TaxTMI Updates e-Newsletter
Mar 21,2024

Breach of principles of natural justice - mismatch between GSTR-3B and auto-populated GSTR-2A - procedure under Circular No.183/15/2022-GST - burden of proof for entitlement to Input Tax Credit - quashing and remand with conditional deposit - right to personal hearing on reconsideration

Breach of principles of natural justice - mismatch between GSTR-3B and auto-populated GSTR-2A - procedure under Circular No.183/15/2022-GST - Impugned assessment orders suffer from breach of principles of natural justice and warrant interference. - HELD THAT: - The assessments arise from alleged mismatches between the petitioner's GSTR-3B returns and the auto-populated GSTR-2A. Circular No.183/15/2022-GST prescribes the procedure for dealing with such mismatches and contemplates an enquiry allowing the taxpayer to produce certificates from suppliers or a Chartered Accountant to explain disparities. The petitioner produced a Chartered Accountant's certificate and asserts non-receipt of earlier notices because compliance was handled by an accountant. Although the petitioner did not participate in the assessment proceedings, the material on record and the statutory procedure set out in the Circular demonstrate that the taxpayer was not afforded the requisite opportunity to be heard before adverse orders were passed. In those circumstances interference is justified to secure observance of natural justice and the procedural framework envisaged for mismatch cases. [Paras 6]

Assessment orders quashed for failure to afford adequate opportunity and breach of natural justice.

Quashing and remand with conditional deposit - right to personal hearing on reconsideration - burden of proof for entitlement to Input Tax Credit - Matters remanded to the assessing officer for fresh consideration subject to conditions and directions for reconsideration and hearing. - HELD THAT: - The Court remanded all five assessment periods for fresh consideration rather than deciding the merits of entitlement to Input Tax Credit. As a condition of remand the petitioner was directed to remit 10% of the disputed tax demand for each assessment period within 15 days of receipt of this order and was permitted to file a reply to the show cause notice within the same period. Upon verification of payment, the assessing officer must give the petitioner a reasonable opportunity including a personal hearing and thereafter pass fresh assessment orders within two months. The statutory burden on the taxpayer to establish entitlement to ITC remains in place, and the remand is for application of the statutory and procedural tests in light of the Circular and any explanations or certificates tendered by the petitioner. [Paras 7]

Matters remanded for fresh assessment on the stated terms: payment of 10% per period, opportunity to file reply, personal hearing and fresh order within two months.

Final Conclusion: The writ petitions are allowed: the impugned assessment orders are quashed and remitted for fresh consideration in accordance with Circular No.183 and the directions in this order, subject to the petitioner's deposit of 10% of the disputed demand for each assessment period and the providing of a reasonable opportunity including personal hearing; no costs.

Non-application of mind - reverse charge mechanism (RCM) - assessment vitiated for failure to consider documentary evidence - duty to consider uploaded and physically submitted documents - opportunity of personal hearing - remand for fresh consideration

Non-application of mind - assessment vitiated for failure to consider documentary evidence - reverse charge mechanism (RCM) - Whether the impugned assessment order is vitiated for non-application of mind by disregarding the petitioner's submissions and documentary evidence asserting that services were taxable on recipient under RCM. - HELD THAT: - The petitioner had consistently maintained that its supply of goods-transport services was taxable on the recipient under the RCM and had submitted a reply to the show cause notice along with documents uploaded on the GST portal and volumous documents physically. The assessing officer's order records non-filing of balance sheet and ITR details and finds undeclared turnover in GSTR returns, yet the order also notes other income in the all India balance sheet and proceeds to confirm demand on turnover treated as taxable on the taxpayer. The High Court found that the assessing officer recorded findings contrary to documents on record and failed to apply mind to the material placed before him, thereby vitiating the assessment. The determinative reasoning is that an assessment cannot be sustained where the authority ignores or misrecords the documentary material and makes findings inconsistent with the materials actually submitted, particularly where the central contention concerned applicability of RCM and the genuineness of turnover. [Paras 6]

Impugned assessment order quashed as vitiated by non-application of mind.

Remand for fresh consideration - duty to consider uploaded and physically submitted documents - opportunity of personal hearing - The procedural relief and directions to be given following quashing of the assessment order. - HELD THAT: - The Court remanded the matter for fresh consideration directing the petitioner to re-submit all relevant documents within fifteen days of receipt of the order. The assessing officer was directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter to pass a fresh assessment order within two months from receipt of the documents. The remand is for re-consideration on merits with opportunity to produce and have considered the documentary material previously uploaded and physically delivered. [Paras 7]

Matter remanded for fresh consideration on terms set out by the Court; petitioner permitted to re-submit documents and to be afforded personal hearing; fresh assessment to be passed within two months.

Final Conclusion: The assessment order dated 28.12.2023 is quashed for non-application of mind. The matter is remanded to the assessing officer for fresh adjudication after the petitioner re-submits documents within fifteen days and is granted a personal hearing; a fresh assessment is to be completed within two months of receipt of those documents.

Cancellation of GST registration with retrospective effect under Section 29(2) of the CGST Act - Requirement of objective satisfaction for retrospective cancellation - Validity and sufficiency of Show Cause Notice for cancellation - Restoration of GST registration - Consideration of consequences on recipients' input tax credit before retrospective cancellation

Validity and sufficiency of Show Cause Notice for cancellation - Cancellation of GST registration with retrospective effect under Section 29(2) of the CGST Act - Show Cause Notice dated 24.01.2022 and the order dated 19.04.2022 cancelling the petitioner's GST registration retrospectively are unsustainable for want of reasons and particulars and because retrospective effect was not put to the petitioner for objection. - HELD THAT: - The Show Cause Notice merely recited a generic ground of "Non-compliance" without specifying cogent reasons or informing the petitioner that cancellation, if ordered, would be retrospective; the consequent order likewise failed to give reasons for cancellation and recorded inconsistent material (stating liability to cancel while showing nil dues). Cancellation with retrospective effect under Section 29(2) cannot be mechanically applied; the proper officer must form a satisfaction based on objective criteria and must afford the registrant an opportunity to meet the specific case against retrospective cancellation. Absent such reasons and procedural adequacy, the order cannot stand. [Paras 4, 5, 6, 7, 8]

Show Cause Notice and cancellation order set aside; cancellation order does not qualify as a valid order of retrospective cancellation.

Restoration of GST registration - Consideration of consequences on recipients' input tax credit before retrospective cancellation - The petitioner's GST registration is to be restored and the petitioner must make necessary compliances; the respondents remain entitled to pursue recovery or, after proper consideration, to initiate lawful action including retrospective cancellation. - HELD THAT: - Given the invalidity of the impugned order and the absence of objective reasons for retrospective cancellation, the Court restored the petitioner's registration and directed the petitioner to file requisite returns and information (including under Rule 23 of the CGST Rules). The Court noted that retrospective cancellation has consequences for recipients' input tax credit and such consequences must be considered by the proper officer when forming satisfaction; this aspect reinforces the need for objective reasoning. The respondents are not precluded from thereafter taking steps for recovery of tax, penalty or interest or from reconsidering cancellation following lawful procedure. [Paras 9, 10, 11]

Registration restored; petitioner to comply with statutory obligations; respondents free to pursue recovery or take action in accordance with law.

Final Conclusion: The Court set aside the Show Cause Notice and the retrospective cancellation order for want of reasoned and specific grounds, restored the petitioner's GST registration subject to compliance and filing of returns, and left open the respondents' statutory remedies including lawful recovery and any future cancellation after due consideration and objective satisfaction.

Defective show cause notice - Signature and authority on show cause notice - Failure to annex supporting documents to show cause notice - Validity of Form GST REG 31 as show cause notice - Mode of service under Rule 21A - electronic service requirement - Permission to issue a fresh show cause notice in accordance with law

Defective show cause notice - Signature and authority on show cause notice - Failure to annex supporting documents to show cause notice - Impugned show cause notice dated 19.02.2024 is defective for not naming or designating the issuing officer, lacking proper signature of the issuing authority, and referring to supporting documents which were not attached. - HELD THAT: - The Court examined the show cause notice and found it unclear as to which ground (fraud, willful misstatement or suppression of facts) was being invoked. The notice did not bear the name or designation of the issuing officer and, according to the petitioner, carried only digital signatures of the Goods and Services Tax Network. Further, the notice referred to case-specific supporting documents but no such attachments were provided or identified, leaving the petitioner unable to ascertain the particulars of the allegations. For these reasoned deficiencies the notice failed to meet the requisite standards of clarity and authoritativeness required of a show cause notice. [Paras 7, 8]

Show cause notice dated 19.02.2024 set aside on grounds of defect in attribution, signature and lack of annexures.

Validity of Form GST REG 31 as show cause notice - Suspension of registration - Form GST REG 31 dated 19.02.2024 produced by respondents does not operate as the show cause notice which proposed cancellation and suspended registration, and therefore does not cure the defects in the impugned notice. - HELD THAT: - The respondents relied on Form GST REG 31 said to have been dispatched to the petitioner. The Court observed that Form GST REG 31, as produced, is not itself the show cause notice that proposed cancellation and suspended the registration. Consequently, production of that Form in Court could not validate or substitute for the defective show cause notice which contained the substantive proposal to cancel and suspend registration. [Paras 5, 9]

Form GST REG 31 of 19.02.2024 does not sustain the impugned show cause notice and is set aside along with the notice.

Mode of service under Rule 21A - electronic service requirement - Physical dispatch not a permitted mode of service - Service by physical mail of Form GST REG 31 was not in conformity with the electronic service requirement prescribed by Rule 21A and therefore cannot be treated as valid service of the notice. - HELD THAT: - Rule 21A requires intimation in Form GST REG 31 to be effected electronically on the common portal or by e-mail to the address provided at registration. The respondents admitted that the Form was not uploaded on the portal nor sent electronically but was physically dispatched. The Court held that physical dispatch does not satisfy the electronically prescribed modes of service under Rule 21A and therefore cannot validate the notice or its service. [Paras 10, 11]

Physical dispatch of Form GST REG 31 does not comply with Rule 21A; such service is invalid and the Form is set aside.

Final Conclusion: Impugned show cause notice dated 19.02.2024 and Form GST REG 31 dated 19.02.2024 are set aside for the defects identified; respondent No. 3 is deleted from the array of parties; respondents remain free to issue a proper show cause notice in accordance with law and to afford the petitioner personal hearing; the Court has not adjudicated merits and reserves all rights and contentions.

Quashing for non-application of mind - remand for fresh consideration - right to be heard / personal hearing - input tax credit reconciliation with auto-populated GSTR 2A and claimed GSTR 3B - interest liability for belated filing - bank attachment and appropriation to abide outcome of proceedings

Quashing for non-application of mind - input tax credit reconciliation with auto-populated GSTR 2A and claimed GSTR 3B - Validity of the impugned assessment order dated 24.07.2023 - HELD THAT: - The Court found that the assessing officer proceeded to conclude that the petitioner had wrongly availed Input Tax Credit despite the material on record showing that the petitioner had availed a lower amount in GSTR 3B than the amount reflected in the auto populated GSTR 2A, indicating non application of mind. The evidence as to remittance of sums towards CGST and SGST for interest liability was also noted. In view of these deficiencies in the assessment reasoning, the impugned assessment order could not stand and required reconsideration by the assessing officer. [Paras 5, 6]

Impugned assessment order quashed and matter remanded to the assessing officer for reconsideration.

Right to be heard / personal hearing - remand for fresh consideration - Procedural directions on reconsideration including opportunity to reply and personal hearing - HELD THAT: - The Court granted the petitioner an opportunity to file a reply to the show cause notice within two weeks from receipt of the order and directed the assessing officer to provide a reasonable opportunity, including a personal hearing, before passing a fresh assessment. A time limit of two months from receipt of the petitioner's reply was fixed for issuance of the fresh assessment order to ensure expeditious disposal on merits. [Paras 6]

Petitioner permitted to file reply within two weeks; assessing officer to provide personal hearing and pass fresh assessment within two months of receipt of the reply.

Bank attachment and appropriation to abide outcome of proceedings - Consequences of prior appropriation from the petitioner's bank account and status of attachment notice dated 26.02.2024 - HELD THAT: - The Court observed that a sum had been appropriated from the petitioner's Canara Bank account towards the demand. In light of the remand for fresh consideration of the assessment, the attachment notice issued to recover the tax demand was directed to be raised and the amount already appropriated was ordered to abide by the outcome of the remanded proceedings. [Paras 6]

Attachment notice to be raised; amount appropriated shall abide by the outcome of the remanded proceedings.

Final Conclusion: The assessment order dated 24.07.2023 is quashed and remanded for fresh consideration; the petitioner may file a reply within two weeks, be afforded a personal hearing, and the assessing officer shall pass a fresh assessment within two months of receipt of the reply. The bank attachment is raised and the appropriated amount will abide the result of the remanded proceedings. No order as to costs.

Retrospective cancellation of GST registration - Cancellation of GST registration under Section 29(2) of the Central Goods and Services Tax Act, 2017 requiring objective satisfaction - Requirements of a Show Cause Notice for cancellation - Consequences of retrospective cancellation on input tax credit - Revocation of cancellation and compliance with statutory formalities

Requirements of a Show Cause Notice for cancellation - Retrospective cancellation of GST registration - Validity of the Show Cause Notice and the impugned order insofar as they effected retrospective cancellation without specifying reasons or putting the assessee on notice. - HELD THAT: - The Show Cause Notice dated 14.06.2023 merely quoted Rule 21(b) without providing cogent particulars and did not inform the petitioner that cancellation would be with retrospective effect. The impugned order dated 03.07.2023 likewise failed to record tenable reasons for cancellation and retrospectively fixed the effective date of cancellation as 11.05.2022. Such notices and orders, bereft of reasons and without affording an opportunity to contest retrospective cancellation, cannot be sustained. Administrative action to cancel registration retrospectively cannot be taken mechanically; the assessee must be put on notice of the nature and consequences of the proposed retrospective cancellation so as to enable meaningful representation. [Paras 6, 7, 10]

Show Cause Notice and impugned order were found to be defective for not stating reasons or apprising the petitioner of retrospective cancellation and thus could not be sustained as issued.

Cancellation of GST registration under Section 29(2) of the Central Goods and Services Tax Act, 2017 requiring objective satisfaction - Consequences of retrospective cancellation on input tax credit - Legal standard for retrospective cancellation under Section 29(2) and the necessity of objective satisfaction before fixing a retrospective date. - HELD THAT: - Under Section 29(2) the proper officer may cancel registration from a retrospective date 'as he may deem fit' but such satisfaction cannot be purely subjective or mechanical. Cancellation with retrospective effect must be based on objective criteria and not merely on non-filing of returns for some period, particularly where returns were filed and the taxpayer was compliant for parts of the period proposed to be retrospectively covered. The consequences of retrospective cancellation-such as denial of input tax credit to downstream recipients-are relevant considerations and retrospective effect should be ordered only where such consequences are intended and warranted. [Paras 11, 12]

Retrospective cancellation permissible only upon objective satisfaction of the conditions in Section 29(2) and having regard to the consequences of such retrospective effect.

Revocation of cancellation and compliance with statutory formalities - Retrospective cancellation of GST registration - Appropriate remedial direction where the petitioner has ceased business and does not seek to continue registration. - HELD THAT: - Both parties sought cancellation though for different reasons and the petitioner closed business w.e.f. 16.05.2023. In view of the defects in the impugned order and the petitioner's closure of business, the High Court modified the impugned order limitedly: registration is to be treated as cancelled with effect from 16.05.2023 (the date the petitioner ceased business). The petitioner is directed to make necessary compliances under Section 29 of the Act. This modification corrects the absence of objective reasoning for the earlier retrospective date while aligning the effective date with the petitioner's cessation of business. [Paras 13, 14]

Impugned order modified so that cancellation is effective from 16.05.2023; petitioner to comply with Section 29 formalities.

Retrospective cancellation of GST registration - Consequences of retrospective cancellation on input tax credit - Whether the respondents are precluded from taking further action for recovery or from later effecting retrospective cancellation. - HELD THAT: - The Court clarified that the modification granted is limited and does not bar the respondents from pursuing lawful steps for recovery of any tax, penalty or interest due against the firm. The respondents are also not precluded from taking steps, in accordance with law, that may include retrospective cancellation if duly justified by objective satisfaction and proper procedure in future proceedings. [Paras 15]

Respondents remain free to pursue recovery and, where warranted by law and proper reasoned procedure, may consider retrospective cancellation in accordance with law.

Final Conclusion: The Show Cause Notice and cancellation order were defective for failing to state reasons and for not apprising the petitioner of retrospective cancellation; the order is modified to treat GST registration as cancelled with effect from 16.05.2023, subject to the petitioner fulfilling statutory compliances, while preserving the respondents' rights to recover dues or take further lawful action including, if justified and properly reasoned, retrospective cancellation.

Intention to evade tax is mandatory for proceedings under Section 129(3) of the CGST Act - Rule 138A obligation to carry invoice/bill of supply or delivery challan and e-way bill - exercise of writ jurisdiction despite availability of alternate statutory remedy - refund of amount recovered in consequence of invalid detention and penalty proceedings

Intention to evade tax is mandatory for proceedings under Section 129(3) of the CGST Act - Proceedings under Section 129(3) could not be validly invoked in absence of intent to evade tax where tax had been paid by the seller. - HELD THAT: - The Court held that invocation of Section 129(3) requires a finding of intention to evade tax; this is a settled principle affirmed by higher authorities including Assistant Commissioner (ST) & Ors. v. M/s. Satyam Shivam Papers Pvt. Limited & Anr. . In the present case the seller had paid the tax, a fact not disputed by the State, and therefore there was no basis to proceed under Section 129(3). The absence of any allegation or material establishing tax evasion rendered the detention and penalty proceedings unsustainable. [Paras 8, 9, 10]

Proceedings under Section 129(3) set aside for want of requisite intention to evade tax.

Rule 138A obligation to carry invoice/bill of supply or delivery challan and e-way bill - The petitioner was carrying the documents mandated by Rule 138A at the time of transit, and no mismatch in quantity was found on physical verification. - HELD THAT: - The Court noted Rule 138A requires the person in charge of the conveyance to carry the invoice/delivery challan and the e-way bill or its number. The record shows the driver produced all requisite documents and the physical verification did not disclose any discrepancy in quantity. In those circumstances the statutory preconditions for detention were absent and the physical verification and consequent detention could not be sustained. [Paras 3, 8, 9]

Physical verification and detention unsupported where required documents were carried and no mismatch was found.

Exercise of writ jurisdiction despite availability of alternate statutory remedy - refund of amount recovered in consequence of invalid detention and penalty proceedings - High Court exercised writ jurisdiction and set aside the impugned orders, directing refund of the amount recovered instead of relegating the petitioner to the appellate forum. - HELD THAT: - Although an alternative statutory remedy of appeal was available, the Court observed that no useful purpose would be served by relegating the petitioner to that forum in view of the settled law on the necessity of intent to evade tax and the undisputed fact of payment of tax. The Court therefore allowed the writ petition, set aside the physical verification, detention and penalty orders, and directed refund of the amount recovered within four weeks. [Paras 7, 10, 11, 12]

Writ petition allowed; impugned physical inspection, detention and penalty orders set aside and refund directed.

Final Conclusion: Writ petition allowed: in view of the absence of any intent to evade tax and the petitioner having carried the documents required by Rule 138A, the Court set aside the physical verification, detention and penalty orders and directed refund of the amount recovered within four weeks.

