TaxTMI Updates e-Newsletter
Feb 28,2026

Interim stay of administrative orders - Interim relief pending adjudication of challenge to Notifications u/s 168A - Stay and vacation of coercive measures including blocking of electronic credit ledger and attachment - HELD THAT:- We are of the opinion that as the substantive challenge is already pending before this Court in Shyam Udyog [2025 (4) TMI 1168 - BOMBAY HIGH COURT] as also the legal issues as involved are pending for consideration of the Supreme Court in Barakati Print and Media Services [2024 (9) TMI 1398 - GAUHATI HIGH COURT] the petitioner would be required to be granted interim reliefs as passed by this Court in Shyam Udyog (supra).

Respondents waive service. - Ordered accordingly.

Non-application of mind - duty of appellate authority to consider submissions and documents on record - failure to consider records/documents on file - judicial review of administrative orders - remand for fresh consideration - HELD THAT:- It is the petitioner’s case that all documents in support of the petitioner’s explanation had already been furnished before the adjudicating authority.

The appellate order impugned does not show any application of independent mind by the appellate authority. The appellate authority has paraphrased the observations of the adjudicating authority and has clearly glossed over the explanations given by the petitioner against the observations made by the adjudicating authority in the petitioner’s appeal before the appellate authority. Non-application of mind by the appellate authority is also evident from the repeated use of the same expression (which has already been extracted hereinabove) at the end of every conclusion that the appellate authority has reached in respect of every ground for demand of tax.

To wit, while the appellate authority has said that no further explanation was given it has clearly lost sight of the explanation actually given by the petitioner in the petitioner’s grounds of appeal and has not dealt with the same. Such approach renders the appellate order uninformed and susceptible to reproach in judicial review.

In the case at hand there is none. Similarly there is no consideration of the documents already on record. At least the order impugned does not reveal so.

On such ground alone, the appellate order impugned dated June 17, 2025 is set aside and the matter is remanded to the appellate authority for fresh consideration on merits in the light of the documents already on record and upon proper consideration of the petitioner’s contention raised in the appeal filed before the appellate authority.

WPA stands disposed of with the above observations.

Grant of opportunity of hearing u/s 75(4) - principles of natural justice - setting aside adjudication for breach of natural justice - remand for fresh adjudication - limitation defence to challenge adjudication proceedings - online notice via ACES-GST Application (CITRIX APPSTORE) - HELD THAT:- There is nothing before this court to come to the definite conclusion that any notice was indeed served upon the petitioners thereby affording them an opportunity of hearing.

In terms of the provisions of Section 75(4) of the said Act of 2017, if an order having adverse consequence is contemplated, grant of an opportunity of hearing is mandatory.

Since it has not been proved before this Court, to any decree of satisfaction, that the petitioners have been afforded an opportunity of hearing prior to the impugned decision being taken, therefore the said decision falls foul of the principles of natural justice as well as the provisions of Section 75(4) of the said Act of 2017 which grant statutory recognition to such principles.

On such ground alone, the adjudication order dated December 14, 2023 stands set aside. The matter is remitted to the file of the Proper Officer for fresh adjudication.

It is clarified that this court has not gone into the merits of the petitioner’s case and all points are left open to be decided by the adjudicating authority in accordance with law.

The petitioner shall not be entitled to question the adjudication proceedings conducted by the Proper Officer in terms of this order on the ground of limitation unless such ground was available to the petitioner at the time when the notice to show cause was issued to the petitioner.

Validity of order of adjudication passed - Opportunity of hearing - Writ of mandamus - Evidence of tax invoices and returns - HELD THAT:- Learned counsel for the petitioner submits that the order of adjudication passed does not take note of submissions of the petitioner as detailed at paragraph No. 5, it is submitted that the petitioner had specifically asserted that purchases were made against valid tax invoices issued by the registered supplier and to demonstrate the same, the petitioner has made various assertions which have not been taken note of by the authority.

In light of the same, the order at Annexure-G is set aside. Matter is remitted for reconsideration. Petitioner may be afforded fresh opportunity of hearing as is permissible.

Evidence of tax invoices and returns - Adjudication subject to evidence - HELD THAT:- Further, learned counsel for the petitioner submits that the supplier has filed GSTR-1 and 3B Returns and same are reflected in GSTR-2A of the petitioner. This submission of the petitioner may be taken note of for the present, however, such submission is subject to adjudication before the authority.

Accordingly, petition is allowed.

Validity of notifications issued u/s 168A in absence of force majeure - violation of principles of natural justice and Section 75(4) - service by uploading on portal under 'Additional Notices and Orders' not proper service - interim stay on recovery and lifting of bank attachment - entertainment of writ challenging vires of notifications - HELD THAT:- Since the vires of the Notifications which form the basis of the order impugned has been challenged, the writ petition is entertained.

In view of the judgement of the Hon’ble Division Bench of this Court in the case of Ram Kumar Sinhal Vs. State of West Bengal [2025 (7) TMI 1866 - CALCUTTA HIGH COURT] uploading of notice and orders on the portal under the “additional notices and orders tab”, is not construed to be proper service and that being so the petitioner’s belated approach can be said to be well explained. Furthermore, violation of provisions of Section 75(4) of the said Act, 2017, vitally affects the validity of the order impugned.

Accordingly, there shall be an interim order restraining the respondent GST Authorities from taking any step to recover any amount from the petitioner on the strength of the impugned adjudication order dated August 11, 2024 (page 40) till disposal of the writ petition.

Since the respondent/GST Authorities have been restrained from recovering any amount on the basis of the said adjudication order, the respondent GST Authorities shall lift the attachment.

Permission to file appeal - exclusion of time spent in pursuing petition for limitation - virtual/e court enabled functioning of the tribunal - HELD THAT:- The time spent in pursuing the present petition be taken into account in case if the issue of limitation is to be reckoned.

The time spent in pursuing the present petition be taken into account in case if the issue of limitation is to be reckoned.

Liberty to file appeal despite expiry of limitation - requirement of deposit as condition for grant of interim relief - challenge to interest u/s 50(1) - challenge to penalty - discharge of tax liability not precluding challenge to interest and penalty - HELD THAT:- Taking note of the fact that the petitioner has discharged the tax liability confirmed by the impugned order dated 16.04.2025 and that the dispute now pertains only to interest and penalty, liberty is granted to the petitioner to challenge the impugned order insofar as interest and penalty is concerned alone before the Appellate Authority, subject to the petitioner depositing Rs. 1,50,000/- within a period of 30 days from the date of receipt of this order.

In case such an appeal is filed, the Appellate Authority shall dispose of the appeal on merits after hearing the petitioner without further reference to limitation on its own turn.

Writ Petition stands disposed of.

Transition of Input Tax Credit - Form TRAN-2 compliance - proof of input stock on cut-off date - declaration in Form TRAN-1 not determinative - judicial non-interference in disputed questions of fact - appellate remedy before Appellate Authority - HELD THAT:- It is the case of the petitioner that the petitioner had 2,49,054 kgs of stocks which were exempted from payment of tax under the VAT regime and that with effect from 01.07.2017 viz., after the advent of GST regime, the petitioner was required to discharge the tax liability for the said stocks. Therefore, the petitioner was entitled to transition the tax that was paid on the aforesaid quantity of input, which the petitioner could not have availed during the VAT regime as the product was exempted under the provisions of the TNVAT Act.

The argument of the petitioner is that the petitioner had filed TRAN-1 by making a declaration in Column 7(d) instead of 7(b) is of no relevance, as the petitioner did not have the required quantity of inputs for transitioning the Input Tax Credit under the new regime. Therefore, no merit in the challenge to the impugned order in this writ petition on the ground stated in the affidavit.

Accordingly, this Writ Petition stands dismissed with liberty to the petitioner to challenge the impugned order before the Appellate Authority within a period 30 days from the date of receipt of a copy of this order.

Mandatory uploading of summary order in FORM GST DRC-07 - electronic uploading treated as notice for recovery - preservation of statutory right to appeal by compliance with procedural requirements - abeyance of recovery proceedings pending statutory compliance - statutory obligation to pass a reasoned order in prescribed form - HELD THAT:- As per Rules 142(5) of the CGST Rules, 2017, a summary of the orders issued under sections 52, 62, 63, 64, 73, 74, 74A, 75, 76, 122, 123, 124, 125, 127, 129 and 130 shall be uploaded electronically in FORM GST DRC-07, specifying therein the amount of tax, interest and penalty, as the case may be, payable by the person concerned.

As per Rule 142(6) of the CGST Rules, 2017, such electronic uploading of orders in Form GST DRC-07 shall be treated as the Notice for recovery.

Thus, the purpose of uploading Form GST DRC-07 electronically is solely to provide a summary of the demand, which is to be treated as a Notice for Recovery of the tax confirmed in the Assessment Order.

The Hon’ble Supreme Court while dealing with a similar issue as in the present case in the context of an order passed under Section 129(3) of the respective GST Enactment in ASP TRADERS vs. STATE OF UTTAR PRADESH [2025 (7) TMI 1525 - SUPREME COURT], held that compliance with these procedural requirements is essential not only for ensuring transparency and accountability in tax administration, but also for safeguarding the taxpayer’s appellate rights under the CGST Act, 2017. There, the arguments of the assessee, which were captured in Paragraph 4.7 and are similar to the arguments in the present writ petition, were entertained.

The Hon’ble Supreme Court in the aforesaid judgment has indicated that uploading of the summary of the order in Form GST DRC-07 to the web portal, as per Rule 142(5) of the respective GST Rules, is mandatory for filing a statutory appeal against the assessment order.

Considering the same, all recovery proceedings pursuant to the speaking order (Order-in-Original No. 01/2024-25 (GST)) dated 09.04.2024) is directed to be kept in abeyance till the uploading of the summary of the order in Form GST DRC-07 in the web portal.

In case, such summary order is uploaded to the web portal, the respondent is at liberty to proceed against the petitioner in accordance with law.

Writ Petition stands disposed of.

Constitution of a Tribunal u/s 109 - duty to make the Tribunal functional for adjudicatory work - implementation of virtual/e court mode and IT enablement for tribunal hearings - appointment of Members and readiness of infrastructure - judicial direction to place affidavit by an officer not below Joint Secretary - HELD THAT:- It appears that the Tribunals were constituted way back vide notification dated 31st July, 2024. We fail to understand when the appointments of the members were made way back in August, 2025 what prompted the respondent in not taking timely steps to make the Tribunal functional.

Be that as it may, having regard to the submissions on instructions made by Mr. Jaitley, learned Standing Counsel for the Central Government, we deem it appropriate to direct the affidavit to be placed on record duly sworn by an officer not below the rank of Joint Secretary, Department of Revenue.

In the matter of timely effective steps being taken in making the Tribunal actual functional viz. discharging the adjudicatory duties. We grant time of one week for the same.

Non-speaking order - Violation of principles of natural justice - Quashing and remand for fresh adjudication - Requirement of a speaking order after personal hearing - Stay of coercive action pending fresh decision - Interest u/s 50(1) and penalty u/s 73(9) - HELD THAT:- We find much substance in the submission made on behalf of the Petitioner that the impugned orders have been passed in a mechanical manner without adverting to the submissions as made by the Petitioner. In fact the impugned orders have not given any finding on the issues raised and have only given a bald finding that the office has gone through the submission and on account of the taxpayers inability to produce relevant documents, the liability is confirmed and the taxpayer is to discharge the liability along with interest Section 50(1) and consequent 70(9) of the CGST Act. This to our mind is a complete violation of principles of natural justice and such mechanical orders passed by the Respondents raising consequent demands on the Petitioner cause grave prejudice and hardship to the Petitioner. In our view therefore, this is a fit case to exercise jurisdiction under Article 226 of the Constitution of India and we deem it appropriate to pass the following orders which will meet the ends of justice.

Impugned orders dated 19th April 2024 bearing reference no. ZD270424038603H passed by Respondent No. 3 and rectification order bearing reference no. ZD270724025317D dated 9th/10th July 2024 passed by Respondent No. 3 are hereby quashed and set aside.

Respondents to issue a fresh show cause notice to the Petitioners and after granting a personal hearing to the Petitioner pass a detailed/reasoned speaking order as expeditiously as possible and preferably within a period of one month from the date this order is made available to the Respondents by the Petitioner.

Advance Ruling - Maintainability of application for advance ruling - Remand for fresh consideration - Verification of documents produced for the first time - Section 101(1) - powers of Appellate Authority to confirm or modify a ruling - HELD THAT:- The Advance Ruling Authority, vide their impugned ruling, in paragraph 14 has observed that the appellant failed to provide any details of purchase invoices of inputs, copies of sales invoices, brochure etc. On account of lack of adequate details, the advance ruling authority, vide it’s impugned ruling, held that the appellant’s application is non maintainable.

The appellant, in their application made before the advance ruling authority, had not submitted the details of purchase invoice of inputs, copies of sales invoices, brochure of the product.

A plain reading of the subsection (1) of the section 101, ibid, depicts that the appellate authority may pass such order as it thinks fit, by either confirming or modifying the ruling pronounced by the advance ruling authority.

There is nothing before this appellate authority to decide on the merits of the case. We also note that the appellants have now submitted the copies of purchase invoices of Raw Materials and sales invoices of Rice Husk Board and Rice Husk Profile. Further, during the course of hearing, the representative of the appellant has stated that they are now in a position to provide the details/documents which they did not submit before the advance ruling authority.

The material produced for the first time needs to be verified for its factual accuracy and relevance to the issue in question.

Hence, we deem it appropriate that the case is remanded back to the Advance Ruling Authority to examine the issue afresh in the light of the materials and records now available.

Thus, the impugned ruling, dated 21.03.2025 is set aside and the matter is remanded back to the Authority for Advance Ruling for fresh decision.

Classification of goods - scope of Chapter 90: instruments, appliances and apparatus used in medical sciences - classification under Chapter 29 as salts and esters of citric acid - classification under Chapter 28 as sodium hydrogencarbonate (sodium bicarbonate) - medical device definition under Medical Device Rules, 2017 - use of dictionary meanings where statutory terms are undefined - HELD THAT:- It is a settled legal position that when a term is not defined in a statute, dictionary meaning of such terms has to be applied. The words instruments, appliances and apparatus, appearing in CTH 9018 of the CTA, 1975 not having been defined in the said Act, we rely on the dictionary meaning of words.

The words instruments, appliances and apparatus, used in chapter 90, is not defined anywhere. In the case of Star Paper Mills Vs CCE [1989 (8) TMI 78 - SUPREME COURT], the Supreme Court has held that when a term is not defined in a statute, its dictionary meaning may be referred.

HSN entry, we find that chapter 29 deal with organic chemicals, while HSN 2918, deals with carboxylic acids with additional oxygen function & their anhydrides, halides, peroxides and peroxy acids; their halogenated sulphonated nitrated or nitrosated derivatives. Dry citrate powder is a chemical compound & not a measuring, checking or medical instrument. Citrate is a salt of citric acid, a carboxylic acid. These acids are organic compounds. Now, HSN 291815 deals with salts and esters of citric acid and in terms of the HSN explanatory notes, the main alcohol acids include citric acid; that it is used for preparing beverages, in the textile industry, in oenology, in medicine, in making citrates, etc.

Thus, we therefore, find that looking to the composition, the product is classifiable under 29181590.

Lastly, the averment of the applicant that the product is a medical device; that they manufacture the product in terms of the license provided by CDSCO would not be helpful owing to the fact that medical device is defined under the Medical Device Rules, 2017, reproduced supra, according to which substances used for in vitro diagnosis and surgical dressings, etc are also a part of the medical device. This however, would not be of any consequence, since the primary requirement of the product falling within the ambit of an instrument, appliance or an apparatus, is not satisfied.

Moving on to the second product viz bicarbonate bag. The competing HSN entries as per the applicant is HSN 90189031 and 28363000. The applicant has stated that the product contains 81.00 gm/L of sodium bicarbonate & is specifically designed for use in medical treatments for patients; that it is essential for the functioning of haemodialysis solutions which are typically administered to individuals with kidney failure.

