TaxTMI Updates e-Newsletter
Jul 02,2024

Relegation to alternative remedy of appeal - restriction on interference by writ jurisdiction where statutory appeal exists - violation of audi alteram partem (opportunity of hearing) - interim protection pending filing and adjudication of appeal - stay of coercive action until appellate authority decides stay application - obligation of appellate authority to consider interim application promptly

Relegation to alternative remedy of appeal - restriction on interference by writ jurisdiction where statutory appeal exists - Whether the writ petition challenging the assessment order could be entertained in view of the statutory remedy of appeal under Section 107 of the U.P. GST Act. - HELD THAT: - The High Court held that the petitioner has an efficacious statutory remedy of appeal under Section 107 of the U.P. GST/CGST Act against the assessment order passed under Section 73. In such circumstances, and having regard to settled principle that matters involving tax where an appeal is provided should ordinarily be decided by the appellate tribunal, the court declined to exercise writ jurisdiction to decide the challenge to the assessment on merits. The Court observed that the grounds assailing the assessment can be adequately considered by the appellate authority and therefore relegated the petitioner to invoke the appellate remedy.

Petition dismissed insofar as it seeks substantive adjudication of the assessment; petitioner relegated to file appeal under Section 107.

Violation of audi alteram partem (opportunity of hearing) - interim protection pending filing and adjudication of appeal - stay of coercive action until appellate authority decides stay application - obligation of appellate authority to consider interim application promptly - Whether interim protection against coercive action should be granted pending filing and decision of the statutory appeal and stay application. - HELD THAT: - While declining to entertain the writ on merits, the Court recognised the petitioner's plea against the quantum of tax and penalty and directed that if the petitioner files an appeal within two weeks and an application for interim relief, the appellate authority shall consider the interim application and pass appropriate orders within ten days in accordance with law. Until the appellate authority passes its orders on the stay application, no coercive action shall be taken against the petitioner. The Court made clear that the protection granted by this order will cease once the appellate authority passes final orders on the interim application.

Interim protection granted on condition that appeal and stay application are filed within stipulated time; no coercive action till appellate authority decides the stay application within ten days.

Final Conclusion: Writ petition disposed of by relegating the petitioner to the statutory appellate remedy under Section 107; conditional interim protection granted barring coercive action until the appellate authority decides any stay application filed with the appeal within the prescribed short timeline.

Right to movement under Article 19(1)(d) - right to trade and business under Article 19(1)(g) and Article 301 - regulation of movement by law - detention and levy under Section 129 of the GST Act, 2017 - requirement to furnish consignment particulars - diversion of goods and carriage without documents

Right to movement under Article 19(1)(d) - regulation of movement by law - detention and levy under Section 129 of the GST Act, 2017 - Whether deviation in the route of carriage, without any statutory prohibition on choice of route, justifies detention of goods and imposition of tax and penalty under Section 129 of the GST Act, 2017. - HELD THAT: - The Court held that freedom of movement and freedom of trade, protected under Article 19(1)(d) and Article 19(1)(g) read with Article 301, permit a merchant or carrier to choose the route for delivery of goods unless a law expressly regulates or prohibits such choice. Absent any statute, rule or binding authority in Karnataka that mandates adherence to a particular route shown in consignment documents, mere deviation of route does not amount to transportation without documents or justify mechanical detention and penal action under Section 129. The Court observed that while consignment particulars (including route particulars) may be required to be furnished, compulsive adherence to the impressed route is not prescribed by law; when the statutory regime does not forbid route alteration, the reason offered for changing route is immaterial to sustain penal consequences. The Court therefore found the authorities' conclusion-that route deviation proved transportation without proper documents and justified tax/penalty-unsustainable in law. [Paras 5]

Deviation from the declared route, in the absence of any statutory prohibition, does not by itself justify detention of goods or levy of tax and penalty under Section 129; the appellate challenge to such detention succeeds.

Requirement to furnish consignment particulars - diversion of goods and carriage without documents - Whether production of consignment documents that indicate a different delivery direction permits authorities to infer intention to evade tax or to treat the documents as defective solely on that basis. - HELD THAT: - The Court reiterated that the statutory scheme requires production of consignment particulars, but stressed that an inspecting authority cannot draw a conclusive inference of tax evasion or treat documents as defective merely because the vehicle was found travelling on a different route than that indicated in the documents. Reliance on incidental indicia such as passage through particular toll plazas or RFID tracking, without a statutory provision making route adherence a condition precedent to transit, cannot sustain seizure or penalty. The Court noted supporting jurisprudence that mechanical detention on such grounds is impermissible and that undervaluation or directional variance, standing alone and without supporting material, are insufficient bases for seizure in transit. [Paras 5, 6]

Mere variance between actual route and route particulars in consignment documents does not authorise treating the documents as defective or inferring intent to evade tax; detention or penalty on that basis is unsupportable.

Final Conclusion: The intra-Court Appeal is dismissed. The Single Judge's order quashing the obligation to pay tax and penalty and directing release of the vehicle is sustained, the State's challenge lacking merit.

Denial of Input Tax Credit for non-existent supplier and fake invoices - Breach of principles of natural justice - duty to disclose materials and enable response - Requirement to establish movement of goods under Section 16(2)(b) - Burden of proof on recipient to substantiate entitlement to ITC

Breach of principles of natural justice - duty to disclose materials and enable response - Denial of Input Tax Credit for non-existent supplier and fake invoices - Impugned assessment order set aside for failure to disclose the basis and documents for the conclusion that the supplier issued fake invoices, and matter remanded subject to conditions - HELD THAT: - The Court found that the revenue's conclusion that the supplier had issued fake invoices was recorded in the assessment order but the departmental authority refused to furnish the documentary basis of that conclusion when requested by the petitioner. Without disclosure of the materials or particulars on which the conclusion of fraud/fake invoices rested, the petitioner could not meaningfully rebut the allegation. In these circumstances the order suffered from breach of the principles of natural justice. The Court therefore set aside the impugned order and remanded the matter for fresh consideration, directing that if the respondent proposes to proceed on the basis that the supplier's invoices were fake, the respondent must provide particulars and any relied-upon documents to the petitioner to enable a reply and personal hearing. The remand was made subject to the condition that the petitioner remit 20% of the disputed tax demand within a specified timeframe, with credit for amounts already remitted, and the respondent was directed to decide afresh within three months after receipt of the petitioner's reply and on being satisfied that the remitted amount has been received. [Paras 6, 7, 9]

Assessment order set aside and matter remanded for fresh consideration after disclosure of particulars and documents relied upon for the finding of fake invoices; remand conditioned on petitioner remitting 20% of the disputed tax demand and conferring opportunity to reply and be heard.

Requirement to establish movement of goods under Section 16(2)(b) - Burden of proof on recipient to substantiate entitlement to ITC - Petitioner had not, on the record, furnished documents such as lorry receipts or weighment slips to establish movement of goods as contemplated by Section 16(2)(b), and therefore could not rely solely on invoices and GSTR 2A to satisfy that requirement - HELD THAT: - The Court noted the respondent's submission and the material on record showing that the petitioner produced tax invoices, e way bill, bank statement and ledger entries, and that the inward supplies reflected in GSTR 2A were not disputed. However, the record also shows absence of lorry receipts or weighment slips to demonstrate actual movement of goods. The Court recorded that satisfaction of the condition in Section 16(2)(b) requires evidence of movement and that the burden to establish entitlement to ITC rests with the taxpayer. While the ultimate question of genuineness of supplies and entitlement to ITC is to be reconsidered on remand, the Court observed that, on the existing record, the petitioner had not discharged its obligation to demonstrate movement of goods. [Paras 4, 5, 7]

On the record before it the petitioner had not established movement of goods by producing lorry receipts or weighment slips; entitlement to ITC must be reconsidered on remand with opportunity to supply such proof.

Final Conclusion: Impugned order dated 07.03.2024 set aside and matter remanded for fresh consideration; respondent must disclose particulars and documents relied upon for any finding of fake invoices, the petitioner may reply and be heard, and remand is subject to the petitioner remitting 20% of the disputed tax demand (with credit for prior remittance) and the respondent issuing a fresh order within three months thereafter.

Appeal to Appellate Authority - Computation of date of filing of appeal - Substitution of Rule 108(3) of the CGST Rules - clarified date of filing as date of provisional/final acknowledgement - Retrospective effect of clarificatory amendment - Condonation of delay

Computation of date of filing of appeal - Appeal to Appellate Authority - Substitution of Rule 108(3) of the CGST Rules - clarified date of filing as date of provisional/final acknowledgement - Date of filing of the appeal is the date of issuance of acknowledgement recorded on the common portal and not the subsequent date of physical submission of the impugned order. - HELD THAT: - The Court examined Rule 108(3) as it stood prior to substitution and the substituted sub-rule effected by Notification No. 26/2022-CT dated 26.12.2022. Under the pre-amendment rule the date of filing could, in certain circumstances, be the date of submission of the certified copy where that submission occurred after seven days. The substituted provision treats the date of issue of provisional/final acknowledgement on the common portal as the date of filing where the decision/order is uploaded, and where it is not uploaded provides for a seven day window for submission of a self certified copy but still treats the provisional acknowledgement date as the date of filing unless submission is beyond seven days. The appellate acknowledgement in the present case was issued on 03.06.2022 via the common portal. The Appellate Authority erred in taking the date of physical filing of the certified copy (25.01.2023) as the date of filing when the online acknowledgement predated that submission. The substituted Rule 108(3) clarifies that the acknowledgement date is the determinative date of filing, and that clarification governs the present dispute. [Paras 5, 6, 7, 8, 9]

The date of filing to be taken into account is 03.06.2022, the date of issuance of the acknowledgement on the common portal, and not 25.01.2023.

Retrospective effect of clarificatory amendment - Condonation of delay - The substituted provision is a clarificatory amendment with retrospective effect and, applying that clarification, the delay in filing is condoned and the appeal is to be considered afresh. - HELD THAT: - The Court referred to the Minutes of the 48th GST Council which record that the amendment to Rule 108(3) was intended to provide clarity on submission of the certified copy and issuance of final acknowledgement. On that basis the Court treated the substitution as clarificatory and applicable to the petitioner's appeal. Because the correct date of filing is the earlier acknowledgement date, the delay that the Appellate Authority relied upon falls away; the Court accordingly condoned the delay and directed that the appeal be remitted to the Appellate Authority for fresh consideration, leaving all contentions open. [Paras 8, 9, 10]

The substituted Rule 108(3) is treated as clarificatory and applicable; the delay is condoned and the matter is remitted to the Appellate Authority for fresh consideration.

Final Conclusion: The impugned order rejecting the appeal as time barred is set aside; the date of filing is the date of portal acknowledgement (03.06.2022), the delay is condoned, and the appeal is remitted to the Appellate Authority for fresh consideration with all contentions kept open.

Appeal under Section 107 of the CGST Act - availability of alternative statutory remedy - plenary power under Article 226 of the Constitution - discretion to decline writ jurisdiction where efficacious remedy exists - violation of principle of natural justice - composite supply and exemption for health care services - adjudicating authority and appealability of its orders

Appeal under Section 107 of the CGST Act - availability of alternative statutory remedy - adjudicating authority and appealability of its orders - Maintainability of writ petitions in presence of statutory remedy of appeal under Section 107. - HELD THAT: - The Court held that orders passed by the Assistant Commissioner are appealable under the statutory scheme and Section 107(1) provides an efficacious remedy. The statutory right of appeal/revision is a self imposed limitation on exercise of writ jurisdiction and, in absence of factors displacing that rule, the High Court ordinarily should not exercise its discretionary power under Article 226. Given the availability of appeal and revisional mechanism, the petitioners have an adequate statutory remedy to agitate their grievances before the appellate authority. [Paras 9, 15, 16, 19]

Writ petitions not maintainable on this ground; petitioners must pursue remedy under Section 107.

Plenary power under Article 226 of the Constitution - discretion to decline writ jurisdiction where efficacious remedy exists - violation of principle of natural justice - Whether exceptional circumstances (fundamental right violation, violation of natural justice, lack of jurisdiction, or challenge to vires of statute) justify interference by writ jurisdiction. - HELD THAT: - The Court found that petitioners did not establish violation of any fundamental right, nor demonstrated that principles of natural justice were breached in a manner warranting exercise of writ jurisdiction. Allegations of portal difficulties and delay in uploading documents did not amount to a denial of natural justice, particularly since documents were allowed to be submitted physically and the factual contentions concerning portal issues require adjudication on evidence. There was no allegation that the impugned orders were wholly without jurisdiction or that any statute's vires was under challenge; consequently, the exceptional grounds to bypass statutory remedy were not made out. [Paras 20, 21, 22, 23]

No exceptional circumstance shown; writ jurisdiction declined on these grounds.

Composite supply and exemption for health care services - discretion to decline writ jurisdiction where efficacious remedy exists - Disposition of substantive dispute and direction for further adjudication. - HELD THAT: - The Court observed that the core controversy-whether supplies of medicines/consumables formed part of a composite health care service exempt from GST or were taxable transfers to in house patients at market price such that tax burden passed to consumers-involves disputed questions of fact and registration particulars. These factual disputes are amenable to effective resolution by the appellate authority under Section 107. Accordingly, rather than deciding the merits, the Court dismissed the writ petitions and left the parties to pursue their remedies before the prescribed forums. [Paras 24, 25]

Substantive disputes remitted to appellate authority; writ petitions dismissed with liberty to appeal.

Final Conclusion: Writ petitions dismissed for want of maintainability in view of the efficacious statutory remedy under Section 107 of the CGST Act; no violation of fundamental rights or principles of natural justice found; factual controversies left to the appellate authority; petitioners granted liberty to pursue appeals and the time spent in this Court shall not be counted for limitation.

Opportunity of hearing - adjournment for sufficient cause - limitation on adjournments - personal hearing - Section 75(4) and (5) of the Karnataka Goods and Services Tax Act, 2017

Opportunity of hearing - adjournment for sufficient cause - personal hearing - Section 75(4) and (5) of the Karnataka Goods and Services Tax Act, 2017 - Denial of adjournment of the personal hearing when the petitioner made a first-time request on medical grounds. - HELD THAT: - The Court found that an opportunity of hearing must be granted where a written request is received or an adverse decision is contemplated, and that the proper officer shall grant time if sufficient cause is shown while recording reasons in writing. The adjudicating officer rejected the petitioner's request for adjournment in a hyper-technical manner despite the request being the first at the stage of personal hearing. Applying the mandate of Section 75(4) and (5) of the Act, the Court held that the denial was unsustainable and contrary to the requirement to consider and record reasons when adjournment is sought for sufficient cause. [Paras 7, 9]

The refusal to grant the adjournment was set aside and the matter was remitted for fresh consideration of the personal hearing request in accordance with the legal requirements of Section 75(4) and (5).

Personal hearing - remand for fresh hearing - Remand for grant of personal hearing and setting aside of consequential demand notice. - HELD THAT: - In view of the defective denial of adjournment, the Court set aside the impugned adjudication order and the consequential demand notice and directed that the petitioner be afforded the opportunity of personal hearing. The matter was remanded to the adjudicating authority to permit the petitioner to avail the personal hearing on the specified date, leaving all contentions open for adjudication in that hearing. [Paras 10]

Order at Annexure-G and the consequential demand notice at Annexure-H were set aside and the petitioner was directed to appear to avail the personal hearing on 28.06.2024.

Final Conclusion: Writ petition allowed: impugned order and consequential demand notice set aside; matter remanded for personal hearing to be granted in accordance with Section 75(4) and (5) of the Karnataka GST Act, 2017; all contentions kept open.

