TaxTMI Updates e-Newsletter
Mar 19,2026

Seeking waiver of the mandatory pre-deposit required by Section 107(6) - Statutory pre-condition of appeal - maintainability of writ petition - Jurisdictional limits of high court.

Pre-deposit requirement under Section 107(6)(b) of the CGST Act - HELD THAT: - The Court held that the impugned Order-in-Original is appealable under Section 107 of the CGST Act and that Clause (b) of sub-section (6) expressly requires deposit of a sum equal to ten per cent of the remaining tax in dispute (subject to the statutory cap) before an appeal can be filed. There is no statutory provision for filing an advance application seeking waiver of this mandatory pre-deposit. Consequently the High Court cannot act as an appellate authority to relieve the appellant of the statutory pre-condition and entertain a writ seeking to bypass that requirement. [Paras 2, 3, 4]

The writ petition was held to be misconceived and dismissed for seeking to avoid the mandatory pre-deposit prescribed by Section 107(6)(b).

Final Conclusion: The petition challenging the Order-in-Original was dismissed because the appellate remedy under Section 107 is subject to the statutory pre-deposit and there is no provision for advance waiver; the High Court cannot substitute itself for the appellate authority to bypass that requirement.

Validity of assessment order passed under Section 73 - Inclusion of tax component in turnover - double taxation -pre-deposit requirement - opportunity of hearing -discrepancy in adjustments of turnover while the petitioner had mentioned different amounts in GSTR 9 and GSTR 9C -​​​​​​​ remand for fresh consideration where material contention was considered by authority

Inclusion of tax component in turnover and risk of double taxation - HELD THAT: - The Court noted that the assessing authority recorded and addressed the contention that the auditor had included the tax component in the turnover figure, and found that if the tax component is treated as turnover it would lead to double taxation. The authority had not expressly rejected this contention but proceeded to compute a total which the Court found required reconsideration. The Court held that the submission that the tax component should be excluded from turnover falls to be considered afresh by the authority because treating the tax component as turnover contrary to the statutory definition would be legally impermissible and could produce double taxation. [Paras 9, 10, 11]

Assessment set aside to the extent it proceeded without appropriately considering exclusion of the tax component; matter remitted to the authority for fresh decision on this point.

Pre-deposit requirement not a bar where issue was before the authority - HELD THAT: - The Court examined the record and observed that the contention regarding inclusion of the tax component was part of the assessment proceedings and was considered by the authority in the impugned order. Consequently the Court rejected the submission that the point was being raised for the first time solely to avoid the pre-deposit; the matter therefore required remand rather than being left to be raised for the first time on appeal. [Paras 6, 9, 10]

Petitioner's contention cannot be treated as newly raised to avoid pre-deposit; matter remitted for fresh consideration by the authority.

Final Conclusion: Writ petition allowed; the impugned assessment order is set aside and the matter is remitted to the assessing authority for fresh consideration after giving the petitioner an opportunity of hearing; petitioner to make the specified deposit to secure the remand.

Maintainability of writ in presence of alternate statutory remedy - Violation of principle of natural justice - denial of fair opportunity of hearing and to avoid the statutory pre-deposit requirement - Validity of show cause notice and final order - discrepancy observed by the Proper Officer regarding the mismatch of TDS credit and turnover reported in GSTR-1/3B.

Violation of principle of natural justice - Writ petition - HELD THAT: - The Court found that notices under Section 61 and show-cause notices under Section 73 were issued and made available on the common portal, and the petitioner failed to file any response or request personal hearing within the time given. The opportunity to seek personal hearing existed after filing a reply to the show-cause notice; absence of any reply or appearance disentitles the petitioner from claiming denial of natural justice. The Court therefore concluded that there was no procedural infirmity in the impugned orders warranting exercise of writ jurisdiction. [Paras 7]

The contention of denial of fair hearing is rejected and not a ground for entertaining the writ petition.

Maintainability of writ in presence of alternate statutory remedy - Arguments on the correctness of the demand and alleged clerical errors are matters to be raised and decided in appeal before the Appellate Authority, not in writ jurisdiction. - HELD THAT: - The Court held that allegations concerning mismatches in GSTR-1/3B, clerical classification of supplies and the correctness of tax liability are substantive disputes which the petitioner must pursue through the statutory appellate mechanism. Since there is an available and efficacious alternative remedy of appeal, the writ petition is not entertainable on merits for these grounds. [Paras 9]

Substantive disputes regarding liability and clerical mistakes must be raised in appeal; writ on merits is therefore not maintainable.

The Court noted the petitioner approached the High Court after the period for filing an appeal had expired and with the apparent intention to avoid the mandatory pre-deposit. The statutory requirement of depositing the prescribed percentage to prosecute an appeal is a legislative condition; the writ cannot be resorted to as a device to evade that precondition. [Paras 10]

The petition cannot be entertained to circumvent the statutory pre-deposit requirement for appeal.

Final Conclusion: The writ petition is dismissed: no violation of natural justice was found as the petitioner did not reply to notices or seek personal hearing, the disputed tax liability and clerical issues are to be agitated in appeal, and the statutory pre-deposit condition for appeal cannot be avoided by invoking writ jurisdiction.

Classification of goods - Manufacture and supply of biodegradable and compostable carry bags at its manufacturing facility - Benefit of Notification No. 9/2025-Central Tax (Rate) - Advance Ruling Authority lacks jurisdiction to determine technical biodegradability Or compostability - admissibility of input tax credit, liability to pay tax, requirement for registration - Whether an activity amounts to supply.

Classification of goods - HELD THAT:- The Authority found that the bags are made of polymer materials (including PBAT and PLA) and, on that basis, fall within Chapter 39 as articles for the conveyance or packing of goods. This classification is a matter of tariff determination and is not contingent upon whether the material is biodegradable; the material composition places the goods within the plastics chapter. [Paras 7]

The bags are classifiable under Chapter 39, heading 3923, sub heading 39232990 as recorded in paragraph 7.

Applicability of concessional notification conditional on biodegradability - Advance Ruling Authority lacks jurisdiction to determine technical biodegradability or compostability - HELD THAT:- The Authority observed that Entry No. 319 provides a concessional rate for "Paper Sacks/Bags and bio degradable bags" and that the concessional rate is conditional on the goods being biodegradable as understood in the context of that entry. The Authority also recorded that it cannot make scientific, technical or environmental determinations about whether a product is biodegradable or compostable, as such determinations fall within the remit of environmental/technical authorities rather than the Advance Ruling Authority (paras 4-6, 8). Consequently, the Authority held that it cannot itself decide the factual/technical question of biodegradability, but that if the bags supplied are in fact biodegradable then Entry No. 319 would apply and GST at 5% would be payable; if they are not biodegradable, the general rate applicable to plastic articles under Chapter 39 would apply (paras 8-9). [Paras 4, 5, 6, 8, 9]

The Authority cannot determine biodegradability; if the bags are biodegradable, Entry No. 319 applies and GST is 5%, otherwise the general Chapter 39 rate applies, as stated in paragraphs 8-9.

Final Conclusion: The Authority ruled that the bags are classifiable under Chapter 39, heading 3923, sub heading 39232990; it declined to decide the scientific question of biodegradability, and held that the concessional 5% rate under Entry No. 319 applies only if the goods are in fact biodegradable, otherwise the general rate for Chapter 39 applies.

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

HELD THAT:- Special Leave Petition dismissed - HC order confirmed [2025 (7) TMI 258 - BOMBAY HIGH COURT] - impugned order not interfered with under Article 136 of the Constitution.

Bad debts written off u/s 36(1)(vii) - requirement of section 36(2) for allowance of bad debt - Allowability of various amounts written off as bad debts (multiple debtors) claimed as deduction - Honouring of guarantee obligations and revenue v. capital character - deduction as business expenditure u/s 37 - Allowability as business expenditure of amounts paid by the assessee to honour guarantees given by its amalgamating subsidiaries - Real income doctrine (no real income) - accrual basis taxation under mercantile system

HELD THAT:- The decision of the High Court [2010 (1) TMI 86 - KARNATAKA HIGH COURT] in reversing the findings of the Income Tax Appellate Tribunal and affirming the decision of the Assessing Officer following by the Commissioner of Income Tax, is legally correct and justified.

Review petition - Ceasure of income tax settlement commission - restriction to the filing of the application before the Interim Board for Settlement - Finance Act, 2021, which was notified on 01.04.2021, the ITSC was abolished and an Interim Board was constituted only to deal with applications pending as of 01.02.2023 - revenue restricted the filing of the application before the Interim Board for Settlement only by the assesses who were eligible to file the application for settlement on 31.01.2021

HELD THAT:- Having carefully gone through the Review Petition, the order under challenge and the papers annexed therewith, we are satisfied that there is no error apparent on the face of the record or any merit in the Review Petition warranting reconsideration of the order impugned.[2025 (2) TMI 1185 - SC ORDER]

The Review Petition is, accordingly, dismissed.

Deductions u/s 80-IA, 80- IB and 80-HHC - independent computation of deductions u/s 80-IA/80-IB and 80-HHC - interpretation of Section 80-IA(9) - two deductions are computed independently - whether after claiming deduction u/s 80-IA or 80-IB, can assessee again claim deduction under Section 80-HHC on the same profits and whether such deduction is to be computed independently or restricted?

HELD THAT: - The Court affirmed the view in Associated Capsules [2025 (5) TMI 1599 - SUPREME COURT (LB)] and Micro Labs [2015 (12) TMI 708 - SUPREME COURT ] that sub section (9) of Section 80IA does not alter the formula for computing eligible deduction u/s 80HHC. Section 80-IA(9) restricts the availability not the computation of deduction

The deduction under Section 80HHC must be computed on the gross total income as provided by Section 80HHC(3) without first reducing it by the deduction allowed under Section 80IA/80 IB; computation of each deduction is separate. Sub section (9) operates to restrict the availability of deductions in the sense that, when both deductions are allowed, their aggregate cannot exceed the profits and gains of the eligible business, but it does not mandate modification of the statutory computation prescribed in Section 80HHC(3). The appeals of the assessee were allowed on this basis. [Paras 5, 6, 24]

Section 80IA(9) restricts the availability of overlapping deductions but does not require computation of Section 80HHC deduction after reducing deduction under Section 80IA; both deductions are computed independently and their aggregate is subject to the cap of profits of the business.

Final Conclusion: The Court held that Section 80IA(9) limits only the availability of overlapping deductions - deductions u/s 80IA/80IB and 80HHC are to be computed independently though their aggregate cannot exceed business profits - and allowed the assessee appeals.

Territorial jurisdiction to entertain writ against rejection of Section 197 application - requirement of reasoned application of Rule 28AA when considering applications under Section 197

Whether the Delhi High Court could entertain the writ petition challenging the rejection of the Section 197 application despite the impugned order being issued from Gurugram - HELD THAT: - The Court examined the factual matrix of prior certificates, the address to which the impugned order was addressed, and the history of prior orders and proceedings emanating from TDS Circle 75(1), Laxmi Nagar, Delhi. Having regard to these facts, the Court held that, in the peculiar facts of this case, the petition should not be rejected on the ground of territorial jurisdiction and that the petition is maintainable before this Court. [Paras 65, 66, 67, 68, 69]

The petition is maintainable before the Delhi High Court and will not be dismissed on territorial jurisdiction grounds.

Requirement of reasoned application of Rule 28AA when considering applications under Section 197 - Whether the impugned one-line rejection of the Section 197 application, based solely on asserted outstanding demands, complied with the mandatory considerations under Rule 28AA and required reasoned decision-making? - HELD THAT: - The Court found that Rule 28AA prescribes the formula and considerations to be applied when deciding an application under Section 197 and that precedents require a reasoned order. The impugned order contained no reasons and simply referred to outstanding demands without addressing the statutory parameters (including brought-forward losses, estimated tax liability, prior certificates, and pending refunds). The Court noted that some demands relied upon had been rectified after the impugned order and that the AO had not applied his mind to the relevant considerations. For these reasons the Court held that the rejection was not sustainable and remanded the matter for a reasoned and speaking consideration under Section 197 read with Rule 28AA. [Paras 75, 76, 77, 78, 81]

The impugned order is set aside and the matter is remanded to the Assessing Officer to pass a reasoned and speaking order under Section 197 of the Act applying Rule 28AA within two weeks.

Final Conclusion: The writ petition is allowed; the impugned order rejecting the application under Section 197 is set aside and the matter is remanded to the Assessing Officer for a reasoned decision under Rule 28AA within two weeks. The pending application is disposed of as infructuous.

Assessment order in the name of a non-existent/amalgamating entity -defect of framing assessment against a non-existent entity whether a curable defect u/s 292B?

