TaxTMI Updates e-Newsletter
Feb 27,2025

Rejection of appeal filed by the petitioners on the ground of delay of 8 days in filing - HELD THAT:- Having considered that there is a marginal delay in filing the appeal and also noting that although the petitioners have a further right to prefer an appeal before the Appellate Tribunal, by reasons of the Appellate Tribunal not being constituted, the petitioners have been compelled to approach this Court. The appeal has not been adjudicated on merits.

Having regard to the peculiar facts made out and noting that some explanation is available for the delay, it is opined that the matter ought to be remanded back to the appellate authority for a decision on merits and accordingly the order dated 27th June, 2024 passed by the appellate authority is set aside.

Petition disposed off by way of remand.

Challenge to adjudication order - adjudication order was passed without giving an opportunity of hearing - violation of principles of natural justice - HELD THAT:- On going through the voluminous document placed, it is found that the matter provides adjudication into facts. It is not simple adjudication but deep and thorough adjudication into facts are required to be done and therefore, it is not one of the exceptional cases, where the appellant/assessee should be permitted to bypass the statutory appellate remedy.

The appellant is directed to file a statutory appeal within a period of 30 days from the date of receipt of server copy of this judgment and order and if the appellant does so, the appellate authority shall entertain the appeal without rejecting the same on the ground of limitation.

Appeal dismissed.

Valid service of SCN - attachment to the Summary of the Show Cause Notice (SCN) in Form GST DRC-01 - absence of a proper SCN - violation of principles of natural justice - HELD THAT:- From the perusal of the records, it would show that in the Summary of the Show Cause Notices issued in GST DRC-01 to the petitioner in the writ petition, there is a mention therein that there is a Show Cause Notice attached. It is the case of the respondents that the said attachment wherein determination of tax is mentioned is the Show Cause Notice. The question therefore arises as to whether the said attachment can be said to be a Show Cause Notice as per the mandate of both the Central Act as well as the State Act and the Rules made therein under. It would be apposite to take note of that in all these cases, the Summary of the Show Cause Notices have been issued in terms with Section 73.

The Proper Officer is required to issue a Show Cause Notice, therefore, the Show Cause Notice is required to specifically mention the reason(s) and the circumstances why the provision of Section 73 had been set into motion. The person against whom the said Show Cause Notice is issued would only have an adequate opportunity to submit a representation justifying that the prerequisites for issuance of Show Cause Notice is not there if and only if the reason(s) for issuance of the Show Cause is specifically mentioned in the Show Cause Notice - Section 73 further stipulates that upon consideration of the representations, if any, the Proper Officer shall pass the order under Section 73(9) determining the amount of tax, interest and penalty.

This Court is of the view that the Summary of the Show Cause Notice along with the attachment containing the determination of tax cannot be said to be a valid initiation of proceedings under Section 73 without issuance of a proper Show Cause Notice. The Summary of the Show Cause Notice is in addition to the issuance of a proper Show Cause Notice. Under such circumstances, this Court is of the opinion that the impugned order challenged in the instant writ petition is contrary to the provisions of Section 73 as well as Rule 142 (1) (a) of the Rules as the said impugned Orders were passed with issuance of a proper Show Cause Notice.

Whether Rule 26 (3) can be applicable to Chapter-XVIII when the said Sub-Rule on refers to Chapter-III? - HELD THAT:- In the case of M/s Silver Oak Villas LLP [2024 (4) TMI 367 - TELANGANA HIGH COURT], the learned Division Bench of the Telangana High Court had applied Rule 26 (3) of the Rules of 2017 even to Chapter-XVIII of the Rules of 2017. In the case of A.V. Bhanoji Row (supra), the learned Division Bench of the Andhra Pradesh High Court held that the signatures cannot be dispensed with and Sections 160 and 169 cannot save an order, notice, communication which did not contain a signature.

This Court has duly perused the Summary of the Show Cause Notices wherein the petitioner was only asked to file his reply on a date specified. There was no mention as to the date of hearing and the Column was kept blank. However, the petitioner had sought for an opportunity of hearing which was however not given - The mandate of Section 75(4) of both the Central and State Act are safeguards provided to the assessees so that they can have a say in the hearing process.

Conclusion - The issuance of the Summary of the Show Cause Notice, Summary of the Statement and Summary of the Order do not dispense with the requirement of issuance of a proper Show Cause Notice and Statement as well as passing of the Order as per the mandate of Section 73 by the Proper Officer. As initiation of a proceedings under Section 73 and passing of an order under the same provision have consequences. The Show Cause Notice, Statement as well as the Order are all required to be authenticated in the manner stipulated in Rule 26 (3) of the Rules of 2017. Accordingly, this Court is of the opinion that the Impugned Order challenged in the writ petition are in violation of Section 75(4) as no opportunity of hearing was given.

This Court while setting aside the impugned Order-in-Original dated 28.04.2024, grants liberty to the respondent authorities to initiate de novo proceedings under Section 73, if deemed fit for the relevant financial year in question - Petition disposed off.

Rectification u/s 254 - Characterization of income - nature of income derived by the petitioner from PGHH/sister concern of the petitioner - "income from other sources" or "income from house property" - HELD THAT:- ITAT’s jurisdiction under Section 254 [2] of the IT Act is limited. It is not akin to a substantial review. This Court clarified this position in an earlier round when the ITAT had similarly exceeded its jurisdiction. The issue of whether the income receivable by the petitioner from PGHH was income from house property or income from other sources was writ large before this Court in the Revenue’s pending appeal.

ITAT, exercising powers u/s 254[2] of the IT Act, could not have reviewed its earlier finding on this issue. ITAT’s impugned order deserves to be set aside accordingly.

