TaxTMI Updates e-Newsletter
Jun 01,2024

Maintainability of writ petition in presence of alternative statutory remedy - appeal under Section 107 of the Central Goods and Services Tax Act, 2017 - rule of exhaustion of alternative remedy - natural justice and service of notice

Maintainability of writ petition in presence of alternative statutory remedy - appeal under Section 107 of the Central Goods and Services Tax Act, 2017 - rule of exhaustion of alternative remedy - Whether the writ petition under Article 226 is maintainable when the assessee has an efficacious appeal remedy under Section 107 of the CGST Act. - HELD THAT: - The Court held that the impugned order passed under Section 73(1) of the GST Act is appealable under Section 107 and that the availability of an alternative statutory remedy ordinarily disentitles the High Court to entertain a writ petition under Article 226 in matters involving recovery of public dues. Reliance was placed on the principle in United Bank of India v. Satyawati Tandon and subsequent authority, that High Courts should exercise self restraint and require exhaustion of the statutory appellate mechanism where a comprehensive remedy is provided by statute. Given the existence of the appeal procedure, the writ court declined to enter into the merits and directed that the petitioner avail the appellate remedy, including any contention as to service of notice, before the Appellate Authority. [Paras 7, 8]

Writ petition dismissed as not maintainable; petitioner directed to pursue appeal under Section 107 of the CGST Act.

Natural justice and service of notice - appeal under Section 107 of the Central Goods and Services Tax Act, 2017 - Whether the alleged non service of notice (email to merged bank) can be adjudicated in writ jurisdiction or requires determination by the appellate authority. - HELD THAT: - The Court recorded the petitioner's contention that notices were served to an e mail account of a bank merged into Canara Bank, preventing the petitioner from operating the account, and that therefore service was not proper in terms of principles of natural justice. However, the Court treated the question of service as a factual dispute which should be examined by the Appellate Authority in the statutory appeal and declined to decide the factual issue in writ jurisdiction. The matter of non service was left open for determination in the appeal under Section 107. [Paras 3, 7]

Allegation of non service not adjudicated by the High Court; directed to be raised and decided in the appeal under Section 107.

Final Conclusion: The writ petition is dismissed on the ground that an efficacious alternative remedy by way of appeal under Section 107 of the CGST Act is available; the petitioner is permitted to file and pursue the statutory appeal, where the factual contention regarding service of notice may be agitated and determined.

Cancellation of GST registration - revocation of cancellation - principles of natural justice - opportunity of hearing - duty to verify pleadings / clean hands doctrine - auto-generated administrative orders and inconsistency - costs for abuse of process

Cancellation of GST registration - duty to verify pleadings / clean hands doctrine - Whether the petitioner had filed a reply to the show-cause notice and whether the writ petitioner's factual averment that a reply dated 02.04.2023 was filed was true. - HELD THAT: - The Court found that no reply dated 02.04.2023 was on the official record; the petitioner subsequently admitted that the reply was only drafted and remained in the petitioner's own file and was not filed or uploaded. The petitioner furnished an additional affidavit conceding the mistake and apologising, and the annexed draft did not bear any date. On the material before the Court the factual contention that a reply was filed was false; the petitioner did not avail the opportunity of hearing before the cancellation order and has not approached the Court with clean hands. [Paras 14, 15, 16, 17]

The Court found that the petitioner did not file the reply to the show cause notice and that the averment in the writ petition alleging filing was untrue.

Principles of natural justice - opportunity of hearing - cancellation of GST registration - Whether the petitioner could successfully challenge the cancellation order on the ground of violation of principles of natural justice where no reply was in fact filed. - HELD THAT: - Although the petitioner alleged non-consideration of a reply as a breach of natural justice, the Court held that where no reply was actually filed and the petitioner failed to avail the opportunity of hearing, the plea of violation of natural justice could not be sustained. The Court emphasised that a party cannot raise non-consideration of a non-existent reply and observed that the petitioner's misstatement amounted to an attempt to take advantage of an erroneous reference in the cancellation order. In these circumstances the writ petition was dismissed. [Paras 3, 17, 21, 22]

The challenge to the cancellation on grounds of violation of principles of natural justice was rejected because the petitioner had not filed the reply and had not availed the hearing opportunity.

Auto-generated administrative orders and inconsistency - Whether the administrative practice that produced an internal inconsistency in the cancellation order (mentioning a reply date but later stating no reply was filed) required remedial attention. - HELD THAT: - The Court observed that the impugned order contained a contradiction-an automatically inserted reference to a reply date alongside an express finding that no reply was filed-and held that such inconsistencies should be examined to prevent future confusion. The Court was not satisfied with the oral explanation and directed the concerned authority to probe the aspect, rectify the systemic/administrative issue and, if necessary, bring the matter to the attention of the competent authority for remedial action. A copy of the order was directed to be sent for compliance. [Paras 18, 19, 25, 26]

The Court directed the respondents to examine and take appropriate remedial steps to address the auto-generation/inconsistency in the administrative order.

Costs for abuse of process - Whether the writ petition should be dismissed with imposition of costs for engaging the Court by misleading averments. - HELD THAT: - Given the petitioner's false averment that a reply had been filed, the Court held that the petitioner had not come with clean hands and had abused the process by litigating on that basis and consuming Court time. The Court considered the conduct serious enough to warrant a monetary penalty as a corrective and deterrent measure. [Paras 21, 22, 23, 24]

The writ petition was dismissed and costs of Rs. 50,000 were imposed on the petitioner to be deposited with the High Court Legal Services Committee within two weeks, failing which recovery proceedings were directed.

Final Conclusion: Writ petition dismissed: the Court found that no reply to the show-cause notice was filed and the petitioner's contrary averment was false; consequently the challenge to cancellation on natural justice grounds failed, costs were imposed for abuse of process, and the respondents were directed to remedy the administrative inconsistency in the cancellation order.

Show cause notice - ex-parte demand - opportunity of personal hearing - re-adjudication/remand to Proper Officer - requirement of a speaking order - failure to consider and appreciate reply - orders under Section 73 of the CGST Act, 2017

Show cause notice - ex-parte demand - opportunity of personal hearing - re-adjudication/remand to Proper Officer - orders under Section 73 of the CGST Act, 2017 - Validity of impugned order dated 24.12.2023 which created demand ex parte on the ground that no reply/explanation was filed by the petitioner. - HELD THAT: - The Court found that the impugned order proceeded to create an ex parte demand solely because it recorded that no reply/explanation had been filed and therefore the Proper Officer concluded that the taxpayer had nothing to say. That approach was held to be untenable: where the only reason for adjudication is absence of reply, the petitioner must be granted an opportunity to respond and the matter requires fresh adjudication. The Court directed remission of the Show Cause Notice to the Proper Officer for re adjudication and mandated that an opportunity of personal hearing be given and a fresh speaking order passed in accordance with law. [Paras 8, 11, 12]

Impugned order dated 24.12.2023 setting up an ex parte demand is set aside and the matter is remitted to the Proper Officer for re adjudication after affording opportunity of personal hearing and passing a speaking order.

Show cause notice - failure to consider and appreciate reply - requirement of a speaking order - re-adjudication/remand to Proper Officer - orders under Section 73 of the CGST Act, 2017 - Validity of impugned order dated 28.12.2023 which rejected the petitioner's detailed reply as a 'plain reply' lacking calculations and documents and created demand. - HELD THAT: - The Court examined the record and found that the petitioner had submitted a detailed reply dated 29.10.2023 with supporting documents including invoices, ledger entries, weighing bridge invoices and bank statements. The Proper Officer's brief conclusion that the reply was 'plain' and unsupported was held to indicate non application of mind; further, if additional particulars were necessary those ought to have been specifically called for. Consequently, the order rejecting the reply without proper consideration could not be sustained. The Show Cause Notice was remitted for fresh adjudication, with liberty to the petitioner to file further reply and with the direction that the Proper Officer hear the petitioner and pass a fresh speaking order within the statutory period. [Paras 9, 10, 11, 12]

Impugned order dated 28.12.2023 is set aside and the matter is remitted to the Proper Officer for re adjudication after giving the petitioner an opportunity to file/furnish further details if necessary, affording personal hearing and passing a fresh speaking order.

Final Conclusion: Both impugned orders dated 24.12.2023 and 28.12.2023 are quashed and the Show Cause Notices dated 22.09.2023 and 29.09.2023 are remitted to the Proper Officer for re adjudication; petitioner may file further reply within 30 days and the Proper Officer shall re adjudicate after personal hearing and pass a fresh speaking order within the period prescribed by law. All rights and contentions are reserved and the Court has not expressed any view on merits.

Cancellation of registration under the GST law - revocation/restoration of GST registration subject to compliance - failure to consider statutory response or representation by the proper officer - appellate authority's competence to condone delay under Section 107 - practicality that suspension/revocation is counter productive to revenue recovery

Failure to consider statutory response or representation by the proper officer - Order rejecting application for revocation of cancellation and the original cancellation order were vitiated by non-consideration of the petitioner's response. - HELD THAT: - The Court found that although the cancellation order recorded that a response had been submitted, the petitioner in fact had not been given consideration of his response to the show cause dated 12th October 2022. The rejection order dated 18th November 2022 records non submission of total purchase and sale statements as the reason for rejection, but the petitioner's response was not examined on merits. In these circumstances the impugned administrative action is amenable to judicial interference because the statutory response was not considered before refusing revocation of registration. [Paras 3, 9, 11]

The order of rejection dated 18th November 2022 and the cancellation order dated 28th September 2022 are set aside for failure to consider the petitioner's response.

Appellate authority's competence to condone delay under Section 107 - revocation/restoration of GST registration subject to compliance - The appellate order refusing to admit the appeal as barred by delay was set aside and the appellate bar did not preclude reconsideration of restoration of registration. - HELD THAT: - The Court noted earlier High Court observations permitting the appellate authority to condone a delay of one month beyond the prescribed period and held that the appellate order dated 12th February 2024 could not be allowed to foreclose the petitioner's substantive right of reconsideration. The Court exercised supervisory jurisdiction to set aside the appellate order insofar as it would prevent reconsideration, and directed that restoration be governed by compliance requirements to enable determination of tax liability by the respondents. [Paras 9, 12]

The order dated 12th February 2024 of the appellate authority is set aside to enable reconsideration and restoration subject to compliance.

Practicality that suspension/revocation is counter productive to revenue recovery - revocation/restoration of GST registration subject to compliance - Registration was ordered to be restored subject to the petitioner filing returns for the period of default and payment of tax, interest, fine and penalty within a stipulated time, failing which the petition would be dismissed. - HELD THAT: - Emphasising that suspension or revocation of registration hinders the assessee's ability to raise invoices and thus impedes revenue recovery, the Court directed a pragmatic course: set aside the impugned orders and restore registration provided the petitioner, within four weeks of receipt of the server copy of the order, files returns for the entire period of default, submits the required documents, and pays the requisite tax, interest, fine and penalty. The respondents were directed to open the portal within one week to facilitate compliance. Once returns are filed, the respondents are to determine the liability in accordance with law. [Paras 10, 11, 12, 13, 14]

Registration restored conditionally on timely filing of returns, submission of documents and payment of tax, interest, fine and penalty; failure to comply results in automatic dismissal of the petition.

Final Conclusion: Impugned orders of cancellation, rejection and appellate refusal are set aside; registration is to be restored provided the petitioner, within four weeks, files returns for the period of default, submits required documents and pays tax, interest, fine and penalty, with the respondents required to open the portal within one week to enable compliance; non compliance will result in dismissal of the writ petition.

Interim stay on recovery - extension of limitation under Section 168A - time limit for issuance of order under Section 73(9)/(10) - force majeure - interim reliefs granted by coordinate High Courts

Interim stay on recovery - interim reliefs granted by coordinate High Courts - extension of limitation under Section 168A - Whether enforcement of recovery under the Order in Original dated 26.04.2024 shall be stayed pending further orders - HELD THAT: - The petition challenges Notifications issued under Section 168A which extended the time limits under sub section (10) of Section 73 for specified periods and an Order in Original passed on 26.04.2024 determining ineligible ITC. Multiple coordinate High Courts, including this Court, have passed interim orders in similar matters restraining enforcement of recovery or prohibiting recovery once a final order is passed. Having considered that (a) the Order in Original has already been passed; (b) similar issues are being examined by different High Courts; and (c) the existence of earlier interim orders in other High Courts and this Court, the Court exercised its discretionary power to preserve the subject matter by restraining enforcement of recovery until further orders. The Court has not finally adjudicated the validity of the Notifications or the merits of the Order in Original; it has confined its relief to prohibiting enforcement of recovery as an interim measure. [Paras 11]

Recovery of the amount assessed by the Order in Original dated 26.04.2024 shall not be enforced till further orders of this Court.

Final Conclusion: Petition granted limited interim relief: enforcement of recovery under the Order in Original dated 26.04.2024 is stayed until further orders; validity of the challenged notifications and the merits of assessment remain undecided.

Over Dimensional Cargo classification - Mens rea for tax penalty

Over Dimensional Cargo classification - Mens rea for tax penalty - Departmental circulars - Penalty founded on the view that the consignment could not be treated as Over Dimensional Cargo merely because it moved at a faster speed, despite all transport documents matching the goods and there being no finding of intention to evade tax, was unsustainable. - HELD THAT: - The Court held that the departmental circular itself excluded transit speed as a criterion for determining whether the goods constituted Over Dimensional Cargo. Since the invoice, e-way bill and bilty were in order and matched the goods, the sole basis adopted by the authorities for seizure and penalty was contrary to the circular and rested only on surmises and conjectures. The Court further held that, in the absence of any substantive basis or finding showing an intention to evade tax, penalty could not be sustained, as mens rea is a sine qua non for imposition of penalty. [Paras 7, 8, 9, 10]

The seizure, penalty and appellate orders were quashed, and the petitioner became entitled to consequential relief including refund of the security and penalty amount.

Final Conclusion: The writ petition was allowed. The Court quashed the seizure, penalty and appellate orders and directed refund of the security and penalty amount to the petitioner.

