TaxTMI Updates e-Newsletter
Mar 04,2023

Cancellation of GST registration - non-speaking order - right to be heard / natural justice - judicial review under Article 14 - fresh consideration in accordance with law

Cancellation of GST registration - non-speaking order - right to be heard / natural justice - judicial review under Article 14 - Validity of the order cancelling the petitioner's GST registration and the appellate dismissal arising therefrom. - HELD THAT: - The Court held that the impugned order cancelling registration was non-speaking and lacked application of mind, having proceeded on the sole basis that no reply to the show cause notice was filed. The petitioner was not afforded an opportunity of hearing before cancellation. Relying on the ratio applied in an earlier decision (Technosum India Pvt. Ltd.), the Court concluded that non-submission of a reply by itself cannot justify cancellation without reasoned findings; such an order fails scrutiny under Article 14. The appellate order dismissing the appeal as barred by limitation was set aside insofar as it prevented judicial review, and the petitioner was granted leave to appear before the authority with a reply and a certified copy of this order (and the precedent) within three weeks. The respondents are directed to afford the petitioner an opportunity to be heard and to pass a fresh order on the show cause notice after considering the reply, following law and reasoned decision-making.

Both the cancellation order and the appellate dismissal are set aside; the petitioner may file a reply within three weeks and the respondents shall reconsider and pass a fresh reasoned order in accordance with law.

Final Conclusion: Writ petition allowed; impugned cancellation and appellate orders set aside, petitioner permitted to file reply within three weeks and respondents to re-decide the matter afresh and with reasons in accordance with law.

Cancellation of GST registration - non-speaking order - right to be heard - judicial review under Article 14 - doctrine of merger - fresh consideration upon filing of reply

Cancellation of GST registration - non-speaking order - right to be heard - judicial review under Article 14 - The order dated 23.01.2021 cancelling the petitioner's GST registration and the appellate order dated 06.02.2023 were quashed on the ground that the cancellation order was non-speaking and the petitioner was not afforded an effective hearing. - HELD THAT: - The High Court observed that the cancellation order contained contradictory statements regarding whether a reply had been submitted and did not assign reasons justifying cancellation. Relying on the Court's earlier decisions (including the judgment in Writ Tax No.145 of 2022), an order cancelling registration which is prima facie non-speaking and passed without adequate application of mind and without affording a proper hearing fails scrutiny under Article 14. In these circumstances the impugned cancellation order and the consequent appellate dismissal were set aside and the petitioner was granted an opportunity to be heard by filing a reply and relevant certified orders.

Impugned cancellation order dated 23.01.2021 and appellate order dated 06.02.2023 set aside; petitioner entitled to be heard.

Fresh consideration upon filing of reply - doctrine of merger - The matter was remanded for fresh consideration by the respondents upon the petitioner filing a reply and producing certified copies of the orders within the stipulated time. - HELD THAT: - The Court permitted the petitioner to appear before the respondent within three weeks with the reply to the show cause notice and certified copies of the present order and the earlier judgment relied upon. On such appearance and filing, the respondents are directed to proceed to pass a fresh order in accordance with law. The appellate dismissal on limitation was noted but did not preclude judicial review of a non-speaking cancellation order; accordingly the doctrine of merger and the petitioner's entitlement to challenge the impugned order were acknowledged insofar as they support granting an opportunity for fresh consideration.

Matter remanded for fresh consideration; respondent to decide afresh in accordance with law after petitioner files reply and produces certified copies within three weeks.

Final Conclusion: Writ petition allowed; impugned cancellation and appellate orders set aside and respondent directed to consider the petitioner's reply and pass a fresh order in accordance with law after the petitioner files the reply and certified copies within three weeks.

Reconstitution of partnership - retirement of partner - amendment under the Tamil Nadu Goods and Services Tax Act, 2017 - non-application of mind - quash and remand for fresh consideration - right to personal hearing

Reconstitution of partnership - retirement of partner - amendment under the Tamil Nadu Goods and Services Tax Act, 2017 - non-application of mind - right to personal hearing - Whether the order rejecting the petitioner's application for amendment under the TNGST Act consequent to reconstitution of the partnership should be quashed and the matter remitted for fresh consideration. - HELD THAT: - The Court found that the petitioner produced a reconstitution deed dated 18.04.2019 and the report maintained by the Registrar of Firms under Section 59 of the Indian Partnership Act, 1932 evidencing retirement of the partners on 18.04.2019, but those documents were not considered in the impugned order. The respondent reached a contrary conclusion on the ground of alleged dues in other businesses without applying mind to the documentary evidence of retirement. For these reasons the impugned order is vitiated by non-application of mind. The matter is therefore remitted to the respondent for fresh consideration on merits and in accordance with law, with directions to afford the petitioner a fair hearing including the right of personal hearing before passing final orders within eight weeks. [Paras 6, 7, 8, 9]

Impugned order dated 10.01.2022 quashed; matter remanded for fresh consideration on merits after affording a fair and personal hearing, and final orders to be passed within eight weeks.

Final Conclusion: The High Court quashed the respondent's order rejecting the amendment application and remitted the matter for fresh consideration on merits and in accordance with law, directing the respondent to grant a personal hearing and to pass final orders within eight weeks.

Cancellation of Goods and Services Tax registration on ground of non-filing of returns - limitation and condonation for filing appeal under Section 107(1) and (4) of the CGST Act - remand for fresh consideration with opportunity of hearing - absence of constitution of Appellate Tribunal under Section 109 leaving the assessee without remedy

Cancellation of Goods and Services Tax registration on ground of non-filing of returns - limitation and condonation for filing appeal under Section 107(1) and (4) of the CGST Act - Order cancelling GST registration and order dismissing appeal for delay were set aside and the matter remanded for fresh decision. - HELD THAT: - Following earlier decisions of this Court, the cancellation of GST registration by the proper officer on the ground of non-filing of returns and the first appellate authority's dismissal of the appeal as barred by limitation warranted reconsideration. The Court observed that strict application of limitation beyond the extended one-month period under Section 107(4) could leave the assessee remediless, particularly where the GST Appellate Tribunal under Section 109 has not been constituted. In the interests of justice and without expressing any opinion on merits, the Court found it appropriate to set aside both the cancellation order and the appellate order and to remit the matter for fresh disposal after affording the petitioner an opportunity of hearing; the petitioner is permitted to file all returns in accordance with statute during the remand proceedings. [Paras 7, 8]

Order dated 19.01.2022 cancelling registration and order dated 28.12.2022 dismissing the appeal are set aside; matter remanded for fresh decision.

Remand for fresh consideration with opportunity of hearing - absence of constitution of Appellate Tribunal under Section 109 leaving the assessee without remedy - Scope and conduct of the remand were directed: fresh decision to be taken in accordance with law after reasonable hearing; petitioner may submit returns during remand; no opinion on merits recorded. - HELD THAT: - The Court directed that respondent No.3 shall afford a reasonable opportunity of hearing to the petitioner while deciding afresh and that the petitioner would be at liberty to submit all statutory returns in the remand proceedings. The remand is for fresh consideration in accordance with law and not a determination on the substantive merits of cancellation. The Court expressly refrained from expressing any view on the merits. [Paras 8, 9]

Matter remanded to respondent No.3 for fresh adjudication in accordance with law after giving the petitioner a reasonable opportunity of hearing; no opinion on merits expressed.

Final Conclusion: Writ petition allowed to the extent that the cancellation order and the appellate dismissal are set aside and the matter is remanded for fresh consideration by the GST proper officer with a reasonable opportunity of hearing; petitioner permitted to file statutory returns in the remand proceedings; no observation on merits.

Ultra vires of subordinate legislation - Rule 55-A of the Tamil Nadu Registration Rules - Clause XX of Rule 162 of the Tamil Nadu Registration Rules - provisional attachment under Section 83 of the Central Goods and Services Tax Act, 2017 - cessation of provisional attachment after one year - delegated legislation versus parent statute - Transfer of Property Act - successive transfers and priority of rights - right to deal with property / Article 300-A

Rule 55-A of the Tamil Nadu Registration Rules - Clause XX of Rule 162 of the Tamil Nadu Registration Rules - ultra vires of subordinate legislation - delegated legislation versus parent statute - Transfer of Property Act - successive transfers and priority of rights - right to deal with property / Article 300-A - Validity of Rule 55-A (including its first, second and third provisos) and the introduction of Clause XX in Rule 162 insofar as they authorize refusal of registration. - HELD THAT: - The Court held that Rule 55-A and the newly inserted Clause XX in Rule 162 must be tested against the parent enactment and settled principles under the Transfer of Property Act. Clause XX in Rule 162, which authorizes refusal of registration for non-production of documents specified in Rule 55-A, lacks a substantive statutory source and is therefore beyond the powers of the Inspector General of Registration; a subordinate rule cannot validly be made to operate as the source of power for refusing registration (paras 13, 13.a). The first proviso to Rule 55-A, by preventing registration where encumbrances, attachments, sale or lease agreements exist until limitation or NOC/raising of attachment, is inconsistent with the doctrine that successive transfers are permissible subject to prior rights and with provisions of the Transfer of Property Act (paras 14-16, 20, 21). The Court found that the proviso would nullify settled law (as declared in Ramayee and affirmed by the Supreme Court) and would unlawfully restrain a person's constitutional right to deal with property (Article 300 A), rendering the first proviso ultra vires and unconstitutional (paras 15, 15.a, 20-21). The Court further held that the second proviso (permitting mere revenue records or tax receipts to establish title) and the third proviso (requiring non-traceable certificates and newspaper advertisement instead of allowing certified copies) are legally unsound because they ignore settled principles that revenue records are not conclusive title documents and that certified copies are the appropriate alternative when originals are unavailable (paras 22-24). Having regard to these infirmities, the rule made grounds for refusal under Rule 55 A and Clause XX were held to be invalid to the extent they purport to prohibit registration contrary to substantive law (paras 12-15, 21-24). [Paras 20, 21, 22, 23, 24]

Rule 55-A insofar as its first, second and third provisos purport to bar registration contrary to the Transfer of Property Act, and Clause XX of Rule 162 insofar as it derives authority from Rule 55-A, are ultra vires and invalid.

Provisional attachment under Section 83 of the Central Goods and Services Tax Act, 2017 - cessation of provisional attachment after one year - registration of documents not to be refused when attachment has lapsed - Whether the provisional attachment dated 18.12.2021 under Section 83 CGST Act continued to operate so as to justify refusal to register the Sale Certificate dated 09.09.2022. - HELD THAT: - Section 83(2) of the CGST Act provides that a provisional attachment ceases to have effect after one year from the date of the order. The provisional attachment relied upon by the registering authority was dated 18.12.2021; there is no material showing any final order of attachment or any extension or subsequent order continuing the attachment. Consequently, by operation of law the provisional attachment had ceased to have effect prior to the refusal to register the Sale Certificate. Because the impugned refusal relied on an attachment that had lapsed and because the first proviso to Rule 55 A (which might have been invoked) has been held invalid, the refusal lacked legal foundation and was liable to be quashed (paras 25-27). The Court therefore directed registration of the Sale Certificate. [Paras 25, 26, 27, 28]

The provisional attachment dated 18.12.2021 had ceased by efflux of time; the refusal to register the Sale Certificate on that ground was unlawful and the impugned order dated 17.10.2022 was quashed, with a direction to register the Sale Certificate.

Final Conclusion: The writ petition is allowed: the first proviso of Rule 55-A and Clause XX of Rule 162, insofar as they authorize refusal of registration contrary to the Transfer of Property Act and constitutional rights, are ultra vires and invalid; the provisional GST attachment dated 18.12.2021 had lapsed after one year and could not support refusal; the impugned order dated 17.10.2022 is quashed and the registering authority is directed to register the Sale Certificate within 15 days.

Summary order. Interim applications disposed of with usual exemptions; notice issued in the batch of petitions challenging rejection of refund claims and Circular No. 151/07/2021-GST; respondents to file counter affidavit within four weeks, rejoinder within one week; matters listed on 22.03.2023.

Adjustment/reversal of Input Tax Credit during search/inspection - voluntary payment by filing Form DRC-03 - coercive recovery during search/inspection - interim directions in Bhumi Associate restraining recovery during search - requirement to advise filing DRC-03 after officers have left the premises - CBIC Instruction No.01/2022-23 clarifying voluntary payments and safeguards - refund/reversal of ITC with interest for payments lacking voluntariness

Adjustment/reversal of Input Tax Credit during search/inspection - coercive recovery during search/inspection - voluntary payment by filing Form DRC-03 - requirement to advise filing DRC-03 after officers have left the premises - CBIC Instruction No.01/2022-23 clarifying voluntary payments and safeguards - Whether the reversal/adjustment of the assessee's Input Tax Credit by filing Form DRC-03 during the course of a night search was voluntary and lawful, having regard to the Court's interim directions in Bhumi Associate and subsequent CBIC instructions and judicial pronouncements. - HELD THAT: - The Court found that the contested reversal of ITC was effected in the midnight hours during the course of search/inspection and that contemporaneous material, including the call transcript produced on record, demonstrated that officers solicited and received OTPs to log into the taxpayer's GST portal and effect the filing of DRC-03. The Court observed that its earlier interim directions in Bhumi Associate - subsequently reflected in CBIC Instruction No.01/2022-23 - prohibit recovery during search/inspection and require that even voluntary filings of DRC-03 be advised to be made after the search concludes and officers have left the premises so as to preserve voluntariness and permit legal advice. The Delhi High Court's scrutiny of similar instructions confirmed that the safeguards must be respected and that collection during the search in the absence of such safeguards gives the collection a coercive character. The officer's conduct in this case was held to display scant regard for those interim directions and for the protective purpose of the CBIC instruction; accordingly the Court concluded that the payments/lEDGER adjustment lacked the element of voluntariness and were therefore not lawful recoveries made in accordance with the safeguards required under the interim directions and the CBIC instruction. Having reached this conclusion, the Court directed that the reversed ITC be restored. [Paras 16, 19, 21, 22]

The reversal/adjustment of ITC effected by filing Form DRC-03 during the search was not voluntary and was contrary to the interim directions and safeguards; respondent-revenue must reverse the ITC adjustment and restore the credit.

Refund/reversal of ITC with interest for payments lacking voluntariness - Relief to be granted in consequence of finding lack of voluntariness in the ITC reversal. - HELD THAT: - On the finding that the adjustment of ITC was coerced and inconsistent with the interim directions and CBIC instruction, the Court exercised its writ jurisdiction to provide specific relief. The Court directed that the respondent-revenue reverse the ITC adjustment of the amount reversed on 12.02.2022 and restore the credit, and further directed payment of interest at the rate of 6% on the sum reversed. The Court disposed of the petition accordingly, rejecting the respondent's contention that technical portal difficulties or lack of coercion justified the action. [Paras 22]

Respondent-revenue directed to reverse the ITC of Rs.37,68,300/- and pay interest at 6%; petition disposed of.

