TMI Tax Updates e-Newsletter
Apr 24,2026

Validity of the survival of two assessment orders for the same tax period and same discrepancies against the same assessee - Duplicate assessment orders for the same tax period - Ex parte assessment - Opportunity of hearing on equitable grounds.

Duplicate assessment orders - Same tax period - HELD THAT: - The Court found that both impugned orders had been passed for the same tax period, namely 2021-2022, in relation to the same petitioner. It held that there could not be two separate orders covering the same discrepancies for the same assessment year. On that basis, one of the two orders was quashed, while leaving it open to the Department to proceed under the other order, since that order also covered an additional discrepancy. [Paras 2, 3, 4]

The impugned order challenged in W.P.(MD)No.11353 of 2026 was quashed, and the Department was left at liberty to pursue the discrepancies under the other assessment order.

Ex parte assessment - Fresh opportunity - Remand for reconsideration - HELD THAT: - Although the assessment had been made ex parte on account of the petitioner's failure to utilise the opportunities provided, the Court considered the nature of the discrepancies, the explanation offered on merits, and the reason stated before the Court for non-participation, namely lack of awareness of the notice after cancellation of GST registration. Taking these circumstances into account, and noting that a substantial part of the disputed tax had already been recovered, the Court held that an opportunity could be granted on equitable grounds for fresh consideration by the assessing authority. [Paras 5, 6, 7]

The impugned order challenged in W.P.(MD)No.11374 of 2026 was set aside and the matter was remanded for fresh consideration, with a direction to the assessee to appear and file its reply and documents; consequential bank attachment was also directed to be raised.

Final Conclusion: One of the two assessment orders for the same tax period was quashed as impermissibly duplicative. The other ex parte assessment order was set aside on equitable grounds and remanded for fresh consideration after giving the assessee an opportunity to present its case.

Condonation of delay - manual application for revocation of cancellation of GST registration after the portal time limit had expired - cancellation of GST registration certificate was on account of non-filing of returns for the consecutive period of six months - HELD THAT:- The writ petition was disposed of by permitting the petitioner to submit, within the time granted by the Court, a physical application for revocation of cancellation of GST registration, and directing the competent authority to entertain and decide it in accordance with law within the further time stipulated.

Entitlement to interest on delayed refund of IGST arising from export shipments -IGST refund on zero-rated exports - HELD THAT: - The Court held that, on a conjoint reading of Sections 54 and 56, the Department is under a clear obligation to process refund claims within the prescribed time and to pay interest where the refund is delayed beyond the statutory period. In the facts of the case, the assessment of the shipping bills was required to be treated as an application for refund, and the petitioner's entitlement to refund had ultimately attained finality after the appellate authority set aside the order-in-original and the Tribunal dismissed the Department's challenge. Since the refund amount was admittedly released only during the pendency of the petition, the case squarely attracted Section 56. The Court rejected the stand in the reply affidavit that interest was not payable because the refund had been withheld due to bona fide administrative process, holding that such stand mechanically ignored the binding appellate orders and the statutory mandate. The Court also noted that its decision in Ms. Anita Agarwal [2024 (11) TMI 785 - BOMBAY HIGH COURT] supported the petitioner's entitlement to interest on belated refund. [Paras 13, 14, 15, 17, 18]

The petitioner was held entitled to interest on the delayed refund, and the writ petition was allowed in terms of the prayer seeking such interest.

Final Conclusion: The Court held that the belated refund of IGST attracted the statutory liability to pay interest under Section 56 of the CGST Act. The writ petition was accordingly allowed and the respondents were directed to comply with the order within the stipulated period.

Effective service of show cause notice - show cause notice uploaded only on the 'Additional Notices Tab' - opportunity of hearing - Principles of natural justice -HELD THAT: - The Court held that, although changes were introduced on the GST portal after 16th January, 2024 making the 'Additional Notices Tab' visible, the show cause notice in the present case had been issued prior to that date. Since the petitioner was not effectively served with the show cause notice and was consequently denied a proper opportunity to file a reply and be heard, the matter required remand. The respondent's contention that a later reminder cured the defect was rejected, as the reminder related to the same show cause notice uploaded in the same tab and could not, in law, amount to a valid or effective reminder when the original notice itself had not been effectively served. [Paras 6, 8, 9, 10, 11]

The impugned order was set aside and the petitioner was permitted to file a reply to the show cause notice, after which the Adjudicating Authority was directed to grant personal hearing, consider the reply and submissions, and pass a fresh order; all rights and remedies were left open.

Final Conclusion: The writ petition was disposed of by setting aside the impugned adjudication order on the ground that the show cause notice had not been effectively served through the GST portal, resulting in denial of fair opportunity. The matter was remitted for fresh adjudication after permitting the petitioner to file its reply and after due communication of the personal hearing notice.

Maintainability of writ petition - Alternative statutory remedy - Pre-deposit requirement in appeal - Bypassing limitation under the GST appellate mechanism - Demand in violation of section 75(7) of the Act of 2017 as the amount of tax, interest and penalty demanded in the order exceeds the amount specified in the show-cause notice. -HELD THAT: - The Court held that the petitioner's plea of want of knowledge of notices and orders could not be accepted, since the notices under sections 61 and 74 and the final order were published on the GST portal. The Court further noted that the appeal had been filed without compliance with the mandatory pre-deposit requirement and without any application for condonation of delay. It also found that the writ petition itself had been filed after expiry of the limitation for approaching the GST Tribunal. In these circumstances, the Court held that the petitioner could not be permitted to invoke writ jurisdiction in order to bypass the statutory remedy, avoid the mandatory pre-deposit, and overcome limitation. [Paras 4]

The writ petition was dismissed as the petitioner had an alternative remedy by way of appeal before the GST Tribunal and could not use writ jurisdiction to circumvent the statutory appellate requirements.

Final Conclusion: The Court dismissed the writ petition, holding that the petitioner could not bypass the statutory appellate mechanism under the GST law after failing to comply with the mandatory pre-deposit and limitation requirements. The proper remedy was to pursue the appeal before the GST Tribunal.

Provisional attachment of the petitioner's bank account under Section 83 - Breach of natural justice on account of non-service or non-consideration of the reply and denial of personal hearing under Section 73 - Provisional attachment of the petitioner's bank account under Section 83 -Opportunity of hearing in tax adjudication - incorrect declaration of tax liabilities in the Petitioner’s annual return in Form GSTR-9, particularly with respect to the availment of excess Input Tax Credit (ITC). - HELD THAT:- The Court found it undisputed that the petitioner had neither submitted a reply to the show cause notice nor obtained an opportunity of personal hearing. It held that the right to be heard is an inalienable right under the principles of natural justice. At the same time, the Court took note of the belated approach of the petitioner and, instead of granting unconditional relief, balanced the equities by directing deposit of the entire demand amount as a condition for setting aside the adjudication order and permitting a fresh reply and hearing. Since the recovery action and provisional bank attachment were consequential to the order that stood set aside, their continuation was held to be unwarranted at that stage, without prejudice to the merits in the fresh proceedings. [Paras 11, 12, 13, 14, 15]

The impugned order was set aside; the petitioner was permitted, subject to deposit of the entire demand amount, to file its reply and participate in physical hearing for fresh adjudication, and the provisional attachment of the bank account was directed to be lifted.

Final Conclusion: The petition was disposed of by setting aside the adjudication order for violation of natural justice, while making fresh adjudication conditional upon deposit of the entire demand and imposing costs on the petitioner. The consequential provisional attachment of the bank account was also directed to be lifted, with all merits left open for de novo proceedings.

Maintainability of Writ Petition - availability of the statutory appellate remedy - Mandatory pre-deposit for GST appeal - Delay and negligence in pursuing statutory remedies. - HELD THAT:- The Court found no basis to accept the plea that the petitioner had no knowledge of the notices and order, since all notices and orders were published on the GST portal and no material was produced to establish otherwise. It further noted that the appeal had been filed without the mandatory pre-deposit, the petitioner had remained absent on the dates fixed for personal hearing, and no application for condonation of delay had been filed. In these circumstances, the Court held that the petitioner had been negligent throughout in pursuing statutory remedies and could not invoke writ jurisdiction to bypass the statutory scheme, avoid the required deposit, and overcome limitation, especially when a further appeal to the GST Tribunal was available. [Paras 4]

The writ petition was dismissed as the petitioner was not entitled to bypass the statutory appellate mechanism.

Final Conclusion: The Court declined to entertain the writ petition and dismissed it, holding that the petitioner had failed to comply with the statutory appellate requirements and had an alternative remedy before the GST Tribunal.

Alternative remedy in writ jurisdiction - denial of unrelied documents and cross-examination - breach of principles of natural justice - invoking the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India - demand of GST and Compensation Cess confirmed against the petitioner without providing proper opportunity to defend its case.

Alternative remedy - Violation of principles of natural justice - HELD THAT: - The Court held that the existence of an appellate remedy does not create an absolute bar to exercise of writ jurisdiction where there is a complaint of breach of principles of natural justice. It entertained the matter because the controversy directly raised whether the benefit of the earlier order passed in favour of one noticee under the same show cause notice could be denied to the present petitioners, and whether refusal of cross-examination itself vitiated the adjudication. [Paras 15, 16]

The objection based on alternative remedy was rejected and the writ petitions were entertained.

Cross-examination - Return of unrelied documents - Judicial discipline - Quasi-judicial propriety - HELD THAT: - The Court held that the controversy was not one of judgment in rem or judgment in personam, but of judicial discipline and the duty of a quasi-judicial authority to follow a binding pronouncement on the same show cause notice and the same procedural safeguards. Once this Court had, in the case of one of the 22 noticees, accepted the entitlement to return of unrelied documents and cross-examination and had remitted the matter for fresh adjudication, the authority was unjustified in refusing the same treatment to the present petitioners. The Court treated those directions as facets of principles of natural justice which the authority was bound to observe. [Paras 18, 19, 20, 21]

The impugned order was quashed in Writ Petition Nos.12375/2025, 14241/2025, 14592/2025 and 15808/2025, and the matters were remanded for fresh adjudication after handing over unrelied documents, permitting fresh replies, affording hearing, and allowing cross-examination at the appropriate stage.

