TaxTMI Updates e-Newsletter
Apr 13,2023

Authority cannot travel beyond grounds stated in show cause notice - violation of the principles of natural justice in cancellation of GST registration under Section 29 of the UPGST Act - cancellation of GST registration - quashing of order with liberty to pass fresh order in accordance with law

Authority cannot travel beyond grounds stated in show cause notice - principles of natural justice - Whether the order cancelling the petitioner's GST registration could be sustained when the reasons recorded in the cancellation order differed from the grounds alleged in the show cause notice. - HELD THAT: - The show cause notice proposed cancellation on the basis that the taxpayer had not filed DRC-03 for interest liability. The cancellation order, however, recorded a different reason - that the firm was found non-existent at the given address - which was neither the ground mentioned in the show cause notice nor a reason falling within the statutory scheme under Section 29. The show cause notice is intended to inform the assessee of specific allegations so as to enable a meaningful reply; an adjudicating authority must decide only on the allegations communicated in the notice. Travelling beyond the pleaded grounds and substituting different reasons in the final order amounts to arbitrariness and breaches the principles of natural justice. For these reasons the cancellation order cannot be sustained.

The cancellation order dated 20.07.2022 is arbitrary, violative of principles of natural justice and contrary to the statutory scheme, and therefore quashed.

Quashing of order with liberty to pass fresh order in accordance with law - Whether respondents may be permitted to reconsider and pass a fresh order. - HELD THAT: - Although the cancellation order is quashed for the reasons stated, the court has not precluded the authority from examining the matter afresh. Any fresh decision must comply with the requirement that the assessee be given notice of the specific grounds on which cancellation is proposed and an opportunity to be heard, and must be rendered in accordance with Section 29 and the principles of natural justice.

Order quashed with liberty to respondents to pass a fresh order, if so advised, in accordance with law.

Final Conclusion: Writ petition allowed; the cancellation order is quashed for being arbitrary and violative of natural justice and Section 29, with liberty to the respondents to pass a fresh order in accordance with law.

Show Cause Notice - cancellation of GST registration - requirement of reasons in administrative orders - right to fair hearing / purpose of notice - appeal dismissed as barred by limitation - fresh notice / remand for reconsideration

Show Cause Notice - right to fair hearing / purpose of notice - requirement of reasons in administrative orders - Validity of the Show Cause Notice dated 17.05.2022 and the cancellation order dated 06.06.2022 in the absence of stated reasons. - HELD THAT: - The Court found that the Show Cause Notice merely stated that there was a reason to believe that specified provisions of the Act were violated, without identifying those provisions or the facts relied upon. The cancellation order recorded only that the taxpayer did not attend the hearing or respond to queries and did not indicate the material or legal basis for cancellation. As the purpose of a show cause notice is to enable the noticee to respond to the allegations on which adverse action is proposed, the absence of any clue or reason rendered both the notice and the cancellation order deficient. For these reasons the Court set aside the Show Cause Notice and the cancellation order and directed that any further action must be taken only after issuance of a fresh notice specifying reasons. [Paras 8, 9, 10, 11, 12]

The Show Cause Notice dated 17.05.2022 and the cancellation order dated 06.06.2022 are set aside for lacking adequate reasons and failing to disclose the basis for proposed cancellation.

Appeal dismissed as barred by limitation - fresh notice / remand for reconsideration - Validity of the impugned order dated 31.01.2023 dismissing the petitioner's appeal as beyond limitation. - HELD THAT: - The impugned order dismissed the appeal on the ground of limitation. However, because the underlying Show Cause Notice and cancellation order were held to be legally defective for want of stated reasons, the Court concluded that the impugned order could not stand. The Court therefore set aside the impugned order and permitted the respondents to issue a fresh show cause notice specifying reasons and to proceed in accordance with law. The petitioner was likewise permitted to apply for cancellation afresh with all relevant material. [Paras 6, 12, 13]

The impugned order dated 31.01.2023 is set aside; respondents may issue a fresh Show Cause Notice specifying reasons and proceed in accordance with law.

Final Conclusion: The writ petition is allowed to the extent that the Show Cause Notice dated 17.05.2022, the cancellation order dated 06.06.2022 and the impugned order dated 31.01.2023 are set aside; respondents are at liberty to issue a fresh notice specifying reasons and proceed in accordance with law, and the petitioner may make fresh applications with relevant material.

Intermediary - refund of IGST on zero-rated supply - place of supply for services - interpretation of Section 2(13) of the IGST Act - Circular No.159/15/2021-GST on intermediary

Intermediary - interpretation of Section 2(13) of the IGST Act - Circular No.159/15/2021-GST on intermediary - zero-rated supply - Whether the petitioner was an intermediary in respect of the Market Research Services and thus not entitled to refund of integrated tax as zero-rated supply. - HELD THAT: - The Court applied the statutory definition of intermediary in Section 2(13) of the IGST Act, which describes an intermediary as a person who arranges or facilitates the supply of goods or services between two or more persons and excludes a person who supplies such goods or services on his own account. The Circular No.159/15/2021-GST was relied on to clarify that intermediary services require a minimum of three parties and that an activity between only two parties cannot be treated as intermediary service. The material on record, including the Market Research Services Agreement and the respondent's own statement of the scope of work, established that the petitioner rendered Market Research Services directly to OHMI, Japan on its own account and did not arrange or facilitate a supply between OHMI, Japan and any third party. Consequently, the petitioner could not be treated as an intermediary for the Market Research Services and those services qualified as zero-rated supply for refund purposes. [Paras 15, 16, 17, 18, 19]

Petitioner was not an intermediary in respect of the Market Research Services and was entitled to refund of IGST paid on those services.

Refund of IGST on zero-rated supply - place of supply for services - Whether the appellate authority's rejection of the petitioner's refund claim was vitiated by lack of application of mind to the limited scope of the appeal. - HELD THAT: - The appellate authority upheld the adjudicating authority's view that the petitioner rendered services by providing support to OHMI's customers (a finding relevant to the Business Support Services) but failed to notice that the petitioner's appeal was expressly confined to the refund claim in respect of Market Research Services. The Court found the appellate order to be made without application of mind insofar as it rejected the confined refund claim and treated the entire amount denied by the adjudicating authority as subject of the appeal. That procedural error rendered the appellate decision unsustainable. [Paras 8, 9, 10, 12]

Impugned appellate order was set aside for want of application of mind to the confined scope of the petitioner's appeal; the refund claim confined to Market Research Services must be processed.

Final Conclusion: Writ petition allowed; appellate order set aside. The respondent directed to process the petitioner's refund claim in respect of IGST paid on Market Research Services (as claimed) and to pay interest in accordance with law.

Export of services - zero-rated supplies - services by an intermediary - natural justice / opportunity to be heard - remand for fresh consideration - set aside

Services by an intermediary - natural justice / opportunity to be heard - export of services - zero-rated supplies - Whether the impugned orders rejecting the refund claim could be sustained where the proper officer introduced the ground that the services were those of an "intermediary" without having raised that ground in the show cause notice and without giving the petitioner an opportunity to address it, and whether the matter required fresh consideration. - HELD THAT: - The adjudicating officer reduced the export value in respect of one invoice for remittance-related reasons but then proceeded to reject the entire refund claim on the additional basis that the services rendered were those of an "intermediary". That ground was not included in the show cause notice and the petitioner was not afforded an opportunity to meet it. The characterisation of the services as intermediary or otherwise is determinative of whether they qualify as export of services and zero-rated supplies, and therefore the petitioner must be given a full opportunity to explain and place materials on the precise nature of the services before the concerned officer. Given these defects in procedure and the centrality of the factual-legal classification, the appropriate course is to set aside the impugned orders and remit the matter to the proper officer for fresh consideration in light of relevant legal principles and with opportunity to the petitioner to be heard. All contentions are reserved for that exercise. [Paras 4, 5, 8, 9, 10]

Impugned orders dated 05.12.2020 and 28.12.2021 set aside; matter remitted to the proper officer (Assistant Commissioner, GST) for fresh consideration of the refund claim with opportunity to the petitioner to address the issue whether the services are intermediary services or export of services.

