TMI Tax Updates e-Newsletter
Mar 10,2025

Challenge to detention and penalty order - whether carrying e-way bill is mandatory for the movement of goods from one place to another? - HELD THAT:- The question is no more res integra after the 14th Amendment of the Uttar Pradesh Goods and Service Tax Rules, 2017 which came into effect from 01.04.2018. Post amendment in the Rule, it has become obligatory that goods should be accompanied with e-way bill. The co-ordinate Bench in Akhilesh Traders [2024 (2) TMI 1128 - ALLAHABAD HIGH COURT] had held that in case goods are not accompanied by e-way bill, a presumption may be read that there is an intention to evade tax. Such a presumption of evasion of tax then becomes rebuttable by the materials to be provided by the owner/transporter of the goods.

In Jhansi Enterprises [2024 (3) TMI 219 - ALLAHABAD HIGH COURT], the co-ordinate Bench following the decision rendered in Akhilesh Traders further held that mere furnishing of documents subsequent to interception cannot be a valid ground to show that there was no intention to evade tax. The Court further held that reliance placed upon the decision by petitioner therein was of transaction prior to April, 2018 but after April, 2018, those difficulties have been resolved and there is no difficulty in generating and downloading the e-way bill.

In the instant case, it is an admitted case that the goods were intercepted by respondent no. 2 on 10.06.2022 at 4:28 a.m., while the eway bill was generated on the same day at 7:36 a.m. after about three hours after the detention of the goods. Moreover, on the inquiry it was found that the petitioner was not carrying out the business at the place where the firm was registered. The registration of the firm was also suo moto cancelled - the conduct of the petitioner clearly reveals that an intention to evade the tax is there as not only the goods in transit were not accompanied by e-way bill but also the description of goods declared by petitioner was different which was intercepted by the taxing authorities on 10.06.2022. Goods declared were taxable @5% while the goods found on verification were taxable @18%.

Conclusion - The e-way bill was generated after the goods were intercepted, leading the court to conclude that there was an intention to evade tax.

No case for interference is made out - petition dismissed.

Challenge to assessment order in Form GST DRC-01 - proceeding does not contain the signature of the assessing officer and also DIN number, on the impugned assessment order - HELD THAT:- The effect of the absence of the signature, on an assessment order was earlier considered by this Court, in the case of A.V. Bhanoji Row Vs. The Assistant Commissioner (ST),[2023 (2) TMI 1224 - ANDHRA PRADESH HIGH COURT]. A Division Bench of this Court, had held that the signature, on the assessment order, cannot be dispensed with and that the provisions of Sections-160 & 169 of the Central Goods and Service Tax Act, 2017, would not rectify such a defect.

The question of the effect of non-inclusion of DIN number on proceedings, under the G.S.T. Act, came to be considered by the Hon’ble Supreme Court in the case of Pradeep Goyal Vs. Union of India & Ors [2022 (8) TMI 216 - SUPREME COURT]. The Hon’ble Supreme Court, after noticing the provisions of the Act and the circular issued by the Central Board of Indirect Taxes and Customs (CBIC), had held that an order, which does not contain a DIN number would be non-est and invalid.

Conclusion - Due to non-mention of a DIN number and absence of the signature of the assessing officer, in the impugned assessment order would have to be set aside.

Petition disposed off.

Scope of SCN - Cancellation of the petitioner's GST registration - reporting officer has not examined the petitioner with respect to ‘red alert notice’ issued by the department to the petitioner - Violation of principles of natural justice - HELD THAT:- Against the cancellation order, the petitioner filed an appeal before the appellate authority i.e. respondent No.1 and prayed for revocation of registration. Meanwhile, the petitioner intimated the department about the change in address of place of business and also updated in GST portal. Along with appeal, a report of the State Tax Inspector has also been filed in which it has been reported that during physical verification conducted on 26.10.2023, business was found functional at the new place ie village Temri, Ekta Nagar, Mana Camp, Raipur. It is also mentioned in the report that Assistant Commissioner, State Tax, Circle-3 Raipur has also recommended for revocation of registration of petitioner.

Perusal of copy of notice dated 10.7.2023 (Annexure R-4) annexed along with return filed on behalf of respondents/State would show that during special drive against fake registrations, petitioner is found to be non-existent business entity and engaged in bill trading activities, and therefore, immediate action to block/recover the fraudulent income tax credits available by petitioner is recommended. There is nothing on record of this writ petition to show as to what action has been taken thereafter against the petitioner.

It is well settled that it is beyond the competence of an authority to make out in favour of the department a case which the department had never canvassed and which the petitioner had never been required to meet. The Hon'ble Supreme Court in the case of Commissioner of Central Excise, Bhubaneswar -I versus Chambdany Industries Ltd [2009 (9) TMI 7 - SUPREME COURT] as also in case of of Precision Rubber Industries Pvt. Ltd. vs. Commissioner of Central Excise, Mumbai [2016 (4) TMI 841 - SUPREME COURT], that no new case would have been set up or decided contrary to the show cause notices and that the Department is not allowed to travel beyond the show cause notice.

In the case at hand, from the order impugned it transpires that respondent No.1 while adjudicating the appeal of petitioner against the cancellation of registration and dismissed the same on the ground that the reporting officer has not examined the petitioner with respect to ‘red alert notice’ issued by the department to the petitioner and as such, report is incomplete, which is clearly impermissible in law. Thus, it is apparent and abundantly clear that respondent No.1 has completely travelled beyond the scope of show cause notice because the regarding the ground on which appeal of petitioner is dismissed by impugned order i.e. issuance of red alert notice, there is no whisper either in the show-cause notice or order cancelling the registration. Further, it also amounts to violation of principles of natural justice as neither a proper show-cause notice has been issued nor any opportunity of hearing was given to the petitioner with respect to allegation of red-alert notice i.e. non-existing unit and fake registration. It is also now well settled that before adjudicating any issue which is against the interest of a party; opportunity of hearing should be granted to him.

The reason of cancellation of registration was that during spot verification at the principal place of business, the same was found closed and non-functioning and since the petitioner has already rectified the said defect by intimating new address of place of business to the department as well as through GST portal, which was also found operational during spot verification, therefore, in the considered opinion of this Court, no fruitful purpose would be served in refusing to revoke the GST registration of petitioner.

Conclusion - i) Authorities cannot exceed the scope of the show cause notice, and cancellation of registration must adhere strictly to statutory grounds. Fundamental rights under Articles 19(1)(g) and 21 must be protected. ii) The cancellation of the petitioner's GST registration is revoked, directing the petitioner to file GST returns within 30 days.

The impugned order set aside - petition allowed.

Activity in relation to Panchayat or Municipality under Article 243 G or Article 243 W respectively, of the Constitution of India - providing services of preparing and providing plans and estimate and preparing and providing DTP [Draft Tender Plan] for the building work provided by the assessee to the R&B department, Government of Gujarat under the contract - pure services or not - HELD THAT:- A plain reading of the subsection (1) of the section 101, ibid, depicts that the appellate authority may pass such order as it thinks fit, by either confirming or modifying the ruling pronounced by the advance ruling authority.

The wordings in section 101 of the CGST Act, 2017, is almost similar to sections 35A of the Central Excise Act, 1944 and 85(5) of the Finance Act, 1994. To substantiate the aforementioned finding, reliance placed on the judgement of the Hon'ble Gujarat High Court in the case of Commissioner of Central Excise vs Medico Labs and Anr. [2004 (9) TMI 108 - HIGH COURT OF GUJARAT AT AHMEDABAD]. This is more so because the jurisprudence developed over the years may be referred as pari materia while ascertaining the ambit and scope of the powers of the Appellate Authority for Advance Ruling.

The impugned ruling dated 30.5.2024 is set aside and the matter is remanded back to the Authority for Advance Ruling (i.e. the GAAR) for fresh decision.

Unexplained income u/s 68 - sale proceeds of the share treated as bogus - Delay filling SLP

As decided by HC [2024 (1) TMI 800 - GUJARAT HIGH COURT] claim of the assessee for exemption of Long Term Capital Gains u/s 10(38) cannot be held to be bogus on the basis of presumption in absence of any evidence brought on record by the assessee with regard to shares of Sunrise Asian Ltd, which is not even found to be rigged by the SEBI also - assessee held the shares for two and half years and after holding the shares for a long period, the same were sold by the assessee - HELD THAT:- There is a gross delay of 292 days in filing the Special Leave Petition which has not been satisfactorily explained by the petitioner.

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

Reopening of assessment u/s 147 - Notice issued after four years - reasons to believe - issue of "guarantee fees" is pending before the Tribunal - HELD THAT:- As per the first proviso to Section 147 of the Act, reassessment proceedings cannot be initiated unless there is a failure to disclose fully and truly all material facts necessary for the original assessment.

In the instant case, reasons reproduced in the draft assessment order, which were the reason furnished to the petitioner at the first instance, does not allege any failure on the part of the petitioner to disclose fully and truly all material facts anywhere in the assessment. There is no an allegation that any income has escaped assessment. Therefore, on this ground itself the proceedings must be quashed. It is a settled position that the reasons furnished at the first instance to an assessee have to be looked into, and the same cannot be improvised subsequently.

In any case, in the documents annexed to the affidavit in reply, the respondents have annexed reasons for reopening, which differ from those reproduced in the draft order. On a comparison of the reasons filed along with the reply and the reasons as reproduced in the draft assessment order, in the reasons annexed to the reply, there are 5 crucial paragraphs which are absent in the reasons reproduced in the draft order, namely paras 1, 2, 3, 4 and 5. It is a settled position that the reasons furnished to the assessee have only to be seen, and the officer cannot supply different reasons in the affidavit of reply.

The reasons appearing in the draft assessment order and to the reply filed by the respondent do not disclose what are the facts which the Petitioner has not disclosed and which were necessary for the assessment. In the absence of this statement in the reasons recorded the impugned proceedings are required to be quashed and set aside, as being without jurisdiction.

Admittedly, there is also no dispute that the issue of "guarantee fee" is pending before the Tribunal since an addition was made on this count in the original assessment proceedings. As per third proviso to section 147 if the subject matter is pending before the Appellate Authority, then the assessing officer is debarred from initiating the reassessment proceedings on that very issue.

In the instant case, even on account of third proviso to section 147, the impugned proceedings are without jurisdiction.

It is also important to note that the fact that the issue of guarantee fee is pending before the Tribunal in the petitioner’s appeal clearly shows that this issue was examined in the course of the original assessment proceedings. Therefore, in the absence of any fresh tangible material, the impugned proceedings would amount to a change of opinion for reviewing the earlier order, which is not permissible under the Act.

The jurisdictional requirement is that the reassessment proceedings can be initiated if any income has escaped the assessment. In the instant case, the issue of the "guarantee fee" has been added to the assessment order passed under section 143 (3) r/w. 144C(13) of the Act. If that be so, we fail to understand as to how the said issue would amount to having escaped the assessment. Therefore, even on this count, the impugned proceedings and the approval granted to such proceedings are wholly without jurisdiction.

Therefore, to summarise, because there was disclosure, there was enquiry and because there was enquiry there was addition and because there was addition, issue is pending before the Tribunal in appeal and therefore none of the jurisdictional condition can be said to have been satisfied for exercising powers u/s 147 of the Act and consequent reassessment order to survive.

We note that the petitioner has filed an appeal after filing the present petition to obviate the limitation period and since, as held by us above, the reassessment proceedings are wholly without jurisdiction, we exercise our discretion to entertain the present petition and quash the reassessment notice u/s 148 and consequently the assessment order passed - Decided in favour of assessee.

Direction to produce assessment records so that at least one of the grounds on which the ITAT had made the impugned order could be suitably addressed - Appellant, has placed before us a communication informing him that the records are not traceable after the passage of approximately 13 to 14 years.

HELD THAT:- While we proposed to consider this Appeal because we are satisfied that it raises substantial questions of law, we think that we would be failing in our duty if we do not direct the PCIT (4), Mumbai, to order an enquiry into the disappearance of records in this matter and submit a report within two months to this Court.

