TaxTMI Updates e-Newsletter
Jun 27,2026

Proceedings against non-existent amalgamating company - Show cause notice without jurisdiction - Amalgamation and post-merger tax liability - Whether, any proceeding for recovery of outstanding tax/GST dues, based on show-cause notice served on a non-existing entity would be maintainable in law ? - HELD THAT: - The Court held that the determinative question was not whether unpaid GST dues could in law be recovered, but whether recovery proceedings could be founded on a notice issued to a company that had already ceased to exist pursuant to an approved scheme of amalgamation. Since the fact of merger and dissolution of the transferor company was undisputed and the Department had been informed of it, the notices were issued to a non-existent entity. Applying the principle stated in Principal Commissioner of Income Tax, New Delhi vs. Maruti Suzuki India Ltd.[2019 (7) TMI 1449 - SUPREME COURT] and followed by this Court in Reliance Industries Limited vs. P. L. Roongta and Vodafone Idea Ltd. (formerly known as Vodafone Mobile Services Ltd.) vs. Union of India and Ors.[2025 (2) TMI 612 - BOMBAY HIGH COURT], the Court held that such notice is without jurisdiction and the proceedings founded on it are void ab initio. The Court further accepted the view taken in Vodafone Idea Ltd.[2026 (5) TMI 162 - BOMBAY HIGH COURT], that the provision dealing with amalgamation or merger does not authorise issuance of a show cause notice to a non-existent entity post merger, and therefore cannot be invoked to sustain the impugned proceedings. The Court clarified, however, that it was not adjudicating the merits of the tax demand and left it open to the authorities to initiate fresh proceedings in accordance with law, if otherwise permissible. [Paras 14, 16, 18, 19, 21]

The impugned adjudication order, being founded on a show cause notice issued to a non-existent amalgamating company, was set aside as without jurisdiction, with liberty to the authorities to proceed afresh in accordance with law.

Final Conclusion: The writ petition was allowed on the limited ground that the show cause notice and the consequential order had been issued against a non-existent amalgamating company and were therefore without jurisdiction. The Court left the merits of the tax demand open and clarified that lawful proceedings against the petitioner could still be initiated, if otherwise permissible.

Effect of the absence of the signature, on an assessment order - Patent irregularity in assessment order - Entertaining delayed writ petition subject to deposit of disputed tax - Validity of an assessment order in Form GST DRC-07 issued without the signature of the assessing officer - delayed writ challenge to such patently defective order could be entertained subject to deposit of part of the disputed tax - HELD THAT: - Following earlier Division Bench decisions of this Court in the case of M/s. SRS Traders [2024 (4) TMI 894 - ANDHRA PRADESH HIGH COURT], following the two Judgments ie. A.V. Bhanoji Row [2023 (2) TMI 1224 - ANDHRA PRADESH HIGH COURT], and M/s. SRK Enterprises [2023 (12) TMI 156 - ANDHRA PRADESH HIGH COURT], the Court held that the signature of the assessing officer on the assessment order is indispensable and absence of such signature is an inherent defect rendering the order invalid. Although the respondents objected to the writ petition on the ground of delay and relied on service through portal upload, the Court did not finally determine the broader controversy on sufficiency of such service. Having regard to the practical difficulties faced by registered persons under the online GST regime, especially where the impugned order suffers from a patent irregularity, the Court held that such delayed writ petitions could be considered on condition of deposit of 20% of the disputed tax. On that basis, the impugned order was set aside and the matter was remanded for fresh assessment after opportunity of hearing. [Paras 4, 11, 12, 13, 14]

The unsigned assessment order was set aside as invalid and the matter was remanded to the Assessing Officer for fresh orders after hearing, subject to the petitioner depositing 20% of the disputed tax within the time granted.

Final Conclusion: The Court held that the assessment order in Form GST DRC-07, lacking the assessing officer's signature, was inherently invalid. The writ petition was entertained despite delay because of the patent defect, and the matter was remanded for fresh assessment subject to deposit of 20% of the disputed tax.

Reasoned adjudication of input tax credit claim - Retrospective cancellation of supplier registration - Failure to consider relevant judicial principles - entitlement to Input Tax Credit on purchases made during the period when the supplier was shown as registered on the GST portal, notwithstanding later retrospective cancellation of the supplier's registration - HELD THAT: - The Court did not finally adjudicate the petitioner's entitlement to the disputed input tax credit on merits. It found that the petitioner had made out a prima facie case warranting interference and directed the respondent authority to reconsider the issue in the light of the two Division Bench in the case of Shyamal Mal Paul [2025 (11) TMI 428 - CALCUTTA HIGH COURT] and Jyoti Tar Products Private Ltd. Vs. Deputy Commissioner, State Tax, Shibpur Charge [2025 (1) TMI 1082 - CALCUTTA HIGH COURT]. The determinative basis of interference was that the matter required a fresh, reasoned consideration of the petitioner's claim concerning invoices issued during the period in question and the effect of retrospective cancellation of the supplier's registration. [Paras 11, 12, 13]

The impugned order was quashed and the matter was remitted to the respondent for fresh consideration by a reasoned order within the time fixed by the Court.

Final Conclusion: The High Court set aside the order denying the disputed input tax credit and remitted the matter for fresh, reasoned adjudication in the light of the governing Division Bench decisions. The entitlement to credit was left open for reconsideration by the authority.

Ex parte assessment - No Opportunity of hearing -belated appeal - Writ intervention despite time-barred appeal - non-participation - Assessment passed ex parte after the assessee did not respond to the show-cause notice or produce supporting documents - HELD THAT: - The Court found that the assessment had been completed ex parte and that the petitioner had assigned reasons for non-participation, while also offering an explanation on the merits of the discrepancy between the returns. In those circumstances, notwithstanding the rejection of the appeal as beyond the condonable period, the Court held that one more opportunity should be afforded. The relief was granted on equitable terms by requiring deposit of the balance amount, over and above the amount already deposited with the appeal, and on such deposit both the appellate order and the assessment order were directed to stand set aside and the matter remitted for fresh consideration. [Paras 6, 7, 8]

The matter was remitted for fresh adjudication on the petitioner's depositing the balance 15% of the disputed tax and thereafter filing reply and supporting documents before the assessing authority.

Final Conclusion: The High Court exercised writ jurisdiction to grant the petitioner a fresh opportunity against an ex parte assessment, despite the statutory appeal having been rejected as time-barred. The appellate and assessment orders were directed to stand set aside on compliance with the condition of deposit, and the matter was remitted for fresh consideration.

Personal hearing under adverse tax determination - No Opportunity of personal hearing under Section 75(4) in proceedings initiated by show cause notice under Section 74 - Challenged to the assessment order and recovery - HELD THAT: - It is evident on a bare reading of Sub-section (4) of Section 75 of the CGST Act, 2017 that an opportunity of hearing has to be given wherever a request has been received in writing from the person chargeable with tax of penalty. The case of the petitioner is not covered under this part. The second part of Sub-section (4) of Section 75 mandates an opportunity of hearing to be given to the person chargeable with tax or penalty where any adverse decision is contemplated against such person. It is, thus, evident on a conjoint reading of Section 74 and Section 75 of the CGST Act, 2017 that after service of SCN and on receipt of the representation from the person chargeable with tax, if the Assessing Authority contemplates passing an adverse order then an opportunity of personal hearing is to be given.

In the present case, this procedure has been followed by the Assessing Authority inasmuch as after receipt of the response of the petitioner, the Assessing Authority granted three opportunities of personal hearing on 10.07.2025, 18.07.2025 and 28.07.2025 to the tax-payer. Chartered Accountant an authorized representative of the tax-payer appeared in personal hearing on 28.07.2025 and made a submission that the defence reply in written is the final submission in the case and nothing more is to be said in addition to the said defence reply. This Court, therefore, understands that the mandate of Sub-section (4) of Section 75 of the CGST Act, 2017 has been fully complied with. In fact, requirement of giving a personal hearing arises only when the Assessing Authority contemplates passing an adverse order.

The contention that a further personal hearing was required again at the stage when the authority finally passed the adverse order was rejected as misconceived, the statute not requiring a second hearing of that nature. [Paras 6, 8, 9]

The challenge to the adjudication order on the ground of want of personal hearing was rejected.

Final Conclusion: The Court declined to interfere with the adjudication order on the plea of breach of personal hearing, holding that Section 75(4) had been complied with. The separate grievance regarding premature recovery was not decided and was directed to be listed for further instructions.

Clubbing of taxation periods - Common show cause notice for multiple tax periods - Separate initiation of proceedings for each taxation period - HELD THAT: - The Court followed its earlier decision in S.J Constructions [2025 (9) TMI 1215 - ANDHRA PRADESH HIGH COURT], which had held that assessment of tax and allied amounts for each taxation period or financial year must be initiated through separate show cause notices and that different taxation periods cannot be clubbed in one common notice. Since the impugned notice covered more than one taxation period, it was held to be unsustainable on that ground alone. [Paras 4, 5]

The impugned show cause notice was set aside, with liberty to the authorities to initiate appropriate action in accordance with law.

Final Conclusion: The writ petition was allowed and the common show cause notice covering the tax periods from 2018-19 to 2020-21 was set aside. The authorities were left free to proceed afresh in accordance with law.

Validity of Assessment Order passed u/s 143(3) - Alternative remedy and writ maintainability - gross violation of the principles of natural justice and denial of effective opportunity of hearing to the petitioner

Violation of principles of natural justice and denial of an effective opportunity of hearing - Validity of Assessment Order passed u/s 143(3) - HELD THAT: - The Court held that the rule of alternate remedy is one of discretion and self-restraint, and does not bar writ jurisdiction where there is a manifest violation of natural justice or a fundamental procedural defect. In the present case, the grievance was not confined to the merits of the additions but was directed against the manner in which the assessment had been completed, namely, denial of a real and effective opportunity of hearing. Since such defect went to the root of the proceedings and affected the legality of the assessment process itself, the writ petition was entertainable. [Paras 36, 37, 42, 48, 50]

The objection based on availability of appellate remedy was rejected and the writ petition was held to be maintainable.

