TaxTMI Updates e-Newsletter
Jul 11,2024

Proceedings under Section 73 of the WBGST/CGST Act - opportunity to respond to a show cause notice - uploading notices and orders on GST portal - due service within the meaning of Section 69(1)(d) - condonation of delay in appeal - pre deposit requirement for filing GST appeal - quashing of attachment

Quashing of attachment - proceedings under Section 73 of the WBGST/CGST Act - Order of attachment dated 21st February 2024 made in pursuance of the adjudication under Section 73(9) quashed - HELD THAT: - The Court noted that the petitioner only became aware of the proceedings when the bank intimated receipt of Form GST DRC 13. Having regard to the peculiar facts, including the manner of upload of the show cause and adjudication order on the portal and the resulting confusion, the Court found that the order of attachment could not be sustained. The Court therefore set aside the attachment without reaching a conclusive determination on whether the upload in the "view additional notices and orders" section constituted valid service under Section 69(1)(d). [Paras 13]

Attachment dated 21st February 2024 quashed

Opportunity to respond to a show cause notice - uploading notices and orders on GST portal - condonation of delay in appeal - pre deposit requirement for filing GST appeal - Petitioner's remedy by appeal and directions for condonation and adjudication by the appellate authority - HELD THAT: - The Court observed that although ordinarily 30 days is appropriate to respond to a show cause notice (referencing Section 73(8) and Rule 142(3) of the CGST Rules), the petitioner had not filed any response. Noting possible confusion arising from the portal's pre redesigned dashboard, the Court declined to decide the legal question of service by upload in the alternate portal section and instead afforded an equitable procedural remedy. The petitioner was permitted to file an appeal within six weeks together with an application for condonation of delay; the appellate authority was directed to hear and dispose of the appeal on merits, condoning the delay and taking into account the petitioner's defence/response, subject to compliance with the statutory pre deposit requirement. [Paras 12]

Petitioner permitted to approach appellate authority within six weeks with application for condonation; appellate authority to hear and decide appeal on merits subject to pre deposit compliance

Final Conclusion: Taking into account the confusion arising from the manner of upload on the GST portal and the petitioner's lack of earlier notice of the proceedings, the High Court quashed the bank attachment and directed that the petitioner be permitted to file an appeal within six weeks with an application for condonation of delay; the appellate authority is to condone the delay and decide the appeal on merits, with the petitioner complying with statutory pre deposit requirements.

Cancellation of GST registration - validity of show cause notice - opportunity of personal hearing - remand for fresh consideration - non-existence at principal place of business - retrospective cancellation of registration - suspension of registration

Cancellation of GST registration - validity of show cause notice - opportunity of personal hearing - The impugned order cancelling the petitioner's GST registration was set aside and the petitioner was granted an opportunity to be heard. - HELD THAT: - The Court found that the sole reason recorded for cancellation was the petitioner's alleged non-response to the show cause notice and that the impugned SCN and the cancellation order proceeded on material supplied by the Anti Evasion Branch. The petitioner had proffered explanations including that the principal place of business was under construction, that an address change application had been made and accepted, and that business activity had previously been recorded at the principal place of business. In view of these circumstances and the admitted need for the petitioner to be heard on the allegations, the Court set aside the cancellation order and directed that the petitioner be permitted to file a response and be afforded a personal hearing. The Court thereby remedied the absence of an effective opportunity to contest the allegations prior to final adverse action. [Paras 16, 18, 19, 20]

Impugned cancellation order set aside; petitioner permitted to file response within ten days and to be afforded a personal hearing on 24.07.2024 at 11.30 AM before the Proper Officer, who shall then take an informed decision.

Remand for fresh consideration - non-existence at principal place of business - retrospective cancellation of registration - The question whether the petitioner's registration ought to be cancelled on the ground of non-existence at its principal place of business was remitted to the Proper Officer for fresh consideration after hearing the petitioner. - HELD THAT: - The Court observed that the allegation of non-existence at the principal place of business was the determinative factual basis for the proposed cancellation, but that material on record showed intervening events (address-change application, earlier inspections, claims of business having been conducted) which warranted fresh adjudication. Rather than adjudicating the merits itself, the Court directed the Proper Officer to consider the allegation afresh after receiving the petitioner's response and documents and after holding a personal hearing, thereby preserving the requirement of an informed decision on merits and addressing any contention of retrospective cancellation. [Paras 17, 18, 19]

Matter remanded to the Proper Officer to decide the allegation of non-existence at the principal place of business on merits after receipt of the petitioner's response and a personal hearing.

Final Conclusion: The cancellation of the petitioner's GST registration was set aside and the matter remitted to the Proper Officer for fresh consideration; the petitioner is permitted to file a response within ten days and to be personally heard on 24.07.2024, after which the Proper Officer shall take an informed decision.

Cancellation of GST registration for non-filing of returns - retrospective cancellation of registration - opportunity of being heard before cancellation - rational basis for retrospective action - consequences of retrospective cancellation on Input Tax Credit

Cancellation of GST registration for non-filing of returns - opportunity of being heard before cancellation - Validity of cancellation of the petitioner's GST registration on ground of non-filing of returns for a continuous period of six months - HELD THAT: - The Court accepted that the petitioner had not filed returns for a continuous period of six months and that the petitioner did not contest the decision to cancel registration on that ground. In view of Section 29(1) and Section 29(2) of the CGST Act, the proper officer is empowered to cancel registration where a person (other than a section 10 taxpayer) has not furnished returns for a continuous period of six months, provided that the person is given an opportunity of being heard. Since the petitioner neither disputed the factual premise nor challenged the cancellation per se, the decision to cancel the GST registration on account of non-filing of returns could not be faulted. [Paras 6, 7]

Cancellation of registration on the ground of non-filing for six continuous months is sustainable; the petitioner did not challenge the validity of cancellation on that ground.

Retrospective cancellation of registration - rational basis for retrospective action - consequences of retrospective cancellation on Input Tax Credit - Lawfulness of cancelling the petitioner's GST registration with retrospective effect from 01.07.2017 - HELD THAT: - Although Section 29(2) permits cancellation from any retrospective date, the Court held that such power cannot be exercised mechanically or whimsically and must be premised on a rational basis. The impugned show cause notice and the cancellation order contained no reasons proposing retrospective cancellation nor any explanation why cancellation should extend to the period during which returns were duly filed. Absent any other consideration justifying retrospective cancellation for periods when the taxpayer had complied with filing obligations, non-filing after a certain date alone did not warrant cancelling registration for earlier periods. The Court noted the adverse ramifications of retrospective cancellation, including potential effects on persons who availed Input Tax Credit, and emphasized that the taxpayer must have a full opportunity to contest any proposal to cancel registration retrospectively. [Paras 8, 9, 10, 11, 12]

Retrospective cancellation was unsupportable on the material before the officer; the operation of the impugned order is confined to cancellation effective from the date of the impugned order.

Final Conclusion: The petition is allowed to the extent that the impugned cancellation order is confined to operate only from the date of the order; the cancellation on the ground of non-filing for six months stands, but retrospective cancellation from 01.07.2017 is set aside for want of reasons and opportunity; authorities remain free to initiate further proceedings and the petitioner may apply for cancellation with an earlier effective date which the proper officer may consider.

Requirement to upload show-cause notice and adjudication order on common portal under Rule 142 - modes of service under Section 169 - substantial compliance - service by registered/speed post - right to statutory appeal - personal hearing - prejudice requirement for vitiation

Requirement to upload show-cause notice and adjudication order on common portal under Rule 142 - modes of service under Section 169 - substantial compliance - prejudice requirement for vitiation - Effect of non-uploading of the show-cause notice on the validity of the adjudication proceedings - HELD THAT: - The Court noted that Rule 142(1) read with Rule 142(5) contemplates uploading the show-cause notice (Form DRC-01) and the adjudication order (Form DRC-07) on the common portal. However, Section 169 provides alternative modes of service, including making the notice available on the common portal and service by registered/speed post. Where the show-cause notice was duly served by speed post, the petitioner filed a reply and availed personal hearing, the Court found this constitutes substantial compliance with the statutory modes of service. In those circumstances mere non-uploading on the portal does not automatically vitiate the proceedings unless prejudice to the assessee is shown. The petitioner did not identify any prejudice caused by non-uploading of the show-cause notice; accordingly the notice and subsequent proceedings were not set aside on that ground. [Paras 9, 10]

Non-uploading of the show-cause notice did not vitiate the proceedings where the notice was served by speed post, the petitioner replied and had a personal hearing, and no prejudice was shown.

Requirement to upload show-cause notice and adjudication order on common portal under Rule 142 - right to statutory appeal - personal hearing - Consequences of non-uploading of the adjudication order and entitlement to pursue statutory appeal - HELD THAT: - The Court recorded the respondents' statement and an e-mail communication that the adjudication order in Form DRC-07 dated 29th December, 2023 was uploaded on the common portal on 20th May, 2024. Observing that without such disclosure the petitioner could not have challenged the order, the Court directed that if the order has not yet been uploaded it must be uploaded within seven days. The Court permitted the petitioner to file an appeal within three months from the date of this judgment or within three months from the date of uploading on the portal, whichever is later, upon depositing the requisite fees. The Court explicitly refrained from adjudicating the merits and left the appellate authority to decide all points including limitation after giving opportunity of personal hearing. [Paras 7, 10, 11, 12]

Respondents to upload the adjudication order within seven days if not already uploaded; petitioner permitted to prefer an appeal within three months from this judgment or from the date of upload, and the appellate authority to decide the appeal on merits (including limitation) after hearing.

Final Conclusion: Writ petition disposed: non-uploading of the show-cause notice did not vitiate proceedings in view of service by speed post, reply and personal hearing; respondents directed to ensure upload of the adjudication order if not done and petitioner granted time-limited right to prefer appeal to be decided on merits by the appellate authority.

Personal hearing notice after consideration of explanation - opportunity of hearing - inspecting officer issuing show cause notice and adjudicating - proper officer - transmission of inspection report to jurisdictional officer as transitional measure - no embargo on Intelligence/Inspecting Officer to adjudicate - statutory appeal under Section 107

Personal hearing notice after consideration of explanation - opportunity of hearing - Validity of assessment orders passed without first applying mind to the explanation and issuing a personal hearing notice only after contemplating an adverse decision - HELD THAT: - The Court noted earlier observations that a personal hearing notice issued prior to receipt and consideration of the taxpayer's explanation does not satisfy the statutory requirement; the authority must first consider the explanation and, if an adverse decision is contemplated, then issue a hearing notice. However, applying the facts of the present petitions, the Court held that the petitioner was not prejudiced merely because an officer from the Intelligence Department passed the impugned orders, particularly where the officer who investigated and the officer who passed the impugned order were different within the same Department. The Court also took into account the departmental Circular which prescribes transitional arrangements for inspections completed and adjudication initiated as on 04.10.2021, permitting inspecting officers to pursue cases already initiated and requiring transmission to jurisdictional officers where adjudication had not been initiated. Having considered the Circular and the precedent relied upon, the Court concluded there was no fatal embargo preventing the Intelligence/inspecting officer from adjudicating in the circumstances of these cases and therefore declined to quash the impugned orders.

Writ petitions challenging the assessment orders were dismissed on merits; the Court found no prejudice to the petitioner from the impugned orders and declined to quash them.

Transmission of inspection report to jurisdictional officer as transitional measure - inspecting officer issuing show cause notice and adjudicating - Effect of Circular No.23/2021 insofar as transitional procedure requires transmission of inspection reports where adjudication had not been initiated - HELD THAT: - The Court extracted Paragraph 14 of the Circular which prescribes that for inspections completed and adjudication initiated as on 04.10.2021, such cases are to be pursued by inspecting officers themselves, whereas inspection reports for inspections completed but where adjudication had not been initiated must be sent to the jurisdictional officer. The Court treated the Circular as clarificatory of administrative procedure but found that, on the facts before it, the impugned orders did not warrant quashing merely because of departmental origin, particularly where prior judicial direction in the earlier round had been observed and the investigating and adjudicating officers were not the same individual.

Circular No.23/2021's transitional prescription acknowledged; no ground to set aside the impugned orders under that Circular in the present petitions.

Statutory appeal under Section 107 - Whether petitioner should be afforded remedy of statutory appeal despite dismissal of writ petitions - HELD THAT: - The Court declined to grant substantive relief by writ but exercised judicial restraint by granting the petitioner liberty to file a statutory appeal before the Appellate Authority within 30 days from receipt of the order, subject to compliance with other requirements of Section 107. The Court directed that any such appeal shall be entertained and disposed of on merits and in accordance with law.

Liberty granted to file statutory appeal within 30 days; Appellate Authority to entertain and decide on merits.

Final Conclusion: Writ petitions dismissed. The Court held that issuing of the impugned assessment orders by officers of the Intelligence/inspecting department did not, on the facts, vitiate the orders; the transitional circular was acknowledged but did not mandate quashing; petitioner granted liberty to file a statutory appeal under Section 107 within 30 days for adjudication on merits.

Show Cause Notice - cancellation of GST registration - requirement of reasons in administrative orders - opportunity to be heard - restoration of registration

Show Cause Notice - requirement of reasons in administrative orders - opportunity to be heard - Impugned show cause notice failed to specify intelligible reasons and was incapable of affording a meaningful opportunity to respond. - HELD THAT: - The show cause notice dated 02.05.2023 alleged cancellation on the ground that registration was obtained by "fraud, wilful misstatement or suppression of facts" but did not disclose the precise nature of the alleged fraud, which statement was a wilful misstatement, or which facts were purportedly suppressed. The object of a show cause notice is to enable the noticee to make an effective response; a notice that merely recites a conclusory allegation without particulars does not meet that standard and is incapable of eliciting a meaningful reply. For these reasons the notice was held to be legally defective. [Paras 9, 10]

The impugned show cause notice of 02.05.2023 is set aside as legally deficient for want of intelligible reasons.

Cancellation of GST registration - requirement of reasons in administrative orders - restoration of registration - Order cancelling GST registration was without reasons and, being founded on the defective show cause notice, was quashed; registration was restored. - HELD THAT: - The cancellation order dated 08.08.2023 merely referred to the show cause notice and stated the effective date of cancellation as 28/01/2019, without setting out any reasons. Because the underlying show cause notice did not specify the allegations, the cancellation order lacked an intelligible basis. The court therefore allowed the petition, set aside the cancellation order, and directed immediate restoration of the petitioner's GST registration. It was clarified that the respondent remains free to issue a fresh show cause notice that clearly sets out reasons if it so chooses. [Paras 11, 12, 13, 14, 16]

Order of cancellation dated 08.08.2023 is quashed; GST registration is restored forthwith, subject to the respondent's right to issue a fresh reasoned show cause notice.

Final Conclusion: The petition succeeds: the show cause notice dated 02.05.2023 and the cancellation order dated 08.08.2023 are set aside for failure to state intelligible reasons; the petitioner's GST registration is restored, with liberty to the revenue to initiate fresh proceedings by issuing a reasoned show cause notice if so advised.

Input Tax Credit - legality of demand under Section 73(9) of the West Bengal/Central Goods and Services Tax Act, 2017 - availability of ITC under Section 16(2)(a) of the GST law - reversal of input tax credit - alternative remedy by statutory appeal - interim stay subject to deposit - GST portal status and suo motu cancellation

GST portal status and suo motu cancellation - Input Tax Credit - Supplementary affidavit containing GST portal printout taken on record and its prima facie significance - HELD THAT: - The petitioners were permitted to file a supplementary affidavit and the Court has taken that affidavit on record. The printout of the GST portal last updated on 19th June, 2024 shows that M/s. Crystolyte Facility Management Pvt. Ltd. was shown as suo motu cancelled with effect from 6th April, 2021 and that GSTR 3B returns had been filed for the tax period 2018-19. The Court records that this prima facie demonstrates compliance by the supplier up to the tax period 2018-19 and therefore is material for consideration in the petition challenging the demand for reversal of ITC. [Paras 3, 4, 5]

The supplementary affidavit and GST portal printout are taken on record and are treated as prima facie evidence of the supplier's compliance up to 2018-19.

Alternative remedy by statutory appeal - Maintainability of the writ petition despite availability of statutory appeal - HELD THAT: - Respondents submitted that an efficacious alternative remedy by way of statutory appeal exists and the writ should not be entertained without its exhaustion. The Court, having regard to the case made out by the petitioners and the material placed on record, held that the writ petition should nevertheless be heard. The Court thus exercised its discretionary judicial review power to entertain the petition at this stage. [Paras 8, 9]

The writ petition is entertained despite the existence of an alternative statutory appeal.

Legality of demand under Section 73(9) of the West Bengal/Central Goods and Services Tax Act, 2017 - interim stay subject to deposit - Grant of interim relief staying the demand under Section 73(9) subject to deposit condition - HELD THAT: - Considering the prima facie case made out by the petitioners challenging the demand raised under Section 73(9), the Court directed a stay of the demand reflected in the impugned order dated 30th March, 2024. The stay was made conditional upon the petitioners depositing 10% of the disputed tax amount with the GST authorities within seven days. The Court further ordered that, upon such deposit, the interim order will continue until the end of July, 2024 or until further order, whichever is earlier. [Paras 9, 10]

Stay of the demand is granted subject to deposit of 10% of the disputed tax within seven days; interim order to continue till end of July, 2024 or further order.

Reversal of input tax credit - availability of ITC under Section 16(2)(a) of the GST law - Prima facie position on exceptional circumstances for reversal of ITC not established - HELD THAT: - Petitioners relied on a Ministry of Finance press release and precedent to submit that there is no automatic reversal of ITC on non payment by the supplier and that reversal is an option only in exceptional situations such as missing dealer or closure of business. On the material placed before it (including the GST portal print showing returns filed for 2018-19), the Court observed that there is no prima facie finding that an exceptional situation exists to justify reversal against the buyer, and noted that respondents had not shown steps taken to recover from the supplier. The Court treated these considerations as part of the prima facie case warranting interim relief. [Paras 4, 6, 9]

On the materials before it, the Court finds a prima facie absence of circumstances justifying reversal of ITC against the petitioner and treats this as part of the basis for interim relief.

Final Conclusion: The Court has taken the supplementary GST portal printout on record, entertained the writ despite an alternative statutory appeal, and granted an interim stay of the demand under Section 73(9) subject to deposit of 10% of the disputed tax within seven days; the interim order shall continue till end of July, 2024 or until further order and the petition is listed for further hearing on 23rd July, 2024.

Abeyance of recovery notices pending adjudicatory proceedings - deposit requirement under Section 112 of the TNGST Act, 2017 - stay of recovery where deposit exceeds twenty percent of disputed tax - requirement to prosecute appeal before the GST Tribunal or file writ within a limited time to maintain stay - non-constitution of the GST Tribunal and interim protection of taxpayers

Abeyance of recovery notices pending adjudicatory proceedings - stay of recovery where deposit exceeds twenty percent of disputed tax - Impugned recovery Notices to recover amounts confirmed in Orders in Original and Orders in Appeal shall be kept in abeyance/stayed where the petitioner has deposited more than twenty percent of the disputed tax. - HELD THAT: - The Court noted that the petitioner had paid in excess of the twenty percent deposit contemplated under Section 112 of the TNGST Act, 2017. In view of that deposit and the absence (as yet) of a functional GST Tribunal, the Court exercised its writ jurisdiction to keep the recovery Notices in abeyance. The order follows the principle that, where adequate interim deposit as statutorily contemplated has been made and appellate remedy is not presently operable, implementation of recovery may be paused to avoid irreparable prejudice to the taxpayer. The Court therefore stayed the impugned Notices pending further proceedings in appeal or writs instituted by the petitioner as directed below. [Paras 6, 7, 10, 11]

Impugned recovery Notices are kept in abeyance/stayed because the petitioner has deposited more than twenty percent of the disputed tax, pending further proceedings.

Requirement to prosecute appeal before the GST Tribunal or file writ within a limited time to maintain stay - non-constitution of the GST Tribunal and interim protection of taxpayers - The abeyance of the recovery Notices is made subject to the condition that the petitioner either files appeals before the GST Tribunal within 30 days of receipt of this order (if the Tribunal is constituted) or alternatively files writ petitions challenging the Orders in Appeal and/or Orders in Original within the same period. - HELD THAT: - Recognising that the GST Tribunal had been notified but was not yet in force, the Court imposed a temporal condition to ensure prosecution of appellate remedies and to provide a clear procedural pathway for maintenance of the interim protection. The petitioner was granted 30 days from receipt of the copy of the order to either institute appeals before the Tribunal (if constituted) or to file writ petitions challenging the orders. Upon institution of such appeals or writ petitions, the impugned recovery Notices shall remain stayed pending further orders in those proceedings. This condition preserves the respondent's enforcement rights while protecting the petitioner from premature recovery where statutory deposit has been made. [Paras 10, 11]

The stay is conditional on the petitioner filing appeals before the GST Tribunal or writ petitions within 30 days; upon such filing the recovery Notices shall remain stayed pending further orders.

Final Conclusion: Writ petitions disposed: recovery Notices dated 24.07.2023 are kept in abeyance/stayed because the petitioner deposited more than twenty percent of the disputed tax; the stay is conditional on filing appeals before the GST Tribunal or alternative writs within 30 days of receipt of this order, failing which appropriate enforcement may follow. No costs.

Condonation of delay - revocation under proviso to Rule 23 of the OGST Rules - acceptance of GSTR-3B (3B) return subject to payment of dues and compliance with formalities - direction to proper officer to open portal for filing GST return

Condonation of delay - revocation under proviso to Rule 23 of the OGST Rules - acceptance of GSTR-3B (3B) return subject to payment of dues and compliance with formalities - direction to proper officer to open portal for filing GST return - Delay in invoking the proviso to Rule 23 of the OGST Rules is condoned and the revocation application is to be considered subject to payment of taxes, interest, late fee, penalty and compliance with formalities; proper officer to open portal to enable filing of GST return. - HELD THAT: - The Standing Counsel on advance notice informed the Court that, if the delay in filing the revocation application is condoned and the petitioner complies with payment of taxes, interest, late fee, penalty and other requirements, the 3B Return Form filed by the petitioner will be accepted by the department. Having recorded that assurance, the Court condoned the delay in invoking the proviso to Rule 23 of the OGST Rules and directed that the petitioner's application for revocation shall be considered in accordance with law provided the petitioner deposits all taxes, interest, late fee, penalty and complies with other formalities. The Court further directed that a copy of the order be produced before the proper officer and, on compliance with the stated conditions, the proper officer shall open the portal to enable the petitioner to file the GST return. [Paras 2, 3, 4]

Delay condoned; revocation application to be considered on payment of dues and compliance; proper officer to open portal for filing of return.

