TaxTMI Updates e-Newsletter
Mar 14,2024

Breach of principles of natural justice - right to personal hearing - input tax credit discrepancy between GSTR-3B and auto-populated GSTR-2A - applicability of CBIC procedural circulars for reconciliation of ITC - quashing and remand for fresh assessment subject to conditions

Breach of principles of natural justice - right to personal hearing - input tax credit discrepancy between GSTR-3B and auto-populated GSTR-2A - applicability of CBIC procedural circulars for reconciliation of ITC - Impugned assessment order was passed without affording the petitioner an opportunity to contest demand arising from disparity between ITC claimed in GSTR-3B and that reflected in GSTR-2A, and applicable CBIC procedural circulars for reconciliation were not followed. - HELD THAT: - The Court observed that the entire tax demand arose from the disparity between the ITC claimed in the petitioner's GSTR-3B and the auto-populated GSTR-2A, and that the assessment order did not record any finding of the transactions being not genuine. The petitioner was not aware of the show cause notice/intimation because communications were handled by the accountant, and therefore was denied an opportunity to contest the demand. The Court noted the contention that CBIC circulars governing the procedure for resolving such disparities had not been adhered to. In these circumstances the Court found that the petitioner should be given an opportunity to file a reply and to be heard before a fresh assessment is made, and quashed the impugned order to secure compliance with principles of natural justice and the prescribed procedure for reconciliation of ITC claims. [Paras 4]

Impugned assessment order quashed and petitioner granted opportunity to file reply and receive personal hearing; non-compliance with procedural safeguards and lack of adjudication on genuineness warranted fresh decision.

Quashing and remand for fresh assessment subject to conditions - Order for remand of the matter to the assessing officer subject to the petitioner remitting 10% of the disputed tax demand and filing a reply within the stipulated time, with directions for fresh assessment thereafter. - HELD THAT: - By agreement the petitioner undertook to remit 10% of the disputed demand. The Court conditioned the quashing of the assessment order on payment of 10% within two weeks of receipt of the order and permitted the petitioner to file a reply within the same period. Upon receipt of the reply and satisfaction of the payment condition, the assessing officer was directed to provide a reasonable opportunity including a personal hearing and to pass a fresh assessment order in accordance with law within two months thereafter. The order thus remands the matter for reconsideration on merits after adherence to the stated conditions and procedural safeguards. [Paras 5]

Matter remanded to the assessing officer for fresh assessment in accordance with law, subject to the petitioner remitting 10% of the disputed demand and filing a reply; fresh order to be passed within two months after affording hearing.

Final Conclusion: The assessment order dated 11.07.2023 is quashed; petitioner to remit 10% of the disputed tax demand and file a reply within two weeks, after which the assessing officer shall afford a personal hearing and pass a fresh assessment order in accordance with law within two months.

Right to be heard - Requirement of personal hearing before assessment - Quashing of assessment order for non-consideration of objections - Remand for reconsideration with opportunity to file reply - Recovery/appropriation to abide by outcome of remanded proceedings - Dispute arising from mismatch between GSTR-3B and auto-populated GSTR-2A

Right to be heard - Requirement of personal hearing before assessment - Quashing of assessment order for non-consideration of objections - Validity of assessment orders passed without considering the petitioner's objections and without affording the requested personal hearing. - HELD THAT: - The petitioner, a registered civil contractor, sought time to reply to show cause notices and expressly requested a personal hearing. Although the petitioner did not file substantive replies on merits before the assessing officer, the impugned assessment orders were issued recording non-filing and non-attendance, without considering the objections or providing the personal hearing requested. The court held that issuing assessment orders without affording the opportunity sought by the petitioner amounted to a defect requiring interference. Given that the tax demand had been appropriated by bank attachment and revenue interest was secured, the appropriate remedy was to quash the impugned orders and remit the matter for fresh consideration rather than to decide the merit of the tax demand on the record before the court. [Paras 4, 5]

Impugned assessment orders quashed and matter remanded for reconsideration after permitting the petitioner to file a reply and be afforded a personal hearing.

Remand for reconsideration with opportunity to file reply - Recovery/appropriation to abide by outcome of remanded proceedings - Directions for further proceedings on remand including timelines and treatment of amounts already appropriated. - HELD THAT: - The court directed that the petitioner may file a reply to the show cause notice within fifteen days from receipt of the order. The assessing officer was directed to grant a reasonable opportunity, including a personal hearing, and thereafter issue fresh assessment orders within two months. The court clarified that amounts appropriated earlier (by way of bank attachment) shall abide by the outcome of the remanded proceedings, noting that revenue's interest is at present secured and that the matter should be reopened to permit adjudication on merits after hearing. [Paras 5]

Petitioner permitted to file reply within 15 days; assessing officer to provide personal hearing and pass fresh orders within two months; earlier appropriations to abide by the result of remand.

Final Conclusion: Writ petitions allowed in part: impugned assessment orders quashed and remitted for fresh consideration after the petitioner files a reply and is afforded a personal hearing; fresh assessment to be completed within two months and earlier appropriations to abide by the result.

Dropping proceedings under Form ASMT-12 - reopening of dropped proceedings - administrative finality - assessment order - imposition of interest and penalty after proceedings were dropped

Dropping proceedings under Form ASMT-12 - reopening of dropped proceedings - assessment order - Continuation of proceedings culminating in the assessment order dated 29.12.2023 after issuance of Form ASMT-12 dated 27.09.2023 recording that no further action was required - HELD THAT: - The petitioner received a notice in Form ASMT-10 for financial year 2017-2018 and replied on 22.09.2023. By order in Form ASMT-12 dated 27.09.2023 the authorities recorded that the reply was satisfactory and no further action was required. The impugned assessment order dated 29.12.2023 relates to the same assessment period and confirms the same demands as indicated in Form ASMT-10; the only addition is interest and penalty to arrive at an aggregate. Having once recorded, by Form ASMT-12, that proceedings were dropped and no further action was necessary, continuation and resurrection of the same demand by issuing the impugned assessment order is unsustainable. The assessment order therefore cannot stand. [Paras 5, 6]

Impugned assessment order dated 29.12.2023 quashed as continuation of proceedings after Form ASMT-12 was unsustainable.

Final Conclusion: Writ petition allowed; the assessment order dated 29.12.2023 is quashed and connected petitions are closed with no order as to costs.

Condonation of delay - appeal against cancellation of GST registration - power to condone delay under Section 107 of the GST Act - filing of returns and revocation of suspension of registration - quashing and remand for disposal on merits

Condonation of delay - power to condone delay under Section 107 of the GST Act - quashing and remand for disposal on merits - Whether the appellate authority erred in rejecting the appeal solely on limitation and whether the appeal should be admitted for adjudication on merits. - HELD THAT: - The impugned appellate order rejected the appeal as belated though the appeal was filed with a delay of less than thirty days. The appellate authority possessed statutory jurisdiction to condone delay under Section 107 of the GST Act and, on the facts disclosed, it was appropriate to exercise that power. Having regard to the short delay and the overall circumstances recorded, the High Court quashed the rejection and directed that the appellate authority receive and decide the appeal on merits after affording the petitioner a reasonable opportunity to be heard. [Paras 5, 6, 7]

Impugned order rejecting the appeal for delay quashed; appellate authority directed to receive the appeal and dispose of it on merits within one month after affording opportunity to the petitioner.

Filing of returns and revocation of suspension of registration - appeal against cancellation of GST registration - Whether, on the material placed, the petitioner had a prima facie case on merits against the cancellation of GST registration. - HELD THAT: - The record showed that the petitioner filed the pending returns in response to the show cause notice and that suspension of registration had been revoked with effect from the earlier order. The subsequent cancellation order recorded that the petitioner had failed to file returns continuously for six months but also disclosed that there were no tax dues as on the date of that order. On this material the High Court observed that the petitioner prima facie had a good case on merits and, accordingly, remitted the matter to the appellate authority for adjudication on merits. [Paras 5, 7]

Petitioner's case on merits recognized as prima facie plausible; matter remanded to appellate authority for merits adjudication.

Final Conclusion: The order of the appellate authority rejecting the appeal as time-barred is quashed. The appeal is to be received and decided on merits by the appellate authority within one month after giving the petitioner a reasonable opportunity to be heard. The writ petition is disposed of with no order as to costs.

Cancellation of GST registration - Retrospective cancellation of registration - Registration obtained by fraud, wilful misstatement or suppression of facts - Requirement of adequate reasons and objective satisfaction for cancellation - Particularity of show cause notice and opportunity of hearing - Consequences of retrospective cancellation on input tax credit - Power of the proper officer under Section 29(2) to cancel registration with retrospective effect

Particularity of show cause notice and opportunity of hearing - Cancellation of GST registration - Validity of the Show Cause Notice dated 05.01.2024 calling for cancellation of the petitioner's GST registration - HELD THAT: - The Show Cause Notice failed to specify the name of the officer or the place where the petitioner was to appear and was signed only as "digitally signed by DS GOODS AND SERVICES TAX NETWORK 07." It also did not put the petitioner on notice that cancellation, if ordered, would be retrospective. For a notice seeking cancellation of registration, particulars sufficient to afford a meaningful opportunity to be heard are essential; omission of the place/authority to appear and absence of notice about retrospective effect deprived the petitioner of an opportunity to address the critical consequence of retrospective cancellation. The defects render the Show Cause Notice unsustainable. [Paras 4, 5]

Show Cause Notice dated 05.01.2024 is invalid for want of requisite particularity and failure to inform the petitioner of the possibility of retrospective cancellation.

Requirement of adequate reasons and objective satisfaction for cancellation - Retrospective cancellation of registration - Power of the proper officer under Section 29(2) to cancel registration with retrospective effect - Sustainability of impugned order dated 29.02.2024 cancelling registration retrospectively to 05.05.2018 - HELD THAT: - The impugned order merely referenced the Show Cause Notice and stated the effective date of cancellation without setting out reasons. Although Section 29(2) permits cancellation from such date as the proper officer deems fit, the satisfaction must be based on objective criteria and not be mechanical or purely subjective. Retrospective cancellation cannot be ordered without articulable reasons showing why retrospective effect is warranted, particularly because such cancellation may have adverse consequences for third parties (e.g., denial of input tax credit). The absence of any reasons or objective satisfaction in the order renders it unsupportable. [Paras 6, 7, 8, 9]

Impugned order dated 29.02.2024 is set aside as it lacks reasons and objective satisfaction for retrospective cancellation.

Cancellation of GST registration - Consequences of retrospective cancellation on input tax credit - Relief to be granted following setting aside of cancellation order and scope of subsequent action by respondents - HELD THAT: - On setting aside the cancellation order, the petitioner's GST registration is restored. The petitioner is directed to undertake necessary compliances and file required returns and information, including under Rule 23 of the Central Goods and Services Tax Rules, 2017. The respondents are not precluded from pursuing recovery of any tax, penalty or interest due in accordance with law and may, if warranted by objective consideration and for cogent reasons, initiate proceedings including retrospective cancellation subject to law. [Paras 10, 11]

Registration restored; petitioner to make compliances and file returns; respondents free to pursue recovery and lawful steps, including retrospective cancellation if justified.

Final Conclusion: The order cancelling the petitioner's GST registration with retrospective effect is set aside for want of particularity in the Show Cause Notice and absence of reasons demonstrating objective satisfaction for retrospective cancellation; registration is restored subject to the petitioner making requisite compliances and without prejudice to respondents' lawful rights to recover dues or initiate fresh proceedings if objectively warranted.