Natural justice - Failure to seek procedural safeguards - The petitioner in Writ Petition No.17609/2025 was not entitled to similar relief where it had neither appeared before the adjudicating authority nor sought return of unrelied documents or cross-examination. - HELD THAT: - The Court found that, unlike the other petitioners, the petitioner in this writ petition had not shown that it had appeared before the adjudicating authority or made any application seeking return of unrelied documents or permission to cross-examine witnesses. In the absence of such foundational facts, the challenge on the same ground was held to be without merit.

Writ Petition No.17609/2025 was dismissed, with liberty to pursue the statutory remedy in accordance with law.

Final Conclusion: The Court held that, in the case of four petitioners, the adjudication stood vitiated by denial of natural justice and by the quasi-judicial authority's failure to follow the earlier directions issued on the same show cause notice in respect of a co-noticee. Their orders were quashed and the matters remanded for fresh adjudication, while Writ Petition No.17609/2025 was dismissed because that petitioner had not sought such procedural safeguards before the authority.

Alternative statutory remedy - statutory pre-deposit - Condonation of delay in statutory appeal - petitioner not served with the show cause notice and not aware of the proceedings initiated by the Department - HELD THAT: - The Court declined to examine the merits of the tax demand and held that the petitioner should avail the appellate remedy. While doing so, it permitted the petitioner to file the appeal within the time granted, along with the statutory pre-deposit and a delay condonation application, and left it open to the appellate authority to consider the explanation for delay and, if satisfied, decide the appeal on merits. [Paras 5]

The petitioner was relegated to the appellate remedy, with liberty to file an appeal within two weeks and seek condonation of delay; interim protection against coercive steps was continued for that limited period.

Final Conclusion: The writ petition was disposed of without entering into the merits, with liberty to the petitioner to file the statutory appeal along with an application for condonation of delay and the required pre-deposit. The appellate authority was left to consider the delay and, if satisfied, decide the appeal on merits.

Alternate Remedy - Statutory Pre-deposit - Delay condonation - absence of digital signature in the Summary of the orders in Form GST DRC-07 - The writ petition was disposed of without examining the merits, as the petitioner sought liberty to pursue the statutory appellate remedy against the order-in-original and the summary orders. - HELD THAT: - The Court declined to express any view on the merits once the petitioner sought permission to avail the statutory appeal. It directed that, if an appeal is filed within the time granted along with the statutory pre-deposit and an application for condonation of delay, the appellate authority should consider the request in accordance with law, bearing in mind that the petitioner had been pursuing the writ remedy before the Court in the meantime. The petitioner was left free to raise all grounds on facts and in law before the appellate authority. [Paras 6, 7]

Liberty was granted to file the appeal, and the appellate authority was directed to consider the delay condonation application in accordance with law before entertaining the appeal on merits.

Final Conclusion: The writ petition was disposed of by relegating the petitioner to the statutory appellate remedy. No opinion was expressed on the merits of the impugned order, and the appellate authority was directed to consider any delay condonation application in accordance with law.

Rejection of application for taking the benefit of waiver of interest and penalty under Section 128A - delay condonation application and statutory pre-deposit - HELD THAT:- The writ petition was disposed of by granting liberty to the petitioner to file an appeal before the appellate authority within two weeks with a delay condonation application and statutory pre-deposit, with all grounds kept open, and by directing that no coercive steps be taken pursuant to the garnishee notice during that period.

Regular bail - GST fraud offences - Role-based assessment in bail

Application u/s 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023 for enlarging the applicant on Regular Bail for the offence punishable under Sections 132(1)(b) and 132(1)(c) of the Central / Gujarat Goods & Services Tax Act - applicant submit that considering the role attributed to the applicant, and nature of the allegation levelled, the applicant may be enlarged on regular bail

HELD THAT:- In the facts and circumstances of the case and considering the nature of the allegations made against the applicant in the First Information Report, without discussing the evidence in detail, prima facie, this Court is of the opinion that this is a fit case to exercise the discretion and enlarge the applicant on regular bail.

Hence, the present application is allowed. The applicant is ordered to be released on bail by executing a bond.

Final Conclusion: Applicant is ordered to be released on bail in connection with F.I.R. registered with Intelligence Officer, DGGI Surat Zonal Unit, Surat, on executing a bond of Rs. 50,000/- (Rupees Fifty Thousand only) with one surety of the like amount to the satisfaction of the trial Court and subject to the conditions for the offence punishable under Sections 132(1)(b) and 132(1)(c) of the Central / Gujarat Goods & Services Tax Act.

Alternate statutory remedy - Maintainability of writ jurisdiction - Jurisdictional error or breach of natural justice - invocation of the extended period of limitation. -HELD THAT:- The Court held that the controversy turned on the applicability of the notification to the nature of services provided by the petitioner and on scrutiny of the underlying agreement and transactions, which involved factual examination more appropriately undertaken by the appellate authority. Since the case did not disclose any jurisdictional error or violation of principles of natural justice, interference under Article 226 was declined and the petitioner was relegated to the statutory appeal under Section 107. [Paras 5]

The writ petition was disposed of by granting liberty to the petitioner to pursue the statutory appeal, with observation that the appellate authority may consider delay by taking into account the period spent in the writ proceedings.

Final Conclusion: The Court declined to examine the merits of the GST rate dispute in writ jurisdiction and directed the petitioner to avail the appellate remedy. No opinion was expressed on the merits of the controversy.

Retention of documents during survey u/s 133A - Validity of u/s 133A(3) (ia), order passed u/s 281B and order passed u/s 133(A)(3)(ia)(b) - Seeking direction to the respondents to return all the documents, paper, hard disk impounded by the order and the document taken without receipt of the petitioners - Share application money unexplained - Reliance on loose scrap of unsigned calculations on a paper that is not even a letter pad of the Appellant, nor does it bear any rubber stamp - Appellant could not produce any documents before the AO or the CIT because books of accounts were under seizure of the Department - Survey operation carried out was actually a “search” or not?

HELD THAT:- Having heard appearing for the petitioners, we are not inclined to interfere with the impugned order [2025 (8) TMI 58 - MADHYA PRADESH HIGH COURT]. Special Leave Petitions are, accordingly, dismissed.

Quantifying the deduction u/s 80-IA - Market value of captive power - Interplay of deductions on independent profits - Capital or revenue subsidy - Book profit exclusion of capital receipt

Market value of captive power - Composite tariff - Electricity duty component - HELD THAT: - The Court held that the open market value under section 80-IA(8) is the rate at which the State Electricity Board supplies electricity to industrial consumers. That tariff is a composite price and, once it is adopted as the statutory benchmark, its integral components cannot be artificially severed. Exclusion of electricity duty from the tariff would amount to substituting the statutory measure of market value by a truncated rate, which the provision does not permit. [Paras 9, 10, 11, 12]

The Tribunal erred in excluding the electricity duty component, and the question was answered in favour of the assessee.

Independent source deductions - Double deduction prohibition - Section 80-IA and Section 80HHC - two deductions related to independent businesses and different profits - HELD THAT: - The Court found that the power undertakings and the export business were distinct activities, with the former generating profits eligible under section 80-IA and the latter earning export profits for section 80HHC. Section 80-IA(9) was construed as preventing double deduction of the same profits, not as authorising reduction where the deductions arise from different sources of income. Since the profits from power generation were not export profits at all, no overlap or duplication existed. [Paras 13]

The reduction of section 80HHC profits by the amount allowed under section 80-IA was held unsustainable, and the question was answered in favour of the assessee.

Characterization of receipt - Purpose test - Sales tax remission subsidy - Capital receipt or revenue receipt - Sales-tax remission received under the West Bengal Incentive Scheme, 1993 was capital in nature and not taxable as . - HELD THAT: - Applying the purpose test, the Court held that the true character of the subsidy depended on the object for which it was granted. The scheme showed that the remission was intended to encourage expansion, modernization and fresh capital investment in backward areas, and was directly linked to investment in fixed capital. Since the subsidy was designed to induce capital outlay and not to assist the business in carrying on its trade more profitably, it retained the character of a capital receipt. [Paras 15, 16, 17]

The Tribunal was wrong in treating the subsidy as revenue in nature, and the question was answered in favour of the assessee.

Book profit under MAT - Capital receipt exclusion - Section 115JB computation - sales-tax remission inclusion - HELD THAT: - The Court held that, once the subsidy was found to be capital in nature, it did not partake the character of income merely because it was credited through the profit and loss account. Under the MAT provisions, adjustments are confined to those specifically contemplated by statute, and a capital subsidy intended for industrial development does not become part of book profit merely by its accounting treatment. The inclusion of such remission in book profit was therefore impermissible. [Paras 18, 19, 20]

The sales-tax remission was liable to be excluded from book profit under section 115JB, and the question was answered in favour of the assessee.

Final Conclusion: The appeal was allowed in full. All the substantial questions of law were answered in favour of the assessee, holding that the full SEB tariff was to be adopted for section 80-IA, there was no reduction of section 80HHC deduction on independent profits, the sales-tax remission was capital in nature, and it was therefore excludible from book profit under section 115JB.

Quantifying the deduction u/s 80-IA - Market value of captive power - Interplay between deductions u/s 80-IA and 80HHC - Computation of book profit under section 115JB - Purpose test for subsidy - Capital receipt exclusion from book profit

Deduction u/s 80-IA - Market value of captive power - Electricity duty component - Transfer price of captively consumed power - HELD THAT: - The Court held that the governing principle is that the market value of power supplied by the captive unit must be determined with reference to the rate at which the State Electricity Board supplies electricity to industrial consumers in the open market, and not the rate at which surplus power is sold by the assessee to the Board. On that basis, the consumer tariff, including the duty component forming part of that tariff, constituted the proper benchmark for quantifying the deduction under section 80-IA. [Paras 7, 8]

The question was answered in favour of the assessee, and the electricity duty component could not be excluded while determining the transfer price of power for section 80-IA.

