the practical consequence: if the escaped amount is the lower figure reflected in the portal, the revenue must satisfy the statutory requirement under Section 149(1)(b); if the AO asserts a higher escaped income, he must supply the basis for that assertion before proceeding. [Paras 14, 15, 16]

Matter remitted to the AO to proceed afresh subject to furnishing of relevant material and affording the petitioner a hearing; liberty granted to AO to take further steps in accordance with law.

Final Conclusion: The Section 148A(d) order and the consequent Section 148 notice (relating to AY 2016-2017) are set aside for want of application of mind; the Assessing Officer may commence fresh proceedings after furnishing the material forming the basis for any claimed escaped income and after affording the petitioner an opportunity of hearing.

Faceless assessment - principles of natural justice - opportunity of personal hearing / virtual hearing - procedural compliance of Section 144B - show cause notice with draft assessment order - variation prejudicial to assessee - quashing and remand for fresh consideration

Faceless assessment - principles of natural justice - opportunity of personal hearing / virtual hearing - procedural compliance of Section 144B - Whether the assessment passed under the faceless assessment scheme is vitiated by the rejection of repeated requests for virtual personal hearing and non-compliance with the procedural safeguards of Section 144B, thereby breaching principles of natural justice. - HELD THAT: - The Court found that the petitioner repeatedly requested hearing through video conferencing and such requests were rejected by the assessing authority on the ground that there was "no legal aspect to be heard". In the faceless assessment regime prescribed by Section 144B, when a draft assessment order proposes a variation prejudicial to the assessee, the National Faceless Assessment Centre (NFAC) is obligated to serve the draft assessment order and show cause notice and to afford opportunity to the assessee, including personal hearing where appropriate. The Court emphasised that denial of audience by an officer on the basis that there is nothing to be considered, without material before him and without allowing the petitioner to be heard, is inconsistent with the statutory scheme and with the requirements of natural justice applicable to the faceless procedure. Having regard to the statutory framework and earlier High Court decisions reproduced in the judgment, the Court concluded that the order, insofar as it was passed after rejecting repeated VC requests and without affording the required opportunity, is in breach of principles of natural justice and the procedural mandates of Section 144B. The matter is thus to be heard from the stage at which proceedings stood and the petitioner to be given hearing by the respondent through email intimation without further adjournment, following the prescribed faceless procedure. [Paras 6, 7]

The assessment order insofar as it was passed after rejecting repeated requests for virtual hearing and without complying with the procedural safeguards of Section 144B is quashed; the matter is remitted to be heard from the stage it stood and the petitioner shall be given the opportunity of hearing in accordance with the faceless assessment procedure.

Show cause notice with draft assessment order - variation prejudicial to assessee - quashing and remand for fresh consideration - Whether the assessment could be sustained where the additions in the final assessment went beyond the scope and issues indicated in the show cause notice / draft assessment order. - HELD THAT: - The Court recorded that the additions made in the final assessment were materially beyond the scope of the issues communicated in the show cause cum draft assessment order, resulting in a final assessment substantially different from the proposal. The faceless assessment scheme requires that where a proposed variation may be prejudicial to the assessee, the draft assessment order and show cause notice must be served and the assessee afforded an opportunity to respond; finalising an assessment by making additions beyond the scope of the show cause without following that procedure undermines the statutory safeguards. On these grounds, coupled with the failure to grant the requested hearing, the Court held that the impugned assessment could not be sustained. The Court quashed the assessment order and the attendant demand notice and permitted the revenue to issue a fresh show cause notice; all contentions available in law would be open to the petitioner in the fresh proceedings. [Paras 8, 9]

The assessment order and demand notice are quashed and set aside on the ground that additions exceeded the scope of the show cause notice; the respondent is permitted to issue a fresh show cause notice and proceed in accordance with law, with the petitioner free to raise all available contentions.

Final Conclusion: Impugned assessment order dated 23.09.2021 and the demand notice of the same date are quashed and set aside for non-compliance with the procedural requirements of the faceless assessment scheme and breach of natural justice; the revenue is permitted to issue a fresh show cause notice and continue the proceedings in accordance with Section 144B and statutory safeguards, with the petitioner to be granted hearing from the stage the proceedings stood.

Unexplained investment under section 69 - valuation of closing stock - weighted average cost method for stock valuation - consistency of method of accounting under section 145 - reliance on search-party valuation and declaration - prescribed accounting standards for stock valuation

Unexplained investment under section 69 - reliance on search-party valuation and declaration - valuation of closing stock - Deletion of addition of Rs.3.50 crores made by the AO as unexplained investment in stock of brass vessels and utensils. - HELD THAT: - The AO had treated the undisclosed sum of Rs.3.50 crores as unexplained investment because he concluded the assessee had not included that amount in its return after redrawing trading accounts. The assessee, however, produced trading accounts split for the period up to the search and the period thereafter showing that it had included the additional amount in closing stock as on the date of search and carried that into the restated accounts. The search party had accepted closing stock at Rs.15 crores and the managing partner had admitted additional stock of Rs.3.50 crores; the assessee incorporated that declaration in its redrawn books showing closing stock of Rs.18,68,25,000. The Tribunal found the AO's inference (that inclusion would have produced an implausible jump in gross profit) to be speculative and inconsistent with the redrawn accounts and the gross profit trends. Having regard to the accepted declaration at search, the trading accounts produced by the assessee and absence of documentary contradiction, the CIT(A) rightly set aside the addition and the Tribunal upheld that deletion. [Paras 10, 11]

Addition of Rs.3.50 crores under unexplained investment is deleted and the CIT(A)'s order upholding deletion is affirmed.

Valuation of closing stock - weighted average cost method for stock valuation - consistency of method of accounting under section 145 - prescribed accounting standards for stock valuation - Deletion of addition of Rs.5,37,29,886 made by the AO on account of alleged undervaluation of gold jewellery closing stock by substituting six months' average purchase price in place of the weighted average cost method. - HELD THAT: - The AO revalued closing stock by applying a six months' average purchase price adopted by the search team and by the assessee for the special purpose of declaring excess stock, and added the difference as income because the AO considered the assessee's closing stock valuation (weighted average) to be incorrect. The assessee demonstrated that it consistently followed the weighted average cost method historically and reverted to that regular method for valuation of closing stock for the year in issue, and explained that a substantial part of purchases comprised old/worn jewellery at lower prices which materially affects weighted averages. The Tribunal accepted the CIT(A)'s view that accounting standards permit valuation either at cost/market (whichever is lower) or by weighted average cost and that the assessee was entitled to follow the historically consistent weighted average method. The special arrangement at the time of search (six months' average) could not be imposed as the assessor's uniform method for the financial year; substitution of the assessee's method by the AO without displacing the explanation and documentary basis was impermissible. Accordingly the CIT(A) was correct in directing adoption of the assessee's returned closing stock value and deleting the addition. [Paras 13, 14, 16, 17]

Addition of Rs.5,37,29,886 for undervalued closing stock is deleted and the assessee's method and returned closing stock value are upheld.

Final Conclusion: The Tribunal dismissed the revenue appeal: deletions by the CIT(A) of the additions of Rs.3.50 crores (unexplained investment) and Rs.5,37,29,886 (undervaluation of closing stock) were upheld, the AO's substitute valuations being set aside.

Discounted cash flow method - Rule 11UA - section 56(2)(viib) - net asset value method - onus on assessee to justify valuation - remand for reconsideration - venture capital undertaking

Discounted cash flow method - Rule 11UA - net asset value method - section 56(2)(viib) - Whether the Assessing Officer was justified in rejecting the assessee's DCF-based valuation solely because projected financials differed from subsequent actuals and in treating excess share premium as income under section 56(2)(viib) by adopting NAV/face value. - HELD THAT: - The Tribunal held that DCF is a permissible method under Rule 11UA and is inherently based on projected future free cash flows; disparity between projections and subsequent actuals, by itself, is not a sufficient ground to reject a DCF valuation. The AO may examine the correctness of the assumptions, projections and computations underpinning a DCF valuation, but he erred by rejecting the method and valuation solely on the basis that actual results for two years did not match projections. The AO also exceeded his authority by effectively replacing the assessee's chosen methodology with NAV/face value without conducting required enquiries into the valuer's assumptions and supporting material. Applying these principles, the Tribunal set aside the addition made under section 56(2)(viib) and directed the AO to re-examine the valuation and re-adjudicate the issue in accordance with law, permitting the AO to probe the DCF computations but not to substitute the method without valid reasons. [Paras 9, 10]

AO's rejection of DCF solely due to variance between projections and actuals was incorrect; matter remitted to AO to re-examine the DCF valuation and re-adjudicate the addition under section 56(2)(viib) in accordance with law.

Remand for reconsideration - onus on assessee to justify valuation - section 56(2)(viib) - Whether the addition towards excess share premium under section 56(2)(viib) should be finally sustained or re-opened for fresh consideration. - HELD THAT: - The Tribunal following precedents considered that when a valuation is challenged, the assessee bears the onus to justify the valuation by furnishing an acceptable valuation report supported by assumptions and empirical material. Given the AO's failure to undertake necessary enquiries into the DCF assumptions and computations and the improper rejection of the valuation on a single ground, the Tribunal found it appropriate to remit the matter. The remand is for the AO to afford the assessee an opportunity to justify the valuation, examine the methodology and assumptions, and then decide the applicability and quantum of any addition under section 56(2)(viib) after providing a fair hearing. The Tribunal explicitly restrained the AO from changing the valuation method without valid grounds. [Paras 10]

Addition under section 56(2)(viib) set aside and restored to AO for fresh consideration after affording opportunity to the assessee to justify the valuation; AO to re-adjudicate in accordance with law.