Final Conclusion: The petition is disposed by setting aside the impugned orders and restoring the matter to the proper officer for fresh adjudication of the refund claim, with the petitioner to be given a fair opportunity to explain the nature of services; all contentions reserved.

Levy of IGST on ocean freight - Ultra vires challenge to notifications and rule imposing IGST on ocean freight - Effect of Supreme Court precedent - Levy of Service Tax on ocean freight - Liberty to challenge departmental action for assessment or recovery

Levy of IGST on ocean freight - Ultra vires challenge to notifications and rule imposing IGST on ocean freight - Effect of Supreme Court precedent - Prayer challenging imposition of IGST on ocean freight was allowed in view of binding Supreme Court authority. - HELD THAT: - The High Court recorded that the petitioner's challenge to levy of integrated tax on ocean freight is squarely covered in its favour by the decision of the Supreme Court in Union of India v. M/s Mohit Minerals Pvt. Ltd. The Court relied on that binding precedent and held that no further orders were required to be passed by this Court in respect of the petitioner's claim challenging the notifications and Rule 13(9) insofar as they impose IGST on ocean freight. [Paras 3, 4]

Prayer (a) upheld and no further relief on IGST required from this Court in view of the Supreme Court decision.

Levy of Service Tax on ocean freight - Liberty to challenge departmental action for assessment or recovery - Petition disposed of without adjudication on the merits of service tax levy, with liberty to challenge if the Department takes further steps for assessment or recovery. - HELD THAT: - The Court noted that an Enquiry Notice had been issued regarding service tax but that no further action had been taken by the Department. The High Court declined to adjudicate the substantive validity of the service tax levy at this stage and disposed of the petition by granting the petitioner liberty to file a fresh challenge in the event the respondents initiate any steps to assess or recover service tax on ocean freight. [Paras 5, 6, 7]

Petition disposed of as to service tax; petitioner granted liberty to apply afresh if any assessment or recovery steps are taken by the respondents.

Final Conclusion: The petition is disposed: the challenge to IGST on ocean freight succeeds by application of the Supreme Court precedent; the challenge to service tax is left open and the petitioner is granted liberty to challenge any future departmental assessment or recovery action.

Methodology for quantification of profiteering - profiteering under Section 171 of the Central Goods and Services Tax Act, 2017 - interim injunction restraining further investigation - stay of penalty and interest

Methodology for quantification of profiteering - profiteering under Section 171 of the Central Goods and Services Tax Act, 2017 - Challenge to the National Anti-Profiteering Authority's quantification methodology and finding of profiteering in respect of supply of construction services. - HELD THAT: - The petitioner impugned the Authority's determination that it realised an additional amount from flat buyers by not passing Input Tax Credit, contending that the Authority's methodology was arbitrary because communications had elicited confirmations of benefit only from a subset of recipients and no material established failure to pass on ITC to others. The Court did not decide the merits of the Authority's quantification or the substantive question of profiteering; instead notice was issued and the respondents were directed to respond. No final adjudication on the correctness of the methodology or the finding of profiteering was undertaken in this order.

Notice issued; merits of the quantification and finding of profiteering left open for adjudication.

Interim injunction restraining further investigation - stay of penalty and interest - Grant of interim relief restraining further investigations into other projects suo motu ordered by the Authority and stay of penalty and interest as demanded. - HELD THAT: - Relying upon earlier coordinate-bench orders addressing challenges to the constitutional validity of Section 171 of the CGST Act and the related rules, the Court exercised its power to grant interim protection. The respondents were restrained from conducting any further investigation into other projects which had been suo motu ordered by the Authority, and there was an interim stay on the imposition or recovery of penalty and interest demanded. This relief was granted as an interim measure without adjudication of the substantive claims on merits.

Respondents restrained from further investigations into other projects; stay granted on penalty and interest as demanded; matter listed for further hearing.

Final Conclusion: Interim orders issued: notice to respondents; restraint on further investigations into other projects suo motu ordered by the Authority and stay of penalty and interest granted; substantive issues regarding quantification of profiteering and pass-through of ITC remain undecided and are to be adjudicated on subsequent hearings.

Pure service - works contract service - transfer of property in goods - exemption under Notification No.12/2017 - concessional rate under Notification No.11/2017 (entry 3(vi) and residual entry 3(xii)) - intended predominant use - classification of construction services

Pure service - works contract service - transfer of property in goods - exemption under Notification No.12/2017 - Exemption of tax on the services provided by TS Transco to Greater Hyderabad Municipal Corporation (GHMC). - HELD THAT: - The Appellate Authority recorded a difference of opinion between its Members on whether the activity undertaken for GHMC (shifting/replacement of overhead cables with underground cables) constitutes a 'works contract' involving transfer of property in goods or a 'pure service' (agreeing to do an act) eligible for exemption under Entry 3 of Notification No.12/2017. The State Member concluded there was no transfer of property in goods and classified the supply as a pure service (SAC 999792) in relation to a municipal function (Article 243W), making it exempt. The Central Member concluded that the abstract of estimate showed a significant material component and that the works involved embedding cables/pipes in the earth, satisfying the immovable property and transfer elements, and thus classified the supply as a works contract not eligible for the exemption. Because of the conflicting conclusions, the Appellate Authority held that no advance ruling can be issued on this question as provided by sub-section (3) of Section 101 of the Act, leaving the question undecided by the Authority for advance ruling. [Paras 69]

No advance ruling issued (deemed that no advance ruling can be given) due to difference of opinion between the Members.

Works contract service - concessional rate under Notification No.11/2017 - intended predominant use - residual entry 3(xii) - Rate of tax applicable to services procured by TS Transco from third party contractors for providing services to GHMC and I&CAD. - HELD THAT: - The Appellate Authority examined the nature of services procured by TS Transco from private contractors and concluded that those supplies involve transfer of property in goods and are therefore classifiable as 'works contract service'. The Authority considered the conditions of entry 3(vi) of Notification No.11/2017 (concessional rate) and held that the works in question are used predominantly for purposes of business/commerce (transmission of electricity) and are thus not covered by entry 3(vi). Applying the scheme of the notification and the principle that specific entries prevail over general/residual ones, the Authority placed these works under the residual entry 3(xii) of Notification No.11/2017. Accordingly, the services procured from third parties for providing services to GHMC and I&CAD are taxable in terms of the residual entry as recorded in the Order. [Paras 69]

Services procured by TS Transco from private contractors for providing services to GHMC and I&CAD are classifiable as works contract services and are taxable in terms of Serial No. 3(xii) of Notification No.11/2017-CT(Rate) as amended.

Works contract service - classification of construction services - residual entry 3(xii) - Tax liability for supply of works contract service by TS Transco to South Central Railway (SCR). - HELD THAT: - On review of the contracts and scope of work with SCR, the Appellate Authority found that the activities (extension of 132 kV power supply, laying lines, transformer works and related civil/telecom works) amount to construction, erection and installation resulting in immovable property and involve transfer of property in goods. Such supplies therefore qualify as 'works contract service' under the statutory definition. The Authority observed that these works fall within the classification scheme (Chapter 99, Group 99542) and are not covered by the concessional sub entries of Notification No.11/2017. Applying the residual entry, the Authority held the supplies to be taxable accordingly. [Paras 69]

Services supplied by TS Transco to South Central Railway are classifiable as works contract services under Chapter 99, Group 99542 and are taxable in terms of Serial No. 3(xii) of Notification No.11/2017-CT(Rate) as amended.