Double deduction restriction - Deduction under section 80HHC - Deduction under section 80-IA - HELD THAT: - Accepting the position supported by the binding precedent noticed in the judgment, the Court held that no reduction in the business profits eligible for section 80HHC was warranted merely because deduction had also been allowed under section 80-IA. The Tribunal's view that the profits eligible under section 80HHC were to be computed without such reduction was therefore sustained. [Paras 9]

The question was answered in favour of the assessee, holding that the section 80-IA deduction did not require reduction from profits eligible for section 80HHC.

Book profit under section 115JB - Export profit exclusion - Section 80HHC eligibility and extent of deduction - HELD THAT: - The Court held that section 115JB is a self-contained code for computation of book profit and draws a distinction between the eligibility of profits under section 80HHC and the extent of deduction allowable under section 80HHC(1B). Explanation (iv) to section 115JB(2) therefore requires exclusion of the entire profits eligible for deduction under section 80HHC as computed under sub-sections (3) or (3A), and the phased reduction under section 80HHC(1B) does not control the computation of book profit. [Paras 10]

The question was answered in favour of the assessee, and 100 per cent of the eligible export profits had to be excluded from book profit under section 115JB.

Purpose test for subsidy - Sales tax remission - Capital receipt - HELD THAT: - Applying the purpose test, the Court treated the character of the subsidy as dependent on the object for which it was granted. Since the incentive under the West Bengal scheme was intended to promote industrial expansion in backward areas and was linked to fixed capital investment, it bore the character of a capital receipt rather than an operational subsidy of revenue nature. [Paras 11]

The question was answered in favour of the assessee, holding that the sales tax remission was capital in nature and therefore not chargeable as revenue receipt.

Capital subsidy exclusion from book profit - Book profit under section 115JB - Receipt outside income - HELD THAT: - Following the principle that a subsidy granted for setting up or expanding an industrial unit in a backward area is capital in character, the Court held that such receipt stood outside the scope of income for the relevant period and was therefore excludible from book profit under section 115JB. The Court also held that the mode in which the subsidy was granted did not alter its capital character. [Paras 12]

The question was answered in favour of the assessee, and the sales tax incentive, being capital in nature, was held excludible from book profit under section 115JB.

Final Conclusion: The appeal was allowed in its entirety. The Court held that the assessee was entitled to have the electricity duty component included in the market value of captive power for section 80-IA, that no reduction of section 80-IA deduction was warranted while computing section 80HHC relief, that the full eligible export profits were excludible from book profit under section 115JB, and that the sales tax incentive was a capital receipt excludible from book profit.

Denial of benefit of accumulation as per Section 11(2) - condonation of delay of 430 days in filing Form No. 10 rejected - Reasonable cause - Liberal approach to exemption compliance - HELD THAT: - The Court found from the record that the petitioner had shown a reasonable cause for the delayed filing of Form No. 10. It held that, while exercising power under Section 119(2)(b), the authority must consider the genuine hardship that would result if delay is not condoned and should adopt a justice-oriented rather than a pedantic approach.

We derive support from the judgment of the Hon’ble Supreme Court in CIT v. Nagpur Hotel Owners’ Association, (2000 (12) TMI 99 - SUPREME COURT) wherein it was held that furnishing of Form No. 10 before completion of assessment constitutes sufficient compliance.

The Court also relied on the principle that furnishing Form No. 10 before completion of assessment constitutes sufficient compliance, and noted that in similar matters involving delayed statutory forms for Section 11 exemption, a liberal approach had consistently been followed. Since refusal to condone the delay had resulted in denial of exemption and consequent tax demand, the rejection order was unsustainable. [Paras 9, 11, 12, 13, 14]

Final Conclusion: The Court held that the delay in filing Form No. 10 for Assessment Year 2015-16 ought to have been condoned, having regard to the reasonable cause shown and the genuine hardship that would otherwise result. The rejection order was set aside and the return was directed to be processed by treating Form No. 10 as having been filed within time.

Service of intimation u/s 143(1) - Non-existent tax demand - Adjustment of refund against unsustainable demand - HELD THAT: - The Court held that the controversy was covered by its earlier decisions, which had settled that service of the intimation u/s 143(1) is mandatory before a demand can be raised against an assessee. In the present case, apart from portal screenshots, the department did not place on record the actual intimation under Section 143(1), nor any material showing that it had been served on the petitioner. On that admitted position, the alleged demand could not be treated as an existing and enforceable demand. Consequently, the refund due for the later assessment year could not be adjusted against such a non-existent demand. [Paras 14, 16, 17]

The impugned demand and the interest thereon were quashed, and the adjustment of refund against that demand was held impermissible.

Final Conclusion: The Court allowed the writ petition and held that, in the absence of the intimation under Section 143(1) and proof of its service, the demand reflected on the portal could not be sustained. The consequential interest and refund adjustment founded on that demand were also set aside, with directions to give effect to the order expeditiously.

Protective assessment - Capital gains on transfer of land - Void sale deed - Receipt of consideration - sale deed forming the basis of the addition had been declared void and no evidence of receipt of sale consideration by the assessee was brought on record - HELD THAT: - The Tribunal held that, once the competent civil court had declared the registered sale deed void on findings of fraud and non-payment of consideration, the Revenue could not, merely because an appeal against that order was pending before the High Court, assess capital gain in the assessee's hands even on a protective basis. The Assessing Officer had made no inquiry from the buyers regarding payment of consideration or the source of the alleged investment, and no material was produced to show that any amount had actually been received by the assessee.

Tribunal further noted that the reassessment had already been initiated within limitation and the Department would remain free to proceed in accordance with the eventual outcome before the High Court; therefore, the Revenue's apprehension did not justify the impugned addition. On these facts, no capital gain could be said to have arisen to the assessee from a transaction already declared void. [Paras 7, 8]

The protective addition made on account of long-term capital gain on sale of land was deleted.

Final Conclusion: The Tribunal allowed the appeal and deleted the protective addition for long-term capital gain. It held that, in the absence of a valid transfer and proof of receipt of consideration, no capital gain arose in the assessee's hands.

Unexplained money u/s 69A - Burden of proof - Verification of interest income

Unexplained money - Burden of proof - Documentary evidence - Addition in respect of time deposits sustained u/s 69A - HELD THAT: - The Tribunal held that an addition under unexplained money provisions cannot rest merely on non-filing of return or non-compliance during assessment. Once the assessee produced documentary material explaining the source and recording of the time deposits, the burden shifted to the AO to dislodge that material by credible evidence. Since no material was brought on record to establish that the deposits represented unexplained money, the approach of treating the entire deposits as unexplained was unsustainable. [Paras 17]

The deletion of the addition relating to time deposits was sustained.

Interest income reconciliation - Remand for verification - HELD THAT: - While the Tribunal accepted the appellate finding that the time deposits stood explained, it found that the interest income had not been fully explained. Since this aspect required factual verification at the assessment level, the Tribunal did not finally adjudicate the merits of that part of the addition and restored the matter for necessary examination and disposal in accordance with law. [Paras 19]

The issue of interest income was remanded to the Assessing Officer for verification and fresh decision.

Final Conclusion: The Tribunal partly allowed the Department's appeal. It upheld the appellate deletion of the addition relating to time deposits, but restored the issue concerning interest income to the Assessing Officer for fresh verification.

Option for new tax regime - Form No. 10-IE - Processing of the return under the old tax regime despite Form No. 10-IE having been filed and being available with the CPC at the time of processing

Whether the CPC was correct in processing the return of the assessee as per old tax regime, in spite of the fact that form No. 10-IE filed by the assessee was available at the time of processing of the return? - HELD THAT: - The Tribunal held that, although the assessee had not filed Form No. 10-IE within the due date under section 139(1), the form had in fact been filed along with the return and was available with the CPC when the return was processed. On that basis, it found that the requirement of filing the form was not mandatory but directory in nature, and therefore the CPC could not ignore the option exercised by the assessee for the new tax regime while issuing the intimation. The intimation was directed to be amended by considering the form already filed and by levying tax in accordance with the new tax regime. [Paras 7]

The assessee's claim to be assessed under the new tax regime was accepted, and the CPC/JAO was directed to amend the intimation accordingly.

Final Conclusion: The Tribunal held that the CPC was required to consider Form No. 10-IE already available on record and to compute tax under the new tax regime for A.Y. 2021-22.

Notice to deceased assessee - Validity of reassessment proceedings - Scope of legal representative liability - Curability of defect in notice u/s292B r.w.s 292BB -

HELD THAT: - The Tribunal found it undisputed that the assessee had died on 19.09.2019 and that the reopening notice under section 148 was issued only thereafter on 25.03.2022. Applying the principles laid down in Savita Kapila [2020 (7) TMI 441 - DELHI HIGH COURT], Alamelu Veerappan [2018 (6) TMI 760 - MADRAS HIGH COURT], Mrs. Shripathi Subbaraya Manohara (Legal Heir) [2021 (7) TMI 695 - DELHI HIGH COURT], Durlabhai Kanubhai Rajpara [2019 (4) TMI 784 - GUJARAT HIGH COURT], Dharamraj Tanwar [2022 (1) TMI 844 - DELHI HIGH COURT], M. Hemanathan [2016 (4) TMI 258 - MADRAS HIGH COURT] and Rajendra Kumar Sehgal [2018 (12) TMI 697 - DELHI HIGH COURT] it held that section 159 does not save proceedings initiated for the first time against a dead person; that a notice issued to a deceased assessee is a nullity in law; and that such defect is not cured by sections 292B or 292BB. Since the foundation notice itself was invalid, all consequential assessment proceedings were equally void. [Paras 13, 14, 15, 16, 17]

The notice under section 148 and the assessment founded on it were held null and void, and the order of the CIT(A) quashing the reassessment was sustained.

Final Conclusion: The Tribunal upheld the order of the CIT(A) and dismissed the revenue's appeal. Since the notice under section 148 had been issued in the name of a deceased assessee after his death, the reassessment and all consequential proceedings were held void.

