TaxTMI Updates e-Newsletter
Jun 12,2024

Condonation of delay - revocation of cancellation of registration - acceptance of GSTR-3B return - payment of taxes, interest, late fee and penalty as condition precedent - mandamus to open portal for filing return

Condonation of delay - revocation of cancellation of registration - Delay in invoking the proviso to Rule 23 of the Odisha GST Rules is condoned - HELD THAT: - The Standing Counsel for the CGST Department stated on advance notice that the delay in filing the revocation application would be condoned. The Court accepted that position and, while noting the departmental condition that statutory dues and formalities must be complied with, directed that the delay in invoking the proviso to Rule 23 be condoned. The condonation is therefore granted subject to the Petitioner fulfilling the consequential statutory requirements prescribed by law. [Paras 3]

Delay in invoking the proviso to Rule 23 is condoned subject to compliance with payment of taxes, interest, late fee, penalty and other formalities.

Acceptance of GSTR-3B return - payment of taxes, interest, late fee and penalty as condition precedent - mandamus to open portal for filing return - Acceptance of the Petitioner's Form GSTR-3B and enabling of portal access are directed on compliance with statutory dues and formalities - HELD THAT: - The Standing Counsel stated that so long as the delay is condoned and the Petitioner deposits all taxes, interest, late fee and penalty and complies with other requirements, the Form GSTR-3B filed by the Petitioner will be accepted by the department. The Court endorsed that position and directed that upon production of a copy of this order and compliance with the stated conditions the proper officer shall open the portal to enable filing of the GST return. The direction is conditional and implementation is contingent on the Petitioner meeting the departmental requirements. [Paras 2, 4]

Subject to deposit of all taxes, interest, late fee, penalty and compliance with other formalities, the Form GSTR-3B shall be accepted and the proper officer shall open the portal to enable filing of the GST return.

Final Conclusion: The writ petition is disposed of by condoning the delay in invoking the proviso to Rule 23 and directing conditional acceptance of the Petitioner's GSTR-3B and opening of the portal, provided the Petitioner deposits all statutory dues and complies with other formalities.

Principles of natural justice - service of notice via electronic portal - quashing of assessment for breach of natural justice - conditional remand on deposit - opportunity of personal hearing - raising of bank attachment

Principles of natural justice - service of notice via electronic portal - quashing of assessment for breach of natural justice - Whether the assessment order was vitiated by breach of principles of natural justice because the show cause notice and order were uploaded only in the 'View Additional Notices' tab on the GST portal and the petitioner was unaware of the proceedings - HELD THAT: - The Court found that the petitioner, a registered person under the GST enactments, was unaware that proceedings had been initiated because the relevant show cause notice and the impugned order were uploaded in the 'View Additional Notices' tab on the GST portal and were not communicated by any other mode. The petitioner did not participate in the proceedings and therefore had no opportunity to contest the tax demand, notwithstanding that he had reconciled the disparity in the annual return. In these circumstances the assessment was held to be vitiated for lack of a reasonable opportunity to be heard and for breach of natural justice. [Paras 1, 2, 3, 6, 7]

Impugned assessment order dated 10.08.2023 quashed for breach of natural justice.

Conditional remand on deposit - opportunity of personal hearing - raising of bank attachment - Remedial directions to be followed on quashing of the assessment order - HELD THAT: - The Court accepted the petitioner's undertaking to remit 10% of the disputed tax demand as a condition for remand. The petitioner was directed to pay the 10% within two weeks of receipt of the order and was permitted to file a reply to the show cause notice within the same period. Upon receipt of the petitioner's reply and satisfaction that the 10% has been received, the respondent is directed to afford a reasonable opportunity, including a personal hearing, and thereafter to pass a fresh assessment order within two months from receipt of the reply. As a consequence of quashing the assessment, the bank attachment was ordered to be raised. [Paras 4, 7, 8, 9]

Assessment remanded on condition of deposit of 10% of disputed demand; petitioner to be afforded opportunity including personal hearing; fresh assessment to be passed within two months; bank attachment to be raised.

Final Conclusion: The writ petition is allowed: the assessment order dated 10.08.2023 is quashed for breach of natural justice; the matter is remitted on the petitioner's payment of 10% of the disputed demand and subject to the petitioner being afforded an opportunity (including personal hearing) to file a reply and contest the assessment; the bank attachment is raised; no order as to costs.

Assignment of receivables - entitlement to GST component of receivables - escrow account - interim relief under Section 17 of the Arbitration and Conciliation Act, 1996 - arbitral tribunal as the proper forum for quantification and construction of assignment agreements - appointment of arbitrator

Assignment of receivables - entitlement to GST component of receivables - arbitral tribunal as the proper forum for quantification and construction of assignment agreements - Petitioner's entitlement to the GST component collected by the respondent during the subsistence of the lease/assignment arrangements and the appropriate forum for determination. - HELD THAT: - The Court held that amounts collected by the respondent from renters during the subsistence of the Agreement, insofar as they constituted the GST component of receivables, fall within the petitioner's entitlement under the two Assignment Agreements executed between the parties. The Court further observed that whether the underlying Lease Agreement has since terminated by efflux of time does not, by itself, destroy the petitioner's claim to GST amounts collected while the Agreement subsisted. Determination of the precise amounts payable to the petitioner and any construction of the Agreement clauses were directed to be adjudicated by the arbitral tribunal, which is the appropriate forum for quantification and interpretation in these proceedings. [Paras 3, 4, 7]

Entitlement to GST amounts collected during subsistence of the Agreements recognised; quantification and clause-construction left to the arbitral tribunal.

Escrow account - interim relief under Section 17 of the Arbitration and Conciliation Act, 1996 - interim injunction/restraint - Whether interim protection should be granted restraining the respondent from dealing with the specified Escrow Account pending constitution of the arbitral tribunal and further proceedings. - HELD THAT: - The Court granted limited interim protection by restraining the respondent from dealing with the Escrow Account bearing no.2105107000000044 maintained with the respondent bank. The restraint is expressly subject to formation of the arbitral tribunal and to the parties approaching the tribunal for continuation or modification of interim protection under Section 17 of the 1996 Act. The interim order is time-bound to a period of six weeks or until the parties obtain appropriate relief from the tribunal, whichever is earlier. [Paras 8]

Restraint on respondent from dealing with the specified Escrow Account for six weeks or until the tribunal grants further relief.

Appointment of arbitrator - arbitral tribunal as the proper forum for quantification and construction of assignment agreements - Appointment of an arbitrator to adjudicate the disputes under the Assignment Agreements. - HELD THAT: - Counsel agreed that an Arbitrator could be appointed in the present proceeding. The Court appointed Ms. Chama Mukherjee as Arbitrator, subject to her communicating consent in the prescribed format to the Registrar, Original Side of the Court within three weeks. The petitioner's advocate-on-record was directed to communicate this order to the appointed Arbitrator by the specified date along with contact details of the petitioner's contact person, enabling constitution of the arbitral tribunal to proceed forthwith. [Paras 10, 11]

Ms. Chama Mukherjee appointed as Arbitrator subject to her consent within three weeks and directions given for communication of the order to her.

Final Conclusion: The Court granted limited interim protection by restraining the respondent from dealing with the specified Escrow Account for a short, defined period, recognised the petitioner's claim to GST amounts collected during the subsistence of the Agreements while leaving quantification and contractual construction to the arbitral tribunal, and appointed an Arbitrator subject to consent and specified procedural steps to constitute the tribunal.

Condonation of delay under proviso to Section 100(2) - appellate authority's power to admit delayed appeal under proviso - appeal to be taken up for consideration on merits

Condonation of delay under proviso to Section 100(2) - appellate authority's power to admit delayed appeal under proviso - Whether the one day delay in filing the appeal against Advance Ruling No. 122/AAR/2023 dated 19.12.2023 is condonable under the proviso to Section 100(2) and the appeal admissible. - HELD THAT: - The Appellate Authority examined the material on record including the appellant's assertion that the Advance Ruling was received on 12.02.2024 and that the appeal was filed on 13.03.2024, thereby delaying by one day beyond the 30-day period. The appellant attributed the delay to paucity of staff and unfamiliarity with indirect tax compliance, given its status as a wholly state-owned electricity distribution utility that historically lay outside indirect tax compliance. The Authority noted the proviso to Section 100(2) which permits admission of an appeal filed within a further period not exceeding thirty days if the appellant was prevented by sufficient cause. Given the shortness of the delay (one day), the non-wanton nature of the delay, and the explanation regarding staffing and administrative unfamiliarity, the Authority found that sufficient cause was shown to justify condonation. The Authority also observed that it is empowered under the relevant provisions to pass such orders as deemed fit to condone delay and admit the appeal for adjudication on merits. [Paras 6]

The one day delay in filing the appeal is condoned under the proviso to Section 100(2) and the appeal is admitted for consideration on merits.

Final Conclusion: Delay of one day in filing the appeal against AAR Order No. 122/AAR/2023 is condoned under the proviso to Section 100(2) and the appeal will be taken up for consideration on merits.

General Anti-Avoidance Rules (GAAR) - Specific Anti-Avoidance Rules (SAAR) - non-obstante clause in Chapter X-A - impermissible avoidance arrangement - commercial substance test - Section 94(8) bonus stripping - procedural scheme under Section 144AB/144BA

General Anti-Avoidance Rules (GAAR) - Specific Anti-Avoidance Rules (SAAR) - non-obstante clause in Chapter X-A - Section 94(8) bonus stripping - commercial substance test - procedural scheme under Section 144AB/144BA - Whether proceedings under Chapter X-A (GAAR) could be initiated in respect of the transactions challenged by the petitioner instead of being confined to Chapter X (SAAR) and Section 94(8) - HELD THAT: - The Court held that Chapter X-A can be invoked in the facts of this case. Chapter X-A contains a non-obstante clause which gives it overriding effect and permits the Assessing Authority to treat an arrangement as an "impermissible avoidance arrangement" and proceed under the GAAR framework. The petitioner's reliance on Section 94(8) as a specific code for bonus stripping did not preclude application of GAAR where the facts disclose an arrangement lacking commercial substance. The Shome Committee recommendations and related administrative statements do not displace the statutory scheme enacted by Parliament nor restrict Chapter X-A to international cases; applicability is to be determined on the facts of each case. The Revenue adduced material indicating concerted group-level steps (timing of allotment, purchases, inter-corporate movements and repayment/write-offs and fund rotations) that, in the view of the Court, demonstrated absence of commercial rationale and supported invocation of Chapter X-A. The Court referred to established anti-avoidance principles and precedent endorsing scrutiny of colourable devices and concluded that the authorities may follow the statutory multi-stage procedure under Section 144AB/144BA to examine and determine the matter. [Paras 28, 42, 43]

The Court dismissed the writ petitions and upheld the Competent Authority's initiation of proceedings under Chapter X-A, permitting the respondents to proceed under Section 144AB.

Final Conclusion: Writ petitions challenging initiation of GAAR proceedings in respect of assessment year 2019-2020 are dismissed; respondents permitted to continue process under Section 144AB and no costs.

Allowable revenue expenditure u/s 37 - broken period interest paid on purchase of securities - securities constitute stock-in-trade - whether broken period interest paid on purchase of securities is revenue expenditure since the securities constitute stock-in-trade? - As held by HC [2023 (1) TMI 673 - TELANGANA HIGH COURT] Tribunal correctly held that the respondent had purchased securities to hold them as stock-in-trade. Therefore, interest paid on such securities would be an allowable deduction - HELD THAT:- There is no merit in the present special leave petition and hence, the same is dismissed.

Pending application(s), if any, shall stand disposed of.

Jurisdiction of the Assessing Officer - authority under section 120(4)(b) to empower Additional Commissioner to act as Assessing Officer - transfer of jurisdiction under section 127 - admission of additional grounds where question of law arises from facts on record (NTPC principle) - challenge to jurisdiction as a pure question of law - time limit under section 124(3) inapplicable where action is wholly without authority

Admission of additional grounds where question of law arises from facts on record (NTPC principle) - challenge to jurisdiction as a pure question of law - Admission of the assessee's additional grounds challenging jurisdiction of the Addl. CIT - HELD THAT: - The Tribunal applied the principle in NTPC Ltd. that a legal question arising from facts already on record may be raised for the first time before the Tribunal. It held that a challenge to the authority of an officer to pass assessment is a pure question of law going to the root of the matter and does not require fresh factual investigation. Reliance on pendency of a High Court appeal against earlier coordinate-bench decisions did not preclude admission where there was no stay or reversal. In light of binding precedents of the jurisdictional High Court and decisions of coordinate benches admitting similar grounds, the Tribunal admitted the additional grounds in Part B of Exhibit E. [Paras 8, 9, 10, 13, 15]

Additional grounds challenging jurisdiction were admitted.

Authority under section 120(4)(b) to empower Additional Commissioner to act as Assessing Officer - jurisdiction of the Assessing Officer - requirement to produce assignment orders to justify authority - Whether the Addl. CIT was authorised under section 120(4)(b)/section 2(7A) to exercise powers of an Assessing Officer and thus validly pass the assessment order - HELD THAT: - The Tribunal examined the record and found no order under section 120(4)(b) placed on record authorising the Additional Commissioner to act as Assessing Officer. The Revenue conceded that the original assignment orders could not be produced due to lapse of time and relied only on intimation letters and references in draft/final orders. The Tribunal held that, when jurisdiction is challenged, the department must produce the requisite authorising orders; absence of such documentation causes prejudice to the assessee. Consequently, on the material before it, the Addl. CIT was not shown to be duly authorised to perform the functions of an Assessing Officer. [Paras 16, 21, 26]

No valid authorisation under section 120(4)(b)/section 2(7A) was established; Addl. CIT was not shown to have jurisdiction.