Suspension of GST registration during cancellation proceedings - Requirement of reasons and issuance formalities for Show Cause Notice - Conscious application of mind by the Proper Officer - Portal-generated notices and technical glitches affecting statutory requirements - Power to suspend registration under Section 29(2) and Rule 21-A(2)

Requirement of reasons and issuance formalities for Show Cause Notice - Conscious application of mind by the Proper Officer - Whether the Show Cause Notice dated 22.04.2024 and the concomitant suspension of GST registration complied with the statutory requirement of recording reasons and exhibited conscious application of mind by the Proper Officer. - HELD THAT: - The Court observed that the Show Cause Notice did not contain any reasons or details explaining the ground alleged for cancellation and that the name, designation and office of the issuing officer were not reflected in the notice. The Proper Officer admitted in Court that certain fields in the Show Cause Notice are populated from a system drop-down menu, that queries or remarks entered by the officer do not appear on the notice sent to the assessee but remain accessible on the officer's portal, and that the officer's name/designation may sometimes not be displayed due to a technical glitch. The Court noted that the portal automatically marked the registration as suspended with effect from the date of issuance of the notice when the officer selected the relevant check-box, leaving no option to specify a different date. Given these facts, the Court concluded there was no evidence of a conscious, individualized determination by the Proper Officer to suspend registration from the date of issuance and that the notice, as served, was deficient in the particulars required to satisfy procedural requirements attendant to suspension under the statute and rules. [Paras 2, 3, 4, 7]

The Show Cause Notice dated 22.04.2024 and the automatic suspension reflected therein suffer from procedural deficiencies because reasons and issuer particulars are not reflected and the suspension appears to be a portal-automatic action without demonstrated conscious application of mind by the Proper Officer.

Portal-generated notices and technical glitches affecting statutory requirements - Power to suspend registration under Section 29(2) and Rule 21-A(2) - Whether the manner in which the GST portal functions in generating Show Cause Notices and recording suspension requires verification and, if so, the scope of such verification. - HELD THAT: - In view of the admitted automatic generation of certain inputs into the Show Cause Notice and the portal's role in determining the date and recording suspension, the Court directed that a senior competent officer of the GSTN Network file an affidavit explaining the portal's functioning. The affidavit was to address: (i) the source and nature of reasons reflected in the Show Cause Notice; (ii) options available to the Proper Officer to incorporate additional reasons or grounds; (iii) how the name, designation and personal signature of the Proper Officer are affixed and reflected on the notice; (iv) what information becomes available to the assessee once the Show Cause Notice is uploaded; and (v) the date and manner in which suspension of registration is effected or reflected on the portal, including whether the date is automatically set to the date of the notice or can be specified by the officer. The Court found it expedient to obtain this factual and technical elucidation before further adjudication. [Paras 5, 6, 8, 9]

Directed filing of an affidavit by a senior competent officer of the GSTN Network within one week to explain the portal's functioning on the specified points so that the procedural validity of portal-generated Show Cause Notices and suspensions can be assessed.

Final Conclusion: The Court found the Show Cause Notice and the recorded suspension defective in procedure and evidencing no demonstrated conscious application of mind by the Proper Officer; it therefore directed a technical affidavit from GSTN to explain how the portal generates notices and records suspensions, and listed the matter for further consideration.

Violation of principles of natural justice - uploading in 'additional notices and orders' vs 'view notices and orders' and its effect on service - service of notice via common portal under Section 169(1)(d) of the WBGST Act, 2017 - appealability under Section 107 of the WBGST Act, 2017 - condonation of delay under Section 5 of the Limitation Act, 1963

Violation of principles of natural justice - uploading in 'additional notices and orders' vs 'view notices and orders' and its effect on service - service of notice via common portal under Section 169(1)(d) of the WBGST Act, 2017 - Relief to set aside the proceedings and the final order under Section 74 was not granted. - HELD THAT: - The petitioner's challenge that the pre-show cause notice, show cause notice and the final order were uploaded in the 'additional notices and orders' section (and thereby prevented the petitioner from responding) was considered. The Court observed that the petitioner failed to state when he came to learn of the uploading of the notices/order. In view of that omission and the availability of the notices on a common portal, the Court was not inclined to exercise its discretion to set aside the proceedings on grounds of breach of natural justice. The Court therefore declined to grant the substantive relief sought in the writ petition without adjudicating the broader question of whether the mode of uploading vitiated service. [Paras 9, 10, 11]

Writ relief to set aside the proceedings and the order under Section 74 refused for want of adequate disclosure as to when the petitioner learned of the notices.

Appealability under Section 107 of the WBGST Act, 2017 - condonation of delay under Section 5 of the Limitation Act, 1963 - Petitioner granted liberty to prefer an appeal to the appellate authority with opportunity to apply for condonation of delay. - HELD THAT: - Recognising that the petitioner has an efficacious alternative remedy by way of appeal under Section 107, the Court permitted the petitioner to approach the appellate authority within six weeks with an application for condonation of delay. The appellate authority was directed to hear and dispose of the condonation application and, if delay is condoned, to decide the appeal on merits subject to compliance with pre-deposit requirements. The Court further directed that the appellate authority, while deciding any condonation application under Section 5 of the Limitation Act, 1963, shall be guided by the specified precedents of this Court. [Paras 11, 12, 13]

Liberty granted to file appeal within six weeks with an application for condonation; appellate authority to adjudicate condonation and, if condoned, dispose the appeal on merits subject to pre-deposit and guidance from cited authorities.

Service of notice via common portal under Section 169(1)(d) of the WBGST Act, 2017 - due service of notice - Question whether uploading in the 'additional notices and orders' section constitutes due service was left undecided. - HELD THAT: - The Court expressly declined to decide, at this stage, the controversy whether publication of the notices in the 'additional notices and orders' section amounts to due service within the meaning of Section 169(1)(d) of the WBGST Act, 2017. That controversy was not adjudicated and remains open for consideration by the appellate authority or appropriate forum. [Paras 11]

Controversy as to whether uploading in the 'additional notices and orders' section constitutes due service left open for adjudication; not decided by this order.

Final Conclusion: Writ petition dismissed on the merits of the petitioner's non-disclosure as to when he learned of the notices; petitioner granted limited liberty to approach the appellate authority under Section 107 within six weeks with an application for condonation of delay, the appellate authority to decide condonation under Section 5 of the Limitation Act and, if condoned, to decide the appeal on merits subject to pre-deposit; the question of validity of uploading notices in the 'additional' section as sufficient service left undecided.

Opportunity of personal hearing under Section 75(4) of the GST Act, 2017 - principles of natural justice - quashing and remand for fresh consideration - non-speaking order

Opportunity of personal hearing under Section 75(4) of the GST Act, 2017 - principles of natural justice - Whether the impugned assessment orders can be sustained where a request for personal hearing was made and a final hearing appearance was frustrated by absence of the assessing officer, without the representation being considered. - HELD THAT: - The Court found that the petitioner submitted a representation dated 21.11.2023 requesting one more opportunity of personal hearing and that on the date when the petitioner attended the final hearing (07.09.2023) the concerned officer was absent, a fact conceded by the departmental officer. Relying on the requirement in Section 75(4) of the GST Act, 2017 and this Court's earlier decision in WP Nos.4105, 4110 and 4108 of 2023 (13.02.2023), the Court held that where an adverse decision is contemplated the authority must afford an opportunity of personal hearing after receipt of the reply or after a request for hearing; failure to consider the petitioner's representation and to provide a personal hearing amounted to breach of the principles of natural justice. For these reasons the impugned assessment orders could not be sustained and required quashing and remand for fresh consideration in accordance with law. [Paras 6, 8]

Impugned assessment orders set aside and the matters remanded for fresh consideration after affording personal hearing.

Quashing and remand for fresh consideration - The procedural directions for further proceedings following quashing of the assessment orders. - HELD THAT: - The Court directed that the petitioner shall appear for personal hearing on 26.02.2024 without awaiting a separate notice from the respondent and ordered the respondent to take a decision after providing the personal hearing within four weeks thereafter. The remand is for fresh consideration on merits and in accordance with law, adhering to the principles of natural justice. [Paras 8]

Proceedings remitted to the respondent with direction to afford personal hearing on 26.02.2024 and to pass final orders within four weeks thereafter.

Final Conclusion: Writ petitions allowed; impugned assessment orders quashed and remitted for fresh consideration after affording personal hearing in accordance with Section 75(4) of the GST Act, 2017 and the principles of natural justice, with specified dates and timelines; no costs.

Violation of principles of natural justice - service of show cause notice - posting of notice in alternative electronic tab - quashing of assessment and recovery orders - remand for fresh assessment after hearing - precondition of deposit for obtaining hearing

Violation of principles of natural justice - service of show cause notice - posting of notice in alternative electronic tab - Proceedings were vitiated by breach of principles of natural justice because the show cause notice was posted under the "View Additional Notices" tab instead of the usual "View Notices" tab. - HELD THAT: - The Court found that the mode and location of electronic service deprived the petitioner of an effective opportunity to contest the proceedings. The petitioner's grievance that the show cause notice was not made available in the usual "View Notices" tab was held to constitute a procedural defect affecting the right to be heard. The Court followed its earlier decision in Sabari Infra Pvt. Ltd. wherein similar electronic service shortcomings warranted remedial action to secure a fair hearing. [Paras 3]

The proceedings were held to be affected by a breach of natural justice and set aside on that ground.

Quashing of assessment and recovery orders - remand for fresh assessment after hearing - The assessment order and consequential recovery notices were quashed and the matter was remitted to the Department for fresh enquiry and passing of a fresh assessment order after affording the petitioner a hearing. - HELD THAT: - Having concluded that the proceedings were tainted by denial of a fair opportunity, the Court set aside the order dated 20.12.2023 and the consequential recovery notices. The matter was remitted to the first respondent for a fresh enquiry and adjudication in accordance with law, thereby ensuring the petitioner an opportunity to be heard before a fresh assessment is framed. The Court directed the Department to complete the fresh assessment process within a fixed timeline. [Paras 5]

The impugned assessment and recovery notices were quashed and the matter remitted for fresh assessment after hearing, to be completed within eight weeks.

Precondition of deposit for obtaining hearing - The petitioner was directed to deposit 10% of the tax component as a precondition to being afforded the fresh hearing. - HELD THAT: - As a condition for securing a fresh hearing on the show cause notice, the Court imposed a requirement that the petitioner deposit 10% of the tax component. The deposit was ordered to be made 'without prejudice' and operates as a precondition for the Department to proceed with the fresh enquiry and assessment. This condition balances the petitioner's right to a hearing with the revenue interest, while preserving the petitioner's entitlement to contest the assessment on merits. [Paras 5]

The petitioner must deposit 10% of the tax component as a precondition for being afforded a fresh hearing.

Final Conclusion: Writ petition allowed; the assessment order dated 20.12.2023 and consequential recovery notices set aside for breach of natural justice; petitioner to deposit 10% of the tax component as a precondition and the Department directed to hold an enquiry and pass a fresh assessment order in accordance with law within eight weeks.

Remand for fresh consideration - opportunity to be heard / personal hearing - confirmation of tax demand for non-filing of reply - discrepancy between GSTR-3B and auto-populated GSTR-2A - conditional remand on interim deposit

Remand for fresh consideration - confirmation of tax demand for non-filing of reply - discrepancy between GSTR-3B and auto-populated GSTR-2A - Impugned order dated 11.10.2023 set aside and matter remanded for reconsideration. - HELD THAT: - The tax proposal concerned an alleged mismatch between the petitioner's GSTR-3B return and the auto-populated GSTR-2A, leading to an inference that Input Tax Credit was wrongly availed. The impugned order was confirmed on the basis that the petitioner did not file a reply to the show cause notice. In view of the petitioner's assertion of non-receipt of communications uploaded on the GST portal and the need to afford a fair opportunity to contest the demand, the court found it just to set aside the impugned order and remand the matter for fresh consideration. [Paras 4]

Impugned order set aside and matter remanded for reconsideration.

Conditional remand on interim deposit - opportunity to be heard / personal hearing - Remand granted subject to conditions: interim payment, filing of reply, hearing and time-bound fresh adjudication. - HELD THAT: - As a condition of remand the petitioner agreed to remit 10% of the disputed tax demand. The court directed that the petitioner shall remit that amount within two weeks of receipt of this order and may submit a reply to the show cause notice within the same period. Upon satisfaction of receipt of the 10% payment and on filing of the reply, the respondent is directed to provide a reasonable opportunity, including personal hearing, and to pass a fresh order within three months from receipt of the petitioner's reply. These procedural directions are intended to balance the petitioner's right to be heard with the interest of expeditious resolution. [Paras 5]

Remand conditional on payment of 10% within two weeks, filing of reply within that period, grant of hearing and issuance of fresh order within three months.

Final Conclusion: Writ petition disposed of by setting aside the impugned order dated 11.10.2023 and remanding the matter for fresh consideration on the petitioner making the stipulated interim deposit, filing a reply and being afforded a hearing; no order as to costs.

Failure of service by electronic communication where notice was only uploaded on portal - opportunity of personal hearing before confirming tax demand - set aside and remand for fresh adjudication on merits - verification of interim remittance as condition for reinstatement of proceedings - requirement to file annual return linked to turnover threshold for financial year - GSTR-3B and auto-populated GSTR-2B mismatch as basis for tax proposal

Failure of service by electronic communication where notice was only uploaded on portal - opportunity of personal hearing before confirming tax demand - GSTR-3B and auto-populated GSTR-2B mismatch as basis for tax proposal - verification of interim remittance as condition for reinstatement of proceedings - Validity of the order dated 22.06.2023 confirming tax demand where show cause notice was not responded to and orders were uploaded on the GST portal without other communication - HELD THAT: - The Court found that the tax proposal arose from a mismatch between the petitioner's GSTR-3B and the auto-populated GSTR-2B and that the confirmation of demand in the order dated 22.06.2023 resulted from the petitioner not replying to the show cause notice or attending the personal hearing. The petitioner produced evidence of remittance of 10% of the disputed tax demand and asserted non-receipt of communications beyond portal upload. In the interests of justice the Court set aside the impugned order subject to verification of receipt of the 10% interim payment, allowed the petitioner two weeks from receipt of the judgment copy to submit replies to the show cause notices, and directed the authority to afford a reasonable opportunity including personal hearing and to pass fresh orders within three months of receiving the replies. [Paras 2, 3, 5, 6]

Order dated 22.06.2023 is set aside subject to verification of payment of 10% of the disputed tax demand; petitioner given two weeks to reply and a right to personal hearing; fresh order to be passed within three months.

Requirement to file annual return linked to turnover threshold for financial year - set aside and remand for fresh adjudication on merits - Validity of the penalty order dated 13.02.2023 for non-filing of annual return (Form GSTR-9) where applicability depends on whether turnover exceeded the statutory threshold in the financial year 2019-2020 - HELD THAT: - The petitioner contended that the obligation to file Form GSTR-9 arises only if turnover in the relevant financial year exceeded the threshold and asserted that his turnover for 2019-2020 did not cross that threshold. Having regard to the petitioner's plea and the absence of adjudication on the merits due to non-participation, the Court found it appropriate in the interest of justice to set aside the penalty order and permit the petitioner to contest the matter on merits. The authority is to reconsider the imposition after affording the petitioner an opportunity to reply and be heard as directed. [Paras 4, 6]

Order dated 13.02.2023 imposing penalty for non-filing of annual return is set aside and remitted for fresh consideration after affording the petitioner an opportunity to contest the claim on merits.