We reluctantly record that similar directions in other matters result in conclusions that, though the records have disappeared, no officer is responsible for such disappearance. This is quite unfortunate, and because of this attitude, the instances of disappearance or selective disappearance of records are on the rise. If the records have disappeared, we fail to understand how no official can be held responsible. In such a situation, at least the highest officer must assume responsibility for the disappearance of records.

PCIT must also apprise this Court of whether there is any procedure for filing police complaints where official records are stated to have disappeared in thin air. Ultimately, the Revenue Officials must be conscious of the fact that they are only trustees with respect to the positions that they hold and the powers that they discharge.

Therefore, they are responsible for ensuring that the records are properly maintained. In a given case, if the records are misplaced, a proper explanation should be forthcoming. The statement in the communication addressed to Mr Suresh Kumar about the matter being 13 to 14 years old is incorrect given the fact that the revenue instituted in this Appeal in November of 2017.

We presume that the records were very much available at the time of the appeal's institution. However, after the appeal's institution, we are surprised by how a statement can be made if the records are not traceable.

Appeal is required to be admitted on the following substantial questions of Law:-

“i) Whether on the facts and in the circumstances of the case and in Law, the Hon'ble ITAT has erred in holding that proceedings u/s 153C of the IT Act, 1961 are invalid in view of non-recording of satisfaction note by the AO of searched person, when the AO of the searched person (i.e. M/s Jogiya Properties Pvt Ltd) and third person (i.e. the assessee company) are the same and thus the common satisfaction note has been recorded?"

ii) "Whether on the facts and in the circumstances of the case and in Law, the Hon'ble ITAT while allowing the cross objection of the assessee and dismissing the Revenue's appeal in AY:09-10 erred in not considering order of the Delhi High Court in the cases of Super Malls(P) Ltd [2016 (11) TMI 1370 - DELHI HIGH COURT] and Nau Nidh Overseas Pvt. Ltd [2017 (3) TMI 108 - DELHI HIGH COURT] and order of KPC Medical College and Hospital [2015 (7) TMI 6 - ITAT KOLKATA]?

Estimation of income - Bogus purchases - addition to the extent of 10% of the Gross Profit margin in respect of unproved purchases by ITAT - 25% addition was confirmed by CIT(A) - HELD THAT:- In this case, AO has accepted the Appellant’s version regarding some of the supplies, which were backed by documentation like delivery challans. If delivery challans and other valid documentation were possible regarding some of the supplies, we fail to understand why the same was not possible regarding the supplies, which are now adjudged as bogus.

The explanation for the meagre documentation inspired no confidence and bordered on frivolity. AO has also considered the stereotyped affidavits of the so-called suppliers and correctly rejected them.

If the Appellant was indeed involved in making bogus purchases. This question, it appears, was posed even to the assessing officer who has dealt with the same in the assessment order.

It is not for this Court to fathom the modus operandi to be adopted by the Appellant while indulging in bogus purchases. Possibly because this modus operandi may have worked in the past, the Appellant must have assumed that the same would work in the future. Based upon such questions posed to the Court, no case is made out to disturb the concurrent findings of fact recorded by the three authorities. No substantial question in these Appeals.

Denial of deduction u/s 80P(2)(d) - interest earned from investments made in any bank not being cooperative society - HELD THAT:- As decided Ashwinkumnar Arban Co-operative Society Ltd. [2024 (11) TMI 971 - GUJARAT HIGH COURT] held that the assessee has furnished evidence that Surat District Cooperative Bank is a cooperative society registered under Gujarat State Cooperative Societies Act.

We find that in a series of decisions, the various Benches of the Tribunals held that the cooperative banks are primarily cooperative societies and interest earned on deposits with such cooperative bank is exempt under Section 80P(2)(d) of the Act.

As decided in Surat Vankar Sahakari Sangh Ltd. [2016 (7) TMI 1217 - GUJARAT HIGH COURT] also held that the assessee cooperative society was eligible for deduction under section 80P(2)(d) in respect of gross interest received from cooperative bank without adjusting interest paid to said bank.

Such decision of Surat Vankar Sahakari Sangh Ltd. [2016 (7) TMI 1217 - GUJARAT HIGH COURT] has been followed in a serious of decisions by me or by the Division Bench of Surat Tribunal. Therefore, no merit in the grounds of appeal raised by the revenue - Decided in favour of assessee.

Disallowance of interest / compensation u/s 69C - levying tax rate of 115BBE - HELD THAT:- It is an undisputed fact that assessee has made payment as per the terms of agreement entered during the course of business then such payment neither can be held to be bogus nor for any non-business purpose.

The considerations which arise during the course of business as a part of commercial / business expediency, the same cannot be questioned or can be doubted by AO without bringing any adverse material on record that it is some kind of make-belief arrangement or some kind of colourable device.

Both ld. AO and ld. CIT(A) have decided this issue in a very slip shot manner without even considering the relevant records or bringing any adverse material on record.

Also we are unable to appreciate how Section 69C can be invoked, i.e., unexplained expenditure outside the books. When assessee has duly shown the payment from the books and claimed as an expenditure debited to the profit and loss account, then how section 69C can be invoked.

Reasons given by the AO and CIT (A) for making the addition is set aside and the claim of assessee is allowed. Thus, addition is deleted. Appeal of the assessee is allowed.

Unexplained cash credits u/sec.68 - estimation of 10% profit on total cash deposited into bank account - HELD THAT:- The assessee has treated the amount received from various parties as his income and amount transferred to Telangana State Breweries Corporation Limited as his expenses and net commission income has been treated as his income.

This fact is further strengthened by statements recorded by AO from various persons from whom the assessee claimed to have received cash for online submission of the application and online payment of purchases for liquor from Telangana State Breweries Corporation Limited.

Assessee is providing services to various persons who are not aware of process of online submission of application form and online procurement of liquor from Telangana State Breweries Corporation Limited. Therefore, assessee is into the business of providing services to various liquor merchants and earned commission.

CIT(A) after considering all the relevant facts has rightly treated the assessee as a facilitator and considered the total cash credits/deposits in the bank account as his business receipts and estimated @ 10% profit on total credits appearing in the bank account. The finding of fact recorded by the learned CIT(A) is uncontroverted by the Revenue, except stating that the learned CIT(A) has accepted the argument of the assessee in light of certain additional evidences contrary to Rule 46A of I.T. Rules, 1962.

Whatever evidences considered by the learned CIT(A) were already on record before the AO and, therefore, in our considered view, it is not a case of violation of Rule 46A of I.T. Rules, 1962 as alleged by the DR.

There is no error in the reasons given by the CIT(A) in estimating the profit @ 10% on total credits appearing in the bank account of the assessee. - Decided against revenue.

Deductions u/s 11 & 12 - Rejection of rectification application of the assessee on the ground that Form No. 10B was not filed within the due date and that no condonation was granted in this regard - HELD THAT:- The matter was not examined on merits by the Ld. CIT(A), who did not condone the delay of 91 days in filing of appeal by the assessee. As explained by the assessee the delay was caused for the reason that the order u/s 154 passed by the AO was communicated on the portal under the caption “issue letter” which was misunderstood by the assessee.

Be that as it may, as held in the case of Vareli Textiles Ltd. [2006 (2) TMI 102 - GUJARAT HIGH COURT] that meritorious cases should not be thrown out on ground of limitation. CIT(E) was not correct in summarily rejecting the appeal on the ground of limitation without examining the merits of the case. It is found that the assessee had filed an application for condonation of delay in filing Form No. 10B.

Delay in filing the Form No. 10B was duly condoned by the Ld. CIT(E). AO was not correct in rejecting the rectification application of the assessee for the reason that delay in filing the Form No. 10B was not condoned.

In the interest of justice, we, therefore, set-aside the matter to the file of JAO with a direction to consider the condonation of delay already granted by the CIT(E) and thereafter re-adjudicate the rectification application of the assessee. Appeal of the assessee is allowed for statistical purposes.

Bogus purchases - estimation of income @ 10% of entire purchases and sales - HELD THAT:- Once the assessee is considered as beneficiary of accommodation entry, the addition should have been made to the extent of profit element embedded in availing such entry, that to only on the amount of alleged/ impugned/ bogus entry and not on the substantial part of transaction.

We find that the AO while making additions/ disallowance taken all the transactions of sales and purchases, which is not justified. Such addition is made without making further investigation in respect of other sales and purchases bills. AO solely relied on the report of Verification Unit without providing copy of such report to the assessee.

It is settled law under Income Tax that only real income or profit after allowing set off of expenditure, can be brought to tax and not the substantial part of transaction. Thus, the addition made by AO @ 10% of total sales and purchases are not justified.

Quantum of the disallowance - We find that assessee is engaged in the business of diamonds, the assessee in his own reply has accepted that he has shown purchase and sales which is not disputed by the lower authorities. Thus, considering the nature of transaction and keeping in view of the facts that Surat Bench of Tribunal in cases of purchases from entry provider (beneficiary) has estimated addition @ 6.00% of the purchases, therefore, 6.00% of purchase amount Rs. 3,11,75,748/- is added (restricted) to the income.

Additions on the sales - We find that the AOs of various well known entry provider namely Rajendra Sohan Lal Jain and in Sanjay Chaudhary made addition @0.20% of amount of entry and allowed deduction of expenses @25%. On appeal before this Tribunal the addition made by AO were sustained [2021 (12) TMI 867 - ITAT SURAT] and [2021 (12) TMI 1414 - ITAT SURAT] respectively. Thus, considering overall facts and circumstances of the present case and keeping in view of possibility of revenue leakage 0.50% of Rs. 6,20,94,701/-, of sales is restricted/added to the income of assessee. In the result, ground No. 3 is allowed and ground No. 4 & 5 are partly allowed.

Applicability of provision of 56(2)(vii)(b)(ii) - assessee had purchased immovable property and there was a difference of value as disclosed by the assessee and adopted by the Stamp Valuation Authority - HELD THAT:- Revenue’s action in invoking provisions of section 56(2)(vii)(b)(ii) is not sustainable in the eyes of law for the reason that the agreement executed on 01/06/2012, between the purchaser and the seller which fall during the financial year 2012–13 relevant to the assessment year 2013–14.

The possession was also took place on the same date i.e., on 01/06/2012. Substantial part of payment has also been made during the financial year 20121–13 relevant to the assessment year 2013–14, while the provisions of section 56(2)(vii)(b)(ii) was not in existence during this period of transaction and the date of taking over the possession.

In fact, the provisions of section 56(2)(vii)(b)(ii) have been inserted in the statute w.e.f. 01/04/2014 i.e., during the assessment year 2014–15 and not before that while the assessee has already executed agreement during the assessment year 2013–14 itself and hence the provisions of section 56(2)(vii)(b)(ii) are not applicable to the said transaction per se.

Thus, consequent upon such amendment inserted in the statute, the addition made by the AO and confirmed by CIT(A) has no legs to stand. Decided in favour of assessee.

Denial of claim of foreign tax credit - Form-67 was not filed on or before the due date to file the return of income u/s 139(1) - assessee before the learned CIT(A) furnished the detail of salary received in UK, return of income filed and taxes paid in UK, reconciliation sheet showing UK income included in the income offered to tax in India - HELD THAT:- Requirement of filing Form 67 is directory and not mandatory. The assessee cannot be deprived of Foreign Tax Credit merely on account of a procedural lapse. The case law referred by the learned CIT(A) is distinguishable from facts of the case on hand as the requirement of filing Form-67 is procedural and not the mandatory requirement.

Accordingly, we set aside the order of the CIT(A) and direct the AO to allow the claim of FTC as claimed by the assessee. Hence, the ground of appeal of the assessee allowed for statistical purposes after necessary verification.

LTCG on redemption of Market Linked Debenture - Benefit of lower tax/concessional rate of tax on capital gain u/s 112A - CIT(A)/NFAC confirming the action of the CPC levying the tax on capital gain @ 20% instead of 10% - assessee argued that under the Securities Contracts (Regulation) Act, 1956, debentures qualify as "securities," and therefore the benefit of the lower tax rate applicable for sale of listed securities shall be provided.

