TMI Tax Updates e-Newsletter
Jun 05,2026

Maintainability of writ petition - Alternative efficacious remedy under the CGST Act - Search and seizure action under Section 67 -Sealing of business premises during search - Reason to believe - Provisional attachment of bank accounts to protect revenue - Bar on parallel proceedings on the same subject matter - Non-interference in fiscal investigation.

Bar on parallel proceedings on the same subject matter - Summons and search not amounting to initiation of adjudicatory proceedings - HELD THAT: - The Court held that the petitioner's reliance on Section 6(2)(b) and on M/s. Armour Security (India) Ltd. [2025 (8) TMI 991 - SUPREME COURT] was misplaced because no specific fact was shown that the petitioner had earlier been proceeded against by any other authority on the same grounds. The judgment relied on by the petitioner did not assist him, since the statutory bar would arise only where proceedings on the same subject matter had already been initiated by the competent authority. On the facts placed before the Court, no such overlap was established. [Paras 13, 24]

The plea founded on Section 6(2)(b) was rejected.

Sealing of business premises during search - Provisional attachment of bank accounts to protect revenue - Alternative efficacious remedy under the CGST Act - Non-cooperation with summons during investigation - HELD THAT: - The issue regarding Section 67 of the CGST Act was considered by Hon’ble Supreme Court in case of State of Uttar Pradesh and Ors. Vs. M/s Kay Pan Fragrance Pvt. Ltd. [2019 (12) TMI 95 - SUPREME COURT]and after considering the provision of Rule 140 and 141, it was observed that the assessee who happened to be owner of seized goods must take recourse to the mechanism already provided for in the Act and the rules for release of goods on provisional basis upon execution of a bond and furnishing of a security in such manner and on such quantum as may be prescribed or on payment of applicable taxes, interest and penalty payable as the case may be as predicated in Section 67(6) of the Act.

The Court held that Section 67 empowered the authorised officer to conduct search and seizure and, where required, to seal premises, while Section 67(6) read with Rules 140 and 141 provided the statutory mechanism for provisional release of seized goods and consequential relief. It further held that Section 83 authorised provisional attachment to safeguard government revenue, and no flaw in the attachment process was shown. The petitioner had not filed any application under the statutory provisions for release of goods or de-sealing of premises, and instead invoked writ jurisdiction directly. The Court also noted the petitioner's non-cooperation: he was not present during search, did not appear despite summons, and did not produce supporting documents in the investigation. In these circumstances, and in view of the availability of an alternative efficacious remedy, no case for interference under Article 226 was made out. [Paras 21, 22, 23, 24, 25]

The writ petition challenging sealing and provisional attachment was dismissed, leaving the petitioner to pursue the statutory procedure under the CGST Act and Rules.

Final Conclusion: The Court held that no case of overlapping proceedings under Section 6(2)(b) was made out and that the respondents' action of search, sealing and provisional attachment was within the statutory framework. As the petitioner had not cooperated with the investigation and had an alternative efficacious remedy under the CGST Act and Rules, the writ petition was dismissed.

Availment of the appellate remedy within the statutory time period under section 107 - Application seeking to dispense with the condition of pre-deposit - HELD THAT:- The prayer to dispense with the condition of 5% pre-deposit was rejected, while clarifying that statutory appeals may be preferred within the statutory time period provided under Section 107 of the Central Goods and Services Act, 2017.

Alternate statutory remedy against assessment orders - Non-supply of seized documents - Pre-deposit - Natural Justice - Challenged the assessment proceedings on the ground that copies of the seized documents from the missing files were not furnished, thereby prejudicing the assessee's defence, was not examined on merits in the special leave proceedings after final assessment orders had already been passed - HELD THAT: - The Court noted that final assessment orders had already been made for the relevant periods and that the assessee was left with the statutory remedy of appeal under Section 107 of the Goods and Services Tax Act, 2017. In the peculiar facts of the case, instead of adjudicating the grievance concerning the 14 missing files in the special leave proceedings, the Court permitted the assessee to raise that contention before the appellate authority. The appellate authority was directed to consider all relevant aspects, including the plea of prejudice arising from the missing seized files, independently and without being influenced by the observations of the High Court. [Paras 7, 9, 10, 12, 13]

The assessee was relegated to statutory appeals against each assessment order, to be filed within four weeks on a pre-deposit of 5% of the total principal tax amount, with liberty to urge before the appellate authority the plea that loss of the seized files had caused serious prejudice.

Final Conclusion: The special leave petition was disposed of by directing the assessee to pursue the statutory appellate remedy against the assessment orders. The contention based on the missing seized files was kept open for consideration by the appellate authority, which was directed to decide the matter uninfluenced by the High Court's observations.

Availability of efficacious statutory appellate remedy - Writ maintainability in tax adjudication - Proper officer under GST - Challenged the show cause notice, the adjudication order, and the connected notifications and circulars - Jurisdiction of issuance of the show cause notice by the Additional Director, DGGI, and the adjudication order by the Additional Commissioner, CGST - lack of jurisdiction - violation of natural justice, or constitutional challenge - Principles of Natural Justice - Judicial Restraint.

Alternate statutory remedy - Writ maintainability in tax adjudication - Exceptions to alternate remedy rule - HELD THAT: - The Court held that though Article 226 confers wide powers, tax statutes provide a complete remedial mechanism and writ jurisdiction is ordinarily not exercised where such remedy exists. On the pleadings, the real controversy concerned classification of services, applicability of exemption to annuity under the BOT arrangement, characterization of the receipts under the concession agreement, and taxability of the composite supply, all of which required examination within the statutory framework. The Court found that the petitioner had participated in adjudication, filed replies, and was heard, and that the challenge substantially assailed adjudicatory findings and statutory interpretation rather than disclosing any exceptional ground warranting bypass of appeal. Mere challenge to notifications or circulars in constitutional form, or the existence of departmental circulars, was held insufficient to render the appellate remedy inefficacious. [Paras 50, 51, 52, 53, 54]

The Court declined to exercise writ jurisdiction and dismissed the petition, while granting liberty to file an appeal under Section 107 within the time specified, to be decided on its own merits without being influenced by the observations in the judgment.

Proper officer under GST - Assignment of powers by notification - Jurisdiction of DGGI and Additional Commissioner - HELD THAT: - The principal submission of the petitioner is that the authorities issuing the Show Cause Notice and the Order-in-Original lacked jurisdiction and consequently the proceedings are void ab initio. In support thereof, challenge has been made to Notification No. 14/2017 dated 01.07.2017, Circular No. 03/03/2017 and other notifications by which officers of DGGI and officers of the rank of Additional Commissioner have been vested with powers under the CGST Act.

The Court held that Section 2(91) defining proper officer operates with Sections 3 and 5, which enable appointment of officers and vesting of powers. On the notifications placed before it, the Court found that the Additional Director, DGGI had been appointed as a Central Tax Officer and invested with the powers of Commissioner, and was therefore competent to issue notice under Section 74. Likewise, the Additional Commissioner, CGST, having been appointed as a Central Tax Officer and vested, by the later notification inserting paragraph 3A and Table V, with power to pass orders on notices issued by officers of DGGI, was competent to adjudicate. The Court rejected the objection that the notifications conferred only territorial and not subject-matter jurisdiction, treating such objection as a technical plea once the power was traceable to a statutory source. [Paras 34, 35, 36, 37, 38]

The jurisdictional challenge to the competence of the officers was rejected, and no inherent lack of jurisdiction was found.

Final Conclusion: The Court dismissed the writ petition on the ground that the petitioner had an efficacious alternate statutory remedy of appeal under the CGST Act. It held that no patent lack of jurisdiction or other recognized exception was made out, while leaving all merits open for consideration by the appellate authority if an appeal is filed within the time granted.

Entitlement to restoration of the cancelled GST registration on filing of an appropriate application - Compliance with proviso to Rule 22(4) of the CGST Rules, 2017- Cancellation for non-filing of returns - HELD THAT: - The Court found that the controversy was covered by the earlier decision in Dhirghat Hardware Stores & Anr. Vs. Union of India & 3 Ors. [2025 (10) TMI 1070 - GAUHATI HIGH COURT], which had construed the proviso to Rule 22(4) to mean that where the registered person furnishes all pending returns and makes full payment of tax dues along with applicable interest and late fee, the proper officer may drop the cancellation proceedings and pass the prescribed order. Accepting that the earlier decision applied on similar facts and law, the Court extended the same relief to the petitioner and directed the competent authority to consider the petitioner's application for restoration if filed within the time granted and if statutory compliances are satisfied. The Court further directed that the period under Section 73(10) would run from the date of the present order, except for the financial year 2024-25, which would be governed as stated in the order. [Paras 11, 12, 13]

The petitioner was permitted to approach the authority within sixty days for restoration of registration, and upon compliance with the proviso to Rule 22(4), the authority was directed to consider restoration in accordance with law.

Final Conclusion: Following the earlier decision on the same legal position, the Court disposed of the writ petition by permitting the petitioner to seek restoration of GST registration within the stipulated time and directing consideration of such request on compliance with the requirements of the proviso to Rule 22(4). The petitioner was also directed to clear the applicable tax, penalty, interest and late fee.

Entitlement to restoration of the cancelled GST registration on filing of an appropriate application after furnishing the pending returns and making payment of the tax dues, interest, late fee and penalty, if any - HELD THAT: - The Court noted that similar matters had already been disposed in the case of Dug Rade [2026 (3) TMI 1308 - GAUHATI HIGH COURT] and other similar writ petitions, accepted the common position of the parties that the present case should receive the same treatment. As the petitioner had already furnished the pending returns and expressed readiness to discharge the outstanding statutory liabilities, the Court held that an appropriate application for restoration should be filed before the competent authority, which must verify compliance and consider restoration in accordance with law. [Paras 12, 13, 14]

The petitioner was directed to file an application for restoration within the time granted, and the respondent authorities were directed to verify the same and thereafter restore the GST registration in accordance with law.

Final Conclusion: Following the course adopted in similar matters, the Court disposed of the writ petition by permitting the petitioner to apply for restoration of the cancelled GST registration and directing the competent authorities to verify compliance and consider restoration in accordance with law within the time stipulated.

Ex parte assessment without notice of adjourned hearing- Audi Alteram Partem - Violation of principles of natural justice in GST adjudication -HELD THAT: - The Court found from the record that the impugned order had been passed ex parte and not on the date originally fixed for hearing. Since no notice of any subsequent date was given to the petitioner, the authority could not proceed in a manner that deprived the petitioner of an opportunity of hearing. Following the view taken in the earlier decision of this Court in M/s Shubham Steel Traders [2024 (2) TMI 1180 - ALLAHABAD HIGH COURT], the Court held that once a hearing date had been fixed, the authority was required either to pass the order on that date or to fix another date and communicate it. Failure to do so resulted in breach of natural justice and vitiated the order. [Paras 3, 5]

The impugned order was quashed, and the authority was directed to grant an opportunity of personal hearing and thereafter pass a reasoned order in accordance with law.

Final Conclusion: The Court held that the ex parte GST order, having been passed without notice of any adjourned hearing date, was vitiated by breach of natural justice. The matter was remitted to the authority to afford personal hearing and pass a fresh reasoned order.

Pre-show cause settlement of GST demand - Issuance of DRC-01A - mandatory in the statutory scheme Or not - Harmonious construction of principal legislation and delegated legislation - Right to seek payment of tax, interest and reduced penalty at the pre-show-cause stage under Section 74(5) read with Rule 142(1A - HELD THAT: - The Court held that Section 74(5) forms an integral part of the statutory scheme by allowing finalisation of the proposed demand before formal show cause notice on payment of tax, interest and 15% penalty. Since a person cannot ordinarily know in advance either that a notice is about to be issued or the quantum proposed, Rule 142(1A) has to be read consistently with that statutory right. The use of the word may in the Rule could not be construed as merely directory where such interpretation would defeat the mandatory consequence enacted in the principal legislation and create an impermissible conflict between the Act and the Rules. Accordingly, non-issuance of DRC-01A does not render DRC-01 inherently without jurisdiction, but where the noticee raises the plea in reply to DRC-01, the benefit of Section 74(5) cannot be denied. That right is lost only where the noticee contests the demand on merits without claiming the statutory benefit, in which event it stands waived. As the petitioner had invoked that right before the adjudicating authority, it was bound to be allowed to discharge the demand with interest and 15% penalty. [Paras 22, 23, 24, 25, 26]

The petition was allowed to the extent that, on payment of the disputed tax, interest and 15% penalty within the time granted, the adjudication order would stand satisfied.

Final Conclusion: The Court held that Section 74(5) of the Act read with Rule 142(1A) confers a mandatory pre-show-cause settlement benefit, and that non-issuance of DRC-01A does not invalidate DRC-01 but cannot deprive the assessee of the right to pay tax, interest and 15% penalty if that plea is raised in reply. The adjudication was therefore directed to stand satisfied on such payment within the time allowed.

Validity of Ex parte assessment order - Breach of natural justice - No Opportunity of personal hearing - HELD THAT: - The Court found that the impugned order had been passed ex parte, although it was not made on the date fixed for hearing, and no notice of any subsequent date was given to the petitioner. On that finding, and following the same principle applied in a similar matter, the Court held that once the authority did not decide the matter on the scheduled hearing date, it was required to fix another date and communicate it to the petitioner. Failure to do so vitiated the proceedings for breach of natural justice. [Paras 3, 5]

The impugned order was quashed, and the authority was directed to grant an opportunity of personal hearing and thereafter pass a reasoned order in accordance with law.

Final Conclusion: The writ petition was disposed of by quashing the ex parte order for breach of natural justice, since no notice of the subsequent hearing date had been given. The matter was remitted to the authority to afford personal hearing and pass a fresh reasoned order in accordance with law.

