TaxTMI Updates e-Newsletter
May 13,2023

Jurisdiction of proper officer - authorization in Form GST INS-01 for inspection versus power to assess - use of third party data for assessment and allocation of turnover among States - remand for verification and fresh assessment

Jurisdiction of proper officer - authorization in Form GST INS-01 for inspection versus power to assess - Validity of the impugned assessment insofar as it was passed by the 1st respondent despite an inspection authorization in GST INS-01 issued to the 2nd respondent. - HELD THAT: - The Court examined the annexure to DRC-07 showing GST INS-01 authorisation dated 29.10.2019 in favour of the Deputy Commissioner (ST), Intelligence (2nd respondent) to inspect the petitioner's premises, while the impugned assessment was ultimately passed by the Deputy Commissioner (ST), Special Circle (1st respondent). Respondents explained that a government notification restructuring cadre strength and divisions resulted in reallocation of responsibilities and made the 1st respondent the proper officer for assessment. The Court found this explanation plausible and accepted that the 1st respondent could act as the assessing authority in the restructured scheme, thereby not invalidating the assessment on the basis of the apparent discrepancy in the original inspection authorisation. [Paras 5, 6]

Discrepancy in the addressee of the inspection authorization did not, on the material before the Court, render the assessment void; the explanation of administrative restructuring was accepted.

Use of third party data for assessment and allocation of turnover among States - remand for verification and fresh assessment - Whether the assessment was correctly made on turnover ascertained from third parties (M/s ABHIBUS and RED BUS) and whether the turnover attributed to the petitioner was appropriately confined to Andhra Pradesh. - HELD THAT: - The petitioner contended that the respondents relied on third party data reflecting total turnover across multiple States (Andhra Pradesh, Telangana, Tamil Nadu and Puducherry) and that assessment should have been confined to turnover relating to Andhra Pradesh alone. The respondents did not clarify whether the data used for assessment had been segregated by State. Given this lacuna, the Court held that the question of proper allocation of turnover required verification. The Court accordingly set aside the impugned assessment and granted the petitioner liberty to furnish state wise records; on deposit of admitted tax (less amounts already paid) within three weeks, the 1st respondent was directed, after affording hearing, to examine the segregated turnover and pass a fresh assessment in accordance with law. [Paras 8, 9]

Impugned assessment set aside and remitted for fresh consideration to determine state wise turnover and to pass a fresh assessment after opportunity of hearing.

Final Conclusion: Writ petition allowed; assessment, penalty and interest order dated 15.12.2022 for the tax periods 2017-18, 2018-19 and 2019-20 (up to November 2019) set aside and remitted for fresh assessment on submission of segregated state wise turnover by the petitioner and after compliance with the Court's directions; no order as to costs.

Refund of input tax credit on zero-rated export of services - entitlement to refund under Section 16(3)(a) of the IGST Act, 2017 - consolidated FIRC as conclusive evidence of receipt of foreign remittance - rejection of refund on ground that services are intermediary services - compliance with appellate authority's order pending exercise of statutory appellate remedy - treatment of deficiency memos and show cause notices as non est after appellate acceptance - interest payable on delayed refund

Refund of input tax credit on zero-rated export of services - entitlement to refund under Section 16(3)(a) of the IGST Act, 2017 - rejection of refund on ground that services are intermediary services - Whether the petitioner was entitled to refund of unutilised input tax credit in respect of services treated as export of services. - HELD THAT: - The Court recorded that export of services is undisputedly a zero-rated supply and that the petitioner is entitled to refund of input tax credit under Section 16(3)(a) of the IGST Act. The appellate authority had found that the services rendered by the petitioner qualify as export of service in accordance with Section 2(6) of the IGST Act and set aside the adjudicating authority's rejection. Having accepted the appellate findings that the impugned orders rejecting refund were without appreciation of facts and not maintainable in law, the High Court held that the petitioner's entitlement to refund stands upheld. [Paras 5, 10, 11, 12, 22]

Petition allowed insofar as the petitioner is entitled to refund of the claimed unutilised input tax credit for the periods in issue.

Consolidated FIRC as conclusive evidence of receipt of foreign remittance - Whether a consolidated FIRC issued by the bank is sufficient evidence of receipt of foreign currency for claiming refund where transaction-wise FIRC is not feasible. - HELD THAT: - The appellate authority accepted the petitioner's contention that, in cases of voluminous export transactions, transaction-wise FIRCs are not feasible and that a consolidated FIRC issued by the bank is conclusive evidence of receipt of foreign currency. The High Court noted and relied on those observations, observing that insistence by Revenue on separate transaction-wise FIRCs was not sustainable and that consolidated FIRCs cannot be a ground for rejection of a refund claim to which the appellant is otherwise eligible. [Paras 8, 11]

Consolidated FIRC issued by the bank is acceptable and cannot, by itself, justify rejection of the refund claim.

Treatment of deficiency memos and show cause notices as non est after appellate acceptance - Whether deficiency memos and show cause notices issued after the appellate orders could be allowed to stand, or should be treated as non est. - HELD THAT: - The Court found it inappropriate for the Revenue to insist on fresh refund applications or to pursue deficiency memos and show cause notices when the proceedings had originated in refund applications that culminated in Orders-in-Appeal allowing the petitioner's claims. The Court directed that the issued deficiency memos and show cause notices shall be treated as non est in view of the appellate authority having allowed the appeals. [Paras 16, 17, 18]

The deficiency memos and show cause notices issued post the appellate orders are to be treated as non est and not operate to withhold the refund.

Compliance with appellate authority's order pending exercise of statutory appellate remedy - Whether the Revenue may ignore and not give effect to the appellate authority's orders on the ground that it proposes to file an appeal. - HELD THAT: - While acknowledging the Revenue's statutory right to file an appeal under Section 112 of the CGST Act within the prescribed period, the Court observed that no appeal had been filed and no stay had been obtained against the Orders-in-Appeal. The Court held that the Revenue cannot refuse to comply with the appellate orders merely because it proposes to challenge them; pending an appeal and absent a stay, the orders of the appellate authority must be given effect to. [Paras 19, 20, 21, 24]

Respondent directed to comply with the Orders-in-Appeal and disburse the refund; intention to appeal does not justify non-compliance in absence of a stay.

Interest payable on delayed refund - Whether the petitioner is entitled to interest on the delayed refund. - HELD THAT: - The Court noted that the Orders-in-Appeal had not awarded interest and that significant time had elapsed since those orders. Applying the principle that interest is payable in accordance with law for delayed refunds, the High Court held the petitioner is entitled to interest on the refund amount as payable under the relevant statutory provisions. [Paras 23, 24]

Petitioner entitled to interest on the refund; respondent directed to disburse refund along with interest as payable in law.

Final Conclusion: The petition is allowed: the Orders-in-Appeal holding that the petitioner is entitled to refund are to be given effect to; deficiency memos and show cause notices arising thereafter are treated as non est; the respondent is directed to forthwith disburse the refund for the periods in issue along with interest payable in law, without prejudice to the respondent's right to file a statutory appeal or seek stay in accordance with law.

Cancellation of registration - show-cause notice - non-speaking order - breach of natural justice - right to know reasons - opportunity of being heard - fresh notice and hearing

Show-cause notice - non-speaking order - breach of natural justice - right to know reasons - opportunity of being heard - Impugned show-cause notice and the order cancelling GST registration were vitiated by vagueness and non-speaking nature, constituting breach of natural justice and deprivation of the right to know reasons. - HELD THAT: - The court examined the show-cause notice and the cancellation order and found the sole ground in the notice to be a bare assertion that business board and activities were not found at the place. The impugned order was cryptic, internally inconsistent about whether a reply was filed, and did not disclose the reasons or the considerations on which the cancellation rested. Absence of stated reasons prevents the affected party from understanding the allegations and mounting an effective defence; such a non-speaking order thus amounts to a breach of natural justice and deprives the petitioner of the legitimate right to know the reasons and to a fair opportunity of being heard. The court therefore set aside the impugned order for this limited vice without adjudicating the merits of the underlying claim. [Paras 5, 6]

Impugned order dated 07.05.2022 cancelling registration is set aside for being cryptic and non-speaking; decision set aside on that ground alone.

Fresh notice and hearing - opportunity of being heard - Remand for fresh proceedings with limited directions: authority to issue a fresh notice containing grounds and reasons, allow time for reply and personal hearing, and pass final order within a stipulated period. - HELD THAT: - Having set aside the cancellation order on procedural grounds, the court directed that the respondents may issue a fresh notice in accordance with law which contains the grounds and reasons for proposed cancellation. The petitioner was granted time until 15.05.2023 to submit its reply and an opportunity for personal hearing within that period. The authority was directed to pass a final order within six weeks after the reply/hearing. The court clarified that these directions are limited and that it has not gone into the merits of either party's case. [Paras 6]

Matter remanded for fresh notice and hearing in accordance with the directions: fresh notice stating grounds and reasons, reply allowed until 15.05.2023, personal hearing to be fixed, and final order to be passed within six weeks thereafter.

Final Conclusion: Writ petition allowed: impugned cancellation order set aside as non-speaking and violative of natural justice; matter remanded with directions to issue a fresh reasoned notice, afford time and hearing to the petitioner, and decide the matter within the stipulated period, the court not expressing any view on the merits.

Constitutional validity of anti-profiteering provisions - entertainment of delayed writ petition - interim stay of adjudication order - validity of actions under a statute pending judicial declaration

Entertainment of delayed writ petition - constitutional challenge to statutory provisions - Writ petition challenging the constitutional validity of Section 171 of the CGST Act and Chapter XV of the GST Rules admitted for adjudication despite being filed after six months from the impugned order. - HELD THAT: - The High Court noted that although the petition was filed six months after the impugned adjudication order, the constitutional challenge to the provisions governing anti-profiteering was a substantive question warranting judicial consideration. The court observed the general principle that a statute and actions taken thereunder remain valid until declared unconstitutional, but nevertheless entertained the writ petition (WPA 7189 of 2023) for final hearing on its merits rather than declining jurisdiction on account of the delay. The court therefore permitted the matter to proceed to final hearing and ordered pleadings to be filed by the respondents and rejoinder by the petitioners.

Writ petition admitted for final hearing despite the delay in filing.

Interim stay of adjudication order - urgency and laches - validity of actions under a statute pending judicial declaration - Application for interim stay of the National Anti-Profiteering Authority's order dated 30th September, 2022 refused. - HELD THAT: - The court declined to grant interim relief because the petitioner had 'sat over' the impugned adjudication order for six months, negating any urgency. The Court reiterated the settled proposition that legislative action and orders made under a statute are to be treated as valid until set aside by a competent court, and observed that the relief sought by the petitioner, if granted, would effectively amount to granting final relief. Having considered submissions, including that of the Additional Solicitor General, the court was not inclined to stay the impugned order and found no ground for interim intervention.

Prayer for interim stay of the impugned adjudication order refused.

Final Conclusion: The writ petition challenging the constitutional validity of the anti profiteering provisions is admitted for final hearing, interim stay of the impugned order dated 30th September, 2022 is refused; respondents to file affidavits-in-opposition within four weeks, petitioners may reply within two weeks, matter listed for final hearing in the July 2023 monthly list.

Deduction under section 80IA - Deduction under section 80IA on other incomes - Depreciation on provision for asset/site restoration cost (ARC) - Provision as revenue expenditure under section 37(1) - Remand for verification of basis of provision - Disallowance under section 14A - Interest on loans to subsidiaries - commercial expediency and common pool funds - Interest on capital work in progress and on External Commercial Borrowings - proviso to section 36(1)(iii) - Expenditure on raising of loans - revenue nature - Roaming charges not subject to TDS under sections 194C/194J - Computation of book profit under section 115JB - treatment of provision write backs - Penalty under section 271(1)(c) - premature initiation - Interest under sections 234B, 234C and 234D - consequential and mandatory

Deduction under section 80IA - Deduction under section 80IA on other incomes - Allowability of deduction under section 80IA (including on other incomes) to the assessee for the years under appeal. - HELD THAT: - The Tribunal applied its earlier decision in the assessee's own case for Assessment Year 2005-06, which held that the assessee commenced telecommunication services after 01/04/1995 and, notwithstanding reconstruction/merger, was eligible for deduction under section 80IA in light of CBDT Circular No.5 of 2005. For parity, the Tribunal allowed the claim of deduction under section 80IA and, following the Tribunal's prior reliance on BSNL, also allowed deduction under section 80IA in respect of 'other incomes' (interest and miscellaneous income). [Paras 8, 9]

Grounds allowing deduction under section 80IA, including on other incomes, are allowed.

Depreciation on provision for asset/site restoration cost (ARC) - Provision as revenue expenditure under section 37(1) - Remand for verification of basis of provision - Whether provision for ARC qualifies for depreciation as capitalized cost or is allowable as revenue expenditure; and whether the matter requires further examination. - HELD THAT: - The Tribunal rejected the claim to treat the provision as capital and allow depreciation, noting a contrary coordinate bench decision (Vodafone Essar Digilink Ltd.) which has been admitted before the High Court without stay; hence that capitalization plea is dismissed. On the alternate contention under section 37(1) that the provision is a revenue expenditure, the Tribunal held that the licence clause establishes an ascertained present obligation crystallising on vacation of premises and that the assessee had furnished the basis/working for the provision which was not examined by the Assessing Officer. Reliance on Vedanta Ltd. established that a provision made on a scientific/reliable basis for a present business obligation can be revenue deductible. Consequently, the Tribunal restored the issue to the file of the Assessing Officer for examination of the method of computation/estimation of the provision in accordance with law. [Paras 13]

Claim for depreciation on ARC rejected; claim for allowance under section 37(1) partly allowed and remitted to Assessing Officer for verification of the basis of the provision.

Disallowance under section 14A - Whether disallowance under section 14A is warranted where no exempt income was earned in the relevant year and Rule 8D was not applicable. - HELD THAT: - It was an uncontested fact that the assessee did not earn any tax exempt income during the relevant year. Rule 8D became effective from AY 2008-09 and is therefore inapplicable to the assessment year in issue. Applying settled law, no disallowance under section 14A is warranted where there is no exempt income in the relevant year and Rule 8D does not apply. [Paras 16]

Ground allowing deletion of disallowance under section 14A is allowed.

Interest on loans to subsidiaries - commercial expediency and common pool funds - Whether interest expenditure on loans advanced to group/subsidiary concerns (including interest free loans) is disallowable. - HELD THAT: - The assessee advanced loans to group companies engaged in the same telecom business for commercial expediency and during initial years requiring funds. Applying the principle in S.A. Builders and the Bombay High Court's approach in Reliance Utilities (presumption that investments from common pool are out of interest free funds where own funds suffice), the Tribunal accepted that the loans were for commercial expediency and that the assessee had sufficient own funds to cover interest free advances. The Assessing Officer cannot substitute his commercial judgment for that of the assessee. Consequently, the disallowance of interest on such loans was held to be unsustainable. [Paras 19]

Disallowance of interest on loans advanced to subsidiaries is deleted.