Venture capital undertaking - section 56(2)(viib) - Whether the assessee qualifies as a venture capital undertaking (and thus whether section 56(2)(viib) is inapplicable) at the stage of this appeal. - HELD THAT: - The Tribunal observed that the question of the assessee's status as a venture capital undertaking was raised but became academic in view of the remand of the valuation/addition issue to the AO. Consequently, the Tribunal left the question open for determination at the appropriate stage and did not decide it in the present proceedings. [Paras 11]

Issue left open for decision at the appropriate stage; not adjudicated in this appeal.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes by setting aside the addition made under section 56(2)(viib) and remitting the matter to the Assessing Officer to re-examine the DCF valuation (per Rule 11UA), afford the assessee an opportunity to justify its valuation and then re-adjudicate the addition in accordance with law; the question whether the assessee is a venture capital undertaking was left open.

Conversion of agricultural land into stock-in-trade - characterisation of receipts as long-term capital gains versus business income - relevance of contemporaneous accounting entries and year-to-year disclosure to prove conversion - exception under section 2(14) for rural agricultural land beyond specified distance - third proviso to section 50C and the tolerance band for valuation differences below 10% - colourable device/afterthought doctrine in tax characterisation

Conversion of agricultural land into stock-in-trade - characterisation of receipts as long-term capital gains versus business income - relevance of contemporaneous accounting entries and year-to-year disclosure to prove conversion - colourable device/afterthought doctrine in tax characterisation - exception under section 2(14) for rural agricultural land beyond specified distance - Whether the lands in question were converted into stock-in-trade on 02.07.2011 so as to attract taxation as business income, or whether the sale gave rise to taxable long-term capital gains. - HELD THAT: - The Tribunal upheld the findings of the CIT(A) and AO that the claim of conversion on the basis of a MoU and subsequent affidavit was an afterthought and not supported by contemporaneous events or accounting treatment. The assessee, who held the lands since 1992 and whose lands fell within the rural exception of section 2(14), failed to demonstrate any triggering event or conduct (such as accounting entries classifying the lands as stock-in-trade, audit under section 44AB, disclosure of turnover or recurrent land-dealing activity) that would show a change of intention from investment to business. The Tribunal relied on the absence of year-to-year disclosure in returns and books, the questionable evidentiary value of the unnotarized MoU and the timing of applications to state authorities, and applied the principle that transactions effected and documented only to avoid tax can be treated as colourable devices. On the totality of facts and settled tests (including prior decisions cited by the authorities), the Tribunal confirmed that the lands were capital assets at the time of sale and the gains were properly brought to tax as long-term capital gains. [Paras 12, 13]

The addition of long-term capital gains on sale of the lands is upheld and the appeal on the main grounds is dismissed.

Third proviso to section 50C and the tolerance band for valuation differences below 10% - application of market/Jantri valuation in computation of capital gains - Whether the Assessing Officer should have accepted the assessee's adopted measurement at Rs.1,800 per sq. mt. instead of Rs.1,950 per sq. mt. where the difference is less than 10%. - HELD THAT: - The Tribunal admitted the additional ground and held that the third proviso to section 50C (as interpreted by coordinate authority) permits a tolerance band where the difference between the stamp authority/transfer value and the assessee's declared value is under 10%. The difference of 8.33% between Rs.1,800 and Rs.1,950 falls within this tolerance, and therefore the Tribunal directed the Assessing Officer to compute the long-term capital gain using the rate of Rs.1,800 per sq. mt. [Paras 15, 16]

The additional ground is allowed; the AO is directed to compute capital gains using the Rs.1,800 per sq. mt. measurement.

Final Conclusion: Appeal partly allowed: the Tribunal confirms that the lands were capital assets and upholds the long-term capital gains addition, but allows the additional ground on valuation and directs recomputation of capital gains using the Rs.1,800 per sq. mt. rate under the tolerance permitted by the third proviso to section 50C.

Penalty under section 271(1)(c) of the Income tax Act - deeming fiction in Explanation 3 to section 271(1)(c) - penalty proceedings initiated by notice under section 274 - natural justice - requirement of absence of prejudice from defective show cause notice - acceptance of return does not preclude levy of penalty where non filing is established

Penalty under section 271(1)(c) of the Income tax Act - deeming fiction in Explanation 3 to section 271(1)(c) - acceptance of return does not preclude levy of penalty where non filing is established - Validity of levy of penalty under section 271(1)(c) where assessee was a non filer and filed return only after receipt of notice under section 148 - HELD THAT: - The Tribunal found on the record that the assessee did not file the return within the statutory period and filed the return only after issuance of notice under section 148; the returned income was thereafter accepted by the Assessing Officer. Explanation 3 to section 271(1)(c) treats a person who failed to furnish a return within the period specified as deemed to have concealed particulars of income for the purposes of clause (c) if no notice under section 142(1)(i) or section 148 had been issued earlier. Applying this deeming provision, the Bench held that the facts established non filing and subsequent filing in response to reassessment notice, and therefore constituted concealment within the scope of Explanation 3. Acceptance of the return by the AO did not negate the application of Explanation 3 or preclude levy of penalty where the precondition of non filing was satisfied. On that basis the Tribunal upheld the levy of penalty and the appellate authority's confirmation of the same. [Paras 24, 28]

Penalty under section 271(1)(c) sustained as correctly attracted by reason of Explanation 3 where the assessee was a non filer and filed return only after notice under section 148.

Penalty proceedings initiated by notice under section 274 - natural justice - requirement of absence of prejudice from defective show cause notice - Whether a show cause notice under section 274 is vitiated by failure to specify which limb of section 271(1)(c) (concealment or furnishing inaccurate particulars) is relied upon - HELD THAT: - The Tribunal examined precedent which recognises that a section 274 notice is intended to put the assessee on notice of initiation of penalty proceedings and that mere failure to strike out inappropriate portions or to specify a single limb does not automatically invalidate the notice. The test is whether the object of the notice-to enable the assessee to know and meet the case against him-was achieved and whether any prejudice resulted. On the facts, the assessee received the notice, understood the nature of the proceedings and furnished a reply; no prejudice was shown. Relying on earlier high court authorities reproduced in the record, the Bench held that the defective drafting of the notice did not nullify the proceedings where the assessee had adequate notice and opportunity to defend. [Paras 25, 26, 28]

Defect in specifying the particular limb in the section 274 notice did not render penalty proceedings vitiated where the assessee understood and replied to the notice and no prejudice was shown; penalty proceedings valid.

Final Conclusion: Appeals dismissed; penalty under section 271(1)(c) upheld for AY 2012 13 - Explanation 3 applies to non filers who file only after notice under section 148, and a defective show cause notice under section 274 is not fatal where the assessee was aware of the proceedings and no prejudice is demonstrated.

Deemed income under section 11(3) - exemption under section 11(1)(a) - accumulation and investment under section 11(2) - prevention of double deduction - Board Circular No. 29 dated 23-08-1969 - Form No. 3A of the Income-tax Rules, 1962

Deemed income under section 11(3) - exemption under section 11(1)(a) - accumulation and investment under section 11(2) - prevention of double deduction - Board Circular No. 29 dated 23-08-1969 - Form No. 3A of the Income-tax Rules, 1962 - Whether income deemed to be income under section 11(3) is eligible for exemption under section 11(1)(a) and for accumulation/investment treatment under section 11(2) - HELD THAT: - The Tribunal rejected the assessee's contention that amounts deemed as income under section 11(3) become eligible, by operation of being 'income' in that year, for the exemptions and accumulation provisions of sections 11(1)(a) and 11(2). It placed decisive weight on Board Circular No. 29 dated 23-08-1969 which, the Tribunal observed, expressly states that when amounts are taxed under section 11(3) the benefit available under section 11(1)(a) is lost and that, where section 11(2) is applied and later found to be violated, the entire accumulation covered by section 11(2) will be subjected to tax under section 11(3). The Tribunal considered the policy rationale in the Circular and held that allowing exemption/accumulation for section 11(3) deemed income would permit repetitive or 'double' relief (recycling the same amount through successive accumulations), thereby defeating the legislative intent. The Tribunal noted supportive administrative machinery in Form No. 3A which requires addition of deemed income under section 11(3) after claiming exemptions under sections 11(1)(a) and 11(2), indicating that deemed income is not to be treated as eligible for those exemptions. The Tribunal also referred to precedents and decisions distinguishing the case law relied upon by the assessee, and endorsed the view that exemption under section 11 is available only on 'income' within the meaning of the sections and not on income merely deemed under section 11(3). Applying these considerations to the facts, the Tribunal concluded that the assessee cannot claim exemption under sections 11(1)(a) or the benefits of section 11(2) in respect of amounts deemed to be income under section 11(3). [Paras 8]

Deemed income under section 11(3) is not eligible for exemption under section 11(1)(a) nor for accumulation/investment treatment under section 11(2).

Final Conclusion: Appeals dismissed; the Tribunal upheld the determination that amounts deemed to be income under section 11(3) are not entitled to exemption under section 11(1)(a) or to the benefits of section 11(2) for assessment years 2015-16 and 2016-17.