HELD THAT:- Section 112A provides a preferential tax rate of 10% on LTCG arising from the transfer of specified assets, which include equity shares of a company, units of an equity-oriented fund, or units of a business trust, provided certain conditions are fulfilled.

Provision does not extend this benefit to debentures, even if they are listed and traded on a recognized stock exchange in India. The legislature has intentionally limited the scope of section 112A of the Act to specific securities and has not included debentures within its ambit.

Since debentures are explicitly excluded from the concessional tax treatment under section 112A the correct rate of tax applicable on the LTCG from the redemption of Market Linked Debentures is 20% under section 112.

AO/CPC had rightly applied the tax rate of 20% on the impugned LTCG. The appeal filed by the assessee, therefore, lacks merit and is accordingly hereby dismissed.

Addition u/s 68/69A - unexplained money during demonetization period - CIT(A) deleted addition - HELD THAT:- We don’t countenance the AO’s action of cherry picking few cash withdrawals and suspecting them for not spending the same, can’t be reasonable ground on which the AO could draw adverse inference against the assessee.

We note that the AO accepted the assessee’s assertion that it has withdrawn an amount during the year before the demonetization was declared and assessee had sufficient cash balance to cover the SBNs deposited during demonetization period. In such a scenario, without the AO able to disprove the explanation of the assessee or contradict the assessee’s claim by adducing any evidence, we are of the view that assessee has discharged its burden by providing relevant evidences to prove the nature and source of SBNs. Therefore, CIT(A) has rightly deleted the addition made by the AO u/s.68 - Decided against revenue.

Disallowance of expenses in respect of reimbursement expenses - CIT(A) who deleted the same by taking note of the fact that the assessee in support of the said expenses had filed ledger extract explaining that expenses was incurred as “reimbursement follow up expenses”; and “travel expenses reimbursement” - HELD THAT:- Assessee in the business of logistic services and it has valid license to clear the cargo all over the country being a CHA. In its line of business, it is noted that assessee had to incur expenditure on account of transportation viz lorry hire charges, loading & unloading, etc., which expenses has been accepted by the AO, but disallowed the expenses reimbursed by the assessee to its employees on account of it being spend on behalf of their clients as well as expenses reimbursed to the employees for travel expenses merely on suspicion, conjectures and surmises which action of the AO can’t be accepted, in the light of the fact that the assessee has filed relevant material, ledger extracts to prove the ibid expenses which relevant evidences have been brushed aside by the AO without pointing out any infirmity in the entries made in the ledger extracts

Assessee’s accounts are audited and the assessee has produced all the books before the AO which has not been rejected. The Ld.AR invited our attention to a chart which shows that the assessee in the year under consideration has shown GP of 49.65% and if the disallowance of Rs. 1,07,24,039/- is made, then GP would shoot up to 61%; and in this regard, it is noted that in earlier years assessee‘s GP was 32.37% & 19.42% and in the subsequent years 47.36%. Hence, considering the overall facts and circumstance of the issue, we find no infirmity in the action of the Ld.CIT(A) allowing the expenses claimed to the tune of Rs. 1,07,24,039/- which action doesn’t require any interference, so we dismiss this ground of Revenue.

Addition u/s 68 - unexplained credit - cash deposit during demonetization as undisclosed income and addition on account of under valuation of stock - HELD THAT:- Whenever Appellant provides explanation, before rejecting the same ld. AO has to record dissatisfaction as to why the explanation furnished by Appellant is not acceptable. As is evident that assessee not only offered explanation regarding nature and source of such credits but also substantiated the same with documentary evidences in the shape of Audited Financial Statements, Stock Register and Cash book.

No specific defects whatsoever was brought out on record by CIT(A) in those evidences and books of accounts so furnished. It is not understood as to how the addition has been made by the lower authorities when the source of such cash deposits, being cash sales, was duly accepted. Even no discrepancy was pointed out by the VAT department in respect of purchases and sales made by the assessee. Therefore, addition so made u/s 68 without finding out any specific defects in books of account and also without rebutting the evidences produced is unjustified and be deleted.

CIT(A) has committed gross error in not accepting the cash generated out of sales made by the assessee on 08/11/2016 as genuine when he himself has accepted the part sales made which is also supported by the same bills which have not been accepted for confirming the addition. Accordingly, we hereby direct to delete the addition upheld by the Ld. CIT(A) u/s 68 of the Act. The ground of appeal No. 2 is allowed.

Addition on account of under valuation of stock towards the stock which has not been sold - We find that this addition is made solely for the reason that the cash deposited during the demonetization period was held as undisclosed income of the assessee and not generated out of the cash sale claimed by the assessee. Since while dealing the assessee’s ground of appeal No. 2 above, we have already held the sales made on 08/11/2016 as genuine and deleted the additions made of the cash deposited in SBN during the demonetization thus there is no reason for making the addition by holding the cost of goods out of such sale as unexplained.

Appeal of the assessee is allowed.

Revision u/s 263 - validity of the initiation of reassessment proceedings and legality of consequent order passed u/s 147 r.w.s 144B -

Whether or not such legality of the re-assessment framed could be examined in appellate proceedings challenging the order passed u/s. 263? - HELD THAT:- As decided in the case of Westlife Development Ltd.[2016 (6) TMI 1208 - ITAT MUMBAI] held that during the course of appellate proceedings against the order passed u/s. 263 of the Act, the validity of the assessment order from which such proceedings have been originated could be examined.

Thus in the present appellate proceedings against the order of the ld. Pr. CIT u/s. 263 of the Act, the validity of the order passed u/s. 147 r.w.s.144B of the Act can be examined.

Validity of reassessment proceedings - As the notice in the present case was dispatched/served upon the assessee on 01/04/2021, thus the same should be treated as notice u/s 148A(b) and AO should complete the consequent proceedings as provided u/s 148A - AO has proceeded to pass the order u/s 148 r.w.s 144B of the Act on the notice so issued u/s 148 on 31/03/2021 served upon the assessee on 01/04/2021. Thus, in view of the order of Suman Jeet Agarwal [2022 (9) TMI 1384 - DELHI HIGH COURT] we hold the order so passed without following the procedure prescribed u/s 148 of the Act is bad in law and is invalid.

Accordingly, we quash the revisionary order passed u/s 263 of the Act as the re-assessment order passed u/s 147 r.w.s 144B of the Act is already held as invalid. Thus, grounds of appeal of the assessee is allowed.

Classification of imported goods - Fork/Yoke 5th and reverse gear shift (parts of motor vehicles) - to be classified under CTH 84831099 considering the goods as ‘Transmission Shafts’ or to be classified under CTH 8708400 as parts of motor vehicle like gear boxes and parts thereof - it was held by CESTAT that 'The appellant has wrongly classified the imported goods under CTH 84831099 and that due to said mis-declaration the appellant has evaded BCD to the extent of 2.5% thereof.'

HELD THAT:- There are no good ground and reason to interfere with the impugned order; hence, the present appeal is dismissed.

Classification of roasted areca nuts (whole/cut/split), which the party intended to import - Prohibited goods or not - to be classified under Chapter 20 of Tariff 2008 1920 or not? - HELD THAT:- As per the parameters fixed by the Authority for Advance Rulings, if the moisture content is between 10% and 15%, the same would be considered as a raw areca nut and anything below the said category would be considered as roasted areca nut. The said finding has attained finality. All the laboratory reports also state that the moisture content of the areca nuts is below 10%. Therefore, there are no reason to interfere with the impugned order.

Appeal dismissed.

Continuous provisional attachment of the Petitioner's Bank Account without any authority of law - Just investigation carried by the office of Respondent No.2 or not - jurisdiction to question or investigate local purchases made against proper invoices - Illegal import - prohibited goods or not - HELD THAT:- The respondent No.5, instead of responding to the notice of this Court and appearing before the Court, has filed the affidavit-in-reply reiterating what is stated earlier in the affidavits filed before this Court with an additional fact that the accounts of the petitioner have been defreezed under Section 110(5) of Customs Act.

The petitioner in reply to the summons has already furnished all the relevant documents and based upon such documents, respondents have not further issued any summons meaning thereby that, in the documents furnished by the petitioner in form of the purchase register, ledger, bank accounts etc., the respondent No.2 could not find any irregularities so far as the petitioner is concerned. Thus, it is clear that the petitioner has co-operated with the summons issued by the respondent Nos.2 and 3 - the respondent No.5 in capacity of respondent No.2 has exceeded his jurisdiction insisting upon the personal presence of the proprietor of the petitioner firm for the reasons best known to him without there being anything on record which requires further investigation qua the petitioner, more particularly, when the petitioner has sold the goods imported by M/s. S.T. Electricals to M/s. Mayur Enterprise.

The respondent No.2/5, only with an ulterior motive, is trying to harass the petitioner under the guise of exercising its powers under Section 108 of the Act. It is pertinent to note that in spite of issuance of notice of this Court, the respondent No.5 has not remained present in person or through authorised person and has tendered the affidavit through the learned advocates for the respondent-Authorities. When this Court has joined the respondent No.5 in his personal capacity, it was incumbent for him to appear and make submissions qua the allegations levelled against him by the petitioner instead of filing an affidavit in reply through the advocate appearing for the Customs Department.

The primary allegation of importing the goods are on ST Electricals and the role of the petitioner is confined only to that of a seller - respondent No.5 has thus acted in total disregard to the notice issued by this court by tendering affidavit only similarly as that of the petitioner filing reply in response to the summons issued under Section 108 of the Act. However, notice issued by this Court against the respondent No.5, while exercising jurisdiction under Article 226/227 of the Constitution of India, is having wider implication than summons issued under Section 108 of the Act and respondent No.5 has ignored the notice by tendering the affidavit-in-reply instead of appearing in person or through authorised person or an advocate.

In the facts of the case when the petitioner has filed the detailed reply in response to the summons issued under Section 108 of the Act, no further purpose would be served to continue the investigation qua the petitioner by the respondent-Authorities.

Conclusion - i) The investigation against the petitioner was not justified, as the goods were already cleared for home consumption and the petitioner had complied with the summons. ii) The provisional attachment of the petitioner's bank accounts to be without jurisdiction and directed their release. iii) In the facts of the case when the petitioner has filed the detailed reply in response to the summons issued under Section 108 of the Act, no further purpose would be served to continue the investigation qua the petitioner by the respondent-Authorities.

Petition allowed.

Seeking release of the Gold jewellery which has been detained - case of the Petitioner is that he was only served with the impugned Order-in-Original without proper hearing being given - Violation of principles of natural justice - HELD THAT:- This Court has already held in the case of Amit Kumar v. The Commissioner of Customs [2025 (2) TMI 385 - DELHI HIGH COURT] that such waiver of show cause notice and personal hearing that too when obtained on a Standard Performa, would be contrary to law.

This Court has now pronounced several orders/judgments, following various judgments of the Supreme Court and this Court, wherein it has been held clearly that if the gold items seized are personal jewellery, the same would not be liable to be confiscated.

The Respondent Department has failed to provide a Show Cause Notice and a Proper Hearing to the Petitioner - The gold chain was clearly personal jewellery of the Petitioner, the impugned order is not sustainable.

The impugned order in original dated 13th November 2024 is accordingly set aside. The Respondent is directed to release the gold item of the Petitioner within a period of four weeks - Petition disposed off.

Classification of product i.e. Small-Form Factor Pluggable (SFP) Transceiver - classifiable under CTI 85176290 as other machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus or otherwise? - eligibility for concessional rate of duty under Sr. No. 20 of Notification No. 57/2017-Cus. Dated 30.06.2017.

HELD THAT:- The function of Transceiver is to receive the data in electrical form and converts the signal in to optical signal or vice versa, and therefore, the Transceiver would fall under the category of 'Electro-optical converter'. The Explanatory Notes has categorized the electro-optical converter under the description 'other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network)'. In the Explanatory Notes, Electro-optical converter is termed as an apparatus and not as a part. Since, the item has found mention at the second single dash (-) level under CTH 8517, there exists no necessity to go beyond this single dash and the item should be classified under the subheading/tariff items covered under this single dash entry. If the item were to be treated as parts, the item would have covered under the third single dash (-) entry, which covered the parts. Therefore, the product cannot be classified as parts and would not be covered under CTI 85177990 which cover parts.