Final Conclusion: Both impugned orders dated 13.02.2023 and 22.06.2023 are set aside and remitted for fresh adjudication; petitioner permitted to submit replies within two weeks and to be afforded personal hearing; fresh orders to be passed within three months, subject in the case of the tax demand to verification of the interim 10% remittance. No order as to costs.

Imposition of Goods and Services Tax under reverse charge - seigniorage paid to Government treated as royalty - adjudication on merits after affording reasonable opportunity of being heard - orders of adjudication to be kept in abeyance pending decision of the Nine Judge Constitution Bench on the nature of royalty - prohibition on recovery of GST on royalty until Nine Judge Constitution Bench decision

Imposition of Goods and Services Tax under reverse charge - seigniorage paid to Government treated as royalty - orders of adjudication to be kept in abeyance pending decision of the Nine Judge Constitution Bench on the nature of royalty - prohibition on recovery of GST on royalty until Nine Judge Constitution Bench decision - Writ petitions challenging show cause notice and intimation for imposition of GST under reverse charge on seigniorage are disposed of in terms of the directions in paragraph 9 of Tvl. A. Venkatachalam v. Assistant Commissioner. - HELD THAT: - The High Court applied the directions issued by the Division Bench in Tvl. A. Venkatachalam v. Assistant Commissioner. Petitioners are to submit objections/representations and the concerned authority shall proceed with adjudication on merits after affording a reasonable opportunity of being heard; however, any adjudication orders are to be kept in abeyance until the Nine Judge Constitution Bench determines the question concerning the nature of royalty. Meanwhile, there shall be no recovery of GST on amounts characterised as royalty/seigniorage until that larger bench gives its decision. The court left open the petitioners' rights to pursue appropriate remedies after the outcome of the Nine Judge Bench decision and permitted challenges to the notification and circular to be pursued thereafter. [Paras 3]

Writ petitions disposed of in terms of paragraph 9 of Tvl. A. Venkatachalam; no costs; interim directions as to submission of objections, adjudication procedure, abeyance of orders and suspension of recovery until Nine Judge Constitution Bench decision.

Final Conclusion: The petitions are disposed of by applying the directions in paragraph 9 of Tvl. A. Venkatachalam v. Assistant Commissioner: objections to be filed, adjudication to proceed on merits with hearing but orders kept in abeyance, and no recovery of GST on the disputed royalty/seigniorage until the Nine Judge Constitution Bench decides the nature of royalty.

Condonation of delay in filing appeal - applicability of Section 5 of the Limitation Act, 1963 under Section 29(2) of the Limitation Act - appellate authority's jurisdiction to condone delay beyond the outer period prescribed by the taxing statute - taxing statute as a self-contained code and implied exclusion of general limitation provisions - restoration of appeal after condonation of delay

Appellate authority's jurisdiction to condone delay beyond the outer period prescribed by the taxing statute - applicability of Section 5 of the Limitation Act, 1963 under Section 29(2) of the Limitation Act - taxing statute as a self-contained code and implied exclusion of general limitation provisions - Whether the appellate authority erred in refusing to entertain the application for condonation of delay on the ground that the same was filed beyond one month from the prescribed period under Section 107(4) of the WBGST Act. - HELD THAT: - The Court held that the appellate authority was not bereft of power to condone delay beyond one month from the prescribed period under Section 107(4) of the Act. Relying on the Division Bench decision in S.K. Chakraborty & Sons and the reasoning that Section 29(2) of the Limitation Act brings Section 5 into operation unless expressly or impliedly excluded, the Court rejected the view that taxing statutes implicitly oust Section 5. The Court also noted supportive precedent in Kajal Dutta and found the contrary single-judge view in M/s Yadav Steels to be unpersuasive. On this basis the appellate authority's refusal to consider the Section 5 application by treating the beyond-one-month delay as non-condonable was a failure to exercise jurisdiction. [Paras 9, 10, 11, 12]

The appellate authority failed to exercise jurisdiction in refusing to entertain the application under Section 5 of the Limitation Act on the ground that it was filed beyond one month; such refusal was set aside.

Condonation of delay in filing appeal - restoration of appeal after condonation of delay - Whether, on merits, the delay in preferring the appeal was sufficiently explained and should be condoned and the appeal restored. - HELD THAT: - The Court proceeded to examine the petitioner's Section 5 application itself rather than remanding the matter. Having considered the explanation furnished, the Court found the delay satisfactorily explained and therefore condoned the delay. Consequentially the appeal was ordered to be restored to its original file and number and directed the appellate authority to hear and dispose of the appeal on merits within a specified time without unnecessary adjournments. [Paras 14, 15]

Delay condoned on the merits; appeal restored and appellate authority directed to decide the appeal on merits within one month.

Final Conclusion: The order refusing condonation dated 19th January 2024 is set aside; the Court held that Section 5 of the Limitation Act is available and the appellate authority erred in refusing to entertain the application as beyond one month; delay is condoned on merits, the appeal is restored and the appellate authority is directed to dispose of the appeal on merits within one month.

Service of notice under section 148 as mandatory requirement for reopening under section 147 - Validity of notice issued through ITBA/e mail delivery and viewability on e filing portal - Date of issuance/viewing of ITBA generated notice for limitation purposes - Limitation for issuance of notice extended due to COVID 19

Service of notice under section 148 as mandatory requirement for reopening under section 147 - Validity of notice issued through ITBA/e mail delivery and viewability on e filing portal - Date of issuance/viewing of ITBA generated notice for limitation purposes - Notice under section 148 was not served on the assessee and reopening under section 147 is invalid - HELD THAT: - The Tribunal examined the ITBA/system records and the report of the Systems Directorate which showed that the notice generated on 30.03.2021 was triggered to [email protected] but delivery bounced; a re trigger on 26.06.2021 to the same address again bounced; and an attempt to send on 23.01.2022 to [email protected] was not triggered from the system. Both email IDs were entered by an ITD user (Assessing Officer). The assessee only registered the e filing account with the e mail [email protected] on 31.03.2022 and therefore could not have viewed any ITBA notice prior to that date. The limitation for issuance of the section 148 notice for AY 2013 14, extended due to COVID 19, expired on 31.03.2021; the ITBA generated notice dated 30.03.2021 was not shown to have been delivered to the assessee within the limitation period. Service of notice under section 148 is a mandatory statutory prerequisite for valid reopening under section 147; absent valid service within the limitation period the consequential assessment cannot stand. The Department's submission that generation of the notice on ITBA sufficed was rejected because the assessee had no access to view the notice before registering on the portal, and the system records did not establish successful delivery. [Paras 4]

The notice under section 148 was not validly served on the assessee within the limitation period and the assessment framed under section 147/144 is quashed.

Final Conclusion: Appeal allowed; the assessment order dated 27.01.2023 passed under section 147 read with section 144 for AY 2013 14 is quashed for want of valid service of notice under section 148.

Admissibility of credit under Section 68 of the Income Tax Act - Proof of identity, creditworthiness and genuineness of creditors - Source of the source principle - Double addition and tax neutrality on subsequent offer/write back - Assessee not required to prove source of creditor's funds

Admissibility of credit under Section 68 of the Income Tax Act - Double addition and tax neutrality on subsequent offer/write back - Deletion of the addition of Rs. 18,00,000 made under Section 68 in relation to sundry creditor M/s. Transearch Consultations Pvt. Ltd. - HELD THAT: - The ITAT found, and this Court accepted, that the assessee maintained a running account with the creditor and produced the ledger which showed receipts totalling Rs. 33 lakhs through banking channels, four debit entries totalling Rs. 15 lakhs and a closing credit balance of Rs. 18 lakhs as on 31.03.2013. The ledger and related entries were not rebutted by the Revenue and the amount was subsequently written off and offered to tax in a later year. On these facts the AO's addition of only the closing balance without disturbing other entries was unjustified and would lead to double addition since the amount was later brought to tax. Having regard to the ledger entries, banking trail and subsequent write back/offer, the ITAT correctly held that the addition was not sustainable. [Paras 13, 14]

Addition of Rs. 18,00,000 under Section 68 in relation to TCPL deleted.

Admissibility of credit under Section 68 of the Income Tax Act - Proof of identity, creditworthiness and genuineness of creditors - Source of the source principle - Assessee not required to prove source of creditor's funds - Deletion of the addition of Rs. 5,00,00,000 made under Section 68 in relation to unsecured loans from M/s. Maple Technology Ltd. and M/s. Marry Gold Overseas Limited. - HELD THAT: - The ITAT recorded that the assessee produced ledger accounts, bank statements and that both creditors responded to notices under Section 133(6), confirmed the loans and furnished their account records, ITRs and balance sheets. Transactions were routed through banking channels, interest was paid and TDS deducted, and amounts were returned or written back and offered to tax in subsequent years. The AO sought to probe the creditors' own source (the 'source of the source') and distrusted a departmental witness for not producing a rent agreement, but undertook no further steps to verify or act on that shortcoming. The tribunal correctly applied the principle that an assessee is not required to prove the source of the creditor's funds once identity, creditworthiness and genuineness of the transaction are established, and that absent positive material showing the funds originated from the assessee, the addition could not be sustained. [Paras 15]

Addition of Rs. 5 crores under Section 68 in relation to loans from MTL and MOL deleted.

Final Conclusion: The High Court found no infirmity in the ITAT's factual and legal conclusions: both additions under Section 68 (Rs. 18,00,000 relating to TCPL and Rs. 5,00,00,000 relating to MTL and MOL) were rightly deleted and the appeal is dismissed.

Foreign tax credit - Filing of Form 67 under Rule 128 - Directory versus mandatory nature of procedural filing - Admission of belated claim in appellate proceedings - Remand for fresh consideration by Assessing Officer

Foreign tax credit - Filing of Form 67 under Rule 128 - Directory versus mandatory nature of procedural filing - Admission of belated claim in appellate proceedings - Remand for fresh consideration by Assessing Officer - Whether the claim for foreign tax credit supported by Form 67, filed with a revised return and later updated with supporting documents, should be admitted and remitted to the Assessing Officer despite its belated completion of attachments. - HELD THAT: - The Tribunal found that Form 67 was filed initially with the original return, was re-filed with the revised return, and was subsequently updated with supporting proof of tax payment prior to completion of assessment. The CIT(A) had dismissed the appeal on the ground that the disallowance of foreign tax credit arose from intimation under section 143(1) and that the appellant should have separately appealed that intimation; the Tribunal held this approach to be erroneous because the claim was in substance before the assessing process and had been pressed before completion of assessment proceedings. Exercising its discretion and applying the principle of admitting a belatedly perfected claim, in the interest of justice and relying on settled authority, the Tribunal admitted the assessee's claim and remitted the matter to the Assessing Officer for consideration on merits with the documents already on record. The Tribunal thereby directed the AO to decide the foreign tax credit claim in accordance with law after verifying the submitted documents.

Claim for foreign tax credit admitted; matter remitted to the Assessing Officer for fresh consideration of the FTC claim on merits in light of the documents filed; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal admitted the assessee's claim for foreign tax credit despite the earlier defect in attachments, set aside the CIT(A)'s dismissal, remitted the issue to the Assessing Officer for fresh decision on merits in accordance with law, and allowed the appeal for statistical purposes.

Commencement of proceedings under section 153C - date of receipt of seized books/documents - Reckoning of six-year block for section 153C with reference to date of handing over seized material - Validity of assessment framed under section 143(3) where proceedings under section 153C are attracted - Quashing of assessment for lack of jurisdiction where statutory procedure under section 153C is not followed

Commencement of proceedings under section 153C - date of receipt of seized books/documents - Validity of assessment framed under section 143(3) where proceedings under section 153C are attracted - Whether the assessment framed under section 143(3) for AY 2020-21 is valid when the seized books/documents were handed over to the assessing officer of the assessee on 16.03.2021, thereby triggering proceedings under section 153C relating to AY 2021-22. - HELD THAT: - The Tribunal accepted the assessee's submission, based on contemporaneous authority, that the initiation of proceedings under section 153C is to be reckoned from the date on which the seized books/documents are handed over to the assessing officer of the person other than the searched person. Applying that principle to the admitted fact that the impugned documents were handed over to the assessee's AO on 16.03.2021, the block of six years under section 153C relates to AY 2021-22 and the AO ought to have proceeded under section 153C for the relevant block. The AO instead proceeded by issuing notice under section 143(2) and framed assessment under section 143(3) for AY 2020-21, contrary to the statutory scheme and established judicial interpretation (as emphasised in Jasjit Singh and RRJ Securities Ltd.). The Tribunal found no contrary case law placed by the Revenue and held that, because the statutory procedure under section 153C was applicable and was not followed, the assessment framed under section 143(3) for AY 2020-21 was without jurisdiction. Consequentially the impugned assessment order was quashed and deemed never to have been issued; the appeal order was set aside. The remaining grounds were rendered academic in view of this legal conclusion. [Paras 7, 8]

Impugned assessment for AY 2020-21 is invalid for want of jurisdiction as proceedings should have been initiated under section 153C with reference to the date of handing over (16.03.2021) relating to AY 2021-22; the assessment is quashed and is deemed never to have been issued.

Final Conclusion: The Tribunal allowed the appeal, quashed the assessment order for AY 2020-21 as without jurisdiction because proceedings under section 153C should have been initiated with reference to the date of handing over seized documents (16.03.2021) relating to AY 2021-22; consequential appellate order set aside and other grounds rendered academic.

Family arrangement - transfer - gift - taxability under section 56(2)(x) of the Income Tax Act, 1961 - CASS limited scrutiny - admission of additional evidence

CASS limited scrutiny - scope of assessment - Validity of the assessment on matters beyond the scope of the notice issued under CASS for limited scrutiny - HELD THAT: - The assessee challenged the validity of the assessment on grounds that the notice under section 143(2) issued pursuant to CASS related only to verification of investment in immovable property and that the assessment extended beyond that limited scope. The Revenue explained that the notice arose from SRO information equating the transaction to a purchase and that the AO restricted the assessment scope to the property in question and did not expand it to other gifts. Having considered the submissions and factual matrix, the Tribunal found no overreach in the AO's proceedings and dismissed the ground challenging the validity of the assessment beyond the CASS-limited issue. [Paras 5, 6]

Ground dismissed; assessment held validly confined and not invalidated for going beyond CASS limited scrutiny.

Family arrangement - transfer - taxability under section 56(2)(x) of the Income Tax Act, 1961 - gift - Whether immovable property received under a family arrangement/gift is taxable as income under section 56(2)(x) - HELD THAT: - The Tribunal examined whether a gift of immovable property made as part of a family settlement falls within the ambits of 'transfer' attractable to tax under section 56(2)(x). Noting that family arrangements are intended to resolve intra-family rights and disputes, are often bona fide and made out of love and affection and that the present transfer formed part of an arrangement determining individual shares in property already owned by family members, the Tribunal held such arrangements are not transfers in the conventional sense liable to tax under section 56(2)(x). The Tribunal relied on the nature and purpose of family arrangements, the fact that parts of the same land were gifted to other relatives under the same deed, and affidavits from parties confirming the family settlement, concluding that the addition made by the AO and confirmed by the CIT(A) was unsustainable. [Paras 13, 14, 15, 16, 20]

Addition under section 56(2)(x) set aside; immovable property received under the family arrangement not taxable as income under section 56(2)(x).

