TaxTMI Updates e-Newsletter
May 24,2025

The core legal questions considered by the Court in this matter are:

• Whether the impugned combined Show Cause Notice dated 02.06.2023 issued under Section 74 of the Himachal Pradesh Goods and Services Tax (HPGST) Act and Central Goods and Services Tax (CGST) Act, demanding GST along with interest and penalty on account of alleged excess/ineligible input tax credit, is valid or suffers from jurisdictional, procedural, or substantive infirmities.
• Whether the impugned order in Form DRC-07 dated 21.04.2025, passed under Section 74 of the HPGST/CGST Act, demanding GST amounting to Rs. 1,14,81,344/- including interest and penalty, is liable to be quashed on grounds of illegality, arbitrariness, non-application of mind, and violation of principles of natural justice.
• Whether the petitioner was denied the opportunity to be heard and whether principles of natural justice were violated in the issuance and passing of the Show Cause Notice and the order in Form DRC-07.
• Whether the petitioner is entitled to interim relief in the form of stay of operation of the impugned Show Cause Notice and order during the pendency of the writ petition.
• Whether the petitioner can seek dispensation from procedural requirements such as filing of certified copies and advance service of notices.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity and Jurisdiction of the Show Cause Notice and Order under Section 74 of HPGST/CGST Act

Relevant legal framework and precedents: Section 74 of the CGST Act deals with the determination of tax not paid or short paid or input tax credit wrongly availed or utilized by reason of fraud, willful misstatement, or suppression of facts. The issuance of a Show Cause Notice under this provision is a prerequisite to demanding tax, interest, and penalty. The legal framework mandates that such notices must be issued within the prescribed time limits and must specify the grounds for the demand.

Court's interpretation and reasoning: The Court noted that the Show Cause Notice dated 02.06.2023 was issued subsequent to the issuance of the order in Form DRC-07 dated 21.04.2025, which is procedurally unusual as typically the Show Cause Notice precedes such orders. However, the Court did not find any jurisdictional infirmity in the issuance of the Show Cause Notice or the order. The Court observed that the petitioner had not challenged the jurisdiction or validity of the notice on any substantial ground except alleging violation of natural justice.

Key evidence and findings: The record indicated that the Show Cause Notice demanded GST amounting to Rs. 12,16,57,928/- including interest and penalty for alleged excess or ineligible input tax credit availed by the petitioner. The order in Form DRC-07 demanded Rs. 1,14,81,344/- on similar grounds. The petitioner had not filed any reply to the Show Cause Notice nor appeared before the authority.

Application of law to facts: The Court held that the issuance of Show Cause Notice and order under Section 74 is a statutory procedure and the petitioner is obliged to respond to the allegations before seeking judicial intervention. The Court emphasized that the mere issuance of a notice or order does not amount to illegality or arbitrariness unless the authority acts without jurisdiction or in violation of statutory provisions.

Treatment of competing arguments: The petitioner argued that the notices were cryptic, vague, and without application of mind, violating principles of natural justice. The respondents contended that the notices were issued following due procedure and the petitioner had not availed the opportunity to respond. The Court favored the respondents' position, stressing the mandatory nature of the petitioner's participation in the process.

Conclusions: The Court concluded that the Show Cause Notice and order were not without jurisdiction or illegal. The petitioner's challenge on these grounds was premature and untenable in the absence of any reply or appearance before the authority.

Issue 2: Alleged Violation of Principles of Natural Justice

Relevant legal framework and precedents: Principles of natural justice require that a person against whom adverse action is contemplated must be given a fair opportunity to be heard, to present their case, and to respond to allegations before any final order is passed. This is a fundamental procedural safeguard in administrative and quasi-judicial proceedings.

Court's interpretation and reasoning: The Court observed that the petitioner had not filed any reply to the Show Cause Notice nor appeared before the authority to contest the allegations. The Court clarified that violation of natural justice arises only if the authority denies the opportunity to be heard. Since the petitioner had not availed of the opportunity to respond, the plea of violation was not maintainable.

Key evidence and findings: The absence of any reply or appearance by the petitioner before the tax authority was central to the Court's reasoning. There was no material to suggest that the petitioner was prevented from submitting a reply or appearing in the proceedings.

Application of law to facts: The Court applied the principle that the right to be heard is contingent on the petitioner's active participation. Failure to respond does not convert the process into a violation of natural justice.

Treatment of competing arguments: The petitioner's contention of violation was rejected on the ground that the opportunity was available but not utilized. The respondents' argument that the process was fair and in accordance with law was accepted.

Conclusions: The Court held that there was no violation of natural justice in the issuance and passing of the impugned notices and orders.

Issue 3: Interim Relief and Procedural Requests

Relevant legal framework and precedents: Courts have discretion to grant interim relief such as stay of operation of impugned orders to prevent irreparable harm during the pendency of litigation.

The Court considered two core legal questions:

(i) Whether the Show Cause Notice (SCN) dated 29th November 2023 was duly communicated to the Petitioner;

(ii) Whether the impugned order dated 5th May 2024 was issued beyond the prescribed limitation period as fixed by Notification No. 56/2023-Central Tax dated 28th December 2023, which mandated the last date for issuance as 30th April 2024.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Communication of the Show Cause Notice

The legal framework governing issuance and communication of SCNs under the GST regime requires that notices be properly served to the concerned party, ensuring fair opportunity to respond. The GST Department's procedural norms emphasize uploading such notices on the official portal and/or sending them through registered email or speed post to ensure effective communication.

In the present case, the Department conceded that neither the SCN dated 29th November 2023 nor the pre-notice consultation dispatched on 16th October 2023 was uploaded on the GST portal. The Department admitted the absence of digital communication and relied solely on dispatch by speed post. The Petitioner contended non-receipt of the SCN, which was a fundamental procedural infirmity.

The Court noted a recurring procedural lapse in GST proceedings, where notices and communications are not consistently uploaded on the portal or sent via email, but only dispatched by speed post. This inconsistency undermines the principles of transparency and effective communication, essential for due process.

The Court observed that the absence of portal upload and email dispatch rendered the communication incomplete and deficient, thereby prejudicing the Petitioner's right to be heard. The lack of signatures and Digital Identification Numbers (DIN) on SCNs further compounded procedural irregularities, affecting the authenticity and traceability of the documents.

The Court's reasoning emphasized that effective communication of notices is a sine qua non for valid proceedings and that the Department's failure to adhere to prescribed mechanisms vitiated the process.

Issue (ii): Limitation for issuance of the impugned order

Notification No. 56/2023-Central Tax dated 28th December 2023 prescribed 30th April 2024 as the last date for issuance of orders in relation to the subject matter. The impugned order was physically signed on 30th April 2024 but was uploaded on the portal only on 5th May 2024.

The Petitioner challenged the order on the ground that the delay in uploading amounted to issuance beyond the limitation period, rendering the order invalid.

The Court scrutinized the distinction between the date of signing the order and the date of uploading it on the portal. The Court recognized that the date of passing the order, i.e., the date of signing, is the operative date for limitation purposes. However, the Court also highlighted the practical difficulties and grievances arising from discrepancies between the order date and the portal upload date.

The Court noted that inconsistent practices by the GST Department in uploading orders cause confusion regarding the effective date of the order, which impacts the rights of the parties and the limitation period for challenging such orders.

While the Court did not expressly invalidate the order on this ground, it underscored the necessity for the Department to ensure that orders are uploaded on the same date they are passed to avoid such disputes.

Procedural and Administrative Issues Noticed

The Court identified systemic procedural lapses in the GST Department's handling of communications and orders:

- Absence of a Standard Operating Procedure (SOP) mandating consistent uploading of all notices, orders, and communications on the GST portal;

- Failure to send communications via registered email addresses alongside speed post;

- Lack of signatures and DIN numbers on SCNs and Orders-in-Original, impairing authenticity;

- Discrepancies between the date of passing orders and the date of uploading on the portal, leading to confusion on limitation and validity.

The Court directed the GST Department to formulate and implement a comprehensive SOP addressing these issues, including mandatory portal uploads, email communications, physical dispatch, and ensuring all documents bear the name, signature (digital or physical), date, and DIN number of the issuing officer.

The Court also mandated the Department to file a short affidavit detailing compliance with these directions and the facts specific to the present case.

Pending compliance, the Court restrained the Department from taking any coercive action against the Petitioner.

3. SIGNIFICANT HOLDINGS

The Court's crucial legal reasoning includes the following verbatim observations:

"In a number of matters relating to the GST Department, there are certain procedural issues that the Court has noticed: firstly, that the communications and notices are not duly uploaded on the portal or sent by email. They are only sent by speed post. Secondly, there is no consistency in the practice being followed by the GST Department."

"Accordingly, it is deemed appropriate to direct that the GST Department ought to create a proper SOP for following a consistent practice of: a) Uploading all notices, orders and communications on the portal; Secondly - by sending all such communications, notices and orders through email on the registered email address; Finally - the said correspondence could also be sent by speed post; b) In respect of lack of signatures and DIN Numbers on SCNs and on the Orders-in-Original, the Department ought to ensure that the name of the Officer, the digital signature or the physical signature along with the date and the DIN Number ought to be made available on all the SCNs and orders that are passed."

"One of the grievances usually raised is that there is no consistency between the date of the order and the date when it was uploaded/issued on the portal. Grievances are thus raised as to the date on which the order itself is passed. The GST Department should make an endeavour to ensure that on the date when the order is passed, it is uploaded on the very same day."

On the question of limitation, the Court implicitly held that the operative date for limitation is the date on which the order is signed/passed rather than the date of uploading, but stressed the importance of contemporaneous uploading to avoid ambiguity.

The Court's directions establish core principles of procedural fairness, transparency, and consistency in administrative processes under the GST regime. The judgment underscores the necessity of technological integration (portal uploads and email communication) alongside traditional methods (speed post) for effective service of notices and orders.

Final determinations include:

- The SCN

The core legal questions considered by the Court in this matter include:

• Whether the Petitioners were granted the opportunity of personal hearing as mandated under the principles of natural justice before the impugned Order-in-Original was passed under Sections 74 and 122 of the CGST Act, 2017.
• Whether the Input Tax Credit (ITC) was fraudulently availed by the Petitioners through issuance of fake invoices without actual supply of goods or services.
• The maintainability of writ petitions under Article 226 of the Constitution challenging the impugned order, given the existence of an alternative statutory remedy under Section 107 of the CGST Act.
• Whether the impugned order suffers from any jurisdictional or procedural infirmities, including the allegation regarding the incorrect date of uploading the order on the portal.

2. ISSUE-WISE DETAILED ANALYSIS

Opportunity of Personal Hearing and Principles of Natural Justice

Relevant legal framework and precedents: The CGST Act mandates issuance of a Show Cause Notice (SCN) and an opportunity for personal hearing before any order imposing demand and penalty is passed. The principles of natural justice require that the affected party be given a fair chance to present their case.

Court's interpretation and reasoning: The impugned order records multiple dates on which personal hearings were scheduled and notes that some Noticees appeared and made oral and written submissions, while others did not. Paragraphs 8.1 and 8.2 of the impugned order explicitly state that personal hearing notices were issued and that the adjudicating authority proceeded ex-parte only due to non-cooperation by certain Noticees.

Key evidence and findings: The Show Cause Notice and all Relied Upon Documents (RUDs) were served upon the Petitioners at the confirmed e-mail address [email protected]. The Petitioners did not file any reply to the SCN or appear for personal hearings despite notices being issued.

Application of law to facts: The Court found no reason to disbelieve the Department's record that personal hearing notices were issued. The Petitioners' contention that no personal hearing was granted was not supported by the record. The Court held that the basic requirements of natural justice had been complied with and that the Petitioners had failed to avail themselves of the opportunity.

Treatment of competing arguments: While the Petitioners disputed the issuance of personal hearing notices, the Court relied on the impugned order's clear recording of such notices and the evidence of service of SCN and RUDs. The Court found the Petitioners' argument unsubstantiated.

Conclusions: The Court concluded that there was no violation of the principles of natural justice and that the adjudicating authority had duly complied with procedural requirements.

Fraudulent Availment of Input Tax Credit through Fake Invoices

Relevant legal framework and precedents: Sections 74 and 122 of the CGST Act deal with recovery of tax and imposition of penalties in cases of fraudulent availment of ITC. The Department's investigation under the Directorate General of GST Intelligence (DGGI) targeted firms allegedly involved in generating fake invoices without actual supply of goods.

Court's interpretation and reasoning: The Court noted the statement of the Petitioner, Mr. Sunny Jagga, who admitted issuing invoices to firms which were later found to be fake or non-existent and that he did not know the locations where goods were delivered. He also stated that the invoices were issued on directions of a third party, Mr. Gopal Sharma, whom he now believes cheated him.

Key evidence and findings: The investigation revealed that substantial ITC amounts were availed by the firms without actual supply. The Petitioner's own statement indicated lack of knowledge about the recipients of invoices and the delivery locations, and acceptance of possible fraud by a third party. The Petitioners failed to file any substantive reply or evidence to rebut the allegations or prove genuine supply.

Application of law to facts: The Court found that these factual issues required detailed examination by the adjudicating and appellate authorities. The Petitioner's admission and failure to demonstrate genuine transactions supported the Department's case of fraudulent ITC claim.

Treatment of competing arguments: The Petitioners argued against the findings and procedural aspects, but the Court emphasized the factual nature of the dispute and the necessity of further inquiry by the appropriate authorities rather than interference through writ jurisdiction.

Conclusions: The Court held that the allegations of fraudulent ITC availment were serious and factual in nature, requiring adjudication through the statutory process.

Maintainability of Writ Petition under Article 226

Relevant legal framework and precedents: The Court relied on the Supreme Court's decision in a recent case which clarified that writ petitions under Article 226 challenging orders passed under the CGST Act are maintainable only in exceptional circumstances such as breach of fundamental rights, violation of natural justice, excess of jurisdiction, or challenge to the vires of the statute.

Court's interpretation and reasoning: The Court observed that none of the exceptional circumstances were present in the instant case. The Petitioners had a statutory remedy under Section 107 of the CGST Act to challenge the impugned order. The Court noted that the High Court should not entertain writ petitions that seek to re-assess factual issues which are better suited for appellate authorities.

Key evidence and findings: The existence of an appealable order and the absence of any fundamental rights violation or procedural illegality were established from the record.

Application of law to facts: The Court relegated the Petitioners to avail the statutory appellate remedy and directed them to approach the Appellate Authority with requisite pre-deposit by a specified date.

Treatment of competing arguments: The Petitioners' contention that the writ petition was maintainable was rejected on the basis of the established legal principles and the factual matrix of the case.

Conclusions: The writ petitions were held to be not maintainable and the Petitioners were directed to pursue the remedy under the CGST Act.

Allegation Regarding Incorrect Date of Uploading the Order

Relevant legal framework and precedents: Procedural correctness in issuance and uploading of orders is important but generally does not vitiate the order unless it causes prejudice.

Court's interpretation and reasoning: The Court noted the Petitioners' allegation but observed that such an issue is procedural and can be raised in the statutory appeal.

Key evidence and findings: No substantive evidence was brought to demonstrate prejudice or illegality due to the alleged incorrect date.

Application of law to facts: The Court declined to entertain this issue at the writ stage and left it open for consideration in the appeal.

Conclusions: The issue regarding the date of uploading the order was held to be appropriate for appellate consideration.

3. SIGNIFICANT HOLDINGS

The Court established the following core principles and final determinations:

"It is evident that the conduct of the Noticees is evasive. In my opinion, no purpose will be served to keep the adjudication proceedings pending in view of the non-cooperation from the Notices in the matter. I observe that even though the basic requirement of Principles of Natural Justice has been legally and dutifully complied with, the Noticees have failed to avail the opportunity. I accordingly proceed further to decide the case on merits."

"The network of firms which were being operated, the question whether any actual supplies were made or not and whether ITC was fraudulently availed would be factual issues that require deeper examination of evidence and documents."

"The existence of an alternate remedy is not an absolute bar to the maintainability of a writ petition under Article 226 of the Constitution. But a writ petition can be entertained in exceptional circumstances where there is: (i) a breach of fundamental rights; (ii) a violation of the principles of natural justice; (iii) an excess of jurisdiction; or (iv) a challenge to the vires of the statute or delegated legislation. In the present case, none of the above exceptions was established."

"The Petitioners are relegated to avail of the appellate remedy under Section 107 of the CGST Act along with the requisite pre-deposit by 15th July, 2025. The Appellate Authority shall adjudicate the appeal on merits and not dismiss the same on the ground of limitation."

Issues: Whether the writ petitions challenging the orders under the Tripura State Goods and Services Tax Act, 2017 were maintainable in view of the statutory appellate remedy, and whether alleged non-supply of relied upon documents justified writ interference on the ground of violation of natural justice.

Analysis: A statutory appeal was available under Section 107(1) of the Tripura State Goods and Services Tax Act, 2017, with a further period for condonation under Section 107(4) of the same Act. The grievance regarding non-supply of relied upon documents was held to be a matter that could be urged before the appellate authority along with other questions of law and fact. As the orders were passed after show-cause notice, consideration of the reply, and personal hearing, the proceedings were not found to suffer from patent violation of natural justice warranting writ interference.

Conclusion: The writ petitions were not entertained and were dismissed, leaving the petitioner to pursue the appellate remedy in accordance with law.

1. Whether the show cause notice and demand order imposing penalty and redemption fine under Section 130 read with Section 122 of the OGST Act, 2017, are valid when the goods alleged to be confiscated are not physically available at the time of issuance of the notice.

2. Whether the appellate authority under Section 107 of the OGST Act was correct in rejecting the appeal filed by the petitioner on the ground of limitation and lack of jurisdiction to condone delay beyond the statutory outer limit.

3. Whether the writ petition challenging the show cause notice and demand order is maintainable, particularly when statutory remedies are available and the petitioner had admitted the stock shortage and paid the penalty and redemption fine.

4. The extent and scope of powers conferred on the proper officer under Sections 67, 122, and 130 of the OGST Act, 2017, including the authority to confiscate goods, impose penalty, and levy redemption fine in lieu of confiscation.

5. The applicability of precedents relating to the imposition of redemption fine where goods are not physically available, especially the distinction between cases where goods were released on bond and those where goods are not available at all.

Issue-wise Detailed Analysis

1. Validity of Show Cause Notice and Demand Order When Goods Are Not Physically Available

The petitioner contended that the show cause notice and demand order under Section 130 of the OGST Act were illegal and void because the goods (MS Billet) alleged to be confiscated were not physically available at the time of issuance. The petitioner relied on several judgments from Customs law, including Chinku Exports and Finesse Creation INC, which held that redemption fine cannot be imposed if goods are not physically available unless the goods were released on bond or undertaking. The petitioner argued that since the goods were not physically available, the authority lacked jurisdiction to impose redemption fine or confiscate.

The Court examined the relevant statutory provisions. Section 67(2) of the OGST Act empowers proper officers to search and seize goods, documents, or books relevant to proceedings. Section 122 imposes penalty for supply of goods without invoice or issuance of false invoice. Section 130 provides for confiscation of goods liable to confiscation and allows payment of redemption fine in lieu of confiscation.

The Court noted that the definition of "goods" under Section 2(52) of the Act is broad and includes every kind of movable property other than money and securities. The Court emphasized that the power to confiscate and impose redemption fine is conferred by statute and must be given a purposive interpretation. The Court observed that the petitioner admitted the stock discrepancy and agreed to pay penalty and redemption fine, which was accepted by the authority.

Relying on the Supreme Court decision in Weston Components Ltd., the Court held that redemption fine can be imposed even if goods are not physically available where the goods were released on bond or undertaking. The Court distinguished this from cases where goods are not available at all without any bond or undertaking. The Court also relied on the Gujarat High Court decision in Synergy Fertichem Pvt. Ltd., which held that the prerequisite for imposing redemption fine is that the goods are liable to confiscation, and the fine is payable in lieu of confiscation.

Applying these precedents, the Court found that in the present case, the goods were seized and documents were seized under Form GST-INS-02. The petitioner admitted the shortage and agreed to pay penalty and redemption fine. The documents and seized materials were released after payment. Therefore, the authority acted within its jurisdiction in issuing the show cause notice and demand order. The Court rejected the petitioner's contention that the notice and order are nullities for want of physical availability of goods.

2. Rejection of Appeal by Appellate Authority on Ground of Limitation

The petitioner filed an appeal under Section 107 of the OGST Act almost two years after the demand order, which was rejected on limitation grounds. The appellate authority held it lacked jurisdiction to condone the delay beyond the outer limit fixed by sub-Section (4) of Section 107.

The Court upheld this decision, noting that the statutory provision places an outer cap on condonation of delay, and the authority cannot exercise discretion beyond that limit. The Court emphasized that limitation is a substantive condition precedent to the exercise of appellate jurisdiction and the rejection of the appeal on this ground cannot be faulted.

3. Maintainability of Writ Petition Challenging Show Cause Notice and Demand Order

The petitioner challenged the show cause notice and demand order by way of writ petition under Article 226 of the Constitution, contending the orders were illegal and void.

The Court analyzed the principles governing writ jurisdiction in the presence of alternative statutory remedies. It relied on Supreme Court precedents including Vicco Laboratories, Magadh Sugar and Energy Limited, and Radha Krishan Industries, which establish that writ jurisdiction should not ordinarily be exercised when efficacious alternative remedies exist, except in cases involving violation of fundamental rights, breach of natural justice, lack of jurisdiction, or challenge to vires of legislation.

The Court observed that the petitioner had admitted the stock shortage, paid penalty and redemption fine, and failed to file timely appeal. The Court noted that the writ petition essentially sought to re-agitate issues that could have been raised in appeal. The Court also relied on a coordinate Bench decision in Shri D. Murali Mohan Patanaik, which declined to interfere in similar circumstances where payment was made without protest and statutory remedies were available.

The Court held that the writ petition was not maintainable as the petitioner had failed to exhaust statutory remedies and did not raise any ground warranting interference under Article 226.

4. Scope of Powers under Sections 67, 122, and 130 of the OGST Act

The Court examined the statutory scheme conferring powers on proper officers to inspect, search, seize, confiscate goods, and impose penalties. Section 67(2) authorizes search and seizure where goods liable to confiscation or relevant documents are secreted. Section 122 imposes penalty for supply without invoice or false invoice. Section 130 provides for confiscation of goods and levy of redemption fine in lieu of confiscation.

The Court held that these provisions confer broad powers on authorities to combat tax evasion and enforce compliance. The power to impose redemption fine is linked to the authority to confiscate goods. The Court rejected the petitioner's narrow interpretation that physical availability of goods is a strict prerequisite for confiscation or redemption fine, emphasizing the legislative intent to prevent tax evasion.

5. Treatment of Competing Arguments and Precedents

The petitioner relied heavily on Customs law precedents such as Chinku Exports, Finesse Creation INC, and others, which held that redemption fine cannot be imposed if goods are not physically available unless released on bond. The petitioner argued that the instant case did not involve release on bond and thus the fine was wrongly imposed.

The Court distinguished these precedents by emphasizing that in the present case, the seized goods and documents were released after payment of penalty and redemption fine, effectively akin to release on bond. The Court also noted that the OGST Act provisions differ in some respects from Customs law but the doctrine of pari materia justifies reliance on Customs precedents.

The revenue side relied on the Gujarat High Court decision in Synergy Fertichem and Madras High Court decision in Visteon Automotive Systems, which upheld imposition of redemption fine without physical availability of goods if confiscation is authorized. The Court found these authorities more applicable and consistent with the statutory scheme.

Regarding limitation and writ jurisdiction, the Court rejected the petitioner's attempt to circumvent statutory appeal remedy by filing writ petition after delay. The Court cited Supreme Court authorities holding that writ jurisdiction cannot be exercised to re-open issues that can be decided in statutory appeals, except in exceptional cases involving jurisdictional errors or fundamental rights violations.

Conclusions

The Court concluded that:

- The proper officer had jurisdiction to issue the show cause notice and demand order under Sections 67, 122, and 130 of the OGST Act, 2017, including imposing penalty and redemption fine, despite the goods not being physically available at the time of notice, as the goods were seized and released after payment.

- The appeal filed by the petitioner was rightly rejected by the appellate authority on limitation grounds, as the authority lacked power to condone delay beyond the statutory outer limit.

- The writ petition challenging the show cause notice and demand order was not maintainable, since the petitioner admitted the shortage, paid the demanded amounts, and failed to exhaust statutory remedies timely.

- The principles of statutory interpretation, relevant precedents, and the legislative intent support the authority's actions in imposing penalty and redemption fine in the circumstances of this case.

Significant Holdings

"The power to confiscate goods and impose redemption fine under Section 130 of the OGST Act is not defeated merely because the goods are not physically available at the time of issuance of show cause notice, particularly where the goods were seized and released after payment of redemption fine and penalty."