Final Conclusion: The Appellate Authority declined to pronounce an advance ruling on the GHMC exemption issue due to a difference of opinion between its Members. It upheld that services procured by TS Transco from third party contractors for GHMC and I&CAD are works contract services and are taxable under the residual entry of Notification No.11/2017, and it held that supplies to South Central Railway are works contract services classifiable under the construction services scheme and taxable under the same notification.

Deduction under Section 80-IB - profits and gains derived from industrial undertaking - first degree nexus / first degree source - DEPB and Duty Drawback as export incentives - ancillary profits - chargeable to tax under the head 'profits and gains of business or profession' (Section 28(iiid)/(iiie))

Whether Assessee is not entitled to deduction under Section 80-IB in respect of amounts received under the DEPB and Duty Drawback Schemes for A.Y. 2008-09? - HELD THAT: - The Court held that DEPB and Duty Drawback are incentives flowing from Government schemes (and statutory provisions such as Section 75 of the Customs Act) and therefore constitute ancillary profits that do not satisfy the requirement of being "derived from" the industrial undertaking for purposes of Section 80-IB.

Applying the restrictive meaning of "derived from" (requiring a first degree or direct nexus between the profit and the industrial undertaking) as laid down in Sterling Foods [1999 (4) TMI 1 - SUPREME COURT] and Liberty India [2009 (8) TMI 63 - SUPREME COURT] the Court concluded that such export incentives are one step removed from manufacture and sale and cannot be treated as part of the net profits of the eligible industrial undertaking for computing the Section 80-IB deduction. The Court noted that Section 28(iiid)/(iiie) makes profits on transfer of DEPB/Duty Drawback chargeable as business income, but that chargeability does not render them "derived from" the industrial undertaking for allowance under Section 80-IB.

The decision in Meghalaya Steels Limited [2016 (3) TMI 375 - SUPREME COURT], which permitted deduction for certain subsidies that directly reduce manufacturing cost, was distinguished: subsidies that reimburse an element of cost have a direct nexus and may qualify, whereas DEPB/Duty Drawback (being export-neutralisation incentives) do not. The High Court's conclusion rejecting the deduction was affirmed and contrary High Court decisions were declared not good law. [Paras 7, 8]

DEPB and Duty Drawback receipts do not form profits "derived from" the industrial undertaking within Section 80-IB and are not eligible for deduction thereunder.

Final Conclusion: Appeal dismissed; the High Court rightly held that amounts received under DEPB and Duty Drawback Schemes are not profits "derived from" the industrial undertaking for the purpose of deduction under Section 80-IB (A.Y. 2008-09), and contrary High Court decisions are not good law.

Residence of a company - Control and management / 'head and brain' - De facto control and management - Jurisdiction to reopen assessments under Sections 147/148 - Service of notice on a principal officer / deemed service - Burden of proof on assessee to establish income earned outside India - Reassessment where there has been no earlier assessment - Statutory and mandatory nature of interest under Section 234A

Residence of a company - Control and management / 'head and brain' - De facto control and management - The control and management of the assessee companies was situated in Delhi and they were resident in India for the relevant previous years. - HELD THAT: - Applying established principles that residence of a company is determined by the place of its central control and directing power - the 'head and brain' - the Court held the factual findings of the AO and CIT(A) (upheld by the High Court) that Rattan Gupta exercised de facto control were based on cogent material. The seized materials, directors appointed at his behest, existence of blank signed cheques, seals, letter heads and undisputed statements indicating that management functions were exercised from Delhi supported the conclusion that the effective control and management was in Delhi. The ITAT's contrary conclusion was held to be perverse because it did not overturn those factual findings and incorrectly shifted burdens. The Court applied the settled tests from precedents that require evidence of actual exercise of control (not merely de jure rights) and that domicile or place of registration is not determinative. [Paras 6, 8, 9]

The finding that the control and management of the assessee companies was in Delhi is affirmed; the companies were resident in India for the relevant years.

Jurisdiction to reopen assessments under Sections 147/148 - Reassessment where there has been no earlier assessment - Notices under Sections 147/148 issued by the Delhi authorities were valid and the Assessing Officer could proceed to assess escaped income including where no original assessment under the Act had been made. - HELD THAT: - The Court held that once it is established that the companies were resident in India and control and management were located in Delhi, the AO at New Delhi had territorial jurisdiction to issue notices and reopen assessments. The Court also relied on the binding precedent that Section 147 empowers the AO to 'assess or reassess' escaped income; the term 'escaped assessment' includes non-assessment, so reassessment can be initiated even if no earlier assessment under the Act was made. Consequently, the Revenue was entitled to proceed under Sections 147/148. [Paras 11, 14]

The reopening and reassessment by the Delhi authorities under Sections 147/148 are lawful and valid.

Service of notice on a principal officer / deemed service - De facto control and management - Service of notices effected at the Delhi office of the chartered accountant (Rattan Gupta) was valid and sufficient; substituted service was unnecessary. - HELD THAT: - Given the factual conclusion that Rattan Gupta was in de facto control and performed more than mere professional auditing functions (including determining directors and holding company documents, signed cheques, seals and letterheads), the Court held there was implied authority to receive notices and that refusal to accept did not require substituted service. The High Court correctly found that service at his Delhi premises constituted valid service for the companies. [Paras 6, 9]

Notices served through/at Rattan Gupta's Delhi office were valid; service requirement satisfied.

Burden of proof on assessee to establish income earned outside India - De facto control and management - The assessees failed to discharge the burden of proving that the claimed commission income was earned exclusively in Sikkim; adverse inference drawn by AO was sustainable. - HELD THAT: - The Court accepted the concurrent findings that summonses issued to payors of commission were not complied with and that the assessees produced no admissible, tangible material to substantiate that commissions were genuinely earned in Sikkim. On that basis, the AO's drawing of adverse inferences and conclusions that income was not proved to arise solely in Sikkim was supported. The ITAT's reversal was held erroneous insofar as it shifted the burden away from the assessees. [Paras 6, 10]

The assessees failed to prove that the income arose exclusively in Sikkim; taxability under the Income Tax Act is sustainable.

Statutory and mandatory nature of interest under Section 234A - Interest under Section 234A is statutory, mandatory and may be levied where appropriate even if a separate specific order on interest is not drafted, and the High Court correctly sustained interest in this case. - HELD THAT: - Relying on the Constitution Bench precedent that interest under Sections 234A/234B/234C is mandatory and automatic, the Court held that computation enclosed as ITNS 150 with the assessment order sufficed to charge interest. Earlier contrary authority (Ranchi Club) was held not good law in view of subsequent binding decisions. The question of framing a separate substantial question under Section 260A on interest was unnecessary because interest is incidental/automatic once tax liability is upheld. [Paras 12, 13]

Levy of interest was sustainable as statutory and automatic; High Court's conclusion on interest is affirmed.

Final Conclusion: The appeals are dismissed. The concurrent findings that the assessee companies were controlled and managed from Delhi, that the Delhi authorities had jurisdiction to reopen and assess the escaped income for Assessment Years 1987-88, 1988-89 and 1989-90, that the assessees failed to prove the income arose exclusively in Sikkim, and that statutory interest under Section 234A is leviable are affirmed. No order as to costs.