Rejection of the appeal as time-barred - Failure to consider grounds for condonation of delay - Non- Reasoned order - HELD THAT: - The Court found that the appeal against the order under Section 129 had been filed beyond the prescribed period, and that specific grounds had been set up to explain the delay, including that the documents had been handed over for filing and the appeal was not filed due to the CA's mistake. Since the impugned appellate order did not consider those contentions at all, the rejection of the appeal on limitation without dealing with the pleaded explanation suffered from non-consideration of material contentions. [Paras 11, 12]

The appellate order was set aside and the matter was remitted to the appellate authority for a fresh decision in accordance with law after notice to the petitioner.

Final Conclusion: The writ petition was disposed of by setting aside the appellate order, since the grounds taken for condonation of delay had not been considered. The matter was remitted to the appellate authority for fresh decision in accordance with law after notice to the petitioner.

Non-Reasoned order for cancellation of GST registration - Failure to respond to show cause notice as distinct from grounds for cancellation -HELD THAT: - The Court held that the impugned cancellation order disclosed no reason for cancelling the registration, though such a drastic consequence affects the registered person's right to carry on trade and therefore requires a reasoned determination on the statutory grounds. Mere failure to reply to the show cause notice or failure to appear may justify proceeding ex parte, but cannot by itself constitute the reason to cancel registration. An order bereft of reasons was therefore treated as no order in the eyes of law. [Paras 5, 6]

The cancellation order was set aside and the matter was remitted to the Superintendent for fresh consideration after permitting the petitioner to file a final reply and after affording hearing on prior notice, to be concluded by a reasoned order.

Final Conclusion: The writ petition was disposed of by setting aside the unreasoned order cancelling registration. The authority was directed to reconsider the show cause notice afresh after receiving the petitioner's reply and granting a proper hearing.

Rejection of the GST appeal as time-barred -Exclusion of time under Section 14 of the Limitation Act - bona fide pursuit of remedy before a wrong forum -Distinction between exclusion under Section 14 and condonation under Section 5 of the Limitation Act- Whether the petitioner is entitled to the benefit of Section 14 of the Limitation Act ? - HELD THAT: - The Court held that the controversy stood covered by M/S Prakash Medical Stores Vs. Union of India and others [2026 (1) TMI 1453 - ALLAHABAD HIGH COURT] It distinguished the decisions in Commissioner of Customs & Central Excise Vs. M/s Hongo India (P) Ltd. [2009 (3) TMI 31 - SUPREME COURT] and Assistant Commissioner (CT) LTU, Kakinada Vs. Glaxo Smith Kline Consumer Health Care Limited [2020 (5) TMI 149 - SUPREME COURT] on the ground that those decisions concerned the inapplicability of Section 5 of the Limitation Act because the special statute contained a self-contained scheme for condonation of delay, whereas they did not decide exclusion of time under Section 14. Applying the principle stated in Prakash Medical Stores, the Court found that the petitioner had in fact filed the appeal before the Commissioner, CGST, Kanpur and had pursued that remedy bonafidely, and the time spent before the wrong forum could not be ignored while computing limitation for the appeal before the competent appellate authority. [Paras 12, 14, 15, 16]

The appellate authority erred in refusing the benefit of Section 14 of the Limitation Act; the impugned order was set aside and the matter was remitted to the first appellate authority for fresh decision in accordance with the observations in the judgment.

Final Conclusion: The writ petition was allowed. The Court held that the petitioner was entitled to exclusion of time under Section 14 of the Limitation Act for the period spent bonafidely pursuing the appeal before the wrong forum, set aside the order rejecting the appeal as time-barred, and remitted the matter for fresh decision.

Eligibility of exemption under Entry 87 of Notification No. 10/2025-Central Tax (Rate) dated 17.09.2025 - Psyllium seeds supplied in their natural, raw and unprocessed form - Scope of Psyllium Seeds (Isabgol) same goods qualify as "goods of seed quality" and are exempt under Entry 77 of Notification No. 10/2025-Central Tax (Rate) - Specific exemption entry prevailing over general seed quality entry.

Whether Psyllium Seeds (Isabgol) supplied in their natural, raw and unprocessed form as procured through Agricultural Produce Market Committee (APMC) auctions directly from farmers, without undergoing any drying, freezing, crushing or other processing qualifies as “fresh” Isabgol seeds and are exempted under Entry 87 (HSN 1211) of Notification No. 10/2025-Central Tax (Rate) dated 17.09.2025 as “Plants and parts of plants (including seeds and fruits) of a kind used primarily in perfumery, in pharmacy or for insecticidal, fungicidal or similar purpose, fresh or “chilled”? -HELD THAT: - The applicant has submitted that they propose to be engaged in trading business of Psyllium seeds, commonly known as Isabgol, to be purchased from farmers through auctions conducted by Agricultural Produce Market Committees (APMCs) in the State of Gujarat, proposes to supply such Psyllium seeds (Isabgol), without undertaking any processing or value addition to Isabgol processing units and the said activities are proposed to be carried out in the ordinary course of business; that they are also maintaining a warehouse at their place of business which is duly registered under the Goods and Services Tax Law bearing GSTIN 24BEGPP6511L2ZB with effect from 01.02.2023; that they hold a valid license as a “General Commission Agent” issued by the Agricultural Produce Market Committee, Sidhpur, License No. 163.

The Authority found from the tariff and HSN notes that Psyllium seeds are specifically covered under sub-heading 1211 90 13. It then applied the clarification on the distinction between fresh, frozen and dried goods to hold that goods supplied in the same state as harvested, without intentional drying, dehydration, freezing or any other processing, retain the character of fresh goods. On the applicant's stated mode of procurement and storage, the seeds remained in their natural form up to supply and therefore did not fall within the taxable entry applicable to frozen or dried goods. Between the two exemption entries, the Authority held that the entry for fresh or chilled goods of heading 1211 specifically covered Psyllium seeds, whereas the entry for goods of seed quality was only general; accordingly, the specific exemption governed the supply. [Paras 19, 20, 21, 23, 25]

The supply was held exempt at NIL GST under Entry 87 of Notification No. 10/2025-Central Tax (Rate), and the alternative claim under the general entry for goods of seed quality was declined in view of that finding.

Final Conclusion: The Authority ruled that raw and unprocessed Psyllium seeds supplied in the same condition as procured from farmers through APMC auctions are fresh Psyllium seeds classifiable under heading 1211 and exempt from GST under the specific exemption entry for fresh or chilled goods of that heading. The alternative reliance on the general exemption for goods of seed quality was not accepted.

Input tax credit on statutory canteen servicesprovided to regular employees - Blocked credit for canteen services attributable to contract workers - Restriction of credit to cost actually borne by employer - Employer-employee relationship - eligibility of input tax credit and restriction thereof governed under Section 16 and 17.

Input tax credit on statutory canteen services - Employer obligation under law - Restriction of credit to cost actually borne by employer - HELD THAT: - The Authority held that canteen services fall within the blocked credit provision for food and beverages, but the proviso permits credit where provision of such facility is obligatory for an employer under any law. Since the applicant is required under the Factories Act to provide and maintain a canteen for its regular employees, the inward catering service to that extent qualifies for the proviso and credit is available. However, where part of the canteen cost is recovered from the employees, the applicant cannot claim credit on that recovered portion, because admissibility is confined to the expenditure actually borne by the applicant in fulfilment of the statutory obligation. [Paras 22, 23, 24, 25, 26]

Credit was allowed only for the portion of canteen services for regular employees whose cost was actually borne by the applicant, and not for the portion recovered from them.

Blocked credit for canteen services attributable to contract workers - Absence of employer-employee relationship - Outward taxable supply of same category - HELD THAT: - The Authority found that contract workers are not employees of the applicant and that no statutory obligation under the Factories Act was shown requiring the applicant to provide canteen facilities to them. The proviso allowing credit for services obligatory under law therefore did not apply. It further held that the applicant is not in the business of supplying food or running a canteen, so the inward catering service was not being used for making an outward taxable supply of the same category. Consequently, the restriction under Section 17(5)(b) continued to operate in respect of the catering services attributable to contract workers. [Paras 15, 18, 20]

Credit attributable to canteen services provided to contract workers was disallowed.

Final Conclusion: The application was answered partly in favour of the applicant. Input tax credit on canteen services was held available only for regular employees and only to the extent of the cost actually borne by the applicant, while credit relatable to contract workers was held inadmissible.

Taxability of post-occupancy transfer of reserved housing flats - Supply of 19 MHADA-reserved flats to MHADA-identified allottees after issuance of the Occupancy Certificate - Works-contract service Or a sale of immovable property outside GST - Non-monetary consideration in the form of additional FSI - Open market value where consideration is not wholly in money

Sale of building vis-a-vis taxable construction service - Works contract service for MHADA-reserved flats - Additional FSI as non-monetary consideration - HELD THAT: - The Authority held that the exclusion available where the entire consideration is received after completion or occupancy certificate was not attracted. Though the monetary consideration from the eventual allottees was to be received only after occupancy certificate, the applicant had, at the plan-approval and commencement stage itself, undertaken a binding obligation to construct and transfer specifically earmarked EWS/LIG flats as a condition for project approval. In return, the applicant received additional FSI, which constituted a valuable non-monetary benefit flowing from another person in respect of and for the inducement of the supply. Since consideration under the GST Act is not confined to cash and includes non-monetary benefits, the Authority held that the entire consideration was not received post-occupancy certificate. Schedule III therefore did not exclude the transaction, and the construction and transfer of the reserved flats remained covered as works contract service under Schedule II. [Paras 5]

The transfer of the 19 MHADA flats was held taxable as works contract service and not excluded from GST as a post-occupancy sale of building.

Valuation where consideration is not wholly in money - Open market value of comparable flats - MHADA-administered price not determinative of GST value - HELD THAT: - The Authority held that Section 15(1) was inapplicable because the price payable by the MHADA allottees was not the sole consideration; the applicant had also received additional FSI as non-monetary consideration. Valuation therefore had to proceed under Rule 27 governing supplies where consideration is not wholly in money. On the facts, the primary rule of open market value was available. The MHADA-prescribed price could not be treated as open market value because it was a controlled and administered price imposed as part of the inclusive housing arrangement and did not reflect an arm's-length transaction where price alone was the consideration. The proper benchmark was the price of comparable flats sold by the applicant to non-MHADA buyers in the same project under normal commercial conditions, with appropriate adjustments for relevant attributes. The contention that the difference between market price and MHADA price represented a government subsidy was rejected, as no subsidy in the statutory sense was received and the additional FSI formed part of the consideration itself. [Paras 5]

GST value was directed to be determined on the open market value of comparable non-MHADA flats in the same project, and not on the administered MHADA price.

Final Conclusion: The Authority held that transfer of the MHADA-reserved flats was not a GST-free post-occupancy sale of building, since the applicant had received additional FSI as non-monetary consideration at the commencement stage under the inclusive housing obligation. The supply was taxable as works contract service, and its value was to be determined on the open market value of comparable flats sold to non-MHADA buyers in the same project, not on the MHADA-administered price.

Condonation of delay in filing returns by co-operative societies claiming deduction - Genuine hardship under CBDT condonation circular - Hyper-technical rejection of condonation applications - Liberal construction of beneficial circular - Rejection of the co-operative societies' applications for condonation of delay in filing returns, despite the CBDT circulars issued to relieve genuine hardship affecting claims for deduction under Chapter VI-A

HELD THAT: - The Court held that the petitioner co-operative societies were undisputedly engaged in activities eligible for deduction and that the difficulty arose after filing of returns within the due date became mandatory. The CBDT circulars were issued precisely to alleviate genuine hardship arising from delay in completion of statutory audit and related circumstances. In that setting, the Chief Commissioners could not construe the circulars narrowly by insisting on a hyper-technical, day-to-day explanation and by treating the matter as if the circular were intended to deny, rather than facilitate, relief.

Having regard to the public-interest role of the co-operative movement, the object underlying the deduction provision, and the absence of any dispute of tax evasion, the delay had to be viewed as a procedural lapse pitted against substantive entitlement. The impugned orders were therefore unsustainable, and the applications for condonation were directed to stand allowed, with consequential directions for pending assessments and appeals to proceed on the footing that the delay in filing the returns stood condoned. [Paras 5]

The impugned orders rejecting condonation were set aside, the condonation applications were treated as allowed, and the concerned assessment and appellate authorities were directed to proceed accordingly.

Final Conclusion: The writ petitions were allowed. The orders rejecting condonation of delay were set aside, the applications for condonation were treated as allowed, and pending or future assessment and appellate proceedings were directed to proceed on that basis, while recording the undertaking of the Registrar to ensure timely future compliance.

Part performance u/s 53A and claim of depreciation - Ownership for depreciation - Alternative remedy in writ jurisdiction - Principles of natural justice in assessment proceedings

Part performance under Section 53A and claim of depreciation - Ownership for depreciation - The assessee could not found its claim to treat the properties as firm assets and claim depreciation merely on the basis of Section 53A of the Transfer of Property Act in the absence of a written and registered instrument of transfer - HELD THAT: - The Court held that Section 53A does not effect transfer of title or ownership and operates only as a limited shield in relation to possession. For claiming any benefit under that provision, a written contract is necessary and, after the statutory change, an unregistered contract has no efficacy for such purpose. In the present case there was no written agreement at all, and Section 32 of the Income-tax Act does not contain a provision analogous to Section 22 treating a person in possession under part performance as owner. On that basis, the assessee's reliance on Section 53A to justify showing the properties as assets and claiming depreciation was rejected, and no fundamental flaw or jurisdictional error was found in the assessment proceedings. [Paras 12, 13, 14]

The challenge based on absence of title transfer was rejected, and the assessment proceedings were held not to suffer from any jurisdictional defect on that ground.

Show-cause notice - Natural justice in reassessment of proposed addition - Shift from unexplained investment to unexplained credit - assessment order was vitiated for want of a further show-cause notice or effective personal hearing - HELD THAT: - The Court found that repeated notices u/s 142(1), followed by the show-cause notice, had already set out the full factual basis under examination, namely the claim of the seven properties as assets, absence of transfer documents, absence of proof of value, and the corresponding entries in the accounts of the legal heirs. The assessee had responded on those aspects and specifically raised its objection that Section 69 could not apply because the entries were recorded in the books. The final treatment under Section 68 was held to be a natural corollary of the same discrepancy considered in the show-cause process, after the authority concluded that the asset entry itself could not be accepted and the corresponding liability shown in the books had to be examined. The Court also held, on the correspondence exchanged, that the proceedings could not be said to have been conducted without effective opportunity, and therefore there was no breach of natural justice. [Paras 16, 17, 18, 19, 20]

The assessment order was held not to be vitiated for want of a fresh notice or personal hearing.