Validity of the final assessment order which was issued in the name of the amalgamating (non-existent) entity instead of the amalgamated company - HELD THAT: - The Court applied the principles in Maruti Suzuki [2019 (7) TMI 1449 - SUPREME COURT], Spice Entertainment [2011 (8) TMI 544 - DELHI HIGH COURT], Sony Mobile [2023 (2) TMI 1074 - DELHI HIGH COURT] and subsequent coordinate-bench decisions to the facts that the merger was approved before framing the final order and the Assessing Officer had been informed of amalgamation well before the final assessment. The Court held that an assessment framed in the name and PAN of the amalgamating company (a non-existent entity) is a substantive illegality; the order contains no recital that it was issued due to an ITBA limitation nor does it treat the assessment as being upon the successor. In these circumstances the final assessment order is void ab initio and the ITAT was correct in quashing it. [Paras 34, 35, 36, 40, 41]

Final assessment order passed in the name of the amalgamating (non-existent) entity is void ab initio and the ITAT's setting aside of that order is sustained.

Defect curable u/s 292Bor not? - HELD THAT: - The Court considered authorities distinguishing clerical errors saved by Section 292B (e.g., Sky Light Hospitality [2018 (2) TMI 1093 - DELHI HIGH COURT]) from cases where jurisdiction was invoked against a non-existent entity (e.g., Maruti Suzuki [2019 (7) TMI 1449 - SUPREME COURT], Spice Entertainment [2011 (8) TMI 544 - DELHI HIGH COURT]). It held that where the AO was informed of amalgamation and yet proceeded to frame the assessment in the name of the non-existent entity, the defect is jurisdictional/substantive and cannot be cured by Section 292B or by alleging an ITBA/system glitch. The Court therefore rejected the Revenue's plea that the error was remediable under Section 292B or by administrative/system correction. [Paras 32, 33, 36, 39, 40]

The defect is not a curable procedural mistake under Section 292B; Section 292B does not save an assessment drawn in the name of a non-existent/amalgamating entity.

Final Conclusion: The appeal is dismissed. The High Court affirms the ITAT's conclusion that the final assessment for AY 2016-17 framed in the name of the amalgamating (non-existent) entity is void ab initio and that the defect is not curable under Section 292B, so no substantial question of law arises for interference.

Validity of reopening of assessment - Application of the first proviso to section 149(1) of the Income-tax Act - survival of the pre-amendment time limit (six years) -scope of new regime - survival of time limit under the pre-2021 regime for reopening assessments

Validity of notices issued under section 148 (and related section 148A) for AY 2013-14 in view of the first proviso to section 149(1) - HELD THAT: - The Court held that the first proviso to section 149(1) operates as a restriction on retrospective application of the extended ten-year limitation introduced by the Finance Act, 2021. For assessment years beginning on or before 1 April 2021 a notice u/s 148 can be issued only if the time limit for issuance continued to exist u/s 149(1)(b) as it stood immediately before the 2021 amendment (the old regime).

Applying the ratio of the Supreme Court RAJEEV BANSAL [2024 (10) TMI 264 - SUPREME COURT (LB)] the maximum reopening period under the old regime for AY 2013-14 expired after the six-year window (extended by relief statutes until 30.06.2021), and therefore after 30.06.2021 no notice u/s 148 could validly be issued for AY 2013-14. The Court concluded that the impugned notices dated in 2024 were barred by limitation under the first proviso to section 149(1) despite the ten-year period in the amended provision. [Paras 3, 7, 9, 11, 13]

Notices under section 148 (and consequential proceedings) for AY 2013-14 issued in 2024 are barred by limitation and liable to be quashed.

Final Conclusion: The writ petition was allowed - Court quashed the impugned notices and related orders for AY 2013-14 on the ground that issuance was barred by the first proviso to section 149(1).

Allowability of voluntary retirement compensation u/s 35DDA - treatment of gratuity and leave encashment for tax purposes - capitality of consideration for transfer of self-generated trademarks pre-amendment to section 55(2) - compensation for transfer of marketing rights when income-earning apparatus is extinguished

Allowability of voluntary retirement compensation under section 35DDA - treatment of gratuity and leave encashment for tax purposes - Disallowance of amounts claimed in relation to VRS, gratuity and leave encashment - HELD THAT: - The Court held that Section 35DDA applies to payments made in connection with voluntary retirement under a scheme and such payments are amortisable over five years; however, gratuity and leave encashment are terminal benefits payable for service rendered and are distinct from the compensation component of the VRS. The VRS document shows separate components for compensation and for gratuity/leave encashment, and therefore the AO, CIT(A) and ITAT erred in treating the entire amounts as part of VRS and restricting allowability to one-fifth of the total sum. The Court also rejected the CIT(A)'s reliance on the later insertion of section 43B(f) to deny allowability for payments made before its effective date, observing that gratuity and leave encashment fell under existing provisions governing welfare payments and were allowable without the post-2002 payment condition. [Paras 10, 11]

Deduction disallowance confirmed by lower authorities was erroneous; question (a) answered for the assessee and against the revenue.

Capitality of consideration for transfer of self-generated trademarks pre-amendment to section 55(2) - Whether consideration received for assignment of trademarks is a capital receipt or business (revenue) receipt - HELD THAT: - Applying the Supreme Court's reasoning in B.C. Srinivasa Shetty [1981 (2) TMI 1 - SUPREME COURT] and subsequent authority, the Court held that self-generated trademarks/brand names assigned prior to the amendment to section 55(2)(a) (effective 01.04.2002) are not assets for the purpose of capital gains computation because cost of acquisition cannot be ascertained; the amendment bringing trademarks within section 55(2)(a) has prospective effect. On the facts, the assignment deed transferred 46 self-generated trademarks along with the goodwill associated with those marks and the transaction took place prior to the cut-off; the receipts therefore are not properly taxable as business income under section 28(iv) or as deemed profits under section 41(1). The Revenue's reliance on non-registration of marks, absence of bifurcation or balance-sheet entries of the JV was held insufficient to convert the character of the receipt into revenue. [Paras 20, 21, 22, 23, 24]

Receipt on transfer of trademarks is a capital receipt; the Tribunal and CIT(A) erred in treating it as revenue.

Compensation for transfer of marketing rights when income-earning apparatus is extinguished - Whether consideration for transfer of marketing rights is a capital receipt or revenue receipt? - HELD THAT: - The Court found that marketing rights constitute an income-earning apparatus and that their transfer deprived the assessee of the ability to exploit those sources of income. The character of the receipt depends on the nature of the transaction and not the subsequent quantum of profit or loss; on the facts the assessee was stripped of its marketing earning apparatus and therefore the compensation received for assignment of marketing rights and related know-how is capital in nature. The CIT(A) and ITAT failed to appreciate the cessation of income-earning capacity and erred in treating the receipts as revenue. [Paras 25, 26]

Receipts for assignment of marketing rights are capital receipts; questions (c) and (d) answered for the assessee and against the revenue.

Final Conclusion: The High Court allowed the tax appeal in favour of the assessee: (i) the disallowance relating to gratuity and leave encashment was overturned; (ii) the consideration for transfer of self-generated trademarks (pre-01.04.2002) was held to be capital in nature; and (iii) amounts received for transfer of marketing rights and related know-how were held to be capital receipts. Tax Appeal No. 640 of 2022 was allowed; connected appeal disposed accordingly.

Computation of ten-year block u/s 153A - inclusion of search assessment year in ten-year reckoning - limitation on reopening assessments emanating from search

While computing the ten-year block, the assessment year relevant to the previous year in which search is conducted (hereinafter “the search assessment year”) is to be included in the reckoning, unlike the computation of six assessment years which expressly excludes it -

HELD THAT: - The Court held that Section 153A prescribes two distinct computational regimes: a six-year period to be identified as the "six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted" and a separate ten-year period defined in Explanation 1 as "not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted". The differing phraseology is deliberate and must be given effect; the six-year computation expressly excludes the search assessment year, whereas the ten-year computation requires reckoning from the end of the search assessment year, thereby including the search assessment year as the first year of the ten-year block. Applying this statutory scheme (and reading Sections 153A and 153C pari materia), the Assessment Year 2014-15 falls beyond the ten-year outer limit measured from the search assessment year in the present case, and the notice under Section 148 is therefore time-barred.

The Court relied on its earlier exposition in Jayantibhai Karamshibhai Maniya [2026 (1) TMI 1204 - GUJARAT HIGH COURT] which adopts the same interpretive conclusion, and found no reason to take a divergent view. [Paras 9, 10, 11, 12, 13]

Final Conclusion: The writ petitions are allowed; the Notices issued under Section 148 for Assessment Year 2014-15 are quashed on the ground of limitation.

Taxability of income of a non-resident under territorial nexus -foreign bank deposits as taxable income of a non-resident - Burden of proof on Revenue to establish escaped income - Prohibition on double taxation of the same income - fundamental latin maxim – ei qui affirmat incumbit probatio

Taxability of income of a non-resident under territorial nexus - Taxability of amounts held in a foreign bank account of a non-resident and applicability of Section 5(2) read with Section 9 of the Act - HELD THAT: - The Court upheld the view that a non-resident having money in a foreign country cannot be taxed in India unless the amount is received or deemed received in India, or accrues/arises or is deemed to accrue/arise to the non-resident in India; Section 5(2) limits the territorial reach of taxation and cannot be enlarged by invoking provisions such as Sections 68 or 69 in respect of amounts outside India. The CIT(A)'s finding that the HSBC Geneva account opened in 1997 and the assessee's non-resident status meant the deposits were outside the purview of the Act was accepted. [Paras 9, 10]

The addition of the foreign bank account deposit was not taxable in India under the Act for the assessment year in question.

Burden of proof on Revenue to establish escaped income - Whether the Revenue discharged the onus of proving that the deposits in the foreign account were sourced from India - HELD THAT: - The Court endorsed the CIT(A)'s finding that the Revenue failed to prove the source of deposits by the circumstantial instances relied upon by the Assessing Officer. Applying the settled principle that the burden rests on the party asserting liability (ei qui affirmat incumbit probatio), the Court found that the Department did not discharge its burden to bring the receipts to tax within the statutory parameters. [Paras 11, 12]

Revenue did not prove that the amounts were sourced from India; therefore the addition could not be sustained.

Double taxation of the same income - Whether the department could tax amounts already subjected to tax in the hands of other persons or in other years? - HELD THAT: - The Court accepted the CIT(A)'s discussion that the law and judicial precedent preclude taxing the same income more than once. If an income has been charged to tax in the hands of one person or year, the taxing authority cannot re-tax it in the hands of another person or year; the charging provisions imply that the same income cannot be subjected to repeated taxation. [Paras 13]

Double taxation of the same income was not permissible; such consideration supported deletion of the addition.

Final Conclusion: The High Court found no substantial question of law and dismissed the appeal, upholding the CIT(A) and ITAT conclusions that the Revenue failed to establish taxability of the foreign bank deposits for the assessment year and accordingly the addition was rightly deleted.

Allowability of interest on loans and advances when funded from interest free own funds - applicability of section 40(a)(ia) to reimbursements for training expenses - treatment of discrepancies between income declared in return and amounts in Form 26AS - application of section 40A(3) to explained reimbursed RTO charges

Allowability of interest on loans and advances when funded from interest free own funds - Disallowance u/s 36(1)(iii) of proportionate interest on loans and advances @ 12% - HELD THAT: - The Tribunal found that the assessee had opening and closing balances evidencing that loans and advances were made from the assessee's own interest free funds and that part of the loan amount was repaid during the year, demonstrating genuineness. AO did not take into account these facts. On this basis the Tribunal held the disallowance of proportionate interest under section 36(1)(iii) was not justified and allowed the ground. [Paras 7]

Disallowance under section 36(1)(iii) set aside and the ground allowed.

TDS u/s 194C - Applicability of section 40(a)(ia) to reimbursements for training expenses - HELD THAT: - The Tribunal accepted that the payments to Mahindra & Mahindra Ltd. were reimbursements for training of the assessee's sales and workshop staff and formed part of the assessee's business activity as a dealer. There was no separate contract attracting section 194C in the circumstances. On that basis the Tribunal held that disallowance under section 40(a)(ia) was not justified and allowed the ground. [Paras 10]

Disallowance under section 40(a)(ia) deleted and the ground allowed.

Treatment of discrepancies between income declared in return and amounts in Form 26AS - application of section 40A(3) to explained reimbursed RTO charges - Additions made for difference between ITR and Form 26AS and for alleged cash expenditure under section 40A(3) - HELD THAT: - The Tribunal observed that the assessee's books and accounting method were consistently maintained and accepted by the Assessing Officer for prior years, and that differences between amounts in Form 26AS and the return could arise from business adjustments such as discounts, debit/credit notes or timing differences. The assessee also explained the RTO charge reimbursements. Having regard to these explanations, the Tribunal found the Assessing Officer's additions were not justified and allowed the grounds relating to both the Form 26AS difference and the section 40A(3) disallowance. [Paras 13, 14]

Additions relating to the ITR/Form 26AS discrepancy and the section 40A(3) disallowance deleted and the grounds allowed.

Final Conclusion: The Tribunal allowed the appeal in entirety, holding that the impugned disallowances and additions under section 36(1)(iii), section 40(a)(ia), the discrepancy between the ITR and Form 26AS, and the section 40A(3) addition were not justified on the facts and explanations furnished by the assessee.