"The appellate authority under Section 107 of the OGST Act lacks jurisdiction to condone delay beyond the outer limit fixed under sub-Section (4) of Section 107, and rejection of appeal on limitation grounds is not liable to be interfered with."

"The writ jurisdiction under Article 226 of the Constitution should not ordinarily be exercised to challenge show cause notices or demand orders where efficacious statutory remedies exist and have not been exhausted, except in cases of jurisdictional errors, violation of fundamental rights, or abuse of process."

"A decree or order passed by a Court or authority without inherent jurisdiction is a nullity and can be challenged at any stage, including collateral proceedings; however, an erroneous exercise of jurisdiction conferred by statute should be corrected through statutory appeals and not by writ petition."

"The definition of 'goods' under the OGST Act is wide and inclusive, and the provisions relating to confiscation and redemption fine must be interpreted purposively to prevent evasion of tax."

The first issue pertains to the validity and legality of the cancellation of the petitioner's GST registration under Section 29(2)(c) of the CGST Act, 2017, which empowers the proper officer to cancel registration if returns are not filed for six consecutive months. This includes examining whether the procedural safeguards under Rule 22 of the CGST Rules, 2017, particularly the issuance of show cause notice and opportunity to reply or appear for hearing, were duly followed.

The second issue concerns the petitioner's entitlement to restoration of GST registration after cancellation, especially in light of the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017, which allows the proper officer to drop cancellation proceedings if the person furnishes all pending returns and pays the due tax, interest, and late fees.

Thirdly, the Court considered the limitation period for filing an application for revocation of cancellation under the GST regime, and whether the petitioner's inability to file such an application within the prescribed timeline could be excused or mitigated.

Regarding the first issue, the Court referred to Section 29(2)(c) of the CGST Act, 2017, which authorizes cancellation of registration where returns have not been filed for six continuous months. Rule 22 of the CGST Rules, 2017 prescribes the procedure for cancellation, mandating the issuance of a show cause notice in FORM GST REG-17, requiring a reply within seven working days in FORM REG-18, and thereafter, if the reply is unsatisfactory or absent, passing an order of cancellation in FORM GST REG-19. The proviso to sub-rule (4) of Rule 22 further provides that if the person furnishes all pending returns and pays all dues, the proceedings shall be dropped with an order in FORM GST REG-20.

The Court noted that the petitioner was served with a show cause notice under Section 29(2)(c) for non-filing of returns for six months but was not notified of any personal hearing date. The petitioner failed to reply within the stipulated time due to illness and personal difficulties, and the cancellation order was passed ex-parte. The Court recognized that while procedural requirements were broadly followed, the absence of a personal hearing date notification was a procedural lacuna. However, the substantive ground for cancellation-non-filing of returns-remained valid.

On the second issue, the Court emphasized the significance of the proviso to sub-rule (4) of Rule 22, which allows for dropping cancellation proceedings if the person submits all pending returns and pays all outstanding dues including interest and late fees. The petitioner, after recovery from illness, updated all pending returns and discharged all GST dues. However, the petitioner could not file an application for revocation of cancellation as the prescribed 270-day timeline had expired, and the GST portal displayed a message denying such filing.

The Court referred to a precedent order involving a similarly situated petitioner, which upheld the principle that cancellation entails serious civil consequences and that the law provides a remedial mechanism for restoration upon compliance with statutory requirements. The Court held that the proper officer has the authority and jurisdiction to drop cancellation proceedings and restore registration if the petitioner approaches with all pending returns filed and dues paid, even if the formal revocation application timeline has lapsed.

Regarding the third issue, the Court acknowledged the limitation period of 270 days for filing an application for revocation of cancellation but found that strict adherence to this timeline should not preclude relief where the petitioner has complied with all substantive requirements post-cancellation. The Court, therefore, permitted the petitioner to approach the competent authority within two months from the date of the order to seek restoration of GST registration by fulfilling the conditions stipulated in the proviso to sub-rule (4) of Rule 22.

The Court directed the concerned authority to consider such an application expeditiously and restore the GST registration if all conditions are met. It clarified that the period for computation under Section 73(10) of the CGST Act/SGST Act shall commence from the date of the instant order, except for the financial year 2024-25, which shall be governed by Section 44 of the CGST Act. The petitioner remains liable to pay arrears including tax, penalty, interest, and late fees.

The Court's reasoning underscores the balance between enforcing compliance under the GST framework and safeguarding the rights of taxpayers by providing an opportunity to rectify defaults and restore registration. The judgment preserves the procedural sanctity of cancellation while recognizing the remedial provisions that mitigate harsh consequences where compliance is subsequently achieved.

Significant holdings include the Court's interpretation of Rule 22(4) proviso, which states: "where the person instead of replying to the notice served under sub rule (1) for contravention of the provisions contained in Clause (b) or Clause (c) of sub-section (2) of section 29, furnishes all the pending returns and makes full payment of the tax dues along with applicable interest and late fee, the proper officer shall drop the proceedings and pass an order in FORM GST REG-20." This principle was applied to allow restoration despite the expiry of the formal revocation timeline.

In conclusion, the Court held that cancellation of GST registration for non-filing of returns for six months is valid under Section 29(2)(c), but the petitioner is entitled to restoration if all pending returns are filed and dues paid. The procedural lapse in not notifying a hearing date was noted but did not vitiate the cancellation. The petitioner was granted a two-month window to apply for restoration, which the proper officer must consider expeditiously and in accordance with law. The petitioner remains liable for arrears as per applicable provisions.

Issues: (i) Whether the petitioner could be permitted to file one consolidated appeal against the common adjudication order arising from a common show cause notice for multiple financial years. (ii) Whether the appeal, if filed within the time granted by the Court, should be protected from dismissal on the ground of limitation, and whether the petitioner could raise the grievance regarding the GST DRC-07 before the appellate authority.

Issue (i): Whether the petitioner could be permitted to file one consolidated appeal against the common adjudication order arising from a common show cause notice for multiple financial years.

Analysis: The show cause notice was common, the adjudication culminated in a common order, and the reference in the impugned order to only one financial year did not alter the fact that the dispute covered the entire period noticed in the proceedings. Requiring separate appeals merely because the form reflected one year would be unnecessarily duplicative.

Conclusion: The petitioner was permitted to file one consolidated appeal before the Appellate Authority under Section 107 of the Central Goods and Services Tax Act, 2017.

Issue (ii): Whether the appeal, if filed within the time granted by the Court, should be protected from dismissal on the ground of limitation, and whether the petitioner could raise the grievance regarding the GST DRC-07 before the appellate authority.

Analysis: In view of the demand amount and the pre-deposit requirement, time was granted for filing the appeal. The Court also directed that, if the appeal was filed within the stipulated period, it should be considered on merits and not rejected as time-barred. The objection regarding the issuance of Form GST DRC-07 was left open for consideration by the appellate authority.

Conclusion: The appeal was allowed to be filed up to 10 July 2025 with the requisite pre-deposit, and it was directed not to be dismissed on limitation if filed within that period.

Final Conclusion: The petition succeeded only to the extent of procedural relief, enabling a consolidated statutory appeal with protection against limitation, while leaving the substantive tax dispute to be decided by the appellate authority.

Ratio Decidendi: Where a common show cause notice and common adjudication order cover multiple periods, a consolidated appeal may be permitted, and procedural limitation may be relaxed to ensure adjudication on merits.

- Whether the petitioner no. 1, claiming ownership of goods in transit, is entitled to release of the goods under Section 129(1)(a) of the WBGST & CGST Act, 2017, based on a tax invoice and e-way bill issued by the supplier.

- Whether the authorities were justified in rejecting the petitioner's claim of ownership on the ground that the purported supplier disclaimed issuance of the tax invoice and registration under the Act.

- The validity and evidentiary value of the tax invoice and e-way bill in establishing ownership of goods for the purpose of release under Section 129.

- The applicability and binding nature of the Circular dated December 31, 2018 issued by the Central Board of Indirect Taxes and Customs (CBIC) regarding ownership proof through tax invoices.

- The procedural fairness owed to the petitioner, including the right to confront and cross-examine the person denying the validity of the invoice.

- The scope of relief available under Section 129(1)(b) of the Act where ownership is disputed but release is sought on payment of penalty.

- The procedural directions for appeal under Section 129(3) of the Act and the manner in which the appellate authority should adjudicate ownership disputes.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Release of Goods under Section 129(1)(a) based on Tax Invoice and E-way Bill

The legal framework under Section 129(1)(a) of the WBGST & CGST Act, 2017 provides for release of detained goods to the owner upon submission of proof of ownership, typically through a tax invoice and e-way bill. The petitioner no. 1 claimed ownership based on the supplier's issuance of these documents in their name. The petitioner relied on a Government of India Circular dated December 31, 2018, which states that possession of a tax invoice in the name of the petitioner should suffice to establish ownership for release purposes.

The Court noted that ordinarily, a tax invoice is sufficient proof of ownership of goods. However, the critical factual finding was that the purported supplier, Siddhartha Ghosh, disclaimed having issued the invoice or even possessing registration under the Act. This dispute over the transaction's authenticity undermined the petitioner's claim.

The Court distinguished the petitioner's reliance on the Circular by emphasizing that the Circular's guidance applies when the authenticity of the invoice is not in dispute. Here, the named consignor's denial of the transaction rendered the invoice's evidentiary value questionable. Thus, the Circular could not be invoked to conclusively establish ownership.

Regarding precedent, the petitioner cited an unreported Division Bench judgment allowing provisional release on the basis of the invoice despite departmental allegations of fakery. The Court clarified that in that case, the consignor did not disclaim the transaction, and the release was provisional, subject to the outcome of the writ petition. Therefore, that precedent did not mandate acceptance of ownership in the present facts.

Issue 2: Justification for Rejection of Ownership Claim and Validity of Tax Invoice

The Assistant Commissioner, on enquiry, found that the purported supplier denied issuing the invoice and having registration, casting doubt on the transaction's validity. The Court upheld this finding as a reasonable basis for rejecting the petitioner's ownership claim under Section 129(1)(a).

The Court held that where the authenticity of the invoice is disputed by the alleged issuer, the authorities are justified in refusing to accept it as conclusive proof of ownership. This approach prevents misuse of documents to claim ownership of goods unlawfully.

Issue 3: Applicability of Section 129(1)(b) and Payment of Penalty for Release

In light of the disputed ownership, the authorities invoked Section 129(1)(b), which allows release of detained goods on payment of penalty, even if ownership is not established. The petitioner paid a penalty equal to 50% of the goods' value to secure release.

The Court found no irregularity in this approach, as it balances the rights of the claimant with the need to prevent illegal transportation of goods. The penalty regime under Section 129(1)(b) acts as a deterrent where ownership is contested.

Issue 4: Procedural Fairness and Right to Confront Adverse Witness

The Court observed that the petitioner was denied an opportunity to confront the statement of Siddhartha Ghosh, whose denial of the transaction was pivotal in rejecting ownership. The Court emphasized the principle of natural justice requiring that the petitioner be allowed to cross-examine such adverse witnesses in appellate proceedings.

The Court directed that if the petitioner files an appeal under Section 129(3), the appellate authority must provide a fair hearing including the opportunity to challenge the denial by the purported supplier, who should be produced as a witness if necessary.

Issue 5: Appeal Mechanism under Section 129(3) and Directions for Disposal

The Court noted that the petitioner has recourse to appeal under Section 129(3) against the detention order. It directed that any appeal filed within four weeks must be heard on merits and disposed of within sixteen weeks.

The appellate authority must consider the petitioner's ownership claim afresh, allowing evidence and cross-examination, and decide the issue in light of the observations made. The respondents were directed to assist the petitioner in filing the appeal and ensure procedural fairness.

3. SIGNIFICANT HOLDINGS

- "Ordinarily a tax invoice is sufficient proof of ownership of goods, however, having regard to the fact that the named consignor on the invoice having come forward and having disclaimed the validity of the transaction and the factum of issuance of such tax invoice, the aforesaid circular in my view cannot come in aid of the petitioners to establish the ownership."

- "If the respondents seek to rely on the statement of the Siddhartha Ghosh, the respondents must make available such statement of Siddhartha Ghosh for the petitioners to respond to the same. The respondents should produce Siddhartha Ghosh as witness in the proceedings for the petitioners to cross-examine him, in the event the petitioners choose to file an appeal under Section 129 (3) of the said Act."

- The Court established the principle that while tax invoices generally suffice to establish ownership for release of goods under Section 129(1)(a), this presumption is rebuttable by credible denial from the purported issuer.

- The Court affirmed the validity of releasing goods on payment of penalty under Section 129(1)(b) where ownership is disputed.

- The Court underscored the procedural fairness requirement that appellants must be allowed to confront adverse witnesses and that appellate authorities must adjudicate appeals on merits within a fixed timeframe.

- Final determination: The petitioner's claim for release under Section 129(1)(a) was rightly rejected due to disputed ownership, but the petitioner is entitled to appeal and establish ownership with due process, including cross-examination of adverse parties. The release of goods on penalty payment under Section 129(1)(b) was appropriate in the circumstances.

Issues: Whether the writ petitions challenging the GST demand orders should be entertained in view of the availability of the statutory appellate remedy, and whether the petitioner should be granted permission to appeal with modification of the pre-deposit requirement and protection against limitation.

Analysis: The petitions concerned two demand orders for the same tax period and overlapping transactions. In view of the statutory remedy of appeal under Section 107 of the Central Goods and Services Tax Act, 2017, the petitioner was directed to pursue appeals before the Commissioner (Appeals). The Court also permitted adjustment of the amount already deposited and limited the immediate pre-deposit to one demand, while protecting the petitioner from dismissal on limitation if the appeals were filed within the stipulated period.

Conclusion: The writ petitions were not entertained on merits and the petitioner was relegated to the appellate remedy under Section 107, with the directions regarding pre-deposit, adjustment of the deposited amount, and limitation protection.

Final Conclusion: The matter was disposed of by directing the petitioner to avail the statutory appeal remedy, with ancillary relief on pre-deposit and filing within time.

Ratio Decidendi: Where an efficacious statutory appellate remedy is available in a GST matter, the writ jurisdiction may be declined and the litigant relegated to the appellate forum with appropriate directions on pre-deposit and limitation.

- Whether the cancellation of GST registration under Section 29(2)(c) of the CGST Act, 2017 for non-filing of returns for a continuous period of six months or more was valid in the absence of a personal hearing date being notified to the petitioner.

- Whether the petitioner, after cancellation of GST registration, is entitled to seek restoration of registration by furnishing all pending returns and paying due taxes, interest, and late fees as per the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017.

- The procedural compliance required under Rule 22 of the CGST Rules, 2017 for cancellation and possible restoration of GST registration.

- The scope of authority of the proper officer to drop cancellation proceedings and restore registration upon fulfillment of statutory conditions.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of cancellation of GST registration without notification of personal hearing date

Relevant legal framework and precedents: Section 29(2)(c) of the CGST Act, 2017 empowers a proper officer to cancel GST registration if a registered person fails to furnish returns for a continuous period of six months. Rule 22 of the CGST Rules, 2017 prescribes the procedure for cancellation, including issuance of a show cause notice (Form GST REG-17) and opportunity to reply (Form GST REG-18). The rule mandates that the registered person be given a chance to show cause why registration should not be cancelled.

Court's interpretation and reasoning: The Court observed that the petitioner was served with a show cause notice requiring a reply within 30 days but was not notified of any personal hearing date. The impugned cancellation order was passed ex-parte on the basis of available records. The Court noted that Rule 22(1) requires issuance of a show cause notice but does not explicitly mandate a personal hearing date. The absence of a personal hearing date notification was highlighted but not found to vitiate the cancellation as the petitioner was given an opportunity to reply in writing.

Key evidence and findings: The petitioner admitted failure to file returns for over six months but contended that no personal hearing date was notified. The record showed issuance of show cause notice and cancellation order.

Application of law to facts: The Court held that the procedural requirement of issuing a show cause notice and providing an opportunity to reply was complied with. The absence of a personal hearing date notification did not invalidate the cancellation as the petitioner could have responded in writing, which was not done within the stipulated time.

Treatment of competing arguments: The petitioner argued procedural unfairness due to lack of personal hearing. The respondent contended compliance with Rule 22 procedure. The Court sided with the respondent, emphasizing written reply opportunity sufficed.

Conclusion: The cancellation was validly effected under Section 29(2)(c) and Rule 22 despite no personal hearing date notification, as the petitioner had opportunity to reply in writing but failed to do so.

Issue 2: Entitlement to restoration of GST registration upon compliance with pending returns and payments

Relevant legal framework and precedents: Proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017 states that if a person served with a show cause notice under Section 29(2)(c) furnishes all pending returns and makes full payment of tax dues along with interest and late fees, the proper officer shall drop the cancellation proceedings and pass an order in Form GST REG-20.

Court's interpretation and reasoning: The Court emphasized that the proviso creates a statutory mechanism for restoration of registration if the defaulter complies with pending statutory obligations. The Court noted that cancellation entails serious civil consequences and thus restoration is permissible upon fulfillment of conditions.

Key evidence and findings: The petitioner expressed readiness and willingness to comply with all formalities under the proviso, though the time limit for filing revocation had elapsed.

Application of law to facts: The Court held that despite the lapse of time for revocation application, the petitioner can approach the proper officer with all pending returns and payments. The officer has authority and jurisdiction to drop cancellation proceedings and restore registration under the proviso to Rule 22(4).

Treatment of competing arguments: The petitioner sought restoration despite time lapse. The respondent did not dispute authority of officer to restore registration if statutory conditions are met. The Court balanced strict statutory timelines with equitable relief.

Conclusion: The petitioner is entitled to seek restoration of GST registration by submitting all pending returns and making full payment of dues with interest and late fees. The proper officer has jurisdiction to restore registration accordingly.

Issue 3: Procedural compliance and authority of the proper officer in cancellation and restoration

Relevant legal framework and precedents: Rule 22 of the CGST Rules, 2017 governs cancellation procedure, including issuance of show cause notice, reply, order of cancellation (Form GST REG-19), and order dropping proceedings (Form GST REG-20). Section 29(2)(c) authorizes cancellation for non-filing of returns for six months.

Court's interpretation and reasoning: The Court interpreted Rule 22 as a complete code on cancellation and restoration. It underscored that the proper officer must follow prescribed forms and timelines but has discretion to drop proceedings if statutory conditions are met. The Court referred to a recent precedent involving a similarly situated petitioner, reinforcing the principle of restoration upon compliance.

Key evidence and findings: The petitioner's failure to file returns triggered cancellation. The procedural steps of notice and order were followed. The petitioner's willingness to comply post-cancellation was established.

Application of law to facts: The Court directed that the petitioner approach the proper officer within two months to seek restoration. The officer must consider the application in accordance with law and take expeditious steps for restoration if the petitioner complies with the proviso to Rule 22(4).

Treatment of competing arguments: The Court balanced enforcement of tax laws with procedural fairness and opportunity for compliance even after cancellation.

Conclusion: The proper officer is empowered to cancel registration following procedure and to restore registration upon compliance with pending returns and payments within a reasonable time frame.

3. SIGNIFICANT HOLDINGS

"It is discernible from a reading of the proviso to sub-rule (4) of Rule 22 of the CGST Rules 2017 that if a person, who has been served with a show cause notice under Section 29 (2) (c) of the CGST Act, 2017, is ready and willing to furnish all the pending returns and to make full payment of the tax itself along with applicable interest and late fee, the officer, duly empowered, can drop the proceedings and pass an order in the prescribed Form i.e. Form GST REG-20."

"Having regard to the fact that the GST registration of the petitioner has been cancelled under Section 29 (2) (c) of the CGST Act, 2017 for the reason that the petitioner did not submit returns for a period of 6 (six) months and more; and the provisions contained in the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017 and cancellation of registration entails serious civil consequences, this Court is of the considered view that in the event the petitioner approaches the officer, duly empowered, by furnishing all the pending returns and make full payment of the tax dues, along with applicable interest and late fee, the officer duly empowered, has the authority and jurisdiction to drop the proceedings and pass an order in the prescribed Form."

"The petitioner shall approach the concerned authority within a period of 2 (two) months from today seeking restoration of his GST registration. If the petitioner submits such an application and complies with all the requirements as provided in the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017, the concerned authority shall consider the application of the petitioner for restoration of his GST registration in accordance with law and shall take necessary steps for restoration of GST registration of the petitioner as expeditiously as possible."

Core principles established include:

- Cancellation of GST registration under Section 29(2)(c) for non-filing of returns is valid if procedural requirements under Rule 22 are complied with, including issuance of show cause notice and opportunity to reply in writing.

- Absence of notification of a personal hearing date does not invalidate cancellation if opportunity to reply in writing is provided.

- The proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017 empowers the proper officer to drop cancellation proceedings and restore registration upon full compliance by the defaulting person of pending returns, tax dues, interest, and late fees.

- Even after the prescribed time for revocation application has elapsed, restoration is possible if the petitioner approaches the proper officer within a reasonable time and complies with statutory conditions.

- The proper officer has jurisdiction and authority to consider restoration applications and must act expeditiously in accordance with law.

Final determinations:

- The cancellation of GST registration was validly effected under the CGST Act and Rules.

- The petitioner is entitled to seek restoration by submitting all pending returns and making full payment of dues with interest and late fees.

- The proper officer is directed to consider and act upon such restoration application within a stipulated timeframe.

- The writ petition is disposed of with directions for restoration procedure and no costs awarded.

Issues: Whether the writ petition should be entertained against the tax demand, or the petitioner should be relegated to the statutory appellate remedy; and whether any delay in filing such appeal should be ignored.

Analysis: The challenge to the demand depended on the contractual documents said to establish exemption, but those agreements were not produced along with the objections before the assessing authority. In that situation, the authority could not examine the claimed exemption on merits. The proper course was therefore to pursue the statutory appeal under the GST law. To preserve that remedy, the Court directed that an appeal filed within one month would be entertained without taking delay into account. The Court also clarified that it was not expressing any view on the merits of the exemption claim or the tax liability.

Conclusion: The petitioner was relegated to the appellate remedy, and any appeal filed within the stipulated period was to be accepted without reckoning delay.

The core legal questions considered by the Authority for Advance Ruling (AAR) pertain to the Goods and Services Tax (GST) treatment of contracts involving supply and erection of rooftop solar power plants. Specifically, the issues are:

(a) Whether the supply of components of the solar power plant along with erection and installation constitutes a composite supply under GST;

(b) If so, the correct classification and applicable GST rate on such composite supply;

(c) The valuation basis on which the GST rate should be applied;

(d) Applicability of Notification No. 24/2018-Central Tax (Rate) dated 31st December 2018, which provides an explanation regarding the apportionment of value between goods and services in such composite supplies.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Nature of Supply - Composite Supply or Works ContractRs.

Relevant legal framework and precedents: Section 2(30) of the GST Act defines composite supply as a supply consisting of two or more taxable supplies naturally bundled and supplied in conjunction, with one principal supply. Section 2(119) defines works contract as a contract involving building, construction, erection, installation, or commissioning of immovable property where transfer of property in goods is involved. Entry no. 6 of Schedule II treats works contract as supply of services.

The General Clauses Act, 1897 (Section 3(26)) and Transfer of Property Act, 1882 provide the definition of immovable property, which is critical to determine whether the contract qualifies as a works contract. The Apex Court in Commissioner of Central Excise, Ahmedabad v. Solid and Correct Engineering Works laid down the test for immovability involving rootedness, embedment, or permanent attachment for beneficial enjoyment.

Court's interpretation and reasoning: The AAR examined the nature of the rooftop solar power plant installation, considering the components (monocrystalline panels, inverters, mounting structures, wiring, etc.) and the installation process. The solar panels are mounted on structures fastened to the roof with concrete foundations, nuts, bolts, and other fixtures, making the entire system integrated and inseparable from the building.

The Authority noted that although the solar panels themselves are not rooted or embedded in the earth like trees or walls, the mounting structures are permanently fastened to the roof, which is part of an immovable building. The civil works involved (e.g., concrete foundations for mounting structures) and the permanence of installation imply the solar power plant is immovable property.

The AAR distinguished the recent Andhra Pradesh High Court ruling which held that the solar power plant was not immovable property because the modules were not permanently attached for beneficial enjoyment of the building. The AAR found that in the present case, the civil foundation is embedded in the earth for the permanent beneficial enjoyment of the solar power plant, thus making the entire installation immovable.

Key evidence and findings: The contract is an Engineering Procurement Construction (EPC) contract, involving supply, design, installation, testing, and commissioning. The detailed installation process, including preparation of roof, mounting structures, electrical wiring, and grid connection, was considered. The permanence and inseparability of the installation were emphasized.

Application of law to facts: Given the permanent attachment and nature of the installation, the supply is a composite supply of the nature of works contract as defined under Section 2(119) of the GST Act.