The entry at the tariff item 8517 6100 is Base station, which is a central communication hub that manages signal communication between mobile devices and the network. A base station is much larger and serves as a communication hub that manages many transceivers and devices within its coverage area. Hence, the subject item is not classifiable here.

The subject item, Transceiver is thus not specifically covered under any of the tariff items from 8517 6210 to 8517 6270. Therefore, the same has to be classified under the residual entry 'other' under the tariff item 8517 6290. Thus, the product i.e. Small Form Factor pluggable (SFP) Transceiver is rightly classifiable under CTI 85176290 (Other) of the First Schedule of the Custom Tariff Act, 1975.

Whether the product under consideration is eligible for concessional basic customs duty under Serial No. 20 of Notification No. 57/2017-Cus., dated 30.06.2017, as last amended up to 23.07.2024? - HELD THAT:- The Optical SFP Transceivers, being capable of converting electrical signal to optical signal and vice versa are equipped to handle and be a part of Optical Transport Network, and therefore would be termed as Optical Transport Equipment / Optical Transport Network products. Hence, the Optical SFP Transceiver falls under the exclusion category specified in Serial No. 20 of Notification No. 57/2017-Cus., dated 30.06.2017. Consequently, it is not eligible for the benefit of concessional basic customs duty under this notification.

Conclusion - i) SFP Transceivers are classifiable under CTI 85176290. ii) Optical SFP Transceivers are not eligible for concessional duty under Notification No. 57/2017-Cus., while electrical SFP Transceivers are eligible.

Ownership/possession of property - transfer of ownership rights/interest in a property by way of a relinquishment deed - modes of transfer defined in the Transfer of Property Act - HELD THAT:- The High Court based its order on an interpretation of Section 14 of the Partnership Act and taking into consideration the fact that it was an admitted position that the property was contributed by late Bhairo Prasad Jaiswal to the partnership firm.

The law on this point is settled which is that separate property of an individual partner, can be converted into partnership property. In this context, reliance can also be placed upon a judgment of this Court in Addanki Narayanappa v. Bhaskara Krishnappa, [1966 (1) TMI 75 - SUPREME COURT] in which this Court has held that irrespective of the character of the property, when it is brought in by the partner when the partnership is formed, it becomes a property of the partnership firm, by virtue of Section 14 of Partnership Act.

A similar view has been taken by the Full Bench of the Madras High Court in The Chief Controlling Revenue Authority vs. Chidambaram, Partner, Thachanallur Sugar Mills and Distilleries and Ors. [1969 (1) TMI 74 - HIGH COURT OF MADRAS], wherein it was held that Section 14 of the Partnership Act enables a partner to bring a property which belongs to him, by the ‘evidence of his intention’ to make it a property of the firm and in order to do so, no formal document or agreement would be necessary.

It is apparent from a perusal of the record that late Bhairo Prasad Jaiswal, first acquired the property in the year 1965 and then after constituting the partnership firm (respondent No. 1) in 1972, he jointly constructed a building over the property with his brother and partner, Hanuman Prasad Jaiswal, pursuant to which the building was constructed which was to run as a hotel. This leaves no room for any doubt that late Bhairo Prasad had brought the property in question to the stock of the partnership firm as his contribution to the same - In fact, this is precisely the reason which prompted the High Court to clarify that the decree rendered by the Trial Court ought to be read in favour of the partnership firm respondent No. 1 alone, as opposed to being read in favour of the firm along with the other three partners, i.e. respondent Nos. 24 herein, because the property had become the firm’s property at the very moment late Bhairo Prasad Jaiswal started constructing the hotel on his land after constituting the partnership. The evidence of his intention to contribute the land and the building of ‘Hotel Alka Raje’ is quite clear.

Conclusion - The property brought into a partnership becomes the property of the firm, and any individual claims to such property are extinguished upon its contribution to the partnership. The property was owned by the partnership firm alone.

There are no reason to take a view different from that of the High Court in this regard. There is absolutely no scope for interference with the order of the High Court dated 09.03.2022 in the exercise of our jurisdiction under Article 136 of the Constitution of India - appeal dismissed.

Dismissal of Application filed under Section 9 of the IBC seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor erroneously on the ground of pre-existing disputes - whether pre-existing dispute exists or not basis which the Section 9 Petition was rejected? - HELD THAT:- Disputes regarding the outstanding amount claimed by the Appellant existed even before the statutory Demand Notice was issued. These disputes are genuine and substantial, rather than being spurious, hypothetical, or illusory. Section 8(2)(a) of the IBC, 2016, stipulates that a Corporate Debtor must, within ten days of receiving a Demand Notice or invoice under Section 8(1), inform the Operational Creditor of the existence of a dispute, if any, or provide a record of any pending suit or arbitration proceedings initiated before the receipt of such Notice or invoice in relation to the dispute. In the present case, the Corporate Debtor has complied with this requirement. Further, the Adjudicating Authority, in line with the provisions of Section 9(5)(i)(d) of the Code and relying on established legal precedents, has concluded that the Corporate Debtor cannot be admitted into insolvency.

Upon reviewing the facts of the present case, it is evident that disputes and conflicts existed regarding the alleged outstanding amount claimed by the Applicant even before the issuance of the statutory Demand Notice and the filing of the present Application. These disputes specifically pertain to the invoices raised by the Applicant/Operational Creditor. A pre-existing dispute is apparent, as the invoices do not align with the agreed schedule of fees. Additionally, the discrepancies in these invoices remain unaddressed despite prior communications highlighting the inconsistencies.

The issue relating to limitation has not been gone into as all the details of the bills has not been placed on record. Moreover, since pre-existing dispute has been clearly established in the facts of the case, it is not required to go into any further issue.

Conclusion - A pre-existing dispute existed between the parties, as evidenced by the Respondent's objections to the invoices and the Appellant's subsequent actions.

Appeal dismissed.

Maintainability of section 7 petition - existence of debt and default u/s 7 - Petition was filed with malicious intent or not - whether the penalty of Rs 10,00,000/- imposed on the Appellant is justified or not?

Whether the Section 7 Petition was filed with malicious intent or not? - HELD THAT:- Given that the Loan Agreement was valid from 08.07.2019 to 31.10.2019, and during this period, both Kaushal Mittal and Yug Mittal were Directors in both the CD and the Appellant, they were directly responsible for any default by the CD. The filing of the Section 7 Petition by these individuals, while being Directors of the Financial Creditor, was not intended to seek a genuine resolution for the CD but rather to harm its interests, thereby demonstrating malicious intent. The Appellant is a related party to the CD, with common Directors during the relevant period when the alleged debt and default occurred. There are merit in the argument that the Mittal family members, who controlled both entities at the time, orchestrated the Loan Arrangement, making the claim self-serving and legally untenable. The Appellant and its related entities were actively involved in the management of the CD during the transactions in question, reinforcing the case for malice.

The Appellant’s Section 7 Petition was filed with ulterior motives. Consequently, there are no infirmity in the findings of the AA, as they are based on the material on record.

Existence of debt or not - HELD THAT:- All the amounts shown as amount paid by the Appellant, were paid to acquire stake in CD and appoint the Directors. It is concluded that the amount of Rs 92,00,000/- in question was not a loan but instead infused by the Appellant as an investment in equity to acquire control and Directorship in the CD, and not as a loan or financial debt. And the said investment was not in the nature of a disbursement against time value of money, which is a fundamental criterion for a financial debt.

The rejection of the CIRP Application was due to its fraudulent and malicious initiation. While it is unnecessary to examine the existence of financial debt and default, it is done for the sake of completeness to ascertain the true nature of the transactions in this case. Regarding the existence of debt, the Appellant transferred a sum of INR 92,00,000/- (Page 147 of the Appeal) to the CD, as reflected in the Appellant’s account statement - the amounts purportedly paid by the Appellant were, in fact, investments intended to acquire a stake in the CD and secure directorship. Accordingly, the sum of Rs 92,00,000/- was not a loan but an equity infusion aimed at obtaining control over the CD. Moreover, this investment does not satisfy the essential criteria of a financial debt, as it was not a disbursement made against the time value of money.

Conclusion - i) The alleged loan from the Financial Creditor (FC)—Appellant Santoshi—was not a genuine loan but rather an arrangement designed to obstruct SBI’s recovery efforts under the SARFAESI Act. Furthermore, in light of the investment term sheet, the transfer of ₹62 lakhs cannot be considered a debt. Therefore, no debt, as defined under the Code, has arisen from this transaction, rendering the present claim untenable and failing to meet the threshold for initiating proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016. ii) Section 7 petition was filed fraudulently and with malicious intent. iii) Given the facts and circumstances, the imposition of a ₹10,00,000 penalty is justified.

Appeal dismissed.

Seeking directions to re-publish public announcement and to take status report on record - Section 59 read with Section 60(5)(c) read with 33(5) N) of IBC 2016 read with Rule 11 of the NCLT rules a/w regulation 14(1) of IBBI (Voluntary Liquidation Process) Regulations, 2017 - HELD THAT:- The present application is rejected for reason that the Applicant/liquidator/s under Voluntary Liquidation Process Regulations, 2017 have not exercised his/their roles appropriately in terms of the IBC Act and its regulations thereof and the role of the company (its shareholders) who initiated the voluntary liquidation and the ex-liquidator for having distributed to shareholders without proper assessment of liabilities has to be examined by the ROC and IBBI under their relevant provisions.

Let copy of this order be served to the RoC, Income Tax department, ESIC, CGST by the Liquidator for intimation and necessary action, if any, with a copy to IBBI. The registrar is also directed to send a copy of this order to the ROC and IBBI for their information and necessary action, if any.

Unfair competition - abuse of dominant position - imposition of an unfair condition, thereby violating Section 4(2)(a)(i) of the Competition Act, 2002.

Does the inclusion of Microsoft Defender with the Windows operating system constitute an imposition of an unfair condition by Microsoft, thereby violating Section 4(2)(a)(i) of the Act? - HELD THAT:- The Commission observes from Microsoft's submissions that there is no compulsion on users to exclusively use Microsoft Defender as their antivirus solution. Users are free to install any third-party antivirus software of their choice, either through the internet or via the Microsoft Store. They can opt to continue using Microsoft Defender or replace it with a non-Microsoft solution on Windows. For antivirus applications that do not register with Windows through MVI, these can run in parallel with Microsoft Defender. However, if a user installs a third-party antivirus solution that registers itself with Windows through MVI as providing real-time protection, Microsoft Defender will automatically disable its real-time protection functionality.

The Commission further notes that OEMs are also permitted to pre-install alternative third-party antivirus software on desktops and laptops running Windows OS. Additionally, other OS providers, such as macOS and ChromeOS, also include built-in antivirus functionality in place. Therefore, in the absence of an element of compulsion or imposition, prima facie there appears to be no violation of Section 4(2)(a)(i) of the Act.

Has Microsoft's conduct resulted in an impediment to technical and scientific development in the market for antivirus applications, thereby violating Section 4(2)(b)(ii) of the Act? - HELD THAT:- The Commission notes that the Informant has not provided any evidence to substantiate that there has been any actual or potential impediment to technical and scientific development on account of Microsoft’s practices. Additionally, the Commission observes that there are many developers of antivirus software, and each of these providers routinely introduce new features and enhance their offerings to provide better services to customers. This ongoing innovation in the sector indicates that Microsoft's inclusion of Defender has not stifled technological advancement or deterred competition - allegations against Microsoft in respect of any actual or potential impediment to technical and scientific development appear to be largely speculative and lack relevant proof of harm, and prima facie there appears to be no violation of Section 4(2)(b)(ii) of the Act.