Penalty u/s 271(1)(b) - failure to comply with notices u/s 142(1) - onus on assessee to prove reasonable cause for non-compliance

HELD THAT: - The Tribunal held that section 271(1)(b) authorises imposition of a penalty of Rs. 10,000 for each failure to comply with a notice u/s 142(1) where the assessee either fails to offer an explanation or offers an explanation which is found to be false or is not substantiated.

The provision casts the onus on the assessee to show a bona fide and reasonable cause for non-compliance and to disclose material facts; it is not the Revenue's burden to prove deliberate default. In the present case the assessee did not respond or offer a substantiated explanation before the AO, the assessment was completed ex parte after non-compliance with statutory notices, and there was no representation or written submission before the Tribunal.

Subsequent or belated compliance was not a ground to negate the penalty where there was no prior satisfactory explanation. Applying these principles, the Tribunal found no infirmity in the levy of two penalties of Rs. 10,000 each for the two occasions of non-compliance and upheld the orders below. [Paras 7, 8]

Final Conclusion: The appeal is dismissed; the penalty imposed under section 271(1)(b) for non-compliance with two notices under section 142(1) is upheld because the assessee failed to prove a reasonable cause for non-compliance. Decided against assessee.

Income chargeable to tax which has escaped assessment - jurisdictional threshold u/s 149(1)(b) - statutory threshold of Rs. 50 lakhs as prescribed u/s.149(1)(b)

HELD THAT:- Tribunal held that the phrase income chargeable to tax which has escaped assessment in section 149 must be understood as the real income sought to be taxed and not the gross value of transactions.

As the additions confirmed by the AO (and upheld by the CIT(A)) produced a total income below the monetary limit prescribed by section 149(1)(b), the assumption of jurisdiction under section 148 was invalid. Consequently, the reassessment proceedings founded on that notice are vitiated for want of jurisdiction; because the reassessment is quashed on this ground, the Tribunal did not adjudicate the remaining grounds raised by the assessee. [Paras 5]

Reopening under section 148 is invalid for lack of jurisdiction as the escaped income does not meet the threshold in section 149(1)(b); reassessment quashed and other grounds not adjudicated.

Final Conclusion: The appeal is allowed; the reassessment initiated by the notice under section 148 is quashed for lack of jurisdiction because the escaped income did not satisfy the Rs. 50 lakhs threshold under section 149(1)(b).

Assessment order in the name of non-exiting company - Validity of assessment despite change of company name - Whether the assessment passed in the old name after amalgamation renders the assessment void or bad in law? -

HELD THAT:- The Tribunal upheld the finding that the assessee, after amalgamation, had continued to use the earlier company's name in communications to the AO and had therefore not shown a bona fide mistake; the AO was under a bona fide impression that the earlier company continued to exist. Reliance on decisions concerning assessments in the name of a non-existing company was held distinguishable because in the present case the assessee itself used the earlier name in replies, so the assessment in the earlier name cannot be treated as bad in law. [Paras 7]

The assessment in the earlier name is valid and the ground challenging it is dismissed.

Addition under section 68 and section 56(2)(viib) for share capital and share premium - Whether the share allotment at a premium was genuine and whether additions under section 68 and alternatively under section 56(2)(viib) were sustainable - HELD THAT: - The Tribunal agreed with the Assessing Officer and the CIT(A) that the valuation offered by the assessee was not acceptable. The AO's enquiries about the investor's creditworthiness, non-response to statutory notices, the investor's lack of substantive business and the transactional sequence (issue to M.G. Finvest at high premium and subsequent transfer producing profits set off against other losses) supported the conclusion that the premium component could not be accepted as genuine. On this basis the additions made under section 68 (share capital and premium) and the alternative quantification under section 56(2)(viib) were sustained. [Paras 3, 7]

The additions relating to share capital and share premium were upheld and the assessee's challenge to the additions was dismissed.

Final Conclusion: The appeal is dismissed: the assessment passed in the earlier name is held valid on the facts, and the additions relating to share capital and share premium (sustained under section 68 and alternatively under section 56(2)(viib)) are upheld.

Reopening of assessment - TOLA - Validity of sanction u/s 151 for notices issued beyond three years - effect of TOLA on time-limit and sanctioning authority for reassessment - jurisdictional competence to grant prior approval for issuance of notice under section 148

HELD THAT: - The Tribunal held that for the assessment year in question the three year time limit expired on 31.03.2021 and, because that date falls within the TOLA window, TOLA extended the time for the specified authority to grant sanction until 30.06.2021. Thereafter, under the new regime the level of authority competent to grant sanction depends on whether the notice is issued within or after three years; where more than three years have elapsed the specified authority is the Principal Chief Commissioner/Principal Director General/Chief Commissioner/Director General as mandated by section 151(ii).

In the present case the order under section 148A(d) and the notice under section 148 were issued on 26.07.2022, i.e. beyond the three year period, but approval was obtained from a Principal Commissioner who is not the authority specified by section 151(ii).

Thus, because the requisite sanction by the specified authority under section 151 was not obtained, the assessing officer lacked jurisdiction to issue the notice and the reassessment proceedings are invalid (paras 7, 8). [Paras 7, 8]

The sanction was invalid for want of competence under section 151(ii) read with TOLA and the reassessment notice and order were quashed.

Final Conclusion: The reassessment order for A.Y. 2017-18 was held invalid for lack of sanction by the authority specified under section 151(ii) (in light of TOLA) and the appeal of the assessee was allowed. Other grounds were left open as academic.

Smuggling - Scope of admissibility of statements recorded under Section 108 of the Customs Act as substantive evidence - confiscation of smuggled goods - redemption and re-export subject to redemption fine - sufficiency of material to sustain confiscation and penalties under the Customs Act - forensic digital evidence as corroboration

Admissibility of statements recorded under Section 108 of the Customs Act as substantive evidence - Statements recorded under Section 108 of the Customs Act can be relied upon as substantive evidence to connect an implicated person with the contravention. - HELD THAT: - It is settled position of law that statement recorded under Section 108 of the Customs Act can be considered for the purpose of proceedings against the parties like the present petitioner qua implicated in a statement recorded under Section 108 of the Customs Act. An authoritative support can be drawn from the judgment of Apex Court in the matter of Naresh J. Sukhawani Vs. Union of India [1995 (11) TMI 106 - SUPREME COURT].

The Court accepted that the passenger's statements recorded under Section 108 were consistent across multiple recordings and, together with collateral material (including forensic analysis of a detained mobile phone and statements of other persons), constituted admissible material to connect the petitioner with the smuggling activity. The judgment relied on precedent holding that Section 108 statements are material evidence that may be used to incriminate and connect parties to Customs contraventions. [Paras 10, 11, 12, 14, 22]

The Court held Section 108 statements admissible and properly considered by authorities for adjudicating confiscation and penalty proceedings.

After considering the consistent statements of the passenger, implicated statements of a money exchanger, forensic phone analysis showing communication between the passenger and the petitioner, and the petitioner's failure to cooperate with summons, the Court concluded that there was adequate material establishing the petitioner's involvement, knowledge that the goods were liable for confiscation, and acts amounting to improper export. On that basis the impugned findings of confiscation and the imposition of penalties were not found to be without legal basis. [Paras 18, 19, 20, 21, 23]

The Court found the evidence sufficient and declined to interfere with the confiscation and penalty orders.

The Court held that the fact a passenger was permitted redemption and re-export did not entitle the petitioner to identical relief; differing treatment in outcomes of co-accused does not automatically provide a basis for challenging the impugned orders under Article 14 where the petitioner was separately connected by evidence to the contravention. [Paras 24]

Article 14 argument based on parity with the co-accused was rejected.

Final Conclusion: The petition was dismissed; the Court upheld the use of Section 108 statements and the collateral evidence as sufficient to sustain confiscation and penalties, and rejected the plea for parity with a co-accused permitted redemption.

Validity of withholding of Walnut Kernels - imposition of additional bank guarantee despite provisional duty bond - certificate of origin has been defaced by the Customs Authority after verification.

Validity of withholding clearance of the imported Walnut Kernels and directing a fresh bank guarantee after provisional assessment and furnishing of a provisional duty bond -HELD THAT: - The Court held that after 100% physical examination and documentary verification were completed and the Bill of Entry was provisionally assessed with a condition for a provisional duty bond which the petitioner furnished, the Respondent Department acted arbitrarily in demanding an additional bank guarantee for release. The Court noted that the Customs officers had alreadydefaced the certificates of origin after verification and there was no material placed on record contradicting the origin from the SAFTA contracting state. A mistake in the Import General Manifest by the vessel's master did not justify withholding the goods when the statutory documentary checks had been completed and the provisional bond accepted. [Paras 9, 10, 11, 12]

Clearance could not be withheld and the consignment was to be released on acceptance of the provisional duty bond without insisting on a further bank guarantee.

Final Conclusion: The petition was allowed: on the facts the respondents were directed to clear the imported Walnut Kernels by accepting the provisional duty bond furnished by the petitioner and without insisting on a fresh bank guarantee; the order was passed in the peculiar facts and not to be treated as a precedent.

Transaction value - Validity of Confiscation of imported goods under Section 111(m) - imported ‘PU coated fabric’ (thickness 0.50 mm +/- 10%) - re-determine the value - discrepancies or misdeclarations - redemption fine and penalties imposed under Section 125(1), Section 112(a) and Section 114AA.

Confiscation - Material misdeclaration affecting assessment or revenue - HELD THAT: - Section 111 (m) provides for confiscation of ‘any goods which do not correspond in respect of value or in any other particular with the entry made under this Act.’ The said provision has been settled by various judicial precedents to mean that the discrepancy or misdeclaration must be material in nature. This provision is intended primarily to prevent evasion of customs duty and to safeguard government revenue. It is not meant to penalise the importers for minor, inconsequential or technical discrepancies which do not result in causing any loss of revenue to the exchequer or violation of import policy. Discrepancies that do not affect duty, import policy, compliance or assessment should not normally lead to the confiscation. In other words, misdeclaration if any, must relate to a material particular which affects assessment or results in the loss of revenue so as to justify confiscation. Every incorrect or imperfect declaration cannot automatically lead to confiscation under Section 111(m) that too when the Bill of Entry has been finalised at declared value and there is no differential duty demand. The department has miserably failed to establish any material mis-declaration regarding any material particular in the Bill of Entry in the facts of this case. The difference, if any, is only about the thickness or the description without there being any dispute about its classification or declared value.

The learned Commissioner himself has accepted the transaction value declared by the Appellant and has set aside the re-determination of value. Once the declared value stand accepted, the very basis of the allegation about material misdeclaration or attempt to evade customs duty disappears. Consequently, it cannot be said that there is any loss of revenue to the exchequer or any attempt on the part of the appellant to defraud the government of its legitimate dues. In such circumstances, the essential ingredient necessary for invoking Section 111(m), namely a mis-declaration affecting revenue or assessment, is clearly absent.

Final Conclusion: The confiscation of the goods, under Section 111(m) in the facts of instant matter, is not sustainable. Once the confiscation has been held to be unsustainable the consequential redemption fine and penalties imposed under Section 112(a) and 114AA ibid respectively cannot survive. The impugned order is therefore set aside by allowing the appeal.

Classification of the subject goods viz. personal computers cleared from SEZ through DTA to customers - conflicting Headings are CTH 98049000 [Department] and CTH 84713010, 84715000 & 85285200 [Assessee] - Scope of 'dutiable goods' for Heading 9804 - importation for personal use under Heading 9804 - distinction between customs duty and igst - deeming fiction under special economic zones act - levy of penalty and charging of interest.

Scope of 'dutiable goods' for Heading 9804 - HELD THAT:- The Court held that the term 'dutiable goods' in Heading 9804 is confined to goods chargeable to duties leviable under the Customs Act, 1962. Levy of IGST under other statutes does not convert goods into 'dutiable goods' for the purpose of Heading 9804. Since the tariff prescribes a 'free' rate for the laptop and desktop headings and monitors are exempted by notification, those goods are not chargeable to customs duty and therefore do not satisfy the first conjunctive requirement of Heading 9804. [Paras 17, 18, 19, 20]

The subject goods are not 'dutiable goods' and therefore cannot be classified under Heading 9804 on that ground.

Importation for personal use under Heading 9804 - Whether the removals from SEZ to DTA were imports for the personal use of the customers such as to attract Heading 9804 - HELD THAT: - The Court found that 'importation for personal use' contemplates personal baggage or goods brought for the importer's own use and cannot be extended to goods manufactured and sold by an SEZ unit to its customers in the ordinary course of business. The character and purpose of use by downstream customers cannot be used to re-characterise the SEZ unit's clearances at the time of classification; customization or subsequent use by customers is irrelevant to classify the SEZ unit's supplies as personal imports under Heading 9804. [Paras 21, 22, 23, 24]

The removals were not imports for personal use of the importer/customs baggage within the meaning of Heading 9804 and therefore the goods cannot be classed under Heading 9804 on this ground.