Interest on capital work in progress and on External Commercial Borrowings - proviso to section 36(1)(iii) - Allowability of interest on borrowed funds used for capital work in progress and ECBs where assets were acquired to improve existing business operations (not geographic extension). - HELD THAT: - The Tribunal held that acquisitions improved service quality within the same telecom circle and did not constitute an extension of business in the sense contemplated by the proviso to section 36(1)(iii). Increase in subscriber base within the same territory does not amount to extension of business. Borrowed funds were used wholly and exclusively for business purposes. Regarding ECBs, although funds were not utilised by 31/03/2006, the funds were available and there was no case of diversion to non business purpose; therefore interest was allowable. Accordingly, interest on CWIP and ECBs was allowed. [Paras 22, 23]

Disallowances of interest on capital work in progress and on ECBs are deleted and interest allowed.

Expenditure on raising of loans - revenue nature - Whether expenses incurred in raising loans are revenue in nature and allowable. - HELD THAT: - The Tribunal accepted that the loan funds were utilized for business purposes (as held on other grounds) and applied the settled principle in India Cements that expenditure incurred in raising loans is revenue in nature and allowable irrespective of the purpose of the loan. Consequently, the disallowance of loan raising expenses was reversed. [Paras 26]

Expenditure on raising of loans is allowable as revenue expenditure and disallowance is deleted.

Roaming charges not subject to TDS under sections 194C/194J - Whether payments of roaming charges to other telecom operators attract TDS under section 194C or 194J and consequent disallowance under section 40(a)(ia). - HELD THAT: - Following the Coordinate Bench decision in Vodafone East Ltd., the Tribunal held that roaming charges for automated inter network services do not fall within the ambit of TDS provisions under section 194C or 194J; no distinction was pointed out by Revenue between that case and the present facts. Therefore, the addition under section 40(a)(ia) was not sustainable. [Paras 29]

Disallowance under section 40(a)(ia) in respect of roaming charges is deleted.

Computation of book profit under section 115JB - treatment of provision write backs - Adjustment to book profit under section 115JB regarding addition of provision for doubtful debts and the subsequent write back. - HELD THAT: - The Assessing Officer added back the provision made for doubtful debts but failed to reduce the book profit by the amount of provision written back. Explanation 1(i) to section 115JB(2) contemplates that book profit is to be computed 'as reduced by' amounts written back. The Tribunal directed the Assessing Officer to reduce the book profit by the amount of provision written back, treating net written off amounts appropriately. [Paras 32]

Assessing Officer directed to give effect to the write back while computing book profit under section 115JB.

Penalty under section 271(1)(c) - premature initiation - Maintainability of challenge to initiation of penalty proceedings at appellate stage. - HELD THAT: - The Tribunal held that a challenge to initiation of penalty proceedings at the appeal stage is premature and accordingly declined to adjudicate the penalty ground. [Paras 33]

Ground challenging initiation of penalty proceedings is dismissed as premature.

Interest under sections 234B, 234C and 234D - consequential and mandatory - Assessee's challenge to levy of interest under sections 234B, 234C and 234D. - HELD THAT: - The Tribunal noted that charging of interest under these sections is mandatory and consequential upon assessment outcomes; the assessee's challenge was therefore rejected. [Paras 34]

Ground challenging levy of interest under sections 234B, 234C and 234D is dismissed.

Final Conclusion: Appeals for Assessment Years 2006-07 and 2007-08 are partly allowed: deductions under section 80IA (including on other incomes) were allowed; disallowances under sections 14A and 40(a)(ia) were deleted; interest on loans to subsidiaries, interest on CWIP and ECBs, and expenditure on raising loans were allowed; book profit computation under section 115JB was to be corrected for write backs; depreciation claim on ARC was rejected but the question of allowance under section 37(1) was remitted to the Assessing Officer for verification of the basis of provision; penalty initiation challenge was held premature and interest under sections 234B/234C/234D upheld.

Disallowance of depreciation on investment in wind turbine generators as not being an activity in the nature of business - disallowance under section 14A and application of Rule 8D for expenditure attributable to exempt income - rule of consistency and effect of concurrent findings of fact by appellate authorities

Disallowance of depreciation on investment in wind turbine generators as not being an activity in the nature of business - rule of consistency - Deletion of disallowance of depreciation made by AO on investment in windmills (WTG) for AY 2011-12 - HELD THAT: - The Tribunal examined the AO's rejection of the assessee's claim that the windmill investments fall within the objects of the company and were used for the purpose of the assessee's business. The AO had ignored earlier findings in the immediately preceding year and the assessee's submissions filed during assessment. The Tribunal applied the rule of consistency where facts remained unchanged and noted precedent authority supporting consistency in tax proceedings. The Tribunal also relied on the earlier concurrent findings of the CIT(A) and the Tribunal in AY 2010-11, and on the Delhi High Court's dismissal of the Revenue's appeal against that earlier Tribunal order, to conclude that there was no substance in the AO's fresh disallowance. [Paras 7, 8, 9, 10]

Addition disallowing depreciation on WTG investment deleted and Revenue's ground on this issue rejected.

Disallowance under section 14A and application of Rule 8D - concurrent findings of fact by appellate authorities - Deletion of disallowance under section 14A (as computed by AO under Rule 8D) for AY 2011-12 - HELD THAT: - The Tribunal found that the CIT(A) had considered the assessee's details and correctly applied the principles regarding expenditures attributable to exempt income, recording that investments were made out of own funds with no interest-bearing borrowings directly attributable to exempt income. The Tribunal observed that identical disallowance in AY 2010-11 had been deleted by the CIT(A) and the Tribunal, and the Delhi High Court sustained those concurrent findings. In view of the identical facts and the binding value of these concurrent findings, the Tribunal held there was no reason to interfere with the deletion of the section 14A disallowance. [Paras 7, 8, 9, 10]

Addition under section 14A read with Rule 8D deleted and Revenue's ground on this issue rejected.

Final Conclusion: Both grounds of Revenue's appeal challenging deletions of (i) depreciation disallowance on windmill investments and (ii) disallowance under section 14A/Rule 8D for AY 2011-12 are dismissed, the Tribunal affirming the CIT(A)'s deletions in view of identical earlier appellate findings and the Delhi High Court's dismissal of Revenue's challenge in the preceding year.

Notice of demand - benefit of the Kar Vivad Samdhan Scheme 1998 already availed - No Due certificate was issued for the relevant period - HELD THAT:- Having regard to the impugned order which barely contains any reason much less the facts or advertance to the contentions of the parties, this Court is of the opinion that the matter has to be considered afresh on its merits. The impugned order is accordingly set aside.The Allahabad High Court shall proceed to hear and dispose of Writ Tax [2018 (7) TMI 2309 - ALLAHABAD HIGH COURT] on their merits expeditiously preferably within a year.

SLP disposed off.

Capital asset u/s 2(14) - Scope of the term Asset / property - "interest of every kind" - whether loan given to its subsidiary in India, by the foreign company constitute capital asset - ITAT and HC has given strong reasons for holding that the concerned transaction would come in the meaning of Section 2(14) of the Income Tax Act - HELD THAT:- In any case, the interpretation given by the Tribunal [2016 (4) TMI 384 - ITAT MUMBAI] as well as the High Court [2019 (9) TMI 199 - BOMBAY HIGH COURT] is only with regard to a particular transaction. As such, we are not inclined to interfere with the impugned order under the extra ordinary jurisdiction of Article 136 of the Constitution of India.

SLP dismissed.

Assessment u/s 153C -Scope of amendment brought to Section 153C introduced vide Finance Act, 2015 w.e.f. 01.06.2015 - Division Bench of the High Court [2019 (8) TMI 461 - GUJARAT HIGH COURT] has quashed the notice under Section 153C - HELD THAT:- Revenue preferred Appeal with other allied Appeals and by a common judgment [2023 (4) TMI 296 - SUPREME COURT] this Court has allowed the appeals preferred by the Revenue and has quashed and set aside the judgment and order passed by the High Court, which has been relied upon while passing the impugned judgment and order.

In that view of the matter, the present Appeal stands disposed of in terms of the judgment and order passed by this Court above.

Deduction u/s 80IA- Applicability of section 79 - No positive profit available for deduction after considering the losses of the previous years to be set off against the income of the current year - As per HC [2020 (3) TMI 234 - GUJARAT HIGH COURT] application of section 80IA( 5) of the Act to deny the effect of provisions of section 79 of the Act cannot be sustained as per the Scheme of the Act,1961. When the loss of earlier years have already lapsed, then the same cannot be notionally carried forward and set off against the profit and gains of the assessee's business for the year under consideration in computing the quantum of deduction under section 80IA(1)

HELD THAT:- This Court is of the opinion that no interference is called for.

However, the issue of eligibility of claim, set off of losses for subsequent assessment years (2002-2003 to 2004-2005) is however kept open.

The special leave petition is dismissed subject to the above observations.

Validity of assessment u/s 144 r.w.s. 144B - HC [2021 (10) TMI 750 - BOMBAY HIGH COURT] concluded that assessment made shall be non-est if such assessment is not made in accordance with the procedure laid down under this section and the order impugned being non-est, the Assessing Officer may take such steps as advised in accordance with law - HELD THAT:- Leave granted.Appeal stands disposed of in terms of the signed order.

Validity of assessment order - Breach of the provisions of the Faceless Assessment Scheme, 2019 - non granting of personal hearing - non furnishing of draft assessment order - HC [2021 (9) TMI 1108 - BOMBAY HIGH COURT] said assessment order not having been passed in conformity with the requirements of the Faceless Assessment Scheme, 2019 has to be treated as non-est and shall be deemed to have never been passed - HELD THAT:- Leave granted. The Appeal stands disposed of in terms of the signed order.

Penalty u/s 274 r.w.s. 270A - assessment order itself has been passed in breach of the mandatory requirements u/s 144B - As decided by HC [2021 (9) TMI 1489 - BOMBAY HIGH COURT]as provided in Sub-Section 9 of Section 144B of the Act, the assessment order will be non-est - HELD THAT:- Today, when the present Special Leave Petition is taken for further hearing, assessee has pointed out that, during the pendency of the present Special Leave Petition and pursuant to the liberty reserved by the High Court in the impugned judgment and order, fresh proceedings have been initiated against the assessee and therefore, according to the learned counsel for the assessee, the impugned judgment and order passed by the High Court has been implemented by the Department.

Petitioner is, as such, not in a position to dispute the above, however, has requested that if this Court is inclined to dispose of the Special Leave Petition, in that case, liberty be reserved in favour of the Revenue to revive the present Special Leave Petition, in case of the difficulty and necessity so arises - we dispose of the present Special Leave Petition, in view of the subsequent development - liberty is reserved in favour of the Revenue to revive the Special Leave Petition in case of difficulty and/or necessity so arises. With this, the Present Special Leave Petition stands disposed of.

Faceless Assessment - procedure for making assessment - HC [2021 (10) TMI 235 - BOMBAY HIGH COURT] said final assessment order is not made in accordance with the procedure laid down u/s 144B (xvi)(b) of the Act as inspite of the variation being prejudicial to the interest of assessee, no opportunity has been provided to the assessee by having him served with a show cause notice as well as draft assessment order - ASG, has submitted that, in that case, the High Court ought to have remanded the matter to the AO for a fresh order - HELD THAT:- As required to be noted that, in para 16(b), the High Court itself has reserved the liberty in favour of the Revenue to take such de novo proceedings as required in accordance with law, even if the matter is not remanded to the Assessing Officer, it will always be open for the Department to initiate fresh assessment proceedings in accordance with law and setting aside the Assessment Orders shall not come in the way of the Revenue.

With this clarification and observation, the Special Leave Petition stands disposed of. Pending applications, if any, also stand disposed of.

Penalty notices issued u/s 270 A and 271 AAC (1) - Respondent did not comply with the mandatory requirement prescribed u/s 144 B (1) (xvi) (b) - HC [2021 (9) TMI 1488 - BOMBAY HIGH COURT] held set aside the impugned assessment order, the consequential notice of demand and penalty notices as the order, as provided under Sub section (9) of Section 144B is non est - ASG, has drawn our attention that subsequently Section 144B(9)has been omitted w.e.f. 01.04.2021 and therefore, the basis on which the High Court has passed the impugned order has gone - HELD THAT:- As assessee is not before the Court and the omission of Section 144B(9) w.e.f. 01.04.2021 was not before the High Court, we deem it appropriate to allow the Revenue to file a review application before the High Court to press into service the omission of sub-section (9) of the Section 144B which has been omitted w.e.f. 01.04.2021 and its effect of omission on the impugned judgment and order passed by the High Court. If such a review application is filed within a period of 6 weeks from today, High Court to consider the same in accordance with law and on merits and, more particularly, the effect of omission of sub-section (9) of Section 144B which has been omitted w.e.f. 01.04.2021 for which, as such, this Court has not expressed anything on merits in favour of either parties and it is ultimately for the High Court to take a call on the aforesaid in accordance with law and on its own merits and after hearing both the parties. Special Leave Petition stands disposed of. Pending applications, if any, also stand disposed of.

Validity of assessment u/s 144B - Assessment Order has been passed without following principles of natural justice and without even issuing a show-cause notice with a draft Assessment Order as mandatorily required u/s 144B [2021 (10) TMI 1407 - BOMBAY HIGH COURT] - HELD THAT:- Leave granted. Appeal stands disposed of in terms of the signed order. Pending applications, if any, stand disposed of.

Assessment u/s 144B - no draft assessment order was served - As per HC [2021 (10) TMI 1213 - BOMBAY HIGH COURT] assessment order has been issued without following the mandatory procedure prescribed under Section 144B of the Act, in as much as, if the review unit of respondents had reviewed the draft assessment order, it should have followed the procedure laid down under sub clause (b) of clause (xvi) of sub-Section (1) of Section 144B - HELD THAT:- Leave granted.Appeal stands disposed of in terms of the signed order. Pending applications, if any, stand disposed of.

Validity of National Faceless Assessment - HC [2021 (11) TMI 822 - BOMBAY HIGH COURT] held non compliance with the mandatory procedure laid down u/s 144B, the assessment order is also non est - HELD THAT:- As AOR, has stated at the Bar that he has instructions to appear appearing on behalf of the respondent and he shall file his vakalatnama. He is permitted to file vakalatnama within a period of two weeks from today. Leave granted. Appeal stands disposed of in terms of the signed order.

Validity of assessment in absence of show cause notice with draft order - mandatory compliance with Section 144B of the Income Tax Act, 1961 - remand for fresh assessment - faceless assessment scheme - opportunity to rectify procedural lapse

Validity of assessment in absence of show cause notice with draft order - mandatory compliance with Section 144B of the Income Tax Act, 1961 - Assessment passed without issuance and service of the show cause notice with a draft Assessment Order mandated by Section 144B was invalid and the High Court did not err in setting aside that assessment order. - HELD THAT: - The Court examined the impugned High Court order [2021 (11) TMI 822 - BOMBAY HIGH COURT] which declared the assessment non est on the ground that the mandatory requirement of issuing and serving a show cause notice accompanied by a draft Assessment Order under Section 144B had not been complied with. The Supreme Court agreed that in the absence of such service the assessment could not be sustained. While recognising the introduction of the Faceless Assessment Scheme, the Court held that the procedural mandate under Section 144B is obligatory and its non-compliance vitiates the assessment so that the High Court's conclusion that the assessment was invalid was justified. [Paras 4]

The assessment passed without the mandatory show cause notice with the draft order under Section 144B is invalid; the High Court's setting aside of the assessment was not in error.