Omission to claim the deductions/exemptions while filing the rectification application u/s 154 - Allowance of lawful deductions and exemptions - Assessment based on Form 16 and Form 26AS - Tax not collectible without authority of law - benefit on the ignorance of the assessee

HELD THAT: - The Tribunal held that the assessee's omission to claim the deductions and exemptions earlier could not by itself justify collection of tax that was not legally due. Referring to the principle underlying Article 265 of the Constitution, it observed that the Revenue cannot benefit from the assessee's ignorance. Since the material relied upon by the assessee was stated to be available in Form 16 issued by the employers and the Revenue also accepted that TDS and advance tax payments were reflected in Form 26AS, the omission was not treated as fatal. On that basis, the assessee was to be given one more opportunity to place documentary evidence before the Assessing Officer, and the matter required a fresh assessment. [Paras 8]

The matter was remitted to the Assessing Officer for de novo assessment after affording the assessee an opportunity to furnish supporting evidence for the claimed deductions, exemptions and tax credits.

Final Conclusion: The appeal was allowed for statistical purposes. The assessment was remitted to the Assessing Officer for fresh consideration of the assessee's claim based on Form 16 and Form 26AS after permitting supporting evidence to be produced.

Bogus purchases - Estimation of profit element - unexplained expenditure u/s 69C - Natural justice - AO acted only on third-party information - Non independent enquiry or proper disclosure to the assessee - HELD THAT: - The Tribunal found that the assessee had furnished purchase invoices, goods received notes, bank statements showing payment through account payee cheques, stock records, supplier ledger accounts, and corresponding sales documents with receipt of sale proceeds through banking channels. Since the corresponding sales were accepted, the purchases could not be treated as wholly non-existent; at the highest, only the profit element embedded in such purchases could be brought to tax. It was further held that section 69C applies only to unexplained expenditure, and once the nature and source of the expenditure stood recorded and explained, total disallowance under that provision was untenable.

Tribunal also noted that the Assessing Officer had neither supplied the adverse material allegedly received from the Sales Tax Department nor carried out any independent enquiry, and had made the addition mechanically on third-party information, contrary to principles of natural justice. [Paras 6, 7, 8, 9, 10]

The restriction of the addition to 15% of the impugned purchases, representing the possible profit element embedded therein, was upheld and the Revenue's challenge to deletion of the balance disallowance was rejected.

Final Conclusion: The Tribunal upheld the order restricting the addition on alleged bogus purchases to 15% of the purchase value and held that total disallowance under section 69C was unjustified on the facts found. The Revenue's appeal was dismissed.

Unexplained cash credits - Burden of proof u/s 68 - unsecured loans received from the lenders - Suspicion vis-a-vis evidence - Consequential interest disallowance

Unexplained cash credits - Identity, genuineness and creditworthiness - Burden of proof under section 68 - Suspicion vis-a-vis evidence - unsecured loans received from the two creditors sustained - HELD THAT: - The Tribunal held that the assessee had discharged the initial onus by furnishing confirmations, PAN details, returns of income, bank statements, ledger accounts and, in the case of one creditor, even the completed scrutiny assessment. The transactions were routed through banking channels, recorded in regular books, and formed part of running accounts in which substantial repayments were also made during the relevant years. The Assessing Officer's reasoning rested essentially on doubts arising from the lenders' financial structure, leverage, negative reserves and onward fund movement, but no material was brought on record to show that the credits represented the assessee's own undisclosed money, that the banking trail was false, or that the transactions were accommodation entries. The Tribunal reiterated that while suspicion may justify inquiry, an addition under section 68 must rest on cogent evidence; merely perceiving the lenders' affairs as commercially weak or unusual does not displace documentary proof of identity, genuineness and prima facie creditworthiness. It also found that the appellate authority had only mechanically affirmed the assessment without independent reasoning. [Paras 21, 22, 23, 24, 26]

The additions made under section 68 for both assessment years were directed to be deleted.

Consequential interest disallowance - Allowance of interest on genuine borrowing - HELD THAT: - The Tribunal found that the interest disallowance was purely consequential to the treatment of the loan as unexplained cash credit. Since the addition under section 68 in respect of the underlying borrowing failed, and the disallowance was not based on any independent ground such as non-deduction of tax, non-business purpose, or violation of any specific provision, the basis of the disallowance disappeared. [Paras 25, 26]

The interest disallowance for assessment year 2012-13 was also deleted.

Final Conclusion: The Tribunal allowed both appeals and deleted the section 68 additions for assessment years 2012-13 and 2013-14, holding that the assessee had discharged its initial burden and that the Revenue's case rested only on suspicion unsupported by cogent material. The related interest disallowance for assessment year 2012-13, being merely consequential, was also deleted.

Presumptive taxation - Demonetisation cash deposits - Unexplained money - Taxability under normal rates vis-a-vis section 115BBE - Business turnover - Unexplained money - Normal rate of tax - business receipts already forming part of turnover declared under the presumptive scheme

HELD THAT: - The Tribunal found that the assessee was engaged in truck plying business and had returned income under the presumptive scheme by declaring profit at 8% of turnover. On the material placed, the cash deposit of Rs. 6,00,000/- was accepted as part of the transportation receipts already included in turnover and, therefore, could not be brought to tax again.

As regards the balance deposit claimed to be out of earlier bank withdrawals, the Tribunal held that sufficient evidence had not been produced; however, since the deposit was connected with the assessee's business activities, the proper course was to bring to tax only 8% of that amount. On the same reasoning, the Tribunal held that such sum was not liable to be taxed under section 115BBE and had to be taxed at normal rates. [Paras 10, 11, 12]

The addition was restricted to 8% of the amount of Rs. 9,50,000/-, and the deposit representing business turnover was excluded from separate taxation; the surviving addition was directed to be taxed at normal rates.

Final Conclusion: The Tribunal partly allowed the appeal by holding that cash deposits representing business receipts already offered under the presumptive scheme could not be taxed again, and by sustaining only an estimated addition on the unsupported portion of redeposited cash. It further directed that the surviving addition be taxed at normal rates and not under section 115BBE.

Penalty u/s. 271(1)(c) - difference of stock shown in the return of income - inaccurate particular of income furnished - Disclosure in return vis-a-vis book profit computation - Book profit under MAT

HELD THAT: - Tribunal found that the stock difference discovered during search had been duly included by the assessee in the computation of income in the return for the relevant assessment year, and that return was accepted by the AO. The penalty was levied only on the footing that the amount was not shown in the profit and loss account and, therefore, was not taken into account in the computation of book profit u/s 115JB.

Relying on CIT v. Reliance Petro Products P. Ltd. [2010 (3) TMI 80 - SUPREME COURT] Tribunal held that penalty u/s 271(1)(c) is attracted only where inaccurate particulars are furnished in the return, and merely because a claim or treatment in law is not accepted by the Revenue, penalty does not follow. Since the stock difference itself had been disclosed in the return, the necessary condition for levy of penalty was not established. [Paras 8, 9, 10, 11]

The penalty was deleted.

Final Conclusion: The Tribunal allowed the appeal and deleted the penalty under section 271(1)(c). It held that, the stock difference having been disclosed in the return of income, penalty could not be imposed merely because the amount was not reflected in the profit and loss account for section 115JB purposes.

Accumulation of income under charitable trust provisions - addition u/s 11(3) in respect of accumulated income - Prospective operation of amendment affecting vested right of utilization - Impossibility of performance

Prospective operation of amendment affecting vested right of utilisation - scope of amendment made by the Finance Act, 2022 to section 11(3) - HELD THAT: - The Tribunal found it undisputed that the assessee had validly accumulated the income in A.Y. 2017-18 and had applied it in F.Y. 2022-23 relevant to A.Y. 2023-24. It held that when the accumulation was made, the law permitted utilisation within five years and also in the immediately succeeding year, and the later amendment, though stated to apply from A.Y. 2023-24, could not be construed to take away that already accrued right. The Tribunal further held that the timing of the amendment left practically no effective opportunity to utilise the accumulation within the shortened period, and therefore the law could not compel performance of an impossible act, following Life Insurance Corporation of India [1996 (2) TMI 5 - SUPREME COURT] and Krishnaswamy S. Pd. v. Union of India [2006 (2) TMI 75 - SUPREME COURT] - It also followed the coordinate bench decisions in ACIT v. State Examination Board and Phulchand Gulabchand Charitable Trust [2020 (11) TMI 336 - ITAT BANGALORE] holding that utilisation in the immediately succeeding year was permissible. [Paras 7]

The deletion of the addition under section 11(3) was upheld and the Revenue's challenge was rejected.

Final Conclusion: The Tribunal held that the assessee was entitled to apply in A.Y. 2023-24 the accumulation validly made in A.Y. 2017-18, and that the amendment to section 11(3) could not be applied to deny that entitlement. The Revenue's appeal was accordingly dismissed.

Retrospective withdrawal of benefits - prospective application of administrative notification - delegated legislation and retrospective effect - discretion to amend Foreign Trade Policy in public interest - adjustment of benefits between MEIS and RoSCTL - arbitrariness and discrimination under Article 14

As decided by HC [2023 (11) TMI 383 - DELHI HIGH COURT] writ petition is allowed in part: the DGFT notification dated 29th January, 2020, insofar as it withdraws MEIS benefit for FIBC bags retrospectively, is declared inapplicable retrospectively and shall operate prospectively; respondents are directed to process MEIS claims submitted pursuant to the Court's interim order for exports during the period from 07th March, 2019 until issuance of the impugned notification, subject to applicable conditions.

HELD THAT- Delay of 149 days in filing the present petition for which no sufficient cause has been shown.

Even otherwise, we are not inclined to interfere with the impugned order. The Special Leave Petition is accordingly dismissed both on the ground of delay as well as on merits.

Imposition of Penalty for use of false and incorrect material - Redemption fine and customs duty - Re-export and penal consequences - Misdeclaration -deliberate misdeclaration of the vehicle's description, country of origin, value and seating capacity - False and incorrect material.