Does Microsoft's conduct of bundling its own security software, Microsoft Defender, with the Windows Operating System violate Section 4(2)(d) of the Act? - HELD THAT:- The Commission does not agree with Microsoft’s integrative approach, which suggests that Microsoft Defender is merely a core security feature of Windows OS. The Commission highlights that there are independent manufacturers specializing in the development of antivirus software, indicating a separate consumer demand and, therefore, a distinct market for antivirus solutions. Furthermore, the Commission has already determined prima facie that Microsoft holds a dominant position in the ‘market for computer security (antivirus) software for Windows OS in India’. Given this, the first two conditions for anti-competitive tying—(i) the existence of two separate products and (ii) dominance in the tying product market (Windows OS) appear to be met in this case - the Commission is of the view that the allegation of the Informant under Section 4(2)(d) of the Act is not made out.

Has Microsoft leveraged its dominant position in the market for operating systems for personal computers in India to safeguard its position in the market for computer security (antivirus) software for Windows OS, thereby violating Section 4(2)(e) of the Act? - HELD THAT:- The Commission notes that for a charge of leveraging to sustain, there must be evidence of an active restriction or conditionality imposed, rather than merely providing a product or service for use. In the present case, there is no indication that Microsoft has placed any restrictions or mandatory conditions on users regarding the use of Microsoft Defender. Consumers have the freedom to install and use third-party antivirus applications of their preference, without any technical or contractual barriers preventing them from doing so. Additionally, the cybersecurity market remains highly competitive, with several established players actively operating and offering a range of antivirus solutions. Therefore, in the absence of compelling evidence of restrictive practices, the allegation that Microsoft has leveraged its dominance in the operating system market to protect its position in the computer security software market, in violation of Section 4(2)(e) of the Act, does not appear to be substantiated.

Has Microsoft restricted the development and market access of rival security software developers by making MVI membership a mandatory requirement for listing in the Microsoft Store thereby violating Section 4(2)(c) of the Act? - HELD THAT:- In response to the Informant’s claim regarding Kaspersky Lab’s antitrust complaints filed in 2016 with Russia's Federal Antimonopoly Service and in 2017 with the European Commission and the German Federal Cartel Office, alleging that Microsoft leveraged Windows 10 to promote its own antivirus software over third- party alternatives, Microsoft stated that it reached a settlement agreement with Kaspersky in 2017. Microsoft further clarified that the settlement had a global impact, leading to changes in Windows that were also implemented in versions released in India and remain available to users in the country - the Commission does not find alleged contravention of the provisions of Section 4 of the Act against Microsoft being made out. In view of the foregoing, the Commission is of the opinion that there exists no prima facie case of contravention and the information filed is directed to be closed under Section 26(2) of the Act.

Conclusion - i) There is no prima facie case of contravention of Section 4 of the Competition Act, 2002, against Microsoft. ii) The information filed was directed to be closed under Section 26(2) of the Act. iii) The Commission granted confidentiality to the Informant and Microsoft for specific documents and information submitted during the proceedings.

Application disposed off.

Money Laundering - proceeds of crime - predicate offence - Provisional Attachment Order - illegal foreign remittances to Hong Kong through banking channels by submitting fake import documents to bank authorities - HELD THAT:- It is, firstly, noted that the claim of the appellant that the property was acquired out of the appellant's own legitimate income remains a bland assertion without any substantiating evidence. It is settled law that under section 8(1) of the PMLA, 2002, the burden of proof is upon the appellant to indicate the sources of income, earning or assets, out of which or by means of which he had acquired the property attached u/s 5(1). The contention of the respondents is that the appellant had no independent source of income and he was associated with his brothers, namely, Sh. Manish Jain and Sh. Rakesh Jain during the relevant period. Moreover, the presumptions u/s 23 and 24 are also against the appellant and it was for him to rebut the presumptions by presenting appropriate evidence before the Ld. AA which he failed to do.

It is by now well-settled that the issue of retrospectivity or otherwise in so far as offence of money laundering is concerned has to be examined with reference to the act which constitutes 'money laundering' under Act, regardless of the time of occurrence of the scheduled offence. Further, the offence of money laundering is a continuing offence. A continuing offence is one which is susceptible of continuance and is distinguishable from one which is committed once and for all. A continuing offence occurs and reoccurs, and each time, an offence is committed.

The decision of the Hon'ble Delhi High Court in Prakash Industries Limited [2022 (7) TMI 877 - DELHI HIGH COURT] may also be referred to in this context, wherein, it was held that it is well settled relating to retroactive application of penal previous that merely because requisite or facet for initiation of action pertains to a period prior to the enforcement of the statute, that would not be sufficient to characterize statute as being retrospective. It must be borne in mind that the Act with which we are concerned penalizes acts of money laundering. It does not create a separate punishment for a crime prescribed under the Penal Code. The Act does not penalize the predicate offence. That offence merely constitutes the substratum on which charge of money laundering is being raised.

There are no sufficient grounds to hold that the actions taken under sections 5 and 8 were not valid on account of non-communication of the reasons by the relevant authorities acting under the said provision. Accordingly, the contention of the appellant is rejected.

Conclusion - The attached properties were rightfully considered proceeds of crime or their equivalent value. The attachment orders upheld.

Appeal dismissed.

Denial of refund of Input Tax Credit (CENVAT Credit) under Rule 5 of the CENVAT Credit Rules, 2004 - export of services or not - interpretation of Rule 6A of the Service Tax Rules, 1994 and Rules 3, 4 and 6 of the Place of Provision of Services Rules, 2012 - POPOS Rules - HELD THAT:- Rule 6 of the Place of Provision of Services Rules, 2012, will apply only to services provided by way of admission to, or organization of, a cultural, artistic, sporting, scientific, educational, or entertainment event, or a celebration, conference, fair, exhibition, or similar events, and of services ancillary to such admission, and not to mere participation in a trade fair to promote the products of the said group Company namely, Hypertherm (S) Private Limited, Singapore.

Although in the Impugned Order-in-Original, a reference has been made to Rule 14 of the Place of Provision of Services Rule, 2012, it has to be stated that the aforesaid Rule will apply only where the provision of service is prima facie determinable in terms of more than one Rule in which case, the place of provision of service shall be determined in accordance with the Rules that occurs later among the many Rules that merit equal consideration. Hence, this is not the situation under contemplation in the facts of the present case and therefore, reference to the aforesaid Rule was irrelevant in the Impugned Orders.

It is clear that only Rule 3 of the Place of Provision of Services Rules, 2012 is to be applied, even if the service is provided in India. Despite the fact that service is provided in India to a recipient located outside the taxable territory, it is deemed to have been provided abroad if the conditions of Rule 6A of the Service Tax Rules, 1994 are satisfied. In these cases, admittedly services were provided by the Petitioner to Hypertherm (S) Private Limited, a Company from Singapore. Therefore, there is export of service.

The payments have been received by the Petitioner in convertible foreign exchange for the export of service to its group Company namely Hypertherm (S) Private Limited, Singapore. This also satisfies the requirement of Rule 6A(1)(e) of the Service Tax Rules, 1994. Since payment was received in Convertible Foreign Exchange, it has to be held that there was export of service.

Conclusion - The Petitioner is not liable to pay service tax under the provisions of the Finance Act, 1994. The Petitioner is entitled to refund of Input Tax Credit (CENVAT Credit) under Rule 5 of the CENVAT Credit Rules, 2004.

The case is remitted back to the Respondents to segregate those services which are deemed to be provided outside India in terms of Rule 3 of the Place of Provision of Services Rules, 2012 and those services which are deemed to have been provided in India as per Rule 6 of the Place of Provision of Services Rules, 2012 - Petition disposed off by way of remand.

Seeking rectification of mistake in the final order - whether the tax liability in the present case was under Reverse Charge Mechanism and whether the appellant was liable to pay tax? - HELD THAT:- There is no question of any express determination of nature of service as admittedly the services rendered by the appellant are those of “Goods Transport Agency” and of giving truck/vehicles on hire. The person liable to pay service tax has clearly been discussed by the adjudicating authorities below and the findings have been affirmed by this Tribunal. Since there were two rounds of litigation and the findings of the departmental adjudicating authority have been affirmed by this Tribunal, the principle of merger applies vis-à-vis all the decisions.

There are no error, as alleged, in the impugned final order dated 28.06.2024 except for the aforequoted typographical omission vis-à-vis word “not” in para 5.1 of the impugned final order.

Application allowed.

Liability to pay Service Tax on the construction of roads and related activities under the Finance Act, 1994 - amounts received by the appellant for the sale of machinery, land, and other services were correctly included in the taxable value for Service Tax purposes or not - Taxability of amount has been received prior to the introduction of the “supply of tangible goods service” i.e., prior to 16th May, 2008 - penalties.

Liability to pay Service Tax on the construction of roads and related activities under the Finance Act, 1994 - amounts received by the appellant for the sale of machinery, land, and other services were correctly included in the taxable value for Service Tax purposes or not - HELD THAT:- From the N/N. 17/2005-ST dated 07.06.2005, it is observed that by virtue of the same, ‘site formation and clearance, excavation and earthmoving and demolition’ and such other similar activities, referred to in sub-clause (zzza) of clause (105) of section 65 of the Finance Act, provided to any person by any other person in the course of construction of roads, airports, railways, transport terminals, bridges, tunnels, dams, ports or other ports, is exempt from the whole of service tax leviable thereon under section 66 of the said Finance Act, 1994. However, we find that the Ld. Commissioner has not extended the benefit of the said notification on the ground that the road constructed is not for the use of general public. In this regard, it is observed that construction of road being private or public is not the criterion for eligibility to the benefit under Notification No.17/2005-ST dated June 7, 2005.

The Ld. Commissioner erred in distinguishing the roads being public or private while examining the eligibility to Notification No.17/2005-ST dated June 7, 2005 when no such criteria is present is the body of the said notification. Accordingly, it is held that by virtue of N/n. 17/2005-ST dt. 07.06.2005 the appellant is eligible for the exemption provided for the ‘Site formation and clearance, excavation and earthmoving and demolition’ and such other similar activities rendered by them. Thus, the demand of service tax confirmed in this regard is not sustainable and hence we set aside the same.

It is also observed that the appellant has raised the ground that they are eligible for exemption from Service Tax with respect to the payment of Rs.48,17,022/- received from M/s. JUD Cements (P) Ltd. on account of sale of land. The submission of the appellant agreed upon that sale of land value is not liable to Service Tax. However, this needs to be verified by the ld. adjudicating authority and for that purpose, the issue needs to be remanded back to the adjudicating authority.

Taxability of amount has been received prior to the introduction of the “supply of tangible goods service” i.e., prior to 16th May, 2008 - HELD THAT:- If the evidences available on record indicate that these amounts have been received prior to 16.05.2008, then no Service Tax is payable on these amounts. However, this needs to be verified by the ld. adjudicating Authority and for that purpose the issue needs to be remanded back to the adjudicating authority.

Penalty - HELD THAT:- The service tax liability is to be re-quantified as per the discussions in the previous paragraphs and hence, the demand of Service Tax along with interest and penalty confirmed in the impugned order is set aside. On re-quantification of their Service Tax liability, the adjudicating authority may decide the liability of penalty, if any required, afresh, based on his findings.

Conclusion - i) The demand of service tax confirmed with respect to construction of road is not sustainable. ii) By virtue of Notification No. 17/2005 ST Dt. 07.06.2005, the appellant is eligible for the exemption provided for the ‘Site formation and clearance, excavation and earthmoving and demolition’ rendered in connection with road construction. iii) The issues relating to exemption from service tax claimed by the appellant needs to be verified by the ld. adjudicating authority.

Appeal disposed off.

Liability of appellant to pay Service Tax under the Reverse Charge Mechanism for the transportation services received from a Goods Transport Agency (GTA), despite the service provider having already paid the tax - invocation of extended period of limitation - HELD THAT:- The appellant is agreed upon that if service tax was required to be paid by the appellant as alleged in the show cause notice, but the service tax has already been paid by the service provider, department cannot recover the service tax once again from the service receiver under Reverse Charge Mechanism. The service tax cannot be demanded on the same service twice, irrespective of the fact whether the service tax has been paid by the service provide by service receiver. This issue is no more res-integra.

