TaxTMI Updates e-Newsletter
May 17,2024

Condonation of delay under Section 107 of the West Bengal Goods and Services Tax Act, 2017 - applicability of Section 5 of the Limitation Act, 1963 to appeals under taxing statutes - self-contained code and implied exclusion of general limitation provisions - failure to exercise jurisdiction by appellate authority - restoration of appeal and direction to decide on merits subject to pre-deposit

Condonation of delay under Section 107 of the West Bengal Goods and Services Tax Act, 2017 - applicability of Section 5 of the Limitation Act, 1963 to appeals under taxing statutes - failure to exercise jurisdiction by appellate authority - Appellate authority's power to entertain and condone delay beyond one month under Section 107(4) by applying Section 5 of the Limitation Act, 1963, and whether its refusal amounted to failure to exercise jurisdiction. - HELD THAT: - The Court examined whether Section 107(4) of the said Act operates as a complete code excluding Section 5 of the Limitation Act, 1963. Relying on the reasoning in the Division Bench decision of this Court and the principles in the cited Supreme Court authority, the Court held that there is no express or implicit exclusion of Section 5 by the taxing statute. In absence of a non-obstante clause or specific exclusion, Section 29(2) of the Limitation Act brings Section 5 into play; consequently the appellate authority was not divested of jurisdiction to condone delay beyond the one-month window specified in Section 107(4). The appellate authority's categorical refusal to entertain the application for condonation solely on the ground that it was filed beyond one month was therefore a failure to exercise the jurisdiction vested in it. [Paras 10, 13]

The appellate authority had jurisdiction to condone the delay beyond one month and its refusal to entertain the condonation application amounted to failure to exercise jurisdiction.

Restoration of appeal and direction to decide on merits subject to pre-deposit - court exercising power to condone delay instead of remand - Whether this Court should remand the condonation application to the appellate authority or decide the condonation itself and restore the appeal. - HELD THAT: - The Court concluded that remand would serve no useful purpose. After considering the condonation application and the petitioner's explanation, the Court found the delay satisfactorily explained. Exercising its supervisory jurisdiction, the Court set aside the appellate authority's order, condoned the delay, restored the appeal to file and number, and directed that the appeal be heard on merits subject to compliance with formalities including payment of pre-deposit. [Paras 14, 15, 16]

Delay is condoned by this Court, the appeal is restored and the appellate authority directed to hear and dispose of the appeal on merits subject to formalities including pre-deposit.

Final Conclusion: Order of the appellate authority dated 13th March, 2024 refusing condonation of delay is set aside; this Court condoned the delay, restored the appeal and directed expeditious hearing on merits subject to compliance with formalities including payment of pre-deposit.

Penalty under provisions for detention, seizure and release of goods in transit - clerical/human error in e-way bill vehicle details - administrative circular permitting correction of minor errors in e-way bill - stock transfer and absence of intention to evade tax - lack of mens rea for tax evasion as defence to penalty

Clerical/human error in e-way bill vehicle details - administrative circular permitting correction of minor errors in e-way bill - penalty under provisions for detention, seizure and release of goods in transit - stock transfer and absence of intention to evade tax - Whether wrong entry of vehicle registration in the e way bill amounted to a clerical error covered by departmental circulars and therefore precluded imposition of penalty under Section 129. - HELD THAT: - The Court found on the material that the movement was a stock transfer from the Ludhiana unit to the Asansol sale depot and that the goods were accompanied by invoice, e way bill and bilty. The discrepancy consisted of an incorrect vehicle number entered in Part B of the e way bill (PB 11 AN 9287) while the vehicle in transit bore registration RJ 13 GB 0072. Having regard to the nature of the transaction (stock transfer), the absence of any material placed by the Department to show an intention to evade tax, and the departmental circulars addressing correction of minor errors in e way bill details, the wrong vehicle entry was held to be a clerical/human error. The Court concluded that a mere mismatch in the vehicle registration in the e way bill, in these circumstances, could not sustain proceedings for confiscation and penalty under the provisions dealing with detention and seizure of goods in transit; accordingly the orders of the detaining authority and the first appellate authority were unsustainable and were set aside. [Paras 7, 9, 10]

The wrong vehicle number in the e way bill was a clerical error covered by the departmental approach to minor corrections; the penalty and detention orders were set aside.

Final Conclusion: Writ petition allowed; orders dated March 19, 2019 and March 16, 2020 quashed on the ground that the incorrect vehicle registration in the e way bill was a clerical error in a stock transfer and did not demonstrate an intention to evade tax.

Quashing of assessment order for lack of opportunity - remand for fresh assessment after deposit - statutory right to hearing under GST - service of notices via GST Portal and change of portal dashboard

Quashing of assessment order for lack of opportunity - service of notices via GST Portal and change of portal dashboard - statutory right to hearing under GST - remand for fresh assessment after deposit - Impugned order dated 21.11.2023 quashed and matter remitted to the Assessing Officer for fresh consideration after compliance by the petitioner. - HELD THAT: - The Court observed that the impugned proceedings were preceded by an intimation, show cause notice, reminder and personal hearing notice which had been uploaded on the GST Portal; however, the Portal's dashboard had been redesigned and certain notices were placed under a different tab. Taking into account the petitioner's contention regarding non-receipt/awareness of the notices and to afford the petitioner an opportunity to be heard in accordance with the statutory right to hearing under the GST scheme, the Court interfered with the impugned order. The Court quashed the order dated 21.11.2023 subject to a condition that the petitioner remit 10% of the disputed tax demand for the assessment year 2017-2018 within four weeks from receipt of the judgment. Upon such compliance, the Assessing Officer was directed to consider the appeal/assessment afresh after affording a reasonable opportunity of hearing and to pass a fresh assessment order within six weeks from receipt of the copy of this order. The direction balances procedural regularity in service of notices on the Portal with the need to secure interim compliance by conditioning the remand on a part deposit of the disputed demand. [Paras 9, 11, 12]

Impugned order quashed; petitioner to remit 10% of disputed tax demand for 2017-2018 within four weeks; on compliance Assessing Officer to afford opportunity and pass fresh assessment order within six weeks.

Final Conclusion: Writ petition allowed by quashing the assessment order dated 21.11.2023; matter remitted to the Assessing Officer for fresh consideration after the petitioner deposits 10% of the disputed demand for 2017-2018 within four weeks, with the Assessing Officer to pass a fresh order within six weeks after affording a reasonable opportunity of hearing.

Blocking and unblocking of electronic credit ledger (ITC) - system-generated GSTR-3A notice for non-filing of GSTR-3B - notice to return defaulter under Section 46 - liability arising from adjudication order and obligation to deposit tax, interest and penalty

Blocking and unblocking of electronic credit ledger (ITC) - system-generated GSTR-3A notice for non-filing of GSTR-3B - Whether the grievance of the petitioner regarding blockage of its electronic credit ledger had been redressed making the writ petition infructuous. - HELD THAT: - The petitioner filed a supplementary affidavit enclosing certain GST returns for the tax period 2020-21 till 2023-24 and proof of payments. The Superintendent, CGST, Agartala communicated that unblocking of the blocked ITC had been initiated and was in progress in the system, and that the GSTR-3A notices for Jan-24 and Feb-24 were system-generated. In view of these developments, the court concluded that the immediate grievance concerning the blocked electronic credit ledger had been addressed.

Petition rendered infructuous as relief sought on blocked ITC has been redressed; writ petition disposed of on that basis.

Notice to return defaulter under Section 46 - liability arising from adjudication order and obligation to deposit tax, interest and penalty - Whether the petitioner remains liable to pay amounts confirmed in the adjudication order despite unblocking of ITC. - HELD THAT: - The communication from the Superintendent recorded that the adjudication order (order-in-original) confirmed the petitioner's liability to pay tax, interest and penalty. The Revenue informed the court that unblocking would be pursued subject to the petitioner discharging the outstanding dues as confirmed by the adjudication. The petitioner's counsel accepted that the petitioner would be advised to make payment of outstanding dues, if any, resulting from the adjudication proceeding. The court therefore noted that while the ITC blockage issue was being remedied, the underlying liability confirmed by the adjudication remained and required compliance.

Petitioner remains liable to pay or remit outstanding tax, interest and penalty as confirmed by the adjudication order; compliance is not negated by unblocking of ITC.

Final Conclusion: Having regard to the respondent's communication that unblocking of the electronic credit ledger has been initiated and the petitioner's position on payment of any outstanding dues, the court disposed of the writ petition as infructuous while observing that liability under the adjudication order remains payable.

Quashing and remand for fresh adjudication - deposit as condition for grant of relief - classification of goods for GST - show cause notice and opportunity of personal hearing - requirement to produce samples and technical literature - fresh adjudication de novo

Classification of goods for GST - quashing and remand for fresh adjudication - deposit as condition for grant of relief - requirement to produce samples and technical literature - fresh adjudication de novo - Impugned order confirming tax, interest and penalty was quashed and the matter remanded for fresh consideration of classification and tax liability subject to conditions. - HELD THAT: - The High Court found that the petitioner's undated reply did not address the allegations in the show cause notices and that no samples or technical material were placed before the assessing officer. Noting the contested question of correct classification of the product (whether the manufactured item is a taxable coir product), the Court set aside the impugned order dated 30.12.2023 and directed conditional relief. The petitioner is directed to deposit 10% of the disputed tax with the third respondent within 30 days of receipt of this order, to file a detailed reply to the impugned order enclosing technical literature and to produce product samples before the third respondent. The impugned order is quashed and shall be treated as a corrigendum to the earlier notices. Thereafter the third respondent is directed to hear the petitioner and pass a fresh order de novo on merits and in accordance with law, preferably within 45 days of compliance by the petitioner. The directions leave open reassessment of the tax, interest and penalty on the basis of evidence and correct classification.

Writ petition allowed; impugned order quashed and remanded for fresh adjudication on classification and tax liability subject to deposit of 10% of disputed tax and furnishing of technical literature and samples, with fresh order to be passed de novo.

Final Conclusion: The Writ Petition is allowed. The impugned order is quashed and remanded for fresh adjudication on merits after the petitioner deposits 10% of the disputed tax within 30 days and files detailed technical material and samples; the assessing officer shall hear the petitioner and pass a fresh order de novo preferably within 45 days thereafter.

Appeal under section 112 of the CGST/OGST Act - Non-constitution of the Appellate Tribunal under section 109 - Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 - Clarification by CBIC Circular No.132/2/2020-GST - Stay under sub-section (9) of section 112 - Deposit requirement under sub-section (6) of section 107 - Commencement of limitation from date President/State President of Tribunal enters office

Appeal under section 112 of the CGST/OGST Act - Non-constitution of the Appellate Tribunal under section 109 - Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 - Clarification by CBIC Circular No.132/2/2020-GST - Stay under sub-section (9) of section 112 - Petitioner entitled to statutory stay under sub-section (9) of section 112 owing to non-constitution of the Appellate Tribunal. - HELD THAT: - The court recognised that the impugned order is appealable under section 112 but that the Appellate Tribunal has not been constituted as required by section 109, thereby depriving the petitioner of the statutory appellate remedy. Having regard to the Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 and the subsequent CBIC clarification, the court held that the petitioner cannot be denied the benefit of stay attributable to the non-constitution of the Tribunal and directed grant of the statutory stay under sub-section (9) of section 112, subject to the specified deposit condition.

Statutory stay under sub-section (9) of section 112 granted to the petitioner, subject to conditions.

Deposit requirement under sub-section (6) of section 107 - Stay under sub-section (9) of section 112 - Stay conditioned on deposit equal to 20% of the remaining amount of tax in dispute (in addition to any earlier deposit under sub-section (6) of section 107). - HELD THAT: - To secure the benefit of the stay, the court required verification that the petitioner has deposited a sum equal to 20% of the remaining disputed tax or directed deposit of the same if not already made, in addition to any earlier deposit under sub-section (6) of section 107. This condition was applied to balance equities while extending relief occasioned by the respondents' failure to constitute the Tribunal.

Stay extended on condition of deposit equal to 20% of the remaining tax in dispute (or verification of such deposit).

Commencement of limitation from date President/State President of Tribunal enters office - Appeal under section 112 of the CGST/OGST Act - Petitioner required to file appeal under section 112 once the Tribunal is constituted and the President/State President enters office; failure to file will permit respondents to proceed. - HELD THAT: - Relying on the Removal of Difficulties Order and the CBIC circular, the court directed that the petitioner must present/file the appeal under section 112 when the Appellate Tribunal is constituted and the President or State President assumes office, with the statutory time limits counted from that date. The court emphasised that the stay granted is not open-ended and that if the petitioner elects not to file the appeal within the period specified upon constitution of the Tribunal, the respondent authorities are free to resume proceedings in accordance with law.

Petitioner to file appeal after constitution of Tribunal and the President/State President entering office; absence of such filing permits respondents to proceed.

Final Conclusion: Writ petition disposed by granting the petitioner the benefit of stay under sub-section (9) of section 112 (subject to verification/deposit of 20% of the remaining disputed tax and earlier deposits), with directions that the appeal under section 112 be filed once the Appellate Tribunal is constituted and its President/State President enters office, and that failure to file the appeal within the period specified then will enable the respondents to proceed in accordance with law.

Remand for fresh adjudication - failure to consider input tax credit of IGST - transactions with Special Economic Zone Unit - order under Section 73 of the WBGST Act, 2017 set aside - requirement to pass a reasoned order in terms of Section 75(4)

Failure to consider input tax credit of IGST - transactions with Special Economic Zone Unit - remand for fresh adjudication - Whether the order passed under Section 73 should be sustained in light of the petitioners' claim of IGST credit on imports from an SEZ unit - HELD THAT: - The petitioners asserted that during financial year 2018-19 they imported goods under bill of entry from ONGC Petro Additions Limited, a Special Economic Zone Unit, and had paid IGST and taken corresponding input tax credit; consequently they contended they were not liable to pay CGST/WBGST. The learned Single Judge noted that the proper officer had overlooked the petitioners' disclosure and the fact of IGST payment and credit, and that a press release of the Ministry of Finance had not been taken into account. Having regard to those omissions and to the respondents' concession that the matter required further consideration, the Court found that the order under Section 73 could not be sustained without re-examination of these factual and legal aspects and therefore remanded the matter to the proper officer for re-adjudication. [Paras 9]

The order dated 15th March 2024 under Section 73 is set aside and the matter is remanded to the proper officer for re-adjudication of the claim of IGST credit in respect of imports from the SEZ unit.

Requirement to pass a reasoned order in terms of Section 75(4) - remand for fresh adjudication - Procedural directions to the proper officer on completion of re-adjudication and hearing - HELD THAT: - The Court declined to decide the merits and directed that the proper officer may proceed with the show cause notice dated 27th December 2023, but must give the petitioners an opportunity of personal hearing and pass a reasoned order in accordance with Section 75(4) of the WBGST Act. A time-limit of six weeks from the date of the order was imposed for concluding the adjudication. The directions preserve the petitioners' procedural rights and ensure that the officer addresses the previously overlooked disclosures in a reasoned manner. [Paras 11, 12]

The proper officer is permitted to proceed with the show cause notice and is directed to conclude the adjudication after personal hearing by passing a reasoned order under Section 75(4) within six weeks.

Final Conclusion: The High Court set aside the order dated 15th March 2024 under Section 73 of the WBGST Act, remanded the matter for fresh adjudication on the petitioners' claim of IGST credit arising from imports from an SEZ unit for financial year 2018-19, and directed the proper officer to afford personal hearing and pass a reasoned order in terms of Section 75(4) within six weeks; the merits were not decided.

Deposit of disputed tax pending appeal under Section 107(6)(b) of the Uttarakhand Goods and Services Tax, 2017 - calculation of deposit based on disputed tax excluding penalty and interest - stay of operation of impugned order

Deposit of disputed tax pending appeal under Section 107(6)(b) of the Uttarakhand Goods and Services Tax, 2017 - calculation of deposit based on disputed tax excluding penalty and interest - stay of operation of impugned order - Direction to deposit before the Proper Officer modified to 10% of the disputed tax amount and operation of the impugned order stayed. - HELD THAT: - The Court noted that the assessed tax demand is Rs. 1,99,58,792/-, while penalty and interest raise the aggregate to about Rupees Six Crores. Applying the scheme of Section 107(6)(b) of the Uttarakhand GST, 2017, the Court held that where the amount of tax is disputed, the statutory obligation is to deposit 10% of the disputed tax amount before the appellate authority. On that basis the impugned direction to deposit a larger sum is modified so that the appellant is required to deposit only 10% of the tax demand (i.e., the disputed tax amount) before the Proper Officer. Pending compliance, the operation of the impugned order is stayed. [Paras 4, 5]

Impugned order modified: appellant to deposit 10% of the disputed tax amount before the Proper Officer; operation of the impugned order stayed.

Final Conclusion: Special Appeal disposed of by modifying the deposit direction to 10% of the disputed tax amount and staying the operation of the impugned order; connected applications disposed of.

Levy of penalty under Section 129(3) for non-filling of Part B of e way bill - Requirement of intention to evade tax for imposition of penalty - Non filling of Part B of e way bill as technical error - Invoice containing vehicle details as compliance mitigating penalty

Levy of penalty under Section 129(3) for non-filling of Part B of e way bill - Requirement of intention to evade tax for imposition of penalty - Non filling of Part B of e way bill as technical error - Invoice containing vehicle details as compliance mitigating penalty - Penalty imposed for non filling of Part B of the e way bill was not sustainable where the omission was a technical error and there was no proof of intention to evade tax. - HELD THAT: - The Court accepted the petitioner's submission that the non filling of Part B of the e way bill was a technical omission and that the invoice itself contained the vehicle details. The decision in Writ Tax No.937 of 2022 (M/s Roli Enterprises vs. State of U.P. and others) holding that mere non filling of Part B, absent any proof of intention to evade tax, does not warrant imposition of penalty was applied. On the facts of the present case, where the error was technical and there was no evidence of mens rea to evade tax, there was no requirement to levy penalty under the statutory provision relied upon by the authorities. [Paras 4, 6, 7]

Orders imposing penalty for non filling of Part B of the e way bill quashed as the omission was technical and there was no intention to evade tax.