Re-export and penal consequences- Redemption fine and customs duty - Confiscation of improperly imported goods - HELD THAT: - The Court held that the statutory scheme governing confiscation, redemption fine, duty and penalty for improper import operates in distinct fields and cannot be mixed so as to dilute the consequences of misdeclaration. Once goods are found liable to confiscation, the option to pay fine in lieu of confiscation under Section 125 is separate from the liability to duty and from penalty for the violations committed. The importer's choice to redeem the goods and seek re-export does not extinguish the consequences flowing from the improper import. Section 125(2) makes the owner liable, in addition to redemption fine, to duty and other charges payable in respect of the goods. The Tribunal therefore erred in holding that, because re-export had been allowed, appropriation of the amount paid towards duty could not be sustained. [Paras 19, 20, 22, 23, 24]

The finding of the Tribunal that re-export on payment of redemption fine absolved the importer from duty and allied consequences was set aside.

Penalty for use of false and incorrect material - Misdeclaration in bill of entry - Use of false documents - HELD THAT:- The Court found that the case involved import of the vehicle by misdeclaring its description, value and place of origin in order to obtain concessional duty, and that the importer had furnished false documents in support of the import. In that setting, the Tribunal misread the show cause notice in concluding that absence of a specific allegation that the importer themselves caused falsification defeated action under Section 114AA. The statute covers knowing or intentional making, signing, using, or causing to be made, signed or used, any declaration, statement or document that is false or incorrect in a material particular. The Tribunal's view was therefore contrary to the statutory provision and to the scheme of the Act. [Paras 18, 23, 24]

Deletion of the penalty under Section 114AA was held unsustainable and the Department's challenge on that issue was accepted.

Final Conclusion: The High Court allowed the Department's appeal and held that the Tribunal had misread the statutory scheme and the show cause notice. Re-export on payment of redemption fine did not erase liability to duty, appropriation or penalty, and the Tribunal's order was held to be perverse and contrary to law.

Entitlement to Provisional release of seized imported goods - Conditional release pending adjudication - HELD THAT: - The Court found that the case stood on the same factual footing as earlier writ petitions in which seized imported goods had been directed to be released on specified conditions. Since, in the present matter also, the challenge was at the stage of seizure memo and the immediate relief sought was only interim release, the Court adopted the same course and directed the respondents to pass orders for provisional release on payment of the enhanced duty as quantified, furnishing of bank guarantee to the extent directed, and maintenance of downstream transaction details. The Court further clarified that such conditional release would not affect the continuation of adjudication, and that the adjudicating authority must decide the proceedings independently after permitting the petitioner to participate. [Paras 8, 9, 10, 11, 12]

Conditional provisional release was directed, while preserving the authority of Customs to continue and conclude adjudication in accordance with law without being influenced by the release order.

Final Conclusion: The writ petition was allowed by directing provisional release of the seized consignment on specified conditions relating to payment of enhanced duty, bank guarantee, and disclosure of transaction details. The adjudicating proceedings were left open to continue independently in accordance with law.

Entitlement to a third re-testing of the seized shawls - Discretion of adjudicating authority - Writ against show cause notice - Principles of Natural Justice. - HELD THAT: - The Court held that Clause (f) of the circular dated 28th July, 2017 does not confer an automatic right to a further re-test. Where the first test and re-test are on record, and variation exists, the competent authority may rely on either report by recording reasons; only if it is unable to decide may it order a second re-test, and that too not in every case. Since the circular vests a discretion in the authority dealing with the adjudication, the petitioner could not compel a third test through a writ petition before the adjudicating process had progressed to that stage. The Court also noted that the request for a further test came long after the second report and appeared to delay the proceedings. [Paras 22, 23, 24, 25, 26]

The challenge to the show cause notice and to the refusal of re-testing was rejected, with liberty to the authority to consider, in the course of adjudication, whether the facts warrant a third test under the circular.

Final Conclusion: The writ petition was dismissed. The Court declined to interfere at this stage, holding that a third test is not available as of right and that the matter must be considered by the adjudicating authority in accordance with the circular, if the circumstances so require.

Entitlement to Provisional release of seized imported goods - Conditional release pending adjudication. - HELD THAT:- The Court found that the dispute stood at the stage of seizure memo and that the prayer was confined to interim release of the seized consignment. Since similar writ petitions involving identical facts had already been dealt with by granting conditional release, and that course had thereafter been left undisturbed by the Supreme Court, the same arrangement was directed in the present case. Release was therefore ordered subject to payment of the enhanced duty as quantified by Customs, furnishing of bank guarantee, and maintenance of transaction details in case of onward sale, while expressly preserving the authority of Customs to continue adjudication independently and without being influenced by the order of provisional release. [Paras 9, 10, 11, 12]

The writ petition was allowed by directing provisional release of the seized goods on stated conditions, leaving the adjudicating authority free to proceed and decide the matter in accordance with law.

Final Conclusion: The Court directed provisional release of the seized imported goods on payment of quantified enhanced duty and furnishing of security, while preserving the Customs authorities' liberty to continue and conclude adjudication independently in accordance with law.

Seeking Provisional release of seized imported goods - imported consignment of the multifunctional devices - Conditional release pending adjudication - HELD THAT: - The Court found that the controversy stood covered by earlier writ petitions of identical nature in which conditional interim release had been granted. Since, in the present matter, the case was also at the stage of seizure memo and the prayer was only for interim release of the seized goods, the same course was adopted. The Court accordingly directed consideration and release on compliance with the stipulated conditions, namely payment of the enhanced duty as quantified, furnishing of bank guarantee to the specified extent, and maintenance of transaction details in the event of provisional sale. It was expressly clarified that such conditional release would not preclude the Customs authorities from proceeding with adjudication and that the adjudicating authority must decide the matter independently on the objections and contentions raised by the parties. [Paras 9, 10, 11, 12]

Conditional provisional release was directed, subject to payment of the quantified enhanced duty, furnishing of bank guarantee, and compliance with the ancillary conditions, without affecting the continuation of adjudication on merits.

Final Conclusion: The writ petition was allowed by directing provisional release of the seized goods on fulfillment of the conditions specified by the Court. The Customs authorities were left free to continue the adjudication, which was directed to be decided independently and in accordance with law.

Entitlement to Provisional release of seized imported goods - Conditional release pending adjudication. - HELD THAT: - The Court found that the dispute stood at the stage of seizure memo and that the prayer was confined to interim release of the seized goods. Noting that in identical writ petitions this Bench had already directed release on specified conditions, and that such course had not been interfered with by the Supreme Court while leaving adjudication to proceed in accordance with law, the Court applied the same arrangement to the present case. It therefore directed the authorities to pass orders for provisional release upon payment of the enhanced duty as quantified, furnishing of bank guarantee, and maintenance of transaction details in case of onward sale, while expressly preserving the adjudicating authority's liberty to continue proceedings independently and uninfluenced by the conditional release. [Paras 9, 10, 11, 12]

The writ petition was allowed by directing provisional release of the goods subject to payment of quantified enhanced duty, furnishing of bank guarantee, and allied conditions, without affecting the merits of the adjudication.

Final Conclusion: Following the course adopted in identical matters, the Court directed provisional release of the seized imported goods on specified conditions and left the adjudicating authority free to proceed in accordance with law on the merits of the case.

Seeking Provisional release of goods - seized drone components - CKD/SKD import prohibition - Applicability of General Rules for Interpretation to Foreign Trade Policy conditions - Invalid restriction on statutory discretion for provisional release.

CKD/SKD import prohibition - HELD THAT: - The Tribunal held that, although the Department alleged that the appellants had together imported major components sufficient to form complete drones, the record did not establish the necessary one-to-one correlation to show import of complete drones in knocked-down or semi-knocked-down condition. The quantities imported were uneven, the imports were spread across multiple Bills of Entry, and the case record itself showed that some components were domestically procured. The Chartered Engineer's opinion was also found inconclusive on whether only imported components or all seized components were examined, and part of the report proceeded on an apparent mistake regarding the material considered. Applying the principle stated in Union of India Vs. Tarachand Gupta & Brothers [1971 (1) TMI 53 - SUPREME COURT], the Tribunal found that goods cannot be treated as imported in CKD/SKD condition unless they are shown to be complete units dismantled and capable of reassembly as such. It further accepted the principle flowing from LML Ltd., Vs. Commissioner of Customs [1998 (7) TMI 244 - CEGAT, NEW DELHI] that the General Rules for Interpretation of the Customs Tariff cannot be used to interpret policy conditions under the Foreign Trade Policy. On that basis, the Commissioner's conclusion that the imports were prohibited drones in CKD/SKD form was held unsustainable. [Paras 6, 7]

The first ground for refusal of provisional release failed, as the seized goods could not be treated as prohibited drone imports in CKD/SKD condition on the material relied upon.

Denial of provisional release on the grounds of public safety, national security and the CBIC circular restricting release of prohibited goods. - HELD THAT: - The Tribunal found no factual basis for the Commissioner's conclusion that release of the seized goods would endanger public safety or national security. The material produced by the appellants showed that they were recognised drone manufacturers and that their supplies were to defence and other governmental security agencies; in that context, the assumption that their activities would threaten national security was held to be without basis. The Tribunal further noted that the Commissioner's reliance on Circular No. 35/2017-Customs to deny provisional release was untenable because the stipulation restricting release of prohibited goods had been declared void and unenforceable in SHANUX Impex Vs. UOI [2023 (12) TMI 597 - DELHI HIGH COURT], following Additional Director General (Adjudication) Vs. M/s. ITS MY Name Private Limited [2020 (6) TMI 72 - DELHI HIGH COURT], on the ground that it imposed limitations not found in the parent statutory provision governing provisional release. In these circumstances, and considering the nature of the seized electronic goods and batteries, the Tribunal held that at least conditional provisional release ought to have been granted. [Paras 8, 9]

The remaining grounds for refusal were rejected, and the appellants were held entitled to provisional release on execution of the bonds directed by the Tribunal.

Final Conclusion: The Tribunal set aside the Commissioner's order refusing provisional release. It held that the material on record did not justify treating the imported goods as prohibited drones in CKD/SKD condition, and that the further grounds based on national security and the CBIC circular could not sustain refusal of provisional release.

