TaxTMI Updates e-Newsletter
Jun 12,2025

Issues: Whether the petitioner was entitled to restoration of GST registration subject to compliance with statutory formalities and payment of returns, tax, penalty and interest; and whether the Court should decide the maintainability of the writ petition in the face of an alternative appellate remedy.

Analysis: The petitioner's registration had been cancelled and the statutory appeal was dismissed as time-barred. The Court followed its earlier orders in similar matters and, on the facts of the case, directed the petitioner to approach the Competent Authority for restoration of the GST number within seven days. The restoration was made subject to completion of requisite formalities and to the petitioner filing returns and depositing tax, penalty and interest within the stipulated time. The Court expressly declined to decide the broader legal objection regarding availability of an alternative remedy under Article 226.

Conclusion: The petitioner obtained a conditional direction for restoration of GST registration, while the challenge on maintainability under Article 226 was left undecided.

Final Conclusion: The writ petition was disposed of with a conditional direction to restore registration on compliance with tax-related obligations, without ruling on the alternative-remedy objection.

Ratio Decidendi: In cases of cancellation of GST registration, the Court may direct restoration subject to timely compliance with filing and payment obligations, while leaving the question of alternative remedy open if it is not adjudicated.

Issues: Whether parallel proceedings under the GST enactments could be continued by different authorities for the same cause, and what consequential directions should follow regarding the petitioner's premises and the investigation.

Analysis: The proceedings had already been initiated by the Central Goods and Services Tax authority under Section 67 of the GST enactments. In that situation, the State tax authority could not independently proceed in parallel on the same cause for the same year. The proper course was to treat the Central authority as the competent authority to carry the matter forward under Section 70, while permitting the State to assist without commencing independent proceedings. The petitioner was also given liberty to seek de-sealing before the concerned respondent, and the seals were directed to be handed over so that the matter could proceed in accordance with law.

Conclusion: Parallel proceedings by the State authority were not permitted, and the Central Goods and Services Tax authority alone was to proceed with the matter, with the State confined to assistance. The petitioner was also granted liberty to seek de-sealing of the premises in accordance with law.

- Whether the cancellation of GST registration under Section 29(2)(c) of the CGST Act, 2017, for non-filing of returns for a continuous period of six months or more, was valid in the present case.

- Whether the procedure prescribed under Rule 22 of the CGST Rules, 2017, particularly the issuance of a show cause notice and opportunity of personal hearing, was complied with before cancellation of the registration.

- Whether the petitioner, despite non-filing of returns, can seek restoration of GST registration by furnishing all pending returns and making full payment of tax dues along with interest and late fees as per the proviso to sub-rule (4) of Rule 22.

- The extent of authority and jurisdiction of the proper officer to drop cancellation proceedings and restore registration upon compliance with statutory requirements.

- The applicability of limitation periods under Section 73(10) and Section 44 of the CGST Act in the context of restoration and arrears payment.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Cancellation of GST Registration under Section 29(2)(c) for Non-Filing of Returns

The legal framework mandates that a registered person who fails to furnish returns for a continuous period of six months is liable to have their registration cancelled under Section 29(2)(c) of the CGST Act, 2017. The Court noted that the petitioner had not submitted GST returns for over six months, which is a statutory ground for cancellation.

The Court observed that the impugned order dated 23.01.2023 was issued by the Superintendent, cancelling the petitioner's registration on this ground. The petitioner admitted non-compliance due to reasons beyond control but expressed willingness to comply forthwith.

Hence, the cancellation was legally permissible under the statute, subject to procedural safeguards.

Issue 2: Compliance with Procedural Requirements under Rule 22 of the CGST Rules, 2017

Rule 22 prescribes the procedure for cancellation of registration, including issuance of a show cause notice in FORM GST REG-17 with a seven working day period to respond, submission of reply in FORM REG-18, and issuance of cancellation order in FORM GST REG-19. The Rule also provides for dropping proceedings if the reply is satisfactory or if the person furnishes all pending returns and pays dues (proviso to sub-rule (4)).

The petitioner contended that although a show cause notice was issued, no date for personal hearing was notified, raising procedural irregularity concerns. However, the Court did not find this omission fatal, given the statutory provisions do not explicitly mandate personal hearing but require an opportunity to show cause.

The Court emphasized that the proper officer must follow the procedure laid down in Rule 22, including issuing notices and considering replies before cancellation.

Issue 3: Authority of Proper Officer to Drop Proceedings and Restore Registration upon Compliance

The proviso to sub-rule (4) of Rule 22 is pivotal. It states that if the person furnishes all pending returns and makes full payment of tax dues with applicable interest and late fees, the proper officer "shall drop the proceedings and pass an order in FORM GST REG-20."

The Court interpreted this proviso as conferring authority on the officer to restore registration if the petitioner complies with these conditions, even after cancellation under Section 29(2)(c).

This interpretation aligns with the remedial purpose of GST laws to encourage compliance rather than impose harsh penalties without recourse.

Issue 4: Restoration of GST Registration and Time Limit for Filing Revocation Application

The petitioner was unable to file an application for revocation of cancellation within the prescribed time limit. The Court acknowledged this but held that the petitioner could still approach the proper officer within two months from the date of the judgment to seek restoration by furnishing all pending returns and making payment of dues.

The Court directed the concerned authority to consider such application expeditiously and in accordance with law, thereby providing a practical remedy despite the lapse of the original time limit.

Issue 5: Computation of Limitation Periods under Sections 73(10) and 44 of the CGST Act

The Court clarified that the limitation period under Section 73(10) for recovery of tax dues shall be computed from the date of this judgment, except for the financial year 2024-25, for which Section 44 applies. This ensures clarity on the timeline for assessment and recovery proceedings post-restoration.

The petitioner remains liable to pay arrears including tax, penalty, interest, and late fees, consistent with the statutory provisions.

Treatment of Competing Arguments

The petitioner argued for leniency and restoration based on willingness to comply and procedural lapses, while the respondent relied on strict statutory provisions for cancellation due to non-filing. The Court balanced these by upholding the statutory cancellation but allowing restoration upon compliance, emphasizing procedural fairness and statutory authority.

3. SIGNIFICANT HOLDINGS

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

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

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

Core principles established include the mandatory procedural safeguards under Rule 22 before cancellation, the remedial power of the proper officer to restore registration upon compliance, and the recognition of serious civil consequences entailed by cancellation, mandating fair opportunity for restoration.

Final determinations are that the cancellation under Section 29(2)(c) was valid but not irrevocable; the petitioner has a statutory right to seek restoration by fulfilling pending compliance; and the proper officer is obliged to consider such restoration applications expeditiously and lawfully.

Issues: Whether the adjudication order was without jurisdiction on the grounds that the subsequent show cause notice was issued after limitation and that the final demand travelled beyond the original show cause notice.

Analysis: The petitioner challenged the impugned adjudication on the basis that the original notice proposed only IGST demand, while the later notice introduced enhanced demands including CGST and SGST after the stated limitation period. It was further contended that the impugned order dropped the IGST demand but imposed substantial CGST and SGST demands far beyond the scope of the original notice. The matter was found to require consideration, and counter affidavit was called for.

Outcome: Interim protection was granted by staying the effect and operation of the adjudication order until the next date of listing.

The core legal questions considered by the Court are:

(a) Whether the Assessing Officer committed a violation of sub-section (4) of Section 75 of the Central Goods and Services Tax Act, 2017 ("CGST Act") by passing an order of assessment without affording an opportunity of personal hearing to the petitioner, despite the order being adverse to the petitioner's interest;

(b) Whether the mandate of sub-section (4) of Section 75 of the CGST Act is mandatory, requiring strict compliance in cases where an adverse order is contemplated, even in the absence of a written request for personal hearing by the assessee;

(c) Whether the alternate remedy available under the law, including appellate proceedings, can be invoked where the initial assessment order was passed without affording the mandatory personal hearing;

(d) Whether the appellate authority erred in rejecting the petitioner's appeal on the ground of limitation without appreciating the violation of the statutory mandate and the civil consequences resulting from the impugned order.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) & (b): Whether the Assessing Officer violated sub-section (4) of Section 75 of the CGST Act by not affording personal hearing when an adverse order was passed, and whether such mandate is mandatory

The Court examined the provisions of Section 75 of the CGST Act, which governs the procedure for determination of tax by the Assessing Authority. Sub-section (4) specifically requires the Assessing Authority to afford an opportunity of personal hearing either when the assessee requests it in writing or when an adverse order is contemplated against the assessee. The Court emphasized that the provision is couched in mandatory terms and compliance is imperative.

In interpreting the statutory mandate, the Court relied on authoritative precedents, including the recent judgment of the Supreme Court in the case of Independent Sugar Corporation Ltd. v. Girish Sriram Juneja & Ors., where it was held that "where a statute requires one to do a certain thing in a certain manner, it must be done in that particular manner or not at all." The Court also extracted from the judgment in A. R. Antulay v. Ramdas Sriniwas Nayak the principle that "other methods of performance are necessarily forbidden."

Further, the Court cited Sharif-ud-Din v. Abdul Gani Lone to reinforce that if the object of a law would be defeated by non-compliance, the provision must be regarded as mandatory and failure to comply attracts the specified consequence. This establishes that the opportunity of personal hearing is a procedural safeguard designed to protect the assessee's civil rights and cannot be dispensed with when an adverse order is contemplated.

Applying these principles, the Court found that since the Assessing Officer had passed an order adverse to the petitioner's interest, the statutory mandate to afford personal hearing was triggered mandatorily, regardless of whether the petitioner made a written request for the same. The Assessing Officer's failure to comply with this requirement amounted to a violation of the CGST Act.

Issue (c): Availability and invocation of alternate remedy despite non-compliance with mandatory procedure

The State's counsel relied on an earlier decision of the High Court in a different writ petition to contend that the petitioner should pursue alternate remedies under the law instead of challenging the assessment order on procedural grounds. However, the Court distinguished the facts of the present case from the earlier decision, noting that in the prior case, the Court did not enter into the merits of the mandatory nature of sub-section (4) of Section 75 and relegated parties to alternate remedies.

In the instant matter, the petitioner had already availed the alternate remedy by approaching the Appellate Authority, which rejected the appeal solely on the ground of limitation without addressing the substantive issue of non-compliance with the mandatory hearing requirement. The Court emphasized that where an order has civil consequences, it must be passed only after affording the opportunity of hearing, and the failure to do so cannot be cured merely by invoking alternate remedies.

Issue (d): The appellate authority's rejection of the appeal on limitation grounds without appreciating the procedural violation and civil consequences

The Court found that the Appellate Authority erred in dismissing the petitioner's appeal on the ground of limitation without considering the fundamental violation of the statutory mandate under sub-section (4) of Section 75. The Court underscored that the impugned order had civil consequences affecting the petitioner's rights, and thus, procedural safeguards must be strictly adhered to.

The Court observed that the failure to afford personal hearing before passing an adverse order vitiates the order itself, and the appellate authority's refusal to entertain the appeal on limitation grounds, without addressing this core procedural lapse, was legally unsustainable.

3. SIGNIFICANT HOLDINGS

The Court held:

"Where a statute requires one to do a certain thing in a certain manner, it must be done in that particular manner or not at all."

"The scheme of the Act mandates that, in either of the two circumstances, a personal hearing is required to be given to the party, who either makes a written request, or against whom the authorities contemplate an adverse order."

"No order, affecting civil rights of a citizen, can be passed without affording an opportunity of hearing."

"The Appellate Authority has failed to appreciate the settled position in law that no order, affecting civil rights of a citizen, can be passed without affording an opportunity of hearing, and also failed to appreciate the fact that the mandate, and the scheme of the Act itself, has been violated by the concerned authorities."

Accordingly, the Court set aside the impugned order of assessment and remitted the matter back to the Appellate Authority for reconsideration in accordance with law, ensuring compliance with the mandatory requirement of affording an opportunity of personal hearing before passing any adverse order.

The core legal questions considered by the Court are:

• Whether the adjudicating authority under the GST Act properly considered the petitioner's detailed reply and supporting documents submitted in response to the show-cause notice alleging excess input tax credit (ITC) availed during the financial year 2020-21;
• Whether the failure to consider the petitioner's reply and documents constitutes a violation of the principles of natural justice;
• Whether the writ petition challenging the Order-in-Original and Summary Order passed under Section 73 of the GST Act is maintainable, given the availability of alternative remedies under the GST Act;
• Whether the impugned demand and penalty orders are sustainable in law in the absence of proper adjudication after considering the petitioner's submissions;
• The procedural and substantive correctness of the adjudication process under the GST Act, specifically compliance with principles of natural justice and jurisdictional facts.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Consideration of Petitioner's Reply and Supporting Documents

Relevant Legal Framework and Precedents: The GST Act mandates adjudication proceedings under Section 73 for recovery of tax, interest, penalty, and other amounts when tax credit is found to be wrongly availed. Principles of natural justice require that the adjudicating authority consider all relevant submissions and documents filed by the party before passing an order. The Court relied on a precedent from the Delhi High Court in a similar matter involving excess ITC allegations, where non-consideration of replies led to setting aside the order and remand for fresh adjudication.

Court's Interpretation and Reasoning: The Court scrutinized the Order-in-Original dated 20.02.2025, particularly paragraph 4, which stated that no defense reply was submitted by the petitioner. However, the petitioner had uploaded a detailed reply along with necessary supporting documents on 20.12.2024 in Form GST DRC-06. The Court found this to be a glaring error as the adjudicating authority clearly ignored the petitioner's response despite it being available on record before the order was passed.

Key Evidence and Findings: The petitioner's reply to the show-cause notice, including reconciliation statements and supporting documents, was submitted online within the stipulated time. The adjudicating authority's own record acknowledged the petitioner's opportunity for personal hearing but failed to consider the uploaded reply. The learned Senior Standing Counsel did not dispute the submission of these documents.

Application of Law to Facts: Ignoring the petitioner's reply and documents amounted to non-adherence to the principles of natural justice, as the petitioner was deprived of a fair opportunity to defend itself. The Court emphasized that the adjudicating authority must consider all relevant submissions before passing an order under Section 73.

Treatment of Competing Arguments: While the opposing counsel argued for dismissal based on availability of alternative remedies, the Court prioritized the fundamental principle of natural justice, which cannot be bypassed by procedural technicalities.

Conclusions: The Court held that the Order-in-Original and Summary Order were vitiated by non-consideration of the petitioner's reply, warranting interference and setting aside of the impugned orders.

Issue 2: Maintainability of the Writ Petition

Relevant Legal Framework and Precedents: Articles 226 and 227 of the Constitution of India empower High Courts to issue writs for enforcement of fundamental rights and for judicial review of administrative actions. However, the doctrine of alternative remedy stipulates that where an efficacious alternative remedy is available under a special statute, writ jurisdiction may be excluded or exercised sparingly.

Court's Interpretation and Reasoning: The learned Senior Standing Counsel contended that the petitioner should have availed the appellate remedies under the GST Act instead of approaching the High Court under Articles 226/227. However, the Court observed that the writ petition was not an attempt to bypass statutory remedies but was filed on the ground of violation of natural justice, which is a fundamental procedural requirement.

Key Evidence and Findings: The Court noted that the adjudicating authority's order contained an error apparent on the face of the record, specifically the denial of having received the petitioner's reply. This procedural irregularity justified the invocation of writ jurisdiction to prevent miscarriage of justice.

Application of Law to Facts: The Court held that where there is a violation of natural justice and an error apparent on the record, the writ jurisdiction is maintainable notwithstanding the availability of alternative remedies.

Treatment of Competing Arguments: The Court balanced the opposing argument on alternative remedy with the petitioner's fundamental right to fair adjudication, ultimately favoring the latter.

Conclusions: The writ petition was held maintainable to address the procedural infirmity in the adjudication process.

Issue 3: Violation of Principles of Natural Justice

Relevant Legal Framework and Precedents: The principles of natural justice include the right to be heard and the rule against bias. These principles are embedded in the adjudicatory process under the GST Act and are essential for ensuring fairness and transparency.

Court's Interpretation and Reasoning: The Court found that the adjudicating authority's failure to consider the petitioner's detailed reply and documents amounted to denial of the right to be heard. The authority's erroneous statement that no reply was filed was a misrepresentation of facts on record.

Key Evidence and Findings: The petitioner's reply was filed online well before the passing of the impugned order. The authority's own record showed that the petitioner exercised the option for personal hearing. Despite this, the reply was disregarded.

Application of Law to Facts: Such non-consideration is a fundamental breach of natural justice and renders the order liable to be set aside.

Treatment of Competing Arguments: The Court did not accept any justification offered for ignoring the petitioner's submissions, emphasizing that procedural fairness cannot be compromised.

Conclusions: The violation of natural justice was established, necessitating quashing of the impugned orders and remand for fresh adjudication.

Issue 4: Directions for Fresh Adjudication

Court's Interpretation and Reasoning: The Court declined to express any opinion on the merits of the case. Instead, it directed the adjudicating authority to take fresh cognizance of the matter after considering the petitioner's reply and documents, and after affording personal hearing.

Key Evidence and Findings: The petitioner was directed to appear before the authority on a specified date with a certified copy of the Court's order. The authority was empowered to proceed with adjudication forthwith or on a convenient date.

Application of Law to Facts: This approach ensures adherence to natural justice and statutory requirements under Section 73 of the GST Act.

Conclusions: The matter was remitted for fresh adjudication in accordance with law and principles of natural justice.

3. SIGNIFICANT HOLDINGS

"In such view of the matter, this Court is of ex facie view that there was glaring non-adherence of principles of natural justice as the Order-in-Original dated 20.02.2025 under Annexure-7 reveals error apparent on the face of the record, which fact could be discerned from narration of the adjudicating authority vide Paragraph-4 of the said Order-in-Original."

"The proper authority has failed to consider the reply to show-cause notice in Form GST DRC-06 (Annexure-6 Series) along with other documents uploaded. This Court, therefore, has no hesitation to set aside the Order-in- Original dated 20.02.2025 vide Annexure-7 as also Summary Order dated 24.02.2025 passed under Section 73 of the GST Act by the Additional Commissioner, GST & Central Excise, Commissionerate, Rourkela- Opposite Party No.1 vide Annexure-8 on the ground of violation of principles of natural justice and remit the matter to the said authority concerned for fresh adjudication."

"Needless to say that this Court has not expressed any opinion on the merit of the case. The facts necessary to decide the point of natural justice as alleged by the petitioner has been discussed on the undisputed position. It is made clear that the adjudicating authority may proceed with the proceeding under Section 73 in accordance with law."

Core principles established include:

• The adjudicating authority under the GST Act must consider all replies and supporting documents filed by the petitioner before passing an order;
• Failure to consider such submissions constitutes violation of the principles of natural justice and renders the order liable to be set aside;
• Writ jurisdiction under Articles 226 and 227 is maintainable to correct such procedural infirmities notwithstanding the availability of alternative remedies;
• Where such violation occurs, the matter must be remitted for fresh adjudication after affording the petitioner a fair opportunity to be heard.

Final determinations:

• The Order-in-Original dated 20.02.2025 and Summary Order dated 24.02.2025 are quashed;
• The matter is remitted to the Additional Commissioner for fresh adjudication in accordance with law and after considering the petitioner's reply and documents;
• The petitioner is directed to appear before the adjudicating authority on the specified date to facilitate fresh adjudication;
• No observation was made on the substantive merits of the excess input tax credit claim, leaving the adjudicating authority free to decide the matter afresh.

The core legal questions considered by the Court include:

• Whether the issuance of notices and communications solely by uploading on the GST common portal constitutes valid and effective service under the GST Act.
• Whether the petitioner was denied the opportunity of personal hearing before passing the impugned order, thereby violating principles of natural justice.
• Whether the respondent was obligated to explore alternative modes of service prescribed under Section 169 of the GST Act when the petitioner failed to respond to notices uploaded on the portal.
• Whether the impugned order passed without personal hearing and effective service should be set aside and the matter remanded for fresh consideration.
• The conditions under which the matter may be remanded, including the petitioner's willingness to pay 10% of the disputed tax amount.

2. ISSUE-WISE DETAILED ANALYSIS

Validity and Effectiveness of Service of Notices via GST Portal

The legal framework governing service of notices under the GST Act includes Section 169, which prescribes modes of service such as delivery by hand, registered post, or electronic means including upload on official portals. The Court acknowledged that uploading notices on the GST common portal is a recognized mode of service.

However, the Court emphasized that mere uploading without ensuring the recipient's awareness does not amount to effective service. The Court noted that the petitioner claimed ignorance of the notices uploaded under the "View Additional Notices and Orders" tab, and no physical or alternative communication was furnished. This lack of awareness led to non-filing of replies within prescribed time limits.

The Court reasoned that service by uploading alone, without any follow-up or alternative communication, may amount to an empty formality rather than effective service. It highlighted the importance of actual notice to the taxpayer to enable meaningful participation in the proceedings.

Denial of Opportunity of Personal Hearing and Principles of Natural Justice

The impugned order was passed without affording the petitioner any personal hearing. The Court reiterated the fundamental principle that no order adversely affecting a party should be passed without giving an opportunity to be heard. The absence of personal hearing, especially when the petitioner was unaware of the notices, constituted a violation of natural justice.

The Court found that the impugned order confirmed proposals contained in the show cause notice ex parte, which was improper. It underscored that personal hearing is an essential procedural safeguard to ensure fairness and transparency in tax assessments.

Obligation to Explore Alternative Modes of Service under Section 169 of the GST Act

Section 169(1) of the GST Act allows service of notices by various modes, including registered post with acknowledgment due (RPAD). The Court held that when repeated reminders sent via the portal remain unresponded, the tax officer is duty-bound to consider alternative modes of service to ensure effective communication.

The Court reasoned that failure to do so results in ineffective service, rendering subsequent orders vulnerable to challenge. It emphasized that reliance solely on portal uploads without exploring other prescribed modes defeats the object of the GST Act and leads to unnecessary litigation, wasting judicial and administrative resources.

Setting Aside of the Impugned Order and Remand for Fresh Consideration

Given the procedural lapses, the Court found it just and proper to set aside the impugned order dated 06.02.2025. The Court accepted the petitioner's willingness to pay 10% of the disputed tax amount as a condition for remand.

The Court directed the respondent to provide the petitioner an opportunity to file reply/objections with supporting documents within three weeks of payment. Subsequently, the respondent must issue a clear 14-day notice fixing the date for personal hearing and pass orders on merits after hearing the petitioner.

This approach balances the interests of the revenue and the taxpayer by ensuring procedural fairness while safeguarding revenue realization.

Treatment of Competing Arguments

The respondent contended that uploading on the GST portal was sufficient service and that the petitioner failed to avail the opportunity. The respondent also acknowledged the absence of personal hearing but sought remand subject to payment of 10% of disputed tax.

The Court accepted the respondent's concession regarding absence of personal hearing and agreed that the petition was filed within limitation. However, it rejected the notion that portal upload alone sufficed without exploring other modes of service. The Court's reasoning favored ensuring effective communication and adherence to natural justice over mere procedural compliance.

3. SIGNIFICANT HOLDINGS

The Court held:

"Sending notice by uploading in portal is a sufficient service, but, the Officer who is sending the repeated reminders, inspite of the fact that no response from the petitioner to the show cause notices etc., the Officer should have applied his/her mind and explored the possibility of sending notices by way of other modes prescribed in Section 169 of the GST Act, which are also the valid mode of service under the Act, otherwise it will not be an effective service, rather, it would only fulfilling the empty formalities."

"Merely passing an ex parte order by fulfilling the empty formalities will not serve any useful purpose and the same will only pave way for multiplicity of litigations, not only wasting the time of the Officer concerned, but also the precious time of the Appellate Authority/Tribunal and this Court as well."

The Court established the core principle that effective service is a prerequisite to passing valid orders under the GST Act and must not be reduced to mere formality. It underscored the need for tax authorities to ensure actual receipt of notices through multiple modes if necessary.

On the issue of natural justice, the Court reaffirmed that personal hearing is mandatory before adverse orders are passed, especially where the taxpayer is unaware of the proceedings.

Finally, the Court's directions for remand with conditions form a significant procedural precedent ensuring that taxpayers are given a fair opportunity to contest assessments, subject to partial payment of disputed tax to protect revenue interests.

Issues: (i) whether the writ petition seeking payment of the GST component and a declaration of liability was maintainable without challenging the communication rejecting the claim, and in the face of disputed questions of fact; (ii) whether the tender conditions permitted the petitioner to claim GST in addition to the quoted amount after participating in the bid and executing the work.

Issue (i): whether the writ petition seeking payment of the GST component and a declaration of liability was maintainable without challenging the communication rejecting the claim, and in the face of disputed questions of fact.

Analysis: The reliefs sought required adjudication of the rejection of the claim and the underlying factual controversy regarding the billing and payment structure. Since the communication declining the claim was not assailed, a general declaration of liability could not be sustained. The controversy also turned on disputed facts, which was not appropriate for determination in writ jurisdiction under Article 226 of the Constitution of India.

Conclusion: The challenge was not maintainable in writ jurisdiction to the extent it sought adjudication of disputed facts and declaratory relief without directly assailing the rejection communication.

Issue (ii): whether the tender conditions permitted the petitioner to claim GST in addition to the quoted amount after participating in the bid and executing the work.

Analysis: The tender condition required quotations inclusive of tax, and the petitioner participated in the process without objecting to that stipulation. After acceptance of the contract and execution of the work, the petitioner could not seek to alter the effect of the tender terms or claim an additional amount under the GST head. The later reliance on the circular could not override the clear tender stipulation or cure the belated challenge. The principle against changing the rules of the game after the bidding process had commenced applied.

Conclusion: The petitioner was not entitled to claim GST over and above the amount quoted under the tender conditions.

Final Conclusion: The dismissal of the writ petition was affirmed, and no interference was warranted with the judgment under appeal.

Ratio Decidendi: A bidder who accepts and acts under clear tender conditions requiring tax-inclusive quotation cannot later seek additional tax over and above the bid amount, and writ relief will not lie to resolve such disputed factual claims or to grant a declaration without assailing the rejection order.

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

(a) Whether the impugned Show Cause Notice (SCN) dated 4th December 2023 and the consequent adjudication order dated 15th April 2024 passed by the Sales Tax Officer were valid, particularly in light of procedural fairness and opportunity of hearing afforded to the Petitioner.