Provisional attachment under Rule 159 of the CGST Rules - formation of opinion for attachment under Section 83 of the CGST Act - requirement of tangible material to justify provisional attachment - revocation of provisional attachment under Rule 159(5) - protection of the interest of the Revenue

Provisional attachment under Rule 159 of the CGST Rules - formation of opinion for attachment under Section 83 of the CGST Act - requirement of tangible material to justify provisional attachment - revocation of provisional attachment under Rule 159(5) - Validity of the Commissioner's order confirming provisional attachment of the petitioner's bank account and rejection of the petitioner's application for revocation - HELD THAT: - The Court held that the petitioner's application under Rule 159(5) did not contain the essential particulars required to persuade the authority to revoke the provisional attachment or to demonstrate that the Commissioner's opinion was not supported by tangible material. The court noted that the contentions raised in the application (paras. (h) and (j)) were insufficient to dispel or controvert the material relied upon in the pre-show cause notice. The impugned order, particularly paragraph Nos. 3 to 20, contained substantial material upon which the Commissioner could form an opinion that the interest of the Revenue required protection. The petitioner did not contend before the Court, nor did the application demonstrate, that the material was not tangible or that the Commissioner's formation of opinion under Section 83 was improper; reliance on the Supreme Court decision cited by the petitioner was therefore insufficient in the absence of material to confront the department. The Court also observed that a subsequent Show Cause Notice dated 29th February 2024 disclosed further material and quantified demand, reinforcing the administrative basis for the attachment. In these circumstances the petition failed to make out even a prima facie case for interference with the provisional attachment. [Paras 4, 6, 7, 8, 9]

The Commissioner's order confirming the provisional attachment and rejecting the application for revocation is upheld; the petition is rejected while leaving the petitioner free to respond to the Show Cause Notice.

Final Conclusion: The petition under Article 226 is dismissed; the provisional attachment of the petitioner's bank account as confirmed by the Commissioner is maintained, subject to the petitioner's right to answer the Show Cause Notice dated 29th February 2024.

Principles of natural justice - non-application of mind - jurisdiction - impleading of necessary party suo motu - remand subject to deposit - opportunity of personal hearing

Non-application of mind - principles of natural justice - jurisdiction - Validity of the assessment order insofar as it relied on all India figures and whether it suffers from non application of mind and breach of principles of natural justice. - HELD THAT: - The Court examined the assessment order and found that the assessing officer had taken into account closing balances of creditors and total revenue and expenditure on an all India basis when making the assessment for Tamil Nadu, which indicated non application of mind. Although the assessment was preceded by an intimation and a show cause notice, the material conclusions in the impugned order reflected an erroneous basis for levy and improper application of figures beyond the State's scope. The petitioner's failure to participate in proceedings was noted, but that neglect did not cure the defect arising from the assessing officer's approach. For these reasons the assessment order was quashed and remitted for fresh consideration. [Paras 5, 7]

Impugned assessment order quashed on grounds of non application of mind and remanded for fresh assessment in accordance with law.

Impleading of necessary party suo motu - Whether the State Tax Officer should be made a party to the writ petition. - HELD THAT: - An objection was raised that the State Tax Officer was not arrayed as a party. The Court impleaded the State Tax Officer suo motu as the second respondent and directed the Registry to issue the order copy after amendment, thereby ensuring all necessary parties were before the Court for just adjudication. [Paras 4, 5]

State Tax Officer impleaded suo motu as second respondent; Registry directed to amend and issue order copy.

Remand subject to deposit - opportunity of personal hearing - Terms on which the matter is to be remitted for fresh assessment, including deposit and opportunity to be given to the petitioner. - HELD THAT: - The Court conditioned the quashing and remand on the petitioner remitting 5% of the disputed tax demand, observing the petitioner's willingness to make a deposit though rejecting a higher percentage as excessive. The petitioner was permitted to file a reply to the show cause notice within two weeks of receipt of the order copy along with the 5% deposit. Upon receipt of the reply and satisfaction as to the deposit, the assessing officer was directed to provide a reasonable opportunity, including a personal hearing, and to pass a fresh assessment order in accordance with law within two months. [Paras 6, 7]

Quash and remand made conditional on payment of 5% of disputed tax demand; petitioner to file reply within two weeks; assessing officer to afford personal hearing and pass fresh assessment within two months.

Final Conclusion: The assessment order dated 23.12.2023 is quashed for non application of mind and remitted for fresh assessment; the State Tax Officer is impleaded as respondent; remand is subject to the petitioner depositing 5% of the disputed demand and filing a reply within two weeks, and the assessing officer shall afford hearing and complete a fresh assessment within two months.

Provisional attachment of cash credit accounts under Section 83 of the Central Goods and Services Tax Act, 2017 - statutory one-year limit on provisional attachment under Section 83(2) of the CGST Act - repeated provisional attachments - right to challenge fresh attachment orders in accordance with law

Provisional attachment of cash credit accounts under Section 83 of the Central Goods and Services Tax Act, 2017 - statutory one-year limit on provisional attachment under Section 83(2) of the CGST Act - Whether the earlier order of provisional attachment continued to operate beyond one year and whether the petitioners could operate the cash credit accounts. - HELD THAT: - The parties conceded that an order made under Section 83(1) of the CGST Act, which provisionally attaches cash credit accounts, has a life of one year and ceases to operate on expiry of that period as provided by Section 83(2). On the admitted position that the earlier order subject of these proceedings had ceased to operate, the petition was disposed of while recording that there could be no impediment to the petitioners operating the cash credit accounts arising from the expired order. The court therefore gave effect to the statutory position on the temporal limitation of provisional attachment. [Paras 3, 6]

The earlier provisional attachment ceased to operate after one year and the petitioners may operate the cash credit accounts; the petition was disposed of on that basis while preserving rights.

Repeated provisional attachments - right to challenge fresh attachment orders in accordance with law - Validity of repeated issuance of provisional attachment orders under Section 83 of the CGST Act. - HELD THAT: - The court did not decide the validity of issuing fresh or repeated provisional attachment orders after an earlier order has expired. A fresh attachment order dated 13.12.2023 was asserted by respondents and the petitioners contended that such repetition would breach Section 83(2). The court expressly left open the question of the validity of repeated issuance of attachment orders and disposed of the petition while reserving the petitioners' right to impugn the fresh attachment order in accordance with law. [Paras 4, 5, 6]

Question of validity of repeated provisional attachments left open for adjudication; petitioners' right to challenge the fresh order is reserved.

Final Conclusion: The petition was disposed of on the admitted statutory position that a provisional attachment under Section 83 ceases after one year, permitting operation of the earlier-attached accounts; the court left undecided the broader question of the validity of repeated provisional attachments and reserved the petitioners' right to challenge the fresh order dated 13.12.2023.

Condonation of delay - limitation for filing appeal under the APGST Act - appellate authority's power to condone delay limited to the statutory condonable period - writ jurisdiction to grant relief where statutory appeal is rejected as time barred - remand for adjudication on merits in the interest of justice

Limitation for filing appeal under the APGST Act - appellate authority's power to condone delay limited to the statutory condonable period - Whether the Appellate Authority could lawfully condone delay beyond the statutory condonable period and whether the appeal was rightly rejected as time barred. - HELD THAT: - The Court accepted that Section 107 provides a three month limitation for filing an appeal and permits the Appellate Authority to allow a further period of one month if satisfied that the appellant was prevented by sufficient cause. The impugned order did not dispute the petitioner's cause for delay (ill health supported by medical certificate and affidavit) but rejected the appeal solely because the delay exceeded the condonable statutory period. The Court held that the Appellate Authority has no power to condone delay beyond the statutory condonable period and, therefore, the appellate order rejecting the appeal on that ground did not amount to an illegality in the sense of conferring extra statutory power on the Authority; however, the material before the Authority established sufficient cause for delay. [Paras 5, 6, 8, 9]

Appellate Authority lacks power to condone delay beyond the one month condonable period under Section 107, but the cause shown was sufficient as recorded by the Authority.

Writ jurisdiction to grant relief where statutory appeal is rejected as time barred - remand for adjudication on merits in the interest of justice - Whether the High Court should exercise writ jurisdiction to condone the delay and direct the Appellate Authority to decide the appeal on merits. - HELD THAT: - Recognising that the appeal is a valuable statutory right and that sufficient cause for delay was established on the material before the Appellate Authority, the Court exercised its writ jurisdiction to do complete justice. Although the Appellate Authority could not itself condone delay beyond the statutory period, the High Court found it appropriate to condone the delay, subject to the imposition of costs, and to remit the matter to the Appellate Authority for adjudication on merits. The Court directed deposit of costs within a specified short period and ordered expedited consideration according to law. [Paras 10, 11, 12]

Delay condoned by the High Court in exercise of writ jurisdiction; appeal remitted to the Appellate Authority to be decided on merits after deposit of costs.

Final Conclusion: Writ petition partly allowed: delay in filing the appeal is condoned by the High Court (subject to costs), and the matter is remitted to the Appellate Authority for expeditious adjudication on merits in accordance with law; costs to be deposited within two weeks.

Cancellation of GST registration for non-furnishing of returns - Power to revoke cancellation upon filing pending returns and payment of dues - Procedural compliance with Rule 22 - show cause, opportunity to reply and disposal under FORM GST REG-20 - Reconsideration and quantification of outstanding statutory dues prior to revocation

Cancellation of GST registration for non-furnishing of returns - Procedural compliance with Rule 22 - show cause, opportunity to reply and disposal under FORM GST REG-20 - Validity of the order cancelling the petitioner's GST registration on the ground of non-filing of returns for six or more continuous months - HELD THAT: - The Court examined the statutory scheme under Section 29(2)(c) and the procedure in Rule 22 of the CGST Rules and noted the proviso to sub rule (4) which contemplates dropping proceedings where the person furnishes all pending returns and makes full payment of tax dues with interest and late fee. Having regard to the petitioner's explanation of non-filing due to the Covid 19 pandemic, the subsequent filing of returns up to December 2022 as permitted by the portal, and the coordinate decisions of this Court in similar matters, the Court found that continuation of the cancellation order would not serve the revenue interest because revocation with payment of outstanding dues would ensure statutory compliance and revenue realization. Consequently the impugned cancellation order dated 15.12.2021 was interfered with and set aside, and the matter was directed to be reconsidered by the competent authority in accordance with the procedure prescribed under Rule 22. [Paras 6, 10, 11]

Impugned cancellation order set aside and petitioner permitted to seek revocation of registration.

Power to revoke cancellation upon filing pending returns and payment of dues - Reconsideration and quantification of outstanding statutory dues prior to revocation - Procedure to be followed by the authority on reconsideration of revocation of cancellation - HELD THAT: - The Court directed that the petitioner shall approach the concerned authority within one month seeking revocation. The authority is to intimate the total outstanding statutory dues, if any, standing in the name of the petitioner up to the date of cancellation and any other GST dues payable. Upon such intimation the petitioner shall deposit the dues within the time specified by the authority and, on payment, the authority shall pass an appropriate order revoking the cancellation and restoring registration. The direction implements the proviso to Rule 22(4) by conditioning revocation on filing pending returns and payment of dues, while leaving quantification and formal revocation to the competent officer. [Paras 6, 11]

Authority to quantify outstanding dues and, upon payment by petitioner within prescribed time, to revoke cancellation and restore registration.

Final Conclusion: The writ petition is disposed of by setting aside the cancellation order; the petitioner is permitted to apply for revocation within one month and, following intimation and payment of outstanding GST dues, the authority shall pass an appropriate order restoring the petitioner's GST registration.

Classification of services - works contract - composite supply - support services to oil and gas extraction - other professional, technical and business services relating to petroleum operations - interpretation preferring specific description over general description - limitation period and applicability of Supreme Court suo motu order - rate of tax for construction services

Limitation period and applicability of Supreme Court suo motu order - Whether the appeal was filed within the prescribed period for preferring an appeal against the AAR ruling. - HELD THAT: - The authority examined the date of communication of the AAR order and the date of filing of the appeal and applied the Supreme Court's suo motu judgment (10.01.2022) regarding extension/condonation of limitation where the limitation expired between 15.03.2020 and 28.02.2022. Applying that judgment, the appeal filed on 29.10.2021 was held to be within the prescribed time limit and therefore the appeal was maintainable.

Appeal held to be filed within the prescribed period and is maintainable.

Support services to oil and gas extraction - classification of services - Whether the supplies made under the EPC contract are classifiable under SAC Heading 998621 (support services to oil and gas extraction). - HELD THAT: - The authority analysed the EPC contract scope and the explanatory notes to SAC Heading 998621. Although the inclusive note to 998621 lists certain activities that support oil and gas extraction, the contract before the authority involved design, construction, installation and handover of new intra-field pipeline infrastructure and associated buildings and works intended to expand production capacity. The authority found that such creation of new infrastructure is distinct from the support services envisaged under Heading 998621 and that the contract obligations point to construction/establishment of facilities rather than mere support services to extraction. Hence the supplies did not fit within the explanatory description of Heading 998621.

Classification under SAC Heading 998621 rejected.

Other professional, technical and business services relating to petroleum operations - classification of services - Whether the supplies are classifiable under SAC Heading 9983 (other professional, technical and business services relating to exploration, mining or drilling). - HELD THAT: - The authority examined the explanatory notes for relevant sub-codes of Heading 9983 and the nature of services actually undertaken under the EPC contract. The activities in the contract did not consist of geological/geophysical consulting, project evaluation or similar advisory/exploratory services described under 9983; instead they comprised engineering, procurement, construction, installation and handover of physical infrastructure. Therefore the supplies did not fall within the scope of Heading 9983.

Classification under SAC Heading 9983 rejected.

Works contract - composite supply - classification of services - Whether the supplies under the EPC contract are classifiable as construction services/works contract and thus under SAC Heading 9954. - HELD THAT: - The EPC contract required pre-bid engineering, detailed design, procurement and supply of materials, fabrication, construction, installation, testing, commissioning and handover of pipelines and associated infrastructure. The contract involved transfer of property in goods in the execution of immovable construction and therefore attracted the definition of 'works contract'. Under Schedule II and the explanatory notes, the composite supply of such works contract services is to be treated as supply of service classified under construction services. The authority found the true nature of the supplies to be construction services for mining/industrial plant facilities and held them classifiable under SAC Heading 9954.

Supplies held to be classifiable under SAC Heading 9954 as construction services/works contract.

Rate of tax for construction services - classification of services - What is the applicable rate of tax given the classification and the omission of the specific entry previously cited by the AAR. - HELD THAT: - Although an item (ii) under Sl. No. 3 previously cited by the AAR had been omitted from the rate notification with effect from 01.04.2019, the authority examined the remaining entries under Sl. No. 3 and identified that the supplies fall within the residual item (xii) for construction services not otherwise specified. Item (xii) prescribes central tax at the specified rate; applying the notification as amended, the authority held that the supplies attract central tax at 9% and corresponding state tax at 9%, yielding the combined GST rate applicable to the supplies classified under item (xii). The authority therefore modified the AAR ruling to reflect the correct applicable rate under the amended notification.

Supplies attract tax in terms of item (xii) of Sl. No. 3 of the Rate Notification as amended (central tax and corresponding state tax as prescribed for that item).

Final Conclusion: The appeal is allowed in part. The supplies under the EPC contract are not classifiable under SAC Headings 998621 or 9983 but are construction/works contract services classifiable under SAC Heading 9954. The appeal was maintainable as filed within time. The supplies are taxable under the residual construction-services entry (item (xii) of Sl. No. 3 of the Rate Notification as amended) and the AAR ruling is modified accordingly; the appeal is disposed of.

Addition u/s 40A(3) - purchases made otherwise than by account payee cheque - As decided by HC [2023 (10) TMI 1285 - DELHI HIGH COURT] payments made by the assessee to the concerns violated Section 40A(3) as they were not made through an account payee cheque drawn on a bank, account payee bank draft or through the use of electronic clearing system through a bank account, and therefore, to fall within the ambit of the 1977 circular, the appellant/assessee was required to establish the genuineness of the transactions. appellant/assessee having failed to do so, led to the deduction being rightly disallowed for the subject payments.

HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court. Hence, the Special Leave Petition is dismissed. Decided against assessee.

Reopening of assessment on the basis of later information - reassessment under Section 148 of the Income Tax Act, 1961 - reason to believe that income chargeable to tax has escaped assessment - assessment completed under Section 143(3) of the Income Tax Act, 1961 - treatment of liquidated damages as a capital receipt - documentary evidence and requirement to confront or rebut assessee's explanation

Reassessment under Section 148 of the Income Tax Act, 1961 - reason to believe that income chargeable to tax has escaped assessment - assessment completed under Section 143(3) of the Income Tax Act, 1961 - treatment of liquidated damages as a capital receipt - Validity of reopening the completed assessment for AY 2009-2010 by issuing notice under Section 148. - HELD THAT: - The Court held that jurisdiction to reopen arises only when the Assessing Officer (AO) has a genuine 'reason to believe' that income chargeable to tax escaped assessment. Where the assessee had disclosed the receipt of liquidated damages in the return, responded to queries during scrutiny, and the assessment was completed under Section 143(3) accepting the returned income, the AO could not rest on a bald assertion of escapement. The reasons recorded referred to information from a third-party search alleging accommodation entries and stated that liquidated damages were not offered to tax; however, the petitioner had specifically explained in the assessment proceedings the reduction of liquidated damages from the cost of shares under Section 51 and treated any excess as a capital receipt. In the absence of any material brought by the AO to contradict or impeach the factual position accepted at the earlier assessment, the condition precedent for reopening was not satisfied. Accordingly, the notice under Section 148 was without jurisdiction and liable to be quashed. [Paras 10, 11]

Notice dated 9th March 2016 under Section 148 seeking reopening of assessment for AY 2009-2010 quashed.

Documentary evidence and requirement to confront or rebut assessee's explanation - reopening of assessment on the basis of later information - Validity of the order rejecting the assessee's objections to reopening (order dated 20th June 2016). - HELD THAT: - The AO rejected objections without dealing with the factual assertions and documentary evidence produced by the assessee (bank cheques, invoices, wealth tax return disclosure). The Court observed that a mere ipse dixit that payments through banking channels do not sanctify a transaction, or that bills may be accommodation entries, is insufficient. Where the assessee has furnished documentary proof and an explanation, the AO must either bring contrary material or confront the assessee with the adverse material before rejecting objections. The AO failed to do so and therefore the objection order could not sustain the reopening. [Paras 9, 10]

Order rejecting objections dated 20th June 2016 set aside as it did not deal with the documentary explanations and lacked justification.

Final Conclusion: Writ allowed: the reopening notice under Section 148 and the order rejecting objections are quashed; petition disposed without costs.

Sanction for issue of notice - Specified authority for purposes of section 148 and 148A - Applicability of amended Section 151 - Proviso to Section 149 and incorporation by reference - Effect of TOLA on sanction and time limits - Quashing of notice and consequential orders for lack of valid sanction

Applicability of amended Section 151 - Specified authority for purposes of section 148 and 148A - Amended Section 151 applies to reassessment proceedings initiated after 01.04.2021 in respect of assessment years beginning before 01.04.2021. - HELD THAT: - The amendments effected by the Finance Act, 2021 came into force on 01.04.2021. The orders under Section 148A(d) and notices under Section 148 impugned in these petitions were issued on 28.07.2022. The Court examined the text of amended Section 151, which prescribes different authorities depending on whether three years or less, or more than three years, have elapsed from the end of the relevant assessment year. Given that the proceedings were initiated after the amendment came into force, the validity of sanction must be tested with reference to the amended provision. The Court concurred with the view in Siemens Financial Services and related decisions that amended Section 151 governs such sanction for notices issued post-amendment. [Paras 10, 11, 15]

Amended Section 151 is applicable and governs the specified authority for sanction in these cases.

Proviso to Section 149 and incorporation by reference - Sanction for issue of notice - The proviso to Section 149 does not by itself incorporate pre-amended Section 151 by reference so as to make the pre-amended sanctioning regime applicable. - HELD THAT: - The proviso to amended Section 149 makes certain pre-amendment time limits applicable to assessment years beginning on or before 01.04.2021, but it only renders the time limits of pre-amended Section 149(1)(b) applicable; it does not incorporate the entirety of the pre-amended provisionary scheme, nor expressly import pre-amended Section 151. The Court held that the proviso's limited operation on time limits cannot be stretched to revive the pre-amendment specification of sanctioning authorities; a fortiori, there is no textual basis to treat pre-amended Section 151 as incorporated by reference into the amended code governing proceedings initiated after the amendment. [Paras 11, 12, 13]

The proviso to Section 149 does not operate to make pre-amended Section 151 applicable.