However, we clarify that this judgment and order would in no way interfere with this Court deciding on whether the income receivable from PGHH should be classified as "income from house property" or "income from other sources" in revenue’s appeal under Section 260-A of the Act.

ITAT exceeded its jurisdiction under Section 254 (2) in deciding such an issue.

Deduction u/s 10A and depreciation on computer peripherals - petitioner states that with respect to the two corporate tax issues, the respondent has failed to pass any appeal effect order till date, and therefore, the proceedings have become time barred with respect to these two issues -

As submitted that once the ITAT set aside the assessment order, the demand arising from the said order stood extinguished and it was the duty of the AO to delete the outstanding demand from the portal of the petitioner. However, despite a lapse of more than 6 years from the date of the ITAT order setting aside the assessment order, the AO has failed to delete the demand from the portal - HELD THAT:- In view of the submissions of the learned counsel for the parties as also the statement of learned counsel for Revenue, we direct that the order dated 26.06.2015 passed by the ITAT be given appeal effect to and the consequential benefits with statutory interest, if applicable, be released forthwith, in accordance with law.

Validity of order passed u/s 250 - penalty proceedings initiated against the petitioner were decided in a manner prejudicial to the natural justice - denial of personal hearing - Rejection of exemption claimed u/s 10 (23C) (iiiab) - HELD THAT:- In the instant case, the petitioner has moved a rejoinder before the Appellate Authority requesting for a personal hearing but the said request was not considered by the Appellate Authority. If the application/request was made for personal hearing by the petitioner before the Appellate Authority, the Income Tax authority ought to have allowed the said application by arranging for video conferencing argument. At least in the instant case, it stands established the request from the petitioner was made before the Appellate Authority but the Appellate Authority did not give opportunity of hearing to the petitioner.

Therefore, this Court is of the considered view that there is a violation of principle of natural justice and if the defect of principle of violation of natural justice has occurred in the initial stage of proceedings, it cannot be cured at the stage of appeal. No doubt, the petitioner has a right to avail the statutory appellate remedy but when the impugned order was passed by the respondent No. 2 in violation of principle of natural justice, it cannot be alleviated. WP allowed.

Application moved seeking a refund of an amount erroneously directed to be refunded to the petitioner along with interest -applicant/respondent/contemnor said that the amount which was attached by the respondent has been erroneously directed to be refunded to the petitioner along with payment of interest @ 6% p.a. from the date of seizure till its realization within six weeks thereof.

HELD THAT:- The interest would be payable after the expiry of the initial 120 days from the date on which the authorization u/s 132 of the Income Tax Act or the requisition u/s 132A of the Income Tax Act was executed.

Thus, pursuant to the notice issued to the non-applicant/petitioner, today a cheque mcontaining the income tax refund order has been handed over to learned counsel for the petitioner, towards the interest which has been calculated in terms of the aforesaid discussion. The same is accepted unconditionally. The copy of the said cheque is taken on record.

Petitioner shall be at liberty to approach the worthy Registrar General, Delhi High Court for refund of the principal amount which already stands deposited with this Court.

Penalty u/sec 271(1) - income disclosed during a survey - as per revenue had there been no survey action u/s 133A assessee would not have disclosed the business income and long term capital gains - HELD THAT:- When the assessee has paid sufficient advance tax apart from the TDS / TCS and the due date for filing of return has not expired on the date of return, it cannot be said that the assessee would not have disclosed the income during the financial year 2016-17 had there been no survey. In our opinion, both the AO and CIT(A) have completely ignored the fact of sufficient advance tax paid by the assessee and the due date for filing of return has not expired. It is also an admitted fact that the income returned by the assessee has been accepted without any variation.

Since in the instant case the income declared during the course of survey has been offered in the return which has been accepted by the AO in the order passed u/s 143(3) of the Act and the assessee has paid sufficient advance tax before the survey was conducted and the date for filing of return of income has not expired on the date of survey, therefore, penalty levied by the AO and sustained by the Ld. CIT(A) is not justified - Appeal filed by the assessee is allowed.

Foreign Tax Credit - Form No. 67 - Rule 128(9) of the Income-tax Rules - Double Taxation Avoidance Agreement - CBDT Circular - Section 90 of the Income-tax Act - Remand to Assessing Officer for verification

Foreign Tax Credit - Form No. 67 - Rule 128(9) of the Income-tax Rules - Double Taxation Avoidance Agreement - CBDT Circular - Remand to Assessing Officer for verification - Whether the claim for foreign tax credit was rightly denied solely because Form No. 67 was filed after the due date for furnishing return under section 139(1), and what remedial course should follow. - HELD THAT: - The Tribunal examined the sole controversy of entitlement to foreign tax credit where income earned abroad (Denmark) was offered to tax in India but the statement in Form No. 67 was furnished after the due date for filing the return. While noting precedent taking differing views on the mandatory or directory character of Rule 128(9), the Tribunal held that the lower authorities declined the claim purely on the ground of belated filing of Form No. 67 without verifying whether tax had in fact been paid in the source country or whether relief had been availed there. Relying on the India-Denmark DTAA principles and CBDT guidance that DTAA provisions govern where applicable, the Tribunal concluded that the Assessing Officer must verify whether the assessee paid tax in Denmark and whether credit or relief was claimed in that jurisdiction; only thereafter the question of allowing FTC should be decided. Consequently, the Tribunal set aside the orders of the lower authorities and remitted the matter to the Assessing Officer with directions to verify the foreign tax payment and decide the claim in conformity with the cited decisions and the CBDT Circular. [Paras 4, 12, 13]

Orders of the lower authorities set aside; appeal allowed for statistical purposes and issue remitted to the Assessing Officer to verify payment of foreign tax in Denmark and to decide the claim for foreign tax credit in accordance with the DTAA, CBDT circular and relevant precedents.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes, set aside the lower orders refusing FTC solely on account of belated Form No. 67 and remitted the matter to the Assessing Officer to verify foreign tax payment and whether relief was claimed in Denmark, thereafter to decide the FTC claim in conformity with the DTAA, CBDT guidance and relevant Tribunal precedents.