Reliance placed in the case of Dhariwal Industries Limited vs. C.C.E. C. Anand [2023 (10) TMI 595 - CESTAT AHMEDABAD], in which this Tribunal held that even though, legally the appellant is liable to pay service tax but in the facts of the present case the transport agency has admittedly paid such service tax. The assessment of payment of service tax by the transport agency has not been disputed by their jurisdictional officer. Therefore, no question can be raised as regard the service tax payment and assessment thereof at the end of the transport agency. If this be so, then the payment of service tax by the goods transport agency was made good as payment of service tax. Therefore, the demand against the appellant for the same service will amount to demand of service tax twice on the same service which in any case is not permissible.

Once the service provider discharged the service tax where the service recipient is liable to pay the service tax, demand of service tax on the same service from the service recipient shall not sustain on the ground that the particular service which already suffered the service tax cannot be made to suffer the service tax twice on the same service. Accordingly, the service tax paid by the transport agency in the facts of the present case is the payment of service tax and not deposit. Therefore, no demand can be raised from the appellant. The impugned order was held not sustainable and the same was set aside and appeal was allowed.

Conclusion - The learned first Adjudicating Authority and the learned Commissioner (Appeals) have committed error in confirming the demand and recovery of service tax, amounting to Rs.1,17,881/- from the appellant. The first Adjudicating Authority and the learned Commissioner (Appeals) erred in confirming the demand of interest on the amount of service tax and imposition of penalty of Rs.1,17,881/- under Section 78(i) of the Finance Act and Rs. 10,000/- under proviso to Section 77 (1) (b) of the Finance Act, 1994, respectively on the appellant.

Appeal allowed.

Taxability - services of selling space for advertisements in print media - service are covered under negative list or not - Recovery of service tax with interest and penalties - suppression of facts or not - extended period of limitation - Benefit of exemption under Notification No.33/2012.

Taxability - HELD THAT:- The appellant is admittedly providing advertisement services to print-media. Those services fall under negative list in sub-clause (g) of section 66 (b) of Finance Act. This issue stands already decided by this Tribunal in its order in the case of Adbur Pvt. Ltd. vs. Commissioner of Service Tax, Delhi [2017 (5) TMI 101 - CESTAT NEW DELHI]. Hence, the show cause notice had wrongly proposed the demand on the amount received for rendering services to print media. The adjudicating authorities below are held to have rightly set aside the said demand.

The demand of Rs.3,99,142/- has been confirmed on the amount received as commission for rendering the services. It is observed that the decision of this Tribunal in the case of Adbur Pvt. Ltd. vs. Commissioner of Service Tax, Delhi [2017 (5) TMI 101 - CESTAT NEW DELHI] has held that the commission received by the advertising agencies is chargeable to service tax. However, the advertising agency being a pure agent is held not liable to pay service tax on amount payable to media companies on behalf of their clients.

Extended period of limitation - HELD THAT:- The invocation of extended period has been justified by the authorities below on the ground that the appellant has failed to take the service tax registration and to file their ST- 3 returns. Section 70 of the Finance Act has been invoked, however, in the light of the above discussion and the decisions considered by the adjudicating authorities below itself, the services rendered by the appellant are held to fall under the negative list. Thus, appellant had no liability to pay tax on the amount received for rendering advertisement agency service to the print media except on the amount of commission - the act of taking no service tax registration and of filing no returns is denied to be the ground for invoking extended period of limitation. The Show Cause Notice is, accordingly, held to be barred by time.

Benefit of exemption under Notification No.33/2012 - HELD THAT:- The threshold limit of Rs.10 Lakhs is to be seen for the previous financial year. The authorities below have given the benefit of Notification No.33/2012 for financial year 2017-18 as the threshold limit for previous year (2016-17) was less than 10 Lakhs. It is observed that it was less than 10 Lakhs for the financial year 2014-15, the previous year for Financial Year 2015-16. Hence the authorities below are held to have erred while not granting the benefit of Notification No.33/2012 for the financial year 2016-17 also.

Conclusion - i) The services provided by the appellant fell under the negative list, thus, the demand proposed by the show cause notice set aside. ii) The show cause notice was time-barred due to the lack of evidence of malafide intention or suppression of facts by the appellant. iii) The authorities erred in not granting the appellant the benefit of exemption under Notification No.33/2012 for the threshold limit of Rs.10 Lakhs.

Appeal allowed.

Non-payment or short payment of service tax - entire case demand has been raised on the basis of Balance Sheet, Profit and Loss Account and ST-3 Returns which were always open to the Department for any query/scrutiny and those are public documents - suppression of facts or not - time limitation - penalties - HELD THAT:- The demand of service tax has been raised on the basis of Form-26AS supplied by the Income Tax Department and the information available in the Balance Sheet, Profit and Loss Account and ST-3 Returns. The department has not conducted any verification to find out the nature of service rendered. By the appellant and whether the appellant is liable to pay service tax or not. It is observed that the being a registered service provider and filing Service Tax Returns regularly, the demand cannot be raised only on the basis of Form-26AS obtained from the Income Tax Department.

The department had raised the allegation of non-payment or short payment of service tax related to the period F.Y. 2014-15 and 2015-16 and the Show Cause Notice for the said period was issued on 07.11.2019 i.e. after a period of 30 months from the date of filing the last ST-3 Return for the period October, 2015 to March, 2016 (ST-3 return filed on 20.06.2016) by which time the normal period of limitation of 30 months had already been over. Even the first query about the difference between the income form sale between ITR and ST-3 was made only on 13.09.2019 and even by that time, the normal period of limitation had already been expired. Thus, the demand confirmed by invoking the extended period of limitation is not sustainable. As the entire demand in the impugned order falls beyond the normal period of limitation, the demands confirmed in the impugned order along with interest is not sustainable and accordingly, the same is set aside.

Penalties - HELD THAT:- The suppression of facts with intention to evade the tax is not established in this case. In these circumstances, no penalty is imposable u/s 78 of the Finance Act, 1994. Accordingly, the penalties imposed on the appellant set aside. The appellant has been registered with the Department and have been filing returns regularly. Thus, the penalties imposed in sections 77(1)(c)(ii) and section 77(2) of the Finance Act, 1994 are not warranted and hence, set aside.

Conclusion - i) No verification was conducted by the department to determine the liability of the appellant for service tax. ii) Demands cannot be solely based on Form-26AS when the appellant is a registered service provider regularly filing Service Tax Returns. iii) The demand confirmed beyond the normal limitation period was not sustainable, and subsequently are set aside along with interest. iv) There was no established suppression of facts by the appellant to evade tax, thus no penalty under Section 78 of the Finance Act, 1994 was warranted.

The impugned order is set aside - appeal allowed.

Liability of appellant to pay service tax on selling commission on RCM basis - invocation of extended period in revenue neutral situations - interest and penalties.

Liability of appellant to pay service tax on selling commission on RCM basis - HELD THAT:- Section 65(105) of the Finance Act, 1994 lists the categories of "taxable services". Sub-clause (zzb) of the section defines the taxable service as "any service provided or to be provided to a client, by any person in relation to business auxiliary service". In the instant case, it is noted that the service is provided in a country outside India, the provisions of Section 66A will also come into play. Section 66A, inserted by the Finance Act, 2006, contains provisions regarding service tax liability where 'service' is provided by a service provider who is based outside India to a service recipient who is based in India.

Section 66A have to be read with the provisions of Rule 2(1)(d)(iv) of the Service Tax Rules, 1994, which states that in relation to any taxable service provided or to be provided by any person from a country other than India and received by any person in India under Section 66A of the Act, the recipient of such services shall discharge service tax liability.

In the instant case, it is not disputed that M/s. Parah had provided the service of selling agent to the appellant. The agreement between the appellant and M/s. Parah clearly evidences that the service provider was engaged to provide services of marketing and sale of appellant's products in UAE. The payment made in convertible foreign exchange was under the head “selling commission” - the services provided by a commission agent are included in the category of taxable service termed as "business auxiliary service", where 'service' is provided by a service provider who is based outside India to a service recipient who is based in India. Section 66A, inserted by the Finance Act, 2006 read with the Service Tax Rules, 1994 mandate that service tax liability is to be discharged by the service recipient.

The Appellants as recipient of taxable service from offshore service providers are liable to pay the service tax under Rule 2(1)(d)(iv) of the Service Tax Rules only.

Invocation of extended period of limitation in revenue neutrality situations - penalties - HELD THAT:- Mere Non Registration and non filing of return cannot be a reason to dismiss the plea of bonafide belief to non taxable nature of the activity of the appellant in that case. This was followed by coordinate Bench of this Tribunal in Jet Airways (I) Ltd. Versus Commissioner Of Service Tax Mumbai [2016 (8) TMI 989 - CESTAT MUMBAI] wherein it was reiterated that the extended period cannot be invoked due to applicability of Revenue neutrality - Penalties imposed under Section 77(2) and 78 is set-aside.

Conclusion - i) Service tax on selling commission is liable to paid by the appellant. However, the demand for the extended period is held to have been wrongly invoked in view of the discussions on revenue neutrality. (ii) Penalties imposed under Section 77(2) and 78 is set-aside for the same reason.

The impugned order stands modified to the extent indicated above and the appeal is allowed partially.

Non-payment of service - commissioning & installation service - maintenance or repair service - interpretation of the relationship between Tata Steel Limited (TSL) and its divisions, specifically Tata Growth Shop (TGS) - HELD THAT:- The issue had already come up for consideration before this Tribunal in the appellant’s own case for an earlier period M/S TATA STEEL LIMITED [2024 (8) TMI 598 - CESTAT KOLKATA] wherein it has been observed 'we hold that TGS & TSL are the same identity and it is well settled that the credit of input is to be utilized for payment of service tax towards output services. There is or can be no dispute with this legal position and this is what the representatives of TGS and TSL, "agreed with. Further, it is also settled legal position that under the Central Excise law there is no requirement of one-to-one correlation between the credits availed in respect of the input and input service and utilization thereof in payment of central excise duty or service tax in respect of dutiable goods manufactured and cleared and/or output service rendered. Hence, TGS has rightly availed the subject cenvat credits of service tax paid, without there being any concomitant obligation to make payment of service tax on the services rendered to another unit of TSL.'

Following the precedent decision in the appellant’s own case, it is held that no Service Tax is payable by the appellant. Consequently, the impugned orders are set aside.

Conclusion - TGS and TSL were the same entity for service tax purposes. No Service Tax is payable by the appellant.

Appeal allowed.

Short payment of service tax for the period 2010-11 to 2013-14 - correct quantification of service tax demand in the Show Cause Notice - suppression of material facts with the intent to evade payment of service tax - Extended period of limitation - HELD THAT:- The said license is for the appellant to act as a contractor for providing services to various clients of the PVVNL and UPPCL. The clients of PVVNL an d UPPCL are neither any government organization or local government authority. Thus the services provided by the appellant to these service recipients cannot be said to be provided by to government organization or local authority to be eligible for the exemption under Notification no 25/2012-ST as claimed by the appellant.

On perusal of the order in the case of M/s Arvindra Electricals [2018 (9) TMI 86 - CESTAT CHANDIGARH] which is relied earlier for holding that the services provided by the appellant are “work contract service”, it is found that while granting the benefit of exemption under this notification, the bench was not seized with the matter wherein the service recipients were other than government organizations or local authority. As such on this ground this order of Chandigarh Bench is distinguishable.

While keeping the demand higher granted the benefit that was available to the appellant with regards to 50% liability to be discharged by the appellant and 50% by the service recipient on reverse charge basis, has been granted and demand has been restricted only to 50% of the amount, there are merits in the said findings recorded by the adjudicated authority.

Extended period of limitation - HELD THAT:- It is a fact on record that even after repeated inquiries appellant failed to provide the requisite details what was called for. They were also not registered, nor were filing service tax returns, during the relevant period it is only on the basis of enquiry and investigation made that case of none payment of service tax has been made out by way of none declaration and separation of facts. Accordingly, extended period of limitation for making this demand has been rightly invoked.