Remand for fresh assessment - faceless assessment scheme - opportunity to rectify procedural lapse - Instead of finally quashing the proceedings, the matter was remanded to the Assessing Officer with liberty to pass a fresh assessment order after complying with the procedure required by Section 144B, and all merits-based contentions of the assessee were left open for consideration. - HELD THAT: - Recognising that the Faceless Assessment Scheme is recent and that the Revenue ought to have an opportunity to correct procedural lapses, the Court modified the High Court's order by directing remand. The Assessing Officer is to pass a fresh assessment order in accordance with law after issuing and serving the show cause notice with the draft Assessment Order as required by Section 144B. The Supreme Court expressly left open the assessee's substantive defenses for consideration by the Assessing Officer on merits. [Paras 5]

The matter is remitted to the Assessing Officer to pass a fresh assessment order in accordance with Section 144B, with all merits-based contentions of the assessee kept open.

Final Conclusion: The High Court correctly found the assessment invalid for non-compliance with Section 144B; however, the Supreme Court remitted the matter to the Assessing Officer to enable a fresh assessment in accordance with law and procedure, keeping the assessee's substantive defenses open.

Validity of assessment passed without issuance of show cause notice and draft assessment order under Section 144B of the Income Tax Act, 1961 - Faceless Assessment Scheme and procedural compliance - Remand for fresh assessment to enable compliance with statutory procedure

Faceless Assessment - Validity of assessment order u/s 144B - Non follow of due procedure - Order was passed without issuing a show cause notice with a draft Assessment Order as was mandatorily required u/s 144B - HELD THAT:- Considering order passed by the High Court [2021 (10) TMI 1213 - BOMBAY HIGH COURT] and considering the fact that the Assessment Order was passed without issuing a show cause notice with a draft Assessment Order as was mandatorily required u/s 144B of the Act, as such, it cannot be said that the High Court has committed any error.

Aonsidering the fact that the Faceless Assessment Scheme has been introduced recently and therefore, the Revenue ought to have been given some leverage to correct themselves and take the corrective measures and therefore the High Court ought to have remanded the matter to the Assessment Officer to pass a fresh order in accordance with law, after following the due procedure as required under the law, namely, more particularly, under Section 144B of the Act.

We modify the impugned judgment and order passed by the High Court and remand the matter to the Assessment Officer to pass a fresh Assessment Order, after following due procedure in accordance with law under Section 144B of the Act.

Validity of assessment u/s 144B - show cause notice with a draft Assessment Order was not issued and served upon the assessee - HELD THAT:- As Assessment Order was passed without issuing a show cause notice with a draft Assessment Order, as was mandatorily required, under Section 144B of the Act, as such, it cannot be said that the High Court has committed any error.

Considering the fact that the Faceless Assessment Scheme has been introduced recently and therefore, the Revenue ought to have been given some leverage to correct themselves and take corrective measures and therefore the High Court ought to have remanded the matter to the AO to pass a fresh order in accordance with law, after following the due procedure, as required under the law, namely, more particularly, under Section 144B of the Act.

We modify the impugned judgment and order passed by the High Court and remand the matter to the Assessment Officer to pass a fresh Assessment Order, after following due procedure, in accordance with law under Section 144B of the Act.

Effect of omission of Section 144B(9) of the Income Tax Act - Validity and effect of CBDT Circular dated 13.08.2020 (para 3) - Relationship between statutory provision and executive circular (pari materia) - Quashing of assessment order for non-conformity with administrative instruction - Remand for fresh consideration in view of subsequent legislative change

Validity of Faceless assessment order u/s 144B - Effect of omission of Section 144B (9) on the merits of the impugned judgment and order passed by the High Court - HELD THAT:- We deem it appropriate to set aside the impugned judgment and order passed by the High Court [2021 (9) TMI 1108 - BOMBAY HIGH COURT] and remand the matter to the High Court to consider the effect of omission of Section 144B (9) of the Act, which has been omitted w.e.f 01.04.2021 on para 3 of the CBDT Circular dated 13.08.2020.

Not expressing anything on merits in favour of either parties on the omission of Section 144B(9) of the Act w.e.f. 01.04.2021, the impugned judgment and order passed by the High Court is set aside. The matter is remitted back to the High Court to consider the same afresh to consider the effect of the omission of Section 144B(9) of the Act, which has been omitted w.e.f. 01.04.2021 and the effect of such omission on para 3 of the CBDT Circular dated 13.08.2020 which, as such, prima facie seems to be pari materia to Section 144B(9) of the Act.

Validity of assessment order u/s 144 r.w.s. 144B - Special Leave Petition has been preferred only for the purpose of expunging the remarks made by the High Court in para 9 - HELD THAT:- As sub-section (9) of Section 144B of the Act has been omitted subsequently and which was not before the High Court, we permit the Revenue to file a review application before the High Court and to point out the subsequent development and omission of sub-section (9) of Section 144B of the Act and as and when such a review application is filed within a period of six weeks from today, the High Court to consider the same in accordance with law and on its own merits and without raising the issue with respect to limitation, however, subject to giving an opportunity to the assessee. So far as the observations made in para 9 of the impugned judgment and order passed by the High Court are concerned, we are of the opinion that the observations made in para 9 are unwarranted and not required. Accordingly, the observations made in para 9 of the impugned order are ordered to be expunged.

Income deemed to accrue or arise in India - licensing of software products of Microsoft in the Territory of India by the Respondent was not taxable in India as Royalty under Section 9(1)(vi) read with Article 12 of the Indo US DTAA - it was held by the High Court [2022 (5) TMI 1070 - DELHI HIGH COURT] that this is not Royalty liable to be taxed in India under the provisions of the Income Tax Act, 1961 and DTAA - HELD THAT:- The issue raised by the Revenue in the present special leave petition is covered against them in ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED VERSUS THE COMMISSIONER OF INCOME TAX & ANR. [2021 (3) TMI 138 - SUPREME COURT] where it was held that the amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income Tax Act were not liable to deduct any TDS under section 195 of the Income Tax Act.

SLP dismissed.

Correctness/validity of an order u/s 127 - power of transfer of case - case transferred from Kolkata to New Delhi - Validity of order passed by the Principal Commissioner of Income Tax, Kolkata- 9 (PCIT)

The intra-court appeal is dismissed [2023 (2) TMI 425 - CALCUTTA HIGH COURT]. The order transferring the appellant's case from Kolkata to Delhi under Section 127 is upheld; the writ challenge based on procedural infirmity, lack of reasons, mala fides, inconvenience and on merits of proposed assessments is rejected - HELD THAT:- We find no merit in the special leave petition it is dismissed.

However, the observations in the impugned order shall be construed only as a prima facie expression and have no reflection on the merits of the case.

All pending applications are disposed of.

Survey proceedings u/s 133A -Authenticity of the data contained in the pendrive seized from the possession of Shri Riyaz, one of the assessee's employee - Whether the appellate Tribunal should not have found that the survey conducted at the residential house of Sri Riyaz violated the provisions of Section 133A? - As decided by HC [2022 (10) TMI 1173 - KERALA HIGH COURT] according to the explanation, a place (a) where a business or profession or activity for charitable purpose is carried on, (b) shall also include any other place where any business or profession and activity for charitable purpose is carried on or not. Therefore, explanation includes a place where any one of the three activities is carried on therein or not. Excluding residence by the construction now commended to this Court would completely take away from the scope of the survey - HELD THAT:- We are not inclined to interfere with the impugned order and judgment of the High Court. The special leave petitions are dismissed. Pending application(s), if any, are disposed of.

Drawback claim - supplementary claim under Section 75 of the Customs Act, 1962 - short shipment due to mismatch in stuffing report - purging of shipping bill - entitlement to refund/drawback - procedural remedy before customs authorities

Drawback claim - short shipment due to mismatch in stuffing report - purging of shipping bill - procedural remedy before customs authorities - Lawfulness of the communication directing the petitioner to file a supplementary claim under Section 75 and refusal to sanction refund in view of error in stuffing report and purging of the shipping bill. - HELD THAT: - The Court accepted the factual finding in the respondents' counter that the stuffing report contained an error in the number of packages which resulted in a mismatch, short shipment, and an error in the Export General Manifest, thereby preventing processing of the shipping bill for drawback/refund. The petitioner did not controvert that the error arose at its instance. The record shows that correction was sought only later, the corrected export certificate was issued, but the amended shipping bill was not re-registered within the prescribed timeframe and the shipping bill purged; retrieval via system was not possible. The Court distinguished the cited precedent (Abi Technologies) on facts since there the petitioner had furnished correct particulars and was held entitled to refund; in the present case the defect in the stuffing report and consequent purge meant there was no legal infirmity in the impugned communication advising the statutory/administrative remedy. The Court therefore found no basis to judicially direct grant of the relief sought and observed that the petitioner remains free to pursue remedies under the Act and applicable regulations.

Writ petition dismissed; impugned letter upholding requirement to pursue a supplementary claim under the statutory procedure is not legally infirm; petitioner may pursue available remedies before the authorities in accordance with law.

Final Conclusion: The petition challenging the communication refusing immediate refund and directing the petitioner to pursue statutory procedure was dismissed on the ground of an admitted error in the stuffing report, resulting short-shipment and purging of the shipping bill; no interference with the impugned communication, petitioner free to seek relief through prescribed statutory channels.

Classification of used rails - Misdeclaration of imported scrap - Acceptance of enhanced value for assessment - Failure to consider material admission

Classification of used rails - Misdeclaration of imported scrap - Acceptance of enhanced value for assessment - Imported rail material declared as heavy melting scrap was liable to be treated in accordance with the importer's own letter admitting misdeclaration and accepting the value for assessment. - HELD THAT: - The Tribunal found that the letter dated 14.05.2013, in which the importer admitted misdescription, had direct bearing on both classification and valuation. In view of that admission, the case was held to be factually similar to the decision of the Supreme Court in Indo Deutsche Trade Links , where declaration of used rails as heavy melting scrap was held improper and classification under heading 7302 was accepted on the basis of the importer's own admission and acceptance of corrected value. The Tribunal therefore treated the description as well as the value accepted by the importer as governing the assessment.

The departmental appeal was allowed on the basis that the goods were not assessable as heavy melting scrap as declared and that the accepted value could be acted upon for assessment.

Failure to consider material admission - The appellate order could not be sustained because it had been passed without considering the importer's letter admitting misdeclaration. - HELD THAT: - The Tribunal recorded that the material letter relied upon by the department had not been considered by the Commissioner (Appeals). Since that document was decisive to the controversy and aligned the facts with the governing Supreme Court ruling, omission to consider it vitiated the appellate decision.

The order of the Commissioner (Appeals) was set aside for having ignored a material admission bearing on the merits of classification and valuation.

Final Conclusion: The Tribunal set aside the order of the Commissioner (Appeals) and allowed the departmental appeal. It held that the importer's admitted misdeclaration and accepted value were material and brought the case within the rule applied by the Supreme Court on classification of used rails.

Effect of Settlement Commission order - benefit of settlement enuring to co-noticees - immunity from prosecution, fine and penalty - unreasonableness and discrimination in continuing proceedings against co-noticees

Effect of Settlement Commission order - benefit of settlement enuring to co-noticees - immunity from prosecution, fine and penalty - Whether the settlement order obtained by the main noticee before the Settlement Commission enures to the benefit of the co-noticee (appellant) and precludes imposition of penalty on the co-noticee. - HELD THAT: - The Tribunal held that once the Settlement Commission has finally settled the dispute in favour of the main noticee and granted immunity from prosecution, fine and penalty, the entire dispute in respect of the same transaction comes to an end and that benefit must enure to other co-noticees. The conclusion is supported by the principle that it would be unreasonable and discriminatory to continue proceedings against a co-noticee in relation to the same transactions after the main party's dispute has been brought to an end by settlement. The Tribunal relied on precedents interpreting the Settlement mechanism and on a recent Madras High Court decision which held that where an importer settled before the Settlement Commission and was granted immunity, the CHA could not be proceeded against for penalty; the reasoning was applied to the facts of this case to hold that the appellant (a shipping line/CHA) is entitled to the immunity granted to the main noticee and therefore cannot be subjected to the impugned penalties. [Paras 7, 8]

The appeal is allowed; the impugned order imposing penalties on the appellant is set aside and the appellant is held entitled to the benefit of the Settlement Commission's order granted to the main noticee, with consequential benefits in accordance with law.

Final Conclusion: The Tribunal allowed the appeal, set aside the penalties imposed on the appellant and held that the immunity granted by the Settlement Commission to the main noticee enures to the benefit of the co-noticee (appellant), entitling the appellant to consequential relief.

Custom House Agent liability under Customs Broker Licensing Regulations - Verification of IEC and KYC by customs brokers - Penalty under Section 114/114AA of the Customs Act - Liability of a license-suspended broker who merely referred exporter to another CHA

Custom House Agent liability under Customs Broker Licensing Regulations - Verification of IEC and KYC by customs brokers - Penalty under Section 114/114AA of the Customs Act - Whether penalty under Section 114 and/or 114AA could be imposed on M/s KVS Cargo for alleged failure to verify antecedents and KYC of the exporter which turned out to be a bogus firm. - HELD THAT: - The Tribunal examined the obligation cast on a CHA under Regulation 11(n) of the Customs Broker Licensing Regulation to verify antecedents, IEC correctness and identity of the client. The evidence established a pre-planned, well-conceived fraud by the exporter who forged identity documents, obtained bogus PAN and IEC and opened a bank account; even public authorities and the bank failed to detect the fraud. The Tribunal relied on the principle that it is impractical to expect a CHA to perform investigative verification beyond ordinary due diligence and to detect sophisticated fabrication which eluded official agencies. There was no material pointing to connivance by the CHA; no incriminating documents were recovered and the documentary records produced showed that requisite documents had been obtained and, to the CHA's knowledge, verified. Applying these considerations and the authority of the Delhi High Court on the standard expected of a CB holder, the Tribunal concluded that the facts did not sustain imposition of penalty on M/s KVS Cargo. [Paras 10, 13, 14, 15, 18]

Penalty imposed on M/s KVS Cargo under Section 114/114AA is set aside.

Liability of a license-suspended broker who merely referred exporter to another CHA - Verification of IEC and KYC by customs brokers - Penalty under Section 114/114AA of the Customs Act - Whether penalty under Section 114 and/or 114AA could be imposed on M/s Him Logistics Pvt Ltd, which, while a CHA by profession, had its licence under suspension and forwarded the exporter to another CHA without presenting documents to Customs. - HELD THAT: - The Tribunal found that M/s Him Logistics, during the relevant transactions, did not act as the CHA before Customs because its licence was suspended; it merely explained document requirements to the exporter and later forwarded the exporter to KVS Cargo. The records did not show that Him Logistics presented documents to Customs, participated in clearance, benefitted from or was aware of the fraud, or abetted it. Prior Tribunal orders in related matters treating similar facts were noted. Given that a suspended broker who only referred the exporter did not perform CHA functions or facilitate clearance, the imposition of penalty under the CBLR and Sections 114/114AA was untenable. [Paras 16, 17]

Penalty imposed on M/s Him Logistics Pvt Ltd is set aside.