Addition on account of provision released - HELD THAT:- We note that the assessee has created a provision in the AY.2016-17 and the same has been added back to the total income in the computation of total income without claiming the provision as an expenditure. Further, during the AY.2017-18 the assessee has released the provision by crediting the same to the P&L account by reducing from the provision created in the earlier AY.2016-17. Therefore, AO and that of CIT(A) have erred in making an addition.

Disallowance of expenditure - As assessee has submitted the entire 17 ledger extracts of all the heads like car expenses, auto expenses, security expenses, data entry, repairs, water, newspaper etc. along with the sample vouchers. Books of accounts of the assessee is audited and the same have been submitted to various statutory authorities.

AO and that of CIT(A) have disallowed the expenditure on adhoc basis at 5% without any cogent reason or identifying any defects. In the present facts and circumstances of the case we do not agree with the lower authorities in disallowing the expenditure on adhoc basis and hence we set aside the order of Ld. CIT(A) by directing the AO to delete the same by allowing the grounds of appeal filed by the assessee.

Appeal of the assessee is allowed.

Reopening of assessment u/s 147 - addition of long-term capital gain by AO based on a joint development agreement - contention of the assessee that the joint development agreement was not executed and the vendor did not receive the consideration and therefore, the capital gain u/s 50C did not arise - HELD THAT:- We find that though the joint development agreement was entered into by the assessee with M/s Monark Dealcom Pvt. Ltd. in respect of landed property located at premises no.125A, Motilal Nehru Road, Kolkata of which he was 50% owner and remaining 50% belonged to Guramrit Singh Gill. We note that no money was ever received under this agreement and this was never performed or executed. We also note that the said land was sold by both the co-owners. i.e assessee as well as his brother Shri Guramrit Singh Gill on 28.08.2017 for the agreed consideration and the capital gain arose in the assessment year 2018-19 and would be paid accordingly.

We observed that in the case of another co-owners Shi Guramrit Singh Gill, the same plea has been accepted by the ld. AO in the reassessment proceedings for the same assessment year 2013-14 and no addition was made.

Accordingly, we set aside the order of ld. CIT (A) and direct the AO to delete the addition. Decided in favour of assessee.

Condonation of delay -delay in filing appeals before the learned CIT(A) - assessee had filed his appeals before the learned CIT(A) with a delay of 10 years 10 months and 19 days and 11 years 03 months and 05 days for the impugned assessment years 2010-2011 and 2011-2012 - HELD THAT:- There were no proper day-to-day explanation offered by the assessee. We note that the delays are of two kinds i.e., normal delay and inordinate delay. In case of former one, the Court’s/Tribunal’s always take a lenient view to condone such normal delays and proceed to decide the matter in issue before it on merits in the interest of substantial justice. However, in the present cases, there was an inordinate delay of more than 10 years and 11 years for the impugned assessment years 2010-2011 and 2011-2012, respectively, and admittedly, the assessee could not explain the day-to-day delay before the learned CIT(A). Even before the Tribunal also, the assessee had filed the appeals with a delay of 35 days and 50 days for the impugned assessment years 2010-2011 and 2011-2012, respectively.

Taking the spirit from the recent Judgment of Pathapati Subba Reddy (died) [2024 (5) TMI 1319 - SUPREME COURT] dismiss the appeals of the assessee as there were no ‘sufficient cause’ shown by the assessee which could convince the Bench to condone the impugned delays of 10 years 10 months and 19 days and 11 years 03 months and 05 days for the impugned assessment years 2010-2011 and 2011-2012 in filing the appeals before the learned CIT(A). We, therefore find no infirmity in the orders of the learned CIT(A) and accordingly, we confirm his orders. The grounds raised by the assessee are dismissed in both these appeals.

Reopening of assessment u/s 147 - reasons to believe - AO noted that the assessee has failed to offer satisfactory explanation about the nature and source of credits into the Axis Bank account - assessee did not comply with the notice by filing the return of income

HELD THAT:- As perused the reasons recorded for reopening of assessment u/s 148(2) AO after extracting the report of the investigation, simply recorded in three lines that I have reason to believe that assessee’s income chargeable to tax has escaped assessment, meaning thereby the AO has not recorded his satisfaction and reasons are vague, unambiguous and scanty.

No details/information have been recorded as from whom the money was received and when it was received. In our opinion the re-assessment can be not be made on vague, scanty and ambiguous reasons recorded.

As there is no satisfaction or independent application of mind by the ld. AO to the information received. Moreover, the reasons are vague, scanty and ambiguous. Therefore, we are inclined to quash the reopening of assessment. Consequently, the appeal of the assessee is allowed.

Condonation of delay - addition as unexplained share capital/share premium under the doctrine of unexplained credits - burden of proof on assessee to establish identity and creditworthiness of share subscribers - insufficiency of non-compliance with summons under Section 131 to itself justify addition - inapplicability of retrospective operation of proviso/Clause (viib) introduced by Finance Act, 2012 to AY 2012-13 - duty of assessing officer to verify evidence and issue further notices (including under Section 133(6)) before making additions - setting aside addition and directing deletion where AO fails to test or controvert documentary evidence

Condonation of delay - Delay of 164 days in filing the appeal was condoned and the appeal admitted for adjudication. - HELD THAT: - The Tribunal examined the explanation for delay - reliance on prior counsel unfamiliar with Tribunal procedure and subsequent approach to new counsel - and found the delay to be bonafide and genuine. In the interest of justice and fair play the delay was condoned and the appeal admitted for hearing. [Paras 2, 4]

Delay condoned; appeal admitted for adjudication.