The product ‘bicarbonate bag’ as is evident does not fulfil the said criteria of an instrument, appliance or an apparatus and therefore we move on to the competing HSN entry. Chapter 28 of the Customs Tariff Act, 1975, deals with Inorganic chemicals, organic or inorganic compound of precious metals, of radioactive elements or of isotopes.

More so since the applicant himself has stated that the product in question, bicarbonate bag contains sodium bicarbonate, it would merit classification under HSN 28363000.

In terms of Notification No. 1/2017-CT(Rate) dated 28.6.2017 (Serial no. 39 of Schedule III) and Notification No. 9/2025-CT(Rate) dated 17.09.2025 (Serial No. 35 of Schedule II), we find that the product ‘bicarbonate bag’ is leviable to GST @ 18%.

Export of services - place of supply of services - intermediary services - definition of intermediary and principal-to-principal supply - intermediary place-of-supply rule versus recipient-location rule - supplier on principal-to-principal basis not an intermediary - supply under the CGST Act - composite supply - payment in convertible foreign exchange as condition for export of services - zero-rated supplies and refund of input tax credit - HELD THAT:- In the instant case, we find that the applicant is providing services to the foreign universities. They do not have any contractual agreement with the students. They are providing marketing services to the foreign universities and the ultimate decision whether to admit a student to the university is with the foreign university. The applicant merely forwards the details of students who wish to secure the admission in a particular university and the final decision is taken by the university. Thus, the applicant is not an intermediary who is facilitating supply of services between two different persons but is providing the services of advertising and marketing to the universities on its own behalf. This is done on principal-to-principal basis. Therefore, we hold that the services provided by the applicant to the universities would not be considered as intermediary services.

Thus, it has been categorically held that a person who supplies the goods and services is not an ‘intermediary’. It is only a person who arranges or facilitates the said services who would be considered as an ‘intermediary’. Thus, since the recipient of the services provided by the Petitioner therein, was located outside India, the services provided by the Petitioner therein were held to be export of service under Section 2(6) of the IGST Act.

We find that the place of supply of such services would be outside India i.e. the place of the recipient of the service. Since the services provided by the applicant fulfills all the conditions laid down under Section 2(6) of the IGST Act, the services would be considered as export of service under the IGST Act and the consequential reliefs sought by the applicant in the form of refund would be available to the applicant subject to verifications as required following due process of law.

Thus, the place of supply in the case of Intermediary services would be the place of recipient of the service and accordingly in the case of export of services where the recipient is located outside India, the place of supply would be considered to be located outside India.

We find that in the instant case, the applicant is providing consultancy and support services to the students for which they are receiving consideration in the form of fees. These services are provided in the course of or furtherance of business and therefore the said services would qualify as a ‘supply’ under the CGST Act, 2017. Since the said services qualify as supply under the Act, the said “ applicant is liable to pay GST on the said services. The argument of the applicant that the said services are ancillary services does not help them in any manner. The word ancillary services is not defined under the Act. Further, there is nothing under the Act which provides any exemption from payment of GST to ancillary services. Further the said service cannot be considered as a composite supply of services tagging the same alongwith the supply of services made to foreign universities.

In the instant case, the supply of marketing services is made to the Foreign University and the supply of consultancy services is made to the students. Both of them cannot be combined to consider the same as composite supply. In view of the above, we find that the services provided by the applicant to the students would qualify as a supply under the CGST Act and the applicant would be liable for payment of GST on the said supply.

We find that one of the primary conditions for any service to qualify as a ‘supply’ under the CGST Act, 2017, is that there should be receipt of consideration for the services. In the instant case, the applicant has stated that in order to promote their business, sometimes they do not charge any consideration or fees from the students. In such cases, it is obvious that the service is given free of charge and no consideration is received from the students. We find that the said services also do not fall under Schedule I of the CGST Act, 2017. In view of the above, we find that such services would not qualify as ‘supply’ under the GST Act and therefore, the applicant would not be liable to pay any GST on such services wherein no fee is received from the students.

The services provided by the applicant to foreign Universities for facilitating student admission, where the contractual relationship and consideration are directly between the applicant and the foreign university qualify as “Export of Services” under IGST Act. Accordingly, such transactions are eligible for refund subject to verifications as required following due process of law.

Assessment orders passed in the name of non-existing companies on account of amalgamation order by which these companies were merged

As decided by HC [2025 (2) TMI 612 - BOMBAY HIGH COURT] inspite of the fact of the AO being informed of the amalgamating company having ceased to exist as a result of the scheme of amalgamation, if the proceedings are initiated against the non-existing companies, then such proceedings are void ab initio although the amalgamated company participated in the proceedings.

HELD THAT:- We are informed by respondent that pursuant to the decision of the High Court, the petitioner/revenue has issued fresh notice on 17.07.2025. In this view of the matter, we see no reason to entertain the present Special Leave Petition and is, accordingly, dismissed.

We are informed by A.S.G. that the respondent has in fact challenged the said notice by filing a writ petition under Article 226 of the Constitution of India. Petitioner/revenue will be entitled to raise all objections, including questions of law and fact in opposition to the writ petition. It is for the High Court to consider the same and dispose it of in accordance with law.

Reopening of assessment u/s 147 - Change of opinion - link between the reasons and the evidence -proceedings have been initiated purely based on the audit objection - Notice after the expiry of four years -

As decided by HC [2025 (7) TMI 258 - BOMBAY HIGH COURT] merely because the AO is now of the opinion that the deduction is wrongly granted, cannot invest him with the jurisdiction to reopen the assessment, especially in a case where reassessment proceedings are initiated when there is already a scrutiny assessment u/s 143(3) and which is after a period of 4 years from the date of the relevant assessment year and there has been no failure to disclose fully and truly all material facts in relation to the concerned assessment year.

HELD THAT:- There is a delay of 124 days in filing this Special Leave Petition and we do not find any plausible and bona fide explanation to condone this inordinate delay.

Even on merits, we see absolutely no reason to interfere with the impugned order in exercise of our jurisdiction under Article 136 of the Constitution of India.

Special Leave Petition is, accordingly, dismissed on the ground of delay as well as on merits.

Reopening of assessment - petitioner is a “Non-Filer” in respect of the said assessment year - live links between the proposition and the conclusion

HELD THAT:- Although the AO has extracted the petitioner’s reply in verbatim, in the impugned order, yet not even one line has been spared by the AO that would evince that he has bestowed any consideration to the said reply. The ultimate conclusion of reopening of the petitioner’s case for re-assessment of his income for the assessment year 2021-22 is not based on any reason.

It is settled that reasons are live links between the proposition and the conclusion but there is none in the case at hand.

Last page records an abrupt conclusion that the petitioner’s case should be reopened without indicating why and how could the petitioner be still treated as a “Non-Filer” when the petitioner had (has) brought on record material to show that the petitioner had indeed filed his return of income for the relevant assessment year. The conclusion that the petitioner is “Non-Filer” despite a reply clearly indicating an Income Tax Return having been filed for assessment year 2021-22 itself can be nothing else but product of non-application of mind.

Since the order impugned clearly evinces total non-application of mind, the same cannot withstand scrutiny under Article 226 of the Constitution of India. The order impugned and the consequential notice of even date u/s 148 are set aside. Assessee appeal allowed.

Penalty levied u/s 271DA - violation of section 269ST - limitation provided under section 275(1)(c) - amount as received by the assessee for sale of spent solvents and scraps in the mode otherwise than an account payee cheque or account payee bank draft or use of electronic clearance system through a bank account.

HELD THAT:- The starting point for initiation of the action for imposition of penalty within the meaning of section 275(1)(c) of the Act is from 25/05/2025 and for the purpose of determining the limitation period for passing the penalty order, Six months from the end of May 2023 should be considered, but not from 7/3/2024, i.e. date on which the authority issued show cause notice under section 274 r.w.s. 271DA of the Act. Since the A.O sent reference to Jt. CIT on 25/05/2023, in our considered view, Six months period should be considered from the end of May 2023 i.e. 31/05/2023 and if, we consider the starting point from 1/06/2023, then the A.O ought to have passed the order u/s 271DA of the Act on 30/11/2023. In the present case, since the A.O has passed the order under section 271DA of the Act on 27/09/2024, in our considered view, it is barred by limitation and the same is non-est in the eyes of law.

Violation of the provisions of clause (b) of section 269ST - In the present case, admittedly, there is no evidence of any kind of sales bills or cash receipts for sale of unaccounted spent solvents and scraps. The only evidence which was found during the course of search was one excel sheet maintained purpose by the Cashier for the entire group and as explained by the assessee, the above document contains details of sales made for a particular period by the group as a whole in respect of all the five companies and from different plants/units.

Since the assessee group is consisting of five companies and further have multiple units/plants which generates spent solvents and scraps and also assessee discharges the spent solvents and scraps from different units/plants to different buyers, in our considered view, only on the basis of consolidated entries appearing in segment (1) of excel sheet, it cannot be alleged that the assessee violated clause (b) of section 269ST of the Act for imposing penalty u/s 271DA of the Act.

Therefore, A.O has not conclusively prove for the violation of provisions of section 269ST of the Act so as to levy penalty under section 271DA of the Act, and thus, in our considered view penalty levied by the AO is not sustainable on merits on the facts of the case and in law.

Admission of the assessee does not Ipso Facto lead to levy of penalty, even though the assessee has made a statement regarding receipt of amount from the sale of spent solvents and scrap. Further, mere confessional statement without there being any documentary evidence in proof of such breakup of transactions cannot be solely relied upon while considering the penalty proceedings.

Such evidence by way of statement might be considered for making the assessment but however for consideration of the penalty proceedings being independent in nature, further additional evidences are required to brought on to the file as corroborative in nature. More over the assessment proceedings and penalty proceedings are different all together and the evidences that were relied upon during the assessment proceedings may not be considered as sole factor and sufficient evidences for levy of penalty.

Penalty is in addition to the tax determined as payable by the assessee. Penalty cannot be taken as additional tax for all purposes. The penalty and assessment proceedings are not one and the same proceedings. The findings given in the assessment proceedings would only be relevant and admissible but not final and conclusive in penalty proceedings. Decided in favour of assessee.

Validity of the reopening of the assessment - addition made on account of bogus purchases -Notice beyond 04 years from the end of the assessment year - Reopening based on information from search/seizure and statements of third parties

HELD THAT:- When the assessee produced all the relevant facts and supporting evidence including the invoice, audit reports, payment made through banking channel and the confirmation/sales recorded by the supplier at the time of passing the first re-assessment order u/sec.143(3) r.w.s 147 then, the reopening of the assessment after 04 years is not valid when there is no failure on the part of the assessee to disclose fully and truly all the relevant material facts necessary for assessment.

Claim of the assessee as purchases made from KIPL is based on the documentary evidence including the payment made through banking channel, then, even if the said claim is found to be suspicious, the reopening of the assessment would be hit by the proviso to sec.147 of the Act as existed at the relevant point of time.

Hence, when the addition made by the AO is otherwise not sustainable on merits, then, the reopening of the assessment as well as the addition on merit is not sustainable. Assessee appeal allowed.

Disallowance u/s 40(a)(i) - non-deduction of tax u/s 195 - contended by the AR that as per provisions of section 9(1)(vii), no income accrued or arose in India in this case, and therefore, no tax was deductible - claim of the AR that during the year, the assessee was providing services to only one client situated at USA

HELD THAT:- Payment of any interest, royalty, fee for technical services or other sum which is payable outside India or in India to a non-resident would be disallowed in case TDS has not been deducted and deposited by the prescribed due date.

Section provides exceptions in terms of the two provisos whereby the disallowance shall not be made if certain conditions are satisfied. Specifically, in the second proviso, it is provided that if the assessee is able to demonstrate that it is not an assessee in default under the first proviso to section 201(1) then it shall be deemed that the assessee had deducted and paid the tax on such sum and the amount would be allowed as deduction in computing the income.

Lower authorities have not examined the issue in the light of these provisos to determine whether the impugned amount is allowable to the assessee subject to fulfilment of the prescribed conditions.

Restore the matter to the AO for fresh consideration in the light of above provisos of section 40(a)(i) r.w.s. 201(1) - Appeal of the assessee is allowed for statistical purposes.

Denial of benefit u/s. 11 and 12 - payment/Remittance made to the University of Texas, USA - income to be taxed as real income or notional or hypothetical income -benefit to person referred in section 13(3) - HELD THAT:- The provisions of section 13(1)(c) of the Act are required to be applied in consonance with the provisions of section 13(3) of the Act. To the extent of the disallowance made by the AO, we find that the signatories to the Memorandum of Association have not derived any benefit out of the net grant applied, in subsequent years, other investigators who are also signatories to the Memorandum of association, they are part of investigation team, it cannot be considered as having indirect benefit u/s 139(1)(C) of the Act without bench marking the services rendered by them.

None of the parties who are signatories to the Memorandum of Association have derived any direct or indirect benefit from the sub-grant remitted to the University of Texas. Accordingly, the invocation of the provisions of section 13(1)(c) read with section 13(3) of the Act is not justified in the facts of the present case. We noticed that the University of Texas is not connected to the society, hence they cannot be treated as persons mentioned u/s 13(3) of the Act.

Applicability of the section 11/12 in the case of the assessee and the application of funds earmarked for charitable purposes - For AY 2010-11 the assessee did not apply 85% of the total receipts, resulting in short application to the extent of Rs. 11,65,484/-. However, in the subsequent assessment years, the assessee applied amounts in excess of the total receipts. In AY 2013-14, the assessee again failed to utilise the funds to the extent of Rs. 19,80,198/-, whereas in AYs 2011-12 and 2012-13 the assessee applied amounts over and above the total receipts. Even in the subsequent assessment year 2014-15, the assessee applied funds in excess of the total receipts. From the above chart, it is clear that only in AY 2010-11 the assessee under-utilised the funds by applying less than 85% of the total receipts. Accordingly, we direct the Assessing Officer to restrict disallowance only to the extent of Rs. 11,65,484/- for AY 2010-11.

Revision u/s 263 - allegation of treaty shopping - CIT held that the LTCG earned by the assessee on sale of shares is taxable under the provisions of Income Tax Act and also under Article 13(4) of India-Mauritius DTAA - commercial rationale of establishment of assessee company in Mauritius - action of CIT in disturbing the assessment order passed u/s.143(3) on the ground that the assessment order was passed by the AO without calling for relevant details and making necessary verifications/enquiry

HELD THAT:- Findings recorded by the CIT are superfluous and contrary to documentary evidences available on record. The assessee has duly established that it is a tax resident of Mauritius and is engaged in the business of holding investments. The parent company of the assessee is also a resident of Mauritius.

Hon’ble Apex Court in the case of UOI vs. Azadi Bachao Andolan [2003 (10) TMI 5 - SUPREME COURT] rejected the Department’s argument of treaty shopping holding that if the assessee qualifies for treaty benefit, the said benefit cannot be denied on some theoretical ground that treaty shopping is unethical and illegal.

Section 90 enables the Central Government to enter into a DTAA with the foreign Government. When the requisite notification has been issued thereunder, the provisions of sub-section (2) of section 90 comes into action and an assessee who is covered by the provisions of the DTAA is entitled to seek benefit thereunder, even if the provisions of the DTAA are inconsistent with the provisions of the Act. The Revenue cannot be allowed to allege treaty shopping merely for the reason that the assessee claimed benefit of DTAA.

In any case in the present appeal, the assessee as pointed earlier is even otherwise eligible for exemption on LTCG u/s 10(38) of the Act. Further, CBDT Circular No. 789, dated 13-4-2000, clarifies that FIIs, etc., which are resident in Mauritius, would not be taxable in India on income from capital gains arising in India on sale of shares. Dehors treaty provisions, the LTCG on sale of shares is exempt in hands of the assessee under provisions of the Act.

In so far as findings of the CIT that there is no commercial rationale of establishment of assessee company in Mauritius, the said findings according to us are without merit.