Admission of additional evidence - Admission of affidavits and other additional evidence filed to support the claim of family settlement - HELD THAT: - The assessee sought to place on record affidavits of parties to the family settlement to substantiate that the gift was part of a family arrangement. The Revenue objected to admission of additional evidence. The Tribunal, however, in the interest of justice admitted the additional evidence and took its contents into account in arriving at the factual conclusion that the gift formed part of a family settlement. [Paras 9, 10, 16]

Additional evidence admitted and considered.

Final Conclusion: The appeal is partly allowed: the challenge to the validity of the assessment beyond CASS limited scrutiny is dismissed, but the addition under section 56(2)(x) is deleted as the immovable property received under the family arrangement is not taxable as income; additional affidavits were admitted and considered.

Permanent Establishment - Fixed Place Permanent Establishment - Service Permanent Establishment - Dependent Agent Permanent Establishment - Preparatory or auxiliary activities - Section 148 reassessment notice - PAN jurisdiction transfer

Service Permanent Establishment - Permanent Establishment - Whether the Section 148 notices are sustainable insofar as they are premised on the existence of a Service PE - HELD THAT: - The Court found the Service PE contention unsustainable. Article 5(2)(l)(ii) requires that services be furnished in the source State for a related enterprise; the reasons recorded by the AO did not establish that the petitioner was rendering services for the Indian subsidiary. Visits by parent-company personnel, managerial oversight or occasional collaboration do not amount to furnishing services to a related enterprise so as to create a Service PE. The respondents' findings were self-contradictory and based on travel itineraries and visitors' programmes rather than material showing deployment of personnel to perform services for the Indian subsidiary; accordingly the Service PE basis for issuing notices under Section 148 failed. [Paras 82, 83, 84]

Service PE not established; notices cannot be sustained on that ground.

Fixed Place Permanent Establishment - Permanent Establishment - Preparatory or auxiliary activities - Whether the Noida factory and Varanasi office constituted a Fixed Place PE justifying reassessment notices under Section 148 - HELD THAT: - The Court held that the AO failed to show any part of the Noida or Varanasi premises was placed at the petitioner's exclusive or considerable disposal or control, a necessary element of a Fixed Place PE. Established tests (stability, productivity, dependence; 'at the disposal of'/'through which' the business is carried on) were not met. The material relied on indicated back office, preparatory or auxiliary functions (tender support, tracking shipments, warranty support), and distinct manufacturing lines and direct imports by the petitioner weighed against functional integration or 'virtual projection'. On a prima facie review required for challenge to a Section 148 notice, the Fixed Place PE conclusion was perverse and unsustainable. [Paras 91, 92, 93, 94, 95]

Fixed Place PE not established; notices quashed insofar as founded on this ground.

Preparatory or auxiliary activities - Permanent Establishment - Whether the functions performed by the Indian subsidiary were preparatory or auxiliary (and thus excluded from PE) or core activities (and thus attracting PE) - HELD THAT: - On analysis the Court concluded the activities as recorded (tender monitoring, technical support, follow-up of purchase orders, tracking shipments, warranty support, information gathering and limited design collaboration) were preparatory/auxiliary in nature. Authorities and commentaries require a functional/factual analysis; where activities are remote from profit generation or are supportive/back office, Article 5(3)(d)/(e) negates a Fixed Place PE. The Transfer Pricing Officer's finding that services were remunerated on a cost-plus basis reinforced that the functions were supportive. Consequently the exclusion under Article 5(3) applies and the AO's contrary conclusion was unsustainable. [Paras 100, 101, 102, 116, 120]

Activities are preparatory/auxiliary; they do not give rise to a PE for the purposes of the notices.

Dependent Agent Permanent Establishment - Permanent Establishment - Whether PRIPL was a Dependent Agent PE of the petitioner (authority to conclude contracts habitually exercised or securing orders wholly/almost wholly) so as to validate Section 148 notices - HELD THAT: - The Court found no material showing PRIPL had been conferred authority to conclude contracts on behalf of the petitioner nor that it habitually exercised such authority. Clause (c) of Article 5(4) (securing orders 'wholly or almost wholly') was not shown to be met; the subsidiary had independent transactions with DLW and earned only a limited percentage of income from the petitioner in relevant years. Discovery of the parent's rubber stamp and board representation did not prove contractual authority or habitual exercise. Thus DAPE was not established on a prima facie basis. [Paras 112, 113, 119, 123, 124]

Dependent Agent PE not established; notices cannot be sustained on DAPE grounds.

Section 148 reassessment notice - PAN jurisdiction transfer - Validity of issuance of the Section 148 notices and of transfer/mapping of the petitioner's PAN to the assessing officer who issued reassessment notices - HELD THAT: - Because the AO's foundational finding of a PE within his territorial jurisdiction was legally unsustainable, the consequent issuance of Section 148 notices was quashed. The PAN migration effected to place the petitioner under the first respondent's jurisdiction (said to facilitate reassessment) was also quashed; PAN mapping was ordered to revert to the original jurisdictional Assessing Officer. The Court noted that the respondents remain free to consider independently whether a PE exists in the Delhi Circle-a matter not adjudicated. [Paras 21, 139, 140]

Impugned Section 148 notices quashed; PAN transfer order quashed and PAN mapping restored to original AO; rights to examine Delhi Circle PE kept open.

Final Conclusion: Writ petitions allowed: the Delhi High Court quashed the reassessment notices issued under Section 148 (relating to AYs 2012-13 to 2018-19) and consequential PAN transfer, holding that the AO's prima facie finding of a Fixed Place PE, Service PE and Dependent Agent PE was unsustainable; the respondents remain free to examine independently whether a PE exists in the Delhi Circle (an issue not decided).

Income from house property - business income - composite/inseparable rent - doctrine of intention for characterisation of lease income - inseparability of letting of building and fixtures - allowability of depreciation where asset is put to use for business - section 56(2)(iii) inseparability leading to taxation under 'income from other sources' - taxability under the head 'income from house property' under section 22

Income from house property - business income - doctrine of intention for characterisation of lease income - composite/inseparable rent - Characterisation of the lease rentals from the commercial complex as business income and not as income from house property - HELD THAT: - The Tribunal examined the lease agreement (including Exhibit A) and the commercial context and held that the assessee did not let out a bare building simpliciter but a commercial complex together with substantial amenities, utilities and infrastructure, thereby converting the subject property into a commercial asset exploited for business. The Tribunal applied established authorities emphasising that the intention of the assessee and the substance of the transaction govern classification and that composite or inseparable lettings of building with substantial plant, furniture or services fall outside the head 'income from house property'. It noted the assessee's bona fide explanation that the property was constructed for sale but temporarily let out because of market conditions and accepted that temporary letting to tide over market conditions, together with the agreement terms and the provision of extensive facilities, warranted treatment as business exploitation rather than mere ownership rent. For these reasons the Tribunal concluded that the tax authorities were in error in treating the receipts as income from house property and allowed the appeals. [Paras 13, 14, 15, 19]

Accepted that the lease rentals are business income; the change of head by the tax authorities to 'income from house property' was erroneous and is set aside.

Composite/inseparable rent - section 56(2)(iii) inseparability leading to taxation under 'income from other sources' - inseparability of letting of building and fixtures - Alternative characterisation that, if not business income, the composite receipts could be taxed under 'income from other sources' and not automatically under 'house property' - HELD THAT: - The Tribunal recorded the assessee's alternate plea that, if the receipts were not held to be business income, the letting of building together with furniture, plant and fixtures (inseparable letting) falls within the ambit of section 56(2)(iii) and would be taxable under 'income from other sources' rather than under 'income from house property'. The Tribunal observed that where lettings are inseparable the law contemplates taxation as business income or, failing that, under the residuary head of other sources, and that in such a case deductions allowable under the relevant provisions (including depreciation if taxed as other sources) would be available. The Tribunal accepted the legal proposition and treated it as a correct alternate legal position, while ultimately deciding the matter on the primary ground that the receipts are business income. [Paras 10, 11, 13]

Recorded that, in the alternative, the receipts could be taxed under 'income from other sources' under section 56(2)(iii) if not held to be business income; but the primary finding is that they are business income.

Allowability of depreciation where asset is put to use for business - composite/inseparable rent - Allowability of expenditure claimed and depreciation (including on non-building assets) against the lease receipts - HELD THAT: - The Tribunal held that once the lease receipts are characterised as business income (or, alternatively, as income from other sources), the expenditure incurred for earning that income is deductible and depreciation is allowable. It rejected the view that statutory deduction under the head 'income from house property' (section 24) precludes separate allowance of business expenditure or depreciation. The Tribunal relied on factual aspects (lease terms, Exhibit A, amendments allocating certain consumption charges to the user, and accounting entries) to conclude that substantial amenities and services were part of the commercial exploitation and that the commercial complex was put to use for business; accordingly, depreciation under section 32 is admissible. The Tribunal directed that the disallowance of the claimed expenses and denial of depreciation was unsustainable and allowed the grounds seeking deletion of those disallowances. [Paras 13, 19]

Disallowance of expenditure and denial of depreciation reversed; expenditure and depreciation to be allowed in computing business (or other sources) income.

Final Conclusion: The Tribunal allowed the assessee's appeals for AY 2010-11 and AY 2012-13, holding that the receipts from letting the commercial complex (with extensive facilities and services) are business income (and alternatively could fall under 'income from other sources' if inseparable), and accordingly set aside the disallowance of claimed expenses and the denial of depreciation; the tax authorities' classification of the receipts as income from house property was held to be erroneous.

Interest under Article 12(5) of the Indo UK DTAA - taxability of income arising or accruing in India under Section 5(2) of the Income tax Act - definition of interest as income from debt claims and the requirement of privity of contract - guarantee commission / guarantee fee as remuneration for services - business profits and permanent establishment under Article 7 of the DTAA - Section 2(28A) - statutory meaning of interest

Interest under Article 12(5) of the Indo UK DTAA - definition of interest as income from debt claims and the requirement of privity of contract - Section 2(28A) - statutory meaning of interest - guarantee commission / guarantee fee as remuneration for services - Guarantee charges received by the appellant are not 'interest' within the meaning of Article 12(5) of the Indo UK DTAA or Section 2(28A) of the Act. - HELD THAT: - The guarantee charges were not received in respect of any debt owed to the appellant by its Indian subsidiaries, nor did the appellant have privity of contract in the underlying loan transactions. Article 12(5) and Section 2(28A) characterise 'interest' as income from debt claims in respect of moneys borrowed or debt incurred; payments qualify as interest only where they relate to a loan transaction (or are within the contractual privity of the debt). The payments here were remuneration for providing parent company guarantees and counter indemnities under the intra group agreement and were payable to the appellant as consideration for a service provided, not as compensation for capital provided or as income from a debt claim. Applying the treaty text and the statutory definition, the court upheld the Tribunal's conclusion that the guarantee commission cannot be treated as 'interest' for the purposes of Article 12 or Section 2(28A). [Paras 20, 21, 22, 23, 24]

Answer: negative for the appellant - the guarantee charges are not 'interest' under Article 12(5) or Section 2(28A).

Taxability of income arising or accruing in India under Section 5(2) of the Income tax Act - source of income - guarantee commission / guarantee fee as remuneration for services - accrue or arise - The guarantee charges accrued and arose in India and are thus taxable in India under Section 5(2) of the Act. - HELD THAT: - Applying established principles on the meaning of 'arise' and 'accrue', the court found that the right to receive the guarantee charges was founded on the intra group parental guarantee and counter indemnity agreement executed with the Indian subsidiaries. The charges were payable on a quarterly basis at an agreed annual rate, invoiced in India and payable by the Indian recipients; they were periodic, from a definite source and intended for the subsidiaries' commercial benefit. The fact that enforcement of the guarantee might expose the appellant's overseas assets to claims by foreign lenders did not alter where the right to receive the payments accrued. On the facts the income had a sufficient nexus to India - the obligation to pay arose in India and the payments were in respect of services utilized in India - and therefore accrued or arose in India within the meaning of Section 5(2). [Paras 29, 30, 31, 32, 34]

Answer: against the appellant - the guarantee charges accrued/arose in India and are taxable under Section 5(2).

Business profits and permanent establishment under Article 7 of the DTAA - guarantee commission / guarantee fee as business income - Whether the guarantee charges constitute business profits under Article 7 of the DTAA was not adjudicated and is left open for determination in an appropriate case. - HELD THAT: - Although the parties addressed whether the guarantee charges could alternatively be business income falling within Article 7, the court observed that the appeal was admitted only on questions concerning characterization as 'interest' and the question of accrual in India. The court therefore did not decide the Article 7 issue and expressly left it open for consideration in a proper proceeding where that question is squarely raised and framed. [Paras 8, 17, 38]

Left open to be addressed in an appropriate case; not decided in this judgment.

Final Conclusion: The High Court affirms the Tribunal: the parental guarantee charges are not 'interest' under Article 12(5) of the Indo UK DTAA or Section 2(28A) of the Act, but the guarantee charges accrued and arose in India and are therefore taxable in India under Section 5(2); the question whether such receipts constitute business profits under Article 7 is left open for determination in an appropriate case. Appeals dismissed.

Allowability of interest as business expenditure - classification of activity as real estate and finance business - nexus between borrowed funds and business income - explanation of unexplained cash deposits under section 68 of the Income Tax Act, 1961 - reliance on books of account and cash book as evidence of source

Allowability of interest as business expenditure - classification of activity as real estate and finance business - nexus between borrowed funds and business income - Whether the interest payment of Rs. 1,65,62,973/- was allowable as a deduction as business expenditure for AY 2014-15. - HELD THAT: - The Tribunal examined earlier final findings for earlier assessment years (notably the CIT(A) order for AY 2009-10 affirmed by the Tribunal) holding that the assessee was engaged in real estate and finance business from purchase and development activity commencing 08/03/2006. Relying on those concurrent findings and on the continuity of the assessee's business classification in subsequent assessment years, the Tribunal held that absence of sale transactions in the subject year did not negate the existence of the business. Given that the loans were taken for business purposes (purchase, construction and development of property and finance activity) and that the business carried on despite adverse market conditions, the interest incurred retained the requisite nexus with business income and was deductible. The Tribunal therefore deleted the disallowance of interest made by the AO and sustained by the CIT(A). [Paras 11, 12, 13, 14]

Disallowance of interest of Rs. 1,65,62,973/- deleted; interest allowed as business deduction.