Jurisdiction under section 263 of the Income tax Act - Deduction under section 54F of the Income tax Act - Erroneous order prejudicial to the revenue - Failure to make enquiries which the Assessing Officer ought to have made - Application of mind by the Assessing Officer

Jurisdiction under section 263 of the Income tax Act - Deduction under section 54F of the Income tax Act - Failure to make enquiries which the Assessing Officer ought to have made - Application of mind by the Assessing Officer - Erroneous order prejudicial to the revenue - Whether the Principal Commissioner of Income tax (revisionary authority) was justified in invoking section 263 to set aside the assessment order for A.Y. 2017 18 on the ground that the Assessing Officer failed to make enquiries regarding the assessee's claim of exemption under section 54F and thus the assessment order was erroneous and prejudicial to the revenue. - HELD THAT: - The Tribunal examined the material on record and found that the Assessing Officer had issued notices under sections 143(2) / 142(1) and had obtained from the assessee details and documentary evidence regarding the properties held and the acquisition of the new residential asset relied upon for claiming exemption under section 54F. The assessee had produced sale deeds, ledger entries, balance sheet, affidavits, rent agreements and municipal tax receipts to demonstrate the nature and use of the properties. On that basis the Assessing Officer applied his mind and allowed the exemption in the assessment order. The PCIT's revision proceeded on the premise that the AO had not made the inquiries which he ought to have made; however a mere observation that the AO's order is brief or does not elaborate all factual points is not sufficient to characterise the assessment order as "erroneous" within section 263. The Tribunal reiterated the settled principle that an order is "erroneous" under section 263 if there is a lack of such inquiry as the circumstances required, but where the AO has in fact obtained relevant particulars and taken a plausible view after examination, the revision power cannot be invoked. Reliance was placed on the stated proposition in Gee Vee Enterprises to the effect that omission to make necessary inquiries can render an order erroneous; however, on the facts of this case the AO did make inquiries and had material before him to decide the nature of the properties. The PCIT's reasons did not establish that the AO failed to make proper and adequate inquiries in the given facts and circumstances; consequently the jurisdictional precondition for invoking section 263 was not satisfied and the revision order was unsustainable. [Paras 15, 16, 17, 18]

Order passed by the Principal Commissioner under section 263 was quashed; the assessment order was held neither erroneous nor prejudicial to the revenue as the Assessing Officer had applied his mind and made appropriate inquiries before allowing exemption under section 54F.

Final Conclusion: The appeal is allowed; the order of the Principal Commissioner of Income tax passed under section 263 is quashed and the assessment order for A.Y. 2017 18 stands restored because the Assessing Officer had made requisite inquiries and applied his mind when allowing the claim under section 54F.

Reopening of assessment - limitation for issuance of notice under Section 148 - extended limitation for foreign assets under Section 149(1)(c) - retrospective effect of statutory amendment - protective addition

Reopening of assessment - limitation for issuance of notice under Section 148 - extended limitation for foreign assets under Section 149(1)(c) - retrospective effect of statutory amendment - Validity of the notice issued under Section 148 on 27.02.2015 for AY 2004-05 in view of the amendment to Section 149(1) by Finance Act, 2012 - HELD THAT: - The Tribunal upheld the learned CIT(A)'s conclusion that the notice dated 27.02.2015 was issued beyond the period of limitation applicable to AY 2004-05. The unamended provision of Section 149 prescribed a limitation which, for AY 2004-05, expired on 31.03.2011. The Finance Act, 2012 inserted sub-clause (c) to Section 149(1) with effect from 01.07.2012, extending the limitation in cases involving assets located outside India. Following the settled principle in K.M. Sharma and S.S. Gadgil and the decisions relied upon (including Braham Dutt and the ITAT Rajkot precedents in the assessee's family matters), the Tribunal held that an amendment brought into force prospectively could not revive a right to reopen assessments which had already become time-barred before the amendment took effect. As the extended 16-year limitation was not in force when the pre-amended limitation for AY 2004-05 had already expired, the subsequent amendment did not validate the notice. The Tribunal further observed that identical issues had been decided in earlier appeals of family members by the Rajkot Bench and, absent any distinguishing fact or law, consistency required following those decisions. Consequently, assessments and consequential proceedings founded on the invalid notice were to be quashed and the merits of the additions (including any protective addition) were not adjudicated. [Paras 12, 13, 14]

Notice under Section 148 dated 27.02.2015 for AY 2004-05 was beyond prescribed limitation and is invalid; consequential reassessment and assessment order quashed.

Final Conclusion: The Revenue's appeal is dismissed; the notice for reopening AY 2004-05 was held time-barred and consequential reassessment/assessment proceedings have been quashed, with no adjudication on the merits of the disputed additions.

Settlement of customs cases under Section 127B of the Customs Act, 1962 - final show cause notice in customs proceedings - time-bound direction to adjudicating authority and Settlement Commission - Article 32 of the Constitution of India

Filing of additional documents and grounds in writ proceedings - Application for permission to file additional documents/grounds and to bring additional prayers on record was allowed. - HELD THAT: - The Court recorded that IA No. 36892 of 2023, which sought permission to file additional documents/grounds and to bring on record further prayers (including challenges to Section 123 of the Customs Act and a prayer for issuance of show cause notice to enable settlement under Section 127B), is allowed. The order thus admits the supplemental material and prayers into the proceeding and proceeds to consider appropriate reliefs arising therefrom.

IA No. 36892 of 2023 is allowed and the additional documents/grounds and prayers are permitted to be brought on record.

Final show cause notice in customs proceedings - settlement of customs cases under Section 127B of the Customs Act, 1962 - Direction to respondent authority to issue a final show cause notice to enable the petitioner to apply for settlement under Section 127B was granted. - HELD THAT: - On the material that the petitioner, an NRI, was apprehended with imported goods of admitted foreign origin and had not been served a final show cause notice despite cooperation, the Court directed Respondent No.2 to issue a final show cause notice within one week from receipt of the order. The direction was given to remove the procedural impediment that prevented the petitioner from taking the statutory route of settlement under Section 127B of the Customs Act, 1962.

Respondent No.2 to issue a final show cause notice to the petitioner within one week of receipt of the order to enable the petitioner to seek settlement under Section 127B.

Time-bound direction to adjudicating authority and Settlement Commission - settlement of customs cases under Section 127B of the Customs Act, 1962 - If the petitioner applies for settlement in response to the notice, the Settlement Commission must dispose of the application within a stipulated time. - HELD THAT: - The Court provided a binding timeline for adjudicatory action to ensure effective exercise of the statutory settlement remedy: if the petitioner files an application for settlement within one week of receiving the final show cause notice, the Settlement Commission is directed to dispose of the application on its merits in accordance with law within two months of receipt. The direction is limited to time-bound disposal and does not predetermine the merits of any settlement application.

If an application for settlement is filed within one week of receipt of the notice, the Settlement Commission shall dispose of it within two months of receipt in accordance with law.

Final Conclusion: IA No. 36892 of 2023 is allowed permitting additional documents/grounds; Respondent No.2 is directed to issue a final show cause notice within one week; if the petitioner applies for settlement under Section 127B within one week of that notice, the Settlement Commission shall decide the application on merits within two months of receipt.

Repayment and recovery of erroneous or excess duty drawback under Rule 16 of the Drawback Rules - Reasonable period to be read into a statutory provision in the absence of prescribed limitation - Time bar of show cause notices for recovery of excess drawback - Quashing of show cause notices issued beyond a reasonable period - Obligation to follow binding precedent

Repayment and recovery of erroneous or excess duty drawback under Rule 16 of the Drawback Rules - Reasonable period to be read into a statutory provision in the absence of prescribed limitation - Time bar of show cause notices for recovery of excess drawback - Quashing of show cause notices issued beyond a reasonable period - Obligation to follow binding precedent - Validity of show cause notices issued after a period of five to ten years for recovery of duty drawback under Rule 16 of the Drawback Rules. - HELD THAT: - Rule 16 provides for recovery of drawback paid erroneously or in excess but does not prescribe any period of limitation. Where a statutory provision is silent as to limitation, a reasonable period must be read into it; what is reasonable depends on the facts of each case. This Court followed its earlier decision in M/s. S J S International, which held that issuance of show cause notices after more than three years from payment of drawback could not be regarded as within a reasonable period and therefore were time barred. Applying that principle to the undisputed facts in these petitions - where the impugned notices were issued five to ten years after the relevant exports and payment of drawback - the Court held such notices to be beyond a reasonable period and therefore invalid. The Court further noted the obligation of the authorities to follow binding precedents and that acts of issuing notices in disregard of settled decisions result in multiplicity of proceedings and harassment. Consequent actions founded on the time barred show cause notices were also rendered unsustainable. [Paras 12, 13]

Impugned show cause notices issued beyond three years from payment of the drawback are quashed and set aside; consequential actions arising therefrom are also quashed.

Final Conclusion: Petitions allowed in part; show cause notices issued by the respondent authorities for the stated export/assessment periods after more than three years are quashed as time barred and all consequential actions arising therefrom are set aside; rule made absolute to that extent.

Double adjudication - jurisdictional excess - show cause notice - confiscation - penalty - remand for fresh consideration - bifurcation of adjudication order

Double adjudication - show cause notice - Whether the same set of alleged offences can be adjudicated twice by two separate authorities on the basis of the same show cause notice. - HELD THAT: - The Court found that it is impermissible for two authorities to adjudicate the same set of allegations twice over. Applying that principle to the facts, the Court concluded that the impugned adjudication by respondent no.1 could not stand insofar as it resulted in duplication of adjudication on the same allegations. However, the Court examined the text of the show cause notice and observed that it specifically called upon the noticees to respond separately to respondent no.1 in respect of seized currency and to respondent no.2 in respect of seized drugs; accordingly, the adjudication by respondent no.2 could not be faulted merely because a single show cause notice addressed both authorities. The Court therefore set aside respondent no.1's order (to the extent it duplicated adjudication) while upholding the validity of respondent no.2's order in that respect. [Paras 15, 18, 19, 20, 21]

The impugned order of respondent no.1 is set aside for duplicative adjudication; respondent no.2's adjudication is not vitiated solely because the matters arose from a single show cause notice.