Final Conclusion: Both appeals by M/s KVS Cargo and M/s Him Logistics Pvt Ltd succeed; the Tribunal set aside the penalties imposed under Section 114/114AA of the Customs Act on the grounds that the acts and omissions attributed to the CHAs were not established, a suspended broker who merely referred the exporter did not act as CHA, and the fraudulent scheme by the exporter could not reasonably have been detected by the appellants.

Admissibility of third party statements without cross examination - requirement of cross examination under Section 9 D of the Central Excise Act - mens rea for abetment - abatement as defined in Section 107 IPC - liability of clearing and forwarding agent (CHA) for mis declaration - onus and limits of verification duties of CHA

Admissibility of third party statements without cross examination - requirement of cross examination under Section 9 D of the Central Excise Act - Whether statements of third parties recorded without affording the appellants an opportunity to cross examine can be relied upon to impose penalties on the appellants. - HELD THAT: - The Tribunal held that the findings against the appellants were founded primarily on statements of third parties which were not subjected to cross examination by the affected persons. The admissibility of such statements is governed by the requirement that a statement can be admitted as evidence only after the maker has been duly examined and the affected party given an opportunity to cross examine, as contemplated by the statutory regime relied upon by the adjudicating authority. The statements relied upon contained material contradictions (including inconsistent accounts regarding the existence of any partnership or contractual relationship) and no contemporaneous agreement or documentary proof was produced to corroborate them. In these circumstances, the Tribunal found that the impugned statements could not form a dependable basis for imposing penal consequences on the appellants.

Statements recorded without giving the appellants an opportunity to cross examine are inadmissible for the purpose of fastening penal liability; reliance on such statements is unsustainable.

Mens rea for abetment - abatement as defined in Section 107 IPC - liability of clearing and forwarding agent (CHA) for mis declaration - onus and limits of verification duties of CHA - Whether the appellants (CHA, its G card holder and employee) could be held liable for abetment/connivance in mis declaration and over valuation of export consignments on the basis of the material on record. - HELD THAT: - The Tribunal analysed the ingredients of abetment and observed that abetment requires instigation, conspiracy or intentional aiding of the illegal act. The only incriminating material against the appellants was a reference to having seen a sample said to cost a particular amount and contradictory statements as to the role and status of the appellants within the CHA. The CHA's role was characterised as that of a processing agent who acts on documents and ascertained KYC, and there was no evidence that KYC documents were false or that the CHA intentionally facilitated the mis declaration. In absence of cogent and corroborative evidence establishing intentional aiding or conspiracy, and given the contradictions in statements and lack of documentary support, mens rea necessary for penal liability could not be attributed to the appellants. Consequently, the penalties imposed on the CHA, its G card holder and employee were held to be unsustainable.

There is no evidence of mens rea or abetment by the appellants; the penalties imposed on them for connivance in mis declaration are not sustainable.

Final Conclusion: For lack of admissible, cogent and corroborative evidence establishing cross examined statements, partnership/control, or intentional aiding of mis declaration, the Tribunal set aside the penalty orders against the appellants and allowed the appeals.

Exemption from countervailing duty - exemption from special additional duty - parts of articles of jewellery - articles of jewellery - separate classification of articles and parts under the Customs Tariff - strict construction of exemption notifications - legislative amendment limiting or extending exemption

Exemption from countervailing duty - exemption from special additional duty - parts of articles of jewellery - articles of jewellery - separate classification of articles and parts under the Customs Tariff - strict construction of exemption notifications - legislative amendment limiting or extending exemption - Silver findings which are parts of silver jewellery are not eligible for exemption from CVD and SAD under the relevant exemption notifications as they are not covered by the entries which exempt articles of jewellery. - HELD THAT: - The Tribunal examined whether 'parts of jewellery' fall within the benefit of the CVD and SAD exemption notifications. The Customs Tariff separately classifies 'articles of jewellery' and 'parts of articles of jewellery' under restrictive sub-headings, indicating they are distinct articles. The CVD exemption entry as originally worded exempted 'articles of jewellery' (including articles of silver jewellery) but did not exempt 'parts of articles of jewellery' until an amendment w.e.f. 26.07.2016 which explicitly included parts. Consequently, prior to that amendment parts were not covered. Exemption notifications must be strictly construed and the burden of showing entitlement lies on the assessee; any ambiguity must be resolved in favour of the revenue. Precedents relied upon by the appellant did not address whether parts are entitled to the exemption granted to articles and thus do not advance the appellant's case. Applying these principles, the findings of the lower authorities that parts (silver findings) are not entitled to CVD or SAD exemption were held to be legal and correct. [Paras 4, 5, 6]

The impugned order upholding denial of CVD and SAD exemption to imported silver findings (parts of jewellery) is affirmed and the appeal is dismissed.

Final Conclusion: Appeal dismissed; Tribunal follows its earlier decision in Kinjal Precious Pvt. Ltd. and upholds the orders denying exemption from CVD and SAD to imported silver findings as parts of jewellery (not covered by the exemption entries prior to the specified amendment).

Suspension of customs broker licence - Immediacy requirement for suspension under regulation 16 - Interim nature of suspension and intent to prosecute - Requirement to initiate proceedings within ninety days - Principles of natural justice

Suspension of customs broker licence - Immediacy requirement for suspension under regulation 16 - Requirement to initiate proceedings within ninety days - Interim nature of suspension and intent to prosecute - Validity of continuing suspension of the customs broker licence under regulation 16 where suspension was imposed after the ninety day period without initiation of further proceedings. - HELD THAT: - Regulation 16 confers power to suspend a customs broker licence as an interim measure predicated on the need for an immediate reaction; the regulations do not prescribe a fixed formula for the limits of immediacy and that assessment is ordinarily for the licensing authority. Suspension, however, is a temporary detriment which must be connected to an intention to commence or continue adjudicatory proceedings leading to revocation; the regulatory scheme incorporates a ninety day timeframe for initiating such proceedings from receipt of the offence report. In the present case the licence was suspended only after the stipulated ninety days and no proceedings had been initiated at the time of suspension. Because the precondition for suspension - namely temporary deprivation pending initiation and conclusion of proceedings - was not satisfied and there was no intent apparent to take the matter to legal conclusion within the prescribed timeframe, the continuation of the suspension was not in accordance with the Regulations. The Tribunal therefore set aside the suspension and restored the licence, while leaving open the licensing authority's power to take appropriate action in accordance with law.

Suspension set aside and customs broker licence restored; liberty preserved for the licensing authority to take lawful action for revocation or other detriment.

Final Conclusion: The appeal is allowed: the continued suspension of the customs broker licence was quashed because it was imposed after the ninety day period without initiation of proceedings, rendering the suspension inconsistent with regulation 16; the licence is restored subject to the licensing authority's right to take appropriate action in accordance with law.

Conflicting scientific test reports and their probative value - admissibility and right to cross-examine technical experts under section 138B of Customs Act, 1962 - onus of proof on Revenue for alternative classification - General Rules for the Interpretation of Import Tariff - classification within Chapter 54 driven by composition thresholds by weight - finality of clearance under section 48 of Customs Act, 1962 - remand for furnishing test reports and verification of evidence

Conflicting scientific test reports and their probative value - admissibility and right to cross-examine technical experts under section 138B of Customs Act, 1962 - remand for furnishing test reports and verification of evidence - Validity and weight of subsequent CRCL and re-test reports vis-a -vis earlier Textile Committee reports, and whether denial of cross-examination of authors of subsequent reports vitiated the re-adjudication. - HELD THAT: - The Tribunal observed that no standard test existed for distinguishing 'texturised' and 'non-texturised' yarns and that a methodology was later devised by CRCL and members of the Textile Committee. Where later testing produced a different result, the authors of the new testing parameters could not be lightly preferred over the initial Textile Committee report without affording the noticees an opportunity to test the competence and basis of the new methodology. Section 138B of the Customs Act (as noticed) and principles of natural justice required that denials of cross-examination of technical experts be viewed critically because cross-examination might have elicited reasons for change of stand and assessed technical competence. The Tribunal rejected the submission that scientific pronouncements enjoy absolute primacy to the exclusion of procedural safeguards; reliance on earlier authorities which did not consider section 138B was held inapposite. Consequently the exercise of re-adjudication based solely on the subsequent reports, when cross-examination was denied and when the remand had been for furnishing the material that remained disputed, could not sustain substitution of classification. [Paras 11, 12, 13, 14]

Subsequent test reports could not be accepted as displacing the earlier Textile Committee reports without permitting cross-examination and satisfying the remand directions; denial of such opportunity undermined the re-adjudication based on the later reports.

Onus of proof on Revenue for alternative classification - General Rules for the Interpretation of Import Tariff - classification within Chapter 54 driven by composition thresholds by weight - finality of clearance under section 48 of Customs Act, 1962 - Whether the customs authorities discharged the burden to re-classify the imported woven polyester fabrics from the sub-heading claimed by the importers to a different sub-heading within Chapter 54. - HELD THAT: - The Tribunal applied the General Rules for tariff interpretation and authorities emphasising that burden of proof for proposing a different heading or sub heading lies on the Revenue. Both parties accepted the Chapter 54 heading for woven synthetic filament fabrics; the dispute related to subordinate sub-headings. The record contained no finding or even a proposal that the impugned samples contained less than 85% by weight of polyester yarn - a compositional threshold material to the alternative sub-heading adopted by the authorities. Where no evidence was produced to establish the requisite compositional threshold, the Revenue failed to discharge the burden of proof necessary to substitute the classification and thereby alter the claimed rate of duty. Consequently the bills of entry classification and the claimed notifications as declared by the importers were left undisturbed. [Paras 15, 16, 17]

Revenue did not discharge the onus to justify re-classification within Chapter 54; in absence of evidence on the material weight composition, the declared classification in the bills of entry must stand.

Final Conclusion: The appeals result in sustaining the orders favourable to the importers: the Revenue's appeal fails and the re-classification/demand premised on the later test reports cannot be sustained; the order impugned in the appeal of M/s Janta Trading Co is set aside and the declared classification in the bills of entry remains intact.

Classification under heading 8471 80 00 - units of automatic data processing machines - Chapter note 5(C) to Chapter 84 - General Rules for the Interpretation of the Harmonized System (GIR) - Rule 1 and Rule 3 - HSN/WCO explanatory notes and WCO classification opinion - classification vis-a -vis heading 8523 (solid-state non-volatile storage devices) - classification vis-a -vis heading 8473 (parts and accessories of machines of heading 8471) - applicability of exemption under Notification No. 24/2005-Customs

Classification under heading 8471 80 00 - units of automatic data processing machines - Chapter note 5(C) to Chapter 84 - General Rules for the Interpretation of the Harmonized System (GIR) - Rule 1 and Rule 3 - HSN/WCO explanatory notes and WCO classification opinion - Cryptographic Device/Token (ProxKey and ProxKey PRO) is classifiable under CTH 8471 80 00 as other units of automatic data processing machines. - HELD THAT: - The Authority applied GIR 1 and, where necessary, GIR 3, and examined Chapter Note 5(C) to Chapter 84 and relevant HSN/WCO explanatory notes and classification opinion. The device performs cryptographic data-processing functions (generation and secure retention of private keys, signing, encryption and authentication) using an embedded crypto-processor validated to FIPS 140-2, is connectable to an ADP system via USB, and accepts and returns data in a form usable by the system. It is not a general-purpose storage medium and its small factory-loaded flash memory only contains product-specific driver/middleware which cannot be modified by the user. The WCO classification opinion describing a cryptographic processor connected as a peripheral to ADP machines falls within CTH 8471 80 and is persuasive. In view of the exclusion in Chapter 85 of machinery covered by Chapter 84 and the device's primary function as a constituent unit of an ADP system, the Authority concluded that the device meets the conditions of Chapter Note 5(C) and the HSN Explanatory Notes for classification under 8471 80 00 rather than under heading 8523 or any other heading. [Paras 5]

Device classified under Tariff entry 8471 80 00: Other units of automatic data processing machines.

Classification vis-a -vis heading 8523 (solid-state non-volatile storage devices) - classification vis-a -vis heading 8473 (parts and accessories of machines of heading 8471) - HSN/WCO explanatory notes and WCO classification opinion - The device is not classifiable under heading 8523 and need not be treated as only a part/accessory under 8473 because its primary character is that of a unit of an ADP system under 8471. - HELD THAT: - The Authority examined Chapter 85 notes and WCO Explanatory Notes for heading 8523 and noted that Chapter 85 excludes machinery and apparatus covered by Chapter 84. The product's functions (secure key generation, non-exportable private key storage, cryptographic processing and returning processed data to the host) distinguish it from solid-state non-volatile storage devices intended for recording or transferring data. Although the product has a factory-loaded 2 MB flash partition for middleware, that memory is limited, non-user-modifiable and ancillary; it does not convert the product into a general-purpose storage medium. The Authority also considered the scope of 8473 (parts and accessories) but found the WCO opinion and the device's specific characteristics favour classification as a constituent ADP unit under 8471 rather than only as an accessory under 8473. [Paras 5]

8523 is not the appropriate heading; the device is not to be classed merely as an accessory under 8473 but as a unit under 8471 80 00.

Applicability of exemption under Notification No. 24/2005-Customs - The goods so classified are eligible for duty exemption under serial number 8 of Notification No. 24/2005-Customs (and not under the serial number claimed by the applicant). - HELD THAT: - Having held that the device is classifiable under heading 8471 80 00, the Authority examined Notification No. 24/2005-Customs and observed that goods covered under heading 8471 are enumerated at serial number 8 of the notification for exemption from customs duty. The applicant's invocation of a different serial number (Sr. 2) was incorrect; the correct exemption entry applicable to goods of heading 8471 is serial number 8. Accordingly, the device, being within heading 8471, qualifies for exemption under the appropriate serial entry. [Paras 5, 6]

Goods eligible for duty exemption under serial number 8 of Notification No. 24/2005-Customs.

Final Conclusion: The Authority ruled that M/s Pagaria Infotech Ventures LLP's Cryptographic Device/Token (ProxKey and ProxKey PRO) is classifiable under Tariff entry 8471 80 00 as other units of automatic data processing machines and is eligible for customs duty exemption under serial number 8 of Notification No. 24/2005-Customs.