Final Conclusion: Writ petition allowed in part: the Court held that the midnight adjustment of Input Tax Credit by filing Form DRC-03 during the search lacked voluntariness and violated the protective directions and CBIC instruction, and accordingly directed the respondent to reverse/restore the ITC of Rs.37,68,300/- with 6% interest and disposed of the petition.

Refund/adjustment of amounts deposited under Income Declaration Scheme, 2016 - Effect of non-payment under Section 187(3) - declaration deemed never made - Non refund bar under Section 191 of the Finance Act, 2016 - Interaction between declarations under the Scheme and assessments under Sections 132/153A/147 of the Income tax Act, 1961 - Article 265 - collection/retention of tax without authority - Interest on tax refund - entitlement under Section 244A and requirement of bona fide conduct

Refund/adjustment of amounts deposited under Income Declaration Scheme, 2016 - Effect of non-payment under Section 187(3) - declaration deemed never made - Non refund bar under Section 191 of the Finance Act, 2016 - Interaction between declarations under the Scheme and assessments under Sections 132/153A/147 of the Income tax Act, 1961 - Article 265 - collection/retention of tax without authority - The petitioner is entitled to have the amounts deposited under the Income Declaration Scheme, 2016 adjusted in future assessment despite non payment of the final instalment and despite the Scheme's deeming and non refund provisions. - HELD THAT: - The Court held that although Section 187(3) of the Finance Act, 2016 deems a declaration void if the specified payments are not made, and Section 191 contains a bar on refund, those provisions do not permit the Revenue to retain amounts after the taxpayer's liability for the relevant assessment years has been fixed and accepted following assessments under Section 132/153A of the Income tax Act. The Court treated Section 187(3) as pari materia to the earlier Scheme provision considered by the Supreme Court in Hemalatha Gargya but noted that the Supreme Court nonetheless directed refund/adjustment of amounts paid in cases where the Scheme benefit was not available. Here, unlike those precedents, the admitted fact is that revised returns were filed and accepted and assessments for AY 2015 16 and 2016 17 were completed on the basis of those returns. Once the departmental assessment and acceptance removed the declared liability, continued retention of the amounts paid under the Scheme would amount to arbitrary retention and be contrary to Article 265. Applying those principles, the Court directed that the amounts deposited by the petitioner under the Scheme be adjusted in future assessment. [Paras 12, 13, 14, 16]

Writ petition allowed; amounts deposited under the Scheme to be adjusted in future assessment.

Interest on tax refund - entitlement under Section 244A and requirement of bona fide conduct - The petitioner is not entitled to interest on the adjusted/refunded amount. - HELD THAT: - The Court examined entitlement to interest under Section 244A and the authorities dealing with interest on refunds. It observed that interest is payable where refund arises from bona fide payments such as advance tax, TDS or excess self assessment made in good faith and not attributable to the assessee's misconduct. The petitioner had intentionally used the Scheme to declare undisclosed income and failed to comply fully with the scheme timetable; his conduct evidenced non bona fide behaviour. On the facts, and applying the principles in Union of India v. Tata Chemicals Limited and related authorities, the Court concluded that interest should not be awarded. [Paras 21, 23, 24, 25]

Claim for interest over the amount retained is rejected.

Final Conclusion: Writ petition allowed: amounts deposited by the petitioner under the Income Declaration Scheme, 2016 are to be adjusted in future assessment for AY 2015 16 and 2016 17; claim for interest is refused.

Diversion of income by an overriding title - Income from Other Sources - overriding title and ownership of income - effect of executive guidelines / office memorandum on characterisation of receipt

Diversion of income by an overriding title - Income from Other Sources - overriding title and ownership of income - Interest earned on fixed deposits did not constitute income of the assessee for the assessment years 2014-15 and 2012-13. - HELD THAT: - The Court held that the amounts placed in bank deposits originated from Central/State Government funds disbursed to the assessee for specified projects and were always the property of the Government. The assessee was authorised to deposit unutilised funds and to follow directions regarding utilisation of any surplus interest; earned interest was transferred to Government fund accounts or returned to the Ministry when not utilisable. On these facts the income was diverted at source by an overriding title and thus never reached the assessee as its own income. The Court applied the established test that income which is diverted before it reaches the assessee cannot be treated as the assessee's income, relying on the reasoning in Commissioner of Income Tax, Bombay City II v. Shri Sitaldas Tirathdas and subsequent authorities including Dalmia Cement Ltd. v. CIT and Travancore Sugar & Chemicals , which explain that where income is by its nature receivable for and on behalf of another, the collector is not the beneficial owner and cannot be assessed for that income. On the material findings about the nature and directions governing the funds (including the Ministry of Tourism memorandum directing deposit and utilisation/return of interest), the addition of interest to the assessee's income was unsustainable.

Addition of interest earned on fixed deposits was deleted; such interest did not constitute the assessee's income for AY 2014-15 and AY 2012-13.

Effect of executive guidelines / office memorandum on characterisation of receipt - diversion of income by an overriding title - The ITAT was justified in treating the executive guideline (Ministry of Tourism memorandum) as evidencing diversion of interest to the Government and not treating that interest as the assessee's taxable income. - HELD THAT: - The Court rejected the Revenue's contention that an executive guideline cannot override statutory provisions in the abstract. It treated the office memorandum and related directions as factual and legal indicia demonstrating that the funds and any interest thereon were held and managed for the Government and that interest was to be applied or returned to the Government. Thus, the guideline did not purport to 'override' the Income-tax Act; rather, it established that by operation of an overriding title the income never accrued to the assessee. In that context the Tribunal correctly declined to tax the assessee on interest which was diverted before it could be considered the assessee's income.

The Tribunal's conclusion that the executive guideline showed diversion of interest to the Government and therefore the interest was not taxable in the assessee's hands was upheld.

Final Conclusion: Both appeals by the Revenue were dismissed. The orders of the ITAT in ITA No. 136/Ran/2018 and ITA No. 226/Ran/2016 were sustained: interest earned on deposits of government-funded project amounts was held to have been diverted by overriding title and therefore not assessable as the assessee's income for AY 2014-15 and AY 2012-13.

Breach of principles of natural justice - quashing of order under Section 148A(d) of the Income tax Act - quashing of notice under Section 148 of the Income tax Act - reopening of assessment - remand for fresh consideration to comply with statutory requirements and to afford opportunity to produce documents

Breach of principles of natural justice - quashing of order under Section 148A(d) of the Income tax Act - quashing of notice under Section 148 of the Income tax Act - Validity of the order dated 13.04.2022 under Section 148A(d) and the notice issued under Section 148 in respect of Assessment Year 2015-16. - HELD THAT: - The Court found that the order under Section 148A(d) and the concomitant notice under Section 148 were passed despite the petitioner having furnished replies and supporting documents and after seeking short adjournments to produce bank statements and documentary proof of non residence. The order was passed in disregard of those submissions and without affording a fair opportunity to the petitioner, resulting in a breach of the principles of natural justice. For these reasons the impugned order under Section 148A(d) dated 13.04.2022 and the notice under Section 148 of the Income tax Act of the same date were quashed. [Paras 7, 8]

Order under Section 148A(d) dated 13.04.2022 and the notice under Section 148 are quashed for breach of natural justice.

Remand for fresh consideration to comply with statutory requirements and to afford opportunity to produce documents - reopening of assessment - Relief and directions following quashing - whether matter should be remitted for fresh consideration and the manner of such exercise. - HELD THAT: - The Court directed that on receipt of a copy of the order the assessing authority shall issue notice through the portal to the petitioner giving two weeks' time to furnish any additional documents, and from that stage consider the entire material afresh and pass the order under Section 148A(d). The matter is therefore remanded to the officer for fresh decision-making in accordance with statutory prescriptions and principles of natural justice; the Court expressly limited its order to quashing and remittance without prejudicing the rights of either party. [Paras 8]

Proceedings remitted: respondent to issue portal notice, allow two weeks for documents, and then reconsider and pass fresh order under Section 148A(d).

Final Conclusion: Petition allowed; impugned order under Section 148A(d) dated 13.04.2022 and the notice under Section 148 for Assessment Year 2015 16 are quashed for breach of natural justice and the matter is remitted to the assessing authority to issue portal notice, grant two weeks for production of documents and then decide afresh in accordance with law, without prejudice to the parties' rights.

Principles of natural justice - opportunity of hearing - show cause notice - penalty under section 271(1)(c) of the Income Tax Act, 1961 - quashing for violation of natural justice - remand for fresh hearing with timelines

Principles of natural justice - opportunity of hearing - show cause notice - penalty under section 271(1)(c) of the Income Tax Act, 1961 - Validity of the penalty order in view of non compliance with principles of natural justice by issuing an impermissibly short show cause notice. - HELD THAT: - The Court found a substantive procedural defect in the penalty proceedings: the show cause notice dated 28.11.2022 called upon the petitioner to appear in person or through a duly authorised representative at 11:00 a.m. on 29.11.2022, thereby giving less than 24 hours' time. Such a short notice for personal appearance to meet a show cause proceeding was held to be a breach of the principles of natural justice. The record indicates that an adjournment request was made and reflected on the portal, but the Assessing Officer proceeded to pass the penalty order without affording a fair opportunity to be heard. In view of this material denial of opportunity, the Court refrained from entering into the merits of the penalty and held that the penalty order could not stand. [Paras 6, 7]

Penalty order set aside on ground of breach of principles of natural justice arising from an unreasonably short show cause notice and failure to consider adjournment request.

Remand for fresh hearing with timelines - opportunity of hearing - Further course of action following quashing of the penalty order. - HELD THAT: - Having quashed the impugned penalty order for procedural infirmity, the Court directed that the matter be restored to the stage at which it was left and that the Assessing Officer shall communicate afresh within four weeks from receipt of this order to afford a hearing. The Court required the petitioner to cooperate and mandated that the entire proceedings be completed within eight weeks thereafter. The Court did not decide the substantive merits of the penalty; those are to be considered afresh in accordance with law after affording a proper hearing. [Paras 8]

Proceedings remitted for fresh hearing from the stage left; communication within four weeks and completion within eight weeks; substantive issues to be decided afresh after affording proper opportunity.

Final Conclusion: The penalty order under section 271(1)(c) for Assessment Year 2010-11 is quashed for violation of the principles of natural justice by issuance of an unreasonably short show cause notice; the matter is remitted for fresh hearing from the stage left with directions to communicate within four weeks and complete proceedings within eight weeks.

Deduction under Section 54 - Capital gains account scheme - Construction completed within stipulated period - Investment in name of spouse

Deduction under Section 54 - Investment in name of spouse - Allowability of deduction under Section 54 where the new house was constructed in the name of the assessee's wife. - HELD THAT: - The Tribunal found that the capital gains proceeds were utilised for the construction of a new house property and that utilisation of the sale proceeds towards construction was not disputed by the Assessing Officer. Although the new house was registered in the name of the assessee's wife, this fact did not, in the Tribunal's view, defeat the claim for deduction since the material requirement - application of the capital gains to the construction of a new residential property - had been satisfied and was not controverted by the AO. The Tribunal, therefore, upheld the Commissioner (Appeals) in allowing the deduction. [Paras 8]

Deduction under Section 54 upheld despite the property being in the name of the assessee's wife; CIT(A)'s allowance sustained.

Capital gains account scheme - Construction completed within stipulated period - Whether failure to deposit unutilised capital gains in the Capital Gains Account Scheme before the due date of filing return precluded the deduction, and whether construction activities met the temporal requirement for claiming deduction. - HELD THAT: - The Tribunal accepted the assessee's evidence of commencement of construction and substantial expenditure during the relevant year, including payment evidence and an electricity connection obtained in February 2006, and noted that application for municipal approval was made in December 2005 with completion on 28.02.2007. On these facts the Tribunal concluded there was substantial utilisation of capital gains for construction during the relevant period, obviating the requirement to deposit the proceeds in the Capital Gains Account Scheme. The Tribunal therefore found no merit in the Revenue's objection based on non-deposit and on timing of municipal approval and declined to interfere with the appellate authority's conclusion. [Paras 6, 8]

Non-deposit in the Capital Gains Account Scheme did not preclude the deduction given demonstrable substantial construction expenditure within the relevant period; temporal/approval issues did not defeat the claim.

Final Conclusion: The appeal is dismissed; the order of the Commissioner (Appeals) allowing deduction under Section 54 for AY 2005-06 is upheld.

Application of Article 16(1) (Dependent Personal Services) of the Indo US DTAA - Overriding effect of a tax treaty under Section 90 of the Income tax Act - Chargeability under Section 5(2)(a) and Section 5(2)(b) - receipt in India versus accrual/arising in India - Scope of employment 'exercised' for treaty relief (place where services are rendered) - Deputation/secondment and payroll attribution in determining taxability

Chargeability under Section 5(2)(a) and Section 5(2)(b) - receipt in India versus accrual/arising in India - Deputation/secondment and payroll attribution in determining taxability - Whether the salary paid by the Indian employer and received in India is taxable in India under Section 5(2)(a) of the Act notwithstanding that services were rendered outside India on secondment. - HELD THAT: - The Tribunal found the factual matrix analogous to the AAR decision in British Gas India (P) Ltd., In re: the assessee remained on the payroll of the Indian employer while seconded to the foreign entity and salary was paid in India. On these facts the salary falls within the scope of Section 5(2)(a) as income 'received' in India by or on behalf of the non resident. The Tribunal, following the AAR, concluded that such receipt in India by an employee seconded abroad brings the salary within chargeability under Section 5(2)(a) of the Act. [Paras 16]

Salary paid by the Indian employer and received in India is covered by Section 5(2)(a) and thus prima facie taxable in India.

Application of Article 16(1) (Dependent Personal Services) of the Indo US DTAA - Overriding effect of a tax treaty under Section 90 of the Income tax Act - Scope of employment 'exercised' for treaty relief (place where services are rendered) - Whether Article 16(1) of the Indo US DTAA, read with Section 90, exempts the assessee's salary from Indian tax when the employment was exercised in the USA and the assessee was a US resident. - HELD THAT: - The Tribunal held that Article 16(1) entitles a resident of a Contracting State to taxation in that State unless the employment is exercised in the other Contracting State. Although Section 5(2)(a) fastens tax liability on amounts received in India, Section 90 gives treaties overriding effect to the extent they are more beneficial. Applying the ratio of the AAR decision relied upon, the Tribunal concluded that where the employment was exercised in the USA and the assessee was a US resident who has been taxed in the USA, Article 16(1) prevails over Section 5(2)(a) and the salary received in India for services rendered in the USA is not taxable in India. [Paras 18]

Article 16(1) of the Indo US DTAA, by virtue of Section 90, overrides Section 5(2)(a) and exempts the salary from Indian tax where the employment was exercised in the USA and the assessee is a resident of the USA.