(b) The vires and validity of the impugned Notifications Nos. 9/2023-Central Tax dated 31st March 2023, 56/2023-Central Tax dated 28th December 2023, and 56/2023-State Tax dated 11th July 2024, which purportedly extended the time limits for adjudication under the GST Act.

(c) Whether the issuance of the impugned notifications complied with the procedural requirements under Section 168A of the Central Goods and Services Tax Act, 2017 (GST Act), including the necessity of prior recommendation by the GST Council.

(d) The implications of conflicting High Court decisions on the validity of these notifications and the ongoing Supreme Court proceedings concerning the same.

(e) Whether the Petitioner was denied a proper opportunity to file replies and participate in personal hearings, given that the SCN was uploaded under the 'Additional Notices Tab' on the GST portal and was not brought to the Petitioner's notice effectively.

(f) The appropriate relief and procedural directions in the light of the above issues pending final adjudication by the Supreme Court.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Validity and Procedural Fairness of the Show Cause Notice and Adjudication Order

Legal Framework and Precedents: The principles of natural justice require that a party be given adequate notice and opportunity to be heard before an adverse order is passed. The GST procedural framework mandates issuance of SCNs and personal hearings before final adjudication. Previous judgments of this Court (e.g., Sughandha Enterprises through its Proprietor Devender Kumar Singh v. Commissioner of DGST) have emphasized the necessity of effective communication of notices and opportunity for personal hearing.

Court's Interpretation and Reasoning: The Court found that the SCN dated 4th December 2023 was uploaded only under the 'Additional Notices Tab' on the GST portal, which was not conspicuous or effectively brought to the Petitioner's attention. Consequently, the Petitioner did not receive proper notice or an opportunity to file replies or participate in personal hearings. The impugned order dated 15th April 2024 was passed ex-parte, without the Petitioner's reply or hearing.

Key Evidence and Findings: The Court noted the absence of a reply from the Petitioner and the lack of personal hearing. It also relied on earlier decisions of this Court, such as in Neelgiri Machinery, where similar circumstances led to remanding the matter for fresh adjudication with proper opportunity.

Application of Law to Facts: The Court applied the principles of natural justice and procedural fairness, holding that the Petitioner must be given a fair chance to respond to the SCN and be heard before passing any order.

Treatment of Competing Arguments: While the Department contended that the notices were uploaded on the portal, the Court emphasized that mere uploading under a less visible tab does not amount to effective service or notice.

Conclusion: The adjudication order was set aside, and the matter was remanded to the Adjudicating Authority to provide the Petitioner an opportunity to file replies and be heard through personal hearings, with proper communication of hearing notices.

(b) Validity of the Impugned Notifications under Section 168A of the GST Act

Legal Framework and Precedents: Section 168A of the GST Act empowers the government to extend the time limits for adjudication of show cause notices and passing of orders, but such extension requires prior recommendation of the GST Council. The impugned Notifications Nos. 9/2023 and 56/2023 (Central Tax) and 56/2023 (State Tax) purportedly extended deadlines for adjudication.

Court's Interpretation and Reasoning: The Court noted that the validity of these notifications was under active consideration in multiple High Courts and the Supreme Court. The Allahabad and Patna High Courts upheld the validity of Notifications 9 and 56 (Central Tax), while the Guwahati High Court quashed Notification 56 (Central Tax). The Telangana High Court raised doubts on Notification 56 (Central Tax), and this issue is now pending before the Supreme Court in SLP No. 4240/2025.

Key Evidence and Findings: The Court referred to the Supreme Court's order dated 21st February 2025, which acknowledged the cleavage of opinion among High Courts and issued notice in the matter. The Punjab and Haryana High Court refrained from expressing views on the vires of Section 168A or the notifications, deferring to the Supreme Court's decision.

Application of Law to Facts: Given the ongoing Supreme Court proceedings and divergent High Court rulings, this Court refrained from adjudicating the validity of the impugned notifications and left the issue open.

Treatment of Competing Arguments: The Petitioner challenged the notifications as invalid for procedural non-compliance and expiry of limitation periods, while the Department defended their validity based on the GST Council's recommendations and statutory provisions.

Conclusion: The Court held that the question of validity of the impugned notifications is sub judice before the Supreme Court and reserved its decision, subjecting any orders to the final outcome in the Supreme Court and related proceedings.

(c) Impact of Conflicting Judicial Opinions and Pending Supreme Court Proceedings

Legal Framework and Precedents: The doctrine of judicial discipline and the principle of stare decisis require lower courts to respect the rulings of higher courts and refrain from conflicting judgments on the same issue pending final adjudication.

Court's Interpretation and Reasoning: The Court acknowledged the conflicting decisions of various High Courts and the ongoing Supreme Court proceedings. It referred to the Punjab and Haryana High Court's order directing that all connected cases be governed by the Supreme Court's eventual ruling.

Key Evidence and Findings: The Court noted the Supreme Court's issuance of notice and interim orders, and the pendency of SLP No. 4240/2025, which directly concerns the validity of the impugned notifications.

Application of Law to Facts: The Court exercised judicial restraint by deferring to the Supreme Court's jurisdiction and refraining from deciding on the validity of the notifications.

Treatment of Competing Arguments: The Court balanced the need for procedural fairness to the Petitioner with the necessity to maintain judicial discipline and avoid contradictory rulings.

Conclusion: The Court disposed of the petitions with directions for further proceedings, subject to the outcome of the Supreme Court's decision, and left the question of validity of the notifications open.

(d) Appropriate Relief and Procedural Directions Pending Final Adjudication

Legal Framework and Precedents: Principles of natural justice and fair adjudication require that parties be given adequate opportunity to be heard. This Court's earlier decisions have emphasized remanding matters where notices were not effectively communicated.

Court's Interpretation and Reasoning: The Court categorized the petitions and determined that, pending final adjudication on the validity of notifications, the Petitioner should be afforded an opportunity to file replies to the SCN and participate in personal hearings.

Key Evidence and Findings: The Court relied on the fact that the SCN was not effectively communicated and that the Petitioner was denied a personal hearing. It noted improvements made to the GST portal after January 2024 but emphasized that the SCN in question pre-dated such changes.

Application of Law to Facts: The Court set aside the impugned demand orders and directed the Petitioner to file replies within thirty days, with hearing notices to be communicated both via email and mobile phone, not merely uploaded on the portal.

Treatment of Competing Arguments: While the Department sought to rely on the portal upload as sufficient notice, the Court prioritized effective communication and due process.

Conclusion: The matter was remanded to the Adjudicating Authority for fresh adjudication after providing the Petitioner a fair opportunity to be heard. All rights and remedies were kept open, and access to the GST portal was to be ensured.

3. SIGNIFICANT HOLDINGS

The Court made the following crucial legal determinations and established core principles:

"The impugned order dated 15th April, 2024 was passed without providing the Petitioner a personal hearing and in the absence of a reply on behalf of the Petitioner."

"Mere uploading of show cause notices on the GST portal under the 'Additional Notices Tab' without effective communication does not satisfy the requirement of notice and opportunity to be heard."

"In the absence of proper notice and opportunity, orders passed ex-parte are liable to be set aside and the matter remanded for fresh adjudication."

"The validity of the impugned notifications issued under Section 168A of the GST Act is presently under consideration before the Supreme Court and this Court refrains from expressing any opinion on the same."

"All orders passed by the Adjudicating Authority shall be subject to the outcome of the proceedings pending before the Supreme Court in S.L.P No 4240/2025 and this Court in W.P.(C) 9214/2024."

"The Petitioner shall be given an opportunity to file replies within a stipulated time and personal hearing notices shall be communicated by email and mobile phone, not merely by uploading on the portal."

"Access to the GST portal shall be provided to the Petitioner to enable filing of replies and access to notices and related documents."

"All rights and remedies of the parties are left open."

The core legal questions considered by the Court include:

• The validity and vires of Notification No. 9/2023-Central Tax dated 31st March 2023 and related notifications issued under Section 168A of the Central Goods and Services Tax Act, 2017 (GST Act), particularly concerning the extension of time limits for adjudication of show cause notices and passing of orders under Section 73 of the GST Act.
• The procedural propriety and legality of the show cause notice dated 29th September 2023 issued by the Department of Trade & Taxes, Government of NCT of Delhi, including whether the petitioner was properly served and given a fair opportunity to respond.
• The impact of the placement of notices on the GST portal, specifically the uploading of notices under the 'Additional Notices Tab' and whether this method provided adequate notice to the petitioner.
• The effect of pending Supreme Court proceedings (SLP No. 4240/2025) on the adjudication of challenges to the impugned notifications and related orders.
• The entitlement of the petitioner to personal hearings and the opportunity to file replies in light of the alleged procedural lapses.

Issue-wise Detailed Analysis

1. Validity of Notifications under Section 168A of the GST Act

Legal Framework and Precedents: Section 168A of the GST Act empowers the government to extend the time limits for adjudication of show cause notices and passing of orders. The issuance of notifications under this section requires prior recommendation of the GST Council. The validity of such notifications has been challenged in multiple High Courts, resulting in divergent judicial opinions:

• The Allahabad High Court upheld Notification No. 9/2023 (Central Tax).
• The Patna High Court upheld Notification No. 56/2023 (Central Tax).
• The Guwahati High Court quashed Notification No. 56/2023 (Central Tax).
• The Telangana High Court raised observations on the invalidity of Notification No. 56/2023 (Central Tax), with the matter currently under Supreme Court consideration.

Court's Interpretation and Reasoning: The Court noted the conflicting views among various High Courts and acknowledged that the ultimate determination on the validity of the notifications rests with the Supreme Court, which has issued notices and is hearing the Special Leave Petition (SLP No. 4240/2025). The Court prudently refrained from expressing any opinion on the vires of the notifications, adhering to judicial discipline and respecting the ongoing apex court proceedings.

Application of Law to Facts: Given the pendency of the Supreme Court's decision, the Court held that the question of the validity of the impugned notifications remains open and subject to the outcome of the apex court's ruling.

2. Procedural Fairness and Service of Show Cause Notice

Legal Framework and Precedents: Principles of natural justice require that the party against whom adverse action is contemplated must be given adequate notice and a fair opportunity to present their case. Prior decisions of this Court, including in W.P.(C) 13727/2024 and other cited cases (e.g., M/s ACE Cardiopathy Solutions Private Ltd. v. Union of India & Ors.), have emphasized that orders should not be passed ex-parte without proper service and opportunity to be heard.

Court's Interpretation and Reasoning: The Court observed that the show cause notice dated 29th September 2023 was uploaded on the GST portal under the 'Additional Notices Tab', which was not prominently visible or brought to the petitioner's attention. Consequently, the petitioner was unaware of the notice and did not file any reply. The Court noted that the Department's practice of uploading notices in this manner effectively denied the petitioner a fair opportunity to respond or appear for personal hearings, leading to ex-parte orders and imposition of demands and penalties.

Key Evidence and Findings: The petitioner's submissions and the record showed that the reminder notice dated 2nd November 2023 was similarly uploaded under the 'Additional Notices Tab' and not communicated effectively. The Court also referred to changes made to the GST portal after 16th January 2024 to improve visibility of such notices, but these changes were not applicable at the time the SCN was issued.

Application of Law to Facts: The Court applied principles of natural justice and prior judicial pronouncements to conclude that the petitioner was denied a proper opportunity to be heard. The impugned orders based on the SCN were therefore set aside, and the matter was remanded to the adjudicating authority to provide the petitioner a fair chance to file replies and be heard.

Treatment of Competing Arguments: While the Department argued that the notices were uploaded on the portal, the Court found that mere uploading under a less visible tab did not constitute valid service. The Department's acknowledgment of the issue and subsequent portal improvements supported the petitioner's contention.

3. Impact of Pending Supreme Court Proceedings on Adjudication

Legal Framework and Precedents: The Court recognized that the Supreme Court is currently seized of the question regarding the validity of the notifications under Section 168A of the GST Act. It is a settled principle that lower courts should not pre-empt or contradict the apex court's pending adjudication on substantial questions of law.

Court's Interpretation and Reasoning: The Court explicitly stated that the validity of the impugned notifications is left open and any order passed by the adjudicating authority shall be subject to the Supreme Court's final decision. The Court also noted interim orders passed by other High Courts and the Supreme Court's directions, emphasizing judicial discipline and restraint.

Application of Law to Facts: The Court disposed of the writ petition with the condition that all rights and remedies remain open, and that the adjudicating authority's fresh order would be subject to the Supreme Court's ruling in SLP No. 4240/2025.

4. Directions for Fair Opportunity and Procedural Compliance

Court's Reasoning and Orders: To ensure compliance with principles of natural justice, the Court directed the following:

• The impugned orders dated 23rd April 2024 and 5th December 2023 were set aside.
• The petitioner was granted time until 10th July 2025 to file a reply to the SCN.
• The adjudicating authority was directed to issue personal hearing notices to the petitioner, which must be communicated not only via the GST portal but also by email and mobile phone, ensuring actual receipt.
• The petitioner's submissions during personal hearings and replies shall be duly considered before passing any fresh order.
• Access to the GST portal shall be provided to the petitioner to enable uploading of replies and access to notices and related documents.

The Court emphasized that these procedural safeguards are necessary irrespective of the ultimate validity of the notifications, to ensure that adjudication is conducted fairly and in accordance with law.

Significant Holdings

"The Court is of the prima facie view that, depending upon the categories of petitions, orders can be passed affording an opportunity to the Petitioners to place their stand before the adjudicating authority. In some cases, proceedings including appellate remedies may be permitted to be pursued by the Petitioners, without delving into the question of the validity of the said notifications at this stage."

"The impugned order is set aside. The Petitioner is granted time till 10th July 2025, to file the reply to the SCN. Upon filing of the reply, the Adjudicating Authority shall issue a notice for personal hearing to the Petitioner. The personal hearing notice shall be communicated to the Petitioner on the following mobile no. and e-mail address."

"However, it is made clear that the issue in respect of the validity of the impugned notifications is left open. Any order passed by the Adjudicating Authority shall be subject to the outcome of the decision of the Supreme Court in S.L.P No 4240/2025."

"All rights and remedies of the parties are left open. Access to the GST Portal, shall be provided to the Petitioner to enable uploading of the reply as also access to the notices and related documents."

Core principles established include:

• Procedural fairness and natural justice require effective service of notices and opportunity to be heard, including personal hearings, before passing orders under GST laws.
• Uploading notices on a portal under a non-prominent tab does not constitute valid service if it deprives the party of knowledge and opportunity to respond.
• Judicial restraint is warranted where the Supreme Court is seized of the question of validity of notifications; lower courts should avoid pre-emptive rulings on such issues.
• Interim relief may be granted to ensure parties are not prejudiced by procedural lapses pending final adjudication.

Final determinations on each issue were that the impugned show cause notice and consequential orders were set aside due to lack of proper service and opportunity to be heard; the petitioner was granted time and opportunity to respond; and the validity of the impugned notifications remains subject to the Supreme Court's decision.

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

• Whether the detention and subsequent confiscation of goods under Section 129(3) of the UP GST/CGST Act, 2017, was valid when the e-way bill was generated after the interception but before the detention order was passed.
• Whether the goods in question, being stock transfer items intended for installation and not for sale in the open market, fall within the ambit of taxable supply and whether tax evasion has been established.
• Whether the procedural compliance under the GST law and relevant circulars was adhered to by the authorities while detaining the goods and imposing tax and penalty.
• Whether the impugned orders passed by the authorities below, including the order imposing tax and penalty and the dismissal of the appeal, were justified in law and fact.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of detention and confiscation under Section 129(3) when e-way bill was generated after interception but before detention order

The legal framework governing detention and confiscation under GST is primarily Section 129(3) of the UP GST/CGST Act, 2017, which empowers authorities to detain goods if accompanying documents such as e-way bills are not produced at the time of interception. The relevant procedural safeguards and timelines must be complied with, including issuance of notices and opportunities to produce documents.

The petitioner contended that although the e-way bill could not be generated initially due to a technical glitch, it was generated at 12:44 PM on 29.1.2021, prior to the detention order passed at 6:56 PM the same day. This sequence was critical to establish that the petitioner had complied with the requirement of producing the e-way bill before the detention order was passed.

The Court noted that the authorities had detained the goods on the ground that documents were an afterthought and that the e-way bill was not produced at the time of interception. However, the petitioner submitted the e-way bill along with the reply to the notice before the detention order was passed, which was not acknowledged or considered by the authorities. The Court found no dispute regarding the timing of the e-way bill generation and its production prior to detention.

Applying the law to these facts, the Court held that detention without considering the e-way bill produced before the detention order was contrary to the procedural requirements and principles of natural justice. The authorities failed to record any reasoned finding rejecting the e-way bill on valid grounds.

The competing argument from the respondent was to uphold the detention on the basis of absence of documents at the time of interception. However, the Court emphasized that the law requires consideration of documents produced before detention, and mere initial absence cannot justify detention if compliance is subsequently demonstrated.

Conclusion: The detention and confiscation under Section 129(3) were invalid as the e-way bill was generated and produced prior to the detention order, and the authorities erred in ignoring this fact.

Issue 2: Nature of goods as stock transfer and absence of tax evasion

The petitioner asserted that the goods-4 MPD machines (Petrol and Diesel delivery machines)-were stock transfer items from BPCL Kanpur to BPCL Atarra petrol pump for installation, not for sale in the open market, and thus not liable to tax or penalty for evasion.

The legal framework involves the GST provisions concerning stock transfers, which are generally not treated as taxable supplies attracting tax liability, provided proper documentation such as stock transfer notes and e-way bills are maintained. The Ministry of Petroleum and Natural Gas directives also prohibit sale of such goods in open market, reinforcing that these goods are not commercial sales items.

The Court examined the evidence, including a certificate confirming that the goods were not for trade and that their price could not be determined. None of the authorities below disputed the stock transfer nature of the goods. The Court also referred to precedents from this High Court, notably the judgements in M/s Vacmet India Ltd. and M/s Goverdhan Oil Mill, where similar issues were adjudicated in favor of the petitioner regarding stock transfers and absence of tax evasion.

The authorities failed to record any finding of tax evasion or dispute the stock transfer status. The petitioner's submission that no intention to evade tax existed was thus supported by the record and law.

The respondent's position did not effectively counter the petitioner's evidence or legal submissions on this issue.

Conclusion: The goods were rightly characterized as stock transfer items not subject to tax evasion proceedings, and the imposition of tax and penalty was unwarranted.

Issue 3: Compliance with procedural safeguards and relevant circulars

The petitioner argued that the entire proceeding violated the circular dated 9.5.2018 issued by the State Government, which provides guidelines on detention and release of goods and documents under GST. The petitioner submitted that procedural safeguards, including issuance of proper notices and consideration of replies, were not followed.

The Court noted that the petitioner had submitted the stock transfer note and e-way bill before the detention order but these were not acknowledged. The detention order and subsequent penalty were passed without proper consideration of the petitioner's submissions, violating procedural fairness.

The respondent did not demonstrate adherence to the circular's provisions or justify the rejection of the petitioner's documents and replies.

Conclusion: The authorities failed to comply with procedural safeguards and relevant circulars, rendering the impugned orders unsustainable.

Issue 4: Validity of impugned orders including appeal dismissal

The petitioner challenged the orders dated 10.7.2023 and 29.1.2021, including the dismissal of the appeal against the detention and penalty order.

The Court observed that the appellate authority did not consider the material on record, including the e-way bill and stock transfer nature of goods, and dismissed the appeal without proper adjudication.

Given the findings on the invalidity of detention, absence of tax evasion, and procedural lapses, the Court held that the impugned orders could not be sustained.

Conclusion: The impugned orders were quashed for failure to consider relevant facts and law.

3. SIGNIFICANT HOLDINGS

The Court held:

"The impugned orders dated 10.7.2023 and 29.1.2021 cannot be sustained in the eyes of law and same are hereby quashed."

Core principles established include:

• Detention of goods under GST law requires proper consideration of documents produced before the detention order; absence of documents at interception alone is insufficient to justify detention if compliance is subsequently demonstrated.
• Stock transfer of goods within the same entity or related units, especially when goods are not intended for sale in the open market, does not constitute taxable supply attracting tax evasion proceedings.
• Procedural safeguards, including issuance of notices and consideration of replies and documents, must be strictly followed in GST detention and penalty proceedings.
• Appellate authorities must consider all material on record and provide reasoned orders; dismissal without such consideration is unsustainable.

Final determinations:

• The detention and confiscation of the goods were illegal and set aside.
• The imposition of tax and penalty was unwarranted as no tax evasion was established.
• The appeal dismissal was improper and quashed.
• Any amounts deposited by the petitioner in connection with the impugned orders shall be refunded in accordance with law.

1. Whether the impugned Show Cause Notice (SCN) and consequent adjudication order were validly issued and passed, particularly in light of procedural fairness and opportunity to be heard.

2. The vires and validity of Notification No. 56/2023-Central Tax and Notification No. 56/2023-State Tax issued under Section 168A of the Central Goods and Services Tax Act, 2017 (GST Act), specifically whether the notifications were lawfully issued following the prescribed procedure, including the requirement of prior recommendation by the GST Council.

3. The effect of the ongoing judicial scrutiny and conflicting High Court decisions on the validity of the impugned notifications, and the impact of pending Supreme Court proceedings on the adjudication of tax demands arising from these notifications.

4. The adequacy and accessibility of communication of SCNs and hearing notices to the petitioner, particularly the issue of notices being uploaded under the 'Additional Notices Tab' on the GST portal and whether this sufficed as proper service.

5. The appropriate relief and procedural directions to be granted in cases where the petitioner was not afforded an opportunity to file replies or participate in personal hearings, leading to ex-parte adjudication orders.

Issue-wise Detailed Analysis:

Validity of the Impugned Notifications under Section 168A of the GST Act

The relevant legal framework involves Section 168A of the GST Act, which mandates that any extension of time limits for adjudication of show cause notices and passing orders requires prior recommendation from the GST Council. The notifications challenged purportedly extended such time limits.

Precedents include various High Court decisions with divergent views: the Allahabad High Court upheld Notification No. 9, the Patna High Court upheld Notification No. 56, while the Guwahati High Court quashed Notification No. 56 (Central Tax). The Telangana High Court raised observations on the invalidity of Notification No. 56, which is currently under Supreme Court consideration in S.L.P No. 4240/2025.

The Court noted that the Supreme Court has issued notices and interim orders in the matter, acknowledging the cleavage of opinion among High Courts and the complexity of the issue. The Punjab and Haryana High Court refrained from expressing any opinion on the vires of Section 168A or the notifications, deferring to the Supreme Court's eventual ruling.

The Court's reasoning was that since the matter is sub judice before the Supreme Court, it is prudent to await the apex court's decision before delving into the validity of the notifications. Consequently, the Court disposed of several related petitions with the caveat that the validity of the impugned notifications would be subject to the Supreme Court's outcome.

Procedural Fairness and Opportunity to be Heard in Adjudication Proceedings

The petitioner contended that the SCN dated 24th May 2024 was uploaded under the 'Additional Notices Tab' on the GST portal, which was not adequately brought to their notice, resulting in no reply being filed and no personal hearing granted before the impugned order dated 17th August 2024 was passed.

The Court relied on its prior decisions, including W.P.(C) 13727/2024 and others, where it was held that merely uploading notices under the 'Additional Notices Tab' without proper communication does not constitute valid service. The Court emphasized that orders should not be passed ex-parte without affording the petitioner a fair opportunity to respond and be heard.

The Court cited the judgment in Satish Chand Mittal (supra), which underscored that the petitioner must have access to notices and the opportunity to participate in hearings. The Court noted that subsequent changes to the GST portal had improved visibility of the 'Additional Notices & Orders' tab, but these changes post-dated the issuance of the impugned SCN and order in the present case.

Applying these principles, the Court set aside the impugned order and directed the petitioner to be granted time to file replies to the SCN. It further mandated that hearing notices should not only be uploaded on the portal but also communicated via email and mobile to ensure actual notice. The adjudicating authority was directed to conduct personal hearings and pass fresh orders after considering the petitioner's submissions.

Impact of Pending Supreme Court Proceedings and Judicial Discipline

The Court acknowledged the ongoing Supreme Court proceedings and the conflicting High Court rulings on the validity of the impugned notifications. In the interest of judicial discipline and consistency, the Court refrained from expressing any final opinion on the validity of the notifications and held that any orders passed by the adjudicating authority shall be subject to the Supreme Court's final decision.

The Court also noted that the challenge to the parallel State Notifications was retained for consideration by the High Court, indicating a nuanced approach to different notifications issued under the GST framework.

Access to GST Portal and Related Documents

The Court emphasized that the petitioner must be provided access to the GST portal if not already available, to enable filing of replies and access to all notices and related documents. This was to ensure procedural fairness and transparency in the adjudication process.

Treatment of Competing Arguments

The Department argued that the notifications were validly issued and that the petitioner had access to the portal. The petitioner countered that the notices were not effectively communicated and that the procedural safeguards were not followed, resulting in ex-parte orders.

The Court balanced these arguments by recognizing the procedural deficiencies in communication and the ongoing legal uncertainty regarding the notifications' validity. It granted interim relief to the petitioner by remanding the matter for fresh consideration, while leaving the substantive validity of the notifications open pending Supreme Court adjudication.

Conclusions

The Court concluded that:

• The impugned order dated 17th August 2024 is set aside on grounds of denial of opportunity to be heard.
• The petitioner is granted time till 10th July 2025 to file replies to the SCN.
• Hearing notices must be communicated via email and mobile in addition to portal upload.
• The adjudicating authority must conduct personal hearings and pass fresh orders after considering the petitioner's submissions.
• Access to the GST portal must be ensured for the petitioner.
• The validity of the impugned notifications remains an open issue, subject to the Supreme Court's decision in S.L.P No. 4240/2025 and this Court's consideration of parallel State Notifications.
• All rights and remedies of the parties are preserved.

Significant Holdings:

"Since there is no clarity on behalf of the Department, this Court follows the order dated 9th September, 2024 in Satish Chand Mittal (Trade Name National Rubber Products) vs. Sales Tax Officer SGST, Ward 25-Zone 1 ... where the Court under similar circumstances has remanded back the matter to ensure the Noticee/Petitioners get a fair opportunity to be heard."