Explanation of unexplained cash deposits under section 68 of the Income Tax Act, 1961 - reliance on books of account and cash book as evidence of source - Whether cash deposits of Rs. 66,70,000/- in the Karnataka Bank account were unexplained and liable to be added under section 68 for AY 2014-15. - HELD THAT: - The assessee produced a cash book, bank statements and a detailed month wise reconciliation showing opening cash, receipts from debtors, cash withdrawals from other bank accounts and date wise deposits into the Karnataka Bank account. The Tribunal found that the AO had failed to consider the opening cash balances and realisations from debtors and had impermissibly relied only on proximate withdrawals to discredit the deposits. The CIT(A) had treated the submitted pages as not forming part of audited books, but the assessment record did not record rejection of the cash book and the AO had in fact examined the cash book. Because the assessee had demonstrated that the deposits were explainable from cash in hand, withdrawals and receipts reflected in books, the addition under section 68 could not be sustained and was directed to be deleted. [Paras 16, 21, 22, 23, 24]

Addition of Rs. 66,70,000/- under section 68 deleted; deposits accepted as explained from books of account.

Final Conclusion: Appeal allowed: the Tribunal held that interest payments were deductible as business expenditure because the assessee was carrying on real estate and finance business, and directed deletion of the addition under section 68 after accepting the explanation and books for the cash deposits.

Supply of reasons recorded for reopening - Validity of reassessment proceedings under section 147/148 - Unexplained cash credits under section 69A - Admission of additional evidence under Rule 46A - Penalty for violation of section 269SS and levy under section 271D - Application of presumptive taxation under section 44AD

Supply of reasons recorded for reopening - Validity of reassessment proceedings under section 147/148 - Reassessment for A.Y. 2012-13 was quashed because reasons recorded for reopening were not supplied to the assessee within a reasonable time. - HELD THAT: - The Tribunal found on the record that the assessee had specifically requested the reasons recorded for issuance of notice under section 148 but the assessing officer did not furnish the reasons contemporaneously and no enclosure was uploaded on the e filing portal. Relying on the principle laid down by the Supreme Court in GKN Driveshafts (India) Ltd. and subsequent High Court authorities, the bench held that recording of reasons and communication thereof to the assessee is a sine qua non which goes to the jurisdiction to proceed with reassessment. The CIT(A) had not dealt with the additional ground challenging the reopening; the Tribunal directed consideration of the point and accepted the assessee's affidavit (filed on oath) that reasons were not received. In these circumstances, the reassessment order could not be upheld and had to be quashed. The Tribunal therefore allowed the legal grounds (grounds 1 and 1.1) without adjudicating the merits of the additions. [Paras 7]

Grounds 1 and 1.1 allowed; reassessment order for A.Y. 2012-13 quashed; merits (grounds 2, 2.1, 2.2) left infructuous.

Unexplained cash credits under section 69A - Admission of additional evidence under Rule 46A - Application of presumptive taxation under section 44AD - Penalty for violation of section 269SS and levy under section 271D - For A.Y. 2017-18 the Tribunal admitted additional evidence and directed the assessing officer to verify turnover and compute income under section 44AD at 8% after examining the admitted documents; appeal allowed. - HELD THAT: - The assessee, suffering from a neurological disease and dependent on an accountant, filed recast trading accounts and supporting ledgers before the CIT(A) which were rejected as afterthoughts. The Tribunal, having heard the assessee in person and considered the affidavit and corroborative material (ledgers, bank statements, CA certificate and related documents), found sufficient cause to admit the additional evidence despite contradictions with earlier submissions to the AO. In view of the admitted documents, the Tribunal directed the AO to verify total credits/deposits vis a vis the turnover claimed by the assessee and to tax income on the verified turnover at the presumptive rate of 8% under section 44AD in the absence of any comparative chart. The Tribunal also noted that issues concerning the genuineness/creditworthiness of alleged loans and penalties under sections 269SS/271D would be open to verification by the AO in the light of the admitted material. [Paras 19]

Grounds 1, 1.1 and 1.2 allowed; additional evidence admitted; matter remitted to the AO to verify turnover and compute taxable income under section 44AD at 8%; appeal for A.Y. 2017-18 allowed.

Final Conclusion: The Tribunal quashed the reassessment for A.Y. 2012-13 for failure to furnish reasons recorded for reopening and allowed the assessee's legal grounds; for A.Y. 2017-18 the Tribunal admitted additional evidence, remitted the matter to the AO for verification of turnover and directed income to be taxed on the verified turnover under section 44AD at 8%, thereby allowing that appeal.

Deduction under section 54F - Capital gains exemption for construction within three years - Advance payments/earnest money constituting investment for exemption - Capital Gains Account Scheme deposit requirement not attracted where investment is made within time - Beneficial construction of exemption provisions - Evidence and genuineness of expenditure for claiming exemption

Advance payments/earnest money constituting investment for exemption - Deduction under section 54F - Beneficial construction of exemption provisions - Advance payments made by the assessee before the date of transfer qualify as investment for the purpose of claiming deduction under section 54F and cannot be disallowed merely because paid prior to transfer. - HELD THAT: - The Tribunal accepted that the assessee had received advances from buyers and applied those advance sums towards construction of the new residential house prior to execution of the sale deeds. The assessee had obtained building permission and undertaken preliminary construction activities; payments to contractors and suppliers were supported by bank payments and later-issued bills. Reliance was placed on judicial precedents holding that benevolent capital-gains exemption provisions must be interpreted liberally and that investments made out of advance or earnest money qualify for exemption. On these facts the Tribunal found no infirmity in the CIT(A)'s conclusion to allow the claim and deleted the addition relating to payments made before transfer. [Paras 10, 11, 12]

Addition of Rs. 2,03,55,192/- disallowed by the AO was rightly deleted by the CIT(A) and is confirmed.

Capital Gains Account Scheme deposit requirement not attracted where investment is made within time - Deduction under section 54F - Evidence and genuineness of expenditure for claiming exemption - Expenditure shown as incurred (by bill dated before due date) and paid in installments after filing date, and not deposited in Capital Gains Account Scheme, does not disentitle the assessee to deduction under section 54F where the assessee proves end-use within the statutory period. - HELD THAT: - The Tribunal noted that the bill for the asserted expenditure was dated before the due date and that subsequent payments were made in instalments; the AO's enquiry to the supplier related to an incorrect year (FY 2019-20) and therefore did not disprove the transaction. The Tribunal applied precedents that procedural requirements (such as deposit into Capital Gains Account Scheme) are not to be strictly construed where the assessee demonstrates actual investment in construction within the prescribed period and where the substantive requirement of section 54F(1) is satisfied. Consequently the CIT(A)'s deletion of the AO's disallowance was upheld. [Paras 13, 14, 16, 17]

Addition of Rs. 3,30,04,128/- disallowed by the AO was rightly deleted by the CIT(A) and is confirmed.

Evidence and genuineness of expenditure for claiming exemption - Deduction under section 54F - Beneficial construction of exemption provisions - Advance payments to suppliers/contractors without contemporaneous bills qualify as expenditure for construction where corroborated by bank records, supplier confirmations and subsequent invoices; such payments are not to be treated as parked funds. - HELD THAT: - The Tribunal examined the payments to several suppliers and contractors, noted bank statement entries and confirmations received from the suppliers in response to AO's inquiries, and observed that supplies were of specified lots requiring advance booking. The residential house was completed within the three-year period. On this factual foundation and following authorities recognizing the benevolent object of the provisions, the Tribunal found the CIT(A)'s conclusion-that the advances were genuine and constituted expenditure for construction-warranted and declined to interfere. [Paras 18]

Addition of Rs. 3,75,00,000/- disallowed by the AO was rightly deleted by the CIT(A) and is confirmed.

Final Conclusion: The Tribunal upheld the order of the CIT(A) and dismissed the Revenue's appeal; the AO's disallowances in respect of advances and construction payments were deleted and the deduction under section 54F for AY 2020-21 is sustained.

Unexplained cash deposits - re-deposit of earlier cash withdrawals - burden on revenue to disprove availability of earlier withdrawals - addition under section 69A of the Income Tax Act - cash deposits during demonetisation period

Unexplained cash deposits - re-deposit of earlier cash withdrawals - addition under section 69A of the Income Tax Act - cash deposits during demonetisation period - Deletion of addition of Rs. 23,07,131/- made as unexplained cash deposit under section 69A for deposits made during the demonetisation period - HELD THAT: - The Tribunal examined the assessee's bank statements, cashbook entries, rent receipts and tenant confirmations and noted admitted opening cash balance and earlier withdrawals. Reliance was placed on the legal principle that where deposits are preceded by withdrawals from the same account, those earlier withdrawals prima facie explain subsequent deposits unless the Revenue adduces material showing that the withdrawn cash was spent for other purposes and therefore unavailable. The Tribunal considered precedents of the Karnataka High Court and coordinate Bench decisions holding that Revenue must show the earlier withdrawals were not available to the assessee at the time of deposit before treating deposits as unexplained. Applying that principle to the facts, and having regard to the admitted cash in hand and withdrawals and the evidence of rental receipts, the Tribunal held that there were sufficient cash withdrawals and cash in hand to account for the deposits made during the demonetisation period. Consequently the addition under section 69A was deleted. The Tribunal therefore directed that the Assessing Officer give due credit for opening balance and earlier withdrawals after verifying books of account, and on the basis of the record before it deleted the addition. [Paras 4, 5]

Impugned addition under section 69A is deleted and the appeal is allowed.

Final Conclusion: The Tribunal deleted the addition treated as unexplained cash deposits under section 69A for Assessment Year 2017-18, holding that earlier withdrawals and recorded cash/ rental receipts adequately explained the deposits made during the demonetisation period and directing the Assessing Officer to give due credit accordingly; the appeal is allowed.

Corroborative evidence requirement for admissions recorded during search - statement recorded under Section 132 (4) of the Act - absence of incriminating material and its effect on assessment under Section 153C - computation of block of assessment years for proceedings under Section 153C - principles of natural justice - opportunity for cross-examination - jurisdictional defect not curable under Section 292B - assessment under Section 143(3) read with Section 153C

Corroborative evidence requirement for admissions recorded during search - statement recorded under Section 132 (4) of the Act - Additions under Section 68 could not be sustained merely on the basis of statements recorded during search in absence of corroborative material. - HELD THAT: - The Court held that while statements under Section 132(4) constitute information and have evidentiary value, the Act does not permit computing undisclosed income solely on the basis of such statements without independent material discovered during the search that corroborates them. Reliance was placed on precedents which reject sustaining additions merely on admissions recorded during search when no corroborative material is produced. Consequently, the ITAT was correct in holding that additions could not be made on mere presumption of incriminating material and in deleting the additions under Section 68. [Paras 20, 21, 22, 23]

Additions deleted as they were unsupported by corroborative material and could not rest solely on statements recorded during search.

Absence of incriminating material and its effect on assessment under Section 153C - assessment under Section 143(3) read with Section 153C - Assessment under Section 143(3) read with Section 153C is invalid in respect of the impugned year where no incriminating material relating to that year was found during the search. - HELD THAT: - The Court observed that Sections 153A/153C require a nexus between material seized and the AYs sought to be assessed; absent incriminating material, the AO lacks jurisdiction to assess or reassess completed or unabated assessments on the basis of other material. The ITAT's finding that no incriminating material was found for the impugned AY was upheld, with reference to authoritative decisions that a satisfaction note and incriminating material must relate to the assessee and the specific assessment year. Hence proceedings drawn under Section 143(3) as against Section 153C were invalid for want of incriminating material. [Paras 18, 24, 25, 27]

Assessment framed under Section 143(3)/153C set aside for absence of incriminating material relating to AY 2011-12.

Principles of natural justice - opportunity for cross-examination - Failure to furnish statements of third parties and to provide opportunity for cross-examination vitiates the assessment proceedings. - HELD THAT: - The Court accepted the ITAT's finding that the assessee was not furnished the statement of the owner of the third-party group nor given an opportunity to cross-examine despite repeated requests, amounting to gross violation of natural justice. Reliance was placed on authority holding that denial of cross-examination where such statements form basis of impugned order renders proceedings null and void. Thus the assessment in respect of the company where this breach occurred was invalidated. [Paras 30, 31, 32]

Assessment set aside in respect of the company where denial of cross-examination constituted violation of natural justice.

Jurisdictional defect not curable under Section 292B - Jurisdictional defects in framing assessment under Section 153C cannot be cured as mere mistakes under Section 292B. - HELD THAT: - The Court held that Section 292B only condones mistakes, defects or omissions in notices or proceedings that are nevertheless in substance and effect in conformity with the Act; it does not cure fundamental jurisdictional defects. Reliance was placed on precedent that jurisdictional infirmities render proceedings null and void and are not amenable to cure under Section 292B. Given the absence of steps showing seized material belonged to the assessee and a mechanically prepared satisfaction note, the defects were treated as jurisdictional. [Paras 33, 34, 35]

Revenue's plea of curability under Section 292B rejected; jurisdictional defects invalidate the assessment.

Final Conclusion: The High Court dismissed the appeals, upholding the ITAT's setting aside of the assessment order and deletion of additions for AY 2011-12 on grounds that additions rested on uncorroborated statements, absence of incriminating material relating to the impugned year, violation of natural justice in one case, and incurable jurisdictional defects.

Taxability of interest received by a Permanent Establishment - permanent establishment not a separate legal person / branch as non separate juridical entity - one cannot make profit out of oneself - treaty exception for banking enterprises under Article 7(3) - Article 14(3) India US DTAA - interest paid by PE to head office may be taxed in India - Explanation to Section 9(1)(v) - statutory fiction deeming banking PE as separate (effective 01 04 2016) - CBDT Circular No. 19/2015 on treatment of interest payable by PE of a bank

Taxability of interest received by a Permanent Establishment - permanent establishment not a separate legal person / branch as non separate juridical entity - one cannot make profit out of oneself - treaty exception for banking enterprises under Article 7(3) - Article 14(3) India US DTAA - interest paid by PE to head office may be taxed in India - Explanation to Section 9(1)(v) - statutory fiction deeming banking PE as separate (effective 01 04 2016) - Interest earned by the Indian PE on deposits maintained with the Head Office/overseas branches is not taxable in India for AY 2003 04 - HELD THAT: - The Tribunal had allowed the assessee's claim and directed deletion of the addition of interest received by the Indian PE from its Head Office/overseas branches. The Court upheld that conclusion. Two lines of reasoning were determinative. First, under domestic law as applicable to the year in question, a branch is not a separate juridical person and the settled principle that 'one cannot make a profit out of oneself' applies; consequently interest received from the Head Office by its Indian branch could not be treated as taxable income of a distinct person. Second, the DTAA framework - in particular the special treatment of banking enterprises in Article 7(3) and Article 14(3) of the India US DTAA and comparable treaty provisions - supports treating the matter in the manner adopted by the Tribunal. The Court further noted the later legislative change (the Explanation to Section 9(1)(v) enacted by Finance Act, 2015 and explained in CBDT Circular No.19/2015) creates a statutory fiction deeming a banking PE separate for taxation, but that Explanation took effect from 1 April 2016 and therefore does not apply to AY 2003 04. Absent any applicable statutory fiction for the year in issue and having regard to the settled judicial principle and the relevant treaty provisions, the Tribunal's finding that the interest was not chargeable to tax in India was unexceptionable. [Paras 3, 17, 19]

Tribunal's order deleting the addition of interest for AY 2003 04 is upheld and the appeals are dismissed.