Final Conclusion: The orders dated 22.5.2023 and 29.2.2024 imposing penalty are quashed and set aside; the writ petition is allowed and consequential reliefs shall follow.

Availability of efficacious alternative remedy - writ petition not maintainable where alternative remedy exists - appeal under Section 107 of the West Bengal Goods and Services Tax Act, 2017 - condonation of delay by Appellate Authority

Availability of efficacious alternative remedy - writ petition not maintainable where alternative remedy exists - appeal under Section 107 of the West Bengal Goods and Services Tax Act, 2017 - Writ petition challenging order passed under Section 129(3) of the West Bengal GST Act, 2017 not maintainable in view of the statutory appeal remedy. - HELD THAT: - The Court observed that the State GST Authorities correctly pointed out the existence of an appeal mechanism under Section 107 of the West Bengal Goods and Services Tax Act, 2017. Applying the settled principle that a writ petition should not be entertained where an efficacious and speedy statutory alternative remedy is available, the Court declined to adjudicate the writ petition on merits and granted leave to the petitioner to institute the statutory appeal. The disposal thus directs the petitioner to pursue the remedy provided by the Act rather than maintain the writ proceeding in this Court at this stage. [Paras 2, 3, 4]

Writ petition disposed of; petitioner granted leave to prefer appeal under Section 107 of the West Bengal Goods and Services Tax Act, 2017.

Condonation of delay by Appellate Authority - Application for condonation of delay in preferring the statutory appeal remitted to the Appellate Authority for consideration. - HELD THAT: - The Court did not decide the merits of any application for condonation of delay. It directed that if the petitioner files the appeal beyond the prescribed limitation, the Appellate Authority shall consider any application for condonation of delay filed along with the appeal, taking note of the Division Bench order in MAT 81 of 2022 (S. K. Chakraborty & Sons -vs- Union of India & Ors.). The adjudicatory determination on condonation is thus left to the Appellate Authority for fresh consideration. [Paras 5]

Appellate Authority to consider any condonation application filed with the appeal, guided by the referenced Division Bench order.

Final Conclusion: The writ petition challenging the order under Section 129(3) of the West Bengal GST Act, 2017 is disposed of on the ground of availability of an alternative statutory appeal; the petitioner is permitted to prefer an appeal under Section 107, and any application for condonation of delay is remitted to the Appellate Authority for consideration.

Challenge to show cause notice - reverse charge mechanism - seigniorage - adjudication kept in abeyance pending decision of the Nine Judge Constitution Bench - no recovery of tax until higher forum decides - opportunity of being heard before adjudication - challenge to notification and circular may be pursued after final decision

Challenge to show cause notice - reverse charge mechanism - seigniorage - adjudication kept in abeyance pending decision of the Nine Judge Constitution Bench - no recovery of tax until higher forum decides - opportunity of being heard before adjudication - challenge to notification and circular may be pursued after final decision - Disposal of the writ petition challenging issuance of Form ASMT-10 requiring GST under reverse charge on seigniorage paid to the Government, by applying the directions issued in A. Venkatachalam v. Assistant Commissioner. - HELD THAT: - The High Court disposed the petition by following the directions recorded in paragraph 9 of A. Venkatachalam. The petitioners are to submit objections/representations within four weeks of receipt of a copy of this order. On receipt, the authority shall proceed to adjudicate the objections on merits and in accordance with law after affording a reasonable opportunity of being heard, but any orders of adjudication shall be kept in abeyance until the Nine Judge Constitution Bench decides the issue regarding the nature of royalty. Meanwhile, there shall be no recovery of GST on royalty/seigniorage until the Nine Judge Constitution Bench delivers its decision. Challenges to the notification and circular remain available to the petitioners to be pursued after the outcome of the Nine Judge Bench, and all contentions are left open for appropriate proceedings, including appeals.

Writ petition disposed in terms of the directions in paragraph 9 of A. Venkatachalam; objections to be filed within four weeks; adjudication to proceed but orders kept in abeyance pending the Nine Judge Constitution Bench decision; no recovery in the interim; other remedies preserved.

Final Conclusion: The petition is disposed of by applying the directions in A. Venkatachalam: objections to be filed, adjudication to follow with hearing but held in abeyance until the Nine Judge Constitution Bench decides the nature of royalty, no interim recovery of GST, and other remedies preserved; no costs.

Levy of interest under Section 50 - Adjudication under Section 73 - Automatic liability and arithmetic quantification of interest - Requirement of adjudication before coercive recovery where liability/quantum is disputed - Binding precedent of coordinate Benches

Levy of interest under Section 50 - Requirement of adjudication before coercive recovery - Automatic liability and arithmetic quantification of interest - Legality of raising demand for interest without initiating adjudication proceedings where liability or quantum is disputed - HELD THAT: - The Court held that although liability to pay interest under Section 50 arises by operation of law, quantification of that liability cannot be unilaterally determined and communicated to the assessee where the assessee disputes the liability or its computation. Relying on earlier coordinate Bench decisions and the principle that a Bench of co equal strength should follow such decisions, the Court observed that initiation of recovery or coercive steps without adjudication under Section 73/74 is impermissible when the liability or quantum is contested. The Court noted the distinction between the automatic nature of the interest obligation and the need for an arithmetic exercise to quantify interest after considering objections of the assessee, and applied that reasoning to the facts of the case. [Paras 15]

Demand for interest cannot be validly raised and enforced without initiating adjudication where the liability/quantum is disputed; adjudication is required before coercive recovery.

Adjudication under Section 73 - Requirement of adjudication before coercive recovery - Binding precedent of coordinate Benches - Validity of Form GST DRC-07 dated 4.1.2021, the appellate order dated 28.12.2022 and the summary of demand in FORM GST APL-04 dated 11.2.2023 - HELD THAT: - Applying the legal principle that adjudication must precede coercive recovery where liability/quantum is disputed and following coordinate Bench precedents, the High Court found that the impugned DRC-07, the subsequent appellate order and the summary demand were issued without requisite adjudication. Consequently, those orders were quashed. The Court, however, left the department free to initiate adjudication proceedings afresh in accordance with law if so advised. [Paras 17]

DRC-07, the appellate order and the summary demand are set aside; liberty granted to the department to initiate adjudication proceedings in accordance with law.

Final Conclusion: Writ petitions allowed; impugned demand/order and appellate confirmation set aside for want of adjudication, with liberty to the revenue to initiate appropriate adjudication proceedings in accordance with law.

Requirement of personal hearing under Section 144B(6)(vii) and (viii) - ex parte assessment - show-cause notice - rules of natural justice / right to be heard - assessment after reasonable opportunity to present case - consequence of amendment to Section 251 on appellate remit powers

Requirement of personal hearing under Section 144B(6)(vii) and (viii) - rules of natural justice / right to be heard - assessment after reasonable opportunity to present case - Assessing Officer's obligation to provide personal hearing under Section 144B(6)(vii) and (viii) where a show-cause notice has been issued - HELD THAT: - The Court held that Section 144B(6)(vii) and (viii) mandates that opportunity of hearing must be given upon issuance of a show-cause notice and that a specific request by the assessee for personal hearing does not exhaustively define the circumstances in which personal hearing must be granted. The statutory word "request" cannot be read to mean that personal hearing is to be granted only when expressly sought in writing; rather, personal hearing is the rule and its waiver by the assessee is the exception. Written replies may suffice where the Assessing Officer accepts the explanation, but where the Assessing Officer's tentative opinion remains adverse after reading the reply, he must fix and communicate a date for personal hearing with reasonable notice (electronic communication being permissible). The Court emphasised that assessment proceedings frequently involve contested questions of fact and law which cannot be reliably resolved on ex parte reading of written submissions; oral hearing is necessary to enable effective discussion, to record reasons dealing with the assessee's explanations and to preserve fairness and confidence in adjudication. [Paras 5, 6, 7, 8, 11]

Personal hearing is generally required under Section 144B(6)(vii) and (viii); absence of an express written request does not absolve the Assessing Officer from providing personal hearing where the tentative view remains adverse after considering written submissions.

Ex parte assessment - show-cause notice - consequence of amendment to Section 251 on appellate remit powers - Validity of the ex parte assessment order dated 23.03.2024 and appropriate remedial direction - HELD THAT: - Applying the above principle to the facts, the Court found the impugned order to be vitiated by denial of a real opportunity of hearing: the show-cause notice was issued on 11.03.2024 with an initial short date, adjournment was sought and a subsequent date fixed fell on a Sunday, and no adequate hearing was afforded before finalisation on 23.03.2024. Given the denial of natural justice and in view of the amendment to Section 251 (which curtails the first appellate authority's power to remit matters), relegating the petitioner to the appellate forum would unfairly force the appellate authority to perform the Assessing Officer's function. Consequently the Court set aside the assessment order, directed that the order dated 23.03.2024 be treated as a final show-cause notice, and ordained that the assessee may file a written reply within the specified short period. If the Assessing Officer accepts the reply wholly he may pass consequential order without further hearing; if he proposes to reject it he must fix a hearing date with at least fifteen days' notice communicated by prescribed mode, after which the assessee shall appear and the assessment be completed in accordance with law. [Paras 12, 13]

The ex parte assessment order dated 23.03.2024 is set aside; the order is to be treated as a final show-cause notice, the assessee afforded a short time to file reply, and fresh proceedings conducted with mandated notice of personal hearing where the Assessing Officer intends to reject the reply.

Final Conclusion: Petition allowed; impugned ex parte assessment order dated 23.03.2024 set aside with directions for fresh consideration in accordance with the requirement of personal hearing under Section 144B(6)(vii) and (viii), and for the petitioner to file reply within the time directed; no order as to costs.

Unexplained cash credit under section 68 - creditworthiness and identity of lenders - burden of proof for additions under section 68 - disallowance of interest as business expenditure under section 37

Unexplained cash credit under section 68 - creditworthiness and identity of lenders - burden of proof for additions under section 68 - Addition of Rs. 30,00,000 treated as unexplained cash credit and added to the assessee's income - HELD THAT: - The Tribunal examined the materials placed on record by the assessee and the lenders, including loan confirmation letters signed by the lenders, bank statements of the lenders showing the amounts advanced, ITR acknowledgements, and the lenders' balance sheet / P&L where relevant. Statements of the lenders recorded under section 133(6) were also on record admitting the advances and explaining sources as professional income, salary and past savings. The AO did not bring any contrary material on record nor undertake enquiries or investigations to disprove the documents and the lenders' statements, and his conclusion of lack of creditworthiness was therefore based on surmise. Applying the principle that an addition under unexplained cash credit under section 68 cannot stand where the assessee places credible contemporaneous evidence proving identity, genuineness and source of funds and the revenue fails to rebut it, the Tribunal found no justification for sustaining the addition. [Paras 7]

Addition of Rs. 30,00,000 treated as unexplained cash credit is deleted.

Disallowance of interest as business expenditure under section 37 - burden of proof for additions under section 68 - Disallowance of interest expense of Rs. 3,56,122 made on account of the above loans - HELD THAT: - The disallowance was founded on the AO's view that the underlying loans were not genuine. Given the Tribunal's finding that the loans were proved genuine by the assessee through lenders' confirmations, bank statements and ITRs, and that the AO failed to produce contrary material or carry out enquiries to disprove the transactions, the basis for disallowing interest as not being allowable business expenditure under section 37 falls away. The interest disallowance was therefore unsustainable in the absence of any independent finding or evidence to discredit the lenders' documentation and admissions. [Paras 7]

Disallowance of interest expense of Rs. 3,56,122 is deleted.

Final Conclusion: The appeal is allowed: the Tribunal deleted the addition of Rs. 30,00,000 treated as unexplained cash credit and the related disallowance of interest of Rs. 3,56,122 for A.Y. 2019-20, since the assessee and lenders produced contemporaneous evidence proving identity, genuineness and source and the revenue failed to rebut that evidence.

Treatment of cash deposits as unexplained income under section 69A read with section 115BBE - rejection of books of account as prerequisite for estimation of income - acceptance of books and vouchers precludes treating cash sales as unexplained - estimation of income on conjecture or comparison charts without pointing out defects in books - principle in Mehta Parikh that accounts accepted by authorities cannot be bypassed

Treatment of cash deposits as unexplained income under section 69A read with section 115BBE - rejection of books of account as prerequisite for estimation of income - acceptance of books and vouchers precludes treating cash sales as unexplained - Whether cash deposits/cash sales of the assessee could be treated as unexplained income when books of account, vouchers, registers and related records were produced and not rejected or found defective by the assessing authorities. - HELD THAT: - The Tribunal found that the assessee produced complete books of account, cash sales vouchers, cash book, sales and purchase registers, stock register, audited balance sheet and VAT returns before the Assessing Officer, none of which were rejected or shown to suffer any defect. The Assessing Officer accepted corresponding entries in the sales book and cash book and the VAT authorities accepted the sales as per books. The Assessing Officer made additions by preparing a comparative chart and estimating unexplained cash, and the CIT(A) confirmed part of that estimate; however neither authority pointed to any specific lacuna, discrepancy or infirmity in the vouchers or books to justify rejection or estimation. Relying on the established principle that accounts accepted by authorities cannot be bypassed and that estimation of income on conjecture is impermissible without rejecting the books, the Tribunal held that additions made on the basis of comparison/estimation in the absence of any pointed-out defects in the books were unjustified. The Tribunal referred to the decision in Mehta Parikh and related authorities to reinforce that cash deposits/sales cannot be treated as unexplained investment where books and vouchers remain unchallenged, and consequently allowed the appeal. [Paras 6, 7, 8]

Addition of cash deposits/cash sales treated as unexplained income was set aside and the appeal was allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that in the absence of any rejection or demonstrable defect in the books of account or vouchers, the Assessing Officer and CIT(A) were not justified in treating the cash deposits/cash sales as unexplained income and making additions by estimation.

Requirement that penalty notice specify the limb of Section 271(1)(c) - Distinction between concealment of income and furnishing inaccurate particulars - Penal consequences and pecuniary burden flowing from classification under Section 271(1)(c) - Assessment order and notice must indicate basis for initiating penalty proceedings

Requirement that penalty notice specify the limb of Section 271(1)(c) - Distinction between concealment of income and furnishing inaccurate particulars - Assessment order and notice must indicate basis for initiating penalty proceedings - Whether the failure of the Assessing Officer to indicate in the notice or assessment order which limb of Section 271(1)(c) was being invoked renders the penalty proceedings liable to be quashed and justifies the Tribunal's remand. - HELD THAT: - The Court affirmed the reasoning of the Tribunal and earlier Division Bench authorities that penalty proceedings under Section 271(1)(c) have civil and pecuniary consequences and therefore the assessee is entitled to know clearly which limb of the provision (concealment of income or furnishing inaccurate particulars, or both) is alleged. The assessment order and the show-cause notice must reflect the AO's application of mind and indicate broadly the limb under which penalty is triggered because the quantum or nature of the pecuniary burden may differ depending on whether concealment or inaccurate particulars (or both) are alleged. The Court relied on and reproduced earlier decisions (including Unitech Reliable Projects Pvt. Ltd. and Manjunatha Cotton & Ginning Factory as affirmed by the Supreme Court) which hold that omission to specify the relevant limb renders the notice/penalty proceedings vulnerable, and that the Tribunal was correct to remand the matter for re-examination by the Assessing Officer. Having found that the assessment order and notice in the present case did not indicate which limb was attracted, the Court found no justification to interfere with the impugned order and declined to entertain the appeal.

Appeal dismissed; Tribunal's remand upheld because the AO did not indicate which limb of Section 271(1)(c) was invoked and clarity in the notice/assessment order is necessary.

Final Conclusion: The appeal is dismissed and the Tribunal's order remanding the matter to the Assessing Officer is upheld on the ground that the notice/assessment order failed to specify which limb of Section 271(1)(c) was invoked; accordingly, the matter requires re-examination by the AO and the appeal cannot be entertained.

Assumption of jurisdiction under Section 153C - documents 'belonging to' an assessee - 'pertain to' test in Section 153C - initiation of proceedings under Section 153A/153C - factual sufficiency of seized material

Assumption of jurisdiction under Section 153C - documents 'belonging to' an assessee - 'pertain to' test in Section 153C - factual sufficiency of seized material - Validity of proceedings initiated under Section 153C read with Section 153A based on seized documents - HELD THAT: - The Court accepted the ITAT's factual finding that the seized material had no cogent connection with the respondent/assessee. The ITAT observed that the agreement relied upon was unsigned, did not bear the company's name, and the receipts and cheques relied upon were not reflected in the registered sale deed executed by the assessee; further, there was no material to support the Assessing Officer's conclusion that the director was acting on behalf of the company at the relevant time. Although Section 153C was amended by the Finance Act, 2015 to introduce the concept of documents that "pertain to" a person, the High Court held that the ITAT's conclusion - that the seized documents lacked any correlation with the assessee - is a factual finding which would not be upset whether tested against the pre-amendment "belonging to" formulation or the post amendment "pertain to" formulation. On that basis the Assessing Officer was held not justified in initiating proceedings under Section 153C read with Section 153A. [Paras 4, 5]

Proceedings under Section 153C read with Section 153A initiated on the basis of the seized documents were not legally sustainable and the ITAT's view upholding cancellation of the assessment is not interfered with.

Initiation of proceedings under Section 153A/153C - deletion of addition on account of undisclosed investment - Validity of deletion of the addition made by the Assessing Officer for undisclosed investment - HELD THAT: - The High Court, having endorsed the ITAT's finding that the seized documents did not belong to or pertain to the assessee in a manner sufficient to sustain proceedings under Section 153C, treated the ITAT's consequential cancellation of the assessments and deletion of the addition for undisclosed investment as justified. The Court found no substantial question of law warranting interference with the ITAT's appellate conclusion. [Paras 4, 5]

The deletion of the addition made by the Assessing Officer is sustained as part of the cancellation of assessments under Section 153C/153A.

Final Conclusion: The appeal is dismissed; the High Court concurs with the ITAT's factual conclusion that the seized material had no sufficient nexus with the assessee and therefore the proceedings initiated under Section 153C read with Section 153A, and the consequent additions, cannot be sustained.