Treatment of competing arguments: The AAR acknowledged the conflicting rulings by various Advance Ruling Authorities-some treating similar contracts as works contracts (Karnataka, Maharashtra, Rajasthan) and others as composite supplies not amounting to works contract (Haryana, Andhra Pradesh High Court). After detailed analysis, the AAR aligned with the view that the contract constitutes a works contract.

Conclusion: The supply of components along with erection and installation of the rooftop solar power plant is a composite supply of the nature of works contract.

Issue (b): Classification and Rate of GST on the Contract

Relevant legal framework and precedents: Notification No. 1/2017-Central Tax (Rate) and Notification No. 11/2017-Central Tax (Rate), both dated 28th June 2017, as amended, provide GST rates on renewable energy devices and related services. Entry no. 201A of Schedule II prescribes 6% CGST + 6% SGST (total 12%) on goods such as solar power devices. Entry no. 38 of Notification No. 11/2017 prescribes 18% GST on services related to construction, engineering, installation, or other technical services for setting up renewable energy plants.

Notification No. 24/2018-Central Tax (Rate) dated 31st December 2018 provides an explanation that when goods specified in entry no. 201A are supplied along with taxable services specified in entry no. 38, the value of goods shall be deemed as 70% of the gross consideration and the remaining 30% as value of taxable services.

Court's interpretation and reasoning: The AAR held that although the contract is a works contract (which is treated as supply of services under GST), the tax rate on the composite supply cannot be a single rate. Instead, the contract value must be bifurcated into goods and services components as per the 70:30 ratio prescribed in Notification No. 24/2018.

The goods component (solar power devices and parts) attracts GST at 12%, while the services component (installation, erection, commissioning) attracts GST at 18%. The effective GST rate on the entire contract is thus 13.8% (70% x 12% + 30% x 18%).

Key evidence and findings: The contract documents, relevant notifications, and prior rulings (including Rajasthan AAR and others) were examined. The AAR emphasized that the two entries (201A and 38) are interlinked and must be read conjointly.

Application of law to facts: The contract is classified as a works contract composite supply, but the tax rate is applied separately on goods and services components as per the prescribed ratio.

Treatment of competing arguments: The AAR considered the Revenue's submission that the entire contract should be taxed at the works contract service rate of 9% CGST + 9% SGST (18% total). However, it preferred the applicant's and other AARs' interpretation that the bifurcation and differential rates apply.

Conclusion: The GST rate applicable is 12% on 70% of the gross contract value (goods) and 18% on 30% of the gross contract value (services).

Issue (c): Valuation for GST Purposes

Relevant legal framework and precedents: The value for GST is the gross consideration charged by the supplier for the entire supply as per the GST Act and relevant notifications.

Court's interpretation and reasoning: The AAR confirmed that the valuation basis for the composite supply is the gross contract value charged by the supplier, which is then apportioned between goods and services in the 70:30 ratio.

Key evidence and findings: The contract value of Rs. 1.76 crore was considered, with Rs. 1.08 crore (70%) attributable to goods and Rs. 0.46 crore (30%) to services.

Application of law to facts: The gross consideration is the value on which GST is calculated, apportioned as per the notification.

Conclusion: GST is applicable on the gross contract value, apportioned 70% to goods and 30% to services.

Issue (d): Applicability of Notification No. 24/2018-Central Tax (Rate)

Relevant legal framework and precedents: Notification No. 24/2018-Central Tax (Rate) dated 31st December 2018 contains an explanation prescribing the 70:30 ratio of goods to services valuation for composite supplies involving renewable energy devices and related services.

Court's interpretation and reasoning: The AAR held that this notification is squarely applicable to the contract under consideration, providing clarity on valuation and tax rates.

Key evidence and findings: The notification explicitly covers solar power generating systems and related services.

Application of law to facts: The notification governs the valuation and tax rate apportionment for the contract.

Conclusion: Notification No. 24/2018 is applicable and governs the valuation and GST rate apportionment for the contract.

3. SIGNIFICANT HOLDINGS

"The supply of components of the solar power plant along with the erection of the same would be treated as a composite supply of the nature of works contract."

"As per Entry no. 201 of Notification No. 01/2017, the tax rate should be 12% IGST on seventy per cent of the gross value charged by the supplier and 18% IGST on thirty per cent of the gross value charged by the supplier."

"The value referred to here is the gross consideration charged by the supplier for the entire supply."

"Notification No. 24/2018-Central Tax (Rate) dated 31 December 2018 containing the explanation with the ratio of goods and services as 70:30 is applicable."

Core principles established include:

• Rooftop solar power plant installations, involving permanent attachment to immovable property, qualify as works contracts under GST.
• Works contracts involving renewable energy devices are composite supplies requiring bifurcation of value and tax rates between goods and services.
• Valuation for GST purposes is on the gross contract value, apportioned 70% to goods and 30% to services as per Notification No. 24/2018.
• The applicable GST rates are 12% on goods and 18% on services, resulting in an effective rate of 13.8% on the total contract value.

Issues: Whether deduction already allowed under Section 80-IA(9) is to be reduced while computing deduction under Section 80-HHC, or whether the restriction operates only at the stage of allowing aggregate deductions.

Analysis: Chapter VI-A permits deductions from gross total income. Section 80-IA(9) provides that profits and gains claimed and allowed under that section shall not again be allowed under another provision under Heading C, and that deductions shall not exceed the eligible business profits. Its language restricts the allowance of deductions, not the computation of deduction under another provision. The computation formula under Section 80-HHC must therefore be applied to gross total income without reducing it by the deduction allowed under Section 80-IA. After independent computation, the aggregate deduction must be limited to the profits and gains of the eligible business.

Conclusion: Deduction under Section 80-IA(9) does not reduce gross total income for computing deduction under Section 80-HHC; it only restricts the aggregate deductions under Heading C to the eligible business profits. The issue is decided in favour of the assessee.

Outcome: The special leave petitions were disposed of in terms of the law laid down in the earlier decision, and the assessing officers were directed to proceed accordingly.

1. Whether the Assessing Officer (AO) had "reason to believe" that the petitioner's income for Assessment Year (AY) 2011-12 had escaped assessment, thus justifying the issuance of a notice under Section 148 for reassessment.

2. Whether the reasons recorded by the AO for reopening the assessment were based on tangible material or merely on suspicion and surmises.

3. Whether the AO complied with the statutory requirements and judicially settled principles regarding the formation of "reason to believe" under Section 147 of the Act.

4. Whether the petitioner had disclosed true and full information in its original return, negating the applicability of the extended limitation period for reassessment.

Issue-Wise Detailed Analysis

Issue 1: Existence of "Reason to Believe" for Reopening Assessment under Section 147

The legal framework governing reopening of assessments under Section 147 mandates that the AO must have "reason to believe" that income chargeable to tax has escaped assessment. This belief must be founded on tangible material and not mere suspicion or conjecture. The expression "reason to believe" has been extensively interpreted by courts to require a rational nexus between the material in possession of the AO and the formation of the belief that income has escaped assessment.

Precedents such as Calcutta Discount Co. Ltd. v. Income Tax Officer elucidate that the AO's belief must be held in good faith, based on information that is more than mere suspicion. The AO must have reasons that induce this belief, and the existence of these reasons-not their sufficiency-is justiciable. The Supreme Court in Chhugamal Rajpal v. S.P. Chaliha emphasized that the AO must have prima facie grounds to issue a notice under Section 148, and mere vague feelings or calls for investigation do not suffice.

The Court also referred to the judgment in The Income-Tax Officer, I Ward, District VI, Calcutta v. Lakhmani Mewal Das, which underscores that the reasons for reopening must have a "live link" or "rational connection" with the belief that income has escaped assessment. The AO's power to reopen is not plenary; vague, indefinite, or remote information cannot justify reopening.

In the instant case, the AO's reasons for reopening were primarily based on information received from the Investigation Wing regarding suspicious trading in shares of a penny stock company, M/s DMC Education Ltd. (DEL). The AO noted that DEL's share price movements were not supported by its financial fundamentals, and that trading was concentrated among a few non-filers or nominal filers. The AO concluded that the petitioner's transactions in DEL shares were bogus and intended to evade tax.

However, the Court found that the information was of a general nature, lacking particulars linking the petitioner specifically to any tax evasion. The AO's reliance on the Investigation Wing's report was essentially a repetition without independent application of mind. The AO did not demonstrate a rational nexus between the material and the belief that the petitioner's income had escaped assessment. The petitioner's turnover in DEL shares was a minuscule fraction of its total turnover, and the petitioner had disclosed all material particulars in its return and during assessment proceedings.

The Court emphasized that the AO's observations were based on suspicion and generalizations about penny stocks, rather than tangible evidence implicating the petitioner. The AO failed to show that the petitioner's transactions were sham or that the petitioner had routed its own money through DEL shares. Consequently, the AO lacked "reason to believe" as legally required.

Issue 2: Sufficiency and Nature of the Reasons Recorded for Reopening

The statutory requirement under Section 147 is that reasons for reopening must be recorded in writing and must be based on tangible material. The Court referred to the decision in Meenakshi Overseas Pvt. Ltd., which held that reasons must demonstrate a live link between the material and the belief that income has escaped assessment. Mere repetition of investigation reports without independent application of mind is impermissible.

In the present case, the AO's reasons were largely a reiteration of the Investigation Wing's information on penny stock manipulation. The reasons lacked particulars such as the period of price fluctuations, the extent of price movements, or any direct evidence of the petitioner's involvement in tax evasion. The AO did not independently verify or analyze the information in relation to the petitioner's transactions.

The Court noted that the AO's conclusion that the petitioner's transactions were bogus and intended for tax evasion was not supported by any material beyond the general observations about DEL shares. The AO's failure to examine the petitioner's detailed turnover data, which showed a nominal trading loss in DEL shares, further weakened the reasons recorded.

Thus, the Court held that the reasons recorded were insufficient and did not satisfy the statutory requirement of being based on tangible material with a rational nexus to the belief of escapement of income.

Issue 3: Compliance with Jurisdictional Conditions for Reassessment

The jurisdictional conditions for reopening include the existence of "reason to believe" and compliance with limitation periods. The petitioner contended that there was no failure to disclose true and full information, negating the applicability of the extended six-year limitation period for reassessment.

The Court observed that the petitioner had filed a return declaring taxable income and had participated in scrutiny assessment proceedings, producing all relevant documents. There was no material to indicate non-disclosure or concealment.

The AO's reliance on general suspicion regarding penny stock trading did not amount to failure to disclose material facts. Hence, the AO could not invoke the extended limitation period under Section 147.

Issue 4: Treatment of Competing Arguments and Evidence

The petitioner submitted detailed data on its overall turnover and specific trading in DEL shares, showing that the turnover in DEL shares was an insignificant fraction of total turnover and that the petitioner had incurred a trading loss rather than gain. The petitioner also highlighted that it held shares of DEL as stock-in-trade and that there was no wide fluctuation in DEL's share price during the relevant period.

The AO did not effectively counter these submissions or provide contradictory evidence. The AO's reasons did not address the petitioner's data or explain how the petitioner's transactions were sham or intended for tax evasion beyond the general suspicion arising from the nature of penny stocks.

The Court found that the AO's failure to engage with the petitioner's evidence and the absence of independent analysis undermined the validity of the reassessment proceedings.

Conclusions

The Court concluded that the AO did not have any legally sustainable reason to believe that the petitioner's income for AY 2011-12 had escaped assessment. The reasons recorded were based on vague and general information, lacking a live nexus with the petitioner's transactions. The AO's conclusion of sham transactions was founded on suspicion rather than tangible material.

The reopening of assessment was therefore held to be without jurisdiction and liable to be quashed. The impugned notice under Section 148 and the order rejecting the petitioner's objections were set aside.

Significant Holdings

"The expression 'reason to believe' does not mean a purely subjective satisfaction on the part of the Income Tax Officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section."

"The reopening of the assessment after the lapse of many years is a serious matter. The Act contemplates reopening if grounds exist for believing that income has escaped assessment, but the reasons must not be vague, indefinite, farfetched or remote."

"The reasons so recorded have to be based on some tangible material and that should be evident from reading the reasons. It cannot be supplied subsequently either during the proceedings when objections to the reopening are considered or even during the assessment proceedings that follow."

"The AO must independently apply mind to the material and not merely repeat observations made by the Investigation Wing or other authorities."

"Reopening cannot be based on suspicion or surmises but must be grounded in tangible material that has a live nexus with the belief that income has escaped assessment."

"The mere fact that the petitioner traded in shares of a penny stock, which was generally regarded as suspicious, without more, does not furnish reason to believe that the petitioner's income has escaped assessment."

"The AO's failure to consider the petitioner's detailed turnover data and the nature of transactions further vitiates the reasons recorded for reopening."

"The impugned notice under Section 148 and the order rejecting objections are set aside as the AO lacked jurisdiction to reopen the assessment."

i) Whether the assessing officer recorded objective satisfaction regarding how income had escaped assessment, in compliance with the principles laid down by the Supreme Court, particularly in the case of Raymond Woollen Mills Vs ITO.

ii) Whether the assessing officer's reasons for reopening the assessment were vague or whether there was specific information justifying reopening, and whether the Tribunal erred in holding the reasons vague.

iii) Whether the Tribunal was justified in quashing the assessment order despite the principle that sufficiency of belief is not open to question, though existence of belief can be challenged, as held in Phool Chand Bajranglal Vs ITO.

iv) The appellant's reservation to add, modify, or alter grounds of appeal or adduce additional evidence during hearing.

Issue-wise Detailed Analysis

1. Objective Satisfaction and Formation of Belief by the Assessing Officer

The legal framework governing reopening of assessments under Section 147 of the Income Tax Act mandates that the assessing officer must have "reason to believe" that income chargeable to tax has escaped assessment. The Supreme Court in Raymond Woollen Mills Vs ITO and Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. clarified that "reason to believe" means a cause or justification to suppose income has escaped assessment, and does not require final legal proof at the stage of reopening. The assessing officer's subjective satisfaction based on relevant material suffices.

The Court examined the assessment order dated 15th December 2017, noting that the reopening was predicated on the detection of a Rs. 1 Crore credit in the assessee's bank account from M/s. Rupak Developers Pvt. Ltd. during the relevant financial year. The Assessing Officer issued notices under Sections 148, 143(2), and 142(1), and gave the assessee opportunity to explain the transaction. The assessee failed to provide any satisfactory explanation or supporting documents to establish the genuineness of the transaction or the business of Rupak Developers Pvt. Ltd.

The Court found that the Assessing Officer had material indicating that Rupak Developers Pvt. Ltd. was a shell company used to provide accommodation entries in the form of bogus long-term and short-term capital gains (LTCG/STCG) through penny stock sales. This material formed the basis of the Assessing Officer's belief that income had escaped assessment.

The Court referred to a similar precedent in Principal Commissioner of Income Tax - 9, Kolkata -vs- P L Goenka HUF, where the Supreme Court's principles were reiterated, emphasizing that the assessing officer's subjective satisfaction need only be based on relevant material and not conclusive proof. The Court underscored that the assessing officer's role is to administer the statute with solicitude for the public exchequer and fairness to taxpayers.

Applying these principles, the Court held that the Assessing Officer had recorded objective satisfaction based on material facts and applied his mind to the reasons for reopening. The Tribunal erred in holding otherwise.

2. Validity and Specificity of Reasons for Reopening

The Tribunal had held that the reopening was based on vague reasons and that the Assessing Officer had mechanically followed investigation reports without independent application of mind. The Court rejected this view, observing that the reasons for reopening were clearly recorded and supported by specific information, including the credit entry in the assessee's bank account and the investigation findings regarding the shell company's activities.

The Court noted that the assessee was given ample opportunity to explain the transactions and failed to do so. The Assessing Officer's reasons were therefore neither vague nor arbitrary but founded on concrete material. The Court also noted that the appellate authority (CIT(A)) had examined the facts in detail and upheld the reopening, further reinforcing the validity of the reasons.

The Court emphasized that the Tribunal's elevation of the CBDT's guidelines to the status of binding regulation was erroneous, as the Assessing Officer is entitled to rely on relevant material and form a subjective belief.

3. Challenge to the Sufficiency of the Assessing Officer's Belief

The Tribunal had quashed the assessment order on the basis that the Assessing Officer's belief was not sufficiently supported. The Court referred to the Supreme Court's ruling in Phool Chand Bajranglal Vs ITO, which clarified that while the existence of belief can be challenged, the sufficiency of the belief is not open to judicial scrutiny. The Court found that the Assessing Officer had sufficient reasons to form the belief that income had escaped assessment.

The Court held that the Tribunal erred in substituting its own view for that of the Assessing Officer and in quashing the assessment order on grounds of insufficiency of belief.

4. Failure of the Assessee to Establish Genuineness of Transactions

The Court highlighted that the assessee failed to establish the genuineness of the Rs. 1 Crore credit transaction or the creditworthiness of Rupak Developers Pvt. Ltd., which was found to be a shell company with no real business activity. This failure reinforced the validity of the reopening and the assessment order.

5. Treatment of Competing Arguments

The Court considered the assessee's non-appearance and lack of explanation as significant. It also took into account the detailed findings of the Assessing Officer and the appellate authority, which were supported by investigation reports and documentary evidence. The Tribunal's contrary conclusion was found to be based on an incorrect appreciation of facts and law.

Conclusions

The Court concluded that the Assessing Officer had applied his mind and recorded sufficient reasons for reopening the assessment under Section 147. The reopening was justified on specific and relevant information, and the assessee failed to rebut the presumption of escaped income. The Tribunal erred in holding that the reasons were vague and in quashing the assessment order.

Significant Holdings

"Section 147 authorises and permits the assessing officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word 'reason' in the phrase 'reason to believe' would mean cause or justification; if the assessing officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment."

"At the initiation stage, what is required is 'reason to believe', but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed the requisite belief; whether the materials would conclusively prove the escapement is not the concern at that stage since the formation of belief by the assessing officer is within the realm of subjective satisfaction."

"Sufficiency of the belief recorded by the assessing officer is not open to question, but the existence of belief can be challenged."

"The assessing officer is entitled to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers."

"The reasons recorded for reopening the assessment cannot be considered to be vague when supported by specific information and investigation reports."

The final determinations are that the reopening of the assessment was valid and justified, the Assessing Officer had objectively recorded satisfaction based on relevant material, the Tribunal erred in quashing the assessment order, and the appeal filed by the revenue is allowed with the assessment order restored.

• Whether the delay of 26 days in filing the audit report in Form 10B, prescribed under Rule 17B of the Income Tax Rules, 1962, for claiming exemption under Section 12A of the Income Tax Act for Assessment Year 2021-22, was justified and whether sufficient cause was shown for condonation of such delay.
• Whether the Commissioner of Income Tax (Exemption) ("CIT") correctly exercised his discretion in rejecting the petition for condonation of delay.
• The legal effect of the delay on the claim for exemption under Section 12A of the Income Tax Act and the nature of the requirement to file the audit report-whether it is procedural or mandatory.
• The impact of external factors such as the Covid-19 pandemic and technical glitches on the assessment of sufficient cause for delay.
• The applicability and scope of Circular No.16 of 2024 dated 18.11.2024, which delegates discretionary power to the CIT for condonation of delay up to 365 days under Section 119(2)(b).

Issue-wise Detailed Analysis:

1. Delay in Filing Audit Report and Sufficient Cause for Condonation

Legal Framework and Precedents: Section 119(2)(b) of the Income Tax Act empowers the CIT to condone delay in filing documents or returns if sufficient cause is shown. Rule 17B prescribes the filing of audit report in Form 10B for claiming exemption under Section 12A. The Court referred to the Gujarat High Court decision in Sarvodaya Charitable Trust vs. Income Tax Officer (Exemption), which held that furnishing of audit report is procedural and can be filed even before assessment.

Court's Interpretation and Reasoning: The Court noted that the audit report was due by 15.02.2022 but was filed on 13.03.2022, resulting in a 26-day delay. The petitioner attributed this delay to a technical glitch amid the Covid-19 pandemic. The Court found this explanation plausible and observed that no objection was raised by the Income Tax Department regarding the technical glitch claim.

Key Evidence and Findings: The petitioner had been availing exemption benefits since Assessment Year 2012-13, indicating a consistent compliance history. The pandemic situation was ongoing during the relevant period, which the Court took into account as a genuine hardship.

Application of Law to Facts: The Court emphasized that the CIT should have exercised discretion pragmatically rather than pedantically. The power to condone delay up to 365 days, as per Circular No.16/2024, was not properly applied. The Court highlighted the principle that substantial justice should prevail over mere technicalities.

Treatment of Competing Arguments: While the CIT rejected the petition citing lack of sufficient cause, the Court disagreed with this approach, finding the rejection arbitrary and lacking proper application of discretion.

Conclusion: The Court set aside the CIT's order rejecting condonation of delay and remitted the matter for reconsideration, directing that the audit report be accepted as if filed within time.

2. Nature of Filing Audit Report and Its Procedural Character

Legal Framework and Precedents: The Court relied on the Gujarat High Court ruling that the audit report filing is procedural and can be submitted even after the return but before assessment. This principle underscores flexibility in procedural compliance.

Court's Interpretation and Reasoning: The Court accepted that the audit report's late filing should not automatically disqualify the exemption claim, especially when the delay is short and justified.

Application of Law to Facts: The petitioner's audit report was filed before assessment, reinforcing the procedural nature of the requirement.

Conclusion: The procedural nature of filing the audit report supports the petitioner's claim and the Court's direction to condone the delay.

3. Discretionary Power under Section 119(2)(b) and Circular No.16/2024

Legal Framework: Section 119(2)(b) authorizes the CIT to condone delay if sufficient cause is shown. Circular No.16/2024 explicitly delegates power to the CIT to condone delay in filing Form 10B up to 365 days.

Court's Interpretation and Reasoning: The Court found that the CIT failed to apply the discretionary power conscientiously and pragmatically. The Court emphasized that discretion must be exercised to advance substantial justice, especially in light of pandemic-related difficulties and technical glitches.

Application of Law to Facts: The 26-day delay was well within the 365-day limit specified in the Circular. The CIT's rejection without adequate appreciation of the circumstances was held to be an arbitrary exercise of discretion.

Conclusion: The Court held that the CIT's order was unsustainable and must be set aside with directions to reconsider the application for condonation of delay.

4. Impact of Covid-19 Pandemic and Technical Glitch on Sufficient Cause

Legal Framework and Precedents: The Court took judicial notice of the Covid-19 pandemic's impact on procedural compliance and referred to a similar case, Action Research for Health and Socio-economic Development vs. CBDT, where pandemic-related difficulties were considered sufficient cause for delay.

Court's Interpretation and Reasoning: The Court recognized that the pandemic and associated technical issues constitute genuine hardship and sufficient cause for delay in filing.

Application of Law to Facts: The petitioner's claim of technical glitch during the pandemic period was accepted as genuine, especially since no contrary evidence was presented.

Conclusion: The Court found that the pandemic and technical issues justified condonation of delay.

5. Consequences of Denial of Exemption Due to Delay

Legal Framework: Section 12A of the Income Tax Act provides exemption from income tax subject to compliance with procedural requirements, including audit report filing.

Court's Interpretation and Reasoning: The Court held that denying exemption solely on technical delay without appreciating sufficient cause and discretion would cause serious prejudice to the petitioner.

Application of Law to Facts: Given the petitioner's long-standing exemption history and the short delay, the Court directed that the audit report be considered as timely filed, thereby preserving the exemption benefits.

Conclusion: The Court ordered consequential relief to the petitioner by treating the audit report as timely filed.

Significant Holdings:

"Taking cognizance of well-established principle that when technical consideration and cause of substantial justice are pitted against each other, it is the substantial justice which is to prevail, this Court holds that mere technicality should not have been ground for claim of exemption under Section 12A of the IT Act."

"The Commissioner of Income Tax (Exemption), Hyderabad has not applied his conscientious mind in proper perspective... the refusal to condone the delay invoking power under Section 119(2) of the IT Act being arbitrary exercise of discretion having regard to the fact-situation."

"The benefit of exemption should not have been denied merely on account of delay in furnishing audit report, which could be produced at a later stage either before the Assessing Officer or the Appellate Authority by assigning sufficient cause."

"The matter is remitted to the said authority concerned to consider audit report in Form 10B furnished under Rule 17B of the Income Tax Rules to claim exemption under Section 12A of the Income Tax Act and in consequence thereof... the Commissioner of Income Tax (Exemptions) is directed to grant all consequential relief to the petitioner by taking into account the Audit Report in Form 10B pertaining to the Assessment Year 2021-22 submitted on 13.03.2022, as if the same is filed within period specified invoking Section 119(2)(b) of the Income Tax Act, 1961."

Core principles established include the primacy of substantial justice over technicalities in tax procedural compliance, the necessity for the CIT to exercise discretion conscientiously under Section 119(2)(b), and the recognition of pandemic-related hardships and technical glitches as valid grounds for condonation of delay.

The final determination was to set aside the CIT's order rejecting condonation of delay, to treat the audit report as timely filed, and to grant all consequential reliefs to the petitioner in relation to the exemption claim under Section 12A for Assessment Year 2021-22.