Transfer of jurisdiction under section 127 - time limit under section 124(3) inapplicable where action is wholly without authority - Whether absence of any order under section 127 transferring jurisdiction barred the assessee's challenge or rendered the assessment valid; and whether limitation under section 124(3) precluded the challenge - HELD THAT: - The Tribunal noted that the Revenue did not place any order under section 127 on record nor controvert the contention that transfers occurred without production of such orders. The Tribunal relied on the jurisdictional High Court's decision that the one month limit in section 124(3) relates to territorial jurisdiction and does not apply where the action is wholly without legal authority. Accordingly, the Tribunal found that lack of a section 127 transfer order and absence of authorisation caused prejudice, and the time limit under section 124(3) did not bar the challenge to jurisdiction. [Paras 18, 20, 22, 26]

Absence of section 127 transfer order and non applicability of section 124(3) limitation where action is without authority support quashing the assessment on jurisdictional ground.

Final Conclusion: The Tribunal allowed the assessee's additional grounds, held that the Addl. CIT was not shown to be authorised under section 120(4)(b) nor was any transfer under section 127 established, quashed the assessment order for AY 2007-08 as without jurisdiction, left the regular merits grounds academic, allowed the assessee's appeal and dismissed the Revenue's appeal.

Treatment of sales reflected in GST returns where GST registration is alleged to have been fraudulently obtained - addition on account of unexplained sales under the concept of unexplained income - disallowance of alleged bogus purchases based on statements recorded during earlier search and survey operations - requirement of corroborative evidence and third party verification to treat GST reflected turnover as assessee's income

Treatment of sales reflected in GST returns where GST registration is alleged to have been fraudulently obtained - requirement of corroborative evidence and third party verification to treat GST reflected turnover as assessee's income - Deletion of addition made treating sales of M/s. Gulathi Enterprises (reflected in assessee's GST return) as assessee's income. - HELD THAT: - The assessee contended that a third party fraudulently used a GST number under the assessee's PAN and produced a police complaint and GST cancellation certificate. The AO, after seeking information from the GST authority and receiving no reply within 20 days, made the addition without conducting further inquiry or producing corroborative bank/payment evidence or third party confirmation linking the sales to the assessee. The CIT(A) found that the GST entries were not verified by any authority, there was no bank transaction corroboration, and the AO had not granted corresponding benefit of purchases under the same GST number; moreover, purchases recorded under that GST number exceeded the sales, which militated against making an addition. On these facts the Tribunal found no infirmity in the CIT(A)'s conclusion that the AO failed to establish that the GST reflected turnover belonged to the assessee and upheld deletion of the addition. [Paras 6]

Addition on account of sales of M/s. Gulathi Enterprises deleted; revenue ground dismissed.

Disallowance of alleged bogus purchases based on statements recorded during earlier search and survey operations - relevance of contemporaneous evidence versus historical statements in establishing bogus purchases - Deletion of addition made on account of alleged bogus purchases from M/s. Ankit International. - HELD THAT: - The AO relied primarily on statements recorded during search/survey of 2017-2018 in the case of another group (Viraj Profile Ltd) to characterize the assessee's 2020 21 purchases as bogus, despite the fact that those statements pre dated the transactions under scrutiny by several years. For the year under consideration the assessee produced ledger entries, invoices, bank payment evidence and the proprietor responded to notices under section 133(6) and summons under section 131. The CIT(A) held that the AO's adverse findings were founded on old search/survey material not directly relating to the year in issue and that no contemporaneous adverse evidence was produced against M/s. Ankit International for 2020 21. The Tribunal agreed that reliance on the earlier statements without direct adverse material for the year under consideration was untenable and therefore upheld deletion of the addition. [Paras 10]

Addition on account of alleged bogus purchases from M/s. Ankit International deleted; revenue ground dismissed.

Final Conclusion: Both grounds of the revenue appeal were dismissed: the Tribunal upheld the CIT(A)'s deletions of (i) the addition in respect of sales reflected under a GST number allegedly fraudulently used and (ii) the addition for alleged bogus purchases, on the basis that the AO lacked adequate contemporaneous corroboration and improperly relied on earlier search/survey material.

Reopening of assessment - formation of belief under section 147 - live nexus between information and belief - pasting of information without application of mind - unexplained cash credit under section 68

Reopening of assessment - formation of belief under section 147 - live nexus between information and belief - pasting of information without application of mind - Validity of reopening assessment under section 147/148 in absence of a discernible application of mind and live nexus between information possessed and belief that income escaped assessment. - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officer and the material relied upon (reproduction of MCA/ITD data and a list of 13 companies). It held that formation of belief under section 147 requires material of such quality that it establishes a rational connection or a "live nexus" between the information possessed and the belief that income has escaped assessment; mere suspicion or reproduction of information copied from departmental sources is insufficient. The AO had not analysed how the reproduced material connected to the assessee's transactions, had not independently enquired into the nature of the listed companies, and had simply relied on pasted information and third party observations without analytically cross verifying with the assessee. The Tribunal found no discernible application of mind in the reasons which could goad a prudent person to believe that income had escaped assessment, and therefore the belief required by section 147 was not properly formed. [Paras 9, 11]

Reopening of assessment quashed for lack of proper formation of belief and absence of live nexus between the material relied upon and the assessee's affairs.

Unexplained cash credit under section 68 - Consequences for the addition made under section 68 where assessment reopening is held invalid. - HELD THAT: - The Tribunal declined to adjudicate the merits of the addition on its substantive correctness because the reopening itself was quashed. Having held the reopening bad in law, the Tribunal recorded that nothing survives for adjudication on merits and therefore did not consider the evidential or legal correctness of the addition; consequently the addition was deleted as it rested on an invalidly reopened assessment. [Paras 12, 13]

Addition made as unexplained cash credit under section 68 deleted because it flowed from an assessment reopened without validly formed belief.

Final Conclusion: The Tribunal allowed the appeal, quashed the reopening of assessment for AY 2011-12 for lack of a properly formed belief and live nexus in the reasons, and deleted the addition made under section 68 as it arose from the invalid reopening.

Short-Term Capital Gain - business income - treatment as stock-in-trade versus investment - principle of consistency - intention test in characterization of income - CBDT Circular No. 6/2016

Short-Term Capital Gain - business income - treatment as stock-in-trade versus investment - principle of consistency - intention test in characterization of income - CBDT Circular No. 6/2016 - Nature of the gain on sale of shares allotted through IPO in A.Y. 2016-17 - whether taxable as Short-Term Capital Gain or as business income - HELD THAT: - The Tribunal found that the assessee had disclosed the shares as 'investment' in the balance sheet and sold the IPO-allotted shares mostly within one month, thereby disclosing the resulting profit as Short-Term Capital Gain for A.Y. 2016-17; in the preceding year A.Y. 2015-16 similar gains were disclosed as STCG and accepted by the Department. The Revenue recharacterised the gains as business income without assigning any valid reason for departing from its earlier treatment. The Tribunal applied the intent-based test recognizing that mere motive to earn profit does not convert an investment into stock-in-trade where the assessee consistently treated the holding as investment. The Tribunal relied on the guidance in CBDT Circular No. 6/2016, which permits an assessee's election to treat listed shares as stock-in-trade but also recognises that where the assessee treats shares as investment that treatment should govern subsequent assessment years and the consistency principle reduces litigation and uncertainty. In absence of any justification from revenue for changing its stand and having regard to the accepted treatment in the preceding year and the comparable facts, the Tribunal held the gains to be Short-Term Capital Gains rather than business income, also following the ratio of the cited precedents on similar facts. [Paras 6, 7, 8, 10]

The gain arising on sale of shares allotted through IPO in A.Y. 2016-17 is to be treated as Short-Term Capital Gain and not as business income; the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the profit on sale of IPO-allotted shares in A.Y. 2016-17 is Short-Term Capital Gain (not business income), applying the assessee's treatment as investment, the principle of consistency and the guidance of CBDT Circular No. 6/2016.

Unexplained expenditure - Section 69C read with Section 115BBE - Proviso to Section 69C - Burden of proof to produce primary documents - Test of human probabilities - Netting of customs duty against addition

Unexplained expenditure - Section 69C read with Section 115BBE - Burden of proof to produce primary documents - Test of human probabilities - Netting of customs duty against addition - Proviso to Section 69C - Validity of additions made as unexplained/unaccounted import expenditure in the hands of Mr. Melwyn Camara and consequentially in the hands of Mrs. Moureen Camara under sec.69C r.w.s.115BBE and entitlement to set off/net custom duty against such addition. - HELD THAT: - The Tribunal considered whether the impugned furniture import expenditure, not recorded in the assessees' books, could be accepted as not constituting unexplained expenditure. The NFAC had affirmed the Assessing Officer's finding that there was an unrecorded concluded transaction comprising the principal value of the imported goods and customs duty, and that the assessee had failed to produce primary documents (such as letter of credit, invoices, banking correspondence) to demonstrate non-payment or return of goods. Applying the standard of plausibility under the test of human probabilities, the Tribunal observed it was improbable that large imports from a China/Hong Kong supplier would be obtained on credit without evidence of prior business dealings or transactional documentation. The assessees' reliance on the supplier's confirmation and assertions of goods being defective and returnable was held insufficient in absence of contemporaneous primary records. The Tribunal further noted that customs duty had already been considered in earlier appellate proceedings by NFAC and that the proviso to Section 69C operated to bar the relief sought to net the customs duty against the impugned addition. In view of these findings, the Tribunal found no merit in the assessees' contention and affirmed the addition. [Paras 6, 7, 8]

Additions under sec.69C r.w.s.115BBE in respect of the unrecorded import transactions are sustained; the assessees' plea to net the customs duty against the additions is rejected.

Final Conclusion: The appeals are dismissed and the stay applications are rejected; the Tribunal affirms the lower authorities' treatment of the unexplained import expenditure and declines the claimed netting of customs duty.

Mismatch between Form 26AS and books - duty to reconcile and make enquiries - remand for verification to the Assessing Officer - deduction under Section 35AC - donor not liable for donee's diversion of funds - alternate claim for deduction under Section 80G rendered infructuous - burden on Revenue to prove excessiveness of related party payment - applicability of Section 40A(2)(b) - TDS credit under Section 199 - verification and reconciliation - interest under Section 234A - non chargeable if tax paid by original due date as per binding High Court direction

Mismatch between Form 26AS and books - duty to reconcile and make enquiries - remand for verification to the Assessing Officer - Addition in respect of difference arising from Form 26AS entry for Urbanize Developers India Pvt. Ltd.; direction to verify difference for Vijaya Bank - HELD THAT: - The Tribunal found an unexplained discrepancy between receipts/TDS as per Form 26AS and the assessee's ledger in respect of Urbanize Developers India Pvt. Ltd.; the assessee had not denied the transaction nor produced a confirmation from the counterparty and the ledger produced was self serving. Consequently the onus lay on the assessee to reconcile the mismatch, and the Assessing Officer was directed to make enquiries from Urbanize Developers India Pvt. Ltd. with an opportunity to the assessee to reconcile the difference. With regard to the Vijaya Bank mismatch, the Tribunal held that the CIT(A)'s direction to the AO to make specific enquiry from the bank and re decide the matter was proper and not beyond powers; any mismatch between Form 26AS and the assessee's accounts requires proper explanation and enquiry. [Paras 7, 9, 10]

Matter in respect of Urbanize Developers India Pvt. Ltd. is set aside to the file of the AO for further enquiry and opportunity to the assessee to reconcile; direction of the CIT(A) to verify the Vijaya Bank difference is upheld.

Deduction under Section 35AC - donor not liable for donee's diversion of funds - alternate claim for deduction under Section 80G rendered infructuous - Proportionate disallowance of deduction claimed under Section 35AC on account of donor's contribution being applied by the donee to ineligible projects; alternate claim under Section 80G - HELD THAT: - The Tribunal examined Section 35AC and its Explanation and Section 35AC(6), concluding that the primary requirement for the donor is payment to an approved institution for carrying out eligible projects. The Explanation makes clear that later withdrawal of approval or notification does not automatically deny the donor's deduction, and Section 35AC(6) contemplates treating the funds as deemed income only in the hands of the donee where approval is withdrawn. Applying that statutory scheme and relevant High Court authority, the Tribunal held that the donor cannot be penalised by disallowance in its hands for the donee's misapplication of funds. The assessee's alternate claim for deduction under Section 80G was rendered unnecessary by this conclusion. [Paras 11, 14, 15, 16]

Proportionate disallowance under Section 35AC is deleted; alternate claim under Section 80G is dismissed as infructuous.

Burden on Revenue to prove excessiveness of related party payment - applicability of Section 40A(2)(b) - Disallowance of 50% of guarantee commission paid to related party (Piramal Enterprises Ltd.) as excessive - HELD THAT: - The Tribunal noted that the genuineness of the guarantee commission was not disputed but the AO ad hoc disallowed 50% without adducing comparable cases or invoking Section 40A(2)(b) to demonstrate that the expenditure was excessive or unreasonable. The AO failed to show why 50% was the appropriate quantum of disallowance and did not establish excessiveness with reference to fair market value or legitimate business needs. Prior acceptance of similar payments in earlier years was not controverted. An adhoc disallowance based on assumption and presumption cannot be sustained. [Paras 17, 18, 20]

The 50% disallowance of the corporate guarantee commission is deleted.

TDS credit under Section 199 - verification and reconciliation - Claim for full credit of TDS as reflected in Form 26AS - HELD THAT: - The Tribunal observed that the assessee furnished reconciliation of TDS and made a rectification application. The AO was directed to verify the TDS claim in the return against Form 26AS and the reconciliation statement and to allow credit in accordance with Section 199 if supported on verification. [Paras 21]

Ground is allowed for statistical purpose; AO to verify and allow TDS credit in accordance with law.