Effect of TOLA on sanction and time limits - Quashing of notice and consequential orders for lack of valid sanction - TOLA's extension of time limits is irrelevant to the challenge based on identity of the sanctioning authority; since sanction was not accorded by an authority specified under amended Section 151, the orders under Section 148A(d), notices under Section 148 and consequential draft assessment orders are quashed. - HELD THAT: - Although TOLA extended certain limitation periods and the temporal window for grants of sanction up to specified dates, the petitioner did not challenge sanction on the basis of time-limit expiry. The determinative question was whether the sanction was granted by an authority prescribed under amended Section 151. On the admitted facts, approval was given by the Commissioner of Income Tax (International Taxes), Chennai, whereas for these assessment years (more than three years elapsed) clause (ii) of amended Section 151 requires sanction by higher specified authorities. The Court, following Siemens Financial Services and related decisions, found that sanction was not granted by the authority specified under clause (ii) and therefore was invalid. Consequently the orders and notices issued with that invalid sanction, and the draft assessment orders dependent on them, were quashed. [Paras 14, 15]

TOLA does not affect the present challenge; absence of sanction by an authority under amended Section 151 renders the impugned orders and notices invalid and they are quashed, as are the consequential draft assessment orders.

Final Conclusion: Writ petitions allowed: amended Section 151 applies; sanction lacked conformity with clause (ii) of Section 151 for the relevant assessment years, therefore orders under Section 148A(d), notices under Section 148 and consequent draft assessment orders are quashed; no order as to costs.

Reason to believe for reopening assessment - Reassessment vitiated for gross factual error - Application of Section 148A(d) - Validity of notice under Section 148 - Sanction under Section 151 - Specified authority for sanction - Withholding tax and AAR proceedings

Reason to believe for reopening assessment - Reassessment vitiated for gross factual error - Withholding tax and AAR proceedings - Application of Section 148A(d) - Impugned order under Section 148A(d) and the notice under Section 148 were issued on a wrong factual foundation and without proper application of mind, and are vitiated. - HELD THAT: - The communication setting out reasons for reopening referred to specific transactions and stated that a reference had been made to the AAR in respect of those transactions. The assessee replied pointing out a gross factual error: the AAR application related only to services under the Assistance and Service Agreement with Fives France and did not cover the cited transactions with Fives Solios SA or the three transactions said to be with Fives France. The assessee also placed on record that taxes were withheld and remitted in respect of payments to Fives France forming the subject of the AAR application. Reassessment under Section 148 requires an objective satisfaction based on tangible material; initiation of reassessment on a mechanistic or erroneous factual premise, or where the officer ignores the assessee's explanation and material, warrants interference. Applying these principles, the Court found the order under Section 148A(d) and the ensuing notice under Section 148 to be vitiated for being founded on a gross factual error and for failure to apply mind to the assessee's reply and materials. [Paras 11, 12]

Order under Section 148A(d) and notice under Section 148 quashed on the ground of gross factual error and lack of application of mind.

Sanction under Section 151 - Specified authority for sanction - Validity of notice under Section 148 - Reassessment proceedings for AY 2016-2017 and AY 2017-2018 are vitiated because approval for reassessment was granted by an authority not specified under Section 151 for the relevant period. - HELD THAT: - Section 151 prescribes the rank of the specified authority whose approval is required for issuance of notices under Section 148, with different authorities applicable depending on the time elapsed since the end of the assessment year. For the Relevant AYs more than three years had elapsed and clause (ii) applied; the Principal Chief Commissioner was the specified authority. While approval for AYs 2014-2015 and 2015-2016 was given by the Principal Chief Commissioner, the approvals for AYs 2016-2017 and 2017-2018 were granted by the Chief Commissioner of Income Tax who was not the specified authority under clause (ii) at the relevant time (the admitted position being that a Principal Chief Commissioner existed). Consequently, sanction granted by the Chief Commissioner in these years was invalid and the reassessment proceedings in respect of those years are vitiated on this ground. [Paras 6, 13]

Reassessment proceedings for AY 2016-2017 and AY 2017-2018 vitiated for want of sanction by the specified authority under Section 151.

Validity of subsequent assessment orders - Consequences of quashing notice - Assessment orders passed pursuant to the quashed reassessment process do not survive. - HELD THAT: - Having held the order under Section 148A(d) and the notice under Section 148 to be vitiated (both on factual grounds and for defective sanction in respect of specified years), the Court concluded that assessments subsequently framed pursuant to those proceedings cannot stand. The impugned assessments are therefore invalidated as a corollary of quashing the foundational order and notice. [Paras 14]

Assessment orders issued pursuant to the vitiated reassessment proceedings are quashed.

Final Conclusion: Writ petitions allowed; orders under Section 148A(d) and notices under Section 148 quashed for being based on a gross factual error and, in respect of AY 2016-2017 and AY 2017-2018, for want of sanction by the specified authority under Section 151; assessment orders made thereafter do not survive.

Faceless assessment - automated allocation - Section 144B non-obstante clause - scope of faceless procedure - assessment/reassessment/re-computation vis-a -vis pre-assessment proceedings

Faceless assessment - automated allocation - Section 144B non-obstante clause - Validity of order under Section 148A(a)/(b) where pre-assessment proceedings were conducted by the local jurisdictional officer and not through the faceless/automated allocation mechanism - HELD THAT: - The court examined the scope of the faceless procedure introduced by Section 144B, read with the Schemes framed by the Board defining "automated allocation" and vesting jurisdiction in a faceless manner. Sub-section (1) of Section 144B, containing a non-obstante clause, mandates that assessment, reassessment or re-computation under specified provisions shall be made in a faceless manner. Sub-section (2) limits such faceless procedure to cases, persons or classes as may be specified by the Board. The court held that Section 144B prescribes the faceless manner for the stage of assessment/reassessment/re-computation itself and does not extend to proceedings antecedent to initiation of reassessment (i.e., pre-assessment or Section 148A proceedings). The petitioner also did not demonstrate that his case falls within any CBIC specification under sub-section (2), and the faceless regime was introduced with effect from 01.04.2021 whereas the assessment year in question is 2019-2020. Consequently, the impugned order under Section 148A was not vitiated merely because the preliminary proceedings were conducted by the local assessing officer rather than through the faceless automated allocation mechanism prescribed for the assessment stage. [Paras 13, 14, 15, 16]

The order passed under Section 148A is not invalid for having been conducted by the local jurisdictional officer and not through faceless/automated allocation; the writ petition is dismissed.

Final Conclusion: The petition challenging the order under Section 148A was dismissed: the faceless procedure mandated by Section 144B applies to the stage of assessment/reassessment/re-computation and does not render preliminary proceedings under Section 148A invalid; additionally, the petitioner did not establish applicability of any CBIC specification and the faceless regime was introduced with effect from 01.04.2021.

Re-opening of assessment under Section 148 - Obligation to consider objections and pass a speaking order - Remand for fresh consideration - Dispute Resolution Panel jurisdiction under Section 144C

Re-opening of assessment under Section 148 - Capital gains escaping assessment - Validity of re-opening the assessment and issuance of notice under Section 148 on the basis of information gathered in assessment of Info-Drive India Ltd. - HELD THAT: - The Court found that the Assessing Officer decided to re-open the petitioner's assessment on the basis of information gathered while undertaking assessment in respect of Info-Drive India Ltd. The annexure to the notice indicated share transfers during financial year 2015-2016, showing that shares initially transferred by the petitioner to Mr. V.N. Seshagiri Rao were eventually acquired by Infodrive Mauritius and that the transaction was not disclosed in the petitioner's return. On this basis the Court concluded there was some foundation for believing that capital gains may have escaped assessment, thereby providing a prima facie basis for initiating reassessment proceedings under Section 148. [Paras 7]

There was some basis for reopening the assessment under Section 148 on the material before the Assessing Officer.

Obligation to consider objections and pass a speaking order - Remand for fresh consideration - Dispute Resolution Panel jurisdiction under Section 144C - Whether the Assessing Officer complied with the obligation to consider the petitioner's objections and to pass a speaking order, and the appropriate remedy where material is placed on record indicating an earlier tax period. - HELD THAT: - The petitioner relied on the Supreme Court's dictum that objections to a notice under Section 148 must be considered and a speaking order passed. The Court noted that the petitioner produced documents suggesting the share transfer to Mr. V.N. Seshagiri Rao occurred on 12.02.2015 (financial year 2014-15) rather than in 2015-2016, which, if verified, would materially affect the reassessment. In view of this potentially determinative material and the need for the Assessing Officer to consider the petitioner's objections and supporting documents before finalising the draft assessment order under Section 144C, the Court concluded that the draft order should be set aside and the matter remanded for reconsideration from the stage of issuing a speaking order. The Court also observed that the petitioner may avail the procedure before the Dispute Resolution Panel under Section 144C, but remanded the matter to ensure the Assessing Officer first considers the objections and documents. [Paras 8, 9]

The draft assessment order is set aside and the matter is remanded to the Assessing Officer to consider the petitioner's objections and documents and to issue a fresh speaking draft assessment order.

Final Conclusion: The draft assessment order under Section 144C is set aside and the matter remanded to the Assessing Officer; the petitioner may file fresh objections and annex relevant documents within two weeks of service of this order, and the Assessing Officer shall issue a fresh draft assessment order within two months of receipt of those objections.

Allowability of business expenditure under section 37(1) of the Income tax Act - commercial expediency - non refundable application fees for lottery based licence - proof of payment and business nexus

Allowability of business expenditure under section 37(1) of the Income tax Act - non refundable application fees for lottery based licence - proof of payment and business nexus - Deductibility of non refundable fees paid for multiple application forms for lottery based allotment of a liquor shop as business expenditure in the assessment for 2017 18. - HELD THAT: - The tribunal examined whether the form fees (paid for 20 application forms, non refundable and paid through bank) constituted allowable business expenditure. The AO and the CIT(A) had disallowed the claim on the ground that the payments did not pertain to the year under consideration and because the assessee had not produced details of the individual application forms; the CIT(A) also rejected the theory of commercial expediency. The assessee, however, produced bank statements, profit and loss records, written submissions and an affidavit confirming the payments, that the fees were non refundable, and that the payments were made to participate in a lottery for allotment of a licence relevant to the assessee's retail liquor business. The revenue did not dispute that one licence was ultimately allotted to the assessee. On these facts the tribunal held that payments made to increase the probability of obtaining the licence were incurred in the course of business, were not shown to be contrary to law, and were supported by documentary evidence and affidavit; consequently the denial of the claim under section 37(1) was not justified. The tribunal therefore deleted the addition and allowed the claim.

The addition disallowing the form fee payments is deleted and the expenditure is allowed as business expenditure under section 37(1).

Final Conclusion: The appeal is allowed and the addition of Rs. 3,00,528 relating to non refundable application fees for lottery based allotment of a liquor shop is deleted; the expenditure is held allowable as business expenditure under section 37(1).

Revisionary jurisdiction under section 263 - Erroneous and prejudicial to the interests of revenue - Duty to make or cause to be made such enquiry under section 263 - Deeming fiction in Explanation 2(c) to section 263 - Finality of assessment and doctrine of merger - Requirement of specific and demonstrable defects before exercising revision

Revisionary jurisdiction under section 263 - Duty to make or cause to be made such enquiry under section 263 - Requirement of specific and demonstrable defects before exercising revision - Finality of assessment and doctrine of merger - Erroneous and prejudicial to the interests of revenue - Validity of the second revisional order passed by the subsequently posted Principal Commissioner under section 263 setting aside the reassessment order dated 19.08.2016 - HELD THAT: - The Tribunal held that the second exercise of revisionary jurisdiction was not justified. The first revisional order had set aside the original assessment for de novo enquiry and the Assessing Officer, in the subsequent assessment dated 19.08.2016, examined the evidence called for by the Assessing Officer (ITRs, audited accounts, bank statements, Form-2/Form-5, shareholders' details and a write-up justifying large share premium) and recorded verification of books and bank statements. Once the assessee had furnished point wise replies and documentary evidence, the Principal Commissioner was obliged, before cancelling or modifying assessment, to examine those replies and form a prima facie objective opinion; he could not rest on a general view that "more enquiries" ought to have been made without specifying defects in the evidence or demonstrating how additional enquiries would have altered the result. The Tribunal emphasised that section 263 casts a duty to "make or cause to make such enquiry as he deems necessary" which means enquiries necessary to form the opinion, not a carte blanche to reopen concluded enquiries on the basis of subjective dissatisfaction. The deeming provision in Explanation 2(c) to section 263 (as amended w.e.f. 01.06.2015) was held inapplicable to the assessment year in question, and in any event the impugned order did not identify any non compliance with Board directions or specific infirmity in the material on record. The Tribunal further observed that revisional jurisdiction cannot be exercised repeatedly on the same subject matter simply because a later assessment accepts the assessee's claim; allowing such practice would defeat finality of assessment and run counter to the doctrine of merger where directions of the first revising authority had been complied with. In the absence of specific and strong grounds pointing out what enquiries were lacking and how those lacunae would have changed the finding, the second revisional order was held to be vitiated for want of application of mind and failure to satisfy the condition precedent for invoking section 263. [Paras 13, 17, 18, 20]

Second revisional order setting aside the assessment dated 19.08.2016 quashed; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, quashed the impugned second revisionary order under section 263 insofar as it set aside the reassessment dated 19.08.2016, and held that the Principal Commissioner had not satisfied the condition precedent for exercise of revisional jurisdiction; the assessment stands restored.

Set off of prior year excess application of income against subsequent year surplus - application of income for charitable purposes - accumulation of income under section 11(2) - timely filing of Form No.10 during assessment proceedings - requirement of furnishing particulars before completion of assessment for claim under section 11

Set off of prior year excess application of income against subsequent year surplus - application of income for charitable purposes - Allowability of setting off excess application of funds in earlier years against the surplus of the assessment year for computing income under section 11 - HELD THAT: - The Tribunal found the facts of the present year identical to those considered by the Coordinate Bench in the assessee's own case for AY 2016-17 and followed the binding precedents of various High Courts and this Tribunal which hold that adjustment of expenditure or excess application incurred in earlier years against income of a subsequent year amounts to application of income in that subsequent year and is to be excluded under section 11(1)(a). Applying that ratio, the Tribunal directed the Assessing Officer to allow the claim for set off of excess utilization of funds, concluding there is no bar to computing the current year's income after allowing such set off. [Paras 6]

Set off of earlier year excess utilization against the current year surplus is allowable; deduction to be given by AO.

Accumulation of income under section 11(2) - timely filing of Form No.10 during assessment proceedings - requirement of furnishing particulars before completion of assessment for claim under section 11 - Whether Form No.10 filed during the course of assessment (before completion) can be accepted for claiming accumulation under section 11(2) despite being filed during assessment proceedings and whether the delay in filing precludes the claim - HELD THAT: - Relying on the Coordinate Bench decision in the assessee's own case and authoritative precedent emphasising that the assessing authority must have necessary information before completing assessment to entertain a claim under section 11, the Tribunal held that Form No.10 filed during the assessment (but before completion) satisfies the requirement. The Tribunal observed that where particulars necessary to allow the exemption are furnished before completion of assessment, the assessing officer cannot refuse the claim on the ground that the information was supplied during proceedings; acceptance of such information after completion would otherwise require reopening the assessment. The Tribunal therefore directed allowance of accumulation claimed through Form No.10. [Paras 6]

Form No.10 filed during the assessment proceedings (before completion) is acceptable for claiming accumulation under section 11(2); accumulation claim allowed.

Final Conclusion: The appeal is allowed: the Assessing Officer is directed to permit set off of earlier years' excess application of funds against the 2015-16 surplus and to accept Form No.10 filed during assessment (before completion) for claiming accumulation under section 11(2).

Unexplained cash credit under section 68 - double facet onus under first proviso to section 68 - onus of assessee to prove identity, creditworthiness and genuineness of investor - burden shifts to Assessing Officer to make further inquiry if assessee discharges initial onus - adverse inference based on inquiry at wrong address - reliance on documentary evidence (PAN, ROC, bank statements, confirmations, audited financials) to discharge initial onus - estoppel under section 124(3)(a) against challenging jurisdiction of assessing officer

Unexplained cash credit under section 68 - double facet onus under first proviso to section 68 - onus of assessee to prove identity, creditworthiness and genuineness of investor - burden shifts to Assessing Officer to make further inquiry if assessee discharges initial onus - adverse inference based on inquiry at wrong address - reliance on documentary evidence (PAN, ROC, bank statements, confirmations, audited financials) to discharge initial onus - Whether the addition of Rs. 2.05 crore made u/s 68 could be sustained where the assessee produced documentary evidence and the AO's adverse inference rested on inquiries at an incorrect address. - HELD THAT: - The Tribunal held that the assessee discharged the dual facet onus under the first proviso to section 68 by producing documentary evidence proving the "nature" and "source" of the share application money as well as the explanation of the subscriber company. The AO's adverse finding as to non-existence of the subscriber company was founded on a spot inquiry at the subscriber's old address despite record (including ROC and the assessee's pleadings) showing a new address; such inquiry could not support an adverse inference. The subscriber's confirmation detailed the source of funds (sale proceeds) and bank statements showed electronic transfers (RTGS) rather than cash deposits; confirmations from parties to whom investments were sold and audited financials further substantiated creditworthiness. Having placed on record PAN, ROC certificate, bank statements, audited financials, share application forms, board resolution and Form No.2 (return of allotment), the assessee met the initial burden and the AO was obliged to undertake enquiries to dislodge that evidence; the AO made only generalized observations and failed to confront or rebut the documentary material. Reliance on precedents (including decisions applying the principle that mere suspicion cannot substitute for evidence and that where initial onus is discharged the department must investigate further) supported deletion of the addition. The Tribunal therefore upheld the CIT(A)'s deletion of the addition. [Paras 23, 24, 25, 26, 28]

Addition of Rs. 2.05 crore treated as unexplained cash credit under section 68 is deleted; revenue's appeal dismissed.

Estoppel under section 124(3)(a) against challenging jurisdiction of assessing officer - Whether the assessment order is void for want of jurisdiction because the notice under section 143(2) was issued by a non-jurisdictional AO. - HELD THAT: - The Tribunal found that the assessee received the notice under section 143(2) from the officer who thereafter proceeded with assessment but did not challenge the jurisdiction within the statutory period after service of the notice under section 142(1). By failing to raise the jurisdictional objection within the one-month period prescribed, the assessee is divested of the right to challenge jurisdiction, in terms of clause (a) to sub-section (3) of section 124 of the Act. The Tribunal rejected the cross-objection seeking quashing of the assessment on jurisdictional grounds. [Paras 30, 31, 33, 34]

Cross-objection challenging jurisdiction is dismissed; assessment not quashed on the asserted jurisdictional ground.

Final Conclusion: The Tribunal dismissed the revenue's appeal against the CIT(A)'s deletion of the addition under section 68 for A.Y.2013-14, holding that the assessee discharged the dual onus and that the AO's adverse inference (based on inquiry at a wrong address and without confronting documentary evidence) was unsustainable. The assessee's cross-objection challenging jurisdiction of the assessing officer was dismissed as barred by section 124(3)(a).