- Whether recovery notices issued by the Income Tax Department for the assessment year 2017-18 after approval of the resolution plan under the Insolvency and Bankruptcy Code (IBC) 2016 are valid and enforceable.

- Whether the penalty orders under sections 271(1)(c) and 270A of the Income Tax Act, which were not served upon the petitioner, can form the basis for recovery notices post-approval of the resolution plan.

- Whether statutory dues of the Income Tax Department are to be treated as secured claims in the insolvency resolution process and thus recoverable notwithstanding the resolution plan approval.

- The legal effect of an approved resolution plan under section 31 of the IBC on outstanding claims, including statutory dues, that are not part of the resolution plan.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Recovery Notices Issued Post-Approval of Resolution Plan

Relevant Legal Framework and Precedents:

The Insolvency and Bankruptcy Code, 2016, particularly section 31, governs the approval and binding effect of resolution plans. The Apex Court's decision in Ghanashyam Mishra and Sons Pvt. Ltd. vs. Delweiss Asset Reconstruction Co. Ltd. (2021) and Vaibhav Goel vs. Deputy Commissioner of Income Tax (2025) clarified that once a resolution plan is approved, claims not included therein stand extinguished and no proceedings can be initiated or continued in respect of such claims.

Court's Interpretation and Reasoning:

The Court observed that the resolution plan in the present case was approved on 1.1.2020 by the NCLT, Ahmedabad. The recovery notices challenged were issued much later, on 4.3.2024 and 9.4.2024, for the assessment year 2017-18, which predates the resolution plan approval. The Court relied heavily on the Apex Court's pronouncement that claims not forming part of the resolution plan are extinguished upon approval.

Key Evidence and Findings:

The petitioner produced the NCLT order approving the resolution plan and correspondence showing the issuance of recovery notices post-approval. The respondent did not controvert these documents.

Application of Law to Facts:

Since the recovery notices relate to dues for a period prior to the resolution plan approval and were not included in the plan, the Court held that such demands are legally unenforceable.

Treatment of Competing Arguments:

The respondent argued that statutory dues of the Income Tax Department are secured claims and can be recovered notwithstanding the resolution plan. However, the Court distinguished this position based on the Apex Court's binding authority, which clarified that all claims, including statutory dues, if not part of the approved plan, stand extinguished.

Conclusions:

The recovery notices issued post-approval for pre-approval dues are invalid and liable to be quashed.

Issue 2: Service of Penalty Orders Under Sections 271(1)(c) and 270A of the Income Tax Act

Relevant Legal Framework:

Procedural fairness under the Income Tax Act requires that penalty orders be served upon the assessee before enforcement actions are taken.

Court's Interpretation and Reasoning:

The Court noted that neither the penalty order dated 18.10.2021 under section 271(1)(c) nor the penalty order dated 24.11.2021 under section 270A were served on the petitioner. This procedural lapse undermines the validity of the recovery notices based on these penalty orders.

Key Evidence and Findings:

The petitioner's submissions and record showed absence of service of penalty orders, which the respondent did not dispute.

Application of Law to Facts:

Since the penalty orders were not served, recovery based on them cannot be sustained.

Treatment of Competing Arguments:

The respondent did not specifically contest the non-service issue but relied on the general validity of the demands.

Conclusions:

The recovery notices premised on unserved penalty orders are procedurally defective and invalid.

Issue 3: Treatment of Statutory Dues as Secured Claims in CIRP

Relevant Legal Framework and Precedents:

The respondent cited the judgment in Rainbow Private Limited, which held that statutory dues of the Income Tax Department are to be treated as secured claims in insolvency resolution.

Court's Interpretation and Reasoning:

The Court acknowledged this position but clarified that the subsequent and more recent Apex Court rulings in Ghanashyam Mishra and Vaibhav Goel cases supersede this view by emphasizing the extinguishment of claims not included in the resolution plan.

Key Evidence and Findings:

The resolution plan did not include the disputed statutory dues for the assessment year 2017-18.

Application of Law to Facts:

Accordingly, notwithstanding the classification of statutory dues as secured claims, the claims not included in the approved plan cannot be enforced post-approval.

Treatment of Competing Arguments:

The Court gave precedence to the binding Apex Court rulings over earlier or conflicting interpretations.

Conclusions:

Statutory dues not incorporated in the resolution plan stand extinguished and cannot be recovered thereafter.

3. SIGNIFICANT HOLDINGS

"Once a resolution plan is duly approved by the Adjudicating Authority under subsection (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan."

This pronouncement establishes the core principle that approval of a resolution plan under the IBC has a conclusive effect of freezing and extinguishing claims not included in the plan, including statutory dues.

Final determinations:

- The recovery notices dated 4.3.2024 and 9.4.2024 issued for the assessment year 2017-18 are quashed and set aside as unenforceable post-approval of the resolution plan.

- Penalty orders under sections 271(1)(c) and 270A of the Income Tax Act, not served on the petitioner, cannot form a valid basis for recovery.

- Statutory dues not included in the approved resolution plan stand extinguished and cannot be pursued thereafter.

The core legal questions considered by the Court are:

(a) Whether the Petitioner, having received a refund under the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSVA), is entitled to interest on the delayed payment of the refund amount under Section 244A of the Income Tax Act, 1961;

(b) Whether the provisions of the DTVSVA exclude or preclude the payment of interest on delayed refunds;

(c) The applicability and interpretation of Section 244A of the Income Tax Act, 1961, in the context of refunds arising from settlements under the DTVSVA;

(d) The effect of judicial precedents, particularly the Supreme Court decision in Union of India v. Tata Chemicals Ltd. and subsequent case law, on the entitlement to interest on delayed tax refunds;

(e) The appropriate relief and consequences if interest is found payable on the delayed refund amount.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) & (c): Entitlement to interest under Section 244A on delayed refund under DTVSVA

The legal framework revolves around Section 244A of the Income Tax Act, 1961, which mandates payment of interest on delayed refunds of income tax. The Petitioner contends that since the refund was delayed by approximately 18 to 22 months beyond the date specified in the certificate issued under the DTVSVA, interest is payable on the delayed refund amount of Rs. 36,51,389/-.

The Court examined the statutory provisions and the nature of the refund under the DTVSVA, which is a special scheme for resolution of direct tax disputes. The Petitioner had filed the requisite declarations and undertakings under the scheme, leading to issuance of Form No. 3 (certificate of tax arrears), Form No. 4 (payment details), and Form No. 5 (order evidencing full and final settlement). Despite this, the refund was disbursed belatedly in two tranches in August and December 2022.

The Respondent argued that the DTVSVA does not expressly provide for payment of interest on refunds under the scheme and thus no interest is payable. However, the Court noted that the absence of express provision does not necessarily exclude the operation of Section 244A, especially since the refund arises under the Income Tax Act framework.

Issue (b): Whether DTVSVA excludes payment of interest

The Respondent's contention that the DTVSVA excludes interest payment was considered but found unpersuasive. The Court observed that the DTVSVA aims to provide a mechanism for speedy dispute resolution and does not explicitly bar interest on delayed refunds. The Court relied on judicial precedents to clarify that the statutory right to interest under Section 244A survives even in the context of refunds under the DTVSVA.

Issue (d): Precedents and their application

The Court extensively relied on the Supreme Court decision in Union of India v. Tata Chemicals Ltd., which held that interest on delayed tax refunds is a form of compensation for the Government's unauthorized retention and use of the taxpayer's money. The Court quoted:

"Refund due and payable to the assessee is debt-owed and payable by the Revenue. The Government, there being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies."

The Court also noted that this principle has been consistently followed in subsequent decisions, including recent rulings of this Court itself, which have held that even under the DTVSVA, interest on delayed refunds is payable.

Issue (e): Relief and consequences

Applying the law to the facts, the Court found the Petitioner entitled to interest on the delayed refund amount of Rs. 4,39,010/-. The delay of approximately 18 to 22 months in refunding the amount after issuance of Form No. 5 was unjustified and warranted compensation by way of interest.

The Court directed the Respondent to pay the interest amount within twelve weeks from the date of the judgment, failing which the sum would bear interest at 12% per annum from the date of the judgment till actual payment.

The Court considered the Respondent's inability to controvert the applicability of the cited precedents and found no merit in the argument that DTVSVA excludes interest payment.

3. SIGNIFICANT HOLDINGS

The Court held:

"Refund due and payable to the assessee is debt-owed and payable by the Revenue. The Government, there being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies."

"Providing for payment of interest in case of refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation to ensure that the aforesaid amount of tax which has been duly paid in prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing Statute."

"Whenever money has been received by a party which ex aequo et bono ought to be refunded, the right to interest follows, as a matter of course."

The Court concluded that the Petitioner is entitled to interest under Section 244A on the delayed refund amount arising from the DTVSVA settlement, notwithstanding the absence of an express provision in the scheme itself. The Respondent was directed to pay the interest amount of Rs. 4,39,010/- within twelve weeks, with 12% interest on delayed payment thereafter.

1. Whether the notice issued under section 148 of the Income Tax Act, 1961 (hereinafter 'the Act') proposing to reopen the assessment for the Assessment Year 2016-17 was valid and legally served upon the petitioner, given that the notice received by the petitioner was in the name of a different person with a different PAN number.

2. Whether the reassessment proceedings initiated by the respondent without valid service of notice under section 148 of the Act can be sustained.

3. The effect of a technical glitch in the Income Tax Portal causing issuance and service of a notice in the name of another person instead of the petitioner.

4. The legal consequences of non-service or invalid service of notice under section 148 on the jurisdiction of the Income Tax Department to reopen assessment.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity and Service of Notice under Section 148 of the Income Tax Act

The legal framework governing reopening of assessments is contained in section 148 of the Income Tax Act, 1961, which mandates issuance of a valid notice to the assessee proposing to reopen the assessment on grounds of escapement of income. Valid service of such notice is a condition precedent to the exercise of jurisdiction by the Assessing Officer (AO).

Precedents emphasize strict compliance with procedural requirements, including correct issuance and service of notice in the name of the correct assessee identified by PAN. The Court considered the petitioner's contention that the notice dated 31.03.2021 was addressed to "Mrs. Giraben Atulbhai Shah" bearing PAN ALHPS1801P, whereas the petitioner's PAN is ACJPV1280C. The petitioner did not respond to this notice, asserting it was not served upon him. Only upon receipt of a subsequent notice under section 142(1) did the petitioner file a return to comply with procedural requirements.

The respondent contended that the notice under section 148 was duly issued in the name of the petitioner (PAN ACJPV1280C) with proper approval and reasons recorded for reopening, but due to a "technical glitch" in the Income Tax Portal, the notice served was incorrectly addressed to another person. The respondent relied on the affidavit stating that the assessment proceedings were carried out correctly under the petitioner's PAN and that the reopening was justified by information flagged on the INSIGHT portal indicating escapement of income.

The Court noted that the order disposing of the petitioner's objections by the respondent rejected the petitioner's claim on the ground that the notice was indeed issued and served to the petitioner, but this finding was contrary to the record, which showed the notice served was in the name of another person. The Court held that mere issuance of a notice in the name of the petitioner, without actual service upon him, cannot be equated with valid service.

Issue 2: Jurisdiction of the AO to Reopen Assessment in Absence of Valid Notice

The Court examined whether the AO could assume jurisdiction to reopen the assessment without valid service of the notice under section 148. The principle established by judicial precedents is that jurisdiction to reopen depends on valid issuance and service of notice. Non-service or defective service vitiates the proceedings.

In the present case, the petitioner's objection was that no notice was served in his name, and the notice served was void. The respondent's contention that the notice was issued but served incorrectly due to a technical glitch was not sufficient to cure the defect in service. The Court emphasized that the procedural safeguard of valid notice cannot be bypassed by technical errors in the system.

Therefore, the Court concluded that in absence of valid service of notice under section 148 upon the petitioner, the AO did not acquire jurisdiction to reopen the assessment for the Assessment Year 2016-17.

Issue 3: Effect of Technical Glitch in Income Tax Portal on Validity of Notice

The respondent admitted that the notice served was in the name of another person due to a technical glitch in the Income Tax Portal. However, the respondent maintained that the notice was issued in the name of the petitioner and the reopening was based on valid reasons recorded after independent application of mind.

The Court held that a technical glitch causing issuance and service of notice in the wrong name is not a mere clerical error but a fundamental defect affecting the validity of the notice. The Court reasoned that procedural requirements under the Act must be strictly complied with and the safeguards provided to the assessee, including valid service of notice, cannot be circumvented by technical errors.

Thus, the Court treated the technical glitch as fatal to the validity of the notice and the consequent reassessment proceedings.

Issue 4: Reliance on Precedents and Treatment of Competing Arguments

The petitioner relied on a prior decision of the same Court where a notice under section 148 was quashed for being factually incorrect and invalid. The petitioner argued that if no valid notice was served in his name, reassessment proceedings cannot be sustained.

The respondent argued that the notice was issued and the reopening was justified by information indicating escapement of income and that the technical glitch did not invalidate the proceedings.

The Court analyzed the competing arguments and found the respondent's reliance on issuance without valid service insufficient. The Court underscored the importance of valid service as a jurisdictional requirement and held that the respondent's contention did not cure the defect caused by the technical glitch.

SIGNIFICANT HOLDINGS

"Merely because the notice is issued in name of the assessee but not served, cannot be considered as an effective issuance and service of notice for reopening of the assessment."

"In absence of any notice issued and served upon the assessee, the respondent cannot be said to have assumed the jurisdiction to reopen the assessment for the Assessment Year 2016-17."

"A technical glitch causing issuance and service of notice in the wrong name is not a mere clerical error but a fundamental defect affecting the validity of the notice."

"The procedural safeguard of valid notice under section 148 of the Income Tax Act is a mandatory condition precedent to the exercise of jurisdiction by the Assessing Officer and cannot be bypassed by technical errors."

The Court finally held that the reassessment proceedings initiated by the respondent for the Assessment Year 2016-17 are quashed and set aside due to non-service of valid notice under section 148 of the Act upon the petitioner.

Issues: Whether sanction for prosecution under the Income-tax Act was justified for delayed deposit of tax deducted at source despite subsequent voluntary payment of the tax with interest.

Analysis: The petitioners had deducted and deposited the tax with interest before the show-cause notice was issued. Their explanation for the delay was neither doubted nor rejected. The case did not involve a complete failure to deduct or deposit tax, and penal prosecution was held not to be warranted merely because it was legally permissible. In the absence of malicious or contumacious conduct, delayed compliance by itself was held insufficient to sustain prosecution sanction.

Conclusion: The sanction for prosecution was not justified and the impugned order was set aside in favour of the petitioners.

Issues: (i) Whether the delay of about 510 days in filing the appeal before the Tribunal should be condoned on the basis of sufficient cause; (ii) whether the claim of short grant of TDS required verification by the Assessing Officer.

Issue (i): Whether the delay of about 510 days in filing the appeal before the Tribunal should be condoned on the basis of sufficient cause.

Analysis: The appeal was delayed because the assessee had pursued rectification proceedings under section 154 of the Income-tax Act, 1961 under a bona fide belief that the mistake would be corrected. The Tribunal accepted this explanation as a sufficient cause and applied a liberal, justice-oriented approach to condonation of delay, consistent with the settled principle that procedural delay should not defeat substantial justice where the explanation is bona fide.

Conclusion: The delay was condoned in favour of the assessee.

Issue (ii): Whether the claim of short grant of TDS required verification by the Assessing Officer.

Analysis: The Tribunal found that the disputed TDS credit claim could not be finally decided on the existing material and that the claim needed factual verification with reference to the evidence filed by the assessee. It therefore directed the Assessing Officer to examine the claim in accordance with law after granting proper opportunity of hearing.

Conclusion: The issue was restored for verification and reconsideration, with the assessee obtaining a partial relief.

Final Conclusion: The appeal succeeded only to the extent of condonation of delay and remand of the TDS credit issue for verification, resulting in a partial allowance for statistical purposes.

Ratio Decidendi: Where a delay is explained by bona fide pursuit of rectification proceedings and the explanation constitutes sufficient cause, a liberal approach to condonation is warranted in the interest of substantial justice.

1. Whether an addition of Rs. 10 crores to the assessee's income, based solely on his admission during the statement recorded under section 132(4) of the Act, is justified in the absence of any incriminating material found during the search.

2. Whether the admission made by the assessee can be considered voluntary and reliable, given the claim that it was made under duress and pressure during prolonged and exhaustive interrogation.

3. The evidentiary value of a statement recorded under section 132(4) and the extent to which it can be relied upon for making additions to income in assessment proceedings, particularly when subsequently retracted or explained by the assessee.

4. The applicability of CBDT instructions and judicial precedents regarding the use of confessional statements obtained during search and seizure operations and the requirement of corroborative incriminating material to sustain additions based on such statements.

5. The consistency of the assessing officer's approach, especially in relation to similar admissions made by associated entities and the treatment of such admissions in their assessments.

Issue-wise Detailed Analysis:

Issue 1: Validity of Addition Based Solely on Admission under Section 132(4) Without Incriminating Material

The legal framework mandates that statements recorded under section 132(4) are admissible in evidence but are not conclusive proof of undisclosed income. The Court examined the statutory provision which requires that such statements must be connected to books of account, documents, or assets found during the search. The Explanation to section 132(4) clarifies that the statement may relate to all matters relevant to the investigation but the nexus with incriminating material is essential.

CBDT Instruction No. F no. 286/2/2003-IT (Inv) dated 10.03.2003 and subsequent reiterations emphasize that confessions obtained under coercion or without credible evidence should not be the basis of assessment. The focus must be on tangible evidence rather than mere admissions.

The Court noted that in the present case, no incriminating documents or assets were found or seized from the assessee's premises that could substantiate the Rs. 10 crores admitted as additional income. The assessee provided detailed explanations for all seized papers, none of which indicated undisclosed transactions pertaining to him. The assessing officer himself accepted these explanations without adverse remarks.

Further, the admission of Rs. 10 crores was not included in the return of income filed by the assessee, indicating a retraction or clarification. The Court relied on judicial precedents holding that admission is relevant but not conclusive and can be explained or retracted if made under mistaken impression or pressure.

Accordingly, the addition made solely on the basis of the admission without corroborative incriminating material was held to be unjustified.

Issue 2: Voluntariness and Reliability of the Admission Made During Search

The assessee contended that the admission was made under duress and extreme pressure during a prolonged interrogation lasting over 12 hours with only a short break, continuing into the early hours of the next day. The statement was recorded at odd hours when the assessee was exhausted and mentally fatigued.

The Court examined the circumstances of recording the statement, noting that the assessee had requested rest during the interrogation and that the surrender of Rs. 10 crores was made in response to a general question at the conclusion of the statement, without reference to any specific incriminating material.

Given the absence of any incriminating documents or assets linking the admission to tangible evidence, and the timing and conditions under which the admission was made, the Court found merit in the assessee's claim that the surrender was ad hoc and under pressure. The Court also noted that the assessee repeatedly requested the assessing officer to verify the correctness of the income based on actual records and seized material, indicating a bona fide attempt to clarify the position.

The Court emphasized that confessions made under coercion or undue influence lack evidentiary value and that the burden lies on the revenue to prove voluntariness and correctness of such admissions.

Issue 3: Evidentiary Value of Statements Recorded Under Section 132(4) and Effect of Retraction

Judicial precedents cited by both parties establish that statements under section 132(4) have high evidentiary value but are rebuttable. The Supreme Court and various High Courts have held that admissions are important but not conclusive evidence and can be explained or retracted if made under mistake or coercion.

The Court noted that in this case, the assessee did not file any affidavit retracting the statement but did not include the admitted amount in his return and submitted detailed explanations supported by seized documents. The assessing officer failed to produce any incriminating material to support the addition.

Further, the Court referred to decisions where additions based solely on retracted confessions or statements without corroborative evidence were disallowed. The Court also highlighted that the CBDT instructions caution against reliance on confessions obtained during search and emphasize collection of evidence.

Therefore, the Court concluded that the retraction or clarification by the assessee diminished the evidentiary value of the statement, and the addition could not be sustained on that basis alone.

Issue 4: Applicability of CBDT Instructions and Judicial Precedents

The Court extensively reviewed CBDT instructions which prohibit obtaining confessions under coercion and require that assessments be based on tangible evidence rather than admissions alone. These instructions were deemed binding and relevant to the facts.

The Court analyzed various judicial decisions relied upon by the parties. It distinguished cases where admissions were corroborated by incriminating material or where retraction was absent or unjustified. Conversely, it found the present case akin to decisions where no incriminating material was found and admissions were made under pressure, leading to deletion of additions.

The Court also noted the inconsistency in the assessing officer's approach, as in the case of an associated entity where a similar admission of Rs. 90 crores was not added to income due to lack of incriminating material, reinforcing the principle that admissions unsupported by evidence cannot form the basis of additions.

Issue 5: Consistency in Treatment of Admissions in Associated Entities

The Court observed that the assessee's admission of Rs. 90 crores on behalf of an associated company was not accepted for addition by the same assessing officer, as no incriminating material was found. This inconsistency undermined the revenue's case for addition in the assessee's hands on similar grounds.

The Court found that the assessee honored admissions supported by incriminating material (Rs. 30 crores in the case of another associated person), but retracted from ad hoc admissions without any supporting evidence.

This differential treatment supported the conclusion that additions based solely on uncorroborated admissions were unsustainable.

Conclusions:

The Court upheld the deletion of the addition of Rs. 10 crores made by the assessing officer on the basis of the admission recorded under section 132(4) of the Act. It held that in absence of any incriminating material found during the search or seized documents linking the admitted amount to undisclosed income, and considering the circumstances under which the confession was made, the addition was not justified.

The Court emphasized that assessment must be based on correct taxable income determined from evidence and documents, not on ad hoc or coerced admissions. It reaffirmed the principle that statements under section 132(4) are relevant but not conclusive and can be rebutted by the assessee with evidence.

The Court also stressed adherence to CBDT instructions discouraging reliance on confessions obtained under pressure and requiring assessments to be founded on credible evidence.

Accordingly, the appeal filed by the revenue was dismissed, confirming the appellate order deleting the addition.

Significant Holdings:

"A statement recorded under section 132(4) of the Income Tax Act is a statement on oath and it has high evidentiary value. It gives rise to presumption about correctness of the facts stated/asserted in such a statement. As such presumption is rebuttable, the persons making such statement is required to bring some evidence on record to rebut the presumption about correctness of the assertion made in such statement."

"The purpose of assessment is to tax correct taxable income. Admission is relevant, but not conclusive. Addition cannot be made solely on the basis of a statement that, too, a statement that stands retracted, and/or is explained subsequently. Statement once retracted, loses its evidentiary value, and cannot, therefore, be the sole basis of any addition."

"A statement under section 132(4) can be recorded only if the person is found in possession of books of account, documents, assets, etc. The intention of the legislature is to permit such examination only where the books of account, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken."

"CBDT Instruction No. 286/2/2003-IT (Inv) dated 10.03.2003 and subsequent instructions emphasize that confessions obtained during search and seizure operations, if not based upon credible evidence, are often retracted and do not serve any useful purpose. The focus should be on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department."

"In the absence of any incriminating material found/seized with respect to the admission made in the statements recorded during search from the possession of assessee, the Assessing Officer is not empowered to make any addition in the total income of the assessee solely based on the alleged surrender which was not supported by the material."

"The statement of the assessee was recorded under duress and undue pressure, which is demonstrated by the fact that the search operation continued uninterrupted for over 12 hours with minimal rest, and the surrender was made on an ad hoc basis without reference to any incriminating document found during the search."

"The assessment must be based on the correct taxable real income of the assessee and consequently, such assessment ought to be as per documents, records and evidence and not merely on the basis of any ad hoc, involuntary statement/surrender made during the course of search, which too stands subsequently retracted/clarified."

The detailed issue-wise analysis is as follows:

1. Whether outstanding receivables from AEs constitute an independent international transaction requiring separate benchmarking:

The relevant legal framework includes section 92B of the Act, which defines "international transaction," and Explanation (c) to clause (i) of section 92B introduced retrospectively from 1st April 2002 by the Finance Act, 2012. This Explanation clarifies that provision of credit or financing between associated enterprises is an international transaction. The TPO relied on this provision to treat delayed realization of receivables as a separate financing transaction, thereby imputing notional interest.

The assessee contended that the outstanding receivables are integrally linked to the primary sale transaction and cannot be viewed in isolation. The assessee argued that the economic impact of deferred realization is already captured through working capital adjustment (WCA) incorporated in the TNMM benchmarking analysis, thus negating the need for separate adjustment.

The Court examined the Transfer Pricing Officer's order, the Dispute Resolution Panel's (DRP) directions, and the assessee's detailed working capital adjustment computations. It noted that the assessee had applied TNMM using Operating Profit to Operating Cost (OP/OC) as the Profit Level Indicator (PLI) and had adjusted margins of comparables for differences in working capital, including receivables, payables, and inventory. The Court observed that the adjusted margin of the assessee was significantly higher than the interquartile range of comparables, indicating arm's length pricing.