Reopening of assessment and validity of notice u/s 148 - service by affixture under Order V Rule 17 CPC - requirement of independent local witness for affixture - procedural compliance under section 282 CPC - void ab initio for invalid service

Reopening of assessment and validity of notice u/s 148 - service by affixture under Order V Rule 17 CPC - requirement of independent local witness for affixture - void ab initio for invalid service - Whether the notice under section 148 was validly issued and served and whether the assessment framed thereon is vitiated for non-compliance with the procedure for affixture under Order V Rule 17 CPC and section 282 CPC. - HELD THAT: - The Tribunal examined the notice dated 27.03.2017 and the assessment record and found a material discrepancy between the date on the notice and the dates stated to have been issued and served by the Assessing Officer, observing that it is improbable that a notice dated 27.03.2017 could have been issued on 15.03.2017 and served on 20.03.2017 (paras 4-5). The affixture report produced on record showed that the notice was purportedly affixed and witnessed by departmental staff (TA and Inspector) and not by independent local persons required by Rule 17 of Order V of the Code of Civil Procedure or section 282 CPC; there was no evidence that any local person identified the place as belonging to the assessee (para 6). Relying on precedent of the jurisdictional High Court and coordinate Tribunal decisions, the Bench held that such defects constitute a flagrant violation of the prescribed procedure for service by affixture and that the statutory requisites for valid service were not fulfilled (paras 7-9). On these determinative findings of invalid service and procedural non-compliance, the Tribunal concluded that the reopening and the resultant assessment were invalid and void ab initio (para 10). [Paras 5, 6, 7, 9, 10]

Notice under section 148 was not validly served by affixture in accordance with Order V Rule 17 CPC and section 282 CPC; reopening and assessment are quashed as void ab initio.

Final Conclusion: The appeal is allowed: the notice under section 148 was held invalid for defective affixture and non-compliance with the procedural requirements, and the assessment for AY 2010-11 is quashed as void ab initio.

Treatment of unexplained credits under Section 68 of the Income Tax Act, 1961 - onus of proof as to identity, genuineness and creditworthiness of lenders - prima facie evidence furnished by banking channel transactions - requirement of adequate enquiry by Assessing Officer before treating credits as bogus - deletion of additions in absence of material to show creditors are shell or entry operators

Treatment of unexplained credits under Section 68 of the Income Tax Act, 1961 - prima facie evidence furnished by banking channel transactions - Validity of deletion of additions made by the Assessing Officer treating unsecured loans as unexplained credits under Section 68 - HELD THAT: - The Tribunal recorded that the assessee produced loan confirmations, certificates of incorporation, PAN details, copies of ITRs, balance-sheets, profit & loss accounts and bank statements of the creditor companies; confirmations under statutory notice were received from three creditors and the bank statements showed transfers to the assessee on the date of disbursement. The Tribunal found the loans were interest-bearing and interest was reflected in the creditors' ITRs. In the absence of any finding of cash deposits into the creditors' bank accounts prior to disbursement, and where no adverse material established that the creditors were non-existent or mere entry operators, the presence of banking channel credits furnished prima facie evidence of genuineness. On these findings, the Tribunal concluded that the CIT(A) rightly deleted the additions. The High Court, on review of the material relied upon by the Tribunal, found no error in that conclusion and declined to interfere. [Paras 5, 8]

Tribunal's deletion of the additions under Section 68 upheld.

Onus of proof as to identity, genuineness and creditworthiness of lenders - requirement of adequate enquiry by Assessing Officer before treating credits as bogus - deletion of additions in absence of material to show creditors are shell or entry operators - Whether the Assessing Officer conducted adequate enquiry and discharged the burden of proving that the loans were bogus or routed funds - HELD THAT: - The Tribunal noted that where the AO has no positive finding on cash deposits into the creditors' accounts, no adverse finding as to identity or existence of the creditors, and where documentary and bank evidence was placed on record, the AO's suspicion-based on common directors and intra-group fund movements-was insufficient to establish that the creditors were shell companies or that funds were routed by the assessee. The High Court endorsed this assessment, observing that the AO failed to establish that the money did not belong to the creditors and that necessary enquiries to displace the documentary and banking evidence were not made. Consequently, the Tribunal's finding that the AO's adverse observations were unfounded was sustained. [Paras 5, 6, 7]

Findings that the Assessing Officer did not conduct adequate enquiry and that there was no material to treat the creditors as shell entities sustained.

Final Conclusion: The appeal is dismissed; the Tribunal's factual and legal conclusions upholding deletion of additions under Section 68, based on documentary and banking evidence and absence of adequate adverse findings by the Assessing Officer, are affirmed.

Dismissal for non-prosecution - ex parte adjudication - opportunity of hearing / principle of natural justice - duty of appellate authority under Sub section (6) of Section 250 - remand for fresh adjudication

Dismissal for non-prosecution - ex parte adjudication - duty of appellate authority under Sub section (6) of Section 250 - opportunity of hearing / principle of natural justice - Validity of the CIT(A)'s order dismissing the appeal on account of non appearance without deciding the appeal on merits - HELD THAT: - The Tribunal examined the CIT(A) order which dismissed the appeal for non prosecution and found that the CIT(A) had passed an ex parte order without deciding the issues on merits. Sub section (6) of Section 250 requires the CIT(A) to state the points in dispute and assign reasons in support of its conclusion. The Tribunal held that dismissing the appeal without considering the merits and without affording appropriate opportunity contrary to the principles of natural justice and the statutory mandate under Section 250(6) was not permissible. Consequently, the CIT(A) order was set aside and the matter restored to the file of the CIT(A) for fresh adjudication after granting sufficient opportunity to the assessee and after the assessee furnishes the details called for by the lower authorities. The Tribunal did not decide the merits of the additions and directed reconsideration in accordance with law. [Paras 7, 8]

Impugned CIT(A) order set aside; matter restored to CIT(A) for re adjudication after granting adequate opportunity and directing assessee to furnish required details.

Remand for fresh adjudication - opportunity of hearing / principle of natural justice - Adjudication of the merits of additions made by AO remitted to CIT(A) for fresh consideration - HELD THAT: - The Tribunal expressly refrained from adjudicating the substantive grounds raised by the assessee against the additions made in the assessment order. Those grounds were not decided on merits; instead the Tribunal restored the matter to the CIT(A) so that the CIT(A) may re consider the issues on merits after providing the assessee sufficient opportunity of hearing and after considering any details the assessee files. The remand contemplates fresh adjudication by the CIT(A) in accordance with the statutory requirements and principles of natural justice. [Paras 7]

Substantive issues relating to the additions remitted to CIT(A) for fresh adjudication afresh after affording opportunity to the assessee.

Final Conclusion: The Tribunal set aside the CIT(A)'s ex parte dismissal for non prosecution for failure to comply with Section 250(6) and natural justice, restored the matter to the CIT(A) for fresh adjudication after affording the assessee adequate opportunity and directed the assessee to furnish the requisite details; the Tribunal did not decide the merits of the additions.

Assessment in name of deceased without substitution of legal heir is invalid - requirement of correct jurisdictional notice - participation of legal heir in proceedings does not confer jurisdiction or cure defect - quashing of assessment where assessing officer proceeds against a non-existent person

Assessment in name of deceased without substitution of legal heir is invalid - requirement of correct jurisdictional notice - participation of legal heir in proceedings does not confer jurisdiction or cure defect - Validity of assessment and demand framed in the name of a deceased assessee despite legal heir being on record - HELD THAT: - The legal heir informed the Assessing Officer of the death and furnished the death certificate and subsequently participated in the assessment proceedings by filing replies. Notwithstanding this, the Assessing Officer framed the assessment order and issued the demand notice in the name of the deceased assessee. The Tribunal applied the settled principle that where the AO proceeds to make an assessment against a non-existent person without substituting the legal heir (or the proper person), the jurisdictional basis of the assessment is fundamentally flawed. The Tribunal relied on the ratio that a jurisdictional notice must be issued in the name of the correct legal entity and that participation by, or representation of, the successor cannot operate as an estoppel to validate proceedings that were jurisdictionally defective. The Tribunal noted and followed the ratio of the Supreme Court and coordinate decisions of the jurisdictional High Court which support quashing an assessment made in the name of a person who has ceased to exist, and therefore held the assessment to be invalid.

Assessment and demand framed in the name of the deceased are quashed; appeal allowed.

Final Conclusion: The assessment order and consequent demand issued in the name of the deceased assessee, made without substituting the legal heir despite notice of death and participation by the legal heir, are quashed and the appeal is allowed.

Presumptive taxation under section 44AD - benefit of presumptive scheme once nature of business is accepted - addition to income on unexplained bank deposits

Presumptive taxation under section 44AD - benefit of presumptive scheme once nature of business is accepted - addition to income on unexplained bank deposits - Whether the denial of benefit under the presumptive taxation scheme and sustaining of addition on account of alleged unexplained bank deposits was justified after the nature of the assessee's business (income by way of commission as a property dealer) had been accepted. - HELD THAT: - The Tribunal accepted the finding that the assessee's business was one of earning commission as a property dealer. Having accepted the nature of business and that income arises from commission, the Tribunal held that the assessee was entitled to claim the benefit of the presumptive taxation scheme under section 44AD. Once the scheme is invoked and the business character is recognised, the revenue cannot challenge the quantum of receipts and corresponding expenditures in a manner that defeats the statutory purpose of section 44AD. The learned CIT(A)'s decision to sustain the addition by re examining the receipts and expenditures, thereby denying the benefit of section 44AD, was therefore incorrect. For these reasons the addition on account of unexplained bank deposits was not sustainble where the presumptive regime applied and the business character was accepted. [Paras 4]

Denial of benefit under section 44AD was set aside; the addition made on account of unexplained bank deposits was not sustained and the appeal of the assessee is allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal, holding that once the nature of business as commission income was accepted, the assessee was entitled to the presumptive taxation benefit under section 44AD and the addition made by the Assessing Officer (and upheld by CIT(A)) on account of alleged unexplained bank deposits was set aside.

Reasonable opportunity of hearing - show-cause notice under Section 148A(b) of the Income Tax Act, 1961 - order under Section 148A(d) of the Income Tax Act, 1961 - vitiation of notice under Section 148 of the Income Tax Act, 1961 - remand for fresh consideration to comply with principles of natural justice

Reasonable opportunity of hearing - show-cause notice under Section 148A(b) of the Income Tax Act, 1961 - order under Section 148A(d) of the Income Tax Act, 1961 - Whether the short response period afforded to the petitioners in the show-cause notice vitiated the subsequent order under Section 148A(d) and the notice under Section 148. - HELD THAT: - The Court found that the show-cause notice dated 23rd March, 2024 afforded the petitioners only six days in total, of which there were only two working days to respond, and there was no communication extending time to upload the response despite a request for fifteen days. Applying the principle that an opportunity of hearing must be reasonable and not illusory (as elucidated by the Division Bench in Girdhar Gopal Dalmia), the Court held that the petitioners were denied a reasonable opportunity to respond. For these reasons the order passed under Section 148A(d) on 25th April, 2024 could not be sustained and the consequential notice under Section 148 was vitiated. [Paras 6, 8, 9]

Order dated 25th April, 2024 under Section 148A(d) set aside; consequential notice under Section 148 also set aside.

Remand for fresh consideration to comply with principles of natural justice - personal hearing through video conferencing - Relief and directions to be given following vitiation of the order and notice. - HELD THAT: - The Court directed that the petitioners be permitted to submit their reply within two weeks from receipt of the order and ordered the respondents to ensure the portal's 'submit response' tab is kept open to enable online filing. Upon receipt of the reply, the petitioners' authorised representative must be afforded a personal hearing by video conferencing and any documents produced shall be considered, after which the assessing authority shall pass a fresh order under clause (d) of Section 148A in accordance with law. These directions effect a remand for fresh consideration limited to providing a genuine opportunity to be heard and compliance with procedural fairness. [Paras 10, 11]

Matter remanded for fresh consideration with directions to accept reply within two weeks, keep portal open, grant personal hearing by video conferencing and pass a fresh order under Section 148A(d) in accordance with law.

Final Conclusion: The order under Section 148A(d) dated 25th April, 2024 and the consequential notice under Section 148 are set aside for failure to afford a reasonable opportunity to the petitioners; the matter is remanded with directions to permit filing of reply within two weeks, keep the portal open, grant a video-conference hearing and pass a fresh order in accordance with law.

Reopening of assessment - reason to believe - reassessment under section 147/148 - quashing of reassessment order

Reopening of assessment - reason to believe - reassessment under section 147/148 - quashing of reassessment order - Validity of the reassessment initiated under sections 147/148 in respect of the assessee's alleged escaped income from sale of immovable property - HELD THAT: - The Assessing Officer recorded reasons to believe that taxable income from sale of immovable property had escaped assessment and the NFAC's appellate order reproduced those reopening reasons, noting that "detailed verification as well as in-depth enquiry is needed for which the case is reopened." The Tribunal, applying the principles in PCIT vs. Manzil Dinesh Kumar Shah and PCIT vs. Maheswari Devi, held that reopening the assessment on the basis that further "detailed verification" or "in-depth enquiry" is required is not a sustainable ground for invoking sections 147/148. On that basis the reassessment/reopening was quashed. As the quashing was dispositive, remaining merits were rendered academic. [Paras 2, 3]

Impugned reopening/reassessment under sections 147/148 quashed; appeal allowed.

Final Conclusion: The Tribunal quashed the reassessment/reopening initiated under sections 147/148 for AY 2012-13 because reliance on the need for "detailed verification" or "in-depth enquiry" did not constitute a sustainable reason to believe; other issues were rendered academic and the appeal was allowed.

Taxability of income India - Royalty receipts - income earned from licensing/sale of software - subscription receipts against cloud services offered by the respondent/assessee - Tribunal has ruled that neither income earned from licensing/sale of software products nor subscription fee earned for providing cloud services, could be construed as royalty - revenue, says that the proposed questions are covered by the judgment of Engineering Analysis Centre of Excellence (P.) Ltd. [2021 (3) TMI 138 - SUPREME COURT] and a review petition has been filed which is pending consideration.

As decided by High Court [2023 (2) TMI 1303 - DELHI HIGH COURT] appeal is closed as no substantial question of law arises for our consideration

HELD THAT:- There is a delay of 337 days in filing the Special Leave Petition. The delay which has not been satisfactorily explained.

The Special Leave Petition is dismissed on the ground of limitation.

Classification of share application money as a loan or deposit - applicability of Section 269SS - applicability of Section 269T - penalty under Section 271D - penalty under Section 271E - definition in Explanation (iii) to Section 269T - object of Section 269SS to curb false entries and unaccounted money

Classification of share application money as a loan or deposit - definition in Explanation (iii) to Section 269T - applicability of Section 269SS and Section 269T - penalty under Section 271D and Section 271E - Share application money received and its repayment do not constitute a loan or deposit within the meaning of Section 269SS/269T and therefore penalties under Sections 271D/271E do not apply. - HELD THAT: - The Court examined the ordinary meanings of 'loan' and 'deposit' and the statutory Explanation (iii) to Section 269T which confines 'loan or deposit' to money repayable after notice or after a period. Share application money is paid for participation in the capital of a company and is not repayable after notice or after a period; it does not create the liability characteristic of a deposit nor the contractual repayment obligation characteristic of a loan. The object of Sections 269SS and 269T-preventing false explanations for unaccounted money-does not convert capital subscription (share application money) into a loan or deposit where the statutory definition and commercial character do not support such classification. Applying these principles, the Tribunal's view that share application money and its repayment do not attract Sections 269SS or 269T was upheld, and consequently penalties under Sections 271D and 271E could not be imposed. [Paras 9, 12, 13, 14]

The impugned Tribunal order holding that share application money and its repayment are not 'loan or deposit' within Sections 269SS/269T and that penalties under Sections 271D/271E do not apply is legally sustainable.

Final Conclusion: Appeal dismissed; substantial question of law answered in the negative - share application money is not a loan or deposit within Sections 269SS/269T and penalties under Sections 271D/271E cannot be levied on the facts of these assessment years.

Addition to income on account of unexplained bank credits - genuineness of transactions and identity/creditworthiness of creditor - burden on assessee to prove claimed source for deposits - reliance on bank records and corroborative evidence to establish commercial reality

Addition to income on account of unexplained bank credits - genuineness of transactions and identity/creditworthiness of creditor - burden on assessee to prove claimed source for deposits - Whether the addition enhanced by the CIT(A) to include the disputed receipts in the assessee's income could be sustained. - HELD THAT: - The Tribunal examined the materials placed before the Assessing Officer and the CIT(A), including the assessee's bank account, the alleged account entries of the creditor (M/s Krrish Buildtech / M/s Brahma City Pvt. Ltd.), and the confirmations filed by the assessee. The CIT(A) found significant discrepancies: repayments shown in bank records did not bear narration indicating payment to the alleged creditor; large cash deposits immediately preceded purported repayments; the confirmation produced by the assessee was undated and lacked identifying particulars such as PAN or contact details; and there was no satisfactory production or service of notice on the creditor to corroborate the transaction. The assessee, who claimed to be a land-aggregator and had opted for presumptive taxation, did not furnish contemporaneous records or corroborative evidence tying the deposits to genuine business transactions. In these circumstances the CIT(A)'s conclusion that the assessee failed to establish the identity and creditworthiness of the creditor and the commercial reality of the transactions was based on the record and not mere suspicion. The Tribunal held that the finding that the receipts were not satisfactorily explained and the consequent enhancement of income was supportable. [Paras 3]

The addition enhanced by the CIT(A) is sustained and the assessee's challenge in respect of the addition is dismissed.

Final Conclusion: The appeal is dismissed; the Tribunal upholds the CIT(A)'s conclusion that the assessee failed to prove the genuineness and source of the disputed bank deposits, and accordingly sustains the enhancement of income made by the CIT(A).

Confiscation - penalty under Section 112(b) of the Customs Act - reduction of penalty - precedent reliance and its applicability - goods not being prohibited

Penalty under Section 112(b) of the Customs Act - reduction of penalty - Penalties under Section 112(b) are imposable on the appellants but are excessive and require reduction. - HELD THAT: - The Tribunal noted that the appellants did not contest the merits regarding possession of seized gold and that penalties are therefore exigible. However, having considered the circumstances and submissions, the Tribunal found the quantum of penalty imposed by the adjudicating authority to be excessive. Applying its discretion, the Tribunal reduced the penalty imposed on each appellant to Rs.10,00,000/-. This constitutes a judicial exercise of mitigation while upholding liability for penalty. [Paras 7]

Penalties upheld as imposable but reduced to Rs.10,00,000 each.