Deduction under section 80GGC - penalty under section 271(1)(c) - bonafide belief based on auditor's opinion - expenditure falling within political purpose and application of section 37(1)/section 37(2B) - requirement that donation be made to a political party registered under section 29A of The Representation of the People Act, 1951

Penalty under section 271(1)(c) - bonafide belief based on auditor's opinion - Whether penalty under section 271(1)(c) can be sustained for furnishing of inaccurate particulars where the claim for deduction was made bona fide on the basis of the auditor's opinion - HELD THAT: - The Tribunal examined whether the assessee's claim of deduction (later disallowed by the Assessing Officer) amounted to furnishing inaccurate particulars of income attracting penalty. The record shows the deduction claim was supported by the auditor's note and quantified in Form 3CD, and the Commissioner (Appeals) in the first instance accepted the claim as bonafide. Although the Assessing Officer subsequently disallowed the deduction after verification, the determinative question for penalty is the state of mind and bona fides at the time of making the claim. Applying the principle that a claim made in bona fide reliance on a professional opinion does not constitute furnishing of inaccurate particulars, and relying on the legal position cited (including the principle in Reliance Petro Products Ltd.), the Tribunal held that the assessee had a plausible and documented basis for the claim at the time of filing the return and therefore the ingredients of section 271(1)(c) were not attracted. Consequently, the penalty imposed by the Assessing Officer and confirmed by the Commissioner (Appeals) was not sustainable. [Paras 8, 9]

Penalty under section 271(1)(c) deleted as the claim was a bona fide one made on the basis of the auditor's opinion and did not amount to furnishing inaccurate particulars

Final Conclusion: Appeal allowed; the penalty levied under section 271(1)(c) in respect of the deduction claimed under section 80GGC for A.Y. 2011-12 is deleted.

Recording of satisfaction in the assessment order for initiation of penalty proceedings under 271D / 271E - penalties under 271D and 271E are pari materia - limitation for imposition of penalty under section 275(1)(c) commences from date of AO's reference for initiation of penalty - deletion of penalty where statutory satisfaction is not recorded - binding effect of Supreme Court precedent (Jai Laxmi Rice Mills) on initiation of penalty proceedings

Recording of satisfaction in the assessment order for initiation of penalty proceedings under 271D / 271E - penalties under 271D and 271E are pari materia - binding effect of Supreme Court precedent (Jai Laxmi Rice Mills) on initiation of penalty proceedings - Validity of penalty under section 271D (and, by parity, section 271E) where the Assessing Officer did not record satisfaction in the assessment order regarding contravention of section 269SS/269T. - HELD THAT: - The Tribunal examined the ld. CIT(A)'s finding that the Assessing Officer failed to record his satisfaction in the assessment order dated 30.12.2017 regarding violation of section 269SS (and hence initiation of penalty under section 271D). Applying the binding ratio of the Hon'ble Supreme Court in CIT v. Jai Laxmi Rice Mills and subsequent High Court and Tribunal decisions, the Tribunal held that recording of satisfaction in the assessment order is a mandatory precondition to validly initiate penalty proceedings under section 271E and, being pari materia, the same requirement applies to section 271D. The ld. AO's failure to record such satisfaction in the assessment order therefore rendered the penalty proceedings invalid, and the penalty imposed by the Addl. CIT was rightly deleted by the ld. CIT(A). The Tribunal found no infirmity in relying on the cited precedents and departmental circular guidance that the AO ought to have recorded satisfaction during assessment proceedings. [Paras 14, 15]

Penalty under section 271D (and accordingly under section 271E) deleted for both assessment years for failure of the Assessing Officer to record satisfaction in the assessment order.

Limitation for imposition of penalty under section 275(1)(c) commences from date of AO's reference for initiation of penalty - deletion of penalty where order is time-barred - Whether the penalty order under section 271D was barred by limitation where the Assessing Officer's reference to the Addl. CIT was dated 15.03.2021 and the penalty order was passed after the statutory period. - HELD THAT: - The Tribunal affirmed the ld. CIT(A)'s application of the Delhi High Court ratio (PCIT v. Mahesh Wood Products P. Ltd.) that the date on which the Assessing Officer made the reference to the Addl. CIT (15.03.2021) is the date of initiation of penalty proceedings for reckoning the six-month limitation under section 275(1)(c). Counting from that date, the statutory period expired on 30.09.2021. The show-cause notice was issued on 02.11.2021 and the penalty order was passed on 30.05.2022, both beyond the prescribed limitation. Consequently, the penalty order was held to be time-barred and unsustainable. [Paras 12, 13]

Penalty under section 271D held time-barred and therefore liable to be quashed.

Final Conclusion: For assessment years 2015-16 and 2016-17 the Tribunal upholds the ld. CIT(A)'s deletion of penalties under sections 271D and 271E: first because the Assessing Officer did not record the requisite satisfaction in the assessment order (a mandatory precondition), and second because the penalty proceedings were time-barred as the limitation ran from the AO's reference dated 15.03.2021; all appeals and cross-objections are dismissed.

Disallowance of expenditure relatable to exempt income under section 14A read with Rule 8D - Re computation of book profit under section 115JB and treatment of section 14A additions - Treatment of interest income during pre commencement / pre operative period as reduction to capital work in progress - Other Method for determination of arm's length price under Rule 10AB - Appropriateness of transactional net margin method and selection of tested party in transfer pricing - Application of safe harbour margins and classification of an associated enterprise as low risk trader - Rule of consistency where identical international transactions under same contract were accepted in earlier assessment years - Use of unaudited exchanged financials and reliance on survey report vis a vis principles of natural justice and admissibility - Disallowance under section 36(1)(iii) for alleged diversion of interest bearing funds

Disallowance of expenditure relatable to exempt income under section 14A read with Rule 8D - Re computation of book profit under section 115JB and treatment of section 14A additions - Validity of disallowance under section 14A read with Rule 8D (interest component and other expenses) and whether such disallowance can be added back to book profit under section 115JB. - HELD THAT: - The Tribunal upheld the unchallenged disallowance under Rule 8D(iii) (other expenses) but found on the record that the assessee had sufficient own/non interest funds in excess of the investments yielding exempt income. Applying the Supreme Court precedents (as relied upon in the order), the Tribunal held that where mixed funds include sufficient non interest bearing funds, investments are to be presumed made out of such funds and interest disallowance under Rule 8D(ii) is impermissible. Consequently the Tribunal reversed the CIT(A)'s and AO's disallowance of interest expenditure under Rule 8D(ii). On the recomputation of book profit under section 115JB, the Tribunal followed the ITAT Special Bench authority that Clause (f) to section 115JB should not be computed by resorting to section 14A/Rule 8D computations and therefore directed deletion of additions made to book profit on account of section 14A disallowance. [Paras 13, 14, 15]

Disallowance of interest under Rule 8D(ii) deleted; unchallenged Rule 8D(iii) disallowance sustained; additions to book profit under section 115JB on account of section 14A/Rule 8D reversed.

Treatment of interest income during pre commencement / pre operative period as reduction to capital work in progress - Whether interest earned on short term fixed deposits (earmarked/linked to project) during the pre operative stage is taxable as income from other sources or must be reduced from capital work in progress. - HELD THAT: - The Tribunal found it undisputed that the deposits were kept to secure project related benefits and that the project was in a pre operative/construction stage for AY 2013 14. Relying on Supreme Court precedents, the Tribunal held that when funds are inextricably linked or earmarked for a project in pre implementation stage, interest earned on such deposits reduces capital work in progress and is not taxable under income from other sources. The Tribunal distinguished earlier Tribunal decisions for other years on the factual ground that business there was held to be set up, whereas in the present year the project had not commenced operations. [Paras 16, 19, 20, 21]

Assessment of the interest income as 'income from other sources' set aside; interest to be reduced from capital work in progress and AO directed to accept assessee's treatment.

Other Method for determination of arm's length price under Rule 10AB - Rule of consistency where identical international transactions under same contract were accepted in earlier assessment years - Appropriateness of transactional net margin method and selection of tested party in transfer pricing - Validity of the TPO's downward transfer pricing adjustment (and CIT(A)'s enhancement) in respect of import of capital equipment from the AE - whether 'Other Method' adopted by the assessee must be accepted and whether the TPO/CIT(A) correctly applied TNMM, selected the foreign AE as tested party, or applied safe harbour margins. - HELD THAT: - The Tribunal concluded that the revenue authorities breached consistency by departing from the method and acceptance in AYs 2011 12 and 2012 13 for the same contract and continuing supplies. Rule 10AB ('Other Method') contemplates pricing by reference to the price for same or similar uncontrolled transactions (akin to CUP), and therefore margins/profit based comparisons adopted by TPO/CIT(A) were misplaced. The Tribunal found the TPO erred in selecting the foreign AE as tested party and in relying on unaudited exchanged financials (also noting Rule 10TF and the inadmissibility of using low/no tax jurisdiction results). The CIT(A)'s reclassification of the AE as a low risk trader and application of safe harbour margins was held to be unjustified: the safe harbour percentages were inapplicable for the year and the assessee had not opted for them, and the survey report underpinning the CIT(A)'s conclusion was used without furnishing it to the assessee. Additionally, the Tribunal accepted the assessee's benchmarking of equipment hard cost (per MW) using expert valuation, CERC benchmarks and lenders' appraisal as reliable comparables under Rule 10AB, and held that the TP adjustment and the CIT(A)'s enhancement cannot be sustained. [Paras 31, 32, 33, 34, 35]

TPO's downward adjustment and CIT(A)'s enhancement set aside; assessee's 'Other Method' and TP study accepted and no transfer pricing adjustment required to the price paid for imported equipment.

Use of unaudited exchanged financials and survey report vis a vis principles of natural justice and admissibility - Whether reliance on a single page unaudited financial statement of the AE obtained under exchange of information and the survey report (not furnished to the assessee) was permissible evidence for making TP adjustments and reclassification. - HELD THAT: - The Tribunal held that the unauthenticated, single page unaudited financial statements obtained under exchange of information are unreliable and that reliance upon them without furnishing copies to the assessee contravenes principles of natural justice. Likewise, the Tribunal found use of the survey report (which was not furnished to the assessee and was carried out after the assessment order) improper - authorities must furnish materials used and give opportunity to rebut. Consequently the Tribunal rejected conclusions premised on those materials, including the CIT(A)'s reclassification of the AE as low risk trader based on the survey. [Paras 30, 31]

Reliance on the unaudited exchanged financials and the non furnished survey report rejected; findings based on those materials overruled.

Disallowance under section 36(1)(iii) for alleged diversion of interest bearing funds - Whether the enhancement by CIT(A) disallowing interest under section 36(1)(iii) on the theory of diversion of interest bearing funds (computed on the downward adjustment) was sustainable. - HELD THAT: - The Tribunal observed that the disallowance under section 36(1)(iii) was predicated on the downward TP adjustment upheld by lower authorities. As the Tribunal deleted the TP downward adjustment and held the price paid to the AE to be at arm's length, the assumed diversion of interest bearing funds ceased to exist. The enhancement was therefore hypothetical and could not be sustained in absence of the underlying TP adjustment. [Paras 36, 37]

Enhancement disallowing interest under section 36(1)(iii) deleted and AO directed to remove the addition from capital work in progress for the subsequent year as indicated.

Final Conclusion: The appeal is partly allowed: interest disallowance under section 14A/Rule 8D(ii) and additions to book profit under section 115JB on that account are deleted; interest income from earmarked deposits in the pre operative year shall reduce capital work in progress; the TPO's transfer pricing downward adjustment and the CIT(A)'s enhancement (including section 36(1)(iii) disallowance) are set aside and the assessee's 'Other Method' under Rule 10AB accepted; reliance on unaudited exchanged financials and an unfurnished survey report was rejected.

Working capital adjustment - comparability adjustment under Rule 10B - arm's length price (ALP) under TNMM - benchmarking of interest on External Commercial Borrowing (ECB) - acceptance of LIBOR+275 basis points as arm's length

Working capital adjustment - comparability adjustment under Rule 10B - arm's length price (ALP) under TNMM - Allowability of working capital adjustment claimed by the assessee while determining ALP under TNMM - HELD THAT: - The assessee had furnished detailed computations of working capital adjustment in the paper book (pages 325-337) which were not considered by the Revenue. The DRP rejected the claim on grounds that year end receivables/payables do not demonstrate the impact on price, cost or profits and that various factors (business cycle, segmental disclosures, trade vs non trade classification, and differing cost of capital) prevent a reasonably accurate adjustment. The Tribunal examined precedents where identical DRP observations were considered and led to directions that the TPO/Assessing Officer decide the issue afresh after considering the information furnished by the assessee. Following those Co ordinate Bench decisions and noting that the assessee had placed the working papers before the authorities, the Tribunal set aside the issue to the file of the Assessing Officer/TPO for fresh adjudication, directing consideration of the material already furnished and any further relevant information the authorities may require. The Tribunal did not finally adjudicate the quantum of adjustment but remitted the matter for fresh decision in light of the submissions and computations on record. [Paras 6, 8]

Issue set aside to the Assessing Officer/Transfer Pricing Officer to decide afresh after considering the working capital computations and relevant information furnished by the assessee.

Benchmarking of interest on External Commercial Borrowing (ECB) - acceptance of LIBOR+275 basis points as arm's length - arm's length price (ALP) under TNMM - Whether interest paid on the assessee's ECB at LIBOR+275 basis points is at arm's length - HELD THAT: - The Revenue disputed the interest rate, contending that an arm's length spread would be LIBOR+200 bps (or below LIBOR+200 bps for a four year term). The assessee established that the ECB term was for five years, for which a spread of 300 bps is permissible under the DRP's own reasoning, and produced earlier orders where LIBOR+2.75% had been accepted for prior assessment years. On recording that the loan term is five years and noting prior acceptance of LIBOR+2.75% in contemporaneous proceedings under section 92CA(3), the Tribunal found no reason to interfere with the assessee's benchmarked interest rate and allowed the ground. [Paras 12]

Payment of interest on ECB at LIBOR+275 basis points accepted as arm's length; ground allowed.

Final Conclusion: Appeal partly allowed: the working capital adjustment issue is remitted to the Assessing Officer/Transfer Pricing Officer for fresh consideration of the computations and information furnished by the assessee; the benchmarking of interest on the ECB at LIBOR+275 basis points is accepted as arm's length and upheld.

Cancellation of registration under section 12AB(4) - Distinction between registration under section 12A and registration under section 12AB - Law applicable is the law in force in the assessment year - Prospective operation of statutory amendment - Scope for independent fresh consideration of registration for subsequent assessment years

Cancellation of registration under section 12AB(4) - Distinction between registration under section 12A and registration under section 12AB - Law applicable is the law in force in the assessment year - Prospective operation of statutory amendment - Validity of cancelling the assessee's registration granted under section 12A (effective for AY 2021-22) by invoking section 12AB(4) as amended - HELD THAT: - The Tribunal held that the registration originally granted under section 12A (dated 04/06/1992), which covered the previous year 2020-21 relevant to assessment year 2021-22, could not be cancelled by invoking the substituted provisions of section 12AB(4) introduced by the Finance Act, 2022 w.e.f. 01/04/2022. Applying the settled principle that the law to be applied in income tax matters is the law in force in the relevant assessment year, the Tribunal found that the amended 12AB(4) provisions operate prospectively and do not permit retrospective cancellation of a 12A registration for the earlier assessment year. Consequently, cancellation with retrospective effect to AY 2021-22 by resort to the post 1.4.2022 formulation of section 12AB(4) was held to be bad in law. [Paras 6, 8]

The order of the PCIT cancelling the registration under section 12A/12AB with effect from previous year 2020-21 (AY 2021-22) by invoking section 12AB(4) as amended is quashed.

Scope for independent fresh consideration of registration for subsequent assessment years - Cancellation of registration under section 12AB(4) - Whether the PCIT may independently consider cancellation of the registration granted under section 12AB for assessment years 2022-23 to 2026-27 - HELD THAT: - The Tribunal clarified that the PCIT's assumption of jurisdiction to cancel a 12A registration for AY 2021-22 did not validate cancelling the subsequent 12AB registration for AYs 2022-23 to 2026-27 on the basis of the earlier year. The Tribunal held that alleged violations in AY 2021-22 cannot be the basis for cancelling the separate registration granted under section 12AB for later assessment years. However, the PCIT is at liberty to initiate fresh proceedings and, after independent consideration under the correct statutory provisions, pass an order under section 12AB(4) (as applicable to those years) if so advised. [Paras 8]

Cancellation of the 12AB registration for AYs 2022-23 to 2026-27 cannot be sustained on the basis of the 12A year violation; the PCIT may, if so advised, pass a fresh independent order under section 12AB(4) for those years.

Specified violations under the Explanation to section 12AB(4) - Interaction between assessment proceedings and cancellation proceedings - Adjudication of factual allegations of specified violations (cash collections, diversion to trustees, genuineness of activities) relied upon by PCIT for cancellation - HELD THAT: - The Tribunal did not decide the substance of the factual contentions on specified violations (such as alleged cash collections, misappropriation by employees, or application of income for benefit of trustees). Those grounds (contentions numbered 5-11 and related factual submissions) were rendered infructuous by the Tribunal's primary legal finding concerning the invalidity of retrospective cancellation under section 12AB(4). The Tribunal therefore did not adjudicate these factual issues on merits in this order. [Paras 17]

The factual contentions regarding specified violations were not finally adjudicated in this order and remain without determination in view of the quashing of the retrospective cancellation.

Final Conclusion: The Tribunal partly allowed the appeal: the PCIT's order cancelling registration with effect from previous year 2020-21 (AY 2021-22) by invoking section 12AB(4) as amended is quashed; the PCIT may, if so advised, independently consider and, after fresh proceedings, decide cancellation of the registration granted under section 12AB for assessment years 2022-23 to 2026-27. Factual allegations of specified violations were not finally determined in this order.

Diversion of imported goods to the open market - misuse of Advance Authorisation / violation of condition of Advance Authorisation - principles of natural justice and denial of cross-examination - admissibility and evidentiary value of statements recorded under Section 108 of the Customs Act - undervaluation and enhancement of transaction value - disallowance of benefit under Customs Notification due to mens rea and diversion - imposition of penalty under the Customs law for misuse of duty-free import facility

Diversion of imported goods to the open market - misuse of Advance Authorisation / violation of condition of Advance Authorisation - Findings that imported raw material cleared duty free under Advance Authorisation were diverted to the open market and not delivered to the declared actual user premises were upheld. - HELD THAT: - The Tribunal accepted the adjudicating authority's conclusion that multiple consignments were not delivered at the factory premises specified in the Advance Authorisation. The conclusion was supported by corroborative material including statements of transporters and buyers, an inter departmental letter from Himachal Pradesh authorities, panchnama findings, and investigative tracing of consignments and deliveries. The Tribunal found that the Revenue had investigated each consignment and demonstrated how and where the consignments were disposed, and that the Advance Authorisation facility was misused to clear goods duty free which were subsequently diverted to the open market. [Paras 6]

Upheld the adjudicating authority's finding of diversion and misuse of the Advance Authorisation.

Principles of natural justice and denial of cross-examination - The challenge that denial of cross examination of certain witnesses violated principles of natural justice was rejected. - HELD THAT: - The Tribunal noted that the Department had permitted cross examination of some witnesses but not of others, and that the appellants and director had not cooperated with investigations or produced evidence to counter the material relied upon. The adjudicating authority's reasons for not permitting broader cross examination were held to be cogent, and the Tribunal applied established precedents that formal cross examination is not an absolute requirement where the show cause notice sets out the material relied upon and the party has an opportunity to meet it. The Tribunal also observed that requests for extensive cross examination could be used as dilatory tactics. [Paras 6]

Held that there was no violation of principles of natural justice in the limited grant of cross examination; the contention was without merit.

Undervaluation and enhancement of transaction value - admissibility and evidentiary value of statements recorded under Section 108 of the Customs Act - The adjudicating authority's enhancement of declared values (undervaluation) was sustained. - HELD THAT: - The Tribunal accepted the Revenue's reliance on supplier declarations from Hong Kong and other materials showing higher actual values than those declared before Indian Customs. The Tribunal also confirmed that confessional or explanatory statements recorded under Section 108 are admissible and can be relied upon to determine transaction value where supported by retrieved documents and admissions. Applying these principles, the Tribunal upheld the enhanced values adopted in the impugned order for the specified bills of entry. [Paras 6, 7]

Upheld the enhancement of declared values and the use of statements/evidence relied upon for valuation.