"The reply filed by the Petitioner to the SCN along with the submissions made in the personal hearing proceedings shall be duly considered by the Adjudicating Authority and fresh order with respect to the SCN shall be passed accordingly."

"It is made clear that the issue in respect of the validity of the impugned notifications is left open. Any order passed by the Adjudicating Authority shall be subject to the outcome of the decision of the Supreme Court in S.L.P No 4240/2025 ... and this Court in W.P.(C) 9214/2024."

Core principles established include the necessity of procedural fairness in tax adjudication proceedings, specifically the requirement of effective communication of notices and opportunity for personal hearing before passing orders. The judgment also reinforces judicial discipline by deferring to the Supreme Court on complex questions of statutory interpretation concerning the validity of tax notifications.

Issues: Whether the assessee, pending constitution of the appellate tribunal, was entitled to have the pre-deposit condition for stay of the impugned first appellate order reduced to 10% of the remaining disputed tax in line with the later notification.

Analysis: The order records that the earlier directions required deposit of 10% of the disputed tax on filing appeal and a further 20% of the remaining disputed tax for stay. It was noticed that a subsequent notification had reduced the further deposit requirement to 10%, and that the State revenue had also issued a corresponding notification. On that basis, the requested modification was accepted.

Conclusion: The assessee was granted the benefit of the reduced deposit requirement, and the impugned order was directed to remain stayed upon deposit of 10% of the remaining disputed tax.

The core legal questions considered by the Court are:

(a) Whether the Assessing Officer had jurisdiction to issue a notice under Section 148 of the Income Tax Act for the assessment year 2016-17, given the procedural requirements for prior approval under Section 151 of the Act;

(b) Whether the approval for issuance of the Section 148 notice was validly obtained from the appropriate specified authority as mandated by Section 151, considering the amount involved and the time elapsed since the end of the relevant assessment year;

(c) Whether the assessment order passed pursuant to the Section 148 notice is liable to be quashed on grounds of jurisdictional defect arising from improper approval for issuance of the notice.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) and (b): Jurisdiction and Validity of Approval for Issuance of Notice under Section 148

Relevant Legal Framework and Precedents:

The Court analyzed the provisions of Section 148 of the Income Tax Act, which mandates that before making an assessment, reassessment, or recomputation under Section 147, the Assessing Officer must serve a notice requiring the assessee to furnish a return. The issuance of such notice is conditional upon the Assessing Officer having information suggesting that income chargeable to tax has escaped assessment and having obtained prior approval from the specified authority as per Section 151.

Section 151 delineates the specified authorities for approval based on the time elapsed since the end of the relevant assessment year:

• Section 151(i): Principal Commissioner or Principal Director or Commissioner or Director, if three years or less have elapsed;
• Section 151(ii): Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, if more than three years have elapsed.

Section 149 prescribes the time limits for issuance of the Section 148 notice, with a three-year period generally applicable for amounts below Rs. 50 Lakhs, and a longer period for amounts exceeding Rs. 50 Lakhs.

The Court also referred to observations from the Supreme Court in a recent judgment, which emphasized strict compliance with the procedural requirements for issuance of notices under Section 148.

Court's Interpretation and Reasoning:

The Court noted that the amount involved in the present case was Rs. 3,65,09,748/-, which exceeds Rs. 50 Lakhs. The Section 148 notice was issued on 25.07.2022 for the assessment year 2016-17, which is beyond three years from the end of the relevant assessment year. Therefore, as per Section 151(ii), the approval for issuance of the notice ought to have been obtained from the higher specified authority, i.e., Principal Chief Commissioner or equivalent.

However, the approval was obtained only from the Principal Commissioner under Section 151(i), which is applicable only if three years or less have elapsed. The Court held that this was a clear violation of the mandatory provisions of Section 151(ii).

Key Evidence and Findings:

The record showed that the approval for issuing the Section 148 notice was obtained under Section 151(i), not Section 151(ii), despite the fact that the relevant time period exceeded three years and the amount was above Rs. 50 Lakhs.

Application of Law to Facts:

Applying the statutory provisions, the Court concluded that the Assessing Officer lacked jurisdiction to issue the Section 148 notice without obtaining valid approval from the specified authority under Section 151(ii). The procedural lapse rendered the notice invalid.

Treatment of Competing Arguments:

The respondents relied on the Supreme Court's observations in the cited case to justify the issuance of the notice. However, the Court distinguished the present facts, emphasizing the strict statutory mandate that approval must be obtained from the correct specified authority based on the time elapsed and the amount involved. The respondents' contention that approval under Section 151(i) sufficed was rejected.

Conclusions:

The Court held that the issuance of the Section 148 notice without proper approval under Section 151(ii) was without jurisdiction and void.

Issue (c): Validity of Assessment Order Passed Pursuant to the Section 148 Notice

Relevant Legal Framework and Precedents:

Since the assessment order dated 30.05.2023 was passed pursuant to the Section 148 notice, its validity is contingent on the validity of the notice itself. The principle that an order passed without jurisdiction is liable to be quashed was applied.

Court's Interpretation and Reasoning:

The Court reasoned that as the issuance of the Section 148 notice was invalid due to non-compliance with Section 151(ii), the entire reassessment proceeding and the resulting order were without jurisdiction.

Key Evidence and Findings:

The impugned assessment order was passed following the invalid Section 148 notice.

Application of Law to Facts:

The Court applied the principle that jurisdictional defects in the initiation of proceedings vitiate subsequent orders and proceedings.

Treatment of Competing Arguments:

Respondents did not provide any substantive argument to uphold the assessment order independent of the notice's validity.

Conclusions:

The assessment order was quashed as it was passed without jurisdiction.

3. SIGNIFICANT HOLDINGS

The Court succinctly held: "In the present case, the approval was obtained from the Principal Commissioner in terms of Section 151(i) and no approval was obtained before issuance of 148 notice in terms of provision of Section 151(ii), which is mandatory. Therefore, the notice under Section 148 was issued in the present case in violation of provision of Section 151(ii) of the Income Tax Act. In view thereof, the initiation of proceedings itself is without any jurisdiction. Hence, the same is liable to be quashed."

Core principles established include:

• Strict compliance with the procedural requirements of Section 151 is mandatory for valid issuance of notices under Section 148;
• The specified authority for approval depends on the time elapsed since the end of the relevant assessment year and the amount involved;
• Issuance of a Section 148 notice without proper approval is jurisdictionally invalid;
• Assessment orders passed pursuant to such invalid notices are liable to be quashed.

Final determinations:

• The Section 148 notice issued without proper approval under Section 151(ii) is invalid;
• The reassessment proceedings and the assessment order dated 30.05.2023 are quashed;
• The writ petition is allowed accordingly.

The core legal questions considered by the Court are:

• Whether the notice dated 30.06.2022 issued under Section 148 of the Income Tax Act, 1961 (the Act) for reopening the assessment year (AY) 2015-16 is valid and sustainable in law.
• Whether the procedure prescribed under Section 148A of the Act was mandatorily required to be followed for reopening assessments after 31.03.2021, and if non-compliance with the same vitiates the notice.
• The applicability of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and the effect of the Revenue's concession in the Supreme Court decision in Union of India and Ors. v. Rajeev Bansal (2024) on the limitation period for issuance of reassessment notices for AY 2015-16.
• The impact of the Supreme Court's ruling in Deepak Steel and Power Ltd. v. Central Board of Direct Taxes (2025) on the validity of notices issued post 1 April 2021 for AY 2015-16.
• Whether the impugned notice and consequent proceedings should be quashed and set aside in light of the above legal framework and precedents.

2. ISSUE-WISE DETAILED ANALYSIS

Validity of the Notice Issued Under Section 148 for AY 2015-16

Legal Framework and Precedents: Section 148 of the Income Tax Act empowers the Assessing Officer (AO) to reopen an assessment if there is reason to believe that income has escaped assessment. Post 31.03.2021, the procedure under Section 148A was introduced, requiring the AO to issue a notice and provide the assessee an opportunity to respond before issuing a notice under Section 148.

Court's Interpretation and Reasoning: The AO initially issued a notice on 01.06.2021 under Section 148, but did not comply with the mandatory procedural safeguards under Section 148A, as the notice was premised on the pre-31.03.2021 regime. Subsequently, the AO sought to cure this procedural defect by relying on the Supreme Court's decision in Union of India & Ors. v. Ashish Agarwal, treating the earlier notice as deemed notice under Section 148A(b). However, the Court noted that this procedural lapse was material, and the subsequent notice dated 30.06.2022 under Section 148 was issued without proper adherence to the new regime.

Application of Law to Facts: The petitioner filed the return for AY 2015-16 declaring a modest income. The AO's failure to follow the procedure under Section 148A for notices issued after 31.03.2021 rendered the impugned notice legally infirm.

Treatment of Competing Arguments: The Revenue relied on the Supreme Court's Ashish Agarwal decision to validate the notice. The petitioner contended that the procedural irregularity was fatal, especially in light of subsequent authoritative rulings and concessions by the Revenue.

Conclusion: The Court found the procedural non-compliance significant and not curable by the AO's subsequent actions.

Applicability of TOLA and the Limitation Period for Reassessment Notices

Legal Framework and Precedents: The Finance Act, 2021 introduced a new regime for reassessment, and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) provided extended limitation periods for issuance of notices. Section 3 of TOLA applies to the entire Income Tax Act, including Sections 149 and 151 under the new regime.

Court's Interpretation and Reasoning: The Supreme Court in Union of India and Ors. v. Rajeev Bansal made a critical concession on behalf of the Revenue that for AY 2015-16, all notices issued on or after 1 April 2021 must be dropped as they would not fall within the limitation period prescribed under TOLA. The Court reproduced the tabulation from the Rajeev Bansal decision clarifying that TOLA does not apply to AY 2015-16 for extending limitation beyond 31.03.2022, and thus notices issued after 1 April 2021 are time-barred.

Application of Law to Facts: The impugned notice dated 30.06.2022 was issued well after 1 April 2021, and thus falls outside the permissible period under the limitation framework recognized by the Supreme Court.

Treatment of Competing Arguments: The Revenue's concession in Rajeev Bansal was decisive, and the petitioner relied heavily on it to argue for quashing the impugned notice.

Conclusion: The Court held that the notice dated 30.06.2022 is barred by limitation and must be set aside.

Impact of Supreme Court Decision in Deepak Steel and Power Ltd.

Legal Framework and Precedents: The Supreme Court in Deepak Steel and Power Ltd. considered appeals arising from High Court orders refusing to entertain petitions challenging notices issued post 1 April 2021. The Revenue conceded that notices for AY 2015-16 issued on or after 1 April 2021 must be dropped.

Court's Interpretation and Reasoning: The Supreme Court allowed the appeals in Deepak Steel and Power Ltd., relying on the concession made in Rajeev Bansal, reinforcing the principle that notices issued after 1 April 2021 for AY 2015-16 are invalid.

Application of Law to Facts: The present case involved a notice dated 30.06.2022, which is post the cut-off date recognized by the Supreme Court. The Court found the Deepak Steel decision directly applicable.

Treatment of Competing Arguments: The Revenue did not dispute the applicability of Deepak Steel and Power Ltd. and the concession made therein.

Conclusion: The Court held the impugned notice invalid in light of the Supreme Court's ruling.

Whether the Impugned Notice and Proceedings Should Be Quashed

Legal Framework and Precedents: The principle that notices issued beyond the limitation period are liable to be quashed is well-settled. The Court also referred to its own decision in Make My Trip India Pvt. Ltd. v. Deputy Commissioner of Income Tax, which supports quashing of such notices.

Court's Interpretation and Reasoning: Given the procedural irregularities, the limitation bar under TOLA, and the Supreme Court's binding precedents and concessions, the Court found no basis to sustain the impugned notice or the proceedings initiated thereunder.

Application of Law to Facts: The petitioner's challenge to the notice was upheld, and the Court set aside the notice dated 30.06.2022 and all consequential proceedings.

Treatment of Competing Arguments: The Revenue's arguments were overridden by the binding precedents and the concession made before the Supreme Court.

Conclusion: The Court allowed the petition and quashed the impugned notice and related proceedings.

3. SIGNIFICANT HOLDINGS

The Court's crucial legal reasoning is encapsulated in the following verbatim excerpts:

"The Revenue concedes that for the assessment year 2015-2016, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020."

"In view of the aforesaid, in such circumstances referred to above the original writ petition nos.2446 of 2023, 2543 of 2023 and 2544 of 2023 respectively filed before the High Court of Orissa at Cuttack stands allowed."

"The impugned notice dated 30.06.2022 issued under Section 148 of the Act stands quashed and set aside."

Core principles established by the Court include:

• Strict adherence to the procedural requirements under Section 148A post 31.03.2021 is mandatory for reopening assessments.
• The limitation period for issuance of reassessment notices for AY 2015-16 is governed by the TOLA framework as interpreted by the Supreme Court, which excludes notices issued after 1 April 2021.
• Revenue's concession before the Supreme Court is binding and decisive in determining the validity of notices issued beyond the limitation period.
• Notices issued beyond the limitation period and without adherence to procedural safeguards are liable to be quashed.

Final determinations on each issue are:

• The notice dated 30.06.2022 under Section 148 for AY 2015-16 is invalid due to procedural non-compliance and limitation bar.
• The reassessment proceedings initiated pursuant to the impugned notice are quashed and set aside.
• The Revenue's concession in Rajeev Bansal and the Supreme Court's decision in Deepak Steel and Power Ltd. are binding and dispositive on the issue of limitation.

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

• Whether the delay in filing the Income Tax Return (ITR) for the Assessment Year 2017-18 can be condoned under Section 119(2)(b) of the Income Tax Act, 1961, given the circumstances of the Petitioner's case.
• Whether the Respondent was justified in rejecting the Petitioner's application for condonation of delay on the ground that no genuine hardship was demonstrated.
• Whether an inadvertent error by the Petitioner's accountant in omitting the claim for refund in the ITR constitutes a valid ground for condonation of delay.
• Whether denial of the refund due to delayed filing, despite acknowledgment of the Petitioner's entitlement to the refund, violates the principles of equity and Article 265 of the Constitution of India.
• The scope and exercise of discretionary power vested under Section 119(2)(b) of the Income Tax Act in cases of delay in filing returns.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Condonation of Delay under Section 119(2)(b) of the Income Tax Act, 1961

Relevant Legal Framework and Precedents: Section 119(2)(b) empowers the Board to authorize any income-tax authority (except certain appellate authorities) to admit applications or claims for refund, exemption, deduction, or other relief after the expiry of the prescribed period, if it is considered desirable or expedient to avoid genuine hardship. The Court referred to prior decisions interpreting this provision, emphasizing that the power to condone delay must be exercised to advance justice meaningfully rather than in a perfunctory manner.

Court's Interpretation and Reasoning: The Court noted that the Respondent rejected the condonation application solely on the ground that the Petitioner did not demonstrate genuine hardship. However, the Court found that the Respondent failed to consider the bona fide nature of the Petitioner's delay, which was caused by an inadvertent omission by the Petitioner's accountant. The Court held that such an error is excusable under the principle "Ignorantia facti excusat" (ignorance of fact is excusable).

Key Evidence and Findings: The Petitioner filed the return belatedly and sought condonation of delay. The delay was due to omission of TDS refund claim, which was a bona fide mistake. The Respondent acknowledged the legitimacy of the refund claim but denied condonation on the ground of no genuine hardship. The Court found this rejection unjustified.

Application of Law to Facts: The Court applied the discretionary power under Section 119(2)(b) liberally and purposively to avoid hardship to the Petitioner. The Court emphasized that the delay was the only obstacle to processing the refund, and the Petitioner's entitlement to refund was not disputed substantively.

Treatment of Competing Arguments: The Respondent argued that the delay was due to lack of due diligence and that an accountant's error is not a ground for condonation. The Court rejected this rigid stance, holding that bona fide errors should not be penalized to the extent of causing unjust enrichment to the Revenue.

Conclusion: The Court concluded that the Respondent ought to have condoned the delay and processed the refund claim on merits.

Issue 2: Violation of Article 265 of the Constitution of India

Relevant Legal Framework: Article 265 mandates that no tax shall be levied or collected except by authority of law. The Court considered whether denial of a refund legitimately due violates this principle.

Court's Interpretation and Reasoning: The Court held that denying the refund due to procedural delay, especially when the substantive right to refund is acknowledged, amounts to unjust enrichment of the Revenue and violates the constitutional principle under Article 265.

Application of Law to Facts: Since the refund amount corresponded to TDS deducted and remitted by the deductors, the Petitioner was entitled to it by law. The denial of refund on procedural grounds without considering bona fide reasons was contrary to the constitutional mandate.

Conclusion: The Court found that the denial of refund violated Article 265 and was therefore impermissible.

Issue 3: Scope of Discretionary Power under Section 119(2)(b) and CBDT Circular No. 9/2015

Relevant Legal Framework: CBDT Circular No. 9/2015 guides the exercise of power under Section 119(2)(b), emphasizing that condonation of delay should be granted only if genuine hardship is demonstrated.

Court's Interpretation and Reasoning: While acknowledging the Circular's mandate, the Court held that genuine hardship includes bona fide errors causing delay. The Court stressed that the power must be exercised liberally to advance justice and prevent undue hardship.

Application of Law to Facts: The Petitioner's delay was due to an inadvertent omission, which the Court considered a genuine hardship. The Court noted that although interest on the refund could be denied as per the Circular, the principal refund amount could not be withheld.

Treatment of Competing Arguments: The Respondent's contention that the Petitioner had sufficient opportunity to file timely was rejected as the Court found no mala fide intention or neglect, only an oversight.

Conclusion: The Court held that the Respondent's rejection of condonation was contrary to the spirit and object of Section 119(2)(b) and the Circular.

3. SIGNIFICANT HOLDINGS

"Ignorantia facti excusat" - ignorance of fact is excusable, and an inadvertent error by the Petitioner's accountant cannot be a ground to punish the Petitioner and unjustly enrich the Department.

The discretionary power under Section 119(2)(b) must be exercised liberally and purposively, in consonance with the object of the provision, to avoid genuine hardship.

Denying a refund legitimately due, on procedural grounds without considering bona fide reasons, violates Article 265 of the Constitution of India.

The Respondent's impugned order dated 17.10.2023 rejecting condonation of delay under Section 119(2)(b) was quashed and set aside. The Respondent was directed to pass a fresh order condoning the delay and allowing the Petitioner to file the return for Assessment Year 2017-18, so that the refund claim may be processed in accordance with law within twelve weeks.

Outcome: The praecipe seeking urgent circulation was dismissed with costs, and the matter was directed to be listed on the assigned date.

- Whether the delay of 134 days in filing the appeal before the Tribunal can be condoned on sufficient cause shown by the assessee.

- Whether the cash deposit of Rs. 15,00,000/- in the assessee's bank account, unexplained in the return of income for AY 2011-12, can be treated as income and added fully to the assessee's taxable income under section 68 of the Income Tax Act.

- Whether the entire amount deposited in the bank account, representing turnover from family-owned retail business of fruits and flowers, should be taxed as income or only the profit element should be taxed.

- The appropriate method and quantum of addition to be made in the hands of the assessee in respect of unexplained cash deposits in the bank account.

2. ISSUE-WISE DETAILED ANALYSIS

Condonation of Delay in Filing Appeal

Relevant legal framework and precedents: The Income Tax Act prescribes strict time limits for filing appeals. However, the authorities have discretionary power to condone delay if sufficient cause is shown. The power to condone delay is not automatic and requires satisfaction of the authority that the delay occurred due to circumstances beyond the control of the appellant.

Court's interpretation and reasoning: The assessee's appeal was delayed by 134 days due to issuance of hearing notices under section 250 of the Act to an incorrect email ID, which prevented compliance. Upon discovering the ex-parte order passed by the CIT(A), the assessee appointed a new authorized representative and filed the appeal before the Tribunal. The affidavit explaining these facts was considered a sufficient cause.

Application of law to facts: The Tribunal found the reasons for delay to be genuine and mitigating, thereby exercising discretion in favour of the assessee and condoning the delay.

Treatment of competing arguments: The Revenue opposed condonation, but the Tribunal prioritized the interest of justice and sufficient cause shown by the assessee.

Conclusion: Delay of 134 days in filing appeal was condoned.

Treatment of Cash Deposit of Rs. 15,00,000/- in Bank Account

Relevant legal framework and precedents: Section 68 of the Income Tax Act deals with unexplained cash credits, which can be added to the income of the assessee if the source is not satisfactorily explained. Section 29 mandates computation of income from business profits under sections 30 to 43D. Section 44AD/44AF provides presumptive taxation for small businesses not maintaining books of accounts. Section 145 permits estimation of income where books are not reliable.

Court's interpretation and reasoning: The Assessing Officer reopened assessment under section 148 after prior approval and added Rs. 15,00,000/- as unexplained cash deposit under section 68, since the assessee had not filed return and failed to explain source. The CIT(A) confirmed this addition.

However, the Tribunal noted that the cash deposits represented turnover (sales) of the family-owned retail business of fruits and flowers, which is a cash-intensive trade. It was undisputed that purchase and sale were in cash and the deposits were not net income but gross receipts. Therefore, treating the entire deposit as income was unfair and contrary to the scheme of the Act.

Application of law to facts: Since the assessee did not maintain books and was a small business, presumptive taxation under section 44AD/44AF was applicable. The Tribunal held that only the profit element of the turnover should be taxed, not the gross turnover itself. It further observed that estimation of profit is permissible and varies with business conditions. The Tribunal considered 5% net profit as reasonable for such retail business, relying on precedents from coordinate Benches of the ITAT Surat.

Key evidence and findings: The Tribunal relied on the factual admission of cash-based business, nature of transactions, and relevant case law where additions were restricted to 5% of total bank deposits as profit element.

Treatment of competing arguments: The Revenue insisted on full addition under section 68, but the Tribunal balanced the equities by taxing only the profit element, thus partially allowing the appeal.

Conclusion: The addition was restricted to 5% of Rs. 15,00,000/-, i.e., Rs. 75,000/- as taxable income.

Mode of Taxation of the Addition

The Tribunal clarified that since the deposits represented turnover of family business, the addition should be taxed under normal provisions of the Income Tax Act and not under section 115BBE, which applies to unexplained income not relatable to business profits.

3. SIGNIFICANT HOLDINGS

"The invocation of the power to condone any delay, major or minor, in observing such time limit is possible only on the satisfaction of the authorities, regarding the assessee having been unable to file the appeal in time due to sufficient cause. The assessee cannot be entitled to automatic admission of appeal filed after the time limit."

"It is an undisputed fact that assessee, along with other his family members engaged in the business of fruits and flowers where purchase and sale, both are in cash, and such sales, in cash, has been deposited in the bank account. Therefore, it is nothing but turnover (sales) of the assessee. The entire turnover(sales) have been taxed by the assessing officer, which is unfair, therefore, I am of the view that only profit element is to be taxed in the hands of the assessee."

"I find that in such type of business, 5% net profit (after deducting direct and indirect expenses from sale) is appropriate. Therefore, I am of the view that to meet the end of justice, the addition at the rate of @ 5% of the total turnover, which is deposited in the bank account, may be a reasonable addition, in the hands of the assessee."

"The amount deposited in the bank account pertains to assessee's family business of fruit and flowers, and it is a turnover (sales) of the assessee, therefore, I direct the Assessing Officer to tax the same, by applying normal rate of income tax (not under Section 115BBE of the Act)."

Final determinations:

• Delay of 134 days in filing appeal was condoned on sufficient cause.
• Full addition of Rs. 15,00,000/- as unexplained cash deposit under section 68 was not justified.
• Only 5% of the total cash deposits representing estimated net profit was to be added to taxable income.
• The addition was to be taxed under normal provisions of the Income Tax Act, not under special provisions for unexplained income.
• The appeal was partly allowed accordingly.

The core legal questions considered by the Tribunal in this appeal are:

(a) Whether the assessee university, established under the Telangana State Private Universities Act, 2020, qualifies as a charitable institution engaged in the activity of imparting education within the meaning of Section 2(15) of the Income Tax Act, 1961, thereby entitling it to approval under Section 80G(5)(vi) of the Act.

(b) Whether the rejection of the application for registration/approval under Section 80G(5)(vi) by the CIT (Exemption) is justified on the ground that the assessee has not carried out any substantial charitable activity.

(c) Whether the prior grant of approval under Section 10(23C)(vi) for the assessee's educational activities conclusively establishes the charitable nature of its activities for the purpose of Section 80G approval.

(d) Whether the CIT (Exemption) complied with the statutory mandate under Section 80G(5) of the Act to examine the genuineness and fulfillment of conditions before rejecting the application, and whether the impugned order is sustainable in law.

(e) The adequacy and sufficiency of the evidence and submissions made by the assessee to establish charitable activities and compliance with conditions for approval under Section 80G.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) - Qualification as a Charitable Institution Engaged in Education:

The relevant legal framework includes Section 2(15) of the Income Tax Act, which defines "charitable purpose" to include education, and Section 80G(5)(vi), which provides for approval of institutions carrying out charitable activities, including education, for donors to claim deduction. The assessee was established as a private university under the Telangana State Private Universities (Establishment and Regulation) Act, 2020, with the primary object of imparting education.

The Tribunal noted that the assessee runs 35 programmes across undergraduate, postgraduate, and doctoral levels, with 4100 students enrolled and 240 faculty members. The university has extensive infrastructure, including classrooms, hostels, auditoriums, sports complexes, and a campus spanning 107 acres. It also maintains collaborations with reputed international universities and companies, enhancing the quality and scope of education and research.

The Court emphasized that education is an established charitable purpose under Section 2(15), and the university's activities, as evidenced by enrolment numbers, faculty strength, infrastructure, and academic collaborations, demonstrate substantial educational activity.

In applying the law to facts, the Tribunal held that the assessee's activities fall squarely within the charitable purpose of education and that the institution qualifies as a charitable entity for the purposes of Section 80G.

Issue (b) - Justification for Rejection of 80G Application on Grounds of No Substantial Charitable Activity:

The CIT (Exemption) rejected the application under Section 80G(5)(vi) on the basis that no charitable activities were being carried out by the assessee, as per the impugned order's brief reasoning. The Tribunal observed that the order was cryptic and non-speaking, lacking any detailed factual or legal findings to support the rejection.