Revenue Authorities cannot sit in arm chair of the assessee and decide how the business is to be conducted and from where operations are to be carried out. As long as the assessee is working within the statutory legal framework, and is complying with all formalities as required under different provisions of the Act, by which it is governed and is taking advantage of any provisions which are available to it within the Act or any legislation or treaty, the Revenue cannot deny the benefit to the assessee on flimsy objections

The satisfaction of twin conditions set out in u/s. 263 of the Act is sine qua non for exercising revisional jurisdiction. Merely, for the reason that the assessment order is prejudicial to the interest of Revenue cannot ipso facto grant ammunition to the CIT for exercise of the revisional powers.

We find that the CIT has failed to show that the assessment order is erroneous. The two mandatory conditions for exercise of revisional powers are not satisfied in the present case. Assessee appeal allowed.

Assessment framed u/s 144 r.w.s. 147 - Requirement/mandation of issuance of notice u/s 143(2) - contention of the Revenue is that since the assessment was ultimately framed u/s 144 of the Act, the requirement of issuance of notice u/s 143(2) of the Act stood dispensed with - HELD THAT:- Once a return of income is filed in response to notice u/s 148 of the Act, the Assessing Officer is required to follow the procedure prescribed for making assessment u/s 143(3) of the Act. Issuance of notice under section 143(2) is a mandatory statutory requirement for assuming jurisdiction to scrutinize the return so filed. The subsequent framing of assessment u/s 144 due to alleged non-compliance does not obviate the necessity of issuing notice u/s 143(2) of the Act.

In the present case, admittedly, no notice u/s 143(2) was issued at any stage. The absence of such notice goes to the root of the jurisdiction of the Assessing Officer and renders the assessment order invalid in the eyes of law. Accordingly, we hold that the assessment order dated 20.01.2023 passed u/s 147 r.w.s 144 of the is void ab initio for want of mandatory notice u/s 143(2) of the Act.

Unexplained credit received - Assessee company failed to prove the ingredient of Section 68 of the lender companies - CIT(A) deleted addition - HELD THAT:- CIT(A) thus duly considered the various documentary evidences as furnished by the assessee and rendered factual findings on the aspect of identity, creditworthiness and genuineness of both the lender entities. It was finally held that the initial onus of Sec.68 as casted upon the assessee was duly discharged and therefore, the impugned addition could not be sustained in terms of ratio of various judicial decisions. All these factual findings could not be controverted before us by way of any concrete material indicating that the loans were in the nature of accommodation entries. The assessee duly furnished ITR of the lender entities, along with bank statements. The loans stood repaid in the same year and therefore, no such addition could be made as per the binding decision in the case of Karaj Singh [2011 (3) TMI 951 - PUNJAB AND HARYANA HIGH COURT] - This being so, we see no reason to interfere in the order of Ld. CIT(A).

Unaccounted sales on the basis of loose papers / documents allegedly containing details of unaccounted sales by the assessee - Quantum of unaccounted sales was to the extent of Rs. 170.81 Lacs. There was no justification for enhanced GP rate of 15%. The same has correctly been set to GP rate as offered by the assessee in its regular books of accounts. Further, once profit element has been estimated on unaccounted sales, separate addition of excess / short stock could not be sustained since the same would subsume in the unaccounted sales only. The benefit of telescoping has rightly been granted to the assessee.

Penalty u/s 271(1)(c) - assessee had concealed the particulars of income by not filing the return u/s 139 and by offering income only after issuance of notice u/s 148 - whether the assessee has established a reasonable cause for failure to file return within the time prescribed under section 139(1)?

HELD THAT:- The filing of tax audit report within time and the disclosure of financial statements are inconsistent with any design to suppress income. It is not a case where the Department unearthed undisclosed income through investigation. The entire income was offered voluntarily in response to notice and was accepted as such.

DR has contended that mistake of accountant cannot constitute a reasonable cause. While it is correct that statutory compliance is the responsibility of the assessee, each case must be examined on its own factual matrix. The surrounding circumstances, conduct of the assessee and contemporaneous material must be considered.

In the present case there is no dispute regarding the correctness of returned income, there is no addition made, the tax audit report was filed within time, tax liability was voluntarily discharged prior to completion of assessment and there is no material to suggest deliberate withholding of income. On cumulative consideration of these factors, we are of the view that the omission to file return u/s 139(1), though a default, was not accompanied by any intent to conceal income. The conduct of the assessee reflects negligence or inadvertence rather than concealment.

Therefore, in our considered opinion, the assessee has demonstrated reasonable cause for failure to file return within time and consequently the deeming fiction under Explanation 3 cannot be invoked mechanically.

Reassessment order ultimately determines income at the returned figure. The show cause notice issued during reassessment had proposed certain variations; however, the final assessment order does not record a specific finding of concealment in respect of any particular addition.Penalty proceedings u/s 271(1)(c) are quasi-criminal in nature and require clear satisfaction as to the precise charge. Appeal of the assessee is allowed.

The assessment order must indicate whether the penalty is for concealment of particulars of income or for furnishing inaccurate particulars. In the present case, the initiation is recorded in a routine manner without linking it to any specific addition or inaccurate claim. When the assessment itself has accepted the returned income, levy of penalty solely on the ground of non-filing of return under section 139(1), without establishing concealment of particulars, cannot be sustained.

Since the income declared in response to notice under section 148 has been accepted without any addition and no independent detection of concealed income has been brought on record, and considering that reasonable cause for non-filing of return u/s 139(1) stands established, the essential conditions for invoking section 271(1)(c) are not fulfilled. The penalty is therefore unsustainable in law.

Appeal of the assessee is allowed.

Addition of Alleged Bogus Purchases - AO estimated addition of 25% - HELD THAT:- When the sales are accepted, entire purchases could not be treated as bogus. The addition so made by Ld. AO would yield abnormal GP rate of 27.72% as against regular GP rate of 2.45% as reflected by the assessee. In fact, an assessment has been framed by Ld. AO on identical lines for AY 2022-23 wherein the assessee’s purchases were subjected to scrutiny. In this year, Ld. AO has doubted the purchases and finally applied GP rate of 2.45% as reflected by the assessee during AY 2021-22. Therefore, the adjudication of Ld. CIT(A) in applying GP rate of 2.45% could not be faulted with.

Addition of Cash Deposit & Time Deposit - assessee deposited cash in two bank accounts - same was added u/s 68 for want of proper explanation from the assessee - HELD THAT:- Assessee has made ample withdrawals before re-depositing the cash in the bank accounts. The assessee has maintained regular books of accounts and all the bank accounts form part of the regular books. No shortage of cash has been observed in the cash book. The source of cash deposits are amply substantiated by the fact that the assessee has made withdrawals for meeting the expenditure and left-over cash has been re-deposited within a short period of time. FDR is also sourced out of earlier cash withdrawals and FDR has been liquidated prematurely within two days only. The assessee has furnished the bank statements during assessment proceedings which have not been disputed. Therefore, these twin additions have rightly been deleted by Ld. CIT(A).

Deletion of adhoc 10% disallowance of certain expenses - As upon perusal of impugned order, it could be seen that this addition has been sustained by CIT(A) and this ground has been dismissed. Therefore, there could be no occasion for the revenue to be aggrieved on this score.

Denial of exemption u/s 11 - properties purchased in the name of trustees out of Trust funds - violation of provisions of Sec.13(1)(c) r.w.s.13(2)(g) - HELD THAT:- Trustees had executed a registered rectification deed on 11.04.2023 substituting their names in the property deeds with the name of the assessee trust. The assessee trust has also furnished the encumbrance certificates and mutations to show that, the land revenue records are reflecting their name and that the impugned property is clear of any encumbrance or liabilities qua the assessee or any of the trustees.

These contemporaneous evidences placed on record does show that the assessee trust was in control and possession of the impugned property and enjoyed the same and not the individual trustees. Further, the facts on record shows that the trustees never derived any benefit from these properties when held in their name.

The source of funds, as noted above, emanated from the coffers of the trustees in the first place, the school building was registered in the name of the assessee trust, the school activities were carried on by the assessee trust and all the fees/receipts realized from students were also enjoyed by the assessee trust.

We thus find there is no iota of evidence to show that the assessee trust had enjoyed or used or applied any income or property of the trust for the personal benefit of the trustees.

Assessee trust was always in possession of the property in question and has been running the School solely and exclusively for its own benefit and in furtherance of their charitable objects on such premises. Furthermore, it does not lie in the mouth of the Revenue to allege violation of Section 13(1)(c) of the Act when they have accepted the receipt of the two schools from the individual trustees along with the cash & bank balance (out of which the impugned property was acquired) on the basis of an unregistered deed.

On these given peculiar facts and the bonafide conduct of the parties involved, we are in agreement with the CIT(A) that the provisions of Section 13(1)(c) had no application in the present case. See M/S. A.R. RAHMAN FOUNDATION [2015 (8) TMI 868 - ITAT CHENNAI] - Decided in favour of assessee.

Cash deposit on account of demonetization -unexplained cash u/s 69A - HELD THAT:- When the sale proceeds had been supported with book results & primary evidences, which were not disproved by the AO, and that the same had already been assessed by the AO as revenue receipts from ‘Business’, then it was wholly improper for the AO to again tax these sale proceeds as unexplained cash u/s 69A of the Act, as it would amount double taxation of the same sum.

No hesitation in deleting the addition made u/s. 69A - Appeal filed by the Assessee is allowed.

TP Adjustment on Interest on Loans to AEs - Upward adjustment made by the TPO, by applying the rate of LIBOR/EURIBOR with different mark up and further addition of 100 points towards Forex Risk Adjustment in respect of loans advanced to Associated Enterprises (AEs) - HELD THAT:- We find that an identical issue arose in the assessee’s own case for AY 2015-16 [2025 (5) TMI 1707 - ITAT AHMEDABAD]wherein Bench accepted the assessee’s internal CUP benchmarking and rejected the external CUPs relied upon by the TPO. No ad-hoc addition of 100 basis points towards forex risk was warranted, as there was no evidence of significant forex risk affecting the assessee's transactions. We respectfully apply the same ratio to the present case. Benchmarking done by the assessee based on internal CUP is valid, and the adjustment made by the TPO and confirmed by the CIT(A) on account of alleged undercharging of interest on advances to AEs is unsustainable. Decided in favour of assessee.

Upward Adjustment on Account of Interest on Outstanding Receivables - charging notional interest on outstanding receivables from AEs beyond the stipulated credit period - We find that an identical issue arose in the assessee’s own case for AY 2015-16 [2025 (5) TMI 1707 - ITAT AHMEDABAD]to hold that the receivables are merely an extension of the main international transaction of sale of goods and do not constitute a separate international transaction warranting independent adjustment. We, therefore, direct deletion of the addition made towards notional interest on delayed receivables from AEs. Thus, no infirmity in the order of the Ld. CIT(A) in deleting the upward adjustment.

Depreciation on Goodwill arising pursuant to Amalgamation -Identical issue arose in the assessee’s own case for AY 2015-16 [2025 (5) TMI 1707 - ITAT AHMEDABAD] wherein held Revenue has failed to demonstrate that the transaction lacks commercial substance or that the claim falls afoul of any specific bar under the Act.

Allocation of Common Expenses while Computing Deduction u/s 80-IC, 80-IE & 10AA - As decided in own case [2025 (5) TMI 1707 - ITAT AHMEDABAD] find no infirmity in the conclusion of the learned CIT(A) in deleting the disallowance on account of allocation of common expenses to the Dehradun, Sikkim, and SEZ units. The accounting treatment adopted by the assessee is based on separate books and verifiable entries, and the disallowance made by the Assessing Officer is not sustainable in the facts and circumstances of the case.

Disallowance of Weighted Deduction u/s 35(2AB) - amount approved by the Department of Scientific and Industrial Research (DSIR) in Form 3CL - We find that the Tribunal in the earlier year, relying on the judgments in Claris Lifesciences Ltd. and Cadila Healthcare Ltd. [[2013 (3) TMI 539 - GUJARAT HIGH COURT] held that prior to 01.07.2016, DSIR’s role was limited to approval of the R&D facility and not quantification of expenditure. Accordingly, deduction under section 35(2AB) could not be restricted merely to the amount mentioned in Form 3CL.

Disallowance u/s 36(1)(iii) - disallowance of interest expenditure made by AO u/s 36(1)(iii) on account of alleged utilization of borrowed funds for capital work-in-progress (CWIP) - HELD THAT:- We find that in the preceding assessment year, the Tribunal examined an identical disallowance made on proportionate basis without establishing any direct nexus between borrowed funds and CWIP. The Tribunal noted that the assessee had substantial own interest-free funds far in excess of the amount invested in CWIP. Relying on the judgment of the Hon’ble Supreme Court in Reliance Industries Ltd. [2019 (1) TMI 757 - SUPREME COURT] it was held that where sufficient own funds are available, a presumption arises that investments are made out of such interest-free funds, and in the absence of contrary material, no disallowance under section 36(1)(iii) is warranted.

In the year under consideration also, the Revenue has not brought any material to establish a nexus between borrowed funds and CWIP, nor demonstrated any change in facts. The Ld. CIT(A), following earlier appellate orders in assessee’s own case, deleted the disallowance.

Disallowance u/s14A read with Rule 8D - Issue is squarely covered in favour of the assessee by the decision in assessee’s own case for AY 2015-16 [2025 (5) TMI 1707 - ITAT AHMEDABAD] as held that in the absence of exempt income and in the presence of old investments funded out of interest-free funds, no disallowance under Rule 8D(2)(ii) was warranted.

Disallowance of Commission Paid to Non-Resident Agents - Following the Co- ordinate Bench’s binding decision [2024 (5) TMI 791 - ITAT AHMEDABAD] we find no infirmity in the CIT(A)’s order deleting the disallowance under section 40(a)(i) as held that the obligation under section 195 arises only if the payment is chargeable to tax in India.

Revenue has not brought any material on record to establish that the agents had a business connection in India within the meaning of section 9(1)(i), or that services were rendered in India. The mere fact that the contracts were executed in India does not render the commission taxable in India when the source of income – namely, the activity of soliciting and securing export orders – occurred entirely outside India.Disallowance made under section 40(a)(i) on account of commission paid to non-resident agents without deduction of TDS is therefore not sustainable.

Appeal of the Revenue is dismissed.

Benami transaction - provisional attachment under Prohibition of Benami Property Transactions - evidentiary value of statements including third-party statements - requirement of disclosure of source of consideration by benamidar - independence of benami inquiry from criminal FIR - HELD THAT:- The appellant, beneficial owner would charge exorbitant rates of interest and in case of the default by the borrower, to force for adjustment of the amount against the sale deed in the name of benamidar. It is relevant to mention here that a sale deed was not to be executed in the name of the money lender i.e. beneficial owner but a third-party who is none else but the benamidar herein. In view of the above, a case of benami transaction was framed by the respondent. It is for the reason that consideration for purchase of property was to be given by the beneficial owner initially in the shape of loan to the land holder and in case of default in repayment of the loan, property to be registered in the name of benamidars, who were not having means to purchase the property and therefore to circumvent the provision of law, the transaction was evolved through lending of money and in case of default, to register the land in the name of the benamidar without making payment of consideration by them. The aforesaid framework has not been disputed by the appellant, rather, opening argument was raised in reference to the complaint, however, with the clarification that no offence was made out and therefore there was no benami transaction.

We, on the face of it, find a framework evolving modus of benami transaction. We may refer the statement of the relevant person which includes the benamidar, Shri Amit Hashubhai Mehta, who admitted that his name was used for extorting high interest on the money given to various persons. He was otherwise as a driver of Shri Jitubhai Vala. The consideration for the property was to be paid in the shape of loan by the beneficial owner and ultimately property to be registered in his name, in case of default in payment of the loan. It is, however, with the disclosure that out of the many properties, one property was purchased by him after taking an amount of Rs.6,80,000/- from Shri Jitubhai Vala, out of which he has already served loan of Rs.2,00,000/-. The aforesaid fact has not been proved with the support of the document. It could have been a loan agreement, bank statement and any other relevant material to show advancement of loan by Shri Jitubhai Vala to the appellant, Shri Amit Hashubhai Mehta.