Addition as unexplained share capital/share premium under the doctrine of unexplained credits - burden of proof on assessee to establish identity and creditworthiness of share subscribers - insufficiency of non-compliance with summons under Section 131 to itself justify addition - inapplicability of retrospective operation of proviso/Clause (viib) introduced by Finance Act, 2012 to AY 2012-13 - duty of assessing officer to verify evidence and issue further notices (including under Section 133(6)) before making additions - setting aside addition and directing deletion where AO fails to test or controvert documentary evidence - Addition of share capital/share premium to the assessee's income was unsustainable and was set aside by the Tribunal directing deletion. - HELD THAT: - The Tribunal found that the assessee had furnished before the Assessing Officer and before the first appellate authority documentary proof regarding the share subscribers - including identification documents, PAN, bank statements, ITRs and assessment orders - which went to identity, creditworthiness and genuineness of the transactions. The AO made the addition mainly because summons under Section 131 were not complied with and without carrying out any substantive verification of the documents furnished or issuing notices under Section 133(6) to the subscribers. The Tribunal held that non-appearance pursuant to summons cannot, by itself, justify treating the receipts as unexplained when documentary material establishing identity and creditworthiness is on record and the AO has not pointed out any defect in those documents. The Tribunal further observed that the proviso/Clause (viib) inserted by Finance Act, 2012 applied from AY 2013-14 and was not applicable to AY 2012-13. Relying on the principles in earlier decisions, including the reasoning in Orissa Corporation Ltd. and decisions of coordinate benches and High Courts cited in the order (e.g., Crystal Networks Pvt. Ltd. , CIT vs. Gangadeep Infrastructure Pvt. Ltd. , and others), the Tribunal concluded that the AO's order lacked requisite enquiry and could not be sustained; accordingly it set aside the appellate order upholding the assessment and directed deletion of the addition. [Paras 7, 8, 9, 11, 15]

Addition of share capital/share premium treated as unexplained is deleted; impugned orders set aside and AO directed to delete the addition.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and, on merits, allowed the appeal by setting aside the orders sustaining an addition of share capital/share premium for AY 2012-13, holding that documentary evidence on record established identity and creditworthiness of subscribers, summons non-compliance alone was insufficient to sustain the addition, and that the proviso introduced by Finance Act, 2012 was not applicable to AY 2012-13.

Unexplained investment u/s 69 - assessee made cash-deposits in a bank a/c during demonetisation - HELD THAT:- Admittedly, the assessee made deposit on 15.11.2016 immediately after declaration of demonetisation on 08.11.2016. The assessee is claiming that the impugned deposit was made from cash balance available in books of his business at the time of declaration of demonetisation. To show this factual aspect, the assessee filed Cash-Book and other documents to AO during assessment-proceeding and the same are also placed in Paper-Book and referred by Ld. AR during hearing. On perusal of assessment-order, one thing is clear-cut that the AO has not rejected assessee’s’ books of account, even the AO has not pointed out a single flaw or deficiency in assessee’s books.

Assessee paid VAT on sale of such gold. The impugned purchase transaction of gold from father and subsequent sale thereof were duly informed to VAT authorities in VAT return and the same were accepted.

The gift was made due to love and affection and a gift-deed executed by father was also filed to AO and the same is a part of Paper-Book as well. Therefore, the assessee is very correct in claiming that the gift transaction is nothing to do with purchase transaction and the two transactions are altogether independent of each other. The AO has made a wrong notion that there is a circular transaction by way of gift. It is also noteworthy that the AO has neither disallowed the purchase made from father nor made any addition qua the gift received from father. Thus, the transactions of purchase and receipt of gift are not disturbed by AO.

AO has, however, made addition treating the deposit in bank a/c as unexplained whereas the source of deposit in bank a/c is very much available in Cash-Book of assessee and the same Cash-Book is not even rejected by AO. It is also noteworthy that the AO has made addition u/s 69 even while accepting the books of account of assessee, the books of account in which the impugned cash deposit in bank a/c is recorded. Nobody can dispute that the section 69 applies only when a sum is not recorded in books of account whereas the position of present case is just opposite in as much as the impugned deposit is already recorded in cash-book accepted by AO. Decided in favour of assessee.

Disallowance of finance charges made u/s 36(1)(iii) - as per AO interest bearing funds have been diverted to non-business purpose - HELD THAT:- Basic business of the assessee is real estate development, and in that process, the assessee collected advances from customers for sale of flats. As per the agreement with the customers, the assessee has paid interest in case of delay in delivery of flats. The assessee had also proved that the funds received from the customers in the form of advances have been utilized for the purpose of business of the assessee.

In fact, it is not a case of the AO that the assessee had diverted funds for non-business purposes. Assuming for a moment that loans and advances given to group concerns are diversion of interest-bearing funds, the fact remains that, as the AO himself noted, the group companies of the assessee are also engaged in the business of real estate development and there is a business nexus between the appellant and the group concerns and thus, in our considered opinion, loans and advances given to other group companies can be said to be in the normal course of the business of the assessee and thus, there is a commercial expediency.

AO erred in disallowing finance charges being interest paid on customers’ advances without any valid reasons. CIT(A), without appreciating the relevant facts, simply sustained the addition made by the AO. Assessee appeal allowed.