The Court relied on Rule 10B(1)(e)(iii) of the Income-tax Rules, 1962, which mandates adjustment for material differences affecting net margins, including working capital differences, and the OECD Transfer Pricing Guidelines recognizing working capital adjustments as a means to neutralize the effect of variations in receivables and payables on profits.

Given that the working capital adjustment inherently accounts for the economic effect of deferred receivables, the Court found that treating outstanding receivables as a separate international transaction for additional adjustment leads to duplication and is inconsistent with transfer pricing principles.

2. Appropriateness and correctness of the working capital adjustment methodology and benchmarking:

The assessee used average balances (opening plus closing divided by two) for receivables, payables, and inventory to compute working capital, a method consistent with accounting and economic principles. The TPO challenged the methodology on the ground that the assessee used FY 2020-21 data for the tested party while comparables' data were from FYs 2018-19 and 2019-20, alleging violation of the contemporaneous data principle under Rule 10B(4).

The assessee rebutted this, explaining that Rule 10B(4) permits use of multiple-year data for comparables to capture broader economic trends, and that it is standard practice under TNMM to adjust comparables' margins using the tested party's current year data. The Court accepted this explanation, finding the methodology consistent with statutory rules, OECD Guidelines, and established transfer pricing practice.

The Court also noted that the working capital adjustment was uniformly applied to all comparables, and the adjusted margins formed a reliable interquartile range for benchmarking. No evidence was presented by the Revenue to suggest selective or erroneous application of the adjustment.

3. Imputation of notional interest on outstanding receivables and its legal validity:

The TPO computed notional interest on delayed receivables using the Comparable Uncontrolled Price (CUP) method, benchmarking interest rates from Bloomberg data based on currency denominations. The Revenue argued that delayed realization constitutes a financing benefit to AEs, justifying imputation of interest.

The assessee countered that it did not charge interest on receivables from either AEs or non-AEs, nor did it pay interest on payables to AEs, indicating a uniform commercial policy without any financing arrangement. The Court emphasized that hypothetical income, such as notional interest without actual receipt, is not taxable under the Act. The Court further observed that the TNMM with working capital adjustment already captures the economic impact of receivables, rendering separate interest imputation unnecessary and duplicative.

4. Treatment of aggregation and netting off of payables in benchmarking:

The assessee argued that benchmarking interest on receivables in isolation violates the principle of aggregation under TNMM, which evaluates net profitability from a set of transactions rather than individual elements. The assessee also contended that the TPO failed to net off outstanding payables against receivables when imputing interest, which would materially affect the quantum of adjustment.

The Court agreed that TNMM requires a holistic view of profitability and that segregating receivables for separate adjustment distorts comparability. The failure to consider netting off payables was also noted as a flaw in the Revenue's approach.

5. Validity of penalty proceedings under section 270A of the Act:

The penalty was initiated on the basis of the transfer pricing adjustment. Since the Court held the adjustment to be unsustainable, the foundation for penalty proceedings was negated. Accordingly, the initiation of penalty proceedings was found to be erroneous.

6. Reliance on judicial precedents:

The assessee relied on a series of judicial decisions that hold that once working capital adjustment is made under TNMM and the tested party's margins fall within the arm's length range, no separate adjustment for notional interest on delayed receivables is warranted. These precedents reinforce the principle that the economic effect of extended credit periods is neutralized through working capital adjustment, and separate imputation of interest amounts to double counting.

Significant holdings include:

"A working capital adjustment takes into account the impact of outstanding receivables on the profitability of the company, either by enabling a higher sale price or resulting in lower cost of goods sold, both of which improve operational performance. It is for this reason that the TNMM analysis does not isolate receivables for a separate benchmarking but rather considers their effect as part of overall capital employed."

"Once comparability is restored through working capital adjustment, no further adjustment is legally or economically tenable."

"Hypothetical income is not taxable under the scheme of the Act. In the absence of actual financing, merely imputing interest on commercial receivables, which are already considered in pricing analysis under TNMM, is not permissible."

"The benchmarking performed by the assessee is not only in conformity with Rule 10B and the OECD Guidelines but also judicially recognized principles."

"The initiation of penalty proceedings under section 270A is unsustainable once the underlying addition giving rise to alleged under-reporting is deleted."

In conclusion, the Court held that the transfer pricing adjustment of Rs. 23,22,513/- on account of notional interest on outstanding receivables from AEs is unsustainable both in law and on facts. The working capital adjustment undertaken by the assessee under TNMM adequately neutralizes the effect of deferred receivables, and the imputation of separate interest results in double counting and taxation of hypothetical income. The benchmarking methodology and documentation submitted by the assessee are consistent with statutory provisions, OECD Guidelines, and judicial precedents. Consequently, the addition was directed to be deleted, and penalty proceedings initiated on this basis were quashed. The appeal was allowed accordingly.

Regarding the reopening of assessment under Sections 147/148, the primary legal framework requires the Assessing Officer (AO) to satisfy jurisdictional preconditions, including the existence of new material or information warranting reassessment. The assessee contended that no new material was brought on record and no independent inquiry was conducted, rendering the reopening invalid. The Tribunal examined whether the information received from the Directorate of Income Tax Investigation (DDIT) constituted sufficient grounds. The Court noted that the AO acted upon information from the Investigation Wing alleging suspicious transactions with a party engaged in an unrelated business (cashew nuts) despite the assessee's business in fabrics. The Tribunal found the reopening procedurally valid, as the AO had jurisdiction to reassess upon receipt of credible information indicating possible undisclosed income. Thus, the reopening was upheld.

On the issue of the addition for alleged bogus purchases amounting to Rs. 24,20,165/-, the legal principle is that purchases must be genuine and supported by evidence of delivery to be allowable expenses. The AO disallowed the entire amount, relying on the absence of proof of delivery and corroborative evidence. The assessee submitted purchase bills, payment proofs through banking channels, delivery challans, and audited financial statements to substantiate the genuineness of transactions. However, the AO and the Commissioner of Income Tax (Appeals) [CIT(A)] found these insufficient and relied heavily on information from the Investigation Wing without conducting independent verification. The assessee argued this was a non-application of mind and arbitrary.

The Tribunal recognized the reliance on Investigation Wing information but emphasized the need for independent inquiry under Sections 131 and 133(6) of the Act to verify such claims. The failure to conduct such inquiries was a lacuna but did not entirely negate the basis for addition. The Tribunal further examined judicial precedents which established that in cases of bogus purchases, it is not necessary to disallow 100% of the purchases; rather, a reasonable addition based on the gross profit (GP) rate should be made to reflect the actual benefit derived.

Applying this principle, the Tribunal noted that the assessee had declared a GP rate of approximately 2.1% in the return of income. The Tribunal observed that various Benches of the Income Tax Appellate Tribunal (ITAT) have sustained a GP rate of 12.5% as a reasonable addition in similar cases. Therefore, instead of sustaining the entire disallowance, the Tribunal directed an addition equivalent to the difference between 12.5% and the declared 2.1%, effectively adding 10.4% as income attributable to the alleged bogus purchases. This approach balanced the need to tax unaccounted income without imposing an arbitrary and disproportionate addition.

Regarding the principles of natural justice, the assessee contended that no opportunity was given to cross-examine the persons whose statements formed the basis of the bogus purchase allegations. The Tribunal acknowledged this contention but did not find that the failure to allow cross-examination vitiated the entire reassessment, especially where the assessee was given opportunities to submit documentary evidence and explanations. Nonetheless, the Tribunal emphasized that adherence to natural justice is critical and should be observed in future proceedings.

The Tribunal also addressed the contention that the books of accounts were duly audited without discrepancies, which should weigh in favor of the assessee. While recognizing the audit, the Tribunal held that an audit report alone does not conclusively prove the genuineness of transactions when credible information suggests otherwise. Thus, the audit was a relevant but not decisive factor.

On the issue of consistency and prior treatment, the assessee pointed out that in a related assessment involving the Karta with identical facts and transactions, only 12.5% of the purchases were added to income, whereas in the present case, 100% was added. The Tribunal found merit in this argument, noting that consistency in assessment is a recognized principle to ensure fairness and avoid arbitrariness. The Tribunal's reduction of the addition to the differential GP rate aligned with this principle and remedied the inconsistency.

In conclusion, the Tribunal held that the reopening of assessment was valid, the addition for bogus purchases was justified but not to the extent of 100%, and a reasonable addition based on the GP rate differential was appropriate. The Tribunal emphasized the necessity of independent inquiry and adherence to natural justice principles. The appeal was partly allowed by reducing the addition accordingly.

Significant holdings include the Tribunal's observation that "in cases of bogus purchases, various Benches of ITAT have sustained GP rate of 12.5% as reasonable addition," and that "where the assessee has declared a GP rate of 2.1%, the differential rate of 10% may be added as income." This establishes the principle that additions for bogus purchases should be proportionate to the actual benefit derived, rather than a blanket disallowance. The Tribunal also underscored the importance of consistency in assessment treatment and the need for independent verification beyond mere reliance on information from the Investigation Wing.

Issues: Whether the order granting bail to the respondent warranted recall or cancellation on the grounds of the alleged pending investigation and the gravity of the alleged smuggling offence.

Analysis: The challenge to the bail order was examined on the basis of the alleged pendency of investigation, the recovery of smuggled gold, and the respondent's alleged role in the offence. It was found that the complaint had already been filed and the matter had progressed beyond the investigative stage, rendering the objection based on pending investigation infructuous. The respondent was also treated as a young person engaged as a helper-cum-driver, with the role attributed to him being distinct from that of the main conspirators. The earlier bail order had taken into account the respondent's age, the nature of the role attributed, and the surrounding circumstances. No violation of bail conditions or other material showing an abuse of bail was established.

Conclusion: The request to recall or cancel the bail order was rejected, and the bail granted to the respondent was allowed to stand.

The core legal questions considered by the Court are:

(a) Whether the Petitioner's role in the alleged smuggling and mis-declaration of imported goods was sufficiently identified and established by the impugned order;

(b) Whether the imposition of penalty of Rs. 5 Crores on the Petitioner under Section 114AA of the Customs Act, 1962 is justified, particularly when no penalty was imposed on him under Section 112(a)(i) of the Customs Act;

(c) Whether the Petitioner was entitled to an opportunity to cross-examine the importer and Customs House Agent (CHA) whose statements formed the basis for the penalty;

(d) Whether the penalty imposed on the Petitioner is proportionate in comparison to the penalty imposed on the importer;

(e) Whether the Petitioner's contention regarding non-recording of statement of a relevant witness (Deepak Kumar) and absence of cross-examination affects the legality of the penalty imposed;

(f) The procedural question regarding the requirement of pre-deposit for challenging the penalty order under Section 129 of the Customs Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Establishment of Petitioner's Role in the Smuggling and Mis-declaration

Relevant legal framework and precedents: The Customs Act, 1962, particularly Section 114AA, penalizes knowingly or intentionally making or using false or incorrect declarations in import documents. The Court also relied on the procedural provisions under Section 108 for recording statements and the evidentiary standards applicable.

Court's interpretation and reasoning: The Court examined the statements recorded under Section 108 from the importer (M/s Shayam Corporation), the CHA (M/s Caspro Logistics), and the Petitioner himself. The statements reveal that the Petitioner was actively involved in the import process, including advising the importer on purchase, sale, banking transactions, and handling of import documents. The importer admitted that the Petitioner handled the entire import procedure, including obtaining registrations and managing banking transactions, and that the Petitioner was in possession of his ATM card, cheque books, and other documents.

Key evidence and findings: The CHA's statement confirmed that the Petitioner orchestrated the import and was the link between the importer and the CHA. The importer's statement admitted that the Petitioner managed the import and was aware of the mis-declaration. The Petitioner's own statement admitted advisory and operational roles and possession of critical documents of the importer.

Application of law to facts: The Court found that the Petitioner knowingly caused the filing of a false declaration regarding the imported goods, satisfying the requirements of Section 114AA of the Customs Act.

Treatment of competing arguments: The Petitioner argued that his role was not established and relied solely on statements of others. The Court rejected this, holding that the statements were corroborative and supported by documentary evidence, including the Petitioner's own admissions.

Conclusions: The Petitioner's role as the mastermind behind the mis-declaration was sufficiently established.

Issue (b): Justification for Penalty under Section 114AA in Absence of Penalty under Section 112(a)(i)

Relevant legal framework: Section 112(a)(i) penalizes importers for contraventions, while Section 114AA penalizes persons knowingly making false declarations. The relationship between these provisions was examined.

Court's interpretation: The Petitioner contended that penalty under Section 114AA could not be imposed without penalty under Section 112(a)(i). The Court did not accept this contention as a legal bar, noting that Section 114AA targets persons who knowingly make false declarations, which can include persons other than the importer.

Application of law to facts: Since the Petitioner was found to have knowingly caused the false declaration, penalty under Section 114AA was justified independent of penalty under Section 112(a)(i) on the importer.

Conclusions: Penalty under Section 114AA can be imposed on the Petitioner notwithstanding the absence of penalty under Section 112(a)(i) against him.

Issue (c): Right to Cross-Examination of Statements of Importer and CHA

Relevant legal framework and precedents: The Court referred to settled principles that cross-examination is not an unfettered right in adjudicatory proceedings. The Court cited recent decisions affirming that cross-examination is warranted only when prejudice is demonstrated and the statements are not merely corroborative of documentary evidence.

Court's interpretation and reasoning: The statements of the importer and CHA were corroborative of documentary evidence on record. The Petitioner did not demonstrate any prejudice caused by denial of cross-examination. Additionally, the Petitioner did not seek permission to cross-examine the witness Deepak Kumar.

Application of law to facts: The Court held that the denial of cross-examination did not violate principles of natural justice given the nature of the evidence and the facts of the case.

Conclusions: The Petitioner was not entitled to cross-examination as a matter of right, and the procedural fairness was observed.

Issue (d): Proportionality of Penalty Imposed on Petitioner

Court's reasoning: The Court observed that the penalty of Rs. 5 Crores on the Petitioner was disproportionate compared to Rs. 2 Crores imposed on the importer. The Court noted the need for proportionality in penalty imposition.

Conclusions and directions: The Court allowed the Petitioner to challenge the penalty before the Customs, Excise and Service Tax Appellate Tribunal with a pre-deposit of 7.5% of Rs. 2 Crores (i.e., Rs. 15 Lakhs). If the penalty of Rs. 5 Crores is upheld on appeal, the Petitioner would then be required to deposit the full amount.

Issue (e): Non-recording of Statement of Deepak Kumar and Its Impact

Court's reasoning: The Petitioner raised that Deepak Kumar's statement was not recorded and he was not cross-examined. The Court noted that the Petitioner never sought permission to cross-examine Deepak Kumar and that the statements of other witnesses and documentary evidence were sufficient to establish the Petitioner's role.

Conclusions: The non-recording of Deepak Kumar's statement did not vitiate the proceedings or penalty imposed.

Issue (f): Requirement of Pre-Deposit for Challenging the Penalty Order

Legal framework: Section 129 of the Customs Act requires pre-deposit for filing appeals against penalty orders.

Court's interpretation: The Court confirmed that the impugned order is appealable under Section 129 and directed the Petitioner to make a pre-deposit of 7.5% of Rs. 2 Crores to maintain the appeal. The Court clarified that if the higher penalty is upheld, the full amount would be payable.

3. SIGNIFICANT HOLDINGS

"I find that the penalty under Section 114AA is imposed on a person who knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular."

"From the above it is clear that Sh. Satish Sharma has pivotal role in the import of Areca Nut and he along with the proprietor orchestrated a plan for smuggling of Areca Nut into India by mis-declaring the same knowingly and intentionally by way of suppression of facts and willful mis-declaration."

"While cross-examination can be granted in certain proceedings, if it is deemed appropriate, the right to cross-examine cannot be an unfettered right."

"The refusal of the adjudicating authority to permit cross-examination of the witnesses producing the documents cannot even on the principles of the Evidence Act be found fault with."

"The production of the documents duly confronted to the appellants was in the nature of production in terms of Section 139 of the Evidence Act, where the witness producing the documents is not subjected to cross-examination."

Core principles established include:

- The liability under Section 114AA of the Customs Act attaches to persons who knowingly cause false declarations, regardless of whether they are the importer or not.

- Statements recorded under Section 108 of the Customs Act, when corroborated by documentary evidence, can form the basis for penalty without mandatory cross-examination.

- Cross-examination is not an absolute right but is subject to the facts and circumstances and the requirement of demonstrating prejudice.

- Penalties imposed must be proportionate, and appellate remedies must be accessible with reasonable pre-deposit conditions.

Final determinations:

- The Petitioner's role in the mis-declaration and smuggling was established and penalty under Section 114AA was rightly imposed.

- The Petitioner was not entitled to cross-examine the importer and CHA as a matter of right.

- The penalty imposed on the Petitioner was disproportionate and was accordingly moderated to require a pre-deposit of 7.5% of the penalty imposed on the importer for the purpose of appeal.

- The procedural requirements under the Customs Act regarding appeal and pre-deposit were upheld.

Issues: (i) whether the printout of the Excel sheet obtained from secondary electronic evidence was admissible in the absence of the certificate required under section 138C of the Customs Act, 1962; (ii) whether the statement recorded from the partner under section 108 of the Customs Act, 1962 could be relied upon without compliance with section 138B of the Customs Act, 1962; and (iii) whether the rejection of transaction value, re-determination of assessable value, and consequential demand, interest, and penalties could be sustained.

Issue (i): whether the printout of the Excel sheet obtained from secondary electronic evidence was admissible in the absence of the certificate required under section 138C of the Customs Act, 1962

Analysis: The valuation case rested principally on a printout said to have been derived from a pen drive containing data recovered from electronic devices. The Tribunal treated that printout as secondary electronic evidence. It held that, in the absence of the statutory certificate, such electronic material could not be relied upon as evidence for proving undervaluation. The reasoning followed the settled requirement that electronic records, when produced in secondary form, must satisfy the statutory safeguards governing admissibility.

Conclusion: The printout was inadmissible and could not be used to sustain the valuation demand.

Issue (ii): whether the statement recorded from the partner under section 108 of the Customs Act, 1962 could be relied upon without compliance with section 138B of the Customs Act, 1962

Analysis: The Tribunal held that statements recorded during investigation do not become proof of their contents merely because they were recorded under section 108. Their evidentiary use depends upon the mandatory procedure in section 138B, including examination of the maker as a witness and the opportunity of cross-examination where required. Since that procedure was not followed, the statement could not be treated as reliable evidence against the importer.

Conclusion: The statement could not be relied upon to prove undervaluation.

Issue (iii): whether the rejection of transaction value, re-determination of assessable value, and consequential demand, interest, and penalties could be sustained

Analysis: The rejection of the declared transaction value and the re-determination of value were founded on the inadmissible Excel-sheet material and the untested statement. Once those materials were excluded, the foundation for invoking rule 12 of the 2007 Valuation Rules and for re-determining value under rule 3 read with rule 10 disappeared. The consequential demand of duty, interest, and penalties therefore also lacked support.

Conclusion: The rejection of transaction value, re-determination of value, and all consequential demands and penalties were unsustainable.

Final Conclusion: The appeals succeeded because the department failed to establish undervaluation through admissible evidence, and the impugned valuation, demand, interest, and penalty orders were set aside.

Ratio Decidendi: Secondary electronic records relied upon for customs valuation must satisfy the statutory certificate requirement, and statements recorded during investigation can be used only in compliance with the mandatory procedure governing their evidentiary admissibility.

1. Whether the confiscation of the impugned goods consisting of gold coins, silver coins, coins of other metals, and promissory notes under Sections 111(d), 111(l), and 111(m) of the Customs Act, 1962, and the imposition of penalties under Sections 112(a) and 114AA are sustainable.

2. Whether the impugned goods are correctly classifiable under Customs Tariff Heading (CTH) 9706 0000 as antiques, or under CTH 9803 as passenger baggage.

3. Whether the appellant complied with the import policy conditions, particularly regarding the requirement of an export license from the country of export (UK) as per Notification No. 97(RE-2008)/2004-2009 dated 17.03.2009.

4. Whether the appellant misdeclared the goods or carried them for commercial purposes, thus justifying confiscation and penalties.

5. Whether the procedural safeguards under Section 138B of the Customs Act, 1962, including the right to cross-examination of witnesses, were duly followed by the adjudicating authority.

Issue-wise Detailed Analysis:

Issue 1: Sustainability of Confiscation and Penalties under Customs Act

Relevant Legal Framework and Precedents: Sections 111(d), 111(l), and 111(m) of the Customs Act, 1962 pertain to confiscation for prohibited goods, misdeclaration, and goods not corresponding to declarations. Sections 112(a) and 114AA provide for penalties. The Baggage Rules, 1998, and relevant notifications govern passenger baggage clearance. The Tribunal referred to precedents including the Apex Court judgment in Hindustan Steel and Tribunal decisions emphasizing procedural fairness under Section 138B.

Court's Interpretation and Reasoning: The Tribunal found no credible evidence that the appellant misdeclared the goods or that the goods were commercial in nature. The appellant declared the goods at the Red Channel, paid applicable duties on other items, and the customs officers prepared detailed inventory and receipts. There was no independent evidence of misdeclaration or commercial intent.

Key Evidence and Findings: The detention receipt, baggage receipts, and customs challans showed proper declaration and payment of duty on other items. The appellant's conduct in declaring goods was not disputed. No evidence indicated the goods were for trade or commercial quantity.

Application of Law to Facts: Since the goods were bona fide baggage and properly declared, confiscation under Sections 111(d), 111(l), and 111(m) was not justified. Consequently, penalties under Sections 112(a) and 114AA could not be sustained.

Treatment of Competing Arguments: The Revenue argued violation of import policy and absence of export license from UK, justifying confiscation. The Tribunal rejected this on the basis that no evidence showed violation of UK export laws, and the appellant had no objection from UK customs. Also, the goods were not proven to be antiques requiring special licenses.

Conclusion: Confiscation and penalties imposed by the Commissioner of Customs were unsustainable.

Issue 2: Classification of Goods under Customs Tariff

Relevant Legal Framework: Customs Tariff Act, 1975, Chapter 97 (CTH 9706 0000) covers antiques of age exceeding 100 years. Chapter 98 (CTH 9803) covers passenger baggage and personal importations. Note 1 to Chapter 98 states it applies even if goods are covered elsewhere.

Court's Interpretation and Reasoning: The Tribunal emphasized that classification as antiques requires proof that goods are indeed antiques over 100 years old. The opinion from Archaeological Survey of India (ASI) Mumbai did not certify the goods as antiques but stated the Customs Department should decide. The detailed description of coins showed a collection of various coins, some historical but not necessarily antiques.

Key Evidence and Findings: Valuation reports from registered valuers and antique dealers described the coins as numismatic collections, including coins from various eras and types, but did not establish them as antiques. ASI's opinion explicitly noted the department should take action as per legislation.

Application of Law to Facts: Since the goods were personal baggage and not certified antiques, classification under CTH 9803 for passenger baggage was appropriate rather than under CTH 9706 for antiques.

Treatment of Competing Arguments: The Revenue insisted on classification as antiques to invoke import policy restrictions. The Tribunal rejected this due to lack of evidence and ASI's non-certification.

Conclusion: The goods should be classified as passenger baggage under CTH 9803, not as antiques under CTH 9706.

Issue 3: Compliance with Import Policy Conditions and Export Licensing

Relevant Legal Framework: Notification No. 97(RE-2008)/2004-2009 mandates that importers of antiques abide by export rules of the country of origin. UK regulations require export licenses for archaeological objects above certain thresholds. The appellant's goods were alleged to require such licenses.

Court's Interpretation and Reasoning: The Tribunal noted correspondence from UK HM Revenue and Customs indicating no restrictions on export of gold and silver coins to India. The appellant's goods fell below threshold limits requiring licenses. No objection was raised by UK authorities at the time of export.

Key Evidence and Findings: Email from UK Customs (HMRC) stated no export restrictions. The appellant's collection was accumulated over 30 years through dealers and open market, making invoices unavailable but lawful. The appellant produced photographs and evidence of declaration.

Application of Law to Facts: Since no export license was required or denied by UK authorities, and the goods were not antiques necessitating such licenses, the import policy condition was not violated.

Treatment of Competing Arguments: The Revenue argued that the goods were antiques requiring export licenses and thus import was prohibited without them. The Tribunal rejected this due to lack of proof that goods were antiques or that export licenses were required.

Conclusion: The appellant complied with export requirements of the UK, and import policy conditions were not breached.

Issue 4: Misdeclaration and Commercial Nature of Goods

Relevant Legal Framework: Sections 111(l) and 111(m) of the Customs Act deal with misdeclaration and goods not corresponding to declarations. Baggage Rules, 1998, and Customs Manual prescribe procedures for declaration and clearance.