Quashing of impugned order - remand for fresh adjudication on merits - opportunity of being heard/right to defence - liability of legal representative/heir under Section 93 of the respective GST enactments - service of notice and treatment of impugned order as addendum to show cause notice

Quashing of impugned order - remand for fresh adjudication on merits - opportunity of being heard/right to defence - liability of legal representative/heir under Section 93 of the respective GST enactments - Impugned order dated 04.05.2023 quashed and matter remitted for fresh consideration so that the petitioner, as legal heir, may be given an opportunity to defend the tax liability for the demand relating to July 2017 to March 2018. - HELD THAT: - The Court found that the demand relates to the period July 2017 to March 2018 and that the impugned order was passed after the death of the original registered dealer. Given that the petitioner is the legal heir and may be liable under Section 93 of the respective GST enactments, fairness requires that he be afforded a proper opportunity to contest the liability. In the circumstances of non-participation in earlier hearings (illness alleged) and issues of notice hosted on the GST portal, the Court exercised its supervisory jurisdiction to quash the impugned order and remit the matter for fresh adjudication on merits and in accordance with law so that the petitioner can be heard and the respondent can re-examine the claim. [Paras 6, 7]

Impugned order quashed; matter remitted for fresh orders on merits with opportunity to petitioner to defend the liability.

Service of notice and treatment of impugned order as addendum to show cause notice - procedure for fresh adjudication and timelines - Directions for service of the antecedent notice, treatment of the impugned order as an addendum, timelines for reply and for passing fresh orders. - HELD THAT: - The Court directed the respondent to serve a copy of the notice that preceded the impugned order to the petitioner within 30 days of receipt of this order. The court declared that the quashed impugned order shall be treated as an addendum to the show cause notice which formed the basis of that order. The petitioner is expected to reply to the show cause notice within two months of receipt, and the respondent is to endeavour to pass fresh orders on merits preferably within three months thereafter, ensuring that the petitioner is heard and cooperates with the respondent during the process. [Paras 8, 9]

Respondent to serve preceding notice within 30 days; impugned order treated as addendum to show cause notice; petitioner to reply within two months; respondent to pass fresh orders preferably within three months thereafter, with hearing of petitioner.

Final Conclusion: Writ petition allowed: impugned order dated 04.05.2023 quashed and the matter remitted for fresh adjudication on merits in respect of the demand for July 2017 to March 2018; directions issued for service of notice, timelines for reply and disposal, and for permitting the petitioner (legal heir) to be heard.

Grant of bail - Serious economic offences involving fraudulent availment of Input Tax Credit - Absence of material recovery or device establishing creation of fake firms - Compoundability of offence - Pre-trial detention and merits not adjudicated - Imposition of conditions for continuance of bail

Grant of bail - Serious economic offences involving fraudulent availment of Input Tax Credit - Absence of material recovery or device establishing creation of fake firms - Compoundability of offence - Pre-trial detention and merits not adjudicated - Imposition of conditions for continuance of bail - Application for regular bail by the applicant accused of offences under the CGST Act was allowed subject to conditions. - HELD THAT: - The Court considered the nature of the allegations concerning creation of fake 'mother firms' and transfer of fraudulent Input Tax Credit, the submissions of the parties, and the material on record. While the offences are serious and punishable (and noted to be compoundable), the Court observed that nothing was recovered from the applicant, there was no device on the record establishing that the applicant created the fake firms, no GST liability or penalty has been assessed to date, and the source of registration of the non-existent companies remains unexplained. The period of pre-trial incarceration of the applicant was also considered. Without expressing any opinion on the merits, the Court found these factors sufficient to conclude that the applicant had made out a case for bail. The Court imposed conditions to prevent tampering with evidence, intimidation of witnesses, non-appearance, repetition of similar offences and inducement or threat to persons acquainted with the facts, and preserved the prosecution's right to move for cancellation of bail if conditions are breached. [Paras 7, 8]

Bail granted to the applicant in Case No. 22362 of 2023 on furnishing a personal bond and two heavy sureties each in like amount, subject to specified conditions; prosecution may move for cancellation on breach.

Final Conclusion: Bail application allowed; applicant released on furnishing bond and sureties subject to enumerated conditions, without adjudication on merits; prosecution permitted to seek cancellation if conditions are violated.

Territorial jurisdiction - alternative remedy of appeal - maintainability of writ petition in presence of statutory remedy - composite adjudication across multiple GSTINs - liberty to avail statutory appellate remedy

Territorial jurisdiction - alternative remedy of appeal - maintainability of writ petition in presence of statutory remedy - Maintainability of the writ petition challenging the impugned composite GST order when a statutory appeal remedy was available and territorial jurisdiction was asserted to lie elsewhere. - HELD THAT: - The impugned order itself informed the petitioner of the remedy of appeal to the Additional Commissioner (Appeals), GST, Gomti Nagar, Lucknow within 90 days. Respondents contended that the High Court lacked territorial jurisdiction and that the petitioner had an adequate alternative statutory remedy by way of appeal. The petitioner, who seeks to challenge a composite order passed by the assessing authority at Agra in respect of returns filed under multiple GSTINs, elected to withdraw the writ petition but sought liberty to approach the appellate authority. Given the availability of the specific appellate remedy and the contention regarding territorial competence, the Court accepted withdrawal and granted the petitioner liberty to pursue the prescribed statutory appeal before the appellate authority named in the impugned order.

Writ petition dismissed as withdrawn with liberty to approach the Appellate Authority as advised in the impugned order.

Composite adjudication across multiple GSTINs - liberty to avail statutory appellate remedy - Whether confusion arising from a composite order covering multiple GSTINs justified retention of the writ instead of pursuing the statutory appeal. - HELD THAT: - The petitioner contended that a composite order covering GST returns across 13 States and different GSTINs created confusion about the appropriate territorial forum for appeal. The Court noted that the petitioner has its registered office at Agra and that the impugned order advised appeal to the Additional Commissioner (Appeals), GST, Gomti Nagar, Lucknow. Rather than deciding the territorial question on merits, the Court permitted withdrawal of the writ and granted liberty to the petitioner to seek remedy before the appellate authority, thereby leaving any territorial or forum-specific disputes to be raised and adjudicated in the appellate proceedings.

Petition dismissed as withdrawn while leaving open the petitioner's right to approach the appellate authority for resolution of forum-specific or other grievances.

Final Conclusion: The High Court accepted withdrawal of the writ petition and dismissed it as withdrawn, while granting liberty to the petitioner to pursue the statutory appeal before the Additional Commissioner (Appeals), GST, Gomti Nagar, Lucknow, thereby directing the petitioner to avail the alternative remedy specified in the impugned order.

Regular bail under Section 439 of the Code of Criminal Procedure - offence under Section 132(1)(c) of the GST Act - ineligible input tax credit - prima facie consideration without detailed discussion of evidence - applicability of the Sanjay Chandra test for grant of bail - conditions for bail and supervision

Regular bail under Section 439 of the Code of Criminal Procedure - offence under Section 132(1)(c) of the GST Act - ineligible input tax credit - prima facie consideration without detailed discussion of evidence - applicability of the Sanjay Chandra test for grant of bail - conditions for bail and supervision - Grant of regular bail to the applicant arrested in connection with the GST offence alleged in File No. STO-3/U-98/JMR/SEC-69/VOLT METAL IND / 2023-24/O.W. NO. 17 dated 12.02.2024. - HELD THAT: - The Court examined the role attributed to the applicant, namely that he allegedly availed ineligible input tax credit on the basis of purchases from entities purportedly non-existent, considered the statutory punishment and that the applicant was in custody since 12.02.2024. The Court noted the applicant's case that purchases were supported by tax invoices, delivery proof and banking transactions and observed that the arrest memo and allegations were general in nature. Applying the principles enunciated in Sanjay Chandra, the Court held that, without undertaking a detailed evaluation of evidence at this stage, a prima facie view favoured exercise of judicial discretion to enlarge the applicant on bail. The Court therefore directed release on regular bail subject to supervisory conditions designed to secure attendance and protect the investigation, while emphasising that trial court shall not be influenced by preliminary observations made at the bail stage.

Application allowed; applicant enlarged on regular bail on execution of a personal bond with one surety of like amount to the satisfaction of the trial court and subject to conditions including prohibition on misuse of liberty, non-interference with investigation or evidence, surrender of passport if any, prior permission to leave the State, periodic appearance before the State Tax Officer for six months, and furnishing/maintaining residential address.

Final Conclusion: Bail application allowed on the terms and conditions directed; liberty is subject to supervisory conditions and the trial court remains free to modify conditions or act on any breach, and the trial court should remain uninfluenced by interim observations made while granting bail.

Constitutionality of Section 16(4) of the CGST/SGST Act and Rule 61(5) of the KGST Rules - stare decisis and reliance on Apex Court precedents - availability of statutory remedy against a show cause notice

Constitutionality of Section 16(4) of the CGST/SGST Act and Rule 61(5) of the KGST Rules - stare decisis and reliance on Apex Court precedents - Challenge to the constitutional validity of Section 16(4) of the CGST/SGST Act, 2017 read with Rule 61(5) of the Karnataka GST Rules, 2017. - HELD THAT: - The High Court declined to entertain the petitioner's challenge to the constitutional validity of the impugned provisions, observing that identical or similar provisions have been upheld by other High Courts which followed the law laid down by the Supreme Court in earlier decisions. Relying on those precedents, the court held that the constitutional challenge is foreclosed and therefore rejected the petitioner's contention that Section 16(4) and Rule 61(5) are illegal, unreasonable, arbitrary or discriminatory. The court did not undertake fresh adjudication of the constitutional question but disposed of the challenge in light of the existing judicial precedent. [Paras 6, 8]

The constitutional challenge to Section 16(4) of the CGST/SGST Act read with Rule 61(5) of the KGST Rules is rejected and the petition in that regard is dismissed.

Final Conclusion: Writ petition dismissed. The challenge to the constitutionality of the impugned provisions is rejected in view of existing precedents; the petitioner's grievance against the show cause notice was not decided on merits and the petitioner is left to pursue the statutory remedies available under the CGST/KGST law.

Entertaining writ petition at show-cause notice stage - challenge to show-cause notice without filing written explanation - alternative statutory remedy / complete code - principles of natural justice - state control over manufacture of rectified spirit

Entertaining writ petition at show-cause notice stage - challenge to show-cause notice without filing written explanation - alternative statutory remedy / complete code - principles of natural justice - Maintainability of writ petition challenging Show Cause Notice when petitioner did not submit written explanation or seek personal hearing. - HELD THAT: - The High Court held that the petition was not maintainable because the petitioner, despite being served with the Show Cause Notice and being given an opportunity to file a written explanation and seek personal hearing, did not avail the statutory opportunity and instead approached the Court to quash the notice. The Court relied on the principle that, while writ petitions at the show-cause stage are not barred per se, ordinarily the authority should be permitted to consider the explanation and decide the matter under the statutory scheme; where alternative statutory remedies exist and no allegation of lack of jurisdiction or breach of principles of natural justice is made, interference at the notice stage is inappropriate. The Court noted and followed the reasoning in the Apex Court decision cited by respondents which criticises approaching constitutional courts before the statutory remedy is exhausted and requires a party to place material before the authority in response to the notice. The petitioner's reliance on earlier decisions concerning state control over manufacture (as in Bihar Distillery) was found inapposite in the facts before the Court and did not justify premature judicial interference. [Paras 12, 13, 14, 15]

Writ petition dismissed as not maintainable for having rushed to Court without filing written explanation or seeking statutory remedy.

Final Conclusion: The writ petition challenging the Show Cause Notice dated 23.09.2021 is dismissed for want of maintainability because the petitioner did not avail the opportunity to file a written explanation or seek personal hearing under the statutory scheme.

E-way bill validity and updation during transit - breakdown of vehicle and unavoidable circumstances - no intent to evade tax - penalty under Section 129 of the CGST Act - general penalty under Section 125 of the CGST Act - refund of excess amount paid after deducting general penalty - precedent: Satyam Shivam Papers Pvt. Ltd.

E-way bill validity and updation during transit - breakdown of vehicle and unavoidable circumstances - no intent to evade tax - penalty under Section 129 of the CGST Act - precedent: Satyam Shivam Papers Pvt. Ltd. - Impugned show cause notice and assessment order quashed on facts of bona fide breakdown and failure to update the e-way bill - HELD THAT: - The Court found that the petitioner possessed a valid e-way bill for the original vehicle which expired on 05.02.2024, and due to a bona fide breakdown the goods were shifted to another vehicle and, because of delay caused by those circumstances, the new vehicle was intercepted on 06.02.2024. The omission to update the e-way bill was attributable to unavoidable circumstances and not to any deliberate or intentional act to evade tax. There was no material to infer intent to avoid or evade tax; consequently, the exercise of power to levy tax and penalty under Section 129 could not be sustained. The reasoning in the Apex Court decision in Satyam Shivam Papers Pvt. Ltd. supporting quashing where no evasion is established was held applicable. On these factual findings the impugned notice and order were set aside. [Paras 6, 7, 9]

Impugned Notice dated 06.02.2024 and Order dated 16.02.2024 set aside and petition allowed.

General penalty under Section 125 of the CGST Act - no intent to evade tax - Appropriateness of imposing maximum general penalty under Section 125 in lieu of other penalties - HELD THAT: - Although the departmental action under Section 129 was quashed on the facts, the Court exercised its discretion to impose the maximum general penalty under Section 125 of the CGST Act in the peculiar facts of the case. The imposition was founded on the Court's view that the breach was not intentional or attributable to the petitioner, yet some penal consequence was just and proper in the circumstances; therefore a general penalty of Rs. 25,000/- was imposed. [Paras 7, 10]

Maximum general penalty of Rs. 25,000/- under Section 125 imposed on the petitioner.

Refund of excess amount paid after deducting general penalty - payment already made by petitioner - Direction to refund amounts paid in excess of the imposed general penalty - HELD THAT: - The petitioner paid the amount demanded pursuant to the impugned order. Having set aside the order and imposed only a general penalty of Rs. 25,000/-, the Court directed that any amount paid by the petitioner in excess of Rs. 25,000/- be refunded. The refund is to be made within one month from receipt of a copy of the order. [Paras 4, 10]

Respondents directed to refund amounts paid in excess of Rs. 25,000/- within one month.

Final Conclusion: The writ petition is allowed; the show cause notice and assessment order are quashed, a general penalty of Rs. 25,000/- under Section 125 CGST Act is imposed, and any amount paid in excess of that penalty shall be refunded to the petitioner within one month.

Cancellation of registration under section 29 of the GST Act - requirement of assignment of reasons and application of mind for administrative cancellation - right to carry on business under Article 19(1)(g) of the Constitution - quashing of administrative order in absence of reasons as arbitrary and discriminatory - appeal barred by limitation and absence of provision to condone delay under section 107

Cancellation of registration under section 29 of the GST Act - requirement of assignment of reasons and application of mind for administrative cancellation - right to carry on business under Article 19(1)(g) of the Constitution - Validity of cancellation of the petitioner's GST registration where returns were not furnished for six months and the cancellation order did not assign reasons. - HELD THAT: - Section 29(2)(c) permits cancellation where a person has not furnished returns for a continuous period of six months, but the competent authority must assign reasons and apply its mind before cancelling registration. In the present case the cancellation order merely recorded non-filing for six months without any reasoning or application of mind. Such a non reasoned cancellation adversely affects the petitioner's fundamental right to carry on business under Article 19(1)(g) and, having regard to the fact that the petitioner thereafter tendered the arrears including tax, interest, penalty and fees, the cancellation is arbitrary and discriminatory. The impugned cancellation is therefore quashed and the registration is to be restored, permitting the petitioner to file returns under the GST provisions. [Paras 6, 7]

The cancellation order is quashed as made without assignment of reasons or application of mind; the registration is restored and the petitioner permitted to file returns.