Principles of natural justice in assessment proceedings - Effective opportunity of hearing - Consequential demand and penalty proceedings - HELD THAT: - The Court held that compliance with natural justice in assessment proceedings requires a real, effective and reasonable opportunity to meet the material proposed to be relied upon, and not a mere formal issuance of notices. On review of the record, it found that the respondents failed to establish that the petitioner was given a meaningful opportunity to present its case, and that the assessment had been concluded in undue haste, reducing the hearing requirement to a ritualistic formality. Since the defect affected the very decision-making process, the assessment was void; and once the assessment failed, the consequential demand notice and penalty proceedings, being dependent upon it, necessarily fell with it. The matter therefore required fresh consideration after granting a meaningful personal hearing. [Paras 47, 48, 49, 50, 51]

The assessment order, consequential demand notice and connected penalty proceedings were quashed, and the matter was remanded to the Assessing Officer for fresh assessment after granting a meaningful opportunity of personal hearing.

Final Conclusion: The Court held that the writ petition was maintainable because the challenge was founded on breach of natural justice affecting the assessment process itself. The assessment order for Assessment Year 2024-25, together with the consequential demand and penalty proceedings, was quashed and the matter was remanded for fresh assessment after granting a meaningful personal hearing.

Limitation for order giving effect to appellate order - Abatement of assessment for non-passing of order giving effect - Penalty for concealment or furnishing inaccurate particulars

Failure to pass an order giving effect to the appellate order within the limitation prescribed u/s 153 -Quasi-judicial assessment order - Abatement of assessment - HELD THAT: - The Court held that the appellate order had altered the basis of taxation by directing that the receipts be treated as royalty and taxed at the beneficial rate, while also requiring verification of tax deducted at source and grant of hearing. In such a case, by reason of Section 153(5) read with Section 153(3), the Assessing Officer was required to pass the consequential order within nine months from the end of the relevant financial year. The order contemplated under Section 153(5) was held not to be a mere administrative or ministerial exercise, but a quasi-judicial order completing the assessment process by re-computation of tax liability and determination of the enforceable demand or refund. Since no such order was passed within time, the Department lost authority to enforce any further demand and the return filed by the assessee had to be treated as accepted; compensatory interest provisions could not cure or validate a time-barred assessment consequence. [Paras 28, 29, 30, 31, 32]

The Court rejected the Revenue's contention that the consequential order was merely administrative and held that non-passing of that order within limitation caused the assessment to abate.

Penalty dependent on subsisting assessment - Foundation of penalty proceedings - HELD THAT: - The penalty proceedings had been initiated in the course of the original assessment on the footing that the receipts were taxable as business income. Once no valid order giving effect was passed within limitation, the original assessment basis no longer survived and the returned income stood accepted. In that situation, there remained no tax sought to be evaded on which penalty could rest. The Court therefore held that when the very foundation of the penalty proceedings had disappeared, the penalty order and consequential demand were unsustainable in law. [Paras 32, 34]

The penalty order and consequential demand notice were quashed as unsustainable.

Final Conclusion: The Court held that, since no order giving effect to the appellate order was passed within the statutory period, the assessment stood abated and the return of income had to be accepted as filed. On that basis, the penalty order and consequential demand notice were quashed, with refund of any recovered amount together with applicable interest in accordance with law.

Method of revenue recognition in housing projects - Project Completion Method - Evidentiary value of statement u/s 132(4) - Substantial question of law u/s 260A

Whether Tribunal's view that the assessee's income from the housing project was to be examined under the Project Completion Method, and that the earlier statement could not by itself determine the method of accounting actually followed in the books give rise to any substantial question of law? - HELD THAT: - The Court held that the Tribunal was justified in treating the statement made on behalf of the assessee as an error and in not treating it as determinative of the nature of the books of account maintained by the assessee.

Where the assessee had consistently maintained that its books were kept under the Project Completion Method, the Assessing Officer was required to undertake the exercise directed on remand on that basis. The impugned order merely required verification and assessment of the correct income under that recognized method, and no substantial question of law arose from such approach. [Paras 7]

The appeal was not entertained, and the Tribunal's remand to the Assessing Officer to assess the correct income under the Project Completion Method was left undisturbed.

Final Conclusion: The High Court held that no substantial question of law arose from the Tribunal's order. The Revenue's appeal was therefore dismissed, leaving intact the remand directing the Assessing Officer to determine the correct income under the Project Completion Method.

Transfer pricing re-characterisation of redeemable preference share transactions as loans - disallowance of interest u/s 36(1)(iii) -Interest disallowance on advances to sister concerns where sufficient own funds exist

Transfer pricing on subscription and redemption of preference shares - Re-characterisation of share transactions as loans - Notional interest on alleged interest-free loan to AE - HELD THAT: - The Court held that the controversy stood concluded by earlier decisions in the assessee's own case [2019 (4) TMI 858 - BOMBAY HIGH COURT] on substantially identical questions. Those decisions had accepted that, absent material showing the transaction to be sham or concealing its real character, the Transfer Pricing Officer could not disregard the apparent transaction of subscription and redemption of preference shares and re-characterise it as a loan so as to impute notional interest. Since the present questions were squarely covered by those binding decisions, no fresh substantial question of law arose. [Paras 6, 8, 21]

The common transfer pricing questions in both appeals were rejected as covered by earlier decisions in the assessee's own case.

Disallowance u/s 36(1)(iii) on advances to sister concerns - Presumption regarding utilisation of own funds - Interest-free advances to subsidiaries - HELD THAT: - The Court found that the assessee had consistently shown that the advances were made out of its own funds and that the Tribunal had recorded a categorical finding, based on the balance sheets and financial position, that sufficient surplus interest-free funds were available. The legal position was treated as settled that where both own funds and borrowed funds are available, and the own funds are sufficient to cover the advances or investments, a presumption arises that such advances were made from own funds; in that situation, no disallowance u/s 36(1)(iii) is warranted. The finding of availability of own funds was a finding of fact supported by the record and was not shown to be perverse. The Court also noted that similar disallowances in the assessee's own earlier years had been deleted and that position had attained finality. [Paras 15, 16, 17, 20, 21]

No substantial question of law arose on the interest disallowance issue, and the Tribunal's deletion of the disallowance was sustained.

Final Conclusion: Both appeals were dismissed. The transfer pricing issue concerning re-characterisation of redeemable preference share transactions was held to be covered by earlier decisions in the assessee's own case, and the additional issue for Assessment Year 2018-19 relating to disallowance of interest on advances to sister concerns failed because the Tribunal's finding that the advances were made from sufficient own funds raised no substantial question of law.

Head office expenditure of foreign bank - Failure to adjudicate cross-objections

Head office expenditure of foreign bank - Allocable staff expenses and general administration costs - whether allocable staff expenses incurred by head office support centres and allocable general administration costs were outside the purview of section 44C and fully allowable under section 37(1)? - HELD THAT: - The Court recorded the statement on behalf of the assessee that the first question of law was concluded against it by the recent decision of the Supreme Court in Director of Income-tax (IT)-I, Mumbai Vs. American Express Bank Limited [2025 (12) TMI 980 - SUPREME COURT]. As the Revenue did not dispute that position, the Court held that the question did not require an independent answer and would stand governed by that decision. [Paras 3]

The first question of law was left unanswered as being covered against the assessee by the Supreme Court decision.

Failure to adjudicate cross-objections - Cross-objections not disposed of as infructuous without adjudication - HELD THAT: - The Court declined to examine the rival contentions on the merits of the cross-objections, but held that the Tribunal was required to pass an appropriate order on them. On that basis, the Court set aside the part of the Tribunal's order which treated the cross-objections as infructuous and remanded the cross-objection proceedings to the Tribunal for adjudication, keeping all contentions expressly open. [Paras 5, 6, 7]

The dismissal of the cross-objections as infructuous was set aside, and the matter was remanded to the Tribunal for adjudication.

Final Conclusion: The appeal was disposed of by recording that the first question stood covered against the assessee by the Supreme Court decision, and by partly allowing the appeal on the second question. The Tribunal's order dismissing the cross-objections as infructuous was set aside, and the cross-objections were remanded for fresh adjudication with all contentions kept open.

Ex parte reassessment - Opportunity to respond to notice u/s 148A(b) - Deduction for primary agricultural co-operative society

Whether assessment made without the petitioner's participation was liable to be set aside and the proceedings restored to the stage of notice under section 148A(b), where the petitioner asserted that it functioned only as an intermediary institution extending credit to members and could therefore claim deduction available to a primary agricultural co-operative society? - HELD THAT: - The Court found that the petitioner's case was not shown to be different from the similar writ proceedings referred to before it, nor was it stated that the earlier order of the Court had been questioned. The Court also recorded that, if the petitioner was able to place the necessary material to show that it functioned only as an intermediary institution lending to its members, it would be open to it to claim deduction under section 80P.

Since the order under section 148A(d) and the consequential assessment were passed without the petitioner's participation, and the petitioner had pleaded bona fides for such non-participation, interference was warranted by restoring the matter to the stage of notice under section 148A(b) so that a response could be filed and hearing availed. [Paras 5]

The assessment order, demand notice and bank attachment order were quashed, and the reassessment proceedings were restored to the stage of notice under section 148A(b) with liberty to the petitioner to file its response and appear before the authority.

Final Conclusion: The Court interfered with the ex parte reassessment and consequential recovery measures, and restored the matter to the stage of notice under section 148A(b) to enable the petitioner to participate and place its claim, including its plea for deduction as a primary agricultural co-operative society. The pending statutory appeal was rendered infructuous.

Reassessment on mere change of opinion - Absence of tangible material for reopening - Audit objections as basis for reassessment - reopening of assessment on ten issues concerning deductions and depreciation claims for Assessment Year 2016-17 - HELD THAT: - The Court held that, though the notice was issued within four years and the first proviso to Section 147 was therefore inapplicable, the jurisdictional requirement of reason to believe still demanded something more than a review of the concluded assessment.

Where queries had been raised during the scrutiny assessment and the assessee had furnished replies and supporting details, those issues must be treated as having been considered by the Assessing Officer even if the assessment order did not discuss them expressly.

On that basis, the proposed reopening on deduction under Section 80G, carried forward additional depreciation, additional depreciation on computers, deduction under Section 32AC, depreciation on computer software, depreciation on goodwill, deduction under Section 35(2AB), legal and professional expenses, non-target based gifts, and club membership expenses was held to be based on a mere change of opinion.

The Court further found that the recorded reasons themselves showed reliance only on the existing record, and that the only asserted fresh basis was the Audit Party's objection. Such audit objection, where the underlying issues had already been examined, was only an opinion of the Audit Party and not tangible material permitting reassessment. The Court also noted that some of the recorded reasons were contrary to the statutory position, including the applicability of the third proviso to Section 32(1) for the relevant year, the treatment of computers and computer software within plant and machinery for depreciation purposes, and the position that goodwill was excluded from depreciable intangible assets only from Assessment Year 2021-22. The reopening was therefore beyond jurisdiction. [Paras 46, 47, 48, 49, 50]

The notice issued under Section 148 and the order rejecting objections were quashed as the reassessment amounted to an impermissible review founded on change of opinion and not on any tangible material.