The Tribunal noted that the assessee had submitted extensive details, including audited financials, Form 10B, ITR-7, registration certificate under Section 10(23C), and other supporting documents. The assessee also pointed out that the university had been granted approval under Section 10(23C)(vi) after due scrutiny of its charitable activities.

The Court found the rejection arbitrary and unjustified, particularly given the substantial evidence of educational activity and infrastructure. The Tribunal held that mere assertion without definite findings or consideration of the record does not satisfy the statutory requirement for rejection under Section 80G(5).

Issue (c) - Effect of Prior Approval under Section 10(23C)(vi):

The assessee relied on the prior approval granted under Section 10(23C)(vi) as conclusive proof of its charitable nature. The Tribunal referred to precedents wherein once registration under Section 12AA or approval under Section 10(23C) is granted on satisfaction of conditions, the activities are presumed charitable unless proven otherwise.

The Court observed that the CIT (Exemption) had not disputed the validity or genuineness of the activities at the time of grant of Section 10(23C)(vi) approval. Therefore, the rejection of Section 80G approval on grounds inconsistent with the earlier approval was held to be legally untenable.

Thus, the Tribunal underscored that the prior approval under Section 10(23C)(vi) serves as a significant, though not absolute, indicator of charitable status for Section 80G purposes.

Issue (d) - Compliance with Statutory Mandate under Section 80G(5):

Section 80G(5) mandates that the Commissioner must be satisfied about the genuineness of activities and fulfillment of conditions before granting approval, and if not satisfied, must record reasons in writing for rejection.

The Tribunal found that the impugned order failed to provide any detailed examination or definite findings on the genuineness or nature of activities. It was a summary rejection without addressing the voluminous evidence submitted by the assessee. The learned DR's submission that the assessee did not produce sample bills was countered by the Tribunal's observation that the CIT (Exemption) did not make any effort to verify or seek further evidence before rejecting.

The Tribunal concluded that the impugned order was arbitrary and non-compliant with the statutory mandate, warranting reconsideration.

Issue (e) - Adequacy of Evidence and Submissions by the Assessee:

The assessee submitted audited financials, registration certificates, details of students, faculty, infrastructure, scholarships granted, research output including publications and patents, and collaborations with reputed institutions and companies. These facts were not disputed by the Department.

The Tribunal noted that the assessee's activities were substantial and genuine, with significant expenditure on academic and infrastructure activities. The rejection based on the claim that "other expenses" exceeded educational expenses was not supported by detailed analysis or findings.

The Court held that the evidence submitted was adequate to establish charitable activities and compliance with conditions for approval under Section 80G(5).

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"Once the assessee has satisfied the conditions for grant of approval u/s 10(23C)(vi) being solely existed for the charitable activities of imparting education as a University, then the nature of the activities of the assessee being charitable in nature cannot be disputed while granting approval u/s 80G(5) of the I.T. Act, 1961 until and unless it is found that the assessee has carried out the activities in contrary to the objects of the assessee university or the activities of the assessee were found to be not genuine activities."

It was further observed:

"It is apparent from the impugned order of the CIT (E) that it is a non-speaking cryptic order summarily rejecting the application without giving a definite finding of fact that the activities carried out by the assessee university are not charitable in nature or are not genuine for achieving its objects of imparting education."

Core principles established include:

• Approval under Section 10(23C)(vi) is a strong indicator of charitable status for Section 80G purposes.
• The Commissioner must record clear, reasoned findings when rejecting an application under Section 80G(5), based on examination of evidence and fulfillment of statutory conditions.
• Rejection orders must be speaking and supported by facts; cryptic or summary rejections are arbitrary and unsustainable.
• Educational institutions established by statute and engaged in substantial educational activity with adequate infrastructure and faculty qualify as charitable institutions under the Income Tax Act.

Final determinations:

• The impugned order rejecting the application under Section 80G(5)(vi) was set aside.
• The matter was remanded to the CIT (Exemption) for fresh consideration of the application after giving the assessee an opportunity of hearing and considering all relevant facts and records, including the prior approval under Section 10(23C)(vi).
• The appeal was allowed for statistical purposes.

Issues: Whether the Principal Commissioner was justified in exercising revisional jurisdiction under section 263 of the Income-tax Act, 1961 on the ground that the assessment order allowing exemption under section 54F was passed without proper enquiry into the claim based on an unregistered agreement to purchase property from the assessee's wife.

Analysis: The assessee's claim for exemption was founded on an unregistered agreement to sell with possession relating to purchase of immovable property from a related party. The order under revision had allowed the claim, but the record did not show adequate verification of the legal effect of the unregistered document, the surrounding circumstances of non-registration, or the applicability of the Registration Act, 1908. On those facts, the Tribunal held that the Assessing Officer had not conducted the enquiry that ought to have been made and that the order, therefore, fell within Explanation 2 to section 263 as an order passed without making necessary enquiries or verification.

Conclusion: The invocation of section 263 was valid and the revisionary order was sustained.

Final Conclusion: The assessment order was held to be both erroneous and prejudicial to the interests of the Revenue, and the assessee's appeal failed.

Ratio Decidendi: An assessment order allowing a deduction or exemption without the enquiry and verification that the circumstances reasonably required is erroneous and prejudicial to the interests of the Revenue, and is amenable to revision under section 263, particularly where the claim rests on an unregistered transaction whose legal efficacy was not properly examined.

1. Whether the reopening of assessment under section 147 of the Act was validly initiated, given the procedural requirements under section 151(1) of the Act concerning obtaining prior approval from the competent authority before issuance of notice under section 148.

2. Whether the Assessing Officer (AO) complied with the requirement of obtaining approval from the Principal Commissioner of Income Tax (PCIT) or Commissioner of Income Tax (CIT) before issuing the notice under section 148, considering that the original assessment was completed under section 143(3) and the reopening was initiated after the expiry of four years from the end of the relevant assessment year.

3. Ancillary to the above, whether the assessment order passed consequent to the reopening under section 147 is sustainable if the reopening itself is held invalid.

Issue-wise Detailed Analysis:

Issue 1 & 2: Validity of Reopening of Assessment under Section 147 read with Section 151(1) of the Act

Relevant Legal Framework and Precedents: The provisions of section 147 of the Act empower the Assessing Officer to reopen an assessment if there is reason to believe that income chargeable to tax has escaped assessment. Section 148 mandates issuance of notice before such reopening. Section 151(1) stipulates that prior approval of the competent authority is necessary before issuing notice under section 148 if the original assessment was completed under section 143(3) or section 147 and the reopening is initiated after four years from the end of the relevant assessment year. The proviso to section 151(1), as applicable to the assessment year under dispute, clarifies that the competent authority for granting such approval is the PCIT/CIT, not any subordinate authority.

Judicial precedents cited by the appellant, such as decisions in Svitzer Hazira (P.) Ltd. and Voltas Ltd., reinforce the requirement of strict compliance with section 151(1) for reopening assessments beyond four years.

Court's Interpretation and Reasoning: The Court examined the facts that the original assessment for the year 2006-07 was completed under section 143(3) and that the reopening notice under section 148 was issued on 12.11.2014, which is beyond the four-year period. The AO issued the notice without obtaining prior approval from the PCIT/CIT, as admitted in the AO's order dated 14.01.2015. The Court carefully analyzed the statutory language of section 151(1) and its proviso, emphasizing that the approval must be from the specified competent authority and not any subordinate officer such as the Joint Commissioner who issued the notice in this case.

The Court found that the first appellate authority erred in relying on section 151(2) to justify the lack of approval, thereby misconstruing the statutory provisions. The Court held that the absence of approval from the competent authority vitiates the reopening proceedings.

Key Evidence and Findings: The AO's own admission in the order rejecting the assessee's objections confirmed the lack of prior approval from the PCIT/CIT. The timeline of events and the nature of original assessment were undisputed, establishing the legal necessity for such approval.

Application of Law to Facts: Applying the statutory mandate, the Court concluded that the reopening notice issued without requisite approval is invalid. Consequently, any assessment order passed pursuant to such reopening is also invalid.

Treatment of Competing Arguments: The Departmental Representative relied on the first appellate authority's reasoning, which was found to be flawed. The Court rejected the contention that section 151(2) dispenses with the requirement of approval in this context, clarifying the correct interpretation of the statutory provisions.

Conclusions: The reopening of assessment under section 147 was invalid due to non-compliance with section 151(1), and the subsequent assessment order passed under section 143(3)/147 is accordingly quashed.

Issue 3: Validity of Assessment Order Passed Consequent to Reopening

Given the Court's decision on the invalidity of reopening, the question of the validity of the assessment order passed pursuant to reopening became academic and was not adjudicated.

Significant Holdings:

The Court held: "In the facts of the present appeal, admittedly, prior to issuance of notice u/s. 148 of the Act, the A.O. has not obtained any approval of the competent authority in terms with the proviso contained u/s. 151(1) of the Act. That being the established factual position on record, the reopening of assessment u/s. 147 of the Act, is completely vitiated, hence, invalid."

Further, the Court stated: "While rejecting assessee's contentions on the ground that in terms with section 151(2) of the Act, no approval was required to be taken, the first appellate authority has completely misconstrued the statutory provision, thereby, misconceived the legal position. Hence, the reasoning of the first appellate authority is unsustainable."

The core principle established is that reopening of assessment beyond four years from the end of the relevant assessment year, where original assessment was completed under section 143(3), requires prior approval from the PCIT/CIT under section 151(1) of the Act, and failure to obtain such approval renders the reopening invalid.

The final determination was to allow the appeal, quash the reopening and the assessment order passed consequent thereto, and dismiss the appeal of the revenue department.

The core legal questions considered by the Appellate Tribunal (AT) in this matter are:

• Whether the deletion of additions on account of unexplained cash deposits by the Commissioner of Income Tax (Appeals) (CIT(A)) was justified without verifying the source, creditworthiness, and genuineness of deposits.
• Whether the CIT(A) erred in partly deleting additions relating to unexplained investments and cash deposits without affording the Revenue an opportunity to examine evidence submitted during appellate proceedings, thereby violating Rule 46A of the Income Tax Rules.
• Whether the additions made on account of unexplained investments without calling for a remand report from the Assessing Officer (AO) were justified.
• Whether the CIT(A) correctly recalculated capital gains on sale of properties, including the acceptance of purchase agreements in absence of sale deeds, and the allowance of indexation benefits.
• Whether the claim of capital gains on sale of flats should be treated as long-term or short-term capital gains, particularly in cases where possession was not taken but allotment letters and payments were made.
• Whether the AO's methodology for calculating indexed cost of acquisition was correct or needed adjustment in line with payment schedules.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Deletion of additions on account of unexplained cash deposits

Relevant legal framework and precedents: The Income Tax Act, 1961, Section 69 deals with unexplained cash credits. The principle that earlier cash withdrawals can be shown as source for subsequent cash deposits is well established. The Karnataka High Court in S.R. Venkataratnam vs CIT held that once the assessee discloses the source as earlier withdrawals, the Revenue cannot disbelieve the explanation merely on surmise. The Delhi ITAT in Neeta Breja and the coordinate bench in ACIT vs Baldev Raj Charla have also held that time gap between withdrawal and deposit does not warrant rejection of explanation if no evidence shows the cash was spent elsewhere.

Court's interpretation and reasoning: The CIT(A) accepted the appellant's explanation that cash deposits were made from prior withdrawals, noting absence of any evidence that the cash was used for other purposes. The CIT(A) relied on the above precedents to hold that the Revenue failed to disprove availability of cash at the time of deposit. The Tribunal concurred, finding no infirmity in the CIT(A)'s order.

Key evidence and findings: Bank statements showing prior cash withdrawals and deposits; no evidence from Revenue disproving availability of cash.

Application of law to facts: The explanation of source of cash deposits from earlier withdrawals was accepted as per settled law.

Treatment of competing arguments: Revenue argued that the CIT(A) erred in deleting additions without verifying source and creditworthiness; however, no evidence was produced to counter the assessee's explanation.

Conclusion: Deletion of additions on account of unexplained cash deposits was upheld.

Issue 2: Deletion of additions relating to unexplained investments and violation of Rule 46A

Relevant legal framework and precedents: Rule 46A of the Income Tax Rules mandates that additional evidence submitted during appellate proceedings must be given an opportunity for examination by the Revenue. Section 69 of the Act deals with unexplained investments.

Court's interpretation and reasoning: The CIT(A) deleted additions related to fixed deposits after verifying bank statements showing investments of Rs. 2.04 crores and noting that AO had made the same addition multiple times without conducting basic enquiries such as obtaining SFT (Specified Financial Transactions) information from banks. The Tribunal found no infirmity in the CIT(A)'s acceptance of the source of fixed deposits and noted that the Revenue failed to point out any irregularity or violation of Rule 46A.

Key evidence and findings: Bank statements reflecting fixed deposits; absence of remand report or further enquiry by AO; no evidence that additions were justified.

Application of law to facts: Since the source was verified and no further evidence was submitted during assessment proceedings, deletion of additions was warranted.

Treatment of competing arguments: Revenue contended that CIT(A) erred in deleting additions without affording opportunity to examine evidence; however, Tribunal found that no additional evidence was submitted during assessment proceedings and no violation of Rule 46A occurred.

Conclusion: Deletion of additions on account of unexplained investments was upheld.

Issue 3: Recalculation of capital gains and acceptance of purchase agreements in absence of sale deeds

Relevant legal framework and precedents: Sections 48 and 50C of the Income Tax Act deal with computation of capital gains and valuation of transfer of immovable property. The burden of proof for cost of acquisition and improvement lies on the assessee. The acceptance of purchase agreements in absence of sale deeds is a matter of evidence and discretion.

Court's interpretation and reasoning: The CIT(A) accepted the purchase agreement dated 06.01.1990 as proof of cost of acquisition for a flat, granting benefit of doubt despite absence of sale deed. However, the CIT(A) disallowed cost of improvement of Rs. 17,03,880 due to lack of documentary evidence. The Tribunal noted that the assessee failed to submit cogent evidence to substantiate cost of improvement and upheld the disallowance.

Key evidence and findings: Purchase agreement submitted; no sale deed or proof of payment for cost of improvement.

Application of law to facts: Benefit of doubt was given for cost of acquisition based on purchase agreement; disallowance of cost of improvement was justified due to absence of evidence.

Treatment of competing arguments: Assessee argued for acceptance of all claimed costs; Revenue challenged lack of documentary proof.

Conclusion: Partial acceptance of cost of acquisition; disallowance of cost of improvement sustained.

Issue 4: Treatment of capital gains on sale of flats and determination of holding period for long-term capital gains

Relevant legal framework and precedents: Section 2(42A) defines long-term capital asset holding period; Section 2(47) defines "transfer" including extinguishment of any rights; Sections 54 and 54F provide exemptions for capital gains on residential property. CBDT Circular Nos. 478 and 672 clarify that allotment letter and payment confer title and rights, and possession is a formality.

Court's interpretation and reasoning: The Tribunal relied on a precedent from the Indore Bench wherein allotment letter and payment were held to confer ownership rights, making the holding period commence from date of allotment rather than possession or registration. The Tribunal held that possession and payment are follow-up activities, and the period of holding should be reckoned from allotment date. Accordingly, capital gains on sale of the flat were to be treated as long-term. However, the Tribunal did not concur with the AO's method of calculating indexed cost of acquisition and directed recomputation linked to payment schedule.

Key evidence and findings: Allotment letter, payment schedule, builder's letters, and sale agreement; absence of registered sale deed; dates of possession and payment.

Application of law to facts: Applying the principle that rights vest on allotment and payment, the holding period was more than 36 months, qualifying for long-term capital gains treatment.

Treatment of competing arguments: Revenue argued for short-term capital gains based on date of sale and possession; Tribunal rejected this, following binding precedents and CBDT Circulars.

Conclusion: Capital gains on sale of flats were long-term; reassessment of indexed cost of acquisition was directed.

Issue 5: Violation of Rule 46A and opportunity to examine evidence

Relevant legal framework: Rule 46A mandates that additional evidence filed during appeal must be shared with the Revenue for examination.

Court's interpretation and reasoning: The Tribunal found that the Revenue failed to specify any additional evidence submitted by the assessee during appellate proceedings that was not available during assessment. Hence, the ground alleging violation of Rule 46A was rendered infructuous. The CIT(A)'s action was within the scope of Section 250(4) of the Act and no irregularity was found.

Key evidence and findings: No specific additional evidence identified by Revenue; assessment record and appellate submissions considered.

Application of law to facts: No violation of Rule 46A occurred as no new evidence was improperly admitted.

Treatment of competing arguments: Revenue alleged procedural lapse; Tribunal rejected for lack of substantiation.

Conclusion: No violation of Rule 46A.

3. SIGNIFICANT HOLDINGS

"The law well settled that assessee can show earlier cash receipts or withdrawals from bank account as source of subsequent cash deposits unless the revenue is able to show that the cash so available is used for some other purposes. In this case there is no information that the cash withdrawn was consumed elsewhere."

"The allottee gets title to the property on the issue of the allotment letter and the payment of instalment is only a follow up action and taking the delivery of possession is only a formality."

"The period of holding must be considered from date of allotment. Possession and payment are only follow up activities."

"Basic enquiries regarding SFT information were not conducted by the AO with the bank, may be due to paucity of time. In the absence of any other information even as remand report, the appellant's contention that Time Deposits of only Rs. 2,04,00,000 was invested, have to be accepted."

"The action of CIT(A) is circumscribed under Section 250(4) of I.T. Act, 1961 and no irregularity is visible."

Core principles established include:

• The principle that cash deposits can be explained by prior withdrawals unless disproved by Revenue.
• Acceptance of purchase agreements as proof of cost of acquisition in absence of sale deeds, subject to evidence.
• Recognition that allotment letters and payment confer ownership rights, making the holding period for capital gains calculation start from allotment date.
• Requirement for AO to conduct basic enquiries such as obtaining SFT information before making additions on unexplained investments.
• Strict adherence to procedural safeguards under Rule 46A, ensuring no evidence is improperly admitted without opportunity to Revenue.

Final determinations on each issue were:

• Revenue's appeal was dismissed in respect of additions on unexplained cash deposits and investments.
• CIT(A)'s deletion of additions was upheld due to lack of evidence and procedural compliance by AO.
• Assessee's appeal was partly allowed on the issue of capital gains, holding the gains as long-term and directing recomputation of indexed cost linked to payment schedule.
• Disallowance of cost of improvement was sustained due to lack of documentary evidence.

Under the first issue, the Tribunal analyzed the impact of the Finance Act, 2022 amendments to section 14A, which purportedly extend the applicability of disallowance irrespective of the accrual or receipt of exempt income in the relevant year. The Revenue contended that these amendments nullify earlier judicial decisions relied upon by the assessee, which held that no disallowance under section 14A can be made absent exempt income. The assessee, conversely, argued that the disallowance under section 14A read with Rule 8D must be computed only in respect of investments that actually yielded exempt income during the year.

In addressing these contentions, the Tribunal referred to a well-established judicial principle that for the purpose of computing disallowance under Rule 8D(2), only the average value of investments yielding exempt income during the relevant year should be considered. Investments not yielding exempt income are excluded from this computation. The Tribunal observed that the first appellate authority correctly applied this settled legal position by restricting the disallowance to the investments that generated exempt income, thereby reducing the disallowance significantly from the AO's computation.

Further, the Tribunal noted that the identical issue had been adjudicated in the assessee's case for the assessment year 2018-19, where a coordinate bench upheld the first appellate authority's approach. Since no factual distinction was demonstrated by the Revenue for the current year, the Tribunal found no reason to deviate from the precedent and upheld the first appellate authority's decision.

Regarding the second issue on whether the amended provisions of the Finance Act, 2022 override earlier judicial precedents, the Tribunal implicitly rejected the Revenue's submission by adhering to the settled principle that disallowance under section 14A read with Rule 8D(2) is to be computed based on investments yielding exempt income. The Tribunal's reliance on earlier decisions and the absence of any contrary factual matrix indicated that the amendments did not warrant a different approach in this case.

The third issue concerned the quantum of disallowance made by the AO, specifically the addition of Rs. 2,35,53,078/- under section 14A read with Rule 8D(2)(iii), which the AO computed without evidence that the borrowed funds on which interest was paid were directly attributable to earning taxable income only. The assessee challenged this disallowance, and the first appellate authority reduced it to Rs. 7,67,694/- after considering the investments yielding exempt income.

The Tribunal found that the AO had recorded his reasoning while rejecting the assessee's suo motu disallowance, thus satisfying the requirement of recording satisfaction under section 14A(2). However, the Tribunal upheld the first appellate authority's reduction of the disallowance amount, emphasizing that the disallowance must be proportionate and based on correct computation principles. The Tribunal also declined to entertain the assessee's cross objection, noting that under identical facts and circumstances, a similar cross objection for the assessment year 2018-19 was not entertained.

In conclusion, the Tribunal dismissed both the Revenue's appeal and the assessee's cross objection, affirming the first appellate authority's order. The Tribunal's key holding reiterates that for disallowance under section 14A read with Rule 8D(2), only investments yielding exempt income during the relevant year are to be considered in computing the average value of investments. The Tribunal stated: "while computing disallowance under Rule 8D(2) based on average value of investment, only those investments can be considered, which have yielded exempt income during the year under consideration."

This judgment preserves the core legal principle that section 14A disallowance is not automatic or absolute but must be linked to the existence of exempt income and the corresponding investments that generate such income. The Tribunal's approach ensures that disallowance is not arbitrarily inflated by including investments unrelated to exempt income, thereby safeguarding the assessee's legitimate interests while ensuring compliance with the statutory provisions.

Issues: Whether the ex parte appellate order should be set aside and the matter remanded to the first appellate authority for a fresh decision after granting one more opportunity of hearing to the assessee.

Analysis: The appeal before the Tribunal arose from an ex parte order of the first appellate authority. In view of the assessee's non-appearance before the lower authorities, the Tribunal nevertheless considered that a final adjudication at the appellate stage should be preceded by a meaningful opportunity of hearing. To meet the requirements of natural justice, and since the assessee sought a fresh hearing before the first appellate authority, the Tribunal found it appropriate to restore the matter. The Tribunal also cautioned the assessee to cooperate in the remand proceedings, failing which the authority would be free to decide the matter on the material already available.

Conclusion: The ex parte appellate order was set aside and the matter was remanded to the first appellate authority for fresh consideration after affording one more opportunity of being heard to the assessee.

Final Conclusion: The appeal succeeded only to the extent of remand and restoration for fresh adjudication, with no final determination of the tax dispute on merits.

Ratio Decidendi: Where the first appellate order is passed ex parte, the matter may be restored for a fresh hearing to ensure compliance with natural justice and a fair opportunity of participation.

Issues: Whether wireless access points imported by the assessee were excluded from the benefit of Nil rate of duty under Sl. No. 13 of Notification No. 24/2005-Cus. dated 01.03.2005 on the ground that clause (iv) referring to "MIMO and LTE Products" was to be read disjunctively.

Analysis: The exclusion in clause (iv) was examined on its plain language and in the context of the notification as a whole. The phrase "MIMO and LTE Products" was held to be conjunctive, not disjunctive, because the wording did not use "or" and the structure of the entry showed that the exclusion was intended only for products combining both MIMO technology and LTE standards. The later clarificatory amendment was treated as supporting the original interpretation for disputes arising prior to the amendment. Since the imported wireless access points had MIMO technology but did not conform to LTE standards, they did not fall within the exclusion.

Conclusion: The denial of exemption was not justified and the imported goods were entitled to the benefit of Notification No. 24/2005-Cus. dated 01.03.2005.

Ratio Decidendi: In a taxing exemption notification, the words of an exclusion clause must be given their plain and conjunctive meaning unless ambiguity or absurdity compels otherwise; a product is excluded only when it satisfies all the conjunctive conditions stated in the clause.

Issues: Whether the import of PP/PE granules under the Target Plus Scheme was entitled to benefit of the scheme despite the Revenue's objection regarding absence of broad nexus with the exported goods, and whether the penalty proceedings against the office-bearers could survive once the main demand failed.

Analysis: The Target Plus Scheme was treated as a post-export incentive under the Foreign Trade Policy, permitting utilisation of duty credit for import of freely importable inputs for the importer's own use. The Court followed the earlier binding interpretation that the scheme does not require the imported goods to be inputs physically incorporated in the very export product, and that the expression "broad nexus" is to be understood in a wider commercial sense within the product group. On the facts, the imported granules were used in the assessee's manufacturing activity, the Original Authority had accepted the explanation, and the Revenue did not place material sufficient to dislodge that finding. Once the substantive benefit under the scheme was rightly extended, the penalties imposed only as a consequence of the alleged main violation could not be sustained.

Conclusion: The benefit of the Target Plus Scheme was correctly extended to the assessee, and the penalty proceedings against the connected respondents were rightly dropped.

Ratio Decidendi: Under the Target Plus Scheme, import of freely importable inputs for the importer's own use is permissible if there is a broad nexus with the relevant product group, and physical incorporation of the imported goods in the exported product is not a mandatory requirement.

Issues: Whether the reassessment changing the declared country of origin from United Arab Emirates to Pakistan, along with the consequent demand of additional duty, confiscation, redemption fine and penalties, was legally sustainable.

Analysis: The imported goods were self-assessed by declaring United Arab Emirates as the country of origin. In verification under Section 17 of the Customs Act, 1962, the proper officer could reassess only on the basis of reliable material, and where reassessment differed from self-assessment without written acceptance, a speaking order was required. The finding that the goods were of Pakistan origin rested mainly on labels found on only a few gunny bags and on general import statistics and press reports. Against that, the record contained commercial documents, bill of lading, certificate of origin issued by the Dubai Chamber of Commerce & Industry, and plant quarantine certification indicating United Arab Emirates origin. Mere markings on some packing material were not sufficient to conclude that the goods themselves originated from Pakistan.

Conclusion: The reassessment treating the goods as Pakistan origin was not sustainable, and the consequential demand, confiscation and penalties could not be upheld.

Final Conclusion: The appeals succeeded and the impugned order was set aside.

Ratio Decidendi: Country of origin cannot be determined merely from markings on a few packing materials when the contemporaneous import documents and official certificates reliably establish a different origin.