All the transactions either through cheque or cash were carried out on the instructions of Shri Jitubhai Vala. The description of the properties registered in their names was also given. The benamidar stated about receipt of Rs. 15,000/- per month from the beneficial owner while he was working as a driver but he could not support his case by disclosing the source to purchase of the property by inducing the money, rather, it was transacted by the beneficial owner.

The document for advancement of a sum of Rs.6,80,000/- for purchase of house has not been referred and therefore it remains for the sake of it even for one property. In view of the above, material produced by the respondent was enough to prove a case of benami transaction.

The facts on record show that the statements of the witnesses were recorded not only by the police authorities but even Initiating Officer. It was not out of threat and coercion by the Initiating Officer. No material for it has been shown with reasons. Those statements were sufficient to make out a case of benami transaction and have been relied upon. An allegation of coercion and threat for the sake of it cannot be accepted. No reason for coercion and threat has been given for recording of the statement. It is not that the officers were having enmity with the appellant so as to threat and record the statement under coercion. It is even for other witnesses. Thus, the arguments were raised for the sake of it and otherwise the appellant, benamidars were under obligation to disclose the source of consideration for purchase of the property which they have failed to do so and otherwise evidence brought on record by the respondent shows that consideration was paid by the beneficial owner in the shape of loan to the landholder and thereupon on non-payment of loan, to be adjusted towards consideration for purchase of land. The appellants have failed to demolish the case which was proved by the respondent by sufficient evidence and could not be rebutted by the appellant.

At this stage, we may clarify that statement of all related witnesses can be considered which may be even of third-party. The statements of the appellants themselves were sufficient to prove the case of benami transaction. It is more so when the benamidar failed to disclose the source of income, as stated earlier. The benami transaction is proved even by the money trail and the sequence of the documents in order to prove the case. Borrowing of the loan by the land holder has not been denied coupled with the registration of the land in the name of the benamidar without transfer of fund by him to the seller and even no source of income has been disclosed for the aforesaid.

Thus, we do not find any merit in the case and accordingly appeals fail and are dismissed.

Benami transaction - provisional attachment - accommodation entries - fiduciary capacity under the exception to benami - source of funds - conflicting statements recorded u/s 131 - demonetization-linked routing of cash - credit worthiness and bank account analysis - HELD THAT:-The transaction was one way where the appellant received a huge sum of Rs. 67,50,000/- and there is no element of repayment if it was received in fiduciary capacity hence even the second ground raised by the appellant is not made out.

In the instant case, the parties failed to disclose the source for its deposit in the bank account of M/s Veer Trading & Co., rather it was found that demonetized money was deposited at the instance of the appellant to get it monetized. The transaction for illicit purpose cannot be endorsed or be allowed to be taken out of the benami transaction. The Adjudicating Authority rightly recorded finding that the transaction does not involve it to be in fiduciary capacity and looking to the modus operandi, it was rightly taken to be a transaction, benami in nature. It is more so when no source of purchase or sale transaction of gold and silver could be disclosed. The IO could gather evidence that M/s Veer Trading & Co. was not involved in actual business but was providing accommodation entries and it is with further analysis of the Income Tax Return of both the firms, namely, M/s Veer Trading & Co. and M/s Shiva Jewellers.

The total income of M/s Veer Trading & Co. during the relevant years was between Rs. 3,89,146/- to Rs. 5,82,544/- other than in one year, it was Rs. 9,55,059/-. The analysis aforesaid was made for the six assessment years starting from 2016 till 2021. The IO did not find credit worthiness of M/s Veer Trading & Co. to deposit cash amount of Rs. 1,47,05,630/-and then to transfer Rs. 67,50,000/- to the appellant. The income tax returns of the appellant were also analyzed. The income was raising from Rs. 2,85,500/- to Rs. 7,43,353/- between the period of six years other than in the year 2018, it was having income of Rs. 9,93,585/-. This was sufficient to show that the firm was not having credit worthiness for deposit of unaccounted cash of Rs. 1,47,05,630/- and, therefore, the Adjudicating Authority found no reason to cause interference in the impugned order. It was more so when the statements of two parties were found to be in conflict.

Thus, we find no reason to cause interference in the order. Accordingly, appeal fails and is dismissed.

Mandatory BIS registration for import of specified electrical appliances - confiscation u/s 111(d) - prospective operation of a superseding Quality Control Order (no retrospective effect) - mens rea as a requisite for imposition of penalty - redemption fine as alternate relief to confiscation - HELD THAT:- We find that the impugned good were imported by the appellant by filing the bill of entry dated 05.04.2025; we also find that the only issue involved in the present case is whether there is any requirement of registration as on the date when the goods were imported into the country; we also find that earlier vide order dated 17.09.2024, there was a requirement of furnishing the certificate from BIS but that requirement was done away with vide subsequent order dated 19.05.2025 and the registration was deferred till 19.03.2026. Further, we find that in the subsequent order dated 19.05.2025 which deferred the effective date to 19.03.2026, explicitly states that it supersedes QOC 2024 (“except as respects things done or omitted to be done before such supersession”).

We also find that the registration with the BIS is only a procedural requirement for which there is no justification for confiscation of the goods and imposition of penalty. We also find that there is no mens rea on the part of the appellant warranting the imposition of penalty. We also find that though there is a procedural violation but the confiscation of the goods is not warranted in the facts and circumstances of the case.

Thus, we are of the considered view that only imposition of redemption fine will meet the ends of justice. Hence, we impose redemption fine of Rs. 15,000 and set aside the imposition of penalty and direct the department to release the goods in favour of the appellant subject to payment of redemption fine of Rs. 15,000 within a period of one week from the date of receipt of certified copy of this order.

Mis-declaration of goods - rejection and redetermination of assessable value - customs valuation based on supplier's export declaration - confiscation of imported goods - redemption fine and penalties under the Customs Act - HELD THAT:- The appellant has not disputed the weight of the Gypsum Boards as given in the Trade Declaration, the value redetermined by the Revenue based on the supplier’s declaration at the time of export is accepted since the appellant has not produced any other purchase order with regard to specific quantity or value of the Gypsum Boards. Similarly, with regard to fabrics, the Revenue has taken into an account the remeasured quantity as per the directions of the Hon’ble High Court and accordingly, has redetermined the value which has been accepted by the appellant and noted by the Hon’ble High Court of Karnataka, hence the same is upheld. Accordingly, the differential duty demanded on the enhanced value stands validated.

Confiscation of imported goods - redemption fine and penalties under the Customs Act - The appellant’s claim that they had ordered for 1057 pieces of Gypsum Boards and by mistake fabric was sent cannot be accepted since as rightly pointed out by the Revenue, the Bill of Entry shows the name of supplier as M/s. Panache International Ltd. while the packing list and the invoice is from Wanhang International Trade Company. The Consulate General of India, Hong Kong vide letter dated 28.05.2012 in response to the Revenue’s letter dated 08.05.2012 intimated that the declaration before the China Customs was 12000 kgs of Gypsum Boards and 22890 sq.mts. of polyester fabrics and the value declared is USD 49969.80.

Hence, there is clear misdeclaration of goods as well as quantity and value. Accordingly, confiscation of goods is upheld, however, taking into consideration the above facts, the impugned order is modified only to the extent of reduction of redemption fine and penalty under Section 112(a)(ii) is reduced and all other penalties are set aside.

Confiscation u/s 111(o) - penalty under Section 112(a) - differential duty payable under EPCG Notification No. 28/97 - non-fulfilment of EPCG export obligation -prematurity of show cause notice - remand for re-computation of differential duty - HELD THAT:- We find that the appellants are liable to pay on demand the differential duty in terms of said notification read with the relevant bond executed by them in this regard. However, we find that impugned order confirming demand has been passed without hearing the appellant and also without appreciating their pending request to Competent Authority for allowing certain further time for including third party export and duty as also computation of duty based on depreciated value of capital goods. Thus, we find that on this count itself, the confirmation of demand of differential duty without considering all relevant factual matrix and certain specific provisions in the notification itself i.e. condition 3 of Notification No. 28/97 dated 01.04.1997 for proper calculation of duty required to be paid for non-fulfilment of export obligation in part of full, is not proper and sustainable. The Adjudicating Authority is required to allow them to present all relevant facts and provisions/relaxation allowed by Competent Authority, if any, post 03.06.2012 before arriving at the amount of differential duty payable by the appellant in terms of bond executed by them. The permissible export made by them during intervening period will also have to be considered in terms of provisions under the Notification and EXIM Policy. Thus, to this extent impugned order confirming demand of differential duty is set aside and remanded back for re-computation.

Confiscation of machinery - In the present case the confiscation has been made under Section 111(o) of the Customs Act. One of the basic criteria for invoking this provision is that if the conditions under which impugned goods have been exempted are not observed, this shall make it liable to confiscation. However, there is a clear provision that unless the said non-observance of the condition was sanctioned by the proper Officer.

In this case, though, initially there was non-observation to the extent that they did not met the export obligation under the stipulated period and hence goods were seized under reasonable belief that they were liable to be confiscated. However, once the said export obligation period itself got further extended from time to time by the Competent Authority, it would tantamount to regularisation of non-fulfilling of export obligation during the said period. Therefore, on this count also the goods would not be liable for confiscation, as such, under Section 111(o). Therefore, we find that in the facts of the case, the confiscation of capital goods is not correct and legally sustainable. Similarly, the penalty under Section 112(a) will also not sustain as the order of the confiscation itself is not sustainable in the facts of the case.

The appeal is allowed partly. - Confirmation of demand of differential duty and interest in the impugned order is set aside.

Customs Broker - Violation of Regulation 13(d) - duty to advise client and intimate non compliance - vicarious liability under Regulation 19(8) - no proof of violation of Regulation 13(o) - penalty to be commensurate with proven violations - cancellation of customs broker licence not warranted in absence of proved violations - HELD THAT:- Admittedly, there is a misstatement insofar as the description of the goods imported is concerned, the Revenue has in fact brought out in the SCN itself the description as declared before the Customs authorities at the exporting point and the declaration given before the Customs authority at the importing point and admittedly there is clear substitution.

There is factum of misdeclaration established which was known to both the parties. When the employee of the Appellant-firm came to know about the mismatch insofar as the description in the export and import documents are concerned, Regulation 13 (d) casts the responsibility on the concerned Customs Broker not only to advise his client, but also to intimate the same to concerned Customs Authority if there is non-compliance of Regulation, which is not done. This is a serious lapse since the duty assessments are different when the same are required to be assessed on R.S.P basis and, in any case, it is suffice to conclude that there is violation of Regulation 13 (d) ibid.

Violation of Regulation 19 (8) - when the Manager of the Customs Broker came to know about the discrepancy, then it is the duty of the Manager of Appellant-firm at least to inform the Customs License Holder, who, in turn is duty bound to intimate the same to the concerned Customs Authority. Hence, there is a vicarious liability on the Customs Broker which would survive in terms of Regulation 19 (8). That having also remaining unfulfilled, we find that Appellant is also liable for violation of Regulation 19 (8).

Thus, we are of the view that violation of Customs Broker license insofar as Regulation 13 (d) and 19 (8) ibid are concerned stands upheld and violation as regards Regulation 13 (o) ibid is not proved and hence, the penalty should commensurate with the above violations which are proved.

In the result, the Appeal of the Appellant-Customs Broker is partly allowed as indicated above.

Principles of natural justice - audi alteram partem - reasonable opportunity of being heard - adjournment and grant of time in appeal proceedings - power to refer back / remand for fresh adjudication - setting aside orders for breach of natural justice without adjudicating merits - HELD THAT:- Section 128-A the Customs Act, 1962, provides procedure in appeal before Learned Commissioner (Appeals), Commissioner have power that an order or decision has been passed without following the principles of natural justice, may refer the matter back for fresh adjudication or decision. It means that following of principles of natural justice is necessary at the stage of adjudication. It cannot be construed the principles required to be followed by the Adjudication Authority are not equally applicable on the Appellant Authority.

Hon’ble Supreme Court in the case of Siemens Engineering and Manufacturing Company of India Ltd., Vs Union of India [1976 (4) TMI 204 - SUPREME COURT], wherein, held that “It is essential that Administrative Authorities and Tribunals should accord fair and proper hearing to the persons sought to be affected by their orders and give sufficiently clear and explicit reasons in support of the orders made by them. The Rule requiring reasons to be given in support of an order is, like the principle of audi alteram partem, a basic principle of natural justice which must inform every quasi-judicial process and this Rule must be observed in its proper spirit and mere pretence of compliance with it would not be satisfy the requirement of law.”

Thus, we have the considered that the impugned order passed by the Commissioner (Appeals), suffers from gross violation of principles of natural justice, as the Department was denied by opportunity of hearing which is very important for any adjudication.

Accordingly, the impugned order is set aside and matter is remanded to the Commissioner (Appeals), with a direction to decide the appeals De novo, after providing due opportunity of hearing to both sides, in accordance with law.

Determination of transaction value - reliance on Bank Realisation Certificate for assessable value - inadmissibility of Chemical Examiner/CRCL moisture test for fixing exported quantity in ad valorem regime - classification and application of uniform duty rate to iron ore fines versus lumps - remand for redetermination of assessable value and duty - HELD THAT:- We find that the appellants are exporter who have entered into contract for supply of iron ore of certain specific grade and quality and have mutually agreed to certain terms and conditions including testing of Fe content, moisture etc., based on test reports at Discharge Port. Therefore, once the mutually agreed terms and conditions are applied to the consignment and a final invoice is being issued, the payments are made by the foreign importer to the appellant and the amount was realized as reflected in the BRC.

All the issues, covered in these appeals have been discussed extensively in the case of Daksh Minerals [2024 (5) TMI 1155 - CESTAT HYDERABAD], Atha Mines [2025 (7) TMI 1725 - CESTAT HYDERABAD], CC Vs Sesa Goa [2014 (8) TMI 213 - CESTAT KOLKATA]. We also find that there is no valid reason for rejecting the transaction value in the first place as the said price was provisional in nature and which got firmed up once the final invoice was issued duly supported by the BRC. We also find that there is a force in the submission that no grounds have been adduced to reject the transaction value, which is required before determining value in accordance with Customs Valuation Rules.

Therefore, we do not find any merit in the order passed by the Commissioner (Appeals) upholding the orders of the Adjudicating Authority for either demanding differential export duty or rejecting part of the refund claimed by appellant by adopting the methodology, which is not correct, for finalization of provisionally assessed Shipping Bills.

The matters are remanded back to the Original Authority to redetermine the assessable value, based on BRC and final invoice submitted by the appellant in respect of the impugned shipping bills and also to apply only the rate applicable to iron ore fine to the entire consignment. As a consequence, if there is any increase in the refund amount, the sum shall be payable by the Department, as per law.

Committee of Creditors as a statutory entity - juristic personality and right to litigate - functional recognition versus jurisprudential status - representation by the Resolution Professional - necessity and propriety of impleading parties -

Legal Character of the COC and it’s Right to Litigate - Does the CoC possess a legal character as a juristic person? Can it sue or be sued (to be neutral, to litigate) in its name? - HELD THAT:- A HUF may be a person in terms of the definition, but it cannot litigate in its name since a suit may be laid only by the ‘karta’ or the manager of the family, who is a natural person. A trust by legal fiction may be termed as a person within this definition, but only trustees can sue and be sued and not the trust, but the trustees are natural persons. Therefore, one who is not constituted as a juristic person even though if it falls within the definition of person under Sec.3(23) of the IBC may be considered as a person wherever the definition which characterise them as such is applied, yet it may not have the right to litigate in its name.

Turning to Sec.3(23)(g), for a statutory entity to be termed as a person with the right to sue or be sued in its name, it must be constituted as a corporate soul such as for instance, a Commissioner of the Municipality, whom most Municipalities Acts constitute as a corporate soul with perpetual succession and common seal. A CoC therefore, can hardly be termed as a person in that sense with right to litigate in its name.

The practice of letting CoC litigate in its name which we have approved in the earlier paragraph, is not without its difficulties. This therefore, necessitates a finetuning of the practice of allowing CoC to litigate in its name to avert the difficulties that it may pose. We therefore hold:

Where CoC is run by a single member, it does not matter whether CoC litigates or the lone member constituting it litigates in their names. Therefore, CoC can litigate in its name.