Final Conclusion: The Tribunal allowed the appeal: while the salary paid by the Indian employer and received in India is prima facie taxable under Section 5(2)(a), Article 16(1) of the Indo US DTAA - given the assessee's residence in the USA and that the employment was exercised there - prevails under Section 90, and the addition was deleted.

Deduction under section 35(1)(iii) - deduction under section 35AC - natural justice - right to cross examine witnesses whose statements are relied upon - reliance on investigation wing reports without independent enquiry - burden of corroboration of incriminating statements - recognition/approval of donee trusts under section 12A and notification for section 35/35AC - verification of advance tax credit from Form 26AS and bank records

Deduction under section 35(1)(iii) - deduction under section 35AC - reliance on investigation wing reports without independent enquiry - natural justice - right to cross examine witnesses whose statements are relied upon - recognition/approval of donee trusts under section 12A and notification for section 35/35AC - Validity of disallowance of donations claimed as deductions under sections 35(1)(iii) and 35AC of the Act. - HELD THAT: - Tribunal examined whether the Assessing Officer was justified in treating the donations as bogus and disallowing the deductions. The assessee had produced donation receipts, trust registration certificates, Government notifications under sections 35(1)(iii)/35AC and evidence of payments through banking channels; these documents were not controverted by independent enquiry. The AO relied heavily on reports and statements recorded by the investigation wing without providing those statements to the assessee or permitting cross examination; the AO made no independent enquiries to rebut the documentary evidence. The three donee bodies were shown to be duly registered/ notified and their registrations had not been cancelled. In these circumstances, reliance solely on untested investigation statements and bank statement inferences, without allowing the assessee an opportunity to test or rebut the material, amounted to a breach of principles of natural justice and left no independent foundation for the disallowance. Applying these considerations and precedents cited, the Tribunal held that the disallowances could not be sustained and allowed the claimed deductions. [Paras 8, 9, 10, 11, 13]

Deductions claimed under sections 35(1)(iii) and 35AC upheld; grounds challenging the disallowance allowed.

Verification of advance tax credit from Form 26AS and bank records - natural justice - procedural obligation to verify material relied upon - Short credit of advance tax as reflected in Form 26AS and whether assessee is entitled to the credit claimed. - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) had directed verification of the assessee's claim of advance taxcredit from Form 26AS and bank statements and to allow the credit if substantiated. There was no reason shown to interfere with that direction. The Tribunal therefore confirmed that the short credit should be verified by the Assessing Officer against Form 26AS and bank records and allowed accordingly. [Paras 4, 14]

Direction to verify and allow the advance tax credit upheld; ground on short credit allowed.

Final Conclusion: Appeal allowed: disallowances of donations under sections 35(1)(iii) and 35AC set aside for lack of independent enquiry and denial of opportunity to test investigation material; advance tax credit to be verified from Form 26AS and bank records and allowed if found correct.

Deeming of full value of consideration under Section 50C where stamp valuation exceeds registered consideration - Third proviso to Section 50C(1) - tolerance of 10% and retrospective application - Binding effect of Departmental Valuation Officer's (DVO) report on reference under Section 50C(2) - Inclusion of amounts paid by purchaser (land premium/ conversion charges) as part of full consideration where paid pursuant to agreement - Validity and evidentiary value of oral agreement for components of sale consideration - Condonation of delay in filing appeal where time was spent in bonafide pursuit of remedies and substantial justice prevails over technical delay

Condonation of delay in filing appeal - Substantial justice over technical delay - Whether the delay of 91 days in filing the appeal before the Tribunal should be condoned. - HELD THAT: - The Tribunal found that the assessee had bonafidely pursued remedies after receipt of the appellate order by filing an application under Section 154 and seeking rectification of the order giving effect, and that time spent in such proceedings is to be excluded when computing limitation for filing the appeal. The assessee also furnished medical evidence and the Department did not seriously oppose condonation. Relying on the principle that substantial justice should prevail over technical objections where delay is not shown to be deliberate or mala fide, the Tribunal held there was sufficient cause to condone the delay and admitted the appeal for adjudication. [Paras 5]

Delay condoned and appeal admitted for adjudication.

Binding effect of Departmental Valuation Officer's (DVO) report on reference under Section 50C(2) - Inclusion of amounts paid by purchaser (land premium/ conversion charges) as part of full consideration where paid pursuant to agreement - Third proviso to Section 50C(1) - tolerance of 10% and retrospective application - Validity and evidentiary value of oral agreement for components of sale consideration - Whether the capital gain must be recomputed by treating the effective sale consideration as including the land premium paid by the purchaser (total consideration taken as Rs. 3.41 crore) and whether the assessee is entitled to benefit of the third proviso to Section 50C(1) on the basis of the DVO valuation. - HELD THAT: - The Tribunal recorded that the registered sale deed showed consideration of Rs. 1.80 crore but the purchaser paid land premium/conversion charges of Rs. 1.61 crore directly to the State authorities as part of the transaction. The assessee produced the purchaser's affidavit confirming payment of the land premium as integral to the sale consideration. The Tribunal noted there was no adverse material controverting this claim and observed that oral agreements are not per se invalid and can be admissible evidence if they meet contractual requirements. The matter had been referred to the DVO who assessed the market value at Rs. 3.54 crore. Applying the binding effect of a DVO reference, and finding that the effective sale consideration of Rs. 3.41 crore (registered consideration plus purchaser-paid premium) was within 10% of the DVO valuation (difference 6.66%), the Tribunal held the assessee was entitled to the benefit of the third proviso to Section 50C(1). The Tribunal therefore directed the Assessing Officer to compute capital gains adopting the total consideration of Rs. 3.41 crore and grant the proviso benefit. [Paras 22, 23, 31, 32]

Assessing Officer directed to recompute capital gain taking full value of consideration as Rs. 3.41 crore (registered consideration plus purchaser-paid land premium) and to allow the benefit of the third proviso to Section 50C(1).

Final Conclusion: The appeals are allowed: delay in filing the appeals is condoned; the Assessing Officer is directed to recompute long term capital gains treating the effective sale consideration as including the land premium paid by the purchaser (total consideration taken as Rs. 3.41 crore) and to grant the benefit of the third proviso to Section 50C(1) in consequence.

Entitlement to exemption under Section 11 and 12 despite belated filing of audit report in Form 10B - Condonation of delay under Section 119(2)(b) - Substantial compliance of procedural requirement for claiming exemption - Restoration to Assessing Officer for verification of Form 10/Form 10B

Entitlement to exemption under Section 11 and 12 despite belated filing of audit report in Form 10B - Substantial compliance of procedural requirement for claiming exemption - Whether the trust's entitlement to exemption under Section 11/12 is defeated solely by belated filing of Form 10B. - HELD THAT: - The Tribunal found that the assessee, a public charitable trust, had substantially satisfied the conditions for exemption under Section 11/12, the only deficiency being belated filing of the audit report in Form 10B. Relying on the decision of the Hon'ble Gujarat High Court in Trust for Reaching The Unreached Through Trustee v. CIT(Exemptions), the Tribunal accepted that exemption cannot be denied merely on the ground of delay in furnishing the audit report where the substantive conditions for exemption are met. The Tribunal observed that authorities possess discretion under Section 119(2)(b) to condone delays to avoid genuine hardship and that a procedural proviso requiring production of audit report is to be treated in a manner that does not defeat substantive rights when conditions are otherwise satisfied. Applying that principle, the Tribunal concluded that the claim of exemption should not be summarily rejected solely for belated filing of Form 10B and therefore restoration for verification was warranted. [Paras 6, 7]

Assessee's entitlement to exemption under Section 11/12 is not to be denied merely on account of belated filing of Form 10B; the matter is to be considered on merits.

Restoration to Assessing Officer for verification of Form 10/Form 10B - Condonation of delay under Section 119(2)(b) - What is the appropriate remedial course of action in light of the belated filing of Form 10B and the assessee having otherwise satisfied substantive conditions for exemption. - HELD THAT: - The Tribunal, applying the principle in the cited High Court decision and having found substantial compliance by the trust, did not itself adjudicate the quantum of exemption but directed restoration of the assessment files to the Assessing Officer. The Assessing Officer is to verify the contents of the belatedly filed Form 10/Form 10B for each assessment year and to grant exemption if the Form's contents and other statutory conditions are satisfied, and to pass consequential orders in accordance with law. The Tribunal expressly restored the appeals to the file of the Assessing Officer for AY 2017-18, and, on the principle of consistency, similarly restored the files for AY 2018-19 and AY 2019-20 for verification and grant of exemption. [Paras 7, 9]

Files restored to the Assessing Officer to verify Form 10/Form 10B and to pass orders granting or refusing exemption in accordance with law for AY 2017-18, 2018-19 and 2019-20.

Final Conclusion: The appeals are allowed for statistical purposes; following the jurisdictional High Court precedent, the Tribunal restored the files to the Assessing Officer to verify the belatedly filed Form 10/Form 10B and to decide entitlement to exemption under Section 11/12 for AY 2017-18, 2018-19 and 2019-20 in accordance with law.

Revisionary jurisdiction under Section 263 - Erroneous and prejudicial to the interests of the revenue - Limited scrutiny and application of mind by the Assessing Officer - Explanation 2 to Section 263 - Scope of de novo reassessment by a superior officer

Revisionary jurisdiction under Section 263 - Limited scrutiny and application of mind by the Assessing Officer - Erroneous and prejudicial to the interests of the revenue - Explanation 2 to Section 263 - Scope of de novo reassessment by a superior officer - Validity of the Principal Commissioner's order under Section 263 setting aside the assessment order and directing de novo consideration. - HELD THAT: - The Tribunal held that the PCIT's exercise of revisionary jurisdiction under Section 263 was not justified. The record showed that the case was selected for limited scrutiny and the Assessing Officer issued detailed notices under Sections 142(1) and 143(2), sought explanations, and received from the assessee valuation under Rule 11UA and supporting documents relating to FMV of investments in unlisted shares, evidencing that the AO applied his mind within the scope of limited scrutiny (paras 20-23). The PCIT's successive show-cause notices and changing calculations, together with withdrawal of specific references earlier relied upon, reflected a change of opinion rather than establishment of an absence of inquiry (paras 19-21). Applying Explanation 2 to Section 263, the Tribunal found no lack of inquiry by the AO - at best the PCIT disagreed with the conclusion reached - and noted settled law that Section 263 cannot be used to substitute the AO's view where the AO has applied his mind and the view taken is a possible one (paras 24-26). Reliance on authoritative decisions emphasising the distinction between lack of inquiry and mere inadequacy of inquiry supported quashing the revision (paras 26-30). For these reasons the PCIT's direction for de novo assessment and the conclusion that the assessment order was erroneous and prejudicial to revenue were held to be unsustainable (para 31). [Paras 21, 23, 24, 25, 31]

The revisionary order passed by the Principal Commissioner under Section 263 insofar as it set aside the assessment and directed de novo consideration is quashed and the appeal is allowed.

Final Conclusion: The Tribunal quashed the PCIT's order passed under Section 263, holding that the Assessing Officer had made the requisite inquiries and applied his mind within the parameters of limited scrutiny; the PCIT's intervention amounted to a mere change of opinion and was not a valid exercise of revisionary jurisdiction.

Foreign Tax Credit - Form 67 filing requirement - Section 90 of the Income-tax Act - credit under DTAA - Directory versus mandatory nature of procedural requirements - Intimation under Section 143(1) - adjustment by CPC for non compliance

Foreign Tax Credit - Form 67 filing requirement - Section 90 of the Income-tax Act - credit under DTAA - Directory versus mandatory nature of procedural requirements - Intimation under Section 143(1) - adjustment by CPC for non compliance - Denial of foreign tax credit on the ground that Form 67 was not filed on or before the due date for furnishing return of income under section 139(1). - HELD THAT: - The Tribunal held that the Assessing Officer erred in denying foreign tax credit where the assessee filed Form 67 after the section 139(1) due date but within the extended time for furnishing the return under section 139(4). Applying section 90 read with the relevant DTAA provision, the Tribunal accepted precedents of the ITAT (Chennai and Bangalore benches) that the entitlement to credit under DTAA/section 90 cannot be defeated by a procedural non compliance; filing Form 67 is directory in nature and AO ought to have considered the Form and allowed the credit when the foreign income was offered to tax in India. The Tribunal noted the CBDT clarification dated 18.08.2022 which allows filing of Form 67 up to the extended due date under section 139(4) (applicable from AY 2022-23) and observed that even prior judicial decisions under identical circumstances require allowance of FTC when Form 67 is filed within the extended return period. On this basis the Tribunal set aside the denial made in the intimation under section 143(1) and directed the AO to allow the foreign tax credit as per the filed Form 67. [Paras 9, 10, 11, 12]

Denial of foreign tax credit for non-filing of Form 67 by the section 139(1) due date is set aside; AO directed to allow the foreign tax credit as claimed in Form 67.

Final Conclusion: Appeal allowed; the Tribunal directs the Assessing Officer to grant foreign tax credit as per the Form 67 filed by the assessee, setting aside the denial made in the intimation under section 143(1).

Condonation of delay - Medical illness as reasonable cause for condonation - Exemption under section 54 - Interpretation of the expression "a residential house" prior to statutory amendment - Exemption under section 54EC

Condonation of delay - Medical illness as reasonable cause for condonation - Delay in filing the appeal before the Tribunal was condoned and the appeal admitted for adjudication. - HELD THAT: - The Tribunal considered the petition for condonation of delay of 832 days in filing the appeal. It held that 715 days fell within the Covid period which is excluded, leaving 117 days. The assessee's advanced age and documented medical ailments, supported by medical records and affidavit, constituted a reasonable cause preventing timely filing. Reliance was placed on the principle in N. Balakrishnan v. M. Krishna Murthy that delays not shown to be mala fide or deliberate should normally be condoned. In view of the facts on record and absence of any suggestion of mala fide or undue benefit, the Tribunal found the remaining delay to be satisfactorily explained and condoned it, admitting the appeal for hearing on merits. [Paras 2, 3, 4]

Delay condoned and appeal admitted.