Disallowance of benefit under Customs Notification due to mens rea and diversion - imposition of penalty under the Customs law for misuse of duty-free import facility - Benefit of Customs Notification No. 99/2009-Cus was denied and penalties/penal consequences were sustained on the finding of mens rea and diversion. - HELD THAT: - Given the established diversion of duty free imports and the corroborative evidence of connivance, the Tribunal agreed that the statutory concession could not be extended. The Tribunal found mens rea established as raw material imported duty free was diverted instead of being used in manufacture for export. The DGFT correspondence showing issuance of show cause/demand notices was noted to negate the appellant's claim of discharged export obligation. Consequent penalties and demands imposed in the adjudicating order were not interfered with. [Paras 6, 7]

Denied the Notification benefit and upheld penalties and demands on account of misuse and mens rea.

Admissibility and evidentiary value of statements recorded under Section 108 of the Customs Act - Statements recorded under Section 108 admitting custody, sale or purchase of imported goods were held to have evidentiary value and were relied upon. - HELD THAT: - The Tribunal reiterated that confessional or admissionary statements recorded under Section 108 form valid evidence under the Evidence Act and may be the basis for demand or penalty where voluntary and corroborated. The Tribunal observed that co noticees' statements admitting custody and sale of goods were not retracted and therefore could be adopted to establish disposition of goods and transaction values. Reliance was placed on settled authorities that admissions need not be further proved. [Paras 7]

Accepted the evidentiary value of the Section 108 statements and relied on them to uphold findings and demands.

Final Conclusion: The Tribunal dismissed all four appeals, upholding the adjudicating authority's findings of diversion and misuse of Advance Authorisation, the enhanced valuation, denial of Notification benefit, the reliance on admissible Section 108 statements, and the penalties and demands imposed; the appellants' challenge on denial of cross examination and natural justice failed.

Royalties and licence fees related to the imported goods - condition of the sale - transaction value - addition to transaction value under Rule 10(1)(c) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - rejection and redetermination of transaction value

Royalties and licence fees related to the imported goods - condition of the sale - addition to transaction value under Rule 10(1)(c) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - Whether lump sum and periodical patent and technology know how fees paid to the foreign collaborator are includible in the transaction value - HELD THAT: - Rule 10(1)(c) requires inclusion of royalties and licence fees in the transaction value only where such payments are payable by the buyer as a condition of the sale of the imported goods. The Tribunal examined the licence and royalty provisions of the agreement and found no stipulation that payment of the lump sum fee or running royalties was a pre condition of importing or acquiring the machinery. The agreement demonstrates that the payments relate to the license to use technology and to manufacture licensed components (royalty payable on casting count and minimum annual guarantees), and are incurred in relation to post import manufacturing activities rather than as a prerequisite for the sale of the imported machinery. Absent contractual evidence that these payments were a condition of sale of the imported goods, the department failed to establish the necessary nexus to the import transaction. Applying the principle in Toyota Kirloskar and subsequent Tribunal decisions, the royalty and technical know how fees are not includible in the transaction value under Rule 10(1)(c). [Paras 13]

Royalty and technical know how fees are not to be added to the transaction value.

Transaction value - rejection and redetermination of transaction value - Whether remand to the adjudicating authority to redetermine the transaction value was necessary and lawful - HELD THAT: - The original order recorded that the 'transaction value is rejected' but contained no discussion or re determination of an alternate transaction value; the adjudicating authority proceeded to load royalties notwithstanding lack of reasons for rejecting the declared value. The Department's appeal on that procedural ground resulted in the Commissioner (Appeals) remanding the matter for redetermination. The Tribunal found the original finding of rejection to be patently erroneous and observed that when the sole question before SVB was whether royalties should be added, there was no basis to reject the declared transaction value. Because the department did not dispute the declared transaction value and no substantive grounds were stated to reject it, there was no requirement to remit for re determination. Consequently the declared transaction value is upheld and remand for this purpose was unnecessary. [Paras 14]

No remand required; the declared transaction value is upheld and the remand to redetermine transaction value is unwarranted.

Final Conclusion: The appeal is allowed: the additions of lump sum and running royalty/technical know how fees to the transaction value under Rule 10(1)(c) are set aside because such payments are not a condition of the sale of the imported machinery; the declared transaction value is upheld and remand for redetermination of transaction value is unnecessary.

Unjust enrichment - refund of excess customs duty - passing on of duty / incidence of duty - price fixation based on London Metal Exchange (LME) - provisional assessment and finalization - reliance on precedents for same facts

Unjust enrichment - refund of excess customs duty - passing on of duty / incidence of duty - price fixation based on London Metal Exchange (LME) - reliance on precedents for same facts - The First Appellate Authority was justified in allowing the refund by holding that the respondent's claim was not hit by unjust enrichment. - HELD THAT: - The Tribunal examined whether grant of the refund would result in unjust enrichment. It accepted the factual position - undisputedly the final product price was determined by reference to LME and was not under the control of the respondent - and relied on this Bench's earlier Final Orders in the respondent's own case together with the principle in State of Rajasthan & Ors. v. Hindustan Copper Ltd. The Court observed that where the price of the final product is fixed on LME basis and bears no relation to the cost of raw material or customs duty, the question of passing on the duty to buyers does not arise and unjust enrichment is not made out. The Revenue failed to distinguish the prior orders, did not place any evidence of change in facts or law, nor show any higher forum challenge to those orders. In these circumstances the Tribunal found no merit in the Revenue's contention and declined to disturb the First Appellate Authority's allowance of the refund. [Paras 5, 6, 7, 8]

Revenue's challenge dismissed; the impugned order allowing the refund on the ground that there was no unjust enrichment is upheld.

Final Conclusion: The Revenue's appeal is dismissed; the First Appellate Authority's order allowing the refund - the claim not being hit by unjust enrichment given LME-based pricing - is affirmed.

Manufacturer-specific anti-dumping duty - reliability of commercial invoices, packing lists and certificates of origin - burden of proof for alleged mis-declaration - confiscation and option of redemption - imposition of penalty for mis-declaration

Manufacturer-specific anti-dumping duty - reliability of commercial invoices, packing lists and certificates of origin - burden of proof for alleged mis-declaration - Whether the appellant was correctly entitled to claim the lower, manufacturer specific anti dumping duty on the imported PVC resin on the basis that M/s. Xinjiang Shengxiong Chlor Alkali Co. Ltd. was the manufacturer. - HELD THAT: - The Tribunal examined the documentary record produced with the bill of entry - commercial invoice, packing list, certificate of origin and a categorical supplier certificate - which consistently identified M/s. Xinjiang Shengxiong Chlor Alkali Co. Ltd. as the manufacturer while naming another entity as exporter. The certificate of analysis contained manufacturing parameters ordinarily available with manufacturers. An independent certificate of origin by the Chinese authority corroborated that the named exporter had exported the goods and that the manufacturer was the Alkali Company. The departmental reliance on the name imprinted on bags was held insufficient to displace the otherwise consistent and unrebutted documentary evidence identifying the manufacturer. On this basis the Tribunal concluded that the claim for the lower manufacturer specific rate was established and that the department had not met the burden to show mis declaration of the manufacturer. [Paras 7, 8]

The Bill of Entry was correctly filed claiming the lower, manufacturer specific anti dumping duty; the departmental demand for higher duty was not sustainabl e.

Confiscation and option of redemption - imposition of penalty for mis-declaration - re-assessment based on alleged mis-declaration - Whether the orders of re assessment, confiscation (with option of redemption) and penalty imposed on the importer could be sustained in view of the Tribunal's finding on manufacturer identity. - HELD THAT: - The adjudicatory measures - re assessment to levy the higher anti dumping duty, confiscation with option of redemption and a penalty framed on the premise of mis declaration - were founded on the department's conclusion that the goods were not produced by the manufacturer claimed in the import documents. Having held that the documentary evidence proves the claimed manufacturer, the factual foundation for re assessment, confiscation and penalty fell away. Consequently, the appellate order maintaining those measures could not be sustained. [Paras 4, 8]

The re assessment, confiscation (and option of redemption) and the penalty imposed could not be upheld and the appeals are allowed with consequential relief.

Final Conclusion: Appeals allowed; departmental appeals dismissed. The Tribunal found the importer entitled to the lower manufacturer specific anti dumping duty on the basis of consistent and unrebutted documentary evidence identifying the manufacturer, and therefore the impugned re assessment, confiscation and penalty could not be sustained.

Reliability of statements recorded under duress - retraction of statement and requirement of examination-in-chief before reliance - burden of proof for undervaluation and need for contemporaneous import data - proforma invoices/quotations cannot alone justify redetermination of transaction value - inadmissibility of electronic evidence without compliance with Section 138C of the Customs Act - sequential application of Customs Valuation Rules

Reliability of statements recorded under duress - retraction of statement and requirement of examination-in-chief before reliance - Initial inculpatory statement of the director dated 13.10.2010 could not be relied upon without the adjudicating authority first satisfying itself about voluntariness by examining the maker of the statement. - HELD THAT: - The Tribunal found serious doubts surrounding the circumstances in which the director's initial statement was recorded, including medical evidence of injuries, subsequent retraction by affidavit, and a sequence of later exculpatory statements. Given these circumstances the onus shifted to the department to prove voluntariness. The investigating officer ought not to have left proof of voluntariness to the adjudicating authority; instead the adjudicating authority was required to examine the declarant in-chief before placing reliance on the retracted statement. In absence of such examination and discharge of burden, the inculpatory statement could not form a safe basis for adjudication. [Paras 13]

Initial statement dated 13.10.2010 not relied upon; it ought to have been subjected to examination-in-chief and proof of voluntariness before being admitted as evidence.

Burden of proof for undervaluation and need for contemporaneous import data - proforma invoices/quotations cannot alone justify redetermination of transaction value - sequential application of Customs Valuation Rules - Department failed to discharge the burden of proving undervaluation as there was no adequate evidence of contemporaneous imports of identical or similar goods at higher values and reliance was placed primarily on proforma invoices. - HELD THAT: - The Tribunal emphasised that to reject declared transaction value the department must gather cogent evidence of comparable imports around the same time. Mere reliance on proforma invoices or quotations is insufficient. The decision reiterates that the Customs Valuation Rules must be applied sequentially and that, absent evidence of contemporaneous higher-priced imports or remittance of additional payments, the declared invoice value must prevail and benefit of doubt goes to the importer. [Paras 9, 10, 12, 13]

Enhancement of value on basis of proforma invoices was unsustainable; department did not discharge burden of proving undervaluation by contemporaneous import data or proof of extra remittance.

Inadmissibility of electronic evidence without compliance with Section 138C of the Customs Act - proforma invoices/quotations cannot alone justify redetermination of transaction value - Data allegedly retrieved from the appellants' computer and proforma invoices recovered could not be accepted for valuation enhancement without demonstrating compliance with statutory safeguards (Section 138C) and proper procedural steps. - HELD THAT: - The Tribunal noted that electronic evidence can be relied upon only if statutory conditions under Section 138C are complied with. The Panchnama and seizure procedure raised procedural infirmities (including deficiencies in recording computer particulars and operators) and selective production of seized documents. Consequently, the electronic material and proforma invoices could not be treated as conclusive corroboration to negate the declared transaction value. [Paras 8, 11, 13]

Electronic evidence and proforma invoices were not admissible and could not justify re-determination of value in absence of compliance with Section 138C and proper procedural safeguards.

Final Conclusion: The impugned order confirming demand on the basis of the retracted statement, proforma invoices and electronic material is set aside for lack of proof of voluntariness, failure to discharge burden of proving undervaluation by contemporaneous data or remittance, and non-compliance with statutory safeguards; appeals allowed with consequential relief.

Inclusion of royalty in transaction value under Customs Valuation Rules - inclusion of post-import advertising and sales-promotion expenses in transaction value - condition of sale test for additions to transaction value - nexus requirement between royalty and imported goods - definition and test for "related persons" in valuation rules - post-import expenditure incurred on buyer's own account

Inclusion of royalty in transaction value under Customs Valuation Rules - nexus requirement between royalty and imported goods - condition of sale test for additions to transaction value - definition and test for "related persons" in valuation rules - Royalty paid to foreign licensors is not to be added to the transaction value of imported raw materials in the appellant's case. - HELD THAT: - The Tribunal found that royalty under the Jockey and Speedo agreements was payable on net sales of finished/licensed products manufactured and sold by the appellant, and not on the imported raw materials. The Customs Valuation Rules permit addition of royalty only if it is directly related to the imported goods, is paid by the buyer to the seller (directly or indirectly) as a condition of sale, and is not already included in the invoice price. On the facts, the royalty related to finished products manufactured by the appellant and not to the raw materials imported; mere containment of imported inputs within finished goods does not establish the requisite nexus. Further, sole distributorship did not, by itself, render the parties "related" under the valuation rules: Explanation II to Rule 2(2) applies only if the case falls within the sub-clauses of that rule. The adjudicating authority relied primarily on distributorship and contractual clauses without admissible evidence to establish relatedness or that the royalty was a condition of the import transactions. Applying precedents and the statutory tests, the Tribunal held there was no basis to add the royalty to the transaction value. [Paras 24, 25, 26, 29]

Royalty payments were not includible in the assessable value of the imported raw materials; the demand on this ground is unsustainable.

Inclusion of post-import advertising and sales-promotion expenses in transaction value - condition of sale test for additions to transaction value - post-import expenditure incurred on buyer's own account - Advertisement and sales-promotion expenses incurred by the appellant in India are not includible in the transaction value of the imported goods. - HELD THAT: - Under Rule 10(1)(e) the transaction value may include payments made by the buyer as a condition of sale to the seller or to a third party to satisfy an obligation of the seller. The Tribunal found no contractual obligation requiring the appellant to incur any fixed amount or fixed percentage of invoice value towards advertising or sales promotion as a pre-condition of import or sale. The advertising activities were post-import expenditures undertaken by the appellant on its own account and not to discharge any contractual obligation of the seller. Reliance on the agreement for mere consultation or marketing responsibility did not satisfy the statutory precondition for addition. In the absence of the prescribed condition precedent or admissible evidence showing the payments discharged an obligation of the seller, the adjudicating authority's inclusion of advertising costs was unsustainable. [Paras 27, 28, 29]

Advertising and sales-promotion expenses cannot be added to the transaction value; the demand on this ground is set aside.

Final Conclusion: The Tribunal set aside the adjudicating order: royalty and advertisement expenses were not includible in the assessable value of the imported goods on the facts and legal tests applied; no wilful suppression was shown and the appeals are allowed with consequential reliefs in accordance with law.

Classification under Customs Tariff - demineralised fish scales vs other protein substances - advance authorisation exemption Notification No. 96/2009 - interpretative rules of Customs Tariff (Rule 1, Rule 3, Rule 4) - time bar / limitation and extended period under Section 28 - restricted imports and sanitary import permit - confiscation and redemption fine - penalties for mis declaration and suppression

Demineralised fish scales vs other protein substances - classification under Customs Tariff - Rule 4 of General Rules of Interpretation - Imported consignments are classifiable as demineralised (decalcified) fish scales under Chapter heading 0511 and not as 'other protein substances' under Chapter heading 3504. - HELD THAT: - Test reports of CIFT and CMFRI established that the imported goods had undergone demineralisation/decalcification and, while containing a high proportion of collagen protein, remained in the form of processed fish scales (with characteristic appearance and odour) at the time of import. The Tribunal applied the tariff interpretation rules and chapter/explanatory notes and held that a source of protein (fish waste/scales) is not thereby converted into an 'other protein substance' simply because it contains protein; a specific entry for fish waste/scales in Chapter 05 is to be preferred over the more general Chapter 35 entry. The Court therefore concluded that the goods are more akin to the products described in Chapter 05 and not to final protein substances of Chapter 35.

Classification upheld under Chapter Heading 0511 (demineralised fish scales); not classifiable under Heading 3504 as imported.

Advance authorisation exemption Notification No. 96/2009 - time bar / limitation and extended period under Section 28 - Benefit of Notification No. 96/2009 (advance authorisation exemption) is upheld for the earlier consignments cleared on the basis of earlier test reports and is not liable to be denied retrospectively for those consignments. - HELD THAT: - Many earlier consignments had been cleared on the basis of earlier test reports (which identified the material as 'fish protein') and the conditions of Notification No. 96/2009 were satisfied at the time of clearance. The Tribunal relied on the settled position that the Revenue cannot invoke suppression to revisit/time barred earlier clearances merely because fresh test reports were obtained later; demands barred by the normal period of limitation cannot be revived by subsequent amendments. Accordingly, the Tribunal allowed the benefit of the notification for the consignments for which imports had been accepted earlier under that scheme.

Advance authorisation exemption allowed for the earlier consignments (42 bills of entry); corresponding demand is not sustainable for those consignments.

Restricted imports and sanitary import permit - mis declaration and denial of exemption prospectively - For consignments where samples were physically examined and tested thereafter, the Revenue's demand is sustained prospectively: six specified bills of entry (Sl. Nos. 43-48) are held exigible and nine provisionally assessed bills are to be reassessed under the correct classification. - HELD THAT: - On physical examination of later consignments and resultant test reports, the goods were found to be demineralised fish scales; documentary and testimonial material indicated that the importer was aware of the true nature of those consignments and that import restrictions (sanitary permit requirements) applied. The Tribunal therefore denied the benefit of the advance authorisation prospectively for consignments after the date samples were drawn, upheld the duty demand for six bills of entry, and directed reassessment of nine provisionally assessed bills by reclassifying them under Chapter 05 as appropriate.

Demand upheld for bills of entry Sl. Nos. 43-48; nine provisionally assessed consignments to be reassessed and reclassified under Chapter 0511 as required (matter remitted for reassessment).

Confiscation and redemption fine - penalties for mis declaration and suppression - Redemption fine/confiscation and the penalties sought do not arise in respect of the consignments for which the advance authorisation benefit is sustained; no penalty/redemption fine is imposed in respect of those consignments. - HELD THAT: - Because classification under Chapter 35.04 was accepted for the earlier consignments at the time of clearance (on the basis of earlier test reports) and the advance authorisation conditions were satisfied, the Tribunal held that confiscation/redemption fines and penalties could not be sustained for those consignments. The Tribunal further noted applicable precedents limiting imposition of redemption fine/confiscation where provisional assessment and release processes were followed. For the consignments where demand is upheld prospectively, the order directed reassessment/appropriate proceedings rather than imposing redemption fine for consignments already allowed.

No redemption fine or penalty sustained in respect of consignments for which exemption was allowed; penalties/redemption fine not imposed on those consignments.

Final Conclusion: Appeal partly allowed: imported goods are classifiable as demineralised fish scales under Chapter 0511 (not Chapter 3504). Benefit of Notification No. 96/2009 granted for earlier consignments cleared on the basis of earlier tests (42 bills); demand upheld for six later bills (Sl. Nos. 43-48) and nine provisionally assessed consignments are remitted for reassessment and reclassification under Chapter 0511. Redemption fine/penalties do not arise for consignments where exemption was sustained.