Where a multi-member CoC decides unanimously to litigate together, then it may institute such proceedings which may include a petition or an application or an appeal in its name.

Where however, a multi-member CoC is intended to be arrayed as a respondent, then it is necessary that every member of the CoC is arrayed independently as a respondent, since the one who approaches the tribunal with a grievance may not know whether the members of the CoC intend to litigate together or not.

What is mentioned in (c) has its relevance only for future litigations. So far as those which are pending, any issue that may visit the tribunal is only required to be addressed as and when it arises.

Who should represent the CoC - HELD THAT:- We are not in agreement with the Adjudicating Authority’s view that only RP has the authority to represent the CoC. The Code constitutes CoC and RP as entirely different entities, and have assigned them different roles and specific responsibilities. It may be that RP is required to file an application seeking the approval of the Adjudicating Authority to the resolution plan approved by the CoC, but then the RP while doing so does not act as an agent of the CoC but merely complies with what IBC directs in Sec.31 of the IBC.

Whether the CoC needs to be impleaded in I.A.466 of 2025. - HELD THAT:- As has been discussed earlier a CoC is a mere collective of independent financial creditors, and despite its formation it does not purport to efface the independent identity of the members constituting it. After all every member of the CoC obtains an entry into it only after independently establishing that they are financial creditors of the corporate debtor, and that they have an independent claim for financial debt from the latter. - The distinction between a CoC and the members who constitute it is well defined and preserved under the statutory scheme of the Code, and hence anything that affects or threatens the individual right of a member of the CoC cannot be construed as a threat to all. When Glas Trust’s presence in the CoC is challenged, it is required to be tested only with reference to the nature of contractual relationship Glas Trust has established with the corporate debtor, and if it has given rise to a financial debt which the corporate debtor has defaulted in repaying.

We affirm the decision of the Adjudicating Authority and hold that the CoC does not required to be impleaded in I.A.466 of 2025.

Issue of Maintainability of the Appeal - The power granted to the holder thereof has authorised him to do everything for the conduct of the legal proceedings which included the authority to “swear, affirm, execute, declare and file affidavits and all papers as may be required (including notices, affidavits, motions, vakalatnamas, compromise terms, petitions, caveats, applications (including injunction applications), appeals,” besides settling pleadings and giving evidence. The objection of the respondent is that inasmuch as the power is a special power granted to the power holder, and inasmuch as neither CoC’s resolution nor the power of attorney have not specifically authorised the power holder to take out an application for impleading on behalf of the CoC and file this appeal, the institution of this very appeal is rendered incompetent.

Without engaging ourselves in an exercise to micro scan the objection raised for evaluating its merit, we merely state that prima facie the extent of power granted appears broad based, but in view of the decision taken in this appeal, we find no need to deal with it in greater detail.

Existence of financial debt and occurrence of default for admission u/s 7 - completeness of application and limitation for Section 7 admission - curable procedural defects (including non-service on Information Utility and inadequate stamping) - admissibility of electronic records and Section 65B at admission stage - principles of natural justice in respect of additional affidavit and opportunity to rebut - authorization defect and cure by subsequent board resolutions - misuse or mala fides u/s 65 - HELD THAT:-We observe that the original financial debt was sanctioned by Dombivli Nagri Sahkari Bank Limited but subsequently it was assigned to the Respondent ARC and it constitutes a financial debt within a meaning of Section 5(8) of the Code. We find that the sanctioned term loan and cash credit facilities, were supported by security documents which included hypothecation and mortgages, assignment deed dated 31.12.2020 and it is also reflected as a liability in the Corporate Debtors audited balance sheets. Thus we observe that under the SARFAESI Act assignment of debt vests a right in the assignee and the Corporate Debtor cannot dispute once acknowledgement is evident from its own records.

We also note that this application was filed on 01.11.2023 and the acknowledgements as per the audited financial statements and also the admission of liability in its email dated 16.02.2024 shows that the application is within the limitation period as provided under Section 18 of the Limitation Act. The objections raised regarding the limitations thus cannot be sustained.

Authorization defect and cure by subsequent board resolutions - HELD THAT:- On some technical objections relating to authorization defect, it is brought to our notice that initial defect in authorization defect which is curable was cured once the board resolutions were placed on record during the proceeding. Such a procedural defect cannot defeat substantive justice especially when debt and default are undisputed.

On the objections relating to stamp duty and the registration objections, Adjudicating Authority has relied on the judgment of Hon’ble Supreme Court in N.N. Global Mercantile (P) Ltd. vs. Indo Unique Flame Ltd. [2023 (7) TMI 761 - SUPREME COURT] holding that inadequate stamping is curable defect and unstamped documents are not void or non-existence. Moreover, at the Section 7 admission stage the Tribunal is not adjudicating the enforceability of contracts but merely verifying the debt and default.

Misuse or mala fides under Section 65 of the IBC - HELD THAT:- In the absence of Section 65B certificate the proceedings at admission stage are not invalidated and certified bank statements are admissible under the Bankers Books Evidence Act. Moreover, the proceedings of admission are independently corroborated, rendering this objection unsustainable.

With respect to the objection relating to the Rule 4(3) regarding the service on IBBI, the Adjudicating Authority had held that this defect can be treated as it is a rectifiable procedural lapse and which was subsequently cured pursuant to the directions of NCLT. Once the compliance was affected and was proved on affidavit the objections ceased to survive.

Thus, we conclude that the impugned order meticulously applies these parameters and does not suffer from any jurisdictional error, perversity, or misapplication of law warranting appellate interference.

We find that the impugned order is a reasoned order which is based on material record and is in conformity with statutory provisions and binding precedents. - No ground which is made out for interfering under Section 61 of the Code. Accordingly, the Appeal is dismissed.

Abetment u/s 64(2) read with Sections 8(3) and 8(4) of FERA - retracted statements under Section 40 of FERA and corroboration - presumption as to culpable mental state u/s 59 of FERA - mens rea and meeting of minds in abetment (Section 107 IPC principles applied) - reduction of penalty and proportionality of administrative penalty - Whether the Appellant abetted and aided M/s Todi Commercial/ Shri Nand Kishore Verma in the contravention of Sections 8(3) and 8(4) of FERA - HELD THAT:- We find that there are a number of statements including that of Shri Nand Kishore Verma, Shri Nirmal Kumar Verma, Shri Rajesh Kumar Agarwal, Shri Rakesh Jain and Shri Sandeep Modi wherein it has been categorically stated that the Appellant was providing funds to Shri Nand Kishore Verma/ M/s Todi Commercial for acquisition of foreign exchange and its remittance abroad. In this regard, deposit slips and draft purchase application form were identified by Shri Sandeep Modi. It cannot also be regarded as mere coincidence that S/Shri Sandeep Modi and Rakesh Jain were working as employees in M/s Set Square Holding (P) Ltd. during the relevant period 1988. It has come on record that S/Shri Sushil Kumar Agarwal and Rajesh Kumar Agarwal were Directors/Promoters of M/s Set Square Holding (P) Ltd. Both S/Shri Sandeep Modi and Rakesh Jain have admitted as having transferred funds to M/s Todi Commercial at the instance of S/Shri Sushil Kumar Agarwal and Rajesh Kumar Agarwal.

The Appellant has challenged the admissibility of the statements recorded under Section 40 of FERA in the face of retractions having been made by himself, his brother Shri Rajesh Kumar Agarwal, Shri Rakesh Jain and Shri Sandeep Modi. In this regard, we are guided by the following observations made in the Judgment of the Hon’ble Supreme Court in the case of Vinod Solanki vs. Union of India [(2008) 16 SCC 537] which has laid down the situations where the retracted statement of the Appellant can be relied upon.

Besides the independent and cogent evidence in the form of analysis of bank statements, it is on record that those who tendered the statements under Section 40 of FERA were closely connected as employees of the Appellant and the fact that none had the economic capacity being merely employees to fund the remittances amounting to US $ 977776 cannot be ignored. Shri Rakesh Jain in the adjudication proceedings has gone on to maintain that he was under instructions of the Appellant and his brother. There is nothing produced before us other than the bald allegation about the statements having been made under Section 40 of FERA under coercion.

It is from the facts and circumstances of a case that the intention, instigation and engagement are to be ascertained. We have already brought out the manner in which the Appellant funded the illegal remittance abroad by Shri Nand Kishore Verma/ M/s Todi Commercial. The facts of the present case thus speak for themselves. Section 59 of FERA 1973 provided for presumption of culpable mental state in any prosecution for any offence under the Act which requires a culpable mental state on the part of the accused, unless the accused proved the fact that he had no such mental state with respect to the charge against a particular offence. Sub-Section 3 of that Section makes such presumption applicable to proceeding before an Adjudicating Officer. The circumstances and the evidence in the present case reverse the burden on to the Appellant which he has failed to discharge. Therefore, the charge of the abetment against the Appellant stands established as he contravened Section 64(2) read with Sections 8(3) and 8(4) of FERA.

We find that the ends of justice will be met by reduction of penalty to Rs. 10,00,000/- on the Appellant. The pre- deposit of penalty amount already paid shall be adjusted against the reduced penalty.

Provisional attachment - proceeds of crime - beneficial ownership / benami transactions - camouflage of proceeds by repayment through cash deposits - statement recorded u/s 50(2) - HELD THAT:- The case was considered in reference to the statements of the witnesses who disclosed the involvement of Shri Praveen Kumar Kommineni and his entities to accommodate LC credit facility of the accused company. The statement of Praveen Kumar was also recorded, where he was asked about the names of his major clients for the LC facility. It was disclosed, but he failed to provide details of the LC beneficiaries. The LC beneficiaries are considered to be those who, in the normal course, availed discounting facilities on an urgent need basis. The appellant Praveen Kumar, however, gave the name of the LC applicant as his client, which demonstrated bogus and accommodative nature of the LC transaction for both the applicant as well as for the beneficiaries. M/s RE Cables and Conductors Pvt. Limited had availed the credit facility from the banks on accommodated transactions without underlying business activity. It was facilitated by Shri Praveen Kumar Kommineni, resulting in devolvement of the LC, which put the financial institution in loss.

Beneficial ownership / benami transactions - HELD THAT:- The facts now remain about the provisional attachment of the property acquired after obtaining a loan of Rs. 59.90 lakhs from the bank. The property stands in the name of Shri P. Eswar Reddy; however, it is occupied by Shri Praveen Kumar Kommineni as a tenant. No rent note or payment of rent has been shown by the appellant to fortify the statement aforesaid. The fact further remains that the loan was obtained by Shri Praveen Kumar Kommineni, and in fact, the statement of Shri P. Eswar Reddy revealed that he was not inclined to purchase the property in his name rather, being an employee of Shri Praveen Kumar Kommineni, he was forced to get the property registered in his name. The demand draft of Rs. 59.90 lakhs bearing No. 383240 dated 24.10.2016 was issued by Shri Praveen Kumar Kommineni because the bank loan was disbursed by the bank in the name of Shri Praveen Kumar Kommineni, and the payment of EMI is paid accordingly.

It is coupled with the fact that the payment of EMIs was made by cash deposited in the bank account to be transferred to the bank loan account without disclosing the source of the cash, and therefore, Shri P. Eswar Reddy finally admitted that the property belongs to Shri Praveen Kumar Kommineni but exists in his name.

The facts aforesaid are relevant because, even after analysis of the bank loan statement, the respondents found that repayments were made by the sources of Shri Praveen Kumar Kommineni by depositing cash on different dates. The appellant could not explain the source of the cash used for repayment of the loan amount. It was tabulated in the impugned order referring to 14 such transactions starting from 20.07.2017 till 24.06.2021. The deposits were made in the bank account with Punjab National Bank and thereafter used to pay the EMIs. Shri P. Eswar Reddy admitted that the funds were arranged by Shri Praveen Kumar Kommineni, which resulted in the finding that Shri P. Eswar Reddy is the owner of the property for name sake, whereas the beneficial owner is Shri Praveen Kumar Kommineni, who received the commission out of accommodated LC entry. The loan from the bank was taken to camouflage the use of proceeds of crime, and in fact, it was repaid gradually by depositing cash in the bank account out of the proceeds of crime.

Thus, the Adjudicating Authority confirmed the provisional attachment order, and we do not find any error in the impugned order so as to cause interference therein. Accordingly, the appeal fails and is dismissed.

Provisional attachment -Proceeds of crime - property equivalent in value - third party holding/parking of proceeds - movable and immovable properties - burden to explain lawful source - failure to serve the notice required by the second proviso to Section 8(1) - effect of acquittal in predicate offence on PMLA proceedings -

Proceeds of crime - third party holding/parking of proceeds - burden to explain lawful source - HELD THAT:- No reasoning has been offered by the Appellants for entering into agreements to sale of their own ancestral property. It further remains unexplained that why transfer of full consideration for such sale was not made at first instance. Then, to prescribe a date line for registration of the sale of the parcels of land, failing which the said properties will be forfeited to the Appellant in itself reflects dubious modus operandi adopted to camouflage the flow of funds from the Gaba family to the Appellants.

In addition, the letter dated 06.11.2015 of Sh. Gurmesh Gaba and recovery of diary by the Income Tax Authority clearly corroborate that the arrangement was entered into by the Appellants with the Gaba family so as to provide the ‘parking place’ for the Proceeds of Crime generated out of the trafficking of Narcotics and Psychotropic Substances. Reference to the suits filed by the Appellants in the Court of Ld. Civil Judge, Phagwara provided for injunction to prevent the alienation of the ancestral properties owned by the Appellants and hence, strengthen the inference drawn about the nature of the transactions indulged in by the Appellants. These were attempts to give credence to these transactions so as to hoodwink their true nature as to layer the proceeds of crime.

The creation of the FDRs either in the sole name of Shri Vaibhav Mehra or in the joint names of father and son would in fact go on to show that the Appellant Shri Anil Kumar Jalota made efforts to bring in his son, so as to distance himself from the said allegations. No evidence has been produced as to show whether the amount transferred in either cheque or in cash has arisen from source other than the income of the Gaba family. Therefore, dismiss the two Appeals as being without merit.

Proceeds of crime - property equivalent in value - burden to explain lawful source - effect of acquittal in predicate offence on PMLA proceedings - HELD THAT:- While the payment of Rs. 3,60,000/- made through Pay Order dated 14.11.2005 of State Bank of Patiala, Jalandhar, seems to have been established by the documents submitted as part of the Appeal Paper Book, the rest of the amount of Rs. 2 lakhs made in cash has not been explained by the Appellant. Her only explanation is that the details thereof were known to her demised husband. It is a matter of record that Smt. Rekha Rani/Luthra was married to Shri Gurjit Gaba in the year 2003. Shri Gaba has in his statement cited afore admitted having funded the impugned property including the construction of the house thereupon. Therefore, the attached property cannot be regarded as free from taint. The copies of the ITRs for self, late husband, her school and her late husband’s business do not mention about the cash payment of Rs. 2 lakhs of the plot and about the funding of the construction of the house on the plot.

As mentioned afore Shri Gurjit Gaba in his statement has stated that it was he who had purchased the plot and constructed the house thereupon. The contention of the Ld. Counsel that the Appellants Smt. Swarn Luthra and Smt. Rekha Rani have not been made accused in the Scheduled Offence has been dealt with by the Tribunal.

The argument made by the Ld. Counsel for the Appellant that since the impugned property was purchased and constructed before the occurrence of the crime is also to be rejected.

Dismiss the two Appeals, being devoid of merit.

Service of show cause notice under section 8(1) provisos - principles of natural justice - HELD THAT:- On perusal of the record, find that Ld. AA while issuing the Show Cause Notice u/s. 8(1) has failed to make Shri Ram Lubhaya, the father of the Appellant as a noticee. In this regard, Ld. Counsel for the Appellant has pointed out that the second proviso of Section 8(1) of PMLA requires that Show Cause Notice should have been issued to Sh. Ram Lubhaya.