Exemption under section 54 - Interpretation of the expression "a residential house" prior to statutory amendment - Assessee entitled to exemption under section 54 in respect of the new residential property purchased and constructed on 30.08.2012. - HELD THAT: - The Tribunal found that the asset compulsorily acquired by Chennai Metro Rail Ltd was a long term capital asset and, on the evidence, a residential house property. The assessee purchased a new residential house within the statutory period (30.08.2012) and completed construction within the allowable time, satisfying condition for exemption under section 54. The Tribunal addressed the contention that the new property comprised multiple independent units and observed that, prior to the Finance Act 2014 amendment w.e.f. 01.04.2015, courts (including the Supreme Court in CIT v. Gita Duggal and High Courts) had construed the phrase "a residential house" to include a residential building having multiple independent units. Applying that pre amendment interpretation to the facts of this case (transfer in 2012 and purchase in 2012), the Tribunal held that the purchase and construction constituted one "residential house" for section 54 purposes and directed allowance of the exemption in respect of the purchase and construction. [Paras 11, 12]

Exemption under section 54 allowed in respect of the new residential house purchased and constructed on 30.08.2012.

Exemption under section 54EC - Claimed exemption under section 54EC rejected. - HELD THAT: - The Tribunal noted that, although the assessee invested amounts in fixed deposits on or before the due date for filing the return, section 54EC permits exemption only for investment in specified eligible bonds. Investment in ordinary bank fixed deposits does not qualify as eligible investment under section 54EC. Accordingly, the Tribunal upheld the rejection of the section 54EC claim. [Paras 13]

Exemption under section 54EC rejected.

Final Conclusion: The appeal was admitted by condoning delay. The Tribunal allowed the assessee's claim of exemption under section 54 in respect of the residential property purchased and constructed in 2012, applying the pre 2015 interpretation of "a residential house", but upheld the disallowance of exemption under section 54EC for investments in ordinary bank fixed deposits; the appeal was thus partly allowed.

Revisionary jurisdiction under section 263 - statutory bar on exercise of revisionary power while identical issues are pending in appeal - simultaneous exercise of jurisdiction by Principal Commissioner and Commissioner (Appeals)

Revisionary jurisdiction under section 263 - statutory bar on exercise of revisionary power while identical issues are pending in appeal - Whether the Principal Commissioner could exercise jurisdiction under section 263 in respect of issues which were considered by the Assessing Officer and were the subject matter of an appeal pending before the Commissioner (Appeals). - HELD THAT: - The Tribunal examined the assessment record and found that the very issues forming the basis of the Principal CIT's revision under section 263 had been considered by the Assessing Officer in the assessment order (see pages 2, 3, 7 and 8 of the assessment order). The assessee had filed an appeal under section 250 against those same additions and matters, which remained pending before the Commissioner (Appeals). Relying on authority establishing that where an appeal against the Assessing Officer's order is pending before the Commissioner (Appeals), the Commissioner/Principal Commissioner may be precluded from invoking section 263 in respect of identical issues, the Tribunal held that the Principal CIT could not simultaneously assume jurisdiction to revise those matters while they were under adjudication on appeal. Because the issues were already considered by the AO and were sub judice before the appellate forum, the exercise of revisionary power in respect of those issues was held to be unsustainable. [Paras 6, 7]

The Principal CIT's order under section 263 was set aside and the assessee's appeal was allowed.

Final Conclusion: The order passed by the Principal Commissioner under section 263 was held unsustainable because the same issues had been considered by the Assessing Officer and were pending adjudication before the Commissioner (Appeals); accordingly the revision order was set aside and the assessee's appeal allowed.

Remission or cessation of liability taxable under section 41(1) - cessation of trading liability - running account of sundry creditors - limitation does not extinguish debt for purposes of section 41(1) - ad hoc disallowance without basis is impermissible

Remission or cessation of liability taxable under section 41(1) - cessation of trading liability - running account of sundry creditors - limitation does not extinguish debt for purposes of section 41(1) - Deletion of addition of Rs.8,46,87,207/- under Section 41(1) was upheld. - HELD THAT: - The Tribunal accepted the assessee's case that the creditor balances represented running accounts arising from continuous contract operations, with payments and bills adjusting the balances year to year, and that there was no evidence of waiver or writing back of the liabilities. The Assessing Officer's conclusion of cessation was not supported by material showing extinguishment of the debts; earlier assessments for prior years also contained similar outstanding balances without any finding of non-existence. The Tribunal relied on established principle that limitation alone does not convert an outstanding debt into income for section 41(1) purposes and that mere age of transactions or non-payment does not demonstrate remission or cessation. In absence of proof of cessation or remission, the addition under section 41(1) could not be sustained. [Paras 9, 10, 11, 12]

Addition under Section 41(1) deleted; ground dismissed.

Ad hoc disallowance without basis is impermissible - requirement of basis for disallowance - Deletion of ad hoc disallowance of Rs.1,50,000/- out of direct expenses was upheld. - HELD THAT: - The Tribunal agreed with the CIT(A) that the disallowance was an unsubstantiated estimate made without any basis. The assessee had produced details and vouchers; if specific vouchers were missing the Assessing Officer should have quantified the disallowance to the extent of non-vouching rather than making an arbitrary ad hoc deduction. The smallness of the amount did not justify an unsupported estimate. As the disallowance lacked particularised foundation, it could not be sustained. [Paras 6, 13]

Ad hoc disallowance deleted; ground dismissed.

Final Conclusion: The order of the CIT(A) deleting the addition under Section 41(1) and deleting the ad hoc disallowance is confirmed; the revenue's appeal is dismissed.

Rectification under section 154 - attribution of delay under section 244A(2) - competence of the Assessing Officer to decide attribution - time bar and futility of remand - debatable issue

Rectification under section 154 - attribution of delay under section 244A(2) - competence of the Assessing Officer to decide attribution - debatable issue - time bar and futility of remand - Validity of the Assessing Officer's rectification under section 154 withdrawing interest granted under section 244A on the ground that delay in issuing refund was attributable to the assessee - HELD THAT: - The Tribunal examined whether the AO could, by a rectification order under section 154, withdraw interest granted under section 244A on the ground that delay in issuing refund was attributable to the assessee. Section 244A(2) contemplates that the question of attribution of delay is to be decided by the Pr. CCIT/CCIT/Pr. Commissioner/Commissioner (the appropriate authority) and not the AO. Given that the present proceedings arose from an order under section 154 already passed by the AO, restoring the matter to the AO for fresh adjudication would be futile because the appropriate authority could not now be directed by the AO to make a fresh attribution under section 244A(2) and any fresh action would be substantially time barred. The Tribunal also recognised that the question of attribution is a debatable one dependent on facts and record; however, because the AO was not the competent authority to decide attribution under section 244A(2) and remand would serve no practical purpose in the context of the rectification proceedings, the rectification was held to be unsustainable. For these reasons the AO's order under section 154 and the CIT(A)'s consequent decision were quashed. [Paras 6]

Order passed under section 154 by the AO withdrawing interest under section 244A is quashed because the AO is not the appropriate authority to determine attribution of delay under section 244A(2) and remanding the issue would be futile and time barred; appeal allowed.

Final Conclusion: The rectification order under section 154 withdrawing interest granted under section 244A was quashed on the ground that attribution of delay under section 244A(2) is not for the Assessing Officer to decide and a remand would be futile and time barred; the assessee's appeal is allowed.

Exercise of statutory jurisdiction within a reasonable time - quashing of administrative order for undue delay - limitation as a defence to refund claims

Exercise of statutory jurisdiction within a reasonable time - quashing of administrative order for undue delay - Impugned Order in Original dated 25.09.2020 passed pursuant to a show cause notice dated 12.03.2009 was liable to be quashed on the ground of inordinate delay in exercise of statutory jurisdiction. - HELD THAT: - The Court applied the principle that where a statute does not prescribe a period of limitation, the statutory authority must still exercise its jurisdiction within a reasonable period. Following the Supreme Court's principle in Bhattinda District Co operative Milk P. Union Ltd. and the decision of a Single Judge in J. Sheik Parith, the Court found that the second respondent, having issued the show cause notice on 12.03.2009, received a reply and afforded a personal hearing in September 2009, yet chose to pass the final Order in Original only on 25.09.2020 after more than eleven years. Such delay amounted to failure to exercise jurisdiction within a reasonable time and warranted quashing of the order. [Paras 1, 5, 6, 7, 10]

The show cause notice dated 12.03.2009 and the Order in Original dated 25.09.2020 are quashed for having been passed after an unreasonable delay.

Limitation as a defence to refund claims - Whether the petitioner was entitled to refund of the amount purportedly paid in 2007. - HELD THAT: - The petitioner asserted that the amount challenged in the Order in Original had been paid in 2007 and sought refund relying on a decision of the Bombay High Court. The Court observed there is no documentary evidence before it to show the sum was paid under protest. Even assuming payment under protest, the Court held that the petitioner cannot seek refund because such a claim would itself be barred by limitation; the same principle of limitation that invalidates the belated adjudication applies equally to retrospective refund claims. The Bombay High Court decision relied on did not address this factual and limitation circumstance and was therefore inapplicable. [Paras 9, 10]

The petitioner is not entitled to claim refund of the amount allegedly paid in 2007 because the refund claim is barred by limitation.

Final Conclusion: Writ petition allowed: the show cause notice dated 12.03.2009 and Order in Original dated 25.09.2020 are quashed for unreasonable delay in exercising statutory jurisdiction; however, the petitioner is not entitled to a refund of the amount allegedly paid in 2007 as that claim is barred by limitation.

Customs valuation - computed value - Customs valuation - contemporaneous imports - Rule 12 - inquiry and notice - Rule 8 - computed value methodology - Arbitrariness in valuation computation - Requirement of evidential basis for discounts and freight - Remand for fresh decision

Rule 12 - inquiry and notice - Customs valuation - contemporaneous imports - Validity of invoking rule 12 to reject declared transaction value and the sequential application of valuation rules (Rules 3-9). - HELD THAT: - The Tribunal found that the lower authorities invoked rule 12 on the ground that the importer had not furnished certain payment documentation and that 'contemporaneous imports' showed higher prices. However, the authorities then proceeded to re-determine value under later rules (notably rule 8) while purporting that rules 4 and 5 were inapplicable. That approach produced a contradictory and arbitrary sequence: reliance on contemporaneous import prices as a prelude to enhancement conflicted with the stated exclusion of rules 4 and 5. Further, where contemporaneous imports were said to be the basis for enhancement, the importer ought to have been given notice of those specific contemporaneous imports so as to meet the case. The Tribunal held that the invocation of rule 12 and the manner of proceeding thereafter lacked proper application of mind and procedural fairness. [Paras 2, 4, 5, 10]

Invocation of rule 12 and the sequence followed by the authorities was unsustainable for being contradictory and procedurally defective; the authorities failed to place the importer on notice of the contemporaneous imports relied upon.

Rule 8 - computed value methodology - Arbitrariness in valuation computation - Requirement of evidential basis for discounts and freight - Whether the computation of value under rule 8 (computed value) by applying Metal Bulletin prices, percentage abatements and a fixed freight addition was legally sustainable. - HELD THAT: - The Tribunal examined the original authority's computation that adopted Metal Bulletin FOB prices as base, applied an unexplained 10% abatement for 'ex-stock', a further quantity discount of about 4.5%, an ad hoc adjustment for sheets, and added a flat USD 50/MT for freight to convert FOB to C&F. The court found these allowances and additions to be cryptic and unsupported by any authority, empirical data or reference to actual freight which was ascertainable. The alternative computation based on HR sheets further demonstrated the adjudicator's uncertainty. On this foundation the Tribunal concluded that the computation was arbitrary, lacked evidential foundation, and therefore could not sustain enhancement under rule 9 either. [Paras 8, 9, 10]

The computation under rule 8 was arbitrary and inadequately supported; the resultant enhancement (and confirmation under rule 9) was discredited.

Customs valuation - contemporaneous imports - Rule 12 - inquiry and notice - Requirement to identify and notify the importer of contemporaneous imports relied upon for valuation enhancement. - HELD THAT: - The Tribunal emphasised that where contemporaneous imports are invoked as the basis for rejecting declared value or enhancing assessable value, the original authority must place the importer on notice of those contemporaneous imports so that the importer has a fair opportunity to respond. The failure to do so rendered the process a travesty of the statutory valuation mechanism and compounded the arbitrariness of the authorities' approach. [Paras 10]

The original authority's failure to place the importer on notice of the contemporaneous imports relied upon was a procedural defect requiring corrective action.

Remand for fresh decision - Appropriate remedy in view of the procedural and computation defects identified. - HELD THAT: - Given the contradictions in the invocation of valuation rules, the arbitrary nature of the computed adjustments, the absence of evidential basis for discounts and freight, and the failure to notify the importer of contemporaneous imports relied upon, the Tribunal concluded that it was not appropriate to uphold the enhancement. Instead, the matter should be remitted to the original authority for fresh consideration in conformity with the Tribunal's observations. The Tribunal did not itself re-compute value but directed that the original authority decide afresh after giving the importer an opportunity to meet the contemporaneous import basis and after applying valuation rules in proper sequence with evidential support. [Paras 7, 10, 11]

Impugned order set aside and matter remanded to the original authority for fresh decision in accordance with the Tribunal's observations.

Final Conclusion: The Tribunal set aside the impugned enhancement of assessable value as arbitrary and procedurally defective, and remitted the matter to the original adjudicating authority for fresh decision after affording the importer proper notice and opportunity, and after applying the valuation rules in correct sequence with adequate evidential support.

Failure to advise importer on restricted imports - failure to exercise due diligence in ascertaining correctness of information - obligation to discharge duties with speed and efficiency without avoidable delay - forfeiture of security deposit as proportionate administrative penalty - customs broker liability for misdeclaration of goods

Failure to advise importer on restricted imports - customs broker liability for misdeclaration of goods - Breach of obligation to give proper advice to the customer (regulation 13(d) of Customs House Agents Licensing Regulations, 2004) held proved against the customs broker. - HELD THAT: - The Tribunal upheld the licensing authority's finding that the broker, faced with a consignment whose contents resembled restricted refrigerant gases, ought to have cautioned the importer and reported non-adherence to customs authorities rather than remaining an uninterested bystander. Reliance on compliance with other regulatory pre-requisites was not a satisfactory defence where the broker was bound to appreciate and warn about restrictions applicable to ozone depleting substances; the obligation to impress upon the importer the consequences of evasive declaration is inherent in the broker's role. The Tribunal found no reason to overturn the conclusion that regulation 13(d) was breached. [Paras 6]

Finding of breach of regulation 13(d) upheld.

Failure to exercise due diligence in ascertaining correctness of information - Breach of obligation to exercise due diligence in ascertaining correctness of information imparted to the client (regulation 13(e) of Customs House Agents Licensing Regulations, 2004) held proved. - HELD THAT: - The Tribunal accepted the licensing authority's inference that the broker demonstrated lack of interest in the true nature of the consignment and failed to keep the customer informed of restrictions applicable to certain specifications of refrigerant gas. Although the authority's reasoning on this charge was concise and linked to the finding under regulation 13(d), the Tribunal found the linkage sufficient: failure to recognise the infirmity in the import naturally led to non-ascertainment of correctness of advice given to the client, thereby constituting breach of regulation 13(e). [Paras 7]

Finding of breach of regulation 13(e) upheld.