Addition u/s 69A - unexplained cash credit - as during demonetization period the assessee had deposited a sum in bank account - assessee could not establish source for the balance cash deposit with no source of income - HELD THAT:- Assessee has filed additional evidences such as income tax returns filed by Mother of assessee and Wife of the assessee for the A.Y. 2017-2018 which are already with the Department and also an affidavits where they were admitted to have paid cash to the assessee and to establish the source of cash deposit and source of income.

From the careful perusal of the above documentary evidences placed before the Tribunal, we find that the assessee has deposited the cash in the Bank out of the income of family members for the purpose of marriage expenditure appears to be bonafide and reasonable. Therefore, we direct the Assessing Officer to delete the addition sustained by the CIT(A) - Decided in favour of assessee.

TP Adjustment - transaction of payment of royalty in relation to licensed manufacturing segment of the Appellant on various models - ALP benchmarking of Royalty Payment to non-UK entities - HELD THAT:- Facts and circumstances of the case required the learned TPO to be more objective in his approach to counter the compensation of 4 to 5% accepted in the case of assessee in the MAP proceedings for A.Y. 2013-14 or APA for A.Y. 2018-19 to 2022-23 and the treatment in A.Y. 201-11, 2011-12 and 2012-13 when no addition was made in respect of Germany entities for royalty payment of 4-5%.

MAP proceedings or APA may not have a precedent effect on different assessee’s but in case of same assessee they at least have far reaching persuasive value and without countering anything on the basis of facts coupled with evidence, the ends of justice require giving assessee benefit of principles of consistency, which are recognized principles for determination of income and adjudication in tax matters. Reliance in this regard can be placed on the judgment of Radha Swami Satsang [1991 (11) TMI 2 - SUPREME COURT] However, the ld. Tax authorities seems to have artificially distinguished the transaction of assessee with Non-UK and UK AEs, to apply a different rate in case of non-UK AE.

We are inclined to allow ground nos. 4 to 6 and the additional ground, as raised. TPO is directed to accept the parameters of determination of compensation as accepted in APA and accordingly benefit the assessee in determination of ALP of disputed transaction with non-UK AE, too.

Classification of goods - Small Form Factor Pluggable (SFP) devices - whether the Small Form Factor Pluggable (hereinafter ‘SFP’) is a part of a machinery and is liable to be classified under CTH 8517 7990 or whether it is to be classified as an apparatus/ machine under CTH 8517 6290? - HELD THAT:- In IBM India Private Limited vs. Commissioner of Customs (Import) CESTAT, Mumbai [2024 (4) TMI 972 - CESTAT MUMBAI] had again considered the same products i.e., Transceiver for Ethernet Switch/ Transceiver modules of different models and had relied upon the Reliance Jio Infocomm [2022 (8) TMI 76 - CESTAT MUMBAI] and had observed that the SFP’s Optical Transceivers 9.1 were entitled to exemption from Basic Custom Duty and would be classified as held in Reliance Jio Infocomm.

In view of the fact that the classification of SFP’s has already been decided in various decisions and has also been accepted by the Department, the impugned ruling dated 26th September, 2024 by which the Authority has observed that SFP’s would be classifiable under 85176290 with Basic Customs Duty Act of 20% would not sustain and the same is liable to be set aside. The goods i.e., SFPs shall stand covered under Entry 85177990 and shall also be entitled to applicable exemptions.

Conclusion - SFPs should be classified under Entry 85177990 and be entitled to applicable exemptions.

The impugned rulings are set aside - Appeal allowed.

Confiscation of imported consignments - hazardous material in the imported consignments - waiver of penalties under the Customs Act, 1962 - disregarding evidence submitted by the importer regarding the contents of the consignments - HELD THAT:- The question of re-examination of a cargo would arise when there is material to discredit the initial examination. On a reading of the order-in-original, it is prima facie found that the description of the goods stuffed in the 67 (54+13) containers did not conform to the pre-shipment certificate.

On a perusal of the order-in-original of the show-cause notice and the order-in-original, it is found that the examination had been conducted on several containers and it has been found that the containers contained waste material which have been referred to as municipal waste that they are hazardous waste and the same is not permissible to be imported.

The Court was convinced in the case of Emami Paper [2024 (5) TMI 1261 - CESTAT KOLKATA] that substantial questions of law arose for consideration and therefore the appeal was admitted. The necessity to grant an interim order did not arise in the said case since the importer agreed to comply with the order passed by the first Appellate authority who directed destruction of the goods.

The option is given to the respondent-importer that if they are willing to re-export the imported cargo which have been held to be prohibited goods in terms of the direction issued by the adjudicating authority, they will give their consent in writing to the Department and if the same is given, subject to compliance of other formalities the Department shall permit the respondent/importer to re-export the goods at their risk and cost without reference to the pendency of this appeal.

The learned Advocate for the appellant shall file requisite number of informal paper books prepared out of Court within four weeks including therein all papers and documents used before the trial Court upon serving copies thereto the learned Advocate for the respondent. Settlement of index and all other formalities are dispensed with.

Conclusion - The Court admitted the appeals based on substantial questions of law raised by the revenue.

List the appeal for hearing after six weeks - The stay application stands disposed of.

Invocation of judicial review under Article 226 of the Constitution to interdict personal insolvency proceedings initiated against respondent no.1 under Section 95 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- This Court in Jiwrajka [2024 (1) TMI 33 - SUPREME COURT], while deciding the constitutional validity of Sections 95 to 100, has delved into the same and has held as follows. Pursuant to an application for initiating personal insolvency proceedings under Section 94 or Section 95, the Adjudicating Authority appoints a resolution professional under Section 97. The resolution professional performs distinct functions under Part II (dealing with corporate insolvencies) and Part III (dealing with personal insolvencies) of the IBC.