Ld. Counsel therefore argued that on this sole ground the confirmation of the provisional attachment of the said property vide the Impugned Order is not sustainable. I have perused the translated version of the sale deed dated 03.06.1978 evidencing the title of Shri Ram Lubhaya for the impugned parcel of land. I do not find that any evidence to the contrary has been placed before me. The statutory requirement of second proviso to Section 8(1) of PMLA is therefore not fulfilled. I therefore hold that the Impugned Order is vitiated to the extent of having confirmed the PAO issued for the said impugned Property. I therefore allow the Appeal.

Proceeds of crime - property equivalent in value - burden to explain lawful source - HELD THAT:- There is no evidence placed by the Appellant as to hit the voluntariness and veracity of his statement even though tendered in judicial custody. Ld. Counsel has further challenged the attachment on the ground that the said property was purchased by the Appellant jointly with his elder brother much before the lodging of the FIR. He, therefore, pleaded that the said property cannot be regarded as proceeds of crime. However, it is also on record that there was a family settlement that the said property will be exclusively owned by the Appellant Sh. Ajay Jain.

The definition of ‘proceeds of crime’ was given interpretation by the Apex Court in the case of Vijay Madanlal Choudhary and Others v. Union of India & Ors. [2022 (7) TMI 1316 - SUPREME COURT (LB)]. It is held that to fall in the definition of ‘proceeds of crime’, it can be even a property of equivalent in value to the proceeds out of the crime. Meaning thereby, it is not necessary that to fall in the definition ‘proceeds of crime’ it should always be a property directly or indirectly derived or obtained as a result of criminal activity rather if somebody has obtained and derived any property out of the crime and has siphoned off or vanished, then any property of equivalent value can be attached.

Since the challenge by the Appellant to the attachment of the property fails on the two grounds mentioned afore, I do not find that the Appeal of the Appellant is on merit and therefore the Appeal is dismissed.

Proceeds of crime - property equivalent in value - burden to explain lawful source - HELD THAT:- It is evident that many of the properties were purchased in cash for which no explanation has been given, other than it being from agriculture and that ITRs have been filed. The explanations offered by the Appellants are neither adequate nor corroborated by evidence documentary or otherwise. The role of the two Appellants Smt. Jagminder Kaur and Smt. Joginder Kaur (since deceased and substituted by LR Shri Maninder Singh) has been that of lending their names for the acquisition of the properties by Shri Maninder Singh. Smt. Jagminder Kaur is admittedly a house wife. Neither Smt. Joginder Kaur in the pleadings made in the Appeal nor subsequently her son and LR Shri Maninder Singh, the other Appellant, could show her capacity as to earn enough to purchase the impugned properties in her name.

No identifying particulars have been submitted by the Appellant or her LR to corroborate the contention made in the Appeal. With respect to the properties at Serial No. 14 & 15 of the impugned order in the name of the Appellant Shri Maninder Singh the prayer in the Appeal has been made that these were also already attached vide the aforementioned order dated 09.03.2015 of the Ld. Competent Authority and Administrator, SAFEM (FOP) & NDPS, New Delhi. However, in these pleadings not even the Serial No. in the Table of the said order dated 09.03.2015 has been mentioned. Therefore, there is no material to infer that the properties are the same which has been attached in the two orders. For the property at Serial No. 18 of the table in the impugned order the prayer in the Appeal states that the order dated 09.03.2015 of the Ld. Competent Authority and Administrator, SAFEM (FOP) & NDPS, New Delhi has not been confirmed. Therefore, with respect to this property the provisional attachment and its confirmation thereof under the provisions of the PMLA cannot be questioned.

These three Appeals are therefore dismissed. Liberty is granted to the Appellants to approach this Tribunal in case the conviction orders are reversed at subsequent stage.

Proceeds of crime - burden to explain lawful source - HELD THAT:- Appellant was sentenced twice for drug related offences in Canada where he migrated. The impugned property at Serial No.1 of the Table in Paragraph 1 of this Order was purchased by the Appellant in the name of his son. The son Sh. Roy Bahadur Nirwal has denied having known the source of money which part funded the said property. Part funding was done through loan of Rs. 2.5 crore by the ICICI Bank, Jaipur. The Appellant has failed to provide any explanation as to the lawful source for repayment of such loan.

No evidence whatsoever has been placed to corroborate the explanation of the Appellant about money having been generated out of his agriculture income. I also find that the purchase of the agricultural land has not been explained in terms of funding which has come out of legal sources. Again, there is no evidence documentary or otherwise which has been produced by the Appellant. In view of the aforementioned, dismiss the Appeal.

Proceeds of crime - burden to explain lawful source - third party holding/parking of proceeds - HELD THAT:- No evidence has been produced as to demonstrate that the attached properties have been generated out of such agricultural income. Moreover, Shri Harmesh Gaba was Director/Partner in more than one firm, wherein Sh. Chunni Lal Gaba is also Director/Partner, except M/s Birji Electricals wherein Sh. Chunni Lal Gaba retired and was substituted by Sh. Mahesh Kumar. The shares/net worth of these Companies/Firms have been attached vide the Impugned Order. The Appellant Shri Harmesh Gaba has failed to produce any evidence documentary or otherwise, as to show the lawful generation of income and its utilisation for purchase of the impugned properties in his name and in the name of his son.

As mentioned afore quite a few properties are still jointly owned by the members of the two families. Shri Harmesh Gaba and Shri Chunni Lal Gaba are Directors/Partners in M/s White Rose Pharma Chemicals Ltd., Shiva Cold Storage and Ice Factory, M/s, Shiva Agriculture Farm and M/s. C.H. Real Estate. Shri Chunni Lal was earlier partner in M/s. Briji Electricals along with Shri Harmesh Kumar but Shri Mahesh Kumar replaced Shri Chunni Lal in the year 2009. Shri Chunni Lal and Smt. Sudesh Rani (W/o Shri Harmesh Kumar) are Directors in M/s. White Rose Estate Investment Pvt. Ltd. Shri Gurjit Kumar S/o Shri Chunni Lal is director/partner in M/s. Medcare Remedies Pvt. Ltd. and M/s. C. G. Real Estate. Shri Gurjit Kumar, Shri Gurmesh Kumar, Shri Mahesh Kumar, Shri Chunni Lal and Shri Harmesh Kumar were in charge of, and were responsible to the firm/company, for the conduct of the business of firms/company. Shri Harmesh Kumar Gaba was thus an integral part of the business jointly run with his brother Shri Chunni Lal Gaba and his family. It is also matter of record that Shri Harmesh Gaba surrendered Rs. 5 crores to the Income Tax Department. The Appellants have acquired properties against payment in cash, for which no explanations have been offered. In view of the aforementioned the two Appeals are dismissed.

Proceeds of crime - property equivalent in value - effect of acquittal in predicate offence on PMLA proceedings - HELD THAT:- The use of cash for the acquisition of these properties confirms the suspicion about the properties being tainted. It is also on record that all the three Appellants have been investigated for trafficking in Narcotics Drugs and Psychotropic Substances. While the Appellant Shri Chunni Lal Gaba and Shri Gurjit Gaba were arrested under the provisions of the NDPS Act, the investigation also revealed that Shri Gurmesh Gaba had kept record of the suspect transactions. In fact, Shri Gurjit Gaba has since been convicted under the provisions of the NDPS Act. These facts as mentioned afore make very strong grounds for keeping the attachment of these properties intact till the conclusion of the proceedings under the PMLA prosecution complaints filed before the Ld. Special Judge, PMLA, Sas Nagar (Mohali) against the three Appellants.

A question has been raised about the impact of the acquittal of Shri Chunni Lal Gaba in the scheduled offence on to the present proceedings. Right at the outset it is made clear that Shri Chunni Lal Gaba is still under trial in the prosecution complaint filed under PMLA for the offence of money laundering.

It therefore follows that the mere acquittal of Shri Chunni Lal Gaba from the scheduled offence cannot cause the properties which have been attached relating to him, to be set free.

In fact, even where an accused is acquitted from the scheduled offence, the accused cannot get the benefit if he is still under trial for the money laundering offence.

It is thus clear that the attachment of the properties of Shri Chunni Lal Gaba cannot be set free at this stage of the proceedings.

On consideration of the statutory provision, allow the Appeal No. FPA-PMLA-1369/JL/2016 filed by Shri Suresh Kumar.

Benefit under Section 73(3) of the Finance Act, 1994 - no penalty for payment under Section 73(3) - penalty under Section 78 - invocation of extended period for recovery of service tax - payment of service tax on basis of own ascertainment / on audit pointing out -HELD THAT:- We find that in the instant case the issues were raised on the conduct of audit of the records of the appellant. The appellants have promptly paid the amounts of service tax that were brought to his notice by the audit team. Therefore, we find that the provisions of Section 73 (3) of the Finance Act, 1994 are available to the appellants. In fact, Revenue should not have issued Show Cause Notice to the appellants on these issues. We find that though extended period has been invoked as a routine, no substantial evidence has been placed on record to justify the invocation of extended period. Hence, we find that penalty under Section 78 cannot be imposed. Similarly, looking into the conduct of the appellants other penalties are also not imposable in the facts of the case. Therefore, we modify the impugned order setting aside all the penalties imposed.

Appeal is disposed in the above terms.

Export of services exemption - SEZ ab-initio exemption - Suppression of facts - extended period of limitation - Deposit of tax collected with the Government - Denial of CENVAT credit for lack of documents and limitation - Penalty u/s 78 - imposition for non-payment by suppression - HELD THAT:- It is not a case where appellant entertained a belief/bonafide belief that no service tax was payable. The decision relied upon by the Counsel of the appellant do not support the case of the appellant, none of the judgments considers the situation where the tax was being collected by the appellant and not paid to the exchequer and NIL service tax returns was filed. The act of the appellant in collection of service tax and not depositing the same with exchequer clearly establishes the intention to evade payment of service tax by suppressing the facts/ documents. I do not find any merits in the reliance placed by the appellant in any of the judgment.

Appellant had not been filing the ST-3 return and was evading the payment of service tax. The conduct of appellant itself establishes that appellant has no claim in equity also for the reason that they are not making this claim with clean hands. It is also settled principle in law that fraud vitiates all. Thus the claim of the appellant to CENVAT Credit cannot be considered and allowed at this stage.

In view of the findings as above, no merits in the submissions made by the appellant, as the appellant was collected the service tax and not deposited with the Government the interest @24% on the amount so collected and not deposited as required to be made in terms of Notification No.13/2016 dated 01.03.2016.

As the demand made by invocation of extended period of limitation as per proviso to Section 73(1) of the Finance Act, 1994, uphold the penalties imposed on the appellant under Section 78 and other provision of the Act.

Appeal is dismissed.

Interest on delayed payment of service tax - Applicability of service-tax interest notifications to periods of delay - Reduction of interest for small service providers u/s 75 - Cum-tax pricing and its effect on tax/interest liability - Penalty for suppression of service tax u/s 78 of the Finance Act, 1994 - Penalty for failure to self-assess u/s 77(2) of the Finance Act, 1994 - Benefit of reduced penalty on payment within 30 days of show cause notice - HELD THAT:- From the submissions made by the appellant before the Adjudicating Authority and First Appellate Authority, it is evident that the appellant is not disputing the amount of service tax demanded, they have paid the entire tax liability of service tax due within 30 days from the issuance of show cause notice, which is now confirmed against the appellant by adjudicating authority and Commissioner (Appeals). They have also deposited the interest due as per their own and penalty calculated @14% on the amount of tax short paid as provided by Section 78 of the Finance Act, 1994.

The entire dispute is in respect of calculation of interest in respect of payment of service tax as per the notification. The said Notification is reproduced in the impugned order and it is observed that dispute is only in respect of the period covered by Notification No.13/2016 dated 01.03.2016 impugned order states that interest should be calculated as per serial no.1 of the table appended in the said notification whereas claim of the appellant is that it is to be calculated as per Sl.No.2 of the notification.

In the present case, the demand had not been made under Section 73(2) of the Finance Act, 1994 and the interest has been demanded in terms of Section 73 not under Section 73B of the Act, as such, the above clause should not be application.

It is also observed that in respect of this amount Adjudicating Authority and Appellate Authority themselves have concluded that appellant have not calculated any amount separately and have allowed the benefit of cum tax price to the gross receipts. Thus, it is enough to establish that the appellant was not calculating their amount of tax short paid separately representing service tax from their clients. The case is simply of short payment of service tax and the same would be covered by Sl.No.2 appended in the said notification.

As observed that appellant had deposited that entire amount of service tax due, major portion of interest along with 15% of penalty as provided under Section 78 of the Act within 30 days from the issuance of the show cause notice, the demand confirmed along with interest and penalty cannot be upheld as per the provisions of Section 78 itself.

No merits in impugned order and the same is set aside. - Appeal is allowed.

Extended period of limitation - proviso to Section 73(1) of the Finance Act, 1994 - suppression of facts - burden of proof - bona fide belief - self-assessment - show cause notice must specify allegations - time-barred demand - HELD THAT:-It is a fact on record that the appellant was filing ST-3 returns as required in law after making self assessment of the tax. They were also filing ITRs with the Income Tax Department. From form 26AS of the appellant it is also evident that the value of services against which TDS was deducted was about Rs.89,19,702/- against the value of Rs.84,92,317/- reflected in ST-3 return. I observe that the entire demand has been made by taking the deference of ITR and STR as their difference was higher without specifying the nature of services against which these demands are made.

The fact as evident that appellant self assessed the service tax payable by classifying the services provided by him under the category of exempted services have assessed the service tax on the none exempted services and paid them in respect of other exempted services. In the opinion of the appellant, no service tax was payable and hence was not paid. As the appellant was continuously during the period of dispute filing ST3 return on the basis of bonafide belief held by him, I do not find any merits in invocation of extended period of limitation for making this demand.

Thus, demand made by invoking extended period cannot be upheld. - No merits in the impugned order and the same is set aside.

Appeal is allowed.

Demand based solely on third-party data (26AS) without corroborative inquiry - Requirement of specific documentary proof to displace exemption claim - Exemption for original works pertaining to Railways - Exemption for subcontractor to exempted works contract - Exemption for construction of single residential unit otherwise than as part of a residential complex - Invalidity of calculation lacking item-wise breakup - Setting aside interest and penalty where principal tax demand is unsustainable - HELD THAT:- On perusal of the declarations, we find that the appellant has established with documentary evidence that they have done the services of construction of single residential units. We observe that construction of single residential unit other than part of residential complex is exempted from payment of service tax as per Sl. No. 14(b) of N.F. No. 25/2012-ST dated 20.06.2012. However, we find that the Department has not undertaken any verification of such factual background from each such individuals. We find that the declarations obtained from each of the individual 10 persons were available with the Department before adjudication of the case. However, the Ld. adjudicating authority has not considered the submissions made by them and confirmed the demands of service tax. Thus, we hold that the appellant is eligible for the exemption as provided under Sl. No. 14(b) of N.F. No. 25/2012ST dated 20.06.2012. Accordingly, we hold that the demand of service tax confirmed on this count in the impugned order is not sustainable and hence we set aside the same.

The service tax liability (including cess) @14.5% has been mechanically calculated on the said amounts. We have seen the work sheet from the show cause notice. - There is no break of demand under separate categories of service mentioned in the Notice. Thus, we find merit in the submission of the appellant that the demand is liable to be set aside on this ground itself.

SCN was issued solely on the basis of data available as per CBDT [26 AS] without adducing any corroborative evidence and without causing any independent enquiry. We find merit in the submission of the appellant that demands raised and confirmed solely relying on the basis of CBDT data is legally not sustainable.

Thus, we hold that the demand confirmed in the impugned order is liable to be set aside on this ground also.

As the demand of service tax itself is not sustainable, the question of demanding interest or imposing penalties does not arise and hence we set aside the same.

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

Business Auxiliary Service - principal-to-principal basis - incentives as trade discounts forming part of sale price - transfer of property in goods excluded from definition of service - transaction specific consideration versus general performance based incentives - negative list of services - HELD THAT:- We find that the short issue involved in the present case is whether the incentives received by the appellant from the manufacturer MSIL in relation to sale of motor vehicles by reaching the sale target is leviable to service tax under the category of Business Auxiliary Service during the relevant periods. This issue is no more res integra which has been addressed by this Tribunal in the case of Bangalore Motors Pvt. Ltd. [2024 (7) TMI 1255 - CESTAT BANGALORE].