Penalty for failure to deduct tax at source - scope of Section 271C(1)(a) - penal interest for belated remittance under Section 201(1A) - prosecution for failure to pay under Section 276B - strict construction of penal provisions

Penalty for failure to deduct tax at source - scope of Section 271C(1)(a) - strict construction of penal provisions - Whether penalty under Section 271C is leviable for mere belated remittance of TDS after deduction - HELD THAT: - The Court held that Section 271C(1)(a) penalises a person who "fails to deduct the whole or any part of the tax" as required by Chapter XVIIB and does not speak to belated remittance of tax already deducted. Penal provisions must be construed strictly and literally; nothing can be read into the provision. Section 271C(1)(b) addresses failure to pay in narrowly prescribed instances and cannot be extended to cover ordinary belated deposit after deduction. Consequently, mere delay in remitting TDS after deduction does not attract the penalty under Section 271C. [Paras 7]

Penalty under Section 271C is not leviable for mere belated remittance of TDS after deduction

Penal interest for belated remittance under Section 201(1A) - prosecution for failure to pay under Section 276B - What are the statutory consequences for non-payment or belated payment of TDS after deduction - HELD THAT: - The Court observed that statutory consequences for failure to pay or belated remittance after deduction are provided by other provisions: Section 201(1A) prescribes payment of simple interest for periods of delay (compensatory in nature) and Section 276B contemplates prosecution for failure to pay tax to the credit of the Central Government. The CBDT Circular explains that Section 271C was introduced to penalise failure to deduct, while delay in remittance attracts interest under Section 201(1A) and, in grave cases, prosecution under Section 276B. Given these specific provisions, the Court declined to expand Section 271C to cover belated remittance. [Paras 7, 8]

Consequences for belated remittance after deduction are governed by Section 201(1A) (interest) and, where applicable, Section 276B (prosecution); Section 271C does not apply

Final Conclusion: Appeals allowed; High Court judgments and orders confirming penalties under Section 271C quashed and set aside; held that mere belated remittance of TDS after deduction does not attract penalty under Section 271C, and consequences of delay lie under Section 201(1A) and, where appropriate, Section 276B.

Addition under Section 68 in respect of share capital claimed to be unexplained investment - genuineness of share transactions and burden of proof - finding of fact versus substantial question of law - appeal under Section 260A maintainability - requirement of substantial question of law - assessment under Section 153C of the Income-tax Act

Addition under Section 68 in respect of share capital claimed to be unexplained investment - genuineness of share transactions and burden of proof - Whether the Tribunal was justified in upholding the addition treated as unexplained share capital on the basis that the assessee failed to prove genuineness of the share transactions - HELD THAT: - The Court recorded that the Assessing Officer and the Tribunal reached conclusions on the basis of evidentiary materials and inferences about off market transactions (shares purchased at a higher price and subsequently transferred at a nominal price). Those conclusions were factual determinations about the genuineness of the transactions and the onus on the assessee to prove them. The High Court held that these findings are questions of fact dependent on the documentary record and credibility of inferences drawn by the tax authorities and Tribunal, and not questions of law amenable to appellate interference under Section 260A.

Tribunal's factual conclusion upholding the addition was not found to raise a substantial question of law.

Finding of fact versus substantial question of law - appeal under Section 260A maintainability - requirement of substantial question of law - Whether the appeal under Section 260A could be entertained on the proposed substantial questions of law - HELD THAT: - Having examined the orders of the Assessing Officer, the Commissioner (Appeals) and the Tribunal, the Court concluded that the proposed substantial questions of law were in reality disagreements with factual findings and inferential conclusions reached by the authorities. The High Court emphasised that an appeal under Section 260A lies only where a substantial question of law arises; in the absence of such a question the statutory right of appeal is not available. Consequently, the Court found no substantial question of law in the matters raised.

The appeal under Section 260A was not maintainable as no substantial question of law was made out.

Assessment under Section 153C of the Income-tax Act - Whether the assessments made under the search-related provisions gave rise to any substantial question of law for the High Court to entertain - HELD THAT: - The Court noted that the assessments flowed from search and seizure operations and consequent proceedings, but the challenges before it related to evaluation of evidence and the genuineness of transactions. These matters were treated as factual by the authorities below. The High Court therefore held that the assessment proceedings under the search provisions did not, on the material placed before it, present a substantial question of law warranting interference under Section 260A.

No substantial question of law arose from the assessment under the search-related provisions; hence the appeal was not entertained.

Final Conclusion: The petition under Section 260A is dismissed in limine: the disputes raised are factual findings and inferences by the authorities and the Tribunal, not substantial questions of law, and therefore the appeal is not maintainable.

Classification under Customs Tariff Act - Tariff classification of scented sweet supari - Reliance on binding judicial precedent - Distinction between Customs and GST classification - Deference to Advance Ruling Authority

Classification under Customs Tariff Act - Tariff classification of scented sweet supari - Reliance on binding judicial precedent - Deference to Advance Ruling Authority - The classification of the imported product described as "Scented & Flavoured and Sweetened Supari" was upheld as made by the Customs Authority for Advance Rulings under sub-heading 080280 of the First Schedule to the Customs Tariff Act, 1975. - HELD THAT: - The CAAR classified the product under sub-heading 080280; the appellant contended it should be classified under Chapter 21 (sub heading 21069030). The CAAR and this Court proceeded on established precedent, including the Supreme Court decision in Crane Betel Nut Powder Works, and the subsequent decision of this Court in M/s. Great Nuts Impex Pvt. Ltd., which govern the classification question. The CAAR declined to accept the GST circular as a basis to depart from the judicial ratio relied upon. Having considered the reasoning and the binding authorities relied upon by the CAAR, this Court found no infirmity in the CAAR's classification and declined to disturb its ruling. [Paras 5, 7]

The CAAR's classification of the product under sub heading 080280 is affirmed and the appeal is dismissed on this issue.

Distinction between Customs and GST classification - Relevance of administrative clarification - The GST Council's clarificatory circular identifying "Scented sweet supari" as falling under tariff item 21069030 was not treated as dispositive for the customs classification and its validity was not examined by this Court. - HELD THAT: - Counsel for the appellant relied on Circular No.163/2019/2021 GST (06.10.2021) which characterises "scented sweet supari" as a betel nut product under tariff item 21069030 for GST purposes. The Court observed that GST classification and customs classification principles may differ and that such a circular issued by the GST authority does not bind the customs classification under the Customs Tariff Act. The CAAR had noted that the circular did not set out reasons that would warrant departing from judicial precedent. The Court expressly declined to examine the validity of the clarificatory circular in these proceedings. [Paras 3, 4, 6]

The GST circular was not accepted as a basis to overturn the CAAR's customs classification and its validity was not adjudicated.

Final Conclusion: The appeal is dismissed; the CAAR's ruling classifying the imported product under sub heading 080280 of the Customs Tariff Act, 1975 is affirmed, and the GST Council's clarificatory circular was not entertained as a ground to disturb that customs classification.

Treatment of operational creditor claims in resolution plan - equitable treatment of similarly situated creditors - priority to operational creditors and liquidation value - classification of operational creditors and rational basis - duty of Resolution Professional under CIRP Regulations to communicate admitted claims - objectionable content in resolution plan and deletion - eligibility of resolution applicant under section 29 A vis a vis MSME and section 240 A - reprimand and costs for failure of Resolution Professional

Treatment of operational creditor claims in resolution plan - equitable treatment of similarly situated creditors - priority to operational creditors and liquidation value - classification of operational creditors and rational basis - The Appellant was incorrectly classified and given 'zero' payment in the approved resolution plan despite an admitted arbitral award based claim and absence of any stay or variation of the award. - HELD THAT: - The Tribunal found that the Appellant had disclosed the arbitral award and pending proceedings and that there was no stay or variation of the award. The approved resolution plan categorised operational creditors into labels (F, G, H, I, J, K, L) without explaining the basis of such classification; the Appellant was placed in category H and assigned NIL payment. Citing the principle of equitable treatment and the requirement that operational creditors receive not less than liquidation value unless a rational basis exists for differentiation, the Tribunal held that the categorical NIL treatment was impermissible where no court order affected the award. The Appellant should therefore be paid an amount equal to the highest percentage of admitted claim paid to any operational creditor category in the plan. [Paras 21, 22, 24, 25, 30]

Appellant's classification and NIL payment in the resolution plan was incorrect; the Appellant shall be paid the highest percentage of admitted claim afforded to operational creditors under the approved plan.