Limits of SEZ Act and Rules as to recovery, penalty and confiscation - Whether the Adjudicating Authority could impose customs-style recovery, interest, penalty and confiscation under the SEZ Act/Rules for the SEZ-DTA clearances - HELD THAT: - The Court observed that although Section 30 of the SEZ Act contemplates treatment of SEZ-DTA clearances vis-a -vis comparable imports, the SEZ Act and Rules do not provide a mechanism equivalent to Section 28/12 of the Customs Act for levy, collection, interest, penalty or confiscation. Rule 47(5) limits jurisdiction to refund, demand, adjudication, review and appeal under relevant Customs provisions; hence the Adjudicating Authority lacked authority under the SEZ scheme to impose confiscation, penalty and interest in the manner applied in the impugned order. [Paras 31, 32]

Charging of interest, ordering of confiscation and imposition of penalty under the impugned order exceeded the powers available under the SEZ Act and Rules and were unsustainable.

Final Conclusion: The Tribunal set aside the impugned adjudication: the goods could not be classified under Heading 9804 because they were not 'dutiable goods' and were not imports for personal use, and the Adjudicating Authority's imposition of interest, penalty and confiscation under the SEZ scheme was beyond its powers; the appeal is allowed with consequential benefits as per law.

Imposition of penalty under Regulation 18 - violation of Regulation 10(m) of the Custom Broker Licensing Regulations, 2018.

Validity of imposition of penalty on the custom broker for alleged breach of Regulation 10(m) of CBLR, 2018 -HELD THAT: - The Tribunal examined the inquiry findings and the adjudicating authority's order which had earlier dropped charges under other provisions of CBLR, 2018 and noted that the adjudicating authority had taken a lenient view in the parallel proceedings against the importer permitting re-export. The Tribunal found that the penalty imposed on the ground that the broker was aware of and had fabricated or concealed the original contract and thereby failed to exercise due diligence under Regulation 10(m) was unsustainable in the facts of the case, particularly where the other charges were dropped and the importer was granted relief. On that basis the imposition of penalty under Regulation 18, predicated on a violation of Regulation 10(m), could not be sustained and the impugned order was set aside. [Paras 15, 16, 17]

The penalty imposed under Regulation 18 for alleged breach of Regulation 10(m) of CBLR, 2018 is unsustainable and the impugned order is set aside.

Final Conclusion: The appeal is allowed; the Tribunal set aside the order imposing penalty under Regulation 18 of CBLR, 2018 for the alleged breach of Regulation 10(m) and granted consequential relief as per law.

Liability to confiscation and penalty under Section 112(a) and 114AA for permitting use of an IEC - Mis-declaration of description and value leading to evasion of customs duty - syndicate used 16 Import Export Codes for committing the alleged act of misdeclaration out of which 12 IEC holders were found non-existent - knowingly making, signing or using false or incorrect declarations - prohibition on third party use of Import Export Code under Foreign Trade (Development and Regulation) Act and Rules.

Liability to confiscation and penalty under Section 112(a) of the Customs Act for permitting use of an IEC - HELD THAT: - The tribunal accepted the appellant's voluntary admission that he let his IEC be used by the importer and his syndicate. The court held that such use of the IEC, contrary to the requirements of the Foreign Trade (Development and Regulation) Act and Rules and the Foreign Trade Policy, rendered the imported goods liable to confiscation under Section 111 and thereby attracted penalty under Section 112(a) of the Customs Act. The decision emphasised that an admission, when voluntary, may form the basis for the finding and that the IEC cannot be lawfully used by third parties other than the allotted holder. [Paras 14, 15, 16]

Penalty under Section 112(a) was correctly imposed and is upheld.

Penalty under Section 114AA of the Customs Act for knowingly making, signing or using false or incorrect declarations - HELD THAT: - The tribunal found on record that the appellant admitted that his IEC was used by the importer and syndicate and that such use involved false or incorrect material declarations to customs. The court concluded that, on the basis of the appellant's admission and statutory provisions, he knowingly allowed false declarations to be made or used for the purposes of the Act, satisfying the ingredients of Section 114AA and justifying imposition of the penalty. [Paras 13, 14, 16]

Penalty under Section 114AA was rightly imposed and is upheld.

Final Conclusion: The tribunal upheld the adjudicating authority's findings that the appellant voluntarily lent his IEC, thereby violating foreign trade requirements and enabling false declarations; the penalties under Sections 112(a) and 114AA of the Customs Act were correctly imposed and the appeal is dismissed.

Imposition of Penalty under Section 112(1) of the Customs Ac - transportation of smuggled Betel Nuts - confiscation of the vehicle - ownership and control - operational control of the vehicle rested with another person - verification of documentary evidence - corroboration of statements.

Imposition of penalty on the appellant under Section 112(1) of the Customs Act in respect of the seized vehicle - HELD THAT:- The Tribunal examined the documentary evidence produced by the appellant (a Finance-Cum-Sale agreement) and the statement recorded under Section 14 from the person who was operating the vehicle. The evidence showed that the vehicle was being handled and controlled by the person operating it and that he did not implicate the appellant; the Revenue did not undertake adequate verification of the sale/assignment document or seek corroborative evidence to establish the appellant's responsibility for transportation or alteration of number plates. On these facts the Tribunal found that no effective case was made out against the appellant to sustain imposition of penalty under Section 112(1). [Paras 13, 14, 15]

Penalty imposed on the appellant under Section 112(1) is set aside

Final Conclusion: The appeal is partly allowed: the penalty imposed under Section 112(1) on the appellant is set aside for want of an effective case, while the order of confiscation of the vehicle is not interfered with.

Imposition of penalties under Section 114AA - claimed the benefit of Service Export from India Scheme (SEIS) scrips from DGFT -Willful suppression Or in bona fide belief - Proper classification of exported services under the DGFT Explanatory Notes (Group 84 v. Group 86).

Interpretation of export service classification - bonafide belief negating penalty - HELD THAT: - The Tribunal held that the distinction between the descriptions in Group 84 and Group 86 was thin and that, on a harmonious reading of the invoices and the Group entries, classification was a question of interpretation. In view of that interpretative difficulty and the appellant's conduct (including non-contestation before DGFT and payment of DGFT penalty), the appellant was found to have entertained a bonafide belief that the services fell under Group 86. The Tribunal therefore treated the matter as one of interpretation rather than deliberate suppression. [Paras 8]

Classification was a matter of interpretation and the appellant entertained a bonafide belief in its claim under Group 86

Penalty under Section 114AA of the Customs Act - Whether penalties imposed under Section 114AA of the Customs Act on the appellant company and its Managing Director were sustainable - HELD THAT:- Relying on the finding that the classification dispute was one of interpretation and noting that the appellant had paid the customs duty and interest and had accepted and paid the DGFT penalty, the Tribunal concluded that penal liability under Section 114AA was not warranted. The Tribunal exercised its discretion to give the appellant the benefit of the doubt on the question of willful suppression and set aside the penalties. [Paras 9, 10]

Penalties under Section 114AA imposed on the appellant company and on the Managing Director were set aside

Final Conclusion: The Tribunal concluded that the classification dispute was interpretative and the appellant had a bonafide belief in its claim; accordingly the penalties under Section 114AA of the Customs Act imposed on the company and its Managing Director were set aside, and the appellants are eligible for consequential relief as per law.

Transaction value - enhancement of assessable value - imported six consignments of “Electric Tricycle Spare Parts” and “Motor Controller” - delay and demurrage charges - nature and principal use of the controller - Assessing Officer re-assessed the importation by enhancing the CIF value and rejected the declared invoice value of the goods under the description of “Electric Tricycle Spare Parts” on the basis of higher values in respect of "similar goods". The Assessing Officer had also re-assessed the goods declared as “Motor Controller” by changing classification to Customs Tariff Heading 87089900.

Transaction value accepted where enhancement unsupported by evidence - Commissioner of Customs (Appeals), Kolkata, who, vide the Order-in-Appeal No. (“impugned order”), set aside the enhancement of values as done by the lower authority and assessed the impugned goods at their declared values; the classification of the goods viz. “Motor Controller” under CTH 87089900 was also set aside and the said goods were assessed under CTH 85030090, as declared by the respondent.

HELD THAT:- We find that the issue involved in the present appeal is no longer res integra as the same has already been dealt with by this Tribunal in the case of the very same respondent vide [2026 (1) TMI 1019 - CESTAT KOLKATA].

The ratio of the decision cited supra is squarely applicable to the facts of the present case. Therefore, in view of the above, we do not find any infirmity in the impugned order passed by the Ld. Commissioner (Appeals) and hence, the same is upheld.

In the result, we do not find any merit in the appeal filed by the Revenue and consequently, the same is dismissed.

Validity of the show-cause notice issued by invoking the extended period of limitation - extended five-year limitation under Section 28(4) - collusion willful misstatement or suppression - manufacture, clearance and export of Aluminium Billet, Aluminium Ingot, Aluminium Wire Rod, etc., falling under Chapter 76 of the Customs Tariff Act, 1975 - demand of Customs duty confirmed against the appellant along with interest and a penalty under Section 114A & 114AA.

Limitation under Section 28 of the Customs Act - Validity of the show-cause notice issued by invoking the extended period of limitation - HELD THAT: - Without going into the merits of the case, we take note of the facts that all the activities of export and re-import, were in the knowledge of the Department during the disputed period i.e. 22.04.2015 to 12.10.2018 and the show-cause notice has been issued on 10.09.2020 by invoking extended period of limitation.

In view of this, we hold that whole of the demand has been raised against the appellant by invoking extended period of limitation. Therefore, the show-cause notice issued against the appellant, is not sustainable in the eyes of law, as the show-cause notice is required to be issued within two years from the relevant date.

Final Conclusion: The impugned order confirming duty, interest and penalty was set aside because the show-cause notice was barred by limitation; the appeal is allowed with consequential relief, if any.

Entitlement to Anticipatory bail under Section 482 of BNSS (parity with Section 438 Cr.P.C.) - presumption of innocence - socioeconomic offence - compoundable offence - gross undervaluation and mis-declaration of the goods declared as ‘Glass Beads’, of various sizes and specifications to evade payment of appropriate customs duty.

Anticipatory bail - HELD THAT: - In Nathu Singh V/s. State of U.P. [2021 (5) TMI 1003 - SUPREME COURT], a three Judge Bench of the Hon'ble Supreme Court has observed that " It is no longer res integra that any interpretation of the provisions of section 438 Cr.P.C. has no take into consideration the fact that the grant or rejection of an application under section 438 Cr.P.C. has a direct bearing on fundamental right to life and liberty of an individual. The genesis of this jurisdiction lies in Article 21 of the Constitution, as an effective medium to protect the life and liberty of an individual. The provision therefore needs to be read liberally, and considering its beneficial nature, the Courts must not read in limitations or restrictions that the legislature have not explicitly provided for."

The Court applied the principles governing anticipatory bail under Section 482 of the BNSS (treated pari passu with Section 438 Cr.P.C.), balancing individual liberty against investigation needs. The Court found that the alleged offences attract punishment up to seven years, are compoundable and triable by a Magistrate, and that the prosecution had not produced prima facie material to show undervaluation at the applicant's instance beyond documentary records and a CHA statement; the customs proper officer had examined and cleared the import entries. The Court noted absence of criminal antecedents, availability of documentary material with the investigating agency, the applicant's willingness to cooperate and attend for recording of statement, and that custodial interrogation was not imperative. In light of these factors and the scope for imposing stringent conditions to safeguard investigation, the Court concluded that pre-arrest protection should be granted subject to specified conditions intended to ensure cooperation, prevent tampering with evidence and avoid flight, including regular attendance before the IO, surrender of passport and provision of address proofs. [Paras 18, 19, 20, 23, 24]

The applicant is entitled to pre-arrest bail on conditions including personal bond with surety, regular attendance before the investigating officer, surrender of passport, submission of identity/address proofs, non-interference with witnesses or evidence, and restraint from leaving India without court permission.

Final Conclusion: Anticipatory bail application allowed; the applicant is granted pre-arrest protection under Section 482 of the BNSS on the conditions specified by the Court to secure attendance and protect the investigation.

Determining eligibility of the resolution applicant to be eligible under Section 29A - declared Ineligibility without being heard on the issue and without being given any opportunity to file reply - scope of connected person - continuation of proceedings of Corporate Insolvency Resolution Process of the Corporate Debtor from the stage of issuance of a fresh ‘Form- G’ - Purposive interpretation of Section 29A (see-through provision) - meaning of 'persons acting in concert' - violation of principles of natural justice - Duty of the resolution professional under Regulation 36A to verify eligibility.

Purposive interpretation of Section 29A (see-through provision) - Whether Cosmic CRF Limited is ineligible to be a resolution applicant under Section 29A of the Insolvency and Bankruptcy Code - HELD THAT:- The purpose of the ineligibility under Section 29-A is to achieve a sustainable revival and to ensure that a person who is the cause of the problem either by a design or a default cannot be a part of the process of solution. Section 29-A, it must be noted, encompasses not only conduct in relation to the corporate debtor but in relation to other companies as well. This is evident from clause (c) (“an account of a corporate debtor under the management or control of such person or of whom such person is a promoter, classified as a non-performing asset”), and clauses (e), (f), (g), (h) and (i) which have widened the net beyond the conduct in relation to the corporate debtor.”