Burden of proof under Section 101 of the Indian Evidence Act, 1872 and onus shifting under Section 102 - attachment of properties upon notification under Section 3(3) of the Special Court (Trial of Offences relating to transactions in Securities) Act, 1992 - powers and duties of the Custodian under Sections 3 and 11 of the Special Court Act, 1992 - proof of communications from public/government offices and admissibility of government letters - evaluation of documentary evidence after prolonged lapse of time

Burden of proof under Section 101 of the Indian Evidence Act, 1872 and onus shifting under Section 102 - proof of communications from public/government offices and admissibility of government letters - Whether the Custodian discharged the primary burden of proving that the appellants remained debtors of the alleged benami companies and whether reliance on an unproved communication from the Income Tax Department was permissible to establish outstanding dues. - HELD THAT: - The Court held that the primary burden to establish the existence of the debt lay on the Custodian and that only after the Custodian discharged that burden could the onus shift to the appellants to rebut it. The Custodian's case rested substantially on a communication dated 5th May, 1998 from the Income Tax Department, yet no witness from the Department was produced and the communication was not proved by proper evidence before the Special Court. Consequently the requisite proof of subsisting debt was not established. The Court further observed that the appellants had given a plausible explanation that, owing to the long lapse of time since the transactions (1996-1997), books of account might not be available and that repayment by cheque in part was supported by a passbook entry; in such circumstances it was not incumbent on the appellants to retain complete documentary records for over a decade. The Special Court erred in effectively shifting the burden onto the appellants without the Custodian first discharging its primary evidential obligation and in drawing adverse inference from non-production of documents where the Custodian had failed to produce the foundational evidence it relied upon. [Paras 36, 37, 38, 39]

Custodian failed to discharge primary burden of proof; reliance on unproved Income Tax Department communication was impermissible; findings against appellants on this basis unsustainable.

Attachment of properties upon notification under Section 3(3) of the Special Court (Trial of Offences relating to transactions in Securities) Act, 1992 - powers and duties of the Custodian under Sections 3 and 11 of the Special Court Act, 1992 - evaluation of documentary evidence after prolonged lapse of time - Whether the Special Court correctly directed recovery from the appellants as garnishees of the notified person given the timing of notification and the nature of attachments. - HELD THAT: - The Court noted that notification under Section 3(2) effects attachment only from the date of such notification under Section 3(3); respondent No.2 was notified on 6th October, 2001, whereas the alleged borrowings occurred in 1996-1997. Thus appellants could not reasonably have been expected at the time of borrowing to suspect that the lender companies were benami or that the Act would operate against them. More importantly, exercise of powers for recovery requires legally sufficient evidence that the debts subsist; since the Custodian did not prove that foundational fact and relied on an unproved departmental communication, the Special Court's direction to treat appellants as liable garnishees could not stand. [Paras 31, 32, 35, 36]

Special Court's recovery directions against the appellants were unsustainable; attachment/ recovery could not be ordered on the basis of unproven assertions and belated notification.

Final Conclusion: Appeals allowed; impugned judgments of the Special Court quashed and set aside. Amounts deposited by the appellants in compliance with the interim order shall be reimbursed forthwith. Pending applications disposed of.

Limitation - condonation of delay under the Insolvency and Bankruptcy Code, 2016 - bar on extension of limitation under Section 62 of the Insolvency and Bankruptcy Code, 2016 - dismissal on the ground of limitation - finality of limitation period

Condonation of delay under the Insolvency and Bankruptcy Code, 2016 - limitation - dismissal on the ground of limitation - Civil Appeals dismissed for delay beyond the period which can be condoned under Section 62 of the Insolvency and Bankruptcy Code, 2016. - HELD THAT: - The Court recorded that there was a delay of 216 days and 141 days respectively in filing the Civil Appeals and expressly found that such delays exceeded the maximum period which can be condoned under Section 62 of the Insolvency and Bankruptcy Code, 2016. Having concluded that the delay was beyond the statutory ceiling for condonation, the Court dismissed the appeals on the ground of limitation. No further examination of the merits was undertaken because the jurisdiction to entertain the appeals was barred by the uncondonable delay. [Paras 1, 2]

Civil Appeals dismissed on the ground of limitation as the delay exceeded the maximum period allowable for condonation under Section 62 of the Insolvency and Bankruptcy Code, 2016.

Final Conclusion: The appeals were dismissed for want of limitation: the recorded delays (216 days and 141 days) exceeded the maximum period capable of being condoned under Section 62 of the Insolvency and Bankruptcy Code, 2016, and therefore the Court declined to admit the appeals.

Limitation under Section 62 of the Insolvency and Bankruptcy Code, 2016 - condonation of delay - maintainability of civil appeals - dismissal as withdrawn - liberty to pursue remedies before the National Company Law Appellate Tribunal

Limitation under Section 62 of the Insolvency and Bankruptcy Code, 2016 - condonation of delay - maintainability of civil appeals - Civil appeals barred by limitation under Section 62 of the IBC and therefore not to be entertained. - HELD THAT: - The Court noted the impugned order date and computed the expiry of the prescribed 45-day period and the further condonable period of 15 days. The Special Leave Petition filed earlier did not prevent the expiry of the limitation period under Section 62. The Civil Appeals were filed after an unexplained delay of 474 days, which far exceeded the period eligible for condonation under Section 62 of the Insolvency and Bankruptcy Code, 2016. In view of the excessive delay, the Court declined to entertain the appeals on grounds of limitation. [Paras 1, 2, 4, 5, 6]

Appeals are barred by limitation and the Court is not inclined to entertain them.

Dismissal as withdrawn - liberty to pursue remedies before the National Company Law Appellate Tribunal - Appellants' request to withdraw the Civil Appeals and the court's order following that request. - HELD THAT: - Counsel for the appellants sought leave to withdraw the Civil Appeals to enable pursuit of remedies before the National Company Law Appellate Tribunal; the respondents objected to granting any liberty. The Court accepted the appellants' request and dismissed the appeals as withdrawn. The Court expressly refrained from giving any opinion on the proposed course of action the appellants intend to follow before the Tribunal. [Paras 7, 8, 9, 10]

Appeals dismissed as withdrawn; no opinion expressed on the appellants' future course of action before the Tribunal.

Final Conclusion: Civil Appeals were not entertained on merits as they were barred by limitation under Section 62 of the IBC; the appellants were permitted to withdraw the appeals, which were dismissed as withdrawn, and the Court did not express any view on the remedies the appellants may pursue before the National Company Law Appellate Tribunal.

Substantial question of law - interference in appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016 - extension of time for deposit - consequences of default as envisaged in the appellate order

Substantial question of law - interference in appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016 - The NCLAT order dated 13 December 2023 does not raise any substantial question of law warranting interference by this Court under Section 62 of the Insolvency and Bankruptcy Code, 2016. - HELD THAT: - The Court considered the NCLAT order dated 13 December 2023 and concluded that it does not present any substantial question of law that would justify exercise of this Court's jurisdiction under the cited provision. Having found no such question of law, the Court declined to entertain interference with the NCLAT order and, on that basis, proceeded to dispose of the appeal. [Paras 1]

Appeal dismissed on the ground that no substantial question of law for interference was made out.

Extension of time for deposit - consequences of default as envisaged in the appellate order - The time granted by the NCLAT for deposit is extended until 8 April 2024, with the original consequences for default as specified in the NCLAT order to follow in the event of non-compliance. - HELD THAT: - On the request of the appellant's counsel, the Court exercised its discretion to extend the time for making the deposit which had been directed by the NCLAT. The extension is limited and conditional: the deposit period is extended only until 8 April 2024, and if the appellant defaults within that extended period, the consequences articulated in the NCLAT's order will apply. This extension was granted without altering the substantive tenor of the NCLAT order beyond the limited temporal relief. [Paras 2]

Time for deposit extended until 8 April 2024; default will attract the consequences specified in the NCLAT order.

Final Conclusion: The appeal is dismissed; however, the period for compliance with the NCLAT deposit direction is extended until 8 April 2024, subject to the original consequences for default set out by the NCLAT. Pending applications stand disposed of.

Section 7 application - one-time settlement (OTS) - deposit of disputed amount by investor as FDR - adjudicating authority to decide pending application after deposit - no expression of opinion on merits

Deposit of disputed amount by investor as FDR - one-time settlement (OTS) - Direction to the appellant/investors to deposit the previously agreed OTS amounts with interest as FDR in favour of the Registrar, NCLT, within a specified time - HELD THAT: - The Tribunal recorded that the appellant had offered to pay the OTS amounts earlier agreed with the banks and to deposit up-to-date interest at 12%. Noting that the Section 7 proceedings are pending before the Adjudicating Authority and that the appellant was unable to make the deposit by the earlier date fixed in the Tribunal's order of 29.02.2024, the Tribunal exercised its discretion to afford an opportunity in the ends of justice. The appellant and the investors were directed to deposit the OTS amounts (as identified in the record) together with 12% interest before the NCLT within 10 days by way of fixed deposit receipt in favour of the Registrar, NCLT. The direction is procedural and interlocutory, intended to preserve the parties' positions and facilitate the Adjudicating Authority's consideration of the pending Section 7 application. [Paras 10]

Appellant and the investors permitted to deposit the OTS amounts with 12% interest as FDR in favour of the Registrar, NCLT, within 10 days.

Section 7 application - adjudicating authority to decide pending application after deposit - no expression of opinion on merits - Disposition of the appeals and direction as to how the Adjudicating Authority should proceed on the pending Section 7 applications - HELD THAT: - The Tribunal observed that Section 7 applications filed by the banks remain pending before the Adjudicating Authority. It emphasised that whether the deposit is made or not, the Adjudicating Authority shall take an appropriate decision on the Section 7 applications after hearing both parties. Consequently, the Tribunal concluded there was no purpose in keeping these appeals pending and disposed of them, while expressly refraining from expressing any final view on the merits of the underlying dispute. The order thus leaves the substantive adjudication to the Adjudicating Authority, subject to the procedural outcome of the deposit directed above. [Paras 10, 11]

Both appeals disposed of; Adjudicating Authority to decide the pending Section 7 applications after hearing the parties, irrespective of whether the directed deposit is made; Tribunal refrained from expressing any opinion on merits.

Final Conclusion: Both appeals disposed of with directions permitting the appellant/investors to deposit the previously agreed OTS amounts with 12% interest as FDR in favour of the Registrar, NCLT within 10 days; the Adjudicating Authority to decide the pending Section 7 applications after hearing the parties; no final opinion expressed on the merits.

Prohibition on considering a resolution plan received from a person not in the final list of Prospective Resolution Applicants - Approval of resolution plan by the Committee of Creditors - Committee of Creditors' authority to modify invitation for Expression of Interest and issue fresh Form G - Restriction by the Committee of Creditors to consider only existing Prospective Resolution Applicants

Prohibition on considering a resolution plan received from a person not in the final list of Prospective Resolution Applicants - Approval of resolution plan by the Committee of Creditors - Whether the Adjudicating Authority could direct the Committee of Creditors to consider resolution plans of applicants whose names did not appear in the final list of Prospective Resolution Applicants - HELD THAT: - The Tribunal held that Regulation 39(1)(b) of the CIRP Regulations, 2016 expressly precludes the Committee of Creditors from considering any resolution plan received from a person who does not appear in the final list of Prospective Resolution Applicants. The orders of the Adjudicating Authority directing the CoC to consider plans of applicants whose names were not in the PRAs were therefore not sustainable. The court observed that neither Patanjali nor the other intervenors had submitted EOIs or appeared in the final list of PRAs (paras 9-10). [Paras 9, 10]

The direction to the CoC to consider resolution plans of persons not in the final list of Prospective Resolution Applicants is set aside.

Committee of Creditors' authority to modify invitation for Expression of Interest and issue fresh Form G - Restriction by the Committee of Creditors to consider only existing Prospective Resolution Applicants - Whether the Committee of Creditors could, without issuance of a fresh Form G, decide to restrict consideration to the existing Prospective Resolution Applicants and refuse new entrants - HELD THAT: - The Tribunal noted that Regulation 36A permits the CoC to modify the invitation for Expression of Interest and that the CoC may issue a fresh Form G to admit new applicants. Absent issuance of a fresh Form G, new applicants cannot be permitted to participate in the CIRP or have their resolution plans considered. The CoC had, by recorded resolution, decided to confine consideration to the Resolution Applicants appearing in the final list of PRAs dated 07.11.2023; in view of that resolution and the regulatory framework, the Adjudicating Authority's orders directing consideration of other applicants could not stand (paras 11-12). [Paras 11, 12]

The Committee of Creditors' decision to restrict consideration to applicants in the final list of PRAs is valid in the absence of a fresh Form G admitting new entrants; the impugned directions permitting consideration of other applicants are set aside.

Final Conclusion: Both appeals are allowed; the impugned orders dated 12.02.2024 and 21.02.2024 are set aside and the Committee of Creditors' decision to confine consideration to the Resolution Applicants in the final list of Prospective Resolution Applicants is upheld.

Section 45 twin conditions - proceeds of crime - money-laundering - beneficial owner - lifting of corporate veil - statements under Section 50 - Income Declaration Scheme declarations - prima facie satisfaction for bail

Section 45 twin conditions - prima facie satisfaction for bail - Whether the appellants satisfied the twin mandatory conditions in Section 45 of the PMLA for grant of bail - HELD THAT: - The Court confined itself to the twin conditions under Section 45-(i) reasonable grounds for believing the accused is not guilty of money-laundering and (ii) that the accused is not likely to commit any offence while on bail-and applied the principles laid down in Gautam Kundu and Vijay Madanlal Choudhary. On a prima facie appraisal of the material collected by the ED (including documentary material and witness statements), the Court found sufficient material to infer prima facie guilt and to conclude that the appellants had failed to satisfy the mandatory twin conditions. The Court therefore upheld the High Court's rejection of bail and dismissed the appeals. [Paras 13, 30, 32, 34]

Appellants failed to satisfy the twin conditions in Section 45; bail rejected and appeals dismissed.

Income Declaration Scheme declarations - proceeds of crime - Whether the fact that IDS declarations were held "void" under the Finance Act prevents those declarations or related findings from being relied on in PMLA proceedings - HELD THAT: - Although the IDS declarations filed by the appellants were declared void under Section 193 of the Finance Act, the Court held that the declarations and the concomitant findings by the Income Tax authorities and the High Court (that the declarations involved suppression/misrepresentation and that the investments belonged to another person) cannot be ignored in PMLA proceedings. The appellants could not be permitted to take advantage of their own wrongdoing; the observations and proceedings under the IDS/Income Tax proceedings substantiate the ED's case and are relevant for a prima facie determination under PMLA. [Paras 26, 29]

Voidness of IDS declarations does not preclude reliance on findings about suppression/misrepresentation for prima facie purposes in PMLA; such material supports the ED's case.

Statements under Section 50 - beneficial owner - lifting of corporate veil - Whether the ED's reliance on witnesses' statements under Section 50 and other material suffices prima facie to treat the companies as controlled/beneficially owned and to lift the corporate veil for the purposes of PMLA prosecution - HELD THAT: - The Court noted precedent that statements recorded under Section 50 are admissible and may establish involvement in money-laundering. On the record, several statements under Section 50 and corroborative material indicated that the appellant Satyendar Kumar Jain conceptualized and supervised accommodation entries, and that the four companies were directly or indirectly controlled by him and his family. The Court accepted that lifting the corporate veil is permissible where corporate structures are used as a facade for illegal activities and held there was sufficient prima facie material to regard the appellant as the beneficial owner for the purposes of the PMLA prosecution. [Paras 24, 25, 28]

Statements under Section 50 and other material furnished sufficient prima facie basis to treat the companies as controlled/beneficially owned and to lift the corporate veil for PMLA prosecution.

Proceeds of crime - prima facie satisfaction for bail - Whether the discrepancies in figures in the Prosecution Complaint and an asserted inadvertent error in the stated quantum vitiate the ED's case or render allegations vague - HELD THAT: - The Court considered the ED's affidavit explaining that a figure mentioned was inadvertent and that the investigation attributes the full amount to the conduct alleged. The Court found the explanation satisfactory and held that the inadvertent numerical discrepancy did not render the allegations vague or undermine the prima facie case. The appellants were not entitled to the benefit of such variance in figures for the purpose of satisfying Section 45. [Paras 11, 31]

Inadvertent error in numerical description did not vitiate the allegations; ED's explanation is acceptable and does not negate the prima facie case.

Final Conclusion: On a prima facie appraisal of the record and applying the statutory twin conditions in Section 45 of the PMLA (as expounded in Gautam Kundu and Vijay Madanlal Choudhary), the Court found sufficient material to conclude that the appellants had not discharged the burden to show they were not guilty and would not be likely to commit further offences while on bail; the High Court's rejection of bail is sustained and the appeals are dismissed.

Prima facie case - stage of framing charges - valuation/market value for proceeds of crime - Part B threshold under PMLA - reliance on prosecution material alone - proceeds parked in third party account

Valuation/market value for proceeds of crime - Part B threshold under PMLA - Whether the trial court erred in refusing discharge because the Enforcement Directorate's valuation of seized articles (relying on an NGO website) was not proper and therefore the PMLA threshold under Part B (Rs.30 Lakh) was not met. - HELD THAT: - The Court held that the correctness of the market value attributed to the seized articles is a disputed question of fact which cannot be conclusively determined at the stage of framing charges. Section 2(zb) of PMLA defines value by reference to market value, and when seized items have no lawful open market, an assessment of what they may fetch is relevant. The applicants did not specify on what basis they contend the value is below the statutory threshold. Consequently, it was not open to the High Court to re-appreciate valuation or to hold that the value was necessarily below the Part B limit; such factual controversy must be adjudicated by the trial court during trial. [Paras 5, 9, 18, 19, 20]

Valuation disputes and the question whether the Part B threshold is met are matters of fact for trial; no illegality in refusing discharge on this ground.

Proceeds parked in third party account - reliance on prosecution material alone - Whether suspicion regarding purported parking of proceeds in the mother's bank account and questioned income tax returns warranted discharge of the applicants. - HELD THAT: - The Court noted that the allegation that proceeds were parked in the co accused mother's account and that her income tax returns showed sudden inflation are matters forming part of the prosecution case. Absence of the Income Tax Department opening returns does not automatically negate the prosecution's material. At the discharge/framing stage the court is required to consider only whether prima facie material exists to proceed; the existence of contested documentary or financial facts relied upon by the prosecution does not, by itself, mandate discharge. [Paras 6, 10, 17, 21]

The challenged contentions about amounts parked and tax returns do not justify discharge; they are matters to be examined in trial.

Prima facie case - stage of framing charges - reliance on prosecution material alone - Whether the trial court applied the correct legal standard at the stage of framing charges and thereby committed any illegality in rejecting the discharge application. - HELD THAT: - The Court reiterated settled law that at the stage of Sections 227/228 (and their analogues) the court's task is limited to a prima facie evaluation of the prosecution material and not a full appreciation of evidence as for conviction. The trial court may sift the prosecution material to see if, taken at their face value, they disclose the ingredients of the offence but should not undertake a detailed assessment of probative value. Applying these principles to the record, the High Court found no demonstrable error in the trial court's conclusion that sufficient grounds existed to frame charges against the applicants. [Paras 13, 14, 15, 16, 21]

The trial court applied the correct prima facie standard and did not err in refusing discharge and framing charges.

Final Conclusion: The petition under Section 482 CrPC is dismissed; no abuse of process or legal error was found in the trial court's rejection of discharge and framing of charges, and the criminal proceedings shall continue for adjudication of the disputed factual questions at trial.

Summary order. Appeals dismissed following the order dated 16.07.2018 of a coordinate Bench; delay condoned and pending applications, if any, disposed of.

