TaxTMI Updates e-Newsletter
Jul 13,2024

Anticipatory bail - summons under Section 69 of the Central Goods and Services Tax Act, 2017 - inapplicability of Section 438 of the Code of Criminal Procedure to Section 69 summons - liberty to invoke writ jurisdiction under Article 226 of the Constitution - interim protection from arrest

Anticipatory bail - inapplicability of Section 438 of the Code of Criminal Procedure to Section 69 summons - Validity of the High Court's cancellation of the anticipatory bail granted by the trial court - HELD THAT: - The Court held that the High Court did not commit any error in cancelling the anticipatory bail. The cancellation followed the dictum in SLP (Crl) No. 4212-4213 of 2019 (The State of Gujarat v. Choodamani Parmeshwaran Iyer) decided on 17 July 2023, where this Court ruled that a person summoned under Section 69 of the CGST Act for recording of statement is not entitled to invoke Section 438 CrPC. Applying that principle, the High Court's action in setting aside anticipatory bail was upheld. [Paras 2, 3, 4]

Cancellation of the anticipatory bail by the High Court is upheld.

Liberty to invoke writ jurisdiction under Article 226 of the Constitution - interim protection from arrest - Relief to be afforded to the petitioner following cancellation of anticipatory bail - HELD THAT: - Although the cancellation was upheld, the Court exercised equitable discretion to afford the petitioner an opportunity to seek relief before the High Court under Article 226. The petitioner was granted liberty to file a writ petition, which the High Court is to consider in accordance with law. As an interim protective measure, the Court directed that there shall be no arrest of the petitioner for a period of six weeks from the date of the order. [Paras 4, 5]

Petitioner granted liberty to move the High Court under Article 226 and afforded interim protection from arrest for six weeks.

Final Conclusion: Special Leave Petition disposed of; the High Court's cancellation of anticipatory bail is upheld, but the petitioner is granted liberty to file a writ under Article 226 and protection from arrest for six weeks pending consideration by the High Court.

Failure to record reasons - reasonsed order requirement - natural justice - personal hearing - remand for fresh consideration - imposition of penalty - GST registration revocation and restoration

Failure to record reasons - reasonsed order requirement - imposition of penalty - Whether the order dated 19.03.2024 imposing penalty can be sustained where the adjudicating authority recorded conclusions that the taxpayer's reply was 'after thought' without assigning supporting reasons. - HELD THAT: - The Court examined the impugned order and the extracted findings of the adjudicating authority which stated that the taxpayer's reply was an 'after thought' and did not prove existence at the registered place of business at the time of inspection. The High Court found that no reasons were recorded to support that conclusion and that the petitioner's explanation regarding shifting of place of business was not considered. An order which reaches adverse conclusions about the credibility or sufficiency of a taxpayer's reply without articulating reasons in support fails the requirement of a reasoned order and is unsustainable. Consequently, the impugned penalty order cannot be upheld owing to absence of reasoned findings. [Paras 4, 5]

Impugned order dated 19.03.2024 set aside for want of reasons; penalty order unsustainable.

Natural justice - personal hearing - remand for fresh consideration - GST registration revocation and restoration - The relief to be granted upon setting aside the impugned order and the procedural directions for further adjudication. - HELD THAT: - Having set aside the order for lack of reasons, the Court directed the matter to be remanded for fresh consideration. The respondent is required to provide a reasonable opportunity to the petitioner, including a personal hearing, and to issue a fresh order after re-consideration. The Court specified a timeline for compliance, mandating that the fresh order be passed within three months from receipt of a copy of this order. This remedial direction ensures that principles of natural justice are afforded and that the adjudicating authority records reasoned findings upon reconsideration. [Paras 6]

Matter remanded for reconsideration; petitioner to be afforded reasonable opportunity including personal hearing; fresh order to be passed within three months.

Final Conclusion: The order imposing penalty dated 19.03.2024 is set aside for lack of reasoned findings; the matter is remanded for fresh consideration after affording the petitioner a reasonable opportunity including personal hearing, and a fresh order is to be passed within three months.

Principles of natural justice - opportunity to be heard - personal hearing - remand on condition of deposit - setting aside assessment for non-participation - GST show cause notice procedure

Principles of natural justice - setting aside assessment for non-participation - GST show cause notice procedure - Impugned assessment order set aside because the petitioner was not afforded a reasonable opportunity to contest the tax demand on merits. - HELD THAT: - The Court noted that although intimations, a show cause notice and multiple personal hearing notices were uploaded on the GST portal, the petitioner asserted unawareness of the proceedings and did not participate. The assessment was confirmed only because there was no reply or documentary evidence in compliance with the departmental circulars. Taking the petitioner's assertion of non-participation into account, the interest of justice required that the impugned order be set aside so the petitioner may be given an opportunity to contest the demand on merits rather than permitting the assessment to stand without hearing. [Paras 4]

Impugned order dated 09.01.2024 set aside to enable the petitioner to contest the tax demand on merits.

Remand on condition of deposit - opportunity to be heard - personal hearing - Remand of proceedings to the respondent on condition that the petitioner remit 10% of the disputed tax demand and be permitted to file a reply and obtain a hearing, with a direction to pass a fresh order within a stated timeframe. - HELD THAT: - The petitioner agreed to remit 10% of the disputed demand as a condition for remand. The Court conditioned setting aside of the assessment on the petitioner remitting that amount within two weeks of receipt of the order and filing a reply to the show cause notice within the same period. Upon receipt of the petitioner's reply and verification that the deposit was made, the respondent is directed to provide a reasonable opportunity, including a personal hearing, and thereafter pass a fresh order within three months from receipt of the reply. The order thus remands the matter for fresh consideration limited to affording the petitioner a hearing and fresh adjudication after the stipulated compliance. [Paras 5]

Matter remanded to the respondent on the condition that the petitioner remit 10% of the disputed tax demand within two weeks and file a reply; respondent to grant hearing and pass a fresh order within three months of receipt of the reply.