Final Conclusion: The Court held that the reassessment for Assessment Year 2016-17 was founded only on material already examined in the original scrutiny assessment and on audit objections which did not constitute tangible material. The impugned notice under Section 148 and the order rejecting objections were accordingly quashed.

Addition for unexplained sales based on third-party digital data - Concurrent findings of fact - Absence of substantial question of law

HELD THAT: - The Court held that the Commissioner (Appeals) and the Tribunal had concurrently found, on facts, that no addition had been made in the hands of V.K. Group on account of any unaccounted purchases and that the earlier understanding of the EmmEss-Gold entries was erroneous.

Once that factual position stood accepted, the corresponding addition in the assessee's hands for alleged unaccounted sales to the same group could not be sustained. In view of these concurrent factual findings, the appeal did not give rise to any substantial question of law. [Paras 8]

The Revenue's challenge to deletion of the unexplained sales addition failed, and the appeals were dismissed.

Final Conclusion: The High Court upheld the Tribunal's order deleting the additions for both assessment years. It held that the matter turned on concurrent findings of fact and that no substantial question of law arose for consideration.

Bogus purchases - Accommodation entries - Estimation of profit element - Addition in respect of bogus purchase bills obtained as accommodation entries restricted to 6% of the impugned purchases - HELD THAT: - The Court held that the case was covered by the earlier decision in Pankaj K. Choudhary [2023 (3) TMI 1402 - GUJARAT HIGH COURT] and Mukesh Mahavirprasad Sen [2023 (1) TMI 1321 - ITAT SURAT] arising on identical facts. It accepted that the assessee had obtained bogus bills without actual material and that the purchases were accommodation entries; however, the Tribunal was justified in following the coordinate Bench view and directing addition only on the income component embedded in such unverifiable purchases, quantified at 6%. [Paras 6, 7]

The Tribunal's direction to make addition at 6% of bogus purchases/unverifiable purchases was upheld and the Revenue's appeal was dismissed.

Final Conclusion: The Court found no merit in the Revenue's challenge to the Tribunal's estimation of addition on bogus purchases. Following its earlier view in identical matters, it upheld restriction of the addition to 6% of the impugned purchases and dismissed the appeal.

Condonation of delay in appeal - Fresh claim before appellate authority - Exemption of BSNL VRS-2019 compensation

Condonation of delay in appeal - Fresh claim before appellate authority - delay in filing the appeal against the intimation under section 143(1) - HELD THAT: - The Tribunal found that in identical cases concerning BSNL employees who had offered VRS compensation to tax for want of awareness, similar delay had been condoned and the exemption claim had been accepted. As the Revenue could not distinguish those decisions either on facts or in law, the same view was followed. The Tribunal also held that reliance on Goetze (India) Ltd [2006 (3) TMI 75 - SUPREME COURT] was misplaced, since the appellate authority was competent to entertain a fresh claim raised for the first time in appeal. [Paras 6, 7]

The refusal to condone delay and to entertain the exemption claim was not sustained.

Exemption of BSNL VRS-2019 compensation - HELD THAT: - Following its earlier decisions in cases of identically placed BSNL employees like JAYESHKUMAR TULSIDAS SUTARIA [2026 (2) TMI 930 - ITAT AHMEDABAD], the Tribunal held that there was no change in either the legal position or the factual matrix. On that basis, it accepted the assessee's claim that the compensation received under BSNL VRS-2019 was not taxable and directed recomputation of taxable income with consequential refund in accordance with law. For the second assessment year, the same reasoning was applied mutatis mutandis. [Paras 6, 8, 11]

The compensation under BSNL VRS-2019 was held exempt, and the Assessing Officer was directed to recompute income and grant refund due, if any, as per law.

Final Conclusion: The Tribunal partly allowed both appeals, condoned the delay in filing the appeals before the first appellate authority, accepted the assessee's exemption claim, and held that the compensation received under BSNL VRS-2019 was exempt under section 10(10B) for both assessment years. The Assessing Officer was directed to recompute the taxable income accordingly and grant refund due, if any, as per law.

Validity of reassessment approval - Specified authority for reassessment sanction - Jurisdictional defect in reassessment -

HELD THAT: - The Tribunal found that the approval had admittedly been taken from the Principal Commissioner of Income Tax-10, Delhi. It held that, for AY 2017-18, the prescribed authority to grant approval was the Principal Commissioner in terms of the legal position noted by the Tribunal from Ashish Aggarwal [2022 (5) TMI 240 - SUPREME COURT].

Since the Department could not dispute the factual position regarding the approval obtained and the legal proposition governing the competent authority, the reassessment suffered from a jurisdictional defect. [Paras 2]

The ground challenging the validity of sanction was accepted, and the reassessment proceedings and consequent assessment were quashed.

Final Conclusion: The appeal was allowed. The Tribunal held that the reassessment for AY 2017-18 was invalid for want of approval from the prescribed specified authority, and accordingly quashed the reassessment proceedings and the consequent assessment.

Jurisdictional satisfaction for penalty under section 271DA - Penalty for cash receipts in contravention of section 269ST - Evidentiary burden in quasi-criminal penalty proceedings

Recorded satisfaction in assessment order - Jurisdiction to initiate penalty u/s 271DA - validity of Penalty under section 271DA initiated in the absence of clear satisfaction in the assessment order regarding contravention of section 269ST - HELD THAT: - The Tribunal held that recording of satisfaction by the Assessing Officer in the assessment order is a jurisdictional requirement for initiation of penalty under section 271DA, and not a mere procedural formality. The assessment order had only made a general reference to penalty proceedings being referred in cases of cash receipt in violation of section 269ST, but contained no clear finding identifying any receipt from a person, in a day, in a single transaction, or in respect of one event or occasion, received otherwise than through the prescribed banking modes.

Since the foundational satisfaction was absent, the subsequent penalty proceedings could not be sustained, and such defect could not be cured by the penalty notice, penalty order or appellate proceedings. [Paras 29, 30, 31]

The penalty proceedings were held to be without valid jurisdiction and the penalty order was liable to be quashed.

Transaction-wise proof of violation u/s 269ST - Rejection of books and estimated income - Admission without corroboration - HELD THAT: - On merits also, the Tribunal held that section 271DA can be invoked only upon clear proof of actual receipt in the prohibited mode satisfying the statutory conditions of section 269ST. The Revenue had not established the identity of the payer, the date of receipt, the exact amount received from each person, or whether the threshold was crossed in a single day, single transaction, or one event or occasion. The levy rested substantially on seized tally data, statements and the assessee's admission of additional income on estimation basis. The Tribunal held that such admission did not by itself amount to admission of violation of section 269ST, and that penalty proceedings, being quasi-criminal, require independent and cogent proof. It further held that once the books were rejected under section 145(3) and income was estimated, the same unreliable material could not be selectively treated as conclusive for imposing penalty without independent corroboration. The absence of enquiry with alleged payers and the reliance on unilateral entries from rejected books left the charge unproved. The Tribunal also observed that penalty u/s 271DA is not automatic, and the Revenue's approach of estimating income at a percentage of receipts while levying penalty equal to the alleged cash receipts reinforced the unsustainability of the levy in the facts of the case. [Paras 36, 37, 38, 39, 40]

The penalty was held unsustainable on merits as well and was directed to be deleted in entirety.

Final Conclusion: The Tribunal allowed the assessee's appeals for both assessment years and deleted the penalties levied under section 271DA. It held that the penalty proceedings lacked jurisdiction for want of recorded satisfaction in the assessment order and, in any event, the alleged contravention of section 269ST was not proved by cogent and independent evidence.

Opportunity of hearing in rectification - Scope of rectification of appellate order - Section 154(3) compliance - Ex parte rectification order - whether rectification order withdrawing relief already granted could not be passed without issuing notice and giving the assessee an opportunity of being heard?

Opportunity of hearing in rectification - Scope of rectification of appellate order - HELD THAT: - The Tribunal found from the rectification order itself that no notice had been issued to the assessee before passing the adverse order. Since the rectification resulted in prejudice to the assessee, compliance with the mandatory requirement of hearing u/s 154(3) was necessary. An ex parte order passed without such intimation was held to be void ab initio. [Paras 6]

The impugned rectification order was set aside for want of the mandatory opportunity of hearing.

Scope of rectification of appellate order - Mistake apparent from record - Review under guise of rectification - HELD THAT: - The Tribunal held that the power under section 154 is confined to rectifying a patent mistake apparent from the record and cannot be used to re-examine or reverse a concluded view. Where the earlier appellate order had already decided the matter in favour of the assessee, the subsequent order altering that conclusion amounted to an impermissible review under the guise of rectification. If the Revenue considered the earlier order erroneous, its remedy was to file an appeal and not to seek such rectification. [Paras 7]

The rectification order was held to be beyond the scope of section 154 and therefore unsustainable.

Final Conclusion: The Tribunal allowed the appeal and set aside the impugned rectification order. It held that the order was invalid both because it was passed without the mandatory opportunity of hearing and because the appellate authority had exceeded the limited scope of rectification by effectively reviewing its earlier appellate decision.

Reassessment beyond four years - Failure to disclose fully and truly all material facts - Change of opinion - tangible new material - HELD THAT: - The Tribunal held that for reopening beyond four years, the recorded reasons must show failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In the present case, no such allegation or finding was recorded. The material relating to the recruitment and training expenses had already been disclosed in the audited financial statements and in the return of income during the original assessment proceedings.

The reasons also did not reveal any fresh tangible material or even the source of information on the basis of which escapement was formed. The reassessment, therefore, rested only on a re-examination of material already considered in the original assessment and amounted to a mere change of opinion. Madhukar Khosla [2014 (8) TMI 568 - DELHI HIGH COURT] and CIT vs Kelvinator of India Ltd [2010 (1) TMI 11 - SUPREME COURT] were relied upon. [Paras 6, 7, 8]

The assumption of jurisdiction under section 147 was invalid, and the reassessment was quashed.

Final Conclusion: The Tribunal allowed the assessee's appeal on the jurisdictional ground alone. Since the reopening was held to be based on mere change of opinion and did not satisfy the condition of failure to make full and true disclosure for action beyond four years, the impugned assessment was quashed.