The Hon’ble Supreme Court, in ArcelorMittal [2018 (10) TMI 312 - SUPREME COURT] has held that eligibility under Section 29A of the Insolvency and Bankruptcy Code, 2016 (“IBC”) must be determined on the basis of the de facto position of the persons concerned, rather than their de jure status.

The Tribunal, after reviewing the expert reports, complaints and material on record, applied a purposive, see through construction of Section 29A (as explained in ArcelorMittal.) and examined connections between Cosmic CRF, its promoters and Cosmic Ferro Alloys Ltd. (CFAL). It found material showing de facto continuity of control, cross shareholdings, post resolution asset transfers and retained involvement of promoters in CFAL's operations. The Committee of Creditors' minutes lacked sub section wise reasoning and had unduly relied on a single senior counsel's opinion; the RP/CoC had also not placed decisive material. Applying the statutory tests and the proviso to clause (c), and having regard to the need to prevent back door re entry by persons connected with an NPA, the Tribunal concluded that Cosmic CRF and its connected persons attracted disqualification under Section 29A (notably clause (c) and, on the facts and purposive assessment, clause (j)), and therefore the applicant is ineligible. The Tribunal recorded that it could not reach definitive conclusions on some factual aspects (notably certain documentary proof regarding invocation/enforcement of guarantees and on clause (a)), but held that disqualification under the identified clauses sufficed to render Cosmic CRF ineligible. [Paras 176, 177, 178, 183, 184]

Cosmic CRF Limited is ineligible under Section 29A of the IBC (in particular under clause (c) and having regard to clause (j) on the facts), and the recall of the Tribunal's earlier findings of ineligibility is not warranted.

Duty of the resolution professional under Regulation 36A to verify eligibility - HELD THAT:- The Tribunal noted that it had given the parties opportunity to file replies on eligibility and that during pendency it had passed interim directions protecting the process (including ordering that any resolution plans received not be opened). The RP had thereafter issued a fresh Form G and taken steps to continue the CIRP. Having concluded that the applicant is ineligible under Section 29A, the Tribunal found no ground to recall its earlier order directing continuation of the CIRP from the stage of issuance of a fresh Form G and directed the CIRP to proceed without delay. The Tribunal also directed IBBI to conduct an independent inquiry into related procedural and disclosure issues. [Paras 76, 77, 195, 196, 197]

No grounds to recall the direction to continue the CIRP; proceedings shall continue and IBBI is directed to inquire into related matters.

Final Conclusion: The Tribunal upheld its earlier conclusion that Cosmic CRF Limited is ineligible under Section 29A of the IBC (principally under clause (c) and in light of clause (j)), declined to recall the Tribunal's order directing continuation of the CIRP from the stage of a fresh Form G, and directed the RP to proceed while IBBI conducts an independent inquiry into related procedural and disclosure issues.

Validity of Initiation of personal insolvency resolution process under Section 95 - Non-service of the demand notice in Form B -Presumption of service of notice - duty to disclose material developments and consequences of concealment.

Presumption of service of notice - service requirement for Form B under Section 95 - HELD THAT:- The Tribunal held that the demand notice in Form B was issued to addresses furnished by the guarantor in the guarantee deed and to other addresses available on the bank's records, giving rise to a deeming presumption that the notice was communicated. The guarantor admitted receipt of the Section 95 application in Form C which enclosed the demand notice, and therefore could not credibly contend ignorance of the demand. The appellant's change of residence without intimating the creditor did not absolve him of responsibility to ensure service and could not vitiate the proceedings. On these grounds the contention of non-service was rejected and the admission under Section 95 was held not to be vitiated. [Paras 7, 8, 9, 10, 11]

The challenge based on alleged non-service of the Form B demand notice was rejected and the admission under Section 95 was held not to be vitiated.

Duty to disclose material developments and consequences of concealment - HELD THAT:- The Tribunal found that the appellant concealed material facts concerning the personal insolvency proceedings, including the closure of the personal insolvency resolution process and liberty granted to creditors to initiate bankruptcy proceedings, which had occurred after filing the appeal but before rectification of defects and arguments. The concealment, together with delay in rectifying registry defects and failure to submit a revised repayment plan, demonstrated mala fides and justified imposition of costs. Because the subsequent order closing the personal insolvency process was not challenged, continuing to contest the Section 95 admission would be futile. [Paras 13, 14, 15, 16, 17]

The appellant's concealment and conduct warranted costs and rendered the appeal ineffective in light of subsequent unchallenged developments; costs were imposed and the appeal dismissed.

Final Conclusion: The Tribunal dismissed the appeal, holding that the Form B demand notice was duly served or deemed served and that the appellant's concealment of material developments and delay warranted costs; the appeal was dismissed with costs payable to the Prime Minister's Relief Fund.

Violation of principles of natural justice - deprived of being heard by the Tribunal -failure to afford the petitioners a hearing on the matter relied upon by the mention results in a procedural impropriety - Apparent derogation of established and the settled principles of being in violation of the provisions of IBC, and that the orders suffer from the principles of Audi Alteram Partem.

Principles of natural justice - HELD THAT:- The Tribunal accepted and acted upon a mention made by counsel for financial institutions who were not parties to the Company Petitions and took the contents of that mention into account without prior intimation to or hearing of the appellants. The matters before Bench II had been argued and reserved for orders; the acceptance of a late mention by a non party on the date fixed for delivery of judgment, without notice to the appellants, amounted to reopening the case and deprived the appellants of an effective opportunity of hearing. For these procedural defects the orders were found to be in breach of the audi alteram partem principle and could not stand. [Paras 4, 6, 9, 12, 13]

The impugned orders were held to be in violation of the principles of natural justice and therefore quashed; the matters were remitted to the NCLT, Bench II, Chennai for fresh decision after giving the appellants an opportunity to be heard on the issues raised by the mention.

Final Conclusion: The appeals were allowed to the extent that the impugned orders were quashed for breach of natural justice and the matters remitted to the NCLT, Bench II, Chennai to be redecided afresh after hearing the parties.

Imposition of penalty - modus operandi involving over-invoicing and unauthorised conversion/transfer of Indian currency to persons outside India - contraventions of Sections 8(1), 8(2) and 9(1)(b) of the Foreign Exchange Regulation Act, 1973 -Establishment of contravention by seized documents and corroborative statements - mitigation of penalty for delay in adjudication

Establishment of contravention by seized documents and corroborative statements - HELD THAT:- The Tribunal accepted the Adjudicating Authority's finding that documents seized from the office (Telephone Index Book and export papers) together with the statements of S/Shri Bijay Kumar Agarwal, Lalit Dhanuka and Uma Shankar Karel, and enquiries with the bank, explained the modus operandi and the appellant's role. The appellant failed to produce evidence to contradict the seizure, statements and bank enquiries; the Tribunal therefore upheld the finding of guilt based on the available record and corroboration. [Paras 13]

The charge framed under the cited provisions was held to be established against the appellant.

Mitigation of penalty for delay in adjudication - HELD THAT: - The Tribunal noted delay in adjudication (partly attributable to the noticees) and that the Adjudicating Authority had already treated delay as a mitigating factor when imposing penalty. Applying mitigation, the Tribunal exercised its discretionary power to reduce the monetary penalty imposed by the Adjudicating Authority. [Paras 12, 14]

Penalty reduced to Rs. 50,000 as a mitigated monetary sanction.

Final Conclusion: The appeal is partly allowed: the Tribunal upheld the finding of contravention but reduced the penalty to Rs. 50,000; other pending applications, if any, are disposed of.

Liability of company under Section 42(1) of FEMA - pre-deposit -absence of mens rea for civil penalty under FEMA - transactions by statements under Section 37 - statutory requirement - proportionality in imposition of penalty - Whether the penalty imposed upon the Appellant Shri Sanjay Pai is sustainable or not.​​​​​​

Liability under Section 42(1) of FEMA - HELD THAT:- The penalty on the Appellant is in terms of Section 42(1) of FEMA for the contraventions made by the Company. We find that the Appellant was the CFO of the Company during the relevant period. It is also noted that the Appellant was an active participant in the transactions which were in contravention of the aforementioned provisions of the Act, Regulations thereunder and the Guidelines. The Appellant has also tendered statements under Section 37 of the Act admitting his active role in the said transactions.

There is nothing in the Section which can indicate directly or indirectly requirement of mens rea. Words like “willful”, “deliberately”, “intentionally” etc. are missing.

The Judgment (supra) in the matter of SEBI cited the Judgment in Director of Enforcement vs. MCTM Corporation Pvt. Ltd. and Ors. [1996 (1) TMI 351 - SUPREME COURT] wherein even for FERA 1947 it was held that the contravention shall be breach of a civil obligation which would attract penalty irrespective of the fact whether the contravention was made with any guilty intention or not. The Judgment (supra) in the matter of SEBI, also cited a number of previous Judgments wherein it was held that mens rea is not an essential element for imposing penalty for breach of civil obligations. The Judgment (supra) has clarified that the case of Hindustan Steel Ltd. vs. State of Orissa [1969 (8) TMI 31 - SUPREME COURT] pertained to criminal/quasi criminal proceeding as the provisions of the Act under consideration in that case imposed a punishment of imprisonment and fine as well. The present appeal deals with provisions which are strictly civil obligations and penalty for the contraventions of these provisions are imposable under Section 13(1) of FEMA which provides for penalty only, up to thrice the sum involved in such contravention.

Final Conclusion: The appeal is partly allowed: the Tribunal affirmed the appellant's personal liability under Section 42(1) of FEMA but held that mens rea is not a requisite for such civil penalties and reduced the penalty payable by the appellant, directing adjustment of the pre-deposit against the reduced amount.

Foreign exchange derivative transactions on an online trading portal - without prior RBI permission - civil penalty for statutory contravention - Imposition of penalty under Section 13(1) of FEMA - mens rea - contraventions of Section 47(2)(h) of the Foreign Exchange Management Act, 1999 (FEMA) read with Regulation 3 of Foreign Exchange Management Regulations, 2000, further read with Reserve Bank of India (RBI) AP DIR (Series) No. 53 and RBI AP DIR (Series) No. 46 vide the Impugned Order.

Prohibition on entering into foreign exchange derivative contracts without RBI permission - HELD THAT: - The Tribunal found that the Appellant conceded trading on the Easy Market website using HDFC Bank cards totalling Rs. 5,21,02,552.53 and that such transactions fell within the scope of foreign exchange derivative contracts and were entered into without prior permission of the Reserve Bank, in contravention of Regulation 3 of the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 and applicable RBI AP DIR instructions. The Tribunal therefore held that the alleged contraventions occurred. [Paras 4, 5, 6]

Contraventions of the Regulations and RBI directions established; the Appellant was guilty of engaging in prohibited online forex trading.

Penalty liability for contravention of FEMA provisions without requirement of mens rea - HELD THAT:- The Judgment (supra) in the matter of SEBI cited the Judgment in Director of Enforcement vs. MCTM Corporation Pvt. Ltd. and Ors. [1996 (1) TMI 351 - SUPREME COURT] wherein even for FERA 1947 it was held that the contravention shall be breach of a civil obligation which would attract penalty irrespective of the fact whether the contravention was made with any guilty intention or not. The Judgment (supra) in the matter of SEBI, also cited a number of previous Judgments wherein it was held that mens rea is not an essential element for imposing penalty for breach of civil obligations. The Judgment (supra) has clarified that the case of Hindustan Steel Ltd. vs. State of Orissa [1969 (8) TMI 31 - SUPREME COURT] pertained to criminal/quasi criminal proceeding as the provisions of the Act under consideration in that case imposed a punishment of imprisonment and fine as well. The present appeal deals with provisions which are strictly civil obligations and penalty for the contraventions of these provisions are imposable under Section 13(1) of FEMA which provides for penalty only, up to thrice the sum involved in such contravention.

Penalty reduced to the lesser quantified amount and pre-deposit to be adjusted against the reduced penalty.

Final Conclusion: The Tribunal held that the Appellant committed prohibited online forex derivative transactions without RBI permission, that penalty under Section 13(1) FEMA does not require mens rea and is attractable once contravention is established, but exercised mitigation by reducing the penalty to a lesser amount and adjusting the pre-deposit against it.

Validity of service by electronic mode under procedural regulations - adequacy of reasons to believe recorded by the Adjudicating Authority - failed to produce any documentary evidence of its source - obligation to supply relied upon documents and opportunity to file supplementary reply.

Validity of service by electronic mode under procedural regulations - Service of summons/notice by electronic mail to the petitioner in compliance with Rule 13 read with Section 13 of the Information Technology Act, 2000 is valid. - HELD THAT:- The Court examined Rule 13(2), Rule 13(3)(iii) and Rule 13(11) of the Adjudicating Authority (Procedure) Regulations, 2013 and held that while Rule 13(2) prescribes service along with complete relied upon documents in a bound paper book, the Regulations expressly provide for electronic communication. Service of the notice and relied upon documents by email/PDF was therefore regarded as valid service under the Regulations read with the Information Technology Act, 2000; accordingly there is no doubt as to validity of service by email in the present case. [Paras 20]

Service upon the petitioner through email is valid.