Appeal barred by limitation and absence of provision to condone delay under section 107 - quashing of administrative order in absence of reasons as arbitrary and discriminatory - Whether the dismissal of the appeal by the first respondent as barred by limitation, and the consequent refusal to condone delay, warrants interference. - HELD THAT: - The appeal against cancellation was dismissed as time barred and there is no provision under section 107 to condone delay. However, because the underlying cancellation order itself is quashed for want of reasons and application of mind, the dismissal of the appeal on limitation does not stand independent of that defect. The court therefore quashed the impugned appellate and cancellation orders and directed restoration of registration, rendering the question of condonation of delay moot in the circumstances. [Paras 2, 7]

The appellate order dismissing the appeal as barred by limitation is quashed in consequence of quashing the underlying cancellation; restoration of registration ordered.

Final Conclusion: Writ petition allowed; impugned cancellation and appellate orders quashed, registration restored and petitioner permitted to file returns.

Notice under Section 226(3) of the Income Tax Act - stay application before the Commissioner of Income Tax (Appeals) - administrative directions by Local Committee to prevent coercive recovery - High Pitch Assessment review by Local Committee - coercive recovery

Stay application before the Commissioner of Income Tax (Appeals) - notice under Section 226(3) of the Income Tax Act - Obligation of the petitioner to seek a stay of the assessment order before the CIT(A) rather than challenge the deposit notice in writ proceedings - HELD THAT: - The Court noted that the petitioner has preferred an appeal before the CIT(A) against the assessment order but has not moved any stay application in that appellate proceeding. In the absence of a stay having been sought before the CIT(A), the Assessing Officer was entitled to issue the impugned notice under Section 226(3) calling for deposit. The Court directed that the petitioner should move a stay application before the CIT(A) and seek appropriate orders thereon. The Court did not adjudicate the merits of the assessment or the entitlement to stay, and expressly kept open all contentions available to the petitioner before the CIT(A). [Paras 7]

Petitioner directed to move a stay application before the CIT(A); existing challenge does not preclude issuance of the Section 226(3) notice in absence of a stay.

High Pitch Assessment review by Local Committee - administrative directions by Local Committee to prevent coercive recovery - coercive recovery - Duty of the Local Committee to consider the petitioner's pending application and, if warranted, issue directions including those to prevent coercive recovery under the committee's mandate - HELD THAT: - The Court observed that the petitioner had filed an application before the Local Committee constituted pursuant to the Board's Circular of 23 April 2022 in relation to the assessment characterised as high pitched, which remained pending. Considering the pendency and the Committee's jurisdiction to give administrative directions (including directions in terms of paragraph E(i)(b) as relied upon by the petitioner), the Court directed the Local Committee to consider and decide the petitioner's application, including on any directions to restrict coercive recovery, as expeditiously as possible and within ten days from the date the order is placed before it. The Court did not decide the merits of the application and left the determination to the Local Committee. [Paras 8]

Local Committee directed to consider and decide the petitioner's pending application (including any direction to prevent coercive recovery) within 10 days of receipt of this order.

Final Conclusion: Writ petition disposed of by directing the petitioner to move a stay application before the CIT(A) and by directing the Local Committee to consider and decide the petitioner's pending High Pitch Assessment application (including consideration of directions to prevent coercive recovery) within ten days; all contentions before the appellate forum and the Local Committee are kept open; no costs.

Arm's length price - comparability analysis - functional dissimilarity - extrapolation of financial results for comparables with different year ends - negative working capital adjustment - notional interest on receivables - application of LIBOR plus 200 basis points for notional interest

Comparability analysis - functional dissimilarity - arm's length price - Exclusion of four comparables - Eclerx Services Limited, Infosys BPO Limited, TCS E-Serve Limited and Cross domain Solutions Pvt. Ltd. - HELD THAT: - The Tribunal examined prior decisions in the assessee's own case for earlier assessment years where these entities were rejected as suitable comparables on grounds of functional dissimilarity and disproportionate turnover. No change in facts or circumstances for the year under appeal was pleaded or proved. Respectfully following the view taken in earlier assessment years and the DRP's approach, the four entities are to be excluded from the comparable set for determining ALP for the year under consideration. [Paras 6, 7]

The four named entities are excluded from the comparable list for AY 2012-13.

Extrapolation of financial results for comparables with different year ends - comparability analysis - Inclusion of R Systems International Limited (segmental) by permitting extrapolation of results despite different accounting year end. - HELD THAT: - Following the principle that a functionally comparable entity should not be excluded solely because full-year data for the relevant financial year is not available, the Tribunal directed that where the comparable is functionally similar and results can reasonably be extrapolated from available data, the AO/TPO must permit such extrapolation. The assessee is therefore entitled to have R Systems (segmental) considered as a comparable after permitting extrapolation for the relevant period. [Paras 8]

R Systems International Limited (segmental) to be treated as a comparable after reasonable extrapolation of its results for the relevant year.

Comparability analysis - arm's length price - Exclusion of ACE BPO Services Private Limited and Crystal Voxx Ltd. from the comparables proposed by the assessee. - HELD THAT: - The Tribunal reviewed the DRP's observations that ACE BPO was not found in the search process and lacked substantiation of its segmental annual report showing ITeS activity, and that Crystal Voxx's P&L reflected revenue as professional income without sufficient disclosure of segmental operations to clarify its functional profile. The material before the Tribunal did not dispel these obscurities; hence the assessee's prayer to include these two entities was rejected. [Paras 9, 10]

ACE BPO Services Private Limited and Crystal Voxx Ltd. are excluded from the comparable set.

Negative working capital adjustment - arm's length price - Whether negative working capital adjustment should be made to the arithmetic mean margin of comparables. - HELD THAT: - The Tribunal followed its earlier decision (as applied by the DRP in the assessee's 2010-11 case) and found no factors in the present year warranting a different view. Accordingly, the Tribunal directed that negative working capital adjustment shall not be made to the arithmetic mean margin of the comparables. [Paras 11]

Negative working capital adjustment shall not be made to the arithmetic mean margin.

Notional interest on receivables - arm's length price - application of LIBOR plus 200 basis points for notional interest - Computation of notional interest on outstanding receivables from Associated Enterprises. - HELD THAT: - After considering authorities and submissions, the Tribunal accepted that interest on delayed recovery of receivables is to be treated for ALP determination. Relying on the reasoning of the Bombay High Court in a cited decision, the Tribunal held that the appropriate rate for notional interest in the circumstances is LIBOR plus 200 basis points and directed the AO/TPO to adopt this rate for computation. [Paras 12, 13]

Notional interest on outstanding receivables to be computed at LIBOR + 200 basis points; AO/TPO directed to adopt this rate.

Final Conclusion: Appeal partly allowed: four specified comparables excluded; R Systems (segmental) to be included after extrapolation; ACE BPO and Crystal Voxx excluded; negative working capital adjustment disallowed; notional interest on receivables to be computed at LIBOR + 200 bps and given effect by the AO/TPO for AY 2012-13.

Penalty under section 271(1)(c) for furnishing inaccurate particulars of income - Dependence of penalty proceedings on sustenance of quantum additions - Deletion of additions in quantum proceedings vitiates penalty imposed for those additions

Penalty under section 271(1)(c) for furnishing inaccurate particulars of income - Dependence of penalty proceedings on sustenance of quantum additions - Whether the penalty levied under section 271(1)(c) could be sustained after the deletions of the additions in the corresponding quantum proceedings. - HELD THAT: - The Tribunal noted that the Assessing Officer levied penalty under section 271(1)(c) based on additions made in the assessment order. Subsequent cross appeals in the quantum proceedings resulted in deletion of the additions by the ITAT (assessee's appeal allowed and Revenue's appeal dismissed). Having regard to the admitted factual position that the quantum additions underpinning the penalty were deleted, the Tribunal held that the foundational basis for initiating and sustaining penalty proceedings under section 271(1)(c) no longer subsisted. Consequently the penalty levied by the AO and affirmed by the CIT(A) could not stand in law and was liable to be deleted. [Paras 6, 7]

Impugned penalty under section 271(1)(c) deleted and the appeal allowed.

Final Conclusion: In view of the deletions of the assessment additions in the quantum proceedings, the Tribunal held that the penalty levied under section 271(1)(c) had no basis and was deleted; the assessee's appeal is allowed.

Profits and gains of business or profession - adventure in the nature of trade - receipt of flats under a joint development agreement treated as capital gains - deduction under section 54F for investment in residential house - exemption under section 54 for reinvestment in residential property - application of section 50C principles for stamp duty/circle rate in capital gains computation - circle rate not determinative of cost of construction for income-tax additions

Receipt of flats under a joint development agreement treated as capital gains - adventure in the nature of trade - profits and gains of business or profession - Whether the flats received by the assessee in lieu of land under the development agreement are business receipts liable under the head "profits and gains of business or profession" or are capital receipts chargeable as capital gains. - HELD THAT: - On the material on record and the tripartite supplementary agreement of 12/03/2014, the Tribunal found that the original 28/04/2010 agreement was not acted upon and the residential project was initiated and completed by the developer M/s. KHPL under the 09/06/2011 agreement. The assessee was one of three parties and did not undertake the construction activity himself. The Tribunal accepted the CIT(A)'s view that the assessee acted as a transferor of land receiving flats as consideration and not as a developer conducting an adventure in the nature of trade. The AO's conclusion treating the flats as stock-in-trade was held to be without adequate enquiry into the documentary evidence, including the supplementary agreement and the role of the builder. Consequently the receipts were held to fall under capital gains provisions rather than business income. [Paras 10, 11]

Addition under section 28(iv) treating the flats as business receipts deleted; transfers held to attract capital gains treatment.

Circle rate not determinative of cost of construction for income-tax additions - valuation based on circle rate not determinative of construction cost - profits and gains of business or profession - Whether the Assessing Officer was justified in making an addition by valuing the Rupam Tower at prevailing circle rate and treating the notional value as unexplained investment from undisclosed sources. - HELD THAT: - The Tribunal accepted the CIT(A)'s finding that the AO mechanically applied stamp duty/circle rates to the built-up area without making enquiries, accepting the assessee's balance-sheet entries, examining bank-supported expenses, referring to the valuation report of a Government-registered valuer, or seeking a report from the DVO. The registered valuer's report and the assessee's books showed construction cost substantially lower than the circle-rate multiplication adopted by the AO. The Tribunal held that section 50C/circle rates are relevant for capital gains computation but cannot be equated to the actual cost of construction for assessing unexplained investment; the AO's addition was therefore based on surmise and conjecture and was rightly deleted by the CIT(A). [Paras 13, 14]

Addition of Rs. 10,32,40,650/- based on circle rate for Rupam Tower deleted; AO's valuation held unjustified.

Deduction under section 54F for investment in residential house - exemption under section 54 for reinvestment in residential property - application of section 50C principles for stamp duty/circle rate in capital gains computation - Whether the assessee is entitled to deduction/exemption under sections 54F and 54 in respect of (a) long-term capital gain on transfer of land in lieu of flats and (b) LTCG on sale of a flat invested in construction of a residential portion in Rupam Tower. - HELD THAT: - The Tribunal upheld the CIT(A)'s treatment that LTCG arose on 09/06/2011 on transfer to the developer and was chargeable under capital gains provisions. Using the FMV as per circle rate for the land on the date of transfer produced the indexed gain figure which the Tribunal accepted for computation. Relying on the factual finding that the assessee applied the consideration towards residential flats in Vishwamohini Complex, the Tribunal accepted the CIT(A)'s view-consistent with the Geeta Duggal line of authority then applicable-that the assessee could claim deduction under section 54F in respect of the amount invested in the residential flats received in lieu of land. For sale of flat No. 403 (held >36 months), the Tribunal accepted the CIT(A)'s direction to allow exemption under section 54 to the extent of investment in the residential portion (5th floor) of Rupam Tower, to be quantified by the AO on the basis of the registered valuer's report. Short-term capital gain on flat No. 401 was to be computed as per law. The Tribunal rejected the Revenue's contention that the amendments restricting "a residential house" to "one residential house" (w.e.f. 01/04/2015) ousted the assessee's claim for the relevant facts and years here. [Paras 12]

Assessee entitled to deduction under section 54F in respect of LTCG arising on transfer of land and to exemption under section 54 for investment in the residential portion of Rupam Tower for the LTCG on flat No. 403; STCG on flat No. 401 to be computed accordingly.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and confirmed the CIT(A)'s deletions: (i) receipts of flats were taxable as capital gains and not as business income under section 28(iv); (ii) the AO's addition valuing Rupam Tower at circle rates was unjustified and deleted; and (iii) the assessee was entitled to relief under sections 54F and 54 in the manner directed by the CIT(A); the cross-objection was partly allowed and other procedural/contention grounds were dismissed.

Addition under section 68 (unexplained advances) - scope of assessment under section 153A in absence of incriminating material - requirement of incriminating material found during search for making additions in completed/unabated assessments - reliance on Hon'ble Supreme Court in ACIT vs. Abhisar Buildwell Pvt. Ltd.

Addition under section 68 (unexplained advances) - scope of assessment under section 153A in absence of incriminating material - reliance on Hon'ble Supreme Court in ACIT vs. Abhisar Buildwell Pvt. Ltd. - Deletion of addition of Rs. 1,76,00,000 made as unexplained advances was upheld. - HELD THAT: - The CIT(A) after remand examined the material and found that no incriminating material was unearthed during the search. Applying the principle laid down by the Hon'ble Supreme Court in ACIT v. Abhisar Buildwell Pvt. Ltd., the assessing officer cannot sustain an addition under section 68 in proceedings under section 153A where no incriminating material is found during the search; absent such material the assessment cannot be framed or additions made on that basis. The Tribunal, having considered the remand report and the CIT(A)'s reasoning, accepted that the CIT(A) rightly deleted the addition because the essential precondition of incriminating material from the search was not satisfied, and found no reason to interfere with that conclusion. [Paras 6, 7, 8]

Appeal dismissed; deletion of the addition of Rs. 1,76,00,000 upheld.

Initiation of penalty proceedings - appealability of initiation of penalty under section 271(1)(c) - Ground challenging initiation of penalty proceedings under section 271(1)(c) was dismissed as not tenable. - HELD THAT: - The CIT(A) observed that no appeal lies against the mere initiation of penalty proceedings and accordingly rejected the appellant's contention on this ground. The Tribunal recorded the CIT(A)'s finding and did not interfere with the conclusion that the challenge to initiation of penalty could not be maintained in the appeal. [Paras 6]

Ground dismissed; challenge to initiation of penalty proceedings not sustained.

Final Conclusion: The Tribunal dismissed the revenue appeal and upheld the CIT(A)'s order deleting the addition under section 68 for A.Y. 2013-2014 on the ground that no incriminating material was found during the search, and affirmed the CIT(A)'s dismissal of the challenge to initiation of penalty proceedings.