Final Conclusion: Writ petition disposed of by setting aside the assessment dated 09.01.2024 and remanding the matter for fresh adjudication on the petitioner fulfilling the conditional deposit and filing a reply; no costs ordered.

Cancellation of registration - show-cause notice - appeal under Section 107 of the Act - lack of opportunity to respond due to incarceration - mechanical decision - restoration of GST registration subject to compliance - activation of portal for compliance - filing of returns and payment of tax, interest, fine, late fees and penalty as condition for restoration

Cancellation of registration - show-cause notice - lack of opportunity to respond due to incarceration - mechanical decision - restoration of GST registration subject to compliance - filing of returns and payment of tax, interest, fine, late fees and penalty as condition for restoration - appeal under Section 107 of the Act - Order cancelling the petitioner's registration and the appellate order rejecting the appeal were set aside and the petitioner's registration was directed to be restored subject to specified conditions. - HELD THAT: - The Court found on the material on record, including the discharge certificate, that the petitioner was in custody between 3rd February, 2022 and 20th July, 2023 and therefore had no opportunity to respond to the show-cause notice dated 27th July, 2023 or to apply for revocation of the cancellation order dated 23rd August, 2022. The appellate authority had rejected the appeal under Section 107 of the Act on the sole ground that no application for revocation had been filed; that rejection was characterised as mechanical and without application of mind. Having regard to the Division Bench direction in Subhankar Golder (MAT 639 of 2024) to set aside cancellations subject to compliance by the taxpayer, the Court set aside both the cancellation order and the appellate order and directed conditional restoration. The conditions specified require the petitioner, within four weeks from receipt of the server copy of the order, to file returns for the entire period of default and to pay the requisite tax, interest, and any fine, late fees and penalty, if not already paid; failure to comply will result in automatic dismissal of the writ petition and denial of the benefit. The respondents were further directed to activate the portal within one week to enable compliance by the petitioner. [Paras 12, 13, 14, 15, 16]

The orders dated 23rd August, 2022 and 13th March, 2024 are set aside and the petitioner's registration shall be restored by the jurisdictional officer if the petitioner files returns for the default period and pays requisite tax, interest, fine, late fees and penalty within four weeks; respondents to activate the portal within one week.

Final Conclusion: Writ petition disposed of by setting aside the cancellation and appellate orders and directing conditional restoration of the petitioner's registration upon compliance with filing of returns and payment of dues within four weeks; portal activation directed and matter disposed without costs.

Natural justice - reconsideration in view of common mismatch between GSTR-3B and auto-populated GSTR-2A - remand for fresh consideration - opportunity of personal hearing - production of certificates in terms of Circular No.183 for claiming eligible input tax credit - unblocking of input tax credit in electronic credit ledger

Reconsideration in view of common mismatch between GSTR-3B and auto-populated GSTR-2A - remand for fresh consideration - opportunity of personal hearing - production of certificates in terms of Circular No.183 for claiming eligible input tax credit - unblocking of input tax credit in electronic credit ledger - Impugned order dated 20.12.2023 set aside and matter remanded for fresh consideration with directions to afford opportunity and to unblock input tax credit pending reconsideration. - HELD THAT: - The court found that the issue concerning mismatch between the petitioner's GSTR-3B returns and the auto-populated GSTR-2A is common to the present proceedings and another challenged order, thereby requiring reconsideration rather than summary finality. In view of the petitioner's assertion that requisite certificates in terms of Circular No.183 are now available and the importance of affording natural justice, the respondent is directed to provide a reasonable opportunity, including a personal hearing, to enable the petitioner to furnish supporting certificates and submissions. The court ordered that a fresh decision be taken on merits after such opportunity and that, pending such reconsideration, the respondent must take necessary steps to unblock the petitioner's input tax credit in the electronic credit ledger. The directions fix a time-bound mandate for issuance of the fresh order within three months from receipt of this order. [Paras 4, 5]

Impugned order set aside; matter remanded for fresh consideration after affording opportunity including personal hearing; respondent directed to unblock input tax credit and pass fresh order within three months.

Final Conclusion: Writ petitions allowed to the extent that the impugned order dated 20.12.2023 is set aside and the matter is remanded for fresh consideration after providing the petitioner a reasonable opportunity (including personal hearing) to produce supporting certificates; respondent directed to unblock the petitioner's input tax credit and to pass a fresh order within three months.

Demand under Form GST DRC-07A - self-assessment under Rule 6 of the Central Excise Rules, 2002 - Sabka Vishwas (Legacy Disputes Resolution) Scheme, 2019 - exercise of powers under Section 142(8) of the CGST Act, 2017 read with Rule 142(A)(1) of the CGST Rules, 2017 - installment payment of tax demand

Demand under Form GST DRC-07A - self-assessment under Rule 6 of the Central Excise Rules, 2002 - installment payment of tax demand - Whether the petitioner could be permitted to discharge the outstanding demand by way of instalments while the summary demand under Form GST DRC-07A remains subsisting - HELD THAT: - The petition challenged the creation of a demand in Form GST DRC-07A for arrears of tax on self-assessment for the period February, 2015 and June, 2017. The Court noted that the demand was based on the petitioner's own self-assessment under Rule 6 of the Central Excise Rules, 2002 and that the petitioner had previously approached the Sabka Vishwas Scheme but did not avail relief for failure to pay the admitted liability. The petitioner had made partial payments and asserted inability to discharge the entire liability due to accumulated losses. Finding no other dispute barring recovery, the Court exercised its discretionary jurisdiction to alleviate immediate hardship by permitting structured payment. The Court directed the balance amount to be paid in twelve equated monthly instalments from 01.08.2024 to 01.07.2025, while preserving the respondent's statutory remedies in the event of default. [Paras 5, 6, 7]

Balance of the demand is to be paid in twelve equated monthly instalments from 01.08.2024 to 01.07.2025; on default the respondent may proceed in accordance with law including attachment and sale of properties.