Thus, we are of the view that the impugned orders cannot be sustained. Consequently, the same are set aside and appeals are allowed with consequential relief, if any, as per law.

Identical issue bar under the second proviso to Section 106(1) of the Service Tax Voluntary Compliance Encouragement Scheme, 2013 - distinction between pre-1-7-2012 taxable service under clause (105) of Section 65 and post-1-7-2012 definition of "service" under Section 65B(44) read with charge u/s 66B - scope and meaning of the term "issue" for the purposes of the VCES proviso - eligibility for VCES where prior notices relate to a different legal issue - HELD THAT:- In the instant case admittedly the facts before 01-07-2012 and after 01-07-2012 are the same, BIS authorizes the Hallmarking/Assaying Centers to administer the Hallmarking Scheme and has been collecting royalty from these Hallmarking/Assaying Centers.

All that mattered was merely whether the Appellant was providing a ‘service’ as defined under Section 65B (44), and whether or not the said ‘service’ was one that was specified in the negative list. Given the nature of the definition of ‘service’ and the charge under Section 66B, the mere allowing the Hallmarking/Assaying Centres to administer the BIS Scheme upon payment of royalty, itself came within the ambit of ‘service’ as defined under Section 65B (44) so as to attract the charge under Section 66B of the Finance Act 1994 and therefore the appellant rightly admitted its liability without demur.

We are therefore of the considered view that the “issue” in so far as the notices issued to the appellant for the period prior to 01-07-2012 being “whether the Appellant was the holder of ‘intellectual property right’ rendering service to these Hallmarking/Assaying Centers in relation to intellectual property service so as to come within the ambit of “intellectual property service” as defined in Section 66 (105) (zzr) and thereby attract the charge of service tax under Section 66 of the Finance Act 1994” was different from the “issue” for which the appellant had filed the declaration for the period July 2012 to December 2012 for the “tax dues” under the chapter, which was namely, “Whether allowing the Hallmarking/Assaying Centres to administer the BIS Scheme upon payment of royalty itself constituted ‘service’ as defined under Section 65B(44) so as to attract the charge of service tax under Section 66B.”

We are therefore of the firm opinion that the Ld. Appellate Authority has erred in upholding the rejection of the declarations filed by the Appellant by the designated authority under VCES, as the proviso to Section 106(1) was inapplicable in the instant case. Ld. Counsel’s reliance on the decision in reliance on the decision in Frankfinn Aviation Services P. Ltd v. Asstt. Commr., Designated Authority, VCES, Service Tax [2014 (4) TMI 133 - DELHI HIGH COURT] in support of the contention that for the particular distinct period of July 2012 to December 2012, the subject matter of declaration, the issue is not pending and that therefore the declaration is acceptable, is also found to be apposite.

The facts and statutory provisions involved in the said case is entirely different from the facts and circumstances of this matter. Likewise, the decisions in M/s Yashwant Agarwal & Co Company, versus Union of India [2017 (2) TMI 1074 - MADHYA PRADESH HIGH COURT] and GR Tech Services, Private Limited, versus CCE, Cochin [2018 (2) TMI 1032 - CESTAT, BANGALORE], involved notice issued under works contract service prior to 01-07-2012 and the declaration was filed for liability under works contract service post 01-07-2012. Similarly, the reliance placed on the clarification at Sl.No.9 of the Board’s Circular dated 08-08-2013 also is inapplicable as it refers to a context where the “issue” is the same, and for the reasons elucidated supra, we have found that the “issue” herein to be different for the period prior to 01-07-2012 and for the period for which the Appellant has filed the declaration.

Thus, we are of the considered view that the Order in Appeal No.380/2016 (STA-I) dated 30-06-2016 is unsustainable and liable to be set aside.

Statutory pre-deposit u/s 35F - treatment of departmental deposits as compliance with pre-deposit requirement - remand for verification and fresh consideration - setting aside order for non-compliance with pre-deposit condition - HELD THAT:- It is evident that the petitioner’s appeal was dismissed by the Appellate Authority only on the ground of non-fulfillment of the condition of mandatory pre-deposit in terms of Section 35F of the said Act of 1944.

Since it is not in dispute that a sum of Rs. 1,80,890/- is already lying with the respondent CGST Authorities which in terms of the report the petitioner was not otherwise liable to pay on account of any demand having been raised against him therefore, for ends of justice it is directed that the respondent CGST Authorities shall treat the aforesaid sum or any portion thereof (as may be required/necessary) as having been paid towards fulfillment of the condition of the statutory pre-deposit in terms of Section 35F of the said Act of 1944.

In such view of the matter, the order impugned dated January 14, 2025 passed by the appellate authority is set aside and the matter is remitted to the file of the appellate authority for consideration of the petitioner’s appeal on merits upon verifying and being satisfied that the condition of statutory pre-deposit under Section 35F of the said Act of 1944 has been met by the petitioner by treating the said amount of Rs.1,80,890/- or portion thereof (as may be required or necessary) as having been deposited by the petitioner towards statutory pre-deposit. It is clarified that if despite treating the said sum of Rs. 1,80,890/- as having been put in to meet the condition of statutory pre-deposit, it is found that there is any deficit and further sum is required to be deposited by the petitioner to comply with the condition of mandatory statutory pre-deposit, the petitioner shall be obliged to do so within the time specified by the Appellate Authority for the purpose of maintaining the appeal.

WPA stands disposed.

Denial of CENVAT credit - Imposition of penalty under Rule 26(1) of the Central Excise Rules, 2002 - Reliability of transporter statements - VAHAN portal verification as evidence - Obligation of Revenue to investigate supplier and trace procurement - Requirement of evidence beyond presumption - Verification under Section 9D of the Central Excise Act, 1944 - HELD THAT:- In the present case, no investigation has also been conducted by the Revenue to show that if the appellants have not procured the goods mentioned in the invoices in question, then from where have the appellants procured such a huge quantity of inputs as has been used by the appellants for manufacture of the final product, on which they have paid duty by utilizing CENVAT Credit as well as PLA.

Merely on the basis of assumptions and presumptions, the demand has been made against the appellants, by alleging that their goods had not been transported to their premises.

It is also a fact on record that the said statements of the transporters have not been verified in terms of Section 9D of the Central Excise Act, 1944 and no supporting evidence has been produced by the Revenue in support of the said statements. In these circumstances, we find that the said statements of such transporters are not reliable statements. In fact, the whole case is based on some verification from the ‘VAHAAN’ portal and from the statement of certain transporters, which cannot be the basis for denial of CENVAT Credit to the appellants.

It is an admitted fact that the appellant/company has used these inputs in the manufacture of their final product, and paid duty on their clearances. Therefore, without establishing as to from where the appellants have procured inputs to manufacture such a huge quantity, the CENVAT Credit availed by them cannot be denied merely on the basis of the evidences as relied upon by the Revenue in support of their allegations, in the facts and circumstances of the case.

We find that on the said allegation that one of the suppliers had not supplied goods to the appellant-company, a Show Cause Notice was issued, inter alia, to impose penalty on the appellant on the said allegation.

Thus, we hold that the CENVAT Credit cannot be denied to the appellant. Therefore, the impugned order qua recovery of CENVAT Credit availed by the appellant, in question, along with interest, and imposition of penalty on all the appellants, is set aside.

Actual value addition - special rate fixation - sale value versus MRP (Section 4A) - deduction of discounts/rebates for net sales value - inclusion of foreign exchange loss in cost of raw materials - reliability and acceptance of Chartered Accountant's certificate - principles of natural justice-requirement of show cause notice before rejection -HELD THAT:- We find that the value that needs to be considered for the purposes of the fixation of special rate as per the Notification Nos.19/2008-CE dated 27.03.2008 and 34/2008-CE dated 10.06.2008 is the actual sale value i.e. the actual amount realised by the appellants in the sale of the goods minus the taxes paid etc and not the MRP as per Section4A of the Central Excise Act, 1944. We find that the wordings of the Statute being plain and unambiguous, the same shall be read and construed strictly by the words and no intendment is allowed in interpreting the same as held in Dharmendra Textiles Processors [2008 (9) TMI 52 - SUPREME COURT]. As regards the Foreign Exchange Loss, we are in agreement with the logic of the impugned order that the same being occurred in respect of the imported goods, the same cannot be excluded from the cost of raw material.

The commissioner proceeds to reject all the applications filed by the appellants. We find that Learned Commissioner ignores his own finding that the appellants are eligible for value addition in respect of some items. Interestingly, we find that the value addition decided by the commissioner (AA) does not vary much from the value addition claimed by the appellants, in respect of the said items in the said years. Interestingly, Commissioner does not even bother to sanction the Special Rate in respect of items for which he himself held that the value addition was more than 115% of 34% and he doesn’t even discuss the admissibility to additional refund in such cases. He pauses just before the conclusion and makes a U-turn and holds that the special rates cannot be sanctioned for extraneous reasons, which were effectively countered by the appellants as discussed above. Such an order cannot be sustained.

Appellants have claimed a value addition, over and above 115% of 34% in respect of 4 items only, among many items they manufactured and cleared over the years. The calculations submitted by the appellants are duly certified by the Chartered Accountant. The Certificates are not countered by the Commissioner with any cogent reasons as discussed above. It is seen that the values arrived by Commissioner are not at variance with the values arrived by the Appellants. Its travesty of justice that the commissioner rejects the special rates even in respect of those items.

There is hardly any difference in the Rates arrived by the Adjudicating authority and the Rates claimed by the appellant. We are of the considered opinion that the impugned order has not made out any case for rejection of the special rates. We find that because of this reason and the other legal infirmities, as discussed above, the impugned order cannot be sustained and needs to be set aside.

Accordingly, the appeal is allowed.

Excisability of waste, residue or by products (bagasse, press mud, bio compost) - application of Rule 6 of the Cenvat Credit Rules, 2004 (reversal/pay 5%) - distinction between 'manufacture' and emerging waste/residue - effect of Explanation to Section 2(d) of the Central Excise Act, 1944 on marketability and excisability - withdrawal of Board Circular treating non excisable by products as 'exempted goods' for Rule 6 purposes -HELD THAT:- We agree with the learned Counsel for the appellant that issue involved in the present appeals is no more res-integra as the issue is well settled in favour of the appellant in view of various judgments and orders pronounced by CESTAT Delhi, Hon'ble Allahabad High Court and the Hon'ble Supreme Court.

It is pertinent to mention here that by issuing Circular No. 1084/05/2022-CX dated 07.07.2022, the Circular No. 1027/15/2016-CX dated 25.04.2016 has been withdrawn by the Board.

The issue raised in these appeals is finally settled in favour of the appellant. Therefore, in the light of law laid down by the Hon'ble Allahabad High Court in Balrampur Chini Mills Limited vs. Union of India & Ors. [2013 (1) TMI 525 - ALLAHABAD HIGH COURT] and by the Hon'ble Supreme Court in UOI vs. DSCL Sugar Limited [2015 (10) TMI 566 - SUPREME COURT], The Hon'ble Supreme Court has held that in the present case it could not be pointed out as to whether any process in respect of bagasse has been specified either in the Section or in the Chapter notice. In the absence thereof this deeming provision cannot be attracted. Otherwise, it is not in dispute that Bagasse is only an agricultural waste and residue, which itself is not the result of any process. Therefore, it cannot be treated as falling within the definition of Section 2(f) of the Act and the absence of manufacture, there cannot be any excise duty. Since it is not a manufacture, obviously Rule 6 of the Cenvat Credit Rules, 2004 shall have no application as rightly held by the High Court.

And in view of the Circular No. 1084/05/2022-CX dated 07.07.2022 the impugned order passed by learned Commissioner cannot be sustained. Since the demand itself is not sustained, the penalty imposed on the appellant also cannot be sustained. Therefore, the appeals are liable to be allowed and the impugned orders passed by learned Commissioner/ Commissioner (Appeals) through which the demand of duty has been confirmed on the appellant and penalty was imposed upon them, are liable to be set-aside.

Consequently, the appeals are allowed.

Cenvat credit on capital goods used for providing output service - Eligibility of inputs used in on-site fabrication and erection - Movable nature of site-erected specialised tanks and excisability - Exclusion of construction materials used for foundations from eligible inputs - Extended period of limitation and invocation of penalty in absence of deliberate evasion -

Cenvat credit on capital goods used for providing output service - HELD THAT:- We find that the appellants are not only manufacturer of the industrial gas but they are also having Service Tax registration as is evident from the various ST-3 returns being filed and also they were providing certain services including supply of tangible goods, erection and commissioning service etc. There is no denial that Cryogenic Tank, per se, is a capital good and a capital good used for providing taxable service i.e. supply of tangible goods is an eligible capital good unless it is specifically excluded from the purview of the capital goods. We do not find any such exclusion in respect of storage tank. We also find that Department has clearly issued a Show Cause Notice dated 23.05.2014 for non-payment of Service Tax on supply of tangible goods service by the appellant. Thus, to that extent, they will be eligible for taking credit in respect of Cryogenic Tank, which is a capital goods, used for providing output service i.e., supply of tangible goods.

Credit on SS Coils, Sheets and Plates used for fabrication and installation - We find that various Co-ordinate Benches have taken into account various case laws to come to the conclusion that items used for fabrication of capital goods and even for repairs and maintenance of such capital goods would be eligible for taking credit. Storage Tank, being a capital good is not in dispute. We also find that in the case of Kisan Co-operative Sugar Factory Ltd. [2023 (12) TMI 1303 - SUPREME COURT], Hon’ble Supreme Court, inter alia, held that various products like MS plates, used for repair and maintenance, fabrication etc., of capital goods would also be eligible for credit or otherwise. In the present appeal, such items were bought by the appellant and were taken to the customer site for fabrication as well as erection of a storage tank.

In the present appeal, these are specialised tanks, which are attached to a foundation, but the same can be moved or dismantled at the end of contract period. The materials have been used for fabrication of such storage tanks and also for erection and commissioning of such tanks. Therefore, when they are providing the output services of supply of tangible goods and as also erection/commissioning service, such SS items will also be eligible as inputs used for providing output service.

After examining the scope of Rule 2(a)(A) of Rule 2(k) of CCR in relation to eligibility of credit in respect of mobile towers, parts and PFB, it was held that they are goods and will be eligible for credit as “input” used for providing output service. Therefore, in view of discussion above, the demand on this ground will also not sustain.

Demand on account of cement and bars used for erection of storage tanks, we do not find any reason to interfere with the findings on merits, as it is especially excluded under the CCR. However, insofar as demand on welding electrodes is concerned, the same stands settled by the Supreme Court in the case of Kisan Co-operative Sugar Factory Ltd., supra, therefore, it is an eligible input.

To sum up, they are eligible to take credit in respect of the storage tank and MS items covered in the demand, except for Cenvat Credit on bars and cement used for making foundation and support structure for storage tank, both bought out as well as fabricated at site. The demand only to this extent will sustain.

Limitation - We find that even the issue which has been the main ground for invoking demand i.e., the fabrication of storage tank at site and attached to earth being not excisable good is also not relevant anymore in view of subsequent judgments covering identical issues. There is also no specific evidence that it was attached to earth in such a manner that it could not have been removed, if it is so desired. We also note that the Department itself initially stated that they are not provider of output service. But later on they held that they were also providing output service. We also note that the whole issue is based on certain interpretations of Cenvat Credit Rules read with certain prevailing judgments in relation to factual matrix and hence it is an interpretational issue. In view of the same, extended period is not invokable and accordingly penalty is also not imposable. Therefore, the demand would not sustain both on merit as well as on limitation, except for cement and bars used for foundation and support structure, however, since demand on cement and bars is also beyond normal period, it would not sustain on limitation. The impugned order is therefore liable to be set aside.