Freeze order - bank guarantee - necessity of investigation - discharge of accused - non-identification in FIR/chargesheet - redundancy of freeze - entitlement to repatriation of funds

Freeze order - bank guarantee - discharge of accused - non-identification in FIR/chargesheet - redundancy of freeze - entitlement to repatriation of funds - Whether the condition of furnishing a bank guarantee for release of funds held under a freeze order against the appellant company was tenable where the criminal proceedings concerned a third party who was discharged and the appellant was not named in the FIR or chargesheet, and if not, what relief should be granted. - HELD THAT: - The Court examined the provenance and purpose of the freeze orders and the bank guarantee condition imposed by the lower courts. The freeze and guarantee were imposed to assist criminal investigation against an accused, Dharmesh Doshi, who, on the material before the Court, has been discharged by the Trial Court and was never an employee, shareholder, director or key managerial person of the appellant company. The appellant company has not been named in the FIR or the chargesheet and, on instructions, the investigating agency stated that no criminal proceedings are pending against the appellant relating to the dispute. Given that the criminal proceedings were in the individual capacity of the discharged accused and the appellant is unconnected to the alleged crime, continuation of the freeze and the bank guarantee condition was not necessary for the investigation and therefore became legally untenable and redundant. Having found that the measures were not essential to the investigation and had persisted for many years causing prejudice to the appellant, the Court concluded that the condition of a bank guarantee must be set aside and the appellant entitled to withdraw the funds previously restrained. The Court directed release of the amount with 4% simple interest from 08.05.2006 until actual payment. [Paras 14, 15, 17, 19, 21]

The bank guarantee condition imposed on release of the appellant's funds was set aside; the appellant permitted to withdraw the restrained amount with 4% simple interest from 08.05.2006 until actual payment.

Final Conclusion: Appeal allowed to the extent that the bank guarantee condition is set aside; the appellant is permitted to withdraw the restrained amount together with 4% simple interest from 08.05.2006 until actual payment.

Filling of casual vacancy under Section 161(4) of the Companies Act - harmonious reading of Regulation 17(1A) of the LODR Regulations with Sections 152 and 161(4) of the Companies Act and Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014 - requirement of shareholder approval by special resolution for appointment of a non executive director above 75 years - Regulation 17(1C) obligation to secure shareholder approval at the next general meeting or within three months - interpretation of the word 'unless' in Regulation 17(1A) - not amounting to prior approval

Filling of casual vacancy under Section 161(4) of the Companies Act - Regulation 17(1C) obligation to secure shareholder approval at the next general meeting or within three months - Appointment of a person who has attained the age of 75 years to fill a casual vacancy under Section 161(4) and the timing/manner of shareholder approval required. - HELD THAT: - The Court held that a casual vacancy arising on account of death can be filled by the Board under Section 161(4) read with the proviso to Rule 4(1) of the Rules and that such appointment must be subsequently approved by the members in the immediate next general meeting or within three months as required by Regulation 17(1C). Regulation 17(1C) and Section 161(4) therefore govern the procedure and timing for ratification of a Board appointment to a casual vacancy, and the Board's interim appointment is permissible to meet the statutory timelines for filling the vacancy. [Paras 16, 22, 23]

A Board may fill a casual vacancy under Section 161(4) and that appointment must be approved by shareholders at the next general meeting or within three months under Regulation 17(1C).

Regulation 17(1A) of the LODR Regulations - harmonious reading of Regulation 17(1A) of the LODR Regulations with Sections 152 and 161(4) of the Companies Act and Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014 - Whether Regulation 17(1A) precludes the Board from appointing a person above 75 years to fill a casual vacancy or requires prior shareholder approval before such Board appointment. - HELD THAT: - The Court analysed Regulation 17(1A) together with Section 152(5), Section 161(4), Rule 4(1) proviso and Regulation 17(1C) and concluded that Regulation 17(1A) cannot be read in isolation. On harmonious construction, appointment of an independent director who has attained 75 years by the Board to fill a casual vacancy is permissible, but such appointment must be subsequently approved by the shareholders by a special resolution at the next general meeting. Thus Regulation 17(1A) does not operate as a pre appointment bar to Board action in a casual vacancy situation. [Paras 21, 24]

Regulation 17(1A) does not prevent the Board from filling a casual vacancy with a person above 75 years; such appointment requires subsequent approval by shareholders by special resolution at the next general meeting.

Interpretation of the word 'unless' in Regulation 17(1A) - requirement of shareholder approval by special resolution for appointment of a non executive director above 75 years - Whether the word 'unless' in Regulation 17(1A) imposes a requirement of prior shareholder approval for appointing a person above 75 years. - HELD THAT: - The Tribunal held that the word 'unless' in Regulation 17(1A) does not mean prior approval. Instead, the regulation must be read with the Companies Act and allied rules to require that where the Board appoints such a person to fill a casual vacancy, the appointment be ratified subsequently by a special resolution with an explanatory statement setting out the justification and satisfaction of statutory qualifications. [Paras 24]

The word 'unless' in Regulation 17(1A) does not mandate prior shareholder approval; it requires subsequent special resolution approval when read harmoniously with the Companies Act and rules.

Quashing of penalty for alleged contravention of Regulation 17(1A) - Whether the fine imposed by the Exchange for alleged non compliance of Regulation 17(1A) was sustainable. - HELD THAT: - Applying the foregoing conclusions, the Tribunal found the respondent's finding - that no person above 75 years can be appointed or continued without prior shareholder approval - to be erroneous. There was no material to show breach of the Companies Act or Regulation 17(1C). Consequently the penalty imposed for alleged violation of Regulation 17(1A) could not be sustained and the impugned order was quashed. [Paras 25, 26]

The impugned order imposing a fine for alleged violation of Regulation 17(1A) is quashed; the penalty cannot be sustained.

Final Conclusion: On a harmonious reading of Regulation 17(1A) with Sections 152 and 161(4) of the Companies Act, Rule 4 and Regulation 17(1C), the Board may fill a casual vacancy by appointing a person above 75 years and such appointment must be approved subsequently by shareholders by a special resolution at the next general meeting; the word 'unless' in Regulation 17(1A) does not require prior shareholder approval, and accordingly the fine imposed for alleged contravention of Regulation 17(1A) was quashed and the appeal allowed.

Application under Section 9 of the Insolvency and Bankruptcy Code - admission of debt - pre-existing dispute - test in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. - remand for quantification of admitted and disputed claim

Application under Section 9 of the Insolvency and Bankruptcy Code - admission of debt - test in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. - Validity of NCLAT's conclusion that the Section 9 application was sustainable solely because the corporate debtor admitted a sum of Rs.22,56,833/-, which exceeded Rs.1,00,000/-, invoking Mobilox. - HELD THAT: - The Supreme Court held that NCLAT's reliance on the appellant's admission of Rs.22,56,833/- and the fact that this amount exceeded Rs.1,00,000/- was an insufficient basis, by itself, to sustain the Section 9 petition. The correct exercise required determination whether any amount over and above the admitted Rs.22,56,833/- was due to the respondent. Only if a further amount was found to be due could the principles in Mobilox (regarding pre-existing dispute and admission) be properly applied to decide maintainability of the insolvency proceedings. The Court therefore found the NCLAT's reasoning, which remanded without first separating the admitted sum from the disputed balance, to be not justified.

NCLAT's conclusion was set aside to the extent it treated the admitted sum alone as sufficient to sustain the Section 9 application without determining whether additional amounts were due.

Remand for quantification of admitted and disputed claim - pre-existing dispute - test in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. - Remand of the matter to NCLAT to determine whether any amount in excess of the admitted Rs.22,56,833/- is due and to apply Mobilox principles in respect of any such excess. - HELD THAT: - The Supreme Court directed that, since the admitted amount of Rs.22,56,833/- has been deposited before the NCLT, the NCLAT must undertake the exercise of ascertaining whether the respondent's claim for the larger sum is sustainable beyond that admitted amount. The NCLAT was instructed to decide if any amount over and above Rs.22,56,833/- is due; and, in doing so, to keep in view the Mobilox test regarding pre-existing dispute. All contentions were left open for fresh consideration by the NCLAT in accordance with law.

Matter remitted to NCLAT for fresh consideration limited to determining whether any sum beyond the deposited Rs.22,56,833/- is due, applying Mobilox where relevant.

Final Conclusion: The appeal is allowed in part: the NCLAT judgment dated 10.08.2020 is set aside to the extent that it relied on the admitted sum alone to sustain the Section 9 petition; the matter is remitted to the NCLAT to determine whether any amount over and above Rs.22,56,833/- is due and to apply the Mobilox principles in that adjudication.

Preferential transactions under the Insolvency and Bankruptcy Code - Fraudulent trading or wrongful trading - Related party two year look back for avoidance - Ordinary course of business exception to preference - Avoidance remedial order restoring property to the liquidation estate

Preferential transactions under the Insolvency and Bankruptcy Code - Related party two year look back for avoidance - Ordinary course of business exception to preference - Avoidance remedial order restoring property to the liquidation estate - Whether the mortgage (security interest) created by the corporate debtor on the Noida property is a preferential transaction (and/or a transaction intended to defraud creditors) and liable to be set aside - HELD THAT: - The Tribunal examined whether the creation of the mortgage on the mortgaged property on 28.02.2017 fell within Section 43(2) read with the relevant time in Section 43(4) by assessing who were the ultimate beneficiaries. Applying the Supreme Court's reasoning in Anuj Jain, the Tribunal held that the enquiry must focus on whether the transfer benefited related parties of the corporate debtor. The record (Form CHG 1, corporate communication and the auditor's observations) showed that the loans secured by the mortgage were ultimately utilised by persons and entities related to the corporate debtor and that the security granted conferred a first and exclusive charge which diminished the liquidation estate to the detriment of other creditors. The transaction was not shown to be in the ordinary course of the corporate debtor's business. Consequently the mortgage was a preference given to related parties within the two year look back period and offended the avoidance provisions; the Adjudicating Authority's contrary conclusion was set aside and the registered charge was ordered cancelled so that the property would revert to the corporate debtor's liquidation estate unencumbered. [Paras 26, 27, 28, 29, 30]

The mortgage is a preferential transaction in favour of related parties within the two year lookback and the registered charge (Form CHG 1) is cancelled; the property shall revert to the liquidation estate.

Preferential transactions under the Insolvency and Bankruptcy Code - Related party two year look back for avoidance - Ordinary course of business exception to preference - Whether the transfer of Rs.1,02,09,360/- by the corporate debtor to SAKS Developers LLP pursuant to the MoU dated 30.08.2018 was a preferential transaction liable to be refunded - HELD THAT: - The Tribunal analysed the MoU's recitals and profit sharing clauses and observed that the agreement lacked essential project particulars and appeared hastily executed during a transient period when moratorium status was uncertain. Given the familial and related party nexus between the corporate debtor and SAKS Developers LLP, and that the transfer occurred within the two year look back period, the payment operated to the disadvantage of the corporate debtor's creditors. Even accepting that the moratorium may technically not have been in force at the exact moment, the surrounding circumstances and subsequent restoration of the admission made the transaction susceptible to avoidance. The Adjudicating Authority's direction for repayment by SAKS Developers LLP was upheld. [Paras 33, 34, 35, 36, 40]

The transfer of Rs.1,02,09,360/- to SAKS Developers LLP is a preferential transaction within the two year lookback and the direction for repayment/refund by SAKS Developers LLP is confirmed.

Final Conclusion: The appeal is allowed in part: the Tribunal sets aside the Adjudicating Authority's finding on the mortgage and directs cancellation of the registered charge so the property forms part of the liquidation estate; the Adjudicating Authority's direction that SAKS Developers LLP refund the transferred amount is affirmed. No order as to costs.

Offence of money laundering as an independent/standalone offence - proceeds of crime - role of question of fact at discharge stage - presumption under Section 24 of the PMLA and burden of proof - attachment and confiscation regime under PMLA

Role of question of fact at discharge stage - proceeds of crime - Whether the petition for discharge could be allowed at the revisional stage on the ground that the property purchased in the petitioner's name was not proceeds of crime. - HELD THAT: - The Court held that the nexus between the properties acquired in the name of the petitioner and the proceeds of crime is a question of fact to be examined at trial and cannot be resolved on a revision petition seeking discharge. The material that the petitioner was a minor at the time of contract, the timing of payment and later purchase of immovable property, and the company's financial statements are matters requiring investigation and evidence. Consequently, disputed factual contentions as to source of funds cannot justify discharge at the stage of reconsideration of the Special Court's order. [Paras 7, 14]

Discharge was rightly refused; factual nexus between property and proceeds of crime must be examined at trial.

Offence of money laundering as an independent/standalone offence - proceeds of crime - Whether a person charged under the PMLA must also be an accused in the predicate offence for money laundering to be made out. - HELD THAT: - The Court reiterated that money laundering is an independent offence distinct from the scheduled/predicate offence. It is sufficient if proceeds of crime derived from a scheduled offence are subjected to processes or activities such as concealment, possession, acquisition, use or projection as untainted property. Therefore, it is not necessary that the accused be charged for the predicate offence to face prosecution for money laundering. [Paras 9, 11]

It is not necessary for a person accused under the PMLA to be an accused in the predicate offence; money laundering stands as a separate offence.

Presumption under Section 24 of the PMLA and burden of proof - role of question of fact at discharge stage - Whether the presumption under Section 24 shifts burden to the accused and whether that presumption can be rebutted at the stage of discharge. - HELD THAT: - Relying on precedent, the Court observed that once allegations are made, Section 24 creates a statutory presumption which shifts the burden to the accused to prove that monies were not proceeds of crime. That presumption may be rebutted, but such rebuttal is to be examined at trial; it cannot be considered at the stage of framing of charge or on a revision petition seeking discharge. Hence, absence of a full investigation or contested documentary material does not entitle the court to quash the prosecution at the revisional stage. [Paras 14]

The presumption under Section 24 shifts the burden to the accused and can be rebutted only at trial; it does not justify discharge at the revisional stage.

Final Conclusion: Criminal revision petition dismissed; the Special Judge's order rejecting the petition for discharge is upheld and the petitioner shall face trial on the allegations under the PMLA, with factual issues including source of funds and applicability of the statutory presumption to be decided at trial.

Provisional attachment under Section 5(1) of the PMLA - recording of reasons to believe in writing - judicial review under Article 226 - alternative efficacious remedy / maintainability of writ

Provisional attachment under Section 5(1) of the PMLA - recording of reasons to believe in writing - Validity of provisional attachment of two specified bank accounts insofar as compliance with the requirement to record reasons to believe under Section 5(1) of the PMLA. - HELD THAT: - The Court examined the operative portion of the provisional attachment order and the material placed before it and found that para 10 of the order, read as a whole, does not specify any reasons particular to attachment of Account Nos. 641301010050403 and 641304010000001. The petitioners' uncontroverted contention that those accounts contained only receipts from the National Highway Authority and no third party deposits meant that the attachment of those accounts required particularised reasons to believe recorded in writing. The absence of such specific reasons for those two accounts demonstrates lack of application of mind in respect of them and non compliance with the statutory mandate to record reasons for belief before provisional attachment under Section 5(1). The Court, however, did not adjudicate the factual question of whether third party deposits existed, observing that such factual determination is beyond its scope under Article 226; instead it confined its interference to the legal defect of non recording of reasons particular to those accounts. The Court further clarified that the authorities remain free to examine the accounts afresh and, if satisfied, to pass a reasoned order of attachment in accordance with law. [Paras 11, 12, 13]

The provisional attachment order dated 14.03.2023 is set aside only insofar as Account Nos. 641301010050403 and 641304010000001; the Deputy Director may reconsider and, if justified, re attach those accounts by a fresh reasoned order in accordance with Section 5(1) of the PMLA.