Adequacy of reasons to believe recorded by the Adjudicating Authority - The reasons to believe recorded by the Adjudicating Authority in the show cause notice do not suffer from illegality on the face of the record. - HELD THAT:- The Court reviewed the reasons recorded in the show cause notice which recited prima facie review of facts and RUDs indicating involvement in money-laundering and noted that the Adjudicating Authority had articulated the basis for its prima facie conclusion while also reserving final view after hearing. On that basis the Court found no illegality in the recording of reasons to believe by the Adjudicating Authority in the show cause notice. [Paras 26]

No illegality was found in the Adjudicating Authority's reasons to believe as recorded in the show cause notice.

Obligation to supply relied upon documents and opportunity to file supplementary reply - Whether the documents already supplied constitute the complete relied upon documents was left to the Adjudicating Authority, and the matter was remitted to the Authority with directions to determine supply and to permit supplementary reply if further documents are supplied. - HELD THAT:- Although the petitioner complained that complete relied upon documents in a bound paper book were not supplied, the Court did not decide on the completeness of the RUDs. Instead the Court directed the Adjudicating Authority to first determine whether the documents requested by the petitioner are relied upon documents and, if so, to direct the Enforcement Directorate to supply them within two weeks. The Court further directed that, if further relied upon documents are supplied, the petitioner shall be allowed two weeks to file a supplementary reply. Aggrieved parties were left free to pursue remedies under Section 26 of the PMLA, 2002. [Paras 29, 30]

The Adjudicating Authority shall decide on completeness of RUDs and, if additional RUDs are to be supplied, direct supply and permit the petitioner to file a supplementary reply within two weeks of supply; parties may pursue remedies under Section 26 if aggrieved.

Final Conclusion: The writ petition was disposed by (i) upholding validity of service by email, (ii) finding no illegality in the Adjudicating Authority's recorded reasons to believe, and (iii) remitting the question of completeness and supply of relied upon documents to the Adjudicating Authority with directions to supply any additional RUDs and permit a time-bound supplementary reply.

Provisional attachment - Payment of salaries from amounts frozen under Section 17(1A) - Proceeds of crime - Scope of scheme of the PMLA including the definitions of "proceeds of crime" and the statutory provisions governing provisional attachment, search, seizure and freezing of property (notably Sections 2(1)(u), 3, 5, 17, 20 and Section 8 procedure) - Adjudicating Authority under Section 8 PMLA lacks power to grant interim payments from frozen property - Whether the frozen assets of the respondent could be treated as 'proceeds of crime' without a direct link to the predicate scheduled offence.

Proceeds of crime must be linked to predicate offence - HELD THAT: - Relying on the legal test articulated by the Apex Court in Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT (LB)], the Court held that only property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence can be regarded as 'proceeds of crime'. The Court found that, on the material before it, the sole surviving FIR related to the parent entity concerned an amount far smaller than the sums frozen and that the Authorities cannot treat all properties as proceeds of crime absent such a link. Consequently, the appellant's broad contention that the entire funds in the respondent's and parent company's accounts represented proceeds of crime was not accepted. [Paras 34, 35, 36]

The claim that the entire frozen amounts constituted proceeds of crime was rejected insofar as no direct derivation from the predicate offence was shown.

Adjudicating Authority under Section 8 PMLA lacks power to grant interim payments from frozen property - HELD THAT:- The Court noted the statutory scheme and expressly recorded that the Adjudicating Authority under Section 8 has no power to issue interim directions to make payments from funds frozen under Section 17(1A). That absence of power informed the Court's view of the remedial avenues available while the statutory adjudication proceeds. [Paras 36, 39]

The Adjudicating Authority has no power to order partial payment from sums frozen under Section 17(1A) pending adjudication.

Constitutional court may grant interim relief when statutory authority lacks power - HELD THAT: - The Court distinguished the cited authority and observed that because the Adjudicating Authority lacks power to order interim payments from frozen property, the Single Judge's exercise of discretion to permit the respondent to pay salaries was not perverse. The Court held that relegation to statutory remedies together with a limited interim relief by the constitutional court, in circumstances where the statutory forum cannot afford that relief, was within the High Court's discretionary jurisdiction. [Paras 39, 40]

The Single Judge's discretion to permit payment of salaries from the frozen accounts while directing the statutory challenge to the Adjudicating Authority was held to be lawful.

Final Conclusion: The appeal is dismissed. The High Court upheld that proceeds of crime must be linked to a predicate scheduled offence, recorded that the Adjudicating Authority under Section 8 cannot direct interim payments from frozen property, and found no error in the Single Judge's discretion to permit salary payments while relegating the parties to statutory remedies.

Power to freeze property under Section 17(1A) of PMLA-Retention of frozen property u/s 20(4) of PMLA - Effect of prior encumbrance on freezing - Directorate of Enforcement exceeded its jurisdiction under Section 8(4) of PMLA by ordering and taking over of physical possession of the fixed deposit accounts of the Appellant while the law only mandates symbolic possession.

Power to freeze property under Section 17(1A) of PMLA - HELD THAT:- The Tribunal held that the freezing order flowed from searches conducted during investigation and from material including an FIR, ECIR and the Supreme Court order indicating large proceeds of crime in the hands of the principal accused and group companies. The Adjudicating Authority recorded reasons to believe and the appellant failed to respond to notices to explain the source of funds; on this basis the Tribunal found the ingredients for action under Section 17(1A) were satisfied and the freezing was justified. [Paras 13]

The freezing of the appellant's bank accounts under Section 17(1A) was held to be justified.

Retention of frozen property under Section 20(4) of PMLA - HELD THAT: - Having regard to the material placed before the Adjudicating Authority (including the FIR/ECIR, investigative findings as to proceeds of crime and absence of explanation from the appellant), the Tribunal found there were reasons to believe the property was prima facie involved in money laundering and that retention for adjudication was warranted. The Special Court's subsequent order confiscating most properties (leaving the fixed deposit unaffected only because of this Tribunal's interim order) reinforced that no prejudice arose from continued retention. [Paras 13, 14]

Continuation of the freezing/retention of the property for purposes of adjudication under Section 20(4) was upheld.

Effect of prior encumbrance on freezing - Whether a prior lien/bank guarantee in favour of DTCP prevents seizure/freezing under PMLA - HELD THAT: - The Tribunal rejected the contention that an existing lien or bank guarantee is a fetter on the Directorate's power to seize, freeze or retain property suspected to be involved in money laundering, noting that investigation disclosed involvement of DTCP officials and that the existence of an encumbrance did not preclude action under PMLA. [Paras 15]

A prior lien or bank guarantee does not bar freezing or seizure of property under PMLA in the circumstances found.

Final Conclusion: The Tribunal dismissed the appeal and upheld the Adjudicating Authority's retention/continuation of the debit freeze on the appellant's bank accounts; ancillary applications, if any, were disposed of accordingly.

Provisional attachment -Proceeds of crime - forgery and backdating - illegally obtained property - seizure of marksheets/certificates issuing registers from the institution and documentary information from the University Grants Commission - Onus to disclose source of assets on notice under section 8(1) - Admissibility of additional evidence at appellate stage.

Provisional attachment under the Prevention of Money Laundering Act - HELD THAT:- The Tribunal upheld the Adjudicating Authority's confirmation of the provisional attachment because the investigation and seized records, together with information from the UGC and related material, established that the appellants and associated entities were involved in issuing large numbers of forged degrees and had received proceeds of crime. The appellants were served notice under section 8(1) and failed to satisfactorily disclose sources for acquisition of the attached movable and immovable properties; the Tribunal accepted the respondents' finding that funds were diverted to accounts of the accused and family members and that the appellants remained recipients of proceeds of crime. The Tribunal therefore found no reason to interfere with attachment on the ground that properties allegedly were personal and unconnected with the offence (paras 11-16). [Paras 11, 12, 13, 15, 16]

The confirmation of the provisional attachment was sustained as the appellants failed to discharge the onus to show legitimate sources for the attached properties.

Provisional attachment under the Prevention of Money Laundering Act - HELD THAT:- The Tribunal rejected the contention that lack of recovery of physical forged degrees vitiated the attachment. It held that seizures (including mark sheets/certificates issuing registers) and corroborative records from the UGC and other agencies sufficiently established issuance of forged degrees and the consequent proceeds of crime; therefore non-recovery of individual degree certificates did not negate the basis for attachment (para 17). [Paras 17]

Non-recovery of specific forged degree certificates did not render the provisional attachment and its confirmation invalid.

Admissibility of additional evidence at appellate stage - HELD THAT:- The Tribunal held that documents constituting new evidence cannot be introduced by way of rejoinder without following the procedure for taking additional evidence at the appellate stage and obtaining the Tribunal's permission with reasons. The bank statements filed in rejoinder were not properly admitted and could not be allowed to undermine the attachment; moreover, even if the lesser amount asserted in those statements were accepted, the provisional attachment remained within that quantum and thus the appellants' argument failed on substantive grounds as well (para 18). [Paras 18]

Bank statements filed in the rejoinder were not admissible without an application and permission to adduce additional evidence; the contention based on them was rejected.

Final Conclusion: The appeals were dismissed. The Tribunal sustained confirmation of the provisional attachment, holding that seizure and corroborative records established proceeds of crime, the appellants failed to disclose legitimate sources for the attached properties, and newly tendered documents in rejoinder were not admissible without proper application at the appellate stage.

Validity of Provisional attachment - Determination of proceeds of crime by calculation of excess excavation as wrongful gain - licence holders quarried red sand beyond the permitted quantities without payment of seigniorage fees - wrongful loss - Offences under Sections 420 and 120B IPC and Section 13 of the Prevention of Corruption Act are scheduled offences under the PMLA - predicate offence without application of mind - attachment of property of equivalent value including property acquired prior to commission of scheduled offence - Onus on accused under Section 24 to demonstrate legitimate source.

Determination of proceeds of crime by calculation of excess excavation as wrongful gain - HELD THAT:- The Tribunal held that the Enforcement Directorate provided a factual basis for computing proceeds by comparing licensed permissible lorry-loads with actual quantities excavated and transported, relying on recorded statements and documentary material to estimate excess loads and resultant revenue loss. The appellants did not satisfy the statutory burden to demonstrate that excavation and receipts corresponded to legitimate, permitted quantities; consequently there was no illegality in the Adjudicating Authority's determination of proceeds of crime on that basis. The Tribunal expressly treated disclosed income in returns as insufficient to displace the respondent's calculation when the disclosed income exceeded what would be attributable to legitimately permitted excavation. [Paras 31, 32, 33]

Tribunal upheld the Adjudicating Authority's calculation of proceeds of crime and found that appellants failed to discharge the burden to demonstrate legitimate source.

Attachment of property of equivalent value including property acquired prior to commission of scheduled offence - HELD THAT:- The excess income was taken to be illegitimate source of income and the property purchased out of it has rightly been taken it to be out of proceeds of crime. It is also necessary to clarify that the property purchased prior to commission of crime can also be subject to the provisional attachment if the equivalent value of proceeds is not available with the accused having siphoned off or is not traceable. The issue aforesaid has been settled by this Tribunal in the case of Sadananda Nayak [2024 (10) TMI 1619 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI] after referring various judgments of the High Courts and the Supreme Court.

The Tribunal affirmed that the definition of 'proceeds of crime' contemplates not only property directly or indirectly derived from scheduled offences but also the value of any such property, permitting attachment of property of equivalent value where tainted property is not traceable. Relying on precedents recognising the three limb construction of Section 2(1)(u), the Tribunal held that properties acquired prior to the commission of the offence can be provisionally attached as equivalent-value property subject to the safeguards and tests articulated in the authorities cited, and therefore the Adjudicating Authority did not err in confirming attachment of such properties in the facts of the case. [Paras 34, 35, 37]

Tribunal held provisional attachment of properties (including those purchased prior to the alleged offences) as equivalent-value property was permissible and sustained the Adjudicating Authority's confirmation subject to established safeguards.

Final Conclusion: The Tribunal found no infirmity in the Adjudicating Authority's confirmation of the provisional attachment: the proceeds were validly computed on the basis of excess excavation which the appellants failed to rebut, and attachment of properties (including certain properties acquired prior to the alleged offences) as equivalent-value proceeds was permissible under the statutory definition and settled precedents; accordingly the appeals were dismissed.

Condonation of delay - Liability to pay service tax - transaction of import of Software - HELD THAT:- Delay condoned.

The special leave petitions are dismissed in view of Circular F.No. 390/Misc./30/2023-JC dated 2nd November, 2023 of the Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes & Customs (Judicial Cell).

However, the question of law is kept open.

Pending interlocutory application(s), if any, shall stand disposed of.

Eligibility of input services under Rule 2(l) of the CENVAT Credit Rules, 2004 - common area maintenance service, vending machine operation service, photography service and travel agent services - definition of input service under Rule 2(l) - denied to be a distinct person than the service recipient Forrester Research Inc (USA) - establishments of distinct persons - refund claim of CENVAT credit in terms of notification number 27/2012.