As has been held by this Court in Jiwrajka [2024 (1) TMI 33 - SUPREME COURT], the Adjudicating Authority does not adjudicate any point at this stage and need not decide jurisdictional questions regarding existence of the debt before appointing the resolution professional. This is because Section 99 requires the resolution professional to, at the first instance, gather information and evidence regarding repayment of the debt, and ascertain whether the application satisfies the requirements of Section 94 or Section 95 of the IBC. The existence of the debt will first be examined by the resolution professional in his report, and will then be judicially examined by the Adjudicating Authority when it decides whether to admit or reject the application under Section 100.

It is well-settled that when statutory tribunals are constituted to adjudicate and determine certain questions of law and fact, the High Courts do not substitute themselves as the decision-making authority while exercising judicial review - In the present case, the proceedings had not even reached the stage where the Adjudicatory Authority was required to make such determination. Rather, the High Court exercised jurisdiction even prior to the submission of the resolution professional’s report, thereby precluding the Adjudicating Authority from performing its adjudicatory function under the IBC.

While there is no exclusion of power of judicial review of High Courts, and the limits and restraint that the constitutional court exercises and must exercise are well articulated - the High Court was not justified in allowing respondent no. 1’s writ petition. The High Court should have permitted the statutory process through the resolution professional and the Adjudicating Authority to take its course.

Conclusion - The High Court's exercise of writ jurisdiction was incorrect as it interfered with the statutory process and made determinations that fell within the Adjudicating Authority's domain.

Appeal allowed.

Violation of principles of natural justice - non-speaking order - no privity of contract between the Appellant and Respondent No.1 - Impugned Order passed based on invocation of personal guarantee by 3rd party - guarantee was not invoked by proper party - valid appointment of Respondent No. 2 - valid Board Resolution to show that the Respondent No. 1 was authorised to file its Application u/s 95 of the Code or not - liability of Appellant as Guarantor for outstanding dues.

Whether there was no privity of contract between the Appellant and Respondent No.1? - Whether the Adjudicating Authority could have passed the Impugned Order based on invocation of personal guarantee by 3rd party? - HELD THAT:- Section 95 of the Code provides right to the creditors to file application to initiate Personal Insolvency Resolution Process (‘PIRP’). The security trustee is merely holding security in favour of the Financial Creditor or consortium of creditors and therefore either the trust or creditors may file application under Section 95 of the Code. The wording of Section 95(1) of the Code clearly stipulates that creditor may apply “either by himself or generally with other creditors”. Therefore, the creditor i.e., Respondent No. 1 is within his right to initiate Section 95 application and does not prevent him based on alleged lack of privity of contract with the Appellant. It is settled law that a party can enforce the contract made for its benefit.

The Assignment Agreement and the transfer of rights and obligations under the Facility Agreement were binding on the Corporate Debtor and accordingly, the Appellant could not seek to escape his obligations thereunder.

Whether the guarantee was not invoked by proper party as Demand Notice dated 21.04.2021 was issued by PHL Fininvest Private Limited whereas the Guarantee was executed into between the Appellant and Piramal Trusteeship Services Private Limited? - HELD THAT:- The clauses of the Personal Guarantee dated 20.07.2017 are loud and vocal and establish the independent rights of creditors in addition to Trust. By no way of imagination it can be argued by the Appellant (as guarantor) that creditor (including its assignee) can not pursue his rights against the Appellant. The pleading of the Appellant does not stand to any logic and need to be dismissed. There are no merit in the pleadings of the Appellant on their issue and stand rejected.

Whether the Impugned Order is a non-speaking order and contravene the principal of natural justice? - HELD THAT:- The proceedings under the Code are summary and time-bound, and thus, the Adjudicating Authority is not required to conduct proceedings akin to civil proceedings. The Adjudicating Authority's role is limited in considering whether a debt is due and payable and whether a default has occurred. In the present case, the amount of default is not in dispute, nor has the Appellant disputed signing the personal guarantee with the Financial Creditor by admitting to being a signatory to the personal guarantee, the privity of contract is established.

Hon’ble Supreme Court of India in case of Dilip B. Jiwarjka vs. Union of India & Ors. [2024 (1) TMI 33 - SUPREME COURT] cautioned that the principles of natural justice cannot be mechanically applied in a straightjacket formula and stipulated that based on the facts and circumstances, principles of natural justice on some occasions may extend to the right to a full-fledged evidentiary hearing while in certain cases may be circumscribed to a bare minimum opportunity to furnish an explanation by the affected party.

The Impugned Order is found to be valid and was passed while keeping in mind the principles of natural justice and equity.

Whether the appointment of Respondent No. 2 was not in accordance with provision of the Code? - HELD THAT:- The Respondent No. 2 was appointed as the Resolution Professional by the Adjudicating Authority vide order dated 08.04.2022 which has not been challenged by the Appellant and thus attained finality - there are no merit in the contention of the Appellant on this issue.

Whether there was no valid Board Resolution to show that the Respondent No. 1 is authorised to file its Application u/s 95 of the Code? - HELD THAT:- The Board Resolution was valid and wide enough to cover the proceedings, and any objections raised by the Appellant were addressed by a fresh Board Resolution ratifying previous actions.