Interest under Section 234A - non chargeable if tax paid by original due date as per binding High Court direction - Levy of interest under Section 234A for late filing where due date was extended but assessee contends tax was paid by the original due date - HELD THAT: - Relying on the binding decision of the Jurisdictional High Court, the Tribunal noted that while the Board's extension of the return filing date preserves the chargeability of interest under Section 234A, the High Court directed that taxpayers who paid the entire tax by the original due date should not be charged interest under Section 234A despite filing the return after that date. The Tribunal therefore directed the department to verify whether the assessee had paid the entire tax by the original due date and, if so, to follow the High Court's direction and not charge interest under Section 234A. [Paras 22, 24]

Matter remitted for verification; if entire tax was paid by the original due date, interest under Section 234A shall not be charged in accordance with the High Court direction.

Final Conclusion: The appeal is partly allowed: the proportionate disallowance under Section 35AC and the 50% disallowance of guarantee commission are deleted; the Urbanize Developers discrepancy is remitted to the AO for further enquiry and opportunity to reconcile, the direction to verify the Vijaya Bank entry is upheld, the AO is directed to verify and allow TDS credit as per Section 199, and the department is directed to verify payment of tax by the original due date and, if established, not to charge interest under Section 234A as per the binding High Court direction.

Characterisation of long term capital gain on sale of unlisted shares - transfer of shares versus transfer of underlying assets/business - separate legal personality of a company and rights of shareholders - taxability under section 112(1)(c) of the Income Tax Act - effect of tax deducted at source/estoppel by payer's withholding - reliance on third party material obtained under section 133(6) and principles of natural justice

Characterisation of long term capital gain on sale of unlisted shares - transfer of shares versus transfer of underlying assets/business - taxability under section 112(1)(c) of the Income Tax Act - Whether the transaction amounted to transfer of shares only and the consequent taxability of the long term capital gain accordingly. - HELD THAT: - The Tribunal found on the material on record, including the Share Purchase Agreement, that the assessee sold its shareholding in Firestone TVS Pvt. Ltd. and that the assets and liabilities of the company continued to remain on the company's books after the sale. The Tribunal applied established legal principles that a company is a separate legal entity and that shares constitute a bundle of rights which cannot be dissected into separate property rights unless the transaction, on its terms and surrounding circumstances, shows otherwise. Relying on the reasoning in Vodafone (as reproduced), the Tribunal held that the contract evidenced a share sale (an exit from the joint venture) and did not disclose a transfer of the company's assets or a slump/asset sale; the agreement did not allocate separate prices to individual assets or rights. On that basis the AO's conclusion that the receipt represented transfer of the entire business and hence was taxable at the higher rate was found to be incorrect. The Tribunal therefore accepted the assessee's characterisation of the income as arising from sale of unlisted shares and not from sale of business/assets. [Paras 3]

The long term capital gain arises from transfer of unlisted shares and not from transfer of the company's assets/business; the higher characterisation adopted by the AO/CIT(A) is rejected.

Effect of tax deducted at source/estoppel by payer's withholding - taxability under section 112(1)(c) of the Income Tax Act - Whether the deduction of tax at source by the buyer at a higher rate (reflected in Form 26AS and buyer's withholding) estops the assessee from claiming the lower tax treatment under the provisions applicable to long term capital gain on shares. - HELD THAT: - The Tribunal observed that the assessee had explained the reasons for higher TDS deducted by the buyer and had claimed refund of excess TDS in its return. The Tribunal held that the fact of deduction of tax by the payer at a particular rate cannot alter or estop the assessee's entitlement to have the income characterised and taxed according to law. The deduction by the buyer therefore did not determine the nature of the income nor preclude the assessee from claiming the tax treatment appropriate to a share sale. [Paras 2, 3]

Deduction of higher TDS by the buyer does not estop the assessee from claiming that the income is long term capital gain on sale of shares and entitled to the tax treatment applicable thereto.

Reliance on third party material obtained under section 133(6) and principles of natural justice - Whether reliance by the AO/CIT(A) on information/material obtained from the buyer (including Forms 15CA/15CB) without adequate confrontation or verification justified altering the characterisation of the transaction. - HELD THAT: - The Tribunal noted that the authorities below had relied upon material obtained from the buyer but had not sufficiently examined the Share Purchase Agreement or confronted the assessee with that material in a manner that would justify recharacterising the transaction as an asset/business transfer. The Tribunal found that the AO/CIT(A) had not made the required effort to examine the agreement and had reached a general conclusion based on purchaser provided material. The Tribunal indicated that Forms 15CA/15CB and payer's filings cannot by themselves determine the final liability of the payee and that reliance on such material, without appropriate scrutiny and opportunity to the assessee, was unsustainable. [Paras 2, 3]

The AO/CIT(A)'s reliance on third party material and payer's filings, without properly examining the agreement and providing adequate opportunity, was not a sound basis to recharacterise the transaction.

Final Conclusion: The assessee's appeal is allowed: the Tribunal holds that the sale was of unlisted shares (not of the company's assets/business), the higher tax characterisation imposed by the authorities is set aside, the consequences drawn from payer's withholding and filings do not alter the legal characterisation, and the impugned addition is deleted.

Explanation-7 to section 271(1)(c) deeming provision - good faith and due diligence burden - penalty under section 271(1)(c) - ambiguous show cause notice - use of current year data under Rule 10B(4) - difference of opinion in selection of transfer pricing comparables

Explanation-7 to section 271(1)(c) deeming provision - good faith and due diligence burden - Whether the deeming provision in Explanation-7 could sustain penalty where the assessee claimed to have computed arm's length price bona fide and with due diligence - HELD THAT: - The Tribunal examined Explanation 7 as attracting a deeming that an addition made under section 92C is to be treated as concealment or furnishing of inaccurate particulars, placing onus on the assessee to demonstrate that the price was computed in accordance with section 92C and that the assessee acted in good faith and with due diligence. However, the Tribunal found that the authorities' reliance on differences in transfer pricing methodology or selection of comparables, without an allegation of inaccuracy, discrepancy or concealment in the information or documents furnished under section 92C, was insufficient to rebut the assessee's bona fides. In the circumstances of this case, the TPO/AO's adjustments arose from a difference of opinion on methodology (including the comparables used) rather than from any overt concealment or materially incorrect information supplied by the assessee. Accordingly, the Tribunal concluded that Explanation 7 could not be invoked to sustain penalty on the facts before it where bona fides and due diligence were not disproved by any specific inaccuracy or suppression in the assessee's records (see paras 7-9, 11). [Paras 7, 8, 9, 11]

Explanation 7 could not sustain the penalty on the facts as the adjustment resulted from a difference of opinion on transfer pricing methodology and there was no established concealment or inaccurate particulars in the documents furnished.

Use of current year data under Rule 10B(4) - difference of opinion in selection of transfer pricing comparables - Whether the TPO/AO could fault the assessee for not using current year data under Rule 10B(4) for AY 2013 14 and treat that as indicia of lack of good faith - HELD THAT: - The Tribunal observed that Rule 10B(4), which prescribes use of data relating to the financial year in which the transaction occurred, was inserted w.e.f. 19.10.2015 and therefore is not applicable to AY 2013 14. The TPO's heavy reliance on Rule 10B(4) to infer deliberate omission to use current year data was therefore misplaced. Given that the contested adjustment arose from a legal debate on the appropriate data set and the comparables to be used, the Tribunal held that the assessee's bona fides could not be impugned on that basis alone (see paras 7-9). [Paras 7, 8, 9]

The TPO/AO's criticism based on Rule 10B(4) is unsustainable for AY 2013 14; absence of current year data usage, in that context, does not demonstrate lack of good faith.

Ambiguous show cause notice - penalty under section 271(1)(c) - Whether the penalty order can be sustained where the show cause notice was ambiguous and did not specifically invoke the deeming presumption of Explanation 7 - HELD THAT: - The Tribunal found that the notice dated 09.05.2017 failed to indicate which limb of section 271(1)(c) was invoked and did not specifically inform the assessee that Explanation 7's deeming presumption was being relied upon, despite the authorities subsequently treating the adjustment as 'concealment' under Explanation 7. Relying on settled law that a show cause notice must clearly communicate the basis and limb of penalty invoked, the Tribunal held that such ambiguity vitiates the penalty proceedings because where a deeming presumption is relied upon the assessee must be given specific opportunity to rebut it (see para 10-12). [Paras 10, 12]

The ambiguous show cause notice which did not specify invocation of Explanation 7 rendered the penalty order unsustainable.

Penalty under section 271(1)(c) - Final relief-whether the penalty levied on the assessee should be upheld or quashed - HELD THAT: - Having concluded that the TPO/AO's reliance on Rule 10B(4) was misplaced for AY 2013 14, that the adjustments stemmed from a difference of opinion rather than proven concealment, and that the show cause notice was ambiguous and failed to specifically invoke Explanation 7, the Tribunal found that the cumulative defects justified interfering with the penalty. The Tribunal therefore allowed the appeal and set aside the penalty levied by the AO and confirmed by the CIT(A) (see paras 11-13). [Paras 11, 12, 13]

Appeal allowed; the penalty under section 271(1)(c) is quashed.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2013 14 and quashed the penalty under section 271(1)(c): Rule 10B(4) was not applicable to the year in issue, the adjustments arose from a difference of opinion on transfer pricing methodology rather than proven concealment, and the show cause notice was ambiguous for not specifically invoking Explanation 7, rendering the penalty unsustainable.

Validity of additions in assessments framed under 153A/153C without incriminating material - Requirement of incriminating material for making additions in proceedings consequent to search - Effect of determination of date of search on abatement of assessment years - Reliance on binding precedent of the Supreme Court in assessment proceedings arising from search

Validity of additions in assessments framed under 153A/153C without incriminating material - Requirement of incriminating material for making additions in proceedings consequent to search - Additions and disallowances made in assessments framed under section 153A read with 153C which are not based on incriminating material found during search are not sustainable. - HELD THAT: - The Tribunal found that the additions in dispute were not founded on any incriminating material recovered during the search and that this was not controverted by the Revenue. Applying the legal principle that assessments under section 153A cannot be sustained by making additions dehors the incriminating material found during search, the Tribunal followed the Supreme Court's decision in PCIT vs. Abhisar Buildwell Pvt. Ltd. and held that the impugned additions/disallowances could not be upheld. Consequentially, the Tribunal set aside the orders of the CIT(A) and allowed the appeals insofar as these additions were concerned. [Paras 9, 11]

Impugned additions/disallowances made in assessments under section 153A/153C without incriminating material are deleted and the appeals are allowed on this ground.

Effect of determination of date of search on abatement of assessment years - Reliance on binding precedent of the Supreme Court in assessment proceedings arising from search - Date of search for the purposes of abatement/limitation was determined in light of the Supreme Court's decision in CIT vs. Jasjit Singh; that determination was applied in the facts of the present case. - HELD THAT: - The Tribunal noted the assessee's submission that the original return for AY 2010-11 was filed earlier and that the notice under section 153C was dated 18.09.2014. The Tribunal accepted the proposition, following CIT vs. Jasjit Singh, that 18.09.2014 ought to be treated as the date relevant for the search in this case for purposes of limitation/abatement issues. This factual-legal conclusion was applied in arriving at the decision to set aside the assessments insofar as the impugned additions were concerned. [Paras 9, 11]

The date-of-search principle as articulated by the Supreme Court in CIT vs. Jasjit Singh was applied to the facts; the Tribunal proceeded on that basis in allowing the appeals.

Application of Tribunal's earlier decisions in the assessee's own case - Consistency in deletion of identical disallowance in earlier assessment years - Identical disallowance on account of freight charges which had earlier been deleted by the Tribunal in the assessee's own case in earlier years supports allowing deletion in the present years. - HELD THAT: - The Tribunal recorded that an identical freight-charge disallowance had been deleted by the Tribunal in the assessee's earlier assessment years. Having regard to that consistent view and the absence of incriminating material supporting the addition in the present years, the Tribunal found it appropriate to follow the earlier Tribunal conclusions and set aside the impugned additions in the present years as well. [Paras 10, 11, 12]

Following the Tribunal's earlier deletions in the assessee's own case, the freight-charge disallowances in the present years are deleted and the appeals allowed.

Final Conclusion: The Tribunal allowed the three appeals (AYs 2010-11, 2011-12 and 2012-13), set aside the CIT(A)'s orders and deleted the impugned additions/disallowances because they were not supported by incriminating material found during the search, applying the Supreme Court precedents relied upon by the parties and following the Tribunal's earlier decisions in the assessee's own case.

Estimation of income under section 144 of the Income-tax Act - onus on the assessee to prove that bank credits are not turnover - estimation of gross profit rate based on past disclosed gross profit - appellate interference in estimation exercised by revenue authorities

Estimation of income under section 144 of the Income-tax Act - onus on the assessee to prove that bank credits are not turnover - estimation of gross profit rate based on past disclosed gross profit - appellate interference in estimation exercised by revenue authorities - Validity of the estimation of income by the Assessing Officer and the reduction by the Commissioner (Appeals) from 8% to 6% of bank credits as gross profit, and whether the assessee discharged the burden to show that bank credits were not turnover. - HELD THAT: - The assessee had not filed a return for AY 2017-18, failed to comply with notices and summons and did not produce books, bills or vouchers to substantiate cash deposits in the bank. In those circumstances the AO completed the assessment under section 144 by estimating taxable income at 8% of total cash credits. The CIT(A)-NFAC examined earlier years' disclosures of gross profit (4.6% and 4.7%) but observed that those returns were not subject to scrutiny and their authenticity was not established; in absence of documentary proof by the assessee the CIT(A) deemed it appropriate to estimate gross profit at 6%, thereby granting relief against the AO's 8% estimate. The Tribunal held that the onus lay on the assessee to prove that the disputed bank credits did not represent turnover and that the assessee failed to produce cogent documentary evidence either before the AO, CIT(A) or the Tribunal. Having regard to the material on record and the limited nature of the earlier disclosures, the Tribunal found no infirmity in the CIT(A)'s approach or in substituting 6% for 8% and declined to interfere with the appellate estimation. [Paras 6, 7]

The Tribunal upheld the CIT(A)-NFAC's direction to estimate gross profit at 6% of bank credits and dismissed the assessee's appeal.