Classification of “Polyester Cut Pile Fabric" - Classification of imported goods on test report - Re-test of samples - Mandatory penalty equivalent to duty

Classification of imported goods on test report - Re-test of samples - imported fabric reclassified as polyester cut pile fabric and the importer entitled to a re-test - HELD THAT:- Tribunal held that the Textile Committee test report showed the goods to be cut pile fabric, and the manufacturer's reports produced by the importer itself described the manufacturing process as one in which loops were cut to form pile. In the absence of any contrary test report showing that the goods were not cut pile fabric, there was no reason to doubt the Textile Committee report or to require re-testing.

Tribunal further held that the importer had no right to insist that testing be carried out in the manner suggested by it, since the mode of testing was for the expert to determine. On that basis, the reclassification and consequent duty demand in respect of both Bills of Entry were sustained. [Paras 12, 13, 14]

The importer's challenge to reclassification and the consequential duty demand failed.

Mandatory penalty equivalent to duty - HELD THAT:- Tribunal found that although differential duty had been confirmed separately for both Bills of Entry, the adjudicating authority imposed penalty equivalent to duty only with reference to one Bill of Entry. Since the penalty u/s 114A was treated as mandatory and equal to the duty so determined, omission to impose corresponding penalty for the second Bill of Entry was held to be an error requiring modification of the order. [Paras 15, 16]

Revenue's appeal was allowed and the penalty was increased by the amount relatable to the second Bill of Entry.

Final Conclusion: Tribunal dismissed the importer's appeal and upheld the reclassification of the goods as polyester cut pile fabric with the consequential duty demand. The Revenue's appeal was allowed to the limited extent of enhancing the penalty so as to cover the differential duty determined in respect of the second Bill of Entry as well.

Rejection of transaction value - description of the goods - PVC coated fabrics - Customs valuation based on NIDB data - Misdeclaration of imported goods - ​​​​​​​Reasonable doubt as to truth or accuracy - declared value of the goods correctly rejected under Valuation Rule 12 and redetermined under Valuation Rule 4/5 - Consequential confiscation and penalty

HELD THAT: - The Tribunal held that the description of the goods as PVC coated fabrics was not contradicted by the CRCL report, which merely furnished further particulars that the fabric was non-textured polyester filament yarn fabric with PVC coating. Absence of the manufacturer's invoice could not be treated as a valid ground against the importer, since the importer could ordinarily produce only the invoice under which the goods were sold to him. In these circumstances, there was no reasonable basis to doubt the truth or accuracy of the declared value under Rule 12. The Tribunal further held that, even on redetermination, the Commissioner's method of discarding high and low values from the NIDB data and adopting a representative value was contrary to Rules 4 and 5, which required adoption of the lowest contemporaneous value and not an average or representative value.

Rejection of transaction value are the Alert circulars of the department and the values available in the NIDB database. In our considered view, in the facts of this case, the Commissioner had no reason to doubt about the truth and accuracy of the transaction value.

Thus, we find neither was there any reasonable ground for the Commissioner to doubt the truth and accuracy of the transaction value and reject it under Valuation Rule 12 nor was the re-determination done as per the principles laid down in the Valuation Rules.[Paras 11, 12, 13, 14, 15]

Consequential confirmation of demand of differential duty under section 28 of the Customs Act with interest, confiscation, fine and penalty also cannot be sustained.

Final Conclusion: The Tribunal allowed the appeal, holding that the declared transaction value had been wrongly rejected and that the value redetermination based on NIDB data was contrary to the valuation rules. As a result, the differential duty demand, confiscation, redemption fine and penalty were also set aside with consequential relief.

Penalty u/s 114(iii) and 114AA - Fraudulent overvaluation of export consignments - Requirement of knowledge and nexus for penal liability - Proof of collusion in overvalued exports

HELD THAT: - The Tribunal found that the appellant was admittedly not the Customs Broker for the impugned exports and there was no evidence on record connecting him with the consignments or showing that he knew of any inflated valuation rendering the goods liable to confiscation.

Mere provision of contact details or export documents to a third person could not, by itself, constitute an offending act attracting penalty, unless supported by clear evidence that it was done with premeditated intent to facilitate fraudulent export and wrongful availment of IGST refund. The finding of the lower authority that certain named persons were employees of the appellant was held to be unsubstantiated, and the reliance on suggestive material which only appears to indicate collusion was found insufficient.

Tribunal held that penal consequences cannot rest on assumption or suspicion and require direct and concrete proof of malicious involvement. [Paras 7, 8, 11, 12, 13]

The penalties imposed on the appellant under Sections 114(iii) and 114AA in both matters were set aside and the appeals were allowed.

Final Conclusion: The Tribunal held that the appellant's involvement in the impugned exports was not established by any concrete evidence and that mere suspicion or unsubstantiated linkage could not sustain penal liability. The penalties under Sections 114(iii) and 114AA were therefore set aside in both appeals.

Foreign judgment on merits - Enforcement of foreign judgments- requirements of Section 13 of the Code of Civil Procedure, 1908 for enforcement in India - Summary judgment - Natural justice - Audi alteram partem.

Whether the judgment of the English Court is in consonance with the requirements of Section 13 of CPC read with 44A. - ELD THAT: - The Court held that a foreign judgment can be treated as conclusive only when it is rendered after due judicial process, with reasonable opportunity to the defendant, and after application of mind to the substantive defence. In the present case, the respondent had disclosed bona fide triable issues supported by contemporaneous documents of statutory significance, including balance sheets and board minutes, besides other correspondence capable of affecting the outcome. Those defences required fuller examination through oral and documentary evidence, and could not properly be foreclosed in summary proceedings. By refusing leave to defend despite the existence of realistic, and not merely fanciful, defences, the English Court prematurely adjudicated disputed questions of fact and denied the respondent a meaningful opportunity to establish its case. The decree, therefore, was not one rendered on merits and the procedure adopted stood opposed to natural justice within the meaning of Section 13 CPC. [Paras 51, 52, 53, 86, 87]

The foreign judgment was held unenforceable under Section 44A read with Section 13 CPC.

Whether the judgment is unenforceable in view of the conditions imposed by RBI in exercise of the statutory power under FERA - HELD THAT: - Interpreting Section 47 of FERA, the Court drew a clear distinction between the institution of legal proceedings and the taking of steps for enforcement. The statute does not bar a party from bringing proceedings or obtaining a determination of liability; however, the negative language of Section 47(3)(b), that no steps shall be taken for enforcing any judgment except to the extent permitted, makes regulatory approval a condition precedent to execution. The Court rejected the contention that the RBI condition created an absolute and permanent bar to all enforcement, and held instead that the decree-holder may seek enforcement if the foreign judgment satisfies Section 13 CPC, but implementation remains subject to prior approval under the foreign exchange law. To that extent, the contrary principle adopted by the High Court on this aspect stood reversed, though the clarification did not alter the result because the decree had already failed under Section 13 CPC. [Paras 78, 80, 81, 83, 84]

There is no absolute bar to adjudication of liability, but enforcement of the decree is impermissible without the requisite permission under Section 47(3)(b) of FERA.

Final Conclusion: The appeal was dismissed and the English Court's decree was held unenforceable in India under Section 44A read with Section 13 CPC. The Court nevertheless clarified that, under Section 47(3) of FERA, adjudication of liability is not barred, but enforcement of a decree requires prior regulatory permission.

Provisional attachment of immovable and movable properties - proceeds of crime - Conditional Release - Alternative Remedies - HELD THAT:- The Court disposed of the petitions by permitting the respondent to operate the attached bank accounts and furnish a fixed deposit receipt for Rs. 33,00,000 in favour of the Enforcement Directorate within two weeks, directing that on such payment the provisional attachment would cease to exist, and that on default the original attachment order would automatically revive.

Demand on the ground of limitation - Abandonment of limitation plea - Scope of appellate challenge - HELD THAT:- The Court examined paragraph 3 of the Tribunal's order and held that it clearly showed the appeal before the Tribunal was argued only against imposition of penalty under Section 78, while the demand of service tax was not contested on merits or on limitation. The appellant's acceptance of the demand, coupled with its approach under the SVLDRS amnesty scheme, reinforced the Tribunal's finding that the demand had not been challenged on any ground. In that view, the limitation ground sought to be raised in the present appeal was held to be unsustainable. [Paras 5, 6]

The challenge to the demand on limitation was rejected, and the appeal was dismissed.

Final Conclusion: The High Court held that the appellant had limited its case before the Tribunal to the penalty issue and had not contested the tax demand, including on limitation. The appeal challenging the demand as time-barred was therefore rejected.

Writ maintainability despite alternate statutory remedy - Delay beyond appellate limitation - HELD THAT:- The Court found that the order-in-original had been preceded by issuance of show cause notice and repeated notices of personal hearing sent to the petitioner's registered address by speed post, but the petitioner did not avail those opportunities. The writ petition was filed more than two years after the order-in-original and thus long after expiry of the statutory appeal period. On that basis, the Court held that the challenge was barred by the principle applied in Assistant Commissioner (CT) LTU, Kakinada, v. Glaxo Smith Kline Consumer Health Care Limited [2020 (5) TMI 149 - SUPREME COURT], and declined to exercise writ jurisdiction. [Paras 6]

The writ petition was dismissed as not fit to be entertained in writ jurisdiction after the lapse of the statutory appellate period.

Final Conclusion: The Court declined to entertain the writ petition against the service tax adjudication order on the ground that it was filed much after the expiry of the appellate period despite service of notice and opportunity of hearing. The writ petition was accordingly dismissed.