Precedent reliance and its applicability - goods not being prohibited - confiscation - Reliance on the High Court decision in Gopal Saha to avoid or reduce penalty was not accepted as being on all fours with the present case. - HELD THAT: - The Tribunal examined the appellants' reliance on Gopal Saha (Calcutta High Court) and observed that the facts and findings in that case-specifically whether the gold had been absolutely confiscated or whether Section 123 protections had been satisfied-were not shown to be comparable. The Tribunal further relied on precedent where confiscation stood and penalty was sustained to distinguish the Gopal Saha decision. As the appellants did not dispute absolute confiscation in the present proceedings, the Tribunal held that the Gopal Saha ratio could not be equated to the facts here and thus could not furnish complete relief to the appellants. [Paras 6]

Gopal Saha not applicable; appellants cannot avoid penalty on that ground.

Final Conclusion: The Tribunal affirmed that penalties under Section 112(b) are exigible in the circumstances but, exercising its discretion, reduced the penalty on each appellant to Rs.10,00,000/-. Reliance on the High Court decision in Gopal Saha was rejected as distinguishable.

Interest on delayed refund of pre-deposit - Pre-deposit under Section 129E of the Customs Act, 1962 - Applicability of the Supreme Court decision in ITC Limited - Parity with coordinate Bench decisions - Effect of subsequent statutory provision/notification on earlier rights

Interest on delayed refund of pre-deposit - Pre-deposit under Section 129E of the Customs Act, 1962 - Applicability of the Supreme Court decision in ITC Limited - Entitlement to interest at the rate of 12% per annum on the delayed refund of the pre-deposit retained by the Revenue. - HELD THAT: - The seized cash of Rs. 9,93,200/- was made a pre-deposit by order of the CESTAT dated 22.04.2000 and was refunded on 05.01.2006. At the relevant time there was no statutory provision or notification fixing the rate of interest on delayed refund of pre-deposit. The Supreme Court in Commissioner of Central Excise v. ITC Limited awarded interest at 12% per annum on delayed refunds where no rate was specified, and the Central Board issued a circular which did not itself fix a rate. A coordinate Bench of this Court in Madura Coats Private Limited applied the 12% rate by parity where facts and timing were analogous. A later notification dated 12.08.2014 fixing 6% is inapplicable to periods prior to its issuance; until a statutory provision or valid notification fixing the rate came into force, the law laid down by the Supreme Court and followed by the coordinate Bench governs. Applying these principles to the present facts, the appellant is entitled to interest at 12% per annum on the delayed refund of the pre-deposit for the period in question, and the impugned Tribunal order denying that rate must be set aside. [Paras 7, 8, 9, 10]

Tribunal order set aside; appellant entitled to interest at 12% per annum on the delayed refund of the pre-deposit, payable within one month on production of a certified copy of this order.

Final Conclusion: Appeal allowed; the CESTAT order is set aside and the appellant is awarded interest at 12% per annum on the delayed refund of the pre-deposit, to be paid by the respondents within one month from production of a certified copy of this judgment.

Jurisdiction of Customs authorities - exclusive territorial jurisdiction - detention and seizure under Section 110(1) of the Customs Act, 1962 - invalidity of actions taken without jurisdiction - quashing of seizure and detention orders

Jurisdiction of Customs authorities - exclusive territorial jurisdiction - detention and seizure under Section 110(1) of the Customs Act, 1962 - invalidity of actions taken without jurisdiction - Preventive Officer at the first instance did not have jurisdiction to detain and seize the goods at Netaji Subhash Chandra International Airport and the detention and seizure are without authority. - HELD THAT: - The notification dated 24th August, 2017 (Table 2) confers jurisdiction in respect of Netaji Subhash Chandra International Airport on the Principal Commissioner of Customs (Port), Kolkata and the Principal Commissioner of Customs (Airport and Air Cargo Complex), Kolkata. A conjoint reading of entries at serial nos. 10 and 11 shows that, although the Commissioner of Customs (Preventive), West Bengal has territorial jurisdiction over the State, the notification delineates separate jurisdictional areas for the Port and the Airport and thereby vests exclusive authority over the Airport area in the Principal Commissioner of Customs (Port) and the Principal Commissioner of Customs (Airport and Air Cargo Complex). The preventive officer (respondent no.5) assumed jurisdiction at the inbound domestic warehouse of the Airport, issued detention and later seizure under Section 110(1) of the Act. Because the notification confers sole jurisdiction to the Principal Commissioners in respect of the Airport, the preventive officer lacked authority to initiate detention and seizure proceedings in that area. Actions and proceedings initiated by the preventive officer on that basis are therefore non est and cannot be permitted to be continued. Consequently, the order of detention dated 5th February, 2024 and the seizure/inventory dated 6th February, 2024 are quashed. The court clarified that this does not preclude initiation of appropriate proceedings by the competent authority in accordance with law. [Paras 10, 11, 12, 13, 14]

Detention and seizure orders issued by the Preventive Officer in respect of goods at the Airport are quashed for lack of jurisdiction; goods to be returned to the petitioner, subject to initiation of proceedings by the appropriate authority if warranted.

Final Conclusion: The court quashed the detention notice dated 5th February, 2024 and the seizure/inventory dated 6th February, 2024 for want of jurisdiction of the Preventive Officer; respondent nos. 2 to 5 are directed to return the goods to the petitioner, without prejudice to initiation of proceedings by the competent authority in accordance with law.

Burden of proof under Section 123 of the Customs Act - reasonable belief of seizure of smuggled goods - admissibility of statements and effect of retraction - benefit of doubt in customs confiscation proceedings - role of corroborative evidence (CDR and seizure list) in upholding seizure

Burden of proof under Section 123 of the Customs Act - reasonable belief of seizure of smuggled goods - Whether the burden to prove that seized goods are not smuggled shifts to the person from whose possession goods were seized and whether the tribunal misapplied that test. - HELD THAT: - The Court reaffirmed that Section 123 shifts the burden to the person from whose possession goods to which the section applies are seized provided the goods were seized under the Act in the reasonable belief that they are smuggled. The three elements required are: (i) the goods are of a class to which Section 123 applies; (ii) seizure under the Customs Act; and (iii) seizure made in the reasonable belief that the goods are smuggled. When these elements are established the onus lies on the person claiming the goods to show they are not smuggled or have been lawfully acquired. The tribunal erred in reversing this legal position by treating the department as having to disprove the noticees' faint plea without the noticees first discharging their statutory onus under Section 123. [Paras 10, 11, 12, 24]

Section 123 operates to place the burden on the person from whose possession the goods were seized where the statutory conditions are met; the tribunal's shifting of the burden to the department was erroneous.

Admissibility of statements and effect of retraction - Whether the tribunal correctly treated retracted statements as rendering the original statements inadmissible or involuntary without examining voluntariness and the circumstances of retraction. - HELD THAT: - The Court held that mere retraction does not automatically convert an earlier statement into an involuntary or inadmissible confession. It is incumbent on the adjudicatory forum to examine the validity of a retraction by considering factors such as the timing of retraction, consistency, whether it is a ruse, and surrounding circumstances. The tribunal failed to probe these aspects and neglected established authorities indicating the need for judicial scrutiny of claimed retractions before discarding earlier statements recorded under Section 108. Consequently, the tribunal's acceptance of retraction without such examination was perverse. [Paras 21, 22, 25]

Retraction does not ipso facto render earlier statements involuntary; the tribunal should have examined voluntariness and circumstances of retraction before rejecting the statements.

Benefit of doubt in customs confiscation proceedings - claim of lawful origin by melting old jewellery - Whether the tribunal correctly gave the benefit of doubt to the noticees on their claim that seized gold was produced by melting old jewellery purchased for cash in the absence of documentary or corroborative proof. - HELD THAT: - The Court emphasised that a claim that seized gold was produced from old jewellery and lawfully acquired is a matter on which the noticees bear the onus under Section 123. The noticees' contention that the gold was from melted old jewellery was a faint plea that was not substantiated by documents or other corroborative evidence. The tribunal erroneously treated the department's failure to 'deny' the claim as decisive; the question of denial arises only after the noticees discharge their statutory burden. Absent any documentary proof or verification of the asserted source, and given the statutory scheme, the tribunal's conclusion that the department failed to establish smuggling was unsustainable. [Paras 21, 22, 23, 24]

In absence of documentary or corroborative evidence by the noticees, the tribunal should not have given benefit of doubt to the claim that the gold was produced from old jewellery; the onus remained on the noticees and was not discharged.

Role of corroborative evidence (CDR and seizure list) in upholding seizure - Whether the tribunal erred in failing to consider corroborative material (call detail records, seizure list, test reports) and other factual indicia when setting aside confiscation and penalties. - HELD THAT: - The Court noted that the adjudicating authority and appellate authority relied on several pieces of corroborative material: statements recorded under Section 108, chemical test reports showing purity, call detail records indicating contacts with suppliers, and seizure lists signed in presence of independent witnesses. The tribunal failed to engage with these materials and the factual findings of the lower authorities, including the absence of any documentary proof by the noticees and the presence of indicia like CDRs and signed seizure lists. The Court held that the tribunal's omission to consider these corroborative facts rendered its conclusions perverse. [Paras 6, 14, 15, 18, 25]

The tribunal's failure to consider corroborative evidence and factual findings (CDRs, test reports, seizure list) was erroneous; the corroborative material supports the confiscation and penalties as found by the adjudicating and appellate authorities.

Final Conclusion: The tribunal's order allowing release of the seized gold, silver and currency and setting aside confiscation and penalties was perverse for misapplication of Section 123, for failing to scrutinise retractions and for ignoring corroborative evidence; the appeal is allowed, the tribunal's order is set aside and the adjudicating authority's order as affirmed by the appellate authority is restored.

Willful defaulter declaration - reliance on Transaction Audit Report - binding effect of NCLT/NCLAT findings on creditor actions - consortium lead bank decision binding on constituent banks - requirement of a reasoned order by the Review Committee - natural justice in review of willful defaulter listings - Master Circular on Wilful Defaulters

Reliance on Transaction Audit Report - willful defaulter declaration - Master Circular on Wilful Defaulters - Declaration of the petitioners as willful defaulters by the First Committee based solely on the Transaction Audit Report (TAR). - HELD THAT: - The First Committee's decision was founded exclusively on the TAR prepared by an auditor retained by the Resolution Professional. The TAR itself contains repeated disclaimers that it was prepared for limited internal use, did not verify information independently, did not constitute an audit under accepted accounting standards, did not warrant accuracy, and explicitly stated that its findings were not conclusive or suitable as definitive legal pronouncements. Given these express limitations, the report could not form the sole basis for declaring the petitioners as willful defaulters under the Master Circular. In the absence of any independent material linking the Consortium credit to the alleged diversion or other impermissible use, the essential factual foundation required by Clause 2.1.3(b) read with Clause 2.2.1(c) of the Master Circular was not established, rendering the willful defaulter declaration unsustainable. [Paras 13, 14, 22, 23, 24]

The First Committee's declaration based solely on the TAR is quashed for being founded on an inconclusive and unverified report and for lack of independent material establishing diversion of Consortium funds.

Binding effect of NCLT/NCLAT findings on creditor actions - consortium lead bank decision binding on constituent banks - Effect of the NCLT/NCLAT rejection of the TAR and consequence of the lead Bank (PNB) withdrawing the willful defaulter charge on the Central Bank's ability to proceed. - HELD THAT: - The TAR had been disbelieved by the NCLT and that finding was affirmed by the NCLAT. The TAR was prepared at the instance of the Resolution Professional representing the Committee of Creditors, which included the Central Bank as a constituent. The lead Bank, having accepted the NCLT/NCLAT rejection and not persisting with the willful defaulter allegation, meant that the Consortium (and parties represented through the Resolution Professional) could not rely on the TAR thereafter. The Central Bank, as a constituent of the Consortium, could not advance an independent cause of action based on the same TAR where the lead Bank had dropped the charge and the adjudicatory tribunals had refused to accept the TAR's findings. In any event, no material was shown to constitute a separate charge against the petitioners vis-a -vis the Central Bank itself. [Paras 18, 19, 21, 28, 29]

The NCLT/NCLAT rejection of the TAR and the lead Bank's decision to drop the willful defaulter charges preclude the Central Bank from declaring the petitioners willful defaulters on the basis of the same TAR; the Central Bank had no independent cause of action established.

Requirement of a reasoned order by the Review Committee - natural justice in review of willful defaulter listings - Validity of the Review Committee's (RC) decision and whether the RC complied with the obligation to consider representations and issue a reasoned order as required by precedent and the Master Circular. - HELD THAT: - The RC's process was mechanical: twenty-one entities were considered together, and the minutes record only a generic recital that hearings occurred and writ petitions were filed. The RC's minutes reproduced portions of the TAR and concluded in a cryptic one-liner that funds had been diverted. There was no individualized, reasoned consideration of representations as mandated by the Supreme Court's guidance that the Review Committee must pass a reasoned order on any representation within the prescribed period. The absence of a reasoned, individualized order and the late service of minutes demonstrate a denial of the requisite procedural safeguards and natural justice, vitiating the RC's decision independently and also rendering it futile in view of the infirmities in the First Committee's decision. [Paras 30, 31, 32, 33, 34]

The RC's decision is vitiated for lack of a reasoned, individualized order and for failure to observe natural justice; accordingly the RC's affirmation cannot stand.

Willful defaulter declaration - consequential reversal of steps - Relief to be granted consequent to quashing of the First Committee and RC decisions. - HELD THAT: - Given that both the First Committee's declaration and the RC's affirmation are quashed for the reasons stated-namely reliance on an inconclusive TAR, absence of independent material linking the loan to alleged diversion, binding effect of NCLT/NCLAT findings, and failure to issue a reasoned RC order-the appropriate relief is to set aside those declarations and to reverse all consequential actions taken pursuant thereto, including removal of the petitioners' names as willful defaulters. [Paras 35, 36]

The declarations by the First Committee and the RC are set aside and quashed; all consequential steps, including uploading of the petitioners' names as willful defaulters, are to be reversed immediately.

Final Conclusion: Writ petitions allowed; the First Committee and Review Committee decisions declaring the petitioners to be willful defaulters are quashed for being founded solely on an inconclusive TAR disbelieved by the NCLT/NCLAT, lacking independent material linking Consortium funds to diversion, and for failure of the Review Committee to furnish a reasoned, individualized order; consequential actions to be reversed.

Execution of decree pending appeal - effect of appeal on execution - rectification of register of members - steps taken pursuant to interlocutory directions - setting aside subsequent transfers as part of restoration of status quo - compliance and enforcement of appellate directions - award of costs and interest for non-compliance

Execution of decree pending appeal - effect of appeal on execution - Maintainability of the execution application despite pendency of a civil appeal before the Hon'ble Supreme Court - HELD THAT: - The Tribunal and this Appellate Tribunal applied the principle that an appeal does not automatically operate as a stay of proceedings or execution of a decree unless the Appellate Court orders so. Relying on Order 41 Rule 5 CPC as framed in the judgment, the pendency of the Civil Appeal before the Supreme Court did not oust the jurisdiction of the Tribunal to entertain the execution application in absence of any stay of the decree. The executing court therefore correctly proceeded with the execution petition. [Paras 21, 58, 59, 61]

Execution application is maintainable notwithstanding pendency of the appeal before the Hon'ble Supreme Court in absence of an operative stay.

Setting aside subsequent transfers as part of restoration of status quo - steps taken pursuant to interlocutory directions - rectification of register of members - Whether the subsequent/fresh transfer dated 28.11.2017 could be treated as independent valid transaction and not liable to be set aside under the Appellate Tribunal's directions - HELD THAT: - The Appellate Tribunal in its order dated 16.04.2019 set aside operative parts of the NCLT order recorded at para 161(ii) to (vi) and expressly provided that any steps taken by the parties pursuant to those directions pending appeals shall stand set aside. The clear intent, as interpreted by the Tribunal in the execution proceeding, was to restore the status quo as at the first transfer (19.05.2010) and to set aside all subsequent actions affecting the share position. On that basis the executing Tribunal concluded that the fresh transfer of 28.11.2017 fell within the scope of steps taken pursuant to earlier directions and was liable to be ignored and rectified in the register of members. The Appellate Tribunal accepted that interpretation as consistent with the mandate to restore the shareholding position w.e.f. 19.05.2010. [Paras 40, 61, 69, 70, 72]

The fresh transfer dated 28.11.2017 did not operate as a valid exception to the restoration of status quo and was rightly treated as set aside; the register of members must be rectified to reflect the position mandated by the Appellate Tribunal.

Compliance and enforcement of appellate directions - steps taken pursuant to interlocutory directions - Whether the appellants had complied with the directions of the Appellate Tribunal dated 16.04.2019 - HELD THAT: - The Tribunal considered material including the report(s) of the Registrar of Companies and the list of shareholders filed by the appellant and found that the register continued to show the shares in the name of the transferee company. The executing court examined the appellants' contentions about alleged rectification and subsequent transfers but concluded that the appellants had not effectively implemented the appellate directions to restore the status as at 19.05.2010. The Appellate Tribunal in this appeal found no error in that conclusion. [Paras 25, 26, 61, 62, 63]

Appellants were found to have not complied with the Appellate Tribunal's directions; execution to enforce rectification was justified.

Award of costs and interest for non-compliance - Entitlement to costs and imposition of interest for non compliance with appellate order - HELD THAT: - The Appellate Tribunal had earlier imposed costs on certain appellants in its order dated 16.04.2019. Having found non compliance with its directions and noting that no stay of that cost order was obtained, this Appellate Tribunal directed payment of the previously imposed costs now with interest at the rate of 12% p.a. from 16.04.2019 until payment, while refraining from additional costs in view of the pending Civil Appeal. [Paras 74]

Appellants directed to pay the costs earlier imposed, with interest @12% p.a. from 16.04.2019 until payment.