Conclusion - The services provided as part of a works contract are taxable unless exempted by specific notifications. The applicability of the reverse charge mechanism post-01.07.2012, holding service providers liable for 50% of the tax is emphasized.

There are no merits in the appeal of appellant and the same is dismissed.

Classification of the product manufactured and classified by the Assessee-Respondent - spices or Mixed Condiments and Mixed Seasoning - to be classified under Tariff Item No. 09109100 or under Tariff Item No. 21039040 - HELD THAT:- Only by establishing presence of more than certain quantity of substances in a particular product, the individuality of the product would not be necessarily lost and therefore, in such an event, the classification done by Appellant for its disputed products which had also undergone quasi-judicial scrutiny way back in 2009 and accepted by the Department not to be brought again to any further dispute. As it is noticed, the products described in this appeal are even of similar names (example – Pav Bhaji spice mix etc.) as found mentioned in the initial order.

The classification adopted by the Respondent-Assessee is confirmed and the proposed classification of the Appellant-Department is rejected, which also had remained unsustainable before the Adjudicating Authority namely the Principal Commissioner.

Conclusion - The classification of the product under Tariff Item No. 09109100 as a spice upheld.

Appeal dismissed.

Contravention of provisions of Notification No. 42/2001-CE, as amended, read with Excise Rule 19 with an intent to evade payment of central excise duty - failure to submit the original and duplicate copies of ARE-1 issued by HBL along with copies of Shipping Bill and Bill of Lading - HELD THAT:- The undisputed facts of the case are that the appellant had obtained CT-1 Certificates from the Jurisdictional Authorities at Jaipur after executing a bond based on which excisable goods were removed without payment of duty under Excise Rule 19 under two ARE-1 forms. The conditions subject to which goods can be removed for export without payment of duty under this rule were prescribed by the Board. The basic requirement in this procedure is that there is evidence of the goods, which were removed from the factory must be exported. The ARE-1 issued by the Range Superintendent must be matched with the corresponding shipping bills under which they were exported. Excise Rule 19 does not provide that one could clear the goods and sell them to anybody in the domestic market who in turn may sell them to somebody else who may export goods or use them to manufacture some goods which may finally be exported.

Undisputedly in this case the appellant had not exported the goods removed under ARE-1 but sold them to M/s CEL. Therefore, there is no evidence from the documents submitted by the appellant that the goods were exported.

Conclusion - The appellant had not exported the goods, which were removed as per the procedure prescribed. Therefore, the demand of duty, interest and penalties imposed on the appellant need to be sustained.

Appeal dismissed.

Method of Valuation of goods - cell phone sold along with a charger - only one Maximum Retail Price (MRP) stated on the packaging - HELD THAT:- It was held in the case of STATE OF PUNJAB & OTHERS VERSUS NOKIA INDIA PVT. LTD. [2014 (12) TMI 836 - SUPREME COURT] that 'Assessing Authority, Appellate Authority and the Tribunal rightly held that the mobile/cell phone charger is an accessory to cell phone and is not a part of the cell phone.'

There are no reason to interfere with the impugned order - SLP dismissed.

Dishonour of Cheque - prayer to transfer Criminal Case pending in the court of Judicial Magistrate Ist Class, Chandigarh (UT) to the court of Metropolitan Magistrate, Coimbatore, Tamil Nadu, essentially on the ground that no cause of action could be said to have arose for the bank to lodge the complaint for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 - lack of territorial jurisdiction of the court in which the complaint is filed - exercise of powers under Section 406 of the Cr.P.C. to transfer the said complaint to the court having territorial jurisdiction to try the offence - expression “that for the ends of justice, this Court can transfer any criminal case or appeal to any place.” in Section 406 Cr.P.C. embraces in itself the lack of territorial jurisdiction of the court to try the offence under Section 138 N.I. Act.

HELD THAT: -This court in the case of Yogesh Upadhaya and Another v. Atlanta Limited [2023 (2) TMI 884 - SUPREME COURT] had the occasion to consider the plea for transfer filed under Section 406 Cr.P.C. in connection with six complaint cases filed under Section 138 and 142 of the N.I. Act respectively. While considering the plea for transfer, the court had the opportunity to consider Section 142(2) contained in the statute book along with Section 142-A.

Further, reliance placed on Dashrath Rupsingh Rathod v. State of Maharashtra, [2014 (8) TMI 417 - SUPREME COURT], wherein it was held that the place, situs or venue of judicial inquiry and trial of the offence must logically be restricted to where the drawee bank is located, i.e., where the cheque is dishonoured upon presentation and not where the complainant’s bank is situated.

The Court after examining the Statement of Objects and Reasons in the N.I. Amendment Act, 2015, stated that the insertion of Sections 142(2) and 142-A in the N.I. Act was a direct consequence of the judgment in Dashrath Rupsingh Rathod [2014 (8) TMI 417 - SUPREME COURT]. Section 142(2) now makes it clear that the jurisdiction to try such an offence would vest only in the Court within whose jurisdiction the branch of the Bank where the cheque was delivered for collection, through the account of the payee or holder in due course, is situated. The newly inserted Section 142-A further clarifies this position by validating the transfer of pending cases to the Courts conferred with such jurisdiction after the amendment came into force.

The Court noted that the non obstante clause was already present in the original Section 142(1) and was not introduced by way of the amendments in the year 2015, along with Section 142(2). The non obstante clause merely has reference to the manner in which cognizance is to be taken in an offence under Section 138. The same must not be construed to mean that the power of this Court to transfer pending criminal proceedings under Section 406 CrPC stands abrogated thereby in respect of an offence under Section 138 of the NI Act.

A case is transferred by virtue of the powers under Section 406 if there is a reasonable apprehension on the part of a party to a case that justice will not be done. There, however, must be reliable material from which it can be inferred that there are impediments that are interfering or likely to interfere, either directly or indirectly, with the cause of justice.

A proceeding which is void under Section 461 cannot be saved by Section 462 - HELD THAT:- The focus of clause (l) of Section 461 18 is on the “offender” and not on the “offence”. If clause (l) had used the words “tries an offence” rather than the words “tries an offender”, the consequence might have been different - the jurisdiction of a criminal Court is normally relatable to the offence and in some cases, to the offender, such as cases where the offender is a juvenile (section 27) or where the victim is a women [the proviso to clause (a) of section 26]. But Section 461(l) focuses on the offender and not on the offence. The saving clause contained in Section 462 of the Code of 1973 is in pari materia with Section 531 of the Code of 1898.

The transfer of cases under Section 406 Cr.P.C. may be allowed when there is a reasonable apprehension backed by evidence that justice may not be done and mere convenience or inconvenience of the parties may not by itself be sufficient enough to pray for transfer. The court has to appropriately balance the grounds raised in the facts and circumstances of each case and exercise its discretion in a circumspect manner while ordering a transfer under Section 406.

In Maneka Sanjay Gandhi, it was held that as a general rule, it is the complainant who has the right to choose the forum that has jurisdiction over the subject matter and the courts do not interfere with such a right unless circumstances that hamper the ends of justice are brought to the notice of the court by the other party.

Section 142 of the N.I. Act in clear terms, provides the complainant with the right to lodge a complaint, before a court, within whose jurisdiction, the branch of the bank where the cheque is delivered for collection, is situated. Therefore, the argument of the accused that another court might also be empowered to take cognizance of the matter under Section 142, since the cause of action arose within that jurisdiction, cannot by itself be a ground for seeking transfer under Section 406 of the Cr.P.C.

A conjoint reading of Section 142(2)(a) along with the explanation thereof, makes the position emphatically clear that, when a cheque is delivered or issued to a person with liberty to present the cheque for collection at any branch of the bank where the payee or holder in due course, as the case may be, maintains the account then, the cheque shall be deemed to have been delivered or issued to the branch of the bank, in which, the payee or holder in due course, as the case may be, maintains the account, and the court of the place where such cheque was presented for collection, will have the jurisdiction to entertain the complaint alleging the commission of offence punishable under Section 138 of the N.I. Act. In that view of the position of law, the word ‘delivered’ used in Section 142(2)(a) of the N.I. Act has no significance. What is of significance is the expression ‘for collection through an account’. That is to say, delivery of the cheque takes place where the cheque was issued and presentation of the cheque will be through the account of the payee or holder in due course, and the said place is decisive to determine the question of jurisdiction.

For the purpose of transfer of any case or proceedings under Section 406 of the Cr.P.C., the case must fall within the ambit of the expression “expedient for the ends of justice”. Mere inconvenience or hardship that the accused may have to face in travelling from Coimbatore to Chandigarh would not fall within the expression “expedient for the ends of justice”. The case must fall within any of the five situations as narrated in para 49 of this judgment. It is always open for the petitioner accused to pray for exemption from personal appearance or request the Court that he may be permitted to join the proceedings online.

Conclusion - No case is made out for transfer of the proceedings in question under 406 CrPC.

Petition dismissed.

Stay of penalty orders - whether the execution of penalty orders passed by the NCDRC can be stayed under the interim moratorium provisions of Section 96 of the IBC? - HELD THAT:- There is a fundamental distinction between civil and criminal proceedings concerning a debt moratorium. While civil proceedings are generally stayed under IBC provisions, criminal proceedings, including penalty enforcement, do not automatically fall within its ambit unless explicitly stated by law. The penalties imposed by the NCDRC are regulatory in nature and arise due to noncompliance with consumer protection laws. They are distinct from "debt recovery proceedings" under the IBC.

It is well settled that there exists a distinction between punitive actions and criminal proceedings. While a criminal proceeding is initiated by the State against an accused to determine guilt and impose penal consequences, punitive actions in the regulatory sphere, such as those imposed by the NCDRC, are meant to ensure compliance with the law and to act as a deterrent against future violations. Section 27 of the CP Act empowers consumer fora to impose penalties to ensure adherence to consumer protection norms. These penalties do not arise from any "debt" owed to a creditor but rather from the failure to comply with the remedial mechanisms established under consumer law. Unlike a criminal prosecution, which requires the establishment of mens rea, the penalties imposed by NCDRC are regulatory in nature and aim to protect the public interest rather than to punish criminal behaviour.

The moratorium under Section 96 of the IBC is intended to provide temporary relief to debtors by preventing certain proceedings against them during the resolution process. However, this protection is not absolute and does not extend to all categories of debts. The legislative intent behind the moratorium is to ensure that the debtor's assets are preserved for an efficient resolution process and to prevent creditors from taking unilateral actions that may frustrate the objective of insolvency proceedings. However, the statutory scheme of the IBC makes it clear that the protection under the moratorium does not cover all forms of liabilities, particularly those classified as "excluded debts" under Section 79(15) of the IBC.

In the present case, the damages awarded by the NCDRC arise from a consumer dispute, where the appellant has been held liable for deficiency in service. Such damages are not in the nature of ordinary contractual debts but rather serve to compensate the consumers for loss suffered and to deter unethical business practices. Courts and tribunals, including the NCDRC, exercise their statutory jurisdiction to award such damages, and these are distinct from purely financial debts that may be subject to restructuring under the IBC - Since such damages are covered under "excluded debts" as per Section 79(15) of the IBC, they do not get the benefit of the moratorium under Section 96 of the IBC, and their enforcement remains unaffected by the initiation of insolvency proceedings.

Judicial precedents support the view that statutory penalties and regulatory actions do not automatically fall within the ambit of an insolvency moratorium. In P. Mohanraj [2021 (3) TMI 94 - SUPREME COURT] this Court held that a moratorium under Section 14 of the IBC extends to proceedings under Section 138 of the NI Act. However, a distinction between debt recovery proceedings and punitive actions needs to be created, and therefore all criminal liabilities do not fall within the scope of the moratorium unless explicitly covered under the IBC. Consequently, penalties imposed by regulatory bodies in the public interest cannot be stayed merely because insolvency proceedings are ongoing.