(i) Whether the appellants violated Regulations 5 and 10(1)(m) of the Sea Cargo Manifest and Transhipment Regulations, 2018 (SCMTR), and Sections 34, 39, 40, and 41 of the Customs Act, 1962;

(ii) Whether, consequent to the above, the appellants are liable for suspension of their operations under Regulation 11 of SCMTR, 2018;

(iii) Whether the export goods covered under the two shipping bills (S/Bs), for which the Let Export Order (LEO) copy was not submitted before vessel departure, are liable for confiscation under sub-sections (d), (f), and (g) of Section 113 of the Customs Act, 1962, and whether the appellants are liable for penalties under Section 114(iii) of the Customs Act and Regulation 13 of SCMTR, 2018.

Issue-wise Detailed Analysis:

1. Alleged Violation of SCMTR, 2018 (Regulations 5 and 10(1)(m)) and Sections 34, 39, 40, 41 of the Customs Act, 1962

The SCMTR, 2018, notified in 2018 and intended to replace earlier Import and Export Manifest Regulations, imposes obligations on authorised sea carriers to electronically deliver departure manifests and abide by customs laws. Regulation 5 mandates delivery of departure manifests before vessel departure, and Regulation 10(1)(m) requires authorised carriers to comply with all applicable laws and regulations. Regulation 11 provides for suspension of operations for failure to comply.

However, the implementation of SCMTR, 2018, has been phased and subject to transitional provisions under Regulation 15, with extensions granted by the Central Board of Indirect Taxes and Customs (CBIC) due to stakeholder unpreparedness and the COVID-19 pandemic. Notifications and circulars from CBIC extended transitional provisions for various ports, including JNCH Nhava Sheva, where the present case arose, up to 30.11.2024 and further to 31.05.2025, expressly advising customs officers not to impose penalties during this interim period.

The appellants contended they are not 'Authorised Sea Carriers' responsible for filing Export General Manifests (EGMs) but act as agents of Non-Vessel Operating Common Carriers (NVOCCs). The Tribunal noted that the SCMTR provisions, particularly Regulations 5 and 10(1)(m), were not operational at the relevant time (January 2022) for JNCH port, as transitional provisions were still in effect. Consequently, the Tribunal held that the appellants could not be penalised for alleged violations of these regulations at that time.

Regarding Sections 34 and 39 of the Customs Act, which require export goods to be loaded under customs supervision and only after 'entry-outwards' permission is granted, the Tribunal found no dispute that the vessel had obtained entry outwards and loading was supervised by customs officers. Hence, no violation of these provisions occurred.

Section 40 requires the person-in-charge of the conveyance not to permit loading without a duly passed shipping bill or bill of export. The Tribunal clarified that the responsibility to provide the LEO copy to the person-in-charge rests with the exporter, not the shipping agent, and that the appellants could not be held liable for non-submission of the LEO copy before vessel departure.

Section 41 mandates the filing of the departure/export manifest by the person-in-charge of the vessel or any other person specified by the Central Government. The Tribunal observed that the Revenue did not allege non-filing of the EGM for the vessel and that the appellants were not responsible for this filing. Therefore, no violation of Section 41 was established.

Further, the Tribunal examined the customs EDI system's error messages generated due to the LEO date being later than the sailing date, which was the factual basis for the investigation. It was noted that the appellants had taken steps to rectify the error by filing a request for correction, evidencing no willful or negligent violation.

2. Suspension of Operations and Imposition of Penalties under SCMTR, 2018

Regulation 11 of SCMTR empowers the Commissioner of Customs to suspend or revoke registration of authorised carriers for failure to comply with the regulations. However, given the transitional status of SCMTR at the relevant time and CBIC's instructions to avoid penal actions during the interim period, the Tribunal found the suspension order and penalties imposed under Regulation 11 and Regulation 13 unsustainable.

3. Confiscation of Export Goods and Penalties under Sections 113 and 114 of the Customs Act, 1962

Section 113(d), (f), and (g) provide for confiscation of goods attempted to be exported contrary to prohibitions, loaded in contravention of customs provisions, or loaded without proper permission. Section 114(iii) provides for penalties corresponding to such violations.

The Tribunal observed that the essential ingredients for confiscation under these provisions were absent. The vessel had obtained entry outwards, loading was supervised by customs officers, and there was no evidence of prohibited export or loading without permission. The only issue was the non-submission of the LEO copy before vessel sailing, which the Tribunal held did not amount to contravention warranting confiscation or penalties.

4. Treatment of Competing Arguments

The appellants argued that they were not the authorised carriers responsible for filing EGMs and that SCMTR was not yet operational at the port on the relevant date. They relied on CBIC notifications and circulars extending transitional provisions and directing non-imposition of penalties during the interim period. They also cited precedent holding that shipping agents acting as NVOCC agents are not liable for violations related to filing export manifests.

The Revenue relied on the findings in the impugned order, asserting violations of SCMTR and Customs Act provisions. However, the Tribunal found that the Revenue's case did not establish the requisite violations, especially given the transitional status of SCMTR and the procedural safeguards and instructions issued by CBIC.

Conclusions

The Tribunal concluded that:

- The appellants did not violate Regulations 5 and 10(1)(m) of SCMTR, 2018, as the regulations were not operational for JNCH port on the relevant date;

- The appellants did not violate Sections 34, 39, 40, and 41 of the Customs Act, 1962, as loading was supervised, entry outwards was granted, and responsibility for LEO submission rests with the exporter;

- There was no basis for suspension of operations or imposition of penalties under SCMTR, 2018;

- The export goods were not liable for confiscation under Section 113(d), (f), and (g), and penalties under Section 114(iii) were not sustainable;

- The impugned order was contrary to the facts and law and was set aside.

Significant Holdings and Core Principles Established:

The Tribunal emphasized the following principles:

"...the impugned order holding that the Regulations 5 and 10(1)(m) ibid have been violated by the appellants does not stand the scrutiny of law."

"...the appellants cannot be held liable for any failure with respect to compliance with the requirement of Section 40 ibid."

"...the essential ingredients of sub-section (d), (f), (g) such as attempt to export contrary to any prohibition; loading of goods in violation of Section 33, 34; loading of export goods in a vessel without obtaining permission of proper officer of customs is not present in this case."

"...the impugned order invoking the provisions of such SCMTR, which is yet to be implemented on the relevant date... for imposition of suspension of the operation of the appellants and imposition of penalties... does not stand for legal scrutiny."

"...there is no violation of regulations 5, 10(1)(m) of SCMTR, 2018 and legal provisions under Sections 34, 39, 40, 41, 113(d), 113(f), 113(g) ibid, and the findings in the impugned order is contrary to the facts on record."

Accordingly, the Tribunal allowed the appeal, set aside the impugned order dated 06.09.2024, and held that the appellants were not liable for suspension, confiscation, or penalties as imposed.

The core legal questions considered in the judgment are:

(a) Whether the statements recorded under section 108 of the Customs Act, 1962 can be relied upon as evidence for imposing penalty under section 114 of the Customs Act without following the procedural safeguards prescribed under section 138B of the Customs Act;

(b) Whether the goods exported, being CD-ROMs, fall within the ambit of "export goods" as defined under section 2(19) of the Customs Act, and consequently, whether the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 apply for re-determination of valuation;

(c) Whether the appellant was involved in the day-to-day affairs of the company M/s. Netcompware Pvt. Ltd., thereby attracting penal consequences;

(d) Whether the confiscation of goods under section 113(d) of the Customs Act was legally sustainable given that the goods had already been exported;

(e) Whether imposition of penalty under section 114 of the Customs Act can be sustained in the absence of valid confiscation under section 113.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Reliance on Statements under Section 108 vis-`a-vis Procedural Safeguards under Section 138B

The legal framework involves sections 108 and 138B of the Customs Act. Section 108 empowers officers to record statements during inquiry or investigation, while section 138B prescribes the conditions under which such statements can be admitted as evidence in adjudication proceedings. The statutory scheme mandates that statements recorded under section 108 are relevant only if the person making the statement is examined as a witness before the adjudicating authority and the authority forms an opinion that the statement should be admitted in evidence in the interests of justice. Additionally, the party against whom the statement is used must be given an opportunity to cross-examine the witness.

Precedents cited include the Tribunal's decision in M/s. Surya Wires Pvt. Ltd. and M/s. Drolia Electrosteel P. Ltd., which emphasize the mandatory nature of section 138B and the analogous section 9D of the Central Excise Act, 1944. The rationale is to prevent coercion or compulsion in recording statements during investigation and to ensure fairness in evidence admission.

The Court observed that the impugned order relied solely on the statement of Shri Pankaj Soni recorded under section 108 without following the procedure under section 138B. There was no evidence that the appellant was examined as a witness before the adjudicating authority, nor was there any opinion formed regarding admissibility of the statement. Consequently, the statement was inadmissible and could not form the basis for penalty imposition.

The competing argument by the department that the statement was sufficient was rejected on the ground that statutory safeguards were not complied with. The Court underscored that failure to follow the procedure renders the statement irrelevant and inadmissible.

Conclusion: Statements under section 108 without compliance with section 138B cannot be relied upon for penalty proceedings under the Customs Act.

Issue (b): Applicability of Customs Valuation Rules and Definition of Export Goods

The appellant contended that once goods are exported, they do not fall within the definition of "export goods" under section 2(19) of the Customs Act, and hence the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 cannot be invoked to re-determine the valuation of exported goods. Reliance was placed on a High Court judgment supporting this position.

The Court noted this submission but did not delve deeply into this issue as the penalty imposition was set aside on other grounds. However, the argument raises the principle that valuation rules apply to goods at the time of export and do not permit revaluation post-export for penalty purposes.

Conclusion: The valuation rules cannot be invoked to re-determine value of goods already exported, limiting the scope of penalty for overvaluation post-export.

Issue (c): Involvement of the Appellant in Day-to-Day Affairs of Netcompware

The department alleged that the appellant was actively involved in the day-to-day affairs of Netcompware and was complicit in the fraudulent export and DEPB scrip procurement scheme. The impugned order relied on statements under section 108, particularly that of Pankaj Soni, which indicated the appellant's involvement in handling pay orders and cash withdrawals linked to the company's accounts.

The appellant denied involvement, asserting permanent residence in Srinagar and non-participation in company affairs. The department countered this by highlighting the appellant's failure to appear before the investigating authorities despite repeated summons, suggesting deliberate avoidance.

The Court, however, found that the evidence relied upon was inadmissible due to non-compliance with section 138B procedures. Without admissible evidence, the finding of involvement could not be sustained.

Conclusion: The appellant's alleged involvement was not established on admissible evidence; therefore, the penalty based on such involvement could not be upheld.

Issue (d): Legality of Confiscation under Section 113(d) of the Customs Act

Section 113(d) provides for confiscation of goods attempted to be exported contrary to prohibitions under the Act or other laws. The Court noted that the goods in question had already been exported and, therefore, could not be confiscated under section 113(d), which applies to goods attempted to be exported.

This interpretation aligns with the statutory language restricting confiscation to attempts or goods brought within customs limits for export contrary to law, not goods already exported.

Conclusion: Confiscation under section 113(d) was not legally sustainable as the goods had been exported.

Issue (e): Consequence of Invalid Confiscation on Penalty under Section 114

Section 114 of the Customs Act allows imposition of penalty where goods are liable to confiscation under section 113. Since the confiscation was not sustainable, the penalty imposed under section 114 could not stand.

The Court emphasized that penalty is contingent upon valid confiscation; absence of the latter vitiates the former.

Conclusion: Penalty under section 114 cannot be sustained without valid confiscation under section 113.

3. SIGNIFICANT HOLDINGS

The Court held that:

"The statements made under section 108 of the Customs Act cannot be relied upon if the procedure followed under section 138B of the Customs Act is not followed."

"The provisions of section 9D of the Central Excise Act and section 138B(1)(b) of the Customs Act have been held to be mandatory and failure to comply with the procedure would mean that no reliance can be placed on the statements recorded either under section 14D of the Central Excise Act or under section 108 of the Customs Act."

"The goods had been exported and, therefore, the goods could not have been confiscated under section 113(d) of the Customs Act."

"Penalty under section 114 of the Customs Act can be levied only if the goods are held liable to confiscation under section 113 of the Customs Act. As the confiscation cannot be sustained, penalty under section 114 of the Customs Act cannot also be sustained."

The Court conclusively set aside the penalty imposed on the appellant under section 114 of the Customs Act due to the inadmissibility of evidence and invalidity of confiscation.

(a) Whether the appellant was rightly denied the benefit of the Exemption Notification No. 46/2011-Cus dated 01.06.2011 on the basis of the "country of origin" certificates issued by the Malaysian authorities for imports of Cocoa Powder Low Fat;

(b) Whether the extended period of limitation under section 28(4) of the Customs Act, 1962 could be invoked for demanding differential customs duty in respect of the appellant's imports;

(c) Whether the department was justified in relying upon verification reports and investigations pertaining to "country of origin" certificates issued to other importers and for earlier periods (2011-12) to deny exemption for imports made during 2014-2018;

(d) The evidentiary burden and due diligence required from the importer and the department regarding verification of "country of origin" certificates issued by foreign authorities under a preferential trade agreement;

(e) Whether the demand of differential duty and interest under section 28AA of the Customs Act was sustainable in the absence of proper verification of the certificates of origin for the relevant imports;

(f) The applicability and distinction of precedents cited by the department in denying exemption and demanding duty.

Issue-wise Detailed Analysis:

1. Denial of Benefit of Exemption Notification Based on "Country of Origin" Certificates

The appellant imported Cocoa Powder Low Fat from Malaysia during 2014-2018 and claimed nil basic customs duty under the Exemption Notification, relying on "country of origin" certificates issued by the Malaysian Ministry of International Trade and Industry (MITI). The Principal Commissioner denied this benefit for eleven Bills of Entry, holding that the regional value content (RVC) declared in the certificates (35%) was not correct, based on an investigation that found the actual RVC to be between 13-17%.

The department's contention was supported by a letter dated 18.03.2014 from Malaysian authorities responding to a verification request regarding imports made by other importers in 2011-12, which stated that the cost structure was not provided due to data privacy, and the department doubted the genuineness of the certificates.

The Court examined the procedural and evidentiary aspects of this denial. It was noted that no verification was sought or conducted by the department with respect to the "country of origin" certificates issued for the appellant's imports during 2014-2018. Instead, the department relied on investigations and correspondence related to imports by other entities in 2011-12. The Court emphasized that such reliance on unrelated verification reports without attempting to verify the certificates for the appellant's imports was improper.

Precedents relied upon by the department (Alfa Traders and Surya Light) were distinguished on facts. In those cases, invoices were faked or the value addition was never in dispute, whereas here, the certificates were issued by the designated competent authority and no attempt was made to verify their authenticity for the relevant imports.

The Court referred to a Division Bench decision in Symphony International, which held that when a certificate of origin is issued by the designated authority under an ASEAN Free Trade Agreement and produced by the importer, the onus shifts to the department to prove its falsity or inaccuracy. Without verification or rebuttal, denial of exemption is unsustainable. This principle was further reinforced by the Tribunal's decision in Kiara Ingredients INC, which held that failure of the department to obtain cost data or conduct verification with the foreign government cannot be held against the importer who has produced the prescribed documentary evidence.

The Court applied these principles to the facts, concluding that the department's denial of exemption without verification of the appellant's certificates was unjustified.

2. Invocation of Extended Period of Limitation under Section 28(4) of the Customs Act

The Principal Commissioner invoked the extended period of limitation for thirty-seven Bills of Entry alleging that the appellant had willfully procured fraudulent "country of origin" certificates by misstatement and suppression of facts, based on the lower regional value content found during investigation of other importers' imports from 2011-12.

However, the Principal Commissioner ultimately held that the extended period could not be invoked for these thirty-seven Bills of Entry, as the extended limitation period requires specific conditions to be met, including proof of fraud or willful misstatement in relation to the particular imports under scrutiny.

The Court concurred with this view, noting that the department failed to establish any fraudulent conduct or misstatement by the appellant in relation to the certificates for the imports made between 2014 and 2018. The reliance on investigations pertaining to other importers and earlier periods was insufficient to invoke the extended limitation period against the appellant's imports.

3. Burden of Proof and Due Diligence in Verification of "Country of Origin" Certificates

The Court emphasized the evidentiary burden on the department once the importer produces a certificate of origin issued by the designated authority under the preferential trade agreement. The department must then discharge the burden of disproving the genuineness or correctness of such certificate through proper verification procedures.

In this case, the department did not attempt to verify the certificates for the appellant's imports with the Malaysian government or the designated authority. The department's reliance on a letter from 2014 relating to other importers was held to be insufficient and procedurally improper.

The Court noted that cost data confidentiality is a legitimate concern and that the absence of cost data cannot be held against the importer, especially where the certificate is issued by the competent authority and no further verification is sought.

This approach aligns with the principle that the importer who produces valid documentary evidence under the relevant Customs notification and trade agreement is entitled to the benefit unless the department can prove otherwise through due process.

4. Application of Precedents and Distinction of Cases

The department relied on decisions in Alfa Traders and Surya Light to support denial of exemption and demand of duty. However, these cases were distinguished based on facts: in Alfa Traders, judicial notice was taken of non-production of goods in the country of origin and in Surya Light, the invoice was faked.

The Court relied on more recent Tribunal decisions (Symphony International and Kiara Ingredients) which clarified the procedural requirements and burden of proof in cases involving preferential trade agreement certificates of origin.

5. Demand of Differential Duty and Interest under Section 28AA

The Principal Commissioner confirmed demand of differential duty along with interest for eleven Bills of Entry falling within the normal limitation period. The Court held that since the denial of exemption itself was unjustified due to lack of verification and improper reliance on unrelated investigations, the demand of differential duty and interest was also unsustainable.

Conclusions:

The Court set aside the impugned order of the Principal Commissioner dated 10.01.2020 and allowed the appeal. The denial of benefit of the Exemption Notification and the consequent demand of differential duty and interest were quashed for all the Bills of Entry, including those falling within the normal limitation period.

Significant Holdings:

"The department has been provided a documentary evidence by way of a stipulated certificate from the designated authority under the agreement. On production of such agreement which is in the nature of the documentary evidence, the onus to prove fakeness of its content or otherwise clearly shifts on the department. Unlike, the course of action adopted in respect of other importers who made imports in the Year-2014, the department has not even attempted to do verification with Government of Malaysia and has proceeded in the instant case, on the basis of following assumptions and presumptions even without as much as verification having been attempted to be made by the authorities. The same is therefore, not maintainable."

"In absence of such burden having been discharged or even having been attempted till such belated stage, the show cause notice cannot be sustained."

"Failure of Indian authorities to get more detailed verification or underlying cost data from the Malaysian Government authorities cannot be held against the appellant, who discharged their burden to claim benefit by producing the relevant prescribed document under the agreement and the Customs notification."

Core principles established include:

- The importer producing a certificate of origin issued by the designated authority under a preferential trade agreement is prima facie entitled to claim exemption under the relevant notification.

- The burden shifts to the department to disprove the genuineness of such certificate by conducting proper verification with the foreign government or competent authority.

- Reliance on investigations or verification reports relating to other importers or earlier periods without verifying the certificates relevant to the appellant's imports is improper.

- The extended period of limitation under section 28(4) can only be invoked upon specific proof of fraud or willful misstatement relating to the particular imports.

- Absence of cost data due to confidentiality cannot be held against the importer in the absence of any adverse verification.

(a) Whether the value appraised under Section 46 of the Customs Act, 1962 (CA 1962) and Rule 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR 2007), based on the Chartered Engineer's (C.E.) appraisement certificate, can be rejected under Rule 12 of CVR 2007Rs.

(b) Whether the Commissioner was correct in relying on the insurance company's inspection and valuation (at Australian $5,200,000) as the actual value of the imported equipmentRs.

(c) Whether the documents submitted, including inspection reports, were manipulated or fabricatedRs.

(d) Whether the extended period under Section 28(4) of the CA 1962 can be invoked in cases of "first check" assessmentsRs.

(e) Whether the benefit of the Export Promotion Capital Goods (EPCG) license can be denied without cancellation of the license by the Directorate General of Foreign Trade (DGFT), the issuing authorityRs.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Rejection of Value Appraised under Rule 9 of CVR 2007 by invoking Rule 12

Legal framework and precedents: Rule 9 of CVR 2007 provides a residual method to determine the value of imported goods when transaction value is not ascertainable, relying on reasonable means consistent with valuation principles. Rule 12 permits rejection of declared value if found incorrect or undervalued. Section 46(4) CA 1962 requires importers to declare true value in the Bill of Entry. Boards Circulars (No. 4/2008 and No. 25/2015) provide guidelines for valuation of secondhand machinery, emphasizing the need for inspection/appraisement reports by qualified Chartered Engineers or equivalent.

Court's interpretation and reasoning: The Court noted that while Rule 9 allows valuation by appraisement, it does not preclude rejection of such value under Rule 12 if found to be false or manipulated. The valuation process is collaborative, involving the importer's disclosure and inspection by Chartered Engineers. If the value declared or appraised is found to be factually flawed or fraudulent, the Customs officer is empowered to redetermine the value under Rule 12 and Section 28 CA 1962.

Key evidence and findings: The Chartered Engineer's certificate was found to be based on a fabricated and baseless inspection report prepared by Bureau Veritas India Pvt. Ltd. (BVIPL). The C.E. admitted he did not physically inspect the machinery and relied on a draft report that was not properly signed or authenticated. Statements of BVIPL personnel revealed issuance of imaginary values without actual verification. These facts undermined the reliability of the appraisement certificate.

Application of law to facts: Given the fraudulent nature of the inspection report and the appraisement certificate, the rejection of the value assessed under Rule 9 by invoking Rule 12 was legally permissible and justified.

Treatment of competing arguments: The appellant argued that Rule 12 only allows rejection of declared value, not the value assessed under Rule 9, and that the C.E.'s report was reliable. The Court rejected this, emphasizing the collaborative valuation process and the need to prevent fraud, noting that the absence of declared value does not bar rejection of appraised value if found false.

Conclusion: The rejection of the value appraised under Rule 9 based on the fabricated certificate was upheld.

(b) Reliance on Insurance Company's Valuation as Actual Value

Legal framework: Insurance contracts operate under the doctrine of uberrimae fidei (utmost good faith), requiring full disclosure of material facts. Section 14 CA 1962 and Rule 10 CVR 2007 require inclusion of all costs and services related to importation in the transaction value.

Court's reasoning: The insurance valuation of Australian $5,200,000 was not challenged as manipulated and was submitted by the appellant during inquiry. The Court accepted that in the peculiar circumstances-where the declared value was found fraudulent and the actual transaction value was not available-the insured value could be accepted as the ex-works value for Customs purposes.

Evidence and findings: The appellant's own statements and documents supported the insurance valuation. The insurance company's representative had inspected the goods, and the valuation was arrived at after consultation.

Application of law: The Court held that the insurance valuation, being a product of a contract requiring utmost good faith and submitted by the importer, could be accepted as a reliable indicator of value.

Competing arguments: The appellant contended the insurance value was not accepted by the insurer as true value and was not based on any invoice. The Court found no allegations or evidence of manipulation of insurance documents and thus upheld reliance on this valuation.

Conclusion: The insurance valuation was accepted as the actual value of the equipment for Customs valuation.

(c) Allegation of Manipulation of Documents

Legal framework: Certification requires an accredited person or agency to verify facts in accordance with established standards. Admissions under Section 58 of the Indian Evidence Act, 1872, though not conclusive, shift the burden of proof and are prima facie evidence unless rebutted.

Court's reasoning: The Court found that the inspection report by BVIPL was fabricated and the Chartered Engineer's certificate was based on this false report. Statements of BVIPL officials admitted issuing certificates without proper inspection. Admissions by appellant's employees regarding discrepancies and omissions were relied upon. The Court noted that mere resiling from statements does not negate their evidentiary value if unproven otherwise.

Evidence and findings: Statements recorded under Section 108 CA 1962, admissions by key personnel, and inconsistencies in purchase orders and bills of lading established manipulation of documents.

Application of law: The Court applied the principle that admissions shift onus and found the appellant failed to rebut the presumption of manipulation.

Competing arguments: The appellant argued the inspection was conducted properly and the report was reliable. The Court rejected this due to lack of independent verification and the admitted fabrication.

Conclusion: The Court upheld the finding of document manipulation and rejected the appellant's valuation certificate.

(d) Invocation of Extended Period under Section 28(4) CA 1962 in First Check Assessments

Legal framework: Section 28(4) allows extended period for issuing show cause notices where goods are undervalued or misdeclared. Section 46(4) requires truthful declaration in Bill of Entry. "First check" assessments are preliminary and based on declared information.

Court's reasoning: The Court held that deliberate concealment or suppression of facts in a first check assessment amounts to suppression under Section 28(4), justifying invocation of extended period for reassessment. The appellant's failure to explain discrepancies and involvement in fraudulent valuation constituted blameworthy conduct.

Evidence and findings: Statements of employees admitted discrepancies in purchase orders, shipment consignees, and payments. The appellant failed to satisfactorily explain these anomalies.

Application of law: The Court found revenue justified in invoking extended period and imposing penalties under Sections 112(a), 114A, and 114AA CA 1962.

Competing arguments: The appellant contended extended period should not apply to first check cases. The Court rejected this, emphasizing the need to prevent fraud and uphold revenue interests.

Conclusion: Extended period under Section 28(4) was rightly invoked.

(e) Denial of EPCG License Benefit without Cancellation by DGFT

Legal framework: Notification No. 103/2009-Cus provides concessional duty rates under EPCG scheme subject to a valid authorization issued by DGFT. Customs and DGFT operate in separate spheres; Customs administers duty exemptions, DGFT issues and cancels authorizations.

Court's reasoning: The Court emphasized that denial of EPCG benefit is conditional on cancellation of authorization by DGFT. Fraudulent valuation before Customs does not automatically invalidate the EPCG benefit unless DGFT cancels the license. Customs can initiate action for violations under Customs Act but cannot deny EPCG benefit without DGFT's cancellation.

Evidence and findings: The EPCG authorization was valid at the time of import. No evidence of cancellation by DGFT was placed on record.

Application of law: The Court held that benefit of EPCG license cannot be denied solely on Customs valuation grounds without DGFT cancellation.