Final Conclusion: The appeal is dismissed; the assessment completed under section 144 was sustained insofar as the CIT(A)-NFAC's reduction of the AO's estimated gross profit from 8% to 6% is upheld, the assessee having failed to prove that bank credits were not turnover.

Interest under

Notice under section 148 - reopening of assessment - reason to believe - escapement of income - credible information - non-application of mind - Explanation 3 to Section 147 - reassessment proceedings

Notice under section 148 - reason to believe - credible information - non-application of mind - reopening of assessment - Legality of the notice issued under section 148 for AY 2013-14 and validity of proceedings under section 147. - HELD THAT: - The Tribunal examined whether the Assessing Officer had a valid reason to believe that income had escaped assessment so as to sustain issuance of the notice under section 148. The file material showed only a general information alleging receipt of Rs. 35 lakh from a third party, whereas the assessee produced bank statements evidencing receipts totalling Rs. 20 lakh. The AO did not place on record any particulars substantiating the alleged receipt of Rs. 35 lakh nor did he verify the genuineness of the information before recording reasons. The Tribunal applied the established principle that the material forming the basis of the belief must have a rational nexus with the formation of belief and that mere suspicion or unexamined information is insufficient. The Tribunal also noted that in the preceding year (AY 2012-13) the issue involving the same counterparty had been investigated and no addition sustained after verification, which further weakened the credibility of the new information. Reliance on Explanation 3 to Section 147 does not permit a roving enquiry where the foundational notice itself is invalid. Because the AO accepted the information mechanically without application of mind or independent verification, the requisite reason to believe was not established and the notice was held to be unsustainable. [Paras 6, 7, 8]

Notice issued under section 148 quashed; consequent proceedings under section 147 quashed and appeal allowed.

Final Conclusion: The Tribunal held that the Assessing Officer failed to verify the information or apply his mind to the material before recording reasons; therefore the notice under section 148 for AY 2013-14 was invalid, the reassessment proceedings were quashed and the appeal was allowed.

Royalty - Equipment royalty - License to use software - Copyright transfer requirement for royalty - Non-exclusive non-transferable licence - Enterprise License Agreement - Cost-to-cost reimbursement - Application of Engineering Analysis Centre of Excellence (Supreme Court)

Royalty - Copyright transfer requirement for royalty - License to use software - Non-exclusive non-transferable licence - Application of Engineering Analysis Centre of Excellence (Supreme Court) - Whether amounts reimbursed by the Indian associated enterprise for software licences procured by the assessee are taxable in India as royalty/equipment royalty. - HELD THAT: - The Tribunal examined the nature of the transactions and the licensing terms and applied the ratio of the Supreme Court in Engineering Analysis Centre of Excellence Pvt. Ltd. and consistent High Court/Tribunal precedents. It found that the Microsoft licences were granted to the assessee under object-code only, non-exclusive, non-sublicensable, non-transferable, revocable licences permitting internal business use by the assessee and its group companies. The Tribunal emphasised that for a receipt to be taxable as royalty, there must be a parting with copyright or a licence conferring proprietary rights entitling the recipient to do any act under section 14 of the Copyright Act; a mere authorisation to use software without transfer of copyright does not amount to royalty. The assessee merely cross-charged costs for standard shrink-wrapped/cloud-based software procured centrally under an Enterprise License Agreement and the payments were cost-to-cost reimbursements. The Tribunal also accepted that certain cloud-hosted services (e.g., Office365) are provided and maintained by Microsoft, not by the assessee, and that the licences generally did not confer any right to sub-license, transfer, reproduce or modify. Applying these legal principles, the Tribunal concluded that the receipts could not be characterised as royalty/equipment royalty. [Paras 18, 19, 20, 21]

No liability arises on the assessee; the receipts are not taxable as royalty.

Cost-to-cost reimbursement - Enterprise License Agreement - Reimbursement not income - Whether cross-charges by the assessee to its group entity represented taxable income or mere reimbursement of cost. - HELD THAT: - The Tribunal accepted the factual position that the assessee centrally procured licences and allocated costs to group entities on actual usage basis under an Enterprise License Agreement. It treated these cross-charges as cost-to-cost reimbursements lacking an income element. The Tribunal noted that deduction of tax at source does not convert such reimbursements into taxable royalty receipts. Consequently, the cross-charges were not treated as taxable income in India. [Paras 16, 21]

Cross-charges amount to cost reimbursement and are not taxable as income in the form of royalty.

Verification of submissions by Assessing Officer - Role of DRP directions - Whether the Assessing Officer failed to comply with the DRP's direction to consider and factually verify the assessee's submission dated 03.04.2023 before passing a speaking and reasoned order. - HELD THAT: - The DRP had observed that the AO's draft assessment did not reflect factual examination of the documents submitted by the assessee and directed the AO to verify the assessee's submission on record and pass a speaking and reasoned order without conducting a fresh inquiry. The Tribunal reviewed the DRP's directions and the subsequent record and, while recording the DRP's stance, proceeded to adjudicate the substantive issue on merits. The Tribunal's decision addressed and accepted the assessee's documentary position, thereby resolving the factual contention which the DRP had required the AO to verify. [Paras 17, 21]

DRP's directions noted; substantive verification effectively undertaken by the Tribunal and the assessee's submissions accepted.

Final Conclusion: The Tribunal allowed the appeal, holding that the amounts cross-charged to the Indian group entity for centrally procured standard software licences do not amount to royalty or taxable income in India under the facts and licences on record; the payments are cost reimbursements and no tax liability arises.

Anticipatory bail (Section 438 Cr.P.C.) - evasion of customs duty - offences under Section 135(1)(i)(A) and 135(1)(i)(B) of the Customs Act - confiscation under Section 111(o) of the Customs Act - requirement of export within 120 days under the authorization scheme - cognizable and non bailable nature of offences exceeding statutory threshold - necessity of custodial interrogation

Anticipatory bail (Section 438 Cr.P.C.) - evasion of customs duty - offences under Section 135(1)(i)(A) and 135(1)(i)(B) of the Customs Act - requirement of export within 120 days under the authorization scheme - confiscation under Section 111(o) of the Customs Act - necessity of custodial interrogation - Anticipatory bail application dismissed - HELD THAT: - The Court found that the import authorization required processing of imported gold and export of finished articles within 120 days of actual receipt; an extension of the outer export date did not negate the 120 day requirement for consignments received earlier. The applicants imported 37 kgs of duty free gold and failed to export processed goods within the mandated period. Investigative material and witness statements indicated absence of the imported gold from the supporting manufacturer's premises and statements by the applicants that could not satisfactorily account for the gold. The gold was either sold in the domestic market or misappropriated and therefore liable to duty and, in principle, to confiscation under Section 111(o). Given these findings and the alleged evasion of duty meeting the statutory threshold, the offences are cognizable and non bailable and custodial interrogation of the applicants was held to be necessary; consequently no case for pre arrest protection was made out. [Paras 13, 14, 15, 16, 17]

Application for protection under Section 438 Cr.P.C. rejected.

Anticipatory bail (Section 438 Cr.P.C.) - interim protection - gravity of offence - Prayer for extension of interim protection refused - HELD THAT: - The ad interim protection earlier granted by the Sessions Court was an administrative interim measure and not a reasoned order disposing of the anticipatory bail matter. Having considered the merits and the seriousness of the alleged misappropriation of 37 kgs of imported gold and the attendant evasion of duty, the High Court declined to extend interim relief. [Paras 18]

Extension of interim order refused.

Final Conclusion: The anticipatory bail application was dismissed; the Court held that the applicants failed to account for imported duty free gold and that custodial interrogation was necessary in view of alleged evasion and possible confiscation; the interim protection was not extended.

Penalty under Section 112(a) and 112(b) - Seizure under Section 123 - reasonable belief and burden of proof - Jurisdiction of the adjudicating authority - Limitation for issuance of show cause notice and COVID extension

Penalty under Section 112(a) and 112(b) - Liability of the appellant for penalty under Section 112(a) and 112(b). - HELD THAT: - The Tribunal examined the admitted facts, statements recorded and ensuing investigation. The appellant admitted association with the persons from whose possession the jewellery was seized and payments to the supplier. The Adjudicating Authority found contradictions in retraction and absence of corroborative markings or supplier records to substantiate the appellant's ownership of part of the seized jewellery. Given that the jewellery were held liable to confiscation and that the appellant had abetted and attempted to cover up by claiming ownership without proof, the factual matrix satisfied the elements of Section 112(a) and 112(b) as acts/omissions abetting goods liable to confiscation or dealing with goods which he had reason to believe were liable to confiscation. The Tribunal upheld the Adjudicator's holistic findings and reasoning that the appellant's conduct attracted penalty. [Paras 11, 12, 16, 18]

Penalty under Section 112(a) and 112(b) rightly imposed on the appellant and sustained.

Seizure under Section 123 - reasonable belief and burden of proof - Validity of seizure under Section 123 and the consequent burden on the claimants to prove goods were not smuggled. - HELD THAT: - The Tribunal accepted that interception occurred on specific intelligence, jewellery were recovered from a concealed compartment, and the person in possession could not satisfactorily establish bonafides at the time of seizure. In these circumstances invocation of Section 123 was appropriate and created a reasonable belief justifying seizure. Once seized under reasonable belief, the onus shifted to the person in whose possession it was recovered or the claimant to prove the goods were not smuggled or made from smuggled gold; the claimants failed to discharge that burden. The Tribunal therefore found no infirmity in applying Section 123 in the facts of the case. [Paras 3, 10, 17]

Seizure under Section 123 was valid and the burden rightly shifted to the claimants, who failed to discharge it.

Jurisdiction of the adjudicating authority - Whether the Adjudicating Authority had jurisdiction to adjudicate the matter. - HELD THAT: - The Tribunal reviewed the control and administrative orders and noted that the Additional Commissioner who adjudicated was under the administrative control of the Commissioner having jurisdiction over the geographic area. The Tribunal found no error in jurisdictional competence and held that adjudication by the Additional Commissioner did not vitiate proceedings. [Paras 13]

Adjudicating authority had jurisdiction; proceedings are not vitiated on that ground.

Limitation for issuance of show cause notice and COVID extension - Whether the show cause notice was issued beyond the statutory six-month period and thus invalid. - HELD THAT: - The Tribunal noted the period for issuance of the show cause notice and applied the general relaxation in limitation granted in the context of COVID by the Supreme Court, as referenced by the Adjudicator. Having regard to that extension, the show cause notice issued on 10.12.2021 fell within the extended period and did not breach the six-month limitation. Consequently, there was no infirmity in issuing the notice within time. [Paras 14]

Show cause notice was issued within the extended limitation period and is not time-barred.

Final Conclusion: The Tribunal upheld the Adjudicating Authority's findings: seizure under Section 123 was valid, the claimants failed to rebut the presumption, the Additional Commissioner had jurisdiction, the show cause notice was timely in view of COVID-related extension, and the penalty under Section 112(a) and 112(b) imposed on the appellant was sustained; the appeal is dismissed.

Transaction value under Section 14 of the Customs Act - Rejection of declared transaction value on existence of material to doubt - Examination by approved Chartered Engineer where load port Chartered Engineer Certificate is absent - Board Circular guidance on treatment of transaction value and examination of used goods

Transaction value under Section 14 of the Customs Act - Examination by approved Chartered Engineer where load port Chartered Engineer Certificate is absent - Rejection of declared transaction value on existence of material to doubt - Whether the adjudicating authority was justified in rejecting the declared transaction value and enhancing it on the basis of an approved Chartered Engineer's certificate where no load port Chartered Engineer Certificate was furnished - HELD THAT: - The Tribunal held that the imported goods were old and used and that in the absence of a load port Chartered Engineer Certificate it was not possible to reliably assess their value on the basis of the invoice alone. Reliance on the Board Circular permitting examination by an approved Chartered Engineer for used goods not accompanied by a load port certificate was appropriate. The Chartered Engineer's certificate, which took into account the used condition and depreciation, furnished a material basis to doubt the declared transaction value and to enhance valuation under the statutory scheme. The decisions cited by the appellant were found inapposite because those precedents addressed facts where the parameters under Section 14 were satisfied or where the factual matrix differed by the presence (or sufficiency) of evidentiary material; here the absence of the load port certificate rendered the Department's recourse to an approved Chartered Engineer permissible and the resulting enhancement sustainable.

The enhancement of the declared transaction value based on the approved Chartered Engineer's certificate was upheld and the appeal was dismissed.

Final Conclusion: The Tribunal found no infirmity in the adjudicating authority's rejection of the declared transaction value and its enhancement on the basis of the Chartered Engineer's certificate in the absence of a load port Chartered Engineer Certificate; the appeal is dismissed.

Classification of coated or impregnated textile fabrics - End-use not determinative for tariff classification - Coating visible to the naked eye attracts Chapter 59 - Requirement of material-specific testing for classification under Chapter 54 - Maintainability of revenue demand where importer has correctly discharged duty - Penalty for alleged mis-declaration where no mis-classification proved - Application of coordinate-bench precedent

Classification of coated or impregnated textile fabrics - End-use not determinative for tariff classification - Coating visible to the naked eye attracts Chapter 59 - Application of coordinate-bench precedent - Validity of Revenue's re-classification demand in respect of 181 consignments - HELD THAT: - The Tribunal followed its earlier decision in Commissioner of Customs (Port), Kolkata v. M/s. Umbar Marketing Private Limited and held that end-use alone cannot determine the tariff classification; the nature of the material and the presence and visibility of coating are determinative. Test reports lacked requisite details to establish that the fabrics fall within the specific sub-heading of Chapter 54 (high tenacity yarn requirement). Where the coating is visible to the naked eye, the fabrics fall within Chapter 59 and cannot be re-classified under Chapter 54 merely on the basis of alleged end-use as umbrella cloth. Applying the coordinate-bench precedent, the Tribunal dismissed the Revenue's appeal seeking re-classification and demand in respect of the 181 consignments. [Paras 7, 8]

Revenue's appeal dismissed; demand in respect of the 181 consignments not sustained.