Court's Interpretation and Reasoning: The appellant declared goods at the Red Channel, and the customs officers prepared detailed inventories and receipts. There was no evidence of misdeclaration, concealment, or commercial intent. The goods were personal collections, not commercial consignments.

Key Evidence and Findings: Baggage declaration forms, detention receipts, and customs challans supported bona fide declaration. No panchanama or independent evidence of misdeclaration was produced.

Application of Law to Facts: The absence of evidence on misdeclaration or commercial use negated confiscation under the relevant sections.

Treatment of Competing Arguments: Revenue contended goods were commercial or misdeclared; the Tribunal found no material to support this.

Conclusion: No misdeclaration or commercial import was established.

Issue 5: Procedural Fairness and Opportunity for Cross-examination

Relevant Legal Framework: Section 138B of the Customs Act mandates adherence to principles of natural justice, including opportunity to cross-examine witnesses and present evidence.

Court's Interpretation and Reasoning: The appellant requested to produce a witness and cross-examine the assessing officer, which was denied by the adjudicating authority without recording reasons. The Tribunal relied on High Court and Supreme Court precedents emphasizing that denial of such opportunity without reasons amounts to violation of natural justice.

Key Evidence and Findings: Requests for witness examination and cross-examination were documented; no reasons for denial were recorded.

Application of Law to Facts: Failure to follow prescribed procedures under Section 138B vitiated the adjudication.

Treatment of Competing Arguments: The Revenue did not justify denial of procedural rights. The Tribunal held procedural lapses as a ground to set aside the order.

Conclusion: The impugned order was liable to be set aside on procedural grounds.

Significant Holdings:

"The action taken by the learned Commissioner in confiscation of the goods, treating the same as 'antique' and applying the import policy condition, does not stand the scrutiny of law."

"In the absence of any specific and independent evidence or proof, to state that the impugned goods are 'antique', we find that the impugned goods are in the nature of personal baggage, and not of the nature of commercial goods."

"The appellant had no intention to mis-declare his baggage before the customs authorities."

"The adjudicating authority has not followed the procedures prescribed under section 138B of the Act of 1962...otherwise it would amount to denial of principles of natural justice."

"The impugned order dated 28.01.2014...does not stand the scrutiny of law and therefore it is liable to be set aside."

Core principles established include:

• Classification of goods as antiques under CTH 9706 requires credible proof of age and nature; mere collection of old coins does not suffice.
• Baggage brought by passengers is governed by Chapter XI of the Customs Act and Chapter 98 of the Customs Tariff, subject to Baggage Rules and notifications.
• Import policy conditions relating to antiques apply only if goods are certified antiques and require compliance with export laws of the country of origin.
• Proper declaration and payment of duty on baggage negate confiscation unless commercial intent or misdeclaration is established.
• Procedural fairness under Section 138B is mandatory; denial of cross-examination without reasons vitiates orders.

Final determination was to set aside the impugned order of confiscation and penalty. The appellant's goods were held to be bona fide baggage, not antiques requiring special import conditions, and no violation of customs laws was established. The appellant was directed to pay applicable customs duties if any, and customs authorities were directed to facilitate lawful clearance or export with proper documentation.

The core legal question considered by the Tribunal was whether the threshold limit of default amount prescribed under Section 4 of the Insolvency and Bankruptcy Code, 2016 ("Code") for maintaining an application under Section 9 is to be determined at the time of filing of the application or at the time of admission of the application. Specifically, the issue arose because the operational creditor had filed the application with the default amount exceeding Rs. 1 crore, but during the pendency of the application, the corporate debtor deposited Rs. 20 lakhs, reducing the default amount below the Rs. 1 crore threshold. The Tribunal had dismissed the application on the ground that the threshold was not met at the time of admission. The appeal challenged this dismissal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue: Whether the threshold amount under Section 4 of the Code is to be examined at the time of filing or at the time of admission of the Section 9 application.

Relevant Legal Framework and Precedents:

Section 4 of the Code provides the minimum amount of default required for initiating insolvency proceedings. Initially, the threshold was Rs. 1 lakh, but after the amendment by S.O. 1205(E) dated 24.03.2020, it was increased to Rs. 1 crore. Section 9 allows an operational creditor to file an application for initiating Corporate Insolvency Resolution Process (CIRP) against a corporate debtor in case of default.

The Court referred extensively to authoritative precedents:

• Rajamundry Electric Supply Corporation Ltd. v. A Nageshwara Rao: The Supreme Court held that the validity of an application must be judged on facts as they were at the time of filing. Subsequent events, such as withdrawal of consent, do not affect maintainability.
• Manish Kumar v. Union of India: It was held that the threshold requirements must be fulfilled at the time of filing the application. If the threshold is met at filing, subsequent changes do not invalidate the application.
• Hyline Mediconz Pvt. Ltd. v. Anandaloke Medical Centre Pvt. Ltd.: This Tribunal held that the minimum default amount prescribed under Section 4 must be satisfied at the time of filing the application and not at any later stage, including admission. The legislative intent behind the amendment raising the threshold was to restrict initiation of CIRP to defaults of Rs. 1 crore or more at the time of filing.

Court's Interpretation and Reasoning:

The Court emphasized the distinction between the date of filing the application and the date of admission. It noted that the "initiation date" of CIRP is the date when the operational creditor files the application (Section 5(11)), while the "insolvency commencement date" is the date when the application is admitted (Section 5(12)). The threshold prescribed under Section 4 is a condition precedent for filing the application, not for admission. The Court reasoned that allowing the threshold to be tested at admission would lead to uncertainty and undermine the legislative scheme.

Applying the principles from the cited precedents, the Court held that since the operational creditor had crossed the Rs. 1 crore threshold at the time of filing the application, the subsequent partial payment of Rs. 20 lakhs by the corporate debtor (even if made without consent) could not affect the maintainability of the application. The Court rejected the argument that the threshold must be examined at admission, observing that no contrary binding precedent was cited by the respondent.

Key Evidence and Findings:

The undisputed facts were that the operational creditor had filed the Section 9 application with a default amount of Rs. 1,16,25,583/-, exceeding the Rs. 1 crore threshold. During the pendency of the application, the corporate debtor deposited Rs. 20 lakhs without the operational creditor's permission, reducing the outstanding amount below Rs. 1 crore. The Tribunal had dismissed the application solely on the ground that the threshold was not met at admission.

Application of Law to Facts:

The Court applied the settled legal principle that the threshold under Section 4 must be satisfied at the time of filing. Since the operational creditor met the threshold at filing, the application was maintainable. The subsequent reduction of the amount due did not vitiate the application. The Court found that the Tribunal erred in dismissing the application on the ground of threshold non-compliance at admission.

Treatment of Competing Arguments:

The respondent argued that the threshold should be examined at admission and that the partial payment reduced the default below the statutory minimum, thus rendering the application non-maintainable. The respondent also contended that the judgments relied upon by the appellant were not applicable and that insolvency proceedings should not be treated as a recovery forum.

The Court rejected these contentions, holding that the cited precedents directly addressed the issue and supported the appellant's position. It also clarified that the object of the Code is to resolve insolvency and not merely to act as a recovery mechanism, but this did not affect the timing of threshold determination.

Conclusions:

The Court concluded that the threshold amount prescribed under Section 4 of the Code must be satisfied at the time of filing the application under Section 9. Subsequent payments or events reducing the amount below the threshold do not affect the maintainability of the application. The Tribunal's dismissal of the application on the ground of threshold non-compliance at admission was a patent error.

3. SIGNIFICANT HOLDINGS

"The validity of a petition must be judged on the facts as they were at the time of its presentation, and a petition which was valid when presented cannot, in the absence of a provision to that effect in the statute, cease to be maintainable by reason of events subsequent to its presentation." (Rajamundry Electric Supply Corporation Ltd.)

"There can be no doubt that the requirement of a threshold under the impugned proviso, in Section 7(1), must be fulfilled as on the date of the filing of the application." (Manish Kumar)

"Part II of the Code is applicable only when minimum default is Rupees One Crore or more w.e.f. 24.03.2020 and an Operational Creditor can initiate Corporate Insolvency Resolution Process against the Corporate Debtor after 24.03.2020 when default is more than Rupees One Crore. No application can be initiated after 24.03.2020 irrespective of the date of default if the threshold of Rupees One Crore is not fulfilled." (Hyline Mediconz Pvt. Ltd.)

The Court held that the application under Section 9 was maintainable as the threshold was met at the time of filing, and the subsequent payment by the respondent did not affect this. The impugned order dismissing the application was set aside, and the matter was remanded for fresh adjudication in accordance with law. The Court explicitly refrained from expressing any opinion on the merits of the case, restricting its decision to the legal issue of threshold timing.

- Whether a claim filed belatedly by homebuyers after approval of the resolution plan by the Committee of Creditors (CoC) but before its approval by the Adjudicating Authority (AA) can be admitted by the Resolution Professional (RP).

- Whether the Resolution Professional is obligated to include claims of homebuyers reflected in the Corporate Debtor's (CD) records and Information Memorandum (IM) in the resolution plan even if such claims were not initially filed during the stipulated claim submission period.

- The applicability of precedents regarding the admission of claims post-approval of the resolution plan by the CoC but pending AA approval.

- The distinction between commercial creditors and non-commercial creditors (homebuyers) in the context of knowledge of the Corporate Insolvency Resolution Process (CIRP) and the consequences of delayed claim submission.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Admission of belated claims after CoC approval but before AA approval of resolution plan

Relevant legal framework and precedents: The Insolvency and Bankruptcy Code (IBC) governs the CIRP process, including timelines for claim submission and approval of resolution plans. The Tribunal relied on the decision in Puneet Kaur (Supra), which recognized that claims filed after CoC approval are generally not admitted. Similarly, the Supreme Court's ruling in RPS International Limited (2023) held that once the resolution plan is approved by the CoC, claims cannot be entertained even if AA approval is pending, to prevent endless reopening of the CIRP.

Court's interpretation and reasoning: The Tribunal acknowledged the binding nature of these precedents but distinguished the present case on the basis that the resolution plan has not yet been approved by the AA. The Court emphasized that the claim of the homebuyers was reflected in the CD's records and IM, which were accessible to the RP and resolution applicant. The Court held that non-consideration of such claims leads to an inequitable and unfair resolution, as highlighted in Puneet Kaur.

Key evidence and findings: The appellants' claim was supported by undisputed evidence of payment to the CD (including a bank loan), and their details were reflected in the IM and CD's records. The claim was filed belatedly on 19.07.2021, after the CoC's approval of the plan but before AA's approval. The RP rejected the claim citing its belated nature post-CoC approval.

Application of law to facts: The Court found that since the claim was reflected in the CD's records and IM, the RP should have considered it in the resolution plan. The Court directed the RP to submit details of such claims to the resolution applicant for inclusion in an addendum to the resolution plan, which should then be placed before the CoC for reconsideration. The AA, when approving the plan, should take the addendum and CoC minutes into account.

Treatment of competing arguments: The Respondent argued that the claim was barred as it was filed 62 days after CoC approval and 536 days after the public announcement, relying on the principle that CIRP must not be prolonged. The Court rejected this argument in light of the appellants being homebuyers (non-commercial entities) and the claim's reflection in the IM, distinguishing it from cases involving commercial creditors or unproven claims.

Conclusions: The Court allowed the appeal, setting aside the rejection order, and mandated inclusion of the appellants' claims in the resolution plan addendum for CoC and AA consideration.

Issue 2: Obligation to consider homebuyers' claims reflected in the CD's records and IM

Relevant legal framework and precedents: Puneet Kaur (Supra) established that homebuyers' claims reflected in the CD's records and IM must be taken into account by the RP and resolution applicant in the resolution plan. Failure to do so results in an unfair and inequitable resolution.

Court's interpretation and reasoning: The Court reaffirmed that the RP has a duty to identify and include such claims when preparing the resolution plan. The Court observed that the appellants' claims were clearly reflected in the IM, and thus should have been incorporated in the resolution plan or its addendum.

Key evidence and findings: The IM contained the appellants' names and unit details under creditors who had not filed claims. The RP's failure to communicate with appellants and consider their claims was noted. The appellants' payments to the CD were undisputed and documented.

Application of law to facts: The Court directed the RP to submit the appellants' details and claims to the resolution applicant, who must prepare an addendum to the resolution plan incorporating these claims. This addendum is to be placed before the CoC for approval and subsequently considered by the AA.

Treatment of competing arguments: The Respondent contended that the claims were barred due to late submission and that reopening the plan would cause uncertainty. The Court balanced these concerns against the principle of equity and fairness to homebuyers, emphasizing that the claims were known and recorded, thus warranting inclusion.

Conclusions: The Court established the principle that homebuyers' claims reflected in the CD's records and IM must be included in the resolution plan, even if initially not filed timely, to ensure just resolution.

Issue 3: Distinction between commercial creditors and homebuyers regarding knowledge of CIRP and claim submission

Relevant legal framework and precedents: The Supreme Court and this Tribunal have held that commercial creditors are expected to exercise vigilance regarding CIRP proceedings and cannot feign ignorance of public announcements. The decision in Pooja Mehra (Supra) underscored that commercial entities cannot claim ignorance when public notices are issued.

Court's interpretation and reasoning: The Court distinguished the appellants, who are homebuyers and non-commercial entities, from commercial creditors. It recognized that homebuyers may not have the same level of awareness or access to information about CIRP, especially in light of the appellants' personal hardships (such as visual impairment).

Key evidence and findings: The appellants missed the public announcement due to no communication from the RP and the impact of Covid-19 lockdowns. The first appellant's 90% visual handicap was noted as a factor affecting their ability to stay informed.

Application of law to facts: The Court took a more lenient view towards the appellants' delayed claim submission, considering their status as homebuyers and mitigating circumstances, unlike commercial creditors who are expected to be vigilant.

Treatment of competing arguments: The Respondent argued that the appellants should have been aware of the CIRP through public notices and thus their claim was barred. The Court rejected this argument in the context of non-commercial homebuyers with disabilities and lack of communication from the RP.

Conclusions: The Court held that homebuyers' claims deserve equitable treatment and that delay in claim submission due to lack of knowledge or disability should not bar their claims outright.

3. SIGNIFICANT HOLDINGS

"In the present case there is no denial that details of the Appellant(s) and other homebuyers, who could not file their claims has not been reflected in the IM. There being no detail of claims of the appellant(s), the resolution applicant could not have been taken any consideration of the claim of the appellant(s), hence, resolution plan as submitted by resolution applicant cannot be faulted."

"However, we are of the view that the claim of those homebuyers, who could not file their claims, but whose claims were reflected in the record of the CD, ought to have been included in the IM and resolution applicant, ought to have been taken note of the said liabilities and should have appropriately dealt with them in the resolution plan. Non-consideration of such claims, which are reflected from the record, leads to inequitable and unfair resolution as is seen in the present case."

"To mitigate the hardship of the Appellant, we thus, are of the view that ends of justice would be met, if direction is issued to resolution professional to submit the details of homebuyers, whose details are reflected in the records of the CD including their claims, to the Resolution applicant, on the basis of which resolution applicant shall prepare an addendum to the resolution plan, which may be placed before the CoC for consideration."

"The mere fact that the AA has yet not approved the plan does not imply that the plan can go back and forth, thereby making the CIRP an endless process. This would result in the reopening of the whole issue, particularly as there may be other similar persons who may jump onto the bandwagon." (cited but distinguished)

Core principles established:

• Claims of homebuyers reflected in the CD's records and IM must be considered in the resolution plan even if filed belatedly.
• Belated claims filed after CoC approval but before AA approval may be admitted by directing inclusion in an addendum to the resolution plan.
• Homebuyers as non-commercial creditors are entitled to equitable treatment, especially when disabilities or lack of communication impede timely claim submission.
• Resolution Professionals have a duty to identify and include such claims to ensure fairness and prevent inequitable resolutions.
• While CIRP timelines and finality of resolution plans are important, they must be balanced against the rights of bona fide creditors whose claims are documented in the CD's records.

Final determinations on each issue:

• The Tribunal's rejection of the appellants' belated claim was set aside.
• The RP was directed to submit the appellants' claim details to the resolution applicant for preparation of an addendum to the resolution plan.
• The addendum along with CoC minutes is to be considered by the AA at the time of resolution plan approval.
• The appellants' claims, as bona fide homebuyers reflected in the CD's records, must be included to ensure a just and equitable resolution.

Issues: Whether the appellant was entitled to interest for delayed reimbursement of service tax paid under the contracts, and whether the absence of Form VCES-3 in the initial stage disentitled the appellant from such relief.

Analysis: The contracts required reimbursement of service tax on production of documentary evidence. The challans, debit notes and supporting invoices furnished by the appellant constituted the requisite proof, and the materials on record showed that the respondent could avail CENVAT credit on that basis. The subsequent clarification of the service tax authorities and the respondent's eventual availing of credit confirmed that the reimbursement ought to have followed once the documents were furnished. Although the contract did not expressly provide for interest, the claim was one in the nature of damages for delayed payment in a commercial transaction, and the Court exercised its discretion on equitable principles under Section 34 of the Code of Civil Procedure, 1908.

Conclusion: The appellant was entitled to interest for the delayed reimbursement, and the denial of any interest by the court below was not sustained.

Final Conclusion: The decree was modified to grant the appellant reasonable interest on the reimbursed service tax amount, and the appeal was allowed accordingly.

Ratio Decidendi: Where contractual reimbursement of tax is supported by the required documentary evidence and the recipient is able to take corresponding credit, delayed reimbursement in a commercial transaction may justify an award of reasonable interest even in the absence of an express contractual stipulation.

The core legal questions considered by the Court were:

- Whether the Appellate Authority violated the principles of natural justice, specifically the audi alteram partem rule, by disposing of the appeal without affording the petitioner a reasonable opportunity of personal hearing.

- Whether the Appellate Order dated 24.02.2025 suffers from non-assignment of reasons and is therefore non-speaking, cryptic, and liable to be set aside.

- Whether the short notice given for the personal hearing via video conferencing was reasonable and adequate to satisfy the requirements of natural justice.

- Whether the appellate proceedings complied with the statutory provisions under Sections 84 and 85 of the Finance Act, 1994 and Section 35 of the Central Excise Act, 1944, particularly regarding the exercise of discretion in granting adjournments and passing reasoned orders.

- Whether the writ petition was maintainable despite the availability of alternative statutory remedies.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Violation of Principles of Natural Justice-Audi Alteram Partem

The petitioner contended that the Appellate Authority passed the impugned order without affording a proper opportunity of personal hearing. Notices for hearings were served at short notice, and the petitioner's counsel was unable to appear due to preoccupation and insufficient time to prepare. A petition for adjournment was filed on 30.11.2024 but was neither disposed of nor explicitly rejected before the final order was passed on 24.02.2025. The petitioner argued that this course of action was arbitrary and violated the audi alteram partem principle.

The opposing party submitted that multiple adjournments had been sought by the petitioner and that the Appellate Authority had exercised discretion by fixing a hearing via video conferencing on 02.12.2024. The petitioner's failure to appear left the Authority no choice but to dispose of the appeal based on available material.

The Court referred to the statutory framework under Sections 84 and 85 of the Finance Act, 1994, and Section 35 of the Central Excise Act, 1944, which empower the Appellate Authority to grant adjournments for sufficient cause but limit the number of adjournments to three. The Court emphasized that the discretion must be exercised judiciously, guided by law and reason, not arbitrarily.

It was noted that the petitioner was not served with the appeal petition until 15.10.2024 and that the hearing notices on 29.10.2024 and 26.11.2024 were served at short notice. The Court found that the Appellate Authority failed to consider the adjournment petition dated 30.11.2024 before passing the final order. The Court held that without disposing of the adjournment petition, the Authority could not have proceeded to final disposal, thereby violating the audi alteram partem rule.

Issue 2: Non-Assignment of Reasons and Non-Speaking Order

The petitioner argued that the Appellate Order was cryptic, bald, and non-speaking, lacking any discussion on the merits of the appeal or the grounds raised by the Revenue. The order merely affirmed the Review Order without independent application of mind or consideration of the petitioner's submissions.

The Court extensively reviewed judicial precedents emphasizing the requirement of reasoned orders as a fundamental principle of natural justice and good administration. It cited authoritative rulings establishing that reasons are the "heartbeat" or "soul" of every judicial or quasi-judicial conclusion, necessary to demonstrate proper application of mind, ensure transparency, enable judicial review, and uphold fairness.

The Court observed that the impugned order failed to address the nature of the services rendered, the classification under service tax law, or the merits of the appeal. Instead, it mechanically endorsed the Review Order and disposed of eleven appeals collectively without individualized reasoning. Such an approach was held to be arbitrary and legally unsustainable.

The Court underscored that the Appellate Authority's jurisdiction is coextensive with that of the Assessing Authority and that the appeal is a continuation of the assessment process requiring an independent and reasoned adjudication on the grounds raised.

Issue 3: Reasonableness of Short Notice for Hearing via Video Conferencing

The petitioner's counsel contended that the short notice for the hearing fixed on 02.12.2024 via video conferencing was insufficient to enable adequate preparation and representation. The Court agreed that reasonableness of time granted is a critical factor in affording a fair opportunity, more so when the hearing is virtual and documents need to be collated.

The Court found that the Appellate Authority ought to have granted reasonable time or considered the adjournment petition before proceeding. The failure to do so further compounded the violation of natural justice.

Issue 4: Compliance with Statutory Provisions on Adjournments and Appeals

The Court analyzed the statutory provisions governing appeals and adjournments. Sections 84 and 85 of the Finance Act, 1994, empower the Commissioner (Appeals) to hear and determine appeals and allow adjournments for sufficient cause, subject to a maximum of three adjournments under Section 35(1A) of the Central Excise Act, 1944.

The Court held that the Appellate Authority failed to exercise discretion properly by not disposing of the adjournment petition and then passing a final order without hearing the petitioner. The order was therefore contrary to the procedural safeguards embedded in the statute.

Issue 5: Maintainability of Writ Petition Despite Alternative Remedy

Though alternative statutory remedies were available, the Court chose to entertain the writ petition due to the absence of factual disputes and the fundamental violation of natural justice principles. The Court relied on precedent holding that writ jurisdiction can be invoked where orders are ultra vires or violate natural justice, and where the issue is primarily one of law and interpretation.

3. SIGNIFICANT HOLDINGS

The Court held:

"It is trite that without disposing of petition for adjournment, the Appellate Authority could not have proceeded to pass order finally disposing of the appeal."

"The Appellate Authority hearing an appeal has to be cautious that his decision is not influenced by factors reflected in any other's opinion. The merit of each case under appeal vis-`a-vis assessment depends on the nature of transactions entered into between parties."

"The Appellate Authority is required to pass a reasoned and speaking order considering and dealing with those grounds."

"Absence of reasons either in the order passed by the authority or in the record contemporaneously maintained is clearly suggestive of the order being arbitrary, hence, legally unsustainable."

"Reason is the heartbeat of every conclusion. Without the same it becomes lifeless."

"The principle of natural justice has twin ingredients; firstly, the person who is likely to be adversely affected by the action of the authorities should be given notice to show cause thereof and granted an opportunity of hearing and secondly, the orders so passed by the authorities should give reason for arriving at any conclusion showing proper application of mind."

"The requirement of indicating reasons has been judicially recognised as imperative. ... Reasons substitute subjectivity by objectivity. The emphasis on recording reasons is that if the decision reveals the 'inscrutable face of the sphinx', it can, by its silence, render it virtually impossible for the courts to perform their appellate function or exercise the power of judicial review in adjudging the validity of the decision."

"It is not number of adjournments granted but reasonableness of time granted which is determinative factor for consideration of grant of opportunity in adherence of principles of natural justice."

"The Appellate Authority having not disposed of the petition for adjournment of hearing in consonance with the manner projected in Section 84 (3) and Section 85(5) of the Finance Act, 1994 read with Section 35(1A) of the Central Excise Act, 1944, particularly when the statute permits the Appellate Authority to exercise his discretion to grant reasonable opportunity, this Court cannot countenance the Appellate Order."

Accordingly, the Court set aside the Order-in-Appeal dated 24.02.2025 and remitted the matter for fresh adjudication on merits after affording the petitioner a reasonable opportunity to be heard. The petitioner was directed to appear before the Appellate Authority by 16.05.2025 and was permitted to file responses and pleadings as per law. The Court clarified that no unnecessary adjournments shall be granted and expressly refrained from expressing any opinion on the merits of the appeal.

1. Whether the demand of Service Tax on the basis of figures shown in Form 26AS (TDS statement) without independent verification of the nature of services and valuation is sustainable.

2. Whether the services rendered by the Appellant during the relevant financial years fall under the taxable categories as determined by the adjudicating authority, particularly the classification under Works Contract Service, Renting of Machinery Service, and Engineering Consultancy Service.