Competing arguments: The appellant argued denial without cancellation was improper. The Court agreed, clarifying the distinct jurisdiction of DGFT and Customs.

Conclusion: EPCG benefit cannot be denied without DGFT cancellation of authorization.

Additional Issues:

Suppression of Considerations and Inclusion of Costs in Assessable Value: The Court examined payments for dismantling, packing, freight, insurance, consultancy, and other expenses incurred abroad which were not declared. These payments were required to be added to the transaction value as per Section 14(1) CA 1962 and Rule 10 CVR 2007. The appellant's own admissions and documents confirmed suppression. The Court upheld addition of these costs to assessable value.

Confiscation and Redemption Fine: Although the goods were liable for confiscation due to misdeclaration, the Court held confiscation could not be ordered as the goods were not available, and the bond executed was under the EPCG notification conditions, not for blameworthy conduct. Confiscation and redemption fine were set aside accordingly.

Penalties: Penalties imposed on the company and an employee were upheld except penalty under Section 114AA on the employee, which was deleted considering the company was already penalized. The Court emphasized deterrence against statutory violations.

3. SIGNIFICANT HOLDINGS

"The rejection of the value assessed under Rule 9 of CVR 2007 is permissible under Rule 12 when the value is found to be based on fabricated or manipulated documents, as the valuation process is collaborative and dependent on truthful disclosure."

"The insurance valuation submitted by the importer, being a product of a contract governed by the principle of utmost good faith and not challenged as manipulated, can be accepted as the actual value of the goods for Customs purposes in the absence of a reliable transaction value."

"Admissions made by parties, even if later resiled from, carry evidentiary weight and shift the burden of proof; failure to rebut such admissions supports findings of fraud or suppression."

"Extended period under Section 28(4) of CA 1962 can be invoked in 'first check' assessments where willful misstatement or suppression of facts is established."

"Benefit under EPCG notification cannot be denied by Customs without cancellation of the EPCG authorization by DGFT, as the two authorities operate in separate spheres."

"All payments made to third parties to satisfy obligations of the seller, including dismantling, freight, insurance, and consultancy, must be included in the transaction value under Section 14(1) and Rule 10 of CVR 2007."

"Goods liable for confiscation must be available for confiscation; if not available, confiscation and redemption fine cannot be imposed."

Issues: (i) Whether the consent decree dated 05.03.2020 constituted a valid contract of guarantee under section 126 of the Indian Contract Act, 1872; (ii) whether invocation of the personal guarantee was a precondition for initiating insolvency proceedings against the personal guarantor; (iii) whether the insolvency application under section 95 of the Insolvency and Bankruptcy Code, 2016 was maintainable in view of fraud alleged in obtaining the consent decree.

Issue (i): Whether the consent decree dated 05.03.2020 constituted a valid contract of guarantee under section 126 of the Indian Contract Act, 1872.

Analysis: Section 126 permits an oral or written guarantee, but the arrangement must still clearly show that the surety undertook secondary liability to discharge the principal debtor's obligation on default. The consent decree recorded a general assurance to pay the dues and to keep the properties unencumbered. It did not contain an express and independent undertaking that Respondent No. 1 was acting as a personal guarantor, nor did it specify that liability would arise only upon default of the corporate debtor. The decree therefore reflected a settlement and joint payment obligation rather than a legally distinct contract of guarantee.

Conclusion: The consent decree was not a valid contract of guarantee and this issue is decided against the appellants.

Issue (ii): Whether invocation of the personal guarantee was a precondition for initiating insolvency proceedings against the personal guarantor.

Analysis: Under the personal guarantor framework, a guarantee must be invoked in accordance with its terms before insolvency action can proceed on that basis. The record did not show any invocation of a separate enforceable guarantee, and the appellants attempted to treat the date of the consent decree itself as the date of default. As the alleged guarantee was not separately established and no invocation was proved, the statutory precondition was not satisfied.

Conclusion: Invocation of a valid personal guarantee was necessary and, on the facts, was absent; this issue is decided against the appellants.

Issue (iii): Whether the insolvency application under section 95 of the Insolvency and Bankruptcy Code, 2016 was maintainable in view of fraud alleged in obtaining the consent decree.

Analysis: The corporate debtor was under CIRP and moratorium when the civil suit was filed and when the consent decree was obtained. The decree was executed without disclosure of the subsisting moratorium, despite the directors not being authorised to bind the corporate debtor during that period. The surrounding circumstances, including the related-party nature of the transaction and the attempt to rely on the decree in insolvency proceedings, supported the finding that the decree was procured by collusion and fraud. A decree vitiated by fraud cannot form the foundation for maintainability under the Code.

Conclusion: The section 95 application was not maintainable because the consent decree was vitiated by fraud and was ab initio void and unenforceable in these proceedings; this issue is decided against the appellants.

Final Conclusion: The impugned orders disallowing the personal insolvency applications and imposing consequences on the resolution professional were upheld, and all connected appeals failed.

The core legal questions considered by the Appellate Tribunal under the Prevention of Money Laundering Act, 2002 (PMLA) in this appeal include:

• Whether the Adjudicating Authority was justified in permitting the retention of seized office files and digital evidence under Section 17(4) of PMLA.
• Whether the Enforcement Directorate (ED) had recorded the requisite "reason to believe" under Section 17(1) of PMLA on the basis of material in its possession that the appellant company was in possession of records relating to money laundering.
• Whether the appellant company, whose premises were searched and documents seized, must necessarily be named as an accused in the scheduled offence or the chargesheet for the attachment and retention of property under PMLA.
• Whether the ED has jurisdiction to investigate the commission of scheduled offences or is limited to investigation related to proceeds of crime under PMLA.
• Whether the appellant company was entitled to release of seized documents and materials not relied upon by the investigating agency.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification for Retention of Seized Documents and Digital Evidence

Legal Framework and Precedents: Section 17(4) of PMLA empowers the Adjudicating Authority to permit retention of seized property if it is necessary for investigation or trial. The Court referred to the Supreme Court's ruling in Vijay Madanlal Choudhary and Ors. vs. Union of India which clarified the scope of attachment and retention of property under PMLA.

Court's Interpretation and Reasoning: The Tribunal noted that the Adjudicating Authority had formed a reasonable belief based on the material on record that the seized documents and digital evidence were connected to proceeds of crime. The retention was thus justified to facilitate ongoing investigation.

Evidence and Findings: The seized materials included four ABI office files and one CD containing digital evidence recovered from the appellant's premises. The investigation revealed suspicious financial transactions involving companies linked to Karti P. Chidambaram, suspected to be proceeds of crime connected to irregularities in FIPB approval for foreign investment in Aircel-Maxis deal.

Application of Law to Facts: Since the investigation was ongoing and the seized materials were relevant to tracing proceeds of crime, retention was warranted under Section 17(4).

Treatment of Competing Arguments: The appellant argued that the materials should be released as the investigation was incomplete and no sanction to prosecute was granted. The Tribunal rejected this, holding that the ongoing nature of investigation and reasonable belief sufficed for retention.

Conclusion: The retention order was lawful and justified.

Issue 2: Requirement of "Reason to Believe" under Section 17(1) of PMLA

Legal Framework and Precedents: Section 17(1) mandates that the ED must record reason to believe, based on material in its possession, that the property is proceeds of crime before seizure or attachment. The appellant relied on a Delhi High Court judgment in J. Sekar & Ors. v. Union of India emphasizing this requirement.

Court's Interpretation and Reasoning: The Tribunal found ample incriminating material against the appellant, including financial transactions and involvement of associates in layering illicit funds, to justify the reason to believe. The Adjudicating Authority's formation of reasonable belief on the basis of seized material and investigation records was upheld.

Evidence and Findings: The investigation disclosed that the appellant's premises contained documents linked to suspicious transactions, and the ED had examined FIPB authorities and financial records indicating irregularities in foreign investment approvals.

Application of Law to Facts: The Tribunal held that the statutory requirement of "reason to believe" was satisfied by the material on record and the Adjudicating Authority's order.

Treatment of Competing Arguments: The appellant contended no material existed to form such belief and investigation was incomplete. The Tribunal rejected this, emphasizing the ongoing investigation and the sufficiency of the material before the Adjudicating Authority.

Conclusion: The "reason to believe" requirement was fulfilled.

Issue 3: Necessity of Being Named as Accused for Attachment and Retention

Legal Framework and Precedents: The Tribunal relied heavily on the Supreme Court's ruling in Vijay Madanlal Choudhary and Ors. vs. Union of India, which clarified that Section 5(1) of PMLA extends to any person involved in proceeds of crime, not necessarily named as accused in the scheduled offence.

Court's Interpretation and Reasoning: The Tribunal held that the appellant's absence from the FIR or chargesheet did not preclude attachment or retention of property found in its possession. The Act's objective to attach proceeds of crime wherever held was emphasized.

Evidence and Findings: The appellant's premises contained incriminating documents and digital evidence linked to proceeds of crime, justifying attachment despite non-inclusion in the FIR or chargesheet.

Application of Law to Facts: The law permits attachment of property in possession of any person connected with proceeds of crime, regardless of accused status.

Treatment of Competing Arguments: The appellant argued that since it was not named in FIR or chargesheet, attachment was improper. The Tribunal rejected this legal stance.

Conclusion: Attachment and retention are permissible even if the person is not an accused in the scheduled offence.

Issue 4: Jurisdiction of Enforcement Directorate in Investigation

Legal Framework and Precedents: PMLA empowers ED to investigate money laundering offences, which are linked to predicate scheduled offences investigated by police or CBI. ED's jurisdiction is limited to proceeds of crime and money laundering aspects, not re-investigation of predicate offences.

Court's Interpretation and Reasoning: The Tribunal clarified that ED does not investigate the scheduled offence per se but focuses on whether proceeds of crime exist, are laundered, and tracing their movement. The Tribunal outlined the scope of ED's investigation including:

• Prima facie evidence of scheduled offence;
• Existence of proceeds of crime;
• Whether proceeds are laundered or likely to be;
• Mode of layering or trail of proceeds;
• Attachment of other properties where proceeds dissipated;
• Verification of genuineness of claimants of attached properties.

Evidence and Findings: The investigation involved examination of FIPB approvals, foreign investments, and financial transactions linked to the appellant and associates.

Application of Law to Facts: ED's jurisdiction was appropriately exercised within the statutory framework.

Treatment of Competing Arguments: The appellant contended ED had no jurisdiction to investigate scheduled offences. The Tribunal rejected this, distinguishing the roles of police/CBI and ED.

Conclusion: ED's jurisdiction to investigate money laundering aspects is valid and distinct from investigation of scheduled offences.

Issue 5: Release of Unrelied Seized Documents and Materials

Court's Interpretation and Reasoning: The Tribunal directed that any seized documents or materials not relied upon by the investigating agencies in the investigation or prosecution be returned to the appellant. However, copies may be retained by ED for further investigation. The appellant must give an undertaking not to challenge authenticity of photocopies returned.

Application of Law to Facts: This balances the appellant's right to property and the investigative needs of ED.

Conclusion: Release of unrelied seized materials with safeguards was ordered.

3. SIGNIFICANT HOLDINGS

The Tribunal preserved the following crucial legal reasoning from the Supreme Court's judgment in Vijay Madanlal Choudhary and Ors. vs. Union of India:

"65......... The sweep of Section 5(1) is not limited to the Accused named in the criminal activity relating to a scheduled offence. It would apply to any person (not necessarily being Accused in the scheduled offence), if he is involved in any process or activity connected with the proceeds of crime. Such a person besides facing the consequence of provisional attachment order, may end up in being named as Accused in the complaint to be filed by the authorised officer concerning offence Under Section 3 of the 2002 Act.

69. We find force in the stand taken by the Union of India that the objectives of enacting the 2002 Act was the attachment and confiscation of proceeds of crime which is the quintessence so as to combat the evil of money-laundering. The second proviso, therefore, addresses the broad objectives of the 2002 Act to reach the proceeds of crime in whosoever's name they are kept or by whosoever they are held."

Core principles established include:

• Attachment and retention of property under PMLA extend to any person connected with proceeds of crime, irrespective of being named accused in scheduled offence.
• ED's jurisdiction is limited to investigation of money laundering and proceeds of crime, not re-investigation of scheduled offences.
• "Reason to believe" under Section 17(1) can be formed on the basis of material in possession and does not require completion of investigation.
• Retention of seized property is justified if necessary for investigation or trial under Section 17(4).
• Unrelied seized materials must be returned with safeguards to protect investigation integrity.

Final determinations on each issue were:

• Retention of seized documents and digital evidence was lawful and justified.
• Reason to believe under Section 17(1) was properly recorded based on incriminating material.
• Attachment and retention do not require the person to be named as accused in scheduled offence.
• ED has jurisdiction to investigate money laundering aspects and proceeds of crime, not the predicate offence itself.
• Unrelied seized materials are to be returned with appropriate conditions.

The core legal questions considered by the Tribunal include:

(a) Whether the Enforcement Directorate (ED) was legally entitled to attach properties already seized under Section 17 of the Prevention of Money Laundering Act, 2002 (PMLA) by invoking Section 5 of the PMLA, without first following the mandatory procedure for retention of seized property under Sections 17(4) and 20 of the Act.

(b) Whether the conditions precedent for attachment under Section 5(1) of the PMLA were fulfilled, particularly the requirement that the Director or authorized officer must have reason to believe that a person is in possession of proceeds of crime and that such proceeds are likely to be concealed or dealt with so as to frustrate confiscation proceedings.

(c) Whether the Adjudicating Authority (AA) complied with the procedural and substantive requirements under Section 8 of the PMLA while confirming the attachment order, including proper consideration of the appellant's submissions and evidence regarding the nature and source of the seized property.

(d) Whether the alleged offences, including cricket-betting and procurement of SIM cards by forgery, constitute scheduled offences under the PMLA, and consequently, whether the properties attached could be considered 'proceeds of crime' under the Act.

(e) Whether the seized cash amounting to Rs. 26,30,000/- legitimately belonged to the appellants or their business entities and was duly accounted for, thereby not constituting proceeds of crime.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Legality of Attachment under Section 5 after Seizure under Section 17

Relevant Legal Framework and Precedents: The PMLA provides a detailed procedural framework for dealing with seized properties. Section 17 authorizes seizure and retention of property for a limited period, requiring an application within 30 days to the Adjudicating Authority (AA) for retention beyond 30 days. Section 20 permits retention for up to 180 days, subject to AA's approval. Section 5 empowers the Director or authorized officer to provisionally attach property involved in money laundering if certain conditions are met, but this is distinct from seizure and retention under Section 17.

The Supreme Court in Vijay Madanlal Choudhary v. UOI upheld the constitutionality of Section 17 and emphasized the mandatory procedural safeguards therein.

Court's Interpretation and Reasoning: The Tribunal observed that the ED seized the properties on 09.05.2015 under Section 17 but did not follow the mandatory steps prescribed under Sections 17(4) and 20, such as filing an application for retention before the AA within 30 days or obtaining AA's permission for retention beyond 180 days. Instead, the ED issued a Provisional Attachment Order (PAO) under Section 5, attaching the same properties already in its possession.

The Tribunal held that the provisions of the PMLA are couched in mandatory terms ("shall"), and the ED was bound to follow the specific procedure for retention of seized property rather than attaching it under Section 5. The Tribunal emphasized the settled legal principle that if a statute prescribes a mode of procedure, it must be strictly followed.

Key Evidence and Findings: The record showed no application for retention under Section 17(4) or Section 20 was filed by the ED. The PAO was issued without invoking the second proviso of Section 5(1), which requires recording reasons to believe in writing.

Application of Law to Facts: Since the property was already in ED's possession, the condition in Section 5(1)(a) that any person is in possession of proceeds of crime was not satisfied. Also, the likelihood of concealment or transfer (Section 5(1)(b)) was negated by the fact that the ED already held the property. Thus, the mandatory conditions for attachment under Section 5 were not fulfilled.

Treatment of Competing Arguments: The ED argued that both retention under Section 17/20 and attachment under Section 5 were alternative remedies and that the choice of procedure was within their discretion. The Tribunal rejected this, holding that the statutory scheme mandates following the retention procedure once seizure has occurred, and attachment under Section 5 is not applicable to already seized property.

Conclusion: The attachment under Section 5 of the property already seized under Section 17 was illegal and unsustainable.

Issue (b): Fulfillment of Conditions for Attachment under Section 5(1)

Relevant Legal Framework: Section 5(1) requires the Director or authorized officer to have reason to believe, recorded in writing, that (a) any person is in possession of proceeds of crime, and (b) such proceeds are likely to be concealed or dealt with so as to frustrate confiscation proceedings.

Court's Interpretation: The Tribunal noted that the ED did not invoke the second proviso of Section 5(1) which allows attachment even without a report under Section 173 CrPC if reasons are recorded. The ED also did not record reasons to believe as required. Since the property was already in ED's custody, no "person" was in possession, and no risk of concealment or transfer existed.

Application to Facts: The Tribunal found that neither condition (a) nor (b) was fulfilled, rendering the attachment invalid.

Issue (c): Compliance with Section 8 by the Adjudicating Authority

Relevant Framework: Section 8 requires the AA to consider replies, hear parties, and record findings on whether properties are involved in money laundering before confirming attachment or retention.

Findings: The appellants contended that the AA merely reiterated submissions without applying mind or addressing whether the offences were scheduled offences, or whether the properties were proceeds of crime. The Tribunal agreed that the AA failed to properly consider the appellants' evidence, including documentary proof of legitimate business transactions and accounting.

Conclusion: The AA's confirmation of attachment was procedurally flawed and lacked proper adjudication.

Issue (d): Whether the Alleged Offences Constitute Scheduled Offences under PMLA

Context: The appellants argued that cricket-betting is not a scheduled offence under the PMLA, and the alleged forgery related to SIM cards was unrelated to the attached properties.

Tribunal's Approach: The Tribunal did not decide on this issue due to the overarching illegality of the attachment order and procedural lapses. It observed that these issues are better adjudicated in the pending prosecution before the Special Court.

Issue (e): Source and Ownership of the Seized Cash

Arguments: The appellants claimed the seized amount belonged exclusively to one brother, Tushar Bansal, proprietor of M/s Balaji Agencies, and was duly accounted for with supporting documents. The ED disputed the genuineness and sufficiency of this evidence.

Tribunal's Findings: The Tribunal noted the AA failed to properly consider this evidence and the nexus between the seized cash and scheduled offences was not established. However, since the attachment order itself was set aside on procedural grounds, the Tribunal refrained from deciding on this issue.

3. SIGNIFICANT HOLDINGS

"The provisions of the PMLA, 2002 are couched in mandatory language, as indicated by the use of the word 'shall' and it is not left to the authorities acting under the provisions of the Act to choose a different course of action as per their desire."

"Since the properties in question were already in the possession of the respondent Directorate in the present case, the first requirement of the provision that the property is in the possession of any 'person' was not met. Further, there was no likelihood of concealment or transfer as the property was already in custody of the Directorate. Therefore, the respondents could not have invoked the said provision to attach the property which was already under seizure."

"The attachment of property under Section 5 fails and cannot be sustained in the eyes of law. Once property is seized under Section 17, the only proper course of action in law is to seek its retention and not to attach the very same property under a different provision of the Act."

"The Adjudicating Authority has failed to appreciate the evidence and submissions of the appellants and has merely reiterated contentions without application of mind, thus the confirmation of attachment order is illegal."

"The order of the Adjudicating Authority confirming the attachment is hereby set aside."

The Tribunal's final determination was that the attachment order under Section 5 of the PMLA was illegal and unsustainable because the ED failed to follow the mandatory procedure for retention of seized property under Sections 17(4) and 20. The conditions for attachment under Section 5 were not fulfilled as the property was already in ED's possession, negating the requirement that a person must be in possession and that there must be a risk of concealment or transfer. The AA's confirmation of the attachment was also procedurally defective for failing to properly consider the appellants' evidence and submissions. Consequently, the impugned order confirming attachment was set aside, and the appellants were entitled to the release of the seized property. The Tribunal expressly refrained from commenting on the merits of the scheduled offence or the genuineness of the property's source, leaving those issues to be decided in the pending prosecution before the Special Court.

Issues: Whether the provisional attachment order confirming attachment of the appellant's bank accounts could be sustained when the appellant was not afforded an opportunity of hearing under the Prevention of Money Laundering Act, 2002, and whether the matter required remand.

Analysis: The appellant was not a noticee before the Adjudicating Authority, yet its bank accounts were attached and the attachment was confirmed. The Tribunal noted that, even if the appellant company was ultimately controlled by the Wadhawan group, the issue involved factual questions that could not be determined without hearing the appellant. Section 8 of the Prevention of Money Laundering Act, 2002 requires observance of the hearing process before confirmation of attachment. The Tribunal also treated the appellant's challenge as maintainable and held that the absence of hearing before the Adjudicating Authority vitiated the order insofar as it concerned the appellant.

Conclusion: The attachment order was set aside qua the appellant and the matter was remanded to the Adjudicating Authority from the stage of issuance of notice under Section 8(1) of the Prevention of Money Laundering Act, 2002 for fresh proceedings after hearing the appellant.

Ratio Decidendi: Confirmation of attachment under the Prevention of Money Laundering Act, 2002 cannot be sustained against a person affected by the order unless the statutory opportunity of hearing is afforded before final adjudication.

1. Whether the commission amount paid by the appellant to foreign buyers, which is deducted in export invoices and shipping bills, constitutes a taxable service under the category of "Business Auxiliary Service" as defined under Section 65(105)(zzb) of the Finance Act, 1994, thereby attracting service tax on reverse charge basis.

2. Whether the appellant, who did not appoint any foreign commission agent directly and had no written or verbal contract with any foreign commission agent, is liable to pay service tax on the commission amount paid to foreign buyers who in turn paid foreign agents.

3. Whether the extended period of limitation for demanding service tax under the proviso to Section 73(1) of the Finance Act, 1994 is invocable in the present case.

4. Whether the commission amount reflected in invoices and shipping bills, and deducted from export proceeds, can be construed as a trade discount rather than a commission for taxable services.

Issue-wise Detailed Analysis:

1. Liability to Service Tax on Commission Amount under Business Auxiliary Service

The relevant legal framework is Section 65(105)(zzb) of the Finance Act, 1994, which defines "Business Auxiliary Service" and subjects such services to service tax. The department contended that the commission paid to foreign agents falls within this category and is liable to service tax on reverse charge.

The appellant argued that the commission amount was not paid to any foreign commission agent directly, but to the foreign buyer, and that the foreign buyer's agents were not appointed or known to them. The appellant further contended that no service was received from any foreign commission agent, thus no taxable event occurred.

The Court examined documentary evidence including export invoices, shipping bills, and bank certificates which showed that the commission amount was separately indicated and deducted from the gross invoice value to arrive at net export value. The Director of the appellant admitted in his statement that no foreign commission agent was appointed by the appellant and that the commission was a normal trade practice to secure export orders. There was no written or verbal contract with any foreign agent.

The Court noted that the presence of a service provider and service recipient with consideration is essential for a taxable event. Since the appellant had no direct contractual relationship with any foreign commission agent and no service was received from such an agent, the commission amount could not be considered as payment for a taxable service.

The Court relied on precedents including a recent decision by the Tribunal which held that when no contract or agreement exists between the Indian exporter and foreign service provider, the demand of service tax on commission shown in export invoices raised on foreign buyers cannot be sustained. The relevant excerpt states:

"Even though some service provider is involved there is no relationship between the appellant and any foreign based service provider as there is no direct transaction made by the appellant with any of the commission agent. It is also a fact that there is no contract between the appellant and the foreign based service provider even if any arrangement of payment is there between the buyer of the goods and so called commission agent in the foreign country. For this reason, the demand of service tax on the commission shown in the invoice raised to the buyer cannot be made."

Other cited precedents similarly held that commission amounts reflected as deductions in export invoices and shipping bills, where no third-party commission agent exists or is appointed by the exporter, constitute trade discounts rather than taxable services. The Court emphasized that a three-party relationship (exporter, buyer, and commission agent) is necessary for commission agent services, which was absent here.

2. Nature of Commission Amount: Commission or Trade Discount

The appellant contended that the commission deducted was effectively a trade discount extended to the foreign buyer, reflected clearly in export invoices and shipping bills. The department argued it was commission paid for services rendered by foreign commission agents to promote exports.

The Court analyzed invoices, shipping bills, and bank certificates showing commission rates generally less than 12.5%, deducted from gross export value. The appellant's own admission that the foreign buyer's agents never provided any service to the appellant and that the commission was a customary trade practice to secure orders supported the appellant's contention.

Precedents were cited where similar deductions were held to be trade discounts rather than commission for taxable services. For instance, in Laxmi Exports, the Tribunal observed that the deduction shown as commission was nothing but a discount given by the exporter to the foreign buyer, with no evidence of a commission agent or service provider. Similarly, in Duflon Industries, the Tribunal held that the purchaser of goods could not be considered a commission agent in the absence of a third-party service provider.

The Court found the department's contention that the commission was for business auxiliary services unsupported by evidence of any contractual relationship or service receipt by the appellant from foreign commission agents. Consequently, the commission amount was held to be a trade discount, not subject to service tax.

3. Invocability of Extended Period of Limitation

The department invoked the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994, alleging suppression of facts by the appellant. The appellant argued that the commission amount was fully disclosed in export invoices, shipping bills, and bank realization certificates, negating any suppression.

The Court agreed with the appellant, noting that all relevant figures were disclosed in official documents and that the commission amount related to export of goods, which is not taxable. The Court held that no malafide or suppression could be attributed to the appellant and therefore the extended period of limitation was not invocable. This was supported by precedent in Texyard International, where similar facts led to rejection of extended period demands.

4. Application of Law to Facts and Treatment of Competing Arguments

The Court considered the department's argument that payment of commission was for sales promotion services rendered by foreign agents and that the appellant's admission of paying commission to secure orders supported the tax demand. However, the Court found that without a direct contractual relationship or evidence of service receipt, such payment could not be taxed.

The appellant's contention that the commission was a trade discount and no third-party service provider existed was supported by documentary evidence and consistent with established case law. The Court emphasized the necessity of a service provider and service recipient relationship for service tax liability, which was absent here.