Retrospective cancellation of GST registration - Requirement of reasons and opportunity to be heard before cancellation - Section 29(2) - cancellation from such date including any retrospective date based on objective satisfaction - Circumstances warranting retrospective effect and consequence on input tax credit

Requirement of reasons and opportunity to be heard before cancellation - Retrospective cancellation of GST registration - Validity of the Show Cause Notice and the order cancelling registration retrospectively and the appropriate effective date of cancellation. - HELD THAT: - The Show Cause Notice dated 02.12.2021 did not specify cogent reasons and merely observed a failure to furnish returns for six months without informing the petitioner that cancellation would be retrospective; the impugned order dated 15.12.2022 likewise failed to give coherent reasons, contained internal contradictions regarding the petitioner's reply, and did not disclose material justifying retrospective cancellation to 01.07.2017. A cancellation order which is bereft of reasons and which denies the party an opportunity to meet a retrospective consequence cannot be sustained. Having regard to the petitioner's expressed desire to discontinue business and the defects in the notice and order, the court modified the effective date of cancellation so that the registration is treated as cancelled with effect from 02.12.2021 (the date of the Show Cause Notice), while leaving the petitioner to comply with statutory obligations under Section 29. [Paras 3, 4, 5, 7, 11]

Show Cause Notice and order to the extent they purported to cancel registration retrospectively from 01.07.2017 cannot be sustained; registration is treated as cancelled with effect from 02.12.2021 and statutory compliances under Section 29 shall follow.

Section 29(2) - cancellation from such date including any retrospective date based on objective satisfaction - Circumstances warranting retrospective effect and consequence on input tax credit - Legal principle governing retrospective cancellation under Section 29(2) of the Central Goods and Services Tax Act, 2017 and the requirement of objective satisfaction. - HELD THAT: - Section 29(2) permits cancellation from a retrospective date where the proper officer deems it fit, but such deeming must rest on objective criteria and not be a mechanical or purely subjective satisfaction. Mere non-filing of returns for a period does not automatically justify cancellation with retrospective effect covering periods when the taxpayer was compliant. Retrospective cancellation has consequential effects - for example on the input tax credit of recipients - and therefore ought to be imposed only where such consequences are intended and warranted by objective material. [Paras 8, 9]

Retrospective cancellation under Section 29(2) requires objective satisfaction based on material; it cannot be applied mechanically merely because returns were not filed for some period.

Final Conclusion: The petition is disposed of by modifying the impugned order so that the petitioner's GST registration is treated as cancelled with effect from 02.12.2021; the retrospective cancellation to 01.07.2017 is set aside, statutory compliances under Section 29 are to be completed by the petitioner, and the respondents remain free to pursue recovery or other lawful steps, including reconsideration consistent with law.

Carrying of tax invoice during transit - interpretation of Rule 48 of the CGST - scope of Rule 138-A of the SGST and Section 68 of the CGST - duplicate copy of invoice as document to be carried by transporter - refund of tax and penalty paid in excess

Carrying of tax invoice during transit - interpretation of Rule 48 of the CGST - scope of Rule 138-A of the SGST and Section 68 of the CGST - duplicate copy of invoice as document to be carried by transporter - Whether imposition of tax and penalty on the petitioner for non production of the Original Tax Invoice by the transporter was sustainable. - HELD THAT: - The Court examined the statutory scheme governing invoices. Rule 48 of the CGST requires invoices to be prepared in triplicate for supply of goods, with the original marked for the recipient, the duplicate to be carried by the transporter and the triplicate retained by the supplier. Neither Rule 138 A of the SGST nor Section 68 of the CGST, as relied upon by the respondents, mandates that the transporter must carry the Original Tax Invoice. The enforcement order and the appellate confirmation penalised the petitioner on the ground that the Original Tax Invoice was not carried during transit, a requirement not supported by the cited provisions. In view of the allocation of the duplicate copy to the transporter under Rule 48, the conclusion that absence of the original invoice warranted tax and penalty could not be sustained. [Paras 9, 10]

The determination of tax and penalty for non production of the Original Tax Invoice by the transporter was held unsustainable and set aside.

Refund of tax and penalty paid in excess - Whether the petitioner was entitled to refund of tax and penalty paid in consequence of the impugned orders. - HELD THAT: - The Court noted that the petitioner had already paid the tax as required and thereafter paid tax and penalty following the impugned enforcement and appellate orders. Since those orders were quashed for being premised on an incorrect legal requirement, the payments made pursuant thereto were rendered excessive. The Court accordingly directed that the excess tax and the penalty paid be refunded to the petitioner within a stipulated period. [Paras 10]

The petitioner is entitled to refund of the tax paid in excess and the penalty; respondents directed to refund within three months.

Final Conclusion: Writ petition allowed; the enforcement order dated 18.09.2021 and the appellate order dated 30.11.2021 quashed for wrongly treating non production of the Original Tax Invoice by the transporter as a ground for tax and penalty, and respondents directed to refund the excess tax and penalty within three months.

Remand for fresh consideration - opportunity to be heard - service of notice through common portal versus physical service - production of documents available on common portal - penalty for non-willful misstatement under the TNGST Act, 2017

Opportunity to be heard - service of notice through common portal versus physical service - production of documents available on common portal - remand for fresh consideration - Validity of the impugned assessment order imposing penalty for non-willful misstatement in view of alleged non-communication of portal notices and the petitioner's opportunity to produce documents - HELD THAT: - The court found that the petitioner, a works contractor registered under the GST Act, 2017, had not been afforded sufficient opportunity to respond to the discrepancies noted by the respondent because the notices and impugned order were communicated through the common portal and not physically. The petitioner asserted that the requisite documents to rebut the alleged misstatement were available on the common portal and that he was willing to produce them. The respondents, through their counsel, indicated willingness to grant another opportunity to the petitioner to submit the documents. Having regard to the need for effective opportunity to be heard and the practical difficulties arising from portal-based communications, the court set aside the impugned order and remitted the matter to the respondent for fresh consideration, directing the petitioner to appear on the specified date with the required documents and directing the respondent to consider those documents and pass fresh orders expeditiously.

Impugned order set aside and matter remanded for fresh consideration; petitioner to appear on 05.03.2024 with documents and respondent to consider them and pass fresh orders expeditiously.

Final Conclusion: Writ petition allowed: the assessment order imposing penalty for non-willful misstatement is set aside and the matter is remitted for fresh consideration with directions for the petitioner to appear on 05.03.2024 with documents and for the respondent to consider them and pass fresh orders forthwith.

Reversal of input tax credit under Section 16(2) - Entitlement to input tax credit on payment within 180 days - Correction of assessment under Section 161 - Assessment treatment of sundry creditors and tax element

Reversal of input tax credit under Section 16(2) - Assessment treatment of sundry creditors and tax element - Entitlement to input tax credit on payment within 180 days - Assessment authority treated entire sundry creditors' purchase value as input tax credit reversal instead of reversing only the tax element; petitioner permitted to seek correction under statutory remedy. - HELD THAT: - The petitioner challenged the assessment order which, in respect of sundry creditors, reversed the full purchase value as if it were ITC rather than reversing only the tax component (the petitioner says the tax element was 18% and that payment evidence was produced). The court did not adjudicate the correctness of the assessment on merits. Relying on the availability of the statutory corrective mechanism, the court granted the petitioner liberty to invoke the remedy under Section 161 of the GST Act within 90 days and to place the requisite documents (including bank statements) before the assessing authority. The assessing authority was directed to consider the application in accordance with law, thereby providing the process for reconsideration rather than substituting its own factual or legal conclusion in the writ proceeding. [Paras 5]

Writ petition disposed by granting liberty to the petitioner to file a Section 161 application with documents; assessing authority to consider it in accordance with law.

Final Conclusion: The High Court disposed the writ petition without deciding the merits; petitioner given liberty to seek correction of the assessment under Section 161 of the GST Act within 90 days and the assessing authority directed to consider the application in accordance with law.

Condonation of delay - royalty - licensing of software - cloud services subscription - business income - permanent establishment - substantial question of law - binding precedent

Condonation of delay - Delay of four days in filing the appeal was condoned. - HELD THAT: - The application for condonation of delay filed by the appellant/revenue sought relief for a four day delay in filing the appeal. The respondent/assessee's counsel stated there was no objection to condonation. Having regard to the concession and the explanation furnished, the Court allowed the condonation application and disposed of it accordingly. [Paras 2, 3, 4, 5, 6]

Application for condonation of four days' delay allowed; delay condoned.

Royalty - licensing of software - cloud services subscription - business income - permanent establishment - substantial question of law - binding precedent - No substantial question of law arises because the Tribunal's conclusion that software licensing and cloud subscription income are not taxable as royalty is covered by higher court precedent. - HELD THAT: - The appeal challenged the Tribunal's finding that income from licensing/sale of software products and subscription fees for cloud services do not constitute "royalty" and that, in absence of a PE, such income is not taxable under the DTAA/Act. Counsel for the appellant/revenue submitted that the questions are governed by the Supreme Court's decision in Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT. The Court noted that a review petition in that matter is pending, and, in view of the binding precedent as represented by the Supreme Court decision relied upon, concluded that no substantial question of law is disclosed for its consideration. The Court therefore closed the appeal while recording a caveat that parties will abide by the result of any successful review in the Supreme Court. [Paras 9, 10, 11, 12, 13]

Appeal closed as no substantial question of law arises; Tribunal's ruling that the amounts are not royalty sustained subject to outcome of pending review petition.

Final Conclusion: Delay in filing the appeal was condoned and, on the merits, the appeal was closed because the questions raised are covered by the Supreme Court precedent relied upon; the parties to abide by any change in law if the pending review petition succeeds.

Exemption u/s 10(38) claimed in revised return - bogus LTCG on shares - revised return was filed by the Assessee claiming the above exemption which was denied - denial of an opportunity to cross examine the entry providers - HC held that [2023 (2) TMI 1277 - ORISSA HIGH COURT] ITAT was justified in accepting the plea of the Assessee that the failure to adhere the principles of natural justice went to the root of the matter. Also, the CBDT circular that permitted to the Assessee to file revised returns if he omitted to make a claim was also not noticed by the AO - HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court. Hence, the Special Leave Petition is dismissed.

Re-opening of assessment under the Income-tax Act - notice under section 148/148A(b) issued in the name of a deceased assessee - challenge to show-cause notice after conclusion of assessment - availability of efficacious statutory remedy of appeal under section 246 - doctrine of exhaustion of statutory remedies

Challenge to show-cause notice after conclusion of assessment - availability of efficacious statutory remedy of appeal under section 246 - doctrine of exhaustion of statutory remedies - Maintainability of a writ petition under Article 226 seeking to quash a notice under section 148/148A(b) after assessment proceedings have concluded and a final assessment order has been passed. - HELD THAT: - The petition challenged a notice dated 30.03.2021 issued under section 148 and subsequent assessment for AY 2016-17. The Court recorded that the stage of the show-cause notice was over and a final assessment order had been passed. Where a statutory forum and an efficacious alternative remedy (appeal under section 246) exist and the assessment proceedings have attained finality, interference by writ jurisdiction is ordinarily inappropriate. Exceptional cases may warrant deviation, but no such exceptional circumstances are found on the record. The petitioner failed to inform the department of the original assessee's death or produce the death certificate, and the proceedings have reached finality. The Court therefore declined to entertain the writ petition and directed that the petitioner may challenge the assessment by availing the statutory appeal remedy; the time spent in prosecuting the writ petition shall not be counted for computation of delay in filing the appeal. [Paras 8, 9, 10]

Writ petition dismissed as not maintainable in view of finality of assessment; liberty granted to challenge the assessment by filing appeal under section 246, with time spent in this petition excluded for delay computation.

Final Conclusion: The petition under Article 226 is disposed of as not maintainable because the assessment proceedings have attained finality; petitioner is granted liberty to prefer statutory appeal under section 246, and the period spent in this petition shall be excluded when computing any delay.