Final Conclusion: Writ petition disposed of by permitting the petitioner to pay the balance of the self-assessed demand in twelve monthly instalments as directed; respondent free to take statutory action on default; no costs.

Treatment of pan-India turnover as State turnover - burden to substantiate State-wise turnover - remand for fresh consideration - personal hearing - setting aside assessment order - lifting of bank attachment

Treatment of pan-India turnover as State turnover - burden to substantiate State-wise turnover - remand for fresh consideration - Assessment treating entire outward supplies on a pan-India basis as attributable to Tamil Nadu was not sustained and was remanded for fresh consideration. - HELD THAT: - The Court noted that the petitioner carried on business in multiple States and had filed GSTR-1 and GSTR-3B returns showing 'nil' for Tamil Nadu for the assessment period 2017-18, while the financial statements on record appeared to be prepared on a pan-India basis. Although the petitioner had not originally placed before the authority state-specific supporting documents such as a Tamil Nadu trial balance, Chartered Accountant certificates or GST returns for other States, the petitioner asserted possession of GST returns for other States which, if produced, would corroborate that the outward supplies related to those States. In view of the fact that the entire tax demand had already been appropriated (securing revenue interest), the interest of justice required that the assessing officer reconsider the matter after the petitioner is given a reasonable opportunity to produce the state-wise documents and to be heard. The Court therefore set aside the impugned order and remanded the matter for fresh decision, directing the first respondent to afford a personal hearing and to pass a fresh order within three months from receipt of the Court's order. [Paras 6, 7]

Impugned order dated 30.12.2023 set aside and matter remanded for fresh consideration after giving the petitioner a reasonable opportunity, including a personal hearing; fresh order to be passed within three months.

Setting aside assessment order - lifting of bank attachment - Interim consequences of setting aside the assessment order and attachment were addressed. - HELD THAT: - Because the assessment order was set aside pending fresh consideration, the Court directed that the bank attachment effected pursuant to the impugned order be lifted. The Court observed that the tax demand had been appropriated and revenue interest thereby secured, which was a relevant consideration in granting the remand and lifting the attachment. [Paras 7]

In view of the setting aside of the assessment order, the bank attachment is raised.

Final Conclusion: The impugned order dated 30.12.2023 is set aside; the matter is remanded to the first respondent for fresh consideration after affording a reasonable opportunity including personal hearing and a fresh order is to be passed within three months; consequent bank attachment is lifted.

Principles of natural justice - service of notice via electronic portal - remand for fresh consideration on conditions - opportunity of personal hearing - reconsideration of tax demand on receipt of reply

Principles of natural justice - service of notice via electronic portal - Validity of the impugned order dated 29.12.2023 in the light of alleged non-communication of show cause proceedings to the petitioner and breach of principles of natural justice. - HELD THAT: - The court examined the impugned order and found that the tax proposal was confirmed because the petitioner did not reply to the show cause notice or produce documents. The petitioner asserted unawareness of the proceedings on the ground that communications were only uploaded on the GST portal and not otherwise brought to his attention. Having regard to that assertion and the requirement that affected persons be given effective opportunity to be heard, the interest of justice required reconsideration of the matter. The court therefore concluded that the impugned order could not stand on account of the denial (or potential denial) of an effective opportunity to participate in the proceedings and set aside the order to permit fresh consideration.

Impugned order set aside on ground of breach of principles of natural justice and to permit reconsideration.

Remand for fresh consideration on conditions - opportunity of personal hearing - reconsideration of tax demand on receipt of reply - Terms on which the matter was to be remanded for fresh consideration and the obligations of the parties on remand. - HELD THAT: - The petitioner agreed to remit 10% of the disputed tax demand as a condition for remand. The court imposed that condition and directed that the petitioner remit 10% within two weeks from receipt of the order and be permitted to submit a reply to the show cause notice within the same period. Upon receipt of the petitioner's reply and upon being satisfied that the 10% remittance was received, the respondent was directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter to pass a fresh order within three months from receipt of the petitioner's reply. These terms were imposed to balance the petitioner's right to be heard with the respondent's interest in recovery and finality.

Matter remanded for fresh consideration on the stated conditions: payment of 10% within two weeks, submission of reply within that period, grant of reasonable opportunity including personal hearing, and issuance of fresh order within three months of receipt of the reply.

Final Conclusion: Writ petition disposed of by setting aside the impugned order for breach of principles of natural justice and remanding the matter for fresh consideration on the petitioner's payment of 10% of the disputed tax demand, submission of a reply, and after affording a reasonable opportunity including a personal hearing; fresh order to be passed within three months.

Condonation of delay - power of appellate authority to condone delay beyond the prescribed period - mechanical dismissal of appeal - pre-deposit requirement for maintenance of appeal - remand for fresh decision on merits

Condonation of delay - mechanical dismissal of appeal - pre-deposit requirement for maintenance of appeal - Whether the Appellate Authority was justified in rejecting the belated appeal without considering the application for condonation of delay. - HELD THAT: - The Court found that the petitioner had exercised the statutory right to appeal under the Act and had filed the appeal with the required pre-deposit, as evidenced by the Form GST APL-01. The delay in filing the appeal was marginal and the petitioner had filed an application dated 27th October, 2023 with supporting documents adequately explaining the delay. The Appellate Authority, by recording only that the appeal was beyond the prescribed period and rejecting it, acted in a mechanical manner by glossing over the explanation for delay. Having regard to the marginal nature of the delay and the explanation furnished, the rejection could not be sustained. [Paras 13, 14, 15, 17, 18]

Order rejecting the appeal for being time-barred set aside; delay condoned.