Eligibility of resolution applicant under section 29 A vis a vis MSME and section 240 A - The Successful Resolution Applicant was not ineligible under clauses (c) and (h) of section 29 A because the corporate debtor is an MSME and section 240 A excludes those clauses for MSME CIRPs. - HELD THAT: - On examination of sections 240 A and 238 of the IBC, and the admitted fact that the corporate debtor is an MSME, the Tribunal held that clauses (c) and (h) of section 29 A do not apply to the resolution applicant in this CIRP. Consequently, the presence of persons who were earlier on the board does not, by itself, render the resolution applicant ineligible under those clauses. [Paras 29, 30]

Successful Resolution Applicant was entitled to submit a resolution plan in this MSME CIRP; no disqualification under section 29 A as read with section 240 A was made out.

Objectionable content in resolution plan and deletion - Portions of the approved resolution plan that made legal findings on the validity of the arbitral award and labelled the award 'void ab initio' were improper and liable to be deleted from the approved plan. - HELD THAT: - The Tribunal noted that the Successful Resolution Applicant had, in the resolution plan, made its own legal analysis concluding defect and unlawfulness in the arbitral process and declaring the award void. Such conclusions intruded upon the jurisdiction of courts and were prejudicial to the Appellant. The Resolution Professional and Adjudicating Authority should have scrutinised and excised such extraneous and legally impermissible comments. The Tribunal directed deletion of the objectionable portions quoted from the resolution plan. [Paras 23, 30]

The objectionable legal commentary in the resolution plan concerning the arbitral award is ordered to be deleted from the approved resolution plan.

Duty of Resolution Professional under CIRP Regulations to communicate admitted claims - reprimand and costs for failure of Resolution Professional - The Resolution Professional failed in his duty to communicate the precise quantum of the Appellant's admitted claim and failed to flag objectionable content in the resolution plan; he is reprimanded. - HELD THAT: - The record showed that an earlier IRP had admitted a defined amount, that the Appellant repeatedly sought clarification, and that after change of RP the Appellant submitted full details but was not informed of the final admitted quantum. Regulations (12, 12A, 13, 14) require the RP to maintain and make available the list of creditors and to communicate admitted amounts. Further, the RP did not draw the Committee of Creditors' or Adjudicating Authority's attention to the Plan's prejudicial legal assertions regarding the arbitral award. The Tribunal reprimanded the Resolution Professional for these failings. [Paras 18, 20, 23, 30]

Resolution Professional reprimanded for failure to communicate admitted claim quantum and for not highlighting objectionable content in the resolution plan.

Reprimand and costs for failure of Resolution Professional - The Successful Resolution Applicant is directed to pay litigation costs to the Appellant for the unnecessary litigation occasioned by the prejudicial treatment of the claim. - HELD THAT: - Given the incorrect and prejudicial classification and the inclusion of objectionable commentary that resulted in avoidable litigation by the Appellant, the Tribunal ordered litigation costs to compensate the Appellant. This is a remedial measure proportionate to the failure found in the Plan and administrative process. [Paras 30, 31]

Successful Resolution Applicant shall pay litigation costs of Rs. One Lakh to the Appellant within 30 days and file an affidavit of compliance.

Final Conclusion: The appeal is allowed. The Appellant shall be paid an amount equal to the highest percentage of admitted claim payable to any operational creditor category under the approved plan; objectionable portions of the resolution plan disparaging the arbitral award are ordered deleted; the Resolution Professional is reprimanded for failing to communicate the admitted claim and for not flagging the objectionable content; the Successful Resolution Applicant shall pay litigation costs and comply with directions within 30 days.

Liquidation value determined by registered valuers - liquidation value - CoC's commercial wisdom in approving a resolution plan - Section 30(2)(b) of the IBC read with Section 53(1) - Builder-Buyer Agreement rights of allottee - valuation caveats and legal title/encumbrance

Liquidation value determined by registered valuers - liquidation value - Builder-Buyer Agreement rights of allottee - valuation caveats and legal title/encumbrance - Validity of ascribing NIL liquidation value to the appellants' security interest in Universal Business Park. - HELD THAT: - The Tribunal examined the valuation reports, the underlying title/transfer documents and the record of Builder-Buyer Agreements (BBAs) and conveyance deeds. Both registered valuers valued only the super built-up area remaining after excluding areas covered by conveyance deeds; they also recorded caveats that legal title and encumbrances were assumed and recommended obtaining legal opinion. The record before the Tribunal, including the RP's particulars and Annexure R-1, showed extensive prior BBAs and conveyance deeds which together exceeded the total saleable area, and which were executed prior to the mortgage/charge. The Tribunal applied the principle that allottee rights under BBAs (and conveyance deeds) confer enforceable interests which preclude the promoter/corporate debtor from re realising such units; having accepted the factual position that the area had effectively been sold/allocated and monetised by the promoters, the Tribunal held that no realizable super area remained for the corporate debtor from the Universal Business Park and that the liquidation value attributable to the appellants in respect of that project was correctly treated as NIL. The Tribunal therefore concurred with the Adjudicating Authority's conclusion on this point. [Paras 23, 24, 29]

The finding that the liquidation value of the appellants' security interest in Universal Business Park is NIL is upheld.

Liquidation value determined by registered valuers - CoC's commercial wisdom in approving a resolution plan - Section 30(2)(b) of the IBC read with Section 53(1) - valuation caveats and legal title/encumbrance - Validity of the Adjudicating Authority's direction to the CoC to re-examine significant differences between the two valuers' liquidation values (paragraph 50 of the impugned order). - HELD THAT: - The Tribunal acknowledged the statutory role and importance of liquidation values prepared by registered valuers under the CIRP Regulations and that such valuations are a specific factor in the resolution process. It observed that ordinarily the CoC should not be permitted to disregard or alter liquidation values arrived at by registered valuers without valid reason, as that would undermine the valuation process. However, on the facts of this case the valuers had expressly recorded caveats and assumptions (including on title and encumbrances) which left issues of realizability to be determined on the facts. Given that the Tribunal agreed with the Adjudicating Authority's substantive conclusion that no realizable asset remained in the Universal Business Park, the specific direction in paragraph 50 to remit the matter to the CoC for re examination was unnecessary and uncalled for. The Tribunal therefore deleted paragraph 50 while affirming the Adjudicating Authority's conclusion under paragraph 49. [Paras 30, 31]

Direction in paragraph 50 to remit valuation differences to the CoC is vacated; paragraph 49 (upholding the plan as approved by the CoC under Section 30(2)(b) read with Section 53(1)) is affirmed.

Final Conclusion: Appeal dismissed except for deletion of paragraph 50 of the impugned order; the Adjudicating Authority's conclusion that the liquidation value of the appellants in respect of Universal Business Park is NIL is affirmed and parties shall bear their own costs.

Binding effect of approved resolution plan - finality and extinction of pre CIRP claims on approval of resolution plan - duty to submit claim during CIRP and consequence of non submission - commercial wisdom of the committee of creditors - priority and treatment of operational creditors under a resolution plan - non obstante effect of the Insolvency and Bankruptcy Code - requirement of Section 30(2) and Section 31 for approval of a resolution plan

Duty to submit claim during CIRP and consequence of non submission - binding effect of approved resolution plan - Whether the appellant, having not submitted its claim to the IRP/RP within the prescribed period, can challenge the approved resolution plan or recover pre CIRP dues after approval and implementation of the plan. - HELD THAT: - The Tribunal held that the appellant did not file any claim with the IRP/RP in response to the public announcement and had not raised objections during the CIRP or at the stage of approval of the resolution plan. Reliance was placed on the settled principle that once a resolution plan is approved under Section 31, claims not part of the plan stand frozen/extinguished and the plan is binding on all stakeholders. Allowing belated claims at the implementation stage would disrupt the CIRP timelines and the finality of approved plans. For these reasons the appellant cannot be permitted to pursue recovery of pre CIRP dues or to challenge the approval on that basis after implementation. [Paras 36, 37, 38, 41, 48]

The appellant cannot challenge the approved and implemented resolution plan or recover pre CIRP dues because it failed to submit a claim during the CIRP; its claim is barred and extinguished on approval of the plan.