Jurisdictional excess - bifurcation of adjudication order - remand for fresh consideration - Whether respondent no.1 exceeded its jurisdiction by adjudicating and imposing penalties in respect of seized anabolic drugs that fell within the territorial/jurisdictional competence of respondent no.2, and what relief should follow. - HELD THAT: - The Court accepted the Revenue's contention that respondent no.1 exceeded its jurisdiction by adjudicating the issue of the seized drugs and imposing penalties in respect thereof, because the premises from which the drugs were seized fell within respondent no.2's jurisdiction. The Court also found that the impugned order dated 14.02.2022 could not be bifurcated to salvage the parts within jurisdiction. Consequently, the Court set aside the impugned order dated 14.02.2022 and remanded the matter to respondent no.1 to decide afresh, confined to the issue pertaining to seizure of currency. The Court expressly reserved all rights and contentions of the parties on the merits. [Paras 16, 17, 22, 23, 24]

The impugned order dated 14.02.2022 is set aside for jurisdictional excess and remanded to respondent no.1 for fresh decision limited to the currency seizure; the Court reserved consideration of merits.

Penalty - confiscation - show cause notice - Whether the petitioners are precluded from challenging respondent no.2's order on merits due to the Court's decision on jurisdiction and the single show cause notice. - HELD THAT: - The Court clarified that its decision to set aside respondent no.1's order and its observations regarding the single show cause notice did not amount to an examination of the merits of the allegations in the show cause notice. The petitioners' challenge to respondent no.2's order was considered only insofar as its validity could be affected by the fact that both adjudications arose from one show cause notice; the Court did not express any opinion on the merits of the penalties or confiscation imposed by respondent no.2 and preserved the petitioners' rights to pursue remedies against that order. [Paras 21, 24]

No merits determination was made regarding respondent no.2's order; the petitioners remain entitled to challenge that order on its merits.

Remand for fresh consideration - What procedural relief should be afforded to the petitioners in view of time spent in litigation and the disposition on jurisdictional grounds. - HELD THAT: - The Court directed that if the petitioners file their respective appeals against respondent no.2's order within four weeks from the date of the judgment, the appellate authority shall consider those appeals uninfluenced by any question of delay. This direction was given in recognition of the time consumed by the petitioners in pursuing the present petitions and does not adjudicate the merits of the underlying dispute. [Paras 25]

If appeals against respondent no.2's order are filed within four weeks, the appellate authority shall consider them without being influenced by delay.

Final Conclusion: The Court set aside the impugned order dated 14.02.2022 of respondent no.1 for jurisdictional excess and duplicative adjudication and remanded the matter to respondent no.1 to decide afresh limited to the currency seizure; respondent no.2's order dated 26.03.2022 was not invalidated on the basis that a single show cause notice addressed both authorities, the petitioners' rights to challenge that order on merits are preserved, and the Court directed condonation of delay on appeal if filed within four weeks.

Words indicative of a profession - requirement of prior approval from the Governing Council under Rule 18(2)(xvi) of the Limited Liability Partnership Rules, 2009 - reservation of name of a Limited Liability Partnership - ejusdem generis rule of statutory construction

Words indicative of a profession - requirement of prior approval from the Governing Council under Rule 18(2)(xvi) of the Limited Liability Partnership Rules, 2009 - reservation of name of a Limited Liability Partnership - Whether the use of the words "AND ASSOCIATES" in the proposed LLP name "S K VERMA AND ASSOCIATES LLP" renders the name indicative of a profession and therefore necessitates prior approval from the Bar Council of India under Rule 18(2)(xvi). - HELD THAT: - The Court examined Rule 18(2)(xvi) which permits reservation of a proposed LLP name including words indicative of a profession only after approval from the governing Council or designated authority. The objection raised by respondents related to the name and not to the nature of activity. Applying principles of statutory construction, including the rule of ejusdem generis, the Court held that the words enumerated in the Rule (such as company secretary, chartered accountant, advocates) denote specific professional denominations. The expression "or such similar words as indicative of a profession" must be read in the context of those specific words and confined to words of the same genus. "AND ASSOCIATES" is a generic phrase usable with diverse vocations and is not a word indicative of any specific profession. Consequently, the respondents' interpretation extending Rule 18(2)(xvi) to cover the generic phrase "AND ASSOCIATES" was incorrect and unsustainable. [Paras 10, 11, 12, 13, 14]

The rejection of the name reservation on the ground that "AND ASSOCIATES" indicates a profession and requires prior approval of the Bar Council of India was set aside; respondents directed to proceed with the petitioner's application and accord registration subject to other legal compliances.

Final Conclusion: The petition is allowed: the Registrar's refusal to reserve the proposed LLP name on the ground that the words "AND ASSOCIATES" indicate a profession and require prior regulatory approval is quashed; the respondents are directed to process and register the LLP name in accordance with law and subject to other necessary compliances.

Pre-existing dispute - Section 9 of the Code - Section 8 notice - transfer under Section 434 - binding effect of High Court order on the Tribunal - numbering and treatment of transferred winding up petition as insolvency petition - remand for further proceedings; merits not adjudicated

Transfer under Section 434 - numbering and treatment of transferred winding up petition as insolvency petition - binding effect of High Court order on the Tribunal - Validity of the Adjudicating Authority's treatment of the proceedings transferred from the High Court (CP No.311 of 2016) and propriety of the impugned order dismissing the Section 9 petition. - HELD THAT: - The Appellate Tribunal found that the National Company Law Tribunal (Hyderabad Bench) misdirected itself by failing to treat the winding up proceedings transferred by the High Court (order dated 29.11.2019) as an insolvency petition to be dealt with from the stage of transfer, and by assigning a fresh CP number to the petition instead of numbering the transferred file as directed. The Tribunal emphasised that an order of the High Court in the case is binding on the Adjudicating Authority and that judicial discipline requires the Tribunal to follow that order in true letter and spirit. Because the Adjudicating Authority did not adhere to the High Court's transfer order and recorded legally unsustainable observations rejecting the petition on that basis, the impugned order was set aside. The Appellate Tribunal expressly refrained from adjudicating the merits of the dispute between the parties and directed the Adjudicating Authority to number CP No. 311 of 2016 upon taking the file on record, issue notices as required, and proceed further in accordance with law, observing that consequential orders in the fresh-filed CP (IB) No.210/9/HDB/2020 should follow (including dismissal of the duplicate fresh petition). [Paras 56, 57, 58, 59, 60]

Impugned order dated 30.06.2022 in CP (IB) No. 210/9/HDB/2020 set aside; Adjudicating Authority directed to number the transferred CP No. 311 of 2016, take it on file, issue notices and proceed in accordance with law; merits not considered by this Tribunal.

Final Conclusion: The appeal is disposed of by setting aside the impugned NCLT order for non compliance with the High Court's transfer order; the NCLT is directed to number and take on file CP No. 311 of 2016 and proceed further in accordance with law, while the appellate court has not gone into the merits.

Inadmissibility of instruments not duly stamped - verification of claims under Regulation 8 of the CIRP Regulations - existence of debt may be proved by diverse documents notwithstanding stamp deficiencies - exclusion of period of limitation by notification under the Rajasthan Relief Undertakings (Special Provisions) Act, 1961 - computation of limitation for filing Section 7 proceedings under the Limitation Act as applied by Section 238A of the IBC - power of Committee of Creditors to replace Resolution Professional by 66% voting share under Section 27(2) of the IBC - inherent jurisdiction of the Adjudicating Authority under Rule 11 (limited to exceptional/peculiar facts) - overriding effect of Section 238 of the IBC on parallel proceedings

Inadmissibility of instruments not duly stamped - verification of claims under Regulation 8 of the CIRP Regulations - existence of debt may be proved by diverse documents notwithstanding stamp deficiencies - overriding effect of Section 238 of the IBC on parallel proceedings - Validity of the Resolution Professional's admission of Alchemist's and ARCIL's claims despite stamp deficiencies alleged by the State under the Rajasthan Stamp Act - HELD THAT: - The Tribunal held that the Resolution Professional verified and admitted the financial creditors' claims on the basis of multiple materials on record (loan agreements, hypothecation/mortgage deeds, assignment agreements, Companies Act charge modification certificates, CERSAI record and audited financial statements) which collectively established debt and default. The adjudication under the Stamp Act is a separate and independent proceeding; the fact that Stamp Authorities later raised demands or found deficiencies did not, by itself, invalidate the RP's prior verification and admission of claims. The Adjudicating Authority properly assessed that existence of debt can be proved by diverse documents irrespective of under/over/correct stamping, especially where there are admissions in audited statements and supporting records, and was not required to impinge on the Collector's domain or await finality of stamp proceedings. Accordingly the challenge under IA No.327/JPR/2019 was rightly rejected. [Paras 14, 15, 16, 25]

The Adjudicating Authority did not err in upholding admission of the financial creditors' claims despite stamp-duty objections; IA No.327/JPR/2019 rejected.