Power of appellate authority to condone delay beyond the prescribed period - remand for fresh decision on merits - Whether the matter should be remitted to the Appellate Authority for decision on merits and the manner in which such disposal should be directed. - HELD THAT: - The Court noted the legal position that the appellate authority retains power to condone delay beyond one month from the prescribed period unless a statutory non-obstante clause expressly excludes the applicability of the Limitation Act; the petitioner relied on authority to that effect. In view of the setting aside of the order rejecting the appeal and the sufficiency of the explanation for delay, the Court remanded the appeal to the Appellate Authority for adjudication on merits and directed that the petitioner be afforded an opportunity of hearing. The Court fixed a time-bound mandate for disposal of the appeal on merits. [Paras 16, 19, 20]

Matter remitted to the Appellate Authority to decide the appeal on merits after hearing the petitioner; disposal to be completed within eight weeks from communication of this order.

Final Conclusion: The order of the Appellate Authority dated 24th November, 2023 rejecting the appeal as time-barred is set aside; delay is condoned and the appeal is remitted to the Appellate Authority for fresh adjudication on merits after hearing the petitioner, to be completed within eight weeks.

Provisional attachment under Section 83 of the CGST Act - Mandatory one-year cessation of provisional attachment - Extension of provisional attachment requiring decision by competent authority - Right of revenue to initiate action in accordance with law despite cessation

Provisional attachment under Section 83 of the CGST Act - Mandatory one-year cessation of provisional attachment - Extension of provisional attachment requiring decision by competent authority - Provisional attachment effected by order dated 19.05.2023 ceased to have effect on expiry of one year from that date - HELD THAT: - Subsection (2) of Section 83 of the CGST Act is couched in mandatory terms that every provisional attachment shall cease to have effect after expiry of one year from the date of the order. The Court held that, in the absence of any decision by a competent authority to extend the period of provisional attachment, internal departmental correspondence does not sustain continuation of the attachment. Applying the statutory mandate to the impugned order dated 19.05.2023, the provisional attachment stands terminated on expiry of one year from that date. The Court expressly left open the respondents' ability to take further action against the petitioner in accordance with law notwithstanding the cessation of the provisional attachment. [Paras 7, 8]

Impugned provisional attachment order dated 19.05.2023 ceased to have effect on expiry of one year from its date; respondents may nevertheless take action as permitted by law.

Final Conclusion: Writ petition disposed of by holding that the provisional attachment dated 19.05.2023 ceased to have effect after one year; no costs; respondents remain free to take any lawful action thereafter.

Rejection of appeal on grounds of limitation - limitation as a bar to appeal - consideration of appeal on merits - deposit of a percentage of disputed tax under Section 107 of the GST enactments

Rejection of appeal on grounds of limitation - consideration of appeal on merits - Impugned order rejecting the petitioner's appeal as time barred was set aside and the appeal was directed to be disposed of on merits. - HELD THAT: - The Court considered the petitioner's explanation that the tax was paid under an incorrect category (Business to Business instead of Bill to Customer) and that the petitioner has a plausible defence on merits. Although the respondents relied on Supreme Court precedent cited by them, the High Court, taking into account that the petitioner continues to be a going concern engaged in business, exercised its discretion to set aside the order rejecting the appeal in limine and directed that the appeal be heard on merits and in accordance with law. The Court thereby removed the limitation bar as the sole basis for summary rejection and required adjudication of the substantive contentions raised in the appeal. [Paras 5]

Impugned order rejecting the appeal on limitation set aside; appeal to be taken up for disposal on merits in accordance with law.

Deposit of a percentage of disputed tax under Section 107 of the GST enactments - consideration of appeal on merits - Condition for entertaining the appeal on merits was fixed as deposit of 10% of the disputed tax and timelines for compliance and disposal were prescribed. - HELD THAT: - The Court directed that the petitioner shall deposit 10% of the disputed tax through its Electronic Cash Register within 30 days from receipt of the order, as contemplated under Section 107 of the GST enactments. Subject to such deposit, the first respondent was directed to take up the appeal and dispose of it on merits and in accordance with law as expeditiously as possible, preferably within three months from the date of the order. The directions balance the interest of revenue with the petitioner's opportunity to have the substantive issues adjudicated. [Paras 6]

Petitioner to deposit 10% of disputed tax within 30 days; upon deposit, appeal to be heard and disposed of on merits, preferably within three months.

Final Conclusion: Writ petition allowed by setting aside the order rejecting the appeal as barred by limitation; petitioner directed to deposit 10% of the disputed tax within 30 days, and upon such deposit the appeal shall be disposed of on merits and in accordance with law.

Principles of natural justice - maintainability of writ petition despite alternative remedy - availability of alternative remedy and its exceptions - exercise of discretion under Article 226 - revocation of cancellation remedy under GST law - statutory appellate remedy under GST law

Principles of natural justice - maintainability of writ petition despite alternative remedy - availability of alternative remedy and its exceptions - Whether the writ petition challenging cancellation of GST registration is maintainable in view of available statutory remedies and alleged violation of principles of natural justice - HELD THAT: - The Court examined the scope of Article 226 in the light of precedent that, although High Courts normally refrain from entertaining writs where effective statutory remedies exist, exceptions include cases alleging violation of principles of natural justice. The show cause notice dated 23.06.2023 was considered and the Court found that it contained the required particulars of the non-existent dealers relied upon by the authority. On that basis the Court held that the petitioner's contention that the principles of natural justice were violated by non-supply of particulars was not tenable. Consequently, having alternative efficacious remedies available under the GST scheme for revocation of cancellation or by way of appeal, the writ petition was not maintainable on merits. Nevertheless, in view of the hardship caused by cancellation of registration, the Court exercised its discretion to afford the petitioner a limited opportunity to invoke the statutory remedies (by filing an application for revocation of cancellation under the GST law or by lodging the statutory appeal), and directed that if such remedy is invoked within the stipulated time the concerned authority must decide the matter on merits after affording hearing to both parties. [Paras 8, 9]

Writ petition dismissed as not maintainable; petitioner granted 15 days to avail statutory remedies and directed that the concerned authority shall decide on merits after hearing.