Alternative remedy in writ jurisdiction - Mixed question of fact and law in assessment - determination of Questions whether the amount could be assessed as unexplained credit u/s 68 and whether it was assessable in the hands of the firm or of the partners and creditors - HELD THAT: - The Court held that those contentions went to the core exercise of assessment and involved a mixed question of fact and law. Having rejected the jurisdictional and natural justice challenges, the Court declined to examine the merits under Article 226 because the assessee had an effective statutory remedy of appeal. The Court expressly left those questions open to be agitated before the appellate authority. [Paras 21]

The writ petitions were not entertained on the merits of the assessment, and the assessee was relegated to the appellate remedy.

Final Conclusion: The Court rejected the writ challenge on the grounds of jurisdictional error and breach of natural justice, and held that the remaining objections to the assessment and consequential penalty orders must be pursued before the statutory appellate authority. The writ petitions were disposed of with liberty to file appeal, and, if filed within the time granted by the Court, the appeal was directed to be treated as within time.

Validity of reassessment where proceedings ought to be under section 153C - denial of Cross-examination and principles of natural justice

Addition based on material not confronted to the assessee - Denial of cross-examination in relation to the material used for making the addition - HELD THAT: - The Tribunal held that, in the facts of the case, grant of cross-examination was imperative. Since the Assessing Officer proceeded to make the addition without allowing the assessee the requested opportunity to cross-examine the relevant person and without considering the entire material found in search or survey proceedings, the action amounted to a gross violation of the principles of naturaljustice. On that ground, the addition could not be sustained. [Paras 11]

The addition was held unsustainable for breach of natural justice.

Validity of reassessment where proceedings ought to be under section 153C - Reassessment void ab initio - HELD THAT: - The Tribunal accepted the assessee's contention that, on the facts before it, the assessment should have been made under section 153C and not by resort to reassessment under sections 147 read with 143(3). Proceeding under the reassessment route was therefore treated as legally untenable, and the reassessment order was held to be void ab initio. [Paras 11]

The reassessment proceedings and the consequential assessment order were quashed as void ab initio.

Final Conclusion: The Tribunal condoned the delay, allowed the appeal, and quashed the reassessment. It held that denial of cross-examination violated natural justice and that the assessment, having been framed under sections 147/143(3) instead of section 153C, was void ab initio.

Deduction u/s 80P(2)(d) - interest earned from deposits or investments with co-operative banks or co-operative societies -Meaning of co-operative society for section 80P(2)(d)

HELD THAT: - The Tribunal held that section 80P(2)(d) grants deduction in respect of interest or dividend derived by a co-operative society from its investments with any other co-operative society. Referring to the definition of co-operative society under section 2(19), it held that the expression includes a society registered under the applicable State law and is not restricted by the nature of business carried on by the recipient society. Consequently, interest earned from investments with co-operative societies, including co-operative banks, qualifies for deduction. The Tribunal also noted that the issue stood covered by consistent decisions, and accordingly reversed the denial of the claimed deduction. [Paras 7, 8, 9]

The disallowance of deduction u/s 80P(2)(d) was deleted and the assessee's claim was allowed.

Final Conclusion: The Tribunal allowed the appeal and held that the assessee, being a co-operative housing society, was entitled to deduction under section 80P(2)(d) on interest earned from investments with co-operative banks for the relevant assessment year.

Undisclosed investment in Mutual Fund and Insurance Policies to be deemed income u/s. 69 r.w.s. 115BBE -Estimated addition at normal rate instead of deemed income taxation - Taxability of income and not gross receipts - Estimated addition at normal rate instead of deemed income taxation -

HELD THAT: - The Tribunal found merit in the assessee's contention that documentary material had been furnished during assessment, including balance sheet, capital account, investment statement, agricultural land records and crop sale bills, and therefore the entire investment could not be treated as wholly unexplained. At the same time, since some of the documents were self-serving and inconsistencies remained, full relief was not justified.

Applying the principle that the Act taxes income and not gross receipts, the Tribunal held that the ends of justice would be met by estimating income at 5% of the amount brought to tax, instead of sustaining the whole amount as deemed income chargeable under section 115BBE. [Paras 8, 9]

The addition was restricted to the estimated amount computed at 5% of the impugned investment figure, to be taxed at the normal rate and not under section 115BBE.

Final Conclusion: The Tribunal partly allowed the appeal by holding that the entire investment amount could not be assessed as deemed income. It directed that only an estimated addition at 5% of the impugned amount be made and taxed under the normal provisions, not under section 115BBE.

Unexplained Cash deposits from retail trade turnover - Presumptive income on small trading receipts - Addition of bank deposits as unexplained income

Whether Cash and other deposits in the assessee's bank account, along with bank interest, could not be assessed again as unexplained income where the deposits represented retail trading receipts on which presumptive profit had already been offered to tax? - HELD THAT: - The Tribunal accepted the assessee's case that he was a small trader in agricultural produce and that the cash deposited in the bank account arose from his retail business in mango, chikoo and grapes. It found that the assessee had already offered profit at 5 per cent on such receipts and paid tax thereon, and that, in the circumstances of a small trader not maintaining books, the same bank deposits could not again be brought to tax as unexplained income.

Relying on the principle recognised in CIT v. Pradeep Shantilal Patel [2013 (11) TMI 1646 - GUJARAT HIGH COURT] Tribunal held that once the bank deposits were treated as business turnover and profit thereon had been offered, further addition of the entire deposits was not justified. [Paras 15, 16, 17]

The addition made on account of bank deposits and interest was deleted.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and held that the bank deposits represented business turnover from the assessee's small retail trade, on which presumptive profit had already been offered to tax. The addition sustained by the first appellate authority was therefore deleted and the appeal was allowed.

Penalty u/s 270A(9) - misreporting of income - Estimated addition and penalty immunity - quantum addition for ingenuine purchases made only by estimating the profit element - HELD THAT: - The Tribunal held that the quantum addition had been made on a purely estimated basis by applying a profit rate to the disputed purchases. It treated this as determinative, noting that penalty is not leviable on an estimated addition. The Tribunal further observed that the statutory scheme itself recognises immunity in the case of estimated additions in matters of under-reported income, and held that the same principle continued to apply even though the penalty had been levied by treating the case as one of misreporting of income. On that reasoning, the penalty was held to be unsustainable. [Paras 4]

The penalty levied under section 270A(9) was deleted.

Final Conclusion: The Tribunal allowed the assessee's appeal and held that penalty for misreporting could not be levied where the underlying addition was itself based on estimation of profit element on purchases.

Presumptive taxation of cash deposits treated as business receipts - Estimation of profit from unrecorded business receipts

Profit attributable to cash deposits accepted as arising from the assessee's business activities had to be determined by applying the presumptive rate OR by estimating net profit at a higher rate - HELD THAT: - The Tribunal noted that, in the second round of assessment, the Assessing Officer himself accepted that the cash deposits in the bank account represented business receipts of the assessee. Once the deposits were treated as emanating from business activity, the surviving controversy was confined to the proper rate of profit to be brought to tax.

On that basis, the Tribunal held that the statutory presumptive scheme under section 44AD became applicable and that profit could be taken only at 8% of the cash deposits, instead of the 30% rate adopted by the Assessing Officer. The total income was accordingly directed to be determined on that basis, after taking note of the income already disclosed in the return. [Paras 3]

The addition based on estimation of profit at 30% was reduced, and income was directed to be computed at 8% of the cash deposits treated as business receipts.

Final Conclusion: The Tribunal partly allowed the appeal and held that, since the cash deposits were accepted as business receipts, profit thereon had to be assessed at the presumptive rate of 8% and not at 30%. The remaining grounds were left open as academic.

TP benchmarking of international transactions - Segmental profitability in associated enterprise and non-associated enterprise transactions - Comparability analysis under functional, asset and risk profile - Export turnover filter for transfer pricing comparables

Benchmarking of international transactions - Segmental profitability - Entity level margin - Profitability for transfer pricing purposes to be benchmarked with reference to the assessee's international transactions or at the entity level, since segmental results for associated enterprise and non-associated enterprise transactions were available and the transactions were capable of segregation - HELD THAT: - The Tribunal held that entity-level benchmarking is justified only where the transactions are so intertwined that segregation is not feasible. In the present case, the assessee's assertion that segment reporting under AS-17 was not mandatory remained unrebutted, and the assessee had nevertheless maintained segmental analysis certified by the chartered accountant. In those circumstances, the segmental working could not be discarded merely because it was not audited. The Assessing Officer, therefore, erred in determining profitability at the entity level instead of confining the benchmarking exercise to the international transactions. [Paras 14, 16]

The transfer pricing benchmarking was required to be undertaken on the basis of segmental profitability of the international transactions and not on entity-level margins.

Comparable companies in apparel manufacturing - Functional, asset and risk profile - Export revenue filter - Merger and acquisition as comparability exclusion - Comparable companies selected under external TNMM - HELD THAT: - The Tribunal held that where external TNMM is applied, the selected comparables must have a comparable functional, asset and risk profile. It accepted that retail businesses with retail outlets were not comparable with a wholesale manufacturer-exporter; manufacturers of fabric or yarn were not comparable with a readymade garments manufacturer; a contract manufacturer of socks operating on a different business model and cost structure was not comparable; and leather garment manufacturers were also functionally distinct. The Tribunal further accepted that companies having merger or acquisition during the year could not be taken as comparables. Since the assessee was a 100% export-oriented undertaking with export turnover of about 95% of sales, companies with export revenue below 75% of sales were also not comparable. On that basis, the issue of comparables was set aside to the file of the TPO for fresh adjudication with directions to exclude companies failing the FAR filter and the export revenue filter, and to consider the listed companies including Meenakshi India Ltd. as directed. [Paras 17, 18]

The comparables issue was remanded to the TPO for fresh adjudication after excluding companies failing FAR comparability or having export revenue below 75% of sales, and after considering the specified list including Meenakshi India Ltd.

Tolerance band under arm's length price determination - benefit of the +/- 5% variation under the proviso to section 92C(2) - HELD THAT: - While directing fresh comparability analysis, the Tribunal expressly directed that the assessee be allowed the benefit of the statutory tolerance band provided in the proviso to section 92C(2). [Paras 18]

The TPO was directed to grant the benefit of the +/- 5% variation in determining the arm's length price.

Final Conclusion: The Tribunal held that the transfer pricing benchmarking had to be confined to the assessee's international transactions on the basis of available segmental results, and not at the entity level. The comparables issue was remanded to the TPO for fresh adjudication after applying FAR and export revenue filters, with a further direction to allow the benefit of the +/- 5% variation under the proviso to section 92C(2); the appeal was allowed for statistical purposes.

Unexplained cash deposits in bank account - Ad hoc disallowance of business expenditure

Unexplained cash deposits in bank account - Source of cash deposits through bank withdrawals, family receipts and insurance premium collections - Affidavits and remand examination of deposit sources - HELD THAT: - The Tribunal found that the receipts from family members and insurance clients had been confirmed by sworn affidavits and also in statements recorded on oath during remand proceedings. It further found that the date-wise details of withdrawals and deposits across bank accounts, together with supporting material relating to family partition and agricultural activities, satisfactorily explained the cash deposits. On that evidentiary position, the Tribunal held that the entire deposits stood explained and the addition could not survive. [Paras 9, 10, 11]

The cash deposits were held to be fully explained and the addition was deleted.

Ad hoc disallowance of insurance business expenditure - Business expenditure of LIC agent - disallowance of expenses claimed against insurance commission income - HELD THAT: - The Tribunal noted that the assessee's status as an authorised LIC agent and the earning of commission income were undisputed. It found that the expenditure claimed formed a reasonable proportion of the gross commission receipts and that the resulting net income was consistent with, and in fact better than, the income disclosed in earlier years. In those circumstances, the Tribunal held that the ad hoc disallowance merely for want of bills or vouchers could not be sustained. [Paras 13]

The ad hoc disallowance of expenses against insurance business income was deleted.

Final Conclusion: The Tribunal allowed the appeal. The addition for alleged unexplained cash deposits and the ad hoc disallowance of insurance business expenses were both deleted.

Unexplained cash deposits - Estimation of business income - Applicability of enhanced tax under unexplained income provisions

Unexplained cash deposits - Peak credit verification - Addition on account of cash deposits in bank accounts under unexplained money provisions - HELD THAT: - The Tribunal found that the Assessing Officer had considered only the cash deposits made in one bank account, whereas before the Tribunal the assessee placed factual material relating to three bank accounts, including cash withdrawals and peak credit workings, to explain the source of deposits. In view of these documents and the limited scope of the earlier examination, the matter was restored for de novo adjudication so that the assessee could place all supporting evidence before the Assessing Officer. [Paras 10]

The addition relating to cash deposits was set aside to the Assessing Officer for fresh adjudication in accordance with law.

Estimation of business income - Net profit rate - Examination of books of account - Determination of net profit at 8% of gross receipts - HELD THAT: - The Tribunal held that the profit rate indicated in section 44AD could not be summarily ignored, particularly when the assessee had failed to file the return in time. At the same time, since the tax audit report and audited financial statements showed that books of account and supporting records had been maintained, the Tribunal considered it just to grant one further opportunity to the assessee to produce the books, subsidiary records, bills, vouchers and other evidence before the Assessing Officer. The Assessing Officer was therefore directed to examine the material thoroughly and make a fresh assessment on the determination of business income. [Paras 14]

The issue of estimating business income was restored to the Assessing Officer for fresh examination of the books and supporting evidence.