Final Conclusion: Writ petition disposed of by condoning the delay in invoking the proviso to Rule 23 of the OGST Rules and directing consideration of the revocation application and opening of the portal for filing the GST return, subject to payment of taxes, interest, late fee, penalty and compliance with formalities.

Show-cause notice - cancellation of registration - principles of natural justice - speaking order - Standard Operating Procedure - suo-moto revision

Show-cause notice - cancellation of registration - principles of natural justice - speaking order - Standard Operating Procedure - Validity of show-cause notices for cancellation of registration that do not contain detailed reasons and the obligation of respondent authorities to follow natural justice and departmental procedures - HELD THAT: - The petitions challenged issuance of show-cause notices for cancellation of registration which, on perusal, consisted only of a one-line reason and lacked detailed reasons or supporting documents. The Court relied upon its earlier decision in Aggrawal Dyeing & Printing (reported) and the subsequent directions given on 12.01.2024 directing departmental compliance. The respondent authorities have filed affidavits stating that instructions were issued to field formations (15.07.2022), a detailed Standard Operating Procedure was circulated (01.04.2023) requiring that show-cause notices contain full details and annexed documents and that speaking orders be passed after affording opportunity of hearing, and that further administrative steps (video-conference directions, minutes and instructions dated 12.01.2024 and 18.01.2024) were taken to enforce compliance. The authorities have also identified a number of possibly non-compliant cases and proposed initiation of suo-moto revision proceedings. In these circumstances the Court recorded that respondent authorities shall henceforth issue detailed show-cause notices, provide documents relied upon, afford reasonable opportunity of hearing, and pass speaking orders in accordance with the SOP and the principles of natural justice. The Court observed that failure to adhere to these directions may attract costs or departmental action against officers who act contrary to the prescribed procedure. The Court disposed of the petitions at this stage while granting liberty to revive in case of difficulty and expecting the parties to follow the proposed timeline for compliance and disposal of detailed notices.

Petitions disposed of at this stage with directions that respondent authorities shall follow the SOP and principles of natural justice by issuing detailed show-cause notices, providing relied-upon documents, affording opportunity of hearing and passing speaking orders; liberty to revive granted.

Suo-moto revision - Standard Operating Procedure - Obligation of respondent authorities to examine past instances of issuance of cryptic notices and to initiate suo-moto revision where required - HELD THAT: - The respondent-State Tax Officer informed the Court that the authorities have called for details of show-cause notices issued without requisite particulars and of orders passed thereon, and that 16 such cases have come to notice while the overall exercise is ongoing. The authorities have been directed to initiate suo-moto revision proceedings under the Act and to examine and rectify cases not in conformity with the Court's earlier direction and the SOP. The Court recorded the respondents' assurance to implement the SOP across field formations and to follow the timeline proposed for action and filing of affidavits detailing steps taken.

Respondent authorities to verify past instances, initiate suo-moto revision where necessary, and implement the SOP statewide; matter disposed of subject to compliance and liberty to revive.

Final Conclusion: The petitions challenging cryptic show-cause notices were disposed of while directing respondent authorities to comply with the Court's earlier decision and the departmental Standard Operating Procedure by issuing detailed show-cause notices, providing documents relied upon, affording reasonable opportunity of hearing and passing speaking orders; respondents must examine prior non-compliant cases and initiate suo-moto revision where necessary, and the petitions may be revived if difficulties in compliance arise.

Admissibility of input tax credit - applicability of reverse charge mechanism on freight - scope of advance ruling under Section 97(2) - first proviso to Section 98(2) - exclusion of questions pending in other proceedings - sub judice bar

Admissibility of input tax credit - sub judice bar - Claim for input tax credit on building materials used in construction of commercial complex - HELD THAT: - The applicant sought an advance ruling on entitlement to input tax credit for building materials used in construction of a commercial complex to be let on rent. The Authority noted that an identical question is pending before the Hon'ble Supreme Court arising from the decision of the Hon'ble Odisha High Court and that the matter is therefore sub judice. Given that the issue is the subject of ongoing proceedings before a higher forum, this Authority declined to answer the question. The Authority accordingly treated the question as not answerable by it on account of its sub judice status. [Paras 8, 11]

Cannot be answered by this Authority as the issue is sub judice.

Applicability of reverse charge mechanism on freight - first proviso to Section 98(2) - exclusion of questions pending in other proceedings - Applicability of reverse charge on inward freight charged in audit for July 2017-March 2018 - HELD THAT: - The applicant queried applicability of reverse charge on freight inward. The Authority observed that an audit objection for the same freight and hamali charges for the period July 2017-March 2018 had already been raised and proceeded with under Section 73(9) in departmental proceedings. Relying on the first proviso to Section 98(2), which prohibits admission of an application where the question is already pending or decided in any proceedings in the case of the applicant under the Act, the Authority held that the question is inadmissible and therefore cannot be entertained. [Paras 9, 11]

Inadmissible and cannot be answered by this Authority.

Scope of advance ruling under Section 97(2) - Mechanism to set off input and output when multiple businesses operate under the same GSTIN - HELD THAT: - The applicant asked how to set off input and output where more than one business is carried on under the same GST number. The Authority examined the scope of matters eligible for advance ruling under Section 97(2) and noted that the question raised does not fall within the categories enumerated therein. As the subject matter is not covered by Section 97(2), the Authority concluded it has no jurisdiction to answer that question. [Paras 10, 11]

Cannot be answered as it falls beyond the jurisdiction of this Authority under Section 97(2).

Final Conclusion: The Authority partially admitted the application and, for the reasons stated, declined to answer (a) the claim for input tax credit on construction materials because the issue is sub judice, (b) the applicability of reverse charge on freight as inadmissible due to pending departmental proceedings for the same period, and (c) the question on set-off between multiple businesses as beyond the scope of advance ruling under Section 97(2).

Exemption for pure services to local authority under Entry 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - pure services excluding works contract service or other composite supplies involving any goods - local authority - function entrusted under Article 243G of the Constitution - function entrusted under Article 243W of the Constitution

Local authority - exemption for pure services to local authority under Entry 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - Whether Bruhat Bengaluru Mahanagara Palike (BBMP) qualifies as a local authority for the purposes of the exemption entry. - HELD THAT: - The AAR examined the statutory definition of "local authority" and the constitutive statute for BBMP. BBMP is established and governed under the Karnataka Municipal Corporations Act and is described in the enabling statute as the Corporation and its authorities. On that basis the Authority concluded that BBMP falls within the definition of a local authority and therefore the first condition for invoking the Entry 3 exemption (that the recipient be the Central/State/UT or a local authority) is satisfied. [Paras 11]

BBMP is a local authority and the first condition of Entry 3 is satisfied.

Pure services excluding works contract service or other composite supplies involving any goods - function entrusted under Article 243G of the Constitution - function entrusted under Article 243W of the Constitution - exemption for pure services to local authority under Entry 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - Whether the security services provided to BBMP are by way of any activity in relation to a function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W, thereby qualifying for exemption under Entry 3. - HELD THAT: - Entry 3 requires, in addition to the recipient being a local authority, that the services be supplied "by way of any activity in relation to any function entrusted" to Panchayats or Municipalities under Articles 243G/243W and the Eleventh/Twelfth Schedules respectively. The Authority assessed the nature of the security services supplied to BBMP and compared them with the matters listed in the Eleventh and Twelfth Schedules. It found that the security services rendered to BBMP are not provided by way of any activity in relation to a function specifically entrusted under Article 243G or Article 243W. Because the second statutory condition for the Entry 3 exemption is not satisfied, the supply cannot be held exempt under that notification entry. [Paras 11, 12, 13]

Provision of security services to BBMP is not an activity in relation to functions entrusted under Articles 243G/243W and therefore does not qualify for exemption under Entry 3.

Final Conclusion: The Authority ruled that (i) BBMP is a local authority, but (ii) the security services supplied to BBMP do not relate to functions entrusted under Article 243G or Article 243W and accordingly such supplies are not exempt from GST under Entry 3 of Notification No. 12/2017-Central Tax (Rate).

Exemption for pure services provided to the State Government in relation to functions entrusted under Article 243G/243W of the Constitution - pure services excluding works contract service or other composite supplies involving any goods - interpretation of 'activity in relation to any function entrusted' under Article 243G/243W - admissibility of advance ruling under Section 97(2)(e) of the CGST Act, 2017

Exemption for pure services provided to the State Government in relation to functions entrusted under Article 243G/243W of the Constitution - pure services excluding works contract service or other composite supplies involving any goods - Whether rent received from the Department of Social Welfare for use as a Scheduled Tribe boys' hostel is taxable or exempt under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate). - HELD THAT: - The Authority found the application admissible as it concerned determination of liability to pay tax. The ruling applies the two conditions in Entry No. 3 of Notification No. 12/2017 - (i) the supply must be of pure services (not a works contract or composite supply involving goods) to Central/State/Union territory/local authority, and (ii) the service must be by way of any activity in relation to a function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W. The Applicant had let a building to the Department of Social Welfare, Government of Karnataka, for running a Scheduled Tribe boys' hostel. That transaction was held to constitute pure services to the State Government, satisfying the first condition. The activity (running a hostel for Scheduled Tribes) falls within the subject matter of Article 243G as reflected in the Eleventh Schedule entry concerning welfare of weaker sections, in particular Scheduled Tribes, thereby satisfying the second condition. Applying these findings, the Authority concluded that the supply is covered by Entry No. 3 of Notification No. 12/2017 and is therefore exempt from GST. [Paras 4, 10, 11, 12, 13]

The rent received from the Department of Social Welfare for use as a Scheduled Tribe boys' hostel is not taxable; it is exempt under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate).

Final Conclusion: The Authority ruled that the applicant's supply of pure services by way of letting the building to the State Government for running a Scheduled Tribe boys' hostel falls within Entry No. 3 of Notification No. 12/2017 and is exempt from GST; the advance ruling application is accordingly allowed.

Taxable supply - consideration - agreement to tolerate an act or a situation (entry 5(e) of Schedule II) - perquisites provided by employer to employee - services by employee to the employer in the course of or in relation to employment (Schedule III)

Taxable supply - consideration - agreement to tolerate an act or a situation (entry 5(e) of Schedule II) - forfeiture/recovery as penalty - GST is not leviable on recovery of joining bonus and retention bonus from employees who exit before serving the pre-agreed period. - HELD THAT: - The Authority applied the clarification in Circular No. 178/10/2022-GST (paras. 6, 6.1, 7 and 7.5) to hold that amounts recovered by an employer on premature exit are akin to forfeiture/penalty incorporated in the employment contract to deter non-serious candidates, and not consideration for tolerating an act or for entering into an independent contractual obligation. The recoveries arise from terms of the employment contract and do not reflect an independent supply with the necessary nexus between an agreement to do/abstain/tolerate and consideration. Further, such recoveries are ancillary to the employment arrangement and are not separate consideration for a service by the employer; consequently they do not fall within the scope of taxable supply under GST. [Paras 13, 15]

Recovery of joining and retention bonus on premature exit is not taxable under GST.

Taxable supply - consideration - agreement to tolerate an act or a situation (entry 5(e) of Schedule II) - perquisites provided by employer to employee - GST is not leviable on recovery of the one-time work-from-home setup allowance where the employee exits before serving the pre-defined period. - HELD THAT: - The Authority found the one-time WFH allowance to be a perquisite provided under the employment contract and recoverable upon premature exit. Relying on Circular No. 178 (paras. 6-7, 7.5) and the treatment of perquisites under Circular No. 172 (Schedule III explanation), the recovery is a contractual forfeiture/adjustment connected to the employment relationship and not consideration for a separate taxable supply or for tolerating an act. Hence the necessary elements of an independent agreement to tolerate or do an act, with corresponding consideration, are absent and GST does not apply. [Paras 13, 14, 15]

Recovery of the one-time WFH setup allowance on premature exit is not taxable under GST.

Taxable supply - consideration - agreement to tolerate an act or a situation (entry 5(e) of Schedule II) - perquisites provided by employer to employee - GST is not leviable on recovery of amounts paid under the Tuition Assistance Program (TAP) where the employee exits before serving the pre-agreed period. - HELD THAT: - The Authority treated TAP reimbursements as perquisites provided under the employment contract which are recoverable upon premature exit. Applying Circular No. 178 (paras. 6-7, 7.5) and Circular No. 172 on perquisites, the recovery is a contractual penalty/forfeiture aimed at deterring premature exit and not consideration for an independent supply or for tolerating an act. There is no separate agreement providing that the employer will tolerate an act or undertake an obligation in return for consideration; thus GST is not attracted. [Paras 13, 14, 15]

Recovery of TAP payments on premature exit is not taxable under GST.

Final Conclusion: Advance ruling: recoveries made by the applicant from employees on account of (i) joining and retention bonuses, (ii) one-time work-from-home setup allowance, and (iii) Tuition Assistance Program payments, when made because the employee exits before a pre-agreed period, are not subject to GST.

Exempt supply - pure services - local authority - activity in relation to any function entrusted to a Municipality under Article 243W - determination of liability to pay tax

Local authority - Municipality under Article 243W - Whether Bangalore Water Supply & Sewerage Board (BWSSB) qualifies as a 'local authority' or as a 'State Government' for the purpose of the exemption notification. - HELD THAT: - The Authority examined the statutory definitions of 'local authority' in Section 2(69) of the CGST Act and the constitutional definitions of 'Panchayat' and 'Municipality' under Articles 243/243B and 243P/243Q. The members of BWSSB are appointed by the State Government under the BWSSB Act, and it is not constituted as an institution of self-government with members elected by inhabitants of a defined area. BWSSB is also not a Municipal Committee, Zilla Parishad or District Board entrusted with control or management of a municipal or local fund. On these material features, BWSSB does not fall within the definition of 'local authority' and is not the 'State Government'. [Paras 11]

BWSSB is neither a State Government nor a 'local authority' within the meaning of the CGST Act.

Exempt supply - pure services - activity in relation to any function entrusted to a Municipality under Article 243W - Whether the professional services rendered by the applicant for assistance in filing corporate tax returns for BWSSB qualify as an exempt supply under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate) (as amended). - HELD THAT: - The exemption requires (i) the supply to be 'pure services' (not involving supply of goods), (ii) the recipient to be Central/State/Union Territory/local authority or governmental authority, and (iii) the service to be an activity in relation to a function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W. The Authority accepted that the services are 'pure services' and did not involve goods. However, since BWSSB was held not to be a 'local authority' or State Government, the second condition is not satisfied. Further, the services for assistance in filing corporate tax returns were not held to be an activity rendered 'in relation to' any function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W. Because the statutory conditions of the entry are conjunctive, failure to satisfy the recipient criterion and the requirement of relation to entrusted municipal/panchayat functions precludes the exemption. [Paras 10, 11, 12, 13]

The professional services for assistance in filing corporate tax returns provided to BWSSB are not an exempt supply under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate).

Final Conclusion: The advance ruling records that BWSSB does not qualify as a 'local authority' or State Government for the purposes of the exemption, and consequently the professional services for assistance in filing corporate tax returns provided to BWSSB are not exempt under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate).

Treatment of advances as unconfirmed cash credit under section 68 of the Act - verification of identity and genuineness of creditors - relevance of investigative agency inquiries (EOW/CBI) to tax adjudication - disallowance under section 40A(3) of the Act - remand for fresh adjudication and verification

Treatment of advances as unconfirmed cash credit under section 68 of the Act - verification of identity and genuineness of creditors - relevance of investigative agency inquiries (EOW/CBI) to tax adjudication - remand for fresh adjudication and verification - Addition of advances treated as unexplained cash credits under section 68 was remitted for fresh examination and verification by the Assessing Officer. - HELD THAT: - The Tribunal observed that the Assessing Officer had disbelieved the assessee's claim that advances were received from numerous persons and had made additions under section 68. Subsequent material placed by the assessee - correspondence from the Government of Odisha regarding identification and refund of small depositors and the Orissa High Court's order taking cognizance of identification and return of deposits in related proceedings - warranted further verification of the depositors' details in the context of section 68. In view of the ongoing inquiries by EOW/CBI and the Government and High Court materials, the Tribunal concluded that the matter requires re-examination; accordingly, it restored the issue to the file of the Assessing Officer with directions to verify and examine the details of depositors, to give the assessee a reasonable opportunity of being heard, and to call for such evidence/documents from the assessee as may be necessary before adjudicating afresh. [Paras 13, 14]

Issue remitted to the Assessing Officer for fresh adjudication and verification of depositors' identity and genuineness, with opportunity to the assessee to produce evidence.

Final Conclusion: The Tribunal restored the matter relating to advances treated as unexplained cash credits under section 68 to the Assessing Officer for fresh examination and verification in light of Government of Odisha correspondence and the Orissa High Court order; the Assessing Officer is to afford the assessee a reasonable opportunity and call for necessary evidence. Both appeals are disposed of accordingly (allowed for statistical purposes).

Tax deduction at source (TDS) under Section 206C - Definition of "buyer" in Explanation(a) to Section 206C - Explanation(a)(iii) conjunctive requirement - Exclusion of public sector undertakings from the meaning of "buyer" - Right to retail vend distinct from purchase of goods - Statutory fixation of sale price within a prescribed range - Principles of natural justice - requirement of notice and hearing before a prejudicial tax recovery order

Definition of "buyer" in Explanation(a) to Section 206C - Explanation(a)(iii) conjunctive requirement - Right to retail vend distinct from purchase of goods - Statutory fixation of sale price within a prescribed range - Exclusion of public sector undertakings from the meaning of "buyer" - Whether Section 206C applies to Mysore Sales and whether excise contractors who obtained vending rights by auction are "buyers" under Explanation(a) to Section 206C - HELD THAT: - The Court held that excise contractors are only shortlisted by auction for the right to retail vend and do not, by that auction, obtain arrack itself; the procurement of bottled arrack thereafter is from the warehouse on issuance of permits. Explanation(a)(iii) excludes from the definition of "buyer" a person where (i) the goods are not obtained by him by way of auction and (ii) the sale price of such goods to be sold by him is fixed by or under a State Act. The connector "and" is conjunctive, so both conditions must be satisfied. The statutory scheme shows that (i) arrack is not obtained by the contractors by auction (the auction confers retail rights only) and (ii) Rule 4 fixes a statutory range (minimum and maximum) within which the retail sale must take place; a statutorily prescribed range constitutes fixation of sale price under the State rules. Consequently both conditions of Explanation(a)(iii) are met and the excise contractors do not fall within the meaning of "buyer"; Section 206C therefore does not apply to Mysore Sales in respect of the transactions under challenge. The Court relied on statutory scheme of the Excise Act and Rules and prior authority distinguishing a licence/right to carry on trade from a purchase of goods. [Paras 14, 15, 16, 20]

Excise contractors who obtained vending rights by auction are not "buyers" under Explanation(a) to Section 206C and Section 206C is not applicable to Mysore Sales for the stated assessment years.

Tax deduction at source (TDS) under Section 206C - Principles of natural justice - requirement of notice and hearing before a prejudicial tax recovery order - Whether an order under Section 206C(6) can be passed without affording notice and an opportunity of personal hearing - HELD THAT: - Although Section 206C(6) does not expressly prescribe notice or hearing before an order to recover tax payable by a person who failed to collect it, the Court held that an order under that provision has adverse civil consequences and therefore the principles of natural justice must be read into the procedure. The assessing officer must put the person concerned on notice and afford an adequate and reasonable opportunity of hearing, including a personal hearing, before passing a prejudicial order under Section 206C. [Paras 19]

Before passing an order under Section 206C(6) an assessing officer must give notice and afford a reasonable opportunity of hearing, including personal hearing.

Final Conclusion: Civil Appeal allowed. The judgments and orders of the High Court (13.03.2006) and the Single Judge (27.10.2003) are set aside; the orders dated 17.01.2001 passed under Section 206C(6) for assessment years 2000-2001, 1999-2000, 1998-1999, 1997-1998, 1996-1997 and 1995-1996 and the consequential demand notices are quashed; no order as to costs.

Nature of expenditure - Capital expenditure - revenue expenditure - expenditure on development of software - abandonment of project - enduring benefit

HELD THAT:- Ld' senior counsel has brought to our notice the order passed by this Court on [2024 (5) TMI 712 - SC ORDER] In view of the said order, this Special Leave Petition also stands dismissed.

Treatment of exchange rate fluctuation as part of actual cost of imported asset - investment allowance on additional cost arising from foreign exchange fluctuation - modification of actual cost in the year of fluctuation - application of Section 32A to imported assets' cost

Treatment of exchange rate fluctuation as part of actual cost of imported asset - investment allowance on additional cost arising from foreign exchange fluctuation - modification of actual cost in the year of fluctuation - application of Section 32A to imported assets' cost - Increase in loan liability due to foreign exchange fluctuations is part of the actual cost of the ship and investment allowance is admissible in the year in which the fluctuation occurs - HELD THAT: - The Court held that the additional cost resulting from variation in the rate of exchange must be reflected by modifying the actual cost in the year of fluctuation, and that investment allowance can be claimed in that year. The Tribunal's reliance on Khatau Makanji to deny investment allowance was displaced by later authorities which treated the Khatau view as per incuriam. The Division Bench's analysis of the principle that an increase or reduction in liability occurs in the year of fluctuation supports treating the adjusted liability as forming part of the asset's cost for the purpose of investment allowance under the provisions governing plant and machinery acquisitions. Having regard to the provisions of Section 32A and the precedents considered by the Court, the question of law is answered in favour of the assessee and against the Revenue, entitling the assessee to factor in exchange rate fluctuations for the relevant assessment years. [Paras 1, 6, 7, 8]

Appeals allowed; investment allowance for the relevant assessment years to include additional cost attributable to foreign exchange fluctuation.

Final Conclusion: The appeals are disposed of in favour of the assessee; for assessment years 1990-91, 1991-92 and 1992-93 the investment allowance must be computed after including the additional cost arising from foreign exchange fluctuations.

Initiation of proceedings under Section 158BD - Requirement of satisfaction note by assessing officer of the searched person - Jurisdiction to initiate assessment proceedings - Handing over of seized documents and procedural compliance under Section 158BD

Initiation of proceedings under Section 158BD - Requirement of satisfaction note by assessing officer of the searched person - Jurisdiction to initiate assessment proceedings - Validity of initiation of proceedings and assessment under Section 158BD where the satisfaction note was recorded by the assessing officer of the assessee instead of the assessing officer of the searched person. - HELD THAT: - The Court examined the assessment order and the reproduced satisfaction note and found that the satisfaction relied upon was recorded by the assessing officer having jurisdiction over the assessee and not by the assessing officer of the UIC Group where the search was conducted. The summons issuance and inspector's report show that the summons were issued by the assessing officer of the assessee on 6.3.2006 with report dated 10.3.2006; consequently the note in the assessment order is the assessing officer's own note and not a satisfaction recorded by the assessing officer of the searched person. The Tribunal's factual finding that satisfaction was required to be recorded by the assessing officer of the searched person and was not so recorded was affirmed as not perverse. On these facts, initiation of proceedings under Section 158BD by the assessing officer of the assessee was held to be without jurisdiction and unauthorized. The Court also noted support from the Supreme Court authority cited in the judgment. [Paras 7, 9]

Initiation of proceedings under Section 158BD was invalid for want of a satisfaction note recorded by the assessing officer of the searched person; the assessment under Section 158BD is without jurisdiction.