Final Conclusion: The High Court dismissed the writ petition challenging cancellation of GST registration, holding that the show cause notice contained necessary particulars and that alternative statutory remedies are available; however, the petitioner was permitted 15 days to file either an application for revocation of cancellation or a statutory appeal, and the authority was directed to decide the matter on merits after hearing.

TP adjustment - reject AMP adjustment using BLT method - adjustment for advertising, marketing and promotion (AMP) - Bright Line Test - Arm's Length Price (ALP) determination - disallowance of depreciation on de-capitalized assets - delay of 215 days in filing the Special Leave Petition

HELD THAT:- The explanation for condoning the delay of 215 days in filing the Special Leave Petition is inadequate and does not constitute sufficient cause to condone the delay.

Special Leave Petition is accordingly dismissed on the ground of limitation. Since the Special Leave Petition is dismissed on the ground of limitation, we clarify that we have not expressed any opinion on the merits of the legal issue involved which may be decided in any other appropriate case.

Addition u/s 41(1) - assessee’s liability to the tune to be a case of cessation of liability - As decided by HC [2022 (11) TMI 1215 - CALCUTTA HIGH COURT] assessee has fulfilled the duty cast upon them to provide evidence that the liability exist at the end of the year. The duty on AO is to prove that the liability has ceased to exist which in our considered view has been miserably failed to be established.

HELD THAT:- As here is a delay of 450 days in the filing of the present special leave petition. Even on merits, we do not see any good ground or reason to interfere with the impugned judgment.

Validity of reopening of assessment - as decided by HC [2023 (1) TMI 1390 - CALCUTTA HIGH COURT] reopening of the assessment was bad in law as material already available in the books of accounts have been re-apprised by the assessing officer and notice u/s 148 has been issued - HELD THAT:- We are not inclined to interfere with the impugned judgment and hence, the special leave petitions are dismissed.

Maintainability of the writ petition in HC - Non deposit of pre-deposit - Validity of reassessment order passed - petitioner has also challenged the very basis for issuing notices under sections 148 and 148-A of Income Tax Act, 1961 - case set-up by the petitioner is that there can be no second proceeding for the same period and on the same issue which was the basis for the previous proceeding in which a final order passed and the said order is a subject matter of challenge in Appeal - As decided by HC [2024 (4) TMI 54 - JHARKHAND HIGH COURT] without a pre-deposit as provided under the statute for preferring an appeal or for seeking an order of stay, the writ petition shall not be entertained.

Secondly, this is also no longer in the realm of doubt that a notice issued by a statutory authority cannot be made the subject matter of challenge before the writ Court - the plea put forth by the petitioner is that the notice under section 148-A has been issued in breach of natural justice inasmuch as no opportunity of hearing was provided to the assessee and all that we intend to indicate is that the requirements of natural justice are not inflexible and its applicability shall be determined on the basis of the facts in each case. Thus present writ petition has been dismissed on the ground that the petitioner has efficacious remedy under the Income Tax Act, 1961.

HELD THAT:- We are not inclined to interfere with the impugned judgment and, hence, the special leave petition is dismissed.

However, all pleas and contentions of the petitioner, Renu Singh, relating to the reopening can be raised before the appellate forum.

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

Breach of principles of natural justice - notice under Section 142(1) of the Income tax Act - inaccessibility of documents uploaded as external cloud links - remand for fresh consideration of evidence - opportunity of personal hearing - costs awarded as condition for setting aside assessment

Breach of principles of natural justice - inaccessibility of documents uploaded as external cloud links - notice under Section 142(1) of the Income tax Act - Assessment order set aside for breach of principles of natural justice because invoices tendered by the assessee were not accessible to the assessing officer. - HELD THAT: - The Court found that although notices under Section 142(1) had been issued and the assessee had filed multiple replies, the assessing officer's order records that the invoices allegedly submitted were not available on file. The petitioner produced an email prima facie showing PDFs of invoices for 30 vendors which, according to the petitioner, if examined with reconciliation statements, would reconcile purchase values. The assessing officer's own findings (recorded in the assessment order) disclose that the invoices were not accessible, thereby impairing the assessee's ability to have those documents considered in the assessment process. In these circumstances the assessment order suffers from a breach of the opportunity to present and have considered material evidence, engaging the principles of natural justice and warranting interference under Article 226. [Paras 5, 6]

Impugned assessment order dated 28.03.2024 set aside on ground of breach of natural justice; assessee permitted to supply the invoices and other documents.

Remand for fresh consideration of evidence - opportunity of personal hearing - costs awarded as condition for setting aside assessment - Assessment remanded for reconsideration after receipt of additional documents, subject to payment of costs; directions to assessing officer to afford hearing and pass fresh order within a specified timeframe. - HELD THAT: - The Court conditioned the setting aside of the assessment on the petitioner paying costs and on an opportunity to cure the defect caused by inaccessible documents. The petitioner was ordered to pay costs to a specified charitable institution and was permitted 15 days to submit invoices and other documents. Upon receipt of those documents the assessing officer must provide a reasonable opportunity, including a personal hearing, and thereafter pass a fresh assessment order within three months from receipt of the additional documents. The direction therefore effectuates a remand for fresh consideration limited to examination of the newly submitted material and affords procedural protection to the assessee by mandating a hearing before re assessment. [Paras 6, 7]

Matter remanded for fresh assessment on receipt of documents within 15 days; assessing officer to afford hearing and complete fresh assessment within three months; costs of Rs. 30,000 awarded to Adyar Cancer Institute as condition of relief.