Final Conclusion: Appeals dismissed; interest received by the Indian PE from its Head Office/overseas branches for AY 2003 04 held not taxable in India, the subsequent statutory provision deeming a banking PE separate (Explanation to s.9(1)(v)) being inapplicable to the year in question.

Clubbing of consignments - classification of incomplete articles as complete article under Interpretative Rule 2(a) - levy of anti-dumping duty on articles presented unassembled or in CKD - rejection of declared transaction value under Rule 12 of the Customs Valuation (2007) Rules and re-determination under Rule 5 - confiscation for mis-declaration and intent to evade duty under section 111(m) of the Customs Act, 1962 - penalty for wrongful import declarations under sections 112(a), 114A and 114AA of the Customs Act, 1962

Clubbing of consignments - Consignments imported by two related companies were rightly clubbed for classification and assessment. - HELD THAT: - The Tribunal upheld the finding that the two sets of consignments had the same supplier, same commercial invoice numbers for the first pair, identical IGM/Bills of Lading dates, matching quantities and complementary items (packing material and pressing machines) and that parts shown as imported by one company were stored at the warehouse of the other. The purchases were arranged and managed by a common person related to the directors of both companies and the evidence showed intent to assemble complete calculators to avoid anti dumping duty. On these facts the Principal Commissioner's conclusion that the imports were connected and could be clubbed for assessment was justified. [Paras 22, 36, 40]

Clubbed assessment of the four Bills of Entry was upheld.

Classification of incomplete articles as complete article under Interpretative Rule 2(a) - levy of anti-dumping duty on articles presented unassembled or in CKD - Parts imported constituted calculators in CKD because the parts as presented imparted the essential character of the finished article and anti-dumping duty under the Notification was therefore leviable. - HELD THAT: - The Tribunal accepted the finding that the PCB assembly with in-built cell bracket together with the compatible button cell and display, as tested, were capable of performing calculator functions and thus provided the essential character of a calculator. Applying Interpretative Rule 2(a), which treats an unassembled article as a complete article if the parts presented have the essential character, the Tribunal held that the parts fell within the description of calculators and were liable to anti-dumping duty. The Tribunal also relied on precedent and statutory scheme to hold that the Rules of Interpretation apply for the levy of anti dumping duty. [Paras 24, 25, 38]

Parts were classifiable as calculators in CKD and subject to anti-dumping duty.

Rejection of declared transaction value under Rule 12 of the Customs Valuation (2007) Rules and re-determination under Rule 5 - The declared transaction values for DVB remotes and certain diodes were rightly rejected and re-determined from documents recovered during investigation. - HELD THAT: - The Tribunal accepted the Principal Commissioner's finding that model numbers were not declared and that contemporaneous documents retrieved from an email account (containing invoice/packing details and transaction data) showed higher values for identical items. The importer could not plausibly explain the price differences. In these circumstances rejection under Rule 12 was appropriate and, in absence of other identical values, the transaction value found in the recovered documents was rightly used under Rule 5 to re-determine assessable value. [Paras 28, 29, 43]

Rejection of declared value and re-determination of value for DVB remotes and diodes was upheld.

Recovery of differential duty - Differential customs duty based on the re-determined values was sustainable. - HELD THAT: - Having found that under valuation of DVB remotes and diodes was established and values correctly re-determined under the Valuation Rules, the Tribunal held that the Principal Commissioner was justified in confirming the demand of differential duty and in directing recovery from the importer. [Paras 30]

Differential duty demand was sustained.

Confiscation for mis-declaration and intent to evade duty under section 111(m) of the Customs Act, 1962 - penalty for wrongful import declarations under sections 112(a), 114A and 114AA of the Customs Act, 1962 - Confiscation and penalties imposed on the companies and certain persons were justified. - HELD THAT: - The Tribunal upheld the Principal Commissioner's factual finding that the importers actively connived to split consignments and mis-declare goods with the intent to evade anti-dumping duty. Given that mis declaration and intent to evade were found, confiscation under section 111(m) was appropriate. Penalties under sections 114A (for the importer furnishing wrong declaration) and 112(a) (for active connivance) as well as penalties on identified persons were held to be rightly imposed in view of submitted incorrect invoices and the connivance established by the investigation. [Paras 31, 32, 44]

Confiscation and imposition of penalties were affirmed.

Final Conclusion: The Tribunal dismissed all appeals, upholding the clubbing of consignments, classification of parts as calculators in CKD attracting anti dumping duty, rejection and re-determination of declared values, confirmation of differential duty, and the orders of confiscation and penalties.

Monetary limit for filing appeals - Board's power under Section 131BA to fix monetary limits for filing appeals - Binding nature of Board's circulars/instructions on the department - Withdrawal/non-filing of appeals below prescribed threshold - Exceptions to monetary limits (constitutional validity, ultra vires, classification/recurring issues) - Dismissal of departmental appeals on low tax effect

Board's power under Section 131BA to fix monetary limits for filing appeals - Binding nature of Board's circulars/instructions on the department - Withdrawal/non-filing of appeals below prescribed threshold - Dismissal of departmental appeals on low tax effect - Whether the departmental appeals are maintainable in view of the CBIC instructions dated 02.11.2023 prescribing a Rs.50 lakh threshold for filing appeals before the CESTAT and requiring withdrawal of pending appeals below that threshold. - HELD THAT: - The Tribunal examined the CBIC instruction dated 02.11.2023 which prescribes that no appeal shall be filed before the CESTAT where the duty involved is below Rs.50 lakhs and directs withdrawal of pending appeals below the monetary limit. The instruction was issued by the Board under the power contained in Section 131BA of the Customs Act, 1962. The Tribunal noted consistent judicial treatment treating Board circulars/instructions of this character as binding on the department and observed that CESTATs, High Courts and the Supreme Court have been dismissing departmental appeals which fall below the prescribed monetary thresholds. Applying the circular to the present matters, each appeal involves duty below the Rs.50 lakh threshold and therefore falls within the scope of the instruction requiring non-filing/withdrawal. The Tribunal followed the precedents and the Board's policy objective of reduction of litigation and concluded that the appeals are not maintainable on that ground. [Paras 6, 7, 8, 10]

All 26 departmental appeals dismissed as not maintainable in view of the CBIC instruction dated 02.11.2023; question of law, if any, left open.

Exceptions to monetary limits (constitutional validity, ultra vires, classification/recurring issues) - Monetary limit for filing appeals - Whether any exception in the instruction applies so as to permit continuation of these appeals despite the monetary threshold. - HELD THAT: - The Tribunal considered the exceptions set out in the instruction - including challenges to constitutional validity, where a notification/instruction has been held illegal or ultra vires, and classification/refund issues of legal or recurring nature. The record showed no basis that any of these exceptions applied to the present appeals. The departmental representative contended exceptions and relied on an interim order in Century Metal Recycling, but the Tribunal observed that the appeals before it did not fall within the listed exceptions and that the Board's instruction requires withdrawal of pending matters which are below the threshold. Consequently, exceptions were not found to be attracted so as to maintain the appeals. [Paras 4, 6, 8, 10]

Exceptions in the instruction do not apply; appeals not saved by any exception and therefore are to be dismissed.

Final Conclusion: The Tribunal dismissed all 26 appeals filed by the department as not maintainable under the CBIC instruction dated 02.11.2023 (issued under Section 131BA) which prescribes a Rs.50 lakh threshold for filing appeals before the CESTAT and mandates withdrawal of pending appeals below that limit; any question of law is left open.

Appointed Date - Scheme of Arrangement - Supervisory jurisdiction of the company court - Power of NCLT under Rule 11 to fix Appointed Date (limited) - Modification of Scheme terms requires cogent reasons

Appointed Date - Power of NCLT under Rule 11 to fix Appointed Date (limited) - Modification of Scheme terms requires cogent reasons - Supervisory jurisdiction of the company court - Validity of the NCLT's modification of the Appointed Date to the date of pronouncement of the sanctioning order - HELD THAT: - The Tribunal held that where the statutory parameters for sanctioning a scheme are satisfied and the scheme as proposed has been approved by the requisite majorities, the company court's jurisdiction is supervisory and it cannot re-open or sit in appeal over the commercial wisdom of the parties. Alteration of the Appointed Date impacts calculations and has financial consequences and therefore any modification by the Tribunal must be supported by cogent reasons. Reliance by the NCLT on Sterlite Ports was misplaced because in that case the definition of "Appointed Date" itself empowered the Tribunal to fix a different date; that factual foundation was absent here. In the present facts the Appointed Date was agreed by the boards, vetted by authorities, approved by shareholders and creditors and there were no cogent reasons recorded to alter it to the date of pronouncement. Consequently the modification made by the NCLT insofar as it fixed the Appointed Date as the date of pronouncement was unwarranted and set aside. [Paras 12, 13, 14]

The Appointed Date shall be the date as fixed by the Scheme and not the date of pronouncement; the NCLT's modification is set aside and the appeal is allowed.

Final Conclusion: Appeal allowed; the NCLT's direction treating the Appointed Date as the date of pronouncement is quashed and the Appointed Date as fixed in the Scheme is restored.

Compliance with Section 19 PMLA-reason to believe and remand - Custodial remand-recording of judicial satisfaction by Special Judge - Section 45 PMLA-twin conditions for grant of bail - Prima facie satisfaction from ECIR and ancillary material for denial of bail in money laundering cases

Compliance with Section 19 PMLA-reason to believe and remand - Custodial remand-recording of judicial satisfaction by Special Judge - Remand and arrest complied with Section 19 of the PMLA and did not vitiate proceedings; illegal custody/insufficient reasons in remand order did not entitle the applicant to bail. - HELD THAT: - The Court examined the reason to believe recorded by the Enforcement Directorate and the remand order of the Special Judge. The ED's recorded reasons (including seizure results, statements, transactional sequence and alleged attempts to destroy evidence) supplied material on which an authorised officer could form a reason to believe. The Special Judge's remand order expressly recorded satisfaction and stated reasons (noting the nature of transactions, allegations of layering and the impossibility of completing investigation within 24 hours), distinguishing the present case from authorities where remand orders merely recited conclusions without independent satisfaction. Allegations that the applicant was wrongfully detained between the expiry of a summon and formal arrest were matters of evidence for trial; the trial court had found production within 24 hours and the High Court found no material to rebut that finding. Accordingly the contention of non compliance with Section 19 was rejected and remand/ arrest were held to be in conformity with law. [Paras 28, 30, 31, 32, 33]

Point answered against the applicant; remand and arrest held to comply with Section 19 and did not entitle the applicant to bail.

Section 45 PMLA-twin conditions for grant of bail - Prima facie satisfaction from ECIR and ancillary material for denial of bail in money laundering cases - Applicant failed to satisfy the twin conditions of Section 45 PMLA; bail was denied. - HELD THAT: - On the material in ECIR and ancillary documents the Court recorded prima facie findings that the applicant had assisted in acquisition and layering of assets allegedly derived from extortion and had participated in transactions described as sham to obfuscate ownership. Several properties stood attached and attachments were confirmed by the Adjudicating Authority. Having regard to the nature and seriousness of allegations, the material collected, and settled jurisprudence requiring strict application of Section 45's twin conditions in money laundering cases, the applicant had not discharged the burden to show reasonable grounds for believing he was not guilty or that he would not commit an offence on bail. Arguments about valuation, bona fides of transactions, or delay in custody were matters to be tried; the gravity of the offence and prima facie involvement weighed against bail. [Paras 35, 36, 38, 39]

Point answered against the applicant; applicant unable to fulfill Section 45 twin conditions and bail refused.

Final Conclusion: The second bail application is rejected. The High Court held that the arrest and remand complied with Section 19 PMLA and that, on the prima facie material in the ECIR and related records, the applicant failed to satisfy the twin conditions of Section 45 PMLA; the trial court shall decide the merits in accordance with evidence.

Cancellation of bail - rigours of Section 45 of the PMLA - complaint under Section 44(1)(b) PMLA governed by Sections 200-205 CrPC - summons versus warrant on taking cognizance of complaint - Section 88 CrPC bonds as alternative to bail - not arrested during investigation - application of Tarsem Lal and Satender Kumar Antil

Cancellation of bail - rigours of Section 45 of the PMLA - not arrested during investigation - application of Tarsem Lal and Satender Kumar Antil - summons versus warrant on taking cognizance of complaint - Section 88 CrPC bonds as alternative to bail - Challenge to the trial court's grant of bail to the respondent in the PMLA complaint case - HELD THAT: - The High Court held that the impugned bail order was not vitiated. Applying the principles in Satender Kumar Antil and the subsequent decision in Tarsem Lal, the Court observed that where an accused was not arrested during investigation and the complaint under Section 44(1)(b) PMLA was filed after completion of investigation, the normal course is to issue summons rather than a warrant and the accused appearing pursuant to summons is not to be treated as in custody. In such circumstances the rigours of Section 45(1) PMLA do not automatically apply; the proviso to Section 45 will operate where the alleged laundered amount is below the statutory threshold. The Trial Court correctly noted the ECIR registration year, delay in arrest, and that the amount alleged to be laundered is below the threshold, and therefore was justified in treating Section 45 as inapplicable and in accepting bond under Section 88 CrPC as a means to secure presence. The Court further held that the Trial Court's reliance on principles underlying Sections 436A/428 CrPC to bolster its reasoning did not render the order erroneous. The respondent's antecedents and other cases, though relevant, did not make the bail grant in this proceeding perverse or contrary to law such as to warrant cancellation at this stage; any contention regarding custody or cancellation in other pending matters remains open to the petitioner to pursue before the appropriate courts. [Paras 62, 63, 64, 66, 67]

The petition seeking cancellation of bail is dismissed; subject to the Trial Court's conditions the respondent may be released forthwith if not required in any other case, and the order leaves open any application by the petitioner for custody or cancellation in other proceedings.

Final Conclusion: The High Court dismissed the petition challenging the Trial Court's grant of bail, finding no legal infirmity in treating Section 45 PMLA as inapplicable where the accused was not arrested during investigation and in accepting bonds under Section 88 CrPC; the order does not preclude the petitioner from seeking custody or cancellation of bail in other pending proceedings.