Handing over of seized documents and procedural compliance under Section 158BD - Procedure for enabling another assessing officer to proceed under Section 158BD/158BC - Whether procedural requirements for handing over seized documents by the assessing officer of the searched person were complied with to enable proceedings against the assessee. - HELD THAT: - The Tribunal found, and this Court agreed, that the prescribed procedure under Section 158BD for the assessing officer of the searched person to hand over documents to the assessing officer of the other person was not followed. Documentary evidence did not show any satisfaction recorded by the assessing officer of the searched person nor any handing over of seized documents to enable the assessing officer of the respondent/assessee to proceed. Non-compliance of this procedural mandate reinforced the conclusion that the proceedings were unauthorized. [Paras 8, 9]

Procedural requirements for handing over seized documents were not complied with; therefore the prerequisites for valid proceedings under Section 158BD were absent.

Final Conclusion: The ITAT's order setting aside the assessment founded on proceedings under Section 158BD was upheld. The substantial question of law is answered in favour of the assessee and against the revenue; the appeal is dismissed.

Violation of principles of natural justice - faceless assessment - opportunity of personal hearing/video conferencing - additional show cause notice - duty to afford opportunity before completing assessment - remand for fresh consideration - quashing of assessment order and consequential notices - efficacious alternative remedy

Violation of principles of natural justice - opportunity of personal hearing/video conferencing - duty to afford opportunity before completing assessment - Assessment order dated 21st March, 2024 under Section 143(3) read with Section 144B is vitiated for failure to afford adequate opportunity to respond to an additional show-cause and for denial of personal hearing. - HELD THAT: - The Court found that the petitioner was not afforded adequate opportunity to respond to an additional show-cause notice issued before the scheduled video hearing. Although the SOP of the National Faceless Assessment Centre does not have statutory force, it provides departmental guidance and cannot be ignored; the duty under Section 144B(6)(viii) to afford an opportunity to show cause when proposing variations reinforces the requirement of a fair opportunity. Because the petitioner did not get a meaningful chance to respond to the additional show-cause and claims that the Faceless Assessment Unit did not join the scheduled video hearing, the assessment is vitiated for breach of statutory obligation and principles of natural justice. The Court also held that this defect could not be cured by directing the petitioner to pursue the ordinary appellate remedy since the denial of opportunity prevented the availment of that remedy. [Paras 8, 9, 10]

Assessment order dated 21st March, 2024 set aside for violation of principles of natural justice and statutory duty to afford opportunity.

Additional show cause notice - remand for fresh consideration - Validity of issuance of the additional show-cause notice not finally adjudicated and remanded for fresh consideration after affording the petitioner an opportunity to respond. - HELD THAT: - The Court declined to determine at this stage whether the second/additional show-cause could be validly issued, observing that that question must be considered after the petitioner is permitted to file a contemporaneous response. Accordingly, the matter is remitted to the Faceless Assessment Unit to enable the petitioner to submit its response and for the Unit to hear and decide the scrutiny assessment afresh within a specified timeframe. [Paras 8, 10]

Issue remanded to the Faceless Assessment Unit for consideration after the petitioner files its response; directions issued for portal activation, scheduling of virtual hearing and disposal within the stipulated period.

Quashing of assessment order and consequential notices - efficacious alternative remedy - Notices issued consequential to the impugned assessment order (penalty/notice under the provisions referenced in the order) are quashed. - HELD THAT: - In view of setting aside the assessment order for breach of natural justice and statutory obligation, the Court also quashed the notices issued on the same date under the penal provisions referred to in the order. The Court rejected the contention that the petitioners should be relegated to alternative remedies because the denial of opportunity precluded effective exercise of those remedies. [Paras 11]

Notices dated 21st March, 2024 made consequential to the assessment order stand quashed.

Final Conclusion: The assessment order dated 21st March, 2024 is set aside for failure to afford adequate opportunity; the matter is remitted to the Faceless Assessment Unit to permit submission of response within 15 days, to activate the portal and schedule a virtual hearing, and to dispose of the scrutiny within 10 weeks; consequential penalty/notice dated 21st March, 2024 are quashed; no order as to costs.

Taxability as royalty under Section 9(1)(vi) of the Income-tax Act, 1961 - application of DTAA to the definition of royalty - End User Licence Agreement (EULA) and distribution agreements - obligation to deduct tax at source under section 195 - precedential effect of the Supreme Court ruling in Engineering Analysis Centre of Excellence (P.) Ltd.

Taxability as royalty under Section 9(1)(vi) of the Income-tax Act, 1961 - application of DTAA to the definition of royalty - End User Licence Agreement (EULA) and distribution agreements - obligation to deduct tax at source under section 195 - Payments made by the respondent for obtaining computer software are not taxable in India as 'royalty' under Section 9(1)(vi) and do not attract an obligation to deduct tax at source under section 195. - HELD THAT: - The Court held that the present transactions are factually similar to those considered by the Supreme Court in Engineering Analysis Centre of Excellence (P.) Ltd., where it was determined that amounts paid by resident Indian end-users/distributors to non-resident software manufacturers under EULAs/distribution agreements do not constitute payments of royalty for the use of copyright. Given the existence of applicable DTAAs and the Supreme Court's authoritative interpretation that such agreements do not create an interest or right amounting to use of copyright, the Assessing Officer's characterization was contrary to that binding precedent. Consequently, the sums paid do not give rise to income taxable in India as royalty and there was no obligation on the persons covered by section 195 to deduct TDS. [Paras 11, 12, 14]

Appeals dismissed as the question of law is covered by the Supreme Court's ruling; no TDS liability arises on the software payments.

Final Conclusion: In light of the Supreme Court's decision in Engineering Analysis Centre of Excellence (P.) Ltd., the High Court dismissed the Revenue's appeals, holding that payments for the software in question are not royalties taxable in India and no tax was required to be deducted at source; appeals dismissed, no costs.

Faceless assessment regime - Automated allocation of cases - Jurisdictional competence of Jurisdictional Assessing Officer versus Faceless Authority - Invalidity of notice issued contrary to the Scheme under Section 151A - Quashing of notice under Section 148 and order under Section 148A(d) - No requirement to demonstrate prejudice where authority acts contrary to statute

Faceless assessment regime - Automated allocation of cases - Jurisdictional competence of Jurisdictional Assessing Officer versus Faceless Authority - Quashing of notice under Section 148 and order under Section 148A(d) - Validity of the order dated 10 April 2024 under Section 148A(d) and the consequential notice dated 10 April 2024 under Section 148 issued by the Jurisdictional Assessing Officer. - HELD THAT: - The Court held that the faceless assessment scheme notified under Section 151A creates a mandatory regime of faceless proceedings and automated allocation for issuance of notices under Section 148 and related proceedings under Section 148A. When the Scheme assigns jurisdiction by automated allocation, the Jurisdictional Assessing Officer lacks authority to issue a notice under Section 148 unless the case was randomly allocated to that officer as provided by the Scheme. The Division Bench decision in Hexaware Technologies Ltd. was followed, which held that issuance of a Section 148 notice by the JAO contrary to the Scheme is not in accordance with law and that an act done by an authority contrary to the statute must be quashed without requiring the assessee to prove further prejudice. The Revenue did not dispute that position. For these reasons the impugned order under Section 148A(d) and the consequential notice under Section 148 issued by the JAO were held to be invalid and were quashed and set aside. [Paras 11, 12, 13]

The impugned order under Section 148A(d) and the consequential notice under Section 148 dated 10 April 2024 issued by the Jurisdictional Assessing Officer are quashed and set aside.

Final Conclusion: Writ petition allowed; impugned order and notice dated 10 April 2024 quashed and set aside; no order as to costs.

Objections before the Dispute Resolution Panel under Section 144C(2) - principles of natural justice - remand for fresh consideration - assessment to be completed in accordance with Section 144C

Objections before the Dispute Resolution Panel under Section 144C(2) - principles of natural justice - Whether objections filed only with the Assessing Officer satisfied the requirement of representation under Section 144C(2) and whether the assessment orders could stand without consideration by the Dispute Resolution Panel. - HELD THAT: - The Court held that the petitioners' objections filed solely with the Assessing Officer constituted an incomplete representation for the purposes of Section 144C(2), since objections were required to be filed both before the Dispute Resolution Panel and the Assessing Officer. The assessments were passed without the requisite consideration by the Dispute Resolution Panel, rendering the representation incomplete and engaging concerns of natural justice. In view of this defect, the impugned assessment orders could not be sustained and required quashing and remand for fresh consideration on merits after proper filing before the Dispute Resolution Panel. [Paras 11, 12]

Impugned assessment orders quashed and remitted for fresh decision after petitioners file their objections with the Dispute Resolution Panel.

Remand for fresh consideration - assessment to be completed in accordance with Section 144C - Extent and conditions of the remand and consequences if petitioners fail to comply with the direction to file objections with the Dispute Resolution Panel. - HELD THAT: - The Court directed that the petitioners may file their previously tendered objections with the Dispute Resolution Panel within 15 days from receipt of the order. Subject to such filing, the respondent shall complete the assessment in accordance with Section 144C. The Court also clarified that failure by the petitioners to file objections within the stipulated period would permit the respondent to proceed as if the order had not been passed, leaving the respondent free to act in accordance with law. [Paras 12, 13]

Remand conditioned on petitioners filing objections with the Dispute Resolution Panel within 15 days; assessment to be completed in accordance with Section 144C, and respondent may proceed if petitioners fail to comply.

Principles of natural justice - Whether invocation of the alternate remedy of appeal before the Appellate Commissioner prevented the Court from granting relief in the writ petitions. - HELD THAT: - Although the petitioners had invoked the appellate remedy before the Appellate Commissioner, the learned Senior Counsel for the petitioners recorded an intention to withdraw those appeals. The Court recorded that withdrawal and proceeded to allow the writ petitions on the stated ground of incomplete representation and breach of natural justice, thereby exercising its discretionary writ jurisdiction to secure a fresh adjudication consistent with statutory procedure. [Paras 5, 14, 15]

The petitioners' recorded withdrawal of appeals was noted and the writ petitions were allowed; the Court exercised its discretion to remit the matters for fresh consideration.

Final Conclusion: Writ petitions allowed: impugned assessment orders for AY 2019-20 and AY 2020-21 quashed and remitted for fresh adjudication in accordance with Section 144C after the petitioners file their objections with the Dispute Resolution Panel within 15 days; failure to comply permits the respondent to proceed as if this order had not been passed; withdrawal of appeals before the Appellate Commissioner recorded.

Power to condone delay/sufficient cause in appeals - principles governing condonation of delay and limitation - preference for substantial justice over technical forfeiture - discretionary power to admit delayed appeal - natural justice in appellate admission proceedings

Power to condone delay/sufficient cause in appeals - principles governing condonation of delay and limitation - discretionary power to admit delayed appeal - Delay of 11 days in filing the statutory appeal to the Commissioner (Appeals) was to be condoned. - HELD THAT: - The petitioner explained the delay as due to non availability of its legal consultant. Applying the established principles for condonation of delay set out in the judgment (including the need to prefer substantial justice over technical forfeiture, that every day's delay need not be approached pedantically, and that courts exercise a discretionary but justice oriented approach), the Court found the reason sufficient. The Court observed that filing tax appeals often requires legal/technical assistance and that non availability of such assistance can constitute sufficient cause. The appellate authority's reliance on precedents and its strict refusal to condone the delay were held to be a misapplication of these principles. [Paras 8, 10, 11]

Delay of 11 days is condoned and the refusal to admit the appeal is set aside.

Natural justice in appellate admission proceedings - discretionary power to admit delayed appeal - The appeal, having been admitted by condonation of delay, was to be considered on merits and recovery stayed until disposal. - HELD THAT: - Having set aside the impugned order refusing condonation, the Court directed that the Commissioner (Appeals) admit and decide the appeal on merits. The Court required the appellate authority to afford the petitioner an opportunity of hearing and to decide the appeal within two months from receipt of the judgment. Pending disposal of the appeal, no recovery pursuant to the assessment order shall be taken. This remedial direction flows from the conclusion that dismissal in limine on technical grounds (without proper application of condonation principles) would violate the cause of substantial justice. [Paras 11, 12]

The appeal is to be admitted and decided on merits within two months after hearing the petitioner; recovery under the assessment order is stayed until disposal.

Final Conclusion: The order refusing condonation of delay is set aside; the 11 day delay is condoned, the appeal is to be admitted and decided on merits within two months after hearing the petitioner, and recovery under the assessment order is stayed pending disposal.

Reopening of assessment - Notice under Section 148 of the Income Tax Act - Reason to believe - Escapement of income - Application of mind - Reversal trades / manipulative trading - Project Falcon / Insight Portal information - Sanction under Section 151 of the Income Tax Act

Reopening of assessment - Reason to believe - Escapement of income - Impugned notice under Section 148 could not be sustained for want of any material showing escapement of income. - HELD THAT: - The Assessing Officer recorded that the assessee had both losses and profits of equal amount arising from two unique derivative contracts and, relying on Project Falcon/Insight Portal data and characteristics of reversal trades, concluded that non-genuine losses and profits amounting to the aggregate figure had resulted in escapement. The Court found that the reasons do not disclose any income that has escaped assessment because the assessed effect of the transactions is nil (loss and profit of equal amount) and there is no linkage in the reasons between the assessee's matching loss-profit trades and the SEBI/ Apex Court observations relied upon. Mere reference to SEBI characteristics and the Apex Court without establishing how those characteristics apply to the assessee's transactions does not furnish a prima facie belief of escapement. Consequently, the recorded reasons do not constitute a valid reason to believe necessary to exercise jurisdiction to reopen the assessment for the year under consideration. [Paras 11, 13, 14, 15]

Notice under Section 148 quashed for failing to show escapement of income.

Application of mind - Reversal trades / manipulative trading - Project Falcon / Insight Portal information - Reasons recorded were insufficiently specific and amounted to a mechanical reference to investigative material without necessary correlation, hence there was no proper application of mind to justify reopening. - HELD THAT: - The reasons set out the general characteristics of manipulative reversal trades as observed in SEBI orders and stated that the assessee had identical buy and sell quantities and recorded profits and losses in two contracts. However, the reasons lack particulars such as dates, quantities, and a clear explanation connecting the assessee's transactions to the identified manipulative pattern; they do not explain how identical loss and profit entries translate into escaped taxable income. The absence of such specific correlation renders the reasons vague and non specific, demonstrating that the Assessing Officer did not form the requisite independent, substantive belief based on application of mind. [Paras 4, 11, 13]

Recorded reasons do not show application of mind and are insufficient to sustain reopening.

Sanction under Section 151 of the Income Tax Act - Notice under Section 148 of the Income Tax Act - Contention that requisite sanction under Section 151 was not obtained was rejected on examination of the record. - HELD THAT: - The Court examined the petition record and found that sanction/approval under Section 151 had been placed on the record (page 18 of the petition). Therefore, the challenge to reopening on the ground of absence of sanction was not tenable in law and was not a basis for quashing the notice. The Court nevertheless quashed the notice for lack of material showing escapement of income as recorded in other reasons. [Paras 12]

Sanction under Section 151 was present; challenge on that ground dismissed.

Final Conclusion: The petition succeeds. The notice dated 31st March 2021 issued under Section 148 for Assessment Year 2015-16 is quashed and set aside because the recorded reasons do not establish a prima facie escapement of income or show the requisite application of mind, although the challenge to absence of sanction under Section 151 was rejected.

Reading down of retrospective amendment - vested right to approach the Settlement Commission - pending application for settlement - administrative circular under section 119(2)(b) - eligibility to file settlement application as on a cut-off date - interim board for settlement - remit and fresh consideration

Reading down of retrospective amendment - vested right to approach the Settlement Commission - eligibility to file settlement application as on a cut-off date - Validity and proper interpretation of Section 245C(5) as amended by the Finance Act, 2021 and the cut-off date for eligibility to file settlement applications - HELD THAT: - The Court adopted the reasoning in Jain Metal Rolling Mills (Madras) and held that the retrospective proviso in Section 245C(5) (which prima facie fixed 01.02.2021 as the cut-off) cannot be applied so as to deprive assessees of a vested statutory right to file applications while the Settlement Commission was still operative up to 31.03.2021. The Finance Act, 2021 having received presidential assent and been notified with effect from 01.04.2021, the Finance Bill prior to that date did not have the force of law and could not extinguish the right to apply which had accrued in the interregnum. Applying principles limiting statutory fictions and retrospective operation, the Court read down Section 245C(5) by substituting 31.03.2021 for the retrospective date of 01.02.2021 so as to preserve the right to file applications in cases where the 'case' (as defined in Section 245A(b)) arose between 01.02.2021 and 31.03.2021. The Court further held that an administrative circular issued under Section 119(2)(b) cannot impose a new burden inconsistent with the statute, and the eligibility condition in paragraph 4(i) of the CBDT circular must likewise be read as 31.03.2021. [Paras 22, 23, 24, 25, 26]

Section 245C(5) (as amended by the Finance Act, 2021) is read down by treating the last date for filing as 31.03.2021 (instead of 01.02.2021); paragraph 4(i) of the CBDT circular dated 28.09.2021 is to be read accordingly.

Pending application for settlement - interim board for settlement - remit and fresh consideration - Consequential treatment of applications filed between 01.02.2021 and 31.03.2021 and the fate of impugned orders of the Interim Board - HELD THAT: - Applying the above reading down, the Court held that applications filed by the petitioners in respect of cases arising between 01.02.2021 and 31.03.2021 are to be deemed 'pending applications' for purposes of consideration by the Interim Board. Orders of the Interim Board which had held such applications invalid for want of eligibility as on 31.01.2021 (or which treated notices issued after 31.01.2021 as rendering the application ineligible) were found unsustainable and were set aside. The matters and any consequential actions by assessing officers were remitted to the Interim Board to decide the applications on merits and in accordance with law and any scheme to be framed by the Central Government. [Paras 26, 27]

Applications filed by the petitioners in respect of cases arising between 01.02.2021 and 31.03.2021 are deemed pending for consideration by the Interim Board; impugned orders holding them invalid are quashed and the matters remitted to the Interim Board for fresh adjudication on merits.

Final Conclusion: Writ petitions allowed to the extent that Section 245C(5) is read down so that 31.03.2021 is the operative cut-off for filing settlement applications; applications filed between 01.02.2021 and 31.03.2021 are deemed pending and the Interim Board's orders rejecting eligibility are set aside and remitted for fresh consideration. No costs.

Rectification under section 154 of the Income Tax Act - claim of exemption under section 11/12 of the Income Tax Act - validity of registration under section 12A pending grant of registration under section 12AB - processing of return under section 143(1) of the Income Tax Act

Rectification under section 154 of the Income Tax Act - validity of registration under section 12A pending grant of registration under section 12AB - claim of exemption under section 11/12 of the Income Tax Act - processing of return under section 143(1) of the Income Tax Act - Whether the rectification petition should be reconsidered in light of the assessee's earlier 12A registration remaining valid for AY 2021-22 until fresh registration under 12AB was granted, and whether the matter requires remand for fresh consideration by the CIT(A). - HELD THAT: - The Tribunal observed that the assessee filed the return for AY 2021-22 claiming exemption under section 11/12 and disclosed the earlier registration under section 12A. A fresh registration under section 12AB was applied for on Form 10A and granted by Form 10C on 05.04.2022 effective from AY 2022-23. The Assessing Officer, while processing the return under section 143(1), denied the exemption on the ground that the new 12AB registration details were not furnished in the original return, and the CPC rejected the assessee's rectification request under section 154 for the same reason. The CIT(A) dismissed the appeal without examining whether the earlier 12A registration remained valid for AY 2021-22 until the fresh 12AB registration took effect. The Tribunal found that the question of continuity/validity of the old registration until grant of new registration was not considered by the authorities and that this factual and legal aspect requires fresh consideration after affording the assessee a reasonable opportunity of hearing. Consequently, the Tribunal directed the CIT(A) to re-examine the issue afresh, indicating that the matter was not finally adjudicated on merits below. [Paras 6, 7, 8]

The matter is remitted to the CIT(A) for fresh examination after granting the assessee a reasonable opportunity of hearing; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal remanded the issue to the CIT(A) to re-examine the rectification and exemption claim in light of the assessee's prior 12A registration (valid for AY 2021-22 until fresh 12AB registration), directing fresh consideration after affording an opportunity of hearing; the appeal is allowed for statistical purposes.

Deduction under section 54F of the Income tax Act (investment in new residential house) - Allotment and payment constituting acquisition for the purpose of section 54F - Aggregation of multiple flats as one residential unit for tax relief - Transfer as extinguishment of right - agreement/allotment creating right in personam

Deduction under section 54F of the Income tax Act (investment in new residential house) - Allotment and payment constituting acquisition for the purpose of section 54F - Aggregation of multiple flats as one residential unit for tax relief - Transfer as extinguishment of right - agreement/allotment creating right in personam - Allowability of deduction under section 54F where sale proceeds were invested in four flats which were allotted and paid for in 2015 but registered in 2019, and whether four flats could be treated as a single residential unit for the purpose of section 54F. - HELD THAT: - The Tribunal found as a fact that the entire sale consideration was paid to the builder within the prescribed period (payments between 04.02.2015 and 02.03.2015) and that the builder allotted the four flats to the assessee in 2015 (allotment letter dated 05.01.2015). The court applied the principle that an allotment coupled with payment creates a contractual/right in personam which, for the purposes of timing under section 54F, amounts to acquisition even if physical possession or registration occurred later. Reliance was placed on the reasoning in Sanjeev Lal (para 21) that rights created by an agreement/allotment, which extinguish the transferor's unrestricted right to deal with the asset, are sufficient to treat the transaction as transfer/acquisition for tax purposes. Further, the Tribunal accepted the factual matrix that the four flats were treated by both builder and assessee as a single consolidated residential unit (single allotment letter showing consolidated area, single sale deed treating them as one unit, same floor and used as a single residential unit). On these findings the Tribunal concluded that the four identifications represented one residential unit and therefore the entire investment in those flats qualifies for deduction under section 54F despite registration occurring in 2019. [Paras 6, 7]

Deduction under section 54F allowed: the allotment and payment in 2015 constituted acquisition within the prescribed period and the four flats constitute one residential unit for the purpose of section 54F.