Maintainability of revenue demand where importer has correctly discharged duty - Requirement of material-specific testing for classification under Chapter 54 - Penalty for alleged mis-declaration where no mis-classification proved - Challenge by importer to confirmation of duty, interest and penalty in respect of one consignment for which importer had declared and paid under Chapter 5407 - HELD THAT: - The Tribunal found that the Show Cause Notice erroneously treated all consignments as classified under CTH 5903, whereas for the single consignment the importer had maintained classification under CTH 5407 and paid the applicable duty. There was no mis-declaration or mis-classification in respect of that consignment. Consequently the order confirming duty, interest and penalty in respect of that consignment was set aside. In view of the absence of mis-declaration, the penalty imposed on the Director was also set aside. The importer was granted consequential relief, if any. [Paras 5, 9, 10]

Impugned order set aside insofar as it confirms duty, interest and penalty for the one consignment; penalty on the Director set aside; importer's appeal allowed with consequential relief.

Final Conclusion: The Tribunal dismissed the Revenue's appeal concerning 181 consignments and allowed the importer's appeals in respect of the single consignment (setting aside duty, interest and penalty and quashing the director's penalty), applying the coordinate-bench precedent that end-use alone is not decisive and coated fabrics visible to the naked eye fall under Chapter 59 unless material-specific testing establishes otherwise.

Onus on person from whom goods were seized under section 123 of Customs Act, 1962 - confiscation under customs law for goods smuggled vs. non-compliance with municipal packaging/statutory requirements - deeming/classification under Customs Tariff for rate of duty not extendable to expand s.123 applicability - limits of customs officers' jurisdiction outside 'customs area' to enforce other municipal statutes - judicial reduction of penalty where part of confiscation upheld

Deeming/classification under Customs Tariff for rate of duty not extendable to expand s.123 applicability - onus on person from whom goods were seized under section 123 of Customs Act, 1962 - Whether 'hand rolling tobacco', 'rolling paper' and 'filters' could be deemed to be 'cigarettes' for the purpose of attracting the onus under section 123 of the Customs Act, 1962 by recourse to General Rules for Interpretation of the Import Tariff. - HELD THAT: - The Tribunal held that the General Rules for Interpretation appended to the Customs Tariff Act, 1975 are linked to determination of rate of duty and cannot be stretched to extend the scope of section 123 of the Customs Act, 1962. Section 123 predates those General Rules and there is no legislative intent to allow tariff deeming to alter the substantive reach of the onus under section 123. The lower authorities erred in relying on tariff classification to 'deem' hand rolling tobacco, rolling paper and filters to be cigarettes so as to shift the statutory onus onto the appellant. [Paras 5]

The deeming by reference to the Import Tariff to treat those goods as 'cigarettes' for attracting the onus under section 123 is untenable and is rejected.

Limits of customs officers' jurisdiction outside 'customs area' to enforce other municipal statutes - confiscation under customs law for goods smuggled vs. non-compliance with municipal packaging/statutory requirements - Whether non-compliance with the Cigarettes and Other Tobacco Products Act, 2003 or similar municipal requirements could justify confiscation of the seized 'hand rolling tobacco', 'rolling paper' and 'filters' when seized outside a 'customs area'. - HELD THAT: - The Tribunal observed that the Cigarettes and Other Tobacco Products Act, 2003 is a municipal law enforceable by designated domestic authorities after import clearance and does not empower customs officers to confiscate goods outside the customs area for mere non-compliance with its stipulations. While packaging non-compliance may bear on import, jurisdiction to oversee compliance shifts to empowered domestic authorities post-clearance. Given that the seized items by their nature were not required to bear the same statutory markings as cigarettes, treating their non-compliance as a ground for confiscation amounted to misapplication of municipal law by customs authorities. [Paras 3, 6]

Confiscation of 'hand rolling tobacco', 'rolling paper' and 'filters' on the ground of non-compliance with municipal packaging/statutory requirements and consequent application of section 111 is void for lack of jurisdiction and set aside.

Confiscation under customs law for goods smuggled vs. non-compliance with municipal packaging/statutory requirements - judicial reduction of penalty where part of confiscation upheld - Whether confiscation of the seized foreign-origin cigarettes could be sustained and what should be the consequence for the penalty imposed on the appellant. - HELD THAT: - The Tribunal upheld the confiscation of the cigarettes of foreign origin as rightly within customs jurisdiction and supported by the record. However, because the confiscation and penalty previously imposed also encompassed goods whose confiscation was set aside (hand rolling tobacco, rolling paper and filters), it was inappropriate to maintain the penalty in full. In the interest of justice the Tribunal reduced the penalty to a specified quantum while leaving the confiscation of the cigarettes intact. [Paras 6, 7]

Confiscation of the cigarettes of foreign origin is upheld; confiscation and penalty insofar as related to the other seized items are set aside; the penalty is judicially reduced.

Final Conclusion: The appeal is allowed in part: confiscation and penalty pertaining to 'hand rolling tobacco', 'rolling paper' and 'filters' are set aside for lack of jurisdiction and improper reliance on tariff deeming; confiscation of foreign-origin cigarettes is upheld; the overall penalty is reduced and the appeal disposed accordingly.

Transaction value - rate of exchange for valuation at the time of presentation of bill of entry - High Seas Sales Agreement valuation - eligibility for exemption under Notification No.4/2006 in respect of goods used as fertilizers

Transaction value - rate of exchange for valuation at the time of presentation of bill of entry - High Seas Sales Agreement valuation - Whether the rate of exchange to be applied for valuation is the rate in force on the date of presentation of the Bill of Entry or the rate on the date of actual payment to the High Seas Seller, and whether the declared value in the Bill of Entry was to be accepted. - HELD THAT: - The tribunal accepted that the transaction value (price) in US dollars was USD 484.75 PMT both as declared in the Bill of Entry and as per the High Seas Sales Agreement, and that the only variation arose from the change in the rupee-dollar exchange rate between the date of presentation of the Bill of Entry and the date of actual payment. The proviso to Section 14 requires that such price be calculated with reference to the rate of exchange as in force on the date on which a Bill of Entry is presented. Accordingly, the exchange rate prevailing on 28.11.2011 (date of presentation) governs valuation for customs purposes, and the declared value in the Bill of Entry was correctly adopted. Earlier decisions of High Courts to the same effect were noted. The demand on account of a higher rupee amount arising solely from a later exchange rate was therefore incorrect. [Paras 4]

Declared transaction value computed using the exchange rate prevailing on the date of presentation of the Bill of Entry is to be accepted; differential demand based solely on a later exchange rate is set aside.

Eligibility for exemption under Notification No.4/2006 in respect of goods used as fertilizers - Whether the imported Muriate of Potash was eligible for exemption (nil CVD) under the Notification as goods used as fertilizers or in the manufacture of fertilizers. - HELD THAT: - The tribunal examined the Notification which extends benefit to goods used as fertilizers or in the manufacture of other fertilizers. The appellant, being a licensed manufacturer and distributor of fertilizers and having cleared the imported Muriate of Potash as fertilizer to farmers, falls within the scope of the Notification. There was no finding of suppression or misdeclaration warranting denial of the benefit. On that basis, the exemption under the Notification was held to be applicable and the demand of differential duty was not maintainable. [Paras 2, 4]

Appellant entitled to the benefit of the Notification; demand on account of differential duty is set aside.

Final Conclusion: Appeal allowed: valuation for customs purposes to be determined by the transaction value converted at the exchange rate prevailing on the date of presentation of the Bill of Entry; exemption under the fertilizer Notification upheld and differential duty demand set aside.

Dereservation of judgment - roster allocation - jurisdiction of Bench - propriety in judicial assignment - interim bail - grant of bail without reasons - grant of bail in offences under PMLA

Roster allocation - propriety in judicial assignment - grant of bail without reasons - interim bail - Validity of the portion of the impugned High Court order which granted interim bail to the first respondent on 26.06.2023. - HELD THAT: - The Bench that had dereserved the judgment on 21.04.2023 was not the roster Bench authorised to hear the matter on 26.06.2023; once the case was released for fresh hearing the Bench ought not to have passed an order on merits. The impugned order granted interim bail though (a) there was no prior prayer for bail on that date before that Bench, (b) the roster for criminal writ petitions was entrusted to another Bench on that day, and (c) the bail was granted without recording reasons and merely to "strike a balance" despite the offence being under the PMLA. These facts rendered the grant of bail improper on grounds of jurisdictional propriety and absence of reasoned adjudication; the Court accordingly held that the bail portion must be quashed and set aside. [Paras 6, 7, 8]

Set aside the part of the impugned order by which bail was granted to the first respondent.

Dereservation of judgment - roster allocation - jurisdiction of Bench - Procedure to be followed after setting aside the grant of bail and the status of further proceedings in the High Court. - HELD THAT: - The writ petition is to be heard afresh by the appropriate roster Bench. The first respondent is permitted to surrender within two weeks and, only after surrender, to file an application for interim relief/grant of bail before the roster Bench. The High Court is directed to entertain such application only after surrender and to give it necessary priority and decide it expeditiously, taking up the writ petition afresh. The Supreme Court clarified that it has not adjudicated the merits of entitlement to bail; that aspect is left open for the High Court to consider while hearing any fresh application. [Paras 4, 5, 9, 10]

First respondent to surrender within two weeks; may apply to the roster Bench for interim relief thereafter; writ petition to be heard afresh by the roster Bench and the question of bail to be decided on merits by that Bench.

Propriety in judicial assignment - Application for intervention (I.A. No. 33382 of 2024). - HELD THAT: - The Supreme Court found no reason to entertain the intervention application and dismissed it. [Paras 12]

I.A. No. 33382 of 2024 dismissed.

Final Conclusion: Partly allowed: the interim-bail portion of the High Court order dated 26.06.2023 is set aside for want of jurisdictional propriety and absence of reasons; the first respondent must surrender within two weeks and may seek interim bail before the roster Bench which will hear the writ petition afresh; merits of bail remain open. Pending applications disposed of; intervention application dismissed.

Reversal of cenvat credit - no credit taken where fully reversed - proportionate reversal of credit - travel beyond the scope of show cause notice - time-bar / limitation of demand - absence of suppression with intent to evade - legislative clarification in Rule 6(3AA) - recovery of proportionate cenvat credit

Reversal of cenvat credit - no credit taken where fully reversed - proportionate reversal of credit - Whether the confirmed demand based on alleged wrongful availment of cenvat credit is sustainable on merits where the appellant reversed the credit. - HELD THAT: - The Tribunal found that the appellant had not taken service tax credit for the earlier years and that the credit taken subsequently in 2008-09 and 2009-10 was reversed - in particular, the entire credit in respect of one supplier was reversed along with interest. The court applied the consistent line of authorities holding that reversal of input credit amounts to non-taking of credit and that reversal, even if subsequent, negates the availability of credit for the purposes of denying exemption/relief. The Tribunal also noted legislative intent reflected in the later insertion of Rule 6(3AA) which confirms recovery should be proportionate cenvat credit and not a blanket levy of 6%/8%, supporting the position that full reversal places the assessee in a favourable position. On this basis the Tribunal allowed the appeal on merits, holding the confirmed demand unsustainable. [Paras 10, 11, 15, 16, 17]

Allowed the appeal on merits and set aside the confirmed demand insofar as it rested on the cenvat credit entries that were reversed.

Travel beyond the scope of show cause notice - absence of allegation in show cause notice - Whether the Adjudicating Authority erred by relying on invoices from Orient Decorators when those invoices were not referred to in the show cause notice. - HELD THAT: - The Tribunal recorded that the show cause notice specifically referred to certain suppliers but contained no reference to Orient Decorators. The Adjudicating Authority, however, relied on Orient Decorators' invoices in the Order-in-Original to confirm demand, which the Tribunal characterised as travelling beyond the scope of the show cause notice. Reliance on material or allegations not put to the assessee in the SCN was therefore held to be impermissible and contributed to setting aside the impugned confirmation to that extent. [Paras 2, 3, 9]

Held that the Adjudicating Authority travelled beyond the scope of the show cause notice by relying on Orient Decorators' invoices not raised in the SCN.

Time-bar / limitation of demand - absence of suppression with intent to evade - Whether the confirmed demand for the extended period is barred by limitation or otherwise unsustainable because there was no suppression with intent to evade. - HELD THAT: - The Tribunal observed that the appellant had disclosed the cenvat credits in ER-1 returns, and the Chartered Accountant's certificate established that no credit was taken in the early years while later credits were proportionate and largely reversed upon detection. Given the disclosure and the fact that a full reversal (with interest) was made for the principal supplier and only a small proportionate credit remained, the Tribunal found no specific case of suppression with intent to evade excise/service tax. Consequently, the Department failed to justify sustaining the demand for the extended period, and the Tribunal held the confirmed demand for the extended period to be time-barred or otherwise not sustainable. [Paras 6, 10, 18]

Held that the confirmed demand for the extended period is not sustainable; appeal allowed on limitation grounds.

Final Conclusion: The Tribunal allowed the appeal both on merits and on limitation: the demand confirmed by the adjudicating authority is set aside (including for the extended period), and the miscellaneous application for filing the CA certificate is allowed; consequential relief to follow as per law.