Exemption of BSNL VRS-2019 compensation - Appellate power to entertain fresh claim - Condonation of delay in appeal - Prospective operation of enhanced leave encashment exemption

Exemption of BSNL VRS-2019 compensation - Appellate power to entertain fresh claim - Condonation of delay in appeal - HELD THAT: - The Tribunal found that identical cases of similarly placed BSNL employees had already been decided by the co-ordinate Bench by condoning the delay, accepting the fresh claim, and holding the BSNL VRS-2019 compensation exempt under section 10(10B). Revenue did not distinguish those decisions either on facts or in law.

Tribunal further held that the reliance placed on Goetze (India) Ltd.[2006 (3) TMI 75 - SUPREME COURT] was misplaced because the restriction in that decision applies to the Assessing Officer and does not curtail the appellate authority's jurisdiction to entertain a fresh claim. Support was also drawn from Collector, Land Acquisition, Anantnag and Ors. vs. Katiji and Ors. [1987 (2) TMI 61 - SUPREME COURT] on condonation of delay and CBDT Circular No. 14 of 1955 requiring the Department not to take advantage of an assessee's ignorance of legal rights. On that basis, the assessee's claim was accepted for both assessment years. [Paras 6, 7, 8, 12]

The claim for exemption under section 10(10B) was allowed for both assessment years, and the Assessing Officer was directed to recompute income accordingly and grant refund due as per law.

Leave encashment exemption - Prospective operation of exemption notification - enhanced exemption limit for leave encashment under section 10(10AA) introduced by CBDT Notification No. 31 of 2023 applicability to the assessment years in appeal - HELD THAT: - The Tribunal held that the assessee's reliance on CBDT Notification No. 31 of 2023 was misplaced because the notification expressly applies from 01/04/2023. Since the appeals related to prior assessment years, namely 2020-2021 and 2021-2022, the enhanced exemption limit could not be extended to the assessee. The additional ground claiming full exemption for leave encashment was therefore rejected. [Paras 9]

The additional ground claiming higher exemption for leave encashment under section 10(10AA) was dismissed.

Final Conclusion: The Tribunal partly allowed both appeals. It held that the compensation received under BSNL VRS-2019 was exempt under section 10(10B) and directed recomputation of income and grant of refund as per law, while rejecting the additional claim for enhanced leave encashment exemption under section 10(10AA) for the years in question.

Provisional release of goods - Conditional release - Enhanced duty - Challenged the confiscation as illegal and arbitrary, and seeks a direction to the 4th respondent to forthwith release the goods - HELD THAT:- The writ petition was allowed by applying the earlier order of the same Court in M/S. SKYLARK OFFICE MACHINES [2026 (3) TMI 1716 - TELANGANA HIGH COURT], and the respondents were directed to act in terms of that order for provisional release of the confiscated goods.

Recovery of costs for customs supervision of special warehouse - Merchant Over Time versus Cost Recovery Charges - Determine the mode of recovery - Binding circulars - Compliance with paragraph 11 of Circular No.32/2016-Cus dated 13.07.2016 issued by the CBEC either on Merchant Over Time ("MOT") basis or Cost Recovery Charges ("CRC") - HELD THAT: - It is evident that the appellant have utilized the services of the officers only for six hours or part of a day. The appellant themselves worked out the MOT charges payable by them for the services utilized. For ready reference, the charges worked out by the appellant for the period from 01st December, 2016 to 31st December, 2016, as submitted by the appellant vide its letter dated 06.01.2017 to the Superintendent of Customs (Bond), NSCBI Airport, Kolkata.

The Tribunal held that paragraph 11 of Circular No.32/2016-Cus permits recovery on Merchant Over Time basis where the services of the customs officer are required once a day, and shifts to Cost Recovery Charges only in specified situations, including where the officer's visit keeps him away from office for the entire day or the better part thereof, where services are required more than once a day, or where round-the-clock supervision is sought. On the record, the appellant had availed the officers' services only for a limited period in a day, and there was no substantive evidence that the officers had actually worked throughout the day or for the better part thereof. The show cause computation was also found unsustainable because it counted only the number of days of supervision and not the actual hours spent, though the Circular makes the duration of supervision the determinative factor. The Tribunal further noted absence of evidence that any Superintendent of Customs had been posted or that the appellant had utilized such services. Consequently, the appellant's payment of supervision charges on MOT basis was held to be legally correct and the demand raised on CRC basis was unsustainable.

An identical matter, pertaining to the appellant’s operations at Dabolim International Airport, Goa, has already been decided by the Ld. Deputy Commissioner of Customs, Custom House, Marmagoa, Goa, wherein a similar demand for recovery of costs on CRC basis made was dropped.

The demand of supervision charges on Cost Recovery Charges basis was set aside, and the appellant was held liable only on Merchant Over Time basis for the services actually utilized.

Final Conclusion: The Tribunal held that, in the absence of evidence showing utilization of customs officers for the entire day or the better part thereof, the appellant's warehouse supervision charges could be recovered only on Merchant Over Time basis. The impugned demand on Cost Recovery Charges basis was therefore set aside and the appeal was allowed.

Rejection of transaction value in related-party imports - Sequential application of Customs valuation methods - re-determination of value under Rule 8 for several categories of imported watch parts - Consequential confiscation and penalties - Reason to doubt - Objective and quantifiable data

Rejection of transaction value in related-party imports - Whether the Commissioner has correctly rejected the transaction values under Rule 10A ? -HELD THAT: - The Tribunal held that under section 14 and the Valuation Rules, transaction value can be accepted only where the buyer and seller are not related and the price is the sole consideration. Once the material showed that the importing and exporting entities were owned or controlled by the same family group, that circumstance itself furnished reasonable doubt about the truth and accuracy of the declared value within the meaning of Rule 10A. On that basis, the Commissioner was justified in rejecting the transaction value, even independent of any further allegation that additional amounts were paid in cash. [Paras 19]

The rejection of the declared transaction value under Rule 10A was upheld.

Sequential application of customs valuation methods - Residual valuation under Rule 8 - Valuation of watch parts - Consequential confiscation and penalties -HELD THAT: - It is evident from record that there were imports, there were sales and there was manufacture of the watch dials during the relevant period. Therefore, the finding in the impugned order that there were no imports, no sales and no manufacture of watch dials during the relevant period is NOT correct. Therefore, the re-determination of the value adopting Rule 8 cannot be sustained. The Commissioner should have adopted the values of contemporaneous imports of identical goods (Rule 5) and if they were not imported, contemporaneous imports of similar goods (Rule 6). Further, while Rule 7A provides for calculation of duty on computational basis based on the cost of manufacture of such goods in India, the sale price of domestically manufactured goods in India cannot be reckoned as per Rule 8. As for loading value based on supposed average under valuation of 60%, such a method is not as per section 14 or the Valuation Rules. The redetermination of value of Watch dials and the consequent demand therefore, cannot be sustained.

The Tribunal held that after rejection of transaction value, the value had to be determined strictly in sequence under the Valuation Rules, and not by a composite reference to several rules. Neither the operative part of the order nor the annexures identified which rule was applied to which goods and why. In respect of watch dials, watch cases with straps or metal bands, watch cases, metal straps or bands, watch movements, winding knobs, hands and pocket watch case chains, the Commissioner invoked Rule 8 on the premise that there were no contemporaneous imports, sales in India, or manufacturing data; yet the impugned order itself relied on import documents, domestic sale invoices, association letters and cost sheets showing the existence of such material. The Tribunal held that this contradiction made recourse to Rule 8 unsustainable, that domestic sale prices could not be used as such under Rule 8, and that loading value on the basis of an assumed average undervaluation was an arbitrary method not permitted by section 14 or the Rules. However, for leather straps, duplicate invoices showing a higher price supported adoption of value under Rule 5, and that differential duty alone was sustained. Since the re-determination substantially failed, confiscation, redemption fine and penalties could not be maintained on that basis. [Paras 26, 27, 28, 29, 30]

The re-determination of value and consequential demand were set aside except to the limited extent of duty on leather straps with interest; confiscation, redemption fine and the penalties on the importer and the other appellants were therefore set aside.

Final Conclusion: The Tribunal upheld rejection of the declared transaction value but found that the subsequent re-determination was largely contrary to the Valuation Rules. The importer's appeal was partly allowed by sustaining only the limited duty demand on leather straps with interest, and the penalties on the other two appellants were set aside.

Customs Broker obligations in export overvaluation cases - Mandatory timelines under Customs Broker Licensing Regulations - Antecedent verification and KYC compliance - Penalty on Customs Broker for the same alleged role

Revocation of Customs Broker licence for export overvaluation - Regulations 10(d), 10(e) and 10(n) - KYC and antecedent verification - revocation of the Customs Broker licence, forfeiture of security deposit and penalty for alleged breach of Regulations 10(d), 10(e) and 10(n) in relation to export overvaluation - HELD THAT: - The Tribunal found that the findings of breach were contrary to the record, as the appellant had produced the exporter's authority letter, IEC, PAN-based KYC material and related documents. It held that the allegations of failure to advise compliance, failure to exercise due diligence and failure to verify the client did not survive on the facts.

Following the reasoning adopted in John K Mathew [2024 (8) TMI 410 - CESTAT MUMBAI] the Tribunal held that a Customs Broker cannot be fastened with liability for the exporter's overvaluation merely on suppositions of collusion, especially where the transaction value is a matter between exporter and overseas buyer and the broker has neither authority nor responsibility to determine such value. The Tribunal also drew support from Trinity International Forwarders [2023 (8) TMI 133 - CESTAT NEW DELHI] and Kunal Travels (Cargo) [2017 (3) TMI 1494 - DELHI HIGH COURT] in holding that a Customs Broker is not expected to reassess export value or detect misdeclaration in the manner of a Customs officer. [Paras 7, 9, 10, 11]

The charges under Regulations 10(d), 10(e) and 10(n) were held not proved, and the licensing action based on those charges was set aside.

Mandatory timelines under Customs Broker Licensing Regulations - Delay in inquiry and adjudication - proceedings were vitiated by delay beyond the prescribed period for completion of inquiry and passing of the order under the Customs Broker Licensing Regulations - HELD THAT: - The Tribunal noted that the inquiry report was submitted beyond the prescribed period from the show cause notice and the impugned order was also passed beyond the prescribed period from receipt of the inquiry report. Referring to the earlier order in the appellant's own case, the Tribunal treated the timelines under the Regulations as mandatory and held that, on the ground of such non-compliance with the prescribed procedure alone, a different view could not be taken in the present matter. [Paras 8]

The impugned order was also liable to be set aside on account of delay in completing the inquiry and adjudication under the prescribed regulatory timelines.