Final Conclusion: Appeal allowed; direction to the Assessing Officer to allow deduction under section 54F for the investment in the four flats treated as a single residential unit, the allotment and timely payments in 2015 being decisive despite later registration.

Proviso to section 50C(1) retrospective/curative effect - date of agreement for sale versus date of registration - stamp duty value for computation of full value of consideration under section 50C - adoption of circle rate on date of agreement where part consideration paid on that date

Proviso to section 50C(1) retrospective/curative effect - date of agreement for sale versus date of registration - stamp duty value for computation of full value of consideration under section 50C - adoption of circle rate on date of agreement where part consideration paid on that date - Whether the first proviso to section 50C(1) (inserted by Finance Act, 2016) is retrospective and, if so, whether the stamp duty value as on the date of the agreement (where part consideration was paid through banking channel on that date) must be adopted as full value of consideration for computing capital gains for AY 2015-16. - HELD THAT: - The Tribunal reviewed the factual finding that an agreement for sale was executed on 31.03.2014 and that part consideration (Rs. 1 lakh) was paid by the buyer through banking channels on that date, facts which were not disputed by Revenue. Applying the principle that the proviso to section 50C(1) was introduced to cure unintended consequences and to relieve genuine hardship where the date of agreement and date of registration differ, the Tribunal followed coordinate decisions and the reasoning of the High Court which held that the proviso is clarificatory/curative and must be given retrospective effect so as to apply to assessments prior to 01.04.2017. On that basis the Tribunal held that where the first proviso applies (i.e., the date of the agreement fixing consideration is different from date of registration and part consideration was paid on the agreement date), the value adopted by the stamp valuation authority on the date of the agreement may be taken as the full value of consideration for computing capital gains. Having found that the stamp duty valuation as on the date of agreement (31.03.2014) equalled the actual consideration and that Revenue did not controvert the payment through banking channel, the Tribunal directed the Assessing Officer to vacate the addition and recompute capital gains adopting the stamp duty value as on the date of the agreement. The Tribunal therefore set aside the CIT(A)'s contrary view that the proviso operates only prospectively from 01.04.2017. [Paras 12]

First proviso to section 50C(1) is retrospective; stamp duty value as on date of agreement (where part consideration paid on that date) to be adopted as full value of consideration for AY 2015-16; addition vacated and capital gain to be recomputed.

Final Conclusion: The appeal is allowed. The Tribunal held that the proviso to section 50C(1) (Finance Act, 2016) is retrospective and directed that the stamp duty value as on the date of the agreement (with part payment made on that date) be adopted as full value of consideration for computing capital gains for AY 2015-16; the addition is vacated and the Assessing Officer is directed to recompute the capital gain accordingly.

Exemption under Notification No.12/2012-CE (Serial No.220) - strict construction of exemption notifications - entitlement to benefit of exemption on imported raw material used in manufacture - prior final orders and consistency in administrative treatment - abuse of process / decision without jurisdiction by appellate authority - alternative statutory remedy not a bar where order is without jurisdiction

Exemption under Notification No.12/2012-CE (Serial No.220) - prior final orders and consistency in administrative treatment - abuse of process / decision without jurisdiction by appellate authority - alternative statutory remedy not a bar where order is without jurisdiction - Whether the impugned order of the Commissioner of Customs (Appeals) denying exemption under Notification No.12/2012-CE (Serial No.220) was liable to be quashed and whether the petitioners are entitled to the exemption for additional customs duty. - HELD THAT: - The Court held that the Commissioner of Customs (Appeals) relied on a reversal previously made in a parallel matter but, in the petitioners' case, there existed prior final orders consistently granting the exemption and no new material facts justified reopening the settled position. The Division Bench's earlier decision in Special Civil Application No. 6089 of 2015 was examined: where the appellate authority had reversed earlier orders without adducing or examining fresh material and without remanding for verification, such conduct amounted to an abuse of process and was without jurisdiction. In those circumstances the existence of an alternative statutory remedy did not preclude writ relief. Applying that reasoning to the petitioners' facts, the Court concluded that the impugned appellate order could not be sustained and that the petitioners were entitled to the benefit of Notification No.12/2012-CE (Serial No.220) in respect of the imported aluminum waste and scrap. [Paras 9]

Impugned order of the Commissioner of Customs (Appeals) quashed and set aside; petitioners entitled to exemption under Serial No.220 of Notification No.12/2012-CE.

Final Conclusion: Writ petitions allowed to the extent indicated; the Commissioner (Appeals) order denying exemption is quashed and the petitioners are held entitled to exemption of Additional Customs Duty under Serial No.220 of Notification No.12/2012-CE. No order as to costs.

Assessment - self-assessment - re-assessment - quasi-judicial decision - liability under paragraph 6.08 of the Foreign Trade Policy - liability on clearing inputs into DTA under paragraph 3 of Notification No. 52/2003-Cus - review procedure under Section 129D - appropriation of payments - penalty under Section 117 of the Customs Act, 1962 - remand for fresh consideration

Assessment - self-assessment - quasi-judicial decision - review procedure under Section 129D - Whether letters/permissions by the Assistant Commissioner permitting re-credit in bond constituted orders of assessment which required challenge before initiating recovery proceedings - HELD THAT: - The appellant contended that the Assistant Commissioner's letters permitting re-credit in the running bond were quasi judicial assessment decisions and, therefore, the Department was bound to challenge such assessment through the appropriate review/appeal process before issuing a showcause notice for recovery. The Tribunal noted that this specific contention was raised in the appellant's reply but was not considered or decided by the Adjudicating Authority. Given the importance of that contention-and the Apex Court's jurisprudence recognising that self assessment/re credit decisions can amount to assessment orders-the matter was not finally adjudicated by the original authority. The Tribunal therefore did not decide the legal question on the merits but found that the Adjudicating Authority must consider the contention afresh and render a finding after providing opportunity of hearing and evidence. [Paras 5, 6]

Remanded to the Adjudicating Authority for fresh consideration and adjudication of whether the permissions to take re credit amounted to assessment requiring prior challenge, with opportunity for hearing and evidence.

Appropriation of payments - quantification of duty - Whether the quantification of duty and the appropriation of amounts paid by the appellant were correct - HELD THAT: - The appellant disputed the computation of duty, asserting (i) existence of opening stock of inputs as on 01.07.2017 which would affect duty quantification, and (ii) that amounts paid during investigation related partly to other periods and that the adjudicating order incorrectly appropriated an amount different from the payments tendered for the subject period. The Tribunal observed these factual and quantification contentions were raised in the reply and supported by documents but were not examined or decided by the Adjudicating Authority. As the quantification and appropriation are matters of fact and accounting requiring verification and possible recalculation, the Tribunal directed that these points be re examined in the remand proceedings with opportunity to adduce evidence. [Paras 5, 6]

Remanded for de novo determination of duty quantification and correct appropriation of payments after verification of opening stock and payment particulars, with opportunity for hearing and evidence.

Liability on clearing inputs into DTA under paragraph 3 of Notification No. 52/2003-Cus - liability under paragraph 6.08 of the Foreign Trade Policy - penalty under Section 117 of the Customs Act, 1962 - Validity of the demand under paragraph 3 of Notification No. 52/2003-Cus (as amended) and the imposition of penalty under Section 117 - HELD THAT: - The show cause notice invoked paragraph 3 of Notification No.52/2003 Cus as amended (w.e.f. 01.07.2017) and paragraph 6.08 of the Foreign Trade Policy to demand customs duty on inputs used for manufacture of goods cleared into DTA. The appellant challenged the applicability of the amended paragraph to imports/BEs presented prior to 01.07.2017 and also contended that the Notification itself provides remedial measures (bond and payment) and does not mandate penalty, contesting the invocation of Section 117. The Tribunal found that these contentions were raised but left undecided by the Adjudicating Authority; accordingly, the Tribunal did not decide the legal merits of applicability or the penalty question. Those issues were directed to be considered afresh by the Adjudicating Authority in the remand proceedings with full opportunity to the parties to produce evidence and be heard. [Paras 5, 6]

Remanded for fresh consideration of (a) applicability of paragraph 3 of Notification No.52/2003 Cus and paragraph 6.08 of the FTP to the relevant imports, and (b) the legality of imposing penalty under Section 117, with opportunity for hearing and evidence.

Final Conclusion: The impugned order is set aside and the appeal is allowed by way of remand; the matter is directed to be considered de novo by the Adjudicating Authority with opportunity for personal hearing and production of evidence on all contentions, and all issues are left open for fresh adjudication.

Refund of import duty in certain cases under Section 26A - Applicability of refund provisions to re-importation - Notification No. 46/2017-exemption and conditions for re-imported goods - Payment of CVD after introduction of GST due to system error - Limitation for refund claims

Refund of import duty in certain cases under Section 26A - Applicability of refund provisions to re-importation - Notification No. 46/2017-exemption and conditions for re-imported goods - Payment of CVD after introduction of GST due to system error - Limitation for refund claims - Whether Section 26A of the Customs Act, 1962 is applicable to the refund claim in respect of re-imported goods and whether the refund is barred by limitation - HELD THAT: - The Tribunal observed that Section 26A applies to refund of duty where goods are imported for home consumption. The present import was a re-importation of goods originally exported and returned; therefore Section 26A does not govern the refund. The statutory scheme applicable to re-importation and exemption from duty is governed by Notification No. 46/2017-Cus (30.06.2017) and its conditions. The respondent complied with the Notification by repaying the drawback received along with interest and satisfied the conditions for relief on re-importation. It was also an admitted fact that after the introduction of GST w.e.f. 01.07.2017, CVD was not payable; the amount was collected on account of system error and at the insistence of the customs authority. Given these facts, the demand for CVD on re-importation could not be sustained under Section 26A and the claim could not be rejected on the ground of limitation under that provision. [Paras 5, 6]

Section 26A is inapplicable to the re-importation in question; Notification No. 46/2017 governs the relief and, having been complied with by the respondent, the refund/demand could not be sustained on the limitation ground.

Final Conclusion: The appeal is dismissed; the Tribunal upheld that Section 26A does not apply to the re-importation and that, having satisfied the conditions of Notification No. 46/2017 and given the CVD was paid due to system error after GST introduction, the demand/refusal based on limitation was not sustainable.

Customs valuation - transaction value - rejection of transaction value and enhancement under the Customs Valuation Rules - contemporaneous imports - undervaluation - packaging and quantity as determinants of transaction value

Transaction value - contemporaneous imports - packaging and quantity as determinants of transaction value - rejection of transaction value and enhancement under the Customs Valuation Rules - Whether the enhancement of assessable value by rejecting the declared transaction value was justified having regard to contemporaneous imports and differences in packaging and quantity. - HELD THAT: - The Tribunal found that the goods imported at Mumbai and Bangalore were identical but differed in commercial packing and quantity; the Mumbai consignments were retail-packed in smaller quantities whereas the Bangalore consignments were bulk-packed in much larger quantities. Relying on earlier decisions, including D. M. International and Buying Overseas , the Tribunal reiterated that rejection of transaction value and any enhancement of assessable value must be supported by cogent evidence comparing contemporaneous imports with respect to quality, quantity, country and time of import, and commercial levels. It held that differences in quantity and retail versus bulk packaging are relevant commercial considerations which can legitimately account for price differentials and that enhancement based solely on the fact of similarity of goods, without addressing these material differences, cannot be sustained. The Tribunal applied this principle to the material before it and concluded that the Department had not made the requisite comparison nor produced adequate evidence to justify loading or rejection of the transaction value.

Enhancement of value set aside and the declared transaction value accepted; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned order of enhancement of value, and held that differences in quantity and packing between contemporaneous imports rendered the Department's enhancement unsustainable in the absence of cogent comparative evidence.

Recordal of tribunal proceedings - live-streaming and recording of judicial proceedings - provision of transcripts and certified recordings - administrative competence of tribunals to implement procedural reforms - judicial restraint in issuing systemic directions against tribunals - rejection of overbroad writ prayers

Recordal of tribunal proceedings - live-streaming and recording of judicial proceedings - provision of transcripts and certified recordings - administrative competence of tribunals to implement procedural reforms - Writ petition to be treated as a representation to the Chairperson, NCLAT, for examination of viability of directions relating to recording, preservation and dissemination of NCLT/NCLAT proceedings. - HELD THAT: - The Court declined to issue systemic directions itself and instead treated the writ petition as a representation to be placed before the Hon'ble Chairperson, NCLAT, for consideration. The Court observed that decisions on recording, generation of transcripts, storage, retention, live-streaming and related technical and manpower requirements would impact multiple NCLT benches and the NCLAT and therefore require inputs from Presidents of various NCLT benches and administrative decision-making by the competent authority. The Court noted practical considerations such as deployment of trained manpower, technical equipment, server location and storage facilities, and that specific case-directed directions may be issued by the concerned NCLT bench where necessary. The petitioner was granted liberty to place the petition before the Chairperson, and the Chairperson was requested to examine the viability of the reliefs sought concerning recordal of proceedings. [Paras 5, 6, 11, 12]

Petition treated as a representation to the Hon'ble Chairperson, NCLAT, who is requested to examine the viability of the directions sought regarding recording, preservation and dissemination of NCLT/NCLAT proceedings; liberty granted to petitioner to place the petition before the Chairperson.

Rejection of overbroad writ prayers - judicial restraint in issuing systemic directions against tribunals - Prayers seeking directions on manner of reserving, dictating and authoring judgments (clauses vii to xiii) are not sustainable and are rejected. - HELD THAT: - The Court held that the reliefs in prayer clauses (vii) to (xiii), which concern the manner in which judgments should be reserved, authored and dictated, go beyond the core issue raised concerning recordal of proceedings and therefore do not merit consideration. On that basis the Court rejected those specific prayers as overbroad and outside the scope of the petition's main thrust. [Paras 8]

Prayers in clauses (vii) to (xiii) are rejected as going beyond the core issue and not warranting consideration.

Final Conclusion: The writ petition is disposed of by treating it as a representation to the Hon'ble Chairperson, NCLAT, for examination of the viability of directions relating to recording, live-streaming, storage, retention and provision of transcripts/recordings of NCLT/NCLAT proceedings; the petitioner has liberty to place the petition before the Chairperson. Prayer clauses (vii) to (xiii) are rejected. The petition is disposed of and the pending application stands closed.

Condonation of delay - Companies Fresh Start Scheme, 2020 - Scheme for condonation of delay for companies restored on the Register of Companies between 01st December, 2020 and 31st December, 2020 - restoration of company name - late fees/additional fees for belated filings - Section 248 removal/striking off - re-activation of DIN and DSC - jurisdiction under Article 226

Scheme for condonation of delay for companies restored on the Register of Companies between 01st December, 2020 and 31st December, 2020 - restoration of company name - late fees/additional fees for belated filings - entitlement to waiver of additional fees under the Schemes and under the Court's Order dated 11.02.2021 - HELD THAT: - The Court held that its Order dated 11.02.2021 directing restoration of the companies' names was conditional upon filing annual returns and balance sheets along with the requisite fee within three months and did not confer the benefit of the condonation Scheme dated 15.01.2021. The Scheme of 15.01.2021 applied to companies restored by orders of the NCLT between 01.12.2020 and 31.12.2020; it was not open to this Court to read that Scheme into its direction when the Order simply restored names subject to payment of requisite fees. The Petitioners failed to seek clarification of the 11.02.2021 Order to claim Scheme benefits and thereafter sought only extensions of time; consequently they cannot now claim waiver of additional fees. The Court therefore found that the Petitioners remain liable to pay late/additional fees to get their names restored and that no relief by way of waiver under the cited Schemes or the earlier judicial order had been granted. [Paras 13, 14]

The Petitioners are not entitled to waiver of additional fees; they must pay the late fees to effect restoration of their names.

Companies Fresh Start Scheme, 2020 - condonation of delay - jurisdiction under Article 226 - scope of the Court's remedial power under Article 226 in relation to Scheme benefits - HELD THAT: - The Court observed that while schemes such as CFSS, 2020 and the subsequent condonation Scheme were administrative measures, this Court in exercising jurisdiction under Article 226 limited its direction to restoration of names subject to compliance with statutory filing obligations and payment of requisite fees. The Court did not, by its order, extend administrative Scheme benefits to the Petitioners, and such an extension could not be presumed. The appropriate remedy, if any, lay in seeking clarification of the Court's order or pursuing administrative relief from the Respondents; the Petitioners pursued neither. [Paras 8, 14]

The Court's Article 226 power was exercised to restore names subject to payment of requisite fees; it did not, and was not held to, import the administrative Scheme benefits for the Petitioners.

Final Conclusion: Writ petitions dismissed: the Court refused to waive additional/late fees and held that the Petitioners must pay the requisite late fees to secure restoration of their names; no relief under the impugned administrative Schemes was available to them.

Disclosure of Significant Beneficial Owner - duty to identify and require compliance of a Significant Beneficial Owner - service of Form BEN-4 under section 90(5) - concept of control and significant influence as basis for SBO identification - company's due diligence obligations under section 90(4A) - penalty for failure to comply with disclosure obligations under section 90

Disclosure of Significant Beneficial Owner - company's due diligence obligations under section 90(4A) - concept of control and significant influence as basis for SBO identification - Reporting company failed to identify or declare a Significant Beneficial Owner and did not take necessary steps under Section 90 read with the SBO Rules. - HELD THAT: - The Registrar found that the company, being a wholly owned subsidiary of an overseas body corporate, relied solely on threshold shareholding tests applied to its immediate and ultimate holding companies and did not consider indirect rights, distributable dividend entitlements, or exercise of significant influence/control. The Registrar concluded that Section 90 and the SBO Rules require both objective (shareholding thresholds) and subjective (control/significant influence) inquiries, and that the reporting company did not discharge its statutory duty to identify any individual who may exercise significant influence or control nor to take steps under Section 90(4A) and (5) to require compliance. On the material available in public domain regarding corporate ownership and the place of the Lee family in the group, the Registrar was satisfied that there were sufficient grounds to require SBO identification and that the company's self-evaluation was inadequate. [Paras 7, 16, 18]

Default under Section 90 r/w SBO Rules established; the company failed in its obligation to identify and require compliance of any Significant Beneficial Owner.

Service of Form BEN-4 under section 90(5) - duty to identify and require compliance of a Significant Beneficial Owner - Reporting company was required to serve Form BEN-4 to its immediate holding company notwithstanding that the holding company is a listed foreign entity. - HELD THAT: - The Registrar observed that sub rule 2 of Rule 2A casts an initial duty on the reporting company to issue Form BEN-4 to members other than individuals holding not less than 10% of shares or voting rights. Because the reporting company is a wholly owned subsidiary of the immediate holding company, it was bound to serve BEN-4 to the holding company to elicit required information irrespective of the holding company's listed status or internal governance, and the reporting company failed to discharge this obligation thereby absolving the holding company from the parallel statutory duty to respond. [Paras 17]

Obligation to issue Form BEN-4 to the immediate holding company was not discharged; failure to serve BEN-4 constituted non-compliance with Section 90(5) read with SBO Rules.

Penalty for failure to comply with disclosure obligations under section 90 - company's due diligence obligations under section 90(4A) - Penalty was imposed on the reporting company and specified officers for the established defaults under Section 90 read with the SBO Rules, and directions were issued to identify SBOs and file BEN-2 within a stipulated time. - HELD THAT: - Having concluded that defaults under Section 90 (notably failure to take steps under sub sections (4A) and (5)) were established, the Registrar proceeded to adjudicate penalties in accordance with the Act and Rules. The Registrar applied the statutory penalty regime for companies and officers in default, determined the period of default from decriminalisation (21.12.2020) to issuance of the show cause notice (15.04.2024), and imposed penalties on the company and identified officers. Additionally, the Registrar directed the company to determine individuals who qualify as Significant Beneficial Owners and to file e form BEN 2 for them within 90 days, and ordered payment of the adjudged penalty within 90 days with information on appeal avenues. [Paras 19]

Penalties adjudicated against the company and named officers for defaults under Section 90 r/w SBO Rules; company directed to identify SBOs and file BEN 2 within 90 days and to pay the adjudged penalty.

Final Conclusion: The Adjudicating Officer found the reporting company in default of its duties under Section 90 and the SBO Rules for failing to identify, require compliance of, and obtain information about any Significant Beneficial Owner, held that the company should have issued Form BEN 4 to its immediate holding company, adjudicated penalties on the company and specified officers, and directed the company to determine SBOs and file e form BEN 2 and to pay the penalty within the time prescribed, subject to statutory appeal rights.

Service tax on security agency services - statutory function exemption for sovereign or public authority - threshold exemption under Notification No.06/2005-ST - availability of alternate remedy by statutory appeal - remand to appellate tribunal for adjudication on merits - suspension/lifting of recovery proceedings pending appeal

Service tax on security agency services - statutory function exemption for sovereign or public authority - threshold exemption under Notification No.06/2005-ST - remand to appellate tribunal for adjudication on merits - Service tax liability of the Dindigul Police for security/escort services rendered during 01.04.2011 to 31.12.2012 - HELD THAT: - The High Court refrained from adjudicating the substantive question whether the police services rendered to banks and private parties fall outside the levy of service tax as statutory/sovereign functions or are taxable as "Security Agency Services." Noting precedent relied upon by the petitioner and that a similar petition had been disposed by affording statutory remedy, the Court granted the petitioner liberty to prefer the statutory appeal to the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai within 60 days and directed that the Tribunal entertain the appeal on the web copy of this order. The Tribunal was invited to examine the tribunal decisions cited by the petitioner and decide the matter on merits in accordance with law. The Court thus remitted the controversy for fresh adjudication by CESTAT rather than deciding the tax liability itself. [Paras 11, 12]

Liberty granted to file statutory appeal before CESTAT, Chennai within 60 days; matter remanded to CESTAT for adjudication on merits and in accordance with law.

Suspension of recovery proceedings pending appellate remedy - Interim treatment of any recovery proceedings initiated pursuant to the impugned order - HELD THAT: - The Court directed that any recovery proceedings initiated against the petitioner pursuant to the impugned order shall be lifted pending the filing and disposal of the statutory appeal. The direction was conditional: if the petitioner fails to file the appeal within the stipulated period, the respondents are at liberty to resume recovery and proceed as if no liberty had been granted. [Paras 13]

Recovery proceedings, if any, are to be lifted pending filing and disposal of the appeal; respondents may resume action if no appeal is filed within the prescribed period.