Applicability of enhanced tax under unexplained income provisions - Prospective operation of enhanced tax rate - The enhanced tax rate under section 115BBE was not applicable to additions made for AY 2017-18. - HELD THAT: - Relying on SMILE Microfinance Limited [2024 (11) TMI 1444 - MADRAS HIGH COURT] Tribunal held that the enhanced rate of tax under section 115BBE could apply only from 01.04.2017, relevant to assessment year 2018-19 onwards, and not to the year under consideration. Consequently, the enhanced rate of 60% could not be applied to the additions for AY 2017-18. [Paras 15]

The assessee's objection to application of the enhanced rate under section 115BBE for AY 2017-18 was accepted.

Final Conclusion: The appeal was allowed for statistical purposes. The additions relating to cash deposits and estimation of business income were remanded to the Assessing Officer for fresh adjudication, while the assessee succeeded on the issue that the enhanced rate under section 115BBE was inapplicable to AY 2017-18.

Capital gains computation on transfer of two industrial units - Fair market value as on 01.04.2001 - Transfer premium paid for transfer of leasehold rights - Substitution of fair market value as on 01.04.2001 as cost of acquisition - Computation of capital gains on sale of two industrial units acquired prior to 01.04.2001 sustained by taxing the entire sale consideration - HELD THAT: - The Tribunal held that the statutory scheme of capital gains under sections 45, 48 and 55 is an integrated code, and what is chargeable is the gain arising from transfer and not the entire gross sale consideration. Since both industrial units had been acquired prior to 01.04.2001, the assessee had a statutory right under section 55(2)(b) to claim substitution of the fair market value as on that date as cost of acquisition.

Once the assessee exercised that option and supported it by valuation reports of a Government Approved Valuer, the authorities were required to examine the claim on merits. The rejection of the reports merely because they became available immediately after completion of assessment was held unjustified, particularly when the assessee had already sought time on the ground that the valuation report was awaited and the reports were filed almost contemporaneously.

Tribunal further held that the auction purchase price of one unit acquired through court receiver proceedings could not, by itself, discredit the later fair market valuation, especially when no defect in valuation methodology, no comparable instance, and no reference to the departmental valuation mechanism had been brought on record. It was also held that the first appellate authority ought not to have confirmed an admittedly excessive computation, and that the claim regarding MIDC transfer premium, being connected with transfer of leasehold rights, also required proper factual examination. The matter was therefore restored to the Assessing Officer to verify the valuation reports, examine the claim for substitution of fair market value as on 01.04.2001 and the claim relating to MIDC transfer premium, and recompute the capital gains in accordance with law after granting due opportunity of hearing. [Paras 14, 15, 16, 17, 18]

The assessment of the entire sale consideration as long-term capital gain was held unsustainable, and the matter was remanded to the Assessing Officer for fresh examination and recomputation of capital gains in accordance with law.

Final Conclusion: The Tribunal held that capital gains could not be computed by bringing the entire sale consideration to tax while ignoring the statutory computation provisions and the assessee's claim to adopt fair market value as on 01.04.2001. The impugned orders were set aside and the matter was restored to the Assessing Officer for fresh adjudication on the valuation claim and the MIDC transfer premium claim; the levy of interest was left to be recomputed consequentially.

Undisclosed interest income - Addition based on seized documents without corroborative evidence - Accrual and receipt of income

Addition on account of alleged interest income from loan advanced to Shri Rajeev Bhale sustained merely on the basis of seized workings showing interest at 24% when actual receipt of such interest was not established - HELD THAT: - The Tribunal held that, although the advance of the loan stood admitted and the seized papers contained a calculation of interest, the determinative requirement was proof that the interest had in fact accrued to and been received by the assessee. The record showed that the borrower was in financial difficulty even in settling the principal amount and that the liability was ultimately adjusted against transfer of another property.

No material was brought on record by the lower authorities to show actual payment of interest to the assessee, and the remand direction requiring verification from the borrower on this aspect was not effectively carried out. In these circumstances, the addition rested only on presumption arising from the seized calculation and not on substantial evidence of real income. [Paras 8]

The addition towards alleged interest income was held to be without merit and was deleted.

Final Conclusion: The Tribunal allowed the appeal and deleted the addition made towards alleged undisclosed interest income. The remaining legal grounds were treated as academic.

Disallowance of expenditure relating to exempt income in absence of any expenditure claim - Mandatory recording of dissatisfaction before invoking the Rule 8D computation mechanism - Capitalized expenditure and presumptive business income as excluding foundation for disallowance

HELD THAT: - The Tribunal held that section 14A proceeds on the existence of expenditure incurred in relation to exempt income and claimed by the assessee while computing taxable income. In the case of one proprietary concern, income was offered under the presumptive scheme u/s 44AD, under which no separate claim of business expenditure survived for examination. In the other concern, the expenditure, including interest and administrative expenses, was capitalised to work-in-progress and was not claimed as revenue deduction.

In these circumstances, there was no identifiable expenditure available for disallowance. Tribunal further held that Rule 8D is only a machinery provision and cannot be applied unless the foundational requirement u/s 14A is first met. It also found that the assessment order did not record the objective dissatisfaction required u/s 14A(2), and the disallowance had been made merely because exempt income and investments existed, which was impermissible. [Paras 11, 12, 13, 14, 15]

The disallowance made u/s 14A read with Rule 8D was directed to be deleted.

Final Conclusion: Tribunal allowed the assessee's appeal and held that section 14A had no application on the facts, since no expenditure relating to exempt income had been claimed as deduction and Rule 8D had been invoked mechanically without the statutory satisfaction.

Low household withdrawals - Outstanding sundry creditors as unexplained cash credits - Disallowance of freight expenditure for non-deduction of tax at source u/s 40(a)(ia)

Low household withdrawals - Estimated household expenses - Addition on account of low household withdrawals sustained where the assessee showed substantially lower withdrawals than in the immediately preceding year and failed to substantiate the claim that household expenses were borne by the spouse - HELD THAT: - The Tribunal noted that the assessee had disclosed household withdrawals far below those shown in the preceding year and that the explanation that household expenses were met by the spouse remained unsupported by any documentary evidence. Since these factual findings remained uncontroverted, the withdrawals were rightly treated as unreasonably low and the estimation adopted by the Revenue authorities was upheld. [Paras 6, 7]

The addition for low household withdrawals was confirmed and the ground was dismissed.

Addition u/s 68 - Outstanding sundry creditors as unexplained cash credits - Year-end creditor balances - Outstanding balances of trade and expense creditors added as unexplained cash credits merely because they remained payable at year end - HELD THAT: - The Tribunal held that the Revenue's approach was internally inconsistent, because the Assessing Officer had not treated the entire credits arising from the transactions as unexplained, but only the balances outstanding at the end of the year, without assigning any reason for accepting the repaid portion as genuine and rejecting the unpaid portion. The assessee had also demonstrated payment of the entire outstanding balances in the succeeding year through banking transactions, and that fact remained uncontroverted. On these facts, the year-end creditor balances could not be treated as unexplained credits u/s 68. [Paras 11, 12]

The addition in respect of the outstanding creditors was held unsustainable in law and was deleted.

Disallowance of freight expenditure for non-deduction of tax at source - Incomplete declaration u/s 194C(6) - HELD THAT: - The Tribunal recorded that the assessee did not controvert the finding that tax had not been deducted on the freight payments. It further accepted the finding of the Revenue authorities that the declarations said to have been furnished by the transporters were incomplete, lacking material particulars such as place, date, period and addressee, and therefore appeared to be an afterthought. In these circumstances, disallowance of the prescribed portion of the freight expenditure u/s 40(a)(ia) was held to be warranted. [Paras 17, 18]

The disallowance of freight expenditure for failure to deduct tax at source was confirmed and the ground was dismissed.

Final Conclusion: The appeal was partly allowed. The addition for low household withdrawals and the disallowance of freight expenditure for non-deduction of tax at source were sustained, while the addition in respect of outstanding sundry creditors was deleted.

Maintainability of appeal against order granting review - Bar on appeal from review order - Explanation to Order 47 Rule 1 of the Code of Civil Procedure, 1908 - Review jurisdiction and condonation of delay - Binding effect of earlier coordinate and larger Bench decisions.

Restoration of appeal pursuant to review of binding precedent - Liberty reserved in original order to seek review - HELD THAT: - The Court held that the earlier appellate order had itself expressly reserved liberty to the Union of India to seek appropriate remedy, including review before the Tribunal, if the Supreme Court reviewed its judgment in Ganpati Dealcom Private Limited [2024 (10) TMI 1120 - SC ORDER (LB)] Once the Supreme Court recalled that judgment, the Tribunal, in allowing the review application and restoring the appeals, merely acted in terms of that liberty and followed the Supreme Court's order. In that situation, the appellants could not assail the restoration by raising objections to review power or limitation against an order passed in consequence of the very liberty contained in the original order. [Paras 7, 8]

No interference was warranted with the Tribunal's order restoring the appeals.

Maintainability of appeal against order granting review - Bar on appeal from review order - HELD THAT: - The Court held that though appeals may lie under Section 49 against a judgment or order of the Appellate Tribunal, an order passed in review which results in revival and pendency of the appeal is not a final decision of the appeal itself. Since the Appellate Tribunal is treated as a civil court and exercises powers akin to those of a civil court, the Code of Civil Procedure applies by virtue of Section 40(5). Consequently, the bar contained in Order 47 Rule 7 CPC operated against an appeal from an order granting review. The determinative principle applied was that a review order restoring the main appeal is interlocutory in character and is not independently appealable. [Paras 9, 10]

The appeals were held to be not maintainable and were dismissed.

Final Conclusion: The High Court declined to interfere with the Tribunal's restoration of the appeals, holding that the Tribunal had acted in consequence of the Supreme Court's review order and the liberty reserved in the earlier order. It further held that an appeal against such an order granting review and restoring the appeals was not maintainable.

Confirmation of provisional attachment - Purchase of the land and the motor vehicle - benami transaction within the meaning of Section 2(9)(A) - Money trail and source of consideration - Benamidar's admission - HELD THAT: - The Tribunal held that the determinative factor was the money trail showing that the motor vehicle was purchased out of compensation received for land which had originally been acquired in the name of the benamidar with funds provided by the beneficial owner. It relied on the admitted employment relationship between the benamidar and the alleged beneficial owner, the benamidar's sworn statement admitting that the land had been purchased in his name by the beneficial owner, the absence of any disclosed or proved independent source with the benamidar to purchase the land, and the recovery of the vehicle registration document from the beneficial owner. On these facts, the plea that the vehicle was purchased from the benamidar's own funds was rejected, since the compensation amount itself flowed from property found to have been acquired benami. [Paras 7, 8, 9]

The provisional attachment as confirmed by the Adjudicating Authority was upheld and the challenge to the benami character of the vehicle failed.

Final Conclusion: The Tribunal found no ground to interfere with the order confirming provisional attachment. Holding that the vehicle was traceable to compensation arising from land earlier purchased benami in the appellant's name, the appeals were dismissed.

SEZ unit exceeded the prescribed procurement limit under the approved Bond cum Legal Undertaking and Letter of Approval - Mandatory compliance with statement-evidence procedure - Relevancy of statements under section 138B - Burden of proof - Substantive manufacture - Conjecture and surmise - Evidentiary value of electronic records - Joint and several liability - Duty-free import diversion - Penalty for alleged customs duty evasion

Whether Bharti Gems had exceeded the prescribed limit of procurement under the Letter of Approval issued by the competent authority ? - HELD THAT: - The Tribunal held that the Commissioner proceeded only on the earlier Bond-cum-Legal Undertaking and ignored the subsequent Bond-cum-Legal Undertaking submitted by the unit and accepted by the competent authority. Once the competent authority had granted acceptance, the SEZ unit was entitled to act upon it, and activities undertaken on that basis could not later be treated as illegal or unauthorised merely because the document had been signed by an authorised signatory and not by the proprietor. There was also no finding that, even after taking the later Bond-cum-Legal Undertaking into account, the unit had exceeded the permissible procurement limit. [Paras 22]

The finding of excess procurement was set aside.

Relevancy of statements under section 138B - SEZ manufacture of jewellery - Duty-free import diversion - NSDL data as sole basis - Manufacture and manufacturing services - HELD THAT: - The Tribunal held that statements recorded under section 108 of the Customs Act could not be relied upon unless the procedure under section 138B was followed, namely examination of the maker before the adjudicating authority and a decision on admissibility; on that basis such statements could not form the foundation of the adverse finding. The Tribunal further held that absence of chain-making machinery could not by itself establish absence of manufacture, particularly when the unit had consistently stated that it was engaged in hand-made jewellery and no expert opinion had been obtained to dislodge that position. Reliance placed solely on NSDL system data regarding alloy procurement was also held unjustified, since the unit had produced contemporaneous business records relating to procurement, consumption and manufacture, and those records could not be ignored without good reason. The Commissioner was also held to have wrongly shifted the burden onto the unit by reasoning that, because export consignments were not examined, the unit must have exported other goods in the guise of jewellery; examination of export goods was for the officers, and non-examination could not support an allegation of diversion. The Tribunal additionally held that the distinction drawn between 'manufacture' and 'manufacturing services' was artificial, since the SEZ regime did not prohibit procurement of raw material free of cost from overseas entities, nor did such procurement render the manufacturing activity unauthorised. [Paras 33, 35, 37, 40, 42]

The findings of non-manufacture, export of other goods in the guise of jewellery, and diversion of duty-free imports to the domestic tariff area were set aside.

Joint and several liability for customs duty - Penalty for alleged customs duty evasion - Penalty on employees - HELD THAT: - The Tribunal held that, since the allegation of diversion of duty-free imported goods and evasion of customs duty was not established, the basis for fastening joint and several duty liability on the entities disappeared. For the same reason, penalties imposed on the entities under sections 112(b)(ii) and 114A, and on the employees under sections 112(b)(ii) and 114AA, were unsustainable, as those penalties rested entirely on the finding of evasion and participation in it. [Paras 47, 49]

The joint and several duty demand and all penalties imposed on the entities and employees were set aside.