Final Conclusion: The appeal is dismissed. The executing Tribunal correctly entertained and allowed the execution petition: the Appellate Tribunal's order of 16.04.2019 was properly interpreted to restore the status quo as on 19.05.2010 and to set aside subsequent steps (including the 28.11.2017 transfer); the appellants were held non compliant and the direction for rectification, enforcement and payment of previously imposed costs with interest is affirmed.

Limitation for filing Section 7 IBC application - cause of action accrual upon confinement of CIRP to a specific project - counting limitation from date of judgment or order - application of Limitation Act principles (including acknowledgement and fresh cause of action) to IBC proceedings

Limitation for filing Section 7 IBC application - cause of action accrual upon confinement of CIRP to a specific project - counting limitation from date of judgment or order - Validity of CP (IB) No. 83/BB/2021 filed on 19.08.2021 as being within the period of limitation - HELD THAT: - The Tribunal found that although CIRP in CP (IB) No. 84/BB/2019 was initially initiated against the Corporate Debtor as a whole on 20.08.2019, a subsequent order dated 04.09.2020 confined that CIRP to the Dreamz Sumadhur Project, thereby giving rise to a separate cause of action for homebuyers of the Dreamz Sneh Project. The Tribunal recorded that where default is shown qua even one financial creditor, limitation is satisfied for a Section 7 petition by other homebuyers asserting defaults. Applying the principle that limitation may run from the date of an order which gives rise to a fresh cause of action, and having regard to precedents recognising counting from a judgment/order or acknowledgement under the Limitation Act as extending the limitation for IBC petitions, the impugned petition filed on 19.08.2021 was held to be within three years from the cause of action dated 04.09.2020. The Appellate Tribunal found no error in that conclusion and accepted the reliance on principles permitting counting of limitation from relevant orders or fresh causes of action and application of Limitation Act doctrines to IBC proceedings. [Paras 11, 12, 13]

The petition under Section 7 was within the period of limitation; the appeal challenging limitation is dismissed.

Final Conclusion: The Appellate Tribunal dismissed the appeal as devoid of merit, upholding the Adjudicating Authority's conclusion that the Section 7 petition filed on 19.08.2021 was within limitation by reason of the fresh cause of action arising from the order dated 04.09.2020; all pending applications are closed and no costs awarded.

Intervention in Section 7 proceedings - Maintainability of Section 7 application - Delay and abuse of process by filing frivolous applications to derail CIRP - Effect of a pending scheme of arrangement under Section 230 on Section 7 proceedings - Finality of adjudicatory findings on maintainability as clarified by the Supreme Court - Adjudicating Authority's discretion to regulate procedure and limit interventions - Requirement of expeditious disposal of CIRP-related proceedings

Intervention in Section 7 proceedings - Delay and abuse of process by filing frivolous applications to derail CIRP - Adjudicating Authority's discretion to regulate procedure and limit interventions - Requirement of expeditious disposal of CIRP-related proceedings - Validity of the Adjudicating Authority's rejection of Intervention Petition No.12 of 2024 - HELD THAT: - The Tribunal upheld the Adjudicating Authority's rejection of the intervention petition. The court recorded that the Section 7 petition has a long history of repeated applications by the corporate debtors and other applicants seeking dismissal or delay; earlier objections to maintainability were rejected by the Adjudicating Authority and those orders were affirmed up to the Supreme Court. The Supreme Court, while dismissing appeals, directed that the Section 7 petition be heard expeditiously and held that the maintainability issue stood concluded for NCLT/NCLAT. Given this background, the Adjudicating Authority correctly exercised its discretion to refuse another intervention which, on the material before it, appeared to be an attempt to delay the proceedings. The Tribunal distinguished the Krrish Realtech precedent relied on by the appellant as fact-specific and not applicable where a pattern of serial, dilatory filings exists. The Tribunal therefore found no error in declining to admit the intervention petition so as to protect the time-bound process envisaged under the Code. [Paras 8, 9, 11, 15, 17]

Rejection of Intervention Petition No.12 of 2024 affirmed; no interference with the impugned order.

Effect of a pending scheme of arrangement under Section 230 on Section 7 proceedings - Maintainability of Section 7 application - Finality of adjudicatory findings on maintainability as clarified by the Supreme Court - Whether pendency of a scheme under Section 230 of the Companies Act precludes continuation of the Section 7 proceedings - HELD THAT: - The Tribunal held that the filing of a scheme under Section 230 is an independent proceeding and does not, by itself, operate as a bar to proceeding with the Section 7 petition. The Adjudicating Authority had noted deficiencies and objections in the Section 230 filing, and there were concurrent factual disputes (including RERA cancellation and title issues). In these circumstances, and given the Supreme Court's direction for expeditious disposal of the Section 7 petition, the Tribunal found no merit in the submission that Section 7 proceedings should be stayed pending disposal of the scheme petition. [Paras 16]

Pendency of the Section 230 scheme is not a ground to halt or delay adjudication of the Section 7 petition; the Adjudicating Authority did not err in refusing to stay the Section 7 proceedings.

Final Conclusion: The appeal is dismissed. The National Company Law Tribunal's order rejecting Intervention Petition No.12 of 2024 is affirmed and the Section 7 proceedings are to continue to be heard and disposed of in accordance with law without being delayed by serial or frivolous intervention applications.

Existence of pre-existing dispute - Section 9 IBC - Operational debt - Mobilox test - Proforma invoice versus debit note - Liability of SPV versus Corporate Debtor - Quantum of fees - Summary jurisdiction of the Adjudicating Authority

Existence of pre-existing dispute - Section 9 IBC - Operational debt - Mobilox test - Liability of SPV versus Corporate Debtor - Quantum of fees - Proforma invoice versus debit note - Summary jurisdiction of the Adjudicating Authority - Whether a pre-existing dispute existed between the parties in respect of the claimed operational debt thereby barring initiation of CIRP under Section 9 of the IBC - HELD THAT: - The Tribunal examined the record to determine if a real dispute, requiring further investigation under the Mobilox standard, existed prior to or on receipt of the demand notice. The Adjudicating Authority's findings - which the Tribunal upheld - identified multiple contested questions going to the existence and quantification of the debt: (a) ambiguity as to which entity (the SPV or the Corporate Debtor) constituted the 'Company' liable to pay fees under the Mandate Letter, (b) a bona fide difference in the method of computing fees (1.5% of sanctioned amount claimed by the Operational Creditor versus the Corporate Debtor's contention that fee applied to processing charges), (c) competing claims as to which advisor procured the Package X sanction (the Operational Creditor versus IDBI Caps, which had been paid for similar services), and (d) disagreement over the contractual requirement to raise a debit note/final invoice rather than reliance on proforma invoices and the appropriate date of default. These controversies were supported by documentary material in the appeal paper book (including the Mandate Letter, IDBI agreement and invoices) and correspondence. Applying Mobilox, the Tribunal found these were plausible, non-frivolous disputes that could not be resolved in the summary proceeding under Section 9 and thus warranted rejection of the Section 9 petition. The Tribunal also noted that although no formal reply to the demand notice was filed before initiation of proceedings, the substance of the defence raised before the Adjudicating Authority amounted to a pre-existing dispute enforceable to defeat a Section 9 claim. For these reasons the Adjudicating Authority's conclusion that a prior dispute existed was affirmed. [Paras 12, 13, 14, 16, 17]

The appeal is dismissed; the Adjudicating Authority rightly rejected the Section 9 petition on the ground of an existing dispute as per the Mobilox test, and the Appellant may pursue other remedies under law.

Final Conclusion: The Tribunal affirmed the Adjudicating Authority's rejection of the Section 9 petition, holding that bona fide disputes as to liability, quantum and entitlement to fees (including the identity of the liable entity, calculation of fees, competing advisors' roles, and the invoice/debit-note issue) existed and, applying the Mobilox standard, were sufficient to bar summary initiation of CIRP; appeal dismissed with liberty to seek other remedies.

Extinguishment of claims on approval of resolution plan - Binding effect of approved resolution plan on Central Government, State Government and local authorities - Moratorium under Section 14 of the IBC - assessment may proceed but recovery barred - Duty of the Resolution Professional to examine books and include statutory dues in the resolution plan - Statutory charge and status of the State as a secured creditor

Extinguishment of claims on approval of resolution plan - Binding effect of approved resolution plan on Central Government, State Government and local authorities - Tax demands for the assessment years 2020-21 and 2022-23 which were not included in the approved resolution plan stand extinguished. - HELD THAT: - Relying on the authoritative exposition in Ghanshyam Mishra and subsequent decisions, the Court held that once a resolution plan is duly approved under Section 31, claims not provided for in the resolution plan are frozen and extinguished and no proceedings in respect of such claims may be continued. The resolution plan in the present case was approved on 10.05.2022 and did not include the State Tax demands for the two assessment years. The State did not lodge claims with the Resolution Professional before approval of the plan, did not challenge the plan, and did not pursue remedies before the NCLT/NCLAT. Applying the settled principle that an approved resolution plan is binding on the corporate debtor and all creditors including the State, the Court concluded that the tax demands not included in the resolution plan are extinguished, subject only to the contingency of a possible liquidation if the plan fails. [Paras 16, 19, 26, 27, 28]

The assessment demands for 2020-21 and 2022-23 not included in the approved resolution plan are extinguished and recovery proceedings thereon are restrained.

Moratorium under Section 14 of the IBC - assessment may proceed but recovery barred - Procedure versus recovery during moratorium - Proceedings for assessment may be undertaken during the moratorium but recovery cannot be effected; however this procedural possibility does not prevent extinguishment of claims not included in an approved resolution plan. - HELD THAT: - The Court observed that Section 14 moratorium does not preclude the tax authorities from carrying out assessment proceedings, but bars recovery action during the moratorium. In the present facts, some notices and assessment steps occurred around the moratorium period; nevertheless, the determinative legal consequence is governed by whether the claims were part of the approved resolution plan. Since the State's demands were not included in the plan and the plan was not challenged, the availability to proceed with assessment during moratorium did not preserve the State's claims against extinguishment upon approval of the plan. [Paras 14, 22, 26, 27]

Assessment proceedings may be conducted during moratorium but cannot secure recovery; such procedural actions do not avert extinguishment of claims omitted from an approved resolution plan.

Duty of the Resolution Professional to examine books and include statutory dues in the resolution plan - Statutory charge and status of the State as a secured creditor - The State's contention that statutory charge/secured-creditor status or the RP's alleged failure to include dues invalidates the binding effect of the approved plan was not sustained on the facts of this case. - HELD THAT: - While authoritative judgments recognise that the Resolution Professional has the obligation to examine books and include known statutory dues in the information memorandum and resolution plan (and that statutory dues may carry a charge/secured status in appropriate cases), those principles operate subject to the factual matrix of each case. Here, the State did not present evidence that it had submitted its claim to the RP prior to approval or that it had challenged the plan before the adjudicatory fora. The decisions relied upon by the State (including Rainbow Papers and PVVNL) were examined and found not to apply to these facts because there was no pre-approval claim by the State and no challenge to the approved plan. Consequently the State's secured-creditor/status arguments do not avert extinguishment of the omitted claims in the present case. [Paras 20, 21, 22, 25, 26]

On the present facts, the State's statutory-charge/secured-creditor arguments and contentions about the RP's duty do not prevent the extinguishment of the tax claims omitted from the approved resolution plan.

Final Conclusion: Both writ petitions are allowed: the State is restrained from proceeding with recovery under the impugned assessment orders for 2020-21 and 2022-23 as those demands were not included in the resolution plan approved by the NCLT and therefore stand extinguished; the Court has not adjudicated the separate exemption contention on annuity which was not argued.

Interpretation of "possession" under Section 8(4) of the Prevention of Money Laundering Act - Overriding effect of the Act under the non obstante clause - Physical possession following confirmation of attachment - Effect of subsequent legislative amendment on statutory interpretation

Interpretation of "possession" under Section 8(4) of the Prevention of Money Laundering Act - Effect of subsequent legislative amendment on statutory interpretation - Whether the term "possession" in Section 8(4) PMLA (as originally enacted) must be read as limited to symbolic/constructive possession or includes taking actual physical possession after confirmation of attachment, and the impact of subsequent amendment. - HELD THAT: - The Court examined the unamended text of Section 8(4) which provides that on confirmation of attachment the Director or authorised officer "shall forthwith take the possession of the attached property". The Single Judge had construed "possession" as only symbolic or constructive, primarily to avoid affecting rights available under other enactments. The High Court held that such reasoning is untenable in view of the Act's non obstante clause which gives the PMLA overriding effect over inconsistent laws, and that the legislative amendment subsequently enacted (which explicitly contemplates taking possession and prescribes manner and rules) confirms Parliament's intention that physical possession may be taken following confirmation of attachment. Having regard to the unamended wording, the overriding provision and the later amendment and rules, the Court concluded that "possession" cannot be restricted to purely symbolic possession and that physical possession after confirmation is consistent with the object of the Act. [Paras 8, 10, 11, 13, 15]

The Single Judge's reading down of "possession" to mean only symbolic/constructive possession is incorrect; the Act, reinforced by the non obstante clause and subsequent amendment, contemplates taking physical possession upon confirmation of attachment.

Overriding effect of the Act under the non obstante clause - Physical possession following confirmation of attachment - Whether the direction of the Single Judge to restore actual physical possession to the writ petitioners should be sustained. - HELD THAT: - The Court observed that the Single Judge's direction to put the writ petitioners back into actual possession flowed from the construal of "possession" as merely constructive. Given the Court's conclusion that the PMLA provides for physical taking of possession after confirmation of attachment and that Section 71 gives the Act overriding effect over inconsistent laws, the direction to hand over actual possession to the petitioners could not stand. The High Court therefore set aside that part of the order while otherwise sustaining the Single Judge's order. [Paras 15, 16]

The direction to return actual possession to the respective writ petitioners is set aside; in all other respects the Single Judge's order is maintained.

Final Conclusion: Appeals allowed insofar as the Single Judge read down the term "possession" and directed restoration of actual possession; that direction is set aside because the PMLA, read with its non obstante clause and subsequent amendment and rules, contemplates taking physical possession upon confirmation of attachment. The remainder of the Single Judge's order is sustained; no order as to costs.

Territorial jurisdiction under Article 226 - search and seizure under PMLA Section 17 - freezing and retention of property under PMLA Section 17(1A) and Section 20 - delegation of authority within the Enforcement Directorate - requirement of recording reasons and provision of RUDs to the affected person - prevailing effect of statute over inconsistent rules

Territorial jurisdiction under Article 226 - Maintainability of writ petition before the Calcutta High Court despite investigation having been initiated in another State. - HELD THAT: - The Court held that Article 226(2) empowers a High Court to entertain a writ petition where the whole or part of the cause of action arises within its territorial jurisdiction. The search, seizure and communication of freezing/continuation of freezing occurred within the territorial jurisdiction of this Court and the petitioners suffered legal and financial injury within that jurisdiction. Reliance on precedent establishing that infringement of a legal right within the territorial limits is sufficient for maintainability was accepted. Hence, the origin of the predicate FIR in another State did not oust this Court's jurisdiction to entertain the petition. [Paras 6, 7, 8]

Writ petition is maintainable before the Calcutta High Court.

Search and seizure under PMLA Section 17 - freezing and retention of property under PMLA Section 17(1A) and Section 20 - delegation of authority within the Enforcement Directorate - prevailing effect of statute over inconsistent rules - Validity of the search, seizure, freezing and continuation/retention orders impugned by the petitioners on grounds of lack of authorisation or procedural infirmity. - HELD THAT: - The Court examined the chain of authorisation and found that the Director had, by internal authorisation, empowered the Deputy Director to record 'reason to believe' under Section 17(1). The Deputy Director recorded the reason to believe, issued Search Authorisation No.116 of 2023 and authorised an Assistant Director to execute the search; the Assistant Director conducted the search, issued the Seizure Memo in Form II and freezing orders dated 10.09.2023. The Deputy Director subsequently recorded reasons under Section 20(1) for continuation/retention and that decision was communicated to the petitioners by the Assistant Director. The Court held that such delegation within the statutory framework and the execution by the authorised subordinate officer was consistent with Section 17(1) and 17(1A), and that where Rules are apparently inconsistent with the amended statutory provision, the statute prevails (citing the principle applied in Vijay Madanlal Choudhary). Consequently, the contention that the Assistant Director lacked authority to issue/communicate continuation was not sustainable and there was no material procedural illegality in the sequence of steps taken by ED. [Paras 12, 13, 14, 15, 17]

Search, seizure, freezing and continuation/retention orders were validly authorised and intra vires the PMLA; no merit in challenge to their validity.

Requirement of recording reasons and provision of RUDs to the affected person - Validity of the show cause notice issued by the Adjudicating Authority and the contention that RUDs were not supplied. - HELD THAT: - The Court observed that copies of the recorded reasons (RUDs) were provided to the petitioners by the Adjudicating Authority and that the RUDs were annexed to the writ petition itself. The petitioners had participated in the adjudication process and filed replies thereto. On this factual basis, the Court concluded that the challenge to the SCN on the ground of non-supply of recorded reasons lacked merit. [Paras 16]

Show cause notice under Section 8(1) is not vitiated for non-supply of recorded reasons; contention in this regard fails.

Final Conclusion: All contentions raised by the petitioners were rejected; the writ petition is dismissed for lack of merit. There shall be no order as to costs.

Offence of money-laundering under Section 3 of the PMLA - Proceeds of crime - Twin conditions under Section 45 for grant of bail - Prima facie satisfaction required for bail - Continuing activity and the relevant date for money laundering - Statutory presumption under Section 24

Twin conditions under Section 45 for grant of bail - Prima facie satisfaction required for bail - Application for bail under Section 45 of the PMLA was to be considered and decided - HELD THAT: - The Court applied the mandatory twin conditions of Section 45 - (i) that the Public Prosecutor be given an opportunity to oppose bail, and (ii) where opposed, the court must be satisfied on reasonable grounds that the accused is not guilty of the offence and is not likely to commit any offence while on bail. The court observed that it need not conduct a mini trial but must form a prima facie view on broad probabilities based on the material collected during investigation. Considering the nature and gravity of the accusation, the severity of punishment under the PMLA, the existence of voluminous documentary evidence and flow charts tracing funds, the applicant's family antecedents and conduct during investigation (including initial evasion and the circumstances of arrest), and the fact that witnesses were yet to be examined, the Court was unable to form the requisite prima facie satisfaction that the applicant is not guilty or would not commit an offence on bail. Consequently the bail application was rejected. [Paras 38, 39, 40, 41, 42]

Bail application under Section 45 of the PMLA rejected for failure to satisfy the twin conditions.