Service tax on tour operator services - short term accommodation service - fees collected under statutory mandate by public/sovereign authority not leviable to service tax - application of Wildlife (Protection) Act, 1972 to entry/permit charges - CBEC Master Circular No.96/7/2007-S.T. - statutory fees not taxable as services

Service tax on tour operator services - fees collected under statutory mandate by public/sovereign authority not leviable to service tax - application of Wildlife (Protection) Act, 1972 to entry/permit charges - Appellant not liable to pay service tax on amounts collected for canter rides, movie shooting, camping and angling charges which are attributable to statutory/sovereign functions connected with entry permits and regulated visits to the National Park. - HELD THAT: - The Tribunal observed that the facts are identical to the decision of the Principal Bench in Dy. Conservator of Forest and Dy Field Director v. Commissioner of Central Excise, Jaipur (2018-TIOL-1904-CESTAT-DEL) and applied that precedent. Relying on the statutory scheme under the Wildlife (Protection) Act, 1972 and the CBEC Master Circular No.96/7/2007-S.T., the Tribunal treated sums collected in connection with entry permits and regulated access (including amounts credited to the State Government after reimbursing vehicle owners) as fees collected pursuant to statutory mandate rather than consideration for a commercial tour operator service. On that basis the Department was held not justified in demanding service tax on those collections and the impugned demand was set aside. [Paras 5, 6]

Demand of service tax on charges for canter rides, movie shooting, camping and angling set aside; appeal allowed.

Short term accommodation service - CBEC Master Circular No.96/7/2007-S.T. - statutory fees not taxable as services - Appellant not liable to pay service tax for providing short term accommodation in guest houses in the context of regulated tourism activities in the National Park. - HELD THAT: - The Tribunal found that, on the facts before it and by application of the aforementioned Principal Bench decision, the amounts received for short-term accommodation were part of the regulated framework connected to the statutory functions of the Forest Department and/or were otherwise covered by the reasoning that statutory fees are not taxable as services. Consequently, the demand insofar as it related to short-term accommodation was not sustainable. [Paras 5, 6]

Demand of service tax on short term accommodation set aside; appeal allowed.

Final Conclusion: On the facts and by applying the Principal Bench decision, the Tribunal set aside the service-tax demands (including interest/penalty aspects) in respect of the contested collections for the period December, 2009 to March, 2014 and allowed the appeal.

Abatement of appeal upon approval of resolution plan - binding effect of approved resolution plan on creditors including the Central Government - extinguishment of claims not part of the resolution plan - CESTAT functus officio after approval of resolution plan - entitlement to refund of pre-deposit where claim is extinguished by approved resolution plan

Abatement of appeal upon approval of resolution plan - CESTAT functus officio after approval of resolution plan - Present appeal abates once the NCLT approves the resolution plan and CESTAT becomes functus officio in respect of the appeal. - HELD THAT: - The Tribunal applied the ratio of the Hon'ble Supreme Court in Ghanashyam Mishra & Sons Pvt. Ltd. (Civil Appeal No. 8129 of 2019) and coordinate-bench decisions, and after noting that the NCLT approved the Resolution Plan on 08.02.2021, concluded that the appeals stand abated. The Tribunal recorded that once a resolution plan is approved, claims not incorporated in the plan stand frozen or extinguished and no proceedings in respect of such claims may be continued against the corporate debtor or the resolution applicant; consequently the adjudicatory forum (CESTAT) has no remaining jurisdiction to decide the appeal, rendering it functus officio. [Paras 7, 8]

Appeal disposed of as abated.

Binding effect of approved resolution plan on creditors including the Central Government - extinguishment of claims not part of the resolution plan - entitlement to refund of pre-deposit where claim is extinguished by approved resolution plan - Claims not included in an NCLT approved resolution plan are extinguished and creditors, including tax authorities, cannot continue proceedings; deposit made in appeal is refundable where the claim does not survive the approval of the plan. - HELD THAT: - Relying on the Supreme Court's conclusions reproduced in the order, the Tribunal accepted that on approval of a resolution plan under Section 31, claims as provided in the plan stand frozen and binding on all stakeholders, and claims not part of the plan stand extinguished. The Tribunal also referred to CBIC Instruction No.1083/04/2022-CX.9 (SOP) which classifies GST and Customs authorities as operational creditors required to submit claims during CIRP and notes that failure to do so leads to admission being barred and claims being extinguished. Further, the Tribunal noted the Supreme Court's decision in Ruchi Soya (paras extracted) which directs refund of pre-deposit where the claim does not survive the resolution plan, and therefore treated the refund principle as applicable. [Paras 5, 6]

Claims not part of the approved resolution plan are extinguished and the remedy of refund of pre deposit applies insofar as the claim does not survive the plan.

Final Conclusion: The Tribunal, applying Supreme Court precedent and coordinate-bench decisions and noting approval of the Resolution Plan by the NCLT, held that the appeals abate and the CESTAT is functus officio; claims not included in the approved plan stand extinguished and the principle permitting refund of pre deposit where the claim does not survive the plan applies.

Business Auxiliary Service - exemption under Notification No.8/2005 for production or processing of goods for or on behalf of the client using raw materials or semi-finished goods supplied by the client - manufacture under section 2(f) of the Central Excise Act, 1944 - job work / production or processing on behalf of client - limitation and suppression - extended period

Exemption under Notification No.8/2005 for production or processing of goods for or on behalf of the client using raw materials or semi-finished goods supplied by the client - Business Auxiliary Service - job work / production or processing on behalf of client - Whether the activity of strapping steel rolls performed by the appellant is liable to service tax as a Business Auxiliary Service or exempt under Notification No.8/2005 as production/processing of goods on behalf of the client using materials supplied by the client. - HELD THAT: - The Tribunal found that the appellant performed job work at the client's premises by strapping steel rolls using steel strips supplied by the client and that the ultimate goods were cleared on payment of excise duty by the client. Such activity falls within production/processing of goods on behalf of the client using materials supplied by the client and is squarely covered by the exemption in Notification No.8/2005. The Tribunal accepted the reasoning of the coordinate Bench (CESTAT, Hyderabad) that mere strapping or packing done at the client's factory does not by itself amount to a distinct manufacture under the inclusive definition in section 2(f) of the Central Excise Act; it is part of the client's production process but not a separate manufacture. As no service tax is leviable under the exemption, consequential interest and penalties also do not arise. The appeal was therefore allowed on merits.

Activity of strapping is exempt from service tax under Notification No.8/2005 and the confirmed demand on merits is set aside.

Limitation and suppression - extended period - manufacturer and service recipient filing returns - Whether the confirmed demand for the extended period can be sustained on the ground of suppression or limitation. - HELD THAT: - The Tribunal noted that the appellant was registered as a manufacturer and as a recipient of services and had been filing ER-1 and ST-3 returns. Given that the excise duty on the finished goods was paid by the clients after the job work and that the appellant honestly believed the exemption under Notification No.8/2005 applied, the Tribunal held that the appellant could not be fastened with suppression to sustain a demand for the extended period. On this basis the confirmed demand for the extended period was set aside on account of limitation.

Confirmed demand for the extended period is set aside on limitation grounds; suppression not established.

Final Conclusion: Appeal allowed: service tax demand set aside on merits by applying the exemption in Notification No.8/2005 to the job work of strapping, and the demand for the extended period is also set aside on limitation grounds with consequential relief as per law.

Construction of Residential Complex Services - taxability of advances prior to 01.07.2010 - promoter/builder/developer not liable prior to 01.07.2010 - composite works contract vs service simplicitor - abatement as indicium of composite contract - explanation to Section 65(105)(zzzh) w.e.f. 01.07.2010

Taxability of advances prior to 01.07.2010 - promoter/builder/developer not liable prior to 01.07.2010 - explanation to Section 65(105)(zzzh) w.e.f. 01.07.2010 - Demand of service tax on advances received by the appellant for construction of residential projects for the period prior to 01.07.2010 is unsustainable. - HELD THAT: - The Tribunal accepted the appellant's submission that, as clarified by the Board Circular No.108/2/2009 dated 29.01.2009 and by the statutory explanation introduced w.e.f. 01.07.2010, a promoter/builder/developer is not liable to pay service tax on advances received prior to 01.07.2010. The decision in M/s. Krishna Homes treating similar facts was followed, and the subsequent Tribunal precedent in Pragati Edifice was noted. Applying those authorities and the Board clarification, the demand raised for advances for the period in dispute cannot be sustained. [Paras 8, 10]

Demand of service tax on advances for the period August 2005 to October 2008 is set aside.

Construction of Residential Complex Services - composite works contract vs service simplicitor - abatement as indicium of composite contract - Demand of service tax under Construction of Residential Complex Services on amounts received for additional works in existing projects is not sustainable where the works are composite in nature. - HELD THAT: - The Tribunal accepted the appellant's contention that the additional works involved both supply of materials and rendition of services, i.e., were composite works contracts rather than pure service simplicitor. The Commissioner (Appeals) had allowed abatement, which the Tribunal treated as evidencing the composite nature of the contracts. Relying on the Tribunal's earlier reasoning in Real Value Promoters , which held that composite contracts are taxable as Works Contract Services and not under Construction of Residential Complex Services, the demand framed under Construction of Residential Complex Services was held to be unsupportable and was set aside. [Paras 11]

Demand under Construction of Residential Complex Services in respect of additional works is set aside; the works are composite and not taxable under CICS for the period in dispute.

Final Conclusion: The impugned order is set aside and the appeal is allowed: demands of service tax (and consequential interest/penalty) confirmed under Construction of Residential Complex Services for advances and for additional composite works for the period August 2005 to October 2008 are unsustainable; consequential reliefs, if any, shall follow.

Delay in adjudication and limitation - reasonableness requirement for exercise of statutory power within a reasonable time - interpretation of the expression "where it is possible to do so" in Section 11A(11) - constitutional guarantee of equality and fair adjudication under Article 14 - finality and certainty as object of limitation provisions in fiscal statutes

Delay in adjudication and limitation - constitutional guarantee of equality and fair adjudication under Article 14 - Adjudication and revival of proceedings after a period exceeding seven years from issuance of the show-cause notice dated 22.09.2014 was vitiated for inordinate and unreasonable delay and offended Article 14. - HELD THAT: - The Court held that where a statutory time-frame exists under Section 11A (1)/(4) - which prescribes maximum periods (taken as five years for present purposes) - adjudication must ordinarily be completed within that reasonable period. The adjudication in this case remained in suspended animation for over seven years despite the petitioners having filed replies and having appeared in personal hearings; resumed proceedings without any satisfactory explanation for the prolonged delay caused prejudice to the petitioners and rendered revival of the proceedings unreasonable. The Court relied on the principle that limitation and similar fiscal time-limits must be strictly construed to provide certainty and finality and that undue delay may impair an affected party's ability to defend itself. In the facts disclosed, the delay was neither justified by extraordinary circumstances beyond the control of the adjudicating authority nor excused by administrative necessity such as would make the statutory limits inapplicable. [Paras 13, 15, 17]

Impugned show-cause notice dated 22.09.2014 and the Order-in-Original dated 30.06.2022 were quashed as being vitiated by inordinate and unreasonable delay; proceedings set aside.

Interpretation of the expression "where it is possible to do so" in Section 11A(11) - reasonableness requirement for exercise of statutory power within a reasonable time - finality and certainty as object of limitation provisions in fiscal statutes - The phrase 'where it is possible to do so' in Section 11A(11) permits elasticity only in extraordinary situations beyond the control of the adjudicating authority and does not authorize indefinite extension of the statutory time limits. - HELD THAT: - The Court interpreted the qualifying phrase to mean that the statutory limits are not rendered otiose; the elasticity is confined to exceptional circumstances capable of justifying delay beyond the prescribed period. The legislative purpose of prescribing outer limits under Section 11A(11) is to ensure timely adjudication; words used by the legislature must be given effect and cannot be treated as surplusage. Authorities and precedents were applied to conclude that absence of a reasonable, extraordinary justification precludes extending the period to years, and that where no specific time is prescribed the adjudication should be completed within a reasonable period - the maximum statutory period under the special enactment being the yardstick of reasonableness. [Paras 9, 11, 15]

The expression 'where it is possible to do so' must be read restrictively; mere administrative delay cannot extend the time limits indefinitely.

Final Conclusion: Writ petition allowed; impugned show-cause notice dated 22.09.2014, Order-in-Original dated 30.06.2022 and the personal hearing notices dated 9/10.05.2022 are quashed and set aside.

Confiscation under Rule 25 of Central Excise Rules, 2002 - job-work/re-packing as manufacture - presumption of clandestine removal - stock reconciliation and accountability of principal - unrecorded stock not necessarily indicative of clandestine removal

Confiscation under Rule 25 of Central Excise Rules, 2002 - presumption of clandestine removal - unrecorded stock not necessarily indicative of clandestine removal - job-work/re-packing as manufacture - stock reconciliation and accountability of principal - Whether confiscation of packed pouches and imposition of penalty under Rule 25 was sustainable where the assessee performed job-work (re-packing/refilling) for IOCL and the packed goods were found within the factory but not recorded in the Daily Stock Register. - HELD THAT: - The Tribunal found that the appellant carried out job-work for IOCL, receiving bulk lubricants and converting them into smaller pouches, an activity characterised as job-work/re-packing as manufacture. The appellants were contractually and operationally responsible for reconciling stocks received from IOCL and accounting for quantities dispatched. The goods in question were physically present within the factory premises and were not seized in transit or found outside the factory without documents. There was no contention that the goods lacked IOCL markings. In these circumstances the Department's action rested on a presumption of clandestine removal arising merely from the fact that the packed pouches had not yet been entered in the Daily Stock Register. The Tribunal held that such a presumption, without more, is insufficient to justify confiscation under Rule 25 of Central Excise Rules, 2002, because unrecorded stock within the premises of a job-worker who is accountable to the principal does not necessarily indicate likelihood of removal without payment of duty. The Tribunal applied the ratio of the cited authority treating unexplained stock variation as not attracting adverse inference where the circumstances show control and accountability by the principal and the goods remain on premises. On these determinative findings the impugned confiscation and penalty were held unsustainable. [Paras 6, 8, 9]

The appeal is allowed; the confiscation and penalty imposed under Rule 25 are set aside and the impugned order is not sustainable.