Obligation to discharge duties with speed and efficiency without avoidable delay - Alleged breach of the obligation to discharge duties with utmost speed and efficiency and without avoidable delay (regulation 13(n) of Customs House Agents Licensing Regulations, 2004) not sustained. - HELD THAT: - The Tribunal disagreed with the licensing authority's broad articulation of this charge. In the absence of evidence demonstrating lack of speed or efficiency or any avoidable delay by the broker, and given the sweeping character of the allegation without particulars as to how it was established in enquiry, the Tribunal did not uphold the finding of breach of regulation 13(n). The obligation is intended to protect customers' interests and must be established by evidence of delay or inefficiency, which was absent here. [Paras 8]

Finding of breach of regulation 13(n) set aside.

Forfeiture of security deposit as proportionate administrative penalty - Validity and proportionality of the order directing forfeiture of the security deposit upheld. - HELD THAT: - Although one of the four original charges and one of the three sustained charges did not survive scrutiny, two of the charges were maintained. The licensing authority declined to revoke the broker's licence and imposed the less severe penalty of forfeiture of security deposit. The Tribunal found the penalty proportionate to the remaining proven breaches and noted absence of mitigating circumstances warranting further leniency. Consequently, there was no reason to interfere with the forfeiture direction. [Paras 9, 10]

Order directing forfeiture of the security deposit sustained; appeal dismissed.

Final Conclusion: Two of the charges against the customs broker (breach of regulation 13(d) and 13(e)) were upheld, breach of regulation 13(n) was not sustained, and the Tribunal affirmed the licensing authority's order directing forfeiture of the security deposit as a proportionate penalty; the appeal is dismissed.

Exclusion of moratorium period under Section 60(6) of the Insolvency and Bankruptcy Code - Limitation for filing appeal under Section 61 of the Insolvency and Bankruptcy Code - Condonation of delay under proviso to Section 61(2) of the Insolvency and Bankruptcy Code - Applicability of Section 60(6) to appeals under Section 61

Exclusion of moratorium period under Section 60(6) of the Insolvency and Bankruptcy Code - Applicability of Section 60(6) to appeals under Section 61 - Section 60(6) of the Code does not operate to expand the period of limitation for filing an appeal under Section 61. - HELD THAT: - The Court examined the object and scope of Section 60(6), which excludes the period of moratorium from computation of limitation for any suit or application "for which an order of moratorium has been made under this Part." While Section 60(6) was enacted to protect corporate debtors and those proceeding against them by excluding moratorium period from limitation, the order under appeal was one passed by the Adjudicating Authority under the Code and the statutory limitation for appeals under Section 61 is a separate, specifically prescribed regime. The Tribunal held that the factual matrix and the Supreme Court decision relied upon (New Delhi Municipal Council) concerned the application of Section 60(6) to proceedings under the Arbitration Act and involved enabling a corporate debtor to avail benefit of exclusion; that precedent did not furnish a basis for treating appeals under Section 61 as within the scope of Section 60(6). Consequently, the appellant cannot claim addition of the moratorium period to the thirty-day limitation for filing an appeal under Section 61, and the exclusion contemplated by Section 60(6) is not available to extend the appeal period in the present context. [Paras 9, 11]

Section 60(6) is not applicable to extend the time for filing the appeal under Section 61 in this case.

Limitation for filing appeal under Section 61 of the Insolvency and Bankruptcy Code - Condonation of delay under proviso to Section 61(2) of the Insolvency and Bankruptcy Code - The application for condonation of 493 days' delay in filing the appeal is not maintainable because the Tribunal's power under the proviso to Section 61(2) is limited to condoning delay not exceeding fifteen days. - HELD THAT: - The appeal against the Adjudicating Authority's order dated 31.08.2021 was filed after a delay of 493 days. The proviso to Section 61(2) permits the Tribunal to allow an appeal beyond thirty days only if satisfied of sufficient cause, but such extended period "shall not exceed fifteen days." Given the magnitude of delay far exceeding the fifteen-day extension permissible under the proviso, the Tribunal held it had no jurisdiction to condone the entire delay sought by the appellant. Accordingly, the application for condonation was dismissed and the memo of appeal was rejected. [Paras 8, 13]

Application for condonation of delay of 493 days dismissed and the appeal rejected for being time-barred beyond the permissible fifteen-day extension.

Final Conclusion: Application for condonation of delay dismissed and the appeal rejected as time barred; no order as to costs.

Jurisdiction under Article 226 - constitution of Bench under Section 6(7) PMLA - maintainability of party-initiated application for transfer to two-member Bench - availability of alternative remedy of appeal under Section 26 PMLA - principles of natural justice (oral hearing) - administrative direction for constitution of multiple Benches of the Adjudicating Authority

Jurisdiction under Article 226 - High Court's territorial jurisdiction to entertain the petition challenging the Appellate Authority's order. - HELD THAT: - The Court applied the ratio in J. Sekar and the decisions in Sterling Agro Industries and related authorities to hold that, because the Appellate Authority is situate in New Delhi, a writ petition under Article 226 is maintainable before this Court. The Court noted that an order of the Appellate Authority forms part of the cause of action and that the presence of a part of the cause of action within the Court's territorial jurisdiction suffices to maintain the petition. The Court therefore disagreed with preliminary objections to maintainability on territorial grounds. [Paras 10, 11]

The writ petition is maintainable before this High Court on territorial jurisdiction grounds.

Constitution of Bench under Section 6(7) PMLA - maintainability of party-initiated application for transfer to two-member Bench - Whether a party may move an application under Section 6(7) PMLA seeking constitution/transfer to a two-member Bench of the Adjudicating Authority. - HELD THAT: - The Court examined Section 6(7) and held that the provision contemplates the Chairperson or a Member, during the course of hearing, forming an opinion that a matter ought to be heard by a Bench of two Members and referring/transferring the matter accordingly. The provision does not envisage a party-initiated right to seek constitution of a two-member Bench. Allowing party applications for such transfer could invite delay tactics and frustrate the time-sensitive regime of provisional attachments under the PMLA. Absent any opinion by the Adjudicating Authority that a two-member Bench is required, an application by the petitioner for constitution of such a Bench is of doubtful maintainability. The Court further observed that ordinarily a single Member can constitute the Adjudicating Authority and adjudicate matters unless a special case is made out. [Paras 12, 13, 14, 15, 16]

An application by a party seeking constitution of a two-member Bench under Section 6(7) PMLA is not envisaged by the provision and is not maintainable as of right; the power to refer lies with the Chairperson or Member during hearing.

Availability of alternative remedy of appeal under Section 26 PMLA - principles of natural justice (oral hearing) - Whether the petitioner was entitled to invoke extraordinary writ jurisdiction notwithstanding the availability of appeal under Section 26 and whether denial of an oral hearing warranted interference. - HELD THAT: - The Court observed that the appropriate remedy to challenge orders of the Adjudicating Authority is an appeal under Section 26 of the PMLA, and that the Tribunal's wide powers make the appellate remedy efficacious. The Court found no grounds for exercise of extraordinary writ jurisdiction under Article 226 in the present case. Although the petitioner contended that the application for transfer was rejected without an oral hearing, the Court did not find sufficient basis to override the availability of the statutory appellate remedy or to exercise extraordinary jurisdiction on that ground. [Paras 11, 17]

Petitioner should be relegated to the remedy of appeal under Section 26; no occasion to exercise extraordinary writ jurisdiction was made out.

Administrative direction for constitution of multiple Benches of the Adjudicating Authority - Administrative need for timely constitution of Chairperson and members of the Adjudicating Authority and constituting multiple Benches. - HELD THAT: - Recognising the heavy volume of cases under the PMLA and that the Act provides for a Chairperson and other members and separate Benches, the Court recorded that while a single Member can constitute the Adjudicating Authority, there is an imperative need for multiple Benches to function. The Court directed the Central Government to take expeditious steps to appoint the Chairperson and other members of the Adjudicating Authority to enable constitution of multiple Benches. [Paras 18, 19]

Central Government directed to appoint the Chairperson and other members of the Adjudicating Authority within eight weeks to facilitate constitution of multiple Benches.

Final Conclusion: Writ petition disposed of: petition held maintainable on territorial grounds but the petitioner was not entitled to challenge the Adjudicating Authority's rejection of the party-filed application for a two-member Bench by invoking extraordinary writ jurisdiction; petitioner to pursue appeal under Section 26, and Central Government directed to promptly fill vacancies and constitute multiple Benches of the Adjudicating Authority within eight weeks.

Offence of money-laundering - Proceeds of crime - PMLA Section 45 twin conditions for grant of bail - Independence of PMLA investigation from outcome of predicate/scheduled offence - Parity in grant of bail

PMLA Section 45 twin conditions for grant of bail - Offence of money-laundering - Proceeds of crime - Application for bail under PMLA - HELD THAT: - The Court declined bail because the twin conditions of Section 45 of the PMLA are not satisfied on the material before it. At this stage the Court was not satisfied that there are reasonable grounds for believing that the applicant is not guilty of the offence alleged or that he is not likely to commit an offence while on bail. The Court noted that the proceeds of crime involved are substantial and the applicant is based in Abu Dhabi, which raises a risk of absconding or impeding the trial; the question of guilt is to be tried by the trial court. Reliance was placed on statutory text and appellate precedents interpreting the special object and autonomous operation of PMLA investigations and the requirement of Section 45 for grant of bail in PMLA cases. [Paras 22, 24]

Bail application rejected as the twin conditions under Section 45 of the PMLA are not met.

Independence of PMLA investigation from outcome of predicate/scheduled offence - Offence of money-laundering - Effect of non-prosecution or closure of predicate/scheduled offences on PMLA prosecution - HELD THAT: - The Court held that prosecution under the PMLA is independent of the ultimate result of the predicate/scheduled offence. A person may not have been named or prosecuted in the predicate offence but may still be implicated for money laundering if investigation reveals complicity in laundering proceeds of crime. The Court referenced and applied reasoning in earlier authorities to support that ED's investigation under PMLA continues regardless of closure or outcome of the predicate proceedings. [Paras 20, 21]

Non-inclusion of the applicant in the predicate FIRs does not preclude his prosecution for money laundering under the PMLA.

Parity in grant of bail - PMLA Section 45 twin conditions for grant of bail - Claim for parity with co-accused who was granted bail - HELD THAT: - The Court rejected the applicant's plea for parity with co-accused Sidhique Kappan. The Court found the role attributed to Kappan was materially different and comparatively limited (primarily conspiracy allegations with minimal financial transactions), whereas the applicant's alleged role involved significant fund movements and connection with large sums and foreign nexus. Therefore parity was not available. [Paras 12, 25]

Parity claim denied because the applicant's alleged role and transactions differ materially from the co-accused who obtained bail.

Trial expedition - Offence of money-laundering - Direction to trial court to conclude trial expeditiously - HELD THAT: - In view of the rejection of bail and the pendency of trial, the High Court directed the trial court to conclude the trial with expedition, preferably within six months, by fixing short dates and avoiding unnecessary adjournments, and authorised the trial court to take coercive steps if parties do not cooperate. [Paras 27]

Trial court directed to conclude trial, preferably within six months, with liberty to take coercive steps for non-cooperation.

Final Conclusion: Bail application under the PMLA is rejected because the Court was not satisfied as to the twin conditions of Section 45; the PMLA investigation is independent of predicate offence outcomes and non naming in predicate FIRs does not bar PMLA prosecution; parity with a co accused granted bail was refused on factual distinctions; the trial court was directed to conclude the trial expeditiously, preferably within six months.

Extension of time to reply to show cause notice - absence of statutory time limit for submission of reply under Section 8(1) of PMLA - computation of the 180 days period under the third proviso to Section 5(1) of PMLA - effect of a High Court stay on the period of attachment - precedential effect of High Court orders versus fact specific decisions

Extension of time to reply to show cause notice - absence of statutory time limit for submission of reply under Section 8(1) of PMLA - Legitimacy of the Single Judge's grant of two months' extension for filing reply to show cause notices issued under Section 8(1) of PMLA. - HELD THAT: - The Court held that the statute does not prescribe a specific time limit for submission of reply to a show cause notice under Sub Section (1) of Section 8. Given the absence of a statutory deadline for the reply itself, a High Court may, in appropriate facts, grant limited time for filing the reply. The learned Single Judge granted two months' extension as a matter of judicial discretion to enable effective response where multiple properties were attached and detailed explanations were required. That grant was not shown to cause prejudice to the Enforcement Directorate in the circumstances and, subject to the temporal caveat explained below, did not require interference. [Paras 11]

The grant of two months' extension to file replies is permissible and is not interfered with.

Computation of the 180 days period under the third proviso to Section 5(1) of PMLA - effect of a High Court stay on the period of attachment - Whether the period extended by the High Court for filing replies would prejudice the Enforcement Directorate by affecting the 180 day limit for provisional attachment under Section 5(1). - HELD THAT: - The Court analysed the interplay between Sections 5 and 8 and observed that the third proviso to Sub Section (1) of Section 5 protects the Directorate's interest by excluding from computation of the 180 days the period during which proceedings under Section 5 are stayed by the High Court and by allowing a further period not exceeding 30 days from vacation of such stay. The Division Bench characterised the Single Judge's direction as amounting to a stay for computation purposes and therefore held that the period of extension would be excluded while arriving at the figure of 180 days. The Court noted the Single Judge had expressly so clarified and recorded that if respondents fail to file replies by the expiry of the extended period (noted to expire on 22.02.2023), the Directorate would be free to proceed according to law. [Paras 9, 12]

The period granted by the High Court is to be excluded for computing the 180 days under the third proviso to Section 5(1); the Enforcement Directorate's statutory timeline remains protected and it may proceed if replies are not filed within the extended period.

Precedential effect of High Court orders versus fact specific decisions - Whether the learned Single Judge's order has binding precedential effect adversely affecting the Enforcement Directorate in other proceedings. - HELD THAT: - The Division Bench emphasised that High Court orders are rendered on the facts and circumstances of the particular case and do not necessarily lay down a binding ratio applicable to other matters. The Court observed that the learned Single Judge did not propound any general binding legal principle in this instance; hence concerns about the order setting a precedent were misplaced. [Paras 13]

The Single Judge's order is fact specific and does not constitute a binding precedent; therefore, no interference on that ground is called for.