Treatment of cash deposits as unexplained money under Section 69A - reopening of assessment under Section 147 and completion under Section 144 - proof by tracing deposits to earlier cash withdrawals and giving benefit of doubt - decision on merits instead of remitting where relevant bank statements are on record - judicial precedent permitting disregard of temporal gap between withdrawal and deposit

Treatment of cash deposits as unexplained money under Section 69A - proof by tracing deposits to earlier cash withdrawals and giving benefit of doubt - judicial precedent permitting disregard of temporal gap between withdrawal and deposit - Addition of Rs.13,00,000 made in Assessment Year 2012-13 treating cash deposits as unexplained money sustained by AO was to be deleted. - HELD THAT: - The Tribunal considered the assessee's claim that the impugned cash deposits were sourced from an earlier large cash withdrawal on 27.07.2011 and noted that relevant bank statements had been placed on record before the CIT(A). The Tribunal observed that although the reason for keeping large cash between withdrawal and later deposits was not explained, the possibility of re-depositing withdrawn cash could not be excluded. Relying on the coordinate Bench decision in ACIT v. Baldev Raj Charla, where a time gap between withdrawal and deposit did not per se defeat the assessee's explanation, the Tribunal gave the assessee the benefit of doubt and held that the AO's addition under Section 69A could not be sustained. The Tribunal also declined to remit the matter to the lower authorities because the material bank statements were already on record and the assessee's widow, who represented the estate, had no further information to advance, making remand unproductive. [Paras 11, 12, 13]

Grounds 3 and 4 allowed; the addition of Rs.13,00,000 for AY 2012-13 deleted.

Treatment of cash deposits as unexplained money under Section 69A - proof by tracing deposits to earlier cash withdrawals and giving benefit of doubt - decision on merits instead of remitting where relevant bank statements are on record - Addition of Rs.8,00,000 made in Assessment Year 2011-12 treating cash deposits as unexplained money sustained by AO was to be deleted. - HELD THAT: - Facts for AY 2011-12 mirrored those in AY 2012-13: a cash withdrawal on 03.08.2010 was followed by a deposit on 13.08.2010. The Tribunal found a direct link between withdrawal and deposit in this year and, applying the same reasoning and precedent relied upon in the lead appeal, held that the assessee's explanation traced the deposit to earlier withdrawal. Consequently, the addition under Section 69A could not be sustained on the record before the Tribunal. [Paras 15]

Grounds 3 and 4 allowed; the addition of Rs.8,00,000 for AY 2011-12 deleted.

Final Conclusion: Both appeals are partly allowed: the additions made by the Assessing Officer under Section 69A in respect of the contested cash deposits for AY 2012-13 and AY 2011-12 are deleted, appeal(s) otherwise dismissed.

Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961 - Requirement of continuity of the Assessing Officer's satisfaction under Section 271(1B) - Furnishing of inaccurate particulars of income versus concealment of income - Penalty invalid where basis of satisfaction is altered by the Assessing Officer

Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961 - Requirement of continuity of the Assessing Officer's satisfaction under Section 271(1B) - Furnishing of inaccurate particulars of income versus concealment of income - Whether the penalty under Section 271(1)(c) could be sustained where the Assessing Officer altered the basis of his satisfaction from 'furnishing of inaccurate particulars of income' to 'concealment of particulars of income'. - HELD THAT: - The Tribunal found that the Assessing Officer's initial satisfaction recorded in the assessment proceedings related to 'furnishing of inaccurate particulars of income' in respect of additions towards estimated share trading income. However, the penalty order was ultimately framed on the distinct premise of 'concealment of particulars of income'. The imposition of penalty under Section 271(1)(c) is dependent on the satisfaction formed under Section 271(1B), and there must be continuity between the satisfaction recorded and the ground on which penalty is imposed. Where the AO substitutes or alters the basis of satisfaction and confirms penalty on a ground different from that for which initial satisfaction was formed, the penal action is unsustainable. The Tribunal relied on precedents holding that penalty cannot be sustained when the nature of default is changed by the AO and the requisite continuity of satisfaction is absent, and therefore set aside the penalty. [Paras 4, 5, 6]

Penalty imposed under Section 271(1)(c) set aside for lack of continuity between the satisfaction recorded under Section 271(1B) and the ground on which penalty was ultimately imposed.

Final Conclusion: The appeal is allowed and the penalty order dated 17.02.2017 imposing penalty under Section 271(1)(c) for A.Y. 2014-15 is cancelled.

Deduction under the head "Income from Other Sources" - expenditure laid out or expended wholly and exclusively for the purpose of making or earning such income - nexus between expenditure and income - section 57(iii) of the Income Tax Act, 1961 - condonation of delay in filing appeal - meritorious cause not to be dismissed on limitation alone

Condonation of delay in filing appeal - meritorious cause not to be dismissed on limitation alone - Delay of 63 days in filing the appeal is condoned. - HELD THAT: - The assessee's appeal was time-barred by 63 days. The assessee filed an application supported by an affidavit explaining prolonged medical treatment for cancer, mental depression, and the need to care for an elderly mother. Applying the guiding principle that a meritorious case should not be thrown out on limitation alone, the Tribunal, on the facts placed before it, found these to be bona fide reasons and exercised its discretion in the interest of justice to condone the delay. [Paras 3]

Delay of 63 days condoned and the appeal admitted for adjudication on merits.

Section 57(iii) of the Income Tax Act, 1961 - deduction under the head "Income from Other Sources" - expenditure laid out or expended wholly and exclusively for the purpose of making or earning such income - nexus between expenditure and income - Disallowance of interest expenses of Rs. 10,87,419/- under section 57(iii) was upheld. - HELD THAT: - Section 57(iii) permits deduction of expenditure under the head "Income from Other Sources" only if the expenditure is laid out or expended wholly and exclusively for the purpose of making or earning that income. The Assessing Officer found, and the CIT(A) and Tribunal agreed, that the assessee's interest payments related to borrowings used for varied purposes (investment in partnership concerns and immovable property) and that the assessed "Income from Other Sources" comprised small amounts of bank interest and refund interest. There was no demonstrated direct nexus showing that the interest expenditure was incurred wholly and exclusively to earn the bank/FDR interest shown as income. The assessee's contention that interest/remuneration from partnership firms constituted taxable income and therefore the disallowance was incorrect was examined; the Tribunal accepted that share of profit is exempt but found no evidence establishing that the interest payments were incurred exclusively to earn the interest income shown under "Other Sources." Consequently, the statutory requirement of "wholly and exclusively" was not satisfied and the deduction could not be allowed. [Paras 5, 6, 7, 9, 10]

The disallowance of interest expenses of Rs. 10,87,419/- under section 57(iii) is confirmed and the appeal is dismissed on merits.

Final Conclusion: The Tribunal condoned the delay of 63 days in filing the appeal and, on merits, upheld the disallowance of interest expenses under section 57(iii) for lack of the required "wholly and exclusively" nexus with the income from other sources; the assessee's appeal is dismissed.

Deduction under section 80P(2)(a)(i) - deduction under section 80P(2)(d) - interest income from surplus funds invested in banks as profits and gains of business attributable to activities of a co-operative credit society - precedential weight of jurisdictional High Court and Tribunal decisions

Deduction under section 80P(2)(a)(i) - deduction under section 80P(2)(d) - interest income from surplus funds invested in banks as profits and gains of business attributable to activities of a co-operative credit society - Whether interest earned by the assessee on fixed deposits with cooperative/nationalised/scheduled banks is eligible for deduction under section 80P(2)(a)(i) (or alternatively under section 80P(2)(d)) of the Income-tax Act. - HELD THAT: - The Tribunal recorded that the assessee is a registered co operative credit society whose primary business is accepting deposits and advancing loans to members and that surplus funds, being the society's own monies, were invested in fixed deposits with cooperative and scheduled banks. Relying on the High Court of Andhra Pradesh & Telangana in Vavveru Co-operative Rural Bank Ltd., which held that interest earned on fixed deposits made out of income derived from activities enumerated in clause (a) of subsection (2) of section 80P qualifies as profits and gains of business attributable to those activities, the Tribunal found Totagars distinguishable where investments represented monies belonging to members and not the society's own funds. The Tribunal also followed the decisions of the jurisdictional ITAT, which held that such interest income qualifies for deduction under section 80P(2)(a)(i) (and could alternatively be covered by clause (d)). In view of the binding precedents of the jurisdictional High Court and the ITAT Pune decisions on the point, the Tribunal concluded that the impugned interest is eligible for deduction under section 80P(2)(a). [Paras 6, 7, 8]

Interest income from the assessee's fixed deposits with cooperative/scheduled/nationalised banks, being derived from the society's own surplus funds linked to its credit business, is eligible for deduction under section 80P(2)(a)(i); appeal allowed.

Final Conclusion: Appeal allowed: the Tribunal, following binding jurisdictional precedents, held that the interest earned on fixed deposits from surplus funds of the co operative credit society is deductible under section 80P(2)(a)(i) for A.Y.2020-21.

Levy of fee under section 234E while processing TDS under section 200A - Prospective applicability of amendment to section 200A(1)(c) - Absence of enabling mechanism to compute late fee at time of processing TDS statements - Applicability of judicial precedents in faceless/identical decisions

Levy of fee under section 234E while processing TDS under section 200A - Prospective applicability of amendment to section 200A(1)(c) - Absence of enabling mechanism to compute late fee at time of processing TDS statements - Late fee under section 234E cannot be levied while processing quarterly TDS returns under section 200A for periods prior to 01.06.2015. - HELD THAT: - The Tribunal followed the view of the Madras High Court in M/s. True Blue Voice India Private Limited that although section 234E was inserted with effect from 01.07.2012 to provide for levy of fee for late furnishing of TDS/TCS statements, there was no mechanism in section 200A to compute or impose that fee at the time of processing TDS statements until section 200A(1)(c) was inserted w.e.f. 01.06.2015. The objects and reasons for the 2015 amendment show it was introduced to enable computation of the fee during processing; in the absence of that enabling provision for the years in question, the authorities had no power to impose section 234E fee while issuing intimations under section 200A. Applying these principles to the facts, and respectfully following the jurisdictional High Court and a coordinate Bench, the Tribunal held that the late fee charged in the intimations for the relevant pre-01.06.2015 periods was without authority and liable to be deleted. [Paras 4, 6]

Late fee charged under section 234E in intimations issued while processing quarterly TDS returns under section 200A for the pre-01.06.2015 periods is invalid; the fee is deleted.

Final Conclusion: All six appeals are allowed; the Assessing Officer is directed to delete the late fee charged under section 234E in the section 200A intimations for the relevant pre-01.06.2015 periods.

Deduction under section 80P(2)(a)(i) for income attributable to business of providing credit to members - deduction under section 80P(2)(d) for interest or dividends derived from investments in other co operative societies - business nexus / attributability of interest income - characterisation of interest income as "income from other sources" versus business income - verification whether payer co operative bank carries banking business under the Banking Regulation Act and holds RBI licence - remand for fresh computation of cost of funds

Deduction under section 80P(2)(a)(i) for income attributable to business of providing credit to members - business nexus / attributability of interest income - characterisation of interest income as "income from other sources" versus business income - Claim of deduction under section 80P(2)(a)(i) on interest earned from investments with banks was not allowable. - HELD THAT: - The Tribunal examined whether interest on investments made by the assessee could be treated as income "attributable" to the business of providing credit to members and therefore eligible for deduction under section 80P(2)(a)(i). The assessee's contention that investments were compulsorily made under state co operative rules and therefore formed part of operational/business funds was considered and rejected on the basis that section 80P(2)(a)(i) permits deduction only for income attributable to the business of banking or providing credit to members. The Tribunal applied the rule of literal construction and relied on the principle that where statutory language is unambiguous it must be given effect. Finding no statutory carve out for compelled investments, and noting that investments in banks were not shown to be part of the carrying on of the principal business, the Tribunal held such interest to be income assessable as income from other sources and not as business income eligible for deduction under section 80P(2)(a)(i). [Paras 11, 12]

Deduction under section 80P(2)(a)(i) on the interest in question is not allowable; interest is to be treated as income from other sources unless shown to be attributable to the principal business of providing credit to members.

Deduction under section 80P(2)(d) for interest or dividends derived from investments in other co operative societies - verification whether payer co operative bank carries banking business under the Banking Regulation Act and holds RBI licence - Claim of deduction under section 80P(2)(d) in respect of interest received from co operative banks was remitted for verification. - HELD THAT: - Section 80P(2)(d) allows deduction for interest/dividends "derived" from investments in other co operative societies. The Tribunal observed that the recent Supreme Court analysis of the distinction between co operative societies and co operative banks requires examination of the payer's character: if the payer co operative bank carries on banking business under the Banking Regulation Act and holds an RBI licence, interest paid by it would not qualify for deduction under section 80P(2)(d). The Tribunal found the record inconclusive as to whether the co operative banks from which interest was received were carrying banking business within the meaning as explained by the Supreme Court and therefore remitted this factual question to the assessing officer for verification. If the AO finds the payer is carrying banking business (RBI licensed), deduction under section 80P(2)(d) should be denied. [Paras 13]

Issue of eligibility under section 80P(2)(d) is remitted to the AO to verify whether the payer co operative banks are carrying banking business under the Banking Regulation Act and hold RBI licence; deduction to be disallowed if such verification is affirmative.

Remand for fresh computation of cost of funds - characterisation of interest income as "income from other sources" versus business income - Computation of net income from investments and allowance of cost of funds was remitted to the AO for fresh determination. - HELD THAT: - The Tribunal noted that the revenue authorities treated the interest as income from other sources and allowed certain expenditure attributable to that income. The assessee produced a computation claiming a different cost of funds (showing a loss from investments), but this had not been examined by the AO. Relying on precedents recognizing that cost of funds may be allowable when properly substantiated, the Tribunal directed the AO to re compute net income from investments after the assessee furnishes details of cost of funds and for the AO to examine those particulars. The Tribunal therefore remitted the quantification issue for fresh consideration. [Paras 14]

Computation of taxable income from investments and allowance of cost of funds is remitted to the AO for fresh examination and recomputation upon production of requisite details by the assessee.

Final Conclusion: The appeal is partly allowed for statistical purposes: the claim under section 80P(2)(a)(i) is rejected by the Tribunal on the ground of non attributability to the business of providing credit; the question of entitlement under section 80P(2)(d) is remitted to the assessing officer for verification whether the payer co operative banks carry banking business under the Banking Regulation Act and hold RBI licence; and the computation of cost of funds and net income from investments is remitted to the AO for fresh determination.

Make available - Fee for Technical Services - Software as a Service (SaaS) / cloud-based services - standard product versus customised software - use of a product embodying technology does not per se make technology available - royalty for use of copyright

Make available - Fee for Technical Services - Software as a Service (SaaS) / cloud-based services - standard product versus customised software - Whether the assessee's receipts from subscription to cloud-based SaaS services satisfy the 'make available' requirement of Article 12(4)(b) of the India-US DTAA and thus constitute Fee for Technical Services taxable in India. - HELD THAT: - The Tribunal examined the nature of services furnished by the assessee - automated cloud-based SaaS delivered to end users, limited implementation assistance at onboarding, and operational user trainings - and applied the India-US DTAA definition of FIS read with the MOU. The MOU and judicial precedents require that to 'make available' technical knowledge or skill must be transmitted so that the recipient is enabled to apply the technology and derive an enduring benefit without recourse to the service provider. Mere provision of automated software, operational trainings, incidental implementation support, or ongoing technical support does not ipso facto transfer enduring technical capability. The Tribunal found the SaaS to be a standard automated facility whose functioning does not result in transfer of proprietary technical know how to the recipients that would enable them to operate or develop the technology independently after the contract; human involvement was limited and ancillary (onboarding/configuration and operational training) and did not convert the receipts into payments that 'make available' technical knowledge, skill or processes within the meaning of Article 12(4)(b). Reliance was placed on the MOU and applicable case law establishing that mere use of a product embodying technology or provision of services involving technical input does not satisfy the 'make available' test unless there is transfer of enduring capability to the recipient.