Inherent jurisdiction under Section 482 CrPC - cognizance of complaint - PMLA jurisdiction and investigation by Enforcement Directorate - prima facie satisfaction for interim relief - stay of proceedings

Inherent jurisdiction under Section 482 CrPC - cognizance of complaint - prima facie satisfaction for interim relief - stay of proceedings - Whether the High Court should exercise its inherent jurisdiction under Section 482 CrPC to grant interim relief by staying the proceedings in the PMLA complaint against the petitioners. - HELD THAT: - The petitioners, not named in the earlier CBI charge-sheets arising from the original FIRs, were subsequently included by the Enforcement Directorate in a 280-page complaint which the Special Judge (Anti-Corruption) took cognizance of by an order directing issuance of process. The petitioners challenged their inclusion and the retrospective dating of institution, contending there was no statutory basis or culpable material linking them to the scheduled offences, and that the Special Judge had not applied mind before taking cognizance. On an examination of the complaint as averred in the petition, the Court found that a prima facie case for interference under its inherent jurisdiction was made out - in particular because the order taking cognizance appeared cryptic and no adequate examination of the basis for implicating the petitioners was reflected. In view of these aspects and until the respondent is heard, the Court directed interim protection by staying further proceedings in the complaint against the petitioners until the next date of hearing, while issuing notice to the respondent for service and listing the matter for hearing. [Paras 42, 46]

Interim stay granted - proceedings in the complaint against the petitioners are stayed till the next date of hearing; notice issued to the respondent and matter listed for further hearing.

Final Conclusion: The High Court, invoking its inherent jurisdiction under Section 482 CrPC, recorded that a prima facie case for interim relief was made out and ordered a stay of proceedings in the Enforcement Directorate's complaint against the petitioners until the next date of hearing, subject to service of notice on the respondent.

Service Tax liability on Consulting Engineer Services - Exemption for construction-related services for use by the general public - Service not taxable in Jammu and Kashmir - Availment of Cenvat credit based on invoices - Proviso to Rule 9 of Cenvat Credit Rules, 2004 - Extended period of limitation (invocation of extended period)

Service Tax liability on Consulting Engineer Services - Exemption for construction-related services for use by the general public - Service not taxable in Jammu and Kashmir - Appellant not liable to pay service tax on Consulting Engineer Services in respect of construction of roads/bridges for public use and services in Jammu and Kashmir. - HELD THAT: - The Tribunal held that the services rendered were consulting engineering services in relation to construction of roads meant for use by the general public. Service Circular No.14/2004 excludes applicability of service tax to services in Jammu and Kashmir and Mega Notification No.25/2012 (Clause 13(a)) exempts services relating to construction of roads/bridges/ tunnels for public use. The Bench adopted the reasoning and detailed findings recorded in its Final Order No. 50857-50858/2023 dated 10.07.2023 and found those findings squarely applicable here despite different financial years. Accordingly the service tax demand was wrongly fastened on the appellant. [Paras 8, 9]

Service tax liability denied; appellant not liable for the alleged service tax.

Availment of Cenvat credit based on invoices - Proviso to Rule 9 of Cenvat Credit Rules, 2004 - Cenvat credit availed by the appellant on the basis of invoices held to be validly taken and not liable to be denied for mere discrepancy in address. - HELD THAT: - The Tribunal applied the proviso to Rule 9 of the Cenvat Credit Rules, 2004, holding that where the particulars prescribed are otherwise available on the documents, an invoice/bill issued by the provider of input service suffices for availment of credit. The department's rejection of invoices solely because the registered address on the invoice did not match the searched/registered premises was treated as a procedural lapse arising from an office shift, and not proof of fake registration. Consequently, the substantial benefit of credit could not be denied on that ground and the Cenvat credit was held to have been rightly availed. [Paras 10]

Cenvat credit upheld as validly availed on the invoices produced.

Extended period of limitation (invocation of extended period) - Invocation of the extended period of limitation in issuing the show cause notice held to be incorrect. - HELD THAT: - The Tribunal noted that the appellant had been filing regular ST-3 returns and the department failed to produce material showing suppression of facts with intent to evade tax, which is necessary to invoke the extended period. Relying on precedent cited in the order, the Bench concluded that the extended period was wrongly invoked and the demand was therefore hit by limitation. [Paras 10, 11]

Extended period of limitation not attracted; demand barred by limitation.

Final Conclusion: The Order-in-Original is set aside; the Tribunal allowed the appeal - service tax demand quashed, Cenvat credit sustained, and the demand held barred by limitation for the period 2015-16 to 2016-17.

Exemption from service tax under section 65(105)(zzzza) and Notification No.25/2012 - works contract services in relation to railways - definition of commercial or industrial construction excluding railways - railway sidings as part of 'railways' for exemption purposes - precedential weight of Tribunal decisions on scope of exemption

Works contract services in relation to railways - railway sidings as part of 'railways' for exemption purposes - definition of commercial or industrial construction excluding railways - precedential weight of Tribunal decisions on scope of exemption - Whether the respondent's execution of a private railway siding is covered by the exemption from service tax and thus outside the ambit of taxation. - HELD THAT: - The Commissioner (Appeals) held that works contracts relating to "railways" were exempt from service tax both prior to 01.07.2012 under section 65(105)(zzzza) of the Finance Act and thereafter under serial no. 14(a) of Notification No.25/2012. The appellate bench accepted the reasoning of earlier Tribunal decisions (notably SMS Infrastructure Limited, Anand Construction and Tracks and Towers Infratech) which construed the exclusion in the definition of "commercial or industrial construction" to embrace railway sidings constructed under private participation governed by the Railways Act. The Tribunal's view, reproduced and relied upon by the Commissioner (Appeals), observes that rail infrastructure projects effected under statutory schemes of private investment remain "railways" and thus fall within the exclusion from the definition of taxable commercial or industrial construction. The Department's contention that the exemption applies only to publicly operated railways and not to the private siding was rejected on the basis that the statutory scheme and precedents treat such sidings as part of the railway network and therefore within the exclusion. Having found no reason to depart from the Tribunal precedents, the appellate order setting aside the demand was upheld. [Paras 9, 10, 11]

The Commissioner (Appeals)'s order allowing the respondent's appeal is upheld; the construction of the private railway siding is covered by the exemption and outside the levy of service tax.

Final Conclusion: The Department's appeal is dismissed. The impugned order of the Commissioner (Appeals) setting aside the demand is affirmed on the ground that construction of the private railway siding falls within the exemption from service tax as construed by prevailing Tribunal decisions.

Taxability requires both a provider and flow of consideration - Corporate guarantee without consideration not taxable - Consideration distinct from assessable value - Profit/markup from purchase and resale of shipping space is business activity, not consideration for service - Principal-to-principal transactions - Application of negative list regime to definition of service

Taxability requires both a provider and flow of consideration - Corporate guarantee without consideration not taxable - Consideration distinct from assessable value - Application of negative list regime to definition of service - Provision of corporate guarantee without any consideration is not a taxable service. - HELD THAT: - The Tribunal accepted the settled position that, under the post-negative-list regime, an activity is a taxable service only where there is both a provider and a flow of consideration for rendering the service. Where corporate guarantees are issued to group companies without any monetary or non monetary consideration, the essential element of consideration is missing and taxability under section 66B does not arise. The reasoning of the Tribunal in Edelweiss Financial Services Ltd (upheld by the Supreme Court) was followed: alleged non monetary benefits cannot be invoked to convert a non consideration activity into a taxable service, and determination of assessable value under section 67 presupposes existence of a service remunerated by consideration.

Demand in respect of corporate guarantees was correctly dropped and is not liable to service tax.

Profit/markup from purchase and resale of shipping space is business activity, not consideration for service - Principal-to-principal transactions - Taxability of markup on freight not res integra - Profit/markup arising from buying space on vessels and reselling it to customers is not consideration for a taxable service; it is a business profit and not taxable as service tax. - HELD THAT: - Following a line of decisions (including Tiger Logistics and Greenwich Meridian Logistics), the Tribunal held that when an appellant purchases space from a shipping line and resells it to customers, the two legs are independent principal to principal transactions. The margin or notional surplus results from a purchase and sale business risk (including risk of unsold space) and therefore constitutes commercial profit, not consideration for rendering a service. Consequently, such profit/markup cannot be treated as service consideration taxable under the Finance Act.

Demand in respect of profit/markup on booking/resale of shipping space was unsustainable and rightly set aside.

Final Conclusion: The departmental appeal is dismissed; the Commissioner(Appeals) order dropping the demand in respect of corporate guarantees and profit/markup on booking of shipping space is upheld.

Quashing of prosecution - Acquittal upon liquidation of tax liability - Continuance of prosecution when liability extinguished - Withdrawal/compounding of prosecution - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - No Dues/Discharge Certificate

Quashing of prosecution - Acquittal upon liquidation of tax liability - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - No Dues/Discharge Certificate - Withdrawal/compounding of prosecution - Whether the complaint/prosecution in Complaint No.72-I of 2011 ought to be quashed and the petitioners-accused acquitted in view of payment of liability under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and issuance of No Dues/Discharge Certificate together with departmental approval to withdraw prosecution. - HELD THAT: - The Court recorded that the petitioners-accused remitted the alleged liability under the SVLDRS-2019 and the respondent issued a No Dues/Discharge Certificate; departmental approval to withdraw the prosecution was also accorded. On the admitted facts that the liability has been liquidated under the statutory scheme and the competent authority has approved withdrawal of prosecution, continuation of criminal proceedings would serve no useful purpose. The Court noted that mere pendency of an application for withdrawal filed by the Department could not justify continuation of prosecution when the liability stood extinguished, and that continuing the prosecution would impose unjustified burden on the trial court and cause unwarranted suffering to the accused. Applying these considerations, the Court concluded that the accusation no longer survives and that quashing the complaint and acquitting the accused is appropriate. [Paras 2, 3, 4, 5]

Complaint No.72-I of 2011 is quashed and the petitioners-accused are acquitted of the accusation so far as it relates to the instant complaint; the petition and pending applications stand disposed of.

Final Conclusion: The High Court quashed Complaint No.72-I of 2011 and acquitted the petitioners because the alleged excise liability was remitted under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, a No Dues/Discharge Certificate was issued and departmental approval to withdraw prosecution was recorded; continuation of prosecution was held to be futile and oppressive.

Waiver of Rural Development Cess - liability to remit tax/cess collected from customers - unjust enrichment - mandamus to quash demand notice under Revenue Recovery Act - installment payment of tax

Installment payment of tax - mandamus to quash demand notice under Revenue Recovery Act - Prayer for grant of six equal monthly installments for payment of APGST demand of Rs. 66,269/- for the year 2002-03 was not entertained by the High Court. - HELD THAT: - The petitioner admitted liability for the APGST amount but sought relief in the form of six monthly installments. The Court observed that it cannot itself order payment in installments under the statutory scheme and that the proper course is for the petitioner to make a representation to the competent tax authority for relief. Consequently the Court declined to grant instalment relief in the writ jurisdiction and did not direct modification of the recovery notice in respect of the APGST component. [Paras 8]

Request for instalments for the APGST demand refused; petitioner may approach the concerned authority for relief.

Waiver of Rural Development Cess - liability to remit tax/cess collected from customers - unjust enrichment - mandamus to quash demand notice under Revenue Recovery Act - Claim of exemption/waiver of Rural Development Cess (RDC) for the year 2002-03 was rejected because the petitioner had collected the cess from the purchaser. - HELD THAT: - Although the Government issued successive G.O.s granting waiver/exemption of RDC and the corresponding sales tax component, those orders do not contemplate a situation where a dealer has collected tax/cess from its customer and retained the amount without remitting to the State. The Court accepted the respondent's unchallenged plea that the petitioner had recovered the cess from the FCI. Granting the claimed exemption in such circumstances would permit the dealer to retain amounts collected on behalf of the State and result in undue enrichment. For that reason the petitioner was not entitled to quash or set aside the demand in respect of the RDC component and no relief was granted under the writ. [Paras 9, 10]

Claim for waiver/exemption of RDC denied on the ground of prior collection; demand under Form-4 in respect of RDC sustained.

Final Conclusion: Writ petition dismissed. The Court refused to order instalment payment for the admitted APGST liability and denied exemption of the Rural Development Cess because the petitioner had collected the cess from the purchaser, which would otherwise result in unjust enrichment; petitioner may seek instalment relief before the appropriate tax authority.

Summary order. Special Leave Petitions dismissed for delay of 498 days; explanation for delay held insufficient.

Article 227 superintendence jurisdiction - interference by High Court on findings of fact - manifest miscarriage of justice - certiorari for patent error - evaluation of conflicting revenue reports by trial court - temporary injunction restraining obstruction and creation of third party interest

Article 227 superintendence jurisdiction - interference by High Court on findings of fact - manifest miscarriage of justice - High Court will not interfere under Article 227 with concurrent findings of fact and orders of trial and appellate courts unless there is manifest miscarriage of justice or a patent error apparent on the face of the proceedings. - HELD THAT: - The Court reaffirmed that exercise of supervisory jurisdiction under Article 227 is limited and will not be invoked merely because a party is aggrieved by a decision. Interference is warranted only where there is a compelling circumstance showing a manifest miscarriage of justice or a patent error, such as clear ignorance or disregard of law. Concurrent factual conclusions reached by the trial and appellate courts, considered in light of the material on record, do not attract interference absent such exceptional flaws. The court relied on settled principles distinguishing a mere erroneous decision from a patent error amenable to certiorari and observed that the impugned orders were supported by reasons and material considered by the courts below. [Paras 11, 12, 13, 14, 15]

No interference under Article 227; impugned orders sustained as there is no manifest miscarriage of justice or patent error.

Evaluation of conflicting revenue reports by trial court - interference by High Court on findings of fact - Conflict between revenue reports did not oblige the trial Court to constitute a fresh revenue team and did not justify interference by this Court where the courts below had considered the reports and other material on record. - HELD THAT: - The petitioner relied on two revenue communications said to be contradictory. The High Court noted that the trial and appellate courts had regard to the revenue reports as well as other material including earlier suit proceedings and the pleadings. The Court declined to prescribe the precise mode of fact-finding that the trial Court must adopt when confronted with divergent revenue entries, and observed that it was not appropriate, in exercise of supervisory jurisdiction, to substitute its own view of how the trial court should have proceeded. The appellate court had also examined the effect of the earlier suit filed and withdrawn by the petitioner and the nature of pleadings on possession. Liberty was left to the petitioner to institute a fresh suit if the cause survives. [Paras 7, 8, 9, 10]

No fault in the courts below for relying on and reconciling the available revenue reports and other material; no ground for interference or direction to constitute a new revenue team.