Final Conclusion: Writ appeal dismissed. The Single Judge's grant of two months' extension for filing replies is upheld, subject to the clarification that the period of extension is to be excluded while computing the 180 days under the third proviso to Section 5(1) of PMLA; if replies are not filed within the extended period (expired on 22.02.2023), the Enforcement Directorate is free to proceed in accordance with law. No order as to costs.

Cenvat credit utilization restriction - Exempted services versus non-taxable territory (services to Jammu & Kashmir) - Supplies to SEZ units treated as export - overriding effect of SEZ Act - Retrospective amendment to Rule 6 (sub rule 6A) and its effect - Temporal scope of prescribed credit utilization quota (no monthly/periodic time bar) - Extended period of limitation - requirement of suppression or wilful misstatement

Exempted services versus non-taxable territory (services to Jammu & Kashmir) - Cenvat credit utilization restriction - Whether services provided in the State of Jammu & Kashmir attract Rule 6 of the Cenvat Credit Rules as 'exempted services' thereby triggering reversal or disallowance of Cenvat credit. - HELD THAT: - The Tribunal held that services rendered in Jammu & Kashmir are not chargeable to service tax by virtue of Section 64 of the Finance Act and therefore are not 'exempted services' within the meaning of the Cenvat Credit Rules. Rule 6 applies where output services are chargeable as taxable services as well as exempted services. Since services to J&K fall outside the levy and are not rendered taxable then subsequently exempted by notification, they cannot be treated as 'exempted services' for the purpose of Rule 6(2)/(3). Accordingly the obligation to maintain separate accounts or to reverse/utilize credit under Rule 6 does not arise in respect of services provided to J&K. [Paras 5]

Rule 6 of the Cenvat Credit Rules is not attracted to services rendered in Jammu & Kashmir and no demand on that basis is sustainable.

Supplies to SEZ units treated as export - overriding effect of SEZ Act - Retrospective amendment to Rule 6 (sub rule 6A) and its effect - Cenvat credit utilization restriction - Whether provision of services to SEZ units/developers required reversal or disallowance of Cenvat credit under Rule 6, or whether such supplies are excluded from Rule 6 by reason of SEZ/retrospective amendment. - HELD THAT: - The Tribunal examined the retrospective amendment effected by Section 144 of the Finance Act, 2012 inserting sub rule (6A) into Rule 6 with retrospective effect from 10-02-2006 to 28-02-2011, which exempts application of sub rules (1)-(4) where taxable services are provided, without payment of service tax, to a SEZ unit or developer for authorized operations. The Tribunal further recognised the SEZ Act's deeming of supplies from DTA to SEZ as 'export' and the overriding effect of the SEZ Act. On these bases the Tribunal held that services to SEZ units during the relevant period could not be treated as 'exempted services' for invoking Rule 6(3)(c) and that the assessee was entitled to avail Cenvat credit; therefore demands premised on reversal for SEZ supplies do not sustain. [Paras 5]

Services supplied to SEZ units/developers are not subject to reversal under Rule 6 for the impugned period; the retrospective amendment and SEZ Act principles preclude the demand.

Temporal scope of prescribed credit utilization quota (no monthly/periodic time bar) - Cenvat credit utilization restriction - Whether excess utilization of Cenvat credit in a period contrary to the percentage quota (20%/35%) gives rise to an immediate demand where the Rules do not fix a time frame for utilization. - HELD THAT: - Relying on the pari materia precedent concerning the earlier Service Tax Credit Rules, the Tribunal held that Rule 6(3)(c)'s restriction is a limitation on utilization and does not prescribe a specific time frame for exercising the residual entitlement. The excess utilization in an earlier month does not automatically translate into a sustainable demand where the assessee remained entitled to utilize the balance in subsequent periods. Given that the Rules are silent on temporal fixation for utilization, demand solely on the ground of earlier excess utilization was unsustainable. [Paras 5]

Demand based solely on alleged excess utilization of credit during the period is not sustainable as Rule 6(3)(c) does not impose a time bound restriction on utilization.

Extended period of limitation - requirement of suppression or wilful misstatement - Whether the demand could be sustained by invoking the extended period of limitation in the absence of suppression, wilful misstatement, or fraud. - HELD THAT: - The Tribunal found that the assessee had disclosed service tax liability and mode of payment in ST-3 returns and had presented books and returns during audit; there was no finding of suppression or mala fide intention to evade tax. The controversy arose from interpretation of entitlement to credit and maintenance of accounts, not from concealment. Reliance on authorities establishing that extended limitation requires suppression or wilful misstatement led the Tribunal to conclude that invocation of extended period was impermissible. [Paras 5]

Extended period of limitation cannot be invoked; the demands are time barred in the absence of suppression or wilful misstatement.

Final Conclusion: Impugned demand confirmed by the Commissioner is set aside. The Tribunal allowed the appeal, holding that Rule 6 did not apply to services to Jammu & Kashmir, that SEZ supplies were excluded by virtue of the retrospective amendment and SEZ law, that the utilization quota is not time bound, and that extended limitation cannot be invoked without suppression; consequential relief granted.

Refund of accumulated CENVAT credit - sanction of refund under Rule 5 of the CENVAT Credit Rules, 2004 - eligibility of input services for refund - res judicata and binding effect of earlier tribunal decision - inadmissible scrutiny of Rule 2(l) at refund sanction stage without notice under Rule 14 - acceptance of attested photocopies as secondary evidence under Section 65 of the Indian Evidence Act - verification of invoices and production of original/missing documents - mismatch of FIRC number and comparison by receipt date - refund of service tax paid under Reverse Charge Mechanism where payment falls post the quarter of service

Refund of accumulated CENVAT credit - res judicata and binding effect of earlier tribunal decision - sanction of refund under Rule 5 of the CENVAT Credit Rules, 2004 - Allowability of the refund claims for the periods January 2012 to March 2015 held barred from re examination and entitled to sanction in favour of the appellant. - HELD THAT: - The Tribunal found that admissibility of the disputed credits had been finally determined in the appellant's own earlier decision reported at 2016 (44) STR 454 (Tri.-Mum.), which describes each category of credit. That unchallenged decision operates as res judicata and binds subsequent adjudication. The Tribunal reiterated its view, following precedents including K Line Ship Management India Pvt. Ltd. and Microsoft Research Lab India Pvt. Ltd., that refund claims under Rule 5 should not be denied by re examining eligibility of input services without issuing notice under Rule 14; hence the Commissioner(Appeals) erred in upholding rejections. Consequently the appeals at Sr. Nos. (i)-(x) succeed and refunds are to be released with interest within three months. [Paras 5, 8]

Appeals (i)-(x) allowed; respondent directed to release refunds with interest within three months.

Verification of invoices and production of original/missing documents - sanction of refund under Rule 5 of the CENVAT Credit Rules, 2004 - Certain refund claims remanded for verification and production of disputed or missing invoices to enable sanction of refund by the original authority. - HELD THAT: - The Tribunal observed that in specific appeals the Commissioner(Appeals) rejected refunds for non production of invoices or because the appellant's name did not appear on invoices. Given the appellant's assertion that relevant invoices are in its possession and that some documents may be with departmental offices, those appeals were remanded to the original authority to verify the disputed invoices and allow production of missing invoices so that refunds can be considered and granted if substantiated. [Paras 6, 8]

Appeals at Sr. Nos. (xi) & (xii) remanded for verification and production of missing/disputed invoices; refund to be facilitated by the original authority.

Mismatch of FIRC number and comparison by receipt date - refund of service tax paid under Reverse Charge Mechanism - Claims rejected on account of FIRC number mismatch and Service Tax paid under Reverse Charge Mechanism after the quarter remanded to original authority for examination. - HELD THAT: - The Tribunal noted that the Commissioner(Appeals) did not consider Tribunal decisions holding that slight numerical mismatches in FIRC may be resolved by comparing receipt dates and other identifying particulars, and that payments made shortly after the quarter under reverse charge may still be examinable for refund. These issues were therefore remanded to the original authority for examination in light of the Tribunal's precedent practice so that admissible refunds may be sanctioned. [Paras 6, 8]

Appeals at Sr. Nos. (xiii) & (xv) remanded to original authority for examination of FIRC mismatch and reverse charge timing issues.

Acceptance of attested photocopies as secondary evidence under Section 65 of the Indian Evidence Act - sanction of refund under Rule 5 of the CENVAT Credit Rules, 2004 - Refund claim rejected for want of original documents remanded with direction that attested photocopies may be accepted as secondary evidence under Section 65 and refund considered accordingly. - HELD THAT: - The Tribunal held that where originals are lost or in the possession of the department and not produced through no fault of the claimant, Section 65 permits secondary evidence of documents. The Commissioner(Appeals) should have invoked that provision or taken an undertaking to guard against double claims. Given the appellant's statements and acknowledgements indicating departmental custody of originals, the appeal was remitted for the original authority to grant refund on the basis of attested photocopies as secondary evidence, subject to appropriate safeguards. [Paras 7, 8]

Appeal at Sr. No. (xiv) remanded for grant of refund on the basis of attested photocopies accepted as secondary evidence; original authority may take suitable undertaking.

Inadmissible scrutiny of Rule 2(l) at refund sanction stage without notice under Rule 14 - sanction of refund under Rule 5 of the CENVAT Credit Rules, 2004 - It is not permissible to test eligibility under Rule 2(l) at the stage of sanctioning refund under Rule 5 without issuance of notice under Rule 14; refund denial on that basis is unsustainable. - HELD THAT: - The Tribunal observed that the department is not entitled to undertake a fresh admissibility enquiry into whether inputs were used in providing output services (Rule 2(l)) at the refund sanction stage under Rule 5, without following the procedural safeguards including notice under Rule 14. This principle, reiterated with reference to earlier Tribunal decisions, underpinned allowance of the primary set of appeals and the direction to release refunds. Where denial occurred solely for such examination, it was held to be improper. [Paras 5, 6]

Denial of refund based on re examination of Rule 2(l) eligibility without notice is unsustainable; appeals allowed to that extent.

Final Conclusion: The Tribunal allowed the first set of appeals relating to January 2012-March 2015 directing release of refunds with interest; other appeals were remanded to the original authority for (a) verification and production of disputed invoices, (b) examination of FIRC mismatches and reverse charge timing issues, and (c) grant of refund on the basis of attested photocopies as secondary evidence, with all directions to be complied within three months.

Penalty under section 76 of the Finance Act - re quantification of penalty - set aside of penalty where the underlying demand is set aside

Penalty under section 76 of the Finance Act - set aside of penalty where the underlying demand is set aside - Validity of the penalty imposed under section 76 in proceedings arising out of the first show cause notice - HELD THAT: - The Tribunal had set aside the demand relating to the first show cause notice on the ground that the extended period of limitation could not be invoked. Since the demand proposed in the first show cause notice has been set aside, the imposition of penalty under section 76 in proceedings arising out of that first show cause notice cannot be sustained. The penalty imposed under section 76 in respect of the first show cause notice is therefore set aside. [Paras 13]

Penalty under section 76 in respect of the first show cause notice (01.10.2005 to 30.09.2010) is set aside.

Penalty under section 76 of the Finance Act - re quantification of penalty - Treatment of penalties under section 76 in respect of the second and third show cause notices - HELD THAT: - The quantification of penalty under section 76 must reflect the statutory method of computation, which depends on the period starting the day after the due date until actual payment. The Tribunal's final order dated 22.12.2016 affected the demand amounts for the second and third show cause notices; accordingly, the matter of penalty quantification in respect of those notices requires fresh determination by the Commissioner after the demand is re quantified in light of the Tribunal's decision. Therefore the penalty levied under section 76 for the second and third show cause notices is not finally upheld but remitted for fresh determination consistent with section 76 and the Tribunal's findings. [Paras 14, 15]

Penalty under section 76 in respect of the second and third show cause notices (01.10.2010 to 30.09.2011 and 01.10.2011 to 30.09.2012) is remitted to the Commissioner for re quantification and fresh determination.

Final Conclusion: The Department's appeal is allowed in part: the penalty under section 76 imposed in relation to the first show cause notice is set aside; penalties for the second and third show cause notices are remitted to the Commissioner for re quantification and fresh determination in light of section 76 and the Tribunal's earlier order.

CENVAT credit entitlement - nexus with output service - eligibility under rule 3 of CENVAT Credit Rules, 2004 - rule 6(5) of CENVAT Credit Rules, 2004 - allocation between taxable and exempted services under rule 6(3) - Point of Taxation Rules, 2011 - remand for fresh adjudication - principles of natural justice

Rule 6(5) of CENVAT Credit Rules, 2004 - allocation between taxable and exempted services under rule 6(3) - Relevance of rule 6(5) for entitlement to CENVAT credit in the impugned proceedings - HELD THAT: - The Tribunal held that rule 6(5) has only limited application and is not germane to the assessee's entitlement where credit on eligible input/input service was properly availed in accordance with rule 3. The subsequent rescission of rule 6(5) after 1 April 2011 does not, by itself, extinguish entitlement; it only removes a specific facilitation and requires that where deployment between output and exempted services was not segregated, allocation must follow rule 6(3). The adjudicating authority's reliance on the existence or otherwise of rule 6(5) was therefore of no consequence to the core question of entitlement and was correctly treated as irrelevant by the Tribunal, particularly where the notice did not invoke failure to allocate or seek recourse to rule 14.

Rule 6(5) is not determinative of entitlement in these proceedings and is irrelevant to the adjudication of the assessee's right to credit where rule 3 entitlement is established.

CENVAT credit entitlement - eligibility under rule 3 of CENVAT Credit Rules, 2004 - Point of Taxation Rules, 2011 - Whether there is a time limit under rule 3 for availment of CENVAT credit and the legal significance of delay in taking credit - HELD THAT: - The Tribunal observed that rule 3 contains no temporal bar for availment of credit and that credit once availed and unutilised continues in the account. It noted the changed significance of timing after the notification of the Point of Taxation Rules, 2011, which attached importance to the time of rendering of service and payment, but emphasised that the adjudicating authority failed to examine relevant precedents or the factual circumstances relied upon by the parties. The Tribunal also recorded that the assessee, while citing authorities, did not explain the reasons for delay in availing credit, a matter relevant to adjudication.

There is no express time-limit in rule 3 for availment of credit; timing becomes legally significant with Point of Taxation Rules, 2011, and delay is a fact-specific matter to be considered by the adjudicating authority.

Nexus with output service - CENVAT credit entitlement - remand for fresh adjudication - principles of natural justice - Validity of the adjudicating authority's denial of credit for lack of nexus and for delay in availment - HELD THAT: - The Tribunal found the adjudicating order's treatment of the alleged lack of nexus to be cursory and legally inadequate. The impugned finding merely listed types of services and concluded they were not directly concerned with output services without reasoned analysis or examination of cited precedents. Given this absence of legal reasoning and failure to address the parties' authorities and factual explanations, the Tribunal could not uphold, modify or reject the order on the record before it. The Tribunal therefore set aside the impugned order and remanded the matter to the original authority for fresh disposal, directing that the principles of natural justice be observed and that the authority consider entitlement, nexus, timing, and any allocation under rule 6(3) where relevant.