Priority and treatment of operational creditors under a resolution plan - commercial wisdom of the committee of creditors - requirement of Section 30(2) and Section 31 for approval of a resolution plan - Whether the resolution plan is vitiated because it provides a lower percentage to operational creditors (including the appellant) compared to financial creditors and thus fails to balance stakeholders' interests as required by the Code and judicial precedents. - HELD THAT: - The Tribunal noted that the Committee of Creditors, in its commercial wisdom, approved the resolution plan after considering feasibility and viability and that the Adjudicating Authority had satisfied itself under Sections 30 and 31. It observed that operational creditors who filed claims were given treatment as per the plan and that stakeholders may take a haircut as determined by the CoC. The Tribunal reiterated that judicial review of CoC's commercial decisions is limited and that differing percentages of distribution between financial and operational creditors do not, by themselves, invalidate an approved plan where statutory requirements are met. [Paras 6, 23, 31, 44, 45]

The disparity in percentages payable to financial and operational creditors does not vitiate the resolution plan; the CoC's commercial determination, once approved by the Adjudicating Authority in conformity with Sections 30 and 31, stands.

Finality and extinction of pre CIRP claims on approval of resolution plan - non obstante effect of the Insolvency and Bankruptcy Code - Whether protections or priorities under the Electricity Act and state supply code can override the effect of an approved resolution plan that does not provide full payment of pre CIRP electricity dues. - HELD THAT: - The Tribunal held that the non obstante clause in Section 238 of the IBC gives the Code overriding effect over inconsistent provisions of other statutes. Therefore, obligations or enforcement rights under the Electricity Act or state supply code cannot be permitted to defeat the finality of an approved resolution plan. The Tribunal treated pre CIRP electricity dues as operational debts which had to be claimed during the CIRP; absence of such claim and approval of the plan precludes reliance on external statutory provisions to upset the plan. [Paras 18, 40, 46, 47]

Statutory provisions under the Electricity Act or state supply code cannot override the finality of an approved resolution plan; IBC's non obstante clause prevails and the appellant cannot rely on those provisions to demand full pre CIRP payment after plan approval.

Binding effect of approved resolution plan - duty to submit claim during CIRP and consequence of non submission - Whether the Appellate Tribunal should set aside the Adjudicating Authority's approval of the resolution plan on the ground that the Adjudicating Authority delegated judicial function to the CoC by asking it to reconfirm conformity with Essar Steel judgment. - HELD THAT: - The Tribunal noted that the Adjudicating Authority had directed the CoC to reconfirm conformity with Supreme Court precedents and that the CoC filed an affidavit to that effect before the Adjudicating Authority. The Tribunal found no error in this procedural step and reiterated that the Adjudicating Authority ultimately satisfied itself before approving the plan. The Tribunal further observed that the appellant had not engaged during CIRP and that the plan had been implemented; consequently no ground existed to set aside the approval. [Paras 7, 15, 31, 51]

No interference with the Adjudicating Authority's approval; the direction to the CoC to reconfirm conformity did not amount to impermissible delegation and does not invalidate the approved plan.

Binding effect of approved resolution plan - Whether the Security Deposit adjustment already made pre CIRP obliges the SRA to reimburse the appellant, and whether the SRA's offer to pay the forfeited security deposit is acceptable. - HELD THAT: - The Tribunal queried how the appellant could be asked to return pre CIRP consumption recovered by adjustment of the security deposit. The Successful Resolution Applicant volunteered to pay the forfeited security deposit to enable restoration of supply, and the Tribunal accepted this undertaking as being consistent with the Code and relevant jurisprudence. Accordingly the Tribunal directed the SRA to pay the security deposit to the appellant. [Paras 39, 52]

The Successful Resolution Applicant is directed to pay the forfeited security deposit to the appellant; the SRA's undertaking is accepted.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority's approval of the resolution plan is upheld as meeting the requirements of the Code; the appellant's belated, pre CIRP claim cannot be entertained after implementation of the plan. The Successful Resolution Applicant is directed to pay the forfeited security deposit to the appellant.

Territorial jurisdiction of Special Court under the Prevention of Money laundering Act - place of commission of money laundering determined by location of the processes/activities under Section 3 of PMLA - transfer of criminal proceedings - effect of magistrate's order under Section 167(2) of the Code of Criminal Procedure on forum for PMLA complaint - residence of accused or location of witnesses not a sole ground for transfer

Territorial jurisdiction of Special Court under the Prevention of Money laundering Act - place of commission of money laundering determined by location of the processes/activities under Section 3 of PMLA - Whether the Special Court, PMLA, Lucknow had territorial jurisdiction to entertain the prosecution complaint arising out of ECIR/02/HIU/2018. - HELD THAT: - The Court applied the principle that territorial jurisdiction for a PMLA offence is to be ascertained with reference to the place(s) where any one of the processes or activities constituting money laundering under Section 3 occurred (acquisition, possession, concealment, use, projection or claiming as untainted property). Relying on the reasoning in Rana Ayyub, the Court held that even if the scheduled offence FIR was filed elsewhere, jurisdiction of the Special Court for a PMLA complaint depends on where the relevant activities took place. The combined prosecution complaint alleged transfers/receipts connected to the case in the area cognizable by the Lucknow Special Court; consequently Lucknow cannot be said to lack territorial jurisdiction to entertain the complaint. [Paras 8, 9, 10, 11]

The Special Court, PMLA, Lucknow has territorial jurisdiction to entertain the complaint; this ground for transfer is rejected.

Residence of accused or location of witnesses not a sole ground for transfer - transfer of criminal proceedings - Whether the fact that a majority of accused and witnesses are residents of Kerala/South India warrants transfer of the proceedings from Lucknow to Ernakulam. - HELD THAT: - The Court rejected the contention that the residence of accused or the preponderance of witnesses from a particular State by itself justifies transfer. The presence of accused or witnesses from another State does not ipso facto render the forum inappropriate nor does it constitute a legally valid ground for ordering transfer of the complaint under the circumstances of this case. [Paras 12]

The residence of accused and location of witnesses do not furnish a legally sufficient basis for transfer; this ground is rejected.

Effect of magistrate's order under Section 167(2) of the Code of Criminal Procedure on forum for PMLA complaint - Whether the petitioner having been remanded to custody by the Magistrate at Ernakulam under Section 167(2) CrPC precluded filing or maintainability of the PMLA prosecution complaint at Lucknow. - HELD THAT: - The Court observed that an order under Section 167(2) CrPC is to be passed by the Magistrate to whom the accused is forwarded and may record whether the Magistrate has jurisdiction to try the case. The petitioner was arrested in Kerala and produced before the local Magistrate who remanded him; the NIA applied for remand to Enforcement Directorate custody. The appellate reasoning established that the earlier remand in Kerala does not render filing of a PMLA complaint at Lucknow impermissible. The statutory scheme and the facts did not support the contention that the Section 167(2) remand at Ernakulam ousted the jurisdiction of the Lucknow Special Court to proceed with the PMLA complaint. [Paras 13, 14]

The prior remand order under Section 167(2) CrPC at Ernakulam does not preclude filing or maintainability of the PMLA complaint at Lucknow; this ground is rejected.

Final Conclusion: No legally valid or justifiable grounds for transfer were made out on the materials before the Court; the transfer petition is dismissed and pending applications, if any, are disposed of.