Final Conclusion: Writ petition disposed by granting liberty to the petitioner to file a statutory appeal before CESTAT, Chennai within 60 days; appeal to be entertained on the web copy and decided on merits; recovery proceedings stayed meanwhile but may be resumed if appeal is not filed within the stipulated period.

Limitation - time-barred adjudication - affidavit-based adjudication in writ proceedings - deferment of adjudication pending writ petition

Limitation - time-barred adjudication - affidavit-based adjudication in writ proceedings - Challenge to adjudication proceedings on the ground that they are barred by limitation is maintainable and can be adjudicated in a writ petition on affidavits. - HELD THAT: - The Court held that the appellant's contention that the adjudication has become time barred falls within the scope of a writ petition and is amenable to adjudication after exchange of affidavits. The bench recorded that the respondents/department should file their affidavit in opposition so that the writ petition may be heard and decided on merits, thereby treating limitation as a justiciable question in the writ jurisdiction determinable on affidavit evidence. [Paras 6]

The challenge based on limitation may be decided in the writ petition on affidavits; respondents to file affidavit in opposition.

Deferment of adjudication pending writ petition - affidavit-based adjudication in writ proceedings - Whether the adjudicating authority should be directed to defer adjudication of the show-cause notice pending disposal of the writ petition. - HELD THAT: - The Court observed that if the adjudicating authority proceeds to adjudicate the show-cause notice before the writ petition is decided, the writ proceedings could become infructuous. In the exercise of supervisory jurisdiction, the bench directed the adjudicating authority at Kolkata to defer the adjudication of the show-cause notice and ordered a timetable for filing of affidavits by the department and replies by the appellant so that the writ petition can be listed and decided on merits. [Paras 7, 8]

Adjudication by the Kolkata authority is directed to be deferred; department to file affidavit within three weeks and reply within one week thereafter.

Final Conclusion: Appeal allowed; Single Bench order set aside. Adjudication at Kolkata deferred pending disposal of the writ petition; respondents directed to file affidavit in opposition within three weeks and the matter listed for hearing in the week commencing 5th August, 2024.

Goods Transport Agency services - liability on recipient under reverse charge - Reimbursable expenses not includible in valuation of taxable service - Extended period of limitation - demand barred by time where primary demand erroneous

Goods Transport Agency services - liability on recipient under reverse charge - Whether turnover attributable to GTA services rendered by the appellant was rightly included in the departmental demand when the liability to pay service tax in respect of GTA rests on the recipient. - HELD THAT: - The Tribunal found documentary evidence (consignment notes, invoices and a client certificate) establishing that the appellant provided GTA services to its clients and that such services attract tax liability on the recipient under the reverse charge mechanism. The major portion of the demand was quantified from the appellant's balance sheet but the appellant demonstrated that a substantial part of that turnover related to GTA services for which the tax liability was on the service recipient. The Department did not produce material to rebut the documentary proof that GTA services were involved and that reverse charge applied. [Paras 13, 14, 20]

Turnover attributable to GTA services was wrongly included in the demand; tax liability for those services rests with the recipients and the inclusion is set aside.

Reimbursable expenses not includible in valuation of taxable service - Whether amounts reimbursed to the appellant for expenses incurred on behalf of clients are includible in the taxable value of services. - HELD THAT: - The appellant produced invoices and records showing reimbursements received were amounts actually incurred on behalf of clients. The Tribunal relied on the reasoning in CST v. Indo Arya Logistics and the High Court decision in Union of India v. Intercontinental Consultants & Technocrats (as applied in the judgment) that valuation of taxable service is the gross amount charged for providing 'such' taxable service and does not include reimbursable expenses incurred for purposes other than providing that taxable service. The Tribunal noted that the legislature later amended the valuation provision prospectively to include reimbursable expenses with effect from May 14, 2015, confirming that prior to that amendment such expenses were not part of valuation. [Paras 15, 16, 17, 21]

Amounts reimbursed to the appellant for expenses incurred on behalf of clients are not part of the taxable value and are not liable to service tax for the periods in question.

Extended period of limitation - demand barred by time - Whether the demand confirmed by invoking the extended period is sustainable in view of the errors in the departmental quantification. - HELD THAT: - The Tribunal observed that the show cause notice and demand were based on values shown in the balance sheet and profit & loss account. Having held that the major portion of the demand was erroneously quantified (being turnover of GTA services and non-taxable reimbursements), and noting that the appellant had been registered, filing ST-3 returns and discharging service tax where applicable, the Tribunal concluded there was no justification for invocation of the extended period. The Department did not produce concrete evidence of suppression to justify extended period invocation. [Paras 19, 20, 22]

Confirmation of demand under the extended period is not sustainable and is set aside as time-barred.

Final Conclusion: The appeal is allowed on merits: the demand attributable to GTA services is set aside (liability being on recipients), reimbursed expenses are not taxable for the period under consideration, and the invocation of the extended period is quashed; consequential relief, if any, to follow as per law.

Exemption under SEZ Act / Section 26(1)(e) and Rule 31 - Liability of sub-contractor to pay Service Tax - Extended period of limitation under proviso to Section 73(1) - time-bar

Exemption under SEZ Act / Section 26(1)(e) and Rule 31 - Primacy of the SEZ Act over Service Tax notifications - Appellant entitled to exemption from service tax for services consumed by SEZ units under the SEZ Act and Rules - HELD THAT: - The Tribunal held that Section 26(1)(e) of the SEZ Act, read with Rule 31 of the SEZ Rules, entitles service providers to exemption from service tax where the taxable services are used for carrying on authorized operations by a developer/entrepreneur/unit in an SEZ. The condition required is consumption of the service for authorized operations; the location of the service provider or place of provision is irrelevant. The Tribunal further found that the exemption under the SEZ Act, having an overriding clause, cannot be constrained by conditions imposed through notifications under the Finance Act; the notifications operationalizing exemption cannot impose inconsistent conditions that defeat the SEZ Act's object. On the facts, the Appellant's services were consumed by SEZ units and invoiced to those units, satisfying the statutory condition for exemption, and therefore the Appellant rightly availed the exemption. [Paras 15, 16, 17]

Exemption under the SEZ Act and Rules applies; the Appellant is entitled to the exemption from service tax for services consumed by SEZ units.

Liability of sub-contractor to pay Service Tax - Extended period of limitation under proviso to Section 73(1) - time-bar - Although a sub-contractor may be liable to pay service tax, the demand in this case could not be sustained because it was barred by limitation - HELD THAT: - The Tribunal noted the larger-bench position that a sub-contractor is, in principle, liable to pay service tax independently. However, having regard to precedents and the contemporaneous confusions in law and departmental circulars on whether sub-contractors' liability would attract double taxation, the Tribunal concluded that invocation of the extended period of limitation was not justified in the present case. Applying those authorities and the reasoning that bona fide belief and a disputed question of law preclude invocation of the extended period, the Tribunal found the demand (which relied on extended limitation) to be time-barred and therefore unsustainable. Consequentially, interest and penalties founded on that demand were also set aside. [Paras 19, 20, 21, 22, 23]

Even conceding that a sub-contractor can be independently liable, the Tribunal held the demand against the Appellant cannot be sustained as it is barred by limitation; interest and penalties premised on that demand are also set aside.

Final Conclusion: Appeal allowed: the Appellant is entitled to exemption under the SEZ Act and Rules for services consumed by SEZ units; the departmental demand based on invocation of the extended period of limitation is time-barred and is set aside together with interest and penalties.

Taxability of services received from abroad - interpretation of liability under Chapter V and Section 66A of the Finance Act, 1994 - taxability of business exhibition service under Rule 3 of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 - reverse charge mechanism for services provided from outside India - imposition of penalty under Section 78 for interpretation-based disputes

Taxability of services received from abroad - interpretation of liability under Chapter V and Section 66A of the Finance Act, 1994 - reverse charge mechanism for services provided from outside India - Demand of service tax on services received from abroad prior to 18.04.2006 - HELD THAT: - The Tribunal found the question no longer res integra in light of the decision of the Hon'ble Bombay High Court in Indian National Ship Owners Association and the dismissal of the department's appeal by the Hon'ble Supreme Court. Applying that settled position, services received from abroad were not taxable prior to 18.04.2006 and the liability under Chapter V/Section 66A could not be fastened on the recipient for the period before the amendment. Consequently, the confirmed demand for the period prior to 18.04.2006 cannot be sustained. [Paras 6]

Demand of service tax on services received from abroad prior to 18.04.2006 set aside.

Taxability of business exhibition service under Rule 3 of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 - Demand of service tax on business exhibition service for the period 18.04.2006 to 10.05.2007 - HELD THAT: - The Tribunal examined classification of business exhibition service (Section 65(105)(zzo) as it existed) under the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. Rule 3 places such services in the second category, making taxability contingent on the service being wholly or partly performed in India. As the business exhibition in the present case was admittedly conducted wholly outside India, the Tribunal held that the service did not attract service tax for the period 18.04.2006 to 10.05.2007 and the demand for that period is unsustainable. [Paras 7]

Demand of service tax on business exhibition service for 18.04.2006 to 10.05.2007 set aside.

Imposition of penalty under Section 78 for interpretation-based disputes - Sustainability of penalty under Section 78 - HELD THAT: - Having held that the demands themselves are not sustainable and that the controversy involved questions of statutory interpretation which were unsettled at the relevant time, the Tribunal concluded that imposition of penalty under Section 78 cannot be sustained. Where liability is determined to be founded on an arguable question of law and the legal position was not clear, penal consequences under Section 78 are inappropriate. [Paras 8]

Penalty under Section 78 set aside.

Final Conclusion: The appeal is allowed; the impugned order is set aside: the service tax demand on services received from abroad prior to 18.04.2006 and on the business exhibition service for 18.04.2006 to 10.05.2007 is quashed, and the penalty under Section 78 is also rescinded, with consequential relief as per law.

Refund of service tax paid for services consumed in SEZ - exemption ab-initio versus option to pay tax and claim refund - requirement of invoice in the name and address of the claimant - procedural defects in invoices (signature, date, proof of payment) - original invoices versus photocopies and subsequent production of originals - allegations in show cause notice as limiting scope of adjudication (exchange rate fluctuation) - refund claim for container repair services and burden to prove authorised operation - re-examination/remand with opportunity to produce evidence and speaking order

Refund of service tax paid for services consumed in SEZ - exemption ab-initio versus option to pay tax and claim refund - Entitlement to refund where services are for authorised operations in SEZ and were paid although exempt. - HELD THAT: - The Tribunal held that SEZs are duty free enclaves and exemptions under the SEZ Act operate with overriding effect, but payment of service tax by mistake does not convert the services into taxable ones. Reliance on principles that exemptions constitute freedom from liability and that revenue authorities must not deprive an assessee of benefits available in law supports the conclusion that mere fact of exemption ab initio does not preclude a claimant from seeking refund of tax paid for services wholly consumed for authorised SEZ operations. The appellate rejection on the ground that the services were exempt ab initio and therefore not refundable was set aside. [Paras 5, 6, 7]

Rejection of refund solely on the ground of exemption ab initio set aside; appellant entitled to refund in respect of services found to be wholly consumed in the SEZ.

Requirement of invoice in the name and address of the claimant - Validity of denying refund because invoices were addressed to the corporate office instead of the SEZ unit claiming refund. - HELD THAT: - The Tribunal observed that substantive justice should not be defeated by procedural technicalities where there is no dispute that the services were received and utilised by the appellant. The department could and should have verified actual receipt/use of services instead of mechanically rejecting invoices addressed to the corporate office. In absence of any allegation of non receipt or dual use, denial solely on this ground was unjustified. [Paras 8]

Denial of refund on the sole ground that invoices were addressed to the corporate office was unjustified and is set aside.

Procedural defects in invoices (signature, date, proof of payment) - Whether refund can be denied for invoices lacking signature, bearing wrong date, or without proof of payment. - HELD THAT: - The Tribunal recognised the importance of invoices and the risk of misuse, observing that signature, correct date and payment proof impart credibility. However, it held that such defects go to admissibility and require the appellant to prove genuineness and admissibility of the invoices. Rather than outright rejection, these matters merit fresh consideration; the appellant should be given an opportunity to rectify or prove the authenticity and absence of fraudulent intention. Verification procedure prescribed by the Commissionerate may be followed. [Paras 9]

Issue remanded for de novo examination with opportunity to the appellant to prove admissibility of disputed invoices; not to be rejected summarily.

Original invoices versus photocopies and subsequent production of originals - re-examination/remand with opportunity to produce evidence and speaking order - Whether refund can be rejected because photocopies were filed at claim stage when originals were later produced. - HELD THAT: - While original documents are preferred as best evidence, the Tribunal held that procedure should not be tyrannical. If originals are subsequently produced with sufficient explanation, the refund claims should be processed and verified; departmental practice of obtaining indemnity bond and examining originals applies. Rejection merely because photocopies were initially filed was not proper where originals were later produced. [Paras 10]

Part of the claim rejected solely on account of photocopies set aside; matter remanded for verification with originals and processing in the normal course.

Allegations in show cause notice as limiting scope of adjudication (exchange rate fluctuation) - Permissibility of denying refund on ground of exchange rate fluctuation when such ground was not alleged in the SCN. - HELD THAT: - The Tribunal noted that the impugned order travelled beyond the scope of the SCN by denying refund on account of exchange rate fluctuation where no such allegation was made. On the construction of the notification conditions relied upon by the appellant, the Tribunal agreed that refund could not be denied on that ground. [Paras 11]

Denial of refund on account of exchange rate fluctuation (not raised in the SCN) is unsustainable.

Refund claim for container repair services and burden to prove authorised operation - Whether service tax paid on container repair qualifies for refund as service in relation to authorised operations in SEZ. - HELD THAT: - The Tribunal observed that exemption notifications must be strictly construed and the burden is on the claimant to demonstrate applicability. Repair of containers does not prima facie fall within 'commercial or industrial construction service' or clearly within authorised operations. Consequently the matter requires fresh examination and the appellant must be afforded an opportunity to establish that such repair was in relation to authorised operations of the SEZ unit. [Paras 12]

Claim for refund on container repair charges remanded for de novo adjudication and for the appellant to produce evidence that the activity qualifies as authorised operation.

Final Conclusion: Appeals disposed. Rejection of refund on the grounds of exemption ab initio and invoices addressed to corporate office set aside and refund allowed on those issues as per law; claims rejected for procedural defects, photocopying of invoices and container repair charges are remitted to the original authority for fresh examination and speaking orders after affording the appellant opportunity to produce evidence and submissions, to be completed within ninety days; denial on account of exchange rate fluctuation set aside.

Construction of residential complex service - deemed provider of service by builder - prospective operation of explanation to Section 65(105)(zzzh) - contractor liable to pay service tax on construction service - extended period of limitation under proviso to Section 73(1) read with Section 78

Construction of residential complex service - deemed provider of service by builder - prospective operation of explanation to Section 65(105)(zzzh) - contractor liable to pay service tax on construction service - Whether service tax could be levied on the appellant (builder/developer) for construction of residential complexes for the period prior to 01.07.2010 and whether the demand for the period September, 2006 to March, 2010 is sustainable - HELD THAT: - The Tribunal considered the effect of the explanation added w.e.f. 01.07.2010 to Section 65(105)(zzzh) which deems construction of a building intended for sale to be a service provided by the builder to the buyer, and examined earlier Circulars and judicial decisions which treated builders who engage contractors as outside the scope of taxable service prior to 01.07.2010 because the contractor, not the builder, remained the service-provider in relation to construction work. The Bench relied on precedent of this Tribunal and other Benches holding that the 2010 amendment by way of an explanation expanded the scope of taxable service and operates prospectively; prior to 01.07.2010, builders/developers who engaged contractors were not chargeable to service tax for construction of residential complexes and the contractor was the person liable to pay service tax. Applying these principles to the present facts, where the appellant had engaged contractors for construction and the demand relates to the period before 01.07.2010, the impugned demand cannot be sustained.

Appeal allowed; the demand confirmed in the impugned order for September, 2006 to March, 2010 set aside and consequential relief granted.

Final Conclusion: The Tribunal held that the explanation to Section 65(105)(zzzh) introduced by the Finance Act, 2010 is prospective; accordingly, service tax could not be levied on the builder for the construction of residential complexes for the period prior to 01.07.2010 and the demand for September, 2006 to March, 2010 was set aside.

Leviability of service tax on sovereign functions - statutory obligation not constituting taxable service - distinction between statutory fee and consideration - alternate remedy by statutory appeal to CESTAT - entertainment and adjudication of appeals on merits by CESTAT

Leviability of service tax on sovereign functions - statutory obligation not constituting taxable service - distinction between statutory fee and consideration - Whether service tax is leviable on cash transportation services provided by the police as part of sovereign/statutory functions - HELD THAT: - The High Court recorded the petitioner's case that deployment of police staff to banks/financial institutions for transportation of cash to ATMs was claimed to be a sovereign/statutory function and therefore not a taxable service in light of Circular No.89/7/2006 S.T., which states that activities undertaken by sovereign/public authorities under statutory obligations, where fees are compulsory and deposited to the Government treasury, do not constitute taxable services. The Court noted several tribunal decisions favouring the police departments on similar facts and acknowledged that prima facie the issue appears covered in favour of the petitioner. However, the Court refrained from deciding the substantive question on merits because an alternative statutory remedy was available. Instead, the Court granted the petitioner liberty to pursue the statutory appeal and directed that the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai, on receipt of the appeal accompanied by a web copy of this order, should admit and decide the appeal on merits and in accordance with law, examining the tribunal decisions relied upon by the petitioner and disposing of the matter expeditiously. [Paras 4, 5, 7, 8, 9]

Writ petition not decided on merits; petitioner granted liberty to file statutory appeal before CESTAT, Chennai within 60 days and CESTAT directed to entertain and decide the appeal on merits expeditiously.

Final Conclusion: The writ petition is disposed of by granting liberty to the petitioner to file a statutory appeal before CESTAT, Chennai within 60 days; the substantive question of service tax on the police's cash transportation activity is left to be adjudicated by the Tribunal on merits in accordance with law.

Valuation of excisable goods with reference to retail sale price - requirement to declare retail sale price on the package under the Standards of Weights & Measures (Packaged Commodities) Rules, 1977 - group package intended for retail sale - wholesale package sold to an intermediary - exemption under Rule 34(b) of the Standards of Weights & Measures (Packaged Commodities) Rules, 1977

Valuation of excisable goods with reference to retail sale price - group package intended for retail sale - wholesale package sold to an intermediary - requirement to declare retail sale price on the package under the Standards of Weights & Measures (Packaged Commodities) Rules, 1977 - exemption under Rule 34(b) of the Standards of Weights & Measures (Packaged Commodities) Rules, 1977 - Whether Section 4A(1) of the Central Excise Act, 1944, applies to the goods sold by the respondent-assessee - HELD THAT: - The critical question was whether the respondent's packages fell within the class of packages that the Packaged Commodities Rules require to bear the retail sale price so as to attract valuation under Section 4A(1). The Court accepted the factual position (not rejected by the Commissioner) that the respondent packed 100 larger poly packs into one HDPE bag and sold those HDPE bags to distributors. A package intended for sale to an intermediary and not for direct sale to a consumer falls within the definition of a wholesale package (Rule 2(x)), including clause (iii) covering packages containing ten or more retail packages. The Rules do not mandate the display of retail sale price on such wholesale packages, and therefore the mere presence of MRP on the poly packs does not, by itself, bring the HDPE bag within the scope of Chapter II obligations to declare retail price. Because the HDPE bags as sold are wholesale packages, they are not group packages intended for retail sale under Rule 2(g), and the statutory trigger for Section 4A(1) is absent. Consequently, the goods in issue do not attract valuation under Section 4A(1); any question whether the individual poly packs were intended for retail sale need not be finally determined for the purposes of these appeals. [Paras 15, 16, 17, 18]

Section 4A(1) of the Excise Act does not apply to the goods the respondent sold; the HDPE bags containing 100 poly packs are wholesale packages and do not require declaration of retail sale price under the Rules.

Final Conclusion: The appeals are dismissed. The Tribunal's conclusion that Section 4A(1) did not apply is upheld on the basis that the HDPE bags containing 100 poly packs are wholesale packages which are not required to bear the retail sale price under the Packaged Commodities Rules.

MRP based valuation - transaction value under Section 4 of the Central Excise Act, 1944 - valuation under Section 4A of the Central Excise Act, 1944 - export consignments to Nepal treated as sale outside the country - penalty under Section 11AC of the Central Excise Act, 1944 - mens rea / intention to evade payment of duty

MRP based valuation - transaction value under Section 4 of the Central Excise Act, 1944 - export consignments to Nepal treated as sale outside the country - Whether differential duty computed on transaction value under Section 4 is exigible for goods sold to Nepal despite initial clearance to depot on MRP basis - HELD THAT: - The Tribunal held that MRP based valuation under Section 4A applies only to goods cleared for domestic sale where the SWM Act operates, and is not applicable to sales outside the country such as exports to Nepal. Reliance was placed on the Tribunal's earlier decision in Gillette India Ltd. v. Commissioner of Central Excise, Jaipur to the effect that export consignments to Nepal must be valued by transaction value under Section 4 and not by Section 4A even if the goods are specified under Section 4A(1). The appellant had accepted liability under Section 4 for goods cleared to Nepal and paid the differential duty with interest before filing the appeal. On these facts and law the Tribunal upheld the demand of differential duty confirmed in the impugned order along with interest. [Paras 9, 11]

Demand of differential duty determined on transaction value under Section 4 for goods sold to Nepal is upheld along with interest.

Penalty under Section 11AC of the Central Excise Act, 1944 - mens rea / intention to evade payment of duty - MRP based valuation - Whether penalty under Section 11AC is sustainable where goods were cleared to depot on MRP basis without knowledge of subsequent export and the assessee later paid differential duty - HELD THAT: - The Tribunal found that the appellant cleared goods to its Patna depot on MRP valuation without having orders from Nepal buyers and therefore lacked any intention to evade duty. When the department contended Section 4 valuation was applicable, the appellant accepted the liability and paid the differential duty and interest. Suppression of facts with intent to evade duty (mens rea) was not established. In view of absence of culpable intention and the appellant's acceptance and payment of duty, the Tribunal concluded that imposition of penalty under Section 11AC was not sustainable and set aside the penalty. [Paras 10, 11]

Penalty imposed under Section 11AC is set aside for lack of intention to evade duty.

Final Conclusion: The appeal is disposed by upholding the confirmed differential duty and interest determined on transaction value for goods sold to Nepal, and by setting aside the penalty imposed under Section 11AC for lack of mens rea.