Exclusion of period of limitation by notification under the Rajasthan Relief Undertakings (Special Provisions) Act, 1961 - computation of limitation for filing Section 7 proceedings under the Limitation Act as applied by Section 238A of the IBC - Whether the Section 7 claims filed on 11.01.2018 by the assignees were barred by limitation or were saved by the exclusion provision of the 1961 Act - HELD THAT: - The Tribunal applied Section 4(1)(b) and Section 4(2) of the Rajasthan Relief Undertakings Act, 1961 to the computation under the Limitation Act (Article 137). The corporate debtor's NPA date was 30.09.1997; the unit was notified as a relief undertaking from 03.10.1998 to 07.12.2016. The 1961 Act excludes the period during which suits or proceedings could not be instituted while the undertaking remained a relief undertaking. Using that exclusion, the Tribunal calculated that only one year and two days elapsed before the notification and thereafter limitation recommenced from de-notification (07.12.2016) so that by the filing date 11.01.2018 only an aggregate period well within three years had elapsed. The Tribunal rejected the contention that the 1961 Act's exclusion could not apply because the IBC post-dated the relief period, holding that the exclusion operates for computing limitation under the Limitation Act and is therefore applicable to Section 7 claims. [Paras 19]

The Section 7 claims were not time-barred; IA No.328/JPR/2019 rejecting the limitation objection was rightly upheld.

Power of Committee of Creditors to replace Resolution Professional by 66% voting share under Section 27(2) of the IBC - inherent jurisdiction of the Adjudicating Authority under Rule 11 (limited to exceptional/peculiar facts) - Whether the Adjudicating Authority should have substituted the Resolution Professional in exercise of inherent powers despite absence of a CoC resolution and despite the applicant holding only 4% voting share - HELD THAT: - The Tribunal distinguished the peculiarly factual precedent relied upon by the State (where the RP had refused to convene CoC meetings and thereby prevented the statutory route), observing those facts were not present here. The State held only 4% of CoC votes and no CoC member (other than the State) had sought replacement; no CoC resolution under Section 27(2) (requiring 66% voting share) was placed before the Adjudicating Authority. In such circumstances the Adjudicating Authority was correct in declining substitution; the exceptional exercise of inherent jurisdiction under Rule 11, permitted in cases where the RP obstructs statutory processes, was not warranted on the facts of this case. [Paras 20, 23, 25, 26]

IA No.301/JPR/2019 seeking substitution of the Resolution Professional was rightly rejected for lack of a CoC resolution and absence of facts warranting exercise of inherent jurisdiction.

Final Conclusion: The National Company Law Appellate Tribunal dismissed the appeals and upheld the Adjudicating Authority's orders dated 24.06.2022 rejecting IA Nos.327/JPR/2019, 328/JPR/2019 and 301/JPR/2019; the RP's admission of the financial creditors' claims was sustained, the claims were held not time-barred, and the request to substitute the RP was correctly refused.

Service of resignation under Section 168 of the Companies Act, 2013 - effect of non-service of resignation on directorship - related party under Section 5(24) of the Insolvency and Bankruptcy Code, 2016 - exclusion from Committee of Creditors under the first proviso to Section 21(2) of the Insolvency and Bankruptcy Code, 2016 - principle against circumvention of exclusion by divesting related party status - bona fides and duties of the (Interim) Resolution Professional

Service of resignation under Section 168 of the Companies Act, 2013 - effect of non-service of resignation on directorship - Whether the resignation letters dated 11.02.2022 were validly served on the corporate debtor and, if not, whether the two nominee directors continued to be directors of the corporate debtor. - HELD THAT: - The Tribunal accepted the factual material showing that the courier consignment was booked but the tracking record indicated non-delivery (door locked) and anomalies in pin code and tracking data. The adjudicating authority's conclusion that the resignation notices had not been served in accordance with Section 168 of the Companies Act, 2013 was upheld. The Tribunal held that non service of the resignation notices meant the statutory precondition for effective resignation (receipt by the company) was not complied with; consequently the two nominees continued as directors of the corporate debtor until valid service/efficacious filing occurred. The Tribunal rejected the appellant's contention that proof of booking or courier receipts alone sufficed to prove service where the courier tracking and related records did not show delivery and contained inconsistencies. [Paras 10, 11, 121, 124]

Resignation letters of 11.02.2022 were not proved to have been served on the corporate debtor; the two nominee directors therefore continued as directors.

Related party under Section 5(24) of the Insolvency and Bankruptcy Code, 2016 - exclusion from Committee of Creditors under the first proviso to Section 21(2) of the Insolvency and Bankruptcy Code, 2016 - principle against circumvention of exclusion by divesting related party status - Whether the appellant fell within the definition of a related party and was thus disqualified from membership of the Committee of Creditors. - HELD THAT: - Having concluded that the nominee directors remained on the corporate debtor's board, the Tribunal examined the factual matrix (agreements, nominee appointments, conduct including management involvement and voting/affirmative rights) and applied the governing legal principle that the first proviso to Section 21(2) is directed at excluding related party financial creditors from the CoC. The Tribunal relied on the settled principle that a related party which ceases to be such solely to participate in the CoC should still be treated as a related party for the proviso's purposes. On the cumulative facts and in light of precedent, the Tribunal found no error in the adjudicating authority's conclusion that the appellant was a related party and therefore disqualified from participation in the CoC. [Paras 12, 124]

Appellant is a related party within Section 5(24) and is not entitled to be continued as a member of the Committee of Creditors.

Bona fides and duties of the (Interim) Resolution Professional - Whether the Interim Resolution Professional acted mala fide or failed in his duties in constituting the CoC including the appellant. - HELD THAT: - The Tribunal examined the IRP's conduct: he received statements by the nominee directors, observed entries on the MCA portal, convened meetings and sought an independent legal opinion before constituting the CoC. While the IRP may have erred in not conducting fuller verification earlier, there was no material to establish collusion or malafide intention. The Tribunal therefore declined to fault the IRP beyond recording a caution/stricture to exercise greater vigilance in future. [Paras 13, 14, 15]

IRP acted without malafide; conduct not set aside but cautioned to exercise due diligence in future.

Final Conclusion: The appeals are dismissed. The adjudicating authority's order partly allowing the applications - holding the two nominee directors to be related parties (and disqualifying them from the CoC) and directing reconstitution of the Committee of Creditors - contains no illegality or irregularity and is affirmed; the IRP is cautioned but not found to have acted with malafide.

Offence of money-laundering dependent on predicate/scheduled offence - Proceeds of crime linked to a scheduled offence - Quashing of provisional attachment order upon discharge/closure of predicate offence - Relief of third-party lender where no subsisting scheduled offence exists - Liberty to revive provisional attachment order on change of circumstances

Offence of money-laundering dependent on predicate/scheduled offence - Proceeds of crime linked to a scheduled offence - Quashing of provisional attachment order upon discharge/closure of predicate offence - Validity of the Provisional Attachment Order (PAO) by ED attaching flats mortgaged to the petitioner where the predicate/scheduled offence has been closed and the connected company has been discharged. - HELD THAT: - The PAO originated from FIR No.109/2020 and sought attachment of flats in the Worli project which were mortgaged to the petitioner, a lender to ORDPL. The Special Court and subsequent orders show that the criminal proceedings in respect of the scheduled offence were closed/discharged. Applying the legal principle affirmed by the Supreme Court in Vijay Madanlal Choudhary and followed in subsequent decisions, an offence under the PMLA (and attendant characterization of property as proceeds of crime) is dependent on the existence of a subsisting predicate/scheduled offence. Where the scheduled offence has been finally discharged/closed, there is no basis to continue prosecution under the PMLA or to maintain attachment of property linked to that scheduled offence. The petitioner, not being an accused but a lender, could not have its mortgaged flats treated as proceeds of crime once the predicate proceedings ceased to subsist. In consequence, the impugned PAO attaching the petitioner's flats cannot continue and the attached properties are to be released, subject to the ED's right to seek revival in accordance with law if circumstances change. [Paras 9, 15, 16]

Impugned PAO quashed in respect of the petitioner's flats; the attached flats are released.

Liberty to revive provisional attachment order on change of circumstances - Whether the Enforcement Directorate may seek revival of the PAO or the petitioner may seek further relief if the properties are not released. - HELD THAT: - The Court granted prospective procedural liberty: the ED is permitted to move for revival of the PAO in accordance with law if there is any change in circumstances. Similarly, the petitioner is accorded liberty to file appropriate application in the event the properties are not released despite this order. These are procedural permissions and do not alter the Court's determination that the current PAO cannot continue in the absence of a subsisting predicate offence. [Paras 17]

ED granted liberty to seek revival of the PAO if circumstances change; petitioner granted liberty to apply if properties are not released.

Final Conclusion: The petition succeeds: the provisional attachment of the petitioner's flats is quashed and the properties are ordered to be released because the predicate/scheduled offence has been closed and the petitioner was a lender not an accused; the ED may seek revival of the PAO in accordance with law if circumstances change and the petitioner may apply if release does not occur.

Deduction of pre-deposits under Section 124(2) of the Finance Act for SVLDRS computation - Adjustment of amounts deposited as interest or penalty while quantifying payable under SVLDRS - Interpretative effect and finality of precedent (Schlumberger Solutions Pvt. Ltd.) - Quashing of impugned SVLDRS-3 statement and remand for recomputation

Deduction of pre-deposits under Section 124(2) of the Finance Act for SVLDRS computation - Adjustment of amounts deposited as interest or penalty while quantifying payable under SVLDRS - Amounts deposited during investigation, including those paid as interest (or penalty), must be deducted when issuing the statement indicating the amount payable under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, and such deduction is not confined to amounts labelled as 'tax'. - HELD THAT: - The Court applied Section 124(2) of the Finance Act, as interpreted in the Division Bench decision in Schlumberger Solutions Pvt. Ltd., to conclude that the relief computed under Section 124(1) is subject to deduction of any amount paid as pre deposit at any stage of appellate proceedings or as deposit during enquiry, investigation or audit. The provision refers to 'any amount paid' and makes no distinction based on the head (tax, interest or penalty) under which the deposit was made. Accordingly, an amount deposited during investigation as interest falls within the category of deposits to be deducted while computing the amount payable under the Scheme. The Designated Committee's refusal to adjust the amount paid as interest could not be sustained in view of the statutory language and the binding precedent which has attained finality.