Reopening of assessment - reasons recorded for reopening - disposal of objections to reasons recorded - sanction under section 151 of the Income-tax Act - non-application of mind - invalidity of reassessment - application of GKN Driveshafts principles

Disposal of objections to reasons recorded - reasons recorded for reopening - non-application of mind - application of GKN Driveshafts principles - invalidity of reassessment - Validity of reassessment in view of disposal of objections to the reasons recorded for issuing notice under section 148. - HELD THAT: - The Tribunal examined the sequence in which the Assessing Officer supplied the reasons and purportedly disposed objections. The order dated 07.11.2016 records that the copy of reasons was supplied to the authorised representative only on 04.11.2016, whereas the AO's order purported to dispose objections said to have been filed on 03.11.2016 (referring to an earlier letter dated 31.10.2016/03.11.2016). That chronology shows objections relied upon in the disposal order could not have been based on the reasons actually supplied, demonstrating non-application of mind by the AO. The Tribunal held that the mandatory procedural requirement-namely disposal of objections to the reasons before proceeding with reassessment-as articulated in GKN Driveshafts and followed by the jurisdictional High Court in Deepak Extrusions, was not complied with. Consequently, the reopening was held vitiated and the reassessment unsustainable on this ground; since the defect is legal and fundamental, the Tribunal did not proceed to decide the merits of additions. [Paras 10, 11, 12, 15]

Reopening was invalid because objections were not properly disposed of after supply of reasons; reassessment vitiated on this ground.

Sanction under section 151 of the Income-tax Act - reopening of assessment - invalidity of reassessment - Validity of reassessment in view of absence of proper sanction/approval under section 151 prior to issuance of notice under section 148. - HELD THAT: - The Tribunal considered the sanction documents supplied much later and noted the letter dated 24.03.2016 did not bear the signature of the approving PCIT and was an intimation by ACIT that approval was directed to be communicated; the proforma annexed also lacked the approving authority's signature. The Tribunal held that approval under section 151 must reflect application of mind by the approving authority and be discernible from the sanction; a perfunctory or unsigned communication does not satisfy the statutory requirement. Reliance was placed on authorities holding that compliance with section 151 is mandatory and absence of evidence of proper sanction renders reopening invalid. On this basis the Tribunal held the initiation of reassessment was invalid. [Paras 13, 14, 15]

Reopening was invalid for want of proper sanction under section 151; initiation of reassessment thus vitiated.

Final Conclusion: The Tribunal quashed the reassessment for A.Y. 2009-2010 on legal grounds of improper disposal of objections and absence of valid sanction under section 151; ground Nos.4 and 5 were allowed and the Tribunal refrained from adjudicating the merits, resulting in the appeal being partly allowed.

Transfer/extinguishment of right of occupancy as capital asset - characterisation of compensation as capital gains - distinction between tenancy right of the company and occupancy by individuals - exemption under section 54F - application of income by a closely held company to its directors - characterisation of receipt by director as capital receipt - taxability under the head 'income from other sources'

Transfer/extinguishment of right of occupancy as capital asset - characterisation of compensation as capital gains - distinction between tenancy right of the company and occupancy by individuals - exemption under section 54F - Whether the amount of Rs. 75,00,000 received by the assessee for vacating the flat is chargeable as long term capital gain on transfer/extinguishment of a capital asset (right of occupancy) and eligible for exemption under section 54F. - HELD THAT: - The Tribunal found that the tenancy/right of the premises was vested in the company OIPL pursuant to the leave and license and related proceedings, and there was no evidence that the assessee held any legal tenurial or sub tenancy right in his individual name (no sub tenancy agreement, no rent paid to the company, and no separate involvement in the eviction suit). The payment by the landlord to the company arose because of the company's tenancy and the consent terms; the directors' residential occupation was by permission of the company and did not create independent proprietary rights. Consequently, the extinguishment or surrender that generated the compensation related to the company's rights and not to any capital asset of the assessee. The Tribunal therefore upheld that the amount could not be taxed as capital gain in the hands of the assessee nor could the exemption under section 54F be claimed by him in relation to that payment (the company alone could properly treat the compensation as arising from surrender of its tenancy/right). [Paras 8]

Not a transfer of a capital asset in the hands of the assessee; amount cannot be taxed as capital gains nor qualify for section 54F exemption in his hands.

Application of income by a closely held company to its directors - characterisation of receipt by director as capital receipt - taxability under the head 'income from other sources' - Whether the Rs. 75,00,000 received by the assessee from the company is taxable as 'income from other sources' or is otherwise assessable in his hands. - HELD THAT: - The Tribunal examined the nature of the payment from the company to the directors and held that the company had received the compensation (taxable as capital gain) by reason of its tenancy; amounts paid to the directors were payments out of the company's income to enable the company to honour the consent terms. Such payments by the company, made from its own compensation, amounted to an application of the company's income and did not represent income earned by the assessee from surrender or transfer of any right or from carrying out activities for the company. In the hands of the assessee the receipt was therefore a capital receipt (received as an application of the company's income) and not assessable as income from other sources. The Tribunal noted that questions as to the company's entitlement to deduction for payments to directors were not before it and were left open. [Paras 9, 10]

The amount received from the company is not taxable as income from other sources in the hands of the assessee; it is a capital receipt in his hands arising from application of the company's income.

Final Conclusion: The assessee's appeal is allowed: the addition made by the AO treating the Rs. 75,00,000 as income from other sources in the assessee's hands is deleted; the compensation is not chargeable to tax as capital gain in the assessee's hands and, in any event, is a capital receipt received from the company as application of its income.

Notice issued to a deceased person - Jurisdictional requirement that notice be issued to the correct person - Assessment framed without jurisdiction is null and void - Consequences of quashing assessment on subsidiary merits

Notice issued to a deceased person - Jurisdictional requirement that notice be issued to the correct person - Assessment framed without jurisdiction is null and void - Validity of the assessment order dated 29.12.2019 framed on the deceased assessee - HELD THAT: - The legal heirs informed the Assessing Officer of the assessee's death by filing a letter of authority and the death certificate on 18.06.2019 during assessment proceedings. Despite this communication, the Assessing Officer proceeded to finalize the assessment on 29.12.2019. Relying on the principle that jurisdiction to initiate or continue assessment proceedings requires issuance of notice to the correct person, and that a notice issued in the name of a deceased person is void, the Tribunal held that the assessment was without jurisdiction. The tribunal followed the reasoning of the cited High Court authority which held that proceedings initiated against a dead person are null and that section 159 (and other procedural provisions invoked to cure defects) do not validate notices issued to a deceased person where proceedings were not pending during the assessee's life. On this basis the assessment order was quashed. [Paras 13, 14]

The assessment order dated 29.12.2019 framed on the deceased assessee is quashed.

Additions under Section 68 and charge under Section 115BBE - Consequences of quashing assessment on subsidiary merits - Fate of additions and taxability determined in the impugned assessment - HELD THAT: - Because the foundational assessment order has been quashed for lack of jurisdiction, all consequential determinations made in that assessment - including the addition treated as unexplained cash credit and the invocation of the special taxation provision - were not adjudicated on merits by the Tribunal. The Tribunal recorded that once the assessment is set aside, the merits of such additions become academic and infructuous in the present proceedings. [Paras 15]

The merits of the additions and related tax determinations are rendered academic and are not decided.

Final Conclusion: The assessment order for AY 2017-18 dated 29.12.2019, framed on the deceased assessee despite notification of death to the Assessing Officer, is quashed; consequential additions and tax determinations in that assessment are rendered academic and are not adjudicated.

Credit for Tax Deducted at Source - right to TDS credit despite non-disclosure of corresponding income - treatment of TDS as payment of tax under Section 199(1) - entitlement to refund of TDS deposited where underlying receipt is not taxable in India - interpretation of Rule 37BA vis-a -vis Section 199

Credit for Tax Deducted at Source - right to TDS credit despite non-disclosure of corresponding income - treatment of TDS as payment of tax under Section 199(1) - entitlement to refund of TDS deposited where underlying receipt is not taxable in India - interpretation of Rule 37BA vis-a -vis Section 199 - Assessee entitled to credit/refund of TDS deducted on consideration for offshore supply although corresponding income was not offered to tax in India. - HELD THAT: - The Tribunal found no infirmity in the view of the CIT(A) that once tax has been deducted at source and deposited with the Government, the deductee is entitled to credit of such TDS irrespective of whether the underlying receipt has been offered to tax in India. The Tribunal relied on the statutory premise that deductions under the relevant chapter are to be treated as payment of tax on behalf of the person from whose income the deduction is made, and held that this supports allowance of credit. The Tribunal further followed coordinate-bench precedents which hold that the revenue cannot refuse TDS credit merely because the recipient considers the receipt not chargeable to tax or does not disclose it in the return; such credit may, where appropriate, result in refund if the receipt is not taxable in the year. The Tribunal also noted and applied the earlier appellate finding in the assessee's related assessment year that a literal application of Rule 37BA cannot defeat the entitlement under Section 199, and that the credit cannot be denied where the receipt is not taxable. In view of these conclusions, the Tribunal dismissed the revenue's appeal and allowed the assessee's appeal for grant of TDS credit and consequent refund. [Paras 13, 14, 15, 16, 17]

Credit/refund of the TDS deducted on the offshore supply was allowed and the revenue's appeal dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s allowance of credit/refund of TDS deducted on amounts received for offshore supply, holding that once TDS is deducted and deposited, the assessee is entitled to credit even if the underlying receipt is not taxable in India; revenue's appeal dismissed and assessee's appeal allowed.

Rectification under Section 154 of the Income Tax Act - mistake apparent from the record - refund of tax paid under protest - binding effect of Supreme Court overruling of an Authority for Advance Rulings decision - distinguishing precedent on facts

Rectification under Section 154 of the Income Tax Act - mistake apparent from the record - refund of tax paid under protest - binding effect of Supreme Court overruling of an Authority for Advance Rulings decision - distinguishing precedent on facts - Whether the rectification applications filed by the petitioner for assessment years 2017-18, 2018-19 and 2019-20 under Section 154 are maintainable and whether refund of taxes paid under protest is warranted following the Supreme Court's overruling of the AAR decision - HELD THAT: - The Court found that the petitioner filed returns and paid tax under protest only after an adverse order of the Authority for Advance Rulings. The Supreme Court in ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED expressly overruled the AAR's determination as it did not state the law correctly in respect of the issues affecting the petitioner. In view of the circular dated 17.11.1971 and the principle that a subsequent interpretation of law by the Supreme Court may constitute a mistake apparent on the face of the record, rectification under Section 154 is permissible where returns were filed and tax paid consequent to the AAR order. The Court held that the Revenue erred in rejecting the rectification applications on the ground that Section 154 was inapplicable. The decision in KESHRI METAL (P) LTD. was distinguished as not arising from a subsequent overruling by the Supreme Court and therefore inapplicable to these facts. Consequently, the rectification applications were to be allowed and refunds directed with applicable interest. [Paras 8, 9, 10]

Rectification applications allowed; impugned order set aside and respondents directed to refund the taxes paid under protest together with applicable interest within two months

Final Conclusion: The petition is allowed, the impugned order dated 18.05.2023 is set aside, the rectification applications for AYs 2017-18, 2018-19 and 2019-20 are allowed, and the respondents are directed to refund the taxes paid under protest with interest within two months.

Rectification under Section 154 of the Income Tax Act - assessee-in-default under Section 201 read with Section 201(1A) - treatment of licence-fee as rent attracting deduction under Section 194I - limits on rectification involving fresh enquiries (TS Balram principle) - condonation of delay in the interest of substantial justice

Condonation of delay in the interest of substantial justice - Whether the identical delay of 547 days in filing appeals should be condoned. - HELD THAT: - The Tribunal accepted the assessee's explanation supported by medical records and other pleadings filed with identical condonation petitions, holding that technical objections should yield to substantial justice. Reliance was placed on the principle in Collector, Land Acquisition v. MST Katiji that procedural delays may be condoned where reasonable cause is shown and justice so requires. Consequently, the identical delay of 547 days in each appeal was condoned. [Paras 2]

Delay of 547 days in each of the seven appeals condoned.