Whether when adequate securities are already available with the Respondent No. 1 by way of first and exclusive mortgage of various properties (both immoveable and moveable) charged in favour of the Piramal Finance Limited at the time of execution of the Facility Agreement dated 20.07.2017 by Corporate Debtor (HEIL) and therefore, the Appellant as Guarantor is not liable for outstanding dues? - HELD THAT:- In terms of Section 128 of the Indian Contract Act, 1872, the liability of the surety is co-extensive with that of the principal debtor. The Supreme Court in the case of Industrial Investment Bank of India Ltd. v. Biswanath Jhunjhunwala [2009 (8) TMI 1186 - SUPREME COURT] while examining the issue of the term 'co extensive liability' has held that the liability of a surety is not in alternative to the principal borrower or Corporate Debtor and further it is not necessary for a creditor to first proceed against the principal borrower or Corporate Debtor before initiating legal proceedings against the surety.

Section 5(22) of the Code defines personal guarantor as an individual who is the surety in a contract of guarantee to a corporate debtor who provides guarantee in his personal capacity against the loans availed by the corporate debtor with co-extensive liabilities alongwith the corporate debtor.

Conclusion - i) The Assignment Agreement and the transfer of rights and obligations under the Facility Agreement were binding, and the Appellant could not escape his obligations. ii) The creditors have the right to enforce the contract made for their benefit, and the Facility Agreement allowed for the assignment of rights without the consent of the Corporate Debtor. iii) The terms of the Personal Guarantee allowed both the 'Lender' and the 'Trustee' to initiate action against the Appellant. iv) The Adjudicating Authority had considered the Resolution Professional's report and provided reasonable opportunities for objections. The Impugned Order was deemed valid, adhering to the principles of natural justice. v) The appointment was within the discretion of the Adjudicating Authority and that the provisions of the Code are directory in nature. vi) The Board Resolution was valid and wide enough to cover the proceedings, and any objections raised by the Appellant were addressed by a fresh Board Resolution ratifying previous actions. vii) The liability of the surety is co-extensive with that of the principal debtor, and the creditor is not required to first proceed against the principal borrower.

There are no merits in the appeal - appeal dismissed.

Seeking grant of regular bail - Money Laundering - proceeds of crime - scheduled offence - right to speedy trial - evidence against the present applicant is in the form of confessional statements by the other co-accused persons which cannot be relied upon with respect to the prosecution of the present applicant - HELD THAT:- The first complaint filed by the respondent/Enforcement Directorate in the present ECIR was on 04.12.2021, thereafter, it is pointed out that 4 supplementary complaints have been filed, last of which was filed on 06.04.2023. The Hon’ble Supreme Court in V. Senthil Balaji [2024 (9) TMI 1497 - SUPREME COURT] has clearly held that since the existence of a scheduled offence is the sine qua non for alleging existence of proceeds of crime then, the said existence of proceeds of crime at the time of the trial of offence under Section 3 of PMLA can be proved only if the scheduled offence is established in the prosecution of the said offence. In these circumstances, it was held, that trial in the case under PMLA cannot be finally decided unless a trial of scheduled offence concludes.

In the present case, as pointed out by the learned counsel for the applicant, in the scheduled offence wherein the charge-sheet has also been filed, the trial has not yet commenced and the charges have not been framed so far.

The role of the present applicant as per the case of the prosecution was for providing entries in order to assist the main accused in laundering the proceeds of crime. The said allegation is sought to be proved by the prosecution on basis of statements made by the other co-accused persons as well as the present applicant. The statements made under Section 50 of the PMLA, no doubt is admissible in evidence, however, the veracity and sanctity of the same has to be tested during the course of the trial - The trial has not even commenced. The present applicant who is accused in a case of money-laundering cannot be considered to be a threat to the society without any material to demonstrate the same. The continued incarceration of the applicant with no possibility of trial being completed in near future, cannot be ignored and in case of conflict with a restrictive statutory provision like Section 45 of PMLA, the latter would not come in way ensuring the right to liberty and speedy trial under Article 21 of the Constitution of India.

In the present case, the applicant was arrested on 12.10.2021 and has been in custody for a period of 3 years and 4 months approximately. The trial in the present complaint, is yet to commence and would take time to conclude. Apart from expressing apprehension of the applicant being a flight risk, no material has been shown to demonstrate the same. The evidence in the present case is primarily documentary in nature which is already in possession of the prosecution.

The applicant is directed to be released on bail upon his furnishing a personal bond in the sum of Rs. 1,00,000/- alongwith one surety of like amount to the satisfaction of the learned Trial Court/Link Court, further subject to the fulfilment of conditions imposed.

Conclusion - The right to a speedy trial is paramount and cannot be compromised by statutory conditions for bail. It establishes that prolonged pre-trial detention without a foreseeable trial conclusion infringes on constitutional rights. The applicant should be granted bail due to the prolonged detention and lack of trial progress.

Bail application allowed.

Levy of service tax on the operation of air-conditioned buses - rejection of Sabkha Vishwas (Legacy Dispute Resolution) Scheme, 2019 - whether the petitioner was eligible for relief under the scheme based on the notices received and the rejection order? - HELD THAT:- The Karnataka High Court in M/S. JAGADISH ADVERTISING [2020 (8) TMI 788 - KARNATAKA HIGH COURT] had held that creation of a remarks column and assigning reasons for rejection by the Designated Committee, under the scheme, was not permissible as there was no such prescription in the statutory form. Consequently, the Learned Single Judge set aside the order of rejection as the committee did not have any authority to go into such reasons.

In the present case, the Designated Committee had set out the reasons for rejection as filing of bogus certificates and notices. This Court is of the opinion that, where applications had been filed by producing documents which are not genuine, the same can be rejected by the Designated Committee. Any other view, would mean that a person claiming the benefit of the scheme can come forward with any kind of document and the Designated Committee is precluded from going into the question of whether the said document is genuine or not. Such a view, would result in extreme situations.