Court held that amounts deposited during investigation, including interest and penalty, must be deducted in computing SVLDRS liability.

Quashing of impugned SVLDRS-3 statement and remand for recomputation - Interpretative effect and finality of precedent (Schlumberger Solutions Pvt. Ltd.) - Whether the impugned statement (Form SVLDRS-3 dated 08.01.2020) should be quashed and the matter remitted to the Designated Committee for reconsideration allowing adjustment of amounts paid towards interest and penalty. - HELD THAT: - Having found that Section 124(2) mandates deduction of deposits made during investigation irrespective of the head under which paid, and noting that the departmental respondents did not challenge the Schlumberger decision which has attained finality, the Court quashed the impugned SVLDRS-3 statement. The Court directed the Designated Committee to re consider the petitioner's claim and recompute the payable amount by adjusting amounts paid towards interest and penalty in accordance with law. Timelines were prescribed for reconsideration by the Designated Committee and for payment by the petitioner, thereby remitting the matter for implementation of the legal conclusion reached.

Impugned SVLDRS-3 statement quashed; matter remitted to the Designated Committee to recompute payable amount after adjusting amounts paid towards interest and penalty, within the time directed.

Final Conclusion: Writ petition allowed; the SVLDRS-3 statement dated 08.01.2020 is quashed and the Designated Committee is directed to re compute the amount payable under the Scheme after deducting amounts deposited during investigation (including interest and penalty) in accordance with Section 124(2) and the binding precedent, with the further directions and timelines as stated by the Court.

Service tax liability for construction services provided to government-owned companies - Exclusion for construction undertaken for personal use (residential complex) - Government-owned company as extended arm of State/Government for exemption

Service tax liability for construction services provided to government-owned companies - Government-owned company as extended arm of State/Government for exemption - Exclusion for construction undertaken for personal use (residential complex) - Construction services rendered to Gujarat State Police Housing Corporation Limited are not liable to service tax. - HELD THAT: - The Tribunal found that Gujarat State Police Housing Corporation Limited is 100% owned by the Government of Gujarat and functions as an extended arm of the State. Applying the established principle that construction of residential complexes for the personal use of the Government (or its extended arm) falls within the exclusion from service tax, the Tribunal followed earlier decisions on identical facts (including S. Kadirvel and related authorities) which held that where the ownership vests with the State and the complex is intended for use of government personnel, the activity is not chargeable to service tax. The Tribunal rejected the lower authorities' contention that GSPHCL's status as a company incorporated under the Companies Act rendered the service taxable, relying on precedent that treats such government-owned corporations as governmental/public purpose vehicles for exemption purposes. In view of these consistent precedents, the Tribunal concluded the issue is no longer res integra and the demand cannot be sustained. [Paras 4, 5]

Assessee's appeal allowed; Revenue's appeal dismissed; impugned demand set aside insofar as it relates to construction services provided to GSPHCL.

Final Conclusion: Following earlier Tribunal decisions that treat a 100% government owned housing corporation as an extended arm of the State and applying the exclusion for construction undertaken for the Government's personal use, the appeal is allowed and the service tax demand in respect of construction for Gujarat State Police Housing Corporation Limited is set aside; Revenue's appeal is dismissed.

Limitation under Section 11B of the Central Excise Act - refund/rebate of duty governed by Section 11B - subordinate legislation cannot override the parent statute - time-bar defence to refund claims

Limitation under Section 11B of the Central Excise Act - refund/rebate of duty governed by Section 11B - subordinate legislation cannot override the parent statute - time-bar defence to refund claims - Assessee's entitlement to refund and whether the claim was time barred in view of Section 11B and the Notification - HELD THAT: - The Tribunal applied the binding ratio of the Supreme Court in M/s. Sansera Engineering Ltd. which holds that refund or rebate of duty is governed by Section 11B of the Central Excise Act and that subordinate legislation (rules or notifications) cannot override the substantive limitation prescribed by the parent statute. Section 11B thus prescribes the one year limitation from the relevant date for rebate/refund claims and subordinate instruments must be read in harmony with that substantive provision. Applying that principle to the present appeal, the Tribunal held that the limitation under Section 11B governs the assessee's claim and that the Notification could not be treated as ousting the parent statute's limitation; consequently the assessee's refund claim was not time barred and the denial of refund by the lower authority was contrary to law. [Paras 8, 9, 10, 11]

Assessee's refund claim held to be in order; denial of refund set aside and refund granted.

Final Conclusion: The Tribunal allowed the assessee's appeal, set aside the order denying refund, directed grant of the refund with consequential benefits as per law, and dismissed the Revenue's appeal.

Point of taxation - right to use information technology software supplied electronically - taxability of information technology software service - extended time limit for issuance of show cause notice - penalty for suppression of facts

Point of taxation - right to use information technology software supplied electronically - taxability of information technology software service - The service of providing the right to use IT software supplied electronically became taxable only when the right to use was effectively granted under the contractual arrangement and payment obligations were met, and not merely on the date of downloading of the software. - HELD THAT: - The Tribunal examined the statutory description of the service and the factual timeline. While the software was downloaded in December 2007, the Finance Act inclusion of IT software service occurred on 16/05/2008. The determinative event is when the "right to use" the software materialised. The End User License Agreement (EULA) was executed on 27/05/2008 (albeit with an earlier effective date) and, under its terms, the license was granted subject to due payment of the licence fees. Major activities facilitating actual use and operationalisation of the software occurred after the service was brought within the tax net. In these circumstances the Tribunal held that the critical event fastening liability was the grant/operationalisation of the right to use (post-EULA and payment conditions) and not the prior electronic download; consequently the supply took place after the levy was introduced and is taxable. [Paras 7, 8]

Point of taxation fixed at the time the right to use was granted/operationalised under the EULA and payment conditions, therefore the service is taxable.

Extended time limit for issuance of show cause notice - taxability of information technology software service - Invocation of the extended period for issuance of the show cause notice was sustainable on the facts and circumstances of the case. - HELD THAT: - The Tribunal rejected the contention that provisional assessments or revenue-neutral consequences precluded invoking the extended limitation. It observed that matters complete in themselves and not covered by provisional assessment need not be kept pending. The adjudicating authority had recorded reasons for invoking extended time, including suppression of material facts regarding receipt of services from persons outside India and non-filing in ST3 returns. The Tribunal placed weight on the original authority's factual findings unless shown to be illogical or procedurally improper, and found no such defect in the order impugned. [Paras 9]

Extended time period for issuing the show cause notice was rightly invoked.

Penalty for suppression of facts - extended time limit for issuance of show cause notice - The penalty imposed for suppression/mis-statement was sustainable and did not call for interference by the appellate forum. - HELD THAT: - Relying on authorities regarding the scope of appellate review of factual findings, the Tribunal held that the adjudicating authority had given clear reasons for concluding suppression and for imposing penalty. The Tribunal noted precedent that penalty may follow once statutory contravention is established and that appellate bodies should not lightly substitute their view for the original authority's factual assessment unless the order is illogical or procedurally defective. There was no demonstration of disproportion or procedural impropriety warranting modification. [Paras 9]

Penalty upheld as sustainable on the facts and reasoning recorded by the adjudicating authority.

Final Conclusion: The appeal is dismissed: the service was taxable when the right to use was granted/operationalised after the levy was introduced; the extended limitation for issuing the show cause notice and the penalty for suppression were rightly invoked and sustained.

Intermediary services - place of provision of services (Rule 3 v. Rule 9 of POPS Rules) - export of services under Rule 6A of the Service Tax Rules, 1994 - extended period of limitation - suppression of facts with intent to evade - penalty under Section 78 and interest under Section 75 of the Finance Act, 1994

Intermediary services - place of provision of services (Rule 3 v. Rule 9 of POPS Rules) - export of services under Rule 6A of the Service Tax Rules, 1994 - Whether the services rendered by M/s Ensim India Pvt. Ltd. are intermediary services (bringing place of provision to India) or are services exported (place of provision outside India). - HELD THAT: - The adjudicating authority examined the Master Service Agreement and the invoices, applied the definition of 'intermediary' in Rule 2(f) of the POPS Rules and the Guidance Note, and analysed whether the essential ingredients of an intermediary-acting as broker/agent, arranging or facilitating a main service between two parties, and providing a separable commission/agency service-are present. The Agreement expressly characterises the parties as independent contractors, disclaims any agency/authority on the developer to act for the service recipient, makes the developer's obligations independent of Ensim Corporation's contracts with third parties, and prescribes reimbursement plus a cost plus fee (not a commission). The authority found no contractual obligation on the developer to facilitate or arrange the supply between Ensim Corporation and its customers, no separate identifiable agency consideration, and no evidence that third parties dealt directly with the developer for consideration. Consequently, the services do not fall within Rule 9(c) as 'intermediary services' and the place of provision is to be determined under the general rule (Rule 3). Applying Rule 3, the recipient being located outside India (Ensim Corporation, USA), and noting that other cumulative conditions of Rule 6A (non negative list service, payment in convertible foreign exchange, and distinct legal existence of parties) are satisfied, the services qualify as export of services under Rule 6A and are not taxable in India. [Paras 5, 7]

Services rendered by M/s Ensim India Pvt. Ltd. are not 'intermediary services'; the place of provision falls under Rule 3 (location of recipient) and the services qualify as 'export of services' under Rule 6A of the Service Tax Rules, 1994, hence not chargeable to service tax.