Rectification under Section 154 of the Income Tax Act - assessee-in-default under Section 201 read with Section 201(1A) - treatment of licence-fee as rent attracting deduction under Section 194I - limits on rectification involving fresh enquiries (TS Balram principle) - Whether the Assessing Officer could, by fresh round(s) of Section 154 rectification, treat the assessee as an assessee-in-default under Section 201 r.w.s. 201(1A) for non-deduction of TDS on payments treated as rent. - HELD THAT: - The Tribunal examined the factual matrix where the assessee's payments for licences of CT and X-ray machines were treated as rent attracting Section 194I. The Assessing Officer had earlier passed Section 201(1) orders and a prior Section 154 rectification in favour of the assessee (lead year 2009-2010). A subsequent round of Section 154 rectification was undertaken to hold the assessee an assessee-in-default. The Tribunal held that where rectification would effectively reopen matters requiring detailed enquiries and reconsideration of facts, such a course is impermissible under settled law exemplified by TS Balram (Volkart Bros.). Consequently, the second round of Section 154 rectification to treat the assessee as an assessee-in-default was held to be legally impermissible and unsustainable in all the assessment years before the Tribunal. [Paras 4]

The Section 154 rectifications which treated the assessee as an assessee-in-default under Section 201 r.w.s. 201(1A) are not sustainable and are set aside for all the assessment years.

Final Conclusion: All seven appeals for assessment years 2009-2010 to 2015-2016 are allowed: the identical delay of 547 days is condoned and the impugned Section 154 rectifications that treated the assessee as an assessee-in-default under Section 201 r.w.s. 201(1A) are quashed as not sustainable.

Unexplained cash deposits - section 69A - treatment as business turnover - estimate of profit at 3.5% - section 115BBE applicability - credit of TDS on interest - interest on fixed deposit held as security - interest under sections 234A and 234B

Unexplained cash deposits - section 69A - treatment as business turnover - estimate of profit at 3.5% - section 115BBE applicability - Addition made by AO treating bank deposits as unexplained money under section 69A and taxing the same under section 115BBE - HELD THAT: - The Tribunal noted that the assessee continued the same business activity as in earlier years and that the facts for the year under appeal were not materially different from AY 2013-14 where NFAC/CIT(A) had treated similar unexplained cash deposits as business turnover and estimated profit at 3.5%. Applying that consistent treatment, the Tribunal held that the cash deposits of Rs. 70,95,115 are part of the assessee's business turnover and directed the AO to treat that amount as turnover and assess estimated profit thereon at 3.5% (resulting in an addition of Rs. 2,48,329), to be taxed under the normal tax regime. Since the amount is thus accepted as business turnover, the Tribunal found that it is not liable to be charged under section 115BBE at the enhanced rate. [Paras 10, 11, 12]

Addition reduced by treating the cash deposits as business turnover and taxing estimated profit at 3.5% under normal rates; section 115BBE held not applicable to the turnover so treated.

Credit of TDS on interest - interest on fixed deposit held as security - Claim for credit of TDS deducted on interest on fixed deposit added by AO - HELD THAT: - The Tribunal observed that if the assessee is entitled to the TDS credit on the interest on the fixed deposit (held as security to Customs), such credit must be given in accordance with law. The Tribunal therefore directed the Assessing Officer to allow the credit of TDS deducted on the said interest amount. [Paras 14]

Directed the AO to allow credit of TDS on the interest on the fixed deposit in accordance with law.

Interest under sections 234A and 234B - Claim challenging interest charged under sections 234A and 234B - HELD THAT: - The Tribunal recorded that the grievance regarding interest under sections 234A and 234B is consequential to the adjustments made and does not require separate adjudication in view of the directions given on the substantive issues. [Paras 16]

Interest issue is consequential and not separately adjudicated.

Final Conclusion: The appeal is partly allowed: the unexplained cash deposits of Rs. 70,95,115 are directed to be treated as business turnover and estimated profit of 3.5% taxed under normal rates (section 115BBE not applied); the AO is directed to grant TDS credit on interest on the fixed deposit if legally due; the challenge to interest under sections 234A/234B is treated as consequential.

Taxability of salary of a non-resident for services rendered outside India - Scope of total income - Income deemed to accrue or arise in India - Income chargeable under the head "Salaries" earned in India - Application of sections 5, 9 and 15 of the Income-tax Act to cross-border salary receipts

Taxability of salary of a non-resident for services rendered outside India - Income chargeable under the head "Salaries" earned in India - Application of sections 5, 9 and 15 of the Income-tax Act to cross-border salary receipts - Whether salary paid by an Indian employer to a non-resident for services rendered outside India is taxable in India for the assessment year 2019-20. - HELD THAT: - The Tribunal examined the scope of total income under section 5, the deeming provisions of section 9 and the definition and chargeability of income under the head "Salaries" in section 15. Section 9(1)(ii) makes salary taxable in India only if it is "earned in India", and the corresponding explanation clarifies that salary is regarded as earned in India where services are rendered in India (including specified rest or leave periods that form part of a service contract). The assessee is an NRI and the material on record shows that services were rendered outside India. There was no rest or leave period falling within the explanatory exception that would attribute the remuneration to services rendered in India. Read together, sections 5, 9 and 15 lead to the conclusion that salary for services actually rendered outside India to a non-resident does not accrue or arise in India and hence is not taxable in India for the year under consideration. The Tribunal therefore found that the addition of the salary to the assessee's Indian taxable income was not sustainable.

Addition of salary for services rendered outside India to the assessee's taxable income is not sustainable; no taxability arises on that salary for A.Y. 2019-20.

Final Conclusion: The appeal is allowed: the salary/allowances received by the non-resident assessee for services rendered outside India are not taxable in India for A.Y. 2019-20.

Summary order. Civil Appeals dismissed; delay condoned; pending applications, if any, disposed of.

Obligations of Customs Broker under CBLR, 2018 - duty to verify Importer Exporter Code (IEC), GSTIN and client identity - exercise of due diligence by Customs Broker in clearance transactions - vicarious liability of Customs Broker for acts or omissions of employees (Regulation 13(12)) - revocation of Customs Broker licence, forfeiture of security and imposition of penalty for breach of CBLR

Duty to verify Importer Exporter Code (IEC), GSTIN and client identity - exercise of due diligence by Customs Broker in clearance transactions - obligations of Customs Broker under CBLR, 2018 - Whether the appellant breached Regulations 10(d), 10(e), 10(m) and 10(n) of the Customs Broker Licensing Regulations, 2018 by failing to verify KYC/IEC/GSTIN and exercising due diligence in respect of the shipments - HELD THAT: - The Tribunal recorded admitted facts that the goods exported were misdeclared, the GSTIN of the supplier was cancelled on the GSTN site, the IEC of the exporter was misused and that the G card holder present at examination confirmed the discrepancy. Regulation 10 requires a Customs Broker to advise clients on compliance, exercise due diligence in information imparted, discharge duties with speed and efficiency, and verify IEC/GSTIN and client identity using reliable documents. The record shows that KYC documents were not collected and the appellant's employee facilitated filing without proper verification. The adjudicating authority's findings on violations of Regulations 10(d), 10(e), 10(m) and 10(n) are supported by the material on record and were not successfully controverted before the Tribunal. [Paras 5]

Findings of violation of Regulations 10(d), 10(e), 10(m) and 10(n) of CBLR, 2018 are upheld.

Vicarious liability of Customs Broker for acts or omissions of employees (Regulation 13(12)) - obligations of Customs Broker under CBLR, 2018 - revocation of Customs Broker licence, forfeiture of security and imposition of penalty for breach of CBLR - Whether the appellant could escape liability and the sanctions imposed by blaming unauthorised acts of its employee or invoking principles of agency under the Contract Act - HELD THAT: - Regulation 13(12) expressly obliges the Customs Broker to exercise supervision and holds the broker responsible for all acts or omissions of employees during employment. The Tribunal found statements and documentary material indicating the senior manager acted within his employment role in arranging exports and that the management had been put on notice of the modus operandi. Mere post fact removal of the employee does not negate the vicarious liability imposed by the Regulations. The Tribunal also observed that the acts of misusing IEC fell within the four corners of the employee's employment and thus attracted employer responsibility. Consequently, the appellant's plea that the employee acted entirely beyond authority and thereby absolved the broker was rejected. [Paras 5]

The appellant is vicariously liable for the acts and omissions of its employee under Regulation 13(12), and cannot evade responsibility by attributing misconduct solely to the employee.

Revocation of Customs Broker licence, forfeiture of security and imposition of penalty for breach of CBLR - Whether the adjudicating authority's sanction of revocation of licence, forfeiture of security and imposition of penalty should be interfered with - HELD THAT: - Given the upheld findings of breaches of Regulation 10 and the appellant's liability for employee acts under Regulation 13(12), the Tribunal found no reason to disturb the adjudicating authority's detailed findings. The imposition of sanctions was a consequence of the established breaches and the responsibility of the broker; the appellant did not demonstrate any material error warranting interference. [Paras 5, 6]

Sanctions imposed in the order in original - revocation of licence, forfeiture of security and penalty - are sustained and the appeal is dismissed.

Final Conclusion: The Tribunal upheld the adjudicating authority's findings that the appellant breached its obligations under CBLR, 2018, is vicariously liable for the acts of its employee, and therefore affirmed revocation of the customs broker licence, forfeiture of security and imposition of penalty; the appeal is dismissed.

Rejection of declared value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - Redetermination of value under Rule 5 of the Customs Valuation Rules - Consented enhancement of value operates as declared transaction value - Requirement of speaking order under Section 17(5) barred where importer accepts re-assessment in writing - Use of contemporaneous market data (e commerce) as a ground for raising suspicion under Rule 12 - Burden on importer to produce manufacturer's invoice/documentary evidence when requested under Section 17

Rejection of declared value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - Use of contemporaneous market data (e commerce) as a ground for raising suspicion under Rule 12 - Burden on importer to produce manufacturer's invoice/documentary evidence when requested under Section 17 - Redetermination of value under Rule 5 of the Customs Valuation Rules - The assessing authority rightly rejected the declared value under Rule 12 and re-determined the assessable value under Rule 5 based on contemporaneous e commerce data and the importer's failure to produce manufacturer's invoice. - HELD THAT: - The Tribunal found that the proper officer had bona fide reason to doubt the truth or accuracy of the declared value because comparable goods on e commerce sites displayed significantly higher prices and the importer failed to produce the manufacturer's invoice when required under verification powers in Section 17. Rule 12 permits raising doubts on such grounds and, if doubt persists after seeking further information, rejection under Rule 12 and redetermination under the sequential valuation provisions is permissible. The adjudicating authority recorded contemporaneous data, the importer's admissions about superior quality and higher value, and absence of manufacturer's invoice, and on that basis rejected the declared value and re-assessed under Rule 5. The re-determination and the reasons thus recorded were held to be sustainable. [Paras 18, 19, 21, 31, 32]

Rejection under Rule 12 and re-determination under Rule 5 upheld.