Offence of money-laundering under Section 3 of the PMLA - Proceeds of crime - Continuing activity and the relevant date for money laundering - Statutory presumption under Section 24 - Whether there was prima facie material to link the applicant with proceeds of crime and the offence of money laundering - HELD THAT: - On examination of the ECIR, complaint and supplementary complaint and the material collected during investigation, the Court found prima facie evidence of a pattern of transactions linking two family controlled firms to transfers into and out of the applicant's bank account. The investigation disclosed transfers from M/s Vikas Construction to M/s Aaghaaz and thereafter to the applicant, utilization of funds by the applicant for personal expenditures (including foreign trips and importing firearms) and unexplained cash withdrawals; statements and documentary material and flow charts were relied upon to trace the trail. The Court noted the wide and inclusive definition of 'proceeds of crime' and of the offence in Section 3, the concept of continuing activity and that involvement in any process connected with proceeds (concealment, possession, acquisition or use) may attract liability. Having regard to these materials and to the applicant's explanations being found not fully credible, the Court was satisfied prima facie that the applicant was linked to the movement and use of funds alleged to be proceeds of crime. [Paras 36, 37, 38, 40, 41]

Prima facie material exists linking the applicant to proceeds of crime and to activities falling within Section 3 of the PMLA.

Final Conclusion: The High Court, applying the statutory tests and settled precedents, found prima facie material linking the applicant to proceeds of crime and, unable to form the requisite satisfaction under Section 45 that the applicant was not guilty or would not offend while on bail, rejected the bail application and directed expeditious trial.

Export of services - Business Auxiliary Services - Export of Services Rules, 2005 - refund under Rule 5 of CENVAT Credit Rules - interest on delayed refund - binding effect of departmental circular - majority decision / Larger Bench precedent

Export of services - Business Auxiliary Services - Export of Services Rules, 2005 - Marketing support / business auxiliary services rendered in India to a foreign principal qualify as export of services under the Export of Services Rules, 2005. - HELD THAT: - The Tribunal held that the services rendered by the appellant to its Singapore principal satisfy the conditions of the Export of Services Rules, 2005 - namely that the recipient is located outside India, consideration is received in convertible foreign exchange, and the services are delivered to and used by the foreign recipient. The Tribunal followed its Larger Bench/majority decisions (including the bench decision in the appellant's own earlier case and the referred third Member majority reasoning) and other Tribunal precedents which treated marketing/identification/procurement services provided in India for a foreign principal as services consumed and used abroad, and therefore as export of services not liable to service tax. The Tribunal rejected the distinction urged by Revenue between export of goods and export of services, holding the Export of Services Rules govern the matter. [Paras 7, 8, 9]

Services rendered by the appellant to M/s Microsoft Operations PTE Ltd., Singapore qualify as export of services and are not liable to service tax.

Interest on delayed refund - Claimants are entitled to statutory interest on refunds delayed beyond the prescribed three months period. - HELD THAT: - The Tribunal accepted the appellant's submission that payment of interest on delayed refunds is automatic and statutory. It applied the principle that interest is payable from the expiry of three months from the date of application for refund and allowed the claim for interest at the statutorily prescribed rate for delayed refunds. [Paras 9]

Appellants are entitled to interest on the delayed refunds from the date specified by law (beyond three months).

Binding effect of departmental circular - majority decision / Larger Bench precedent - The Tribunal treated the Board's circular and the Tribunal's own Larger Bench/majority decisions as binding guidance supporting export characterisation. - HELD THAT: - The Tribunal noted that Circular No.111/05/2009 ST and earlier Tribunal majority/Larger Bench decisions directly dealing with business auxiliary/marketing services supported the conclusion that such services rendered to a foreign principal are exports. The Tribunal observed that Revenue cannot take a view contrary to its own circular and that the majority decision (including a third Member reference decision) is required to be followed as binding Tribunal precedent. [Paras 3, 7]

The departmental circular and the Tribunal's majority/Larger Bench decisions favouring export characterisation are binding and support the appellants' claim.

Final Conclusion: The appeals by the appellant allowing the claims for export treatment and interest are allowed; the Department's appeals are rejected - the marketing/business auxiliary services provided to the overseas principal qualify as exports under the Export of Services Rules, 2005, and the appellants are entitled to statutory interest on delayed refunds.

Business Auxiliary Service - sale of goods - mere trading of goods - principal to principal basis - agency relationship - warranty obligation - Negative list - Notification No.12/2003 ST

Business Auxiliary Service - sale of goods - principal to principal basis - warranty obligation - Whether the supply/sale of bought out spares by the appellant in connection with sale of drilling rigs amounted to a taxable service under the category of Business Auxiliary Service or was a sale of goods outside the ambit of service tax. - HELD THAT: - The Tribunal examined the contractual and commercial character of the transactions and found that the spares were purchased in the appellant's name and sold to customers on a principal to principal basis. There was no agency relationship, no commission paid, and the transactions did not involve intermediary or facilitation services of the nature contemplated by Business Auxiliary Service. Supplies were effected pursuant to contractual/warranty obligations or requisitions by customers but were materially transfers of title in goods. The Tribunal noted that where the transaction is mere trading or sale of goods, it falls outside the realm of service taxation and is covered by the Negative list (as reflected in Notification No.12/2003 ST and the corresponding statutory scheme). Applying these principles, the Tribunal held that the impugned supplies of spares were sales and not services, and therefore not liable to service tax. [Paras 4, 5]

Impugned transactions are sales of goods effected on principal to principal basis pursuant to contractual/warranty obligations and do not constitute Business Auxiliary Service; the impugned order is set aside.

Final Conclusion: Appeal allowed; the demand of service tax in respect of the supplies of bought out spares was quashed and the impugned order set aside, the transactions being sales of goods on principal to principal basis and not taxable services.

Levy of service tax on commission/discount received by distributors for sale of SIM cards - Business Auxiliary Services - Distinction between trading activity (purchase and sale) and provision of taxable service - Prohibition of double taxation where principal has discharged service tax - Precedent-based resolution by following earlier tribunal and High Court decisions

Levy of service tax on commission/discount received by distributors for sale of SIM cards - Business Auxiliary Services - Distinction between trading activity (purchase and sale) and provision of taxable service - Prohibition of double taxation where principal has discharged service tax - Whether the margin/discount/commission received by the appellant for sale of SIM cards is exigible to service tax as Business Auxiliary Services - HELD THAT: - The Tribunal examined whether the amounts retained by the authorised distributor for sale of pre-paid SIM cards amounted to a taxable service under the category of Business Auxiliary Services. Having regard to earlier decisions of the Tribunal and the High Court, the Court concluded that the activity undertaken by the distributor is essentially purchase and sale of SIM cards and recharge coupons and constitutes a trading activity rather than rendering a separate taxable service. It followed precedents which held that where the principal (telecom company) has already discharged service tax on the full value of SIM cards, imposing service tax again on the distributor's margin would amount to double taxation and is not permissible. The Tribunal therefore applied the settled ratio in the cited authorities that distributors engaged in principal-to-principal purchase and sale of SIM cards do not provide Business Auxiliary Services attracting service tax, and the question was answered against Revenue.

The demand of service tax on the commission/discount received by the appellant is unsustainable; the impugned order is set aside and the appeal is allowed.

Final Conclusion: Following earlier tribunal and High Court decisions that characterise the distributor's activity as trading (purchase and sale) and preclude a second layer of service tax where the principal has discharged tax, the appeal is allowed and the demand, interest and penalties confirmed in the impugned order are set aside.

Taxability of composite contract as Works Contract Service versus Erection, Commissioning and Installation Service - Vivisection of composite contract into goods and services - Requirement of contractual break-up to tax only service component - Applicability of Larsen & Toubro decision to composite contracts - Remand for fresh consideration where later binding precedents are available - Limitation in relation to reassessed demands requiring re-examination

Taxability of composite contract as Works Contract Service versus Erection, Commissioning and Installation Service - Vivisection of composite contract into goods and services - Applicability of Larsen & Toubro decision to composite contracts - Requirement of contractual break-up to tax only service component - Whether the demands raised under Erection, Commissioning and Installation Service on the entire contract value are sustainable, or whether the contracts are composite works contracts and require reassessment under the Works Contract Service doctrine in light of later decisions - HELD THAT: - The Tribunal observed that the Appellate Authority below had not the benefit of subsequent judicial decisions (including the Apex Court's decision in Larsen & Toubro and the CESTAT decision in Vishwanath Projects Ltd.) which clarify that where a contract is a composite works contract involving transfer of materials and rendition of services, such contract may fall within the Works Contract Service sphere and cannot be simply vivisected unless a contractual break-up between goods and services is shown. The record shows excise/sales tax was paid on the composite invoice value and no separate recovery beyond the invoiced amount was established by the department. Given these developments in law and the absence of examination of divisibility/composite nature by the lower authority, the Tribunal found it appropriate that the Appellate Authority should re-examine the nature of the contracts, consider whether a contractual break-up exists or whether the contract is a composite works contract taxable under the Works Contract Service head, and apply binding precedents accordingly. The Tribunal also directed that the Appellate Authority consider argument on limitation while re-adjudicating the matter. [Paras 6, 7]

Matter remitted to the Appellate Authority for fresh consideration of applicability of relevant case law (including Larsen & Toubro and Vishwanath Projects Ltd.), determination of whether the contracts are divisible or composite, and for reconsideration of limitation; appeal allowed by way of remand.

Final Conclusion: The appeal is allowed by way of remand: the matter is sent back to the Appellate Authority to examine afresh, in light of subsequently available decisions and the contractual records, whether the contracts are composite works contracts or divisible, and to reconsider the demand and limitation accordingly; the appellant may advance all relevant arguments before the Appellate Authority.

Levy of service tax on construction of residential complexes - Applicability of Board circulars clarifying taxability of builder/promoter/developer prior to 1.7.2010 - Explanation to Section 65(105)(zzzh) of the Finance Act clarifying works contract including transfer of immovable property w.e.f. 1.7.2010 - Liability to pay interest on belated payment of service tax - Imposition of penalties for non-payment and non-filing under the Finance Act, 1994

Levy of service tax on construction of residential complexes - Applicability of Board circulars clarifying taxability of builder/promoter/developer prior to 1.7.2010 - Explanation to Section 65(105)(zzzh) of the Finance Act clarifying works contract including transfer of immovable property w.e.f. 1.7.2010 - Imposition of penalties for non-payment and non-filing under the Finance Act, 1994 - Service tax, interest and penalties claimed for the period April 2009 to June 2010 - HELD THAT: - The Tribunal applied the Board's circulars and the reasoning in Krishna Homes (Tri.-Del.) which held that agreements between builders/developers and buyers for construction of residential units, though contractual in nature, were not intended by the Government to be taxable as services prior to 1.7.2010. The Explanation bringing such works contracts within taxable services was introduced w.e.f. 1.7.2010. Having regard to that position and the Board's clarifications, the demand of service tax for the period prior to 1.7.2010 cannot be sustained. Consequentially, penalties imposed for non-payment and non-filing for that period, being predicated on an unsustainable demand, were set aside. [Paras 5, 6, 8, 9]

Demand of service tax, interest thereon and penalties for April 2009 to June 2010 set aside.

Liability to pay interest on belated payment of service tax - Liability to pay interest on service tax paid belatedly for the period July 2010 to March 2011 - HELD THAT: - The appellant admitted having paid service tax for July 2010 to March 2011 belatedly. The Tribunal upheld the impugned order insofar as it confirmed the demand of interest for that period, observing that the tax liability post 1.7.2010 was governed by the Explanation and the appellant's belated payment attracted interest as confirmed by the original authority. [Paras 8, 9]

Interest demand for July 2010 to March 2011 is sustained; appeal is not allowed on this aspect.

Final Conclusion: Appeal partly allowed: demands of service tax, interest and penalties for April 2009 to June 2010 quashed in view of Board circulars and Tribunal precedents; interest confirmed for belatedly paid service tax relating to July 2010 to March 2011 is sustained.

Restoration of statutory appeal - compliance with pre-deposit - costs for restoration - set aside impugned order - remand for consideration on merits - no coercive steps where pre-deposit complied

Restoration of statutory appeal - compliance with pre-deposit - set aside impugned order - CESTAT's dismissal of the application for restoration is set aside and the appeal is restored because the pre-deposit condition was admittedly complied with despite a short delay. - HELD THAT: - The Court found that the writ petitioner had in fact effected the pre-deposit, albeit with a delay of nine days, and that the application for restoration before the CESTAT proceeded on an inaccurate assertion by the petitioner that obscured that delay. Bearing in mind the undisputed compliance with the pre-deposit condition and the larger interest of justice, the Court concluded that the impugned CESTAT order rejecting restoration should be set aside and the appeal restored to the Board of the CESTAT for consideration on merits and in accordance with law. [Paras 7, 8]

Impugned order dated 18 April 2024 is set aside insofar as it rejects the application for restoration, and the appeal is restored to the CESTAT.

Costs for restoration - Restoration is subject to payment of costs by the writ petitioner within the time fixed by the Court. - HELD THAT: - The Court imposed a condition for restoration by directing the writ petitioner to deposit the costs awarded by the CESTAT. The deposit of costs is ordered as a precondition to the restoration taking effect, with a specific limited period granted for compliance, thereby balancing the sanction imposed by the CESTAT with the finding of substantive compliance of the pre-deposit condition. [Paras 9]

Subject to deposit of costs of INR 2 lakhs within two weeks, the appeal shall stand restored on the Board of the CESTAT.

No coercive steps where pre-deposit complied - remand for consideration on merits - No further coercive steps shall be taken by the revenue in view of the compliance with the pre-deposit; the CESTAT is to consider the appeal on merits. - HELD THAT: - Given that the pre-deposit condition has been complied with, the Court directed that respondent no.2 should not take further coercive action pending the CESTAT's further orders. The appellate forum (CESTAT) is to consider the restored appeal on merits and in accordance with law, thereby remitting substantive adjudication to the tribunal. [Paras 7, 10]

No further coercive steps to be taken by respondent no.2 pending consideration by the CESTAT; the appeal is remitted for determination on merits.

Final Conclusion: Writ petition allowed; impugned CESTAT order of 18 April 2024 set aside insofar as it refused restoration; appeal restored to the CESTAT on payment of the directed costs within two weeks and to be decided on merits; no coercive steps to be taken in view of the pre-deposit having been complied with.

Construction services - residential complex - personal use exclusion - governmental entity as extended arm of the State - service tax liability of contractor versus sub-contractor - issue no longer res integra / follow-on precedent

Construction services - residential complex - personal use exclusion - governmental entity as extended arm of the State - issue no longer res integra / follow-on precedent - Whether construction of staff quarters for Gujarat State Police Housing Corporation Limited attracts service tax or is excluded as construction for the personal use of a government entity - HELD THAT: - The Tribunal held that the construction services in question were rendered for M/s. Gujarat State Police Housing Corporation Limited (GSPHCL), which is 100% owned by the Government of Gujarat and functions as an extended arm of the State. Relying on a body of earlier Tribunal decisions treating similar police housing corporations and analogous facts, the bench applied the principle that construction of residential complexes intended for personal use by a government entity falls within the exclusion from service tax. The Tribunal observed that this issue is no longer res integra and followed the precedent in RD Contractors & Co. and other cited authorities which treated the construction as for the personal use of the State (and therefore not taxable on the contractor), including the reasoning distinguishing liability of main contractors and sub-contractors. In view of those precedents and the identity of the service recipient as a government entity, the impugned orders sustaining service tax demands were found unsustainable. [Paras 5, 6]

Appeals by the assessees relating to construction of staff quarters for GSPHCL are allowed and the impugned orders confirming service tax demands are set aside.

Construction services - service tax liability of contractor versus sub-contractor - Validity of the adjudicating authority's order (as challenged by the Revenue) in respect of one appellant where show-cause notice had been dropped by Commissioner (Appeal) - HELD THAT: - On consideration of the record the Tribunal found that, in respect of the appeal brought by the Department, the adjudicating authority's order was legally correct. The Tribunal therefore declined the Revenue's challenge and upheld the findings of the adjudicating authority in that particular appeal. [Paras 6]

The Department's appeal is dismissed and the adjudicating authority's order is upheld.

Final Conclusion: The Tribunal, applying established precedents that treat construction for housing corporations wholly owned by the State as construction for the personal use of the government, allowed the assessees' appeals and set aside the impugned demand orders in the first two matters; the Revenue's appeal in the third matter was dismissed and the adjudicating authority's order was upheld.

Business Auxiliary Services - multimodal transport operator - principal-to-principal transactions - place of provision of services - Rule 10 vis-a -vis Rule 8 and application of Rule 14 - extended period of limitation - proviso to Section 73(1) and burden on Revenue to plead specific grounds

Business Auxiliary Services - multimodal transport operator - principal-to-principal transactions - Whether the appellants' activity of purchasing and reselling cargo/container space (including profit or freight margin) is taxable as Business Auxiliary Services - HELD THAT: - The Tribunal found that the appellants contracted for cargo/container space on a principal-to-principal basis and were registered as multimodal transport operators, assuming responsibility and issuing multimodal transport documents. The activity of procuring space from shipping lines and reselling it (including any notional surplus or mark-up) is a distinct commercial transaction of purchase and sale of space and not a service rendered on behalf of the shipping line. The definition of Business Auxiliary Services under Section 65(19) lists specific promotional, marketing, procurement and ancillary services and does not specifically cover sale of cargo/container space by a principal who assumes the risk and issues transport documents. The Tribunal applied the reasoning in its earlier decisions (noting Greenwich Meridian, Karam Freight Movers, EMU Lines and related orders) that freight or profit on freight in such principal-to-principal multimodal arrangements does not fall within BAS. On these grounds the demand under BAS was held not sustainable. [Paras 8, 11]

The sale/purchase of cargo/container space and the freight margin earned by the appellants are not taxable as Business Auxiliary Services; the adjudged demands under BAS are not sustainable.