Receipts from subscription to the cloud based SaaS services do not satisfy the 'make available' requirement and therefore do not constitute Fee for Technical Services taxable in India.

Royalty for use of copyright - Software as a Service (SaaS) / cloud-based services - Whether the receipts fall to be taxed as royalty (payment for use of copyright) under the DTAA or domestic law. - HELD THAT: - The Tribunal considered the characterisation of the receipts as royalty and applied the Supreme Court's reasoning in Engineering Analysis Centre of Excellence Pvt. Ltd. and subsequent authorities: distribution/EULA/SaaS arrangements that do not create an interest or right in the distributor/end user in the copyright do not amount to royalty for use of copyright. The assessee's arrangement granted users access to automated services without transfer of copyright, right to copy, modify or create derivative works, and thus did not create the kind of right that would attract taxation as royalty under the DTAA or section 9(1)(vi) principles. On this basis the Tribunal held the facts to be covered by the cited precedents and analogous decisions.

Receipts from the SaaS subscriptions do not constitute royalty for use of copyright and are not taxable as such in India.

Final Conclusion: The appeal is allowed: subscription receipts for the cloud based SaaS services are neither Fee for Technical Services under Article 12(4)(b) of the India-US DTAA (no 'make available') nor royalty for use of copyright; accordingly, the additions treating such receipts as taxable under those heads are set aside.

Allowability of business loss under section 37 - forfeiture pursuant to agreement and arbitral award - valuation under section 43CA/50C and reference to Valuation Officer - Assessing Officer's duty to refer to Valuation Officer under section 50C(2) - department not entitled to a second inning where AO fails to follow mandatory procedure

Allowability of business loss under section 37 - forfeiture pursuant to agreement and arbitral award - Claim of loss on account of forfeiture of advance treated as business loss and allowable under section 37 - HELD THAT: - The assessee, a real estate developer, entered into an agreement to purchase a hotel and paid advances which were subsequently forfeited pursuant to the contractual forfeiture clause and an arbitral award. The Tribunal noted that the transaction was in the normal course of the assessee's business of real estate and that the forfeiture arose from failure to complete a business contract. The first appellate authority examined the agreement, payment schedule, clause providing for forfeiture on default and the arbitral award directing partial refund, and concluded that the net forfeited sum represented a loss incurred in the ordinary course of the assessee's business. The Assessing Officer's objections-that the assessee had not produced details of a broker, had not made sufficient efforts to raise funds, and that certain submissions were vague-were examined and the Tribunal found no reason to disturb the conclusion of the CIT(A) that the loss was a business loss allowable under the Act. [Paras 8, 11]

Addition disallowing the claimed forfeiture loss is deleted; the loss is allowed as a business loss.

Valuation under section 43CA/50C and reference to Valuation Officer - Assessing Officer's duty to refer to Valuation Officer under section 50C(2) - department not entitled to a second inning where AO fails to follow mandatory procedure - Addition under section 43CA (read with section 50C) based on higher stamp valuation deleted for failure of AO to refer disputed stamp valuation to the Valuation Officer - HELD THAT: - The assessee sold a plot at a price lower than the stamp-duty valuation, but specifically objected to the enhanced stamp valuation (preferential location uplift) before the Assessing Officer and requested reference to the Valuation Officer. The AO adopted the stamp valuation without making the mandatory reference under section 50C(2). The Tribunal, following coordinate decisions, held that when the assessee disputes the value adopted by the stamp authorities and requests a reference, the AO must refer the matter to a Valuation Officer; failure to do so renders the addition unsustainable. The Tribunal also declined to remit the matter back to the AO for curing procedural lapses, observing that allowing the department a second opportunity would amount to a retrial of facts for no fault of the assessee. [Paras 21, 23]

Addition on account of difference between sale consideration and stamp valuation is deleted for failure to refer the valuation to the Valuation Officer.

Final Conclusion: Both grounds of the Revenue appeal are dismissed: the forfeiture loss claimed by the assessee is held to be an allowable business loss, and the addition based on higher stamp valuation is quashed because the Assessing Officer did not refer the disputed valuation to the Valuation Officer as required; appeal dismissed.

Ex parte order - service of notice and notice jurisdiction - principles of natural justice / right to be heard - remand for fresh adjudication - duty to intimate change of address and contact details - estoppel for failure to furnish correct address

Ex parte order - service of notice and notice jurisdiction - principles of natural justice / right to be heard - remand for fresh adjudication - Whether the impugned ex parte appellate order requires interference and whether the appeal should be remanded for fresh adjudication in view of non-service of notices. - HELD THAT: - The Tribunal examined the assessment and appellate records and found that both the Assessing Officer's order (u/s 144) and the CIT(A)'s order were passed ex parte because notices did not effectively reach the assessee. The address and email used in the assessment and in the CIT(A)'s order differed from the addresses/emails furnished in the assessee's appeal papers and subsequently before this Tribunal. In these circumstances the Tribunal applied the principle that nobody should be condemned unheard and that effective service of notice is essential to the jurisdictional fairness of ex parte proceedings. Accordingly, the Tribunal set aside the CIT(A) order and remanded the matter for fresh adjudication on merits, directing the CIT(A) to give the assessee a proper opportunity of hearing, consider explanations and evidence, call for a remand report from the Assessing Officer if necessary, and thereafter pass a speaking order in accordance with law.

CIT(A) order set aside and appeal remanded for fresh hearing and decision on merits with directions to afford opportunity and, if required, obtain a remand report from the Assessing Officer.

Duty to intimate change of address and contact details - estoppel for failure to furnish correct address - Whether the assessee must furnish correct address/contact details and the consequence of failing to do so. - HELD THAT: - The Tribunal recorded that the assessee had changed addresses and email-ids during the proceedings and had not ensured that the Assessing Officer and the CIT(A) were informed of the correct contact particulars. The Tribunal directed the assessee to furnish correct address, email-id and phone number to the Assessing Officer and the CIT(A) and to update the PAN database within 60 days. The Tribunal further directed that if the assessee fails to furnish correct particulars within the period, the CIT(A) may proceed to hear and decide the appeal by serving notice at the address and email recorded in Form 36 before the Tribunal, and in that event the assessee would be estopped from contending that notices were not served at the correct address.

Assessee directed to furnish and update correct contact particulars within 60 days; failure will permit CIT(A) to serve notice at the address in Form 36 and the assessee will be estopped from contesting service.

Final Conclusion: The CIT(A) order is set aside and the appeal is remanded for fresh hearing and decision on merits with directions to afford opportunity, call a remand report if necessary, and to ensure the assessee updates and furnishes correct contact particulars within 60 days; failure to comply will render the assessee estopped from disputing service at the address recorded in Form 36. Appeal treated as allowed for statistical purposes.

Deductibility of delayed employees' contribution under section 36(1)(va) - deductibility of employer's statutory contributions under section 43B - effect of judicial precedent on claim for deduction in respect of delayed employees' contribution - remand for verification of deposit before due date of return

Deductibility of employer's statutory contributions under section 43B - remand for verification of deposit before due date of return - Whether the employer's portion of PF/ESI, alleged to have been deposited before the due date of filing the return, is allowable as deduction. - HELD THAT: - The Tribunal found that the Assessing Officer treated the entire sum as employees' contribution and disallowed it under section 36(1)(va). The assessee contended that the employer's contribution was deposited before the due date for filing the return and is therefore deductible under section 43B read with section 36. The Tribunal did not decide the factual question itself but directed the Assessing Officer to verify the assessee's contention: if the employer's contribution was deposited before the due date for furnishing the return, the AO is to allow the deduction in accordance with the provisions of section 43B read with section 36. [Paras 5]

Remanded to the Assessing Officer for verification; employer's contribution to be allowed if deposited before the due date of filing the return.

Deductibility of delayed employees' contribution under section 36(1)(va) - effect of judicial precedent on claim for deduction in respect of delayed employees' contribution - Whether deduction can be claimed for delayed deposit of employees' contribution to PF/ESI. - HELD THAT: - The assessee did not press the challenge to the disallowance of the employees' contribution in view of the Supreme Court decision in Checkmate Services Pvt. Ltd., which holds that deduction under section 36(1)(va) for delayed deposit of amounts collected as employees' contribution cannot be claimed even if deposited before the due date for filing the return when read with section 43B. Relying on that binding precedent, the Tribunal treated the issue as not pressed and applied the precedent to the facts, resulting in the disallowance standing in respect of the employees' contribution. [Paras 5]

Disallowance in respect of delayed employees' contribution stands in view of the Supreme Court precedent relied upon by the assessee.

Final Conclusion: The appeal is partly allowed for statistical purposes: the matter of employer's contribution is remanded to the Assessing Officer for verification and allowance if deposited before the due date of filing the return; the disallowance relating to delayed employees' contribution is sustained in view of the cited Supreme Court precedent.

Regulation 10(n) of Customs Brokers Licensing Regulations, 2018 - verification of IEC and GSTIN by customs broker - presumption as to genuineness of certified governmental documents - verification of client identity and functioning at declared address by documents, data or information - revocation of customs broker licence - forfeiture of security deposit - imposition of penalty on customs broker

Regulation 10(n) of Customs Brokers Licensing Regulations, 2018 - verification of IEC and GSTIN by customs broker - verification of client identity and functioning at declared address by documents, data or information - presumption as to genuineness of certified governmental documents - Whether the appellant Customs Broker violated Regulation 10(n) of CBLR, 2018 - HELD THAT: - Regulation 10(n) requires the customs broker to verify (a) correctness of IEC, (b) correctness of GSTIN, (c) identity of the client, and (d) functioning of the client at the declared address, using reliable, independent and authentic documents, data or information. The obligation to verify IEC and GSTIN means satisfying oneself that such registrations/certificates were issued by the competent officers and does not extend to re-examining the correctness of the issuing officers' actions. Section 79 presumption supports treating governmental certificates as genuine. Identity and address verification can be discharged by independent, reliable and authentic documents, data or information; physical inspection of premises is not mandated. Where GSTIN/IEC and other authentic documents supporting the address exist and there is no evidence that such documents were forged or obtained by fraud known to the broker, the broker fulfils Regulation 10(n). Applying these principles to the record, the broker had relied on authentic GSTIN/IEC and met the identity and address verification obligations; subsequent non existence of exporters on field verification does not establish a breach by the broker. Therefore the finding of violation of Regulation 10(n) was unsustainable. [Paras 8, 9, 12, 13, 14]

No violation of Regulation 10(n) was proved; the finding of contravention is set aside.

Revocation of customs broker licence - Regulation 14 & 18 read with Regulation 17(7) - Whether the revocation of the appellant's customs broker licence can be sustained - HELD THAT: - Revocation was predicated on the finding that Regulation 10(n) was violated. Since the Tribunal has held that the broker did not fail in discharging the responsibilities under Regulation 10(n), the foundational basis for revocation falls away. Absent a proven contravention, the exercise of revocation cannot be sustained. [Paras 15, 16]

Revocation of the customs broker licence cannot be sustained and is set aside.

Forfeiture of security deposit - remedial consequences for breach of CBLR - Whether the forfeiture of the appellant's security deposit is correct - HELD THAT: - Forfeiture of the security deposit was a consequence of the finding of breach of Regulation 10(n). Given that the breach was not established, there is no legal basis to uphold forfeiture as a punitive or remedial measure in this case. [Paras 15, 16]

Forfeiture of the security deposit is not sustainable and is set aside.

Imposition of penalty on customs broker - penalty under CBLR - Whether the imposition of the penalty of Rs. 50,000 upon the appellant is correct - HELD THAT: - The penalty was imposed because the broker was found to have contravened Regulation 10(n). As the Tribunal has concluded there was no contravention, the basis for imposing the penalty is absent. Consequently, the penalty cannot be sustained. [Paras 15, 16]

The penalty imposed on the appellant is set aside.

Final Conclusion: The impugned order dated 18.06.2021 is quashed; the Tribunal holds that the customs broker did not contravene Regulation 10(n) of CBLR, 2018 and consequently revocation of licence, forfeiture of security deposit and imposition of penalty are set aside and the appeal is allowed with consequential relief.

Confiscation for breach of import policy condition - enhancement of declared value to meet policy threshold - confiscation and redemption under customs law - imposition and mitigation of redemption fine and penalty - bona fide importer's inadvertent non-compliance with DGFT policy - judicial discretion to reduce penalties following precedent

Confiscation for breach of import policy condition - enhancement of declared value to meet policy threshold - Validity of confiscation of imported marble slabs where declared CIF value was below DGFT policy threshold and value was enhanced at importer's request - HELD THAT: - The Tribunal found that the appellants had declared CIF values below the USD 60 per square metre threshold in the DGFT policy and, on being queried, agreed to enhance the value to USD 60 in order to permit clearance. The adjudicating authority thereupon enhanced the value and directed confiscation with option of redemption on payment of a fine and imposition of penalty. The Tribunal rejected the contention that confiscation was unsustainable for want of a market survey, noting that enhancement was effected at the appellants' own request and clearance was permitted subject to adjudication and payment of redemption fine and penalty. The Tribunal therefore did not interfere with the order of confiscation insofar as it flowed from the admitted non-compliance and the subsequent enhancement of value. [Paras 6, 7]

Confiscation and redemption direction upheld as arising from admitted non-compliance and the voluntary enhancement of value; challenge based on absence of market survey dismissed.

Imposition and mitigation of redemption fine and penalty - bona fide importer's inadvertent non-compliance with DGFT policy - judicial discretion to reduce penalties following precedent - Whether the quantum of redemption fine and penalty imposed was justified and whether they should be reduced - HELD THAT: - The Tribunal accepted that the appellants' breach was unintentional and constituted an inadvertent mistake in first-time imports. The Commissioner (Appeals) had already reduced the original amounts. Applying the Tribunal's consistent precedents that, in similar cases of import without valid licence where value is enhanced (often on basis of expert certificate), a redemption fine of 10% and penalty of 5% of the enhanced value meet the ends of justice, the Tribunal concluded that the fines and penalties as fixed below were excessive. Exercising its discretion and following the cited precedential approach, the Tribunal reduced the redemption fine to 10% and the penalty to 5% of the enhanced value in each appeal. [Paras 7, 8]

Quantum of redemption fine and penalty reduced to 10% and 5% respectively of the enhanced value in each appeal.

Final Conclusion: Appeals disposed by upholding confiscation consequential to admitted policy breach and voluntary enhancement of value, but mitigation granted by reducing redemption fine to 10% and penalty to 5% of the enhanced value in each appeal.

Transaction value - rejection of declared transaction value under Rule 12 of the Customs Valuation Rules - acceptance of transaction value under Section 14 read with the Customs Valuation (Determination of Value of Imported Goods) Rules - requirement of coherent valuation methodology and evidentiary corroboration for redetermination - natural justice - right to cross examination of expert witness - confiscation and redemption with fine under the Customs Act

Transaction value - rejection of declared transaction value under Rule 12 of the Customs Valuation Rules - requirement of coherent valuation methodology and evidentiary corroboration for redetermination - natural justice - right to cross examination of expert witness - Validity of re determination of declared transaction value and consequent confiscation/penalty imposed - HELD THAT: - The Tribunal applied Section 14 read with the Customs Valuation Rules and the precedents relied upon by the parties to hold that transaction value must be accepted unless there are substantiated reasons to reject it and the statutory valuation procedure is followed. The authority redetermined value on the basis of a Chartered Engineer's estimate without disclosing any valuation methodology item wise or showing how the engineer arrived at the aggregate figure. Investigative material (emails and statements) did not establish that any amount over and above the invoiced price was paid; statements were retracted and the appellant produced an explanation from the supplier about the invoicing stamp. Further, the appellant was denied an opportunity to cross examine the Chartered Engineer, contrary to principles of natural justice. In these circumstances, the impugned order overturning the declared transaction value, imposing penalty and ordering confiscation (with option of redemption) was unsustainable. The Tribunal, following the ratios in Eicher Tractors Ltd. and Century Metal Recycling Pvt. Ltd., held that mere production of emails or vendor price lists and an engineer's unaired aggregate estimate cannot discharge the burden on the revenue to demonstrate a valid reason to reject the transaction value under Rule 12; absent a transparent valuation methodology and evidentiary corroboration, the re determination was set aside. [Paras 7, 8]

The re determination of the declared transaction value and the consequential confiscation and penalties were set aside and the appeal allowed.