Consented enhancement of value operates as declared transaction value - Requirement of speaking order under Section 17(5) barred where importer accepts re-assessment in writing - The appellant's written waiver of show cause notice and personal hearing and its written acceptance of the enhanced value precluded challenge to the re-determined value; once accepted in writing the enhanced value became the transaction value and obviated the need to proceed under rules 4 to 9. - HELD THAT: - The Tribunal emphasised that Section 17(5) requires a speaking order where reassessment is contrary to self-assessment, except where the importer confirms acceptance of the re-assessment in writing. The appellant had in writing waived issuance of a show cause notice and personal hearing and purportedly accepted the enhanced unit values in its statement. Having voluntarily accepted the enhancement and paid duty, the consented value operates as the declared transaction value, removing the necessity for the assessing authority to initiate the sequential valuation under rules 4-9. Reliance was placed on consistent Tribunal precedents holding that an importer who consents to enhancement and pays duty is estopped from later challenging the enhanced value. [Paras 14, 15, 21, 22, 28]

Appellant bound by its written acceptance; no requirement to re-open valuation under rules 4-9 or to issue a speaking order.

Allegation of payment under duress - Onus to raise objections promptly and not after payment - The appellant's contention that duty was paid under duress or that the acceptance was made under coercion was rejected as not raised earlier and unsupported by record. - HELD THAT: - The Tribunal observed that the appellant paid the duty, redemption fine and penalty and only thereafter sought to characterize acceptance as under protest. There was no contemporaneous objection nor material to show coercion; had there been duress the appellant would not have paid duty voluntarily without objection. The Commissioner (Appeals) and the Tribunal treated the post-payment protest as an afterthought and found no merit in the duress plea. [Paras 29, 30, 35]

Claim of duress and protest after payment rejected.

Final Conclusion: The appeal is dismissed: the assessing authority validly rejected the declared value under Rule 12 and re-determined value under Rule 5 based on contemporaneous market data and absence of manufacturer's invoice; the appellant's written waiver and acceptance of enhanced value operated as the transaction value and precluded subsequent challenge; the plea of duress in payment was unsustainable.

Review under Order XXVII Rule 1 CPC - error apparent on the face of the record - appeal in disguise - reliance on previously decided orders - materiality of factual misrecital

Review under Order XXVII Rule 1 CPC - error apparent on the face of the record - appeal in disguise - Review application challenging the common order dated 22.01.2024 dismissed for want of merit. - HELD THAT: - The Court examined the review petitioner's contentions and found that the grounds averred amounted to re-agitation of conclusions already reached by the same Court. The allegations did not disclose any error of law or fact which would qualify as an "error apparent on the face of the record" nor did they rely upon any new material that was not available earlier. The relief sought in the review was essentially a re-consideration of the merits of the original writ petitions, which would amount to an impermissible appeal in disguise. In the absence of any sufficient cause within the scope of Order XXVII Rule 1 CPC, review is not maintainable. [Paras 9]

Review dismissed for want of merit; no grounds made out under Order XXVII Rule 1 CPC.

Materiality of factual misrecital - error apparent on the face of the record - Whether the alleged erroneous recital of the date of communication of the IIIPI order vitiates the impugned order. - HELD THAT: - The petitioner contended that the order was recorded as dated 14.01.2020 whereas the communication was said to have been made on 16.07.2020. The Court treated this as a mere recital of the petitioner's case and observed that, even if the later date of communication were accepted, that factual difference bears no consequence to the conclusions reached in the common order. Hence the alleged misrecital did not constitute an error affecting the decision. [Paras 8]

The factual misrecital, even if accepted, is immaterial to the outcome and does not vitiate the order.

Reliance on previously decided orders - appeal in disguise - Whether reliance on earlier decisions and submissions raised in the writs warranted review of the Court's earlier conclusions. - HELD THAT: - The petitioner challenged the Court's reliance on prior authorities and earlier Division Bench orders and urged reconsideration of principles applied. The Court found that such arguments merely assail the correctness of its conclusions and duplicate earlier submissions; they neither demonstrate per incuriam nor identify any controlling legal error requiring review. Consequently, disagreement with the Court's application of precedent does not satisfy the narrow grounds for review. [Paras 9]

Challenged reliance on prior orders does not constitute grounds for review; arguments dismissed as re-argument of merits.

Final Conclusion: The review application is dismissed for lack of merit; the Court found no error apparent on the face of the record, no fresh material, and held that the petitioner's contentions amounted to an impermissible appeal in disguise; no order as to costs.

Principles of natural justice - audi alteram partem - opportunity to peruse and rebut evidence - reliance on financial statements as acknowledgment of debt - remand for fresh consideration after hearing

Principles of natural justice - audi alteram partem - opportunity to peruse and rebut evidence - Whether the impugned admission order was vitiated for breach of principles of natural justice by not giving the appellant opportunity to peruse and contest the financial statements placed by the Chartered Accountant. - HELD THAT: - The Tribunal found that the Adjudicating Authority, after directing the Chartered Accountant to appear and to furnish signed financial statements, proceeded on the basis of those statements without giving the Appellant notice or a real and effective opportunity to examine, rebut or make representations concerning the documents relied upon against it. The adjudicatory process required that the party proceeded against be put on notice of material relied upon so as to enable a meaningful response; absence of such opportunity amounted to a breach of the audi alteram partem rule and rendered the impugned order vitiated. The Tribunal emphasised that justice must not only be done but be manifestly seen to be done, and that the Appellant deserved an opportunity to be heard on the financial statements and notes submitted by the CA. [Paras 12, 13, 14]

Impugned order set aside for violation of principles of natural justice; admission into CIRP and consequential orders quashed.

Remand for fresh consideration after hearing - reliance on financial statements as acknowledgment of debt - Whether the matter should be remanded to the Adjudicating Authority for reconsideration after affording the parties hearing on the financial statements filed by the Chartered Accountant. - HELD THAT: - Having set aside the impugned order on grounds of denial of opportunity, the Tribunal directed that the Company Petition be restored to the Adjudicating Authority for fresh adjudication. The remand is for the Adjudicating Authority to decide the Section 7 petition afresh in accordance with law after hearing all parties with respect to the financial statements submitted by the CA. The Tribunal did not express any view on the merits of the underlying dispute including whether the financial statements constitute an acknowledgment bringing the claim within limitation; those questions remain open for determination by the Adjudicating Authority after hearing the parties. The Tribunal also directed the Adjudicating Authority to endeavour to complete the hearing within two months from appearance and provided for payment of actual IRP expenses shown by invoices. [Paras 15]

Matter remanded to the Adjudicating Authority for fresh decision after hearing all parties on the financial statements; interim consequential orders set aside and directions given for further conduct.

Final Conclusion: The appeal is allowed; the impugned order admitting the Corporate Debtor into CIRP is set aside for breach of natural justice and the petition is remitted to the Adjudicating Authority to decide afresh after hearing all parties on the financial statements produced by the Chartered Accountant; no expression of opinion on merits.

Pre-existing dispute - notice of dispute under Section 8(2) of the Insolvency and Bankruptcy Code - summary jurisdiction of the Adjudicating Authority under Section 9 of the Insolvency and Bankruptcy Code - plausibility test for dispute (Mobilox standard) - termination of contract as foundation of operational dispute

Pre-existing dispute - notice of dispute under Section 8(2) of the Insolvency and Bankruptcy Code - termination of contract as foundation of operational dispute - Existence of a pre-existing dispute between the parties anterior to the demand notice which justified rejection of the Section 9 application. - HELD THAT: - The Tribunal examined the Corporate Debtor's reply to the demand notice which expressly denied liability and detailed a dispute arising from alleged breach of clause 7 of the Agency Agreement, notification of withholding of SAD payments by letter dated 19.07.2011 and related communications including the Appellant's acknowledgement dated 09.08.2011 and correspondence of 12.03.2015. The records show that the Corporate Debtor had, prior to the demand notice, communicated both the factual basis of the dispute (CBI investigations, alleged illegal gratification and resultant forfeiture under the contract) and denial of liability. On the material before the Adjudicating Authority and on appeal, the Tribunal found that the dispute was genuinely pleaded and pre-dated the demand notice; there was no evidence that the defence was merely spurious, hypothetical or illusory. Applying the threshold for prima facie plausibility, the Adjudicating Authority correctly took cognisance of the pre-existing dispute and rejected the Section 9 petition on that ground. [Paras 12, 13, 16, 18, 22]

There existed a pre-existing dispute in respect of the claimed operational debt prior to the demand notice, and the Adjudicating Authority rightly rejected the Section 9 application on that basis.

Summary jurisdiction of the Adjudicating Authority under Section 9 of the Insolvency and Bankruptcy Code - plausibility test for dispute (Mobilox standard) - Extent of inquiry required by the Adjudicating Authority under Section 9 when a notice of dispute is raised and whether it must adjudicate the lawfulness of the contract termination. - HELD THAT: - The Tribunal reaffirmed that proceedings under Section 9 are summary in nature and the Adjudicating Authority's role is limited to determining whether a plausible dispute exists that requires further adjudication. Reliance was placed on the Mobilox standard: the authority need only be satisfied that the dispute is not a patently feeble legal argument or an assertion unsupported by evidence. It is not the forum to finally determine the lawfulness of the termination of the Agency Agreement or to resolve contested rights and liabilities which require a fuller adjudication. Given the Corporate Debtor's detailed notice of dispute and supporting contemporaneous communications, the Adjudicating Authority was not required to and rightly did not enter into a final adjudication of the termination's legality. [Paras 20, 21]

The Adjudicating Authority correctly applied the limited, plausibility-based inquiry appropriate to Section 9 and was not obliged to adjudicate the legality of contract termination in the summary proceedings.

Final Conclusion: The appeal is dismissed. The Tribunal finds no error in the Adjudicating Authority's conclusion that a genuine pre-existing dispute existed prior to the demand notice and that, applying the Mobilox plausibility standard within the summary jurisdiction of Section 9, the Section 9 application was rightly rejected; the Appellant remains free to pursue other remedies under law.

Offence of money laundering dependent on predicate/scheduled offence - Proceeds of crime - Discharge, acquittal or quashing of scheduled offence bars prosecution under the Prevention of Money Laundering Act, 2002 - Interpretation of Section 3 of the Prevention of Money Laundering Act, 2002 - Application of the ratio in Vijay Madanlal Choudhary

Offence of money laundering dependent on predicate/scheduled offence - Discharge, acquittal or quashing of scheduled offence bars prosecution under the Prevention of Money Laundering Act, 2002 - Interpretation of Section 3 of the Prevention of Money Laundering Act, 2002 - Whether the petitioner must be discharged from proceedings under the PMLA in view of the discharge/quashing of the predicate scheduled offence - HELD THAT: - The High Court applied the ratio of the Apex Court in Vijay Madanlal Choudhary, holding that money laundering under Section 3 of the PMLA is predicated upon the existence of a criminal activity relating to a scheduled offence and that property regarded as "proceeds of crime" must be derived or obtained as a result of such a scheduled offence. The Court reiterated that authorities cannot prosecute for money laundering on a notional basis or on the assumption that a scheduled offence has been committed unless that scheduled offence is registered or pending inquiry/trial before a competent forum. Consequent to that principle, if a person is finally discharged, acquitted or the criminal case in respect of the scheduled offence is quashed by a court of competent jurisdiction, there can be no offence of money laundering against that person or anyone claiming property linked to that scheduled offence. Applying this principle to the petitioner, the Court found that the impugned order rejecting discharge under Section 245(2) Cr.P.C. and continuing PMLA proceedings was inconsistent with the settled ratio, and therefore set aside the trial court's order and directed discharge under the PMLA. [Paras 9, 10]

Impugned order dated 10.06.2023 set aside; petitioner discharged from charges under the PMLA and all further proceedings against the petitioner terminated.

Final Conclusion: Criminal Revision allowed: in view of the Apex Court's ratio in Vijay Madanlal Choudhary, discharge/acquittal/quashing of the predicate scheduled offence precludes prosecution under the PMLA; the trial court's order is set aside and the petitioner is discharged from PMLA proceedings.