Final Conclusion: Writ petition allowed by setting aside the assessment order dated 28.03.2024 for AY 2022-23 for breach of natural justice; petitioner permitted to supply invoices within 15 days, on payment of costs, and assessing officer directed to provide a hearing and pass a fresh assessment order within three months of receipt of documents.

Opportunity of personal hearing by video conferencing - faceless assessment unit's duty to share video conferencing link - compliance with Section 144B(6)(viii) of the Income Tax Act, 1961 - vitiation of assessment for failure to afford statutory hearing

Opportunity of personal hearing by video conferencing - compliance with Section 144B(6)(viii) of the Income Tax Act, 1961 - Whether the petitioner was afforded the required opportunity of personal hearing by video conferencing in terms of Section 144B(6)(viii). - HELD THAT: - The Court found that although the petitioner had requested personal hearing and the Faceless Assessment Unit (FAU) approved that request, the portal view accessible to the petitioner did not display the video conferencing link and no automated SMS/email alerts were triggered. The FAU produced a notice dated 28th March, 2024 claiming that a link had been sent, but that document was not visible on the petitioner's portal view and the assessment order was passed before the petitioner's contemporaneous complaint was resolved. The Court held that the statutory requirement to give an opportunity to show cause by a personal hearing was not satisfied on the material before it. [Paras 7]

The petitioner was not afforded the required opportunity of personal hearing by video conferencing in terms of Section 144B(6)(viii).

Faceless assessment unit's duty to share video conferencing link - vitiation of assessment for failure to afford statutory hearing - Whether mere creation of a video conferencing meeting ID/link without sharing it with the assessee discharges the FAU's duty to afford personal hearing. - HELD THAT: - The Court held that mere creation of a meeting ID/link does not absolve the FAU of its responsibility. The meeting ID/link must be disclosed or shared so the assessee can log in and participate; absent such sharing and communication, the statutory obligation to afford personal hearing is not complied with. The FAU's finding that the assessee chose not to attend the video conference was held to be perverse and unsupported by evidence where the link was not shown to have been communicated to the assessee. [Paras 7]

Creation of a video conferencing meeting ID/link alone does not satisfy the FAU's duty; the link must be shared with the assessee to effectuate personal hearing.

Vitiation of assessment for failure to afford statutory hearing - Consequences of the failure to afford personal hearing and the appropriate remedy. - HELD THAT: - Given the failure to afford the petitioner the statutory opportunity of personal hearing, the Court concluded that the assessment order dated 29th March, 2024 was vitiated. The order was set aside and the matter remanded to the FAU to afford the petitioner a personal hearing by sharing a video conferencing link on the portal and to decide the matter afresh from the stage of affording such hearing. The Court made clear it did not adjudicate the merits and left the FAU free to pass appropriate orders after hearing. [Paras 8, 9, 11]

The assessment order dated 29th March, 2024 is set aside; the matter is remanded to the FAU to afford personal hearing by sharing a video conferencing link and to decide afresh within eight weeks.

Final Conclusion: The writ petition is allowed to the extent that the assessment order dated 29th March, 2024 for Assessment Year 2022-23 is set aside for failure to afford the petitioner a personal hearing by video conferencing; the matter is remanded to the Faceless Assessment Unit to share a video conferencing link on the portal, afford hearing and decide the assessment afresh within eight weeks, the Court having not gone into merits of assessment.

Limitation for issuance of notice under section 143(2) - Invalidity of assessment order for jurisdictional infirmity - Admission of additional grounds raising pure legal question - Validation of defective notice by assessee's participation (Section 292BB)

Admission of additional grounds raising pure legal question - Additional grounds seeking to raise limitation challenge to notice under section 143(2) were admitted. - HELD THAT: - The Tribunal, applying settled principles and having regard to precedents on admission of purely legal grounds going to the root of the matter, held that the proposed additional grounds did not require fresh facts and were legal in nature. Consequently the prayer for admission of the additional grounds challenging issuance of notice under section 143(2) was allowed and the additional grounds were admitted for consideration. [Paras 4]

Additional grounds admitted.

Limitation for issuance of notice under section 143(2) - Invalidity of assessment order for jurisdictional infirmity - Validation of defective notice by assessee's participation (Section 292BB) - Notice under section 143(2) issued on 15.10.2013 was beyond the six months period and rendered the assessment order passed under section 143(3) void for want of jurisdiction. - HELD THAT: - Having admitted the additional ground, the Tribunal examined the record and found that the assessment year concerned was 2012-13 and the last date for issuing notice under section 143(2) was 30.9.2013. The impugned notice was issued on 15.10.2013, i.e., after the statutory period. In these circumstances the Tribunal concluded that the Assessing Officer had assumed jurisdiction erroneously and the assessment order suffered from a jurisdictional defect. The Tribunal observed that, once the jurisdictional infirmity was established, the merits of the additions and the penalty became academic. The Department's reliance on participation/validation under Section 292BB was considered but did not alter the finding that the notice was issued beyond the prescribed time and the assessment was invalid. [Paras 7, 8, 9]

Impugned assessment order quashed as void for lack of jurisdiction; consequent penalty deleted.

Final Conclusion: The Tribunal allowed the appeals: it admitted the additional legal grounds and held that the notice under section 143(2) having been issued after the prescribed six month period rendered the assessment order void for want of jurisdiction; accordingly the assessment and the consequential penalty were set aside.