Process constituting manufacture - marketability - excisable goods - manufacture test: transformation into a new article - sale or realisation of residual waste not by itself manufacture - classification under tariff not determinative of manufacture - twin tests for goods: manufacture and marketability

Process constituting manufacture - manufacture test: transformation into a new article - sale or realisation of residual waste not by itself manufacture - excisable goods - classification under tariff not determinative of manufacture - Black sand remaining after use of natural sand in casting is not a manufactured product liable to central excise duty - HELD THAT: - The Tribunal examined whether the residue termed 'black sand' results from a process constituting manufacture and thus qualifies as excisable goods. There is no finding or evidence of any process or ingredients which transform natural sand into a distinct manufactured article; the record indicates that natural sand used in casting merely turns black on being burnt and otherwise remains sand. The authorities below proceeded from the fact of subsequent sale to treat the residue as a manufactured and marketable product, but sale or incidental realisation of value from a waste or residue does not establish that a manufacturing process, producing a new article, has occurred. Reliance on the tariff entry in the First Schedule is insufficient by itself to characterise an item as manufactured for levy of excise; a tariff description cannot substitute for proof of the process of manufacture and marketability as a product distinct from its original character. Applying the twin tests articulated by higher courts - existence of a process constituting manufacture and marketability - the first test is not satisfied on the material on record, and therefore the residue cannot be held to be excisable. [Paras 14, 16, 18, 19, 20]

Impugned orders demanding duty on black sand set aside; black sand held not to be a manufactured excisable product

Final Conclusion: The appeals are allowed: the demands on 'black sand' generated during manufacture of castings are quashed as the residue was not shown to be a manufactured, excisable product; consequential relief granted as per law.

CENVAT credit entitlement in job work - treatment of Notification No.214/86-CE as postponement of duty and shift of liability - definition of job work and legal status of job worker as manufacturer - prohibition on treating job-worked goods as exempted goods for denial of credit - scope of show cause notice and impermissible change of case by adjudicating authority

CENVAT credit entitlement in job work - treatment of Notification No.214/86-CE as postponement of duty and shift of liability - definition of job work and legal status of job worker as manufacturer - prohibition on treating job-worked goods as exempted goods for denial of credit - Appellant entitled to avail CENVAT credit on furnace oil used in manufacture of job-worked goods - HELD THAT: - The Tribunal considered whether furnace oil used by the appellant in conversion of MS ingots/billets into rolled products on job work basis was admissible as input credit. The adjudicating authorities had denied credit on two bases: (i) treating the job-worked goods as exempted goods within the meaning of the CENVAT Credit Rules and (ii) holding that inputs used for manufacture of goods for the principal do not qualify as inputs of the job worker. The Tribunal held that Notification No.214/86-CE merely postpones duty and shifts the liability to the principal manufacturer and is not an unconditional exemption; a job worker who undertakes processes amounting to manufacture is legally a manufacturer of the job-worked goods. Reliance was placed on earlier Tribunal decisions (including Federal Mogul Goetze and Sterlite/Larger Bench reasoning) that a job worker cannot be compelled to ensure the principal discharges duty and that the notification does not per se render job-worked goods exempt so as to deny input credit. The Tribunal also noted that the adjudicating authority altered the case beyond the scope of the show cause notice by applying a different legal test. Applying these principles, the furnace oil used in manufacture of job-worked finished goods was held to qualify for CENVAT credit. [Paras 6, 8, 9, 10]

Impugned orders denying CENVAT credit are set aside and the appeal is allowed; the appellant is entitled to CENVAT credit on furnace oil used for job-worked goods for the period in question.

Final Conclusion: Impugned Order-in-Appeal dated 01.12.2014 is set aside; appeal allowed and CENVAT credit on furnace oil availed by the appellant in respect of job-worked goods is held to be admissible for the period June 2011 to December 2011, with consequential relief as per law.

Cenvat credit - Rule 6(3) of Cenvat Credit Rules, 2004 - bagasse as agricultural waste / not a manufactured product - revenue deposit - refund under Section 11B - relevant date where refund arises as consequence of court order - consequential relief flowing from quashing of demand

Bagasse as agricultural waste / not a manufactured product - Rule 6(3) of Cenvat Credit Rules, 2004 - Whether bagasse is a dutiable manufactured product and whether Rule 6(3) CCR, 2004 applied to require reversal of Cenvat credit - HELD THAT: - The Tribunal held that the issue is settled by the Supreme Court in Union of India v. DSCL Sugar Ltd. and by allied Allahabad High Court precedent that bagasse is only agricultural waste and not a result of manufacture. Consequently, bagasse does not satisfy the test of manufacture and is not excisable; Rule 6(3) of the Cenvat Credit Rules, 2004 therefore has no application to inputs used for generation of electricity from bagasse in the facts of this case. The Tribunal relied on these precedents to conclude that there was no legal basis for requiring reversal of credit on the ground that electricity generated from bagasse was non-excisable. [Paras 12, 13]

Bagasse is not a dutiable or manufactured item; Rule 6(3) CCR, 2004 did not apply.

Revenue deposit - Cenvat credit - Whether amounts voluntarily reversed by the assessee under Rule 6(3)/6(3A) are in the nature of revenue deposit and whether limitation under Section 11B applies to refund of such amounts - HELD THAT: - The Tribunal held that because Rule 6(3) was inapplicable (given bagasse is not dutiable), the sums reversed by the assessee were effectively revenue deposits. As such, those sums were not subject to the one year limitation period applicable to refunds under Section 11B of the Central Excise Act. The Tribunal observed that Revenue ought to have suo motu refunded the amounts reversed under Rule 6(3) and that no limitation barred refund of such revenue deposits in the circumstances of this case. [Paras 12, 13]

The reversed amounts are revenue deposits and limitation under Section 11B does not bar their refund.

Refund under Section 11B - relevant date where refund arises as consequence of court order - consequential relief flowing from quashing of demand - Whether the refund claim filed after the High Court's order is within time by reference to the relevant date under Section 11B and whether the assessee is entitled to consequential relief following quashing of the SCN - HELD THAT: - The Tribunal accepted the assessee's submission that where duty becomes refundable as a consequence of a court order, the 'relevant date' for computing limitation under Section 11B is the date of that judgment, decree or direction. The assessee filed the refund claim within the statutory period measured from the High Court order which quashed the SCN; accordingly the claim was within time. Further, because the demand proceedings were quashed, the assessee was entitled to consequential relief in respect of amounts reversed and appropriated pursuant to the quashed SCN. [Paras 8, 12]

Refund claim was within time measured from the High Court's order and the assessee is entitled to consequential relief flowing from that order.

Final Conclusion: The impugned order is set aside. The Tribunal allows the appeal, holding that bagasse is not a dutiable manufactured product, Rule 6(3) CCR did not apply, amounts reversed by the assessee were revenue deposits not subject to Section 11B limitation, and the assessee is entitled to consequential refund as per law.

Eligibility for Cenvat credit on input services - product liability insurance as an input service - interpretation of input service under Rule 2(l) of the CENVAT Credit Rules, 2004 - notion of activities 'upto the place of removal' and its limited application - post-manufacturing activity vs. manufacturing-related service - exclusion of general insurance relating to motor vehicles (Explanation (BA) to Rule 2(l))

Product liability insurance as an input service - eligibility for Cenvat credit on input services - post-manufacturing activity vs. manufacturing-related service - notion of activities 'upto the place of removal' and its limited application - Credit of service tax paid on product liability insurance is admissible as Cenvat credit as an input service. - HELD THAT: - The Tribunal held that product liability insurance, which covers financial loss arising from defects in finished products (including costs of recalls and related liabilities), is not a mere post-manufacturing activity but addresses financial risks of the manufacturer and therefore falls within the inclusive ambit of the definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004. The restriction 'upto the place of removal' is specific to outward transportation and does not apply to other services listed in the definition; if such restriction were applied generally, it would render the wider definition of input service redundant. The Tribunal also noted that Explanation (BA) excludes only general insurance relating to motor vehicles and does not exclude product liability insurance covering manufacturer's financial risks. Reliance was placed on earlier decisions of this Tribunal in the appellant's own cases where similar credit was upheld; applying that precedent, the disallowance of credit was held unjustified and the impugned order was set aside. [Paras 4, 5, 6]

The appeal is allowed; the appellant is eligible for Cenvat credit of the service tax paid on product liability insurance and the impugned order is set aside.

Final Conclusion: Appeal allowed; disallowance of Cenvat credit on product liability insurance set aside and appellant entitled to consequential relief as per law.

Definition of "input service" prior to 01.04.2011 - inclusive part of the definition covering "activities relating to business" - nexus between input services and manufacturing activity - inward and outward transportation as input services - recovery of wrongly availed CENVAT credit under Rule 14 of CCR

Definition of "input service" prior to 01.04.2011 - inclusive part of the definition covering "activities relating to business" - nexus between input services and manufacturing activity - inward and outward transportation as input services - Denial of input service CENVAT credit for services availed during setting up of the cement grinding plant for the period 2008-09 to 2010-11 - HELD THAT: - The Tribunal examined the definition of "input service" as it stood for the dispute period and noted that the inclusive portion expressly covered services used in relation to setting up and "activities relating to business", as well as inward and outward transportation up to the place of removal. The Revenue's denial rested on a finding that the services were not used in the manufacture or that the setting up activity was not an activity related to the business. The Tribunal rejected that reasoning, observing there was no challenge that business was not subsequently carried on from the premises and that the pre-01.04.2011 definition had a broad ambit to cover the disputed services. Reliance placed by the appellant on earlier orders was held to support the appellant's entitlement. Consequently the denial of credit was found to be contrary to law and unsustainable. [Paras 18, 19, 20, 21]

Denial of input service credit was contrary to law; impugned order set aside and the appeal allowed with consequential benefits.

Final Conclusion: For the period 2008-09 to 2010-11 the Tribunal held that the pre-01.04.2011 definition of "input service" covered the disputed services availed during setting up of the plant; the impugned order denying CENVAT credit was set aside and the appeal allowed with consequential benefits.

Input service - place of removal - Cenvat credit on Goods Transport Agency (GTA) service - FOR contract / FOR sale (delivery at buyer's works) - valuation under Section 4 of the Central Excise Act, 1944 - extended period of limitation and penalty in cases of interpretation of law

Input service - place of removal - Cenvat credit on Goods Transport Agency (GTA) service - FOR contract / FOR sale (delivery at buyer's works) - valuation under Section 4 of the Central Excise Act, 1944 - Admissibility of Cenvat credit on GTA services used for outward transportation of finished goods in the factual matrix where sales were on FOR basis to the customer's works - HELD THAT: - The Tribunal held that whether GTA services qualify as "input service" under Rule 2(l) CCR, 2004 depends on the factual determination of the "place of removal". Rule 2(l) contains inclusion clauses covering services used for clearance of final products up to the place of removal; the amendment by Notification No.10/2008 substituted "upto the place of removal", shifting the determinative reference to the end point where sale is effected. The Court applied principles in the Supreme Court decisions (Roofit, Emco and related authorities), the Larger Bench interim guidance and CBEC Circular dated 08.06.2018, which require case-specific examination of contract terms and conduct to ascertain when and where property and risk pass to the buyer. On the facts, the appellant's purchase order specified delivery terms ("FREE DELIVERY AT OUR WORKS") and payment/acceptance terms indicating that sale concluded on delivery at the buyer's factory; an auditor's certificate confirmed freight formed part of the transaction value. The impugned order failed to examine these facts. Applying the statutory definition, relevant jurisprudence and the circular, the Tribunal concluded that where sale is completed at the buyer's premises under FOR/delivery-at-works terms, outward transportation up to that place is within "upto the place of removal" and thus GTA service credit is admissible. [Paras 8]

Cenvat credit of service tax paid on outward freight/GTA service is allowable in the appellant's case because the place of removal is the buyer's works under the FOR delivery terms; the impugned denial is set aside.

Extended period of limitation and penalty in cases of interpretation of law - Cenvat credit on Goods Transport Agency (GTA) service - Recoverability of credit with interest and imposition of penalty where the dispute concerns interpretation of law - HELD THAT: - Relying on the CBEC Circular of 08.06.2018 and the Court's review of precedents, the Tribunal held that the question was one of interpretation of law on which reasonable alternate views existed and which was the subject of litigation and administrative clarification. Consequently, invocation of extended period of limitation and imposition of penalty for the contested credit was not legally sustainable. The impugned adjudication imposing demand, interest and penalty without proper factual and legal examination was set aside. [Paras 8, 10]

Demands including penalty (and extended period invocation) arising from the contested interpretation are not sustainable and are set aside.

Final Conclusion: The appeal is allowed: the Tribunal set aside the impugned order dated 29.09.2020, holding that (i) on the facts the place of removal was the buyer's works for FOR deliveries and hence Cenvat credit on GTA services up to that place is admissible under Rule 2(l) CCR, 2004 read with Section 4; and (ii) demands based on an interpretation of law, including invocation of extended limitation and penalty, are not sustainable.

Penalty for alleged failure to supply goods as per excise invoices - Adverse inference from stock discrepancy at consignee - CENVAT credit record reconciliation and RG-23D - Benefit to co-notice under Sabka Vishwas (Legacy Dispute Resolution) Scheme - Requirement of notice specifying exact nature of contravention

Penalty for alleged failure to supply goods as per excise invoices - Adverse inference from stock discrepancy at consignee - CENVAT credit record reconciliation and RG-23D - Whether the penalty imposed on the appellant could be sustained on the basis of presumed shortage in the consignee's stock when the appellant produced reconciliation and statutory records - HELD THAT: - The Tribunal held that the adjudicating authority's inference that the appellant had not supplied goods as per invoices rested on the presumption arising from shortage of raw material at the consignee's factory. Such discrepancy in the consignee's stock cannot, by itself, justify an adverse inference exclusively against the appellant because shortages may arise for reasons not attributable to a particular supplier. The respondent did not dispute the contents of the RG-23D register maintained by the dealer nor the quarterly CENVAT returns filed under the CENVAT Credit Rules, 2004 showing availing and passing of credit. Considering the production of reconciliation and corroborative evidence from manufacturer and transporter, the Tribunal found no sufficient basis to sustain penal liability against the appellant on merits and set aside the penalty. [Paras 7]

Penalty set aside on merits for want of sufficient basis to attribute the consignee's stock discrepancy to the appellant

Benefit to co-notice under Sabka Vishwas (Legacy Dispute Resolution) Scheme - Requirement of notice specifying exact nature of contravention - Whether the appellant, being a co-noticee, was entitled to relief in view of the main noticee's settlement under the Sabka Vishwas (Legacy Dispute Resolution) Scheme and whether the show cause notice sufficiently specified the contravention - HELD THAT: - The Tribunal noted that the main noticee had availed the SVLDRS and settled the dues. The Circular clarifies that where the main-noticee discharges the duty demand, co-noticees can apply under the Scheme and that waiver of penalty/interest may follow where the duty is settled. The Tribunal further observed the principle that an assessee must be put on notice as to the exact nature of the contravention it is alleged to have committed; the SCN did not, in substance, establish that the appellant had not supplied goods as invoiced. In view of the main noticee's settlement under SVLDRS and the absence of a specific, sustainable finding against the appellant, the Tribunal found no merit in sustaining the penalty against the co-noticee. [Paras 6, 8]

Co-noticee entitled to benefit in view of main noticee's settlement under SVLDRS; penalty not maintainable

Final Conclusion: The appeal is allowed; the penalty imposed on the appellant is set aside and consequential relief, if any, shall follow in accordance with law.

CENVAT credit on inputs - registration not prerequisite for CENVAT credit - manufacture versus warehousing classification - twin test for manufacture (process amounting to manufacture and marketability) - denial of input credit not sustainable where duty on final product is accepted

CENVAT credit on inputs - registration not prerequisite for CENVAT credit - manufacture versus warehousing classification - Entitlement to avail CENVAT credit on CVD paid on imported Propane and Butane and utilise the same on clearance of LPG from the warehousing premises despite registration being in warehousing category at the time of import - HELD THAT: - The Tribunal examined whether absence of manufacturer registration at the time of receipt of imported Propane and Butane disentitled the appellant from availing CENVAT credit when those inputs were subsequently used in producing and clearing LPG from the MLIF. Relying on the ratio in the Karnataka High Court's decision in mPortal (as set out in the order), the Tribunal observed there is no provision in the CENVAT Credit Rules making registration as a manufacturer a statutory precondition to claim CENVAT credit. The Tribunal further applied the principle, drawn from the decisions referred to in the impugned order (including Ajinkya Enterprises and Vishal Precision Steel Tubes & Strips), that once the department accepts and the duty is discharged on the final product, denial of credit on inputs that went into that final product cannot be sustained. On the facts, the Tribunal recorded that the imported Propane and Butane were blended (with Ethyl Mercaptan) to form LPG which was stored at MLIF and subsequently cleared; therefore the inputs were used in the manufacture/formation of the dutiable product and the appellants were entitled to the CENVAT credit and its utilisation on clearance from the warehouse. [Paras 7]

The appellants are entitled to avail CENVAT credit on the imported Propane and Butane and to utilise the same on clearance of LPG from MLIF; the denial of credit is not sustainable.

Twin test for manufacture (process amounting to manufacture and marketability) - denial of input credit not sustainable where duty on final product is accepted - Application of the legal tests for manufacture and consequence for credit where duty on the final product was accepted by the department - HELD THAT: - The Tribunal considered the appellant's submission that addition of Ethyl Mercaptan rendered the blended product excisable and invoked the twin test that (i) the process must amount to manufacture and (ii) the product must be marketable. The Tribunal treated the LPG after addition of Ethyl Mercaptan as the excisable product and, in line with the authorities relied upon, held that since duty on the final product was accepted and paid on clearance, the inputs used in producing that product could not be denied credit. This reasoning led to setting aside the demand which sought recovery of CENVAT credit on the ground of absence of manufacturer registration at the time of import. [Paras 7]

The process of blending with Ethyl Mercaptan resulting in marketable LPG satisfies the relevant manufacturing test for purposes of credit; acceptance/payment of duty on the final product precludes denial of input credit.

Final Conclusion: Impugned order set aside; appeal allowed and appellants granted consequential reliefs in law after holding that CENVAT credit on imported Propane and Butane was admissible and its utilisation on clearance of LPG from MLIF was sustainable.

Refund voucher - interest payable under Section 24(4) of the TNGST Act - revised assessment order - non-disclosure of material subsequent order to the adjudicating court - setting aside of a judicial order for failure to place material facts

Refund voucher - interest payable under Section 24(4) of the TNGST Act - revised assessment order - non-disclosure of material subsequent order to the adjudicating court - Whether the Single Judge's direction to issue a refund voucher with interest should be set aside in view of a revised order passed by the tax authority prior to disposal of the writ petition which was not brought to the Single Judge's notice. - HELD THAT: - The appellate court examined the record and found that, although a refund voucher was originally issued on 01.06.2005 directing repayment with interest, the tax authority had passed a revised order on 16.12.2005-prior to disposal of the writ petition-holding the assessee liable to certain resale tax and penalty. That revised order was not placed before the learned Single Judge when the writ petition was disposed of on 25.06.2007. The non-disclosure of the intervening revised order, which directly affected the entitlement to refund, was a material omission warranting interference. In these circumstances the learned Single Judge's direction to issue the refund voucher with interest could not stand, and the appellate court set aside that direction on the sole ground of failure to bring the revised order to the attention of the Single Judge.

The Single Judge's order directing issuance of the refund voucher with interest is set aside for non-disclosure of the revised order passed on 16.12.2005.

Final Conclusion: Writ appeal allowed; the order dated 25.06.2007 directing issuance of a refund voucher with interest is set aside on the ground that a materially affecting revised order passed on 16.12.2005 was not placed before the learned Single Judge. No costs.

Violation of principles of natural justice - opportunity to produce documents - remand for fresh consideration - assessment under the Tamil Nadu Value Added Tax Act, 2006

Violation of principles of natural justice - opportunity to produce documents - assessment under the Tamil Nadu Value Added Tax Act, 2006 - Whether the impugned assessment orders suffer from violation of principles of natural justice by failing to consider documents filed by the petitioner and by treating the petitioner as having produced no documents. - HELD THAT: - The petitioner filed detailed replies dated 13.02.2019 for the Assessment Years 2006-2007 and 2007-2008 enclosing multiple documents supporting its contentions. The impugned assessment orders proceeded on the basis that the petitioner had not furnished any documents and incorrectly referred to a reply dated 14.02.2019 which the petitioner did not file. The Court found that if there was any shortcoming in the documents furnished, the assessing authority should have given the petitioner an opportunity to produce the missing purchase invoices or to clarify the record before recording an adverse finding. Pointing out the shortcoming for the first time in the assessment order amounted to a manifest breach of the principles of natural justice. In view of this procedural infirmity, the Court set aside the impugned orders and remitted the matters for fresh adjudication on merits, permitting the petitioner to file additional documents and representations and directing the assessing authority to pass fresh orders within a stipulated timeframe. [Paras 6, 7, 8]

Impugned assessment orders set aside on account of violation of natural justice; matters remitted to the assessing authority for fresh decisions on merits.

Final Conclusion: The impugned Assessment Orders dated 30.11.2020 for AYs 2006-2007 and 2007-2008 are set aside for violation of natural justice and remitted to the second respondent to decide afresh on merits within three months. The petitioner is permitted to file additional documents and representations within 30 days. No costs.

Amnesty scheme entitlement despite prior payment of tax and interest - waiver of interest and penalty under Vera Samadhan Yojana - misinterpretation and misapplication of scheme clause relating to cases where assessment pertains only to interest or penalty - requirement of deposit for availing scheme where assessment order, after set off, raises only penalty - quashing of assessment order and recovery measures where scheme benefit rightly available

Amnesty scheme entitlement despite prior payment of tax and interest - waiver of interest and penalty under Vera Samadhan Yojana - Petitioner is entitled to benefit of the Vera Samadhan Yojana although tax and interest were paid prior to assessment and the assessment, after set off, finally resulted in a demand only for penalty. - HELD THAT: - The Court held that the object and provisions of the Scheme contemplate granting relief to cases where tax and interest have already been paid prior to or during the operation of the Scheme; such paying dealers are not excluded. Clause 4.1 entitles remission of interest and penalty on payment of tax; other clauses (including Clause 4.5) address specific eventualities but must be read in the light of the Scheme's object to resolve old disputes and afford relief. The petitioner had challenged an assessment comprising tax, interest and penalty before the appellate authority and had paid tax and interest prior to framing of assessment. Rejecting the respondents' narrow reliance on Clause 4.5 to treat the outstanding demand (after set off) as a pure penalty case requiring 20% deposit, the Court found that the petitioner was eligible for waiver of penalty under the Scheme and not liable to deposit additional amount to obtain the Scheme benefit. [Paras 11, 12, 13, 14, 16]

Benefit of the Vera Samadhan Yojana granted to the petitioner; petitioner entitled to waiver of penalty under the Scheme.