Penalty on Customs Broker for the same alleged role - Duplicative penal action - penalty imposed in the licensing order for the appellant's role as Customs Broker when separate penalties had already been imposed on the same basis in adjudication arising from the DRI proceedings - HELD THAT: - The Tribunal recorded that, in adjudication of the show cause notice treated as the offence report, separate penalties had already been imposed on the appellant under the Customs Act for the same role as Customs Broker. It therefore held that the further penal consequences in the impugned licensing order, founded again on the DRI findings, could not withstand legal scrutiny. [Paras 7]

The penal component of the impugned order was unsustainable on this ground as well.

Final Conclusion: The Tribunal held that the alleged violations of Regulations 10(d), 10(e) and 10(n) were not established on the record, that the proceedings were also vitiated by breach of the prescribed timelines, and that the penalty in the licensing order was improper in view of separate penal action already taken on the same basis. The impugned order revoking the licence, forfeiting the security deposit and imposing penalty was therefore set aside and the appeal was allowed.

Appealability of consent order - Scope of statutory bar against appeal from consent orders -HELD THAT: - The Court noted that the impugned order was framed as a consent order on the basis of the undertaking recorded on behalf of the petitioner. At the same time, the Court held that the petitioner might not have consented to the part of the order saddling it with liability at a per day rate for non-compliance. On that view, the statutory bar against appeal from a consent order was not treated as excluding a challenge to that latter part of the order. The Court therefore relegated the petitioner to the appellate remedy under Section 421, while continuing interim protection for a limited period and directing that, if filed within the time granted, the appeal be treated as within limitation. [Paras 6, 7]

The writ petition was disposed of by permitting the petitioner to challenge the impugned order before the appellate Tribunal, with interim protection continued for the period specified and the appeal, if filed within that period, to be considered within limitation.

Final Conclusion: The Court declined to examine the merits of the impugned NCLT order in writ jurisdiction and held that the petitioner could challenge the part imposing per day liability before the appellate Tribunal despite the order being described as a consent order. Interim protection was continued for a limited period to enable such appeal.

Prematurity of appeal - Appeal against non-adjudicatory order - Intervention in resolution plan approval proceedings - The appeal against the order directing that the appellant's intervention application be considered along with the re-submitted resolution plan - HELD THAT: - From looking to the relief clause in the instant Appeal, there is nothing in it to indicate that the Appellant had ever attempted to give a challenge to the first part of the order, where the CoC was directed to reconsider the resolution plan and after completing its deliberation, to resubmit the same before the Ld. Adjudicating Authority for consideration.

The Appellate Tribunal held that the impugned order did not finally decide the appellant's application on merits. The first part of the order had already remitted the resolution plan to the CoC for reconsideration, and that part was not under challenge. The appellant's interlocutory application, including the prayer to intervene and to oppose approval of the plan, was expressly left open for consideration when the reconsidered plan would be placed before the Adjudicating Authority. In that situation, the appellant's asserted rights had not yet crystallized, no immediate prejudice had been caused, and the reliefs sought in the application had no independent existence until the question of intervention was considered at the stage of re-submission of the plan. The Tribunal also declined to accept the contention that the appellant, as a prospective resolution applicant, was at that stage a necessary party to the CoC's reconsideration process. [Paras 12, 13, 14, 15, 16]

The company appeal was held to be premature and was dismissed, leaving all rights of the appellant open to be urged when the reconsidered plan is placed before the Adjudicating Authority.

Final Conclusion: Since the impugned order contained no final adjudication against the appellant and merely deferred consideration of its intervention application until the reconsidered resolution plan is re-submitted, the appeal was held to be premature. The appeal was accordingly dismissed, with the appellant's rights left open to be raised at the appropriate stage.

Criminal prosecution -Scope of quash the criminal proceedings and PMLA complaint - Evidentiary value of subsequent committee report - Prima facie case for criminal conspiracy and illegal mining offences - Money laundering as distinct offence - large-scale illegal extraction and misappropriation of natural resources, resulting in a quantified loss to the State exchequer - commission of serious economic offences having substantial ramifications on public interest and public revenue - recovery of the enormous loss of amount caused to the Government on account of the alleged illegal mining activities - Mini Trial - Continuing Offence - statements under Section 161 CrPC - Predicate Offence - Independent Offence - Evidentiary Value

Evidentiary value of subsequent committee report - Disputed factual issues at quash stage -HELD THAT: - The Court held that the report dated 31.03.2021 had not been directed by the Supreme Court, had not been accepted by the Government, and was prepared in the context of damage assessment in recovery proceedings, not for determining criminal liability. Questions relating to valuation methodology, quantity of quarried granite, marketable percentage, recoverable quantity, and the correctness of competing committee reports were held to be disputed matters of evidence. The Court further held that even acceptance or modification of a report for civil recovery purposes would not, by itself, conclude the pending criminal prosecution, since the exact quantum of wrongful gain or loss is not decisive of the existence of the alleged economic offences. If the accused sought to rely on the report, its admissibility, relevance and probative value had to be tested before the trial court. [Paras 7, 8, 9, 10]

Quashment on the basis of the subsequent committee report was refused, and the accused were left to rely on that report, if permissible, during trial.

Prima facie case for criminal conspiracy and illegal mining offences - Women accused as partners in quarrying concern - Delay in registration of FIR - Section 161 statements and parroted versions - HELD THAT: - The Court found that the women accused could not claim exclusion merely on the ground of gender, since the materials prima facie indicated their participation and their admitted status as partners during the period of the alleged illegal mining. Their subsequent retirement from the partnership was held not to efface possible criminal liability for acts committed during their association. The plea of mala fides was rejected because the prosecution had collected material which, if taken at face value, disclosed the alleged offences. As to delay in registration, the Court held that the allegations concerned continuing and large-scale illegal mining, alleged collusion by public officials, and grave offences affecting public resources; therefore, delay by itself could not vitiate the prosecution at the threshold. The contention that witness statements were merely parroted versions was also rejected, since statements under Section 161 Cr.P.C. are not substantive evidence and questions of tutoring, credibility and reliability are matters for trial. On the conspiracy aspect, the Court held that the eyewitness and documentary materials disclosed a strong prima facie case and that, at the stage of discharge or quashing, the Court cannot undertake a meticulous evaluation of evidentiary worth; grave suspicion founded on the materials is sufficient to proceed. [Paras 12, 13, 14, 15, 16]

The dismissal of the discharge petitions was upheld and the quash petitions relating to the predicate offences were rejected.

Money laundering as distinct offence - Proceeds of crime - Survival of PMLA proceedings despite challenge to predicate offence - HELD THAT: - The Court held that once the Enforcement Directorate had filed a complaint founded on scheduled offences and had placed prima facie materials indicating existence of proceeds of crime, disputed questions regarding the source of properties and the merits of the scheduled offences could not be adjudicated under Section 482 Cr.P.C. The offence of money laundering was held to be distinct and independent, and prosecution could continue if the ingredients of Section 3 PMLA were prima facie disclosed. The Court found that the petitioners were themselves arrayed as accused in the scheduled offences and that the investigation had yielded material relating to acquisition of immovable properties, financial transactions and attachment proceedings indicating laundering of the alleged proceeds. The Court also held that the subsequent committee report had no determinative effect on the PMLA complaint, and that the PMLA prosecution would not automatically fail unless the very foundation of all scheduled offences forming the basis of the ECIR stood obliterated, which was not the position here. [Paras 17]

The quash petitions against the PMLA complaint were dismissed and the prosecution was directed to continue in accordance with law.

Final Conclusion: All the criminal revision cases and quash petitions were dismissed. The Court held that the prosecution materials disclosed sufficient prima facie grounds for trial in both the illegal quarrying cases and the connected PMLA case, leaving all factual and legal defences open to be raised before the trial court.

Writ of mandamus to compel PMLA investigation - Authorized Officer's reasons to believe - Administrative circulars vis-a-vis statutory discretion - Non-joinder of affected parties - Reasons to believe - Predicate offence - Scheduled offence - Proceeds of crime - A writ court cannot direct the Enforcement Directorate to register an ECIR or initiate proceedings under the PMLA merely because a predicate offence has been registered and a representation has been submitted by the complainant. - HELD THAT: - The Court held that, under the scheme of the PMLA, initiation of proceedings depends on the Authorized Officer's own satisfaction regarding involvement of proceeds of crime and on reasons to believe recorded in writing on the basis of material in possession. Registration of an FIR for a scheduled offence does not by itself compel registration of an ECIR, and the Court cannot substitute its satisfaction for that of the statutory authority. The petitioner's reliance on an internal departmental circular prescribing investigation where the amount involved exceeds a stated threshold was rejected on the ground that administrative circulars are only internal guidelines and cannot override or supplement the statutory conditions governing exercise of power under the Act. The Court further held that no adverse direction could be issued when persons specifically alleged to be involved in the fraud had not been impleaded, since such directions would affect their rights. It was also held that mandamus lies only to enforce a clear statutory duty and corresponding legal right, whereas initiation of inquiries or enforcement action under the PMLA is a discretionary, quasi-judicial function dependent on statutory satisfaction. [Paras 4, 5, 6, 7, 8]

The prayer for a mandamus directing the Enforcement Directorate to initiate proceedings under the PMLA was refused and the writ petition was dismissed, leaving it to the Directorate to decide independently on the basis of available material.

Final Conclusion: The Court dismissed the writ petition, holding that registration of a predicate offence does not by itself require the Enforcement Directorate to register an ECIR or commence PMLA proceedings. The decision whether to act under the PMLA was left to the statutory satisfaction of the competent authority on the material available.

Alternative statutory remedy under the PML Act - Confirmed attachment of mortgaged property - Special Court's power to consider lifting of attachment - Challenged to attachment of a mortgaged property by a secured creditor after confirmation of attachment under the PML Act - HELD THAT: - The Court found that the attachment made by the Enforcement Directorate had already been confirmed by the Adjudicating Authority under the PML Act and that the prosecution under that Act was pending before the Special Court for PMLA cases. In that situation, the proper remedy for the secured creditor seeking removal of the attachment was to approach the Special Court under Section 8(7) of the PML Act for lifting of attachment, rather than seek quashing of the attachment in the writ petition.

The writ petition was dismissed, leaving it open to the petitioner to seek relief before the Special Court under Section 8(7) of the PML Act.

Final Conclusion: The Court declined to interfere with the confirmed attachment in writ proceedings and held that the petitioner's remedy lay before the Special Court under the PML Act for seeking lifting of the attachment.