Provisional attachment - relied upon documents - right to supply of documents - principles of natural justice - scope of appeal/impugnment of prior proceedings - remand for fresh consideration

Scope of appeal/impugnment of prior proceedings - provisional attachment - relied upon documents - Whether the Appellate Tribunal erred in treating the appeal as challenging only the confirmation of the provisional attachment and not the prior order rejecting the application for supply of Relied Upon Documents. - HELD THAT: - The prayer in the appeal (Annexure A-13) expressly impugns the order dated 14.12.2015 confirming the provisional attachment and also challenges "all proceedings prior thereto including the detailed Order dated 24.11.2015". The Appellate Tribunal misconstrued the scope of the appeal by recording that the appellant had not impugned the order rejecting the application for supply of Relied Upon Documents and therefore refused to entertain the appellant's application before it. This Court holds that the Tribunal failed to notice that the appeal, on its face, attacked the earlier order as well, and that such failure vitiates the impugned order. The Tribunal's conclusion that the prayer for supply of documents was not tenable because the Adjudicating Authority had rejected it and no challenge had been made was thus erroneous. [Paras 8, 9, 10]

The Appellate Tribunal's finding that the appeal did not impugn the order rejecting the application for supply of Relied Upon Documents is set aside.

Remand for fresh consideration - right to supply of documents - principles of natural justice - Disposition of the appellant's application for supply of Relied Upon Documents and further course of proceedings before the Appellate Tribunal. - HELD THAT: - Given the Tribunal's error in failing to recognise that the appeal attacked the earlier rejection, the proper course is to restore the appellant's application on the Appellate Tribunal's file and direct the Tribunal to decide it afresh in accordance with law. The Court restored the application to its original number on the Tribunal's record and directed that the Appellate Tribunal may, if it so deems fit, consider the application together with the final hearing of the appeal. This preserves the appellant's entitlement to challenge non-supply or illegibility of relied upon documents and to have that contention adjudicated by the Tribunal. [Paras 11, 12]

The application for supply of documents is restored to the Appellate Tribunal's record and the matter is remitted for fresh consideration; the Tribunal may decide the application and, if appropriate, consider it along with the final hearing of the appeal.

Final Conclusion: The impugned order of the Appellate Tribunal dated 14.12.2023 is set aside; the appellant's application for supply of Relied Upon Documents is restored and the Appellate Tribunal is directed to decide it afresh in accordance with law, with liberty to consider it along with the final hearing of the appeal.

Exclusion under Section 65(91a) - construction for personal use - Works contract service and levy of service tax on construction services post-transfer - Non-taxability of consideration stated in registered sale deed - Temporal application of service tax: periods prior to and after 01.07.2010

Exclusion under Section 65(91a) - construction for personal use - Works contract service and levy of service tax on construction services post-transfer - Liability to service tax on consideration received under construction agreements for completing unfinished residential units already sold to individual buyers. - HELD THAT: - The Tribunal accepted the appellant's position that separate agreements existed: a sale deed transferring the undivided interest and a subsequent construction agreement for completion of the individual flat. Applying the exclusion in Section 65(91a), services rendered for construction of a residential unit for the personal use of the individual buyer fall outside the definition of 'residential complex' for works contract service. The Tribunal relied on its prior decision in Modi Ventures where, on similar facts, services to individual flat owners for completion of their units were held excluded from service tax both before and after 01.07.2010. On this basis the adjudicated demand for service tax on amounts received under the construction/completion agreements was held not leviable.

No service tax liable on consideration received under construction agreements for completion of unfinished units sold to individual buyers; appeal allowed on this ground.

Temporal application of service tax: periods prior to and after 01.07.2010 - Applicability of service tax for periods prior to 01.07.2010 and for the intervening half-year 01.07.2010 to 31.12.2010. - HELD THAT: - The Tribunal noted earlier rulings of the Bench and the appellant's own precedents which hold that construction services of the type in issue are not subject to service tax prior to 01.07.2010. For the period from 01.07.2010 to 31.12.2010, the Tribunal followed its decision in Modi Ventures that even post-01.07.2010, where construction services are provided to individual flat owners for their personal use under separate completion agreements, such services are excluded from works contract service taxation. Consequently, the demands for the periods under consideration were not maintainable.

Service tax not leviable for the periods prior to 01.07.2010 and for 01.07.2010 to 31.12.2010 in respect of the construction services to individual buyers.

Non-taxability of consideration stated in registered sale deed - Whether the value recorded in the registered sale deed for the transfer of the undivided land and semi-finished flat is subject to service tax. - HELD THAT: - The record and earlier adjudications accepted that service tax cannot be demanded on the sale deed value. The impugned orders had erred by treating sale deed consideration within taxable turnover and by including non-taxable reimbursements. The Tribunal affirmed that amounts specified in the registered sale deed for transfer of property are not chargeable to service tax and directed that the impugned order be set aside insofar as it includes sale deed value in the demand.

Sale deed consideration is not subject to service tax; inclusion of sale deed value in the demand set aside.

Final Conclusion: The Tribunal allowed the appeal, holding that services for completion of individual residential units sold to buyers are excluded from service tax under Section 65(91a) (both before and after 01.07.2010), that no service tax is leviable for the periods in dispute, and that consideration stated in the registered sale deed is not taxable; the impugned order is set aside and the appellant is entitled to consequential benefits.

Deemed sale under Article 366(29A)(d) of the Constitution of India - rent-a-cab scheme operator - transfer of right to use goods - five-point test in Bharat Sanchar Nigam Limited - service tax levy pre-negative list and post-negative list

Deemed sale under Article 366(29A)(d) of the Constitution of India - five-point test in Bharat Sanchar Nigam Limited - rent-a-cab scheme operator - Whether operational lease transactions under the Master Lease Agreement are transactions of 'deemed sale' or taxable as 'rent-a-cab scheme operator' / service - HELD THAT: - The Tribunal applied the five-point criteria from Bharat Sanchar Nigam Limited to the sample Master Lease Agreement clauses. It found that (i) goods were agreed for delivery, (ii) identity of the goods was agreed, (iii) the lessee had legal right to use the vehicles including requisite permissions, (iv) the lessee's right was for a definite period to the exclusion of the lessor, and (v) the lessor could not re-transfer the right during the lease. Having satisfied all five conditions, the Tribunal concluded the transactions constitute a 'deemed sale' under Article 366(29A)(d) and therefore fall within State sales tax/VAT domain rather than service tax; accordingly the appellants' operating lease rentals cannot be subjected to service tax as 'rent-a-cab' or otherwise. [Paras 7, 9]

The lease transactions are 'deemed sale' and not taxable as Rent-a-Cab/service.

Service tax levy pre-negative list and post-negative list - transfer of right to use goods - Whether the service tax demands confirmed in the impugned order are sustainable - HELD THAT: - The Tribunal, having held the core lease transactions to be 'deemed sale', determined there is no scope to sustain the service tax demand confirmed against the appellants in respect of lease rentals. The finding that the operating lease is a deemed sale rendered the impugned adjudged demands legally unsustainable. [Paras 9, 10]

Adjudged service tax demands confirmed by the impugned order are set aside.

Penalties under Sections 76, 77 and 78 - extended period of limitation - Whether penalties and demands invoking extended period of limitation can be sustained - HELD THAT: - As the Tribunal held the underlying transactions to be 'deemed sale' and set aside the service tax demands, the consequential imposition of penalties under the Finance Act and any demand based on extended period of limitation could not be sustained. The impugned order's confirmation of penalties and extended-period demands was therefore reversed. [Paras 3, 9, 10]

Penalties and extended-period demands confirmed in the impugned order are not sustainable and are set aside.

Final Conclusion: The impugned order dated 04.11.2015 is set aside; the appeals are allowed as the operational lease transactions constitute 'deemed sale' and the confirmed service tax demands, extended-period demands and penalties are quashed.

Classification of promotional arrangements as Business Auxiliary Service - Chargeability of commissions received from foreign entities for domestic sales - Extended period of limitation and invocation of suppression/mis-statement where department issues overlapping notices under different service categories - Remand for quantification of demand limited to normal period of limitation

Classification of promotional arrangements as Business Auxiliary Service - Intellectual Property Service distinction where royalty is charged - Services rendered under the promotional agreements are classifiable as Business Auxiliary Service and not as Intellectual Property Service. - HELD THAT: - The agreements titled 'Promotional Agreement' show that the appellant undertook a range of promotional and marketing activities (testing/certification, publicity, distribution of promotional literature, seminars, training, assistance to customers and maintenance of inventories) and received a 'promotional fee' in consideration of those activities. The Tribunal found that these contractual obligations go beyond mere allowance of use of trademark or receipt of royalty; unlike the cases where royalty for use of intellectual property was collected and characterised as Intellectual Property Service, the present agreements record fees for promotional activities and marketing support. On that factual and contractual basis the Tribunal held that the services squarely fall under Business Auxiliary Service, and that the decisions treating royalty-based receipts as Intellectual Property Service are inapplicable to these facts. [Paras 8]

Demand confirmed only to the extent the services are classifiable and taxable as Business Auxiliary Service.

Chargeability of commissions received from foreign entities for domestic sales - Binding effect of Larger Bench decision - Commissions received from foreign entities for sale of goods in the domestic market are not leviable as Service Tax in the circumstances, following the Larger Bench decision relied upon. - HELD THAT: - The Tribunal held that the question of taxability of commissions received in convertible foreign exchange for sales in the domestic market is governed by the Larger Bench decision in M/s. Arcelor Mittal Stainless Steel Ltd., and on that authoritative basis the demand confirmed by the Commissioner in respect of such foreign commissions cannot be sustained. [Paras 9]

Demand in respect of commissions received from foreign entities quashed.

Extended period of limitation and invocation of suppression/mis-statement where department issues overlapping notices under different service categories - Reasonable cause for non-payment where department's formation proposed different classifications - Remand for computation limited to normal period of limitation - Invoking extended period of limitation based on alleged suppression/mis-statement could not be sustained where overlapping show-cause notices were issued by different formations proposing different service classifications; demand should be restricted to the normal period and remitted for computation. - HELD THAT: - On the same set of facts and identical agreements, two separate formations issued show-cause notices proposing different classifications ('Management Consultants Service' and 'Business Auxiliary Service') over overlapping periods. The Tribunal accepted that when the department itself is uncertain about the applicable service category, allegations of suppression or mis-statement do not furnish a basis to invoke extended limitation. The adjudicating authority had also set aside penalty proceedings under Section 80 on the ground that the matter involved interpretation of law and that the existence of divergent departmental proposals provided reasonable cause for non-payment. Consequently, the Tribunal held that the extended period could not be invoked and confined the recoverable demand to the normal period of limitation; remanded the matter to the adjudicating authority for quantification/ computation for the normal period. [Paras 10]

Extended-period demand disallowed; matter remitted to adjudicating authority to compute demand for the normal period only.

Final Conclusion: The Tribunal held that the appellant's activities under the promotional agreements are taxable as Business Auxiliary Service (not Intellectual Property Service); demands in respect of foreign commissions are not sustainable in view of the Larger Bench decision; invocation of extended limitation is unjustified where overlapping notices proposing different service classifications were issued, and the demand is therefore confined to the normal limitation period and remitted for computation of the demand for that period.

Reverse charge mechanism - Service receiver liability under Notification No.30/2012-ST - Liability for consultancy services other than legal consultancy - Repair and maintenance services not covered by reverse charge mechanism - Procedural requirement to establish a prima facie case before issuance of show cause notice

Reverse charge mechanism - Service receiver liability under Notification No.30/2012-ST - Demand of service tax under reverse charge on blasting and painting services provided by corporate entities is not sustainable. - HELD THAT: - Tribunal found that the show cause notice was issued without adequate scrutiny of the appellant's records and that the appellant established that the blasting and painting services were rendered by corporate entities. Under the governing notification (Notification No.30/2012-ST dated 20.06.2012) the obligation to pay under reverse charge does not arise where the service is provided by a corporate entity. Because Revenue did not make out a prima facie case prior to issuing the notice and the material showed the providers were corporate entities, the confirmed demand in respect of blasting and painting could not be sustained. [Paras 5]

Demand in respect of blasting and painting services under reverse charge set aside.