The Court also noted that the department failed to produce evidence of any foreign commission agent appointed by the appellant or any service rendered to the appellant by such agents. The appellant's disclosure of commission amounts in export documents further negated any claim of suppression.

Significant Holdings:

"Even though some service provider is involved there is no relationship between the appellant and any foreign based service provider as there is no direct transaction made by the appellant with any of the commission agent. It is also a fact that there is no contract between the appellant and the foreign based service provider even if any arrangement of payment is there between the buyer of the goods and so called commission agent in the foreign country. For this reason, the demand of service tax on the commission shown in the invoice raised to the buyer cannot be made."

The Court established the core principle that for service tax liability under Business Auxiliary Service, a direct contractual relationship and receipt of service by the Indian exporter from a foreign commission agent is essential. Mere deduction of commission amounts in export invoices payable to foreign buyers, who may themselves pay commission to agents, does not create a taxable event.

The Court further held that commission amounts reflected as deductions in export invoices and shipping bills, absent any evidence of a third-party commission agent service provider appointed by the exporter, constitute trade discounts and are not subject to service tax.

On limitation, the Court concluded that where the commission amount is fully disclosed in export documentation and no taxable service exists, invocation of the extended period of limitation is unjustified.

Accordingly, the Court set aside the demand of service tax on the commission deducted in the export invoices and allowed the appeal with consequential relief to the appellant.

The core legal questions considered by the Tribunal in this appeal are:

• Whether the demand for service tax based on the turnover declared in Income Tax records, which did not tally with the ST-3 Returns filed by the appellant, is justified.
• Whether the amount paid to security guards, including wages, salaries, and statutory contributions such as EPF and ESI, forms part of the taxable value for service tax purposes or qualifies for abatement/exclusion.
• Whether the show cause notice issued invoking the extended period of limitation is time barred, considering the appellant's registration and filing of returns.
• The applicability of relevant judicial precedents and statutory provisions, particularly Section 67 of the Finance Act, and the interpretation of "gross amount charged" for service tax computation in the context of security services.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification of Service Tax Demand Based on Income Tax Records

Relevant Legal Framework and Precedents: The demand was raised because the turnover declared in the ST-3 Returns did not match the Income Tax records. The relevant provision for computation of taxable value is Section 67 of the Finance Act, which defines the gross amount charged for taxable services. The appellant's failure to charge service tax from clients was noted, but the Commissioner (Appeals) allowed benefit of cum-tax under Section 67(2) of the Act, which permits certain adjustments.

Court's Interpretation and Reasoning: The Tribunal noted that the appellant was registered and had filed ST-3 Returns, and the Revenue's demand was based on data obtained from the Income Tax Department. The Tribunal emphasized that the appellant did not suppress any facts and had a bona fide belief in their tax treatment, as evidenced by their registration and returns filed.

Key Evidence and Findings: The appellant provided invoices inclusive of amounts paid to security guards, and the Revenue's demand was on the entire invoice value. The appellant contended that part of this amount was reimbursement and not taxable.

Application of Law to Facts: The Tribunal held that the demand needed re-quantification after allowing abatement for wages, salaries, and statutory contributions, as these are not part of the taxable value under Section 67.

Treatment of Competing Arguments: The Revenue argued non-regular filing and lack of evidence for exempted services, relying on Income Tax data. The appellant countered with judicial precedents and statutory interpretations supporting exclusion of wages and statutory contributions from taxable value.

Conclusion: The Tribunal agreed with the appellant that the demand should be reduced by excluding wages and statutory contributions and that the entire invoice value could not be subjected to service tax.

Issue 2: Inclusion or Exclusion of Wages, Salaries, EPF, and ESI Contributions in Taxable Value

Relevant Legal Framework and Precedents: Section 67 of the Finance Act governs the computation of taxable value. The Tribunal relied on multiple precedents including the decision in M/s Gurubani Security Pvt. Ltd., the Allahabad High Court ruling in Security Services v. Union of India, and Tribunal decisions such as Security Guards Board for Greater Bombay and Thane District v. Commissioner of Central Excise and Young Brothers Transporters and Contractors v. CCE, Meerut-I.

Court's Interpretation and Reasoning: The Tribunal reiterated that amounts paid as wages, salaries, and employer contributions to EPF and ESI are reimbursements or statutory levies and do not constitute consideration for taxable services. These amounts are collected as agency payments for disbursement to security personnel and statutory authorities, and hence excluded from the gross taxable value.

Key Evidence and Findings: The appellant's invoices included amounts paid to security guards and statutory contributions. The Tribunal noted the provisions of the Maharashtra Private Security Guards (Regulation of Employment & Welfare) Act, 1981, which mandates the employer to remit wages and allowances to the Security Guards Board, establishing that these payments are pass-through and not part of service consideration.

Application of Law to Facts: The Tribunal applied the principle that employer contributions to EPF and ESI, as well as wages paid to security guards, are not subject to service tax and must be excluded from the taxable value.

Treatment of Competing Arguments: The Revenue sought to tax the entire invoice value, while the appellant relied on settled legal principles and prior Tribunal and High Court rulings to exclude these amounts.

Conclusion: The Tribunal held that the demand must be re-quantified after abatement of wages, salaries, and statutory contributions, thereby reducing the service tax liability.

Issue 3: Limitation and Time-Barred Nature of Show Cause Notice

Relevant Legal Framework and Precedents: The limitation for issuance of show cause notices under the Finance Act is governed by the extended period provisions, which require suppression or fraud for invocation beyond the normal limitation period. The CBEC Manual instructs Range Officers to scrutinize returns and raise queries promptly.

Court's Interpretation and Reasoning: The Tribunal observed that the appellant was registered and had filed returns, which were not scrutinized by the Department for several years (2017 to 2021), and no queries were raised during this period. The demand was based on Income Tax data, not on any concealment or suppression by the appellant.

Key Evidence and Findings: The absence of any departmental scrutiny or queries and the appellant's compliance in filing returns indicated no deliberate suppression.

Application of Law to Facts: The Tribunal concluded that the extended period could not be invoked as there was no evidence of suppression or fraud by the appellant.

Treatment of Competing Arguments: The Revenue contended that the appellant was not regular in filing returns and did not discharge service tax liability properly. The appellant countered by showing their registration, return filing, and bona fide belief.

Conclusion: The Tribunal allowed the appeal on the ground of limitation, holding the show cause notice as time barred.

3. SIGNIFICANT HOLDINGS

The Tribunal's key legal reasoning and principles include the following verbatim excerpts and conclusions:

"As far as the contribution made towards EPF, ESI and salary, the same stand settled in favour of the appellant in view of the decision of Hon'ble High Court of Allahabad and Tribunal's decision in case of Security Guards Board for Greater Bombay and Thane District v. Commissioner of Central Excise... The Employees Provident Fund & Miscellaneous Provisions Act, 1952 and the Employees State Insurance Act, 1948 created the liability upon the principal employer to contribute to the respective funds... Thus, in our considered view, service tax demand cannot be confirmed on the employer's contributed amount towards P.F., E.P.F. and E.S.I."

"The wages and allowances are collected by the Board as an Agency for payment to the concerned persons/authorities. Therefore, the wages and allowances are excludible from the value of service tax. Thus, the taxable value for the purpose of levy needs to exclude these charges. The demand is modified to that extent."

"Considering the same along with the fact that the quantification of the Service Tax Department is based on the Income Tax Return filed by the appellant, it shows that they have not indulged in any activity which indicates suppression on their part. The fact that they have not charged Service Tax, shows their bonafide belief. Therefore, I allow the appeal on the ground of time-bar itself."

Core principles established:

• Employer contributions to statutory funds (EPF, ESI) and wages paid to security personnel are not includible in the taxable value for service tax under Section 67 of the Finance Act.
• Amounts collected as agency payments for disbursement to employees or statutory authorities qualify for abatement and exclusion from taxable value.
• Extended period for issuance of show cause notices cannot be invoked in absence of evidence of suppression or fraud, especially where returns have been filed and not scrutinized timely by the Department.
• Service tax demand must be re-quantified after allowing appropriate abatements, significantly reducing the tax liability.

Final determinations:

• The Tribunal allowed the appeal, holding the demand for service tax requires re-quantification excluding wages, salaries, and statutory contributions.
• The show cause notice issued invoking the extended period was held to be time barred.
• The appeal was allowed with consequential relief as per law.

1. Whether the services rendered by the appellant qualify as export of services under the Export of Services Rules, thereby exempting them from service tax liability.

2. Whether the appellant is entitled to a refund of service tax paid under the reverse charge mechanism, given the classification of services and the applicable legal provisions.

3. Whether refund proceedings can be used to modify or re-assess a self-assessment made by the appellant in their service tax returns.

4. The procedural propriety of the refund claim rejection, including the timing and issuance of the Deficiency Memo.

Regarding the qualification of services as export of services, the appellant contended that the services fall under BAS as defined under Section 65(105)(zzb) of the Finance Act, 1994, and specifically under category (iii) of the Export of Services Rules effective from 27.02.2010. The two essential conditions for export under this category are: (i) the recipient of the service is located outside India, and (ii) payment is received in convertible foreign exchange. The appellant asserted both conditions were met, supporting their claim that the service tax paid was not exigible and thus refundable.

The respondent, however, argued that the services provided, including transportation, travel, and hotel arrangements, fall under category (ii) of the Export of Services Rules, which requires the service to be performed outside India to qualify as export. Since the services were performed within India, the respondent maintained they were taxable and not eligible for refund. Additionally, the respondent emphasized that the appellant had self-assessed and paid service tax without claiming exemption under the relevant notification, and since the assessment was not modified or challenged before the Commissioner (Appeals), refund proceedings cannot be used to alter the assessment.

The Tribunal examined the relevant legal framework, including Section 11B of the Central Excise Act, 1944 (as applicable to service tax via Section 83 of the Finance Act), the Export of Services Rules, and judicial precedents concerning refund claims and self-assessment. The Tribunal relied heavily on the Supreme Court's ruling in ITC Ltd. vs. Commissioner of Central Excise, Kolkata-IV, which clarified that refund proceedings are execution proceedings and cannot be used to modify or re-assess an existing assessment, including self-assessment. The refund claim must conform to the original assessment unless it has been modified through proper channels.

Further, the Tribunal referenced a recent decision by the Principal Bench of the Tribunal in a similar case, which upheld the principle that self-assessed service tax returns, if unmodified, bind the assessee and preclude refund claims that contradict the self-assessment. The Tribunal also noted the High Court of Delhi's decision in BT (India) Pvt. Ltd., which affirmed the applicability of the ITC Ltd. principle to service tax matters, a position subsequently upheld by the Supreme Court in disposing of the department's Special Leave Petition.

On the procedural aspect, the appellant argued that the Deficiency Memo was issued after an inordinate delay of nearly three years, contrary to CBIC instructions requiring issuance within 15 days, and that the authorities exceeded the scope of the Deficiency Memo and show cause notice. The appellant contended this procedural lapse invalidated the refund rejection. However, the Tribunal did not find this argument sufficient to override the substantive legal principle regarding the non-modification of self-assessment through refund proceedings.

In applying the law to the facts, the Tribunal observed that the appellant had declared and paid service tax under BAS without claiming exemption at the time of filing returns. Since no modification or appeal against this self-assessment was pursued, the refund claim effectively sought to alter the original assessment via refund proceedings, which is impermissible. The Tribunal thus rejected the appellant's contention that the services qualified as export and were not taxable, holding that the refund claim was not maintainable.

The Tribunal also addressed competing arguments regarding the classification of services and the interpretation of export rules, concluding that the performance of services within India disqualifies them from export of services under category (ii) of the Export of Services Rules, as relied upon by the revenue. The appellant's reliance on category (iii) was not accepted in light of the facts and the self-assessment record.

Significant holdings include the following verbatim excerpts from the Tribunal's reasoning:

"Refund proceedings are in the nature of execution proceedings and they cannot modify an assessment including self- assessment. Refund can only be sanctioned or denied as per the assessment- be it self-assessment by the assessee or the best judgment assessment by the officer."

"The order of the Larger bench of this Tribunal in Balaji Warehouse interpreting the applicability of ITC Ltd. to service tax matters relied upon by the appellant has been clearly overturned by the High Court of Delhi in BT (India) Pvt. Ltd. Clearly, ITC Ltd. applies to service tax matters also."

"Since the appellant had self-assessed service tax without applying the notification and the assessment has not been modified, it cannot be modified now in the refund proceedings. As per the self-assessment, the appellant was not entitled to the refund."

The core principles established are:

- Export of services must satisfy the conditions laid down in the Export of Services Rules, including the location of service performance and recipient, to qualify for exemption from service tax.

- Self-assessment of service tax, once filed and unmodified through appeal or reassessment, is binding and cannot be altered through refund proceedings.

- Refund proceedings are execution proceedings and do not permit re-assessment or modification of the original tax liability.

- Procedural irregularities such as delayed issuance of Deficiency Memo do not override substantive legal principles governing refund claims.

On the final determinations:

- The appellant's services do not qualify as export of services under the applicable rules since the services were performed within India.

- The refund claim filed by the appellant is not maintainable as it seeks to modify an unmodified self-assessment.

- The impugned order rejecting the refund claim is upheld, and the appeal is dismissed.

1. ISSUES PRESENTED and CONSIDERED

• Whether the appellant is entitled to refund of service tax paid on inputs used in Special Economic Zone (SEZ) operations under Notification No.9/2009-ST dated 03.03.2009 and its amendment Notification No.15/2009-ST dated 20.05.2009.
• Whether service tax paid on services wholly consumed within SEZ qualifies for refund under the said notifications.
• Whether the refund claim can be rejected on the ground that the services do not bear a direct nexus with the authorised operations undertaken by the appellant.
• Interpretation and applicability of exemption provisions under Notification No.4/2004 dated 31.03.2004 and subsequent amendments.
• Whether refund claims filed within the prescribed time under Section 11B of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 are maintainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Refund of Service Tax under Notification No.9/2009-ST and its Amendment

- Legal Framework: Notification No.9/2009-ST dated 03.03.2009 exempts taxable services specified in Clause (105) of Section 65 of the Finance Act, 1994, provided in relation to authorised operations in SEZ and received by developers or units of SEZ, from service tax under Section 66 of the Finance Act, 1994. Notification No.15/2009-ST dated 20.05.2009 amended the refund procedure.

- Court's Interpretation: The Tribunal held that the exemption applies to services related to authorised SEZ operations, regardless of whether services are provided inside or outside the SEZ. The refund procedure applies to services procured from outside SEZ, where service tax is paid first and refunded later.

- Key Findings: The appellant had paid service tax on inputs used for SEZ operations and filed refund claims within the prescribed time. The Tribunal found the appellant eligible for refund under the statutory provisions.

- Application of Law to Facts: Since the appellant bore the incidence of service tax and the services were used in authorised SEZ operations, refund claims are maintainable.

- Treatment of Competing Arguments: Revenue argued that refund should be denied based on the amended condition excluding services wholly consumed within SEZ. The Tribunal rejected this, clarifying that exemption and refund provisions are distinct and refund cannot be denied merely because the claim is under Notification No.9/2009-ST.

- Conclusion: The appellant is entitled to refund of service tax paid on inputs used in SEZ operations under the relevant notifications.

Issue 2: Refund of Service Tax Paid on Services Wholly Consumed Within SEZ

- Legal Framework: Notification No.9/2009-ST as amended by Notification No.15/2009-ST excludes services consumed wholly within SEZ from refund procedure applicability.

- Court's Interpretation: The Tribunal clarified that services wholly consumed within SEZ are exempt from service tax and no tax liability arises initially; hence, no refund procedure is necessary. However, if service tax was paid inadvertently, refund under Section 11B is available.

- Key Evidence: The appellant's refund claims included service tax paid on such services. The Tribunal noted no dispute that services were related to authorised SEZ operations.

- Application of Law to Facts: The Tribunal held that refund cannot be denied on the ground that the claim was made under Notification No.9/2009-ST, as the appellant is eligible for refund under Section 11B.

- Treatment of Competing Arguments: Revenue contended that refund is barred for services wholly consumed within SEZ as per amended notification. The Tribunal rejected this, emphasizing the statutory right to refund where tax liability was discharged.

- Conclusion: Refund of service tax paid on services wholly consumed within SEZ is admissible under Section 11B notwithstanding the exclusion in Notification No.9/2009-ST.

Issue 3: Nexus of Services to Authorised SEZ Operations

- Legal Framework and Precedents: Tribunal's earlier decision in the appellant's own case and in Tata Consultancy Services Ltd. vs. CCE & ST established that refund claims cannot be rejected on the ground of lack of nexus once the Approval Committee certifies the direct nexus of services to authorised SEZ operations.

- Court's Interpretation: The Tribunal held that the adjudicating and appellate authorities erred in disregarding the Approval Committee's certificate confirming nexus and justification for use of services in authorised operations.

- Key Findings: The Approval Committee, including the jurisdictional Commissioner of Central Excise, had examined and approved the nexus of services to SEZ operations.

- Application of Law to Facts: The Tribunal set aside the rejection of refund claims on the ground of lack of nexus, as the statutory committee's approval is binding and conclusive.

- Treatment of Competing Arguments: Revenue's stand that services lacked nexus was rejected as contrary to the Approval Committee's findings.

- Conclusion: Refund claims cannot be denied on the ground of absence of nexus when the Approval Committee has certified such nexus.

Issue 4: Timeliness and Validity of Refund Claims under Section 11B and Section 83

- Legal Framework: Section 11B of the Central Excise Act, 1944 and Section 83 of the Finance Act, 1994 govern refund of service tax paid erroneously or in excess, subject to prescribed time limits.

- Court's Interpretation: Tribunal noted that the appellant filed refund claims within the prescribed time period and bore the incidence of service tax.

- Key Findings: No dispute existed regarding timeliness or eligibility under the statutory provisions.

- Application of Law to Facts: Since claims were timely and valid, refund was maintainable.

- Treatment of Competing Arguments: Revenue did not challenge timeliness but opposed refund on substantive grounds.

- Conclusion: Refund claims filed within the statutory time limits under Section 11B and Section 83 are maintainable.

Issue 5: Applicability of Exemption Notifications No.4/2004 and Subsequent Amendments

- Legal Framework: Notification No.4/2004 dated 31.03.2004 exempts certain services in SEZ from service tax. Notification No.15/2009-ST amended Notification No.9/2009-ST to clarify refund procedure and conditions.

- Court's Interpretation: The Tribunal considered these notifications in conjunction and held that exemption and refund provisions operate together to ensure no double taxation on SEZ operations.

- Key Findings: The appellant's refund claims were consistent with the exemption framework and amendments.

- Application of Law to Facts: The Tribunal applied the exemption notifications to validate refund claims.

- Treatment of Competing Arguments: Revenue's restrictive interpretation of the amended notification was rejected.

- Conclusion: Exemption notifications and their amendments support the appellant's entitlement to refund of service tax paid on SEZ operations.

The core legal questions considered in the judgment are:

(a) Whether the Cenvat Credit availed by the appellant on consignments of MS Round, TMT Cutting, end cutting, etc., is recoverable on the ground that the goods were not physically received but only paper invoices were issued by the vendor.

(b) Whether the investigation and evidence collected by the Department, including statements of vehicle owners and other corroborative material, are sufficient and reliable to confirm the demand.

(c) Whether the extended period of limitation for issuing the Show Cause Notice was rightly invoked by the Department.

(d) Whether the failure to make the vendor a co-noticee in the proceedings against the appellant violates statutory provisions and principles of natural justice.

(e) Whether the penalty imposed on the Director of the appellant company is sustainable in light of the findings on merits and limitation.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Recovery of Cenvat Credit on ground of non-receipt of goods

The relevant legal framework includes the provisions of the Central Excise Act, 1944, and the Cenvat Credit Rules, which permit credit only if inputs are actually received and used in manufacture. The Department alleged that the appellant availed Cenvat Credit on inputs not physically received, based on purported recovery of documents from the vendor indicating issuance of paper invoices without actual dispatch.

The Court noted that the appellant produced valid Central Excise Invoices showing Assessable Value, Excise Duty, and VAT paid by the vendor, who filed returns and paid duty accepted by jurisdictional authorities. The appellant also maintained statutory books (RG 23 A Part I and II) and ER 1 Returns reflecting receipt and utilization of inputs. Payments to the vendor were made through banking channels, and freight payments to transporters were supported by vouchers and service tax paid on reverse charge basis.

The Department's investigation, however, was limited to statements from only 70 vehicle owners out of 160 transactions, many of which were not recorded under Section 14 of the CEA 1944, and lacked affirmation under Section 9D regarding voluntariness. The Court found these statements lacked evidentiary value. Further, the Department did not investigate input-output ratios or verify whether the appellant could have manufactured finished goods without inputs from the vendor, nor did it examine whether the appellant procured inputs elsewhere.

The Court held that the appellant produced sufficient documentary evidence to rebut the Department's allegations, and the Department failed to properly investigate or consider the factual evidence. Therefore, the demand on the ground of non-receipt of goods was not sustainable.

Issue (b): Sufficiency and reliability of Department's investigation and evidence

The Department relied heavily on statements of vehicle owners denying engagement with drivers or receipt of freight payments, recorded 2 to 5 years after the transactions. The appellant argued that such delayed statements could not be reliable and were not corroborated by any other evidence. The Department did not secure statements from all vehicle owners, nor did it conduct searches or recover private records indicating cash transactions to rebut banking channel payments.

The Court found the investigation incomplete and inadequate, noting the absence of adverse statements for 90 out of 160 transactions and the lack of proper evidentiary value of recorded statements. The Department's failure to consider the appellant's documentary evidence and the incomplete verification vitiated the proceedings.

Issue (c): Invocation of extended period of limitation

The Show Cause Notice was issued invoking extended period provisions. The appellant contended that no suppression or misstatement was established by the Department, as all transactions were recorded in statutory books and monthly returns, audited by the Department, with no prior query raised. The Department did not produce evidence of suppression or concealment necessary to invoke extended limitation.

The Court relied on precedent that extended limitation can be invoked only upon proof of suppression or misstatement, and not on assumptions. Since the Department failed to establish such suppression, the invocation of extended limitation was held to be legally unsustainable.

Issue (d): Non-inclusion of vendor as co-noticee

The Department made the partner of the vendor a co-noticee but did not make the vendor firm itself a co-noticee. The Court observed that the vendor is a distinct legal entity from its partner and that non-inclusion of the vendor violated statutory provisions and principles of natural justice. The vendor was not given opportunity to respond to allegations of paper transactions, despite the entire proceedings being premised on the vendor's conduct.

Further, the vendor's returns and duty payments were accepted by authorities, and there was no indication that the vendor had not accounted for the invoices. The Court held that this procedural lapse rendered the proceedings against the appellant legally unsustainable.

Issue (e): Penalty on Director

Since the demand was set aside on merits and limitation grounds, the penalty imposed on the Director was also held unsustainable and was set aside accordingly.

3. SIGNIFICANT HOLDINGS

"We do not find such statements / letters to have any evidentiary value whatsoever. Viewed with the fact that the Revenue could lay hands only on 70 out of the 160 vehicle owners, we find that the verification is not even complete in respect of all the transactions. On this ground itself the proceedings are vitiated and liable to be set aside."

"The appellant has produced sufficient number of evidence from their side in their defence. On the other hand, the Revenue not only failed to properly investigate the issue, but also did not consider the factual evidence before confirming the demand."

"If the Dept alleges that the appellants have not received the inputs in question, in order to undertake the manufacturing activity, the appellants should have received such goods from other third party on cash payment basis. No evidence to this effect has been found by the Revenue during their investigation."

"By non- making of the vendor as a Co-noticee, to enable them to counter the allegation that they have only carried out paper transaction, is contrary to the statutory provisions as well as principles of natural justice. In such a case, the present proceedings against the appellant are erroneous and would have no legal legs to stand on."

"It is well settled fact that for invoking the extended period of limitation suppression/ misstatement etc. must be established by the Department, and it cannot be based on presumption."

"The confirmed demand is legally not sustainable on merits and on account of time bar."

"Since we have allowed the appeal filed by the appellant company both on merits as well as on account of limitation, the penalty imposed on the Director of the company also does not sustain."

The Tribunal considered two core legal questions:

(i) Whether the product 'Danazol', classified as a 'bulk drug', falls under Sl. No. 47A of Notification No. 4/2006-CE dated 1.3.2006, thereby entitling it to unconditional exemption from duty, or whether it should be treated as 'drug or medicine' under Sl. No. 47B of the same Notification, which provides conditional exemption subject to compliance with procedural rules.

(ii) In the event that 'Danazol' qualifies for exemption under Sl. No. 47A, whether the appellant is required to reverse the common input credit attributable to the exempted goods in accordance with Rule 6(3) of the CENVAT Credit Rules, 2004.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Classification of 'Danazol' under Notification No. 4/2006-CE

Relevant Legal Framework and Precedents: The Notification No. 4/2006-CE dated 1.3.2006 provides exemption from excise duty under two relevant entries: Sl. No. 47A, which grants unconditional exemption to 'bulk drugs', and Sl. No. 47B, which grants conditional exemption to 'drugs or medicines' subject to adherence to the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. Neither 'bulk drug' nor 'drug or medicine' is explicitly defined in the Notification. The Drugs (Price Control) Order, 1995, however, defines 'drug' to include both 'bulk drugs' and formulations.

Several Tribunal decisions, including those cited by the appellant-Aurobindo Pharma Ltd., Astrix Laboratories Ltd., Dr. Reddy's Laboratories Ltd., and CCE, Hyderabad Vs. Hetero Drugs Ltd.-have held that 'bulk drugs' fall within the broader definition of 'drug'. A recent Division Bench Final Order of the Tribunal in the appellant's own case (Final Order Nos. 40939 & 40940/2023) reaffirmed this position, holding that 'drug' is a superset encompassing 'bulk drugs' as a subset. Consequently, the appellant is entitled to choose the exemption most favorable to it, and judicial discipline requires adherence to such precedents.

Court's Interpretation and Reasoning: The Tribunal found the issue no longer res integra and followed the binding precedents. It interpreted the term 'drug' in the Notification in light of the Drugs (Price Control) Order, 1995, and prior Tribunal rulings, concluding that 'Danazol' as a bulk drug is covered under Sl. No. 47A. The Tribunal emphasized that the appellant is entitled to the unconditional exemption under Sl. No. 47A rather than the conditional exemption under Sl. No. 47B.