Final Conclusion: The Tribunal held that the impugned order was founded on untenable findings regarding excess procurement, absence of manufacture, and diversion of duty-free imported goods. Consequently, the duty demand, confiscation-related consequences challenged in these appeals, and all penalties imposed on the entities and employees were set aside, and the appeals were allowed.

Revocation proceedings - Customs Broker licence - Denial of cross-examination and violation of principles of natural justice - Violations of Regulations 10(n) and 10(j) - allegation relating to deletion of WhatsApp chats - KYC verification obligations of Customs Broker - assumptions and presumptions without any independent evidence -Proportionality of licence revocation - forfeiture of security deposit.

Whether the revocation proceedings are vitiated due to denial of cross-examination and violation of principles of natural justice ?- HELD THAT: - The Tribunal held that proceedings for revocation of a Customs Broker licence have serious civil and commercial consequences and therefore require strict observance of procedural fairness. Since the findings were substantially based on the statement of the G-card holder and on verification reports and investigative conclusions regarding the alleged non-existence of the importer, the appellant was entitled to test that adverse material by cross-examination. The request was repeatedly made but rejected without cogent reasons, and the adjudicating authority substantially adopted the investigation record without independent evaluation of the defence. Applying the principle recognised in Thilagarathinam Match Works [2019 (1) TMI 619 - MADRAS HIGH COURT] and Andaman Timber Industries [2015 (10) TMI 442 - SUPREME COURT], the Tribunal held that the denial caused prejudice and rendered the proceedings materially infirm. [Paras 18, 19, 20, 21, 22]

The revocation proceedings were held to be vitiated for violation of principles of natural justice.

Whether the appellant violated Regulations 10(n) and 10(j) of the CBLR, 2018 and, if so, whether the punishment of revocation, forfeiture of security deposit and penalty is legally sustainable and proportionate ? - HELD THAT: - The Tribunal held that Regulation 10(n) requires verification through reliable, independent and authentic documents, data or information, and does not mandate compulsory physical verification of every importer's premises or continuous surveillance over the importer's subsequent business activity. As the appellant had verified IEC, GST registration, PAN, Aadhaar, Udyam registration and other KYC credentials through official sources, there was substantial compliance, absent material showing conscious knowledge, collusion or deliberate disregard of suspicious circumstances. The subsequent non-traceability of the importer at the declared address could not, by itself, establish breach by the Customs Broker. The allegation under Regulation 10(j) based on deletion of WhatsApp chats was also found speculative, there being no cogent evidence of wilful concealment, removal or destruction of records. The Tribunal further found no evidence of deliberate connivance, conscious facilitation, pecuniary gain or active involvement by the appellant, and noted that even the department had required repeated testing to identify the imported goods, which undermined the allegation of prior knowledge. On that evidentiary position, and applying the doctrine of proportionality recognised in Om Kumar v. Union of India [2000 (11) TMI 1215 - SUPREME COURT], the extreme penalty of revocation could not be sustained. [Paras 39, 40, 41, 42, 43]

The Tribunal held that Regulation 10(n) had been substantially complied with, the charge under Regulation 10(j) was unsupported, no grave misconduct was proved, and the revocation, forfeiture and penalty were liable to be set aside.

Final Conclusion: The Tribunal set aside the revocation order in its entirety. It held that the proceedings were vitiated by denial of effective cross-examination, that substantial KYC compliance under Regulation 10(n) had been shown, that the charge under Regulation 10(j) was unsupported, and that the extreme punishment of revocation, forfeiture and penalty was legally unsustainable.

Rejection of the declared transaction value and enhancement of value - confiscation of the imported goods under Sections 111(d) and 111(m) -Transaction value of imported used garments - Contemporaneous import valuation - Confiscation of restricted second-hand clothing without licence - Proportionality of redemption fine and penalty.

Whether the rejection of the declared transaction value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and the consequential re-determination of value under Rule 5 of the said Rules are legally sustainable ? - HELD THAT: - The Tribunal held that mere acceptance of enhanced value at the time of clearance does not bar the importer from challenging such enhancement. On merits, the declared value could not be rejected merely because it appeared lower than certain other imports. For application of contemporaneous import data, the Department had to establish comparability in terms of quality, condition, quantity and commercial level and also show reliable material for rejecting the declared price. Since the goods were mixed lots of used garments varying in quality and composition, and no detailed comparative material, evidence of additional consideration, or market-based material was produced, rejection of the transaction value under Rule 12 and redetermination under Rule 5 were contrary to the valuation scheme. [Paras 8]

The declared value was directed to be accepted and the enhancement of value was set aside.

Whether the confiscation of the imported goods under Sections 111(d) and 111(m) of the Customs Act, 1962 is legally sustainable ? - HELD THAT: - The Tribunal found that the procedural circular regarding fumigation and allied compliance did not override the substantive requirement under the Foreign Trade Policy that import of second-hand goods, other than capital goods, is restricted and requires a licence. As no such licence had been produced, the goods were liable to confiscation as goods imported in violation of import policy. At the same time, since there was no evidence of misdeclaration as to description, quantity or value, confiscation on the ground of misdeclaration could not be sustained. [Paras 9]

Confiscation was upheld under Section 111(d) alone, while confiscation under Section 111(m) was set aside.

Whether the redemption fine imposed under Section 125 and the penalties imposed under Section 112 of the Customs Act are sustainable and proportionate ? - HELD THAT: - The Tribunal treated the absence of deliberate misdeclaration, suppression and fraudulent intent as a material mitigating factor. It also noted that the goods were low-value used clothing, that the trade was heterogeneous and price-sensitive, and that there was no market survey or other material showing the prevailing market value or margin of profit. On that basis, the Tribunal held that redemption fine must bear a reasonable nexus to probable profit and should not assume a punitive character. Even though mens rea was absent, import of restricted goods without licence remained a statutory contravention warranting penalty at a moderate level. [Paras 10]

Redemption fine was reduced to 10% of the declared invoice value and penalty was sustained at 5% of the declared value.

Final Conclusion: The Tribunal held that the declared transaction value of the imported used garments could not be rejected for want of reliable comparative evidence and restored the declared value. Confiscation was sustained only for import of restricted second-hand garments without licence, while the redemption fine and penalty were reduced to moderate and proportionate levels.

Entitlement to concessional CVD under Clause 1C of Notification No. 04/2006-CE when the goods were intended for industrial and institutional consumers and not for retail sale - imported cement sold to industrial and institutional consumers - Rejection of declared RSP and substitution of contemporaneous RSP for reassessment and enhancement of duty - Extended limitation for differential duty on assessed Bills of Entry - Suppression of facts - Wilful misstatement - Valuation under customs law.

Concessional CVD on imported cement sold to industrial and institutional consumers - Packaged cement not intended for retail sale - HELD THAT: - The Tribunal held that the determinative test under the notification was not mere packing or printing of RSP, but whether the goods were intended for retail sale. The record showed consistent assertion that the imported cement was supplied only in wholesale to industrial and institutional consumers engaged in construction activity and manufacture of hollow blocks, and the department had not produced any evidence of even a single retail sale. The lower authorities erred in treating import in 50 kg bags with printed RSP as automatically excluding the benefit under Clause 1C. The Tribunal also rejected the view that high seas sale imports were by themselves outside the notification, since neither the notification nor the Customs Act imposed any condition that the cement had to be purchased directly from the manufacturer for availing the benefit. [Paras 8, 9, 13, 14, 16]

Benefit of Clause 1C was held available, and denial of concessional CVD merely on the basis of packaging and printed RSP was unsustainable.

Rejection of declared RSP and substitution of contemporaneous RSP - Valuation basis for enhancing CVD liability - HELD THAT: - The Tribunal found that the dispute was throughout confined to the applicability of the exemption notification and not to rejection of the transaction value or assessable value under Section 14. No proper valuation exercise had been undertaken in accordance with the statutory valuation provisions, and the department's exercise was only a notional substitution of declared RSP for increasing CVD liability. The appellate order had substantially expanded the valuation basis beyond the show cause notice and the original order, while no material was produced to establish comparability of imports, parity in trade level or quantity, or any retail market enquiry supporting adoption of another importer's RSP. In the absence of a legally sustainable valuation exercise, rejection of the declared RSP and reassessment on that basis could not be upheld. [Paras 10, 11, 16]

The reassessment founded on substituted contemporaneous RSP was set aside as unsupported by the notification and the valuation provisions.

Extended limitation for differential duty on assessed Bills of Entry - Penalty for alleged suppression in assessed imports - HELD THAT: - The Tribunal noted that the imports were made prior to the introduction of self-assessment and the Bills of Entry had been assessed by the proper officers after scrutiny of the declarations and accompanying documents. The department was thus aware of the nature of the imports, including import of cement in 50 kg bags with printed RSP, and had consciously extended concessional assessment. In those circumstances, the allegation of suppression lacked factual foundation. Since no cogent evidence of wilful suppression, misstatement or deliberate concealment was shown, invocation of the extended period failed, and with it the differential duty demand, interest and penalty under Section 114A also could not survive. [Paras 12, 15, 16]

The demand was held barred by limitation, and the consequential interest and penalty were also liable to be set aside.

Final Conclusion: The Tribunal held that the appellant was entitled to concessional assessment under Clause 1C of Notification No.04/2006-CE, and that denial of the benefit on the basis of packaging, printed RSP, and substituted contemporaneous RSP was unsustainable. The extended period having also failed, the differential duty demand, interest and penalty were set aside and the appeal was allowed.

Rejection of SAD refund on the ground of absence or improper wording of endorsement in certain reconstructed sales invoices - Benefit of Notification No. 102/2007-Cus. - payment of SAD and subsequent VAT-paid sales stood established and the original records had been misplaced by the department - Procedural endorsement in sales invoices - Departmental loss of original records - Entitlement to consequential interest on the refunded amount.

SAD refund under Notification No.102/2007-Cus. - Procedural endorsement in sales invoices - Substantial compliance - Departmental loss of original records - HELD THAT: - The Tribunal held that, once the original adjudicating authority had itself recorded verification of the invoices, the department could not later draw an adverse inference regarding those very documents after admitting loss of the original refund files. The appellant had reconstructed the record at the department's instance and had also accepted proportionate exclusion wherever endorsement omission was admitted in some office copies. Applying the Larger Bench ruling in Chowgule & Co. Pvt. Ltd.[2014 (8) TMI 214 - CESTAT MUMBAI (LB)] and the consistent line of decisions noticed in the order, the Tribunal held that the endorsement requirement under Notification No.102/2007-Cus. is procedural and cannot defeat substantive refund entitlement when payment of SAD, subsequent sale of imported goods and discharge of VAT/Sales Tax are otherwise proved. The endorsement made by the appellant substantially conveyed non-admissibility of credit, and in any event there was no allegation of actual availment of inadmissible credit by buyers. Since the evidentiary difficulty arose from the department's own misplacement of records, the refund claim could not be denied on that basis. [Paras 19, 20, 21, 22, 24]

The refund claims were held admissible in accordance with law, subject to proportionate exclusion relatable to invoices where endorsement omission had been admittedly accepted by the appellant.

Statutory interest on delayed refund - Consequential interest under Section 27A - HELD THAT: - The Tribunal found that the refund claims had remained pending for years despite early filing, and that the delay was prolonged by repeated adjudication, remand proceedings and admitted loss of records by the department. As the refund itself was found allowable and the appellant could not be made to suffer for departmental lapses or retention of refundable amounts, consequential statutory interest under Section 27A of the Customs Act, 1962 was held payable in accordance with law. [Paras 23, 24]

The appellant was held entitled to applicable statutory interest along with the refundable amount.

Final Conclusion: The Tribunal held that SAD refund under Notification No.102/2007-Cus. could not be denied on the basis of procedural defects in reconstructed invoice copies, particularly when the original records had been misplaced by the department and the substantive conditions for refund stood established. The appeal was allowed, with refund to be granted after proportionate exclusion, if any, for the admitted invoices and with consequential statutory interest.

Revocation of Customs Broker licence - forfeiture of the security deposit - Procedural lapse in appointment of qualified person - failure to have a duly qualified and approved person under the customs broker licensing regime -Proportionality of punishment - HELD THAT: - The Tribunal held that the real question was whether the alleged non-availability of acknowledged intimation regarding appointment of a qualified person constituted such a grave breach as to warrant the extreme consequence of revocation. Mere absence of departmental acknowledgment was not treated as conclusive proof of non-intimation, particularly when the appellant had consistently asserted that intimation had been given. The Department had produced no positive evidence of deliberate non-compliance, and its case rested only on absence of record. The Tribunal further noted that the partner, being a G-card holder, had signed the documents, and there was no allegation of misdeclaration, fraud or revenue loss in any transaction. The decision in Shipping & Travel (Agents) Pvt. Ltd. v. Commissioner of Customs, Mumbai [1999 (8) TMI 392 - CEGAT, MUMBAI] was distinguished because that case involved complete absence of any qualified person and conscious nondisclosure, whereas the present matter involved, at best, lack of documentary acknowledgment and irregularity in compliance. Applying the principle that punishment must be proportionate, as noticed in Kunal Travels (Cargo) v. Commissioner of Customs [2017 (3) TMI 1494 - DELHI HIGH COURT] and Commissioner of Customs v. Worldwide Cargo Movers [2006 (11) TMI 281 - BOMBAY HIGH COURT], the Tribunal found revocation and forfeiture disproportionate, but sustained the penalty since there was lack of due diligence in maintaining proper documentation and compliance. [Paras 21, 22, 23, 24, 25]

Revocation of licence and forfeiture of security deposit were set aside, but the penalty was upheld as justified for the procedural lapse and want of due diligence.

Final Conclusion: The appeal was partly allowed. The Tribunal held that the alleged breach relating to appointment and intimation of a qualified person was procedural and did not justify revocation of the Customs Broker licence or forfeiture of security deposit, though the penalty was maintained for lack of due diligence in regulatory compliance.