Final Conclusion: The Tribunal set aside the order rejecting the declared transaction value, quashed the confiscation/penalty consequences and allowed the appeal, holding that the statutory valuation procedure, evidentiary corroboration and principles of natural justice were not complied with.

Speaking order - principles of natural justice - transaction value under Customs Valuation Rules - referral to Special Valuation Branch (SVB) - payment under protest - res judicata - remand for fresh speaking order - Section 17(5) of the Customs Act, 1962

Transaction value under Customs Valuation Rules - referral to Special Valuation Branch (SVB) - speaking order - principles of natural justice - remand for fresh speaking order - Enhancement of declared values for SEZ DTA clearances by the Specified Officer and the requirement for a speaking order and compliance with SVB directions. - HELD THAT: - The Tribunal found that the Specified Officer enhanced assessable values for clearances to the DTA Unit without issuing a reasoned speaking order, failed to comply with the practice of referring related party transactions to the SVB for specialised consideration and did not afford the appellant opportunity of hearing. The SVB had earlier accepted the declared import values subject to review if invoicing or contemporaneous prices changed; no reasoned methodology or statutory basis for the 90% loading was communicated and the reassessment relied largely on a worksheet supplied by the appellant. Because the adjudicating authority did not examine evidence or apply the sequential valuation exercise under the Valuation Rules and violated principles of natural justice by not issuing a reasoned speaking order, the Tribunal held that the matter could not be finally decided on the record before it and remanded the entire issue to the Original Authority for issuance of a well reasoned speaking order in terms of Section 14 read with the Customs Valuation Rules, with strict observance of natural justice. [Paras 12, 13, 14, 16, 17]

Remanded to the Original Authority to determine values afresh and to issue a well reasoned speaking order in accordance with law and after observing principles of natural justice.

Payment under protest - Section 17(5) of the Customs Act, 1962 - Whether duties paid by the appellant since 05.10.2016 at enhanced values are to be treated as payments under protest for limitation and refund purposes. - HELD THAT: - The Tribunal accepted the appellant's contemporaneous communications that they paid higher duty only to clear goods and repeatedly requested speaking orders. Given the assessing authority's failure to issue a speaking order despite those representations, the Tribunal treated all payments made at enhanced rates since 05.10.2016 as payments under protest. Consequently, the limitation under Section 27 is not to be applied to bar refund claims arising if duties are found excessive after fresh determination. [Paras 15]

All duty payments made at enhanced rates since 05.10.2016 are to be treated as payments under protest and limitation will not bar consequent refund claims if excess duty is established.

Res judicata - speaking order - Validity of the Commissioner (Appeals)'s rejection of the appellant's appeal on the ground of res judicata. - HELD THAT: - The Tribunal held that the lower appellate authority erred in dismissing the subsequently filed appeal by applying res judicata. The earlier appeal had been dismissed as time barred without examination on merits because no speaking order had been issued earlier; the present appeal relates to distinct clearances and a speaking order that the appellant had repeatedly sought. Since the earlier order was not a decision on merits and the assessing authority had not issued the requisite speaking order, the principle of res judicata could not be validly invoked to bar the present appeal. Accordingly the impugned appellate order was set aside. [Paras 12, 17]

Impugned order rejecting the appeal as barred by res judicata is set aside and the appeal is allowed insofar as remand is ordered.

Final Conclusion: Impugned Order in Appeal dated 22.06.2020 is set aside. The matter is remanded to the Original Authority for passing a reasoned speaking order determining assessable values in accordance with the Customs Act and Valuation Rules after affording the appellant an opportunity of hearing; payments made at enhanced rates since 05.10.2016 are treated as payments under protest for refund/limitation purposes and remand proceedings are directed to be completed within three months.

Personal Insolvency Resolution Process - Personal Guarantor - Co-borrower vs Personal Guarantor distinction - Joint and several liability - Maintainability of Section 95 petition - Report under Section 99 by Resolution Professional - Recommendation for initiation of personal insolvency resolution - Discharge of Resolution Professional - Interim moratorium under Section 96 - Forum shopping

Personal Guarantor - Co-borrower vs Personal Guarantor distinction - Joint and several liability - Maintainability of Section 95 petition - Whether the petition under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 against the respondent is maintainable as she is a 'personal guarantor'. - HELD THAT: - The Tribunal examined the loan agreement, sanction letter, loan application form and related transactional documents. Clause 2.13 of the loan agreement records that where the loan is provided to more than one borrower/co-borrower their liability is joint and several. The record of default and application form describe the respondent as a co-borrower/co-obligant and there is no executed guarantee deed or express description of the respondent as a surety or personal guarantor. On that factual and contractual foundation the Court held the respondent is not a 'personal guarantor' as defined in Section 5(22) of the Code and therefore proceedings under Section 95 are not maintainable against her. [Paras 19]

Application under Section 95(1) is dismissed for non-maintainability as the respondent is not a personal guarantor.

Report under Section 99 by Resolution Professional - Recommendation for initiation of personal insolvency resolution - Discharge of Resolution Professional - Whether the Report and recommendation of the Resolution Professional under Section 99 warranted admission of the Section 95 petition and consequent initiation of personal insolvency resolution process. - HELD THAT: - The Resolution Professional prepared and circulated the Section 99 report and recommended admission after noting communications, registration with information utility and non-response by the debtor within specified timelines. However, the Tribunal found the core premise of the recommendation-namely that the respondent was a personal guarantor-was not borne out by the contractual documents. Consequently the RP's recommendation could not sustain admission of the petition. In view of the dismissal of the petition the RP appointed for the process was discharged from office and the interim moratorium ceased. [Paras 16, 17, 19, 20]

The RP's recommendation did not justify admission; the RP stands discharged and the interim moratorium under Section 96 ends.

Forum shopping - Clean hands doctrine - Whether the conduct of the applicant in pursuing multiple fora affected the propriety of the petition. - HELD THAT: - The Tribunal observed that the applicant had pursued arbitration, proceedings under the Negotiable Instruments Act and insolvency remedies in respect of the same dispute. That multiplicity of actions amounted to forum shopping and indicated that the applicant had not approached the Adjudicating Authority with clean hands. This factor was noted in the reasoning for dismissing the petition and terminating the moratorium. [Paras 19, 20]

Applicant's resort to multiple fora amounted to forum shopping and was noted against it in dismissing the application.

Final Conclusion: The Section 95 petition against the respondent is dismissed as she is not a 'personal guarantor'; the Resolution Professional's recommendation did not warrant admission, the interim moratorium under Section 96 ceases and the RP appointed for the process is discharged; the applicant's resort to multiple fora was noted as forum shopping.

Twin conditions for grant of bail under PMLA - retrospective operation of amended Section 45 PMLA - Section 436A Cr.P.C. - custody threshold - judicial discipline and expeditious trial

Section 436A Cr.P.C. - custody threshold - Invocation of Section 436A Cr.P.C. to seek bail on ground of having undergone one half of maximum sentence - HELD THAT: - The Court recorded that the petitioners had not undergone detention for one half of the maximum period of imprisonment for the alleged offence. Consequently Section 436A Cr.P.C., which permits temporary release on having served half the maximum sentence, could not be invoked. The finding is based on the admitted length of custody and the statutory requirement of Section 436A. [Paras 5]

Section 436A Cr.P.C. cannot be invoked as the petitioners have not undergone detention for one half of the maximum period of imprisonment.

Twin conditions for grant of bail under PMLA - judicial discipline and expeditious trial - Whether the petitioners satisfy the 'twin conditions' under amended Section 45 of the PMLA for grant of bail and whether change in circumstances warrants reconsideration - HELD THAT: - The Court observed that in its earlier order it had held that the twin conditions for grant of bail under Section 45 of the PMLA were not satisfied and that the petitioners did not challenge the subsequent order of this Court dated 16.08.2022 before the Supreme Court. The petitioners failed to demonstrate any change in circumstances since the earlier dismissal. Further, the Supreme Court had directed expeditious trial disposal, and the High Court noted that judicial discipline required refraining from entertaining the bail petitions pending trial. Applying these considerations, the Court concluded that the earlier finding that the twin conditions were not satisfied continues to hold good. [Paras 6, 12, 13]

The petitioners do not satisfy the twin conditions under Section 45 PMLA and no change in circumstances or other grounds justify grant of bail; the petitions are not entertained in view of earlier findings and the Supreme Court's direction for expeditious trial.

Retrospective operation of amended Section 45 PMLA - Whether the amendment to Section 45 of the PMLA operates retrospectively and revives the twin-conditions test - HELD THAT: - The Court rejected the petitioners' contention that the amended Section 45 cannot operate retrospectively. Relying on the Supreme Court's decision in Vijay Madanlal Choudhary, the High Court noted the apex court's statement that anomalies identified earlier were removed and that the Finance (No.2) Act, 2019 clarified that the amendment shall operate retrospectively, thereby reviving the twin conditions. On that basis the High Court held there was no merit in the petitioners' retrospective operation argument. [Paras 7, 8]

The amendment to Section 45 PMLA operates retrospectively as held by the Supreme Court; the petitioners' contention to the contrary is without basis.

Final Conclusion: The Criminal Original Petitions for bail are dismissed: Section 436A Cr.P.C. does not apply; the petitioners do not satisfy the twin conditions under amended Section 45 PMLA and cannot rely on a non-retrospective operation argument; judicial discipline and the Supreme Court's direction for expeditious trial warrant refusal of bail.

Exemption under Mega Exemption Notification No. 25/2012-ST - service tax liability on sale of services - burden of proof to establish exemption - verifiability of documents on remand - reliance on third party information from Income Tax Department

Exemption under Mega Exemption Notification No. 25/2012-ST - burden of proof to establish exemption - service tax liability on sale of services - Whether the appellant proved entitlement to exemption under the Mega Exemption Notification in respect of the disputed receipts of Rs.17,03,136/- for Financial Year 2012-13 - HELD THAT: - The appellant's service tax demand was originally raised on the basis of Income Tax return information showing receipts from 'Sale of Services' for Financial Year 2012 13. While the adjudicating authority dropped demand in respect of receipts of Rs.40,53,932/- after accepting documents, it confirmed service tax demand on the remaining receipts (Rs.17,03,136/-) on the ground that the appellant failed to produce documents showing those receipts related to exempted vehicle hire services under the Mega Exemption Notification. On remand the appellant produced only six bilties, of which photocopies for two could not be correlated with invoices, vehicle registration numbers were missing, lorry owner details (and PAN) did not match the appellant's claim of ownership, and the bilties were not supported by requisite corroborative documents. The Tribunal found that the appellant did not facilitate departmental verification nor produce sufficient admissible evidence to discharge the burden of proof for claiming the exemption. In the absence of requisite and sufficient documents, the claim of exemption for the disputed amount could not be adjudicated in appellant's favour. [Paras 5, 6]

Claim of exemption under the Mega Exemption Notification in respect of the disputed receipts is not established; the demand for service tax on those receipts is upheld.

Verifiability of documents on remand - reliance on third party information from Income Tax Department - Whether the adjudicating authority and the Commissioner (Appeals) correctly proceeded on remand and whether the order confirming the demand suffers from infirmity - HELD THAT: - The Commissioner (Appeals) had remanded the matter to enable verification of documents after the appellant raised the new plea that vehicles owned by it were given on hire. Pursuant to remand, the adjudicating authority directed production of bills, invoices and bilties and passed a fresh speaking order. The Tribunal observed that the appellant failed to produce adequate and verifiable documents despite the remand directions; only limited and deficient documents were filed which could not be correlated or supported. The Tribunal found no infirmity in the approach of the lower authorities in relying upon the Income Tax third party information and in confirming the demand where the appellant did not discharge the evidentiary burden on remand. [Paras 5, 6]

Remand directions were complied with by the department; absence of requisite documents justified upholding the adjudicating authority's order and the Commissioner (Appeals)'s decision.

Final Conclusion: The appellant failed to produce requisite and verifiable documents to establish that the disputed receipts for Financial Year 2012 13 were covered by the Mega Exemption Notification; the service tax demand in respect of those receipts is upheld and the appeal is dismissed.

Levy of service tax under reverse charge - Charging section by insertion of Section 66A - Taxability of services provided from outside India received in India - Applicability of Rule 2(1)(d)(iv) of Service Tax Rules - Intimation under Section 73(3) and its effect - Imposition of penalties under Sections 77 and 78 - Business Auxiliary Services

Charging section by insertion of Section 66A - Levy of service tax under reverse charge - Taxability of services provided from outside India received in India - Applicability of Rule 2(1)(d)(iv) of Service Tax Rules - Service tax on commission paid to foreign commission agents is leviable under reverse charge only from 18.04.2006 and not from 01.01.2005. - HELD THAT: - The Tribunal held that the statutory charging provision for services received from abroad and taxed in India was introduced by insertion of Section 66A w.e.f. 18.04.2006. Although Rule 2(1)(d)(iv) of the Service Tax Rules had been applied earlier, the Finance Act, 2006 (inserting Section 66A) constitutes the charging section under the Act. The Tribunal relied on decisions of the Bombay High Court and the Supreme Court which recognise that taxable services received from abroad are taxed in the hands of Indian recipients only after enactment of Section 66A, and followed the Karnataka High Court decision to the same effect. Applying that legal principle to the facts, the Tribunal held that demand for service tax under reverse charge prior to 18.04.2006 was without authority of law. [Paras 12, 13]

Demand for the period 01.01.2005 to 18.04.2006 is not sustainable; liability to pay under reverse charge arises from 18.04.2006.

Intimation under Section 73(3) and its effect - Imposition of penalties under Sections 77 and 78 - Penalties under Sections 77 and 78 are not tenable in the facts of this case where service tax for the period from 18.04.2006 to 27.12.2008 was discharged and intimated to the Department. - HELD THAT: - The Tribunal noted that the appellants had paid service tax and interest for the period from 18.04.2006 to 27.12.2008 and had informed the proper officer, requesting treatment of the communication as an intimation under Section 73(3). Given the payment and intimation, and having found that reverse-charge liability only arose from 18.04.2006, the Tribunal found invocation of penal provisions under Sections 77 and 78 not tenable in the circumstances of this case. [Paras 13, 14]

Penalties imposed under Sections 77 and 78 are set aside.

Final Conclusion: The appeal is allowed: the demand of service tax under reverse charge is quashed for 01.01.2005 to 18.04.2006, the tax liability is recognised from 18.04.2006 (for which the appellant had discharged tax and interest and intimated the Department), and penalties under Sections 77 and 78 are not sustained; consequential reliefs, if any, to follow as per law.