Key Evidence and Findings: The appellant's product 'Danazol' is a bulk drug cleared to other manufacturers without following the procedural conditions under Sl. No. 47B. The department's initial denial of exemption was based on this non-compliance. However, the Tribunal noted that the appellant's own prior case rulings and other authoritative decisions support classification under Sl. No. 47A.

Application of Law to Facts: Applying the established legal principle that 'bulk drugs' fall within the definition of 'drug', and considering the appellant's entitlement to the most favorable exemption, the Tribunal held that 'Danazol' qualifies for unconditional exemption under Sl. No. 47A.

Treatment of Competing Arguments: The department argued that 'Danazol' should be treated under Sl. No. 47B due to its use outside the factory, requiring compliance with procedural rules. The Tribunal rejected this, relying on binding precedents and the broader definition of 'drug' to include 'bulk drugs', thereby overruling the department's contention.

Conclusion: The product 'Danazol' is eligible for unconditional exemption under Sl. No. 47A of Notification No. 4/2006-CE dated 1.3.2006.

Issue (ii): Reversal of Input Credit under Rule 6(3) of CENVAT Credit Rules, 2004

Relevant Legal Framework: Rule 6(3) of the CENVAT Credit Rules, 2004 mandates reversal of input credit attributable to exempted goods to the extent specified by law.

Court's Interpretation and Reasoning: The Tribunal observed that the department adopted a contradictory stance-initially denying exemption under Sl. No. 47A, then conceding the exemption but demanding reversal of input credit under Rule 6(3). The Tribunal noted this inconsistency and clarified that since the exemption is unconditional under Sl. No. 47A, the appellant's reversal of credit is a procedural compliance issue subject to verification.

Key Evidence and Findings: The appellant stated before the Commissioner (Appeals) that it had already reversed the CENVAT credit related to 'Danazol'. The Tribunal recorded this admission and allowed the department to verify the correctness of such reversal.

Application of Law to Facts: The unconditional exemption under Sl. No. 47A means the appellant is not liable to duty but must reverse input credit as per Rule 6(3). The appellant's compliance in reversing credit, if mathematically accurate, validates the exemption claim.

Treatment of Competing Arguments: The department's demand for reversal was accepted in principle but subject to confirmation of accuracy. The Tribunal granted the appellant an opportunity to explain any discrepancies.

Conclusion: The appellant is entitled to exemption under Sl. No. 47A, subject to verification of the reversal of input credit under Rule 6(3). The department may demand excess credit or refund excess reversal accordingly.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"Judicial discipline requires us to follow the ratio of the above judgments. We hence find that the appellant is entitled to the benefit of unconditional exemption from tax as per Sl. No. 47A of Notification No. 4/2006-CE dated 1.3.2006."

"Now that we have held that the appellant is eligible for the exemption under Sl. No. 47A of Notification No. 4/2006-CE dated 1.3.2006, the goods are unconditionally exempt from payment of duty. We find that the appellant has also stated in the reply to the Commissioner (Appeals) as recorded at para 18 of the impugned order that they have already reversed the CENVAT credit involved on 'Danazol'. That being so, we find that the exemption has been correctly availed by them. We however permit the department to verify the mathematical accuracy of the claims of reversal made by the appellant and demand the excess credit taken or refund the excess reversal of credit made by the appellant if any. Needless to say that in case of a demand, the appellant may be given an opportunity to explain the reversal of credit made by them."

Accordingly, the Tribunal set aside the impugned order confirming the duty demand and allowed the appellant the benefit of Sl. No. 47A for the product 'Danazol'. The appellant's reversal of input credit under Rule 6(3) is subject to departmental verification, with consequential relief to be granted as per law.

Issues: (i) Whether HR plates used in the manufacture of towers for wind operated electricity generators qualify as parts or components of the wind operated electricity generator for exemption under Notification No. 12/2012-CE. (ii) Whether the extended period of limitation and the penalty were sustainable.

Issue (i): Whether HR plates used in the manufacture of towers for wind operated electricity generators qualify as parts or components of the wind operated electricity generator for exemption under Notification No. 12/2012-CE.

Analysis: The exemption covered wind operated electricity generators, their components and parts, and also parts consumed within the factory for manufacture of specified goods. The distinction drawn between a finished part and the raw material used to manufacture that part was accepted. HR plates were found to be inputs used for fabrication of towers and not identifiable parts or components of the tower itself. Mere use of the plates in making towers did not convert them into parts of the tower or of the wind operated electricity generator.

Conclusion: The claim for exemption on HR plates failed on merits.

Issue (ii): Whether the extended period of limitation and the penalty were sustainable.

Analysis: The procurement of duty-free goods had been permitted under the relevant concessional duty procedure, and the record did not justify allegations of suppression, fraud, collusion, or misstatement. The normal limitation under Section 11A of the Central Excise Act, 1944 was held applicable even where proceedings were initiated with reference to the concessional-rate rules. Since the extended period was not available, the penalty could not be sustained.

Conclusion: The extended period was not invocable and the penalty was set aside.

Final Conclusion: The appeal succeeded only to the extent of limitation and penalty, while the substantive demand was sustained for the normal period.

Ratio Decidendi: Raw material used to manufacture a part is not itself a component or part of the final exempted machine, and the extended period of limitation cannot be invoked in the absence of suppression or other qualifying conduct.

Issues: Whether penalty under Section 47(6) of the Kerala Value Added Tax Act was sustainable on the facts proved, and whether the assessee could rely on the claimed return movement circulars and documents to show that the consignment had been taken back outside the State.

Analysis: The consignment of gold ornaments was found in transit without reliable supporting documents for the alleged return journey. The inward movement was said to be covered by e-sugam, but the document produced for the return movement was found ambiguous and insufficient to identify the consignment with certainty. The Court found that the assessee failed to establish actual transportation of the goods back outside the State, and that the materials relied on did not satisfy the mandatory documentary requirements under the VAT regime. The circulars relied on by the assessee did not assist, since the prescribed documents were not shown to accompany the consignment and the factual return of the goods remained unproved.

Conclusion: The penalty under Section 47(6) of the Kerala Value Added Tax Act was upheld, and the revision was dismissed in favour of the Revenue.

Ratio Decidendi: Where a taxable consignment is intercepted without reliable statutory documentation for the asserted return movement, the assessee bears the burden of proving actual transportation outside the State, failing which penalty under the VAT enforcement provision is justified.

Issues: (i) Whether the Railway Administration could raise a demand for misdeclaration of goods under Section 66 of the Railways Act, 1989 after delivery of the goods, or whether such recovery was confined to the pre-delivery stage under Sections 73 and 78 of the Railways Act, 1989. (ii) Whether the challenge to the genuineness of the demand notices was substantiated.

Issue (i): Whether the Railway Administration could raise a demand for misdeclaration of goods under Section 66 of the Railways Act, 1989 after delivery of the goods, or whether such recovery was confined to the pre-delivery stage under Sections 73 and 78 of the Railways Act, 1989.

Analysis: Section 66 deals with false or incorrect description of goods and empowers the railway administration to charge the appropriate rate where the statement is materially false or where the description differs on examination. The provision does not fix the point of time at which such charge must be raised. By contrast, Sections 73 and 78 specifically govern overloading and empower pre-delivery action in that distinct context. The demand notices in question related to misdeclaration, not overloading, and the reliance on the overloading line of authority was therefore misplaced. The earlier decision concerning penal charges was also distinguished as it arose in the context of Section 54 and did not control the present statutory setting.

Conclusion: The demand for misdeclaration was correctly held to fall under Section 66, and it was not restricted to being raised only before delivery; the contrary view was rejected.

Issue (ii): Whether the challenge to the genuineness of the demand notices was substantiated.

Analysis: The record contained no evidence to support the allegation that the notices were not genuine, and the claim petitions did not contain material pleading to that effect. In the absence of proof to the contrary, the notices were accepted as genuine.

Conclusion: The objection to the genuineness of the demand notices failed.

Final Conclusion: The orders of the Tribunal and the High Court were set aside, and the railway authorities were held entitled to proceed on the basis of the misdeclaration demands.

Ratio Decidendi: A demand for misdeclaration of goods under Section 66 of the Railways Act, 1989 is not confined to the pre-delivery stage, and provisions governing overloading cannot be used to limit its operation where the facts disclose a distinct misdeclaration claim.

1. Whether the fixation of the cut-off date of 01.07.2020 for the grant of pensionary benefits to employees opting for the Pension Scheme from the Contributory Provident Fund (CPF) Scheme, and the non-payment of arrears prior to this date, is lawful or amounts to discrimination and arbitrariness.

2. Whether the retired employee who had multiple earlier opportunities to switch to the Pension Scheme but declined, and accepted CPF benefits on retirement, can now claim pension benefits retrospectively from the date of retirement after opting for the Pension Scheme under the 2020 Circular.

3. Whether the principle of approbation and reprobation applies to the employee's acceptance of the Pension Scheme terms and his selective challenge to unfavorable conditions therein.

4. The extent to which financial and administrative considerations justify the cut-off date and the denial of retrospective pension arrears.

Issue-wise Detailed Analysis

Issue 1: Legality and Validity of the Cut-off Date (01.07.2020) for Grant of Pension Benefits

The legal framework involves the RBI Pension Regulations, 1990, and subsequent administrative circulars issued by RBI, particularly the Administration Circular No. 1 dated 14.09.2020 and detailed instructions dated 18.09.2020. These circulars allowed a last option for employees and retirees to switch from CPF to the Pension Scheme, subject to refund of the RBI's CPF contribution with accrued interest plus simple interest at 3% per annum. Crucially, pension benefits were made payable prospectively from 01.07.2020, with no arrears payable for the period prior.

Precedents cited include this Court's decisions in Mohammad Ali Imam and Others, State of Punjab v. Amar Nath Goyal, State of Tripura v. Anjana Bhattacharjee, and others, which establish that fixation of cut-off dates by the executive for pension or pay benefits is a policy decision influenced by financial, economic, and administrative considerations. Such cut-off dates are not arbitrary or discriminatory unless shown to be capricious or whimsical. The Court emphasized judicial restraint in interfering with such policy decisions.

The Court noted that the Government of India had rejected earlier proposals by RBI in 2002, 2018, and 2019 to grant another option for CPF optees to switch to the Pension Scheme, primarily due to financial liability concerns. The 2020 Circular was issued after Government approval, explicitly providing for pension benefits from 01.07.2020 onwards, excluding arrears.

The Court held that the cut-off date was a well-informed policy decision balancing financial sustainability and administrative feasibility. It was neither arbitrary nor discriminatory. The financial burden of retrospective pension arrears was substantial (estimated over 900 crores), justifying the prospective-only pension payment.

Issue 2: Entitlement of the Retired Employee to Retrospective Pension Arrears

Respondent No. 1 joined RBI service in 1981 and had four prior opportunities (1990, 1992, 1995, 2000) to opt for the Pension Scheme but chose to retain CPF benefits. On retirement in 2014, he received CPF and gratuity dues. After the 2020 Circular, he opted for the Pension Scheme and started receiving pension from 01.07.2020.

The Division Bench of the Kerala High Court held that since the Respondent had refunded the CPF contribution with interest as required, he was entitled to pension benefits from the date of retirement, including arrears, and that denial of arrears was discriminatory and arbitrary compared to earlier circulars where arrears were granted.

The RBI challenged this, arguing that each administrative circular constituted a separate scheme with distinct terms, including different cut-off dates and interest rates on refunds. The 2020 Circular was a complete package balancing liabilities and benefits, approved by the Government of India, and the Respondent, having accepted it, could not selectively claim retrospective arrears contrary to its terms.

The Court found that the Respondent's claim for arrears conflicted with his prior decisions and the terms of the 2020 Circular. It emphasized that the Respondent had accepted the scheme as a whole and could not now repudiate unfavorable terms while claiming benefits. The principle of approbation and reprobation was applicable, preventing selective acceptance and rejection of contractual terms.

Issue 3: Applicability of the Principle of Approbation and Reprobation

The Court considered whether the Respondent could accept the pension benefits under the 2020 Circular but challenge the non-payment of arrears, which was a clear and integral part of the scheme's terms. The Court held that such selective acceptance was impermissible. The Respondent had accepted the terms, filled the forms, and refunded the CPF amount with interest as required. Therefore, he could not now repudiate the condition of prospective pension payment only.

This principle was invoked to uphold the integrity of the scheme and prevent abuse of the contractual arrangement.

Issue 4: Financial and Administrative Considerations Justifying the Cut-off Date and Non-Payment of Arrears

The Court recognized that financial constraints and administrative exigencies are valid and relevant considerations for the executive in framing pension schemes and fixing cut-off dates. The Government of India's prior refusals to permit retrospective pension benefits reflected these concerns. The 2020 Circular's terms were a product of detailed financial calculations and policy decisions.

The Court observed that the 3% simple interest charged on refunded CPF contributions was a nominal rate intended to cover administrative costs and inflation, lower than earlier rates (6% or 12%) applicable in prior schemes. The prospective pension payment from 01.07.2020 was a conscious decision to limit financial exposure and ensure scheme viability.

The Court referred extensively to precedents affirming that such policy decisions, especially involving financial implications, warrant judicial deference and should not be interfered with unless arbitrary or discriminatory.

Conclusions on Issues

The Court concluded that:

- The fixation of 01.07.2020 as the cut-off date for pension payment under the 2020 Circular is lawful, rational, and not discriminatory or arbitrary.

- The Respondent, having declined earlier options and accepted the 2020 Scheme's terms, including refunding CPF contributions with interest, is not entitled to pension arrears from the date of retirement.

- The principle of approbation and reprobation bars the Respondent from selectively accepting benefits and rejecting conditions of the scheme.

- Financial and administrative considerations justify the scheme's terms and the non-payment of retrospective arrears.

- The Division Bench's judgment granting pension from the date of retirement and arrears is unsustainable and is set aside.

Significant Holdings

The Court held:

"Apart from this, there may be other considerations in the mind of the executive authority while fixing a particular date i.e. economic conditions, financial constraints, administrative and other circumstances, and if no reason is forthcoming from the executive for fixation of a particular date, it should not be interfered with by the Court unless the cut-off date leads to some blatantly capricious or outrageous result."

"The choice of cut-off date cannot be held to be arbitrary (unless it is shown to be totally capricious or whimsical)."

"Financial constraints could be a valid ground for introducing a cut-off date while implementing a pension scheme on a revised basis."

"The Respondent cannot be permitted to choose a particular aspect of the Scheme that makes it unworkable, and that too for his own financial benefit. Approbation and reprobation would not be permissible in such schemes."

"The Scheme in itself had to be given effect to as a whole."

"There being no violation of the Constitutional, Statutory or Common Law principles, interference by the Division Bench... cannot sustain."

Accordingly, the appeal was allowed, the Division Bench judgment was set aside, and the Single Judge's dismissal of the writ petition was restored.

Issues: Whether the plaint could be rejected under Order VII Rule 11 of the Code of Civil Procedure, 1908 on the ground that the pleadings disclosed no cause of action, were barred by law, or suffered from jurisdictional and court-fee defects, despite the plaint raising a distinct challenge to sale deeds executed after revocation of authority.

Analysis: Rejection of a plaint under Order VII Rule 11 is confined to the averments in the plaint and can be ordered only when the plaint, on its face, discloses no cause of action, is barred by law, or is otherwise hit by the limited grounds contained in the rule. The pleadings here disclosed a specific and independent challenge to sale deeds executed after the alleged revocation of the board resolution and power of attorney. The documents relied upon were unregistered, and under Sections 17, 23 and 49 of the Registration Act, 1908 and Section 54 of the Transfer of Property Act, 1882, such documents do not by themselves convey title or create an interest in immovable property. An unregistered agreement to sell may at best be used for collateral or specific-performance purposes, not as a completed transfer. The pleadings also raised factual questions on the true nature of the transaction, the effect of revocation, the validity of the sale deeds, and the correctness of the mutation entries, all of which required trial. Revenue entries are not conclusive of title, and title disputes over immovable property fall within civil court adjudication. The plea of insufficient court fee could not justify immediate rejection without an opportunity to make good the deficiency. The High Court, therefore, erred in treating the later cause of action as academic and in rejecting the plaint in its entirety.

Conclusion: The plaint could not be rejected at the threshold, and the civil suit had to be tried on merits.

The core legal questions considered by the Court include:

• Whether the income of the deceased should be determined based on the Income Tax Returns submitted, despite the lower courts' reluctance to accept them as proof of income.
• The appropriate method for computing compensation in a motor accident claim, including the calculation of future prospects, deductions, and application of multipliers.
• The correctness of the compensation amount awarded by the Motor Accidents Claims Tribunal (MACT) and upheld by the High Court.
• The admissibility and evidentiary value of Income Tax Returns in determining the deceased's income for compensation purposes.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Determination of the Deceased's Income Based on Income Tax Returns

Relevant legal framework and precedents: The Court referred to the authoritative precedent set in Malarvizhi & Ors. v. United India Insurance Co. Ltd. & Ors. which clarified that when Income Tax Returns (ITRs) are available, the income determination must proceed on the basis of such statutory documents. Further, the Court relied on a recent decision in New India Assurance Co. Ltd. v. Sonigra Juhi Uttamchand, which emphasized that monthly income can be fixed using tax returns only if the details of payment of tax are appropriately brought into evidence, enabling the Tribunal or Court to calculate income in accordance with law.

Court's interpretation and reasoning: The Court disagreed with the Tribunal and High Court's approach that discounted the Income Tax Returns as proof of income. It held that ITRs are statutory documents and must be accepted unless convincingly disproved. The Court examined the ITR of the deceased for the relevant financial year, which showed a gross total income of Rs. 1,98,192 per annum.

Key evidence and findings: The Income Tax Return annexed as Annexure P2 was pivotal. The deceased's declared income was Rs. 1,98,192 per annum, which was significantly higher than the Rs. 90,000 per annum income considered by the Tribunal and High Court.

Application of law to facts: The Court applied the principle from the cited precedents and fixed the deceased's income at Rs. 1,98,192 per annum, rejecting the lower courts' findings.

Treatment of competing arguments: The Claimant-Appellants argued that the deceased was a Mechanical Engineer earning up to Rs. 5,00,000 per annum as per ITRs, while the Respondents contended that the Tribunal's lower income assessment was justified. The Court found the Tribunal's and High Court's rejection of ITRs unsustainable in law.

Conclusion: The income of the deceased was fixed at Rs. 1,98,192 per annum based on the Income Tax Returns.

Issue 2: Computation of Compensation including Future Prospects, Deductions, and Multiplier

Relevant legal framework and precedents: The Court applied the principles laid down in National Insurance Co. Ltd. v. Pranay Sethi, which provides a comprehensive framework for calculating compensation, including consideration of future prospects, deduction for personal expenses, and application of an appropriate multiplier based on the deceased's age.

Court's interpretation and reasoning: The Court recalculated compensation using the fixed income of Rs. 1,98,192 per annum. It added 25% for future prospects (appropriate for the deceased's age of 47), resulting in Rs. 2,47,740. One-third deduction was applied to account for personal expenses, reducing the figure to Rs. 1,65,160. Using a multiplier of 13 (corresponding to the deceased's age), the loss of dependency was calculated as Rs. 21,47,080.

Key evidence and findings: The Court took into account medical expenses (Rs. 1,73,100), loss of estate (Rs. 18,150), funeral expenses (Rs. 18,150), and loss of consortium (Rs. 96,800) as additional heads of compensation.

Application of law to facts: By applying the established compensation formula, the Court arrived at a total compensation of Rs. 24,53,280, significantly higher than the Rs. 13,91,300 awarded by the Tribunal and upheld by the High Court.

Treatment of competing arguments: The Respondents did not dispute the components of compensation but relied on the lower income figure. The Court's acceptance of the statutory income figure led to a commensurate increase in compensation.

Conclusion: The compensation was recalculated and enhanced to Rs. 24,53,280 in accordance with the legal principles governing motor accident claims.

Issue 3: Validity of the High Court's Observation that Income Tax Returns Cannot Be Accepted as Proof of Income

Relevant legal framework and precedents: The Court relied upon the precedent in Malarvizhi & Ors. and Sonigra Juhi Uttamchand which recognize Income Tax Returns as valid statutory evidence of income, subject to proper proof of tax payment details.

Court's interpretation and reasoning: The Court held that the High Court's categorical rejection of Income Tax Returns as proof of income was erroneous. ITRs are statutory records and must be accepted unless there is cogent evidence to the contrary.

Key evidence and findings: The Court noted that the Income Tax Return was duly annexed and no contrary evidence was produced to discredit it.

Application of law to facts: The Court applied the legal principle that statutory documents like ITRs carry presumptive correctness and should be relied upon for income determination.

Treatment of competing arguments: The High Court's contrary view was not supported by any legal precedent or sufficient reasoning.

Conclusion: The High Court's observation rejecting Income Tax Returns as proof of income was set aside.

3. SIGNIFICANT HOLDINGS

The Court held:

"The determination of income must proceed on the basis of Income Tax Return when available, being a statutory document."

"Monthly income could be fixed taking into account the tax returns only if the details of payment of tax are appropriately brought into evidence so as to enable the Tribunal/Court to calculate the income in accordance with law."

Core principles established include:

• Income Tax Returns are valid and primary evidence for determining the income of the deceased in motor accident compensation claims.
• The compensation calculation must follow established legal principles involving future prospects, appropriate deductions, and multipliers based on age.
• Tribunals and Courts must not arbitrarily reject statutory documents like ITRs without cogent reasons.

Final determinations on each issue are:

• The deceased's income was fixed at Rs. 1,98,192 per annum based on Income Tax Returns.
• The compensation payable to the Claimant-Appellants was recalculated and enhanced to Rs. 24,53,280.
• The impugned orders of the Tribunal and High Court were modified accordingly.

Issues: Whether the arbitral awards rejecting reimbursement of excise duty were liable to be restored, or whether the Section 34 court rightly set them aside for patent illegality in ignoring the clear contractual terms and the entire agreement clause.

Analysis: The dispute turned on the interpretation of Clause 3.4.1.5 of the GCC and the effect of the later correspondence, particularly the letter dated 27.08.2008. The Court held that the clause was plain, clear and unambiguous, and therefore there was no warrant to rely on internal aids of interpretation or prior negotiations. The contract's entire agreement clause excluded pre-contract communications and agreements from interpretive use. It was also held that an arbitral award which ignores the express terms of the contract, or reads into it a condition not found there, suffers from patent illegality and may be interfered with under Section 34. In an appeal under Section 37, the appellate court was concerned only with whether the Section 34 court had acted within its permissible limits, and no error was found in the impugned judgment.

Conclusion: The award rejecting reimbursement of excise duty was correctly set aside, and the challenge to the Section 34 judgment failed.

Issues: (i) Whether a revision was maintainable against the order imposing fine-cum-compensation in a prosecution under section 138 of the Negotiable Instruments Act, 1881. (ii) Whether the appellate court could dismiss the accused's criminal appeal on merits in the absence of the accused and without representation by counsel.

Issue (i): Whether a revision was maintainable against the order imposing fine-cum-compensation in a prosecution under section 138 of the Negotiable Instruments Act, 1881.

Analysis: The proviso to section 372 of the Code of Criminal Procedure, 1973 confers a statutory right of appeal on the victim against an order acquitting the accused, convicting for a lesser offence, or imposing inadequate compensation. Where such a statutory appeal lies, section 401(4) bars entertainment of a revision at the instance of the party who could have appealed. The Court treated the complainant's grievance against alleged inadequacy of compensation as falling within the appellate route provided by law, and not within revisional jurisdiction under sections 401 and 482 of the Code.

Conclusion: The revision filed to challenge inadequacy of compensation was not maintainable and was dismissed.

Issue (ii): Whether the appellate court could dismiss the accused's criminal appeal on merits in the absence of the accused and without representation by counsel.

Analysis: A criminal appeal cannot be disposed of on merits merely because the appellant or counsel is absent. The court is required to ensure fair hearing and, if necessary, appoint amicus curiae before proceeding. Disposition on merits without representation offends the principles of natural justice and denies the accused an effective hearing in appeal.

Conclusion: The appellate judgment dismissing the accused's appeal on merits in the absence of representation was set aside and the appeal was remanded for fresh decision in accordance with law.

Final Conclusion: The challenge to the alleged inadequacy of compensation failed for want of maintainability, but the conviction appeal was restored for fresh adjudication on merits after hearing the parties or with assistance of amicus curiae if required.

Ratio Decidendi: Where the statute provides a specific appellate remedy, revision is barred at the instance of a party who could have appealed; and a criminal appeal cannot be decided on merits without affording a fair hearing, including appointment of amicus curiae if the accused is unrepresented.

Issues: Whether the complaint dismissed for default under Section 256 of the Code of Criminal Procedure, 1973 could be restored in exercise of inherent powers under Section 482 of the Code of Criminal Procedure, 1973, and whether revision was maintainable instead of an appeal under Section 378(4) of the Code of Criminal Procedure, 1973.

Analysis: The complaint under Section 138 of the Negotiable Instruments Act, 1881 had remained unattended on several consecutive dates, despite repeated opportunities. The trial court was held to have acted within its authority under Section 256 of the Code of Criminal Procedure, 1973 in dismissing the complaint for non-appearance, which operated as an acquittal. The revisional court was held correct in holding that revision was not maintainable against such an order and that the proper remedy was an appeal under Section 378(4) of the Code of Criminal Procedure, 1973 with special leave. It was further held that inherent jurisdiction under Section 482 of the Code of Criminal Procedure, 1973 cannot be invoked to bypass a specific statutory remedy or to revive proceedings concluded by a lawful acquittal.

Conclusion: The request to restore the complaint through Section 482 of the Code of Criminal Procedure, 1973 was rejected, and the applicant was held bound to the statutory appellate remedy.

Final Conclusion: The proceedings ended in favour of the accused, with the complaint dismissal and the revisional order left undisturbed.

Ratio Decidendi: Inherent jurisdiction cannot be used to circumvent an express statutory appellate remedy or to reopen a complaint validly dismissed under Section 256 of the Code of Criminal Procedure, 1973, as such dismissal amounts to an acquittal.