Air Travel Agency Services - Business Auxiliary Services - principal to principal relationship - commission as trade margin (sale and purchase) - extended period for issuance of show cause notice (suppression/mistatement) - classification under specific category vs general category

Air Travel Agency Services - Business Auxiliary Services - principal to principal relationship - commission as trade margin (sale and purchase) - classification under specific category vs general category - Whether the commission/margin earned by the appellant on purchase and sale of air tickets from other GSA/IATA agents is exigible to service tax as Business Auxiliary Services or is within Air Travel Agency Services (i.e., a trading margin on principal to principal sale/purchase). - HELD THAT: - The Tribunal found that the appellants, being IATA approved ticketing agents, purchase tickets in the ordinary course on behalf of their customers and sell them to customers, and that the relationship with co GSA/IATA operators is one of principal to principal rather than agent and principal. The show cause notice purportedly treated the commission retained by the appellant as remuneration for services rendered to co operators and classified it under Business Auxiliary Services. The Tribunal examined statutory definitions and prior Tribunal decisions and held that activities connected with booking of passage for travel by air fall squarely within the definition of Air Travel Agency Services, and that purchase from a GSA and resale to customers does not convert the trade margin into a distinct taxable service under Business Auxiliary Services. Applying the ratio of earlier decisions, the Tribunal concluded that the impugned classification under Business Auxiliary Services is not sustainable and set aside the order confirming tax liability on the commission/margin, allowing the appeal with consequential relief. [Paras 7, 8, 9, 11, 12]

The commission/margin is not exigible as Business Auxiliary Services and falls within Air Travel Agency Services; the impugned classification is set aside and the appeal allowed.

Extended period for issuance of show cause notice (suppression/mistatement) - Whether the extended period for issuance of the show cause notice could be invoked by Revenue in absence of evidence of suppression, mis statement, collusion or fraud. - HELD THAT: - The Tribunal accepted the appellant's submission that Revenue produced no evidence of suppression, mis statement, collusion or fraud to justify invocation of the extended period. It also noted that regular audits had been conducted and that Revenue, having raised the issue only in subsequent audits, could not validly resort to the extended period. On these grounds the Tribunal found force in the appellant's contention and rejected the invocation of the extended period for issuing the show cause notice. [Paras 11, 12]

Extended period could not be invoked; show cause notice issued beyond the normal limitation is not justified in the absence of suppression or fraud.

Final Conclusion: The Tribunal set aside the order confirming service tax demand under Business Auxiliary Services, held that the commission/margin constitutes trading activity covered by Air Travel Agency Services, rejected invocation of the extended period for the show cause notice, and allowed the appeal with consequential relief.

Liability under reverse charge mechanism - exemption of State Transport Undertakings from service tax - characterisation of STU activity vis-a -vis rent-a-cab service - extended period of limitation and requirement of intent to evade (suppression with mens rea)

Liability under reverse charge mechanism - exemption of State Transport Undertakings from service tax - characterisation of STU activity vis-a -vis rent-a-cab service - Appellant not liable to service tax under reverse charge for hired buses/taxis and legal consultancy services - HELD THAT: - The Tribunal applied precedents holding that State Transport Undertakings, constituted by statute and engaged in providing bus services for public convenience, do not fall within the taxable category of rent-a-cab or related renting services. Notification No.25/2012 dated 20.6.2012 exempts State Transport Undertakings from tax liability; on that basis and following the Tribunal and Supreme Court decisions cited, the appellant-being a statutory State Transport Undertaking discharging public functions without profit motive-cannot be treated as a service-provider liable to tax even under the reverse charge mechanism. The Tribunal therefore found no cogent basis to fasten service tax liability for receipt of hired buses/taxis or for payment to advocates/firm of advocates. [Paras 8]

Demand under reverse charge for the impugned services is not sustainable and is set aside.

Extended period of limitation and requirement of intent to evade (suppression with mens rea) - Extended period of limitation wrongly invoked by the department - HELD THAT: - The Tribunal held that invocation of extended limitation requires proof of suppression coupled with intent to evade duty. A mere disclosure omission revealed by departmental audit does not establish the requisite mens rea. Reliance was placed on Supreme Court authority that audit discovery alone is insufficient to invoke extended period unless deliberate evasion is shown. No evidence on record proved an intent by the statutory appellant to evade payment; consequently the extended period was held wrongly invoked in issuing the show cause notice. [Paras 9, 10]

Extended period of limitation cannot be invoked; consequential demand based on extended period is invalid.

Final Conclusion: The Order-in-Original confirming service tax demand and invoking extended limitation is set aside; the appeal is allowed and the impugned demand is quashed.

Programme Producers' Service - Advertising Service - Service Tax liability - Reconciliation of gross billing - TRU clarification - De novo adjudication - Principles of natural justice - Verification of records

Service Tax liability - Programme Producers' Service - Advertising Service - Reconciliation of gross billing - TRU clarification - Verification of records - Impugned demand and adjudication set aside and remitted for fresh adjudication. - HELD THAT: - The Tribunal found that the dispute primarily arose from the appellant's failure to furnish timely data and a coherent explanation correlating facts with law. The appellant has now offered to present detailed records and a reconciliation which, according to their calculations, substantially reduces the disputed liability. In view of this, the Tribunal did not decide the substantive question of taxable value or classification between Programme Producers' Service and Advertising Service, nor the applicability of the Tax Research Unit clarification relied upon by the appellant. Instead, the Tribunal set aside the original order and remanded the matter for de novo adjudication so that the original authority may verify the appellant's data, examine the submissions in light of the law and the TRU clarification, and apply the correct legal tests. The original authority is directed to follow the principles of natural justice, afford the appellant a reasonable and time bound opportunity to be heard both orally and in writing, and complete the process of verification expeditiously within ninety days of receipt of the Tribunal's order. [Paras 6, 7]

Set aside the impugned order and remanded the matter to the original authority for de novo adjudication with directions to verify records, apply relevant legal principles and Board clarifications, afford hearing, and complete adjudication within ninety days.

Final Conclusion: The Tribunal set aside the adjudicating authority's order and remanded the case for fresh, de novo adjudication; all substantive issues were left open for the original authority to decide after verification of the appellant's records and following principles of natural justice within a ninety day time frame.

Exemption notification for export promotion - substantial compliance - beneficial legislation - penalty under Section 76 of the Finance Act, 1994 - procedural irregularity and non-prejudicial delay - natural justice - remand for de novo adjudication

Substantial compliance - procedural irregularity and non-prejudicial delay - penalty under Section 76 of the Finance Act, 1994 - beneficial legislation - Whether the appellant's claim for exemption under Notification No. 18/2009 ST could be rejected and penalty imposed solely on procedural grounds and for delay in filing EXP 2 - HELD THAT: - The Tribunal held that the notification is a beneficial export promotion measure and procedural requirements must not be construed so rigidly as to defeat substantive rights. Although there was delay in filing EXP 2, the delay was explained and not shown to have caused prejudice to Revenue. The appellant had furnished material indicating substantial compliance with the notification's requirements and there were no allegations of fraudulent or blameworthy conduct. Imposition of penalty requires a fair exercise of judicial discretion and a finding of blameworthy conduct; the lower authorities did not record such a finding or engage with the question of culpability. Consequently, denying the substantive benefit or imposing penalty merely for procedural lapses (without demonstration of prejudice or blameworthy conduct) was impermissible. [Paras 6, 7]

The penalty was quashed and the impugned order insofar as it denied exemption or imposed penalty on procedural grounds was set aside.

Exemption notification for export promotion - remand for de novo adjudication - natural justice - Adjudication on the appellant's entitlement to exemption under Notification No. 18/2009 ST - HELD THAT: - The Tribunal did not decide the substantive claim on merits but remanded the matter to the Original Authority for de novo adjudication of the appellant's claim for duty exemption under Notification No. 18/2009 ST. The remand directs the lower authority to follow principles of natural justice, give the appellant a reasonable and time bound opportunity to submit evidence and be heard orally and in writing, and to issue a speaking order after verification. The Tribunal clarified that the procedural issues relating to delay and the penalty (having been set aside) are not part of the remand, and the adjudication should be completed expeditiously with the appellant's cooperation within ninety days of receipt of the order. [Paras 8]

Matter remanded to the Original Authority for de novo adjudication on merits of the exemption claim, with directions to afford opportunity and complete verification within ninety days.

Final Conclusion: The impugned order is set aside; the penalty is quashed and the matter is remanded to the Original Authority for de novo adjudication of the claim for exemption under Notification No. 18/2009 ST, with directions to follow natural justice and complete the process within ninety days.

Intermediary services - place of provision of services - Rule 9 of Place of Provision of Services Rules - Rule 3 of Place of Provision of Services Rules - negative list regime - taxable service - value of free supplies in works contract - extended period of limitation (suppression of facts) - revenue neutral / input tax credit - penalty under Section 78

Intermediary services - place of provision of services - Rule 9 of Place of Provision of Services Rules - Rule 3 of Place of Provision of Services Rules - negative list regime - taxable service - Services rendered by Hoshizaki Europe BV from its Dubai office for marketing and sales promotion to the appellants are intermediary services and, for the purpose of place of provision, the appropriate rule is Rule 9 making the place of provision the location of the service provider (Dubai), hence not exigible to service tax in India for the period in dispute. - HELD THAT: - The transactions fall in the post-negative list period; the pre-01.07.2012 definition of Business Auxiliary Service is not operative for the disputed period and cannot be invoked. The agreement dated 25.02.2014 shows Hoshizaki provided marketing and sales promotion from its Dubai office on agreed service costs. Application of the three CBIC criteria (nature and value not alterable; separable identification of intermediary's value; identity and title of service) and the subsequent amendment to the definition of 'intermediary' confirm that the services qualify as intermediary services. Where more than one POPS rule could prima facie apply, Rule 14 requires application of the later rule; Rule 9 (intermediary services) is therefore the appropriate rule and points to the service provider's location as the place of provision. Consequently, services provided from Dubai are outside the exigibility of service tax under Section 66B for the period April 2014-September 2015. [Paras 7, 8]

Demand of service tax on marketing and sales promotion services received from Hoshizaki Europe BV is set aside.

Value of free supplies in works contract - works contract - Service Tax (Determination of Value) Rules, 2006 - Rule 2A - Bhayana Builders precedent - Value of goods and materials supplied free of cost by the service recipient to the provider of taxable construction/works contract service is outside the taxable value (gross amount charged) and cannot be included in assessable value for service tax under the applicable rules. - HELD THAT: - Applying the Larger Bench's conclusion in Bhayana Builders and the subsequent affirmation by the Supreme Court, free supplies by the service recipient neither constitute consideration flowing to the service provider nor form part of the gross amount charged. The notifications and rules relied upon to determine a percentage-based service component operate on the contract value charged by the service provider; absent any contractual or ledger adjustments reflecting consideration, the value of free supplies is not includible under Section 67 or Rule 2A. [Paras 9]

Demand of service tax on the value of free supplies in the works contract component is set aside.

Extended period of limitation (suppression of facts) - revenue neutral / input tax credit - Invocation of the extended period of limitation under the plea of suppression is not sustainable where the dispute is revenue neutral because any service tax payable could be taken as input credit by the appellant. - HELD THAT: - Precedents establish that where tax, if payable, would be available as input credit to the assessee (rendering the transaction revenue neutral), the requisite mens rea to invoke extended limitation (suppression or evasion) is absent. Reliance on authorities cited in the order supports that extended period cannot be invoked in such circumstances. [Paras 9, 10]

Extended period of limitation invoked for demand is not sustainable; demand barred on this ground.

Penalty under Section 78 - The imposition of penalties confirmed in the impugned order is not legally sustainable in view of the findings on tax exigibility, valuation of free supplies and limitation. - HELD THAT: - Given that the demands of service tax have been set aside - because the services from Dubai are not exigible, the value of free supplies is not includible, and extended limitation is not invokable - the concomitant penalties confirmed by the Commissioner (Appeals) cannot stand. The Tribunal accordingly allows the appeal and sets aside the impugned order including penalties. [Paras 10, 11]

Penalties confirmed in the impugned order are set aside.

Final Conclusion: The appeal is allowed: demands of service tax (including those computed on marketing/sales promotion services rendered from Dubai and on free supplies in works contract) and the penalties confirmed by the Commissioner (Appeals) are set aside for the period April, 2014 to September, 2015.

Pre-deposit - Form GST DRC-03 - acceptability of input tax credit for pre-deposit - CBIC clarification on mode of pre-deposit - binding effect of High Court writ relief vis-A -vis appellate powers of Tribunal

Pre-deposit - Form GST DRC-03 - acceptability of input tax credit for pre-deposit - CBIC clarification on mode of pre-deposit - Whether pre-deposit under Section 35F of the Central Excise Act/Section 83 of the Finance Act can be made using Form GST DRC-03 (electronic credit/cash ledger) and whether an appeal can be admitted where pre-deposit was made through DRC-03. - HELD THAT: - The Tribunal examined the legal and administrative position including the Hon'ble Bombay High Court's observation that there is no provision to accept pre-deposit under Section 35F through DRC-03, the subsequent CBIC Circular dated 28.10.2022 clarifying that payments through DRC-03 under the GST regime are not a valid mode for pre-deposits under the Central Excise Act/Finance Act, and decisions of coordinate benches holding DRC-03 payments impermissible. Although a coordinate bench had taken a contrary view applying equitable relief and prospective effect to the Circular, that reasoning relied on writ-jurisdiction relief granted by a High Court and cannot be adopted by the Tribunal which lacks power to grant such writ relief. In these circumstances the Tribunal held that pre-deposit made via DRC-03 is not an acceptable mode for compliance with Section 35F and applications for admission based on such payment cannot be entertained; however the assessee is free to file appeal after making the pre-deposit by a permissible method. [Paras 9, 14]

Applications for admission based on pre-deposit made through DRC-03 are rejected; the appellant may file appeal after making pre-deposit in a permissible manner.

Final Conclusion: The Tribunal rejected admission of appeals where the mandatory pre-deposit was made using Form GST DRC-03, holding that such mode is not permissible for pre-deposits under Section 35F of the Central Excise Act/Section 83 of the Finance Act in light of CBIC clarification and coordinate decisions, and granted liberty to file appeals upon payment of pre-deposit by an accepted method.

Manufacture - photography service - identity of commodity test - classification under Chapter 4911 - exemption for printing services

Manufacture - identity of commodity test - classification under Chapter 4911 - photography service - exemption for printing services - Whether the assessee's activity of printing images supplied in digital form and producing photo books/albums, calendars and similar printed matter amounts to manufacture and not a taxable photography/service, thereby precluding demand of service tax, interest and penalties. - HELD THAT: - The Tribunal followed the settled twofold test of manufacture - whether a different commercial commodity comes into existence and whether the original identity ceases to exist - and applied it to the assessee's process of converting digital images into printed and bound photo books. The impugned activity involves printing on paper/LMO film, lamination/binding and finishing that produces a distinct article (photo books/albums) different in identity and commercial character from the digital inputs. The Tribunal's decision in Venus Albums (upheld by the Apex Court) was held to be directly applicable: such activity is classifiable under Chapter 4911 as printed pictures/photographs and constitutes manufacture. The authorities' classification of the same operations as taxable photography/service was therefore rejected. The Tribunal's reasoning was reinforced by classification guidance (HS Code 4911) and by notifications exempting printing from service tax, leading to the conclusion that service tax, interest and penalties could not be sustained. [Paras 7, 8]

The activity is manufacture classifiable under Chapter 4911; the demand of service tax, interest and penalties is set aside, the assessee's appeal is allowed and the Department's appeal is dismissed.

Final Conclusion: Applying the identity-of-commodity test and following the Tribunal's decision in Venus Albums (affirmed by the Apex Court), the Appellate Tribunal held that printing and binding of photographs into photo books/albums amounts to manufacture (Chapter 4911); consequently, the service tax demand, interest and penalties were quashed and the assessee's appeal allowed while the Department's appeal was dismissed.

Confirmation of Tribunal's conclusion - Dismissal of civil appeal - Judicial review of appellate tribunal order

Confirmation of Tribunal's conclusion - Dismissal of civil appeal - Whether the conclusion reached by the Customs, Excise and Service Tax Appellate Tribunal, Bangalore should be interfered with - HELD THAT: - The Court considered the correctness of the Tribunal's conclusion and found no error warranting interference. Having examined the matter, the Supreme Court agreed with the Tribunal's conclusion and found no reason to reverse or modify the appellate tribunal's decision. The limited reasoning recorded by the Court affirms the Tribunal's determination as correct. [Paras 2]

The Tribunal's conclusion is upheld and the civil appeal is dismissed.

Final Conclusion: The Supreme Court dismissed the civil appeal, upholding the correctness of the Customs, Excise and Service Tax Appellate Tribunal, Bangalore's conclusion.

Expunction of adverse observations against non-party - improper observations in absence of party or accused - confiscation under Section 43A of the Karnataka Excise Act, 1965 - leave to appeal

Expunction of adverse observations against non-party - improper observations in absence of party or accused - Whether adverse observations made by the High Court against the buyer, who was not a party to the High Court proceedings and not made an accused in the FIR, should be expunged from the impugned order. - HELD THAT: - The Supreme Court found that the High Court had recorded observations in paragraph 6 and paragraph 8 of its order which referred to the appellant as "a distillery owner as well as the buyer" and further stated that the buyer had not sought release of the spirit and was involved in the crime. The appellant was not impleaded as a party before the High Court and was not made an accused in the FIR. Those observations therefore were rendered in the absence of the appellant and were unnecessary. For this reason the Supreme Court expunged the words "as well as the buyer" from paragraph 6 and the adverse observations directed at the buyer in paragraph 8. The Court expressly clarified that this expunction was procedural and interlocutory in character and that the merits of the confiscation were not considered or decided by it. [Paras 9, 10, 11, 12]

The impugned observations in paragraphs 6 and 8 of the High Court's order relating to the buyer are expunged; the appeal is allowed on that ground.

Final Conclusion: Appeal allowed insofar as the Supreme Court expunged the High Court's adverse observations against the buyer (who was not a party before the High Court and not an accused in the FIR); the Court did not consider the merits of the confiscation order.

Classification of goods under tariff entries - examination of precedents regarding tariff entries - appellate authority's factual and legal conclusion - dismissal of appeals for lack of merit

Classification of goods under tariff entries - examination of precedents regarding tariff entries - appellate authority's factual and legal conclusion - Validity of the CESTAT's conclusion dismissing the appeals concerning the product's treatment under competing tariff entries after consideration of earlier judgments. - HELD THAT: - The Supreme Court considered the materials and prior judgments relating to different entries applicable to the product in issue and concluded that the Customs, Excise And Service Tax Appellate Tribunal (CESTAT) had correctly applied the precedents and arrived at a right conclusion. The Court found no error in CESTAT's evaluation of the entries or in its application of relevant judicial decisions, and accordingly saw no reason to interfere with the appellate authority's decision to dismiss the appeals.

The CESTAT's dismissal of the appeals was upheld.

Final Conclusion: The appeals are dismissed; the Supreme Court affirmed the CESTAT's conclusion and declined to interfere. No order as to costs.

Waste versus by-product - exemption under Notification No.89/1995-C.E. - manufacture and excisability of incidental products - value of product not determinative of excisability - refining process and removal of unwanted materials

Waste versus by-product - exemption under Notification No.89/1995-C.E. - manufacture and excisability of incidental products - Fatty Acid, Wax and Gum arising during refining of crude vegetable oil are to be treated as waste and eligible for exemption under Notification No.89/1995-C.E. - HELD THAT: - The Tribunal accepted the reasoning of the Larger Bench in M/s Ricela Health Foods Ltd., holding that the marketability or value of an incidental product cannot be the determinative test to characterise it as a manufactured (excisable) by product. In the process of refining crude vegetable oil the operation is directed to obtain refined oil by removing unwanted materials; the products so removed (gums, waxes and fatty acids with odour) are incidental removals and not the object of a separate process of manufacture. Applying the principle that incidental products arising from removal of impurities during refining are waste/refuse rather than manufactured goods, the Tribunal concluded that such fatty acids, wax and gum fall within the scope of exemption under Notification No.89/1995-C.E. and are not chargeable to excise duty. [Paras 6, 7, 9]

Demand of excise duty in respect of the fatty acids (and allied incidental products) set aside and the exemption under Notification No.89/1995-C.E. held applicable.

Final Conclusion: Appeal allowed; the demand confirmed by the authorities in respect of fatty acids (arising during refining) is set aside as those incidental products are treated as waste and covered by Notification No.89/1995-C.E.; having decided the issue on merits, extended period of limitation was not examined.