Denial of credit for lack of nexus and for delay is not sustained on the present record; matter remitted to the original authority for fresh adjudication in accordance with law and principles of natural justice.

Final Conclusion: The Tribunal set aside the impugned order and remitted the matter for fresh disposal: rule 6(5) was held not to be determinative of entitlement; rule 3 contains no express time bar though timing gained relevance post Point of Taxation Rules, 2011; and the adjudicating authority must re-examine entitlement, nexus with output services and any allocation or timing issues while observing principles of natural justice.

Availment of CENVAT Credit despite invoices not bearing assessee's registered address - registration of service receiver premises not a precondition for availment of CENVAT Credit - burden of proof on the assessee to establish that output services were rendered - absence of statutory requirement in the CENVAT Credit Rules, 2004 for premises registration as condition for credit

Availment of CENVAT Credit despite invoices not bearing assessee's registered address - registration of service receiver premises not a precondition for availment of CENVAT Credit - absence of statutory requirement in the CENVAT Credit Rules, 2004 for premises registration as condition for credit - burden of proof on the assessee to establish that output services were rendered - Whether CENVAT credit can be denied solely because invoices were not addressed to the premises shown in the assessee's registration certificate. - HELD THAT: - The Tribunal found that the dispositive question was whether invoices not bearing the registered address preclude availment of credit. Precedents relied upon by the appellant uniformly held that registration of premises is not a statutory precondition for claiming CENVAT credit. The Commissioner (Appeals) sought to distinguish those precedents on the ground that, in the cited cases, premises were subsequently registered; that distinction was found unsustainable because the leading precedent itself rejects a requirement of prior registration and no provision in the CENVAT Credit Rules, 2004 imposes such a restriction. While the burden lies on the assessee to prove that output services were rendered (a point noted by the Commissioner (Appeals)), the record showed production of invoices and supporting agreements indicating use of hired studios during the relevant period. The Tribunal also accepted the registration certificate produced for the appellant. On that basis the Tribunal held that denial of credit solely on the ground of variance in invoice address from the registered address was contrary to the established legal position and to the rule framework, and therefore the Commissioner (Appeals) erred in upholding the denial. [Paras 6, 7]

Denial of CENVAT credit solely because invoices did not show the registered address was unsustainable; the appeal is allowed.

Final Conclusion: Appeal allowed. The order of the Commissioner (Appeals) denying CENVAT credit on the ground that invoices were not addressed to the registered premises is set aside; consequential relief, if any, to follow.

Cenvat credit - after sale service during warranty period - in or in relation to manufacture of excisable goods - Repair & Maintenance services - activities relating to business - place of removal

Cenvat credit - after sale service during warranty period - Repair & Maintenance services - in or in relation to manufacture of excisable goods - activities relating to business - Entitlement to cenvat credit on repair and maintenance services provided free of charge during the warranty period for pumps manufactured and sold by the respondent. - HELD THAT: - The Tribunal found that the services for which cenvat credit was claimed were repair and maintenance of the excisable goods (pumps) provided during the warranty period and furnished free to the customers. The cost of such free servicing was held to be included in the transaction value of the pumps on which excise duty was discharged, and therefore formed part of the value of manufacture. The Tribunal held that such servicing is in relation to the manufacture of the final product and is a vital part of the respondent's business activity. Further, Rule 2(l)'s inclusion of "activities relating to business" covers the warranty servicing, bringing it within the scope of cenvatable inputs/services. Reliance was placed on earlier tribunal decisions, including Leroy Somer India Pvt. Ltd., which treated warranty repairs and maintenance provided on behalf of the manufacturer as activities relating to business entitling the manufacturer to take cenvat credit. Applying these principles to the facts, the Tribunal concluded that the respondent was entitled to the cenvat credit claimed. [Paras 4, 5]

Respondent entitled to cenvat credit on repair and maintenance services provided during the warranty period; revenue appeal dismissed and impugned order upheld.

Final Conclusion: The Tribunal dismissed the revenue's appeal and upheld the adjudicating authority's allowance of cenvat credit claimed by the manufacturer for repair and maintenance services supplied during the warranty period, holding such services to be in relation to manufacture and covered as activities relating to business.

Definition of "manufacture" under the Central Excise Act - eligibility for registration as a manufacturer under Central Excise Rules - revocation of registration under delegated notification powers - denial and recovery of CENVAT credit - claim for rebate on export after clearance on payment of duty - job work arrangements under CENVAT Credit Rules - jurisdictional limits of central excise vis a vis Customs/Foreign Trade Policy

Definition of "manufacture" under the Central Excise Act - eligibility for registration as a manufacturer under Central Excise Rules - Whether the appellant qualified for registration as a manufacturer under the Central Excise Act and Rules - HELD THAT: - The Tribunal held that the statutory definition of "manufacture", being inclusive and covering processes incidental or ancillary to completion of a manufactured product, does not, by itself, exclude a person who elects to be within the excise regime. The Central Excise Rules' registration requirement (rule 9) and the statutory definitions must be read together; the existence of arrangements such as job work or complex commercial engagements does not per se render an applicant ineligible. The court emphasised that a definition clarifies statutory expressions but cannot be used to read into the charging provision conditions not enacted by the legislature. Given that duty was discharged on the final product and the activities claimed (testing/inspection, end facing, job work) fall within the scope of processes encompassed by the definition, the appellant was properly fitted within the statutory concept of a registered manufacturer. [Paras 6, 7]

The appellant was eligible for registration as a manufacturer under the Central Excise Act and Rules.

Revocation of registration under delegated notification powers - denial and recovery of CENVAT credit - Validity of the revocation of the appellant's central excise registration and consequent disallowance/recovery of CENVAT credit - HELD THAT: - The Tribunal found that revocation contemplated by the delegated notification can be exercised only within the strict grounds authorised (breach of provisions or specific offences) and according to the procedure prescribed. The impugned revocation, which rested on a finding that the appellant's activity did not amount to "manufacture", was not sustainable where duty on the final product had been discharged and where statutory definitions and rules did not support exclusion. Relying on the principle affirmed in Creative Enterprises, if activity does not amount to manufacture there can be no levy, and once duty is levied and discharged, denial of credit on the basis of absence of "manufacture" lacks sanction. Consequently, revocation for the purposes of recovering CENVAT credit was not valid in law and the denial/recovery order could not stand. [Paras 10]

The revocation of registration and the denial/recovery of CENVAT credit were held invalid; the impugned orders were set aside.

Job work arrangements under CENVAT Credit Rules - claim for rebate on export after clearance on payment of duty - Whether use of job work arrangements and clearance on payment of duty with subsequent rebate/exemption affects the appellant's entitlement to CENVAT credit - HELD THAT: - The Tribunal observed that job work procedures permitted under the CENVAT Credit Rules and the recognized mechanism of clearing goods on payment of duty and claiming rebate upon export are legally permissible and do not, by themselves, disqualify the appellant from availing CENVAT credit. The court noted that different statutory schemes (central excise, customs/FTP, rebate mechanisms) must be treated separately and that central excise authorities cannot negate entitlements under excise law by reference to perceived commercial complexity or by importing concerns properly belonging to customs/FTP jurisdiction. The appellant had discharged duty on the final product and complied with job work requirements; therefore these arrangements did not justify denial of credit. [Paras 5, 6, 8]

The job work arrangements and clearance on payment of duty with claim for rebate did not disentitle the appellant from claiming and retaining CENVAT credit under central excise law.

Jurisdictional limits of central excise vis a vis Customs/Foreign Trade Policy - Whether central excise authorities could adjudicate alleged irregularities under the DFECC/FTP or import proceedings - HELD THAT: - The Tribunal declined to adjudicate on the propriety of imports or compliance with the DFECC/FTP scheme, observing that such matters fall within the domain of customs and FTP enforcement and were outside the competence of the central excise adjudicating authorities in these proceedings. The absence of concurrent or antecedent customs proceedings was noted, and the court restricted its review to matters determinable under central excise law (registration, levy, credit and rebate), leaving customs/FTP issues to the appropriate forum. [Paras 6]

Alleged irregularities under Customs/FTP were outside the jurisdiction of the central excise authorities in these proceedings and were not decided by the Tribunal.

Final Conclusion: The appeals were allowed; the Tribunal set aside the impugned orders of revocation of registration and recovery/denial of CENVAT credit, holding that the appellant qualified as a registered manufacturer, that revocation and credit denial were not sustainable in law, and that issues concerning Customs/FTP lay outside the remit of the central excise adjudication.

Promissory estoppel - remission of sales tax under incentive scheme - eligibility linked to investment within scheme period - discretionary power to relax conditions - transitional non obstante provision for carry forward of remission under Section 118(c) of WB VAT Act - no right to compel exercise of executive discretion by writ of mandamus - arbitrariness under Article 14

Promissory estoppel - arbitrariness under Article 14 - Whether the State breached any promise in the Incentive Scheme so as to invoke promissory estoppel and render its action arbitrary under Article 14. - HELD THAT: - The Court found that the State's promise, as crystallised by the Cabinet decision and the modified registration certificate, limited remission to investments totalling Rs. 194 crores and that remission on that amount was granted and fully utilised by the petitioner. There was no antecedent promise by the Government to allow remission for investments made after 31.03.2004. Consequently the petitioners failed to show that they relied upon any governmental promise extending to the disputed investment so as to attract promissory estoppel. In the absence of such a promise, there was no question of arbitrary withdrawal of benefits or a requirement for the State to disclose reasons as an exemption from liability; the State's action could not be characterised as arbitrary under Article 14 on the facts of the case. [Paras 18, 19, 34, 35]

No breach of promissory estoppel; State action not arbitrary and Article 14 not attracted.

Remission of sales tax under incentive scheme - eligibility linked to investment within scheme period - transitional non obstante provision for carry forward of remission under Section 118(c) of WB VAT Act - Whether investments made during 01.04.2005 to 31.12.2005 qualify for remission under the 1999 Incentive Scheme or under Section 118(c) of the WB VAT Act. - HELD THAT: - The scheme had a limited operative period from 01.04.1999 to 31.03.2004 and the Court held that the right to claim remission accrues only upon the investment being made within that operative period; otherwise the scheme would be rendered of unlimited duration contrary to its object. The Court interpreted Section 118(c) of the WB VAT Act as permitting carry forward of a balance unexpired period or balance eligible amount only where such balance existed as on the appointed day; since the investment of Rs. 23 crores was made after 31.03.2004 and no balance eligible amount in respect of that investment existed on the appointed day, Section 118(c) did not apply to entitle the petitioners to remission for that investment. [Paras 12, 24, 27, 28, 29]

Investments made during 01.04.2005 to 31.12.2005 do not qualify for remission under the scheme and Section 118(c) does not avail the petitioners for that investment.

Discretionary power to relax conditions - no right to compel exercise of executive discretion by writ of mandamus - Whether the Court can issue a writ of mandamus directing the State to exercise its statutory power to relax the conditions so as to grant remission for the disputed investment. - HELD THAT: - Section 44 of the 1994 Act confers a discretionary power upon the State to relax provisions relating to remission (the statute uses 'may'); such discretion must be exercised by the executive in public interest after considering specified factors. The Court emphasised that mere existence of a statutory power of relaxation does not create a legal right in favour of the petitioner to compel its exercise. The petitioners failed to demonstrate any legal right enforceable against the State or a failure to perform a statutory duty that would justify issuance of mandamus directing exercise of that discretion in their favour. [Paras 31, 32, 33]

No mandamus can be issued to compel the State to relax conditions and grant remission for the contested investment.

Final Conclusion: The writ petition is dismissed: the Tribunal's decision upholding the State's refusal to allow remission on the investment made during 01.04.2005 to 31.12.2005 is free from infirmity, promissory estoppel is not attracted, Section 118(c) of the WB VAT Act does not apply to that investment, and no mandamus lies to compel exercise of the State's discretionary power to relax conditions.

Quashing of recovery action pending remand - bank attachment in Form U - arbitrariness and non-application of mind in recovery proceedings - remand to statutory authority for fresh consideration - refund claim to be decided on merits

Quashing of recovery action pending remand - bank attachment in Form U - arbitrariness and non-application of mind in recovery proceedings - Validity of the recovery notice dated 06.02.2023 and the consequential bank attachment in Form U dated 22.02.2023 against the petitioner - HELD THAT: - The Court found that the statutory Appellate Authority (second respondent) had quashed and remanded the assessment orders - in respect of 2016-17 entirely and in part for 2015-16 - to the assessing authority for fresh consideration. In that factual and legal matrix, the first respondent proceeded to issue the impugned recovery notice and effect bank attachment without having a subsisting assessment order to sustain such recovery and without application of mind. The attachment of the petitioner's bank account and the withdrawal effected were therefore held to be arbitrary and unsustainable. Having regard to the quash and remand by the Appellate Authority, the Court concluded that the recovery notice and the Form U attachment cannot stand and must be quashed. [Paras 1, 2, 5, 9, 10]

The recovery notice dated 06.02.2023 and the bank attachment in Form U dated 22.02.2023 are quashed and set aside.

Remand to statutory authority for fresh consideration - refund claim to be decided on merits - Procedure for refund of amounts withdrawn from the petitioner's bank account and directions for its adjudication - HELD THAT: - The Court recognised that a sum had been withdrawn from the petitioner's bank account despite the quash/remand by the Appellate Authority. Rather than ordering an immediate refund, the Court directed that the petitioner must make a representation to the first respondent seeking refund. The Court mandated that on receipt of such representation within two weeks, the first respondent shall consider and pass final orders on the representation on merits and in accordance with law within four weeks thereafter. This constitutes a remand to the first respondent to adjudicate the refund claim within the specified timeline. [Paras 6, 7, 8, 10]

Petitioner to submit representation within two weeks; on receipt, the first respondent to decide the refund claim on merits within four weeks.

Final Conclusion: Writ petition allowed; impugned recovery notice dated 06.02.2023 and bank attachment in Form U dated 22.02.2023 quashed. Petitioner permitted to seek refund by representation to the first respondent within two weeks, which the first respondent shall decide on merits within four weeks; connected proceedings closed; no costs.