Levy of Service Tax under the category of ‘Commercial Training or Coaching Service’ - Vocational training exemption - Effective date of amending notification - Approved vocational education course under the negative list under Section 66D(l)(iii) - Extended period of limitation

Vocational training courses - Beneficial exemption - Employability test - training imparted by the appellant in film direction, cinematography, and editing and sound design qualified - entitlement for exemption under Notification No. 24/2004-ST for the pre-amendment period - HELD THAT: - The Tribunal held that, though the appellant's activity fell within Commercial Training or Coaching Service, the dispute concerned only exemption. Construing Notification No. 24/2004-ST in light of its beneficial object, the Tribunal rejected the Department's view that exemption was available only if employment was assured immediately on completion of the course. It found the Department's assumption that entry into the film industry depends solely on personal talent and experience to be speculative. The courses were held to impart practical technical skills, industry familiarity and capabilities enabling trainees to seek entry-level employment or self-employment, and therefore to fall within the scope of vocational training covered by the notification. [Paras 7]

Exemption was held admissible for the pre-amendment period.

Publication in Official Gazette - NCVT affiliation - Designated trades - scope of amending Notification No. 03/2010-ST - HELD THAT: - The Tribunal found that the amendment substituting the definition of vocational training institute operated only from the date of publication in the Official Gazette, as provided in the notification itself. On the material produced, including the Gazette search, the appellant had created a high degree of probability that publication occurred on 22.01.2011; since the fact of publication was especially within the Revenue's knowledge and the Revenue did not rebut the appellant's case, the Tribunal treated the publication date as proved. It further found that the appellant had NCVT affiliation from 10.11.2010 and that its courses were in designated trades under the Apprentices Act, 1961. Accordingly, the conditions under the amended exemption notification stood fulfilled and no tax demand survived for this period. [Paras 8]

The appellant was held entitled to exemption for the period 01.04.2010 to 31.03.2012 as well.

Negative list exemption - Approved vocational education course - Disjunctive statutory definition - HELD THAT: - The Tribunal held that Section 65B(11) defines an approved vocational education course in separate alternative limbs, and satisfaction of any one limb is sufficient. Since the appellant was an NCVT-affiliated institute and its impugned courses were notified as designated trades under the Apprentices Act, 1961, separate Modular Employable Skill approval was not required. The Tribunal also held that, in this statutory context, the expression education in approved vocational education course is used in a broad sense and includes vocational education directed to development of knowledge and skills for livelihood. On that basis, the services were treated as falling in the negative list. [Paras 9]

The services rendered from 01.07.2012 were held non-taxable under the negative list.

Interpretational dispute - Suppression of facts - Invocation of the extended period and consequential penalties - HELD THAT: - The Tribunal held that the dispute was purely interpretational and that no clear finding of wilful misstatement or suppression based on a positive act evidencing intent to evade tax had been established. Since the appellant succeeded on merits and the record did not disclose the ingredients necessary to invoke the longer limitation period, the basis for extended limitation and penalties failed. [Paras 10]

The extended period and penalties were held unsustainable.

Final Conclusion: The Tribunal held that the appellant's courses were entitled to exemption for the pre-amendment and amended notification periods, and that from 01.07.2012 the services were covered by the negative list as approved vocational education courses. The impugned orders were set aside on merits, with consequential relief, and the extended period and penalties were also held unsustainable.

Works contract classification - civil and structural contracts for BHEL and SAIL - commercial or industrial construction service or erection, commissioning or installation service - Valuation of consultancy consideration - CENVAT credit verification on supporting invoices - Extended period of limitation.

Admitted tax liability - Interest liability - Penalty waiver - services provided to Chittaranjan Locomotive Works (CLW), Indian Railways -HELD THAT: - The Tribunal recorded that the appellant had admitted liability for the service in question and had already discharged a substantial part of it through cash and CENVAT credit as reflected in the returns. On that factual position, only the balance amount remained payable. Having regard to the circumstances noted by the Tribunal, the balance tax was directed to be paid with interest, but no penalty was considered warranted. [Paras 6]

The appellant was held liable to pay the balance admitted amount with interest, and penalty on that amount was set aside.

CENVAT credit verification - Supporting invoices - Remand for documentary examination - HELD THAT: - The Tribunal accepted the appellant's request that entitlement to the disputed credit be examined on the basis of invoices stated to be available with it. Since such documentary verification had not been properly undertaken, the matter required remand for scrutiny of the evidence. The remand was confined to the demand falling within the normal period, the extended period having been held unavailable. [Paras 7, 23]

The CENVAT credit issue was remanded to the adjudicating authority for verification of invoices, and any demand on this count was confined to the normal period.

Works contract classification - Commercial or Industrial Construction Service - HELD THAT: - On reading the agreement, the Tribunal found that the appellant was obliged to provide labour, materials and consumables, use its own equipment and undertake allied obligations, showing that supply of material formed an essential component of the contract. Liability to works contract tax under the VAT law further reinforced the composite nature of the transaction. The contract was therefore not one for service simpliciter, and the demand raised by classifying it under Commercial or Industrial Construction Service could not be sustained. [Paras 9, 11]

The demand relating to BHEL was set aside on merits on the ground that the contract was a works contract and not taxable under Commercial or Industrial Construction Service.

Discharge of tax through CENVAT credit - Verification of payment - HELD THAT: - The Tribunal noted that the appellant had itself accepted tax liability on the balance amount after a part of the demand had already been dropped and the Revenue had not challenged that relief. It further found that the appellant had shown part payment through CENVAT credit in the returns and claimed that the remaining amount had also been paid through CENVAT credit though not reflected in the ST-3 return. In these circumstances, the Tribunal held that no case had been made out to annul the demand itself; the only matter requiring examination was the factual verification of the additional debit said to have been made from the CENVAT account. [Paras 12, 13, 23]

The matter was remanded only for verification of payment through CENVAT credit, and on such verification the debit was to be treated as proper discharge of the tax liability even if not reflected in the ST-3 return.

Consultancy valuation - Agency charges - Re-quantification - HELD THAT: - The Tribunal found from the MOU that the appellant acted as executing agency for completion of the project and that the project cost represented the cost of execution, including material and related services, essentially in the nature of reimbursement. It held that the adjudicating authority erred in computing tax on the total project cost together with the 8.5% agency charges. At the same time, it rejected the contention that the 8.5% agency charges were merely profit margin, because the MOU separately provided for those charges over and above project cost. Since the demand had been raised under consultancy service, the Tribunal confined taxable consideration to the 8.5% agency charges alone and directed re-quantification accordingly. [Paras 15, 16, 23]

The demand for the Rajendra Agricultural University contract was ordered to be re-quantified by restricting the taxable value to the 8.5% agency charges for the normal period, with interest payable on the re-quantified amount and penalty set aside.

Extended period of limitation - Suppression - PSU assessee - HELD THAT: - The Tribunal held that, the appellant being a public sector undertaking, there was no basis to infer wilful intent to evade tax. It also noted substantive errors in the Revenue's approach, including incorrect classification in the BHEL matter and erroneous quantification in the University matter, which supported the appellant's plea of bona fide belief. Relying on the principle that time-barred demands cannot be revived by a later extension of the normal period, the Tribunal further held that the extended period could not be invoked in the facts of the case. It clarified, however, that where the appellant had admitted liability and filed returns, the admitted amounts already payable would remain payable with interest, though penalty would not survive. [Paras 18, 19, 20, 21, 22]

The demands for the extended period were held unsustainable; only liabilities falling within the normal period or already admitted by the appellant survived, with interest but without penalty where so directed.

Final Conclusion: The appeal was partly allowed. The BHEL demand was set aside on merits and limitation; the CENVAT credit and SAIL issues were remanded for limited verification; the Rajendra Agricultural University demand was restricted to re-quantification on the 8.5% agency charges for the normal period; and the admitted balance liability for Chittaranjan Locomotive Works was directed to be paid with interest but without penalty.

Reverse charge liability on imported marketing services - Business Auxiliary Service - Extended period of limitation - Penalty under Sections 77 and 78

Reverse charge liability - Imported marketing services - demand on commission paid to foreign service providers for marketing services - HELD THAT: - The Tribunal recorded that the appellant did not contest the service tax demand on commission paid to the service providers and had already discharged the tax along with applicable interest before issuance of the notice. In view of that admission, the demand on this component was upheld. [Paras 5]

The service tax demand on commission payments, with interest already paid, was upheld.

Business Auxiliary Service - Share purchase agreement - Contingent bonus payments - additional amounts described as bonus payments under the share purchase agreement held to be consideration for marketing and business promotion services or part of the share purchase price? - HELD THAT: - On examining the clauses of the agreement, the Tribunal found that apart from the stated purchase price for the shares, separate bonus payments were agreed upon, contingent upon the sellers continuing as managers of the foreign company and the company achieving stipulated sales turnover. The Tribunal held that such payments, being linked to continued performance and promotion of the appellant's business, were not consideration for acquisition of shares but consideration for marketing services. On that basis, the amounts were rightly classified as Business Auxiliary Service and held taxable under reverse charge. The decisions cited by the appellant were held inapplicable as they related to customs valuation. [Paras 6]

The service tax demand on the bonus payments was upheld.

Extended period of limitation - Suppression of facts - Penalty mitigation - HELD THAT: - The Tribunal held that the relevant facts came to the notice of the department only during investigation and the documents had been produced only then; it therefore found suppression and intent to evade tax, and upheld invocation of the extended period. At the same time, since the tax and interest on the commission payment component had been paid prior to issuance of the show cause notice, the penalty under Section 78 was reduced to the amount relatable to the bonus payment demand, and the penalty under Section 77 was set aside. [Paras 7]

The extended period was upheld; penalty under Section 78 was reduced and penalty under Section 77 was set aside.

Final Conclusion: The Tribunal sustained the service tax demands on both the admitted commission payments and the bonus payments treated as consideration for marketing services received from abroad. It also upheld invocation of the extended period, but modified the penalties by reducing the penalty under Section 78 and setting aside the penalty under Section 77, with the appeal partly allowed to that extent.

Order of the Commissioner not in compliance with the directions of the Hon’ble Supreme Court - classification issue accepted at this stage - Maintainability of appeal

Whether, upon the addition of 0.31% of Nitrogen, the PGR becomes classifiable as “other fertilizers,” or whether such addition of Nitrogen is merely a pretence and not an essential constituent?