Offence of money laundering under Section 3 of the Prevention of Money Laundering Act, 2002 - Proceeds of crime derived from a scheduled offence - Prima facie requirement and standard for framing of charge - Abetment under Sections 107/109 IPC as constituting liability related to a scheduled offence - Independence of PMLA proceedings from initiation, continuation or outcome of predicate proceedings - Continuing nature of the process or activity connected with proceeds of crime - Doctrine of double jeopardy vis a vis distinct statutory proceedings - Retrospectivity and applicability of PMLA to continuing conduct

Prima facie requirement and standard for framing of charge - Offence of money laundering under Section 3 of the Prevention of Money Laundering Act, 2002 - Sustainability of the trial Court's order rejecting the petitioner's application for discharge and framing charge under Section 3 PMLA. - HELD THAT: - At the stage of framing charge the Court must consider broad probabilities, the total effect of evidence and documents on record and basic infirmities, without undertaking a roving inquiry or weighing evidence as at trial. The material on record, including documents showing modus operandi, money trail and alleged possession, concealment, use and projection of tainted money, is prima facie sufficient to indicate that petitioner No.2 knowingly assisted or was party to processes connected with proceeds of crime. Given that her husband has been convicted for a scheduled offence and there is prima facie material that she assisted in concealing/ projecting the proceeds as untainted, the trial Court rightly concluded that a prima facie case under Section 3 PMLA exists and was justified in framing charge. [Paras 12, 18, 31]

The impugned order refusing discharge and framing charge under Section 3 PMLA against petitioner No.2 is legally sustainable.

Abetment under Sections 107/109 IPC as constituting liability related to a scheduled offence - Proceeds of crime derived from a scheduled offence - Whether conviction under Section 109 IPC without explicit mention of the scheduled offence precludes prosecution under the PMLA. - HELD THAT: - Abetment under Sections 107/109 IPC relates to instigation, conspiracy or intentional aiding of an act and is meaningful only in relation to some substantive offence. The punishment for abetment is the punishment for the offence abetted. Where the accused has been prosecuted, convicted and sentenced for abetment arising from the amassing of disproportionate assets by a public servant (an offence listed in the Schedule), omission to specifically mention the scheduled provision in the conviction does not negate that the accused abetted a scheduled offence. Consequently a conviction under Section 109 IPC in the context of the same facts does not preclude prosecution under Section 3 PMLA for involvement with proceeds of the scheduled offence. [Paras 19, 20, 21, 22]

Absence of explicit reference to the scheduled provision in the conviction order does not bar prosecution under the PMLA where the abetment relates to a scheduled offence.

Doctrine of double jeopardy vis a vis distinct statutory proceedings - Whether the doctrine of double jeopardy prevents prosecution under PMLA after conviction under IPC/PC Act. - HELD THAT: - Double jeopardy protects against a second trial for the same offence following conviction or acquittal on an earlier indictment; it is distinct from double punishment. Proceedings under the PMLA constitute a distinct statutory offence concerning laundering of proceeds of crime and are not prosecution for the same offence as under the IPC or the PC Act. Precedents establish that a subsequent trial under a different statute for a distinct offence does not attract the bar of double jeopardy. [Paras 24, 25]

Double jeopardy is not attracted and does not preclude PMLA prosecution in the present facts.

Continuing nature of the process or activity connected with proceeds of crime - Retrospectivity and applicability of PMLA to continuing conduct - Whether PMLA can be applied to dealings in proceeds of crime that originated before the scheduled offence notification and whether such application is impermissibly retrospective. - HELD THAT: - The offence under Section 3 is concerned with processes or activities connected with proceeds of a scheduled offence and may be a continuing activity. The determinative date is when the person indulges in the process or activity connected with the proceeds; therefore continuing possession, concealment or use after a predicate offence is notified as scheduled renders the conduct prosecutable under PMLA. Reliance on the Supreme Court's exposition confirms that the PMLA penalises continuing dealing with proceeds and that inclusion of an explanation does not alter the intrinsic scope. Thus prosecution for continuing laundering activity is not barred as impermissibly retrospective. [Paras 26, 27, 28]

PMLA applies to continuing activities connected with proceeds of crime and is not rendered retrospective or constitutionally impermissible in the circumstances.

Final Conclusion: The petition against framing of charge under Section 3 PMLA insofar as petitioner No.2 is concerned is dismissed; the trial Court's order holding prima facie case and framing charge is upheld. The petition as to petitioner No.1 was not pressed and stands dismissed as not pressed with liberty to raise grounds in the trial Court.

Non-bailable offences under PMLA and Section 45(1) proviso - Grant of bail to a woman or sick/infirm accused and monetary threshold less than one crore - Reasonable grounds for believing - limited inquiry on bail under Section 45(1) - Parity with co-accused in grant of bail

Non-bailable offences under PMLA and Section 45(1) proviso - Grant of bail to a woman or sick/infirm accused and monetary threshold less than one crore - Parity with co-accused in grant of bail - Reasonable grounds for believing - limited inquiry on bail under Section 45(1) - Whether the applicant is entitled to be released on bail in view of Section 45(1) of the PMLA read with its proviso, having regard to her being a woman, her infirmity, the amount involved and the fact that co-accused have been enlarged on bail. - HELD THAT: - The court applied the limited scope of inquiry mandated by Section 45(1) of the PMLA - namely, to examine whether there are reasonable grounds for believing that the accused is not guilty and is not likely to commit an offence while on bail - without delving into merits. The proviso to Section 45(1) permits bail to a person who is a woman or is sick or infirm or where the accused is charged with laundering less than one crore rupees. The applicant is a woman, medically infirm (surviving on one kidney and suffering other ailments), and the impugned deposit in the company account is Rs. 50,00,000/-, which is below the one crore threshold in the proviso. Further, principal and other co-accused have already been granted bail, and the applicant alone remained in custody despite no specific allegation of active commission on her part beyond being a director of the company in whose account the amount was routed. Considering these factors together, and applying the jurisprudence that a court on a bail application need only form a view based on probability from available material (without weighing evidence as in trial), the court found that the circumstances warranted enlargement on bail. The court therefore exercised its discretion to grant bail subject to usual conditions and reservation for cancellation if conditions are breached. [Paras 26, 27, 28, 29, 30]

Bail allowed; applicant released on furnishing personal bond and two sureties and subject to conditions restricting tampering with evidence, pressurising witnesses, attendance at trial dates and prior permission for travel abroad, with liberty to move for cancellation on breach.

Final Conclusion: The High Court allowed the second bail application under Section 45(1) PMLA (including its proviso), granting bail to the applicant - a woman and infirm accused in respect of alleged proceeds of crime less than one crore - observing limited inquiry on probability, parity with co-accused and absence of specific active allegation; bail granted on furnishing bond and sureties subject to enumerated conditions.

Design services - service tax - sale of goods versus contract of service - aspect theory - reverse charge - associated enterprise

Design services - service tax - sale of goods versus contract of service - aspect theory - reverse charge - associated enterprise - Imported "Engineering Design & Drawings" used for manufacture of WTG are leviable to service tax as "design services" for the period in dispute. - HELD THAT: - The Court examined the definition of "design services" as it stood during the relevant period and held that the definition is wide enough to cover the engineering designs and drawings imported by the respondent and used in manufacturing WTG. The fact that the designs were reduced to and imported on paper and declared as "goods" for customs purposes did not preclude characterisation of the same activity as a taxable service under the Finance Act. Applying the settled distinction between sale of goods and contract of service, the Court observed that taxability depends on the substance and intention of the contract and that the aspect theory permits different fiscal heads to tax distinct aspects of a transaction. The Court further recorded that the imported designs supplied by a related overseas unit attract service tax under reverse charge principles where the supplier and recipient are associated enterprises. For these reasons the Court quashed the CESTAT order that had negated service tax liability on the ground that the item was treated as goods and held the respondent liable to service tax as provider/recipient of "design services."