Common area maintenance, vending machine operation, photography and travel agent services - eligible input services for CENVAT credit and refund. -HELD THAT:- The Court held that Rule 2(l) of the CENVAT Credit Rules includes services which are used directly or indirectly in relation to an output service and contains an inclusive list without requiring a one to one correlation. The absence of maintenance, vending or travel related services would adversely affect the quality or efficiency of the appellant's provision of output services and therefore these services have sufficient indirect nexus to be treated as eligible input services. Consequently the CENVAT credit and refund wrongly denied in respect of those services must be allowed. [Paras 11, 12, 13]

The specified services are eligible input services and the denial of CENVAT credit and refund in respect thereof is set aside.

Establishments in taxable and non taxable territories treated as distinct persons for export of service - HELD THAT:- Applying Explanation 3(b) to clause 44 of section 65(B) and rule 6A(1)(f) of the Service Tax Rules, the Court found that an establishment in the taxable territory and a separate company in a non taxable territory qualify as establishments of distinct persons. The existence of common group ownership or a common director did not negate separate corporate existence or the power vested in respective Boards. Prior departmental acceptance of similar refunds for earlier periods was noted. On that basis the transaction qualifies as export of service and CENVAT credit under reverse charge is available to the appellant.

Hon’ble High Court of Gujarat in the Linde Engineers Private Limited vs Union of India [2020 (8) TMI 181 - GUJARAT HIGH COURT] has held that the petitioners and holding companies located outside India/non-taxable territories are to be treated as distinct person and the transaction between them shall be qualified to be called as Export of Service in terms of rule 6(A)(f) and explanation 3(b) to section 65(v)(44) of Finance Act. in the present case the appellant/service provider is in India, whereas FRLON, the service recipient is located in non-taxable territory, irrespective both being the holding companies, the service provider is in compliance of Rule 6A(f) of the Service Tax Rules, 1994. The transaction between the two, therefore, amounts to Export of Service. In light of the above discussion, the issue number 2 also stands decided in favour of the appellant and against the department.

The appellant and FRLON are distinct persons and the service transaction qualifies as export of service; the denial of associated CENVAT credit is set aside.

Final Conclusion: Both framed issues are decided in favour of the appellant: the impugned denial of CENVAT credit and refund in respect of the specified input services and the denial of export of service treatment between the appellant and FRLON are set aside and the appeals are allowed.

Taxability of services received in India under Section 66A - reimbursements and fund transfers made by the assessee to its overseas branches or payments to foreign vendors - reverse charge - Burden on Revenue to prove receipt of service in India - Services rendered and consumed abroad.

Whether reimbursements and payments made to overseas branches and foreign service providers amounted to receipt of taxable services in India and attracted service tax under Section 66A - HELD THAT:- The Commissioner in the impugned order on perusal of the Master Service Agreement entered into between the appellant having its principal office at Bangalore and branch office at California, USA on the one hand and M/s. Empower Consulting Services, California USA and another agreement with M/s. Info Objects Inc; observed that M/s. Info Objects Inc. were supplying skilled manpower to the overseas branch of the appellant which was also evident from the invoices raised on the appellants branch office at California. Similarly, the appellants branch office renders software development and maintenance services to the clients abroad. Thus, from the agreements and that invoices it is seen that the services are rendered and received outside India and hence not liable to tax.

We also find that in the reply to the show-cause notice, the respondent had clearly stated that in order to keep the branches functional, certain amounts are transferred for expenses such as rent, electricity bills, telephone and internet expenses etc.; thus, explaining that the amounts transferred were on account of operational expenses and not against any services rendered by them. Though the Commissioner has in detail based on facts and agreements explained the circumstances under which the payments were made, nothing is forth coming from the Revenue to dispute these facts. Therefore, we are in agreement with the reasoning given in the impugned orders and accordingly, we uphold the order of the Commissioner.

Following the settled decisions in the case of Infosys Ltd. Versus Commissioner of Service Tax, Bangalore [2014 (3) TMI 695 - CESTAT BANGALORE] and KPIT Cummins Infosystems Ltd. Versus Commissioner of C. EX.[2013 (12) TMI 792 - CESTAT MUMBAI]and based on the detailed observations of the Commissioner in the impugned orders, we do not find any merit in the appeals filed by the Revenue.

Final Conclusion: The Tribunal upheld the Commissioner's orders holding there was no evidence of receipt of taxable services in India and, on the Revenue's failure to prove the taxable event, dismissed the appeals.

Validity of the subsequent show cause notice invoking the extended period of limitation, when an earlier SCN on similar facts for an earlier period had been issued - suppression of facts - examination of books of account - demand for service tax based solely on Income Tax third-party data - negative list (clause (e) of Section 66D of the Finance Act, 1994) - violation of principles of natural justice - non-taxability of trading activity - absence of pre-SCN consultation and unsustainability of penalties.

Invocation of extended period of limitation - HELD THAT: - The Tribunal held that when a Show Cause Notice invoking the extended period has already been issued on a particular set of facts, the Department cannot issue a subsequent SCN on the same facts again invoking the longer limitation on the ground of suppression. The extended period is available only where there is evidence of conscious fraud, collusion or suppression with intent to evade tax; absent such evidence and where returns had been filed, the larger period is not invocable. The reasoning relied on prior authority and the fact that the earlier SCN for F.Y. 2015-16 had been decided in favour of the appellant, indicating the Department had prior knowledge of the facts. [Paras 17, 18, 19]

Extended period of limitation was not invocable and the subsequent SCN for F.Y. 2016-17 was unsustainable on limitation grounds.

Reliance solely on third-party income-tax data for demand - HELD THAT: - The Tribunal found that the notice and demand for service tax arose only from third-party information (Form 26AS) supplied by the Income Tax Department and that the Department had not examined the appellant's books of account or other records to arrive at the assessable value. Citing earlier Tribunal in the case of Sharma Fabricators & Erectors Pvt. Ltd.[2017 (7) TMI 168 - CESTAT ALLAHABAD] and High Court precedent [2019 (2) TMI 2100 - ALLAHABAD HIGH COURT], the Tribunal held that charges framed merely on presumptions from third-party data, without examining the assessee's records, cannot sustain a demand. [Paras 20, 21]

The demand founded solely on third-party Income Tax data without verification of the appellant's records was unsustainable.

Trading of goods covered by negative list - HELD THAT: - On examination of invoices, a chart reconciling sales with Form 26AS and documentary material including a certificate of association with the importer, the Tribunal was satisfied that the appellant was engaged in sale and trading of goods and had discharged applicable state tax. The Tribunal concluded that the activity falls under clause (e) of Section 66D (negative list), and no specific taxable service had been identified by the Department in the SCN or impugned orders. [Paras 22, 23, 24]

The impugned order was unsustainable on merits because the appellant was engaged in trading of goods covered by the negative list.

Final Conclusion: The impugned order was set aside: the extended period of limitation was not invocable, the demand based solely on third-party Income Tax data was unsustainable, and on merits the appellant's activity was trading of goods within the negative list; the appeal was allowed with consequential relief.

Taxation of Services (provided from outside India and received in India) - Import of services - Demand of service tax on import of software through Compact Disc and software electronically downloaded - liability to pay service tax on the software purchased from Indian vendors on high seas sale - services received prior to 16.05.2008 and the payments made on 12.08.2008 i.e. prior to 16.05.2008 - invocation of extended period - Whether software imported in Compact Disc (CD) is leviable to service tax.

Levy of service tax on software supplied in Compact Disc form - HELD THAT: - The worksheet enclosed along with the show-cause notice clearly shows that compact disc has been imported in six instances and in all other cases, it is an electronic download. We find that with regard to these compact discs, it is a settled law that they are ‘goods' and as rightly contested by the appellant, the Supreme Court in the case of Tata Consultancy Services [2004 (11) TMI 11 - SUPREME COURT (LB)] has categorically held there are ‘goods’ and therefore, we do not find any reason to levy service tax on the goods, accordingly, the impugned order to the extent of demanding service tax on the Compact Disc is set aside.

Demand of service tax on software imported in Compact Disc form is set aside.

Levy of service tax on electronically downloaded software imported under high-sea sale arrangements - HELD THAT: - The Tribunal found that where the ultimate source and developer of the software are foreign service providers who supply the right to use software to the appellant, and the appellant has filed Bill of Entry and discharged customs duties, the transaction constitutes import of services under Section 66A and the Import of Services Rules. High-sea sale (transfer of title while goods are at sea) did not alter the character of the import; hence service tax demand on electronically imported software under high-sea sale was upheld. [Paras 7]

Service tax demand on electronically imported software received under high-sea sale is confirmed.

Liability for software received before 16.05.2008 despite payment made after that date -HELD THAT: - The Tribunal applied the principle that the taxable event is the rendering or receipt of the taxable service. Where the software was received prior to 16.05.2008 (date from which ITSS became taxable), subsequent invoicing or later payments do not create liability. On the facts, software imported prior to 16.05.2008 is not taxable even though payment fell due or was made after that date. [Paras 8, 9]

Service tax demand on software received prior to 16.05.2008 is set aside notwithstanding later payments.

Validity of invoking extended period of limitation for demand covering 16.05.2008 to 31.03.2010 -HELD THAT: - The Tribunal observed that the show-cause notice and the appellant's own reply established that the appellant was aware of its liability to discharge service tax on electronically downloaded software for the period 16.05.2008 to 31.03.2010. The appellant's contention that imports via high-sea sale negated liability did not demonstrate bona fides sufficient to defeat invocation of the extended period; accordingly the extended period was held to be rightly invoked for that period. [Paras 10, 11]

Invocation of the extended period for the period 16.05.2008 to 31.03.2010 is sustained and the demand for that period is upheld.

Final Conclusion: The Tribunal set aside service tax demands on Compact Disc imports and on software received prior to 16.05.2008, confirmed service tax on electronically imported software under high-sea sales for 16.05.2008-31.03.2010, upheld invocation of the extended period, and remanded the matter for redetermination of tax, interest and penalty.

Liability to pay service tax under the category of ‘Construction of Residential Complex’ during the relevant period - liability to pay service tax under ‘Sponsorship Service’ and ‘Business Auxiliary Service’ under Reverse Charge Mechanism (RCM) - explanatory amendment to Section 65(105)(zzzh) read with contemporaneous Board circulars - Classification of payments for foreign legal compliances as sponsorship service - overseas branch - business auxiliary service - Applicability of reverse charge mechanism - entitlement to cenvat credit where output services are not taxable

Liability for service tax on construction of residential complex prior to statutory clarification - HELD THAT:- The Tribunal held that with the subsequent insertion of the Explanation to Section 65(105)(zzzh) w.e.f. 01.07.2010 and in view of Board Circulars dated 29.01.2009 and 10.02.2012, the appellant could not be held liable to pay service tax for the period prior to 01.07.2010. The decisions cited by the appellant were treated as supporting the view that liability to tax the said service arose only from 01.07.2010. The demand confirmed by the Commissioner for the disputed period was therefore set aside. [Paras 4]

Demand of service tax on Construction of Residential Complex for the period October 2006 to September 2009 is set aside to the extent it relates to the period before 01.07.2010.

Classification of payment as Sponsorship Service - Whether the payments made to a local associate for renewal of licences and legal compliances for the Dubai branch constitute Sponsorship Service - HELD THAT:- The Tribunal found that the payments were made for establishing/renewal of the legal existence and for legal compliances of the Dubai place of business, and not for sponsorship. Consequently, the demand characterized as for Sponsorship Service was not sustainable. [Paras 5]

Demand of service tax on account of Sponsorship Service is not sustained.

Application of reverse charge mechanism where service provider and recipient are not distinct - classification as Business Auxiliary Service - Whether services rendered by the Dubai branch qualify as Business Auxiliary Service and attract service tax under Reverse Charge Mechanism - HELD THAT:- The Tribunal accepted that the Dubai branch's activities fall under Business Auxiliary Service, but held that the branch was an extended arm of the appellant and, therefore, the service provider and service recipient are one and the same. As a result, the Reverse Charge Mechanism treating them as distinct persons could not be invoked and no liability under RCM arises. [Paras 6]

The services are classifiable as Business Auxiliary Service but do not attract service tax under RCM because the provider and recipient are the same entity.

Entitlement to cenvat credit where output services are not taxable - HELD THAT:- The Tribunal held that since the output services were not liable to service tax for the disputed period, the appellant was not eligible for cenvat credit and sustained the confirmation of ineligible credit and interest. However, the appellant produced evidence (chartered accountant certificate, ledger entries and a Superintendent's verification) showing reversal of unutilized cenvat credit; on that basis the penalties originally imposed were set aside. [Paras 7]

Confirmation of ineligible cenvat credit and interest is upheld; penalties are set aside in view of reversal of unutilized credit evidenced by the appellant.

Final Conclusion: The appeal is disposed by setting aside the demand insofar as it relates to Construction of Residential Complex services prior to 01.07.2010, by rejecting the characterization of the payments as Sponsorship Service, by holding that Business Auxiliary Service supplied by the Dubai branch does not attract RCM as provider and recipient are the same, and by upholding disallowance of cenvat credit with interest while deleting penalties in view of reversal of unutilized credit.

Validity of time barred demand duty under Rule 3(5A) of the Cenvat Credit Rules, 2004 - limitation - absence of a recovery mechanism for amounts payable under Rule 3(5A) during the relevant period - extended period of limitation - bona fide belief.