HELD THAT: - The Court held that, in view of the earlier decision of the Supreme Court in Commissioner of Central Excise, Bangalore vs. Karnataka Agro Chemicals [2008 (5) TMI 14 - SUPREME COURT] the enquiry on remand was confined to examining whether the presence of nitrogen made the product classifiable as "other fertilizers" or whether nitrogen had been added merely as a pretence. The Commissioner's conclusion that nitrogen was artificially introduced, did not undergo chemical reaction, and did not alter the nature of the product, was found to be unsupported by any acceptable expert basis. The reference made to the Director of Agriculture was also held not to satisfy the Supreme Court's directions.

Having regard to the scientific nature of the issue, the Court held that effective compliance with the remand directions required proper expert assistance, and that the competent authority under the Fertilizer (Control) Order, 1985 would be the most appropriate expert source. On that ground, the Tribunal's order and the Commissioner's order were set aside and the matter was remitted for fresh adjudication. [Paras 8, 9]

The impugned orders were set aside and the matter was remitted to the Commissioner/adjudicating authority for fresh consideration in accordance with the Supreme Court's directions, with liberty to obtain appropriate expert opinion.

Maintainability of appeal - HELD THAT: - The Court held that the controversy before it was confined to examining whether the Commissioner had acted in conformity with the Supreme Court's remand order and whether the Tribunal had failed to examine that aspect. Since the Court was not deciding the classification of the product on merits, the objection that the appeal was barred as a classification dispute was rejected. The authorities cited by the Revenue on maintainability were therefore held not to call for detailed consideration. [Paras 8]

The objection to maintainability was rejected.

Final Conclusion: The High Court allowed the appeal in part, holding that the Commissioner's adjudication and the Tribunal's affirmance did not conform to the Supreme Court's remand directions. The matter was remitted to the Commissioner for fresh consideration with liberty to obtain proper expert assistance, while keeping the substantive classification questions open.

Relevancy of statements recorded during inquiry - Mandatory compliance with section 9D procedure - Extended period of limitation - Suppression of facts vis-a-vis balance sheet and statutory returns

Relevancy of statements recorded during inquiry - Mandatory compliance with section 9D procedure - Cross-examination after admission of statement in evidence - Statements recorded under section 14 of the Central Excise Act relied upon without following the procedure contemplated under section 9D - HELD THAT: - The Tribunal held that where the conditions contemplated for dispensing with the maker's examination are absent, the adjudicating authority must first examine the person as a witness, then form an opinion that the statement should be admitted in evidence in the interests of justice, and only thereafter the stage of cross-examination arises. Since the adjudicating authority directly relied upon the statements of the employees and director, and rejected the assessee's objection on the ground that cross-examination would serve no purpose, the statutory requirement was not complied with. Consequently, the statements were not relevant for proving the facts contained in them and the demand, which rested on such statements, could not be sustained. [Paras 20, 28, 29]

The denial and recovery of CENVAT credit based on statements recorded under section 14 was unsustainable, as section 9D had not been complied with.

Extended period of limitation - Suppression of facts vis-a-vis balance sheet and statutory returns - HELD THAT: - The Tribunal found that the department itself founded the case on figures reflected in the assessee's balance sheets, and the assessee had also been filing ER-1 returns in which the relevant transactions were shown. When the material was available in the balance sheets and statutory returns, and the officers could have sought clarification or raised objections on that basis, the allegation of wilful suppression with intent to evade duty was not sustainable. The adjudicating authority had merely reproduced the allegations in the show cause notice without establishing the ingredients necessary for invoking the longer limitation period. [Paras 32, 33, 37, 38, 39]

The demand was time-barred to the extent it rested on the extended period, and the invocation of section 11A(4) was held to be invalid.

Final Conclusion: The Tribunal set aside the impugned order and allowed the appeal. It held that the demand could not be sustained on statements recorded under section 14 without compliance with section 9D, and that the extended period of limitation was also not invocable where the case rested on material reflected in the balance sheets and ER-1 returns.

Levy of entry tax of H.R. Sheets - Distinct commercial commodities - Penalty under Entry Tax Act - Condonation of delay - HELD THAT:- Delay was condoned, and the special leave petition was dismissed as the Court found no ground to interfere with the impugned judgment/order[2025 (11) TMI 1984 - ALLAHABAD HIGH COURT] .

Defective show cause notice - Limitation for reversal of input tax credit - violation of natural justice principle in assessment - Reasonable Opportunity of Hearing - non-speaking order - claiming adjustment of ITC for the VAT paid towards the sale of old windmill​​​​​​​ -HELD THAT:- The Court found that the dealer had consistently asserted that the input tax credit was adjusted against VAT payable on the sale of old windmills and not against sale of electricity. The show cause notice, however, proceeded on a different premise, namely that credit on purchase of windmills could not be adjusted because electricity generated was an exempt commodity, without addressing the dealer's specific case regarding sale of old windmills. Neither the assessing authority nor the appellate authority examined this distinction, and the fresh assessment order introduced an entirely new line of reasoning without a fresh notice. In these circumstances, the defect in the notice was held to be incurable. Since the statute required action for reversal within the prescribed period, issuance of a fresh show cause notice at this stage would be hopelessly barred by limitation. The Court therefore held that a further remand on the basis of the old notice would be futile and impermissible. [Paras 21, 22, 23]

The dealer was held entitled to succeed; the order of remand could not be sustained because the defective notice could not support a fresh assessment and a fresh notice was time-barred.

Final Conclusion: The Tax Case was allowed. The Court held that the assessment could not be remanded for fresh consideration on the basis of the existing show cause notice, and that issuance of a fresh notice for reversal of input tax credit was barred by limitation.

Entitlement to exemption from State taxation - Transit sale exemption - High sea sale exemption - Hire-purchase transactions - levy of penalty and the assessment as best judgment assessment - wilful suppression.

Transit sale exemption - Inter-State sale - HELD THAT: - The Court held that the assessee's own records showed that purchase orders were first obtained from customers and the suppliers were thereafter directed to dispatch the goods. In such circumstances, the movement of goods was occasioned by the prior contract and the transactions fell within the principle of inter-State sales under Section 3(a), not sales effected by transfer of documents during movement under Section 3(b). The records also showed that the goods were consigned to the assessee, received by it, and thereafter delivered to customers under hire-purchase agreements, with two invoices being raised for the same goods. The Court accepted the concurrent factual findings that the transactions were not composite transit sales but distinct transactions in which title remained with the assessee until payment of the entire dues, and that the State was competent to tax such first sales notwithstanding the constitutional limitations relied on by the assessee. [Paras 35, 37, 38, 39, 44]

The claim of exemption as transit sales failed, and the levy under the State law on the disputed hire-purchase transactions was sustained.

High sea sale exemption - Sale in the course of import - Transfer of documents of title - Customs frontiers - HELD THAT: - The Court held that exemption under Section 5(2) is available only if the sale occasions the import or is effected by transfer of documents of title before the goods cross the customs frontiers of India. On the documents examined, the assessee was shown as consignee, the bill of entry was filed by the assessee, customs duty and allied charges were paid by it, and those charges were included in the invoices later issued to customers. The financing covered the import value, customs duty, clearance charges and profit margin, and the machinery was handed over thereafter under hire purchase. These facts established that the import and the subsequent hire-purchase sale were separate transactions and that appropriation to the customer occurred only after the goods crossed the customs frontiers. The assessee therefore failed to satisfy either limb of Section 5(2). [Paras 40, 41, 42]

The disallowance of exemption claimed as high sea sales or sales in the course of import was upheld.

Penalty for wilful suppression - Incorrect and incomplete returns - HELD THAT: - The Court upheld the concurrent finding that the assessee had filed incorrect and incomplete returns by camouflaging taxable sales as exempt transit sales or import sales and by issuing two invoices for the same transaction. The documentary pattern relied upon by the assessee was treated as evidencing an attempt to evade tax liability arising on the first sale under the hire-purchase arrangement. On that basis, the levy of penalty for wilful suppression was found justified. [Paras 33, 35, 42]

The penalty levied against the assessee was affirmed.

Final Conclusion: The Court dismissed both revision petitions and affirmed the Tribunal's common order. It held that the assessee had failed to prove entitlement to exemption either as transit sales or as high sea sales, and that the penalty imposed for wilful suppression was valid.

Levy of entry tax on Grinding Media Balls and Rubber Liners - local area - Classification of integral machine components - Meaning of 'incidental goods' within the meaning of Section 2(hh) - Functional integrality test in plant and machinery - Levy of entry tax on plant and machinery.

Whether Grinding Media Balls and Rubber Liners, which are fitted inside the Ball Mill as its constituent parts to enable the grinding of copper ore, are 'incidental goods' within the meaning of Section 2(hh) of the GST Act, or whether they form part of 'plant and machinery' and are thus outside the scope of levy of entry tax as incidental goods under the Entry Tax Act? - HELD THAT: - The Court held that the governing distinction is between goods used for manufacture as plant and machinery, and goods used in manufacture as incidental goods. On the admitted facts, the Ball Mill could not function or grind ore unless the Grinding Media Balls and Rubber Liners were fitted inside it. These items were therefore not independent goods deployed in the manufacturing process, but constituent and indispensable components of the machine itself. Their direct contact with the ore and their periodic replacement due to wear and tear did not alter that legal character, since operational deterioration is not the test of classification. Applying the principle that component parts essential to the functioning of a complete machine partake the character of machinery, the Court held that the revisional authority erred in treating functional participation in grinding as sufficient to classify them as incidental goods. The Court also noted that, in the absence of any distinguishing factual change, departure from the earlier revision order taking the contrary view was arbitrary. Once the levy of entry tax failed, the penalty founded on that levy could not survive. [Paras 14, 15, 16, 17, 20]

Entry tax levied on Grinding Media Balls and Rubber Liners as incidental goods was unsustainable, and the consequential penalty was also set aside.

Final Conclusion: The writ petition was allowed. The Court quashed the revision and assessment orders insofar as they levied entry tax and penalty on Grinding Media Balls and Rubber Liners, holding that they are integral parts of the Ball Mill and therefore form part of plant and machinery, not incidental goods.