Liability for consultancy services other than legal consultancy - Procedural requirement to establish a prima facie case before issuance of show cause notice - Demand confirmed under reverse charge for consultancy charges cannot be sustained where the consultancy is shown to be other than legal consultancy and Revenue had no supporting documents to establish otherwise. - HELD THAT: - The Original authority treated consultancy and legal charges together in the books and confirmed a reverse charge demand. The Tribunal observed that Revenue did not possess documentary evidence showing the services were legal consultancy (which may attract reverse charge), and that the show cause notice was issued without proper preliminary scrutiny. Accepting the appellant's case that the services were consultancy other than legal consultancy (liability of service provider), the Tribunal held the reverse charge confirmation unsustainable. [Paras 5]

Demand in respect of consultancy charges under reverse charge set aside.

Repair and maintenance services not covered by reverse charge mechanism - Demand under reverse charge for repair and maintenance services is not sustainable. - HELD THAT: - Both parties agreed that repair and maintenance services are not covered by the reverse charge mechanism. The Revenue's representative conceded the notification does not include repair and maintenance within RCM. In view of this admission and the absence of contrary material, the Tribunal held the confirmed demand in respect of repair and maintenance services unsustainable. [Paras 4, 5]

Demand in respect of repair and maintenance services (and associated interest and penalty) set aside.

Procedural requirement to establish a prima facie case before issuance of show cause notice - Show cause notice issued on the basis of mismatches between financial statements and ST-3 returns without seeking further information was procedurally defective. - HELD THAT: - The Tribunal emphasised that where data between financial statements and returns do not tally, Revenue should call for information, scrutinise records and make out a prima facie case before issuing a show cause notice. The show cause in this case was issued merely by comparison of dates and figures without such inquiry; consequently, the Tribunal accepted the appellant's contentions on the nature of services received and set aside the confirmations that lacked proper preliminary scrutiny. [Paras 5]

Show cause notice was procedurally defective for lack of prior scrutiny; confirmations based on that process are set aside to the extent indicated.

Reverse charge mechanism - Demand of the balance amount which the appellant did not press is not maintained. - HELD THAT: - The appellant expressly did not press the confirmed demand of a small balance. The Tribunal therefore declined to maintain that portion of the demand and set it aside. [Paras 3, 5]

Balance demand not pressed by appellant is set aside.

Final Conclusion: Appeal allowed in part: demands confirmed under reverse charge for blasting and painting, consultancy charges, repair and maintenance, and the unpressed balance are set aside; the impugned order modified to that extent.

Exemption under Notification No.45/2010-ST dated 20.07.2010 - distribution of electricity services - services to non-commercial organisations (educational institutions, CPWD, Railways) not liable to service tax - works contract / construction services - interest under Section 75 - penalties under Sections 76 and 78 of the Finance Act, 1994

Exemption under Notification No.45/2010-ST dated 20.07.2010 - distribution of electricity services - Exemption under Notification No.45/2010-ST applies to the appellant's services in relation to distribution of electricity. - HELD THAT: - The Tribunal found no dispute that the appellant provided erection and commissioning of electrical sub-stations and related works to Andhra Pradesh power distribution companies. The Notification is service-specific and, following precedent, the denial of exemption by the original authority lacked legal basis. Accordingly the Tribunal set aside the demand of service tax in respect of the works covered by Sl. Nos.1 to 4 in the appellant's chart as being covered by the Notification. [Paras 11]

Demand of tax amounting to Rs.1,09,26,745/- (Sl. Nos.1-4) set aside as exempt under Notification No.45/2010-ST dated 20.07.2010.

Services to non-commercial organisations (educational institutions, CPWD, Railways) not liable to service tax - works contract / construction services - Services rendered to educational institutions, CPWD and Railways are not taxable as they were provided to non-commercial organisations and not intended for commerce or industry. - HELD THAT: - The original authority had confirmed demand on ground of non-production of agreements; the appellant produced the agreements either with the appeal or at hearing which confirmed that services were rendered to non-commercial organisations. The Tribunal accepted that such services fall within the excluded category under the statutory scheme and CBEC Circular dated 17.09.2004, and set aside the related demand. [Paras 11]

Demand of Rs.10,04,292/- (Sl. Nos.5-7) set aside as services to non-commercial organisations and not taxable.

Interest under Section 75 - penalties under Sections 76 and 78 of the Finance Act, 1994 - Interest and penalties levied by the adjudicating authority are not sustainable in view of the findings on tax liability and payments made. - HELD THAT: - For Sl. Nos.8 and 9 the Tribunal recorded that the appellant had discharged the bulk of the tax during the normal course and paid the residual tax and interest on 04.03.2024. Given that the substantive demands in respect of Sl. Nos.1-7 were set aside and taxes where payable were discharged with interest, the Tribunal set aside the demand of interest under Section 75 and the imposition of penalties under Sections 76 and 78. The appellant had paid the penalty under Section 77(2) which was noted. [Paras 12, 13]

Interest under Section 75 and penalties under Sections 76 and 78 set aside; penalty under Section 77(2) already paid by appellant.

Final Conclusion: The appeal is allowed in part: demands in respect of services covered by Notification No.45/2010-ST and services rendered to non-commercial organisations are set aside; taxes where payable were discharged with interest and the demand of interest and penalties under Sections 75, 76 and 78 has been set aside; the impugned order is set aside accordingly.

Clandestine removal of goods - preponderance of probabilities as standard of proof in adjudication proceedings - retracted statements and their evidentiary value - corroboration of documentary evidence recovered in search - requirement of tangible evidence of clandestine manufacture (raw material receipt, power consumption, transportation, sale proceeds)

Clandestine removal of goods - requirement of tangible evidence of clandestine manufacture (raw material receipt, power consumption, transportation, sale proceeds) - Whether the charges of clandestine removal and undervaluation against the respondents were established on the record. - HELD THAT: - The Court held that the burden to prove clandestine manufacture and clearance lay squarely on Revenue and required tangible, corroborative material - e.g., evidence of disproportionate purchases or unaccounted consumption of major raw materials, reliable proof of actual removal and transportation of unaccounted finished goods, discovery of such goods outside the factory, receipt of sale proceeds, or demonstrable excess power/production consistent with the alleged clandestine output. The majority of the Tribunal correctly found absence of such tangible evidence: physical verification did not disclose excess raw material; no reliable proof of clandestine purchases or transportation arrangements; no cogent evidence of disproportionate power consumption, capacity utilisation or labour commensurate with the alleged clandestine production; and no recovery of sale proceeds. The Commissioner's conclusions based on machine-capacity estimates, diesel consumption assumptions and various inferences were held to be speculative and founded on a chain of assumptions rather than independent proof. Consequently, the Court agreed with the Tribunal that unaccounted production and clandestine removal were not established on the materials before the authorities. [Paras 31, 33, 34, 36, 37]

Charges of clandestine removal and undervaluation were not proved; the additions and demands could not be sustained.

Preponderance of probabilities as standard of proof in adjudication proceedings - retracted statements and their evidentiary value - Whether the Tribunal erred in discrediting retracted statements and applying a higher (criminal) standard of proof. - HELD THAT: - The Court reiterated that adjudication under the Central Excise Act is governed by the civil standard of preponderance of probabilities, not the criminal standard of proof beyond reasonable doubt. Nonetheless, even applying the correct civil standard, the Tribunal (majority) was justified in discrediting retracted statements where retractions were supported by surrounding circumstances (affidavits, offer for cross-examination which Revenue did not avail, complaints of harassment and medical evidence) and where the statements lacked independent corroboration. The Court agreed with the Tribunal's approach that retracted confessional or inculpatory statements cannot sustain findings of clandestine removal absent credible, independent corroboration. [Paras 21, 22, 23, 24, 25]

Tribunal rightly treated the retracted statements as unreliable in the absence of credible corroboration; there was no misapplication of the standard of proof.

Corroboration of documentary evidence recovered in search - requirement of proper seizure procedure and authentication of seized documents - Whether loose sheets, Hisaba books, Kachcha challans and duplicate documents recovered in search were sufficiently authenticated and corroborative to sustain the demand. - HELD THAT: - The Court accepted the Tribunal's finding that the documentary material relied upon lacked demonstrable authorship, was not recovered in a manner that established a clear link to the respondents, and comprised duplicate copies raising questions of authenticity. The authors of the documents were not examined; panchnamas and seizure memos failed to identify specific seized records; and procedural safeguards to preserve evidentiary integrity (identification, sealing and linking to the respondents' records) were deficient. Consequently, these documents could not serve as reliable corroboration of the allegations. [Paras 27, 36]

Documentary evidence recovered in the searches was not authenticated or corroborated sufficiently to support the charges.

Final Conclusion: The High Court found no substantial error in the majority order of the CESTAT: in the absence of cogent, tangible and corroborative evidence linking the respondents to clandestine manufacture and removal, the additions and penalties could not be sustained. The appeal is dismissed.

Pre-notice payment under section 11A - operation of section 11AB for interest on delayed payment - penalty under section 11AC - absence of mala fides / revenue neutrality as defence to penalty - standing as assessee for challenge to notice

Pre-notice payment under section 11A - operation of section 11AB for interest on delayed payment - penalty under section 11AC - absence of mala fides / revenue neutrality as defence to penalty - Whether penalty under section 11AC could be sustained when the appellant had paid the differential duty and interest before service of notice - HELD THAT: - The Tribunal limited the appeal to the penalty imposed under section 11AC and examined whether pre-notice payment of differential duty along with interest disentitled the revenue from imposing penalty. The Court noted that the appellant had, on its own determination and before issuance of show-cause notice, paid the differential duty and interest after obtaining CAS 4 certification and had enabled CENVAT credit by supplementary invoices; revenue had not shown any concluded recovery of that credit. The statutory scheme as in force before the amendment was considered: where a person pays the duty (and informs the officer) before service of notice under section 11A, the officer shall not serve notice in respect of the duty so paid and any penalty leviable. For clearances up to 7th April 2011 the pre-amendment provision governs; for clearances after that date, the amended scheme and section 11A(3) apply, but similarly pre-notice payment affects the initiation of proceedings. The Tribunal found no material on record to sustain a charge of fraud, collusion, willful mis-statement or suppression of facts that would take the case outside the proviso/Explanation 1 to section 11A; the appellant's payment of duty and interest and the fact of revenue neutrality undermined any inference of mala fides. The Tribunal also observed that section 11AC is contingent on the recovery provisions in section 11A and that, having regard to the pre-notice compliance by the appellant, the conditions for invoking penalty were not made out for the period up to 7th April 2011 and were not established for the later period on the record before it. Consequently, the adjudicatory exercise culminated in setting aside the penalty imposed under section 11AC. [Paras 6, 7, 8, 9, 10]

Penalty under section 11AC set aside because differential duty and interest were paid before service of notice and no material established fraud or intent to evade duty.