3. Whether the provisions of Section 65 of the Finance Act, 1994, which were omitted effective 01.07.2012, can be applied for determining the taxability of services rendered during the financial years 2015-16 and 2016-17.

4. Whether the Appellant's failure to file ST-3 returns for the period from October 2015 to March 2017, due to illness and death of the working director, justifies confirmation of demand and penalty.

5. Whether the value for charging Service Tax on Works Contract Service was correctly determined, specifically the application of Rule 2A of the Service Tax (Determination of Value) Rules, 2006.

6. Whether the Cenvat credit claimed by the Appellant can be rejected solely on the ground of non-filing of ST-3 returns.

7. Whether penalty under Section 78 of the Finance Act, 1994 is imposable in the absence of short payment of Service Tax.

8. Whether exemption notifications applicable to sub-contractors of Works Contract service providers were properly considered in the demand.

Issue-wise Detailed Analysis:

1. Demand of Service Tax Based on Form 26AS Figures Without Verification

The legal framework involves the Finance Act, 1994, and the principle that Service Tax liability cannot be imposed solely on the basis of third-party information such as Form 26AS, which is a TDS statement under the Income Tax Act. The Court referred to binding precedents including the Supreme Court's decision in the case of Jain Housing & Construction Ltd., which held that entries in Form 26AS cannot form the sole basis for fastening Service Tax liability.

The Court noted that the Show Cause Notice (SCN) was issued based on third-party information without investigation into the nature of services or valuation methods. The Appellant submitted evidence such as contracts, invoices, and ledger accounts to demonstrate the true nature of services rendered. The adjudicating authority's reliance on Form 26AS entries to classify services as Renting of Machinery was found to be erroneous and not maintainable.

The Court applied the law to facts by accepting the Appellant's evidence and rejecting the demand based solely on Form 26AS figures. It treated the services to M/s Krishna Build Estate Pvt. Ltd. as Works Contract Service rather than Renting of Machinery Service, consistent with the contractual documentation.

2. Classification of Services Rendered and Applicability of Section 65

The adjudicating authority classified the services under Section 65(105)(g) and Section 65(105)(zzzza) of the Finance Act, 1994. However, Section 65 was omitted effective 01.07.2012 following the introduction of the negative list regime under the Finance Act, 1994.

The Court held that applying the provisions of Section 65 for the financial years 2015-16 and 2016-17 was legally incorrect. The services must be classified under the negative list regime and relevant notifications applicable during the period. This misclassification rendered the demand unsustainable.

Regarding the nature of services, the Court accepted the Appellant's submission that the services rendered to M/s WAPCOS Ltd. and others were Works Contract Services, supported by ledger entries and contractual documents, overruling the adjudicating authority's classification as Engineering Consultancy Service based on Form 26AS entries.

3. Determination of Taxable Value under Rule 2A of the Service Tax (Determination of Value) Rules, 2006

Rule 2A(ii)(A) stipulates that for original works contracts, the taxable value is 40% of the aggregate contract value. The Court observed that the Appellant's services fell under original works contracts and hence Service Tax should be charged only on 40% of the contract value.

The adjudicating authority had determined Service Tax liability based on the full value as per balance sheets, which was contrary to the statutory valuation rules. The Court found this approach incorrect and adjusted the taxable value accordingly.

4. Non-filing of ST-3 Returns and Its Consequences on Cenvat Credit and Demand

The Appellant failed to file ST-3 returns for the relevant period due to the illness and subsequent death of the working director. The adjudicating authority rejected the Cenvat credit claimed on the ground of non-filing of returns.

The Court referred to Rule 9(5) and 9(6) of the Cenvat Credit Rules, 2004, which require maintenance of proper records for availing Cenvat credit and place the burden of proof on the manufacturer or service provider. The Court emphasized that the entitlement to Cenvat credit depends on proper records and not merely on filing of ST-3 returns.

Since the Appellant maintained proper records and deposited the due Service Tax, the rejection of Cenvat credit solely due to non-filing of returns was found to be unjustified. Consequently, no short payment of Service Tax was established.

5. Exemption Notification for Sub-contractors

The Appellant was a sub-contractor under a main contract awarded to M/s JMC Project India Ltd. for installation of drainage systems related to sewerage treatment. The Court noted Notification No. 25/2012-ST dated 20.6.2012, specifically clause (e) of Sl. No.12 and clause (h) of Sl. No.29, which exempt sub-contractors from Service Tax if the main contractor is exempt.

The Court accepted the Appellant's claim that the services provided under this contract were exempt and accordingly directed the dropping of the demand of Rs. 2,18,195/- related to this work.

6. Penalty under Section 78 of the Finance Act, 1994

Section 78 imposes penalty equal to the amount of Service Tax short paid or not paid. Since the Court found no short payment of Service Tax after proper valuation and acceptance of Cenvat credit, it concluded that no penalty under Section 78 was imposable.

7. Limitation and Procedural Aspects

The Appellant raised limitation as a ground, but the Court did not find it necessary to elaborate on this point in detail, focusing instead on the substantive issues of classification, valuation, and admissibility of credit.

Competing Arguments and Treatment

The Department relied on third-party information from the Income Tax Department and the adjudicating authority's findings to justify the demand. The Appellant challenged the basis of demand, classification of services, valuation, and penalty imposition.

The Court gave precedence to documentary evidence, statutory provisions, and binding judicial precedents over mere entries in Form 26AS. It rejected the Department's reliance on incorrect statutory provisions and improper valuation methods.

Conclusions

The Court concluded that the demand based on Form 26AS entries without proper investigation was unsustainable. The services rendered were wrongly classified under omitted provisions and incorrect categories. The valuation of Works Contract Service was not in accordance with Rule 2A. The rejection of Cenvat credit on the ground of non-filing of returns was improper. The exemption notifications applicable to sub-contractors were not considered correctly. Consequently, the demand and penalty were set aside.

Significant Holdings:

"It is a trite law that no demand of Service Tax can be made on the basis of entries shown in Form 26AS."

"The provisions of Section 65 were omitted with effect from 01.07.2012 after the introduction of negative list of services concept. Since the demand has been confirmed by holding the taxability of services undertaken by the Appellant under incorrect provisions, the same is liable to be quashed."

"The manner of availment of Cenvat credit of duties or service tax paid on inputs and input services is provided under Rule 9 (5)(6) of the Cenvat Credit Rules, 2004... Cenvat credit is taken by way of maintaining record, not on the basis of filing of ST-3 returns."

"In case of original work, the value for charging Service Tax would be forty percent of the aggregate value as per Rule 2A(ii)(A) of the Service Tax (Determination of Value) Rules, 2006."

"Penalty under Section 78 of the Finance Act, 1994 is imposable equal to the amount of Service Tax short paid or not paid. As there is no short payment of Service Tax, no penalty is imposable."

The Court set aside the impugned order and allowed the appeal with consequential relief as per law.

The core legal question considered by the Tribunal was whether the activity carried out by the appellant in assisting Haj pilgrims up to 30.06.2012 falls under the category of 'tour operator' services as defined under Section 65(115) read with Section 65(105)(n) of the Finance Act, 1994. This issue was relevant for determining the appellant's liability to pay service tax for the period 2008-09 to 2012-13. Additionally, the Tribunal considered the applicability of exemption notifications effective from 01.07.2012 and the relevance of judicial precedents and service tax rules such as the Place of Provision of Service Rules, 2012 and Export of Service Rules, 2005.

2. ISSUE-WISE DETAILED ANALYSIS

Issue: Classification of Assistance to Haj Pilgrims as 'Tour Operator' Service

Relevant Legal Framework and Precedents: The key statutory provisions under consideration were Section 65(115) and Section 65(105)(n) of the Finance Act, 1994, which define 'tour operator' services. The appellant's activity involved assisting pilgrims in performing religious rites related to Haj and Umrah, which was not a defined taxable service under the Finance Act until 30.06.2012. The exemption for such assistance was introduced effective 01.07.2012 through Notification No. 25/2012-ST dated 20.06.2012.

Judicial precedents heavily relied upon included the Supreme Court and Tribunal decisions in M/s Cox & Kings India Ltd., All India Haj Umrah Tour Organizer Association Mumbai Vs. Union of India, and M/s Al-Hussain India Hajj & Umrah Services Management. These decisions clarified that assistance in religious pilgrimages like Haj and Umrah does not constitute 'tour operator' service liable to service tax prior to the exemption notification.

Court's Interpretation and Reasoning: The Tribunal noted that the appellant's activity was assisting pilgrims in religious ceremonies, which is distinct from commercial tour operator services. The Tribunal referred to the decision in M/s Al-Hussain India Hajj & Umrah Services Management, where it was held that such services are not taxable as 'tour operator' services for the period up to 30.06.2012. The Tribunal emphasized that the issue is no longer res integra, meaning it has been conclusively settled by higher judicial authority.

Key Evidence and Findings: The appellant's submissions and documentary evidence demonstrated that the services rendered were limited to assistance in religious rites, without the commercial characteristics of tour operator services. The revenue's concession that the issue is no longer res integra further supported the appellant's position.

Application of Law to Facts: Applying the legal framework and precedents, the Tribunal concluded that the appellant's services prior to 01.07.2012 did not attract service tax under the 'tour operator' category. The exemption notification effective from 01.07.2012 further reinforced this position.

Treatment of Competing Arguments: The revenue initially demanded service tax along with interest and penalty for the period 2008-09 to 2012-13, contending that the appellant's services fell under 'tour operator' service. However, the Tribunal noted that the revenue's authorized representative admitted the issue was no longer open for dispute. The appellant's reliance on binding precedents and statutory notifications was accepted, leading to the rejection of the revenue's demand.

Conclusions: The Tribunal held that the appellant's activity of assisting Haj pilgrims up to 30.06.2012 does not constitute a taxable 'tour operator' service under the Finance Act, 1994. Accordingly, the demand for service tax, interest, and penalty was set aside.

3. SIGNIFICANT HOLDINGS

The Tribunal expressly relied upon the following crucial legal reasoning from the precedent in M/s Al-Hussain India Hajj & Umrah Services Management:

"The appellant is engaged in providing services in connection with religious trips Hajj and Umrah mainly to Mecca, Madina, Mina, Muzdalifa etc. Both the sides agree that the issue involved in the present appeals has been considered by this Tribunal in the case of M/s. Cox & Kings India Ltd. & Others v. Commissioner of Service Tax, New Delhi. The Tribunal had decided the issue in favour of the appellant. Following the precedent decision of the Tribunal, these appeals are also allowed with consequential relief, if any."

Core principles established include:

• Assistance in performing religious rites related to Haj and Umrah is not taxable as 'tour operator' service under the Finance Act, 1994 prior to 01.07.2012.
• Exemption notifications issued from 01.07.2012 explicitly exclude such services from service tax liability.
• Judicial precedents from the Supreme Court and Tribunal have conclusively settled this issue, rendering it no longer res integra.
• Revenue cannot impose service tax demands retrospectively on such assistance services for the period before the exemption notification.

Final determinations on the issue were that the appellant was not liable to pay service tax on assistance to Haj pilgrims for the period 2008-09 to 2012-13, and the appeal was allowed with consequential relief in accordance with law.

Issues: (i) Whether preferential location charges were separately taxable as a distinct service or were part of the composite construction service and eligible for abatement; (ii) Whether amounts collected towards club construction/facilities were taxable under club or association service or formed part of construction value; (iii) Whether differential demand under the Point of Taxation Rules, 2011 could survive when tax and interest had already been paid; (iv) Whether the demand based on loose papers marked as cash receipts over and above agreement value was sustainable without corroborative evidence; (v) Whether the demand relating to retained tax on cancelled bookings was sustainable.

Issue (i): Whether preferential location charges were separately taxable as a distinct service or were part of the composite construction service and eligible for abatement.

Analysis: The charging provision for preferential location service required an extra advantage, separate consideration, and service over and above the basic construction transaction. The agreements showed a single transaction for sale of flats, with no separate service or distinct additional consideration proved for preferential location. After 01.07.2012, the classification of services had to be tested on the principle of bundled services, and a naturally bundled element takes the character of the principal service. The preferential location component was treated as an element of construction and not an independent taxable service. The separate bifurcation in cost sheets did not establish a separate levy.

Conclusion: The demand on preferential location charges was not sustainable and was rightly set aside in favour of the assessee.

Issue (ii): Whether amounts collected towards club construction/facilities were taxable under club or association service or formed part of construction value.

Analysis: Taxability under club or association service required an existing club or association providing services to members for subscription or other consideration. On the facts, there was no club or association in existence during the relevant period; the collection was only towards construction cost of club-related facilities within the housing complex. That amount was therefore part of the construction value and not a fee for a separate club service. The claim for abatement followed from its character as construction consideration.

Conclusion: The demand under club or association service was unsustainable and was set aside in favour of the assessee.

Issue (iii): Whether differential demand under the Point of Taxation Rules, 2011 could survive when tax and interest had already been paid.

Analysis: The dispute concerned timing of payment, since the assessee had paid tax on receipt basis rather than due basis. However, the record showed that the tax had eventually been paid on the taxable amounts and interest for delay had also been deposited. In such circumstances, a fresh demand on the same amounts would result in double taxation. The Point of Taxation Rules operate to secure timely payment, but they do not justify sustaining a further demand where the tax liability and interest have already been discharged.

Conclusion: The differential demand based on the Point of Taxation Rules was set aside in favour of the assessee.

Issue (iv): Whether the demand based on loose papers marked as cash receipts over and above agreement value was sustainable without corroborative evidence.

Analysis: The allegation rested on loose sheets bearing entries under the head "INTT". No cash excess, third-party verification, or corroborative material established that the entries represented unaccounted receipts from buyers. The burden to prove taxability and clandestine receipt lay on the Revenue, particularly where the demand was founded on private papers not forming part of the books of account. In the absence of a proven chain of events linking the documents to actual cash receipts, the allegation could not be sustained.

Conclusion: The demand based on alleged unaccounted cash receipts was not proved and was set aside in favour of the assessee.

Issue (v): Whether the demand relating to retained tax on cancelled bookings was sustainable.

Analysis: The assessee accepted this component and stated that the amount along with applicable interest had already been paid. The demand did not survive once the payment was adjusted against the liability.

Conclusion: The demand relating to cancelled bookings was set aside in favour of the assessee.

Final Conclusion: The entire confirmed demand and all consequential penalties were set aside, and both appeals were allowed with consequential relief.

Ratio Decidendi: A levy cannot be sustained as a separate taxable service where the disputed amount is only an element of a naturally bundled construction transaction and no separate consideration or independent service is proved; likewise, a demand based on alleged clandestine receipts must be supported by corroborative evidence, as the burden of proving taxability lies on the Revenue.

Issues: Whether the demand of central excise duty based on pen-drive data and confessional statements, without compliance with the statutory requirements for electronic evidence and without corroborative evidence of clandestine manufacture and removal, was sustainable.

Analysis: The demand rested primarily on data retrieved from pen drives recovered during search and on statements recorded from the director and employees. The electronic material was not shown to have been produced from a computer regularly used to store or process information, and the required certificate accompanying the electronic output was not obtained. The pen drives were not seized through a proper seizure memo, and the manner of retrieval of printouts did not satisfy the safeguards prescribed for admissibility of electronic records. The record also lacked independent corroboration such as evidence of excess raw material, excess power consumption, extra labour, cash trail, or transport of clandestinely removed goods. In clandestine removal matters, the charge must be established by tangible, direct, and affirmative evidence, not by suspicion or uncorroborated private records.

Conclusion: The demand was not sustainable, and the assessee was entitled to relief.

Ratio Decidendi: Electronic records relied upon for excise demand are admissible only when the statutory conditions for electronic evidence are satisfied, and clandestine removal must be proved by corroborative, tangible evidence rather than unauthenticated data or unverified statements.

Additional relevant questions include:

• Whether the lactose cleared was indeed edible lactose as claimed by the Revenue.
• Whether the appellant had the manufacturing facilities or had engaged in manufacturing of edible lactose.
• The applicability of the proviso to section 11A(1) and penalty provisions under section 11AC for alleged clandestine clearance without payment of duty.
• The legitimacy of the CENVAT credit availed by the appellant on inputs and input services related to the imported lactose.
• The effect of processing part of the imported edible lactose into pharma grade lactose through a job worker on the liability to pay duty on the unprocessed edible lactose cleared.

Issue-wise detailed analysis:

1. Nature of the lactose cleared - whether edible lactose or not

The Tribunal had earlier remanded the matter to the Commissioner to examine the nature of the lactose imported by the appellant. The Commissioner, after review, confirmed that the appellant had imported edible lactose as per the Bills of Entry submitted. This was not disputed by the appellant. The Commissioner relied on documentary evidence (Bills of Entry) to establish that 1567.320 MT of edible lactose was imported during the relevant period.

This finding was crucial because the Revenue's demand was premised on the clearance of edible lactose without payment of duty, which is an excisable good under the Act.

2. Whether the appellant manufactured edible lactose or merely cleared imported edible lactose

The appellant contended that it did not manufacture edible lactose at all, having no manufacturing facilities for either edible or pharma grade lactose. Instead, it imported edible lactose, availed CENVAT credit on the customs duty paid, and sent part of the imported lactose to a job worker for conversion into pharma grade lactose. The processed pharma grade lactose was received back, while the unprocessed edible lactose was cleared after reversal of CENVAT credit.

The Commissioner did not find or produce any evidence to contradict the appellant's claim of non-manufacture. The impugned order acknowledged the appellant's lack of manufacturing facilities and accepted that part of the lactose was processed externally. However, the Commissioner confirmed the demand on the basis that edible lactose was cleared from the factory without payment of duty, equating clearance with manufacture for the purpose of duty liability.

3. Interpretation of the charging section of the Central Excise Act, 1944

Section 3(1) of the Act provides that Central Excise duty (CENVAT) shall be levied on all excisable goods "which are produced or manufactured in India." The proviso clarifies duty on goods produced or manufactured by hundred percent export oriented undertakings but does not alter the fundamental requirement of manufacture or production within India for duty liability.

The Court emphasized that the charge of duty is on manufacture or production, not merely on clearance (removal from factory premises). Therefore, if the appellant had only imported edible lactose and cleared it without manufacturing it, no excise duty would be leviable on such clearance.

4. Application of law to facts and evidence

The Commissioner's order confirmed import of edible lactose and accepted the appellant's claim of no manufacture. However, the Commissioner failed to establish any manufacturing activity on the part of the appellant. The demand was confirmed on the basis of clearance of edible lactose from the factory, treating it as manufacture, which the Court found to be a fundamental error.

The appellant's reversal of CENVAT credit on the cleared edible lactose further indicated recognition of the input nature of the goods cleared. The loss of lactose during processing by the job worker was also recorded but did not affect the core issue of manufacture versus clearance.

5. Treatment of competing arguments

The Revenue relied on the premise that clearance of edible lactose without payment of duty amounted to evasion under the proviso to section 11A(1) and justified penalty under section 11AC. The appellant argued that no manufacture had taken place and therefore no duty was payable on clearance of imported edible lactose.

The Court found the Revenue's argument untenable in the absence of any evidence of manufacture. The charging section's clear language was decisive in favor of the appellant. The penalty and interest demands were thus unsustainable.

6. Conclusions on issues

The Court concluded that the appellant was not liable to pay Central Excise duty on edible lactose cleared from its factory, as it had not manufactured the lactose but merely imported and cleared it after processing part through a job worker. The impugned order confirming demand and penalty was set aside.

Significant holdings include the following verbatim reasoning:

"...the charge of duty of excise (known as CENVAT) is on manufacture or production of excisable goods and not merely on clearing them (i.e., taking goods out of the factory which it had not manufactured). The Commissioner lost sight of the charging section of the Act and confirmed the demand without establishing through any evidence that the appellant had manufactured edible grade lactose."

Core principles established:

• Central Excise duty under the Act is chargeable only on goods manufactured or produced in India, not merely on clearance of goods from the factory.
• Import of excisable goods and clearance thereof without manufacture does not attract Central Excise duty, provided CENVAT credit on customs duty is reversed appropriately.
• Revenue must establish manufacture or production to sustain demand of excise duty and penalties under the Act.

Final determinations:

• The appellant imported edible lactose and did not manufacture it.
• The clearance of edible lactose from the factory without manufacture does not attract Central Excise duty.
• The demand of Rs. 60,95,448/- Central Excise duty along with interest and equal penalty imposed under sections 11A(1) and 11AC of the Act was unsustainable.
• The impugned order confirming demand and penalty was set aside, and consequential relief granted to the appellant.

Issues: (i) whether unutilised Cenvat credit could be claimed as cash refund after discontinuance of production when the registration was not surrendered and the credit could have been carried forward into the GST regime; (ii) whether the claim was admissible under the existing refund provisions and the transitional scheme under the CGST Act.

Issue (i): whether unutilised Cenvat credit could be claimed as cash refund after discontinuance of production when the registration was not surrendered and the credit could have been carried forward into the GST regime.

Analysis: The claim was examined against the settled principle that refund of tax credit is purely statutory and cannot be claimed as a matter of right outside the conditions prescribed by law. The appellant had not surrendered registration and had continued filing returns till migration into GST, so the situation was materially different from cases where registration had been surrendered and refund of balance credit had been allowed. On the facts, the credit could have been transitioned through the prescribed GST mechanism, and failure to do so did not create a right to cash refund.

Conclusion: The claim for cash refund was not admissible on this basis and was correctly rejected.

Issue (ii): whether the claim was admissible under the existing refund provisions and the transitional scheme under the CGST Act.

Analysis: Rule 5 of the Cenvat Credit Rules permitted refund only in the limited situations specified by the rule, particularly where credit related to exports, and Section 11B governed refund claims under the existing law with its own limitation and procedural requirements. Section 142(3) of the CGST Act was held to be only an enabling transitional provision that preserves an existing right and provides the mode of refund in cash if such right otherwise exists; it does not create a new right or revive a lapsed one. Since the appellant had neither established entitlement under the existing law nor shown a permissible transitional claim, the statutory route for refund was unavailable.

Conclusion: The refund was not permissible under the existing law or under the transitional provisions.

Final Conclusion: The appeal failed because the appellant had no enforceable right to cash refund of the unutilised credit, and the rejection of the refund claim was sustained.

Ratio Decidendi: Transitional provisions for refund do not create a fresh entitlement to cash refund; they operate only where an enforceable right exists under the pre-existing law and the claim satisfies the prescribed statutory conditions.

Closely related to this was the issue of whether freight, insurance, and other transit-related charges should be included in the assessable value of the goods. The appellant contended that the sale was ex-works, and these charges were merely commercial arrangements separate from the sale price, whereas the department argued that the sale was completed only upon delivery at the destination, making such charges integral to the transaction value.

Another issue implicitly considered was the applicability and interpretation of various Supreme Court and Tribunal precedents concerning the place of removal and valuation, especially the interplay between the judgments in Ispat Industries Ltd, Roofit Industries Ltd, Emco Ltd, and subsequent Larger Bench decisions.

Issue-wise Detailed Analysis

1. Whether the sale was ex-works or FOR destination basis

Relevant legal framework and precedents: The appellant relied heavily on the Supreme Court judgment in CC & CE, Nagpur Vs Ispat Industries Ltd, which held that the place of removal must be a location relatable to the seller and cannot be the buyer's premises even if the sale is FOR destination. The appellant argued that the title passed at the factory gate, supported by the pricing structure and payment of VAT at that point.

The department countered by relying on clauses of the purchase orders indicating that the price was variable FADS (Free at Destination Stores), inclusive of freight, insurance, and other charges, and that ownership remained with the appellant until receipt and acceptance at the destination. They further relied on the Larger Bench decision in The Ramco Cements Ltd Vs CCE, Puducherry, which examined the interplay of Ispat Industries with Roofit Industries and Emco Ltd judgments. These latter judgments emphasize that the place of removal depends on the factual matrix and the point at which the sale is actually completed.

Court's interpretation and reasoning: The Tribunal undertook a holistic examination of the purchase order clauses, noting that despite a separately quoted ex-works price, the overall terms indicated that the goods were accepted only upon receipt in good condition at the destination. The appellant bore responsibility for freight, insurance, and unloading charges, which were prepaid, indicating that risk and ownership remained with the appellant during transit.

The Tribunal distinguished the appellant's reliance on Ispat Industries by emphasizing that the factual matrix here was more aligned with the Roofit Industries and Emco Ltd line of cases, where the place of sale and removal depends on the contractual terms and actual transfer of ownership. The Tribunal cited its own previous decision in Schneider Electric India Pvt Ltd Vs CCT, Medchal-GST, which analyzed the conflicting judgments and concluded that when the sale is on FOR basis, the place of removal is at the buyer's premises, and freight and insurance costs form part of the transaction value.