Final Conclusion: The Tribunal allowed the appeal, holding that confiscation and penalty under Rule 25 could not be sustained where packed pouches belonging to the principal (IOCL) were found within the job-worker's premises and the Department's action was based on mere presumption of clandestine removal; consequential relief, if any, to follow as per law.

Denial of CENVAT credit on technical grounds - Entitlement to CENVAT credit where dutypaid inputs were received and used despite invoices being in the name of another entity - Demand and recovery of CENVAT credit under Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11A of the Central Excise Act - Imposition of penalty under Rule 15(2) of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act - Necessity of verification and observance of fair hearing before confirming demand

Denial of CENVAT credit on technical grounds - Entitlement to CENVAT credit where dutypaid inputs were received and used despite invoices being in the name of another entity - Necessity of verification and observance of fair hearing before confirming demand - Imposition of penalty under Rule 15(2) of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act - Sustainability of denial of CENVAT credit, demand, interest and penalties confirmed by adjudicating authorities when invoices were in the name of a related entity but inputs were received and used by the assessee and earlier Tribunal decision addressed the same controversy - HELD THAT: - The Tribunal examined the material including prior verification and earlier Tribunal findings in the assessee's case and concluded that denial of credit on the ground that dutypaid documents were in the name of M/s Johnson Matthey Chemicals Pvt. Ltd. was unsustainable where the inputs were in fact received and utilised by the assessee and the dutypaying documents bore the relevant names/addresses with proper accountal. The Tribunal noted that the Commissioner had mechanically confirmed the demand despite an Assistant Commissioner's verification favourable to the assessee and without affording further opportunity of fair hearing, relying on settled principle that demands cannot be confirmed merely on assumptions or technicalities once verifications contradict the notice. Applying that reasoning to the present proceedings, which arose from the same grounds and period, the Appellate Tribunal found no justification to sustain the denial of credit, demand, interest and penalties and set aside the impugned orders, allowing the appeals with consequential relief to the appellants. [Paras 4, 5]

Impugned orders denying CENVAT credit and confirming demand, interest and penalties set aside; appeals allowed.

Final Conclusion: The Tribunal allowed the appeals, set aside the adjudicating authorities' orders denying CENVAT credit and confirming demand, interest and penalties for the stated period(s), holding that denial on hypertechnical grounds was unsustainable in view of verification and earlier Tribunal findings, and granted consequential relief to the appellants.

Export of services - business auxiliary services - place of provision determined by location of recipient - cost sharing agreement - destination based consumption tax - Rule 3(1)(iii) of the Export of Service Rules

Export of services - business auxiliary services - place of provision determined by location of recipient - cost sharing agreement - Rule 3(1)(iii) of the Export of Service Rules - Whether the amounts received by the appellant from VISA/Mastercard are exigible to service tax as business auxiliary services or qualify as export of services and are not taxable. - HELD THAT: - The Tribunal found that the agreements between the appellant and VISA/Mastercard are cost sharing arrangements under which the appellant carried out promotional activities that benefit both parties. The services in question fall within Category III under Rule 3(1)(iii) of the Export of Service Rules, where the place of provision is determined by the location of the recipient rather than the place of performance. Applying the destination based character of service tax, and following the Tribunal's earlier decision in the appellant's own case which held the activity to be an export of services (an order the Department did not challenge), the impugned conclusion that the services were consumed in India and therefore taxable was unsustainable. The Tribunal relied on consistent authority that the recipient who requests and pays for the service determines destination; incidental use or benefit within India does not convert such services into taxable domestic supplies. For these reasons the demand raised under the head of business auxiliary services was held not maintainable and the impugned orders were set aside. [Paras 11, 12]

Impugned orders set aside; demand under business auxiliary services held not sustainable as the amounts qualify as export of services.

Final Conclusion: Appeals allowed; impugned orders set aside and demand under business auxiliary services discharged on the ground that the receipts from VISA/Mastercard qualify as export of services under Rule 3(1)(iii), with consequential relief as per law.

CENVAT credit - reversal of proportionate credit - retrospective amendment to CENVAT Credit Rules by Finance Act, 2010 - payment of interest as condition to avail retrospective benefit - refund procedure under Section 11B of the Central Excise Act, 1944 - statutory interest on delayed refund under Section 11BB of the Central Excise Act, 1944 - unjust enrichment

Retrospective amendment to CENVAT Credit Rules by Finance Act, 2010 - payment of interest as condition to avail retrospective benefit - reversal of proportionate credit - Whether the appellants are entitled to refund of the interest paid to avail the benefit of the retrospective amendment under the Finance Act, 2010. - HELD THAT: - The Tribunal recorded that the appellants paid interest at 24% and reversed proportionate credit in compliance with sub-rule introduced by the Finance Act, 2010 in order to avail the retrospective settlement mechanism. The adjudicating authority, in the de novo proceeding pursuant to the Tribunal's remand of 19.08.2010, accepted the reversal and the interest payment and set aside the demand. The Tribunal observed that payment of interest under Section 72 of the Finance Act, 2010 was a statutory condition to obtain the retrospective benefit and that the 2019 Tribunal order only made a general remark on the principle without directing refund of interest. The Tribunal therefore held that a subsequent passing remark cannot override the statutory mandate and the de novo adjudication which closed the matter; no evidence was shown that a refund claim for the interest had been filed after the 2011 de novo order. Accordingly, the claim for refund of the interest paid pursuant to the Finance Act, 2010 was rejected. [Paras 9]

Refund of the interest paid in compliance with the Finance Act, 2010 is not allowable and the rejection of the interest refund is upheld.

Refund procedure under Section 11B of the Central Excise Act, 1944 - statutory interest on delayed refund under Section 11BB of the Central Excise Act, 1944 - date of receipt of refund application as trigger for interest - Whether interest is payable on the excess CENVAT credit refund claim from three months after filing the refund application dated 17.06.2011 until actual payment on 21.11.2019. - HELD THAT: - Relying on the Supreme Court's reasoning in Ranbaxy Laboratories Ltd., the Tribunal applied Section 11BB of the Central Excise Act, 1944 and held that statutory interest becomes payable where a refund claimed under Section 11B is not paid within three months of receipt of the refund application. The appellants filed the refund application on 17.06.2011; therefore interest is payable from the expiry of three months from that date. The Tribunal set aside the order denying interest on the excess credit and held that interest is to be allowed for the period after the three-month window following the refund application. [Paras 11]

Order denying interest on the refund claim for the excess CENVAT credit is set aside and interest is allowable from three months after filing the refund application.

Final Conclusion: The appeals are disposed of by (a) upholding the rejection of refund of interest paid in compliance with the Finance Act, 2010 for availing the retrospective amendment, and (b) setting aside the order denying statutory interest on the refund claim for the excess CENVAT credit, with interest payable from three months after the refund application filed on 17.06.2011.

Taxability of works contract - determination of taxable turnover under Rule 10 - deduction for labour and other charges where books are not maintained - exclusion of land value from taxable turnover - inapplicability of other States' machinery provisions to KVAT scheme - remand for fresh quantification of deductible land value

Exclusion of land value from taxable turnover - taxability of works contract - Whether absence of a specific machinery provision in the KVAT Rules to exclude the value of undivided share of land renders levy of tax on sale of apartments treated as works contracts unenforceable. - HELD THAT: - The Court held that the statutory scheme under the KVAT Act and Rule 10 contemplates taxing the value of goods transferred in the execution of a works contract and prescribes deductions to arrive at the taxable turnover. The Rules do not contemplate inclusion of land value in the taxable turnover for goods transferred; accordingly, absence of a separate machinery provision to exclude land value does not render the charging machinery unworkable. It was incumbent on the assessees to declare contract receipts net of the portion attributable to undivided share of land and then apply the deduction formula under Rule 10. Reliance on machinery provisions of other States does not show that the KVAT scheme is inoperable. [Paras 11, 13]

Contention that levy is unenforceable for want of a machinery provision to exclude land value rejected; assessees required to demonstrate and exclude land component and then apply Rule 10.

Determination of taxable turnover under Rule 10 - deduction for labour and other charges where books are not maintained - Whether the Assessing Authority was justified in computing taxable turnover by applying Rule 10(2)(b) (table deductions) where books of account were not produced. - HELD THAT: - The Court noted that the assessees did not maintain trading accounts and that, in such circumstances, Rule 10(2)(b) authorises computation of taxable turnover by applying the prescribed percentages (table) where actual turnover is not ascertainable from books. The Assessing Authority's use of the statutory formula and allowance of deductions (including deduction for amounts on which subcontractors paid tax subject to Form 20H) was in accordance with the Rules. Consequently, the Tribunal was right in upholding use of Rule 10(2)(b) when books were not produced. [Paras 9, 11]

Assessment by applying Rule 10(2)(b) in absence of books sustained and upheld.

Remand for fresh quantification of deductible land value - computation of land element for exclusion - Whether the deduction of only 5% of the contract receipt towards land value by the Assessing Authority was justified, and if not, the appropriate remedial step. - HELD THAT: - The Court found that adopting a flat figure of 5% without any stated reasoning or methodology was arbitrary. It observed that in an earlier assessment year (2007-08) the Assessing Authority had applied a methodology (taking original land cost, applying appreciation and pro rata apportionment) which produced a substantially higher percentage. In the absence of documentary proof from the assessees as to the actual land component, the Court considered the 2007-08 methodology permissible for adoption by the Appellate Tribunal as a basis for fresh determination. Accordingly, the Court remanded the matters (OT Rev Nos. 105, 106 and 107 of 2019 relating to assessment years 2008-09 and 2009-10) to the Appellate Tribunal for fresh determination of taxable turnover in accordance with the observations in the judgment within six months. [Paras 14, 15]

5% deduction held arbitrary; matters remanded to the Appellate Tribunal for fresh determination of taxable turnover for the specified assessment years.

Inapplicability of other States' machinery provisions to KVAT scheme - Whether reliance on Maharashtra and Haryana VAT Rules (which contain specific mechanisms to exclude land value) renders the KVAT Rules inoperative or requires similar machinery in Kerala. - HELD THAT: - The Court examined the provisions of Maharashtra and Haryana Rules and noted they contain express mechanisms to determine and exclude land value. However, the KVAT scheme follows a different structure that does not include land value within the taxable turnover for goods transferred; absence of identical machinery in Kerala does not make the KVAT Rules defective. The Legislature can prescribe different procedural machinery; the appropriate remedy for any lacuna would be legislative or by the concerned forums, not to invalidate the KVAT charging scheme. [Paras 12, 13]

Contention based on other States' Rules rejected; absence of similar provisions in KVAT Rules does not vitiate levy under Kerala law.

Final Conclusion: The impugned Tribunal orders are upheld in principle: the levy on works contracts under the KVAT Act is sustainable and Rule 10 may be applied where books are not maintained. However, the assessment years 2008-09 and 2009-10 (OT Rev Nos. 105, 106 and 107 of 2019) are remanded to the Appellate Tribunal for fresh determination of the deductible land component and taxable turnover (the Tribunal to complete the exercise within six months); for all other purposes the revisions are dismissed.

Input tax credit repayable where goods are not used in the course of business - application of change of use / lost or destroyed doctrine under Section 19(1) - treatment of normal commercial loss (spillage, handling, ground loss, moisture, transit loss) - comparison of statutory schemes for denial of input tax credit

Application of change of use / lost or destroyed doctrine under Section 19(1) - input tax credit repayable where goods are not used in the course of business - Whether Section 19(1) of the KVAT Act applies to require repayment of input tax credit where goods claimed as inputs are lost or not used in the course of business - HELD THAT: - On plain reading Section 19(1) mandates repayment of input tax where goods on which input tax was deducted are not used in the course of business or are lost or destroyed. The provision contains no exception carved out for particular types of businesses or for losses arising in specified commercial circumstances. The petitioner's contention that losses due to spillage, transportation, handling, grading/separation or moisture are normal in the course of business and therefore do not fall within "lost or destroyed" is rejected. Comparative reference to the TNVAT scheme and its express sub clauses does not avail the petitioner because Section 19(1) of the KVAT Act itself requires reversal where goods are not used or are lost or destroyed, without exception. The Court accordingly affirms that Section 19(1) is attracted in the facts pleaded where goods to the extent claimed were not used in the course of business. [Paras 12, 13, 16, 19]

Section 19(1) applies and input tax credit is repayable where goods on which credit was taken are not used in the course of business or are lost or destroyed.

Treatment of normal commercial loss (spillage, handling, ground loss, moisture, transit loss) - application of input tax credit denial to assessed stock shortfall - Whether the authorities and Tribunal were correct in disallowing proportionate input tax credit for loss of iron ore (spillage, ground loss, transportation, handling, processing) for the tax period 2008-2009 - HELD THAT: - The audit findings and the books of account demonstrate a quantified loss of iron ore for the tax period 2008-2009 and show that proportionate input tax credit had been claimed on those goods. The Court finds it undisputed on the record that the stated quantity/value of iron ore was not used in the course of business to that extent. In those circumstances the revenue authorities and the Tribunal rightly applied Section 19(1) to direct repayment of the proportionate input tax credit. The petitioner's reliance on authorities dealing with manufacturing/invisible loss or different factual matrices was examined and distinguished; those decisions do not alter the statutory effect of Section 19(1) on the facts before this Court. [Paras 14, 15, 17, 21]

The authorities and the Tribunal rightly disallowed/required repayment of the proportionate input tax credit in respect of the assessed loss for 2008-2009.