Limitation of demand - HELD THAT:- The Tribunal held that the show cause notice issued on the basis of audit for the period 17.03.2012 to 27.09.2013 was time-barred. It found no material to establish suppression with intent to evade duty and observed that extended period of limitation cannot be invoked merely because the matter arose from an audit; further authorities were relied upon to that effect. Consequently the entire demand was held to be barred by limitation. [Paras 6]

The demand is barred by limitation.

Non-existence of statutory recovery mechanism precludes demand, interest and penalty - HELD THAT: - The Tribunal found that during the period in question there was no statutory mechanism to recover amounts payable under Rule 3(5A) of the Cenvat Credit Rules and that the recovery provision for wrongly availed credit was inserted later. In the absence of a recovery mechanism the demand could not be sustained; once the demand failed on merits, interest and penalty also could not be imposed. The Tribunal noted that the case was covered by a preceding Tribunal in the case of M/s Prism Johnson Ltd [2019 (7) TMI 780 - CESTAT NEW DELHI], where similar demands were set aside on merits and limitation, and followed that ratio. [Paras 7, 8]

The demand cannot be sustained on merits; interest and penalty do not survive.

Final Conclusion: The impugned order is set aside; the appeal is allowed on the grounds of limitation and absence of a recovery mechanism, and consequential interest and penalty are quashed.

Entitlement to take Cenvat credit of Countervailing Duty (CVD) / Special Additional Duty (SAD) levied under Section 3(5) - debit through DEPB scrips - interpretation of foreign trade policy amendment- Applicability of EXIM policy amendment to licences issued pre- and post-amendment.

Cenvat credit of Additional Customs Duty debited under DEPB - HELD THAT: - The Tribunal held that Rule 3 of the Cenvat Credit Rules and the Notifications/Circulars relied upon permit availing Cenvat credit of Additional Customs Duty levied under section 3(5) of the Customs Tariff Act when such duty is debited in DEPB scrips. The earlier exclusion in Para 4.3.5 of EXIM Policy 2002-07 was deleted by amendment dated 28.01.2004, and subsequent EXIM policy provisions expressly provided that Additional Customs Duty/Excise Duty paid in cash or through debit under DEPB shall be adjustable as Cenvat credit or drawback, thereby removing any bar to credit where payment is by DEPB debit. Circular No.20/2006 was held to relate to DFCE/other notifications and not to the DEPB scheme; Circular No.18/2006 and the Notifications were read as permitting credit of CVD/SAD debited in DEPB. On this basis, the denial of credit was unsustainable. [Paras 7, 8, 11]

Cenvat credit in respect of CVD/SAD debited in DEPB scrips is admissible and the denial of such credit was set aside.

Applicability of EXIM policy amendment to licences issued pre- and post-amendment - HELD THAT:- The Tribunal accepted the view in precedent that the amendment to the EXIM Policy (vide the 28.01.2004 amendment and related notifications) entitles an importer to avail Cenvat credit of Additional Customs Duty debited in DEPB irrespective of whether the DEPB licence was issued under the earlier or later policy; there is no condition excluding debits in DEPB issued under the previous policy. Consequently, the departmental contention that credit is allowable only where licences were issued under the new FTP was rejected. [Paras 11]

The policy amendment applies and licences issued earlier do not disentitle the importer from claiming Cenvat credit for DEPB debits.

Final Conclusion: The impugned orders denying Cenvat credit in respect of CVD/SAD debited in DEPB scrips were found unsustainable; the Tribunal allowed the appeals and set aside the Commissioner (Appeals) order on the grounds that the policy amendment and applicable notifications/circulars permit such credit.

Demand of excise duty, interest and penalties - Manufacture test - Printing of cheque books, cartons/boxes/cases, calendars, sheets, match tickets, letterhead pads, Adhiwakta welfare stamps and other products - Manufacture Or Not - job works basis.

Printing as not amounting to manufacture - Whether the activity of printing carried out by the appellant amounts to 'manufacture' for levy of Central Excise duty. - HELD THAT:- The Tribunal held that mere printing on pre-existing paperboard/paper or similar substrates does not transform the identity, character or use of the underlying commodity so as to constitute manufacture. The adjudication relied on co-ordinate decisions which examined the two-fold test of manufacture - whether a different commercial commodity comes into existence and whether the original commodity would be of no commercial use but for the process - and concluded that plain and printed substrates remain the same commercial commodity. The department's reliance solely on tariff classification to treat the activity as manufacture was rejected, and the Tribunal found no material that the appellants had machinery, raw-material procurement or processes that would satisfy the chapter-note test for manufacture. [Paras 12, 13]

Printing carried out by the appellants does not amount to manufacture; the appellants are not liable to excise duty on that ground.

Classification of printed paper under Chapter 49 - HELD THAT: - It is not the case of the Department that the Appellants have the machinery wherewithal to manufacture excisable products classifiable under Section 48 or Section 49. The only allegation by the Department on the basis of the classification of the goods cannot be sustained. There is no allegation in the Show Cause Notice or in the impugned order that the Appellant had installed machineries, procured raw material, employed persons to produce the products classifiable under Chapter 48/49. It is not denied that the Appellants are engaged in printing of cheque books, cartons/boxes/cases, calendars, sheets, match tickets, letterhead pads, adhiwakta welfare stamps and other products; it is not proved that mere printing on the material amounts to manufacture. We, further find that as submitted by the learned Counsel for the Appellant that there is no specific section or chapter notes in the Central Excise Tariff Act, 1985 deeming printing to be an act of manufacture. It is also not proved that the products manufactured by the Appellants are marketable in themselves as they are printed for a particular consumer.

We find that the issue is no longer res integra having been decided by the co-ordinate Bench of the Tribunal in the case of M/s Chromaprint (India) Pvt. Ltd. [2024 (3) TMI 493 - CESTAT CHENNAI] after going through the various cases decided in this regard and held that activity of printing does not amount to manufacture.

Accordingly, the impugned order cannot be sustained on merits. We find that the issue is squarely covered in favour of the Appellants on merits. We need not go into the issue of limitation and other issues.

Final Conclusion: The Tribunal allowed the appeals, holding that the appellants' printing activity does not amount to manufacture and, alternatively, that the printed products fall under Chapter 49 attracting nil duty; consequently the excise demand, interest and penalties imposed in the impugned order were set aside.

Entitlement to the benefit of SSI exemption under Notification No. 8/2003-C.E. dated 01.03.2003, as amended - branded readymade garments cleared under the brand "AKSH" - burden of proof - benefit of doubt -Ownership of trade mark as precondition for exemption -

Ownership of trade mark as precondition for exemption - HELD THAT: - The Tribunal accepted the documentary evidence placed by the appellant, including the application/letter and the image of the mark, and recorded that the Revenue did not produce concrete evidence to establish that the trade mark 'AKSH' belonged to any person other than the appellant. In view of the absence of positive evidence from the Revenue, the benefit of doubt was given to the appellant and the Tribunal held on the record that the appellant is the owner of the trade mark. [Paras 11]

Revenue's allegation that the brand belonged to a third party is rejected and the appellant is held to be the owner of the trade mark 'AKSH'.

Entitlement to SSI exemption for branded goods - HELD THAT: - Because the Tribunal found that the appellant owns the trade mark and is not using a third-party brand, the statutory condition disqualifying SSI benefit for clearance of goods under another's brand did not apply. The Tribunal therefore concluded that the appellant qualifies for the benefit of Notification No. 8/2003-C.E., as amended. [Paras 12]

Demand of central excise duty confirmed by lower authorities is set aside and the appellant is held entitled to the SSI exemption.

Final Conclusion: The Tribunal allowed the appeal, holding that the appellant is the owner of the trade mark 'AKSH' and therefore entitled to the SSI exemption under Notification No. 8/2003-C.E.; the demands confirmed by the adjudicating authority and the Commissioner (Appeals) were set aside.

Demand for duty on account of under-valuation - Transaction value - Transportation/forwarding charges - Inclusion of separately billed transportation charges in the assessable value of excisable goods - place of removal - time of passing of property - ex-works sale.

Transportation/forwarding charges - HELD THAT:- The Tribunal applied the principle in Ispat Industries Ltd [2015 (10) TMI 613 - SUPREME COURT] holding that valuation under excise depends on the time at which property in the goods passes to the buyer as understood under the Sale of Goods Act. On the facts the goods were sold at the factory gate and transportation was arranged afterwards at the buyer's request with a separate bill; consequently the transportation charges were not part of the transaction value and were not includable in the assessable value. [Paras 8, 9]

Transportation charges billed after factory-gate sale are not includable in assessable value; the duty demand on that account is unsustainable.

Final Conclusion: Relying on the Apex Court's reasoning in Ispat Industries Ltd., the Tribunal held that transportation charges billed separately after a factory-gate sale are not includable in assessable value; the impugned order was set aside and the appeal allowed.

Excisability of goods - Manufacturer of Sponge Iron falling under S.H.7203.10.00 - Determination of dolochar, arising as waste in sponge iron - manufactured excisable commodity within the meaning of Sections 2(d) and 2(f) - Whether in the course of manufacture of final product of Sponge Iron, dolochar which has been generated during the process, is liable to pay duty, or not ?

Excisability of process-generated waste - HELD THAT:- In the process of manufacture of Sponge Iron, Coal Ashes, Char (burnt remains of Coal), devolatilized Dolomite, Iron particles etc. are generated which is nothing but ‘waste’ which is also known as ‘Dolochar’ in the trade and it has no primary use.

The ‘Dolochar’ generated in the process of manufacture of Sponge Iron are in the nature of unavoidable/ inevitable waste which fetches some price when sold out in the market.

The Tribunal held that dolochar arising in the course of sponge iron manufacture is an unavoidable waste/coal char and not a distinct manufactured excisable commodity. The conclusion was reached by following earlier coordinate decisions of this Tribunal (including M/s Alok Steel Industries Ltd. [2020 (1) TMI 581 - CESTAT KOLKATA] and M/s Jharkhand Ispat Pvt. Ltd.[2022 (2) TMI 598 - CESTAT KOLKATA]) which determined that dolochar is akin to waste/coal char and not subject to central excise; a contrary coordinate decision was treated as per incuriam and not followed. The Tribunal therefore found no sustainable basis for a duty demand on dolochar. [Paras 6, 7]

No duty is payable on dolochar generated during the manufacture of sponge iron; the demand is not sustainable

Final Conclusion: The appeal is allowed; the impugned demand for excise duty on dolochar is set aside and no duty is payable on dolochar generated in the course of manufacture of sponge iron.

Maintainability of writ petition despite availability of alternate statutory remedy - Validity of the order of removal of the elected President under Section 205 of the Tamil Nadu Panchayats Act, 1994 - addition of fresh charges not contained in the show cause notice and the absence of reasons for rejecting the explanations - audi alteram partem - Violation of principles of natural justice - non-application of mind - procedural fairness.

Maintainability of writ petition despite availability of alternate statutory remedy - HELD THAT:- The Court held that existence of an alternate remedy under Section 219 does not bar exercise of Article 226 jurisdiction where exceptions apply. Because the petitioner alleged that the impugned order was passed relying on fresh charges not contained in the show cause notice, the matter fell within the recognised exception of breach of natural justice; accordingly the writ petition was maintainable and the Court proceeded to consider the merits. The Court relied upon settled principles identifying circumstances in which constitutional courts may entertain writs despite alternate remedies. [Paras 38, 39, 40, 41]

The writ petition is maintainable as the alleged breach of natural justice brings the case within exceptions to the bar of alternate remedy.

Requirement to confine decision to charges in show cause notice - Whether the District Collector's order impermissibly relied upon grounds not included in the show cause notice - HELD THAT:- The Court found that the impugned order introduced two additional grounds concerning meetings which were not the subject of the original show cause notice. The Collector, having not given fresh notice on those matters, thereby acted in breach of the audi alteram partem principle. The Court observed that reliance on matters outside the scope of the notice is an ex facie violation of natural justice and, on established authority, renders the proceedings liable to fail. [Paras 49, 50, 51]

The order relied on matters beyond the show cause notice and thus violated principles of natural justice.

Duty to record reasons in quasi-judicial orders - Whether the District Collector's order disclosed adequate reasons after considering the petitioner's explanations - HELD THAT: - The Court held that authorities exercising quasi judicial powers must record reasons to demonstrate application of mind. Although the impugned order reproduced charges and the petitioner's responses, it did not discuss why the explanations were rejected nor set out reasons for removal. Absent such reasons, the Court found the order arbitrary and not in compliance with the requirement to furnish reasons for decisions that entail penal consequences. [Paras 54, 58, 59, 60, 61]

The impugned order fails to furnish reasons showing consideration of the petitioner's explanations and is therefore vitiated for lack of recorded reasons.

Final Conclusion: The writ petition is allowed; the impugned orders are set aside and the Section 205 proceedings are restored to the file of the Inspector of Panchayats for fresh consideration-without the need to initiate de novo proceedings-requiring the authority to peruse records afresh, hear the petitioner on his explanations and pass a reasoned order. No costs.