Key evidence and findings: The purchase order clauses demonstrated that payment was contingent on receipt of goods in good condition, that ownership remained with the appellant until delivery, and that freight and insurance costs were prepaid by the appellant. The appellant's failure to actually pay insurance charges was noted but did not alter the contractual terms indicating risk retention. The Tribunal found that the commercial understanding of a separate ex-works price was insufficient to override the contractual terms.

Application of law to facts: Applying the precedents, the Tribunal held that the place of removal must be determined by the terms of the contract and factual circumstances. Since the contract was clearly FOR destination, the place of sale was at the buyer's premises, not the factory gate. Consequently, freight and insurance costs were includable in the assessable value.

Treatment of competing arguments: The appellant's argument that the sale was ex-works based on price structure and VAT payment was rejected as incomplete in light of the contractual terms. The department's reliance on detailed purchase order clauses and Larger Bench precedents was accepted as reflecting the true nature of the transaction.

Conclusion: The Tribunal concluded that the sale was completed at the destination, not at the factory gate, and that the place of removal was the buyer's premises.

2. Inclusion of freight, insurance, and related charges in assessable value

Relevant legal framework and precedents: The question of whether transportation and insurance charges form part of the transaction value has been extensively considered in judgments such as Roofit Industries Ltd, Emco Ltd, and Ultra Tech Cement. These judgments hold that when the sale is on FOR basis and ownership passes at the destination, such charges are integral to the transaction value and must be included for excise/GST valuation.

Court's interpretation and reasoning: The Tribunal, relying on the Larger Bench decision in Ramco Cements Ltd and its own earlier ruling in Schneider Electric, reiterated that the inclusion of freight and insurance charges depends on the place of removal. Since the sale was on FOR basis, these charges were necessarily part of the transaction value. The Tribunal noted that the appellant's commercial arrangement of quoting freight separately did not exempt these charges from inclusion when ownership passed at the destination.

Key evidence and findings: The purchase orders explicitly included freight and insurance in the price and required prepayment by the appellant. Payment terms also linked release of funds to receipt of goods at the destination in good condition, reinforcing the inclusion of these charges in the transaction value.

Application of law to facts: The Tribunal applied the legal principle that all costs incurred up to the point of sale must be included in the assessable value when sale occurs at the destination. Since ownership and risk passed only at the destination, freight and insurance costs were rightly included.

Treatment of competing arguments: The appellant's contention that insurance charges were not actually paid was dismissed as irrelevant to the contractual terms. The department's position that these costs formed part of the transaction value was upheld.

Conclusion: Freight, insurance, and related charges were properly includable in the assessable value of goods for excise/GST purposes.

3. Interpretation and applicability of precedents

Relevant legal framework and precedents: The Tribunal analyzed the Supreme Court decisions in Ispat Industries Ltd, Roofit Industries Ltd, Emco Ltd, and subsequent Larger Bench rulings, along with various Tribunal decisions such as Unique Structures & Towers Ltd, Schneider Electric, and Toshiba Transmission & Distribution System India Pvt Ltd.

Court's interpretation and reasoning: The Tribunal recognized that Ispat Industries established a general principle that place of removal is the seller's premises, but also acknowledged that Roofit Industries and Emco Ltd introduced a more nuanced approach requiring examination of the factual matrix and contract terms. The Larger Bench in Ramco Cements clarified that in FOR contracts, the place of removal is the buyer's premises, and all costs up to that point must be included in valuation.

Key evidence and findings: The Tribunal found that the present case's factual matrix aligned with the Roofit Industries and Emco Ltd line of cases rather than Ispat Industries. It noted that the department's reliance on Larger Bench and other Tribunal decisions was appropriate and that the appellant's reliance on Ispat Industries was misplaced given the contractual terms.

Application of law to facts: The Tribunal applied the precedents by focusing on the contractual terms and actual transfer of ownership, concluding that the place of removal was the buyer's premises and that valuation must include freight and insurance.

Treatment of competing arguments: The appellant's reliance on Ispat Industries was considered but ultimately distinguished on facts. The department's reliance on the Larger Bench and other judgments was accepted as correctly interpreting the law in the context of FOR contracts.

Conclusion: The Tribunal held that the relevant precedents support the finding that in contracts with FOR terms, the place of sale is the buyer's premises and the assessable value includes freight and insurance charges.

Significant Holdings

"The core issue to be decided is whether in this case the sale is on exworks basis or at buyer's premises. ... a holistic perusal of all this terms and conditions would clearly indicate that the goods are accepted only when they reach the destination in good condition and liability for their transport including pre-payment of transport is on the appellants themselves. Therefore, in the factual matrix it is obvious that sale has got concluded only at the destination of the buyer and not at the factory gate."

"... the place of removal has to be determined on the basis of factual matrix including the point at which sale has actually taken place. Therefore, when the sale is clearly on FOR basis, following the judgments in the case of Roofit Industries and Emco Ltd, the place of removal will be at the buyer's premises and obviously the cost of transportation, insurance, etc., if any, incurred by the assessee are required to be included in the assessable value."

"... the Commissioner (Appeals) has rightly held that in the given factual matrix, the judgments in the case of Roofit Industries and Emco Ltd are relevant and not that of Ispat Industries as clearly the price is not ex-works."

Core principles established include the necessity of examining the entire contractual matrix to determine the place of removal and the consequent valuation, the recognition that the place of sale may be at the buyer's premises in FOR contracts, and that freight and insurance costs must be included in the transaction value when ownership passes at destination.

Final determinations: The Tribunal upheld the impugned orders dismissing the appeals, confirming that the sale took place at the buyer's premises on FOR basis and that freight and insurance costs are includable in the assessable value for excise/GST purposes.

Issues: (i) Whether the appellant's clearances of MRP-marked medicines supplied through distributors and to institutional buyers were assessable under Section 4A of the Central Excise Act, 1944, and whether the extended period of limitation was invokable; (ii) whether the penalty imposed on the company and the penalty imposed on its manager under Rule 26 of the Central Excise Rules, 2002 were sustainable.

Issue (i): Whether the appellant's clearances of MRP-marked medicines supplied through distributors and to institutional buyers were assessable under Section 4A of the Central Excise Act, 1944, and whether the extended period of limitation was invokable?

Analysis: The medicines bore MRP and were cleared not only directly to institutions but also through distributors. The governing metrology framework exempts only packaged commodities meant for industrial or institutional consumers where the goods are directly supplied for such use or are clearly marked as not for retail sale. The record showed no endorsement of "not for retail sale" on the packages cleared by the appellant, and the mere use of "Government invoice" on excise invoices did not satisfy the requirements of the metrology rules. The returns filed with the department did not disclose the clearances in a manner showing which goods were assessed under Section 4 and which, if any, under Section 4A. The non-disclosure of this material fact justified invocation of the extended period.

Conclusion: The demand under Section 4A, the confirmation of differential duty and interest, and the invocation of the extended period were upheld against the company.

Issue (ii): Whether the penalty imposed on the company and the penalty imposed on its manager under Rule 26 of the Central Excise Rules, 2002 were sustainable?

Analysis: The equal penalty on the company followed the confirmed duty demand and was sustained. However, the order imposing penalty on the manager did not record any specific role, personal benefit, or independent culpability. An employee acting in the course of employment, without evidence of personal interest in the alleged evasion, could not be visited with penalty merely on that basis.

Conclusion: The penalty on the company was sustained, but the penalty on the manager was set aside.

Final Conclusion: The company's challenge failed on merits and limitation, while the individual penalty against the manager was annulled, resulting in partial relief only.

Ratio Decidendi: MRP-based assessment under Section 4A applies where the goods are not shown to be excluded as institutional or industrial supplies by direct sale or by a clear "not for retail sale" endorsement, and suppression of material clearance details in returns can justify the extended period of limitation; employee penalty requires evidence of specific culpable involvement.

Issues: (i) Whether the authorities were bound to follow the Commissioner's circulars governing issuance and use of Form III B. (ii) Whether liability under Section 3B could be fastened without a transaction-wise finding that Form III B was false or wrong.

Issue (i): Whether the authorities were bound to follow the Commissioner's circulars governing issuance and use of Form III B.

Analysis: The dispute concerned Form III B issued for concessional purchases under the trade tax framework. The record indicated that the relevant circulars prescribed the manner in which the form was to be issued and dealt with. Where administrative circulars govern the working of the statutory scheme, the authorities were expected to give them due effect while processing and scrutinising the forms.

Conclusion: The circulars were binding on the authorities and could not be ignored.

Issue (ii): Whether liability under Section 3B could be fastened without a transaction-wise finding that Form III B was false or wrong.

Analysis: Section 3B fastens liability only when a false or wrong certificate or declaration is issued, and the provision contemplates an opportunity of hearing. The form itself did not contain any column requiring disclosure of the tax rate, and the proceedings were initiated on a general footing for the assessment year. The provision was treated as applying to the specific certificate or declaration involved in the particular transaction, not by a blanket order for the whole year. In the absence of a pinpointed finding that a particular Form III B was false or wrong, the demand could not be sustained in the manner adopted below.

Conclusion: Liability under Section 3B could not be upheld without a transaction-specific finding of false or wrong issuance of Form III B.

Final Conclusion: The impugned orders were set aside and the matter was sent back for fresh decision by the assessing authority in accordance with law.

Ratio Decidendi: Liability for issuing a false or wrong declaration must be determined with reference to the specific transaction and certificate or form involved, and a blanket assessment for the entire year is impermissible where the statutory scheme requires form-wise examination.

Issues: Whether delay in filing the first appeal could be condoned where the appellant showed that the delay occurred due to the admitted mistake of the advocate, and whether the matter should be sent back for decision on merits.

Analysis: The first appeal was undisputedly filed beyond time. The explanation offered was that the papers and fee had been handed over to the advocate, who assured that the appeal had been filed, but later admitted by affidavit that the appeal could not be filed within time due to his own fault. In such circumstances, the failure was attributable to counsel and not to the assessee. The Court applied the principle that a litigant should not suffer for the negligence of counsel, and since the controversy had not been examined on merits, justice required that the appeal be decided substantively.

Conclusion: The delay was liable to be condoned and the orders rejecting the appeal could not be sustained. The matter was remitted to the First Appellate Authority for decision on merits.

Final Conclusion: The revisions succeeded, the impugned appellate orders were set aside, and the first appellate authority was directed to decide the appeal afresh on merits.

Ratio Decidendi: Where delay in filing an appeal is shown to have arisen from the admitted negligence of counsel, the litigant should not be denied adjudication on merits and the appeal ought to be heard substantively.

ISSUES PRESENTED AND CONSIDERED

1. Whether a dealer is entitled to avail input tax credit in respect of purchases of goods the sale of which is exempt from tax under the statute by virtue of notifications issued under section 7(c).

2. Whether an order allowing input tax credit in circumstances where section 13(7) of the Act operates to prohibit such credit can be sustained in law.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Entitlement to input tax credit where sales are exempt under section 7(c)

Legal framework: Section 7(c) (statutory exemption provision) exempts turnover of sale or purchase of specified goods by specified classes of dealers as may be notified; section 13 constitutes the scheme for availing input tax credit, with section 13(1) permitting credit to the extent provided under relevant clauses and section 13(7) specifying circumstances where input tax credit is not allowable, including where the sale of such goods by the dealer is exempt under section 7(c).

Precedent Treatment: The Court applied and followed the reasoning of a binding higher-court decision addressing the same issue, which interpreted sections 7(c) and 13(7) to preclude allowance of input tax credit where sales are exempt under section 7(c). That precedent was treated as directly on point and controlling.

Interpretation and reasoning: The Court adopted the statutory distinction between taxable persons, taxable goods and taxable events and observed that entitlement to input tax credit is governed strictly by section 13. While notifications under section 7(c) effectuate exemption from levy/collection of tax, they do not enlarge the statutory scheme for input tax credit where section 13(7) manifests a legislative prohibition. The Court reasoned that where the subject turnover admittedly falls under the statutory exemption (section 7(c)) read with the relevant notifications, the dealer's entitlement to input tax credit must be evaluated against the express bar in section 13(7). The legislative text of section 13(7) imposes a statutory mandate denying input tax credit in such circumstances, and that mandate cannot be overridden by an intent or policy expressed elsewhere (e.g., in notifications) to grant credit.

Ratio vs. Obiter: The holding that section 13(7) disallows input tax credit where sales are exempt under section 7(c) was applied as ratio. Observations distinguishing between exemption from levy and entitlement to input tax credit, and emphasizing statutory textualism in tax jurisprudence, were treated as integral to the ratio rather than mere obiter.

Conclusions: A dealer whose sales fall within the exemption under section 7(c) is not entitled to input tax credit under section 13 where section 13(7) applies to prohibit such credit. The prior higher-court decision to that effect governs and is followed.

Issue 2 - Validity of an order allowing input tax credit contrary to section 13(7)

Legal framework: Administrative or adjudicatory orders granting input tax credit must conform to the statutory scheme; where section 13(7) expressly prohibits credit, an order granting credit would conflict with statutory mandate.

Precedent Treatment: The Court relied on the higher-court decision which affirmed that orders granting input tax credit in facts where section 13(7) applies are not tenable and must be set aside.

Interpretation and reasoning: Applying the statutory prohibition in section 13(7) to the facts, the Court concluded the impugned order could not be sustained. The Court emphasized that the exemption from levy under section 7(c) does not translate into a right to input tax credit where the statute expressly excludes such benefit. Given the admitted factual position that the turnover falls within section 7(c) notifications, the statutory bar in section 13(7) operates decisively to deny credit; administrative attempts to permit credit in that factual matrix are incompatible with the statute.

Ratio vs. Obiter: The determination that an order granting input tax credit contrary to the statutory prohibition must be quashed is ratio, directly following the controlling precedent and statutory text.

Conclusions: The impugned order allowing input tax credit (in the circumstances where sales are exempt under section 7(c)) cannot be sustained and is quashed. The revision is allowed and the substantial questions of law are answered in favour of the revisionist and against the opposite party, consistent with the statutory scheme and precedent.

Issues: (i) whether the statutory demand notice issued to the partners, but not separately addressed to the firm, was sufficient compliance for a prosecution under Section 138 of the Negotiable Instruments Act, 1881; (ii) whether a signed blank security cheque could be treated as a cheque issued towards an enforceable liability; and (iii) whether the summoning of the non-signatory partner could be sustained in the absence of a specific plea that she had no role in the firm's affairs.

Issue (i): whether the statutory demand notice issued to the partners, but not separately addressed to the firm, was sufficient compliance for a prosecution under Section 138 of the Negotiable Instruments Act, 1881

Analysis: The notice was addressed to the two partners in their capacity as partners of the firm, and the cheque itself was issued on behalf of the firm by the authorised signatory. The requirement of notice is meant to afford an opportunity to make payment and avoid prosecution. A hyper-technical objection that the firm was not separately named was rejected because the firm had, in substance, been served through its partners and was also arrayed as an accused.

Conclusion: The notice was held to be sufficient, and this ground for quashing failed.

Issue (ii): whether a signed blank security cheque could be treated as a cheque issued towards an enforceable liability

Analysis: The material on record showed that the cheque series belonged to an earlier period, that prior correspondence had demanded return of the cheques treated as security, and that business dealings had resulted in outstanding dues, including liability arising from non-submission of C-Forms. A signed blank cheque does not lose efficacy merely because particulars are filled in later. A security cheque, if issued to secure an obligation and presented against outstanding dues, can attract penal consequences when dishonoured.

Conclusion: The plea that the cheque was only a blank security cheque was rejected, and the cheque was treated as capable of supporting the prosecution.

Issue (iii): whether the summoning of the non-signatory partner could be sustained in the absence of a specific plea that she had no role in the firm's affairs

Analysis: The record showed that the notices and replies were addressed to both partners, and there was no contemporaneous assertion at that stage that the partner had no involvement in the firm's affairs. Vicarious liability for offences involving a firm depends on the role and control exercised, but a bald denial at the summoning stage was not enough to dislodge the complaint.

Conclusion: The summoning of the partner was upheld.

Final Conclusion: The complaint under Section 138 of the Negotiable Instruments Act, 1881 was found fit to proceed, and the petition for quashing was rejected.

Ratio Decidendi: In a cheque dishonour prosecution, notice addressed to partners in their representative capacity can amount to effective notice to the firm, and a signed blank security cheque may sustain liability when issued against outstanding dues and later dishonoured.

The core legal questions considered in the judgment are:

- Whether the Kolhapur District Bar Association (respondent no. 2), which issued a notice restricting voting rights of members who have not cleared dues by a specified date, is amenable to writ jurisdiction under Article 226 of the Constitution of India as a "State" or "instrumentality of State" within the meaning of Article 12 of the Constitution.

- Whether the notice dated 01 April 2025 issued by the Bar Association, restricting voting rights of members who fail to clear dues by that date, is arbitrary and illegal, infringing the legal right of members to participate in elections.

- Whether members whose dues become payable after 01 April 2025 should be allowed to participate in elections despite the notice.

- The maintainability of a writ petition under Article 226 challenging internal election processes and decisions of a Bar Association, which is a private association governed by its own rules and by-laws.

- The appropriate forum and remedy for disputes between members and the Bar Association regarding election rights and dues.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether the Bar Association is a "State" or "instrumentality of State" under Article 12 of the Constitution so as to be amenable to writ jurisdiction under Article 226

Relevant Legal Framework and Precedents: Article 12 of the Constitution defines "State" to include the Government and Parliament of India, the Government and Legislature of each State, and all local or other authorities within the territory of India or under the control of the Government of India. The writ jurisdiction under Article 226 extends to "State" entities. The issue of whether a Bar Association is a "State" or "instrumentality of State" has been considered in various judgments, including the decisions cited by the petitioner from Karnataka and Delhi High Courts. However, the Bombay High Court's Division Bench decision in Rajghor Ranjhan Jayantilal vs. Election Scrutiny Committee of B.B.A. (2024) is a key precedent rejecting the contention that a Bar Association is a "State" under Article 12.

Court's Interpretation and Reasoning: The Court distinguished between statutory bodies constituted under law, such as the Bar Council of Maharashtra and Goa, and Bar Associations, which are voluntary associations of persons governed by their own by-laws and rules. The Court emphasized that the Bar Association does not receive government aid or financial assistance, nor does the government exercise any control or stake in its establishment or management. There is no deep or pervasive State control over the Bar Association's affairs. Consequently, the Bar Association cannot be considered a "State" or instrumentality thereof within the meaning of Article 12.

Key Evidence and Findings: The petitioner's averments that the Bar Council exercises control over the Bar Association and that their functions are aligned were found insufficient to establish State control. The Court relied on the absence of government funding, control, or management involvement to conclude the Bar Association is a private entity.

Application of Law to Facts: Applying the principles from the Rajghor Ranjhan Jayantilal case and others, the Court found no basis to hold the Kolhapur District Bar Association as a "State" under Article 12. Therefore, the writ petition under Article 226 was not maintainable against the Bar Association.

Treatment of Competing Arguments: The petitioner's reliance on decisions from other High Courts was considered but distinguished on facts and legal reasoning. The Court rejected the argument that the Bar Association's alignment with the Bar Council's functions converts it into a State instrumentality.

Conclusion: The Bar Association is not a "State" under Article 12; hence, writ jurisdiction under Article 226 does not extend to it.

Issue 2: Whether the notice restricting voting rights of members who have not cleared dues by 01 April 2025 is arbitrary and illegal

Relevant Legal Framework and Precedents: The election process of Bar Associations is governed by their own rules and by-laws. The Advocates Act governs advocates but does not convert Bar Associations into State entities. The Court referred to the principle that internal disputes in voluntary associations are to be resolved within the association or civil courts, not by writ jurisdiction.

Court's Interpretation and Reasoning: The Court observed that the elections are creatures of statute and rules, and any grievance related to election procedures or notices must be addressed through the internal mechanisms or civil courts. It noted that entertaining writ petitions on such issues would lead to chaotic judicial interference in the functioning of Bar Associations, which are numerous and autonomous.

Key Evidence and Findings: The petitioner failed to demonstrate that the notice was beyond the Bar Association's authority or that it violated any fundamental or legal right enforceable by writ jurisdiction. The Court emphasized that the relationship between members and the Bar Association is governed by the by-laws to which members subscribe.

Application of Law to Facts: The Court applied the principle that disputes regarding membership dues and election eligibility are contractual or civil in nature, not constitutional issues warranting writ intervention. The petitioner's challenge to the notice was therefore misplaced in the writ jurisdiction.

Treatment of Competing Arguments: The petitioner argued that the notice was arbitrary and illegal, infringing voting rights. The Court rejected this, holding that the Bar Association's rules govern such matters and that judicial review under Article 226 is not the appropriate remedy.

Conclusion: The notice restricting voting rights for non-payment of dues by a specified date is not subject to writ jurisdiction and is not found to be illegal or arbitrary by the Court.

Issue 3: Whether members whose dues become payable after 01 April 2025 should be allowed to participate in elections

Relevant Legal Framework and Precedents: The Bar Association's rules and by-laws determine eligibility criteria for elections. The Court noted that the petitioner's prayer to allow members with dues payable after 01 April 2025 to vote is a matter of internal policy and governance.

Court's Interpretation and Reasoning: The Court held that such internal policy decisions are not amenable to judicial review under Article 226. It observed that members accept the rules upon joining and disputes regarding eligibility must be resolved within the association or civil courts.

Key Evidence and Findings: No statutory or constitutional provision was shown to mandate that members with dues payable after a certain date must be allowed to vote. The Bar Association's discretion in framing election rules was upheld.

Application of Law to Facts: The Court applied the principle of contractual governance of associations, concluding that the petitioner's claim for mandamus directing the Bar Association to allow such members to vote is not maintainable in writ jurisdiction.

Treatment of Competing Arguments: The petitioner's argument for enfranchisement of members with dues payable after the cut-off date was rejected on the basis that the Bar Association's rules govern such matters and judicial interference would disrupt the association's functioning.

Conclusion: The Court declined to grant relief to allow members with dues payable after 01 April 2025 to participate in elections.

Issue 4: Maintainability of writ petition under Article 226 challenging internal election processes and decisions of a Bar Association

Relevant Legal Framework and Precedents: The Court relied heavily on precedents including Rajghor Ranjhan Jayantilal and Dilip Shridhar Modgi cases, which held that Bar Associations are private bodies not subject to writ jurisdiction. It also noted that writ jurisdiction is not available for disputes involving questions of fact or contractual issues within private associations.

Court's Interpretation and Reasoning: The Court reasoned that entertaining writ petitions against Bar Associations for internal disputes would lead to judicial chaos, given the number of Bar Associations and their autonomous functioning. It emphasized that the proper remedy lies in civil courts or internal dispute resolution mechanisms.

Key Evidence and Findings: The Court found no statutory or constitutional basis for writ jurisdiction over Bar Associations. It noted the absence of government control or funding and the private nature of the associations.

Application of Law to Facts: The Court applied the principle that writ jurisdiction is limited to State actions and not private associations' internal governance. The petitioner's writ petition was thus held not maintainable.

Treatment of Competing Arguments: The petitioner's reliance on the Advocates Act and Bar Council's control was rejected as insufficient to convert the Bar Association into a State entity. The Court emphasized the need to avoid misuse of writ jurisdiction.

Conclusion: The writ petition challenging the Bar Association's election notice and eligibility criteria is not maintainable under Article 226.

3. SIGNIFICANT HOLDINGS

- "It is certainly not possible to draw any parity in regard to the statutory duties and obligations as conferred by law on the Bar Council which is constituted under a statute with that of a bar association which is an association of persons."

- "In the absence of there being any deep or pervasive State control in the management of the affairs, the Bar Association cannot be held to be a State within the meaning of Article 12 of the Constitution of India."

- "If all such activities, actions and decisions of the bar association are to be held to be subject, to the judicial review of the High Court under Article 226 of the Constitution of India, by reaching to a conclusion that the bar association is a 'State' within the meaning of Article 12 of the Constitution, in our opinion, this would certainly lead to a chaotic situation."

- "The relationship between the bar association and its members on anything to do with the functioning of the bar association is circumscribed/governed and controlled by the rules of the bar association, to which the members subscribe, when they accept the membership of the bar association."

- "Merely for the reason that the advocates are governed by the Advocates Act, a relief in a writ petition under Article 226 of the Constitution cannot be granted against the bar association."

- "We are thus not inclined to entertain this writ petition. We however, keep open the remedy of the petitioners to approach the appropriate Civil Court for redressal of their grievance, if any."

Final determinations:

- The Kolhapur District Bar Association is not a "State" or instrumentality thereof under Article 12; hence, writ jurisdiction under Article 226 does not apply.

- The notice restricting voting rights of members who have not cleared dues by 01 April 2025 is not arbitrary or illegal in a manner warranting writ intervention.

- Members whose dues become payable after 01 April 2025 are not entitled to vote as a matter of right enforceable by writ jurisdiction.

- Writ petitions challenging internal election processes and decisions of Bar Associations are not maintainable; the appropriate remedy lies in civil courts or internal dispute resolution.

- The writ petition is dismissed with no order as to costs.