Judicial review under Article 226 - alternative efficacious remedy / maintainability of writ - Whether the writ petition was maintainable despite the availability of statutory remedies before the Adjudicating Authority/competent forum. - HELD THAT: - The Court acknowledged the settled principle that extraordinary writ jurisdiction is limited where an efficacious alternative remedy exists and noted the respondents' reliance on that principle. Notwithstanding that, the Court entertained the petition insofar as it raised a pure legal defect - non compliance with the statutory requirement to record reasons for belief - which the Court considered appropriate for supervisory interference under Article 226. The scope of the Court's scrutiny was confined to whether the impugned order complied with Section 5(1), and the Court did not substitute itself for the factual adjudication which is the domain of the adjudicatory process prescribed under the PMLA. [Paras 12]

Writ jurisdiction was exercised limitedly to examine statutory compliance with Section 5(1); the availability of alternative remedy did not preclude interference on the identified legal defect.

Final Conclusion: The petition is disposed of by setting aside the provisional attachment only in respect of the two specified bank accounts for failure to record particularised reasons to believe; all other attachments are left undisturbed, and the Deputy Director is free to re examine and, if satisfied, pass a fresh reasoned order of attachment in conformity with law.

Service tax on club services to members - Service tax on membership fee - Service to oneself doctrine - Levy of service tax on subscription fee - Grant of special leave to appeal

Service tax on club services to members - Service to oneself doctrine - Service tax on membership fee - Levy of service tax on subscription fee - Whether leave should be granted to consider the question of applicability of service tax on services rendered by a club to its members and on membership/subscription fees where the club is an unregistered institution - HELD THAT: - The Court considered the CESTAT's view that service tax is not leviable on services rendered by a club to its members treating it as a case of service to oneself, while the levy on subscription/membership fee had been upheld. The Court noted that the earlier decision in State of West Bengal & Ors. v. Calcutta Club Ltd. concerned an incorporated club, whereas the present respondent is an unregistered institution and not incorporated under any provision of law. In view of this distinction, and despite submissions about the limited tax effect, the Court formed the view that the question raised warrants examination by this Court and therefore granted leave to appeal and issued notice.

Delay condoned; special leave to appeal granted; notice issued and case posted for hearing.

Final Conclusion: Leave granted to consider the question of service tax on services rendered by an unregistered club to its members and on membership/subscription fees; delay condoned and matter listed for hearing.

Summary order. Appeal dismissed as the tax effect falls below the monetary threshold specified in Circular No. 17 of 2019 (Ministry of Finance, Department of Revenue, Central Board Direct Taxes Judicial Section) dated 8 August 2019.

Appeal to High Court under section 35G of the Central Excise Act, 1944 - appeal to Supreme Court under section 35L of the Central Excise Act, 1944 - determination of taxability/excisability as a question having relation to the rate of duty or value for purposes of assessment - jurisdictional bar on High Court for orders relating to rate of duty or value for assessment

Appeal to High Court under section 35G of the Central Excise Act, 1944 - appeal to Supreme Court under section 35L of the Central Excise Act, 1944 - determination of taxability/excisability as a question having relation to the rate of duty or value for purposes of assessment - Whether the High Court has jurisdiction to entertain appeals against CESTAT orders deciding liability to pay service tax on transportation of goods by pipeline - HELD THAT: - The Court held that the core controversy-the liability of the assessee to pay service tax for transportation of goods by pipeline-falls within the exclusion carved out in section 35G(1) as being an order relating to the determination of a question having relation to the rate of duty or to the value of goods for the purposes of assessment. Section 35L(2) expressly clarifies that the determination of taxability/excisability is included within the expression "having a relation to the rate of duty". Reliance on the Full Bench decision of the Bombay High Court and other authorities shows that issues of taxability/excisability have all India impact and are to be appealed to the Supreme Court to ensure uniformity. Consequently, appeals from CESTAT on the question whether the activity is exigible to service tax are barred from being entertained by the High Court and lie to the Supreme Court. [Paras 8, 9, 10, 11]

Appeals to the High Court against the CESTAT orders on liability to pay service tax for pipeline transportation are not maintainable and the High Court lacks jurisdiction; such appeals lie to the Supreme Court.

Final Conclusion: The preliminary objection to maintainability is sustained; the appeals are dismissed as not maintainable, with liberty to the revenue to file appeals before the Hon'ble Supreme Court.

Refund of accumulated CENVAT credit - deficiency memo not amounting to show cause notice - show cause notice under Rule 14 of the CENVAT Credit Rules, 2004 - right to refund where CENVAT credit remains on books of account

Refund of accumulated CENVAT credit - deficiency memo not amounting to show cause notice - show cause notice under Rule 14 of the CENVAT Credit Rules, 2004 - Legality of rejecting refund of accumulated CENVAT credit without issuance of a show cause notice invoking the CENVAT Credit Rules - HELD THAT: - The Tribunal examined the deficiency memo dated 02.05.2019 and found that it did not invoke the CENVAT Credit Rules and did not refer to Rule 14; consequently the deficiency memo could not be treated as a show cause notice. The order rejecting refund was passed without issuance of any show cause notice proposing denial of availment of the credit. The Tribunal noted the settled position that when CENVAT credit remains on the books and gets accumulated due to export, refund of such accumulated credit cannot be rejected in absence of lawful initiation of proceedings to deny the credit. For these reasons the part of the order rejecting refund was held unsustainable in law. [Paras 4]

Part of the impugned order rejecting refund was set aside and Revenue was directed to refund the accumulated CENVAT credit of Rs. 25,81,828/- to the appellant.

Final Conclusion: The appeal is allowed; the Tribunal set aside the rejection of refund and directed repayment of the accumulated CENVAT credit refused without issuance of a show cause notice.

MODVAT credit - extended period of limitation - willful suppression or misstatement - defacement of duty paying documents - final assessment of returns - barred by limitation

Extended period of limitation - willful suppression or misstatement - final assessment of returns - barred by limitation - MODVAT credit - Whether the Tribunal was justified in holding that the demand for alleged wrongful availment of MODVAT credit was barred by limitation and that the extended period could not be invoked. - HELD THAT: - The Tribunal examined the factual matrix and found that the assessee had produced duty paid documents, filed RT 12 returns which were finally assessed, and allowed defacement of documents by Central Excise Officers after verification. There was no allegation or finding of deliberate suppression or misstatement of material facts by the assessee. The Tribunal applied the legal principle that invocation of the extended period of limitation requires the department to establish that the assessee willfully misstated facts or suppressed material information with intent to withhold it from the department. On the facts found-production and examination of documents, final approval of returns and absence of any charge of suppression or misstatement-the Tribunal concluded that the extended period could not be invoked and the demand was therefore barred by limitation. The Court agreed that where the Tribunal, after factual inquiry, concludes limitation bars the demand, it may grant relief on that ground without entering into merits, and that the Tribunal's conclusion was properly founded on law and fact.

The Tribunal correctly held that the extended period of limitation could not be invoked in the absence of willful suppression or misstatement and that the demand for the period 1.3.1990 to 31.3.1994 was barred by limitation.

Final Conclusion: The appeal is dismissed; the question referred is answered against the revenue, upholding the Tribunal's finding that the demand was time barred and the extended period of limitation was not invocable in the absence of willful suppression or misstatement.

Re-determination of annual production capacity - show cause notice and opportunity to be heard - principles of natural justice - jurisdictional limits on subordinate officers - finality of administrative orders not appealed - departmental estoppel/consistency of revenue's stand

Re-determination of annual production capacity - show cause notice and opportunity to be heard - principles of natural justice - Validity of re-determination of the assessee's annual production capacity by the Commissioner/Joint Commissioner without issuance of a show cause notice or affording an opportunity of hearing. - HELD THAT: - The Commissioner had, after examining the assessee's submissions and verification report, determined the annual capacity and fixed duty liability for 1997-98, providing for 70% non-alloy and 30% alloy treatment. The Commissioner subsequently purported to re-determine the capacity pursuant to a Board instruction without issuing any show cause notice or giving the assessee an opportunity to place material. The Court held that such unilateral re-fixation, effected without affording the assessee an opportunity of hearing, was contrary to the principles of natural justice and therefore not sustainable. The absence of any show cause notice proposing re-determination and the failure to permit the assessee to be heard rendered the revision legally infirm.

Re-determination without issuance of show cause notice and hearing was invalid and unsustainable.

Jurisdictional limits on subordinate officers - finality of administrative orders not appealed - Whether a subordinate authority (Joint Commissioner) could unilaterally revise or supersede the Commissioner's earlier determination of annual capacity solely on the basis of a Board circular. - HELD THAT: - The Court noted that the original determination by the Commissioner had been made after consideration of the assessee's requests and verification and that no appeal was preferred against that order. The Tribunal below failed to consider the specific contention that a junior officer could not unilaterally alter a determination accepted by the department and not challenged. Applying the principle that an administrative order which has attained finality by not being challenged cannot be unilaterally revised by a subordinate officer merely on the basis of an instruction, the Court found the re-fixation by the Joint Commissioner impermissible. The adjudicating and appellate authorities' reliance on the Board's circular to justify such re-determination did not validate the unilateral revision in the absence of appropriate procedure and respect for the finality of the earlier order.

A subordinate officer could not validly supplant the Commissioner's earlier, unchallenged determination solely by reference to a Board circular; such re-fixation was impermissible.

Departmental estoppel/consistency of revenue's stand - finality of administrative orders not appealed - Whether the department, having accepted or acquiesced in identical determinations in other cases and not challenged them, could take a different stand against the present assessee. - HELD THAT: - The Court relied on consistent precedents where the Tribunal had upheld that once the revenue accepted orders in identical cases or allowed similar determinations to attain finality, it could not adopt an inconsistent position in other cases; doing so would create confusion and unfairness. The Court observed that the Tribunal below ignored earlier Tribunal decisions favourable to other assessees on identical issues and the department's failure to challenge those decisions. On this basis, the Court held the department was precluded from adopting a contrary stand in the present case and that the assessee had made out sufficient grounds for interference with the Tribunal's dismissal.

Having accepted identical determinations in other cases (and not challenged them), the department was precluded from taking a contrary stand; reliance on prior consistent decisions required quashing the demand.

Final Conclusion: The appeal is allowed: the Tribunal's order is set aside; the orders of the first appellate authority and the Joint Commissioner are quashed and the demand is quashed. The substantial question of law is answered in favour of the assessee.

Valuation of goods - Captive consumption valuation - Valuation under Rule 8 of the Valuation Rules, 2000 - Valuation for transfers to related/sister units under Rule 9 (proviso) - Rule 11 Best Judgement Method - Revenue neutrality

Valuation of goods - Captive consumption valuation - Valuation under Rule 8 of the Valuation Rules, 2000 - Valuation for transfers to related/sister units under Rule 9 (proviso) - Rule 11 Best Judgement Method - Appropriate method of valuation where manufactured goods are partly consumed captively and partly transferred on stock transfer to a sister unit. - HELD THAT: - The Tribunal held that Rule 8 applies where the entire output is captively consumed and Rule 9 (proviso) governs transfers to sister units, but the statutory valuation scheme (Rules 4-10A) does not expressly cover a hybrid situation of part captive consumption and part transfer to a related unit. In such a case Rule 11 (the Best Judgement Method) is available as it is to be used when none of the other specified rules can be applied. The Appellant had adopted a Rule 11 methodology tailored to the mixed situation and the Tribunal found that choice appropriate. The Tribunal further noted that even if valuation under Rule 8/CAS 4 were applied, there would be no loss to the exchequer because of the availability of credit at the destination unit, but this did not displace the primary conclusion that Rule 11 was the suitable method for the facts of the case. [Paras 8]

Rule 11 is the appropriate method to value SRGO/DHDS where production is partly captively consumed and partly transferred to a sister unit; the valuation adopted by the appellant under Rule 11 was proper.

Revenue neutrality - Valuation of goods - Whether revenue neutrality arising from availability of CENVAT/credit at the sister unit precludes sustaining the demand based on alternative valuation. - HELD THAT: - The Tribunal accepted the Appellant's contention that duty paid by the producing refinery would be available as credit to the sister unit receiving the goods, rendering the exercise revenue neutral and resulting in no loss to the exchequer. The Tribunal relied on precedent where similar factual matrices led to treatment that the ultimate collection of duty did not benefit the exchequer if offset by credit at the related unit. On that basis, the Tribunal treated the revenue neutrality argument as a material consideration supporting the conclusion that there was no justifiable demand to be upheld. [Paras 6, 9]

Revenue neutrality applies since the destination sister unit is eligible to take credit of duty paid by the producing unit; therefore the demand based on alternate valuation cannot be sustained.

Final Conclusion: The Tribunal allowed the appeal, setting aside the demand: it held that Rule 11 (Best Judgement Method) was the appropriate method for valuation in a mixed situation of part captive consumption and part transfer to a sister unit, and that revenue neutrality (availability of credit at the receiving unit) meant no loss to the exchequer.

Inclusion of government subsidy in transaction value for excise - transaction value / assessable value under Central Excise - subsidy under investment promotion scheme not consideration for excise duty - extended period of limitation and allegation of suppression / mis representation - non levy of interest and penalty where no suppression of material facts

Inclusion of government subsidy in transaction value for excise - subsidy under investment promotion scheme not consideration for excise duty - transaction value / assessable value under Central Excise - Subsidy received under the Rajasthan Investment Promotion Scheme, 2014 is not includible in the transaction value / assessable value for levy of Central Excise duty. - HELD THAT: - The Tribunal held that the subsidy disbursed as VAT credit under the RIPS (in the form of VAT 37B challans) does not amount to consideration for the purposes of arriving at transaction value. The appellant had paid VAT to the State and subsequently utilised the VAT 37B challans as subsidy; the Central Excise Department cannot treat amounts remitted back to the assessee by the Sales Tax Department as retained revenue of the Government or as consideration for the sale of goods. The decision follows and applies the Tribunal's earlier precedents dealing with sales tax / VAT incentive schemes (including Shree Cement Ltd. and Welspun Corporation Ltd.), which reasoned that such remission/subsidy is linked to capital investment and statutory conditions and therefore not includible in assessable value. In view of these consistently followed decisions, the impugned orders confirming demands by including the subsidy in assessable value were set aside and the appeals allowed. [Paras 6, 7, 9]

Impugned orders confirming demand by including the RIPS subsidy in assessable value are unsustainable; appeals allowed on this ground.

Extended period of limitation and allegation of suppression / mis representation - non levy of interest and penalty where no suppression of material facts - Allegation of suppression / mis representation and invocation of extended period of limitation not attracted; consequently interest and penalty are not leviable. - HELD THAT: - The Department invoked the extended period on the ground of non disclosure, contending that retention of sales tax amounts constituted suppression. The Tribunal observed that once sales tax was paid as per the Sales Tax Department, and the subsidy was subsequently disbursed and utilised via VAT 37B challans, there was no evidence of retention of Government exchequer by the assessee or of any positive act of suppression. The question whether the subsidy was includible in transaction value was one of legal interpretation; therefore, mis representation allegations were misplaced. Reliance was placed on prior Tribunal rulings (as quoted) which held that no suppression existed in similar circumstances. Consequently, the Department was not entitled to invoke the extended period and no interest or penalty could be sustained. [Paras 8, 9]

Extended period and penal consequences disallowed; no interest or penalty leviable in the absence of suppression or mis representation.