Final Conclusion: The Revision Petition is dismissed. The question whether the Tribunal was right in not allowing input tax credit on normal loss/material loss due to spillage, ground loss and during transportation is answered in the affirmative in favour of the revenue; Section 19(1) of the KVAT Act applies and repayment of the proportionate input tax credit for the assessed loss in 2008-2009 is warranted.

Power to summon under Section 81 of the TNVAT Act - Applicability of summons in Form PP to an assessee - Deemed assessment under Section 22(2) of the TNVAT Act - Commissioner's selection for detailed scrutiny under Section 22(3) and Rule 10(11) - Stratified random sampling for selection of assessments - Assessing officer's independent power to call for information despite deemed assessment

Power to summon under Section 81 of the TNVAT Act - Applicability of summons in Form PP to an assessee - Whether a summons in Form PP issued under Rule 16(1) (implementing Section 81) can be addressed to an assessee or is confined to a third party - HELD THAT: - The Court held that Section 81 is a generic and wide provision granting the assessing authority and specified officers the powers of a civil court to summon persons and compel production of documents. That power is not confined to third parties and expressly includes dealers; consequently a summons in Form PP issued under Rule 16(1) implementing Section 81 can be lawfully addressed to an assessee. The Court relied on the breadth of clauses (a) and (b) of Section 81 which empower summoning and compelling production of documents and noted Sub-sections (2) and (3) which further enable enforcement and calling for information by officers of the Commercial Taxes Department. [Paras 16]

Summons in Form PP under Rule 16(1)/Section 81 can be issued to an assessee.

Commissioner's selection for detailed scrutiny under Section 22(3) and Rule 10(11) - Stratified random sampling for selection of assessments - Whether the selection mechanism under Section 22(3) and Rule 10(11) displaces or limits the power of assessing officers under Section 81 - HELD THAT: - The Court explained that Section 22(3) and Rule 10(11) implement a scheme by which the Commissioner selects, by suitable stratified random sampling, up to twenty per cent of assessments for detailed scrutiny and informs assessing authorities. That scheme supplements tax administration by ensuring random checks and potential revision of selected assessments. However, this selection mechanism is in addition to, and does not eclipse, the independent and wider powers conferred on assessing officers by Section 81 to summon persons and documents. Thus the existence of a Commissioner-led selection process does not negate the assessing officer's statutory authority to call for accounts. [Paras 13, 14, 19, 20]

Selection under Section 22(3)/Rule 10(11) is additional and does not restrict the independent power of assessing officers under Section 81.

Deemed assessment under Section 22(2) of the TNVAT Act - Assessing officer's independent power to call for information despite deemed assessment - Whether an assessing officer is precluded from calling for records from a dealer whose assessment is 'deemed to have been completed' under Section 22(2) - HELD THAT: - The Court held that a deemed completion of assessment under Section 22(2) does not ipso facto preclude an assessing officer from exercising powers under other provisions such as Section 27, Section 25 or Section 81. The assessment is deemed complete only if the return filed complied with all statutory requirements; whether those requirements were met and whether the return's declarations are correct can be tested only by calling for records. Refusal to furnish particulars would impede assessment, which the statute does not contemplate. The Court therefore upheld the validity of summons aimed at ascertaining compliance and correctness despite the deemed completion date. [Paras 21, 25, 26]

Deemed completion under Section 22(2) does not bar an assessing officer from summoning records under statutory powers; summons may be issued to verify compliance and correctness of returns.

Final Conclusion: The writ petitions challenging the Form PP summons were dismissed: Section 81 empowers issuance of summons to a dealer, the Commissioner's selection under Section 22(3)/Rule 10(11) is supplemental and does not negate the assessing officer's powers, and deemed assessment under Section 22(2) does not preclude calling for records to verify compliance; accordingly the impugned summons were sustained.

Assessment of compensation - proof of income from multiple sources - just and fair compensation - future prospects - deduction for personal expenses - multiplier method - interest from date of filing

Proof of income from multiple sources - assessment of compensation - Income of the deceased to be assessed at Rs.35,000 per month for purposes of computation of compensation. - HELD THAT: - The Court examined the material on record showing that the deceased derived earnings from agriculture (sale of paddy and bananas), supply of milk and coconuts to a school (Ex. P12 and Ex. P13 and PW3's evidence) and contracts (receipts from works contract). The Court accepted that the deceased was multitasking and not in a fixed salaried job and observed that after his death the land was lying fallow, indicating loss of agricultural income. Finding the High Court's bifurcation and conservative estimate unduly low and the Tribunal's higher figure excessive, the Court, as a reasonable assessment based on the available evidence and the nature of activities, fixed monthly income at Rs.35,000 for computation of compensation. [Paras 11, 12, 13, 14, 15]

Income fixed at Rs.35,000 per month.

Future prospects - deduction for personal expenses - multiplier method - just and fair compensation - Compensation computed by adding 10% for future prospects, deducting one-fourth for personal expenses, and applying multiplier 11 to arrive at total compensation of Rs.38,81,500. - HELD THAT: - Applying the accepted principles for computation of loss of dependency, the Court added 10% to the monthly dependency for future prospects and deducted one-fourth towards personal expenses. Considering the deceased's age of 52 years, the Court applied multiplier 11 (as per Sarla Verma and subsequent authority) and calculated the principal heads: monthly dependency after adjustments, multiplication by 12 and by 11, and inclusion of conventional heads (loss of estate, funeral expenses, loss of consortium). The resulting aggregate compensation was assessed at Rs.38,81,500. [Paras 15, 16]

Total compensation assessed at Rs.38,81,500.

Interest from date of filing - modification of appellate order - Award modified and ordered to bear interest at 8% per annum from the date of filing of the claim petition until realization; the High Court order is modified accordingly. - HELD THAT: - The Court confirmed that interest at the rate of 8% per annum was payable from the date of filing of the claim petition until realization and directed modification of the High Court's judgment to the extent of reassessing and enhancing compensation to the amount determined by this Court. The remainder of the High Court order was left intact subject to this modification. [Paras 17]

Award modified; interest @8% from date of filing directed.

Final Conclusion: Appeal allowed in part; the High Court judgment is modified by reassessing the deceased's monthly income at Rs.35,000 and awarding total compensation of Rs.38,81,500 with interest at 8% per annum from the date of filing of the claim petition until realization.

Section 138 of the Negotiable Instruments Act, 1881 - limitation bar to underlying debt - jurisdiction under Section 482 of the Code of Criminal Procedure, 1973 - presumption under Sections 118 and 139 of the Negotiable Instruments Act

Section 138 of the Negotiable Instruments Act, 1881 - limitation bar to underlying debt - jurisdiction under Section 482 of the Code of Criminal Procedure, 1973 - High Court's quashing of summons on the ground that the underlying debt was time-barred at the stage of exercising jurisdiction under Section 482 CrPC. - HELD THAT: - The Court examined whether the High Court was justified in quashing the summons issued in proceedings under Section 138 of the N.I. Act on the principal premise that the underlying debt was time-barred as on the date of the summoning order. Relying on the proposition that the classification of an underlying debt as barred by limitation is a mixed question of law and fact, the Court held that such a determination ordinarily requires evidence and cannot be conclusively adjudicated in a Section 482 CrPC petition at the stage of summons. The judgment referred to the reasoning in Yogesh Jain v. Sumesh Chadha where it was observed that once a cheque is issued and dishonoured and statutory notice issued, it is for the accused to dislodge the statutory presumptions under Sections 118 and 139 of the N.I. Act, and that whether the cheque was issued for a time-barred debt is prima facie a matter of evidence not amenable to final determination in a Section 482 petition. Applying that legal position, the Court found that the High Court erred in deciding the limitation issue at the summoning stage and in quashing the proceedings on that basis. [Paras 6, 7, 8]

High Court's order quashing the summoning order and the underlying complaint was set aside and the criminal proceedings were restored to the Trial Court for adjudication.

Final Conclusion: Appeal allowed; impugned High Court order quashing the summons and complaint on the ground of limitation set aside and CC No. 6437 of 2017 restored to the Trial Court for further proceedings; no order as to costs.

Validity of auction sale under SARFAESI Act - service of auction notice under Security Interest (Enforcement) Rules, 2002 - effect of non-compliance with Rule 9(1) of the 2002 Rules - confirmation of sale to third party auction purchaser - exercise of equitable jurisdiction under Article 142 of the Constitution

Validity of auction sale under SARFAESI Act - service of auction notice under Security Interest (Enforcement) Rules, 2002 - effect of non-compliance with Rule 9(1) of the 2002 Rules - Whether the auction sale held on 31.12.2012 and the subsequent sale in favour of the auction purchaser can be upheld despite absence of proof of personal service of the auction notice dated 30.11.2012. - HELD THAT: - The Court found that although the appellant-bank did not maintain documentary proof of service of the notice dated 30.11.2012 and there was therefore a lapse in compliance with the procedural requirement, the respondent was demonstrably aware of the auction notice. The respondent filed a writ petition within 14 days, participated in the auction, had earlier entered into an agreement with the eventual auction purchaser and accepted having read the newspaper notice. The auction purchaser took possession, executed a sale deed and constructed flats which were transferred to third parties. Balancing the procedural lapse against these facts and the commercial realities of transfers to bona fide third parties, the Court concluded that the lack of proof of service did not render the sale incapable of confirmation. Consequently the High Court's order quashing the auction and the appellate orders upholding that quashing were set aside and the sale in favour of the auction purchaser was upheld and confirmed.

The auction sale is confirmed; impugned orders quashing the auction are set aside and the sale in favour of the auction purchaser is upheld.

Exercise of equitable jurisdiction under Article 142 of the Constitution - confirmation of sale to third party auction purchaser - What equitable relief, if any, should be granted to the respondent in view of the procedural lapse by the bank and the confirmed sale to the auction purchaser? - HELD THAT: - Noting the bank's procedural lapse on service but also the respondent's awareness of the auction and the subsequent bona fide dealings by the auction purchaser, the Court exercised its plenary powers under Article 142 to achieve complete justice between the parties. As a pragmatic and final resolution of competing equities, the Court directed the appellant-bank to pay a specified lump sum to the respondent as full and final settlement; the bank may deduct tax at source and must furnish the certificate. A timeline for payment was fixed and interest was stipulated in the event of default. This remedy was granted notwithstanding confirmation of the sale to the auction purchaser, in order to balance the respondent's prejudice arising from the procedural defect with the commercial positions of the auction purchaser and third parties.

The bank is directed, under Article 142, to pay the respondent a lump sum in full and final settlement, with provisions for TDS and interest on delayed payment; this equitable relief resolves the respondent's claim while the confirmed sale stands.

Final Conclusion: The appeals are allowed: the High Court order quashing the auction is set aside and the sale in favour of the auction purchaser is confirmed; exercising Article 142 the Court directed the bank to pay a lump sum to the respondent as full and final settlement, with prescribed provisions for tax deduction and interest on delayed payment; no order as to costs.

Rebuttable presumption under Section 139 of the Negotiable Instruments Act - Standard of proof - preponderance of probabilities to rebut the presumption - Requirement to prove existence of a legally recoverable debt/consideration - Competence of power-of-attorney holder as witness - Admissibility and production of account statements pursuant to an order under Section 91 Cr.P.C.

Requirement to prove existence of a legally recoverable debt/consideration - Competence of power-of-attorney holder as witness - The complainant failed to establish existence of a legally recoverable debt or consideration in relation to the cheque and the power-of-attorney witness was not in a position to prove the underlying transaction. - HELD THAT: - The trial material and Exhibits were examined against the pleaded case that a loan of Rs.70,000 was advanced under a hire purchase agreement and that Exhibit P2 cheque was towards part payment. Exhibit P7 (hire purchase agreement) does not demonstrate that such a loan was advanced; it records hire terms and instalments without specifying default date or amount due. PW1, a power-of-attorney holder, admitted in cross-examination that he could not depose to the circumstances under which Exhibit D1 statutory notice was issued, nor to the entire transaction between the parties, and lacked personal knowledge of key matters. The complainant also failed to produce the statement of accounts relating to Exhibit P7 despite an order under Section 91 Cr.P.C. Taken together, the documentary record and PW1's admissions do not constitute satisfactory proof of the existence or quantum of a legally recoverable debt or consideration supporting the cheque. [Paras 8, 9, 10, 16, 17]

The complainant has not proved the existence of a legally recoverable debt or consideration and the testimony of the power-of-attorney witness was insufficient to establish the transaction.

Rebuttable presumption under Section 139 of the Negotiable Instruments Act - Standard of proof - preponderance of probabilities to rebut the presumption - Admissibility and production of account statements pursuant to an order under Section 91 Cr.P.C. - The accused succeeded in rebutting the statutory presumption under Sections 118/139 of the Negotiable Instruments Act on the basis of preponderance of probabilities. - HELD THAT: - The court applied the settled principle that once cheque execution is admitted, a presumption arises under Section 139 but it is rebuttable on a preponderance of probabilities. The authorities cited establish that probable defences or material consistent with the accused's innocence may suffice to rebut the presumption. On re-appraisal, material on record - including PW1's inability to account for the transaction, absence of account statements notwithstanding an order under Section 91 Cr.P.C., and the accused's specific plea that instalments were paid - made the existence of the debt doubtful. Consequently the evidentiary burden imposed by S.139 was overcome on the balance of probabilities and the finding of acquittal in the appellate court is justified. [Paras 11, 12, 14, 15, 18]

The accused has rebutted the statutory presumption on the preponderance of probabilities and is entitled to acquittal; the appellate court's acquittal is affirmed and the appeal is dismissed.

Final Conclusion: On re-appreciation of the evidence the High Court finds that the complainant failed to prove a legally recoverable debt and that the accused successfully rebutted the statutory presumption under Sections 118/139 of the Negotiable Instruments Act on the preponderance of probabilities; the appellate court's acquittal is upheld and the appeal is dismissed.