Conflict between PMLA attachment mechanism and Supreme Court Article 142 scheme for PACL assets - Provisional attachment of PACL-linked properties without consultation with Lodha Committee - PMLA provisional attachment - Lodha Committee mechanism - Continuance of the provisional attachment orders over PACL-linked properties under the PMLA, without consultation with the Lodha Committee constituted under the Supreme Court's Article 142 orders - HELD THAT: - The Court held that, though statutory powers of the Enforcement Directorate are not extinguished by judicial orders, the special mechanism created by the Supreme Court for PACL assets required a modified application of those powers. The scheme under the PMLA contemplates attachment and eventual vesting of property in the Central Government, whereas the Supreme Court's Article 142 framework was devised to secure restitution to investors through the Lodha Committee. The Court found that the Enforcement Directorate had itself earlier acted consistently with that framework by supplying its investigative inputs to the Lodha Committee, which led to recovery and attachment action through that mechanism, thereby acknowledging that PACL-linked assets were to be addressed through the Supreme Court-created process. It further held that the route of restoration under Section 8(8) of the PMLA is only an exception dependent on the Special Court's satisfaction and cannot justify continuation of the impugned attachment orders. Since the impugned orders had already served any preservative purpose, the petitioners had undertaken not to alienate or encumber the properties, and prolonged pendency without adjudication was prejudicing investor interests, the matter was directed to be dealt with under the Lodha Committee framework rather than within the PMLA's complete code. [Paras 29, 30, 31, 32, 33]

The impugned provisional attachment orders were set aside and the matter was relegated to the Lodha Committee for decision in accordance with law, with the petitioners bound not to dissipate, alienate or encumber the properties until final adjudication by the Committee.

Final Conclusion: The Court held that, in the peculiar context of PACL assets already governed by the Supreme Court's Article 142 mechanism, the impugned PMLA attachment orders could not be continued. They were set aside, the dispute was relegated to the Lodha Committee, and the petitioners were restrained from dealing with the properties pending that adjudication.

Levy of Service tax under the concept of declared service - Maintenance of Minimum Average Balance by bank customers - consideration for banking facilities - Minimum Average Balance as contractual condition - Binding nature of Board circulars - Writ jurisdiction against show cause notice for want of jurisdiction - Maintainability of the petitions in view of the availability of an equally efficacious alternative remedy - Quid Pro Quo - Necessary and Sufficient Nexus - Wholly Without Jurisdiction - Binding Circulars - Pure Question of Law

Minimum Average Balance as contractual condition - Non-monetary consideration - Declared service under agreeing to do an act - Valuation of taxable service - HELD THAT: - It is an undisputed fact and a matter of record that the petitioners – Banks have not charged any consideration for rendering the facilities in question and as such, in the absence of the legal mandate contained in Section 67 of the Finance Act and the judgments of the Apex Court in Bhayana Builder’s case [2018 (2) TMI 1325 - SUPREME COURT], the act of the customers in maintaining MAB cannot be construed, treated, categorized or described as ‘consideration’ towards the services provided by the petitioners- Banks leading to the sole / unmistakable conclusion that the demand for payment of service tax on the erroneous premise that maintaining MAB in the accounts of the customers amounts to consideration as sought to be contended in the impugned SCNs is clearly contrary to law and facts and the impugned SCNs deserve to be quashed on this ground also.

The impugned SCNs seek to invoke the definition of ‘consideration’ as defined under Section 2(d) of the Indian Contract Act for the purpose of making the impugned demand; in this context, it is apposite to observe that for the alleged promise made by the customers to be construed as "consideration", such promise must necessarily fructify into a benefit or consideration accruing to and receivable by the petitioners-Banks. It is only upon satisfaction of this foundational requirement that a monetary value can be ascribed to such "consideration" for the purposes of levy of Service Tax. In the absence of these indispensable prerequisites being satisfied, it would be wholly untenable to contend that the maintenance of the stipulated MAB by the customers constitutes the "consideration" for the services rendered by the petitioners - Banks.; in fact, this aspect has been explained by the respondents themselves in paragraphs 4, 5, 6 and 7 of their aforesaid Circular dated 03.08.2022, wherein the expression “contract” and “consideration” in the Contract Act are referred by the Board itself by specifically clarifying that the 2nd party must pay consideration to the 1st party doing an act and that there must necessarily be sufficient nexus between the agreement to do an act and the consideration so received failing which, the services provided by the petitioners – Banks would not be exigible / amenable to service tax and as such, even this contention urged by the respondents cannot be accepted.

A perusal of the material on record will also indicate that during the pendency of the present petitions, the respondents who had initiated identical / similar proceedings against the South Indian Bank Ltd., issued show cause notice dated 28.09.2023 to the said Bank demanding payment of GST. The said Bank submitted a reply dated 15.11.2023 putting forth identical / similar contentions as urged in the present petitions and requested the respondents to drop the proceedings. The respondents considered the said reply and noticed that the definition of consideration, supply etc., under the GST regime was identical to the definitions under the pre-GST service tax regime and placed reliance upon the judgment of the Apex Court in Bhayana Builder’s case supra and other judgments relied upon by the petitioners herein and passed an order dated 30.12.2023 dropping the proceedings which was subsequently accepted by the respondents on merits on 08.06.2024 as can be seen from the information provided by the respondents themselves under the RTI Act.

Thus, there is no change whatsoever insofar as demand for payment of service tax or GST in the pre-GST / post-GST regime is concerned, is sufficient to come to the conclusion that the respondents having accepted the aforesaid order dated 30.12.2023 by accepting very same / identical / similar contentions urged by South Indian Bank on 08.06.2024 as noticed supra, the impugned SCNs issued by the respondents containing the very same allegations deserve to be quashed on this ground also.

The impugned show cause notices, founded on the premise that MAB is consideration for services rendered by the Banks, were held to be contrary to the Finance Act, the binding circulars, and the contractual framework, and were quashed.

Alternative remedy - Jurisdictional challenge to show cause notice - Pure question of law - HELD THAT: - The Court found that the controversy raised a pure question of law turning on the existence of jurisdictional facts necessary to sustain the service tax notices. The impugned notices and the stand of the respondents disclosed a predetermined view on liability, and relegating the Banks to the statutory process would therefore be a futile exercise. Since the challenge went to the very authority of the respondents to issue the notices and no disputed facts required adjudication, the case fell within the recognised exceptions to the rule of alternative remedy. [Paras 27, 28, 29]

The objection as to maintainability was rejected and the writ petitions were entertained.

Final Conclusion: The Court held that maintenance of Minimum Average Balance is only a contractual condition of the banking relationship and not consideration for any taxable service or declared service under the Finance Act. As the impugned notices were without jurisdiction and contrary to the binding circulars and statutory scheme, they were quashed, and the writ petitions were allowed.

Legitimate expectation arising from erroneous statement of limitation in adjudication order - Condonation of delay in first appeal under service tax law - Failure to consider cause for procedural omission before dismissal on limitation - Dismissal of the first appeal solely for non-filing of a condonation application - HELD THAT: - It is a well-established principle of law that a party should not be made to suffer for the mistake of the authority. This principle applies with particular force where the mistake relates to the exercise of a statutory remedy because such a mistake has the effect of misleading the party into believing that a step which was legally necessary (viz., filing a condonation application) was in fact unnecessary.

The Tribunal held that, although the statutory limitation under Section 85 prescribed two months with a further condonable period of one month, the preamble to the Order-in-Original made a positive and misleading statement that the appeal was to be filed within three months. Such a preamble could not override the statute, but where the authority's own misstatement induced the appellant not to file a condonation application, the matter had to be examined in the light of legitimate expectation and the settled principle that a party should not suffer for the mistake of the authority. The Commissioner (Appeals) acted mechanically in dismissing the appeal on limitation without considering the circumstances that caused the procedural omission. In such a situation, the appellate authority was required to afford an opportunity to regularise the defect and then exercise the condonation discretion in accordance with law. [Paras 12, 13, 14, 15, 16]

The impugned order was set aside and the matter was remanded, with liberty to the appellant to file a condonation application before the Commissioner (Appeals), who was directed to consider it in the light of the misleading statement in the Order-in-Original and thereafter decide the appeal on merits.

Final Conclusion: The Tribunal held that the first appeal could not be dismissed mechanically on limitation when the appellant's omission to file a condonation application was directly induced by the incorrect statement in the Order-in-Original regarding the appeal period. The order of dismissal was therefore set aside and the matter restored to the Commissioner (Appeals) for consideration of condonation and decision on merits.

Demand of service tax on vacant land - Scope of immovable property for service tax - Prospective operation of amendment expanding taxability - Appropriation of service tax already collected and paid - Rent of vacant land

Renting of vacant land - Exclusion of vacant land from immovable property - Prospective operation of amendment - Leasing or licensing of vacant port land for storage and business use during the period prior to 01.07.2010 - HELD THAT: - It is a fact that the appellant had rented-out the vacant land to their clients M/s. Lakshmi Balaji Export, M/s. Kineta Minerals, M/s. Bharat Mines etc., to store their goods in order to proceed with their manufacturing activities. The question arose whether the renting of vacant land amounts to Renting of Immovable Property as is alleged by the Revenue during the disputed period from June 2007 to 2009-10. It is also a fact that appellant is one of the major ports constituted as per Chapter V-A of Major Port Trust Act, 1963 read with Section 47 of the Tariff Authority for Major Ports (TAMP).

The Tribunal held that, under the definition applicable during the disputed period, vacant land, whether or not having facilities clearly incidental to its use, stood excluded from the ambit of immovable property. The Commissioner's reasoning that the land within the port area became land appurtenant to buildings or lost the benefit of exclusion because it was commercially used was rejected, since the dispute related to a period prior to the amendment that came into force on 01.07.2010. Relying on the principle stated in Commissioner of S.T. Noida Vs. Greater Noida Development Authority [2015 (10) TMI 296 - ALLAHABAD HIGH COURT], as also the Tribunal's view in the similar port trust matter, the amendment introducing taxability of vacant land given for later construction was treated as one expanding the scope of the levy and therefore operating only prospectively. Consequently, the demand for the period prior to 01.07.2010 was unsustainable. [Paras 8, 9, 10, 11]

The balance service tax demand for the period prior to 01.07.2010 was set aside, and the penalties were also set aside.

Appropriation of tax already collected and paid - Service tax already collected from clients and paid by the appellant - HELD THAT: - The Tribunal noted the Commissioner's finding that the appellant had in fact collected and paid service tax, and that such payment had not been disputed by the appellant. Since the impugned order had appropriated that paid amount against the demand, the Tribunal sustained the order to that limited extent. [Paras 11]

The appropriation of the service tax amount already collected and paid was upheld.