Rejection of the Certificate of Origin and unilateral recomputation of Local Value-Added Content - Verification of origin criteria - Duty demand - Extended period and customs penalty - Wilful suppression, wilful misstatement, or intent to evade duty.

Whether the Department is justified in rejecting the Certificate of Origin and recomputing Local Value Added Content (LVAC) in exported goods and whether such verification burden lies on the importer ? -HELD THAT: - The Tribunal held that the Interim Rules of Origin prescribe a specific statutory formula for computing Local Value Added Content with reference to the FOB value of the export product and the CIF value of non-originating materials, and that the concept cannot be reduced only to labour and handling charges. By adopting an alternate method and without determining the value of non-originating materials in the manner required by the Rules, the Department impermissibly substituted the statutory formula. The Certificate of Origin issued by the designated authority of the exporting country formed part of the statutory scheme and could not be disregarded without resort to the prescribed verification mechanism through that authority. Since no such verification was undertaken, and the importer was only required to produce the Certificate of Origin and could not be expected to verify the foreign supplier's internal cost structure, the rejection of the certificate and unilateral recomputation of value addition were contrary to law. [Paras 9]

The Certificate of Origin could not be rejected and Local Value Added Content could not be recomputed by the Department through an alternate methodology; the exemption claim was therefore maintainable.

Whether the demand of duty, invocation of extended period and penalties are sustainable in the facts and circumstances of the case ? - HELD THAT: - Once denial of exemption failed, the duty demand could not survive. The Tribunal further held that the extended period was unavailable because the importer had disclosed all relevant documents, including the Certificates of Origin, at the time of import and those documents had been accepted by Customs; there was no material showing wilful suppression, misstatement, collusion, forgery or manipulation. The case was treated at best as one of difference in interpretation or methodology. For the same reason, the statutory conditions for penalty under Sections 114A and 114AA were absent, since there was no evidence that the importer had knowingly or intentionally used any false or incorrect document or acted with intent to evade duty. [Paras 10]

The demand, the invocation of the extended period, and the penalties were set aside as lacking the necessary factual and legal basis.

Final Conclusion: The Tribunal held that the Department could not deny preferential exemption by discarding the Certificate of Origin and recomputing Local Value Added Content through a method contrary to the Interim Rules of Origin and without invoking the prescribed verification mechanism. Consequently, the duty demand, extended limitation, and penalties were set aside and the appeal was allowed.

Customs Broker obligations of due diligence, supervision and verification - Forfeiture of security deposit without revocation of licence - Violations of Regulations 11(a), 11(b), 11(n) and 17(9) - Revocation of suspension of Customs Broker licence.

Whether the findings regarding violation of Regulations 11(a), 11(b), 11(n) and 17(9) of CBLR, 2013, are sustainable on the basis of the materials and evidence on record? - HELD THAT: - The Tribunal held that the disciplinary proceedings turned on compliance with the Customs Broker's obligations of due diligence, supervision and verification, and not on proof of participation in the alleged drawback fraud itself. The statements recorded during investigation and the surrounding circumstances showed that the Delhi customs clearance operations were substantially conducted through intermediaries, without effective supervision by the licence holder, and that the exporters' credentials and antecedents were not adequately verified. These materials were sufficient to establish lapses under the licensing regulations. At the same time, the record did not conclusively prove deliberate collusion, sharing of drawback, receipt of illegal gratification or conscious participation in the fraudulent export scheme; accordingly, the case was treated as one of serious supervisory and verification failures rather than deliberate fraud. [Paras 10, 11, 12, 13, 18]

The findings of violation under Regulations 11(a), 11(b), 11(n) and 17(9) were upheld.

Whether forfeiture of security deposit without revocation of licence under Regulation 20(7) of CBLR, 2013 warrants interference at the instance of either the Customs Broker or the department? - HELD THAT: - The Tribunal accepted the principle stated in Commissioner of Customs, Chennai-VIII v. Trishiv Logistics Pvt. Ltd. [2019 (4) TMI 1049 - CESTAT CHENNAI] that the adjudicating authority has discretion under the regulatory scheme to choose an appropriate consequence depending on the gravity of the established violations. Since the evidence proved supervisory and verification lapses but did not conclusively establish deliberate collusion or conscious involvement in the alleged fraud, the decision to impose the lesser consequence of forfeiture of security deposit, instead of revocation of licence, was neither arbitrary nor disproportionate. The Tribunal further held that mere pendency of the DRI investigation could not justify indefinite continuation of suspension in the absence of conclusive material showing active involvement of the Customs Broker. [Paras 14, 15, 16, 17, 18]

The Customs Broker's appeal against forfeiture was dismissed, and the departmental appeals seeking restoration of suspension and revocation of licence were also dismissed.

Final Conclusion: The Tribunal upheld the findings that the Customs Broker had committed serious lapses in supervision, due diligence and verification, but found no conclusive proof of deliberate collusion in the alleged fraudulent exports. It therefore sustained forfeiture of the security deposit without revocation of licence, upheld revocation of suspension, and dismissed all three appeals.

Rejection of the SAD refund claims under Notification No. 102/2007-Cus. - Substantial compliance with refund conditions - Prior remand and reconstruction of records - Jurisdictional objection and insistence on original documents - Unjust enrichment -Procedural defects vis-a-vis substantive entitlement - Interest on delayed customs refund.

SAD refund under Notification No. 102/2007-Cus. - Substantial compliance - Non-production of original documents - Invoice endorsement requirement - HELD THAT: - The Tribunal held that the earlier jurisdictional objection had already been concluded in the appellant's own case and, after remand, the authorities were bound to examine only eligibility on merits. It found from the departmental acknowledgments and record that the original refund claims had been filed with the prescribed primary documents and that the subsequent absence of originals was attributable to loss or non-traceability of departmental records, for which the claimant could not be prejudiced. On merits, the Tribunal found that payment of SAD at the time of import, subsequent sale on payment of VAT/CST, and non-availment or non-passing on of credit were established through copies of Bills of Entry, VAT records, Chartered Accountant certificates, reconciliation statements, indemnity bonds and the verification furnished by the Specified Officer of the SEZ. Applying the principle that procedural requirements cannot defeat substantive entitlement, it held that absence of invoice endorsement, objections regarding invoice-cum-challan format, and insistence on originals were only procedural or hypertechnical defects and could not justify rejection of the refund claim where the substantive conditions of paragraph 2(a), 2(b), 2(d) and 2(e) of the notification stood satisfied. The Tribunal, however, confined the admissible refund to the amount that had actually formed part of the impugned proceedings, as the additional claim was unsupported by documents and had not been adjudicated. [Paras 6, 7]

The appellant was held entitled to refund of SAD to the extent of the claim actually adjudicated, and rejection of the claim on jurisdictional and procedural grounds was held unsustainable.

Interest on delayed customs refund - Statutory interest under Section 27A - HELD THAT: - The Tribunal accepted the claim for interest, noting that the governing customs provisions applied to such refund proceedings and that the claimant could not be made to suffer for administrative uncertainty regarding the competent authority. Relying on the principle recognised in Devharsh Infotech Private Limited v. Union of India [2021 (2) TMI 567 - GUJARAT HIGH COURT], it held that once the refund claim is found admissible, it must be paid with applicable interest. Since Section 27A of the Customs Act provides for interest where refund is not sanctioned within the prescribed period, the appellant was held entitled to statutory interest on the admissible refund amount in accordance with law. [Paras 6]

The admissible refund was directed to be paid together with applicable interest under Section 27A of the Customs Act.

Final Conclusion: The Tribunal held that the appellant had satisfied the substantive conditions for refund under Notification No. 102/2007-Cus. and that the claim could not be defeated by jurisdictional objections, loss of original records by the department, or other procedural deficiencies. The appeal was allowed with a direction to grant the adjudicated refund amount together with applicable statutory interest.

Imposition of penalty under Section 112(a) - Abetment of improper importation - uncorroborated and retracted statement - Penalty under Section 114AAfor fraudulent exports - exports take place only on paper and no physical exports take place.

Abetment of improper importation - Penalty under Section 112(a) - Uncorroborated retracted statement -HELD THAT: - The Tribunal held that abetment necessarily postulates the existence of at least two persons, namely the actual committer and the abettor. In a case of alleged improper importation, the importer would be the committer. Since the record did not establish who the actual importer was, and it was not the Revenue's case that either appellant was the importer, the charge of abetment could not stand. The Tribunal also found that the investigation had not pursued the crucial lead arising from the phone number appearing in the shipping documents, and the case rested substantially on an uncorroborated statement that had been retracted at the earliest opportunity. In these circumstances, penalty under Section 112(a) was held to be unsustainable. [Paras 13, 14]

Penalty imposed on the appellants under Section 112(a) was set aside.

Penalty for fraudulent exports - Inapplicability to imports - Penalty under Section 114AA - HELD THAT: - The Tribunal held that Section 114AA was introduced to deal with fraudulent exports effected only on paper without any actual physical export. On that construction, the provision is confined to such export-related fraud and is not invokable in the case of imports. The penalty imposed on the appellants under that provision was therefore without authority. [Paras 15]

Penalty imposed under Section 114AA was set aside.

Final Conclusion: The Tribunal set aside the penalties imposed on both appellants. It held that the charge of abetment under Section 112(a) failed in the absence of any established actual importer, and that Section 114AA had no application to imports.

Maintainability of advance ruling application -barred under section 28-I(2) - Same question already decided - Trade facilitation​​​​​​​ -Binding nature of judicial precedent on advance ruling authority - Scope of advance ruling jurisdiction.

Advance ruling maintainability - Questions already decided by Court - Judicial discipline - HELD THAT: - It is a settled principle of law that rulings of the Tribunal and Courts are binding on subordinate authorities. The CAAR, being a statutory authority under the Customs Act, is equally bound by such precedents. To allow fresh application on questions already adjudicated by higher judicial fora would risk the creation of conflicting rulings and introduce uncertainty, an outcome contrary to the very object of the advance ruling mechanism. Clause (b) therefore operates as a statutory reinforcement of judicial discipline, making it explicit that once a question has been conclusively determined by the Tribunal or Courts, the Authority cannot re-adjudicate the same issue at the behest of another party.

The Authority held that the scheme of advance rulings does not permit it to entertain a question already concluded by a Court, since subordinate statutory authorities are bound to follow higher judicial pronouncements. Treating clause (b) of the proviso to Section 28-I(2) as a reflection of judicial discipline, it found that the classification issue raised by the applicant stood squarely covered by the Madras High Court decision in M/s Shahnaz International Pvt. Ltd.[2023 (8) TMI 492 - MADRAS HIGH COURT]. On that basis, it declined to pronounce any ruling on the classification question. [Paras 5, 6]

The application was held not admissible on the classification question because that issue had already been decided by a Court.

Scope of advance ruling authority - Partial rejection of application - HELD THAT: - The Authority further recorded that certain questions raised in the application were outside the purview of the Customs Authority for Advance Rulings under the applicable regulations. It then held that the statutory scheme did not contemplate partial rejection of an application. Since no ruling could be pronounced on the classification issue and some of the remaining questions were beyond its scope, the application was rejected in toto. [Paras 5, 6]

The application was rejected in its entirety, the Authority holding that partial rejection was not envisaged under the statutory scheme.

Final Conclusion: The Authority declined to entertain the application, holding that the classification question stood concluded by a High Court decision and that certain other questions lay beyond the scope of advance ruling jurisdiction. As the statutory scheme did not permit partial rejection, the application was rejected in toto.

Maintainability of departmental appeal under Section 37A(5) - Reason to believe - foreign security situated outside India - Subscription to shares and subsequent transfer by gift of the foreign company's equity - Foreign security in contravention of Section 4 - Equivalent value seizure - legality of the Order of Seizure - Denial of the Appellant an opportunity to counter the issues raised by the Respondents - infringement of the principles of natural justice.

Maintainability of departmental appeal under Section 37A(5) - Harmonious construction of statutory provisions - HELD THAT: - The Tribunal held that Section 37A could not be read in isolated sub-sections so as to confer hearing rights on the Directorate of Enforcement before the Competent Authority and yet deny it any right to challenge the resulting order. The provision had to be construed harmoniously as a whole to avoid defeating its purpose and offending principles of natural justice. This view was reinforced by the express direction of the Supreme Court requiring the Tribunal to decide the departmental appeal under Section 37A(5). [Paras 23, 24]

The preliminary objection to maintainability was rejected and the appeal was held to be competent.

Foreign security - Subscription to memorandum of association as direct investment outside India - Holding and transfer of unpaid shares - HELD THAT: - On examining the financial statements and notes of the Singapore company, the Tribunal found that the company had issued ordinary shares classified as equity, that the share capital stood reflected at SGD 10,000,000, and that the shares carried an ascribed value of SGD 1 each. Even without returning a final finding on whether the consideration had actually been paid, the Tribunal held that the shares could not be treated as valueless paper, since the allotment and subscription conferred rights and entitlements and were in fact transferred by gift or for stated consideration. Referring to Regulation 2(e) of the Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004, the Tribunal held that subscription to the memorandum of association of a foreign entity itself amounts to direct investment outside India and is to be treated on par with purchase of existing shares of a foreign entity. It therefore held that the Competent Authority erred in proceeding on the basis that only paid-up shares could amount to foreign security, since Section 4 does not make payment a condition for acquisition, holding, ownership, possession or transfer. On the admitted facts and supporting documents, the respondents had acquired, held and transferred the shares, and the Authorised Officer had reason to believe that contravention of Section 4 was suspected. [Paras 29, 30, 31, 32, 33]

The finding of the Competent Authority that no share of any value was held in Singapore and that there was no violation of Section 4 was held to be erroneous.

Equivalent value seizure - Prohibition against multiple seizure for same foreign security - HELD THAT: - The Tribunal held that Section 37A is a temporary securing measure intended to seize, within India, value equivalent to the foreign security situated outside India, pending adjudication. Its object is met once equivalent value is secured, and the provision does not authorise seizure exceeding that value. The Department's contention that acquisition and transfer were separate contraventions justifying separate seizures was rejected, because transfer by gift only changes the holder while the same foreign security continues to exist; it does not justify seizure of equivalent value more than once. On that basis, seizure could be sustained only against the persons who, on the Tribunal's findings, continued to hold the foreign security, and not against those who had already divested their holdings. [Paras 34, 35]

The impugned order was set aside only to the extent it vacated seizure of the properties standing in the names of the daughter and son, while the order vacating seizure in the names of the father and the deceased wife was upheld.