Final Conclusion: The Tribunal set aside the impugned orders and allowed the appeals: subsidy under the Rajasthan Investment Promotion Scheme is not includible in the transaction/assessable value for excise duty, and allegations of suppression justifying extended limitation, interest or penalty are unfounded.

Simultaneous availment of SSI exemption and CENVAT credit - Interpretation of exemption notification excluding third party branded goods from aggregate clearances - Entitlement to CENVAT credit on inputs where duty has been paid on third party branded goods - Clarificatory effect and retrospective application of amendment to exemption notification - Binding precedent under Article 141 of the Constitution

Simultaneous availment of SSI exemption and CENVAT credit - Entitlement to CENVAT credit on inputs where duty has been paid on third party branded goods - Interpretation of exemption notification excluding third party branded goods from aggregate clearances - Assessee entitled to avail SSI exemption under Notification No. 8/2003 CE for its own branded clearances while simultaneously availing CENVAT credit for inputs used in manufacture of third party branded goods cleared on payment of duty. - HELD THAT: - The Tribunal applied the law as settled by the Hon'ble Supreme Court in Nebulae Health Care Ltd., which held that the scheme of the Notification treats clearances bearing a third party's brand as outside the exemption: such goods are not to be included in determining aggregate clearances for home consumption and are ineligible for the exemption. Consequently, when an SSI unit manufactures third party branded goods and duty is paid thereon, the manufacturer is governed by normal excise provisions and is entitled to CENVAT credit on inputs used for those goods. That principle establishes that availing the exemption for the assessee's own branded products does not preclude simultaneously taking CENVAT credit for duties paid on third party branded goods manufactured/cleared by the unit. [Paras 5]

Denial of exemption and demand on account of simultaneous availment was unsustainable; assessee entitled to exemption for its own branded clearances and to CENVAT credit on third party branded clearances where duty was paid.

Clarificatory effect and retrospective application of amendment to exemption notification - The proviso inserted into paragraph 2(iii) of Notification No. 8/2003 CE w.e.f. 11.02.2009 is clarificatory of the Notification's scheme and its clarificatory effect applies to the period prior to the formal amendment. - HELD THAT: - The Tribunal noted that the inserted proviso merely clarifies that inputs used in manufacture of specified goods bearing another's brand are excluded from the exemption scheme. Relying on earlier Tribunal precedent treating the amendment as clarificatory, and in light of the Supreme Court's exposition of the Notification's scheme, the proviso was held to reflect what the Notification always meant and therefore may be applied to the earlier period in question. This supports the conclusion that the assessee's conduct during the disputed period falls within the clarified entitlement. [Paras 5]

Amendment by proviso is clarificatory and may be applied to the pre amendment period; it does not defeat the assessee's entitlement to exemption for its own branded clearances while availing CENVAT credit for third party branded clearances where duty was paid.

Final Conclusion: Appeal allowed; order confirming duty demand, interest and penalty set aside and assessee entitled to exemption for its own branded clearances under Notification No. 8/2003 CE and to CENVAT credit on inputs for third party branded goods cleared on payment of duty for the period in dispute, with consequential relief.

SSI exemption - inclusion of value of supplies to Merchant Exporters in computation of SSI exemption ceiling - clarificatory Circular No. 468/39/2002-CX - non-inclusion of packing material supplies for computing out-turn - penalty not imposable for lawful availment of exemption - judicial precedent of this Tribunal

SSI exemption - inclusion of value of supplies to Merchant Exporters in computation of SSI exemption ceiling - clarificatory Circular No. 468/39/2002-CX - non-inclusion of packing material supplies for computing out-turn - penalty not imposable for lawful availment of exemption - Whether value of corrugated boxes supplied by an SSI unit to merchant exporters must be included for computing the aggregate clearances (out-turn) for denying SSI exemption and whether penalties could be imposed for such availment. - HELD THAT: - The Tribunal applied its earlier precedent in Decorpac, which follows the ratio in Vadapalani Press and allied decisions, holding that clearances of corrugated boxes by an SSI unit used as packing material by its buyers who export are not required to be included in the aggregate value of clearances for the purpose of claiming the SSI exemption. The clarificatory Circular relied upon by Revenue was held not to compel a contrary result as the Tribunal's consistent line of authorities, accepted by the Bombay High Court in the appellant's earlier litigation, establishes that supplies of packing material which are exported as part of a packaged consignment by the buyer do not defeat the non-inclusion benefit for the SSI unit. In consequence, duty demands confirmed on that basis were unsustainable and penalties imposed on the appellant and its managing partner were not maintainable. The Tribunal therefore set aside the appellate order confirming liability, applying the settled judicial precedent of the Tribunal and related High Court confirmation. [Paras 8]

Appeals allowed; order of Commissioner (Appeals) BR/53-54/MV/2012 dated 28.08.2012 set aside with consequential relief; no duty or penalty maintainable insofar as based on inclusion of such supplies.

Final Conclusion: The Tribunal allowed the appeals, holding that supplies of corrugated boxes by the SSI unit to merchant exporters (used as packing material for exported goods) are not to be included in computing the SSI exemption ceiling; consequential duty demands and penalties confirmed by the Commissioner (Appeals) were set aside and are not sustainable.

Cenvat credit wrongly availed - Penalty under Section 11AC - Rule 15(2) of Cenvat Credit Rules - willful mis-statement or suppression - voluntary payment and reduction of penalty under Section 11AC(3) - settlement under Section 11A(2B)

Cenvat credit wrongly availed - interest under Section 11AB - Confirmation of demand for wrongly availed cenvat credit and interest - HELD THAT: - The appellant did not dispute the substantive finding that additional duty credit was wrongly availed in respect of nine Bills of Entry and accepted that the irregular credit related to imports under the EPCG scheme for the period April 2007 to April 2009. The Commissioner confirmed the demand for recovery of the wrongly availed credit and interest, and the appellant had, on being pointed out, reversed the credit and paid interest prior to adjudication. The Tribunal records that there is no challenge to the demand and interest and accordingly does not disturb the adjudication on the quantum of duty and interest confirmed by the Commissioner. [Paras 2, 3, 4]

Demand for wrongly availed cenvat credit and interest confirmed; appellant's payment accepted and not reopened.

Penalty under Section 11AC - Rule 15(2) of Cenvat Credit Rules - willful mis-statement or suppression - voluntary payment and reduction of penalty under Section 11AC(3) - settlement under Section 11A(2B) - Whether penalty under Rule 15(2) read with Section 11AC was imposable - HELD THAT: - The Commissioner imposed penalty under Rule 15(2) read with Section 11AC but reduced it to 25% in view of payment of duty and interest. The Tribunal examined whether the statutory ingredients of fraud, collusion, willful mis-statement or suppression of facts with intent to evade duty were established. Relying on binding precedents and the Supreme Court's exposition in Rajasthan Spinning and Weaving Mills and related decisions, the Tribunal held that mere wrongful availment discovered on audit, coupled with an inadvertent or mechanical error and voluntary payment before the show cause could not be equated to willful suppression or intent to evade duty. The Tribunal noted that the appellant had informed the department and made payment upon discovery and that there was no finding of deliberate deception. In that factual and legal matrix the imposition of penalty under Section 11AC/Rule 15(2) could not be sustained. [Paras 4]

Imposition of penalty under Rule 15(2) read with Section 11AC set aside; appeal allowed to that extent.

Final Conclusion: The appeal is allowed insofar as the penalty under Rule 15(2) read with Section 11AC is concerned and the penalty is set aside; the demand for wrongly availed cenvat credit and interest, which the appellant did not contest and had paid, stands affirmed.

Liability for payment of Central Excise duty on clearances to Duty Free Shops - warehousing procedure for removal without payment of duty and diversion/home-consumption provisions - deemed registration of duty free shop under Rule 9 of Central Excise Rules by virtue of Customs bonded warehouse license and subsequent notification - validity and effect of departmental permission to remove goods without payment of duty - recovery of duty from the party executing bond (merchant-exporter) as distinct from the manufacturer

Liability for payment of Central Excise duty on clearances to Duty Free Shops - validity and effect of departmental permission to remove goods without payment of duty - deemed registration of duty free shop under Rule 9 of Central Excise Rules by virtue of Customs bonded warehouse license and subsequent notification - Whether the clearances made by the appellant to the duty free shop without payment of Central Excise duty were estopped by the permission granted to the duty free operator and by compliance with the warehousing procedure, and whether denial of exemption on procedural grounds was sustainable. - HELD THAT: - The Tribunal held that the appellant's clearance on 14.05.2009 was effected pursuant to a permission granted by the Commissioner to M/s Nuance Group to receive and warehouse non-duty-paid goods in a Customs bonded warehouse and that the department did not contend that the clearances were made contrary to that permission. The Commissioner granting permission would have satisfied himself about fulfillment of prescribed conditions and, in the circumstances, registration under Rule 9 was a procedural requirement which could not defeat the substantive benefit where the goods were received in the warehouse and the warehouse operator had executed bond and furnished bank guarantees. Subsequent statutory and administrative clarifications (Notification No. 07/2013 and Circular No. 970/04/2013) dispelled doubts by deeming such duty free shop premises to be registered for the purposes of Rule 9. The warehousing procedure and the Circular envisaged that where goods were received in the warehouse and exported in accordance with procedure, the substantive exemption operates and diversion provisions impose liability on the warehouse operator. On these grounds the demand on the manufacturer for lack of procedural registration was not sustainable. [Paras 4]

Clearance pursuant to the Commissioner's permission and warehousing procedure could not be denied substantive exemption on the ground of procedural non-registration; the demand on the manufacturer for such alleged procedural lapse was not sustainable.

Recovery of duty from the party executing bond (merchant-exporter) as distinct from the manufacturer - warehousing procedure for removal without payment of duty and diversion/home-consumption provisions - Whether, if duty were found payable for non-compliance by the warehouse/merchant-exporter, the liability to pay or to be recovered should lie against the manufacturer or against the merchant-exporter/warehouse operator who executed the bond. - HELD THAT: - The Tribunal applied settled administrative practice and earlier authorities to hold that where the merchant-exporter or warehouse operator has executed the requisite bond and bank guarantees for receiving and exporting the goods, any liability arising from diversion or procedural lapses is principally that of the merchant-exporter/warehouse operator. The warehousing Circular specifically provides that in case of diversion to home consumption the duty is to be paid by the warehouse operator and interest provisions apply against the exporter/warehouse operator. Precedents cited support recovery from the party which furnished the bond rather than the manufacturer, absent any finding that the manufacturer contravened the conditions of the permission. [Paras 4]

Any claim for duty arising from the transactions should be pursued against the merchant-exporter/warehouse operator who executed the bond and furnished bank guarantees, and not against the manufacturer in the facts of this case.

Final Conclusion: The appeal is allowed; the impugned order confirming demand, interest and penalties against the manufacturer is set aside because the clearances were made under the Commissioner's permission and warehousing procedure and any liability, if attracted, should be pursued against the bonded warehouse/merchant-exporter who executed the bond.

Cenvat credit admissibility on inputs - Recovery of inadmissible Cenvat credit - Imposition of interest and penalty consequent to denial of Cenvat credit - Treatment of amounts paid on non excisable or exempt goods as deposit - Value addition and revenue neutrality as relevant to excise classification - Preclusion of Revenue from denying credit where supplier's duty and valuation have been accepted - Burden of proof regarding admissibility of Cenvat credit (Rule 9(5), Cenvat Credit Rules, 2004)

Cenvat credit admissibility on inputs - Recovery of inadmissible Cenvat credit - Preclusion of Revenue from denying credit where supplier's duty and valuation have been accepted - Value addition and revenue neutrality as relevant to excise classification - Whether the Cenvat credit availed and utilized by the assessee on GP Sheets 'Cut to Length' in March, 2010 was recoverable and the impugned demand sustainable. - HELD THAT: - The Tribunal held that the impugned demand could not be sustained because the foundational adjudication against the supplier M/s Colour Roof (India) Ltd. was itself set aside by the Tribunal, and on the facts there was evidence of value addition leading to higher assessable value and net duty paid by the recipient. The Tribunal applied the principle that where the supplier's assessment, classification and duty payment have been accepted by the department (and retained as revenue), the recipient who otherwise satisfies statutory conditions for taking Cenvat credit cannot be deprived of that credit; reliance was placed on precedents treating such situations as precluding the Revenue from converting paid duty into a deposit and then denying credit to downstream units. Having considered the rival contentions and the supplier case decision, the Tribunal found the impugned order without merit and set it aside. [Paras 4, 5]

Impugned demand for recovery of Cenvat credit in respect of GP Sheets 'Cut to Length' is set aside and the appeal is allowed.

Imposition of interest and penalty consequent to denial of Cenvat credit - Burden of proof regarding admissibility of Cenvat credit (Rule 9(5), Cenvat Credit Rules, 2004) - Whether interest and penalty imposed on the assessee in consequence of denial of Cenvat credit should be sustained. - HELD THAT: - As the primary demand for recovery of Cenvat credit was set aside on the ground that the supplier's case was allowed and because the Tribunal found merit in the assessee's position on value addition and accepted treatment of duty by the department, the consequential imposition of interest and penalty could not stand. The Tribunal therefore set aside the impugned order in its entirety, including the directions for recovery of interest and imposition of penalty. [Paras 4, 5]

Directions for recovery of interest and imposition of penalty are set aside along with the primary demand; appeal allowed.

Final Conclusion: The impugned order denying Cenvat credit and directing recovery of duty, interest and penalty is set aside; the appeal is allowed.

Cenvat credit - input service - assessable value - place of removal - chartered accountant's certificate - extended period / limitation

Input service - Cenvat credit - assessable value - chartered accountant's certificate - Entitlement to Cenvat credit on service tax paid on after sales service where the value of such services is included in the assessable value of the goods. - HELD THAT: - The Tribunal applied its earlier decision in the appellant's own case and binding precedents to hold that after sales services (including warranty/servicing) are includible in the transaction/assessable value under Section 4(3)(d) and, if so included, the service tax paid on such services qualifies as input service credit. The adjudicating authority's denial based on the timing of service (post sale and beyond the place of removal) was rejected because the determinative test is whether the value of after sales services is part of the assessable value of the cleared goods. The Tribunal found that a Chartered Accountant's certificate produced by the appellant authenticated that the value of after sales services formed part of assessable value; the veracity of that certificate was not assailed and, accordingly, the factual requirement for allowing credit was satisfied. The Tribunal also noted consistent decisions of the Tribunal and CESTAT on identical facts and period and held that the revenue's contrary reliance on place of removal and limitation was distinguishable or not applicable where the assessable value includes such charges and no infirmity in the CA certificate was shown. On these grounds the impugned conclusions disallowing credit were set aside and the appeal allowed. [Paras 4, 5]

Credit allowed because after sales service charges are shown to be included in the assessable value (as evidenced by the Chartered Accountant's certificate); impugned denial set aside and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned order, and held that service tax paid on after sales services qualifies for Cenvat credit where those service charges are included in the assessable value of the goods (as supported by the CA certificate); the appeal was allowed.