Place of provision of services - Rule 10 - place of provision of services - Rule 14 (order of application) - Whether, in the post-negative-list regime, the place of provision of the appellants' services renders them taxable within India - HELD THAT: - The Tribunal examined the Place of Provision of Services Rules, 2012 and held that services of transportation of goods (other than by mail or courier) are governed by Rule 10, which fixes the place of provision as the place of destination of the goods. Since the appellant's services related to ocean transportation of export goods to a destination outside the taxable territory, such services are not covered by the service tax net post the negative-list change. Where more than one rule might prima facie apply, Rule 14 directs application of the rule that occurs later among equally meriting rules; accordingly Rule 10 was held to be the correct rule to apply rather than Rule 8. The learned Commissioner's contrary conclusion was thus not sustainable. [Paras 10]

For services relating to ocean transportation of export goods, Rule 10 governs the place of provision and the services are outside the taxable territory; the impugned finding applying Rule 8 is unsustainable.

Extended period of limitation - proviso to Section 73(1) - burden on Revenue to plead specific grounds for invoking extended period - Whether invocation of the extended period of limitation (proviso to Section 73(1)) was justified in the show cause notice and impugned order - HELD THAT: - The Tribunal applied settled law that the Revenue must plead and prove specific and explicit grounds (fraud, collusion, willful mis-statement or suppression of facts) in the show cause notice before invoking the extended period. The SCN in this case merely averred that the assessee 'deliberately and intentionally never shown the said income' without stating specific allegations falling within the proviso. Given that the department had access to the assessee's records and returns, and absent specific averments, the Revenue failed to discharge the burden required to invoke the extended period. Consequently the demand confirmed for the extended period was held to be patently illegal and unsustainable. [Paras 9]

Invocation of the extended period of limitation was not justified; demands confirmed for the extended period are unlawful.

Final Conclusion: The impugned order confirming service tax demands, interest and penalties is set aside; the appeal is allowed in favour of the appellants.

Sugar cess as duty of excise - application of Central Excise Act procedural provisions to cess - exemption of cess on export - liability on diversion to home consumption

Sugar cess as duty of excise - application of Central Excise Act procedural provisions to cess - liability on diversion to home consumption - Whether sugar cess levied under the Sugar Cess Act, 1982 is to be treated as a duty of excise and, consequently, whether exemptions and procedural provisions of the Central Excise law apply with respect to export and diversion to home consumption. - HELD THAT: - The Tribunal found that Section 3(1) of the Sugar Cess Act, 1982 mandates that cess shall be levied and collected as a duty of excise on all sugar produced by sugar factories and that sub section (4) expressly provides that the provisions of the Central Excise Act, 1944 and rules made thereunder, including those relating to refund and exemption, apply in relation to levy and collection of the duty under the Sugar Cess Act. Applying the ratio of earlier decisions, including the decision in Indian Sugar Exim Corporation Ltd and the Larger Bench's treatment of analogous cess levies, the Tribunal held that the sugar cess retains the character of excise duty for all relevant purposes. Consequently, where Central Excise notifications (including those governing export and diversion to home consumption) operate, the cess must be regarded as falling within their sweep and be governed by the same rules on liability and exemptions. [Paras 4, 6, 7]

Sugar cess is to be treated as a duty of excise and the procedural and exemption provisions of the Central Excise law apply accordingly; liability on diversion to home consumption is governed by the relevant Central Excise provisions.

Exemption of cess on export - application of Central Excise Act procedural provisions to cess - Whether the appellant is exempt from payment of sugar cess on export of sugar by virtue of Notification No. 42/2001 CE (NT) dated 26.06.2001 and Circular No.10/93 CX.8 dated 01.09.1993. - HELD THAT: - Having held that sugar cess is a duty of excise and that Central Excise Act provisions apply to its levy and collection, the Tribunal examined the export notifications and the specific circular. It applied the principle that exemptions and procedural provisions applicable to excise duties operate mutatis mutandis in relation to the sugar cess. The Tribunal also noted Circular No.10/93 CX.8 which, exercising powers under sub section (4) of Section 3 of the Sugar Cess Act, exempted the duty of excise leviable under Section 3(1) of the Sugar Cess Act on sugar exported out of India. In view of these provisions and precedent, the Tribunal held that the appellant is not liable to pay sugar cess on export under the facts before it. [Paras 4, 5]

The appellant is exempt from payment of sugar cess on export of sugar under the applicable Central Excise notification and the cited circular; the demand is unsustainable.

Final Conclusion: The appeals are allowed: the Tribunal held that sugar cess is a duty of excise to which Central Excise procedural and exemption provisions apply, and that the appellant is not liable to pay sugar cess on export of sugar; the impugned demands are set aside with consequential relief.

Revenue neutrality - Extended period of limitation / time-bar - Valuation of captively consumed goods under Central Excise Valuation Rules - Board circulars as guidance for valuation

Extended period of limitation / time-bar - Suppression of facts and malafide intention - Whether the demand raised by show cause notice dated 18.03.2016 for the period March, 2011 to November, 2013 is barred by limitation and whether extended period can be invoked - HELD THAT: - The Tribunal held that the demand for the period March, 2011 to November, 2013, prosecuted by the show cause notice dated 18.03.2016, is beyond the normal period of limitation. The Tribunal relied on the fact that the appellant filed monthly returns regularly and was periodically audited, and that the department did not take action even after amendment to Rule 8 effective 01.12.2013. In these circumstances the Tribunal found no suppression of fact or malafide intention that would justify invocation of the extended period. Reliance of the appellant on earlier judicial decisions supporting denial of extended period where returns and audits were regular was accepted. Consequently the demand was held time-barred. [Paras 4]

The demand is hit by limitation; the extended period of limitation cannot be invoked and the demand is not sustainable.

Revenue neutrality - Cenvat credit availability and intra-group transfers - Whether the factual position amounts to revenue neutrality and whether that precludes attribution of malafide or suppression for limitation purposes - HELD THAT: - The Tribunal found that the clinker unit cleared goods to the appellant's grinding unit which used the clinker as input to manufacture dutiable cement; duties paid at the clinker stage would be available as cenvat credit to the grinding unit. The subsequent grant of a common central excise registration (from May 2016) and surrender of separate registration of the clinker unit reinforced that both units operated as one economic entity. On these facts, and in view of precedent where demands were set aside on revenue neutrality, the Tribunal concluded that the situation was revenue neutral and that no malafide or suppression could be attributed to the appellant. That conclusion supported the finding that limitation could not be extended. [Paras 4]

The facts constitute revenue neutrality; absence of malafide or suppression strengthens the conclusion that the demand is time-barred.

Valuation of captively consumed goods under Central Excise Valuation Rules - Board circular effect - Valuation of clinker cleared to the grinding unit (whether to be valued under Rule 8 at cost-construction percentage or under Rule 4 at transaction value) is not adjudicated and left open - HELD THAT: - Although the appellant contended that valuation under the pre-December 2013 position and relevant Board circulars justified use of cost-construction method (110%/115% of cost) for captively consumed goods, the Tribunal expressly declined to decide the merit of the valuation dispute. The Tribunal observed that since the entire demand was time-barred and revenue neutrality established, it was unnecessary to address the substantive valuation issue; accordingly the question of correct valuation under Rule 8 vis-a -vis Rule 4 was not adjudicated in the appeal. [Paras 4]

Merits of the valuation dispute were not decided and remain undetermined in this proceeding.

Final Conclusion: The appeal is allowed. The impugned order is set aside on the ground of limitation (demand for March, 2011 to November, 2013 time-barred); consequential relief granted and connected proceedings disposed of.

Entitlement to interest on refundable pre-deposit - refund under section 35 FF - effect of re-credit and subsequent debits in CENVAT/RG-23A - compensation by charging interest

Entitlement to interest on refundable pre-deposit - refund under section 35 FF - compensation by charging interest - Whether the appellant is entitled to interest on the amounts debited on 12.11.2014 for the period from 12.11.2014 till 17.06.2021 - HELD THAT: - The Tribunal found that the appellant had initially debited the disputed amounts on 12.11.2014 and, although a suo-moto re-credit was carried out on 31.05.2016, the appellant subsequently debited the same amounts again on 31.12.2016 and 31.01.2017 at the insistence of the department. The department collected interest of Rs. 1,20,508 by challan dated 10.03.2017, thereby effectively charging interest for the period during which the appellant had retained the amounts. In these circumstances the department had compensated itself by charging interest, and the appellant could not be deprived of interest on the refundable pre-deposit for the earlier period. Applying the legal obligation under section 35 FF to refund amounts along with interest where pre-deposited amounts are refundable, the Tribunal held that interest on the amount of Rs. 41,28,106 is payable for the entire period from 12.11.2014 to 17.06.2021. The appeal was allowed and consequential relief granted. [Paras 6, 7]

Appellant entitled to interest on the debited amount for the period 12.11.2014 to 17.06.2021; appeal allowed with consequential relief.

Final Conclusion: Appeal allowed; Tribunal directed payment of interest on the refunded amount from 12.11.2014 up to 17.06.2021, holding that charging of interest by the department constituted compensation and did not disentitle the appellant from interest for the earlier period.

Valuation under Section 4 - valuation under Section 4A (MRP-based valuation) - exemption under Rule 34 of the Standards of Weights and Measures (Packaged Commodity) Rules, 1977 - exemption under Rule 26(a) of the Legal Metrology (Packaged Commodity) Rules, 2011 - requirement to declare Maximum Retail Price (MRP) on package - multi-piece package and aggregation of weight/measure - transaction value basis of assessment

Valuation under Section 4 - valuation under Section 4A (MRP-based valuation) - exemption under Rule 34 of the Standards of Weights and Measures (Packaged Commodity) Rules, 1977 - exemption under Rule 26(a) of the Legal Metrology (Packaged Commodity) Rules, 2011 - requirement to declare Maximum Retail Price (MRP) on package - multi-piece package and aggregation of weight/measure - Assessable value of shampoo sachets/pouches containing 10 ml or less is to be determined under Section 4 and not under Section 4A. - HELD THAT: - The Tribunal examined whether sachets/pouches of shampoo containing 10 ml or less fall within the exemption from the requirement to declare MRP under the packaged commodity rules, and whether that removes the statutory basis for applying Section 4A MRP based valuation. It applied the criteria distilled in Sarvotham Care Ltd. and similar precedents: (i) mere specification of an item under Section 4A does not automatically mandate Section 4A valuation; (ii) a statutory requirement to declare retail price on the package is essential for Section 4A to apply; (iii) where the rules exempt packages below the prescribed weight/measure from MRP declaration, assessments must be on transaction value under Section 4. The sachets in question were small packs within the exemption threshold (as per Rule 34 of SWMPC Rules, 1977 up to 31.03.2011 and Rule 26(a) of the Legal Metrology (Packaged Commodity) Rules, 2011 thereafter) and thus not required to bear MRP; accordingly there was no statutory requirement to declare retail price on the package and the statutory foundation for Section 4A valuation was absent. The Tribunal also noted that the multi piece package doctrine requires aggregation of pieces only where the combined pack constitutes a multi piece retail package exceeding the prescribed limit; that was not the case here. Following the Tribunal's earlier final order in the appellant's own case for a prior period, the present demand under Section 4A could not be sustained and valuation under Section 4 was held to be correct. [Paras 9, 10, 11, 12]

The demand under Section 4A is set aside; valuation shall be on transaction value under Section 4 and the appeal is allowed with consequential reliefs.

Final Conclusion: The appeal is allowed: the Tribunal held that sachets/pouches of shampoo of 10 ml or less fall within the exemption from MRP declaration and therefore the assessable value is to be determined under Section 4, not under Section 4A; the impugned demand under Section 4A is set aside with consequential reliefs.

Refund of CENVAT credit under Section 142(3) of CGST Act, 2017 - eligibility for cash refund where CVD and SAD paid after the appointed day but duty pertains to pre-01.07.2017 period - non-applicability of Rule 9(1)(b) and (bb) of the Cenvat Credit Rules, 2004 in absence of suppression or adjudication - remand for limited factual verification and processing of refund claim

Refund of CENVAT credit under Section 142(3) of CGST Act, 2017 - eligibility for cash refund where CVD and SAD paid after the appointed day but duty pertains to pre-01.07.2017 period - Claim for refund of CVD and SAD paid after 01.07.2017 is admissible as cash refund under Section 142(3) where the duty pertains to the pre-GST period and was otherwise admissible as CENVAT credit. - HELD THAT: - Section 142(3) provides that claims for refund filed before, on or after the appointed day for amounts of CENVAT credit paid under the existing law shall be disposed of in accordance with the existing law and any amount eventually accruing shall be paid in cash. The appellant's CVD and SAD related to the period May, 2017 to June, 2017 and were admissible as CENVAT credit under the Cenvat Credit Rules, 2004. Although the payment was physically made after 01.07.2017, the duty pertains to the pre-appointed day period when CENVAT credit entitlement existed; hence the statutory scheme entitles the assessee to cash refund under Section 142(3). The tribunal relied on this statutory mandate and on precedents cited by the appellant to support allowance of refund on this legal basis. [Paras 4]

Refund claim of CVD and SAD admissible in cash under Section 142(3) insofar as the duty pertains to the pre-01.07.2017 period.

Non-applicability of Rule 9(1)(b) and (bb) of the Cenvat Credit Rules, 2004 in absence of suppression or adjudication - Rule 9(1)(b) and (bb) of the Cenvat Credit Rules, 2004 cannot be invoked where there is no show cause notice, adjudication or finding of suppression, and payment of duty was made suo moto to regularise excess imports. - HELD THAT: - The tribunal observed that the appellants paid CVD and SAD on their own to regularise excess imports under advance authorization and there is no record of any departmental demand notice or adjudication alleging suppression of facts. Invocation of penal provisions under Rule 9(1)(b) or (bb) presupposes an established case of suppression or malafide, which is absent here. Therefore, in the factual matrix where the payment was voluntary and no offence was made out, the penal provisions cannot be applied to deny refund. [Paras 4]

Rule 9(1)(b) and (bb) do not apply; no suppression or malafide established to bar refund.

Remand for limited factual verification and processing of refund claim - Matter remanded to the adjudicating authority for limited purpose of factual verification, document scrutiny and processing of the refund claim. - HELD THAT: - Although the tribunal decided the core legal questions in favour of the appellants, it noted that there was no detailed discussion or verification of factual aspects and supporting documents on record. Consequently, the tribunal set aside the impugned orders and remanded the cases to the adjudicating authority to carry out the necessary factual verification and to process the refund claim in accordance with the legal conclusions reached. [Paras 4, 5]

Appeals allowed in part by way of remand to the adjudicating authority for limited verification and processing of the refund claims.

Final Conclusion: Impugned orders set aside; appeals allowed to the extent that the legal entitlement to cash refund under Section 142(3) is recognised and the matter is remanded to the adjudicating authority for limited factual verification and processing of the refund claims without applying Rule 9(1)(b) or (bb) in absence of any adjudicated suppression.

Chargeability of interest on unutilised CENVAT/MODVAT credit - admissibility of CENVAT/MODVAT credit for bunker fuel and foodstuff in ship-breaking - reversal of credit and liability for interest - application of Rule 57AH (now Rule 12 of the Central Excise Rules) in relation to wrongly availed credit

Chargeability of interest on unutilised CENVAT/MODVAT credit - reversal of credit and liability for interest - Whether interest under the Central Excise provisions is chargeable on CENVAT/MODVAT credit which was held not admissible and directed to be reversed where the credit was lying unutilised - HELD THAT: - The Court examined the Tribunal's finding that fuel oil and foodstuff on board the ship were not inputs for the manufacture of scrap and therefore not eligible for MODVAT/CENVAT credit, and noted that the Tribunal explicitly held there was no specific finding sustaining levy of interest on the amount of credit which had been directed to be reversed. Relying on the decision in Commissioner of Central Excise v. Gupta Steel (Tax Appeal No. 1145 of 2005) - which concluded that charging interest on unutilised credit ordered to be reversed was not sustainable - this Court found the present case squarely covered by that precedent. The Court also recorded that the Supreme Court had declined to entertain a related SLP (in Gupta Steel) on account of low tax effect, leaving the question to be agitated in appropriate cases. In consequence, no substantial question of law arises for consideration and the levy of interest on the unutilised credit was held unsustainable in the facts before the Tribunal.

Levy of interest on the amount of CENVAT/MODVAT credit lying unutilised and directed to be reversed is not sustainable; appeal dismissed as covered by Gupta Steel.

Admissibility of CENVAT/MODVAT credit for bunker fuel and foodstuff in ship-breaking - application of Rule 57AH (now Rule 12 of the Central Excise Rules) in relation to wrongly availed credit - Whether bunker fuel and foodstuff on board a ship are inputs eligible for MODVAT/CENVAT credit in relation to ship-breaking operations - HELD THAT: - The Tribunal held, and this Court accepted, that fuel oil and foodstuff on board the ship are not inputs required directly or indirectly for the manufacture of scrap emerging from ship-breaking, and hence MODVAT/CENVAT credit taken in relation thereto is not admissible. The Court treated that factual and legal conclusion as determinative and squarely covered by the earlier decision in Gupta Steel, leaving no substantial question of law for fresh consideration.

Credit in respect of bunker fuel and foodstuff on board ship is not admissible for MODVAT/CENVAT in ship-breaking; the credit was rightly directed to be reversed.

Final Conclusion: The High Court dismissed the appeal, holding that the Tribunal's findings - that bunker fuel and foodstuff are not inputs for ship-breaking scrap (hence MODVAT/CENVAT credit not admissible) and that interest cannot be levied on credit lying unutilised and ordered to be reversed - are squarely covered by the decision in Gupta Steel and do not raise any substantial question of law.