Misinterpretation and misapplication of scheme clause relating to cases where assessment pertains only to interest or penalty - requirement of deposit for availing scheme where assessment order, after set off, raises only penalty - Respondent authority erred in applying Clause 4.5 and rejecting the petitioner's application for non payment of amounts stated in the intimation when, on the Scheme's true construction, no deposit was required in the petitioner's circumstances. - HELD THAT: - The Court examined Clause 4.5 and the time limit provisions in Clause 8 but concluded that the respondents' approach-treating the outstanding demand after set off as an independent penalty demand requiring 20% payment-was contrary to the Scheme's object and earlier High Court jurisprudence. Reliance on Clause 4.5 and the extended payment deadlines could not justify denial of relief where the petitioner had a bona fide position that tax and interest were already paid and the Scheme applied to the assessment which had encompassed tax, interest and penalty. Prior decisions of this Court were held to support a liberal construction favouring genuine claimants. [Paras 9, 10, 14, 15, 16]

The respondents' rejection of the application under Clause 4.5 was held to be unsustainable and amounted to misapplication of the Scheme.

Quashing of assessment order and recovery measures where scheme benefit rightly available - invalidity of coercive recovery including bank attachment during pendency of scheme application - Impugned assessment orders, notices and recovery actions (including bank attachment and sums recovered) were quashed; respondents directed to grant Scheme benefit and refund amounts recovered with statutory interest. - HELD THAT: - Because the petitioner was held entitled to the Scheme, the Court found the consequent coercive recovery and bank attachments improper. The impugned assessment orders and notices issued by respondent No.3 were quashed and set aside, and the respondents were directed to grant the benefit of the Scheme to the petitioner. The Court further directed refund of amounts recovered pursuant to the recovery proceedings with statutory interest within 12 weeks, thereby negating the consequences of the attachment and recovery. [Paras 16, 17]

Assessment orders and recovery notices quashed; respondents to grant Scheme benefit and refund amounts recovered with statutory interest within 12 weeks.

Restoration of appeals withdrawn to avail amnesty scheme - Alternative prayer for restoration of the second appeal was rendered unnecessary once the petitioner was held entitled to the Amnesty Scheme. - HELD THAT: - The Court noted that because the petitioner succeeded on the primary contention of entitlement to the Scheme, there was no need to entertain the alternative relief of restoring the withdrawn appeal. The entitlement to Scheme relief disposed of the necessity for restoration as a remedy. [Paras 16]

Prayer for restoration of the second appeal does not survive once Scheme relief is granted.

Final Conclusion: Petitions allowed; impugned assessment orders and recovery notices set aside. Respondent directed to extend Vera Samadhan Yojana relief to the petitioner (waiver of penalty), to refund amounts recovered pursuant to the recovery proceedings with statutory interest within 12 weeks, and rule made absolute to that extent.

Turnover tax - single point tax - exemption under Section 49(2) of the Gujarat Sales Tax Act, 1969 - effect of legislative amendment on prior exemption notification - inclusion of sales exempt under Section 49(2) in taxable turnover for levy of TOT

Turnover tax - exemption under Section 49(2) of the Gujarat Sales Tax Act, 1969 - inclusion of sales exempt under Section 49(2) in taxable turnover for levy of TOT - Liability of ONGC to pay TOT on sales to OMCs for the relevant year in view of the amendment to Section 10A deleting clause (f) of subsection (2). - HELD THAT: - The Court analysed Section 10A as amended by the Gujarat Sales Tax Amendment Act, 1993 and concluded that deletion of clause (f) of sub-section (2) removed the deduction for sales wholly exempt under Section 49(2) when computing taxable turnover for TOT. The statement of objects and reasons of the 1993 amendment expressly contemplated that sales exempt under Section 49(2) would henceforth be liable to turnover tax. The Tribunal and revisional authority correctly treated the amendment as effective from 01.04.1993 and applied it to include sales covered by Entry No.173 in the computation of taxable turnover, thereby making ONGC liable to pay TOT for the relevant year. The Court rejected the petitioner's submissions that the prior exemption under Section 49(2) continued to preclude TOT liability and that the single point nature of TOT precluded levy at ONGC's level in the post amendment statutory scheme. [Paras 13, 15, 16, 17, 18]

ONGC is liable to pay TOT on sales to OMCs for the relevant period in view of the amendment to Section 10A effective from 01.04.1993 which includes sales exempt under Section 49(2) in taxable turnover.

Turnover tax - single point tax - remission/refund - Whether the fact that OMCs allegedly paid TOT on resale entitles ONGC to a refund, and the appropriate forum for remission/relief. - HELD THAT: - The Court noted the contention that OMCs had already paid TOT on resale (which included the first point sale) and that remission/adjustment could be claimed by OMCs. While holding ONGC liable under the amended Section 10A, the Court observed that claims for remission or refund by OMCs (or relief on account of double levy) fall to be considered by the revenue authorities and are not a basis to set aside the assessment against ONGC. The Court therefore left it open to the concerned authorities to examine any remission proposals or claims for refund by OMCs; it did not adjudicate entitlement to remission on merits. [Paras 19]

Claims for remission or refund arising from alleged double taxation are to be considered by the revenue authorities; ONGC's liability under Section 10A is not displaced by such claims and the petition does not entitle ONGC to the refund sought.

Final Conclusion: The High Court dismissed the petition. It upheld the revisional and Tribunal orders that, by virtue of the 1993 amendment to Section 10A (effective 01.04.1993), sales by ONGC to OMCs (including those covered by Entry No.173) are includible in taxable turnover for levy of TOT, and directed that any claim for remission or refund by OMCs be pursued before the appropriate revenue authorities.

Quashing of assessment order and remand for fresh adjudication - obligation to furnish documents relied upon by the assessing officer - reliance on information from common portal requires disclosure to assessee - direction to comply with appellate remand order before passing fresh assessment

Obligation to furnish documents relied upon by the assessing officer - reliance on information from common portal requires disclosure to assessee - natural justice/personal hearing - Whether the assessing officer could confirm demand without furnishing to the petitioner the documents and information relied upon pursuant to the Appellate Deputy Commissioner's remand directions. - HELD THAT: - The Court recorded that after the Appellate Deputy Commissioner set aside the earlier assessments and remitted the matters with a direction that the assessing officer provide copies of purchase invoices, payment details and delivery particulars, the respondent fixed a personal hearing but did not furnish the material ordered to the petitioner and proceeded to pass fresh impugned orders. The respondent's counter asserted non-production by the petitioner, but the Court emphasised that the demand confirmed in the impugned orders was based on alleged information gathered from the common portal and that the petitioner could not be saddled with liability unless that information and the documents relied upon were furnished to the petitioner. In view of the duty to disclose material forming the basis of assessment and to afford effective opportunity to the assessee, the impugned orders could not stand without compliance with the remand direction to produce the documents and information. [Paras 6, 8, 9]

Impugned assessment orders quashed for failure to furnish to the petitioner the documents and information relied upon before confirming demand.

Quashing of assessment order and remand for fresh adjudication - direction to comply with appellate remand order before passing fresh assessment - Whether the matter should be remitted to the assessing officer and on what conditions. - HELD THAT: - The Court directed that the informations and documents identified by the Appellate Deputy Commissioner be furnished to the petitioner within two months of receipt of the order and that thereafter the respondent shall proceed to pass a fresh assessment order on merits and in accordance with law. The Court remitted the matter to the respondent for fresh adjudication, observing that assessment should not be finalised on the basis of portal information without affording the petitioner the material and opportunity to be heard. The Court gave a timeline, preferably six months for passing the fresh order, while leaving the adjudicatory exercise to be conducted in accordance with law after compliance with the disclosure direction. [Paras 10, 11]

The matters are remitted to the respondent to pass fresh orders after furnishing the directed documents and information to the petitioner; impugned orders set aside.

Final Conclusion: Writ petitions allowed; impugned assessment orders quashed and matters remitted to the assessing officer to furnish the documents/directions given by the Appellate Deputy Commissioner and thereupon pass fresh assessment orders on merits and in accordance with law within the timelines indicated.

Effect of executive memorandum on recovery proceedings - power of State Government to notify exemptions and reductions of tax - revisional power of the Commissioner of Commercial Taxes - finality of assessment orders - prejudice to revenue

Effect of executive memorandum on recovery proceedings - power of State Government to notify exemptions and reductions of tax - finality of assessment orders - prejudice to revenue - Whether the Government Memo dated 28.07.2010 operates to bar or stay recovery proceedings under the Andhra Pradesh Revenue Recovery Act, 1864 read with Section 17-C of the APGST Act in respect of assessment orders for the financial years 2003-04 and 2004-05 which have attained finality. - HELD THAT: - The Court examined Memo No. 24066/CT.II(1)/20104 dated 28.07.2010 and the scope of Section 9 of the APGST Act, 1957. Section 9 empowers the State Government to notify exemptions or reductions in tax or interest by notification in the Gazette in respect of specified classes of goods or persons; it does not permit the State to nullify or stay enforcement of judicial or quasi judicial orders which have attained finality. The Court further observed the Commissioner's statutory power under Section 20 to suo motu call for and examine subordinate orders and that executive directions which prevent revenue recovery pursuant to final orders are without jurisdiction and detrimental to revenue. Applying these principles, the Court held that the Memo could not be treated as impeding recovery of tax or interest under final orders for 2003-04 and 2004-05 and that the Memo is without jurisdiction and prejudicial to revenue. [Paras 22, 25, 26]

Writ petition dismissed insofar as it sought to restrain recovery for the financial years 2003-04 and 2004-05; the Government Memo does not bar recovery under final orders.

Revisional power of the Commissioner of Commercial Taxes - effect of executive memorandum on recovery proceedings - finality of assessment orders - Treatment of recovery proceedings in respect of the financial year 2001-02 where appellate/revisional proceedings (TREVC No. 26 of 2018) are pending. - HELD THAT: - The Court recorded the factual position that assessment/revisional litigation in respect of 2001-02 is sub judice (TREVC No. 26 of 2018). While holding that the executive Memo does not independently stay recovery, the Court directed that recovery in respect of 2001-02 shall abide by the interim or final orders in TREVC No. 26 of 2018 before this Court, thereby leaving enforcement to be governed by the pending judicial proceeding. [Paras 24, 26]

Writ petition disposed of in respect of 2001-02; recovery shall operate in accordance with the orders (interim or final) in TREVC No. 26 of 2018.

Final Conclusion: The writ petition is dismissed insofar as it seeks to restrain recovery for the assessment years 2003-04 and 2004-05 (the Government Memo of 28.07.2010 does not bar recovery and is without jurisdiction and prejudicial to revenue); in respect of 2001-02 recovery shall be governed by the outcome of TREVC No. 26 of 2018.

Directors' personal liability for company tax dues - Recovery proceedings against director's personal property for company dues - Lifting the corporate veil - Liability of person "in charge and responsible" at time of offence

Directors' personal liability for company tax dues - Recovery proceedings against director's personal property for company dues - Lifting the corporate veil - Liability of person "in charge and responsible" at time of offence - Quashing of notice dated 7th March 2023 seeking recovery of company VAT dues from the petitioner (an Additional Director appointed after the relevant period). - HELD THAT: - The petitioner was appointed Additional Director only from 24th December 2020, whereas the VAT demands relate to the years 2014-15 and 2015-16. Following the Division Bench decision in M. R. Choksi and the subsequent C V Cherian judgment of this Court, there is no statutory provision enabling sales-/VAT authorities to fasten personal liability on directors to recover company tax dues or to attach and sell directors' personal property for realization of company liabilities. Criminal liability under provisions dealing with offences by companies may fasten on directors who were in charge and responsible for the company's conduct, but that does not translate into a personal civil liability to pay the company's tax dues or a power to proceed against their personal assets. The doctrine of lifting the corporate veil is to be invoked only where there is a strong factual foundation; no such foundation was shown to justify treating the petitioner as personally liable for the prior-period dues. In these circumstances the notice issued to the petitioner for recovery of the company's outstanding VAT dues was without jurisdiction and liable to be quashed and set aside, and respondents are restrained from initiating recovery from the petitioner's personal property. [Paras 6, 7, 8]

Impugned notice dated 7th March 2023 quashed and set aside; respondents restrained from initiating proceedings against the petitioner's personal property for recovery of the company's outstanding VAT dues.

Final Conclusion: The petition is allowed: the recovery notice dated 7th March 2023 is quashed and the respondents are restrained from proceeding against the petitioner's personal property for the company's VAT dues for 2014-15 and 2015-16; no order as to costs.

Power of remand in appeal under Section 37 of the Arbitration and Conciliation Act, 1996 - scope of interference under Section 34 and Section 37 of the Arbitration and Conciliation Act, 1996 - exceptional circumstances warranting remand - limited supervisory role of courts in arbitral proceedings and object of expeditious arbitration - remand unwarranted where Section 34 court has given elaborate reasons

Scope of interference under Section 34 and Section 37 of the Arbitration and Conciliation Act, 1996 - limited supervisory role of courts in arbitral proceedings and object of expeditious arbitration - Whether an Appellate Court in an appeal under Section 37(1)(c) can remand the matter to the Section 34 Court as a routine practice or whether remand is permissible only in exceptional circumstances - HELD THAT: - The Court held that the jurisdiction of an Appellate Court under Section 37(1)(c) is circumscribed and akin to the limited grounds available under Section 34; the appellate function is to examine whether the Section 34 Court exercised its jurisdiction rightly within those constraints. Applying the objects and scheme of the Arbitration Act, which favour expeditious, efficient and minimally supervised arbitration, the Court reasoned that remand in an appeal under Section 37 is not to be routinely ordered. Remand is available only in exceptional cases where it is unavoidable - examples given include summary disposal of a Section 34 petition without consideration of merits, interference without service of notice, or decisions rendered when contesting parties are dead and not represented. The Court emphasised that routine remands would frustrate the Arbitration Act's aims by prolonging proceedings and increasing costs. [Paras 15, 18, 19]

Remand from a Section 37 Court is permissible only in exceptional circumstances; appellate courts must be conservative in ordering remands, given the narrow supervisory role envisaged by the Arbitration Act.

Remand unwarranted where Section 34 court has given elaborate reasons - power of remand in appeal under Section 37 of the Arbitration and Conciliation Act, 1996 - Whether the Division Bench's order remanding the petition to the learned Single Judge was justified in the present case - HELD THAT: - On the facts, the learned Single Judge had undertaken an extensive, detailed consideration of the arbitral award, recorded findings on multiple aspects including jurisdiction, specific performance, damages, and evidentiary treatment, and addressed alleged patent illegality and perversity. The Supreme Court found the Division Bench's conclusion - that several issues had not been addressed by the Single Judge and therefore remand was necessary - unsustainable. Given the detailed reasons delivered by the Section 34 Court, the appellate remand was held to be wholly unwarranted. The Court observed that it must benefit from reasoned judgments of the Section 34 Court and that, where the Single Judge has dealt with the merits, the Appellate Court ought to decide the appeal on merits instead of remanding as a routine measure. [Paras 8, 13, 20]

The Division Bench's remand was set aside as unwarranted because the learned Single Judge had given elaborate, reasoned consideration of the Section 34 petition.

Power of remand in appeal under Section 37 of the Arbitration and Conciliation Act, 1996 - limited supervisory role of courts in arbitral proceedings and object of expeditious arbitration - Procedural consequence: what direction should follow from setting aside the Division Bench's remand-order - HELD THAT: - The Court directed that the impugned Division Bench judgment dated 7 July 2023 be set aside and the appeal be restored to the High Court for adjudication on merits. Specific procedural directions were issued: the restored appeal to be listed before the roster Bench on the stated date without fresh service; the High Court to permit filing of an amended memorandum of appeal containing only relevant and permissible grounds and to fix a hearing schedule; and continuation of the interim relief previously granted by this Court. The Supreme Court expressly refrained from adjudicating the merits of the arbitral award or the Single Judge's judgment, leaving all issues in the remanded appeal open for decision by the High Court. [Paras 20, 24, 25]

Impugned Division Bench order set aside; appeal restored to High Court to be heard on merits with directions for listing, limitation of grounds, and continuation of interim relief; no adjudication on merits by this Court.

Final Conclusion: The Supreme Court allowed the application for special leave, set aside the Division Bench's remand-order as unwarranted, restored the appeal to the Bombay High Court for fresh hearing on merits with directions to restrict pleadings to relevant grounds and to list the matter as directed, continued the interim relief previously granted, and left all substantive issues arising in the remanded appeal open to be decided by the High Court; the appeals were partly allowed with no orders as to costs.

Conditions of bail - interest of justice - right to privacy under Article 21 - impossibility of compliance with bail condition - certificate of assurance from Embassy/High Commission - use of technology for real time tracking - scope of Section 437(3) CrPC - limitations under Section 37 NDPS Act

Use of technology for real time tracking - right to privacy under Article 21 - conditions of bail - Validity of the bail condition requiring the accused to drop a PIN on Google Maps - HELD THAT: - The Court held that a condition compelling an accused to drop a PIN on Google Maps was legally unsustainable. Technical evidence from Google LLC established that a dropped PIN is a static, user controlled marker and does not permit real time tracking of the user's device; thus the condition was both redundant and ineffective to serve investigative needs. More broadly, the Court reiterated that bail conditions imposed under Section 437(3) CrPC must be confined to the "interest of justice" and cannot authorise continuous surveillance of an accused's movements. Imposing conditions that enable constant monitoring-whether by technological means or otherwise-would infringe the accused's right to privacy under Article 21 and, if so onerous, would frustrate the very purpose of bail. Accordingly, the impugned Google Maps PIN condition, having no real utility for investigation and entailing an impermissible intrusion into privacy, was ordered to be deleted. [Paras 10, 15]

The condition of dropping a PIN on Google Maps is deleted as it is redundant, ineffective for real time tracking, and violates the right to privacy.

Certificate of assurance from Embassy/High Commission - impossibility of compliance with bail condition - limitations under Section 37 NDPS Act - conditions of bail - Legality and applicability of the requirement to obtain a certificate of assurance from the Embassy/High Commission for foreign nationals released on bail - HELD THAT: - The Court examined paragraph 15(iv) of Supreme Court Legal Aid Committee and observed that those directions were intended as one time measures for undertrials languishing in custody due to delayed trials. The requirement that a foreign undertrial obtain a certificate of assurance from the relevant Embassy/High Commission is not mechanically mandatory in every NDPS bail order; its application depends on case specific facts. Further, the Court recognised that obtaining such a certificate may be beyond the control of the accused; if the Embassy/High Commission refuses or fails to issue the certificate within a reasonable time, the condition may be dispensed with because imposing an impossible condition would unjustly deny bail. The Court also noted that, where appropriate, alternative conditions (such as surrender of passport and periodic reporting) can be imposed. The panel declined to refer clause (iv) to a larger Bench for reconsideration and directed deletion of the Embassy certificate condition in the present order. [Paras 12, 13, 14, 15, 16]

The condition of obtaining a certificate from the Embassy/High Commission is not mandatorily required in every case and was deleted in the present bail order; courts may dispense with it where compliance is impossible and may impose alternative safeguards.

Final Conclusion: The Supreme Court granted leave, held that the Google Maps PIN condition and the Embassy/High Commission certificate condition imposed in the bail order were unsustainable in the circumstances, directed deletion of both conditions, and listed the matter for final orders after compliance verification.

Application under Section 34(3) - limitation for setting aside arbitral award - computation of limitation period (effect of Section 12(1) of the Limitation Act) - expiry of prescribed period when court is closed (Section 4 of the Limitation Act) - proviso to Section 34(3) excluding applicability of Section 5 of the Limitation Act

Application under Section 34(3) - limitation for setting aside arbitral award - computation of limitation period (effect of Section 12(1) of the Limitation Act) - The petition under Section 34 of the Arbitration and Conciliation Act filed on 31st October 2022 was barred by limitation. - HELD THAT: - The Arbitral Award was received on 30th June 2022. In computing the three month period under subsection (3) of Section 34, Section 12(1) of the Limitation Act requires exclusion of the day from which limitation is to be reckoned; accordingly limitation commenced on 1st July 2022. The three month prescribed period therefore expired on 30th September 2022. The proviso to Section 34(3) permits the court to extend time by a further period of thirty days for sufficient cause, which would have run up to 30th October 2022. The petition filed on 31st October 2022 was therefore beyond both the three month prescribed period and the maximum thirty day extension under the proviso. [Paras 7, 10, 11]

Petition dismissed as time barred.

Expiry of prescribed period when court is closed (Section 4 of the Limitation Act) - application under Section 34(3) - limitation for setting aside arbitral award - Section 4 of the Limitation Act was not attracted to extend the filing date to the day the court reopened. - HELD THAT: - Section 4 applies where the "prescribed period" expires on a day when the court is closed. "Prescribed period" means the period of limitation computed in accordance with the Limitation Act. For an application under Section 34(3) the prescribed period is the three months; the thirty day extension in the proviso is not part of the prescribed period. Here the three month prescribed period expired on 30th September 2022 (the day before the pooja vacation); consequently Section 4 could not operate to defer expiry to the reopening date. [Paras 9, 10]

Section 4 inapplicable; petition could not be saved by court closure.

Proviso to Section 34(3) excluding applicability of Section 5 of the Limitation Act - Section 5 of the Limitation Act is excluded in proceedings under Section 34(3) by virtue of the proviso to that subsection. - HELD THAT: - This Court reiterated the established view that the language of the proviso to Section 34(3) excludes the applicability of Section 5 of the Limitation Act to applications under Section 34. The limited remedial power under the proviso (a maximum of thirty days on sufficient cause) is the only extension available and Section 5 cannot be invoked to enlarge this period. [Paras 8]

Section 5 not available to enlarge limitation under Section 34(3).

Final Conclusion: The appeal is dismissed; the High Court correctly held the Section 34 petition to be barred by limitation, Section 4 of the Limitation Act did not apply, and Section 5 is excluded by the proviso to Section 34(3).

Specific performance - refund of advance sale consideration - burden of proof for payment of consideration - corroboration of payment evidence - endorsement on agreement as evidence of subsequent payment - equitable discretion under Section 20 of the Specific Relief Act

Specific performance - equitable discretion under Section 20 of the Specific Relief Act - Whether the plaintiff was entitled to specific performance of the agreement of sale. - HELD THAT: - The Trial Court found the agreement to have been executed and relied upon documentary and oral evidence, but having regard to equitable principles including those under Section 20 of the Specific Relief Act, declined specific performance on the ground that the suit property would fetch more value than the sale consideration. The plaintiff did not challenge the First Appellate Court's refusal of specific performance before this Court, and that part of the decree therefore stands concluded.