Principles of natural justice - right to personal hearing - service and dispatch of orders - quashing and remand for fresh consideration - treatment of impugned order as show cause notice

Principles of natural justice - right to personal hearing - quashing and remand for fresh consideration - Impugned assessment orders dated 29.10.2019 were passed without affording personal hearing and therefore violated principles of natural justice. - HELD THAT: - The Court found that the assessment orders, though dated 29.10.2019, were dispatched only on 27.01.2023 and received by the petitioner on 30.01.2023. The assessment orders themselves disclose that no personal hearing was afforded to the petitioner. In view of the absence of an opportunity of personal hearing, the orders suffer from breach of the principles of natural justice. The respondent-Department has recorded instructions to re-do the assessment and is prepared to proceed afresh. Accordingly, the Court quashed the impugned assessment orders and remanded the matters to the first respondent for fresh consideration on merits and in accordance with law, with a direction to adhere to principles of natural justice including granting the right of personal hearing; final orders are to be passed within twelve weeks from receipt of this order. The petitioner's authorised representative was specifically directed to appear for personal hearing on the stated date and time. [Paras 6, 7, 9, 11]

Impugned assessment orders dated 29.10.2019 quashed; matters remanded to the first respondent for fresh consideration and final orders within twelve weeks after affording personal hearing.

Service and dispatch of orders - treatment of impugned order as show cause notice - In W.P. No. 4385 of 2023 the impugned assessment order was not preceded by a proper show cause notice and is to be treated as a show cause notice permitting the petitioner to reply. - HELD THAT: - The Court observed that a proper show cause notice had not been sent in respect of W.P. No. 4385 of 2023. Given the defective initiation of the proceeding and the absence of proper service, the Court treated the impugned assessment order in that petition as a Show Cause Notice and permitted the petitioner to submit a reply which the respondent must consider while passing the final orders on remand. [Paras 10, 11]

Impugned assessment order in W.P. No. 4385 of 2023 treated as a Show Cause Notice; petitioner permitted to file a reply to be considered by the respondent on remand.

Final Conclusion: The writ petitions are allowed in part: the assessment orders dated 29.10.2019 for the assessment years 2013-14 to 2016-17 are quashed and remanded to the first respondent for fresh consideration in accordance with law and after granting personal hearing; in W.P. No. 4385 of 2023 the impugned order is treated as a show cause notice and the petitioner is permitted to reply; final orders to be passed within twelve weeks.

Priority to secured creditors - Non-obstante clause and overriding effect of central enactments - Priority under Section 31B of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Priority under Section 26E of the SARFAESI Act - Bona fide purchaser - Quashing of revenue entry/attachment

Priority to secured creditors - Non-obstante clause and overriding effect of central enactments - Priority under Section 31B of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Priority under Section 26E of the SARFAESI Act - Priority of secured creditor's dues over State tax dues - HELD THAT: - The Court held that debts due to a secured creditor shall be paid in priority over other debts and Government dues by virtue of the non-obstante provision inserted as Section 31B in the RDB Act and the corresponding provision in SARFAESI (Section 26E). The Court relied on the legislative purpose of the central enactments to facilitate speedy recovery by secured creditors and on earlier decisions (including Kalupur Commercial Cooperative Bank Ltd.) which interpreted the later central provisions as giving precedence to secured creditors even where a State law creates a statutory charge. The Court also accepted that a statutory charge under the State VAT law (Section 48) arises only after assessment crystallises the liability, and where the secured creditor's rights and possession/pre-emptive steps precede crystallisation, the central priority provisions will prevail. Applying these principles, the Bank as secured creditor had first right to realise the secured asset and its dues enjoy priority over the State tax charge. [Paras 8]

The secured creditor (Bank of Baroda) has priority over State tax dues; Section 31B (and Section 26E) gives secured creditors precedence over Government dues.

Bona fide purchaser - Quashing of revenue entry/attachment - Registration of sale deed - Entitlement of the auction purchaser to protection and relief from the registered State revenue entry - HELD THAT: - The Court found that the petitioner was a bona fide purchaser at the public e-auction conducted by the Recovery Officer, having paid the full sale consideration and received a sale certificate. Given the legal priority of the secured creditor and the settled position that the mortgage and recovery under central enactments supersede subsequent State charges, the petitioner cannot be made liable for the State's dues. Accordingly, the Court held that the revenue entry (Entry No.6209) registering the State charge must be quashed to protect the purchaser's title and directed the revenue authority to register the sale deed executed between the petitioner and the Recovery Officer/Bank. The State Tax Authority was left free to pursue recovery of its dues against appropriate persons by appropriate proceedings without disturbing the petitioner's possession or title. [Paras 8, 10, 11]

Revenue Entry No.6209 is quashed; petitioner is declared bona fide purchaser and absolute owner for purposes of registration, and the Sub-Registrar is directed to register the sale deed.

Final Conclusion: Writ petition allowed: the court quashed Revenue Entry No.6209 and declared the petitioner a bona fide purchaser with valid title arising from the Recovery Officer's auction; secured creditor's priority under the central enactments prevails over the State tax charge, and the sale deed is to be registered while the State may pursue recovery against appropriate persons by lawful proceedings.

Pre-deposit for admission of appeal - prima facie consideration at pre-deposit stage - reassessment passed during COVID-19 lockdown without opportunity of hearing - carried forward input tax credit treated as pre-deposit - remand for fresh adjudication and stay of recovery pending re-assessment

Pre-deposit for admission of appeal - prima facie consideration at pre-deposit stage - Whether the Tribunal was justified in directing payment of pre-deposit without addressing the appellant's prima facie case, particularly where reassessment had been passed without hearing during the COVID-19 lockdown. - HELD THAT: - The Court accepted that the Tribunal is obliged to examine whether a strong prima facie case has been made out before insisting on pre-deposit for entertainment of an appeal. Where hearing was not afforded because reassessment was passed during the lockdown, the Tribunal ought to have regarded that deprivation of opportunity when deciding pre-deposit. Applying the approach adopted in Kavya Marketing, the Court held that refusal to address the prima facie case and insistence on pre-deposit without reasons amounted to an error. In the present facts the chronology-provisional assessment, subsequent audit assessment, and a reassessment effected without opportunity of hearing during the pandemic-required the Tribunal to consider whether pre-deposit should be demanded; it failed to do so adequately. [Paras 12, 13, 14]

The Tribunal's direction for pre-deposit was quashed insofar as it failed to consider the appellant's prima facie case and the lack of opportunity to be heard during the COVID-19 lockdown.

Carried forward input tax credit treated as pre-deposit - remand for fresh adjudication and stay of recovery pending re-assessment - Whether the carried forward input tax credit could be treated as pre-deposit and the matter remanded for reassessment with protection against recovery. - HELD THAT: - Having quashed the Tribunal's pre-deposit direction, the Court considered appropriate interim and consequential measures. Noting that the Tribunal had taken cognizance of the appellant's carried forward input tax credit, the Court directed that the carried forward ITC shall continue to operate as pre-deposit for the purpose of prosecution of the appeal. The matter was remitted to the First Appellate Authority to pass reassessment afresh, with a direction to decide within a stipulated period and with the respondent restrained from raising demand until final determination by the First Appellate Authority. The Court emphasised cooperation by the appellant and confined its intervention to the peculiar facts so as not to create precedent. [Paras 14, 15, 16]

Carried forward input tax credit to the appellant shall operate as pre-deposit; the reassessment is remitted to the First Appellate Authority for fresh decision within 12 weeks, and no demand shall be raised until final determination.

Final Conclusion: The petition is allowed: the Tribunal's direction for payment of pre-deposit is quashed for failure to consider the appellant's prima facie case and the absence of opportunity to be heard during the COVID-19 lockdown; the carried forward input tax credit shall stand as pre-deposit, the reassessment is remanded to the First Appellate Authority for fresh adjudication within 12 weeks, and recovery is stayed until final disposal.

Non-appearance of complainant - proviso to sub-section (1) of Section 256 of the Code - proceeding on basis of recorded evidence - application under Section 311 of the Code - acquittal for non-appearance - power to reject Section 311 application and proceed

Non-appearance of complainant - proviso to sub-section (1) of Section 256 of the Code - proceeding on basis of recorded evidence - application under Section 311 of the Code - power to reject Section 311 application and proceed - Whether the learned Magistrate was justified in dismissing the complaints for non-appearance of the complainant despite the complainant's evidence having been recorded and an application under Section 311 being pending. - HELD THAT: - The Court held that the proviso to sub section (1) of Section 256 permits the Magistrate to dispense with the personal attendance of the complainant and proceed where the court is satisfied that personal attendance is not necessary, for example where the complainant's evidence has been recorded. Prior decisions were noted to the effect that where prosecution evidence is closed the court should not mechanically acquit the accused for non appearance of the complainant but may proceed to decide the matter on merits. In the present case the Special Leave Petitions averred and there was no specific denial that the complainant's cross examination had been completed (and adopted in the related matters) and that an application under Section 311 had been filed; neither the Magistrate nor the High Court took these facts into account. The Magistrate could, if the complainant failed to appear to press a Section 311 application, have rejected that application and proceeded on the basis of the available evidence rather than straightaway dismissing the complaints and ordering acquittal. For these reasons the orders of dismissal/acquittal were vitiated and the proceedings were to be restored to the stage they were at when the acquittal/dismissal was passed, for continuation of the prosecution from that stage. [Paras 13, 14]

Orders of the learned Magistrate and the High Court dismissing the complaints for non appearance are set aside; proceedings are restored to the stage they had reached before the dismissal so that prosecution may proceed.

Final Conclusion: Appeals allowed; impugned orders set aside and matters remitted to the learned Magistrate to proceed from the stage existing prior to dismissal/acquittal, in view of the proviso to Section 256 and the availability of recorded prosecution evidence.

Recall of interim order - foundational order - maintainability of interlocutory applications by unrelated parties - application of executive notification on interest rate - clarification/modification of an order - revisiting and recalling prior interlocutory relief

Recall of interim order - revisiting and recalling prior interlocutory relief - Whether the order dated 7th November, 2022 recalling the interim orders dated 10th June, 2020, 19th August, 2020 and 25th August, 2020 should itself be recalled. - HELD THAT: - The Court examined the genesis of the proceedings (which originally concerned Amrapali Group projects) and the sequence by which other builders sought and obtained interim reliefs. After revisiting the material and objections (including that many intervening applicants were unconnected to the Amrapali proceedings), the Court concluded that its prior interim orders granting relief to unrelated promoters were improvidently extended and therefore properly recalled by the order dated 7th November, 2022. The application to recall that recall lacked merit because the Court had considered the record and objections before making the recall. The Court found no reason to disturb its own order dated 7th November, 2022. [Paras 13, 25, 26]

Applications to recall the order dated 7th November, 2022 are dismissed; the recall contained in that order remains operative.

Clarification/modification of an order - foundational order - application of executive notification on interest rate - Whether the order dated 10th July, 2020 (a clarification/modification) was required to be recalled along with the foundational orders. - HELD THAT: - The Court observed that the order dated 10th July, 2020 is a clarification/modification of the foundational order of 10th June, 2020, reflecting later facts and developments (including notice of the State notification of 9th June, 2020). The objection that the 10th July order was not recalled was held to be without substance because it merely clarified the foundational order and did not independently sustain the interim reliefs that were recalled. [Paras 10, 27]

The objection regarding non-recall of the 10th July, 2020 order is without substance; no separate recall is required.

Maintainability of interlocutory applications by unrelated parties - revisiting and recalling prior interlocutory relief - Whether the interlocutory applications filed by various builders/developers (who were not connected to the Amrapali proceedings) are maintainable and entitled to restoration or fresh hearing after recall of earlier interim orders. - HELD THAT: - The Court found that the original proceedings and directions were confined to securing the interests of Amrapali Group homebuyers. Intervening IAs filed by other promoters (Ace, Prateek, Paramount, Ajnara, CREDAI/NAREDCO etc.) were by parties not connected to the Amrapali cause; their filing did not confer entitlement to the interlocutory reliefs extended earlier. Having considered the record and objections, the Court held that restoration of those IAs or rehearing is not warranted in the instant proceedings because those applicants were strangers to the cognizance taken in the Amrapali matter. [Paras 8, 23, 28, 29]

The interlocutory applications filed by unrelated builders/developers are not maintainable in these proceedings and are dismissed.

Final Conclusion: The applications seeking recall of the order dated 7th November, 2022 are dismissed; the Court affirms its decision to recall the interim orders of 10th June, 2020, 19th August, 2020 and 25th August, 2020 as recorded in the order dated 7th November, 2022, holds the objection about the 10th July, 2020 clarification to be without substance, and dismisses the interlocutory applications filed by builders/unrelated parties as not maintainable in the Amrapali proceedings.

Extraordinary power to transfer investigation to CBI - exercise of constitutional jurisdiction under Articles 32 and 226 - use of transfer as a remedy only in exceptional circumstances - credibility of investigation and public confidence - trial court proceedings and defence at trial

Extraordinary power to transfer investigation to CBI - use of transfer as a remedy only in exceptional circumstances - credibility of investigation and public confidence - Direction for investigation by the Central Bureau of Investigation was not warranted - HELD THAT: - The Court examined the appellants' claim that the accused had been illegally abducted in another State and that the FIR and subsequent charge-sheet were foisted, and considered whether those allegations justified invocation of the Court's extraordinary power to direct a CBI investigation. Applying the settled principle that transfer of investigation is an extraordinary remedy to be exercised sparingly and only where necessary to secure credibility of the investigation or where exceptional circumstances exist, the Court held that the material on record did not satisfy that threshold. The High Court's appraisal of the rival contentions and reliance on precedents emphasizing cautious exercise of the power were endorsed. Given that charges have been framed and trial is proceeding, the Court observed that disputed factual contentions concerning abduction and framing are matters for resolution in the trial on evidence rather than by a routine transfer to the CBI. Consequently, the prayer for a CBI probe was declined. [Paras 11, 19, 20, 22, 23]

Prayer for transfer of investigation to the CBI dismissed; no direction for CBI investigation issued.

Trial court proceedings and defence at trial - quashing of charge-sheet and discharge - Prayers for quashing the charge-sheet and for discharge were not entertained at this stage - HELD THAT: - The Court noted that the trial court had framed charges and that the defence pleadings and evidentiary opportunities remain available to the appellants. The allegation that the offence could not have been committed because of prior abduction was characterised as a defence issue to be tested in the course of trial through evidence, examination of witnesses (including those ordered to be called by the High Court in collateral proceedings), and recording under Section 313 CrPC. The Court therefore declined to quash the proceedings or grant discharge at this juncture, leaving all contentions open for determination by the trial court and preserving the appellants' remedies, including civil remedies if malicious prosecution or other actionable wrong is established later. [Paras 11, 21, 22, 23]

Application for quashing/discharge refused without prejudice; all defence contentions left open for trial and other legal remedies.

Final Conclusion: The appeals are dismissed; no direction is issued for CBI investigation and the trial and all defence remedies remain unimpaired, with no order as to costs.