Standing as assessee for challenge to notice - Whether cessation of manufacturing status and contractual transfer of the facility ousted jurisdiction to proceed against the appellant or precluded recovery of duty and interest already paid by it - HELD THAT: - The Tribunal rejected the appellants' contention that cessation of manufacture and transfer of the unit to another entity absolved them from consequences of having debited their CENVAT and personal ledger accounts to discharge differential duty and interest. Contractual assumption of liabilities by the transferee was not a ground to nullify payments made by the appellant or to prevent revenue from recovering or adjudicating liabilities; however, because the appellant had itself paid the differential duty and interest before notice, subsequent contractual arrangements did not negate the effect of that payment under the recovery provisions. The Court accordingly confined the relief to setting aside the penalty rather than addressing any broader claim of non-liability by reason of corporate transfer. [Paras 3, 5, 6]

Transfer of the manufacturing facility and contractual assumption of liabilities did not preclude the appellant's payment from operating to bar notice consequences, but did not independently disentitle revenue to proceed; relief granted is limited to setting aside the penalty.

Final Conclusion: Appeal allowed to the extent of setting aside the penalty under section 11AC; the Tribunal found that the appellant's pre-notice payment of differential duty and interest, together with absence of material establishing fraud or intent to evade, disentitled revenue from imposing the penalty for the periods in question.

Provisional assessment - finalization of provisional assessment - transaction value - assessable value - recovery of short-levy - interest under rule 7(4) of Central Excise Rules, 2002

Provisional assessment - request by assessee - Whether the provisional assessment under rule 7 of the Central Excise Rules, 2002 was resorted to at the instance of the assessee or imposed by department - HELD THAT: - The Tribunal examined correspondence and the order of the original authority which records that the assessee requested provisional assessment and was directed to execute bond and furnish costing data and documents. No contemporaneous evidence of protest by the assessee was found. In view of the documented communication and absence of contrary evidence, the Tribunal held that provisional assessment was made at the instance of the assessee and not compulsorily imposed by the authorities. [Paras 4]

Provisional assessment was at the instance of the assessee and validly invoked.

Finalization of provisional assessment - transaction value - assessable value - recovery of short-levy - interest under rule 7(4) of Central Excise Rules, 2002 - Whether the finalization of the provisional assessment and consequential recovery (under section 11A) and interest (under rule 7(4)) was legally sustainable despite ongoing dispute over price with the customer - HELD THAT: - The Tribunal found that when goods were cleared there was no settled transaction value because the contractual price was disputed and subject to judicial determination; that is precisely the contingency for which rule 7 exists. The assessee did not furnish the requested costing data and documents and offered no justification for non-submission; non-receipt of payment does not determine valuation for excise. The Tribunal accordingly upheld the finalization made by the original authority and the consequent recovery and interest, rejecting the contention that provisional assessment enabled collection of an enhanced consideration not forming part of price. [Paras 5, 6]

Finalization of provisional assessment and consequent recovery with interest was sustainable and the challenge thereto failed.

Final Conclusion: The appeal is dismissed - provisional assessment was invoked at the instance of the assessee and its finalization, with recovery and interest, is upheld for the period 01.04.2010 to 31.03.2011.

Right to cross-examination under principles of natural justice - admissibility of statements recorded under Section 14 and requirement of testing under Section 9D - reliance on computer-generated records from third parties without authentication - proof of clandestine clearance and degree of probability standard

Right to cross-examination under principles of natural justice - admissibility of statements recorded under Section 14 and requirement of testing under Section 9D - Denial of opportunity to cross-examine witnesses whose statements were relied upon rendered the adjudication vitiated. - HELD THAT: - The Tribunal found that the adjudicating authority declined the appellants' repeated requests to cross-examine witness-deponents whose statements and explanations of seized records were made the basis of the demand, without assigning reasons or considering the mandate of Section 9D. Reliance upon Andaman Timber Industries and the principle that refusal to allow cross-examination where statements are the foundation of the order is a serious flaw, the Tribunal held, because the assessee contested the truthfulness of those statements and sought to test them. The adjudicating authority's failure to permit or deal with that request offended principles of natural justice and undermined the validity of conclusions drawn from those statements. [Paras 16, 17]

Opportunity to cross-examine should have been afforded; refusal vitiated the impugned order.

Reliance on computer-generated records from third parties without authentication - proof of clandestine clearance and degree of probability standard - Whether the documentary evidence and untested statements of third parties suffice to establish clandestine removals was negatived. - HELD THAT: - The Tribunal examined the departmental case which rested on computer printouts recovered from an intermediary and on statements of customers and transporters. It recorded that there was no independent corroborative material showing physical clearance or recovery of sale proceeds, and that the linking of the appellants to the intermediary's records depended on statements which were not tested by cross-examination. Given the lapse of time and absence of verification, the Tribunal held that the relevance and admissibility of such documents and the inferences drawn therefrom could not be sustained. While the Department invoked the degree of probability standard in D. Bhoormull, the Tribunal found that reliance on uncorroborated third-party records and untested statements was inadequate to uphold the demand. [Paras 17]

Documentary records from third parties, coupled with statements not tested by cross-examination and lacking corroboration, did not suffice to sustain the finding of clandestine clearance.

Final Conclusion: Impugned order confirming duty, interest and penalties founded on untested statements and unauthenticated third-party computer records was set aside for violation of natural justice and for insufficiency of admissible evidence; appeals allowed and the order quashed.

Valuation under rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules - inclusion of royalty in cost of production - inclusion of administrative overheads in cost of production - CAS4 Guidance Note as guidance for apportionment and nexus with production - remand for fresh consideration where adjudicating authority omitted consideration of applicable guidance

Valuation under rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules - inclusion of royalty in cost of production - inclusion of administrative overheads in cost of production - CAS4 Guidance Note as guidance for apportionment and nexus with production - Whether the adjudicating authority correctly included 'royalty' and specified administrative overheads in the cost of production without applying CAS4 guidance under valuation by reference to cost of production under rule 8, and the consequent remedy. - HELD THAT: - The Tribunal held that valuation by reference to cost of production under rule 8 is the appropriate recourse for the impugned clearances and that the CAS4 Guidance Note furnishes the relevant principles governing inclusion of expenses such as royalty and administrative overheads, requiring nexus with production (for example, royalty based on production) before inclusion. The adjudicating authority did not consider CAS4 in relation to the two additions and therefore failed to apply the determinative guidance on whether and when such costs must be included in assessable value. Because this omission was material to the correctness of the additions, the Tribunal set aside the impugned order and remanded the matter to the original authority for fresh consideration and decision in accordance with rule 8 and the CAS4 guidance, affording the authority opportunity to determine, on the facts and applying the guidance, whether the disputed amounts are includible in cost of production. [Paras 6]

Impugned order set aside and matter remanded to the original authority for fresh adjudication applying rule 8 and CAS4 guidance.

Final Conclusion: The appeal is allowed by way of remand: valuation under rule 8 and the CAS4 Guidance Note must be applied afresh by the original authority to determine whether 'royalty' and the challenged administrative overheads are includible in cost of production for the specified periods; the impugned order is set aside and the matter remitted for reconsideration.

Strict interpretation of exemption notification - burden on claimant to prove applicability of exemption - meaning of 'plastic waste' in exemption notification - use of textile yarn waste / 'popcorn' not falling within plastic scrap or plastic waste - extended period of limitation not invocable without suppression - penalty under Section 11AC(1)(a) for clearing goods without payment of appropriate duty - mandatory and automatic liability to pay interest under Section 11AA

Strict interpretation of exemption notification - burden on claimant to prove applicability of exemption - meaning of 'plastic waste' in exemption notification - use of textile yarn waste / 'popcorn' not falling within plastic scrap or plastic waste - Appellant's entitlement to benefit of Notification No.08/2014-CE for Polyester Staple Fibre/Filament Yarn manufactured from plastic scrap or plastic waste including waste PET bottles. - HELD THAT: - The Tribunal held that the wording of the notification is clear and unambiguous and must be strictly construed; the burden to establish applicability lies on the assessee. The material called 'popcorn', produced by mechanical and chemical processing of various wastes including textile yarn waste, was held not to qualify as 'plastic waste' or 'plastic scrap' within the notification. Admissions in statements and purchase records showed use of textile yarn waste; even a small quantity of such non-specified waste takes the manufacture outside the parameters of the notification. Reliance on the Supreme Court precedents requires that no words be added to the exemption and any ambiguity in an exemption is to be resolved in favour of the revenue. Consequently, the appellant failed to establish entitlement to the concessional rate under the notification.

Benefit of Notification No.08/2014-CE denied; appellant not entitled to concessional rate for clearances where textile yarn waste/'popcorn' was used.

Extended period of limitation not invocable without suppression - Extent of period for which duty could be demanded (normal period v. extended period). - HELD THAT: - The Adjudicating Authority and the Tribunal found no suppression of facts or mis-statement by the appellant, and therefore the extended period of limitation could not be invoked. The demand was accordingly restricted to the normal period of limitation (January, 2017 to June, 2017) and demands for the earlier period (July, 2014 to December 2016) were dropped.

Demand confirmed only for the normal period; extended period demand dropped.

Penalty under Section 11AC(1)(a) for clearing goods without payment of appropriate duty - penalty under Section 11AC(1)(c) not leviable in absence of suppression - mandatory and automatic liability to pay interest under Section 11AA - Leviability of penalty and interest. - HELD THAT: - Given the finding that there was no suppression, the Tribunal agreed with the Adjudicating Authority that the mandatory penalty under Section 11AC(1)(c) was not leviable. However, penalty under Section 11AC(1)(a) for contravention (clearing goods without payment of appropriate duty) was upheld and not interfered with. Liability to pay interest under Section 11AA on the confirmed duty amount was held to be mandatory and automatic and was therefore sustained.

Penalty under Section 11AC(1)(a) upheld; penalty under Section 11AC(1)(c) not leviable; interest under Section 11AA upheld.

Final Conclusion: The appeal is dismissed: the assessee failed to establish entitlement to the concessional rate under Notification No.08/2014-CE for supplies made from textile yarn waste/'popcorn', the demand is confirmed for the normal period only, the penalty under Section 11AC(1)(a) and interest under Section 11AA are upheld while the penalty under Section 11AC(1)(c) is not leviable.

Debit entry in cenvat credit account treated as non-availment of credit - treatment of common input service credit where activities include manufacture and trading - application of sub-rule (3) of Rule 6 of Cenvat Credit Rules, 2004 regarding payment for exempted (trading) activity - requirement to segregate or reverse input-service credit attributable to exempt/trading activity

Debit entry in cenvat credit account treated as non-availment of credit - treatment of common input service credit where activities include manufacture and trading - application of sub-rule (3) of Rule 6 of Cenvat Credit Rules, 2004 regarding payment for exempted (trading) activity - Effect of debiting cenvat credit of common input services before adjudication on the demand under Rule 6(3) for payment of percentage of value of trading (exempted) activity and related interest and penalty. - HELD THAT: - The Tribunal accepted the appellant's undisputed debit of the entire cenvat credit availed on common input services prior to adjudication. Relying on the principle in Chandrapur Magnet Wires (supra), a debit entry in the credit account operates to erase the earlier credit as if it had never been availed. The Tribunal also noted the reasoning in Lally Automobiles (supra) permitting adjustment after the trading activity where segregation in advance is not feasible, and recognising that attributable input-service credit can be debited after the fact. Applying these principles, since the appellant had already debited the common input-service credit before adjudication, there was effectively no credit available against which Rule 6(3)'s provision for payment of 5%/6% of the value of exempted activity could operate. Consequently, the demand founded on non-segregation and the computation under Rule 6(3) did not survive; the related interest and equal penalty were also set aside. [Paras 8, 9]

Demand under Rule 6(3) for payment of percentage of value of trading activity, with interest and equal penalty, set aside because the appellant had debited the common input-service cenvat credit before adjudication, rendering the credit as not availed.

Final Conclusion: The appeal is allowed: the confirmed demand under sub rule (3) of Rule 6 of Cenvat Credit Rules, 2004 together with interest and the equal penalty is set aside because the appellant had debited the common input-service credit before adjudication, and thus no credit remained attracting the Rule 6(3) levy.