Admissibility of CENVAT credit on input services - Nexus with manufacture/business - Exclusionary clauses in the definition of input service (post-01.04.2011) - Remand for limited factual verification of invoices and nexus - Inadmissibility of rent-a-cab services - Consequential interest and penalty liability pending final verification - HELD THAT:- We hold that credit on pest control and housekeeping services is admissible in principle under the inclusive limb of the definition of “input service”. However, we also find that no invoices or supporting documentary material have been placed before this Bench to conclusively establish the nature of the services, their nexus with the manufacturing activity, and their non-coverage under the exclusion clause. In the absence of such evidence, we are unable to render a final determination on admissibility. Accordingly, remand is the only option available, and the issue is remanded to the adjudicating authority for the limited purpose of factual verification of invoices, nexus and eligibility, and to allow the credit if found in order.

Gardening and cleaning services - In the appellant’s own case, M/s. 8CETEX Petrochemicals Limited v. Commissioner of CGST & Central Excise, Chennai, [2025 (1) TMI 1694 - CESTAT CHENNAI], this Tribunal has taken a similar view in respect of housekeeping and cleaning services relating to factory upkeep, subject to verification of documentary evidence. Respectfully following the aforesaid decisions, we hold that credit on gardening and cleaning services is admissible in principle under the inclusive limb of Rule 2(l), subject to verification that the services were actually used for factory upkeep/statutory compliance and are not hit by the exclusion clause. However, since no invoices or supporting documentary material have been placed before this Bench, the matter is remanded to the adjudicating authority for limited verification of nexus, eligibility and quantification.

Construction services (commercial and industrial) - In the appellant’s own case [2025 (1) TMI 1694 - CESTAT CHENNAI], this Tribunal allowed credit after examining documentary evidence and concluding that the services were in the nature of repair/maintenance and not hit by the exclusion clause. Respectfully following the said decision, we hold that credit is admissible in principle if the services pertain to repair/renovation and are not barred construction. Since invoices and work documents have not been produced before this Bench, the issue is remanded for limited verification though the issue of eligibility of credit is decided in favour of the appellant.

Cab services - We find that rent-a-cab services are specifically excluded under Rule 2(l)(B) post-01.04.2011 when used primarily for employee transportation or personal consumption. Accordingly, no credit is admissible on this component. As regards interest and penalty, we clarify that recovery is governed by Section 11A of the Central Excise Act, 1944, and interest is payable under Section 11AA/11AB as applicable, particularly where inadmissible credit has been taken and utilized. Penalty consequences arise under Section 11AC, subject to the statutory conditions prescribed therein. If reversal along with applicable interest is established prior to issuance of show cause notice under Section 11A(2B), penalty may not sustain. Since documentary evidence is not available on record, this limited aspect is remanded to the adjudicating authority for verification.

Plant civil work services - We observe that admissibility of such credit depends entirely upon the factual nature of the activity undertaken. However, we find that no invoices, work contracts or supporting documents have been placed before this Bench to conclusively establish the scope and nature of the civil work services. In the absence of documentary evidence, we are unable to record a final finding. Accordingly, remand is the only option, and the matter is remanded to the adjudicating authority for limited verification of the nature of work, nexus with manufacturing activity, and applicability of the exclusion clause.

Labour and manpower services - We find that manpower deployed for housekeeping, cleaning and maintenance of factory premises has nexus with manufacturing operations. Tribunal decisions including Ultratech Cement Ltd. v. CCE, Hyderabad [2016 (12) TMI 381 - CESTAT HYDERABAD], support eligibility of such services even post-01.04.2011, provided they are not exclusively used for excluded activities. Accordingly, credit is admissible in principle, subject to verification of invoices and nexus.

Membership services - We note that the Chennai Bench in Trimble Information Technologies India (P) Ltd. v. Commissioner of GST [2021 (8) TMI 395 - CESTAT CHENNAI], held that corporate membership subscriptions incurred for business promotion and brand expansion are eligible input services. Following the ratio of the said decision, we hold that membership of CII may be admissible in principle as an eligible business-related input service. However, no documentary evidence has been placed before this Bench to conclusively establish the precise nature and purpose of the membership subscription. In the absence of such evidence, remand becomes unavoidable. Accordingly, the matter is remanded to the adjudicating authority for limited verification, and credit shall be allowed only if purpose of membership is not for recreation, but, for the business.

Thus, we hold that the disputed input services, namely pest control/housekeeping, gardening and cleaning, construction-related services, plant civil work, manpower services for factory maintenance, and membership services, are admissible as input services in principle, being capable of falling within the inclusive part of Rule 2(l) of the CENVAT Credit Rules, 2004, even after the amendment w.e.f. 01.04.2011, subject to fulfillment of the statutory conditions of nexus with manufacture/business and non-applicability of the exclusion clauses.

The disputed input services, namely pest control/housekeeping, gardening and cleaning, construction-related services, plant civil work, manpower services for factory maintenance, and membership services, are admissible as input services in principle, being capable of falling within the inclusive part of Rule 2(l) of the CENVAT Credit Rules, 2004, even after the amendment w.e.f. 01.04.2011, subject to fulfillment of the statutory conditions of nexus with manufacture/business and non-applicability of the exclusion clauses.

No invoices or supporting documents have been produced either before the lower appellate authority or before this Bench to conclusively establish eligibility.

It is settled law that CENVAT credit cannot be finally allowed without verification of documentary evidence. Therefore, remand is unavoidable for the limited purpose of verifying receipt, nexus, and exclusion applicability of the disputed services. Accordingly, the matter relating to credit of ₹27,28,645/- is remanded to the adjudicating authority for limited verification of invoices and eligibility strictly in terms of Rule 2(l), as amended.

Credit on rent-a-cab services is held inadmissible being specifically excluded under Rule 2(l)(B). The plea of reversal prior to SCN, along with interest, shall be verified by the adjudicating authority, and penalty consequences shall follow accordingly.

The appellant’s prayer for waiver of interest and penalty cannot be considered at this stage, as these are purely consequential and will depend upon the final determination of inadmissible credit, if any, after verification.

Thus, the appeals are partly allowed by way of remand in the above terms and disposed of accordingly.

Binding nature of Board circulars - beneficial circulars applied retrospectively; adverse clarifications prospectively - extended limitation u/s 11A(4) invocable only on fraud, suppression or wilful misstatement - classification dispute arising from Board clarifications - penalty consequential on unsustainable duty demand - verification and appropriation of amounts collected u/s 11D -

Binding nature of Board circulars - beneficial circulars applied retrospectively - Circular No.924/14/2010 - HELD THAT:- It is undisputed that during April 2012 to 14.05.2014, the Appellant classified the impugned goods under Heading 8437, claiming Nil rate of duty, strictly on the basis of CBEC Circular No.924/14/2010-CX dated 19.05.2010. The said circular clarified that rice par-boiling machinery and parts/accessories thereof merit classification under Heading 8437.

It is well settled that circulars issued by the Central Board of Excise & Customs under Section 37B are binding on the Department. The Hon’ble Supreme Court in Ranadey Micronutrients v. CCE [1996 (9) TMI 124 - SUPREME COURT], held that consistency and discipline in tax administration require that circulars issued by the Board must be followed by the Department, even if the Department subsequently forms a different opinion.

The binding nature of Board circulars has also been conclusively settled by the Constitution Bench of the Hon’ble Supreme Court in CCE, Bolpur v. Ratan Melting & Wire Industries [2008 (10) TMI 5 - SUPREME COURT], wherein it was held that circulars issued by the Board are binding on departmental authorities and must be followed in adjudication and assessment. The Court clarified that while circulars cannot override statutory provisions, so long as they remain operative, the Revenue cannot take a stand contrary thereto, and uniformity in tax administration demands strict adherence by field formations.

The Apex Court reaffirmed the earlier ratio in Commissioner v. Mysore Electricals Industries Ltd. [2006 (11) TMI 202 - SUPREME COURT], that beneficial clarifications should be applied retrospectively but adverse clarifications should not be given retrospective effect merely because they are issued later in time. Therefore, a circular that adversely alters the duty liabilities of an Appellant, without express retrospective language, cannot be applied to past transactions prior to the date of issuance of the show cause notice.

Thus, so long as the beneficial circular remained in force, clearances made thereunder cannot be subjected to duty retrospectively upon its withdrawal.

Consequently, we hold that the duty demand for the period prior to 15.05.2014 is wholly unsustainable and liable to be set aside.

Demand for the period 15.05.2014 to July 2014 - HELD THAT:- The present case is not one of clandestine removal or deliberate concealment. The entire dispute arises from classification governed by Board circulars and conflicting interpretations. The Appellant acted under a binding circular till its rescission. Such bona fide conduct cannot be equated with suppression with intent to evade duty.

Department has failed to establish any positive act of suppression after 15.05.2014. Hence extended period is not invocable. Consequently, even the demand for the period 15.05.2014 to July 2014 is time barred.

Thus, the entire demand of Rs.99,47,758/- fails on merits for the pre-15.05.2014 period and on limitation for the post-15.05.2014 period, along with demand of consequential interest.

Penalties under Section 11AC and Rule 26 - HELD THAT:- Once the duty demand itself does not survive, the question of penalty under Section 11AC automatically does not arise. Penalty provisions are consequential and cannot stand independent of an unsustainable duty demand.

Moreover, the dispute is purely interpretational, arising from Board circulars. The Hon’ble Supreme Court in Hindustan Steel Ltd. v. State of Orissa [1969 (8) TMI 31 - SUPREME COURT], held that penalty cannot be imposed merely because it is lawful to do so, unless there is deliberate or contumacious conduct. Accordingly, penalty imposed on Appellant No.1 under Section 11AC and personal penalty imposed on Appellant No.2 under Rule 26 are liable to be set aside.

Demand under Section 11D - HELD THAT:- In case the appellant has deposited the entire amount collected along with applicable interest, no further penal consequence would arise. However, if any shortfall remains unpaid, the adjudicating authority shall ensure recovery of the unpaid amount in accordance with Section 11D, and the question of penalty, if any, shall be examined strictly in accordance with law and confined only to the extent of any unpaid amount.

Accordingly, the Section 11D issue is remanded only for the limited purpose of verification and appropriation as directed above.

We find that the matter requires limited verification, since the records indicate certain deposits claimed to have been made, but the challans and exact break-up do not match the amount collected as duty. Therefore, this issue is remanded only for the limited purpose of verification and appropriation of the amount, and the adjudicating authority shall ensure that any recovery or penal consequence, if warranted, shall be confined strictly to the extent of any unpaid amount found due upon such verification.

Entitlement to separate SSI exemption - liability to be clubbed under Para 2(vi) of Notification No. 08/2003-CE - penalty as consequence of suppression of facts u/s 11AC - penalty under Rule 25 of the Central Excise Rules, 2002 - HELD THAT:-We find that Para 2(vi) of Notification No. 08/2003-CE clearly provides that where specified goods are cleared by one or more manufacturers from the same factory, the exemption applies only to the aggregate value of clearances and not separately.

In the present case, both Appellant-1 and Appellant-2 manufactured the same excisable goods from the same premises during the same financial year. Therefore, benefit of separate exemption limits is not available.

Thus, the duty liability confirmed is legally sustainable and is also not disputed by the appellants.

Invocation of Extended Period - HELD THAT:- Appellant-2 neither obtained registration nor filed statutory returns nor discharged duty liability, despite clearing goods valued at more than Rs.50 lakhs. Further, Appellant-1 being registered since 2010 and having previously complied with excise requirements, cannot legitimately claim ignorance. The leasing arrangement and continued manufacturing activity from the same premises were not intimated, and the Department came to know only through investigation.

Therefore, in view of the ratio laid down in Kripa Fabs [2015 (7) TMI 383 - MADRAS HIGH COURT] and Candid Enterprises [2001 (3) TMI 101 - SUPREME COURT], we hold that invocation of the extended period is sustainable, particularly in respect of Appellant-2 who remained outside the excise net.

Penalty - HELD THAT:- Appellant-2 cleared excisable goods without registration and without payment of duty. Such conduct cannot be treated as a mere procedural lapse.

Accordingly, penalties imposed under Rule 25 and Section 11AC are justified.

Classification of goods for fiscal purposes - common parlance test - essential character test - inclusive construction of an "including" clause - burden on the Revenue to establish residuary classification - resort to residuary entry impermissible where a specific entry reasonably applies - regulatory or licensing classification not determinative for tax classification -

HELD THAT:- In Reserve Bank of India v. Peerless General Finance & Investment Co. Ltd. [1987 (1) TMI 452 - SUPREME COURT] approving Dilworth, this Court elucidated the scope and function of ‘inclusive definitions’ in statutory interpretation.

Applying the above principle, the expression “fruit drink” occurring in Entry 103 cannot be confined solely to ready-to-consume bottled beverages. In common trade understanding, fruit squashes, concentrates and sharbat preparations intended for dilution are all capable of being understood as fruit drink preparations. The nomenclature “sharbat” does not strip the product of its essential character as a fruit-based beverage concentrate, particularly where its composition and intended use align with that understanding.

Once it is demonstrated that the product is a fruit-based beverage preparation intended for dilution and consumption, it bears a reasonable and substantial claim to classification as a “fruit drink” within Entry 103. It cannot be relegated to the residuary entry merely because it is marketed as a “sharbat”. The nomenclature adopted by the parties, or the description of the product as a “non-fruit syrup” under the licensing statute, is not determinative for the purposes of classification under a taxing statute. What is decisive is the nature, composition and commercial identity of the product. If, on a proper application of the common parlance and essential character tests, the product reasonably answers the description of a “fruit drink”, the same cannot be denied merely on account of its label or regulatory categorization.

The material placed on record, including tax invoices evidencing payment of VAT at 5% in several States namely Delhi, Gujarat, West Bengal, Madhya Pradesh, and Andhra Pradesh demonstrates that the trade and tax authorities in those jurisdictions have consistently treated the product as falling within fruit-based beverage entries.

It is no doubt true that VAT is a State subject under Entry 54 of List II of the Seventh Schedule to the Constitution and classifications adopted by one State are not binding upon another. However, they are not wholly irrelevant. Where similarly worded entries across multiple jurisdictions have been construed in a particular manner, such uniformity assumes evidentiary value in determining commercial understanding of the product, and whether the assessee’s interpretation is at least a reasonably plausible view.

The consistent concessional classification adopted across several States therefore fortifies the appellant’s case that its view is neither artificial nor untenable but a bona fide and commercially recognised interpretation.

The concurrent findings recorded by the authorities and affirmed by the High Court cannot therefore be regarded as pure findings of fact so as to be insulated from appellate interference. They are conclusions arrived at upon an erroneous application of settled principles governing fiscal classification and are vitiated by a clear misdirection in law. Consequently, such findings warrant interference by this Court.

Accordingly, it is held that “Sharbat Rooh Afza” is classifiable under Entry 103 of Schedule II, Part A of the UPVAT Act as a fruit drink / processed fruit product and is exigible to VAT at the concessional rate of 4% during the relevant assessment years. The impugned judgment(s) affirming classification under the residuary entry and levy at 12.5% are set aside.

In fine, the appeals are allowed. The respondent authorities shall grant consequential relief including refund or adjustment of excess tax paid in accordance with law. There shall be no order as to costs.

Refund adjustment - settlement under the Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fees Act, 2023 has overriding effect - entitlement to refund - retention/collection of tax contrary to law (Article 265) - payment of refund with interest as per rules -HELD THAT:-Admittedly the department in no manner has questioned the settlement, which was arrived for the Tax Period 2008-09 and 2009-10.

We are of the opinion that the petitioner would clearly entitled for the refund of tax for the Tax Period 2007-08. Hence, the action on the part of the respondent to adjust the said refund for the subsequent Tax Period 2008-09 and 2009-10 is in fact rendered inconsequential and irrelevant in view of the settlement order referred by us hereinabove for the said period. Thus, there being no dispute whatsoever in regard to the demand for the said years, as such demands stood settled in the amnesty scheme issued by the respondent. In these circumstances, there was no occasion for the department to retain the refund entitled to the petitioner for the Tax Period 2007-08 to be adjusted for the purported demands for the next year, in view of the demand being settled.

In this view of the matter, we are inclined to allow this petition. The petition is accordingly allowed