Principles of natural justice - audi alteram partem - right to cross-examination in tax proceedings - quasi-judicial nature of tax proceedings - reliance on departmental/investigation reports without producing officers for cross-examination - prejudice requirement for vitiating proceedings

Right to cross-examination in tax proceedings - reliance on departmental/investigation reports without producing officers for cross-examination - prejudice requirement for vitiating proceedings - Whether the report of the Commercial Tax Department at Bombay could be relied upon without affording the petitioner an opportunity to cross-examine the officers who prepared that report. - HELD THAT: - The Court found that the Deputy Commissioner issued show cause notices disclosing the contents of the Bombay enquiries, permitted inspection of the enquiry report, and afforded the petitioner opportunities to file objections and to make personal submissions. The enquiry established factual matters - absence of F-forms issued by the Maharashtra Department, agents dealing in goods other than claimed, and non-availability of certain agents at given addresses - which the petitioner could have controverted by producing material evidence establishing the agents' addresses, businesses and issuance of F-forms. The Court distinguished K. T. Shaduli Grocery Dealer on the ground that the Kerala statute expressly incorporated a broader right to prove correctness of returns; no comparable statutory provision was shown here. Relying on precedent, including that administrative or tax authorities are not strictly bound by technical rules of evidence, the Court held that reliance on departmental investigation reports does not automatically entitle a petitioner to cross-examine the reporting officers where the materials and the substance of enquiries were disclosed and an opportunity to rebut was afforded. Further, non-permission to cross-examine vitiates proceedings only if prejudice is shown; no prejudice was demonstrated on the facts. Applying these principles to the present record, the Court concluded that the procedure followed was fair, that cross-examination of the Bombay officers was not required, and that no violation of natural justice occurred which would warrant interference with the impugned order. [Paras 33, 34, 35, 36, 37]

No right to cross-examination of the Bombay officers was required in the facts of this case; reliance on the enquiry report did not violate principles of natural justice and did not vitiate the impugned order.

Final Conclusion: The Tax Revision is dismissed: the procedure followed by the tax authorities complied with the principles of natural justice, no prejudice from absence of cross-examination was shown, and there is no occasion for interference.

Penalty under Section 27(3) of the TNVAT Act - wilful non-disclosure of assessable turnover - best judgment assessment - method of accounting on deemed sale value under Section 5 - knowledge of the department negating suppression

Penalty under Section 27(3) of the TNVAT Act - wilful non-disclosure of assessable turnover - Levy of penalty under Section 27(3) was not sustainable in the absence of a finding of wilful non-disclosure of assessable turnover. - HELD THAT: - The Court held that Section 27(3) can be invoked only if the assessing authority is satisfied that the escape from assessment was due to wilful non-disclosure of assessable turnover. The impugned orders levying penalty merely confirm suppression and quantify turnover by best judgment assessment but do not contain an independent finding that the non-disclosure was wilful. Failure to examine and record the jurisdictional fact of wilfulness vitiates the levy of penalty, particularly in light of this Court's earlier direction to examine the bonafides as a preliminary issue. Accordingly, penalty under Section 27(3) could not be sustained without such a finding. [Paras 13]

Penalty under Section 27(3) set aside for lack of finding of wilful non-disclosure.

Best judgment assessment - wilful non-disclosure of assessable turnover - A best judgment assessment and a finding of suppression do not automatically support imposition of penalty under Section 27(3) unless wilful non-disclosure is shown. - HELD THAT: - The Court reviewed precedent and observed that while a best judgment assessment may establish escaped turnover, penalty is penal in nature and requires positive evidence or findings of deliberate conduct amounting to wilful suppression. Although some precedents permit inferring wilfulness from the order as a whole where the assessing authority's reasoning clearly shows application of mind to wilfulness, the assessment orders in this case do not disclose such reasoning. Mere rejection of the taxpayer's explanations for turnover differences does not by itself establish wilful nondisclosure. [Paras 13]

Levy of penalty cannot be sustained merely because a best judgment assessment was made or the taxpayer's explanations were rejected.

Method of accounting on deemed sale value under Section 5 - knowledge of the department negating suppression - Where the taxpayer adopted the method of accounting on the suggestion/direction of Enforcement Wing officers and the method was within the knowledge of the department, the question of suppression and wilful non-disclosure does not arise. - HELD THAT: - The Court found that the petitioner consistently followed a method of computing tax liability on deemed sale value by adding gross profit and transport as suggested by Enforcement Wing officers during inspections. That methodology was disclosed to, and not objected to by, inspecting officers on successive inspections. Authorities were therefore aware of the accounting method, and when facts are within the knowledge of the department mere omission does not amount to suppression. On these grounds, and because the Court's earlier direction to consider bonafides as a preliminary issue was not honoured in the assessment, the imposition of penalty was unwarranted. [Paras 2, 4, 13, 14]

Penalty set aside because the method of accounting was adopted on revenue officers' suggestion and was within the department's knowledge, negating suppression.

Final Conclusion: The writ petitions are allowed insofar as the impugned orders levy penalty under Section 27(3) of the TNVAT Act for assessment years 2009-10 to 2012-13; those penalty components are set aside. The remaining portions of the assessment orders are left undisturbed.

Exemption under Item No. 5 of the IV Schedule (man-made fabrics) - Explanation to Item No. 5 - inclusion in I Schedule to the Additional Duties of Excise (Goods of Special Importance) Act and levy of additional duty - nil rate of additional duty - interpretation of 'levy' and requirement of actual additional duty for exemption - revision jurisdiction under Section 22(1) of the APGST Act - 'decided erroneously or failed to decide any question of law'

Exemption under Item No. 5 of the IV Schedule (man-made fabrics) - Explanation to Item No. 5 - inclusion in I Schedule to the Additional Duties of Excise (Goods of Special Importance) Act and levy of additional duty - nil rate of additional duty - interpretation of 'levy' and requirement of actual additional duty for exemption - Disputed turnover from sale of HDPE woven fabrics is not entitled to exemption under Item No. 5 of the IV Schedule to the APGST Act. - HELD THAT: - The Explanation to Item No. 5 operates in two parts: first, the goods must be included in the relevant heads and sub-heads of the I Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957; and second, the goods are excluded where no additional duties of excise are levied under that Schedule. Both conditions must be satisfied for exemption under Section 8 read with Item No. 5. The court held that a mere inclusion in the I Schedule (even if at a nil rate) satisfies only the first part; the second part requires that additional duty be actually levied (i.e., a positive rate), and a nil rate means no additional duties are levied for the purpose of the Explanation. Relying on principles of literal construction of exemption provisions and authorities distinguishing contexts where 'nil rate' may be treated as a rate for other purposes, the court concluded that HDPE woven fabric, though found to be a man-made fabric, does not qualify for the exemption because additional duty under the Act No. 58 of 1957 was not levied at a substantive rate. Consequently the commodity remains taxable under the APGST Act and cannot claim exemption under Item No. 5. [Paras 48, 49, 51, 52, 60]

HDPE woven fabrics are not exempt under Item No. 5 of the IV Schedule; disputed turnover is taxable under the APGST Act.

Revision jurisdiction under Section 22(1) of the APGST Act - 'decided erroneously or failed to decide any question of law' - erroneous decision on question of law - Whether the Sales Tax Appellate Tribunal was justified in allowing the appeals by setting aside the revisional orders of the Deputy Commissioner (CT). - HELD THAT: - Section 22(1) permits revision by the High Court where the Appellate Tribunal has either decided a question of law erroneously or has failed to decide a question of law. The court analysed the scope of this revisional power and applied the tests from authority: an order is 'erroneous' if it is inconsistent with applicable law. The Tribunal's conclusion that HDPE woven fabrics were exempt under Item No. 5 was a legal error because it misconstrued the Explanation's requirement as to levy of additional duty. As the Tribunal's decision on the legal question of taxability was contrary to law, interference in revision under Section 22(1) was warranted. [Paras 56, 57, 59, 60, 61]

The Sales Tax Appellate Tribunal erred in allowing the appeals; the revisional petitions succeed and the Tribunal's orders are set aside.

Final Conclusion: Tax Revision Cases Nos. 210, 211 and 212 of 2002 are allowed: the Appellate Tribunal's orders dated 25.07.2002 are set aside and the revisional orders of the Deputy Commissioner imposing tax on the respondent for the relevant assessment years are restored; no order as to costs.

Defence of duress and prior payment - quashing of criminal proceedings - premature complaint - second complaint under Section 138 of the Negotiable Instruments Act - maintainability and cognizance of complaint - distinction between complaints under Chapter XVII of the Negotiable Instruments Act and registration of FIRs

Defence of duress and prior payment - quashing of criminal proceedings - Petitioner's contentions that the cheque was issued under duress and that the cheque amount had already been paid are not grounds for quashing the criminal proceedings at the stage of summoning. - HELD THAT: - The Court held that allegations that the cheque was issued under duress and that payment had already been made constitute defences which the accused is entitled to raise at trial but do not supply a basis for exercise of inherent jurisdiction under Section 482 Cr.P.C. to quash the proceedings. Such disputed factual contentions must be examined during trial and cannot be resolved at the threshold in a petition for quashing. [Paras 7]

The defence of duress and prior payment does not warrant quashing of the complaint or criminal proceedings.

Premature complaint - second complaint under Section 138 of the Negotiable Instruments Act - maintainability and cognizance of complaint - distinction between complaints under Chapter XVII of the Negotiable Instruments Act and registration of FIRs - Filing of a premature complaint does not bar filing a fresh complaint under Section 138 of the Negotiable Instruments Act when the time to file becomes ripe, and the Magistrate's taking of cognizance of the fresh complaint was not illegal. - HELD THAT: - The Court distinguished the rule concerning registration of successive FIRs (as discussed in T. T. Antony ) from complaints under Chapter XVII of the Negotiable Instruments Act, observing that offences under Section 138 et seq. stand on a different footing. Reliance was placed on the Supreme Court decisions permitting a complainant who filed prematurely to file a fresh complaint and, if required, seek condonation of delay under the proviso to Section 142 (as in Yogendra Pratap Singh and Gajanad Burange ). Since the earlier Complaint Case No.451 of 2021 was prematurely filed and later dismissed, that premature filing did not render the subsequent Complaint Case No.568 of 2021 infirm. There was no material to show illegality in the learned Magistrate taking cognizance of Complaint Case No.568 of 2021, and therefore quashing the fresh proceedings was inappropriate. [Paras 8, 10, 11, 12]

Filing of a premature complaint does not preclude filing a fresh complaint under Section 138 NI Act when time becomes ripe; the Magistrate's cognizance of the fresh complaint was proper and the proceedings will not be quashed on that ground.

Final Conclusion: Criminal Miscellaneous Petition dismissed; no merit in seeking quashing of Complaint Case No.568 of 2021 as the petitioner's factual defences are matters for trial and a prematurely filed complaint does not bar a fresh complaint under Section 138 of the Negotiable Instruments Act.

Industrial Promotion Assistance (IPA) without financial cap - Special package terms to prevail over general scheme (non obstante/primacy) - Interpretation of incentive package terms - Public policy under Section 23 of the Indian Contract Act - Enforcement of governmental promise / estoppel against unilateral resilement - Writ relief setting aside administrative order as perverse

Industrial Promotion Assistance (IPA) without financial cap - Interpretation of incentive package terms - Special Package of Incentives dated 02.03.2006 does not stipulate any overall financial cap based on Fixed Capital Investment for release of IPA to ACL. - HELD THAT: - The approval letter of 02.03.2006, read as a whole and with the enclosed Statement A, expressly provided that IPA would be 75% of VAT and CST paid in the previous year, would be released without any financial cap and would be available for the period detailed in Statement A. Clause (i) under the package and Clause 8 under "Mode of Calculation of IPA" confirm continuation for the number of years IPA is available; para 9 of the approval relates to a different incentive and begins with "in addition to the Industrial Promotion Assistance", so its reference to a financial cap is not applicable to IPA. The special package, granted with concurrence of the Finance Department and operating under Para 18 of the WBIS, 2000 (which contemplates case-by-case mega project packages subject to a non obstante), governs the entitlement and not any later or separate scheme provision. The Court therefore held that no overall cap linked to FCI was imposed in the package granted to ACL. [Paras 22, 23, 24, 30, 34]

IPA as per the special package dated 02.03.2006 is without any overall financial cap and entitlement must be determined accordingly.

Special package terms to prevail over general scheme (non obstante/primacy) - Interpretation of incentive package terms - The special package approved for ACL, being a mega project package under Para 18 of WBIS, 2000, has primacy over general provisions of later or other WBIS documents and must be interpreted on its own terms. - HELD THAT: - Para 18 of WBIS, 2000 permits special packages for mega projects on a case-by-case basis and contains a non obstante clause; accordingly the specific terms of the package approved by the Commerce and Industries Department for ACL govern the entitlement. The Court rejected reliance on observations or provisions drawn from WBIS, 2004 or other materials that are not applicable to the package granted to ACL and affirmed that the package's express terms determine the scope of IPA. [Paras 13, 18, 22, 29, 30]

The special package granted to ACL prevails and must be interpreted according to its own terms rather than by reference to other scheme provisions.

Writ relief setting aside administrative order as perverse - Enforcement of governmental promise / estoppel against unilateral resilement - The order dated 14.02.2019 of the Additional Chief Secretary rejecting disbursement of IPA in excess of FCI was quashed as being based on irrelevant material and perverse; the learned Single Judge correctly directed disbursement in accordance with the package and supplementary affidavit. - HELD THAT: - The Additional Chief Secretary relied on an observation of the Finance Department that pertained to WBIS, 2004 and misapplied para 9 of the package letter to IPA. That finding was founded on irrelevant material and an incorrect interpretation of the package; it amounted to perversity. The State had earlier released IPA for a significant period and, having issued the special package, could not unilaterally resile from its commitments. The learned Single Judge's conclusion that the authorities acted mala fide and arbitrarily in attempting to defeat ACL's legitimate claim was affirmed. [Paras 33, 34, 35, 46, 48]

The administrative order dated 14.02.2019 is set aside and the direction to disburse the balance amount under the special package stands affirmed.

Public policy under Section 23 of the Indian Contract Act - Enforcement of governmental promise / estoppel against unilateral resilement - The contention that release of IPA in excess of FCI would be void as opposed to public policy under Section 23 Indian Contract Act was rejected. - HELD THAT: - Section 23 renders agreements void if their object is opposed to public policy. The State bore the burden to demonstrate that the special package's terms were so unfair or unreasonable as to shock the conscience and be tainted by public policy. No pleading or material was produced to show that disbursal of IPA beyond FCI would contravene public policy; at most a submission was advanced at the Bar. The Court observed that the terms of the special package did not appear unreasonable or unfair in a manner warranting setting aside on public policy grounds and relied on established principles that courts may relieve parties from contractual duties only in clear cases of public policy breach, which was not shown here. [Paras 41, 43, 44, 45, 47]

Claim that release of IPA above FCI is opposed to public policy is not accepted; relief under the package must be enforced.

Final Conclusion: The appeal is dismissed. The High Court's order allowing the writ petition and directing disbursement of the balance amount under the Special Package of Incentives dated 02.03.2006 is affirmed; the administrative order of 14.02.2019 is set aside. No order as to costs.

Power of Appellate Court to order payment pending appeal under Section 148 of the Negotiable Instruments Act - Minimum deposit of twenty percent of fine or compensation - Time-limit for deposit under Section 148(2) - Obligation to grant interim relief upon admission of appeal - Invalidity of punitive bail-conditions and automatic cancellation clauses

Power of Appellate Court to order payment pending appeal under Section 148 of the Negotiable Instruments Act - Minimum deposit of twenty percent of fine or compensation - Time-limit for deposit under Section 148(2) - Whether the Appellate Court could direct deposit of fifty percent of the fine and require deposit within thirty days contrary to Section 148, and what amount and timeframe should be ordered pending disposal of the appeal - HELD THAT: - The Court examined the amended Section 148 of the Negotiable Instruments Act, 1881 and its object to expedite cheque dishonour cases and protect payees from delay tactics. Section 148(1) contemplates that the Appellate Court may order deposit of a sum which shall be a minimum of twenty percent of the fine or compensation awarded by the trial court, and Section 148(2) provides the deposit is to be made within sixty days or within such further period not exceeding thirty days as directed for sufficient cause. The appellate order under challenge directed deposit of fifty percent within thirty days and made non-deposit a ground for automatic cancellation of bail. Having regard to the purposive interpretation endorsed by the Supreme Court and the statutory scheme, the High Court found the Appellate Court erred in directing deposit of fifty percent (instead of the statutory minimum of twenty percent) and in the manner imposed. Applying the law and precedents relied upon in the judgment, the High Court modified the impugned order to require deposit of twenty percent of the fine within sixty days from the date of the High Court's judgment, consistent with Section 148(1)-(2) and the objects of the amendment. [Paras 17, 18, 19, 23, 24]

Impugned order directing deposit of fifty percent set aside to the extent indicated; applicant directed to deposit twenty percent of the fine within sixty days from this judgment.

Obligation to grant interim relief upon admission of appeal - Invalidity of punitive bail-conditions and automatic cancellation clauses - Whether the Appellate Court could make the grant of bail conditional upon deposit of fifty percent and provide for automatic cancellation of bail on non-deposit, and whether bail should continue during the appeal - HELD THAT: - The Court observed that once an appeal is admitted the Appellate Court is ordinarily obliged to grant appropriate interim relief and should not permit a 'swinging pendulum' during the pendency of the appeal. The High Court held that the condition of fifty percent deposit and the clause of automatic cancellation were punitive and contrary to settled principles as well as inconsistent with the statutory scheme under Section 148. Having modified the deposit requirement to twenty percent and fixed the time for deposit, the High Court directed that the bail already granted by the Appellate Court shall continue on the same terms and conditions until disposal of the appeal, while making it clear that failure to deposit the prescribed twenty percent within sixty days will result in automatic cancellation of bail. [Paras 20, 24, 25, 26]

Bail granted by the Appellate Court shall continue on same terms during the appeal; failure to deposit twenty percent within sixty days will result in automatic cancellation of bail.

Final Conclusion: The High Court allowed the Section 482 Cr.P.C. petition in part by modifying the Appellate Court's order: the appellant is directed to deposit twenty percent of the fine within sixty days and the bail already granted shall continue on the same terms pending disposal of the appeal, subject to automatic cancellation if the twenty percent is not deposited within the prescribed period.