Final Conclusion: The Tribunal held that leasing or licensing of vacant land was outside the scope of renting of immovable property service during the period prior to 01.07.2010, since the subsequent amendment expanding the levy operated prospectively. The demand for that period and the penalties were set aside, but the appropriation of the service tax already collected and paid by the appellant was sustained.

Renting of immovable property - Extended period of limitation - Suppression with intent to evade - Normal period demand in notices issued prior to insertion of section 73(2A) - lease of the closed sugar factory premises - Bona Fide Belief - Retrospective Amendment - Normal Period Demand

Renting of immovable property - Lease of factory premises - PSU liability to service tax - Lease of the closed sugar factories amounted to renting of factory premises and not mere leasing of land, and the appellant, though a State Government PSU - HELD THAT: - The Tribunal examined the lease agreements and found that what had been leased was the factory premises as such, including the appurtenant facilities, and not only land. On that basis, the claim of exemption on the footing that the transaction was merely leasing of land was rejected. The Tribunal also held that the appellant's status as a Public Sector Undertaking under the Bihar Government did not confer any immunity from service tax, since PSUs are commercial entities and no exemption from service tax had been shown to exist in respect of the services rendered by them. [Paras 6, 7, 8]

The demand was held sustainable on merits, but only subject to limitation.

Extended period of limitation - Bona fide belief - Suppression with intent to evade - Normal period demand in notices issued prior to insertion of section 73(2A) - HELD THAT: - The Tribunal held that during the disputed period the levy on renting of immovable property remained under active judicial uncertainty because of the Delhi High Court decisions in Home Solution Retail India Ltd. & Ors vs. Union of India [2009 (4) TMI 14 - DELHI HIGH COURT] and Home Solutions Retail India Ltd. vs. Union of India [2010 (5) TMI 3 - DELHI HIGH COURT]. In that background, and particularly since the appellant had not collected service tax from the lessees and no material showed deliberate evasion, suppression with intent to evade could not be attributed to it. The Tribunal therefore held that the ingredients necessary for invoking the extended period were absent. It further held that the notice had been issued prior to insertion of section 73(2A), and that amendment was not shown to be retrospective. Following Infinity Infotech Parks Ltd. vs. Union of India [2014 (12) TMI 36 - CALCUTTA HIGH COURT], as relied upon in Onkar Associates vs. Commissioner of Central Excise & Service Tax [2025 (10) TMI 1432 - CESTAT CHANDIGARH], the Tribunal held that once the extended period failed in such a pre-amendment notice, the demand for the normal period also could not survive. [Paras 12, 13, 14, 15, 16]

The entire demand was set aside as time-barred and the appeal was allowed with consequential relief.

Final Conclusion: The Tribunal rejected the appellant's case on merits and held that the lease of the factory premises attracted service tax, with no exemption available merely because the appellant was a PSU. However, since the extended period was held not invocable and the notice had been issued before insertion of section 73(2A), the entire demand, including that for the normal period, was set aside as time-barred.

Legality of arrest - Compliance with arrest safeguards - Mechanical remand - Departmental identification number - Reasons to believe - Information to family on arrest - Notice before arrest in offences punishable up to seven years - Mechanical remand - Validity of arrest, detention and remand in the Central Excise prosecution for non-compliance with mandatory arrest safeguards and for want of due application of mind in the remand order. - HELD THAT: - The Court found that the specific plea regarding non-generation of DIN on the documents issued by the department had not been specifically denied, and no material was produced to show compliance with the departmental guidelines in that regard. The recorded reasons to believe were found to be vague and evasive, and neither the grounds of arrest nor the reasons to believe bore the seal or signature of the competent Commissioner. The stand in the counter affidavit that Section 35(3) of the B.N.S.S. was not mandatory was rejected. In the absence of any record showing the date and time of generation of DIN, it remained unclear when the grounds of arrest were prepared; the handwritten DIN on the grounds of arrest was contrary to the departmental circular. The Court also found no clear material showing that any family member or friend had been informed of the arrest, disclosing apparent violation of Section 48 of the B.N.S.S., particularly when the approval itself directed such intimation. It further found that no notice under Section 35(3) of the B.N.S.S. had been served though the alleged offences were punishable up to a maximum of seven years. On these features, the remand order was held to be prima facie mechanical and without due application of mind. [Paras 14, 15, 16]

The arrest, detention and remand were held unsustainable in law; the petitioner was directed to be released forthwith, subject to his not being wanted in any other case, while leaving it open to the department to proceed afresh in accordance with law.

Final Conclusion: The High Court held that the petitioner's arrest, detention and remand were illegal owing to non-compliance with mandatory procedural safeguards and a mechanical remand order. The petitioner was directed to be released forthwith, with liberty reserved to the respondent to proceed afresh in accordance with law.

Clandestine manufacture and removal based on electricity consumption - Corroborative evidence for clandestine clearance of steel ingots and CTD bars - Reliability of expert opinion on power consumption - Burden of Proof - Appreciation of Evidence - Extended Period of Limitation - HELD THAT: - As could be gathered from the records, it is not in dispute that the assessee company was engaged in the manufacture of ingots and CTD bars. It had two induction furnaces of 2.5 MT capacity each and two furnaces of 7 MT capacity each. The principal allegation against the assessee is that it indulged in large-scale evasion of duty by resorting to clandestine manufacture and removal of finished goods. To establish this allegation, the revenue has primarily relied upon the evidence stated to have been recovered by the Directorate General of Central Excise Intelligence, namely invoices used by SAS, alleged non-accountal of scrap purchased from three dealers, alleged under-valuation of scrap, data recovered from the computer of SAS, excess consumption of electricity beyond industry norms, and the statements of the Managing Director and other persons.

The Court held that the Tribunal was right in finding that clandestine production of steel ingots could not be determined solely on the basis of electricity consumption. The expert opinion relied on by the Commissioner was found to rest on estimation rather than any scientific study, as no trial production was conducted, no standard technical literature was available for a fixed norm, relevant differences in furnace capacity and condition were not properly accounted for, and even the calculation adopted contained an admitted error. The other technical material on record also showed varying consumption figures, and the opinion favourable to the assessee had not been duly considered. As regards the alleged corroboration from scrap dealers and invoices, the Court noted that the statements had been retracted in cross-examination, some witnesses had not appeared, and there was no reliable evidence establishing unaccounted procurement of raw materials, clandestine clearance of finished goods, or receipt of sale proceeds. On that basis, the Tribunal's appreciation that the Commissioner's demand was untenable was upheld. [Paras 26, 27, 28, 29, 30]

The Tribunal's setting aside of the duty demand was upheld, and the consequential penalties founded on the same allegation also did not survive.

Final Conclusion: The High Court found no error in the Tribunal's view that the allegation of clandestine manufacture and removal was not established by reliable evidence and could not rest substantially on power-consumption analysis. The revenue's appeal was accordingly dismissed.

EOU exemption for quarrying equipment used for manufacture of export goods - Scope of goods used for the purpose of manufacture - Extended period of limitation - barred by limitation - Substantial compliance

EOU exemption for quarrying equipment - Use for the purpose of manufacture - Granite quarry as approved manufacturing location - Duty-free imported and indigenously procured capital goods and consumables used at the approved Balakundi quarry site for excavation of granite blocks - HELD THAT: - The Tribunal found that the Balakundi unit had already been included as an additional manufacturing location under the letter of permission, was declared a warehousing station, and had been granted private bonded warehouse and in-bond manufacturing licences. The movement of goods from the Tamil Nadu unit to Balakundi was under approved documents and was intimated to, and acknowledged by, the departmental authorities. The sole ground of denial was that the goods were used for excavation of granite blocks and not in direct processing of the final granite articles. Rejecting that basis, the Tribunal held that granite blocks obtained from the quarry were the basic raw material for manufacture of the export products, and therefore use of the capital goods in quarrying was use for the purpose of manufacture. In the absence of any allegation of diversion and since the imported goods as well as quarried granite were duly accounted for, there was no deviation from the conditions of the exemption notifications. The later approval of the bonded warehouse for EOU operations in 1997 did not disentitle the appellant because the location had already been included as a manufacturing centre in 1985 under the existing letter of permission. [Paras 5, 6, 7]

Denial of the exemption notifications on the ground that the goods were used in quarrying was held unsustainable.

Extended period - Departmental knowledge of bonded transfers and usage - HELD THAT: - The Tribunal held that the record showed that at every stage of transfer and use of the imported and indigenous goods, the appellant had obtained permissions and furnished the prescribed intimations and returns. Since the movements and use of the goods were within the knowledge of the department and under approved procedures, the basis for invoking the extended period was absent. [Paras 7]

The demand was held not sustainable on the basis of the extended period.

Final Conclusion: The Tribunal held that use of duty-free capital goods and consumables in the approved quarry unit for obtaining granite blocks, which constituted the raw material for exported granite articles, satisfied the requirement of use for the purpose of manufacture under the exemption notifications. The impugned demand was therefore set aside, and the appeal was allowed with consequential relief.

Admissibility of statements recorded during investigation - Admissibility of computer-derived evidence - Clandestine manufacture and removal of excisable goods - Mandatory requirements of Section 36B -Relevancy of statements recorded during investigation under Section 14, without compliance with Section 9D

Whether the statements recorded under Section 14, in this case can be relied upon in the present proceedings to sustain the charge of clandestine manufacture and clandestine clearance of excisable goods against the appellant, or not? - HELD THAT: - The Tribunal held that Section 9D lays down a mandatory statutory safeguard governing the use of investigation statements in adjudication. Where none of the contingencies specified for dispensing with witness examination existed, the adjudicating authority was required to examine the makers of the statements before itself, form the requisite opinion for admission of the statements, and afford the noticee the opportunity of cross-examination. None of the relied-upon deponents was produced before the adjudicating authority, no satisfaction was recorded under Section 9D, and the appellant's request for cross-examination was not granted. The Tribunal further held that the directors' inability to comment on selected entries shown to them, and similar responses of other witnesses, could not be treated as admissions of clandestine removal. In consequence, the statements were devoid of evidentiary value for proving the truth of their contents. [Paras 8, 9]

The reliance placed on the investigation statements was held legally unsustainable, and the issue was decided in favour of the appellant.