Extended period of limitation - suppression of facts with intent to evade - penalty under Section 78 and interest under Section 75 of the Finance Act, 1994 - Whether extended period of limitation, interest and penalty are invocable/leviable in respect of the alleged service tax demand. - HELD THAT: - The authority considered the department's allegation of willful suppression with intent to evade and the assessee's detailed rebuttal showing contractual terms, invoicing, receipt of foreign exchange and bona fide legal position taken. Having held that the services qualify as export and there is no contravention, the essential ingredients for invoking extended limitation (fraud, collusion, willful mis statement or suppression with intent to evade) and for imposing penalty under Section 78 are not established. Because there is no sustainable demand on merits, the consequential claims for interest under Section 75 and penalty under Section 78 do not survive. [Paras 5, 7, 8]

Extended period of limitation is not invocable; there is no liability for service tax, and therefore interest and penalty are not leviable - the show cause proceedings are dropped.

Final Conclusion: Adjudication finds that the services supplied by M/s Ensim India Pvt. Ltd. to Ensim Corporation, USA are not 'intermediary services' but qualify as export of services under Rule 6A; accordingly the show cause proceedings for the Financial year 2016-17 are dropped and no demand for service tax, interest or penalty is sustained.

Principle of natural justice - personal hearing - change of adjudicating authority - interpretation of Rule 11(3) of the CENVAT Credit Rules - lapsing of CENVAT credit - simultaneous availment of Notifications No.29/2004 and 30/2004

Principle of natural justice - personal hearing - change of adjudicating authority - Whether the revisional order dated 21.01.2021 was passed in breach of the principle of natural justice by a different authority without providing fresh personal hearing to the petitioner - HELD THAT: - The Court found that the Revisional Authority that adjudicated the Revision Application differed from the authority which had earlier conducted the personal hearing. The petitioner had relied on its written request dated 09.09.2019 asking the authority to decide on the record, but the revisional bench nonetheless proceeded to pass the impugned order without fresh opportunity to the petitioner before the adjudicating authority who ultimately decided the matter. The Court held that even where the dispute involves interpretation of statutory provisions, it is a serious violation of natural justice if the authority which heard the matter is not the authority that adjudicates it. In view of this lapse the revisional order cannot stand and the petitioner must be afforded a fresh personal hearing before the appropriate Revisional Authority; the petitioner shall be permitted to file further documents or written submissions within two weeks of receipt of the judgment and the authority shall fix the personal hearing by e-mail. [Paras 11, 12]

Impugned revisional order quashed to the limited extent that the matter is remitted for fresh adjudication and a fresh personal hearing to be afforded with liberty to file further documents within two weeks.

Interpretation of Rule 11(3) of the CENVAT Credit Rules - lapsing of CENVAT credit - simultaneous availment of Notifications No.29/2004 and 30/2004 - Whether the question of admissibility of rebate and the legal correctness of treating the carried forward CENVAT credit as lapsed under sub rule (3) of Rule 11 should be finally adjudicated by the Revisional Authority - HELD THAT: - The Court recorded the central controversy concerning the interpretation and application of sub rule (3)(i) and (ii) of Rule 11 of the CENVAT Credit Rules (as inserted w.e.f. 01.03.2007) and its interplay with Notifications Nos.29/2004 and 30/2004 and relevant Board circulars. The revisional authority had examined whether the petitioner had continuously availed the exemption and whether the carried forward CENVAT credit ought to have lapsed, concluding that the credit lapsed and rebate paid from such lapsed credit was not a payment of duty. The Court, however, expressly declined to determine the correctness of that interpretation on the merits in this petition because it was remitting the matter for fresh consideration in the light of the procedural breach identified; accordingly the legal and factual issues surrounding Rule 11(3), lapsing of credit and admissibility of rebate are to be considered afresh by the concerned Revisional Authority after providing the petitioner the opportunity of personal hearing and filing further material. [Paras 10, 11]

Merits of the interpretation and application of Rule 11(3) and the question whether the carried forward CENVAT credit lapsed and thereby rendered the rebate inadmissible are remitted to the concerned Revisional Authority for fresh adjudication after affording personal hearing and permitting further submissions.

Final Conclusion: Petition allowed to the limited extent of quashing the revisional order insofar as it was passed without fresh adjudication by the authority which heard the matter; the matter is remitted to the concerned Revisional Authority to decide the disputed questions (including the applicability of Rule 11(3) to the carried forward CENVAT credit and admissibility of rebate) afresh after giving the petitioner a personal hearing and permitting further documents or written submissions within two weeks.

Ultra vires - validity of Notifications and Rules framed for levy under Section 3A - judicial precedent and stare decisis - effect of omission and re introduction of a statutory charging provision without corresponding notification

Ultra vires - validity of Notifications and Rules framed for levy under Section 3A - Validity of the impugned notifications and rules framed for determination of annual capacity and levy of excise under erstwhile Section 3A - HELD THAT: - The Court recognised that earlier decisions of the Madras High Court (Beauty Dyers and the Division Bench in Entex) held that the Rules and Notifications which fixed annual capacity and levied a flat rate were unsustainable as they adopted a deemed value approach and lacked a proper link with Section 3A, rendering them ultra vires. Those conclusions were upheld on further appeal to the Supreme Court (special leave dismissed) and were followed in subsequent decisions. Given that the impugned Single Judge orders under challenge were founded on that earlier reasoning, the Court treated the validity question as finally adjudicated and binding. The Court therefore declined to reopen the vires question in these appeals in view of the settled precedent and the principles applied in those decisions. [Paras 7, 8, 11, 13]

The impugned Notifications and Rules are to be viewed in the light of the earlier decisions holding them ultra vires; the Court declined to disturb that position.

Effect of omission and re introduction of a statutory charging provision without corresponding notification - judicial precedent and stare decisis - Whether anything survives to be adjudicated given omission of Section 3A in 2001 and its later reintroduction without a corresponding notification bringing textile products back under Section 3A - HELD THAT: - The Court noted that Section 3A was omitted with effect from 11.05.2001 and, although reintroduced in 2008, no notification was issued to bring textile products within the purview of Section 3A thereafter. The Division Bench earlier recorded that, because of the omission of Section 3A, nothing survived to be adjudicated in related appeals. Considering the absence of a fresh notification bringing textile products within the reintroduced Section 3A and the binding nature of prior decisions, the Court held that there is no live controversy warranting interference and that uniformity dictated adherence to the established view. [Paras 9, 15, 16, 18]

Since Section 3A stood omitted and textiles were not re notified under the reintroduced provision, nothing survives to be adjudicated and the writ appeals are dismissed.

Final Conclusion: The Court dismissed the writ appeals: the challenges to the Notifications and Rules remain governed by earlier decisions declaring them unsustainable, and, in any event, Section 3A was omitted and textile products were not brought back under the reintroduced provision by notification, leaving no live controversy.

Doctrine of unjust enrichment - refund of excess excise duty on downward price revision - price variation clause and retrospective adjustment by supplementary/negative invoices - Chartered Accountant certificate and customer's declaration as evidence of non reimbursement - rebuttable presumption under Section 12B of the Central Excise Act, 1944

Doctrine of unjust enrichment - refund of excess excise duty on downward price revision - price variation clause and retrospective adjustment by supplementary/negative invoices - Chartered Accountant certificate and customer's declaration as evidence of non reimbursement - rebuttable presumption under Section 12B of the Central Excise Act, 1944 - Refund claims arising from downward price revision are not hit by the doctrine of unjust enrichment and the assessee is entitled to refund where it is shown that the incidence of duty was not passed on to the buyer. - HELD THAT: - The Tribunal found that the contracts with the buyer contained a price variation clause under which prices were adjusted periodically and downward adjustments were given effect to by issuance of negative supplementary invoices. The assessee produced supplementary invoices, a Chartered Accountant certificate and a letter from the buyer stating non reimbursement of the excise element, and evidenced the excess duty as receivable in its books. While Section 12B raises a presumption that duty included in an invoice was passed on, the Tribunal reiterated that this presumption is rebuttable. On the facts, the documentary record and certificates rebutted the presumption and established that the assessee bore the excess duty. The Tribunal relied on earlier decisions holding that where price revision clauses operate and the duty burden was not collected from the buyer, refund claims are maintainable. Consequently the Tribunal held the refund claims were not barred by unjust enrichment and were allowable on merits. [Paras 6]

The refund claims for the specified periods are not hit by unjust enrichment and the assessee is entitled to the refunds.

Final Conclusion: Appeal of the assessee allowed; departmental appeal dismissed. The Tribunal held that refunds arising from downward price revision were admissible on the facts, the presumption under Section 12B having been rebutted by the assessee's evidence.