Final Conclusion: The Tribunal held that the departmental appeal under Section 37A(5) was maintainable, and that the foreign share subscription and transfers could not be treated as valueless or outside the scope of foreign security under FEMA. The appeal was partly allowed by restoring seizure only to the extent of the equivalent value of foreign security held by the daughter and son, while upholding vacation of seizure in the names of the father and the deceased wife.

Writ maintainability - Judicial review despite alternative statutory remedy - Provisional attachment - failure to satisfy the statutory requirements for immediate attachment under the second proviso to Section 5(1) -Reasons to believe and immediate necessity for attachment.

Alternative statutory remedy - Jurisdictional challenge to provisional attachment - HELD THAT: - The Court held that the existence of remedies before the Adjudicating Authority and the appellate forum does not by itself bar exercise of writ jurisdiction where the challenge goes to the very jurisdiction to invoke the power of immediate attachment. The grievance raised was not against the merits of confirmation of attachment, but against non-compliance with the procedural restrictions governing the exercise of power under the second proviso to Section 5(1). The scheme under Section 8 was held to be confined to adjudication on whether the property is involved in money-laundering, and not to examination of whether the preconditions for invoking the exceptional power of immediate attachment were satisfied. Since breach of that procedural safeguard constituted a jurisdictional issue for which the statutory process did not provide an efficacious corrective forum, the writ petition was held fit to be entertained. [Paras 40, 41, 42, 43, 45]

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

Recorded reasons to believe - Immediate attachment to prevent frustration of proceedings - Non-application of mind in provisional attachment - HELD THAT: - The Court held that where the first proviso was admittedly not attracted, recourse to the second proviso required the competent officer to record, on the basis of material in his possession, reasons to believe that immediate non-attachment was likely to frustrate proceedings under the Act. On examining the attachment order, the Court found that the authority had discussed material bearing on the alleged commission of money-laundering, but had not recorded a legally sufficient basis showing why immediate attachment was necessary. Mere reproduction of the statutory language was held insufficient, and the statute-required procedure had to be followed strictly. The Court further held that the material relied on must specifically relate to the likelihood of frustration of proceedings, and that material pointing only to the alleged offence could not by itself satisfy that distinct requirement. In the facts noticed by the Court, the properties had not been dealt with and, in the absence of mutation entries, there was no objective material showing any real possibility of transfer so as to frustrate proceedings. The recorded apprehension was therefore held to lack objective nexus with the statutory condition for urgent attachment. Since the foundational attachment order was legally defective, the later adjudicatory steps founded upon it also could not survive. Liberty was, however, reserved to initiate fresh proceedings if the statutory conditions were made out. [Paras 65, 66, 67, 73, 74]

The provisional attachment order was set aside, and all further proceedings against the petitioner's rights founded on that order were also set aside, with liberty to initiate fresh proceedings in accordance with law.

Final Conclusion: The High Court entertained the writ petition on the ground that the challenge went to the jurisdictional validity of invoking the exceptional power of immediate attachment under the PMLA. It held that the provisional attachment order did not disclose the statutorily required reasons based on objective material showing that non-attachment would frustrate proceedings, and therefore set aside the attachment and the consequential proceedings, while reserving liberty to initiate fresh action in accordance with law.

Retention of seized cash and articles under the Prevention of Money Laundering Act - Burden to explain source of cash - Proceeds of crime -Non-supply of relied upon documents - breach of natural justice - Failure to substantiate source of seized cash.

Supply of relied upon documents - Principles of natural justice - Access to documents in retention proceedings - HELD THAT: - The Tribunal found that the only documents relied upon in the original application for retention were the panchnamas, and copies thereof had been supplied to the appellant. Since no other document had been relied upon by the respondent for seeking retention, the plea of non-supply of relied upon documents was held to be factually incorrect. The Tribunal further held that, if the appellant desired any additional documents, he could have invoked the statutory remedy for obtaining them, but no such application had been made. On that basis, no procedural illegality or breach of natural justice was made out. [Paras 9, 10]

No violation of procedure or principles of natural justice was established, and the objection founded on non-supply of documents failed.

Retention of seized cash and digital devices - Confiscation sought in prosecution complaint - Unexplained cash found during search - HELD THAT: - The Tribunal held that retention was justified in view of the material indicating the appellant's connection with the main accused, the filing of the prosecution complaint in which the appellant had been arrayed as an accused, and the prayer therein for confiscation of the seized cash. The Tribunal also found that the appellant had failed to disclose or substantiate the source of the cash seized during search. The documents later produced to explain the cash as sale proceeds of scrap were found unreliable, as they lacked material particulars and did not satisfactorily establish the source. In these circumstances, the order retaining the seized cash and articles was upheld, subject to the result of the trial. [Paras 11, 13, 15, 16]

The retention order was sustained, and the appeal against retention of the cash and articles was dismissed.

Final Conclusion: The Tribunal upheld the order retaining the seized cash, documents and digital devices. It held that the appellant had received the relied upon documents, had not shown any procedural breach, and had failed to establish a credible source for the seized cash; the seizure and retention were left subject to the final outcome of the trial.

Substitution of immovable properties under attachment by a demand draft of equivalent value, pending appeal against confirmation of attachment -Scope of Rule 5 of the 2013 Possession Rules - Absence of statutory power to replace immovable attachment with demand draft or fixed deposit - HELD THAT: - The Tribunal held that the governing question was not the practical adequacy of the alternative security but the existence of statutory authority to permit such substitution. On a reading of Rule 5, substitution of attached immovable property is not generally available and is confined to specified contingencies. The Tribunal found that the appellant's case did not fall within those contingencies, and that neither the Act of 2002 nor the Rules conferred a wider power to replace attached immovable property with a demand draft or fixed deposit merely because equivalent value would stand secured. The Tribunal followed its earlier view in M/s. Agribiotech Industries Ltd. v. The Deputy Director, Directorate of Enforcement, Jaipur [2025 (7) TMI 80 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI], which had in turn relied on Hetero Tracks Limited vs. Deputy Director Directorate of Enforcement Delhi [2015 (7) TMI 1255 - APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING ACT AT NEW DELHI], and distinguished the orders cited for the appellant on the ground that those orders had proceeded on consent or without consideration of the relevant Rules. It therefore declined to pass an order contrary to the statutory scheme and held that no case was made out under Rule 5(5) or Rule 5(6). [Paras 7, 8, 10]

The application for substitution of the attached immovable properties by a demand draft of equivalent value was dismissed.

Final Conclusion: The Tribunal held that substitution of attached immovable property by equivalent monetary security is not permissible unless the case falls within the limited situations expressly provided in Rule 5 of the 2013 Rules. As no such case was made out, the application was dismissed.

Railway arrangement for allotment of specified space for hoardings and billboards - Support service under reverse charge mechanism - classifiable as renting of immovable property service - Extended period for non-disclosure of non-RCM transactions - definition of support services under Section 65B(49).

Support service under reverse charge - Advertisement space licensed by Railways - HELD THAT: - The Tribunal held that the definition of support services contemplates outsourced infrastructural, operational, administrative, logistic, marketing or similar functions which an entity ordinarily carries out itself but obtains from another. On the agreements and contracts on record, Railways had merely let out specified earmarked space for advertisement purpose, while the respondent was required to arrange its own materials and electricity and install the display structures. There was no evidence that Railways were themselves engaged in advertisement or promotion activities and had outsourced any such function to the respondent, nor did the agreements show any obligation on Railways to render advertisement or promotional support. The basic premise of the show cause notice that Railways were providing support service was therefore untenable, and reverse charge could not be invoked against the respondent on that footing. [Paras 12, 13, 14]

The demand founded on classification of the railway licence arrangement as support service under reverse charge was rightly rejected.

Renting of immovable property for advertisement space - Forward charge liability - HELD THAT: - After the basic ground of the notice failed, the Tribunal examined the adjudicating authority's further finding on classification and upheld it. The contract showed allotment of specific area or location, collection of yearly licence fee and security deposit, and grant of that space to the respondent to the exclusion of others for erecting hoardings and display boards. The use of the expression licence fee did not alter the true nature of the arrangement, since permitting use of specified space in immovable property falls within renting of immovable property, including where possession or control is not transferred. The Tribunal also declined to entertain, at the appellate stage, the respondent's alternative contention based on sale of space or time for advertisement, since that aspect had not been raised before or dealt with by the adjudicating authority. In the factual matrix, the classification as renting of immovable property service was held to be correct, and the liability, if any, was on forward charge and not under reverse charge. [Paras 15, 16]

The adjudicating authority's classification of the arrangement as renting of immovable property service and consequent exclusion of reverse charge was affirmed.

Extended period for non-disclosure of non-RCM transactions - Penalty - HELD THAT: - The Tribunal accepted the adjudicating authority's reasoning that the respondent had already obtained service tax registration and was discharging tax on its advertisement service, and that there was no statutory obligation to declare in ST-3 returns services received which were not under reverse charge. In that situation, non-declaration of the licence fee paid to Railways could not amount to suppression of material facts with intent to evade tax. The Tribunal further observed that once the demand itself failed on merits, the objection on limitation did not survive independently; nevertheless, the adjudicating authority's finding against the extended period was found to be proper. The penalties on the respondent and its Director were therefore also unsustainable. [Paras 18, 19, 20]

The finding that the extended period was not invocable and that no penalty could be imposed was upheld.

Final Conclusion: The Tribunal upheld the order dropping the show cause proceedings. It held that Railways had not provided support service to the respondent, that the arrangement was correctly treated as renting of immovable property service not liable under reverse charge, and that the extended period and penalties were also not sustainable.

Demurrage charges and dispatch money - Exigible to service tax under the category of port services or declared service - Loading and unloading activity in the port area -Reverse charge on consulting engineering service from foreign service provider having Indian establishment.

Port services - Demurrage charges - Dispatch money - Declared service - Consideration for service - HELD THAT: - The Tribunal held that, though loading and unloading within the port area may answer the description of port service, the demand failed on the basic requirement of identifying the actual service provider and recipient. For the period prior to 01.07.2010, the appellant was neither the port nor a person authorised by the port and therefore could not be treated as provider of port service. For the later period also, the vessel owners had not undertaken the loading or unloading activity, while the actual operations were performed by stevedores who, according to the record, billed the appellant and discharged tax on that activity. The invocation of section 66A against the appellant on the footing that foreign vessel owners had rendered port service was therefore unsustainable. Independently, the Tribunal found that demurrage and dispatch were contractual incidents of the charter party governing transportation and turnaround time, adjusted against freight, and not consideration for any separate service. In the case of imports, such charges were relatable to transportation and purchase cost; in exports, they were part of the cost of fulfilling FOB delivery obligations. The same reasoning applied to the post-01.07.2012 attempt to treat the amounts as declared service, since contingent penal or incentive clauses in the transportation contract could not be split up and taxed as a standalone service, and the Commissioner (Appeals) could not travel beyond the show cause notices by introducing that basis. [Paras 15, 16, 17, 18, 19]

The demands on demurrage charges and dispatch money were set aside on merits for both the pre- and post-01.07.2012 periods.

Consulting engineering service - Reverse charge mechanism - Foreign contractor with Indian establishment - Section 66A - HELD THAT: - The Tribunal found it admitted that the foreign contractor had an office and establishment in India, held service tax registration, and that the contract itself contemplated payment and reimbursement of service tax through such Indian establishment. The Indian establishment had in fact discharged the service tax on the transaction and the appellant had reimbursed it in accordance with the contractual terms. On a plain reading of section 66A, the existence of an Indian establishment directly concerned with the provision of service and with statutory compliance prevented a second levy on the appellant under reverse charge merely because the agreement had been signed by the overseas office. The adjudicating authority's interpretation treating the overseas unit alone as relevant was not accepted in the facts of the case. Since tax had already been paid on forward charge basis by the Indian establishment, a separate demand under reverse charge could not survive. [Paras 20, 21]

The reverse charge demand on consulting engineering service was held not sustainable.

Final Conclusion: The Tribunal allowed all the appeals, holding that demurrage charges and dispatch money arising out of the charter party arrangements were not taxable as port services or as declared service, and that the consulting engineering service demand under reverse charge was also unsustainable because the Indian establishment of the foreign contractor had already discharged the tax on forward charge basis. Consequently, the impugned orders, including the related penalties, were set aside on merits.

Leasing of tea estates with appurtenant structures - taxable as renting of immovable property or is excluded as an agricultural activity - Plantation operations - Vivisection of composite contract - Payment of wages and deployment of workers - manpower recruitment or supply agency service - Provision of tractor and related facilities - Supply of tangible goods service -

Leasing of tea estates with appurtenant structures - taxable as renting of immovable property or is excluded as an agricultural activity - HELD THAT: - The Tribunal held that the lease agreement was directed wholly to plantation operations, including cultivation, harvesting and processing of green tea leaves, and that the consideration was linked to agricultural output, showing an agricultural revenue-sharing arrangement rather than commercial renting. It found that, both under the pre-negative list regime and after the introduction of Section 66D, the statutory scheme consistently excluded services in relation to agriculture. Applying the principle stated in Doypack Systems Pvt. Ltd. v. Union of India [1988 (2) TMI 61 - SUPREME COURT] on the width of the expression "in relation to", the Tribunal held that land, labour quarters, staff facilities and machinery, being incidental and integral to plantation operations, could not be artificially segregated into different taxable services.

As regards manpower supply, the essential elements were absent because the lessee had control and supervision over the workers, bore wages and statutory dues, and no separate consideration flowed to the appellant.