Business Auxiliary Service - air travel agent service - option to discharge service tax by paying specified percentage of basic fare under Rule 6(7) of the Service Tax Rules - treatment of CRS/GDS commission and airline incentives - levy under Section 73A for amounts collected as service tax - extended period of limitation under proviso to Section 73(1)

Business Auxiliary Service - air travel agent service - treatment of CRS/GDS commission and airline incentives - GDS commission, airline incentives, cancellation charges and similar receipts are taxable under BAS or covered by air travel agent service - HELD THAT: - The Tribunal found that appellants provide services connected with booking of air passage and are not acting as agents procuring services on behalf of CRS/airlines such that a three party relationship required for BAS exists. Passengers approach the travel agent and are unaware of the CRS; the agent does not promote or market the airline/CRS services for the client but promotes its own business by selling tickets. Receipt of commission or incentives does not change the nature of the service rendered. The Larger Bench ruling in Kafila Hospitality & Travels Pvt. Ltd. was held squarely applicable, concluding that target based incentives and CRS commissions are not leviable as BAS. The fact that appellants paid service tax under the Rule 6(7) option for air travel agent service and such payment was accepted by the department also defeats reclassification as BAS. [Paras 6, 7, 8]

The commission, incentives, cancellation charges etc. are not taxable as Business Auxiliary Service and fall within air travel agent service; demand under BAS is not sustainable.

Assistance for visa/passport processing - CBEC clarification on visa facilitation - Amounts received for arranging visa/passport processing and related statutory fees are taxable services under BAS - HELD THAT: - The Tribunal accepted the CBEC Circular (20.04.2011) that assistance provided for processing of visa applications does not fall within the taxable services under the relevant clauses of Section 65(105). The adjudicating authority failed to identify any specific clause of the BAS definition under which such activity could be classified. Where the nature of taxable service was not determined and the show cause notice/order lacked clarity on the category of service, the demand cannot be sustained. [Paras 9]

Charges collected for visa/passport processing and related statutory fees are not exigible to service tax as BAS; demand on this ground cannot survive.

ORC/RAF (over riding commission/retaining refund administrative fees) - Business Auxiliary Service - Whether ORC/RAF retained from customers is taxable as BAS - HELD THAT: - The Tribunal held that ORC/RAF charged from customers represent recovery of overheads or booking costs and form part of the airfare received from the person booking the ticket. There was no specification in the SCNs or impugned order as to which clause of BAS would cover these amounts. The appellants rendered air travel agent services by booking passage; they did not provide a BAS to airlines/CRS in relation to ORC/RAF. The prior dropping of demand for pre 01.07.2012 period and identical circumstances thereafter preclude a different approach for subsequent periods. [Paras 10, 11]

ORC/RAF amounts collected/retained by the appellants are not taxable under Business Auxiliary Service; demand is unsustainable.

Trade margin on resale of tickets purchased from consolidators - Rule 6(7) option - Whether margin earned by purchasing tickets from consolidators and selling at higher price is liable to service tax - HELD THAT: - The Tribunal accepted that where the appellants purchased tickets from consolidators/general sales agents at discounted price and sold them at higher price, the difference constitutes a trade margin from sale purchase activity and is not taxable as service. Where consolidators had paid service tax (having opted under Rule 6(7)), levy of service tax again on the same ticket by the appellants is not permissible. Documentary evidence showed appellants paid service tax on basic fare where applicable, undermining confirmation of demand. [Paras 12, 13]

Trade margin on resale of tickets is not taxable; demands confirmed on this basis are invalid.

Levy under Section 73A for amounts collected as service tax - Whether amounts alleged to have been collected as service tax were retained and liable to be recovered under Section 73A - HELD THAT: - Section 73A applies where amounts collected as service tax are not paid to Government. The Tribunal found that appellants collected applicable service tax from customers and transferred such amounts to airlines through the Billing Settlement Plan (BSP) or deposited them with Government, and had filed ST-3 returns and produced challans. The Department's presumption that amounts paid matched commission/incentives paid by consolidators was unsupported by evidence. Given disclosure in accounts and filings, there was no case of amounts representing service tax being retained by appellants. [Paras 14, 15]

No recovery under Section 73A is warranted; allegation that appellants retained service tax is not supported and demand cannot be sustained.

Extended period of limitation under proviso to Section 73(1) - Whether extended period of limitation (proviso to Section 73(1)) is invocable for the disputed demands - HELD THAT: - The Tribunal accepted appellants' plea that they acted under a bona fide understanding in discharging service tax under Rule 6(7) and that receipts were disclosed in books and annual reports. There was no suppression, fraud, collusion or intent to evade tax. The appellants filed returns and paid tax on basic fare; hence the extended period proviso cannot be invoked. Further, issuance of an earlier SCN dated 22.04.2016 precluded applying the longer period for the subsequent SCN dated 27.11.2018, following the Apex Court authority cited. [Paras 16, 17]

Demands are time barred; extended period of limitation under proviso to Section 73(1) cannot be invoked.

Final Conclusion: The Tribunal set aside the impugned adjudication and allowed the appeal: commission, incentives, cancellation charges, visa facilitation charges, ORC/RAF and trade margins were held not taxable as Business Auxiliary Service or otherwise in the circumstances; no recovery under Section 73A was warranted and the extended limitation period was held inapplicable, with consequential relief as per law.

Construction of Complex Service - composite contract - Works Contract Service - service tax on construction services under Section 65B(44) - retrospective amendment of Rule 2A of Determination of Service Tax Valuation Rules (2017) - Management, Maintenance and Repair Service - quantification of service tax

Construction of Complex Service - composite contract - Works Contract Service - Validity of demand of service tax for the period November 2008 to 30.06.2012 raised under Construction of Complex Service - HELD THAT: - The appellant, a builder/promoter, rendered composite contracts involving supply of goods and rendition of services. Prior to 1.7.2010 the Tribunal's precedent and Board circular prevented liability of promoters; accordingly the appellant is not liable up to 1.7.2010. For the period 1.7.2010 to 30.06.2012 the demand under Construction of Complex Service cannot be sustained because composite contracts fall within the ambit of Works Contract Service for that period. The Tribunal's decision in Real Value Promoters and subsequent follow-up decisions, including the dismissal of the Department's appeal by the Apex Court, squarely apply and lead to setting aside the demand for the entire period up to 30.06.2012. [Paras 5]

Demand of service tax, interest and penalties for November 2008 to 30.06.2012 set aside.

Service tax on construction services under Section 65B(44) - retrospective amendment of Rule 2A of Determination of Service Tax Valuation Rules (2017) - quantification of service tax - Quantification of service tax for the period 1.7.2012 to 31.3.2013 where demand is under Section 65B(44) - HELD THAT: - The Tribunal found that the legal characterization for the period 1.7.2012 to 31.3.2013 falls under Section 65B(44). However, Rule 2A of the Valuation Rules was amended retrospectively w.e.f. 2017 and that amendment affects the method of quantification. In view of the retrospective amendment, the matter of quantification cannot be finally decided by the Tribunal and must be remitted to the adjudicating authority to quantify the service tax for 1.7.2012 to 31.3.2013 applying the amended Rule 2A; the adjudicating authority will also consider the appellant's claim regarding non-collection and the benefit of cum-tax, and the question of penalty is left open for fresh consideration. [Paras 6]

Demand for 1.7.2012 to 31.3.2013 remanded to the adjudicating authority for quantification applying the amended Rule 2A; penalty left open for reconsideration.

Management, Maintenance and Repair Service - Sustainability of demand under Management, Maintenance and Repair Service for the period 2012-13 - HELD THAT: - The appellant did not contest the demand confirmed under MMRS. Having regard to the absence of challenge, the Tribunal sustained the demand along with interest and penalties on this issue. [Paras 7]

Demand, interest and penalties under MMRS upheld for the period 2012-13.

Final Conclusion: The appeal is partly allowed and partly remanded: demands for November 2008 to 30.06.2012 are set aside; the demand for 1.7.2012 to 31.3.2013 is remanded for quantification applying the retrospective amendment to Rule 2A; the demand under MMRS for 2012-13 is upheld.

Composite works contract doctrine - Erection, Commissioning or Installation (ECI) and composite contracts pre-01.06.2007 - Service tax on works contracts - service element computation (33%) - Cenvat credit on input services - Denial of credit without reopening supplier's assessment - Penalty under Rule 15(4) of Cenvat Credit Rules, 2004 read with Section 78 of Finance Act, 1994

Composite works contract doctrine - Erection, Commissioning or Installation (ECI) and composite contracts pre-01.06.2007 - Service tax on works contracts - service element computation (33%) - Liability to service tax for projects executed during October 2005 to March 2007 involving supply of materials and erection/installation. - HELD THAT: - The appellant's project executions for customers involved both supply of materials/equipment and erection, commissioning and installation, constituting composite/works contracts. The appellant taxed only the service element (computed as 33% of contract/invoice value) and paid VAT on the balance. The Tribunal applied the Supreme Court decision on ECI not applying to composite contracts prior to 01.06.2007 and held that the demand for the period October 2005 to March 2007 is covered by that precedent. Consequently, the impugned demand for that period cannot be sustained. [Paras 12]

Demand for the period October 2005 to March 2007 is unsustainable.

Service tax on works contracts - service element computation (33%) - Cenvat credit on input services - Demand for service tax for the period 2007-2008 and 2008-2009 in respect of labour/service of erection and commissioning. - HELD THAT: - The appellant had provided only labour/service of erection and commissioning to APC during 2007-2009, paid service tax on the full invoice value for such labour/service, and ceased the activity thereafter. The appellant informed the authorities by letters and filed ST-3 returns. Absent any contrary finding by the adjudicating authority that the appellant had not discharged service tax liability on such invoices, the Tribunal found the demand for those periods unsustainable. [Paras 13]

Demand for 2007-2008 and 2008-2009 is unsustainable.

Cenvat credit on input services - Denial of credit without reopening supplier's assessment - Penalty under Rule 15(4) of Cenvat Credit Rules, 2004 read with Section 78 of Finance Act, 1994 - Validity of recovery of Cenvat credit and penalty for the period 2006 to 2008 where credit was taken on service tax charged by the service provider (APC). - HELD THAT: - The invoices raised on the appellant by APC charged service tax which was collected and, as admitted in the record, remitted by the appellant to APC. The Tribunal relied on precedents and reasoning that when the supplier/provider's tax liability and collection are not being reopened or disputed before the forum, the recipient who availed Cenvat credit on such input services cannot be denied credit by the jurisdictional authority over the recipient's premises merely by asserting that no service was received. Consequently, the demand for recovery of Cenvat credit for the period 2006 to 2008 is not sustainable. Since the substantive demand under the proviso to Section 73(1) was held unsustainable, the consequential penalty under Rule 15(4) read with Section 78 also cannot be sustained. [Paras 14]

Denial and recovery of Cenvat credit for 2006 to 2008 and the penalty under Rule 15(4)/Section 78 are unsustainable.

Final Conclusion: The appeal is allowed: the departmental demands for (i) October 2005 to March 2007, (ii) 2007-2008 and 2008-2009, and (iii) recovery of Cenvat credit for 2006 to 2008 together with the consequential penalty are set aside, with consequential reliefs as per law.

Service by way of agreeing to refrain from an act or to tolerate an act - agreement as requisite for taxable consideration - distinction between penalty/compensation and consideration for service - pari materia application of GST guidance to Service Tax regime

Service by way of agreeing to refrain from an act or to tolerate an act - agreement as requisite for taxable consideration - distinction between penalty/compensation and consideration for service - Whether amounts recovered by the appellant from employees for premature resignation/shortfall in notice period constitute consideration for a declared service under clause (e) of Section 66E of the Finance Act, 1994 and are liable to service tax. - HELD THAT: - The Tribunal accepted the appellant's contention that there was no separate agreement under which the employer agreed to tolerate the act of employees; amounts recovered on premature quitting operate as penalties or compensation to discourage breach and not as consideration for tolerating an act. The decision relied upon Circular No. 214/1/2023-Service Tax and earlier decisions (including the Tribunal and High Court precedents cited) which hold that notice pay or amounts recovered in lieu of notice do not give rise to rendition of service by the employer and are not consideration for a declared service under clause (e). The Tribunal further noted that the clarificatory guidance in Circular No. 178/10/2022-GST (and the later Circular) is applicable by parity of reasoning to the Service Tax regime because the impugned provisions are identically worded and pari materia, and that factual taxability must be determined on whether there is an agreement to tolerate the act and a flow of consideration specifically for that toleration. Applying these principles to the amounts recovered for the period July 2012 to March 2015, the Tribunal held that such recoveries are not consideration for a service of tolerating an act and therefore do not attract service tax under clause (e) of Section 66E. [Paras 9]

Amounts recovered from employees for premature quitting or failure to serve stipulated notice are not consideration for a declared service under clause (e) of Section 66E and are not taxable as service; appeals allowed with consequential relief.

Final Conclusion: The appeals are allowed; amounts recovered from employees for non compliance with notice period during July 2012 to March 2015 do not constitute consideration for a service under clause (e) of Section 66E of the Finance Act, 1994 and are not liable to service tax, with consequential relief as per law.

Interest on refund of pre-deposit under Section 35FF - inapplicability of Section 11B and Section 11BB to refunds of non-duty deposits - unjust enrichment not applicable to refund of non-duty deposits - entitlement to interest from date of payment till date of refund - rate of interest on refund - 12% per annum as appropriate - property rights under Article 300A in relation to withheld refunds

Inapplicability of Section 11B and Section 11BB to refunds of non-duty deposits - unjust enrichment not applicable to refund of non-duty deposits - property rights under Article 300A in relation to withheld refunds - Denial of interest on the refunded amount on the ground that Sections 11B/11BB apply and that unjust enrichment bars interest is not justified; the appellant is entitled to interest. - HELD THAT: - The Tribunal held that Sections 11B and 11BB of the Central Excise Act do not apply to the amount in question because the refund arises from a revenue deposit/pre-deposit and not from payment of duty. Reliance was placed on Tribunal and Supreme Court precedents which recognise that refunds of amounts other than duty fall outside those provisions and that the concept of unjust enrichment does not operate to deny interest in such cases. Further, the Tribunal observed that withholding of the appellant's money makes the accrued interest part of the property of the appellant under Article 300A and that denial of interest merely because there is no express statutory provision would be unjustified in the circumstances. On these bases the denial of interest was set aside and entitlement to interest was recognised. [Paras 6, 7, 9, 11]

The appellant is entitled to interest on the refunded amount; Sections 11B/11BB are not applicable and unjust enrichment does not bar the grant of interest.

Entitlement to interest from date of payment till date of refund - interest on refund of pre-deposit under Section 35FF - Interest is payable from the date of payment of the initial amount until the date of its refund. - HELD THAT: - Applying the law laid down by the Supreme Court and this Tribunal, the appropriate period for computing interest is from the date when the amount was paid/deposited by the appellant until the date on which the department refunded that amount. The Tribunal relied on precedents (including Sandvik Asia Ltd. and other authorities discussed) which hold that delayed refunds attract interest for the entire period the sums were retained by the Department, and accordingly awarded interest for that period. [Paras 7, 10, 11]

Interest shall be computed from the date of payment/deposit of the amount until the date of refund.

Rate of interest on refund - 12% per annum as appropriate - interest on refund of pre-deposit under Section 35FF - The appropriate rate of interest on the sanctioned refund is 12% per annum. - HELD THAT: - The Tribunal noted various statutory notifications fixing rates under different sections of the Act (rates ranging from 6% to 18%) and examined relevant decisions including Tribunal and High Court authorities as well as the Supreme Court's approach. In light of the existing notifications and judicial precedents (including decisions that confined the rate to 12% for refund cases of this character), the Tribunal concluded that awarding interest at 12% per annum is appropriate for the refund of the pre-deposit in the present case. [Paras 12, 13, 15]

Interest on the sanctioned refund shall be paid at the rate of 12% per annum.