Temporary injunction restraining obstruction and creation of third party interest - interference by High Court on findings of fact - The interlocutory directions restraining the respondent from causing obstruction in cultivation of the suit property and from creating third party interest or changing the nature of the property were affirmed by the appellate Court and not disturbed. - HELD THAT: - The trial Court's interim order temporarily restrained the respondent from obstructing cultivation and from creating third party interests or converting the suit property for non-cultivation purposes until disposal of the main suit. The appellate court confirmed that order after considering the records and the material on file. The High Court found that the trial court had guarded the parties' rights and that the appellate court had given valid reasons in upholding the interim protection, thereby justifying continuance of those directions. [Paras 1, 14, 15]

Interim injunction and restraints as imposed by the trial Court and affirmed on appeal are sustained; petition to set them aside dismissed.

Final Conclusion: The petition under Article 227 is dismissed. The High Court found no merit to disturb the concurrent orders of the trial and appellate courts, including the interim restraint on obstruction and creation of third party interests, as there was no manifest miscarriage of justice or patent error warranting interference; liberty granted to the petitioner to institute fresh proceedings if rights subsist.

Impleading under Section 319 Cr.P.C. - Service of notice under Section 138 of the Negotiable Instruments Act - Liability of company officers and authorized signatory - Doctrine of vicarious liability - Limitation for prosecution under Section 142 of the Negotiable Instruments Act

Service of notice under Section 138 of the Negotiable Instruments Act - Liability of company officers and authorized signatory - Doctrine of vicarious liability - Whether absence of an individual statutory notice to the authorized signatory (applicant) vitiates impleadment and prosecution. - HELD THAT: - The court held that where a company is the principal accused and statutory notice under Section 138 was served on the company (and its two directors already impleaded), an authorised signatory who was 'in charge of and responsible for the conduct of business' and who signed the cheques is deemed to have been aware of the notice to the company. The three-Judge decision in Aneeta Hada does not mandate that individual notices must be served on directors or signatories; on the contrary, later authority (Krishna Texport & Capital Markets Limited v. Ila A. Agrawal) endorses that reading in individual notice requirements into Section 138 would frustrate the summary remedy and is not warranted. Given that the bank produced evidence showing the applicant was the signatory, the trial court rightly concluded that separate service on the applicant was not necessary for maintaining prosecution and impleadment under Section 319 Cr.P.C. was permissible. [Paras 9, 10]

Absence of a separate statutory notice to the applicant does not vitiate his impleadment where the company was served and the applicant, as authorised signatory, was deemed aware of the notice; prosecution is maintainable.

Impleading under Section 319 Cr.P.C. - Limitation for prosecution under Section 142 of the Negotiable Instruments Act - Whether impleadment of the applicant under Section 319 Cr.P.C. was barred by the limitation period under Section 142 of the Negotiable Instruments Act. - HELD THAT: - The court distinguished the facts from N. Harihara Krishnan, where impleadment after cognizance was held to be a device to evade limitation. In the present case the trial court had not taken cognizance and the matter was at the enquiry stage when Section 319 impleadment was sought and allowed. Limitation under Section 142 becomes operative upon taking cognizance; therefore, impleading an accused during enquiry prior to cognizance is not subject to the same limitation objection. On these factual and legal grounds the objection based on expiry of statutory period was held inapplicable. [Paras 11, 12, 13]

Impleadment under Section 319 Cr.P.C. at the enquiry stage before cognizance was not barred by the limitation under Section 142 of the N.I. Act; the limitation objection did not vitiate the order.

Final Conclusion: The High Court dismissed the writ petition; the trial court's order impleading the applicant as accused no.4 under Section 319 Cr.P.C. is upheld and not quashed.

Rebuttable presumption under Section 139 of the Negotiable Instruments Act - Standard of proof: preponderance of probabilities to rebut statutory presumption - Material alteration of a cheque and its effect on enforceability - Part payment discharging liability and effect on prior cheque - Joint trial and reappreciation of evidence on appeal

Rebuttable presumption under Section 139 of the Negotiable Instruments Act - Standard of proof: preponderance of probabilities to rebut statutory presumption - Whether the accused succeeded in rebutting the statutory presumption in favour of the complainant in respect of Exhibit P1 cheque so as to render the offence under Section 138 NI Act not made out. - HELD THAT: - The court accepted concurrent findings that (a) the accused made a part payment after issuance of Exhibit P1 and that Exhibit D1 is a receipt evidencing payment of the said part amount, and (b) Exhibit P2 was originally for the lesser balance and was materially altered by the complainant - a finding in respect of which there is no appeal and which has attained finality. Applying the settled law that the presumption under Section 139 is rebuttable on the preponderance of probabilities, and having regard to authorities on part payment and the need to endorse part payments on the cheque and on the standard required to raise a probable defence , the court found that the materials on record and circumstances made it improbable that Exhibit P1 represented a legally enforceable debt at the time of presentation. The court therefore held that the accused discharged the evidentiary burden required to rebut the statutory presumption and that criminal liability under Section 138 did not subsist in respect of Exhibit P1. [Paras 12, 13, 14, 20, 21]

The accused has succeeded in rebutting the presumption in respect of Exhibit P1 and the finding of acquittal is to be upheld; no interference with the concurrent findings.

Material alteration of a cheque and its effect on enforceability - Part payment discharging liability and effect on prior cheque - Whether the trial court's finding that Exhibit P2 was materially altered and that part payment converted the liability into a lesser balance is final and dispositive of the enforceability of Exhibit P1. - HELD THAT: - The trial court found that Exhibit P2 had been materially altered by insertion to convert a cheque originally for the balance into a higher amount; that finding was not challenged by the complainant and has become final. Coupled with the trial court's finding (accepted on appeal) that Exhibit D1 records part payment by the accused leaving only a smaller balance, the appellate court was justified in treating the existence of a legally enforceable debt as negatived. The joint trial of both cases permitted reappreciation of the same evidence in appeal; there is no illegality in the appellate court reassessing the common evidence in both matters and reaching the concurrent conclusion. [Paras 12, 13, 14, 20]

Finding of material alteration of Exhibit P2 and of part payment is final; these findings dispossess Exhibit P1 of enforceability and support acquittal.

Final Conclusion: Concurrent findings that the complainant materially altered Exhibit P2 and that the accused made part payment (as evidenced by Exhibit D1) rebut the presumption of a legally enforceable debt in respect of Exhibit P1; appeal dismissed and the acquittal upheld.

Rebuttal of presumption under Section 139 of the Negotiable Instruments Act - Presumption under Section 118 of the Negotiable Instruments Act - Standard of proof - preponderance of probabilities to rebut statutory presumption - Cheque issued in discharge of a legally enforceable debt - Appellate re-appreciation of evidence in appeal against acquittal

Rebuttal of presumption under Section 139 of the Negotiable Instruments Act - Presumption under Section 118 of the Negotiable Instruments Act - Standard of proof - preponderance of probabilities to rebut statutory presumption - Cheque issued in discharge of a legally enforceable debt - Whether the accused succeeded in rebutting the statutory presumptions in favour of the complainant and whether the cheque was shown to have been issued in discharge of a legally enforceable debt - HELD THAT: - The trial court found that the payee's name on Exhibit P1 was written subsequently in a different handwriting and ink and concluded that the accused had successfully rebutted the presumptions under Sections 118 and 139 of the Negotiable Instruments Act. The High Court reviewed the evidence and accepted the trial court's findings. PW1's cross-examination revealed no definite case that any amount was due to the complainant rather than to his son-in-law, and PW1 admitted Exhibit D1 records the transaction between the accused and the son-in-law. PW2 (the son-in-law) was shown to have been abroad during the currency of Exhibit P1, which lends probability to the defence case that the cheque had been entrusted as security and was materially altered and misused by the complainant. Applying the settled law that the accused need only raise a probable defence on the preponderance of probabilities to rebut the statutory presumption, and having regard to authorities recognizing appellate power to re-appreciate evidence in acquittal appeals, the court found no reason to interfere with the trial court's conclusion that there was no satisfactory evidence that the cheque was issued in discharge of a legally enforceable debt to the complainant. [Paras 4, 9, 10, 15, 16]

The accused has rebutted the statutory presumptions and there is no satisfactory evidence that the cheque was issued in discharge of a legally enforceable debt; the acquittal is upheld.

Final Conclusion: The appeal is dismissed and the acquittal of the accused under Section 138 of the Negotiable Instruments Act is affirmed.

Suspension of sentence under Section 389 Cr.P.C. - deposit condition under Section 148 of the Negotiable Instruments Act - exception to the minimum 20% deposit requirement - appellate court's obligation to record reasons when exercising statutory discretion - appellate discretion to remit or require deposit pending disposal of appeal

Deposit condition under Section 148 of the Negotiable Instruments Act - exception to the minimum 20% deposit requirement - appellate court's obligation to record reasons when exercising statutory discretion - Whether the Sessions Court lawfully directed deposit of 20% of the fine/compensation while suspending sentence without assigning reasons or considering whether the case fell within the exception to the deposit requirement. - HELD THAT: - The Court held that when an accused seeks suspension of sentence under Section 389 Cr.P.C. in relation to conviction under Section 138 N.I. Act, the Appellate Court exercises statutory discretion under Section 148 of the N.I. Act to require deposit of a portion of the fine or to waive such deposit, but it must record reasons for its exercise of that discretion and consider whether the case falls within the exception to the minimum 20% deposit. Reliance was placed on the principles in Jamboo Bhandari and the Division Bench decision in Sreenivasan v. Babu Raj, which require that (a) the Appellate Court give unambiguous reasons showing it considered the object of the provision; (b) the deposit directed must not be less than 20% unless an exception is recorded; and (c) any direction for deposit exceeding 20% must carry additional reasons. The Sessions Court's order was a blanket direction to deposit 20% without assigning sufficient reasons or recording consideration of the exception, which rendered the direction legally infirm. [Paras 3, 5, 6]

The Sessions Court's direction to deposit 20% of the compensation is set aside for want of sufficient reasons and failure to consider whether the case warranted the exception.

Suspension of sentence under Section 389 Cr.P.C. - appellate discretion to remit or require deposit pending disposal of appeal - Scope and consequence of remand to the Sessions Court for fresh consideration of applications for suspension of sentence. - HELD THAT: - Having found the impugned orders deficient, the High Court directed that the Sessions Court shall reconsider the applications under Section 389 Cr.P.C. afresh, affording both sides an opportunity of hearing. The Sessions Court must apply the statutory principles governing Section 148 N.I. Act-including whether the case is an exception to the deposit requirement and the need to record reasons for its decision-before determining whether to require any deposit and, if so, the quantum. The reconsideration is to be completed within one month from receipt of the copy of this judgment. [Paras 6]

The Sessions Court is directed to reconsider the suspension applications afresh after hearing both parties and in accordance with the legal principles, within one month; the earlier deposit direction is set aside.

Final Conclusion: The High Court set aside the Sessions Court's order insofar as it directed a 20% deposit without reasons or consideration of the exception under Section 148 N.I. Act, and remanded the matter to the Sessions Court to reconsider the suspension applications afresh after hearing both parties and recording reasons, to be completed within one month.

Privity of contract - oral contract - burden of proof as to terms and market rates - admissibility and weight of a unilateral final bill - compromise under Section 138 of the Negotiable Instruments Act and its evidentiary effect in civil proceedings - concurrent findings and perversity

Privity of contract - oral contract - There was privity of contract between the plaintiff and the 1st defendant by virtue of an oral agreement for construction of the house. - HELD THAT: - Both the trial Court and the First Appellate Court on appreciation of evidence found that the plaintiff carried out the construction of the defendants' house in 2007-08 and that supervision and on-site inspection by PW-2 was admitted by the 1st defendant. The courts drew an adverse inference against the defendants for failing to summon persons alleged to have arranged the work on a lump-sum basis and relied on payments made by the 1st defendant to the plaintiff (including payments through cheques and settlement in the criminal complaint) to support the existence of an oral contract. The High Court found no reason to interfere with the concurrent factual finding of privity and observed that, despite absence of a written agreement, the evidence supported the existence of an oral contract between the parties. [Paras 35, 36, 47, 49, 59]

Concurrent findings that an oral contract/privity existed are upheld.

Burden of proof as to terms and market rates - admissibility and weight of a unilateral final bill - The plaintiff failed to prove the quantum claimed because he did not establish item-wise market rates or produce original bills, and the unilateral final bill (Ex.PW-1/D) could not alone sustain a decree. - HELD THAT: - The High Court acknowledged that the plaintiff relied on Ex.PW-1/D, a final bill generated after completion of construction which was neither signed by the parties nor supported by original bills, vouchers or material to prove expenditure. Where a claim consists of distinct items of work, the burden is on the plaintiff to prove the rate for each item and demonstrate consensus on terms; uncertainty in stipulations defeats the claim. The Court held that absence of evidence as to market rates and absence of original supporting documents rendered reliance on the unilateral bill unsustainable, making the concurrent decrees perverse on this basis. [Paras 61, 62, 63, 67, 68]

The decree cannot be sustained on the basis of the unilateral final bill in the absence of proof of item-wise rates and supporting original documents.

Compromise under Section 138 of the Negotiable Instruments Act and its evidentiary effect in civil proceedings - The compromise/withdrawal of the criminal complaint under Section 138 N.I. Act and the Criminal Court record did not establish the genuineness of the final bill or operate as admissible proof of the civil claim. - HELD THAT: - The plaintiff relied on the Criminal Court's record of compromise to bolster his civil claim. The High Court observed that the Criminal Court's order merely records payment and withdrawal of the complaint and does not adjudicate on the genuineness of the civil bill. Relying on established precedent, the Court held that such a criminal compromise is not admissible as proof in the civil suit to establish the correctness of the bill or the quantum claimed. [Paras 64, 65, 66]

The criminal complaint compromise is not admissible to prove the civil claim or the genuineness of the final bill.

Concurrent findings and perversity - Concurrent findings as to existence of contract are sustained, but the decrees based on unsecured quantification are perverse and are set aside. - HELD THAT: - The High Court differentiated between the factual conclusion that a contract existed and the sufficiency of evidence to quantify the plaintiff's entitlement. While upholding the lower courts' finding of privity, the High Court found that the courts wrongly granted a monetary decree on the basis of an unsupplemented unilateral bill and absence of market-rate evidence. Accordingly, substantive questions framed in the RSA were answered partly in favour of the respondent (existence of contract) and partly in favour of the appellants (failure to prove quantum and inadmissibility of reliance on the unilateral bill), rendering the lower courts' monetary decrees perverse. [Paras 59, 68, 69, 70]

The RSA is allowed insofar as the decrees for recovery are set aside, while the finding of an oral contract is maintained.

Final Conclusion: The High Court upheld the concurrent finding that an oral privity of contract existed between the plaintiff and the 1st defendant but found that the plaintiff failed to prove the quantum claimed; reliance on an unsigned unilateral final bill and on the criminal compromise was held inadequate, the monetary decrees of the courts below were set aside, and the Regular Second Appeal was allowed.