Whether the seized documents, notebooks and other computer-derived evidence relied upon by the Revenue satisfy the mandatory requirements prescribed under Section 36B, so as to be treated as admissible evidence against the appellant, or not? - HELD THAT: - The Tribunal held that Section 36B constitutes a complete code for admissibility of computer-derived records and requires strict fulfilment of the statutory conditions, including the certificate contemplated under sub-section (4). No such certificate was produced and no foundational facts were established to show regular use of the device, regular feeding of information, proper functioning of the device, or faithful reproduction of the original inputs. The adjudicating authority nevertheless treated the seized papers and comparison charts as substantive evidence. The Tribunal also found that Seized Document No. 01 was unsigned, unconfirmed, not shown to the alleged buyer for confirmation, and its authorship and nexus with the appellant's manufacturing activity were not established. The notebooks recovered from a third party contained only rough entries without identifying the goods, consignor or consignee. The reconciliation furnished by the appellant was not dealt with, and the Department's comparison was confined only to invoices of one buyer, leading to a selective and flawed methodology that could even result in double levy on already duty-paid transactions. [Paras 10, 11]

The seized documents and computer-derived materials were held inadmissible and incapable of sustaining the charge against the appellant.

Whether the documents and evidences available on record conclusively establish that the Appellant had indulged in clandestine manufacture and removal of excisable goods, as alleged, or not? - HELD THAT: - The Tribunal reiterated that a charge of clandestine manufacture and removal, being quasi-criminal in nature, cannot rest on assumptions, presumptions, private records or inadmissible statements, and must be supported by independent corroborative material. On the facts, the Revenue failed to establish excess procurement of raw materials, shortage on stock verification, independent evidence of vehicle movement, receipt of unaccounted sale proceeds, verification of the alleged buyer's books, or any categorical admission by the alleged buyer. Electricity consumption, even if accepted, could only operate as a corroborative circumstance and could not by itself sustain the allegation in the absence of the other essential factors. The Tribunal also noted that the same statements and records of the third party relied upon here had been found unreliable in connected proceedings, which further weakened the Revenue's case. Since the foundation of the clandestine removal case failed, the duty demand, interest and equal penalty imposed on the appellant-company were held to be unsustainable. [Paras 12, 13, 14, 15]

The charge of clandestine manufacture and removal failed, and the demand of duty with interest and the penalty on the appellant-company were set aside.

Final Conclusion: The Tribunal held that the Revenue's case of clandestine manufacture and removal failed because the investigation statements were inadmissible for non-compliance with Section 9D, the seized and computer-derived materials were inadmissible for non-compliance with Section 36B, and no independent corroborative evidence established the allegation. The demand of duty with interest and the penalty imposed on the appellant-company were therefore set aside and the appeal was allowed.

Inter-State sales without C-Forms - Capital goods under the TNVAT Act - Residuary entry - Absence of C Forms, the tax on inter-State sales of moulds and dies had to be determined by treating the goods as capital goods under the Tamil Nadu Value Added Tax Act, 2006, Or by applying the residuary entry in Part-C of the First Schedule to that Act. - HELD THAT: - It is common ground between the parties that C-Forms were not provided and, therefore, sub-section (2) of Section 8 is applicable. Sub-section (2) prescribes that the rate applicable to the sale or purchase of the relevant goods inside the appropriate State shall be adopted in cases falling within its scope.

Apart from listing different kinds of goods in clauses (a) to (g) of Section 2(11), the phrase “used in the State for the purpose of manufacture, processing” is used therein. This condition was examined in Schwing Stetter [2016 (5) TMI 912 - MADRAS HIGH COURT]by a Division Bench of this Court and the Court categorically held that both these conditions should be fulfilled for the goods to be treated as capital goods for purposes of applying the rate of tax prescribed for such goods in the TNVAT Act. The admitted position is that the moulds and dies of the petitioner were not used in the State for the purpose of manufacture. Hence, one of the conditions in Section 2(11) is not satisfied. Petitioner has been unable to point to any other entry in the schedule to the TNVAT Act as being applicable. In those circumstances, there is no infirmity in the Tax Department resorting to the residuary entry, namely, entry 69 of part-C of the first schedule.

The levy at the residuary rate was upheld and no interference with the impugned order was warranted.

Final Conclusion: The writ petition was dismissed. The Court upheld the tax treatment of the inter-State sales without C-Forms on the footing that the goods did not satisfy the statutory requirement of use in the State so as to qualify as capital goods under the TNVAT Act.

Arbitrability of statutory cess disputes - Contractual deduction pursuant to statutory liability - Scope of referral under Section 11(6) - Building and Other Construction Workers' welfare cess - Deduction and refund of BOCW cess, arising from a construction contract and turning on the applicability of the BOCW enactments and related rules - HELD THAT: - There is no dispute that the GCC also contains clause 42.0 for settlement of disputes and clause 42A for settlement of disputes through arbitration.

The Court held that, though the agreement contained clauses for deduction of cess and an arbitration clause, the controversy raised was not one of mere contractual interpretation. The applicant's challenge was founded on the plea that, by reason of the exclusion in the BOCW Act, the BOCW Act, the BOCW Cess Act and the Rules did not apply to the work in question. Determination of that plea necessarily required examination of the statutory scheme, the scope of the exclusion under Section 2(1)(d), and the authority of the State machinery under the enactments. The respondent-SECL had only deducted and deposited the cess as a collecting agency under the statutory mandate and was not the beneficiary of the amount. The Court therefore treated the controversy as one substantially relating to statutory liability, for which the special enactments provide a complete mechanism of levy, collection and adjudication. On that reasoning, the existence of an arbitration clause did not by itself make the dispute arbitrable, and the matter was required to be pursued before the appropriate statutory forum rather than by reference under Section 11(6). [Paras 16, 17, 18, 19, 20]

Appointment of an arbitrator was declined and the arbitration request petitions were dismissed.

Final Conclusion: The Court held that the controversy over deduction and refund of BOCW cess was essentially a dispute on statutory applicability and liability under the special enactments, not a pure contractual dispute. It therefore refused to exercise power under Section 11(6) for appointment of an arbitrator and dismissed the petitions.

Maintainability of Writ petition against private Asset Reconstruction Company (ARC) - SARFAESI action by private secured creditor - Absence of public law element - Interim protection in non-maintainable writ - The writ petition challenging the demand notice and possession notice issued by a private Asset Reconstruction Company, and seeking limited directions for production of original loan documents and interim protection - HELD THAT: - It is the case of petitioner that the present case raises a distinct threshold question: whether, in view of alleged withholding of originals and pleading prima facie case of disputed/forged signatures, the petitioner may be granted limited evidence preservation directions that do not amount to a full adjudication of private contractual or SARFAESI merits.

The Court applied the principles stated by the Supreme Court in Phoenix Arc Private Limited Vs. Vishwa Bharati Vidya Mandir and Others [2022 (1) TMI 503 - SUPREME COURT] and S. Shobha Vs. Muthoot Finance Ltd [2025 (2) TMI 616 - SUPREME COURT] and held that a private ARC or private finance company, while enforcing security under the SARFAESI Act, is not thereby performing a public function so as to become amenable to writ jurisdiction. The case was not treated as one of relegation on the ground of an alternative remedy before the DRT; rather, the Court held that the writ itself was not maintainable for want of the requisite public law element. On that footing, the petitioner's attempt to seek limited evidentiary directions and short interim protection until approaching the statutory forum could not be entertained, since no interim relief could be granted in a proceeding that was itself not maintainable. [Paras 6, 7, 8]

The petitioner was left to avail the appropriate remedy before the appropriate forum, with the benefit of Section 14 of the Limitation Act.

Final Conclusion: The writ petition was held not maintainable against the private ARC and the Court declined to grant even limited interim or evidentiary relief in writ jurisdiction. Liberty was reserved to the petitioner to pursue the appropriate remedy before the competent forum, with the benefit of Section 14 of the Limitation Act.

Disclosure of material particulars in secured asset auction - Misdescription of mortgaged property in sale notice -Seeking direction to the respondent-Bank to deliver land and building including plant and machinery - Effect of 'as is where is' clause - claim for delivery of the entire property - Entitlement to refund of earnest money being 25% of the bid amount deposited by the petitioner with 15% interest per annum.

Compliance with the obligation to disclose the correct description and material particulars of the secured asset in the auction notice under Rule 8(7) -HELD THAT: - In the present case there was specific mention of ‘Flour Mill’ being part of Lot No.2 described at serial No.6 of the auction notice but admittedly no such ‘Flour Mill’ existed at the spot. It is also the categorical stand of the respondent in the written statement that the word ‘Flour Mill’ was inadvertently mentioned in the auction notice due to human error and this fact was apprised to the petitioner, however no such document or intimation has been provided on record by the respondent Bank.

The Court held that Rule 8(7) cast a duty on the Bank to state the detailed terms and conditions of sale, including the correct description of the immovable property and all material particulars necessary for a purchaser to judge its nature and value. On the admitted record, the sale notice mentioned a flour mill though none existed at site; the khasra numbers of the mortgaged property were not stated in the notice; and part of the plant and machinery stood on land not mortgaged to the Bank, with the mortgaged and unmortgaged portions lying within a common boundary wall without demarcation. The plea that the property was sold on an 'as is where is' basis did not relieve the Bank of its statutory obligation of disclosure. The auction founded on such defective and incomplete description was therefore violative of Rule 8(7), and the petitioner could not be compelled to deposit the balance bid amount. [Paras 11, 12, 14, 15, 16]

The auction, insofar as it proceeded on a defective description of the secured assets, was held unsustainable and the petitioner was not liable to pay the remaining 75% of the bid amount.

Refund of earnest money to auction purchaser - Denial of delivery of possession of mixed mortgaged and unmortgaged property - HELD THAT: - The Court found that the auctioned unit, as shown to the petitioner, comprised parcels mortgaged to the Bank as well as parcels never mortgaged to it, and some of the machinery intended to be sold stood on the unmortgaged portion. Since the entire area was enclosed by one boundary wall and lacked demarcation, and since the flour mill described in the notice was admittedly absent, the Bank could not be directed to hand over the entire property as claimed. In those circumstances, the proper relief was restitution of the amount already deposited by the successful bidder, together with interest. [Paras 17, 18]

The claim for delivery of the entire property was declined, but the Bank was directed to refund the 25% bid amount deposited as earnest money with interest at 9% per annum, along with costs.

Final Conclusion: The writ petition was allowed in part. The Court held that the auction notice suffered from material non-disclosure and misdescription of the secured assets in violation of Rule 8(7), declined the prayer for delivery of the entire property, and directed refund of the earnest money with interest and costs.