As regards supply of tangible goods, there was no material showing transfer of possession or effective control of the tractor or machinery, nor any separate consideration. The demands were therefore founded on an impermissible vivisection of an indivisible agricultural arrangement. [Paras 18, 19, 21, 22, 23]

The demands under renting of immovable property service, manpower recruitment or supply agency service, and supply of tangible goods service were held unsustainable on merits.

Whether the demands are sustainable on limitation and whether penalties are imposable - HELD THAT: - The essential ingredients for classification under the aforesaid taxable service categories are not satisfied, as there is neither any independent consideration for such alleged services nor any material to establish that there is supply of tangible goods or provision of manpower under the control and supervision of the recipient; accordingly, the demands are set aside, and the issues relating to limitation, interest and imposition of penalties do not survive for consideration.

Final Conclusion: The Tribunal held that the lease of the tea estates was a composite agricultural arrangement and could not be split up and taxed under different service categories. The impugned orders were set aside and the appeals were allowed; in view of the decision on merits, the questions of limitation, interest and penalties were held not to survive.

Centralised service tax registration and jurisdiction to issue show cause notice - Classification of loading and unloading contract vis-a-vis manpower supply service - Reverse charge liability on manpower supply service - Classification of service - Extended period of limitation.

Whether action to issue show cause notice by Vadodara Audit- III Commissionerate and it’s adjudication by Valsad Commissionerate is beyond jurisdiction as the tax payer was centrally registered with Kolkata Service Tax Commissionerate? - HELD THAT: - In the case of MIRC Electronic Ltd. Vs. CCE, Noida [2018 (5) TMI 1891 - CESTAT ALLAHABAD] has clearly held that authorities at Noida had no jurisdiction to raise demand on tax payer having centralized registration at Mumbai. The Commissioner (Appeals) in this case had held that from the copy of registration, claim of centralized registration made by the appellant was not correct. The Tribunal in this case, observed that the finding of learned Commissioner (Appeals) is factually incorrect and therefore, it set aside the impugned order and remanded the matter to Commissioner (Appeals) for fresh decision on the issue of jurisdiction.

In the case of Commissioner of Customs, Central Excise and Service Tax, Hyderabad-II Vs. Larsen and Toubro Ltd.[2019 (1) TMI 381 - CESTAT HYDERABAD], the Tribunal held that the Commissionerate where centralized registration has been obtained has the jurisdiction to issue the demand even when services provided outside the territorial jurisdiction of that Commissionerate. In this case, the appellant had challenged the jurisdiction of Hyderabad-II Commissionerate, where they obtained centralized registration on the ground that the services have been provided outside the jurisdiction.

The Tribunal found no dispute on the fact that the appellant held centralised registration with Kolkata Service Tax. It noted that the Revenue had not produced any authority supporting the legality of issuance of show cause notice by Vadodara Audit-III Commissionerate or confirmation of demand by Valsad Commissionerate despite such centralised registration. Following the Tribunal decisions noticed by it on the effect of centralised registration, it held that the competent jurisdiction rested with the Commissionerate where such registration had been obtained. The proceedings initiated and decided outside that jurisdiction were therefore unsustainable. [Paras 5]

The show cause notice and demand confirmation were held to be beyond jurisdiction, and on that ground the service tax demand was found not sustainable.

Whether in the facts of the case, appellant has received man power supply service from Mr. Shyam B. Mandal and is liable to pay service tax on reverse charge basis?​​​​​​​ - HELD THAT: - In the case of Gokul Ram Gurjar Vs. CCE, Jaipur [2018 (4) TMI 834 - CESTAT NEW DELHI] has held that the scope of work described in work orders determines classification of service. In this case, work relates to washing of cans/crates and packing of milk. Since, there was no specific mention about deployment of labour/ work force, the services provided by the appellant should not fall under the taxable category of man power supply service. The work order clearly indicates that the amount shall be paid on per liter for per pack basis. Since, there is no specific mention about payment or reimbursement of wages and salaries to the work man, the services provided should not fall under the taxable category of service.

On examining the work order, the Tribunal found that the contractor had been entrusted with specified operational work, that payment was linked to the quantity of work done on a per MT basis, and that supervision, control, and responsibility for safe handling remained with the contractor. The contract also placed liability for damage caused by improper handling upon the contractor. From these terms, the Tribunal held that the substance of the arrangement was execution of assigned work and not supply of manpower. Relying on earlier Tribunal decisions holding that contracts for specified work, where labour remains under the contractor's control and payment is output-based, do not fall within manpower recruitment or supply service, it concluded that no reverse charge liability arose. [Paras 5]

The contract was held not classifiable as manpower supply service, and the demand failed on merits as well.

Final Conclusion: The Tribunal held that the proceedings were without jurisdiction since the appellant had centralised service tax registration with Kolkata, and further held on merits that the impugned contract was for execution of specified loading and unloading work and not for manpower supply. The impugned order was therefore set aside and the appeal was allowed.

Taxability of health and fitness service - Classification of Ayurvedic treatment activities - classifiable as "Health and Fitness Services" or as "Healthcare Services" - Exemption for health care services by clinical establishment - Entitlement to exemption under Notification No. 25/2012-ST for the post-01.07.2012 period -definition of ‘Health and Fitness Services’ under Section 65(51).

Health and Fitness Service - Ayurvedic therapeutic treatment - Therapeutic massage - HELD THAT: - The Tribunal found that the appellant held licences to run a private hospital and had consistently produced hospital records, patient case sheets, treatment procedures, outpatient records, list of doctors and therapists, and an affidavit of its senior chief physician explaining the diagnostic and treatment protocol followed under the Ayurvedic system of medicine. These materials showed that treatment was prescribed and supervised by qualified medical practitioners and administered through recognised therapeutic procedures. The Revenue produced no contrary evidence to establish that the centre was rendering services such as massage or allied activities merely for general physical well-being. The objection that sample records did not cover the entire period was rejected, and the Revenue's contention that the ailments were only lifestyle conditions was also held to be without merit, the Tribunal following CCE, Cochin vs. Coconut Lagoon Kumarakom [2018 (8) TMI 106 - CESTAT BANGALORE] and Manthena Satyanarana Raju Charitable Trust [2018 (7) TMI 1826 - SUPREME COURT (LB)], in holding that such treatments remain Ayurvedic therapeutic treatment and fall outside the scope of Health and Fitness Service. [Paras 12, 13, 14, 16]

The demand for the pre-01.07.2012 period was unsustainable because the appellant's activities were therapeutic Ayurvedic treatment and not taxable health and fitness services.

Health care services by clinical establishment - Clinical establishment - Exemption under Notification No.25/2012-ST - HELD THAT: - Having found that the appellant was operating as an Ayurvedic hospital and rendering diagnosis, treatment and care to patients through qualified professionals, the Tribunal held that the appellant answered the description of a clinical establishment and that the services rendered were health care services in a recognised system of medicine. The Commissioner's refusal to apply the earlier Tribunal decision on the ground that no District Medical Officer certificate had been produced was rejected, since the appellant was itself registered and functioning as a hospital and had produced voluminous material evidencing therapeutic treatment. Relying also on Manthena Satyanarana Raju Charitable Trust [2017 (5) TMI 672 - ANDHRA PRADESH HIGH COURT], the Tribunal held that such Ayurvedic treatment was covered by the exemption available to health care services by a clinical establishment under Notification No.25/2012-ST. [Paras 14, 15, 16]

The post-01.07.2012 demands were not maintainable, the appellant being entitled to exemption for health care services by a clinical establishment.

Final Conclusion: The Tribunal held that throughout the disputed period the appellant was providing Ayurvedic treatment through an Ayurvedic hospital. Consequently, the services were outside the taxable category of health and fitness service up to 30.06.2012 and were exempt as health care services by a clinical establishment thereafter; the impugned orders were therefore set aside and the appeals allowed.

Reversal of CENVAT credit as non-availment refund under Notification No. 12/2013-ST - input services - Non-inclusion in the UAC-approved list -Rejection of refund claims of unutilized cenvat credit availed on input services used in the output services of export - Development Commissioner's default list for specified services.

Reversal of CENVAT credit as non-availment - Refund under Notification No. 12/2013-ST - HELD THAT: - The Tribunal found that the credit earlier availed on the relevant input services had been reversed in the subsequent returns on realisation of the error and that such reversal was on record. Applying the principle that reversal of credit is equivalent in law to non-availment, it held that the condition in paragraph 5 of Notification No. 12/2013-ST stood satisfied at the time of filing the refund claims. The decisions relied on in the impugned orders concerning conscious dual benefit were held inapplicable, since the present case involved a bona fide correction of an inadvertent availment. [Paras 17]

The rejection of the two refund claims on the ground of prior availment of CENVAT credit was held unsustainable.

Reversal of CENVAT credit in the subsequent return period - Notification No. 12/2013-ST - SEZ input services for authorised operations - Development Commissioner's default list - Refund of unutilised CENVAT credit - HELD THAT: - The Tribunal held that the appellant was entitled to refund of credit on input services used for authorised operations irrespective of their omission from the unit-specific UAC list, so long as they were covered in the Development Commissioner's default list. It further observed that the UAC list could be enlarged through the approval process and that, in the absence of any case by the Revenue that the disputed services were not required for authorised operations or had been misutilised, non-inclusion in the UAC list by itself could not defeat the refund claim. On that basis, the rejection of the claims was found unsustainable. [Paras 18]

The four refund rejections based on non-inclusion of services in the appellant's UAC list were set aside.

Final Conclusion: The Tribunal allowed all six appeals. It held that reversal of wrongly availed CENVAT credit before filing the refund claims satisfied the condition of non-availment, and that refund on input services used for authorised SEZ operations could not be denied merely because such services were not reflected in the unit-specific UAC list when they were covered by the Development Commissioner's default list.

Denial of Cenvat credit on invoices issued by bogus or non-existent suppliers - Reasonable steps to verify duty-paid inputs and supplier identity - modus operandi - objection based on non-supply of relied-upon documents -Extended limitation and equal penalty for fraudulent availment of credit.

Cenvat credit on grey fabrics - Invoices of bogus or non-existent suppliers - Rule 7(2) reasonable steps - HELD THAT: - The Tribunal held that the governing principle was the obligation under Rule 7(2) of the Cenvat Credit Rules, 2002, which required the credit taker to take reasonable steps to satisfy itself about the identity and address of the manufacturer or supplier and the duty-paid nature of the goods. Relying on the Gujarat High Court decisions in M/s. Prayagraj Dyeing & Printing Mills Pvt. Ltd. Vs. Union of India [2015 (4) TMI 109 - GUJARAT HIGH COURT], Shiv Enterprises Vs. Commissioner of Central Excise & Customs and Rivaa Exports Vs. Government of India [2015 (4) TMI 420 - GUJARAT HIGH COURT], and on the Tribunal decision in Chintan Processors P Ltd. [2008 (6) TMI 151 - CESTAT AHEMDABAD], it was held that credit cannot be sustained on invoices issued by bogus, fake or non-existent suppliers merely because documents were available or payments were claimed to have been made. The Tribunal also noted the abnormalities in the invoices and delivery challans, including vague description of goods, absence of transport particulars, common addresses and illegible signatures, and concluded that the appellant had failed to satisfy the mandatory requirement of reasonable verification. On that basis, denial of credit was upheld. [Paras 5]

The denial of Cenvat credit was upheld.

Extended limitation for inadmissible Cenvat credit - Positive action indicating knowledge of bogus documents - Equal penalty under Section 11AC - HELD THAT: - The Tribunal accepted that, in terms of the Gujarat High Court ruling in Kirtida Silk Mills Vs. Commissioner [2014 (9) TMI 555 - GUJARAT HIGH COURT], extended limitation is not invocable unless positive evasion is established. It nevertheless found such positive conduct present in the case. The discrepancies appearing from the invoices and delivery challans, read with the finding that the suppliers were bogus or non-existent, showed that the appellant had knowingly taken credit on non-genuine documents. The Tribunal therefore held that the ingredients necessary for invoking the extended period stood satisfied and, applying the same fraud-based foundation, sustained interest and the equal penalty under Rule 15(2) read with Section 11AC. [Paras 5]

The demand within the extended period, along with interest and equal penalty, was sustained.

Natural justice - Belated plea of non-supply of relied upon documents - HELD THAT: - The Tribunal found no merit in the contention regarding non-supply of documents because the appellant's request was made only after passing of the adjudication order and was stated to be for the purpose of filing the appeal. Since the appellant had not taken this objection in response to the show cause notice, the plea of violation of natural justice was rejected. [Paras 5]

The challenge based on violation of natural justice was rejected.

Final Conclusion: The Tribunal upheld the denial of Cenvat credit, interest and equal penalty, holding that the appellant had availed credit on invoices issued by bogus or non-existent suppliers without complying with the obligation to take reasonable verification steps under Rule 7(2). The plea of limitation and the objection based on non-supply of documents were rejected, and the appeal was dismissed.

Recovery of tax and interest - Settlement of arrears under Samadhan Scheme - Interest payable under court order - Scope of High Court's earlier interim order -Finality of prior adjudication - Interference with Cancellation of settlement certificate - HELD THAT: - The Court held that the liability to pay interest at 18% per annum arose from the earlier order passed by the High Court while granting interim protection, subject to payment of tax with such interest if the challenge failed. That interest was not interest levied under the Entry Tax Act or under the Scheme itself. Since the Scheme covered arrears of tax, penalty and interest outstanding under the specified enactments, the court-directed interest stood outside its purview and could not be reduced or settled under the Scheme. The Court also noted that, in the petitioner's earlier challenge relating to 1994-95, this Court had already held that the rate of interest at 18% per annum was final and that only assessment of tax remained; that view had attained finality. In that situation, the petitioner's further grounds based on absence of power to revoke the settlement certificate were not considered. [Paras 10, 12]

The petitioner was not entitled to settlement of the said interest under the Scheme, and no interference with cancellation of the Form-II and Form-III settlement was warranted.

Final Conclusion: The writ petitions were dismissed. The Court held that the 18% interest payable under its earlier order was outside the scope of the Samadhan Scheme and therefore could not be settled or reduced thereunder.