Impugned CESTAT order set aside; liability for service tax on the imported engineering designs/drawings upheld in favour of the Revenue.

Foreign entity services - extended period of limitation - remand - Two specific contentions - whether services (if any) rendered by a foreign entity fall within "design services" and whether the department was justified in invoking the extended period of limitation - were not decided by the CESTAT and are remitted for fresh consideration. - HELD THAT: - The Court observed that the CESTAT had noted but not addressed these specific grounds raised by the respondent. In consequence, the Court remitted only these two issues to the CESTAT for adjudication in accordance with law, clarifying that no other grounds are to be considered on remand.

Matter remitted to CESTAT to decide (a) applicability of "design services" to services rendered by the foreign entity and (b) whether extended period of limitation was properly invoked.

Final Conclusion: The CESTAT order holding that imported engineering designs and drawings were not taxable as "design services" is quashed and set aside; service tax liability on those imports for June, 2007 to September, 2010 is upheld in favour of the Revenue, while the two specified issues regarding foreign-entity services and extended limitation are remitted to the CESTAT for fresh adjudication.

Classification under Schedule III of the Kerala Value Added Tax Act - specific entry overrides residuary entry - dominant use test for classification - medicament for therapeutic or prophylactic use - burden of proof on the Revenue in classification disputes - plain meaning rule in interpretation of taxing entries

Specific entry overrides residuary entry - classification under Schedule III of the Kerala Value Added Tax Act - dominant use test for classification - Classification of Mosquito Mats, Coils and Vaporizers and Mortein Insect Killers - HELD THAT: - The Court held that these products are classifiable under the specific entry for mosquito repellants in Notification SRO 82/06 (Sl. No.66) and not under the more general Entry 44(5) of Schedule III as insecticides. The HSN Code 3808 was deleted from Entry 44(5) with retrospective effect, and Sl. No.66 specifically covers mosquito repellants (electric or electronic mosquito repellants, gadgets and insect repellants, devices and parts and accessories). Entry 44(5) relates to products used in agricultural operations; therefore, once a specific entry for mosquito repellants exists, that specific entry governs classification. The dominant use and the specific wording of the notification determine classification; reliance on licences under the Insecticides Act or on the capacity to kill insects does not override the specific taxing entry. For these reasons the High Court's conclusion upholding classification under Sl. No.66 was affirmed. [Paras 9]

Mosquito Mats, Coils and Vaporizers and Mortein Insect Killers are classifiable under Sl. No.66 of Notification SRO 82/06 (mosquito repellants) and not under Entry 44(5) of Schedule III.

Classification under Schedule III of the Kerala Value Added Tax Act - dominant use test for classification - specific entry overrides residuary entry - Classification of Harpic Toilet Cleaner and Lizol Floor Cleaners - HELD THAT: - The Court accepted that Harpic and Lizol are essentially cleaning products whose dominant use is for removal of stains, deodorising and cleaning floors and toilets. After the introduction of SRO 82/06 these products fall under the specific entry Sl. No.27(4) (stain removers, cleaning powders and liquids including floor and toilet cleaning). Merely because they may kill germs does not convert them into insecticides or bring them within Entry 44(5). Given the specific nature of Sl. No.27(4), that entry applies and displaces the general Entry 44(5). The High Court's classification under Sl. No.27(4) was therefore affirmed. [Paras 9]

Harpic Toilet Cleaner and Lizol Floor Cleaners are classifiable under Sl. No.27(4) of Notification SRO 82/06 and not under Entry 44(5) of Schedule III.

Medicament for therapeutic or prophylactic use - classification under Schedule III of the Kerala Value Added Tax Act - dominant use test for classification - burden of proof on the Revenue in classification disputes - plain meaning rule in interpretation of taxing entries - Classification of Dettol Antiseptic Liquid - HELD THAT: - Applying established tests for classification (dictionary and technical meanings, user's point of view, popular meaning and history of the entry), the Court found that Dettol is an antiseptic with active germicidal ingredients used on wounds, for surgical/medical use and for prophylactic purposes. Considering its dominant use and material composition, Dettol falls within Entry 36(8)(h)(vi) of Schedule III as a medicament for therapeutic or prophylactic uses (HSN 3004.90) rather than the residuary entry relied upon by the Revenue. The Court reiterated that ambiguities in taxing entries are to be resolved in favour of the assessee and that the burden to prove a classification under a particular entry lies on the Revenue. Consequently the High Court's contrary finding was set aside and Dettol was held to be taxable under the medicament entry at the lower rate. [Paras 9]

Dettol Antiseptic Liquid is classifiable under Entry 36(8)(h)(vi) of Schedule III as a medicament (therapeutic or prophylactic use) and is taxable at the rate applicable to that entry.

Final Conclusion: The appeal is partly allowed. The High Court's judgment is affirmed in respect of Mosquito Mats, Coils and Vaporizers and Mortein Insect Killers (classified under Sl. No.66 of SRO 82/06) and Harpic and Lizol (classified under Sl. No.27(4) of SRO 82/06). The High Court's decision is set aside in respect of Dettol Antiseptic Liquid, which is held to be classifiable under Entry 36(8)(h)(vi) of Schedule III and taxable accordingly. No order as to costs.

Finality of withdrawal of appeal - maintainability of a fresh appeal after prior withdrawal - exhaustion of remedy where no liberty reserved to file afresh - prohibition on repeated appeals - non-appealability of order rejecting review under Order XLVII, Rule 7 CPC

Finality of withdrawal of appeal - maintainability of a fresh appeal after prior withdrawal - prohibition on repeated appeals - Present appeals are not maintainable because an earlier appeal against the same order was withdrawn without reservation of liberty to file a fresh appeal. - HELD THAT: - The Court applied the settled principle that a litigant who withdraws an appeal without reserving liberty to challenge the order afresh is precluded from re-agitating the same order by filing a subsequent appeal. The High Court relied on the reasoning in Vinod Kapoor as well as the later reaffirmation in Sandhya Educational Society , which hold that withdrawal of a prior challenge without liberty to file afresh renders any later appeal against the same order not maintainable. The Court rejected the appellant's submission that the present case is distinguishable on facts, observing that once an appeal is withdrawn without reserving a right to file a fresh challenge, the remedy stands exhausted and the litigant cannot institute repeated appeals on the same controversy.

Appeals dismissed as not maintainable on the ground of prior withdrawal without liberty to file afresh.

Exhaustion of remedy where no liberty reserved to file afresh - non-appealability of order rejecting review under Order XLVII, Rule 7 CPC - Withdrawal of the earlier appeal with liberty only to pursue remedies before the authority does not preserve a right to file a fresh appeal in this Court. - HELD THAT: - The Court examined the nature of the liberty recorded at the time of withdrawal and concluded it amounted only to permission to approach the concerned authority (for example, to demonstrate movement of goods) and did not include reservation of a right to challenge the same High Court order afresh. The Court noted the consistent line of authority that an order rejecting a review is not ordinarily susceptible to a further appeal and that procedural provisions limiting appealability (as reflected in Order XLVII, Rule 7 CPC) support the consequence that remedies not expressly preserved by the withdrawing order are exhausted. Accordingly, the limited liberty to seek administrative or authority-level relief did not entitle the appellant to relitigate the same judgment before this Court.

Liberty to pursue remedies before the authority did not amount to reservation of right to file a fresh appeal; therefore the present appeals cannot be maintained.

Final Conclusion: The appeals are dismissed as not maintainable because the appellant had earlier withdrawn its challenge to the same order without reserving any liberty to file a fresh appeal, thereby exhausting the remedy and precluding repetition of the litigation.