Conclusion - The penalties imposed by the NCDRC are regulatory in nature and do not constitute "debt" under the IBC. The moratorium under Section 96 of the IBC does not extend to regulatory penalties imposed for non-compliance with consumer protection laws.

The appellant is directed to comply with the penalties imposed by the NCDRC within a period of eight weeks from the date of this judgment - Appeal dismissed.

Right of Micro and Small Enterprises to supply 25% of goods and services to be procured by the Government and its instrumentalities under its Procurement Policy - legality of minimum turnover clauses prescribed in the Notice Inviting Tenders issued by the Government and its instrumentalities - rights and duties flowing out of Section 11 of the Micro, Small and Medium Enterprises Development Act, 2006, prescribing a Public Procurement Policy for Micro and Small Enterprises (MSEs) Order 2012.

Right of Micro and Small Enterprises to supply 25% of goods and services to be procured by the Government and its instrumentalities under its Procurement Policy - HELD THAT:- The first statutory recognition of MSMEs, measures for their protection, promotion and grant of special benefits was through the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993. The 1993 Act was repealed by the comprehensive and promising regime under the present Micro, Small and Medium Enterprises Development Act in 2006, which not only created different classes of enterprises under Section 7, but also established an Advisory Committee to advise the Central government regarding the classification of enterprises, a National Board for MSMEs under Section 3, the functions of which are provided in Sections 5 and 6, inter alia to deal with, “factors affecting the promotion and development of micro, small and medium enterprises and review the policies and programmes of the Central Government” and to “make recommendations on matters referred to it by the Central Government which are necessary or expedient for facilitating the promotion and development and enhancing the competitiveness of the micro, small and medium enterprises”.

Clause 3 of the policy sets annual goals of procurement from MSEs from the financial year 2012-13 itself. The object of the said clause is to achieve an overall procurement of a minimum of 25 percent of total annual purchases of products and services from MSEs within a period of 3 years. Sub-clause (3) clarifies that after a period of 3 years, commencing from 2015, the overall procurement goal “shall be made mandatory”. The consequence of non-compliance with the mandate is contemplated under sub-clause (4), where the ministries, departments and public sector undertakings that fail to meet the annual goal are obligated to justify with reasons and are made answerable to the Review Committee.

Having considered the provisions of the Act and the MSE Procurement Preference Policy, 2012, it is opined that there is no mandatory minimum procurement ‘right’ of an individual MSE. However, there is certainly a statutory foundation for the Procurement Preference Policy, 2012, having force of law as it ‘encapsulates a mandate and discloses a specific purpose’. Clause 3 of the policy mandating procurement of 25 per cent of supply from MSEs is simply the statutory duty of the bodies constituted under the Act and the Policy - It is, therefore, necessary to ensure that in the functioning of these bodies, there is efficiency in administration, expertise through composition, integrity through human resources, transparency and accountability, and response-ability through regular review, audits and assessments.

Shifting the focus of judicial review to functional capability of these bodies is not to be understood as an argument for alternative remedy, much less as a suggestion for judicial restraint. In fact, this shift is in recognition of an important feature of judicial review, which performs the vital role of institutionalizing authorities and bodies impressed with statutory duties, ensuring they function effectively and efficiently. The power of judicial review in matters concerning implementation of policy objectives should transcend the standard power of judicial review to issue writs to perform statutory duty and proceed to examine whether the duty bearers, the authorities and bodies constituted properly and also whether they are functioning effectively and efficiently. By ensuring institutional integrity institutional objectives are achieved. Further, effective and efficient performance of the institutes can reduce unnecessary litigation.

The Review Committee, specifically entrusted with this duty, should resolve this issue. Under sub-clause (2) of clause 12, the Review Committee is specifically entrusted with the twin duties of (i) reviewing the 358 items exclusively reserved for MSEs and (ii) considering the request of the ministries, departments and public sector undertakings for exemption from 25% on a case-to-case basis. The Review Committee also has the obligation to ‘‘monitor the achievements of the policy’’. As the Review Committee is entrusted with reviewing and monitoring the performance of the sector, we are of the opinion that this body, comprising domain experts, must examine this issue, take an appropriate decision and ensure its implementation.

The respondents, in particular the Review Committee constituted under clause 12 of the Procurement Preference Policy 2012 are directed to examine this issue of mandatory procurement of 25 per cent of goods and services by the Government, its departments and instrumentalities from the MSEs under clause 3 of the Policy and notify whether the said procurement would be independent of the 358 items reserved for procuring from MSEs and take such action as is necessary for compliance of the Procurement Order 2012 and upload its decisions for the purpose of clause 5 of the Policy. The necessary action shall be taken within 60 days from the order.

Is the prescription of mandatory minimum turnover clause in NITs violative of articles 14 and 19 of the Constitution, provisions of the MSMED Act and the Procurement Preference Policy, 2012? - HELD THAT:- The two most relevant criteria for framing suitable conditions in NIT relate to the ‘capacity’ and ‘capability’ of the bidder. In Association of Registration Plates v. Union of India, [2004 (11) TMI 600 - SUPREME COURT]; Krishnan Kakkanth v. Govt. of Kerala, [1996 (10) TMI 478 - SUPREME COURT], Ugar Sugar Works Ltd. v. Delhi Administration [2001 (3) TMI 1008 - SUPREME COURT]; M.R.F. Ltd. v. Inspector Kerala Govt., [1998 (11) TMI 674 - SUPREME COURT] this Court had an occasion to examine a tender clause which read, “The tenderers/bidders of the joint-venture partners together must have had a minimum annual turnover equivalent to INR 30 crores in the immediately preceding last year. At least 25% of this turnover must be from the licence plate business. Certificate confirming and the certification of this minimum 25% turnover being from licence plate business will have to be provided duly attested by a chartered accountant/any bank to be attached in support of fulfilment of this condition”.

The law as applicable for procurement through MSEs stands on a different footing. This is for the reason that there is a statutory prescription for notifying a procurement preference policy (Section 11), and in furtherance of such a statutory prescription, the Preference Policy 2012 has been notified mandating procurement of a minimum of 25 per cent from the Micro and Small enterprises. Although it is generally permissible for the government, and its instrumentalities to provide minimum turnover criteria wherever “public safety, health, critical security equipment, etc.”,26 are involved, it must be ensured that such prescriptions do not defeat the Procurement Order 2012 - The Procurement Order 2012 declares the procurement preference obligations of the State and therefore statutory and executive authorities are bound to implement the same. Minimum turnover clauses cannot undermine or override the Procurement Preference Policy 2012.

Apart from the earlier direction relating to mandatory procurement, we also direct the authorities under the Act, including the Review Committee and in particular the Grievance Cell, which is specifically entrusted with the obligation to redress “imposition of unreasonable conditions in tenders floated by Government Departments or agencies that put Micro and Small Enterprises at a disadvantage” to examine limits of minimum turnover clauses and issue necessary and appropriate policy guidelines.

Conclusion - i) The Public Procurement Policy for Micro and Small Enterprises (MSEs) Order 2012 has force of law as it is formulated in exercise of power under Section 11 of the Act and also encapsulates the purpose and object of the Act. ii) Though there is no mandatory minimum procurement ‘right’ for an individual MSE there is certainly a statutorily recognized obligation on the authorities and the bodies under the Act and the Procurement Order 2012 to implement the mandate which is subject to judicial review. iii) The judicial review will primarily ensure proper constitution and effective functioning of the authorities the National Board for MSMEs, the Advisory Committee, the Facilitation Council, the Review Committee and the Grievance Cell and leave the policy and decision making to them. iv) The respondents, and in particular, the Review Committee constituted under clause 12 of the Procurement Preference Policy 2012 to examine the issue of mandatory procurement of 25 per cent of goods and services by the Government, and its instrumentalities from MSEs under clause 3 of the Policy in the context of clause 11 providing for reservation of specific items for procurement and take such action as is necessary for effective implementation of the Policy within a period of 60 days from the date of the order. v) The respondents, including the Review Committee and in particular the Grievance Cell, shall examine and declare limits of the minimum turnover clauses with respect to MSEs and issue appropriate policy guidelines within a period of 60 days from the date of our order.

Petition disposed off.

Seeking grant of bail to the petitioner who had been in custody since December 2018, exceeding six years - HELD THAT:- Considering the facts and circumstances of the case and in particular that the petitioner, who was extradited in December, 2018, has been in custody since then, i.e. more than six years by now, and according to the learned senior counsel, appearing for the respondent-CBI, despite filing three charge-sheets and two supplementary charge-sheets, the investigation is still on going, as is also apparent from the counter affidavit, and the fact that the trial has not yet commenced, we are inclined to grant bail to the petitioner on such terms and conditions as may be determined by the Trial Court in connection with FIR/RC No.RC-217-2013-A0003 dated 12.03.2013.

The CBI will make appropriate request before the Trial Court for imposing necessary conditions before releasing the petitioner on bail.

SLP disposed off.

Overriding provisions of nomination on provisions relating to succession - Amendments to Section 39 of the Insurance Act, 1938, specifically sub-sections (7) and (8), confer a "beneficial interest" to certain nominees, thereby excluding heirs from succeeding to the benefits of an insurance policy under personal law - HELD THAT:- The right of a nominee under Section 39 of the Act of 1938, vis-à-vis the right of an heir under the personal law, was considered in Smt. Sarbati Devi & Anr vs Smt. Usha Devi, [1983 (12) TMI 319 - SUPREME COURT] wherein the Apex Court has held that there is nothing in Section 39 of the Act of 1938 (before amendment) to hold that the provision overrides the law relating to succession.

The ratio in Smt. Sarbati Devi's case [1983 (12) TMI 319 - SUPREME COURT] is followed in various other cases where the provisions relating to nomination are interpreted to hold that such provisions do not override the law relating to succession.

It is required to be emphasised that the Apex Court and various Courts, despite the use of the expression “vest absolutely” or “Notwithstanding anything contained in any law for the time being in force” and “to the exclusion of all” in various provisions of law governing nominations have held that such provisions have to be understood in the background of the scheme of the Act in which the provisions relating to nomination are found. The contentions suggesting nomination overriding the provisions of law have been rejected, in various decisions.

Section 39(7) and (8) of the Act of 1938, seem to suggest a different category of succession not provided in personal law, (Hindu Succession Act) but running contrary to personal law. The provision meddling with the law of succession does not fit in the Scheme of the Act of 1938 which occupies a different field in the Seventh Schedule as compared to “Succession’’ which is found in a different List and Entry. In the light of the discussions made above, it is difficult to hold that the Parliament has enacted a parallel law relating to succession in so far as benefits flowing from the policy of insurance.

Under the unamended provision, the nominee had an obligation to distribute the benefits flowing from the policy to the legal heirs. Under Section 39(7), there is no such obligation as long as there is no claim by the legal heirs. In the absence of any claim by legal heirs, the title vests in beneficiary nominee. However, if there is a claim by the legal heir/s, then the nominee's claim has to yield to the personal law governing succession.

Coming to the facts of the case, the appellant who is the mother of late Ravi Somanakatti, the insured, is one of the Class-I heirs, along with widow and minor son of the insured. Since this Court has taken a view that the Section 39 of the Act of 1938 does not override the provisions of Hindu Succession Act, 1956, the appellant who is the nominee described in Section 39(7) of the Act of 1938 cannot claim absolute ownership over the benefits flowing from the insurance policy as other Class-I heirs of the deceased have also laid a claim over the benefits flowing from the policy - Though the Trial Court has not noticed the amended Section 39 and decreed the suit for partition by referring to un-amended Section 39, this Court is confirming the judgment and decree for the reasons already recorded.

Conclusion - i) The amended Section 39 is not intended to override the provisions of law relating to succession. ii) The expression 'beneficial interest' in Section 39(7) and 'beneficial title' in Section 39(8) should be interpreted to mean that such nominees or their legal representatives will get beneficial title over the benefits if the testamentary and non-testamentary heirs do not claim the benefits. iii) In the absence of any claim by legal heirs, the title vests in the beneficiary nominee. However, if there is a claim by the legal heir/s, then the nominee's claim has to yield to the personal law governing succession.

Appeal dismissed.