The refusal to grant specific performance has attained finality and is not reopened in this appeal.

Refund of advance sale consideration - burden of proof for payment of consideration - corroboration of payment evidence - endorsement on agreement as evidence of subsequent payment - Whether the plaintiff proved payment of the advance consideration of Rs. 18,00,000 comprising Rs. 3,00,000 at the time of agreement and a subsequent Rs. 15,00,000. - HELD THAT: - Both lower courts accepted proof of the initial payment of Rs. 3,00,000 by the plaintiff based on evidence of PW-1 and PW-3. The High Court examined the claim of an additional Rs. 15,00,000 evidenced by an endorsement (exhibit A-1(a)) and found it unproved. The High Court noted absence of contemporaneous stamp receipts, the omission of that specific payment from the suit notice (exhibit B-1), and the irregular sequence of signatures on the endorsement (witness signature appearing before the defendant's), all of which undermined the plaintiff's sole testimony of subsequent payment and the absence of corroborative evidence. Having reviewed the record, this Court concurs with the High Court that the plaintiff proved only the initial payment and failed to establish the subsequent payment of Rs. 15,00,000 by positive, corroborative evidence. [Paras 11, 12]

Plaintiff proved only the initial advance payment; the claimed subsequent payment of Rs. 15,00,000 is not established and the decree is to that extent modified.

Final Conclusion: The appeal is dismissed. The High Court correctly upheld proof only of the initial advance and rejected proof of the subsequent payment; parties shall bear their own costs.

Lawful retention of security deposit by contracting authority - recovery of tax under the GST enactments (Sections 63, 73, 74) - licensee's GST liability and enforcement by GST authorities - refund of security deposit with interest

Lawful retention of security deposit by contracting authority - licensee's GST liability and enforcement by GST authorities - Retention of the security deposit and advance by the second respondent to meet alleged GST liability of the petitioner was not permissible. - HELD THAT: - The Court held that although the petitioner, as a licencee and service-provider, had a statutory obligation to obtain GST registration and pay tax, any alleged evasion or unpaid GST is to be recovered by the competent authorities under the GST enactments in the manner provided by law. The State Marketing Company (respondent) being a contracting/licensing authority does not have power to exercise a lien by retaining the security deposit and advance as a mode of recovery of GST liabilities; such retention cannot supplant the statutory recovery mechanisms under the GST law. Consequently, the impugned orders by which the respondent continued to retain the amounts paid by the petitioner were unsustainable. [Paras 13, 14]

Petitioner's GST liability, if any, must be pursued by the GST authorities under the statute and not by retention of the security deposit by the respondent; therefore retention was unlawful.

Refund of security deposit with interest - Direction to refund the security deposit and advance to the petitioner with interest. - HELD THAT: - In exercise of writ jurisdiction the Court directed repayment of the amounts collected by the second respondent, since retention to meet GST demands was held impermissible. The Court ordered refund of the security deposit and advance together with interest at 9% from the date when the petitioner's licence expired, to be paid within three months from receipt of the order. The remedy was granted notwithstanding any separate proceedings that may be instituted by GST authorities for tax recovery. [Paras 15]

Second respondent directed to refund the collected amounts with 9% interest from licence expiry, payable within three months.

Final Conclusion: Writ petition allowed: the respondent cannot retain the licencee's security deposit and advance as a mode of recovering alleged GST dues; those dues must be pursued by GST authorities under the statute. The respondent is directed to refund the amounts with 9% interest from the date of licence expiry within three months.

Liability of drawer under Section 138 of the Negotiable Instruments Act - vicarious liability under Section 141 of the Negotiable Instruments Act - proprietorship concern not amenable to Section 141 vicarious liability - authorized signatory status insufficient to fasten vicarious criminal liability

Liability of drawer under Section 138 of the Negotiable Instruments Act - vicarious liability under Section 141 of the Negotiable Instruments Act - proprietorship concern not amenable to Section 141 vicarious liability - authorized signatory status insufficient to fasten vicarious criminal liability - Whether the complaint under Section 138 of the Negotiable Instruments Act could be sustained against the petitioner (accused no.3) who is not proprietor nor the signatory of the cheque, but alleged to be an authorized signatory of a proprietorship concern. - HELD THAT: - The Court held that Section 138 makes the drawer of the cheque liable and Section 141 creates vicarious liability only where the offence is committed by a company, firm or other association of individuals. The scope of Section 141 cannot be extended to a proprietorship concern so as to make persons other than the proprietor or the actual signatory criminally liable. The court relied on the principle that a proprietorship concern stands on a different footing from a company or a firm and that vicarious liability under Section 141 is directed at juristic persons and persons in charge of such bodies; references in the judgment to precedent support that the complaint must contain requisite averments to bring persons within the ambit of Section 141 [Aparna A. Shah v. Sheth Developers (P) Ltd.] and Raghu Lakshminarayanan v. Fine Tubes and related authorities [S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla]. Applied to the facts, the complaint itself pleads that Accused No.1 is a proprietorship concern and that Accused No.2 is its proprietor and the cheques were signed by Accused No.2. The mere fact that the petitioner signed the distributorship agreement or is alleged to be an authorized signatory does not suffice to invoke vicarious criminal liability under Section 141 where the concerned entity is a proprietorship. Accordingly the complaint as framed cannot be sustained against the petitioner. [Paras 10, 11, 12, 13]

The complaint is quashed as against the petitioner; Section 141 cannot be invoked to fasten vicarious liability on the petitioner who is neither proprietor nor the cheque signatory.

Final Conclusion: Complaint under Section 138 of the Negotiable Instruments Act is quashed as against the petitioner (accused no.3); the order leaves open proceedings against other accused and no costs are imposed.

Complementarity of the SARFAESI Act and the RDDB Act - doctrine of election of remedies - Application of other laws not barred under Section 37 of the SARFAESI Act - availability of statutory remedy by way of appeal under the RDDB Act - discretionary equitable relief under Article 226 in debt recovery cases

Complementarity of the SARFAESI Act and the RDDB Act - doctrine of election of remedies - Application of other laws not barred under Section 37 of the SARFAESI Act - Continuation of recovery proceedings under the RDDB Act was maintainable despite simultaneous SARFAESI Act enforcement proceedings. - HELD THAT: - The Court held that the question whether RDDB Act proceedings can run concurrently with SARFAESI Act enforcement proceedings is no longer res integra and has been authoritatively settled by the Supreme Court. Reliance was placed on the decisions in Transcore v. Union of India and Another , Mathew Varghese v. M. Amritha Kumar and M.D. Frozen Foods Exports Pvt. Ltd. v. Hero Fincorp Ltd. which collectively establish that the two statutory schemes are complementary and not mutually exclusive. The Court noted that Section 37 of the SARFAESI Act contemplates that the SARFAESI Act operates in addition to other laws and does not bar invocation of remedies under the RDDB Act; consequently the doctrine of election of remedies is inapplicable where the remedies are not repugnant. Applying these principles, the Court concluded that Respondent No.1's continuation of its Section 19 RDDB Act application was maintainable notwithstanding the SARFAESI proceedings instituted in respect of the secured asset. [Paras 5]

The RDDB Act proceedings (T.A. No. 165/2022) were maintainable and there was no bar to their continuation due to parallel SARFAESI Act proceedings.

Availability of statutory remedy by way of appeal under the RDDB Act - discretionary equitable relief under Article 226 in debt recovery cases - The writ petition under Article 226 was not maintainable and relief was refused as the petitioners had remedies under the RDDB Act and the petition was filed to circumvent statutory appeal. - HELD THAT: - The Court observed that the petitioners had not availed the statutory appellate remedy under Section 20 of the RDDB Act against the DRT order and that the present writ petition was filed to circumvent the statutory route. Relying on established principles that a debtor who has failed to discharge liabilities is ordinarily not entitled to discretionary equitable relief under Article 226, the Court found the petition to be not bona fide. In consequence, the Court declined to entertain the writ petition and dismissed it along with pending applications. [Paras 5, 6]

The writ petition was dismissed; discretionary relief under Article 226 was refused and the DRT order was allowed to stand.

Final Conclusion: The High Court dismissed the writ petition as without merit, holding that parallel RDDB Act proceedings were maintainable alongside SARFAESI Act enforcement proceedings and that the petitioners, having statutory remedies available, were not entitled to equitable relief; the DRT order directing recovery was left undisturbed.

Abatement of reference under third proviso to Section 15(1) SICA - measures under Section 13(4) SARFAESI Act - amount outstanding - definition of secured creditor - appeal as continuation of original proceedings - effect of revival of writ petition and interim order

Abatement of reference under third proviso to Section 15(1) SICA - measures under Section 13(4) SARFAESI Act - definition of secured creditor - Whether the reference before the BIFR abated by operation of law on account of secured creditors representing not less than three-fourth in value of the amount outstanding having taken measures under Section 13(4) of the SARFAESI Act. - HELD THAT: - The Court held that the third proviso to Section 15(1) of SICA operates to abate a reference once secured creditors representing not less than three-fourth in value of the amount outstanding (as explained in Section 13(9) of the SARFAESI Act) have taken measures under Section 13(4) of the SARFAESI Act. The definition of "secured creditor" in the SARFAESI Act is wide and includes asset reconstruction companies and certain trustees; only creditors who fall within that definition and who have taken measures under Section 13(4) are relevant for computing the three-fourths value. The Court accepted the statutory scheme and legislative intent that the SICA reference must yield in specified circumstances to enforcement measures under the SARFAESI Act, and rejected the appellant's contention that "outstanding" should be read as total amount borrowed. The amount to be reckoned is the amount outstanding to those secured creditors (principal, interest and other dues as per books) who have taken the enforcement measures, and if that amount is not less than three-fourths in value, abatement follows as a matter of law. [Paras 31, 32, 33, 34, 35]

Reference pending before the BIFR abated by operation of law because secured creditor(s) qualifying under the SARFAESI Act, representing not less than three-fourth in value of the amount outstanding, had taken measures under Section 13(4) of the SARFAESI Act.

Appeal as continuation of original proceedings - jurisdiction of AAIFR to examine abatement - Whether the AAIFR could entertain and decide an application that the reference before the BIFR had abated, or whether such determination was exclusively for the BIFR. - HELD THAT: - The Court held that an appeal is a continuation of the original proceedings and nothing prevented the AAIFR from examining a pure legal question raised in the course of an appeal, namely whether the reference had abated by operation of law. The AAIFR did not usurp the BIFR's jurisdiction; it was competent to consider the legal effect of measures taken under the SARFAESI Act on the reference before it on appeal. Consequently, the AAIFR's consideration and ruling on abatement was lawful. [Paras 24, 26]

AAIFR was competent to examine and decide the question of abatement raised in the appeal; its exercise of jurisdiction in that regard was not a usurpation of BIFR's functions.

Effect of revival of writ petition and interim order - Whether the revival/restoration of the earlier writ petition and the interim order therein prevented the BIFR or AAIFR from issuing or enforcing the fresh show-cause notice and subsequent orders (dated 01.03.2007 and 21.05.2007). - HELD THAT: - The Court found that the earlier show-cause notice, which had been the subject of the writ petition, had been cancelled by BIFR on 07.04.1994 and that the matters relating to the fresh show-cause notice dated 01.03.2007 and the BIFR order dated 21.05.2007 were not challenged in the restored writ petition. The Supreme Court's restoration of the writ petition did not operate to annul or restrain the subsequent distinct proceedings taken by the BIFR which were neither informed to nor otherwise dealt with by the Supreme Court at the time of restoration. The High Court's subsequent dismissal of the writ petition as infructuous was left unchallenged. Therefore, the revival of the earlier writ petition and its interim order did not preclude the BIFR/AAIFR from proceeding on the fresh notice and order. [Paras 22, 23, 24]

Revival of the earlier writ petition and the interim order did not prevent the BIFR or AAIFR from proceeding with the fresh show-cause notice and the subsequent order; the interim order did not operate to eclipse the later proceedings.

Interpretation of "amount outstanding" - explanation to Section 13(9) SARFAESI Act - Whether the expression "amount outstanding" in the third proviso to Section 15(1) of SICA must be read to mean the amount outstanding as explained in Section 13(9) of the SARFAESI Act or the entire amount of financial assistance disbursed to the borrower. - HELD THAT: - The Court applied literal and purposive construction and held that "amount outstanding" must be understood as explained in Section 13(9) of the SARFAESI Act (i.e. principal, interest and other dues payable as per the secured creditor's books), and not as the entire amount of financial assistance disbursed. Reading "outstanding" to mean total borrowed amount would contradict the statutory language and the legislative intent to protect secured creditors' enforcement rights in specified circumstances. The Court relied on the explanatory provision in Section 13(9) and on Supreme Court precedents that construed the interplay between SICA and SARFAESI. [Paras 31, 33, 34, 35]

"Amount outstanding" in the third proviso to Section 15(1) SICA means the amount outstanding (principal, interest and other dues) as explained in Section 13(9) of the SARFAESI Act and does not mean the total financial assistance disbursed.

Final Conclusion: The appeal is dismissed. The High Court rightly upheld the AAIFR's order declaring the reference before the BIFR to have abated by operation of law upon the qualifying secured creditor(s) taking measures under Section 13(4) of the SARFAESI Act, and the AAIFR was competent to decide the issue in the appeal.

Classification of account as Non-Performing Asset (NPA) - Out of order status of cash credit account - Non-renewal of credit facility as ground for NPA - RBI Master Circulars on asset classification - Notice under Section 13(2) of the SARFAESI Act - Measures under Section 13(4) of the SARFAESI Act - Maintainability of writ under Article 226 in commercial disputes - Interim orders are tentative and not conclusive

Classification of account as Non-Performing Asset (NPA) - Non-renewal of credit facility as ground for NPA - RBI Master Circulars on asset classification - Out of order status of cash credit account - Validity of classifying the petitioners' account as NPA on June 30, 2023 - HELD THAT: - The court held that classification as NPA on June 30, 2023 was justified. The last renewal of the cash credit facility was on September 29, 2022 and valid until December 31, 2022; thereafter the sanctioned limit effectively fell to zero. Under the relevant RBI Master Circulars (including the April 1, 2023 Circular and the earlier November 12, 2021 directions), a cash credit account may be treated as 'out of order' or declared NPA not only when the outstanding exceeds the sanctioned limit for 90 days but also where the account remains unrenewed and the record of recovery is unfavourable. Clause 4.2.4(c) of the April 1, 2023 Master Circular permits treating a cash credit account as NPA where the limit is not renewed within 180 days of ad hoc sanction; here 180 days expired on June 29, 2023 and the account was declared NPA on June 30, 2023. Alternatively, under the November 12, 2021 Master Circular, the account was 'out of order' because credits were not sufficient to cover interest during the relevant 90 day periods. The petitioners were given opportunities (including recall notice and email reminders) to regularize the account but failed to do so. The court therefore rejected the argument that classification was illegal merely because the outstanding did not exceed the sanctioned limit prior to classification. [Paras 18, 21, 22, 24, 25]

The classification of the petitioners' account as NPA on June 30, 2023 is lawful and is upheld.

Notice under Section 13(2) of the SARFAESI Act - Measures under Section 13(4) of the SARFAESI Act - Validity of the Section 13(2) notice dated September 11, 2023 and consequential measures under Section 13(4) - HELD THAT: - The court observed that a Section 13(2) notice need not contain elaborate reasons for NPA classification as it is not a judicial or quasi-judicial order. Since the NPA classification itself was held to be justified, the issuance of the notice under Section 13(2) and the bank's subsequent actions under Section 13(4) were within the statutory scheme and could not be faulted. Measures taken pursuant to Section 13(4) during the pendency of the writ petition were therefore permissible and did not render the writ maintainable on that ground. [Paras 28, 29, 31]

The Section 13(2) notice and the consequent measures under Section 13(4) are valid and sustain judicially.

Interim orders are tentative and not conclusive - Maintainability of writ under Article 226 in commercial disputes - Whether the interim order dated December 6, 2023 attained finality and precluded re-examination at final hearing - HELD THAT: - The court reaffirmed the settled principle that ad interim findings are prima facie and tentative, rendered to test triability and do not bind the court at final hearing. Consequently, the petitioners' submission that the respondent bank had not challenged the interim order and that its findings had attained finality was rejected. Further, the dispute being essentially commercial and arising from contract between private parties did not warrant interference under Article 226 beyond the scope contemplated by law. [Paras 2, 14, 27]

The interim order did not attain finality and cannot preclude re-examination; the writ petition is not maintainable on the basis asserted by the petitioners.

Final Conclusion: The writ petition is dismissed on contest: the NPA classification dated June 30, 2023 and the subsequent Section 13(2) notice and Section 13(4) measures are upheld; interim findings did not attain finality. The petitioners remain free to pursue remedy before the Debts Recovery Tribunal under Section 17 of the SARFAESI Act.

Pre-deposit requirement under Rules 60 & 61 of Schedule - II to the Income Tax Act - tribunal cannot grant relief beyond the pleadings - interim order merges on dismissal or withdrawal of appeal - bona fide purchaser for value

Pre-deposit requirement under Rules 60 & 61 of Schedule - II to the Income Tax Act - Whether the Debt Recovery Tribunal ought to have entertained and decided Appeal No. 1/2004 in the absence of compliance with the mandatory pre-deposit requirement under Rules 60 & 61 of Schedule - II to the Income Tax Act. - HELD THAT: - The Court found on the record that no material was placed before the Tribunal to show compliance with the mandatory pre-deposit condition entitling the appellant to challenge the confirmation of sale. Relying on Bishan Paul and the principle that title vests on confirmation only when full price is realized, the Court held that an appeal challenging confirmation under the rules is subject to the pre-deposit condition, and in the absence of proof of such deposit the Tribunal ought not to have entertained the appeal. Because the mandatory condition was not fulfilled, the proceedings before the DRT lacked jurisdiction to proceed on that ground and the impugned orders could not be sustained. [Paras 20]

The appeal was not maintainable in the absence of compliance with the pre-deposit requirement and the DRT ought not to have entertained or decided the appeal.

Tribunal cannot grant relief beyond the pleadings - Whether the DRT/DRAT were competent to grant relief cancelling or setting aside the auction proceedings and sale where no such relief was specifically pleaded or prayed for in the appeal. - HELD THAT: - The Court applied established principles that a court or tribunal must decide on the case as pleaded and generally cannot grant relief not claimed by the parties. Citing Bharat Amratlal Kothari and related authorities, the Court held that the Tribunal has no jurisdiction to go beyond the reliefs prayed for and cannot grant reliefs outside the scope of the pleadings. Since setting aside the auction/sale was not sought in the appeal, the DRT's order granting such relief exceeded the scope of the pleadings and was not permissible. [Paras 19, 21, 22]

The DRT/DRAT exceeded their jurisdiction by granting relief not prayed for and could not validly set aside the auction proceedings on that basis.

Interim order merges on dismissal or withdrawal of appeal - bona fide purchaser for value - Whether the interim stay granted on 23.12.2003 survived after the appeal was dismissed as withdrawn, and whether the failure to communicate the interim order to the Recovery Officer justified setting aside the auction and confirmation. - HELD THAT: - The Court recorded that the interim order in Appeal No. R-366/2003 was ultimately dismissed as withdrawn, and applied the doctrine that an interim order merges with the final order on dismissal/withdrawal so that the interim stay ceases to operate. In that circumstance the consequential proceedings (attachment/auction/confirmation) could not be set aside on the basis of the interim order. The Court noted the contention regarding non-communication of the interim order to the Recovery Officer but held that, as a matter of law, once the appeal was dismissed as withdrawn the interim order stood wiped out and could not support undoing the auction; accordingly the Tribunal erred in relying on the interim order to set aside the sale. The Court also observed the position of the auction purchaser as a purchaser for value in assessing relief. [Paras 23, 24, 25]

The interim order ceased to operate on dismissal/withdrawal of the appeal and could not justify setting aside the auction; the Tribunal erred in relying on it to annul the sale.

Final Conclusion: The writ petition is allowed; the impugned judgment and order dated 19.10.2005 of the Debt Recovery Appellate Tribunal and the order dated 29.04.2005 of the Debt Recovery Tribunal, Lucknow are quashed and set aside, with consequential reliefs granted to the petitioner.

Demand notice under the SARFAESI Act - possession of secured assets under the SARFAESI Act - pre-deposit under Section 18 of the SARFAESI Act - breach of court undertaking and forfeiture of interim relief - power to proceed with auction and recovery on default

Demand notice under the SARFAESI Act - possession of secured assets under the SARFAESI Act - Whether the petitioner was entitled to injunctive relief restraining the bank from taking physical possession of the secured assets - HELD THAT: - The Court recorded that the petitioner had been served with a demand notice under the SARFAESI Act and that proceedings were validly pursued by the bank, including appointment of Court Receivers and e-auction processes. The petitioner had sought interim protection before the DRT and this Court but the orders of those forums either refused relief or granted conditional stays subject to deposits and undertakings. Having failed to point out any illegality in the bank's actions under the SARFAESI Act and having repeatedly defaulted on the deposits/undertakings which stayed the bank's possession proceedings, the petitioner could not claim continued injunctive protection. The Court therefore held that, on the facts of this case, restraint against the bank taking possession could not be maintained.

Relief restraining the bank from taking possession of the secured assets was refused and the petition dismissed.

Breach of court undertaking and forfeiture of interim relief - power to proceed with auction and recovery on default - pre-deposit under Section 18 of the SARFAESI Act - Effect of the petitioner's default of undertakings, failed deposits and dishonoured cheque on the entitlement to relief - HELD THAT: - The Court reviewed the sequence of undertakings and conditional orders: an agreed schedule to pay specified amounts, a subsequent undertaking and an undertaking secured by cheques. The petitioner made partial payments but failed to make the larger payments within the stipulated time, and a cheque given later was dishonoured for insufficiency of funds. The petitioner had also not made the pre-deposit required by DRAT. The Court observed that the specific orders dated 13.09.2022 and 25.05.2023 satisfied the petitioner's prayer for extension of time, but because the petitioner wilfully defaulted on those undertakings and payments, the consequential reliefs (injunctions and stay of auction/possession) lapsed. In these circumstances the bank was entitled to proceed in accordance with law, including taking possession and conducting/confirming auction.

Default of undertakings and failure to make required deposits/dishonour of cheque led to forfeiture of interim protection and permitted the bank to proceed with recovery and auction.

Final Conclusion: The writ petition was dismissed for failure to honour court undertakings and payment obligations; having defaulted on agreed deposits and given a dishonoured cheque, the petitioner is not entitled to injunctive relief and the bank is at liberty to proceed with possession and recovery in accordance with law.