Late fee under Section 234E - computation and intimation under Section 200A - prospective effect of statutory amendment - demand without authority - privilege to pay fee to avoid penalty under Section 271H

Late fee under Section 234E - computation and intimation under Section 200A - prospective effect of statutory amendment - Validity of levying late fee under Section 234E by intimation issued under Section 200A for TDS statements relating to periods prior to 01.06.2015 - HELD THAT: - The Tribunal examined the scheme introduced by Parliament whereby the mechanism for computing and issuing intimation for payment of fee under Section 234E was provided by amendment to Section 200A effective from 01.06.2015. Relying on the decision of the Hon'ble Karnataka High Court in Fatheraj Singhvi, the Bench held that the machinery for enforceability under Section 200A was inserted prospectively and could not be applied to periods prior to 01.06.2015. The Karnataka High Court's reasoning - that Section 234E was enacted in tandem with provisions (including Section 271H and the proviso to Section 272A(2)) creating a substantive regime and that the subsequent insertion of clauses in Section 200A confers the power to compute and demand the fee only from 01.06.2015 - was followed. The Tribunal noted earlier co-ordinate decisions of the Pune Bench adopting the same ratio and concluded that intimations under Section 200A demanding fee under Section 234E for TDS deducted prior to 01.06.2015 were issued without authority of law and therefore liable to be set aside. The Bench directed deletion of the late fee levied by the CPC-TDS for the relevant period and allowed the appeals. [Paras 8, 9, 10]

Intimations issued under Section 200A demanding fee under Section 234E for periods prior to 01.06.2015 are without authority; the late fee levied under Section 234E for the relevant period is deleted and the appeals are allowed.

Final Conclusion: The Tribunal allowed the appeals and set aside the demand/intimation issued under Section 200A insofar as it seeks computation or payment of fee under Section 234E for periods prior to 01.06.2015, directing deletion of the late fee for the assessment year 2014-15 (financial year 2013-14).

Requirement of a reasoned order - remand for fresh consideration - burden to prove identity, genuineness and creditworthiness of lenders - examination of sources of cash deposits for additions under unexplained cash credits - adverse inference for failure to comply with assessment notices

Requirement of a reasoned order - remand for fresh consideration - Disallowance confirmed by CIT(A)/NFAC of a part of provision for expenses (confirmed to the extent of Rs. 83,000) requires reconsideration - HELD THAT: - The CIT(A)/NFAC confirmed an addition of Rs. 83,000 against provision for expenses without giving cogent reasons or independent application of mind, having merely extracted the assessee's submissions. The Tribunal held that the appellate authority must pass a reasoned order addressing the written submissions and the evidence on record; a bald finding does not satisfy the requirement of a reasoned decision. Accordingly the matter is sent back to the CIT(A)/NFAC to examine the evidence and pass a reasoned order. [Paras 8]

Partly allowed; remitted to CIT(A)/NFAC for reconsideration with directions to pass a reasoned order after examining submissions and evidence.

Burden to prove identity, genuineness and creditworthiness of lenders - remand for fresh consideration - Addition under section 68 in respect of unsecured loan of Rs. 50,00,000 confirmed by CIT(A)/NFAC but remanded for fresh consideration - HELD THAT: - CIT(A)/NFAC confirmed part of the addition on the ground that the assessee did not demonstrate the creditworthiness of the lender, yet the Tribunal observed that the appellate order recorded no independent application of mind and appears to have relied on the Assessing Officer's remand report. The Tribunal noted that bank records of the lender could show deposits or funds standing to his credit and that a proper verification is required. In the interest of justice, the issue was not finally adjudicated on merits and is remitted for fresh consideration by the CIT(A)/NFAC. [Paras 11]

Partly allowed; remitted to CIT(A)/NFAC for independent examination of the lender's records and a reasoned decision on the addition under section 68.

Examination of sources of cash deposits for additions under unexplained cash credits - requirement of a reasoned order - remand for fresh consideration - Deletion by CIT(A)/NFAC of additions on account of cash deposits with HDFC Bank Ltd. is unsustainable without factual discussion and is remitted for fresh adjudication - HELD THAT: - The Assessing Officer made additions on account of cash deposits for lack of explanation as to sources. Although CIT(A)/NFAC called for and received a remand report, it deleted the additions without discussing the remand report or the evidences furnished in respect of each cash deposit. Applying the settled principle that quasi-judicial authorities must record cogent reasons, the Tribunal held that the appellate order's bald findings do not meet the requirements of a reasoned order. The matter is therefore remitted to the CIT(A)/NFAC to examine evidences for each deposit, verify sources, and pass a reasoned order. [Paras 16, 18]

Partly allowed; deletion set aside and matter remitted to CIT(A)/NFAC for verification of sources of cash deposits and for passing a reasoned order.

Final Conclusion: Both the assessee's and the Revenue's appeals are partly allowed. The Tribunal has remitted (a) the question of the limited provision disallowance, (b) the addition under section 68 in respect of the unsecured loan, and (c) the deletion of cash-deposit additions to the CIT(A)/NFAC with directions to examine the relevant evidence and remand reports and to pass reasoned orders addressing the material on record.

Beneficial owner - conduit arrangement - treaty entitlement under DTAA - re-opening of assessment under Section 147 for excess relief - issuance of draft assessment under Section 144C to eligible assessees despite no variation in returned income

Re-opening of assessment under Section 147 for excess relief - Validity of reopening assessments for AY 2014-15 and AY 2015-16 - HELD THAT: - The Tribunal held that reopening was valid on the facts of the case. The Assessing Officer formed belief based on findings in an earlier year that the assessee had been granted excess relief by claiming a lower treaty rate, invoking the material in the file and Explanation 2(b) to Section 147 as constituting sufficient reason. Appropriate authority approval for reopening was obtained. In view of these materials and the prior-year findings, no jurisdictional infirmity in reopening was found and the ground attacking reopening was dismissed.

Reopening of the assessments held valid; ground dismissed.