Conclusion - The petitioner was not entitled to the benefits of the scheme due to insufficient evidence to support eligibility.

There are no reason to interfere with the order of rejection of the application of the petitioner and accordingly, the Writ Petition is dismissed.

Levy of service tax on reimbursement - reimbursable expenses received by the appellant as 'consideration' towards rendering of the taxable service of 'supply of manpower' - time limitation - HELD THAT:- The personnel engaged are the employees of the appellant company and the appellant is paying all salaries etc. to such employees. Only cost of salary of such employees are reimbursed by the JV on actual basis. Thus, it is observed that the whole arrangement between the appellant and the JV does not fall under the taxable service of manpower supply service as defined under rule 2(g) of the Service Tax Rules. Accordingly, the reimbursements received by the appellant cannot be considered as 'consideration' towards any taxable service.

The instant case is squarely covered by the decision of the Hon’ble Apex Court in COMMISSIONER OF CGST, DELHI SOUTH Versus BOEING INDIA DEFENSE PVT. LTD. [2023 (12) TMI 239 - SC ORDER] where it was held that 'The issues which arise in these appeals are covered by the judgment of this Court in UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [2018 (3) TMI 357 - SUPREME COURT] where it was held that only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax.'

Time Limitation - HELD THAT:-In the instant case, the Show Cause Notice dated 16-09-2014 has been issued by invoking the larger period under proviso to the Section 73(1) of the Act, whereas the activity of the appellant is well within the knowledge the of the respondent when first Show Cause Notice, dated 09- 04-2013 was issued. Hence, the whole demand is barred by limitation.

Conclusion - i) The reimbursements received by the appellant cannot be considered as 'consideration' towards any taxable service. ii) The demand is barred by limitation.

The impugned order is set aside - appeal allowed.

Extended period of limitation - suppression of facts - intent to evade or not - differences between the Form-26AS and the Balance Sheet furnished by the appellant - HELD THAT:- In the present case, on the basis of third party data received from the Income Tax Department, there was a mismatch in the gross amount declared in the ITR/TDS on the services during the period of FY 2016-17. Further, due to portal glitches, certain errors were there in the service tax returns for the second half year period from 01.10.2016 to 31.03.2017; but at the time of statutory audit, the exact liability was indentified and entire amount was deposited. The information sought by the Revenue was supplied along with the relevant documents, but despite that, show cause notice was issued after inordinate delay of more than three years and by resorting to best judgment assessment, the demand was confirmed without looking into the documents/information supplied by the appellant.

Extended period of limitation - HELD THAT:- There is no allegation of suppression against the appellant either in the show cause notice or in the Order-in-Original & Order-in-Appeal. The Revenue has failed to establish any of the ingredients as required for invoking the extended period of limitation.

The impugned order is barred by limitation - Appeal of the appellant allowed only on limitation by setting aside the impugned order.

Maintainability of petition - availability of alternative statutory remedy - petitioners did not put in the pre-deposit as is required for maintaining such appeals - HELD THAT:- Considering the fact that the petitioners had already applied before the statutory authority by filing appeals and at this stage since learned advocate representing the petitioners would submit that the petitioners are ready and willing to pursue the aforesaid appeal provided the communications dated 30th September, 2024 are permitted to be withdrawn, I am of the view that in the fitness of things and not to render the petitioners remediless, the petitioners should be permitted to pursue the appeal filed by them. Accordingly, the petitioners are permitted to withdraw the letters dated 30th September, 2024.

The Commissioner of Appeals is directed to if necessary by passing appropriate orders to restore the appeal, hear out and dispose of the appeals in accordance with law, subject to compliance of statutory formalities.

Application disposed off.

Works contract - Exemption to subcontractors in terms of Entry 59-A of the 1st schedule to the AP VAT Act - HELD THAT:- Entry 59A exempts all goods sold within the SEZ area by an operator, developer, a co-developer or contractor or by any of the above. The term contractor has now been interpreted to include sub-contractors, by virtue of the Judgment of the erstwhile High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh in M/s. Larsen and Toubro and Others vs. State of Andhra Pradesh [2006 (10) TMI 377 - ANDHRA PRADESH HIGH COURT].

However, Section 7A, which was introduced subsequently, on 24.09.2008, states that exemption of tax on sale of goods within the Special Economic Zone will be available on sale of any goods to persons who have been authorized to establish unit in the SEZ or authorized to develop operate and maintain a SEZ. The further condition is that only such sales of goods made for the purposes, set out in Section 7A would be eligible for such exemption.

In the present case, entry 59A states that all goods sold by the persons mentioned in entry 59A, would be eligible for exemption. Section 7A also provides for such exemption. However, the said exemption is subjection to certain conditions - When there is a possibility of conflict between two provisions of law, the rule of harmonious construction would have to be applied to see if both provisions of law can operate simultaneously. Applying this principle, there are no reason as to why both provisions cannot operate at the same time. At best, Section 7A is a more restrictive provision of law whereas item 59A is a more expansive exemption. It may also be noted Entry 59A was not deleted from the Act, when Section 7A was introduced, and came to be deleted much later. This is also a factor, which has to be taken into account while trying to harmonize both the provisions of law.

Conclusion - There are no reason to hold that there is a conflict between Section 7A of AP VAT Act and Entry 59A of the 1st Schedule to the AP VAT Act. In the absence of a conflict, the non-obstante clause does not come into operation and consequently the petitioner was entitled to the benefit of Entry 59-A of the 1st schedule which exempts all the sales made by the petitioner, in the course of execution of the works contract, for M/s. Abhijeet Projects Limited.

All the impugned orders are set aside and the Writ Petitions are allowed.