Final Conclusion: The Order-in-Appeal is set aside; appeal allowed. The appellant is entitled to interest on the refunded pre-deposit amount at 12% per annum, to be calculated from the date of deposit/payment until the date of refund.

Classification of goods as parts of railway rolling stock - end-use / sole or principal use test - General Rules for the Interpretation of the First Schedule - Rule 3 preferring the most specific heading - suitability for use test (Note 3 of Section XVII) - benefit of Notification No. 12/2016-CE - penalty under Rule 25/Rule 27 of the Central Excise Rules and Section 11AC

Classification of goods as parts of railway rolling stock - end-use / sole or principal use test - Rule 3 preferring the most specific heading - suitability for use test (Note 3 of Section XVII) - benefit of Notification No. 12/2016-CE - Whether PVC flooring/covering supplied to Indian Railways is classifiable under Chapter 86 as parts of rolling stock and, if so, whether the exemption under Notification No. 12/2016-CE is admissible. - HELD THAT: - The Tribunal applied the interpretive framework of the First Schedule and the Supreme Court's reasoning in Westinghouse Saxby Farmer Ltd., holding that end use is a determinative factor where the Chapter notes and headings require consideration. Note 3 of Section XVII (the "suitability for use" or "sole/principal use" test) must be read alongside the General Rules; parts which are suitable for use solely or principally with articles of Chapter 86 cannot be diverted to a different chapter by invoking exclusions such as Note 2(f). The facts showed that the PVC flooring/covering was supplied to and required by the Railways for use in rolling stock and was not marketable for general use. Earlier tribunal authority applying the same principle (Rail Tech) was followed. Consequently the goods are classifiable under the Chapter 86 tariff entry relied upon and the concessional treatment claimed under Notification No. 12/2016-CE (as applied to Chapter 86 goods) must be upheld.

Classification under Chapter 86 accepted; exemption under Notification No. 12/2016-CE upheld and the revenue demand based on classification under Chapter 39 not sustainable.

Penalty under Rule 25/Rule 27 of the Central Excise Rules and Section 11AC - Whether penalty could be imposed on the assessee for the classification and duty issue. - HELD THAT: - The adjudicating authority had proposed penalties under Rule 27 and Section 11AC but imposed penalty under Rule 25 read with Section 11AC without corresponding allegations in the show cause notice, thereby travelling beyond the SCN. The assessee had communicated to the department that classification under Chapter 86 was made at the insistence of the Railways, and the differential duty had been debited/appropriated under protest and paid before the SCN. There was no material to infer an intent to evade duty. In these circumstances the imposition of penalty was not sustainable.

Penalty not imposable; the penalty imposed is set aside.

Final Conclusion: Appeal allowed: the Tribunal upheld classification of the goods as parts of railway rolling stock and the concessional treatment under Notification No. 12/2016-CE, held the revenue demand unsustainable, and set aside the penalty.

Admissibility of cenvat credit on inputs lying in stock as on 30.06.2017 - cenvat credit on inputs subsequently used in manufacture of goods cleared under GST - cenvat credit on capital goods - deferred availment under Rule 6(4) of the Cenvat Credit Rules, 2004 - effect of rescission of exemption notification on entitlement to cenvat credit

Admissibility of cenvat credit on inputs lying in stock as on 30.06.2017 - cenvat credit on inputs subsequently used in manufacture of goods cleared under GST - effect of rescission of exemption notification on entitlement to cenvat credit - Cenvat credit claimed on inputs lying in stock as on 30.06.2017 and subsequently used in manufacture of goods cleared on payment of GST is admissible. - HELD THAT: - The Tribunal accepted the finding that the inputs for which credit was claimed as lying in stock on 30.06.2017 were not used in the manufacture of goods cleared under Notification No. 30/2004-CE and therefore the proviso to that Notification-disallowing credit where such inputs were used in manufacture of exempted goods-was inapplicable. Since those inputs were utilised in manufacture of goods taxable under GST after the rescission of the exemption, the fundamental basis for denying credit under Rule 6(1) did not exist. The Revenue's contention that mere availing of the exemption notification precluded credit was held to be without merit, and the Commissioner (Appeals)'s allowance of the input credit was sustained (see paras 5, 5.1). [Paras 5]

Input cenvat credit of the respondent was rightly allowed.

Cenvat credit on capital goods - deferred availment under Rule 6(4) of the Cenvat Credit Rules, 2004 - effect of rescission of exemption notification on entitlement to cenvat credit - Cenvat credit on capital goods, though subject to deferred availment for two years under Rule 6(4) while goods were exempt, became admissible to the respondent upon rescission of the exemption and consequent liability of manufactured goods to tax. - HELD THAT: - Rule 6(4) deferred availment of credit on capital goods for two years where such goods were used exclusively in manufacture of exempted goods. The Tribunal observed that the respondent's entitlement to credit had accrued but its availment was deferred while the exemption continued. On rescission of Notification No. 30/2004-CE with effect from 30.06.2017, the restriction ceased to operate and the respondent became entitled to avail the accrued cenvat credit on capital goods, particularly since thereafter the capital goods were used for manufacture of taxable goods under GST. The Tribunal agreed with the Commissioner (Appeals) that the credit was therefore admissible (see paras 5.2-5.3). [Paras 5]

Cenvat credit on capital goods was correctly allowed to the respondent following rescission of the exemption and is admissible.

Final Conclusion: The Tribunal sustained the Commissioner (Appeals) order allowing cenvat credit on both inputs and capital goods; the Revenue's appeal is dismissed and the impugned order is upheld.

Entitlement to interest on refund - payment of interest under Section 13A of the KST Act, 1957 - interest calculable from date of appellate order - reading down of statutory provision - jurisdiction of the Appellate Tribunal to decide vires - no question of law under Section 23(1) of the KST Act, 1957

Entitlement to interest on refund - payment of interest under Section 13A of the KST Act, 1957 - interest calculable from date of appellate order - Whether the petitioner is entitled to interest on the refund and from which date such interest is payable. - HELD THAT: - The Court accepted the premise that the first appellate authority allowed the appeal on 24.03.2012 and a refund voucher was raised subsequently. The statutory scheme provides for payment of interest under Section 13A of the Act and, applying that provision, the petitioner is entitled to interest in terms of Section 13A(b) from the date of the appellate order allowing the claim. The Tribunal and the assessing authorities were correct in treating entitlement to interest as governed by Section 13A and in fixing the starting point in accordance with that provision rather than the date of collection of the amount urged by the petitioner. [Paras 6]

Entitlement to interest is governed by Section 13A of the Act and interest is payable from 24.03.2012, the date of the appellate order allowing the refund.

Reading down of statutory provision - jurisdiction of the Appellate Tribunal to decide vires - Whether the Tribunal could 'read down' Section 13A (i.e., entertain a challenge to its vires) when the petitioner sought interest from the date of collection. - HELD THAT: - The petitioner had sought a judicial reading down of Section 13A to permit interest from the date of collection. The Tribunal correctly observed that such a request amounted to a challenge to the provision's operation and was outside the Tribunal's jurisdiction and the scope of the statutory appeal. Consequently the Tribunal properly declined to entertain a reading-down exercise and confined itself to applying Section 13A as existing. [Paras 6]

Tribunal correctly held that reading down Section 13A was outside its jurisdiction and scope of the appeal.

No question of law under Section 23(1) of the KST Act, 1957 - Whether a question of law arises under Section 23(1) to sustain the revision petition to the High Court against the Tribunal's order. - HELD THAT: - Under Section 23(1) a revision lies to the High Court only if the Tribunal has failed to decide or has erroneously decided a question of law. On the facts, the appellate order had allowed the refund and the issue before the Tribunal concerned the period and manner of payment of interest under the statute. The High Court found no arguable question of law of the kind envisaged by Section 23(1) because the Tribunal applied the statutory provision (Section 13A) and declined to undertake a vires/read-down challenge. Accordingly there is no maintainable question of law for revision. [Paras 6, 7]

No question of law arises under Section 23(1); the revision petition is not maintainable and is rejected.

Final Conclusion: The revision petition is dismissed. The petitioner is entitled to interest in accordance with Section 13A of the KST Act, 1957 from 24.03.2012 (the date of the appellate order allowing refund); the Tribunal rightly declined to read down Section 13A as beyond its jurisdiction, and no question of law under Section 23(1) is made out.

Appeal period - pre-deposit for appeal - Section 78 waiver requirement - treatment of electronic credit ledger debit as pre-deposit - appellate disposal in accordance with law

Appeal period - pre-deposit for appeal - Validity of the impugned Notice dated 23.01.2024 and Endorsement dated 09.02.2024 issued during the subsisting appeal period against the order dated 22.12.2023. - HELD THAT: - The court accepted the undisputed fact that the order in original was passed on 22.12.2023 and that the petitioner is entitled to prefer an appeal within four months (3 + 1) from that date, i.e., on or before 22.04.2024, as contemplated under Section 107 of the KGST Act. The impugned Notice and Endorsement, having been issued within that appeal period, were held to be clearly illegal and arbitrary. The court therefore quashed those communications insofar as they attempted to effect action during the subsisting appeal period and directed procedure for filing the appeal and treatment of the pre-deposit as set out in the order. [Paras 5, 6]

Impugned Notice dated 23.01.2024 and Endorsement dated 09.02.2024 issued within the appeal period are quashed and the petitioner is permitted to file an appeal on or before 22.04.2024.

Section 78 waiver requirement - Whether waiver of the three-month period for filing an appeal under the KGST Act could be invoked without reasons recorded by the proper officer. - HELD THAT: - The court noted that waiver of the three-month period is permissible only under Section 78 of the KGST Act and only if the proper officer records reasons in writing explaining why the period is to be dispensed with and, in particular, why the respondent would not be in a position to recover the amount. The impugned Notice and Endorsement did not contain any such recorded reasons invoking Section 78; on that ground as well they were held to be liable to be quashed. [Paras 6, 7]

Waiver under Section 78 requires reasons recorded in writing; absence of such reasons in the impugned communications renders them invalid.

Treatment of electronic credit ledger debit as pre-deposit - appellate disposal in accordance with law - Relief to be granted pending appeal: whether the 10% amount debited from the electronic credit ledger may be treated as the pre-deposit and whether the Appellate Authority may be restrained from insisting on additional pre-deposit. - HELD THAT: - The court exercised its discretionary relief power to protect the petitioner's appellate rights during the subsisting appeal period. It directed that, if the petitioner files an appeal before 22.04.2024, the 10% amount debited from the electronic credit ledger on 21.02.2024 shall be treated as the 10% pre-deposit for the purpose of the appeal. The Appellate Authority was directed to dispose of the appeal in accordance with law and not to insist upon any additional pre-deposit by the petitioner. [Paras 8]

If an appeal is filed by 22.04.2024, the 10% electronic ledger debit shall be treated as the pre-deposit and the Appellate Authority shall dispose of the appeal in accordance with law without insisting on any further pre-deposit.

Final Conclusion: The petition is allowed: the Notice dated 23.01.2024 and Endorsement dated 09.02.2024 are quashed; the petitioner may file an appeal on or before 22.04.2024; the 10% debited from the electronic credit ledger is to be treated as the pre-deposit for that appeal and the Appellate Authority shall adjudicate the appeal in accordance with law without insisting on any additional pre-deposit.

Interest on nil demand - de novo assessment - binding effect of a Division Bench decision - application of Section 22 of the Assam General Sales Tax Act, 1993 - interest on delayed payment under Section 22(3)

Interest on nil demand - de novo assessment - application of Section 22 of the Assam General Sales Tax Act, 1993 - Whether interest could be levied by the assessing and appellate authorities where, after de novo reassessment pursuant to the Supreme Court's remand, the Division Bench found nil demand for the assessment years - HELD THAT: - The Supreme Court had remitted the matter for de novo assessment to ascertain whether the assessee had collected sales tax from consumers; subsequent de novo assessment found that the company had not collected sales tax and liability was limited to value addition, with the Division Bench later determining that after de novo assessment there was nil demand for the assessment years. The Division Bench held that where earlier assessment orders and demand notices were set aside and, on reassessment, no taxable demand is found, the question of payment of interest for a nil demand does not arise. Section 22(3) provides for levy of interest where turnover stated in returns is found incorrect and demand exceeds returns by more than 10%, but that statutory mechanism cannot be invoked to impose interest when, in the operative reassessment, no tax liability survives. The High Court, applying the principle of consistency and the binding nature of its earlier Division Bench determination (not interfered with by the Apex Court), concluded that the assessing officer and the appellate authority erred in imposing interest in derogation of the Division Bench's determination and that such imposition was unsustainable.

Impugned orders imposing interest set aside; assessment and appellate orders insofar as they impose interest are interfered with.

Final Conclusion: The writ petitions are allowed to the extent stated: the impugned decisions imposing interest are quashed in view of the Division Bench's determination that de novo assessment resulted in nil demand for the assessment years, and the assessing and appellate authorities could not lawfully impose interest contrary to that determination; parties to bear their own costs.

Principles of natural justice - preliminary inquiry conducted ex parte - prematurity of writ petition - relegation for merits hearing - administrative action entailing civil consequences - violation of natural justice renders the action void

Prematurity of writ petition - relegation for merits hearing - Whether the writ petition dismissed as premature ought to be sustained or the matter should be remitted for consideration on merits. - HELD THAT: - The Single Judge had dismissed the writ petition as premature on the ground that only a preliminary inquiry report existed and no adverse order had been passed against the petitioner (record of Single Judge's reasoning reproduced at para.6). On review of the record and submissions, the Division Bench found that the matter required adjudication on merits rather than being summarily non-suited on the stated ground of prematurity. Consequently, the impugned order dated 13.03.2024 dismissing the petition as premature was set aside and the matter was relegated to the learned Single Judge for consideration on merits. [Paras 9]

Impugned order dismissing the writ petition as premature is set aside and the matter is remitted to the Single Judge to be heard on merits.

Principles of natural justice - preliminary inquiry conducted ex parte - administrative action entailing civil consequences - violation of natural justice renders the action void - Whether holding an ex parte preliminary enquiry against a retired employee without giving opportunity of hearing offends the principles of natural justice and whether such action is vitiated. - HELD THAT: - The Court noted that the petitioner had superannuated in 2016 and that the preliminary enquiry was conducted ex parte on 21.12.2023 without affording the petitioner any opportunity to comment. Administrative actions which entail civil consequences attract the requirement of reasonable opportunity to be heard unless excluded by statute. Applying the settled principle that natural justice is to be read into statutory or administrative proceedings affecting civil rights unless expressly excluded, the Division Bench observed that conducting an ex parte preliminary enquiry without giving the retired employee an opportunity would be a violation of the principles of natural justice and such a decision would be void. The Court relied on the established principle summarized from higher authority that reasonable opportunity must be given before an order is made where civil consequences follow (see para.8), and directed that the matter be heard on merits accordingly. [Paras 7, 8]

An ex parte preliminary enquiry held without affording the retired employee an opportunity offends principles of natural justice and would be void; the matter must be heard on merits after affording opportunity.

Final Conclusion: The Special Appeal is partly allowed: the order dismissing the writ petition as premature is set aside and the matter is remitted to the learned Single Judge for consideration on merits, the Division Bench holding that an ex parte preliminary enquiry without affording the retired employee a hearing offends principles of natural justice and would be void.