Definition of "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004 - "used in or in relation to manufacture" nexus test - input service inclusive limb covering services remotely connected to manufacture but related to business activities - services rendered in compliance with statutory obligations treated as input services - admissibility of Cenvat credit on clearing, forwarding and godown charges - penalty under Rule 15(3) of the Cenvat Credit Rules, 2004

Definition of "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004 - "used in or in relation to manufacture" nexus test - input service inclusive limb covering services remotely connected to manufacture but related to business activities - Cenvat credit admissibility of professional charges, legal charges, audit and training fees - HELD THAT: - The Tribunal held that the definition of 'input service' under Rule 2(l) has a restrictive main part and an inclusive limb which extends to services remotely connected with manufacture so long as they are related to business activities. Professional and legal services, and audit and training fees, being integral to statutory compliances and the operation of the establishment and, in the case of audit/training, pertaining to replies to adjudicatory proceedings, satisfy the nexus test and fall within the inclusive part of the definition. Consequently such services qualify as input services eligible for Cenvat credit.

Cenvat credit on professional, legal, audit and training charges allowed.

Services rendered in compliance with statutory obligations treated as input services - "used in or in relation to manufacture" nexus test - Cenvat credit admissibility of civil construction work, analytical charges for ETP samples and transport of biomass used for water treatment - HELD THAT: - The Tribunal accepted that where services are rendered to meet statutory environmental and factory obligations (including effluent treatment and analysis) they constitute an essential and integral part of the manufacturing process. Reliance was placed on the principle that effluent treatment and related activities are part and parcel of manufacture; analytical testing of ETP samples and transport of biomass used in treatment are thus services used in relation to manufacture and qualify as input services under Rule 2(l).

Cenvat credit on civil construction, ETP analytical charges and transport of biomass allowed.

Services rendered in compliance with statutory obligations treated as input services - "used in or in relation to manufacture" nexus test - Cenvat credit admissibility of maintenance of garden - HELD THAT: - The Tribunal found that statutory or regulatory requirements (including pollution control norms demanding green coverage of open spaces) make maintenance of garden a compliance-related activity. Because such maintenance aids in pollution control and is performed to meet statutory obligations connected to the plant's operation, the service falls within the inclusive limb of 'input service' and is eligible for Cenvat credit.

Cenvat credit on garden maintenance allowed.

Input service inclusive limb covering services remotely connected to manufacture but related to business activities - "used in or in relation to manufacture" nexus test - Cenvat credit admissibility of consulting services (salary restructuring study) - HELD THAT: - The Tribunal held that consultancy engaged to restructure remuneration to achieve better utilisation of employees is a service directed at improving business processes and enhancing production. Although remotely connected, such consulting services are related to the activities of the business and therefore qualify under the inclusive limb of the 'input service' definition as services used in relation to the manufacture and clearance of final products.

Cenvat credit on consulting services allowed.

Admissibility of Cenvat credit on clearing, forwarding and godown charges - "used in or in relation to manufacture" nexus test - Cenvat credit admissibility of clearing and forwarding charges and godown charges - HELD THAT: - The Tribunal considered documentary evidence (tax/commercial invoices) produced by the appellant showing outward transport to godowns at Zirakpur and Guwahati and sales effected from those godowns. Having found such evidence sufficient to establish that the services related to the outward clearance of goods from the factory and removal to place of sale, the Tribunal concluded these services are connected to the clearance and removal of final products and thus qualify as input services under Rule 2(l). The earlier finding of insufficiency of invoices was set aside on this basis.

Cenvat credit on clearing, forwarding and godown charges allowed.

Input service inclusive limb covering services remotely connected to manufacture but related to business activities - "used in or in relation to manufacture" nexus test - Cenvat credit admissibility of staff welfare expenses (training of factory staff/workers) - HELD THAT: - The Tribunal observed that periodic training of factory staff and workers is essential for the establishment and contributes to efficient operation and production. Such training, being directly related to factory activity and workforce competence, falls within the scope of 'input service' and is therefore admissible for Cenvat credit.

Cenvat credit on staff welfare (training) allowed.

Final Conclusion: The impugned order rejecting claims of Cenvat credit on the specified input services and imposing penalty was set aside; the appeal is allowed and the claims held admissible with consequential relief as per law.

Settlement under SVLDR Scheme - Grant of cum duty benefit - Infructuous appeals - Dismissal of appeals

Settlement under SVLDR Scheme - Grant of cum duty benefit - Assessees' entitlement to settlement under the SVLDR Scheme and consequent grant of cum duty benefit - HELD THAT: - The Bench recorded that the appellants (assessees) sought benefit under the SVLDR Scheme and that the matter had been settled in terms of that scheme. On the basis of the appellants' submission that settlement had been reached under the SVLDR Scheme, the Tribunal accepted that the appellants were entitled to the benefit as settled and proceeded accordingly. There is no separate reasoning recorded disputing the settlement; the acceptance of the settlement under the statutory scheme determined the entitlement to the cum duty benefit. [Paras 1]

Appeals by the assessees dismissed as settled under the SVLDR Scheme and cum duty benefit recognised as per that settlement.

Infructuous appeals - Dismissal of appeals - Consequences for departmental appeals challenging earlier orders directing grant of cum duty benefit - HELD THAT: - Having accepted that the appellants' matters were settled under the SVLDR Scheme and that cum duty benefit was to be given, the Tribunal held that the appeals filed by the Department against the impugned orders directing grant of cum duty benefit had become infructuous. The Tribunal therefore dismissed the departmental appeals as no longer maintainable in view of the settlement and the resulting outcome. [Paras 3]

Departmental appeals dismissed as infructuous in light of the settlement granting cum duty benefit.

Final Conclusion: The Tribunal recorded settlement of the assessees' cases under the SVLDR Scheme, recognised the grant of cum duty benefit accordingly, dismissed the assessees' appeals on that basis and held the appeals instituted by the Department to be infructuous and dismissed.

Classification of goods for taxation - meaning of 'insecticide' for entry-wise classification - Entry 30 of Part II of Schedule B - residual entry 'all other goods' in Part III of Schedule B - concurrent findings of appellate authorities - use of product literature and statutory registration as classificatory evidence

Classification of goods for taxation - meaning of 'insecticide' for entry-wise classification - Entry 30 of Part II of Schedule B - use of product literature and statutory registration as classificatory evidence - The mosquito repellant 'Good Knight' is to be classified as an 'insecticide' under Entry 30 of Part II of Schedule B to the OVAT Act and not as 'all other goods' under Part III of Schedule B. - HELD THAT: - The Additional Commissioner of Sales Tax (Appeals) and the Odisha Sales Tax Tribunal concurrently held that the product falls within the expression 'insecticide' in Entry 30 of Part II of Schedule B and is therefore taxable at the lower rate indicated therein. The High Court noted that the product literature describes one of the principal ingredients as 'Transfluthrin 0.88% w/w Liquid Vaporiser' and expressly states that it is 'an effective insecticide recommended for the control of adult mosquitoes in the household.' Further, the dealer holds a certificate of registration under the Insecticides Act, 1968 for manufacture of transfluthrin liquid vaporiser, which corroborates the classificatory character of the product. On these material records, the Court found no error in the concurrent factual and legal conclusion of the appellate authorities rejecting the Department's plea to treat the product under the residual 'all other goods' entry. [Paras 3, 4]

The product is an 'insecticide' under Entry 30 of Part II of Schedule B and thus amenable to tax at the rate applicable to that entry.

Concurrent findings of appellate authorities - Whether the High Court should re-examine the classification issue despite concurrent findings below. - HELD THAT: - The Court declined to re-examine the matter, being unpersuaded that the Department's challenge warranted interference with the concurrent findings of the ACST and the Tribunal given the documentary material and statutory registration supporting the classification. No error of law or jurisdiction was shown that would justify fresh adjudication by this Court. [Paras 5, 6]

The Court refused to entertain further examination and dismissed the revision petition.

Final Conclusion: The revision petition is dismissed; the product 'Good Knight' is upheld as an 'insecticide' within Entry 30 of Part II of Schedule B for the tax period 1st April, 2007 to 31st December, 2008, and the concurrent orders of the appellate authorities are affirmed.

Interest under Section 25(5) of the Haryana General Sales Tax Act, 1973 - advance payment and adjustment of tax - refund adjustment - requirement of deliberate evasion for imposition of interest or penalty - principles of natural justice

Interest under Section 25(5) of the Haryana General Sales Tax Act, 1973 - advance payment and adjustment of tax - requirement of deliberate evasion for imposition of interest or penalty - principles of natural justice - Validity of the notice raising demand for interest on amount deposited in advance and subsequently adjusted/refunded - HELD THAT: - The Court examined Section 25(2A) and Section 25(5) of the Act and applied the settled principle that interest or penalty may be imposed only where an assessee is shown to have acted deliberately to evade payment of tax. Reliance was placed upon earlier authority in M/s Hindustan Steel Ltd. v. State of Orissa to the effect that liability to penalty does not arise merely from default but requires evidence of an attempt to contravene the statute with the object of evasion. Here the petitioner had, at the department's request, deposited excess advance tax for March 1998 and the department had previously adjusted such deposits while framing assessments; the department later issued refund/adjustment orders only after this Court directed framing of earlier assessments. There was no finding or allegation of deliberate or dishonest conduct by the petitioner or of any attempt to evade tax. In these circumstances imposition of interest for subsequent years, despite the department having solicited and enjoyed the benefit of the advance payment and later refunding/adjusting it, was held to be contrary to principles of natural justice and unsustainable. The impugned demand notice therefore could not stand. [Paras 5, 6, 7]

Impugned notice demanding interest quashed; respondents directed not to claim interest on the tax already deposited by the petitioner and treated as short deposit.

Final Conclusion: Writ petition allowed; the notice raising demand of interest on the advance deposit is set aside and respondents are directed not to claim interest on the amount already deposited.