Simultaneous availment of SSI exemption and CENVAT credit - interpretation of Notification No. 8/2003-CE (para 2(iii) and proviso) - entitlement to CENVAT credit on inputs used for manufacture of branded goods of third parties - clarificatory/retrospective application of an amendment to an exemption notification - binding effect of a Supreme Court precedent under Article 141 of the Constitution

Simultaneous availment of SSI exemption and CENVAT credit - entitlement to CENVAT credit on inputs used for manufacture of branded goods of third parties - binding effect of a Supreme Court precedent under Article 141 of the Constitution - Assessee entitled to avail SSI exemption for its own branded goods while also availing CENVAT credit in respect of inputs used for manufacture of branded goods of other companies cleared on payment of duty. - HELD THAT: - The Tribunal applied the ratio of the Hon'ble Supreme Court in Nebulae Health Care Ltd., which construed the scheme of the Notifications to exclude clearances bearing third party brand names from the exemption and held that where excise duty is paid on such third party branded goods manufactured by an SSI unit on job work basis, the SSI unit is entitled to CENVAT/Modvat credit on inputs used for those goods. The Bench observed that the Supreme Court's holistic reading of the Notification establishes that third party branded clearances do not qualify for the exemption but fall under normal excise law, permitting credit where duty has been paid. Relying on that binding precedent, the Tribunal concluded that the appellant could simultaneously claim exemption for its own branded products and avail CENVAT credit for inputs used in manufacture of branded goods of others cleared on payment of duty for the disputed periods. [Paras 5]

Appeal allowed on this issue; appellant entitled to SSI exemption for its own branded clearances and to CENVAT credit on inputs for third party branded goods cleared on payment of duty.

Interpretation of Notification No. 8/2003-CE (para 2(iii) and proviso) - clarificatory/retrospective application of an amendment to an exemption notification - The proviso inserted into para 2(iii) of Notification No. 8/2003-CE w.e.f. 11.02.2009 is clarificatory of the original notification and, accordingly, its clarification can be given effect from the inception of the Notification. - HELD THAT: - The Tribunal noted that the disputed period predates the formal insertion of the proviso (11.02.2009) but, adopting earlier Tribunal authority and the interpretative approach in Nebulae Health Care Ltd., treated the proviso as merely clarifying the original scheme of the Notification. Consequently, the clarificatory import that third party branded clearances are excluded from the exemption was applicable to the Notification's entire operative scope, and therefore did not preclude applying that understanding to the periods under dispute. [Paras 5]

Proviso construed as clarificatory; the clarified scope of the Notification applies to the periods in issue.

Final Conclusion: The appeals are allowed; the order of the Commissioner (Appeals) confirming duty, interest and penalty is set aside and the appellant is held entitled to SSI exemption for its own branded clearances while being permitted to avail CENVAT credit on inputs used in manufacture of branded goods of others cleared on payment of duty, with consequential reliefs, if any.

Requirement of previous sanction of the Commissioner for review by a successor-in-office and for reviews beyond twelve months - validity of initiation of review proceedings where sanction in writing is not obtained - power of appellate authority to remand where impugned review proceedings are void ab initio - principle that an order bad in law ab initio cannot be cured by subsequent action - interpretation of Section 9A(4) read with Rules 14(10) and 14(11) regarding review, limitation and sanction

Requirement of previous sanction of the Commissioner for review by a successor-in-office and for reviews beyond twelve months - validity of initiation of review proceedings where sanction in writing is not obtained - interpretation of Section 9A(4) read with Rules 14(10) and 14(11) regarding review, limitation and sanction - Initiation and validity of review proceedings in absence of previous sanction of the Commissioner and where review was undertaken beyond twelve months - HELD THAT: - The Court held that Section 9A(4) permits review by the officer who passed the order or by its successor-in-office only subject to rules; Rules 14(10) and 14(11) prescribe that (a) no order other than one passed by the Commissioner shall be reviewed after twelve months without previous written sanction of the Commissioner, and (b) no authority below the rank of Commissioner shall review an order passed by its predecessor in office except with previous sanction of the Commissioner. Applying those provisions, review orders passed by a successor-in-office without the Commissioner's prior written sanction, and review orders made beyond twelve months without such sanction, are not sustainable. The Court relied on and followed the Coordinate Bench decision in Tata Steel Ltd. and noted the Apex Court dismissal of the State's challenge to that decision, adopting the same ratio for the facts before it. The determinative legal consequence is that reviews initiated in violation of the statutory/schematic sanction and time-bar are void ab initio and cannot stand. [Paras 16, 17, 18, 19, 22]

Review orders in respect of the listed assessment years, which were initiated without the Commissioner's prior written sanction and/or beyond twelve months, are set aside as void ab initio.

Power of appellate authority to remand where impugned review proceedings are void ab initio - principle that an order bad in law ab initio cannot be cured by subsequent action - Validity of the Appellate Authority's remand to the Assessing Authority where the review proceedings were alleged to be void ab initio - HELD THAT: - The Court examined the Appellate Authority's remand in the light of the Petitioner's plea that initiation of review proceedings was void for lack of sanction. The Court found that an order void ab initio cannot be validated by subsequent proceedings, and that remanding the matter back to the Assessing Authority effectively confers jurisdiction on an authority to initiate or continue proceedings which it lacked at the time of initiation. Although the Appellate Authority had recorded the Petitioner's grievances and directed fresh adjudication, remand in these circumstances was impermissible because it would permit a reviewing authority to exercise jurisdiction absent the statutory sanction required under the Rules. Consequently, the appellate remand was set aside along with the review orders. [Paras 11, 20, 21, 22]

The Appellate Authority's orders remanding the matters for de novo adjudication were set aside insofar as they sought to revive or validate review proceedings that were void ab initio.

Final Conclusion: Writ petitions allowed. Review orders dated 31.08.2020 and 12.09.2020 and Appellate Orders dated 23.12.2022 for the assessment years 2012-13 to 2016-17 are set aside; any penalty amount recovered or deposited is directed to be refunded or adjusted; authorities remain free to act within the law.

Applicability of Arbitration and Conciliation (Amendment) Act, 2015 - Section 11(6A) - limited jurisdiction of court in appointment of arbitrator - Section 26 - Act not to apply to pending arbitral proceedings / prospective operation - Section 21 - commencement of arbitral proceedings - accord and satisfaction as bar to arbitration - prospective versus retrospective application of procedural amendments

Section 21 - commencement of arbitral proceedings - Section 26 - Act not to apply to pending arbitral proceedings / prospective operation - applicability of Arbitration and Conciliation (Amendment) Act, 2015 - Section 11(6A) - limited jurisdiction of court in appointment of arbitrator - Whether the Amendment Act, 2015 (including Section 11(6A)) applies where the notice invoking arbitration was given before 23.10.2015 but the Section 11 petition for appointment of arbitrator was filed after that date. - HELD THAT: - The Court examined the interplay between Section 21 (which fixes commencement of arbitral proceedings as the date a request for arbitration is received) and Section 26 of the Amendment Act, 2015. Having considered prior decisions, the Court held that Parmar Construction Company and Pradeep Vinod Construction Company directly address applications under Section 11(6) and rule that where the notice invoking arbitration was received before the Amendment Act came into force, the pre-amendment law governs such arbitral proceedings unless the parties otherwise agree. Observations in BCCI regarding bifurcation of "arbitral proceedings" and "court proceedings in relation thereto" (paras 37-39 in that decision) relate to the context in which they arose (challenges under Sections 34/36) and do not displace the specific holding applicable to Section 11 petitions. Applying these principles to the facts - notice received in 2013 but Section 11 petition filed in 2016 - the Court concluded that the unamended 1996 Act governs the matter and that the High Court was entitled to examine defences such as "accord and satisfaction" while deciding the Section 11 petition. [Paras 9, 10, 11]

Where a request for reference to arbitration was received before 23.10.2015, the pre Amendment Act governs Section 11 proceedings filed thereafter; the High Court rightly applied the pre amendment law and adjudicated the plea of accord and satisfaction.

Final Conclusion: The appeal is dismissed. The Court affirms that when the notice invoking arbitration was received prior to 23.10.2015, the pre Amendment Arbitration Act, 1996 governs Section 11 applications filed after that date, and consequently the High Court correctly refused appointment of an arbitrator after finding accord and satisfaction; no order as to costs.

Power of Appellate Court to order deposit pending appeal - Section 148 of the Negotiable Instruments Act, 1881 - special reasons - suspension of sentence and non compliance - vacation of suspension for non compliance - purpose of amendment to Section 148 to protect payee of dishonoured cheque

Section 148 of the Negotiable Instruments Act, 1881 - special reasons - purpose of amendment to Section 148 to protect payee of dishonoured cheque - Whether the petitioners were entitled to a waiver of the deposit of minimum 20% of the fine under Section 148 on account of alleged strong prospects of success in the appeal or other circumstances of the case. - HELD THAT: - The Court held that while Section 148 ordinarily requires the Appellate Court to direct deposit of a minimum of 20% of the fine/compensation, the Appellate Court may decline to impose that condition only for recorded "special reasons." The petitioners relied on their acquittal in a separate complaint arising from the same facts and on alleged contradictions in the complainant's statements as constituting special reasons. The Court observed that the merits of the appeal cannot be ventilated or treated as constituting special reasons under Section 148; every appellant will assert good prospects of acquittal and that alone cannot justify exemption. The record of the conviction shows the issuance of the cheques and signatures were admitted and the statutory presumptions remained unrebutted in the conviction. Having regard to the purposive object of Section 148 to afford interim relief to the complainant and to curb delay tactics, the petitioners' contentions did not qualify as special reasons to exempt them from deposit. Accordingly the direction to deposit 20% of the fine was held to be lawful and not vitiated. [Paras 14, 15]

Prayer for waiver of the 20% deposit under Section 148 was rejected; the requirement to deposit 20% of the fine stands.

Suspension of sentence and non compliance - vacation of suspension for non compliance - Power of Appellate Court to order deposit pending appeal - Whether the Appellate Court was justified in vacating the suspension of sentence for non payment of the 20% deposit ordered under Section 148. - HELD THAT: - The Court relied on authoritative exposition that where suspension of sentence is granted on a condition, non compliance of that condition permits the Court that granted suspension to declare the suspension vacated. The fact that the Appellate Court had initially suspended sentence without imposing the deposit condition does not render subsequent imposition of the Section 148 deposit and revocation of suspension, upon non compliance, unlawful. Given the object of Section 148 and the Appellate Court's power to take a call on non compliance, vacation of the suspension for failure to deposit the ordered amount was within jurisdiction and consistent with the legislative purpose to protect the complainant from delay. The High Court found no infirmity in the Appellate Court's order vacating suspension and directing surrender in default, and therefore affirmed the validity of that course of action. [Paras 21, 22, 23, 24]

Vacation of the suspension of sentence for non payment of the 20% deposit was held valid; petitioners were directed to deposit the amount within the time fixed or surrender in default.

Final Conclusion: The petition is disposed of: the petitioners are directed to deposit 20% of the fine imposed by the Trial Court within ten days, failing which they shall surrender as directed; the High Court declined to quash the Appellate Court's orders directing the deposit and vacating suspension of sentence for non compliance, and clarified that its observations shall not prejudice the pending appeal.

Challenge to arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 - public policy and patent illegality - interpretation of contract tax clause (Clause 14 of GCC) regarding reimbursement of taxes and duties - reimbursement of taxes "at actuals" and applicability to Bought Out Products (BOP) - deemed export benefits/CENVAT credit and their relevance to reimbursement - limitation in claims and running account/acknowledgement - scope of judicial interference with arbitral findings (competence competence; not appellate review)

Interpretation of contract tax clause (Clause 14 of GCC) regarding reimbursement of taxes and duties - reimbursement of taxes "at actuals" and applicability to Bought Out Products (BOP) - deemed export benefits/CENVAT credit and their relevance to reimbursement - Clause 14 of the GCC obliges the Employer to reimburse taxes and duties, including Excise Duty and Central Sales Tax (CST), in respect of supplies made through sub contractors (BOP) as well as goods manufactured by the contractor, and "at actuals" refers to taxes actually paid to the exchequer. - HELD THAT: - The Court upheld the Arbitral Tribunal's interpretation of Clause 14.1-14.4, observing that the clause speaks of reimbursement of "all Taxes and Duties" and makes no distinction between taxes on manufactured items and on BOP. Clause 14.2 and the deeming mechanism for 'sale in transit' support treating supplies from approved sub contractors as transactions for the project and thereby within the ambit of Clause 14.1. The project's deemed export status and the prospect of CENVAT benefits were relevant to understanding why reimbursement was framed "at actuals"; the term denotes taxes actually paid to the exchequer and is not confined to taxes paid directly by the contractor. The omission of Schedule 7 did not alter this contractual obligation, Schedule 7 being indicative and not determinative of actual reimbursable amounts. The Court found no error in the Tribunal's construction and application of these provisions. [Paras 47, 48]

The Court upheld the Tribunal's finding that the petitioner (Employer) was contractually liable to reimburse taxes and duties on BOP as well as manufactured goods, and that reimbursement "at actuals" means taxes actually paid to the exchequer.

Challenge to arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 - scope of judicial interference with arbitral findings (competence competence; not appellate review) - Whether the award was vitiated by lack of evidence, non consideration of vital submissions, or patent illegality warranting interference under Section 34. - HELD THAT: - Applying the narrow scope of judicial review under Section 34, the Court concluded that the Arbitral Tribunal had considered pleadings, documentary and oral evidence and given reasoned findings. The Tribunal's factual conclusions-being plausible views based on the record-do not amount to patent illegality or perversity that would justify setting aside the award. The Court emphasised that it cannot reappraise evidence or sit as an appellate body to substitute its view for that of the arbitrators where the tribunal's conclusions are supported by the record. [Paras 50, 54, 55]

The Court found no patent illegality or other ground under Section 34 to set aside the award and refused to interfere with the Tribunal's findings.

Limitation in claims and running account/acknowledgement - Whether the claimant's claims for reimbursement of taxes and duties on BOP were time barred. - HELD THAT: - The Court accepted the Tribunal's factual finding that the respondent had earlier made payments (including at least one payment on 11.02.2015) and thereafter made on account payments, so that the respondent's denial of liability first crystallised by its letter dated 07.10.2016. On these facts the cause of action for limitation was held to arise from 07.10.2016, and the arbitration notice dated 18.02.2019 was held to be within the three year limitation period. The Court rejected the submission that limitation should be reckoned from each invoice date in the circumstances found on record. [Paras 49, 50, 51]

The Court held the claims to be within the period of limitation and not time barred.

Final Conclusion: The petition under Section 34 was dismissed. The arbitral award dated 14.10.2020 was upheld; the Court found no reason to interfere for patent illegality, lack of evidence, or limitation, and affirmed the Tribunal's interpretation that taxes and duties on BOP are reimbursable "at actuals" under the contract.