Clandestine manufacture and clearance - requirement of tangible evidence for allegations of excess production - reliance on fuel consumption test for extrapolation of annual production - burden of proof in revenue proceedings - need for commensurate investigation before sustaining charge of clandestine removal

Reliance on fuel consumption test for extrapolation of annual production - requirement of tangible evidence for allegations of excess production - need for commensurate investigation before sustaining charge of clandestine removal - Whether Revenue could sustain a demand for alleged excess manufacture and refund by extrapolating annual production from a single test heat fuel consumption observation without further investigation or corroborative evidence. - HELD THAT: - The Tribunal held that the Revenue's case rested solely on fuel consumption observed during a test run and an arithmetic extrapolation to the year, but failed to account for variables affecting fuel usage (atmospheric temperature, raw material quality, furnace condition, initial furnace temperature, frequency of heats, and labour skill). The department did not analyse consumption of raw material, nor did it take stock of fuel, raw material and finished goods at audit; it did not establish clearance of the alleged excess production to buyers, obtain statements of any buyers, or verify transport records. The Tribunal emphasised that allegations of clandestine manufacture and clearance are serious and cannot be sustained merely on mathematical inference; they require tangible and corroborative criteria-such as excess raw material stocks, discovery of unaccounted finished goods, evidence of actual removals or sales to identified parties, recovery of sale proceeds, transportation proof, buyer statements, or other linked documentary or physical evidence-and that a commensurate investigation is necessary before holding the assessee liable. Applying these principles to the record, the Tribunal found the extrapolation and the mathematical formula insufficient to prove excess production or clandestine removal. [Paras 9, 10, 11, 12]

The extrapolation from a single heat test of LDO consumption, without further corroborative investigation or tangible evidence, does not sustain the charge of excess manufacture or clandestine clearance.

Final Conclusion: Revenue's appeal is dismissed; the adjudicating authority's decision dropping the demand is upheld because the charge of excess manufacture/illicit clearance was not proved by tangible corroborative evidence and could not be established merely by extrapolating a single fuel consumption test.

Classification of goods - manufacture - essential character - prepared foods versus worked cereal grains - HSN Explanatory Notes - tariff classification

Classification of goods - manufacture - essential character - prepared foods versus worked cereal grains - HSN Explanatory Notes - Savory Oats and Silk Oats are classifiable under CETH 1104 12 00 and the processes undertaken by the appellant do not amount to manufacture attracting excise duty; consequent demand, interest and penalties set aside. - HELD THAT: - The Tribunal's factual findings, accepted by this Appellate Tribunal, show the appellant performed mixing and packing of plain (rolled) oats with dehydrated vegetables, seasonings or flavouring without pre cooking such that the final product retains the primary character of oats and requires cooking by the consumer as per packet instructions. The HSN Explanatory Notes and chapter scheme distinguish products prepared beyond the processes covered by Chapter 11 (which would fall under Chapter 19). Applying the determinative test - whether a new product known to the market emerges with transformation of the original identity - the mixing and packing here do not produce a new distinct commodity. Precedents (including Satnam Overseas and the Larger Bench decisions discussed) support that mere admixture of dried vegetables/condiments to raw cereal flakes, where the product remains raw and requires cooking, does not amount to manufacture and remains classifiable under Chapter 11. On that basis the Tribunal correctly held classification under CETH 1104 12 00 not 1904 20 00, and consequently there is no excise liability: the demand of duty, interest and penalties was liable to be set aside. [Paras 10, 11, 14, 15, 20]

Impugned order set aside; Savory Oats and Silk Oats held classifiable under 1104 12 00, processes not amounting to manufacture, and demand of excise duty, interest and penalties quashed.

Final Conclusion: Appeal allowed; following the Tribunal's earlier decision in the assessee's own case (affirmed by the Supreme Court), the demand, interest and penalties relating to the period February 2015 to January 2016 are set aside and consequential relief granted.

Summary order. Appellant absent; allowed to seek refund of amount deposited through DRC-3 as per Board communication dated November 24, 2023; permitted to make the required pre-deposit within four weeks; matter listed on February 28, 2024.

Summary order. The appellant was granted six weeks to make the pre-deposit (intending to seek refund through DRC-3 as per the CBIC communication dated November 24, 2023); matter listed on March 11, 2024.

Summary order. Appellant permitted to withdraw amount already deposited; directed to deposit the required pre-deposit within four weeks; matter listed for hearing on March 04, 2024.

Constitutionality of tax provisions - alternative remedy - restoration and consolidation of writ petitions - pre-deposit to continue during pendency

Constitutionality of tax provisions - alternative remedy - High Court's dismissal of the writ petition on the ground of availability of an alternative remedy was set aside and the petition was restored for adjudication on merits. - HELD THAT: - The Supreme Court granted leave and, noting the commonality of challenges to the provisions of the Odisha Entry Tax Act, 1999 and the parties' concession that similar matters were pending before the High Court, set aside the impugned order which had dismissed the writ petition solely on the basis of an alternative remedy. The Court restored the petition to its original number for substantive hearing rather than allowing summary dismissal on jurisdictional/alternative remedy grounds. The order reflects the Court's decision to permit adjudication of the challenge to the constitutionality of the impugned provisions on merits before the High Court together with related matters.

High Court order dismissing the writ petition for availability of an alternative remedy set aside; writ petition restored for hearing on merits.

Restoration and consolidation of writ petitions - The restored writ petition was directed to be heard along with a specified batch of similar writ petitions. - HELD THAT: - Having set aside the dismissal, the Court ordered that the restored writ petition proceed to hearing together with identified Writ Petitions Nos. 14069/2012, 21892/2012, 18046/2015, 4720/2016 and 8423/2016, so that common questions of law concerning the impugned provisions may be considered collectively by the High Court.

Writ petition restored and directed to be heard along with the listed batch of writ petitions.

Pre-deposit to continue during pendency - The pre-deposit already made by the appellant shall continue to operate until final disposal of the writ petitions. - HELD THAT: - The Court preserved the status of the pre-deposit furnished by the appellant during the pendency of the writ proceedings, directing that it shall remain in effect until the High Court disposes of the restored and consolidated petitions, thereby maintaining the interim financial arrangement pending final adjudication.

Pre-deposit to continue till disposal of the writ petitions.

Final Conclusion: Leave granted; impugned High Court order set aside; writ petition restored for hearing with a listed batch of similar petitions; pre-deposit already made to continue until final disposal; appeals disposed accordingly.

Entry tax leviability - schedule of taxable goods - jurisdiction to levy entry tax - non-speaking order - reasoned order and opportunity of hearing - New Act deemed to be in force from November 1, 1999

Entry tax leviability - schedule of taxable goods - jurisdiction to levy entry tax - Final assessment and recovery of entry tax could not be sustained where the goods (IMFL) are not included in the schedule of taxable goods under the New Act. - HELD THAT: - The provisional assessment was made under the earlier Act of 2000 while the final assessment was recorded under the New Act which, by its terms, levies entry tax only on goods set out in its schedule. The goods in question - Indian Made Foreign Liquor (IMFL) - are not included in the schedule to the New Act. If a good is not an item in the schedule, the authority lacked jurisdiction under the New Act to impose entry tax on that good. Although the State relied on provisions in the New Act to validate prior actions, the determinative legal question is whether the New Act permits taxation of IMFL at all; that question goes to the root of liability and must be answered before any recovery can be sustained. [Paras 7]

Impugned assessment insofar as it imposes entry tax on IMFL (not included in the New Act's schedule) cannot be sustained and requires reconsideration.

Non-speaking order - reasoned order and opportunity of hearing - Appellate order dated December 31, 2022 was non-speaking and failed to address the petitioner's contention that IMFL is not in the New Act's schedule; the order is quashed and the matter is remanded for fresh decision after giving opportunity and reasons. - HELD THAT: - The Appellate Authority did not consider the petitioner's argument regarding absence of IMFL from the New Act's schedule and passed an unreasoned order. The court found the impugned order bereft of reasons on the fundamental jurisdictional point, rendering it a non-speaking order. The proper course is to set aside that order, direct that the petitioner be granted another opportunity of hearing, and require the authority to pass a reasoned order specifically addressing the imposition of tax on goods not mentioned in the schedule. The parties are permitted to place relevant documents and judgments before the authority for fresh consideration, and the authority must articulate reasons for acceptance or rejection of the contention. [Paras 8, 9]

Appellate order quashed; matter remanded with directions to afford hearing and to pass a reasoned order dealing specifically with the imposition of entry tax on IMFL, within the time directed by the Court.

Final Conclusion: Writ petition allowed: the appellate order dated December 31, 2022 is quashed for being non-speaking; the authority is directed to grant the petitioner a fresh hearing and to pass a reasoned order specifically addressing the imposition of entry tax on IMFL (not appearing in the New Act's schedule) within three months, with a copy supplied to the petitioner within one week of its passing.

Pre-deposit under section 73 of the GVAT Act - quash and set aside tribunal order - remand for fresh hearing to determine pre-deposit - award of costs to the appellant - consolidated hearing of related appeals

Pre-deposit under section 73 of the GVAT Act - quash and set aside tribunal order - remand for fresh hearing to determine pre-deposit - consolidated hearing of related appeals - Impugned Tribunal direction to deposit specified sums as pre-deposit and its order sustaining summary dismissal required quashing and remand for fresh determination of pre-deposit by the First Appellate Authority. - HELD THAT: - The Court found that the Tribunal's order directing fixed pre-deposit amounts for the appellant (for Financial Year 2011-12 and Financial Year 2013-14) should not stand in view of the comparable proceedings in the sister concern and the need for the First Appellate Authority to determine the quantum of pre-deposit in accordance with section 73 of the GVAT Act. The impugned Tribunal order was therefore quashed and set aside, and the matter remanded to the First Appellate Authority for fresh hearing and for determination of pre-deposit as per law. The First Appellate Authority was directed to hear both the related appeals together and decide the pre-deposit within a limited timeframe after compliance with the directions on costs. [Paras 9, 10]

Tribunal's order directing specified pre-deposit amounts quashed and set aside; matter remanded to the First Appellate Authority to determine pre-deposit under section 73 of the GVAT Act and to hear the related appeals together within two months from receipt of the order.

Award of costs to the appellant - consolidated hearing of related appeals - Whether costs should be awarded and the conditions for further proceedings. - HELD THAT: - The Court directed that a cost of Rs. 6000/- be paid by the appellant (to be produced before the First Appellate Authority) mirroring the order passed in the sister-concern matter. Payment of the directed cost was made a pre-condition for the First Appellate Authority to proceed, and the First Appellate Authority was instructed to verify the cost challan before proceeding to hear the appeals afresh within the stipulated period. The direction ensures parity of treatment with the sister-concern order and conditions the stay and further hearing upon compliance with the cost direction. [Paras 9, 10]

Costs of Rs. 6000/- awarded to the appellant; First Appellate Authority to verify payment and proceed to hear the appeals after deposit of costs.

Final Conclusion: Impugned Tribunal order directing fixed pre-deposit amounts is quashed and set aside; matters remanded to the First Appellate Authority for fresh hearing and determination of pre-deposit under section 73 of the GVAT Act, both related appeals to be heard together within two months after the appellant deposits the directed cost of Rs. 6000/-, which the First Appellate Authority shall verify.

Tender notice transparency and specification of documentary requirements - requirement of audited I.T. return as pre-qualification - Section 44AB read with Explanation 2 to Section 139 - due date for audit and filing of return - judicial review of tender process limited to arbitrariness and irrationality - employer's satisfaction in assessing conformity with tender conditions

Tender notice transparency and specification of documentary requirements - requirement of audited I.T. return as pre-qualification - Section 44AB read with Explanation 2 to Section 139 - due date for audit and filing of return - Whether rejection of the petitioner's bid for non-submission of the I.T. return for the assessment year 2023-2024 was lawful where the tender did not specify the exact years of I.T. returns required and statutory law fixed the due date for audit and filing. - HELD THAT: - The tender checklist required an I.T. return of the "last assessment year" and financial statements for the last three years but did not specify which assessment years were to be filed (para 10). The petitioner's gross receipts for the year ending 31.03.2022 exceeded Rs. 1 crore, thereby attracting audit under Section 44AB and entitling the petitioner to file the audited return for the year 2022-2023 on or before 31 October of the assessment year in terms of Explanation 2 to Section 139 (paras 11-14). Because the tender notice failed to specify the years for which I.T. returns were required, two classes of bidders arose (those subject to audit and those not), and the respondents' insistence on production of the I.T. return for assessment year 2023-2024 without prior specification lacked the transparency and openness required of tender conditions (paras 19-20). While the court recognised the limited scope of judicial interference in tender decisions and the employer's prerogative to determine essential conditions, that prerogative does not excuse a failure to publish clear documentary requirements (paras 16-18, 20). [Paras 12, 13, 14, 19, 20]

The rejection of the petitioner's bid on the ground that the I.T. return for assessment year 2023-2024 was not submitted is unsustainable because the tender did not specify the years required and the petitioner was entitled by statute to file the audited return by 31 October; the petitioner's bid must therefore be treated as valid.

Judicial review of tender process limited to arbitrariness and irrationality - employer's satisfaction in assessing conformity with tender conditions - Remedial direction to the respondents on how to proceed after finding the tender requirement unspecified and the petitioner's entitlement under the Income Tax law. - HELD THAT: - Although ordinarily the employer's satisfaction as to conformity with tender conditions is respected and judicial review is narrow, the court found that the respondents had not specified the required years and therefore could not lawfully reject the bid on that basis (paras 16-20). In the circumstances the court directed that the petitioner's bid be considered valid; alternatively, the respondents are to permit the petitioner an opportunity to submit the I.T. return for assessment year 2023-2024 and thereafter consider the petitioner's bid along with other valid bidders (para 21). The impugned rejection letter was set aside (para 21). [Paras 16, 18, 21]

Set aside the letter rejecting the bid; direct that the petitioner's bid be treated as valid or, alternatively, the petitioner be allowed to submit the I.T. return for assessment year 2023-2024 and the respondents shall reconsider the bid along with other valid bidders.

Final Conclusion: The writ petition is allowed: the rejection of the petitioner's bid for non-submission of the I.T. return for assessment year 2023-2024 is set aside because the tender did not specify the years required and the petitioner was entitled by statute to the prescribed filing date; the respondents must either treat the bid as valid or permit submission of the I.T. return for 2023-2024 and reconsider the bid accordingly.

Right to disclosure of prosecution material - supply of post-trap/recovery/arrest memo - fair trial under Article 21 - duty of investigating agency to furnish list of documents not relied upon - trial court's discretion to order production subject to relevance and investigation interest - provisional non-disclosure where it may prejudice ongoing investigation

Supply of post-trap/recovery/arrest memo - right to disclosure of prosecution material - fair trial under Article 21 - duty of investigating agency to furnish list of documents not relied upon - trial court's discretion to order production subject to relevance and investigation interest - Applicant entitled to copy of post trap memo/ arrest memo dated 31.01.2024; CBI directed to furnish same - HELD THAT: - The Court examined the competing contentions that the applicant was denied the post-trap/recovery memo prepared on 31.01.2024 and the CBI's plea that disclosure would prejudice ongoing investigation. Relying on the principles endorsed by the Supreme Court in the suo motu proceedings approving the Draft Criminal Rules of Practice, 2021 and subsequent decisions (including P. Ponnusamy and authorities cited therein), the Court recognised that the accused's right to a fair trial under Article 21 encompasses access to documents and material that may be necessary to test the legality of arrest and to prepare defence. The Court noted the normative duty to furnish, at least, documents reflecting the evidence and material leading to arrest and confinement, and the obligation (as reflected in Draft Rule 4 and precedent) to provide a list of statements and seized material whether or not relied upon by the prosecution so that the accused can seek appropriate orders under the CrPC. While acknowledging that the trial court may exercise discretion to withhold material if disclosure would genuinely prejudice the investigation, the present record did not establish such a justification for non-supply of the post-trap memo dated 31.01.2024. Applying these principles to the facts, the Court held that CBI should have provided the post-trap memo to the applicant and directed its supply within a short time frame. [Paras 8, 9, 11, 13, 14]

Application allowed; CBI directed to provide copy of post trap/ arrest memo dated 31.01.2024 to the applicant or his counsel within seven days.

Final Conclusion: The petition under Section 482 Cr.P.C. is allowed; in view of the accused's right to fair trial and the disclosure principles reiterated by the Supreme Court, the Central Bureau of Investigation is directed to furnish the post-trap/arrest memo of 31.01.2024 to the applicant or his counsel within seven days.

Liability of directors under Section 138 read with Section 141 of the Negotiable Instruments Act - non-executive director not liable for day-to-day affairs - requirement of specific averments that a director was in charge of and responsible for conduct of business - written/oral guarantee by an erstwhile director creating civil liability but not vicarious criminal liability under the NI Act - quashing of complaint under Section 482 Cr.P.C. for abuse of process

Liability of directors under Section 138 read with Section 141 of the Negotiable Instruments Act - non-executive director not liable for day-to-day affairs - Whether the petitioner, who was a non-executive additional director and had resigned prior to dishonour of cheques, could be prosecuted as a director for offence under Section 138 read with Section 141 NI Act. - HELD THAT: - The petitioner produced unchallenged documentary evidence in the form of Form DIR-11 (and related MCA receipts) showing appointment as a non-executive additional director on 04.11.2019 and resignation on 04.11.2020, well before the cheques were dishonoured on 21.06.2021. The court applied the established principle that liability under the NI Act depends on the role played in the affairs of the company and not designation alone, and that a non-executive director who was not involved in day-to-day management cannot be fastened with criminal liability absent material showing actual control or responsibility at the relevant time. In the absence of any dispute of the DIR-11 evidence and given the temporal gap between resignation and dishonour, continuation of proceedings against the petitioner would be an abuse of process. [Paras 6, 7, 9, 14, 15]

Proceedings against the petitioner as a director were quashed and the summoning order set aside on the ground that he had resigned prior to the alleged offence and, being a non-executive director, could not be held liable.

Requirement of specific averments that a director was in charge of and responsible for conduct of business - Whether the complaint contained the necessary specific averments to show that the petitioner was in charge of and responsible for conduct of the company's business at the relevant time. - HELD THAT: - The complaint contained general allegations that the petitioner and other directors were engaged in day-to-day affairs and that the petitioner extended an oral guarantee, and also alleged presence when cheques were issued. However, the court found that the pleadings lacked particularised averments demonstrating that the petitioner was in charge of and responsible for the company's business when the offence occurred. Reliance was placed on precedents holding that generalised assertions without specific details of control and management are insufficient to fasten criminal liability on directors who are not managing or authorised signatories. [Paras 8, 11, 13]

The complaint was held to be bereft of appropriate pleadings establishing that the petitioner was in charge of and responsible for the conduct of the business, and thus insufficient to sustain prosecution.

Written/oral guarantee by an erstwhile director creating civil liability but not vicarious criminal liability under the NI Act - Whether an oral or written guarantee by an erstwhile director would render him vicariously liable criminally under the NI Act for dishonour of cheques. - HELD THAT: - The court referred to binding precedent which holds that a guarantee by an erstwhile director may give rise to civil liability but does not automatically result in vicarious criminal liability under the NI Act. Applying that principle, the court observed that even if an oral guarantee was alleged, such a guarantee would not suffice to fasten criminal liability on a director who resigned before the cheque dishonour without specific pleadings showing criminal responsibility. [Paras 12]

A guarantee by an erstwhile director may create civil liability but does not, by itself, attract vicarious criminal liability under the NI Act; thus such allegation did not sustain prosecution of the petitioner.

Final Conclusion: The petition is allowed; the criminal complaint against the petitioner is quashed and the summoning order dated 31.03.2022 is set aside on the ground that the petitioner had resigned as a non executive director prior to the dishonour and the complaint lacks necessary specific averments of his responsibility, rendering further prosecution an abuse of process.