Issuance of draft assessment under Section 144C to eligible assessees despite no variation in returned income - Permissibility of issuing draft assessment under Section 144C where there is no change in the quantum of returned income - HELD THAT: - The Tribunal examined the effect of the Finance Act 2020 amendment and its explanatory memorandum which, with effect from 01-04-2020, expanded the scope of Section 144C to require issuance of a draft assessment to eligible assessees whenever the AO proposes any variation prejudicial to the assessee, even if there is no change in the figure of income. The AO issued the draft after that amendment (draft dated 29-09-2021) and the reopening notice dated 20-03-2020 preceded the amendment. The higher tax rate applied by the AO was a variation prejudicial to the assessee. On these bases the Tribunal found no jurisdictional error in the issuance of the draft assessment under Section 144C and dismissed the challenge to its maintainability.

Issuance of draft assessment under Section 144C was permissible; challenge dismissed.

Beneficial owner - conduit arrangement - treaty entitlement under DTAA - application of India-Germany DTAA rate - Whether the assessee was the beneficial owner of the royalty, and whether a lower treaty rate (including under India-Germany DTAA) applied - HELD THAT: - The Tribunal noted that substantial merits-based submissions and additional grounds were advanced before it for the first time and had not been adjudicated by the lower authorities. Given the absence of prior adjudication on these contentions (including whether the assessee acted as a conduit, whether it performed functions or bore risks, and the alternative claim for the India-Germany treaty rate), the Tribunal set aside the orders of the lower authorities and restored the matters to the Assessing Officer for fresh adjudication on merits. The Assessing Officer was directed to permit the assessee to substantiate its case and to re-examine whether the assessee is the beneficial owner of the royalty in its own right and the alternative contention regarding the applicable treaty rate.

Merits on beneficial ownership and applicable treaty rate remitted to the Assessing Officer for fresh consideration; issues kept open.

Final Conclusion: The Tribunal upheld the validity of reopening and the issuance of the draft assessment under the amended Section 144C, but set aside the assessments on merits and remitted the questions of beneficial ownership and the applicable treaty rate to the Assessing Officer for fresh adjudication; appeals allowed for statistical purposes.

Exemption under Section 10(1) read with Explanation 3 to Section 2(1A) - agricultural income - income derived from saplings or seedlings grown in a nursery deemed to be agricultural income - income from other sources - total income - remand for limited verification of documentary details - production of supporting documents and opportunity of hearing - rule of consistency

Exemption under Section 10(1) read with Explanation 3 to Section 2(1A) - agricultural income - income derived from saplings or seedlings grown in a nursery deemed to be agricultural income - income from other sources - production of supporting documents and opportunity of hearing - remand for limited verification of documentary details - Whether the receipts from sale of plants/tissue/saplings are agricultural income exempt from tax or taxable as income from other sources, and whether the matter requires remand for limited verification of missing documentary details. - HELD THAT: - The Tribunal noted that Explanation 3 to Section 2(1A) treats income derived from saplings or seedlings grown in a nursery as agricultural income and that the assessee is a biotechnology company engaged in nursery operations and sale of plants. Revenue had accepted similar claims in earlier assessment years in the assessee's own case. The Tribunal found that the AO and the CIT(A) did not fully examine the claim under the said Explanation but observed deficiencies in the assessment file: sales register entries lacked certain particulars (complete addresses, dates of order/supply, mode of supply and receipt of sale consideration) for receipts totalling the amounts recorded in assessment. In view of the legal principle that agricultural receipts of the specified kind are not part of total income, the Tribunal held that such receipts cannot be taxed as income from other sources without a proper examination. However, because the AO and CIT(A) identified specific documentary particulars that were not produced or verified during assessment, the Tribunal did not decide the claim finally on merits; instead it set aside the appellate order and remitted the issue to the AO for limited verification of the missing details. The AO was directed to afford reasonable opportunity of hearing and the assessee was directed to cooperate and furnish the necessary details without unnecessary adjournments. [Paras 8]

Matter remitted to the file of the AO for limited examination of the missing sale particulars and verification of supporting documents; appeal partly allowed.

Final Conclusion: The Tribunal held that receipts from sale of saplings/seedlings grown in a nursery fall within the scope of agricultural income under Explanation 3 to Section 2(1A) and cannot be taxed as income from other sources without proper verification; the appellate order confirming the addition is set aside and the issue is remanded to the AO for limited verification of specified documentary particulars, with directions to give the assessee reasonable opportunity to be heard.

Disallowance under section 43B - exclusive method of accounting - inclusion of VAT in turnover - intimation under section 143(1) - application of section 145A(ii) - opening balance pertaining to earlier years

Disallowance under section 43B - exclusive method of accounting - intimation under section 143(1) - inclusion of VAT in turnover - Validity of disallowance of current year VAT unpaid before filing return where assessee followed an exclusive method of accounting and did not debit VAT to profit and loss account - HELD THAT: - The Tribunal examined whether the CPC's disallowance of the VAT outstanding for the current year under section 43B, effected through intimation under section 143(1), was sustainable despite the assessee's claim that VAT was not routed through the profit and loss account due to an exclusive accounting method. The Tribunal accepted the first appellate authority's view that VAT is integral to sales/turnover and, in light of statutory requirements and accounting standards (including the effect of section 145A(ii) and ICDS), VAT must be included in turnover and cannot be excluded by an alternative accounting treatment. The Tribunal also noted that the CIT(A) had specifically recorded dissatisfaction with and rejected the assessee's exclusive accounting treatment, distinguishing the present facts from the Ganapati Motors line of authority where authorities had not doubted the accounting modality. Consequently, on the facts of this case the disallowance of the current year VAT under section 43B, as confirmed by the CIT(A), was upheld and the assessee's reliance on the jurisdictional High Court decision was held not applicable. [Paras 5, 18]

Disallowance of current year VAT unpaid before filing the return is sustained and the assessee's challenge to that disallowance is dismissed.

Opening balance pertaining to earlier years - disallowance under section 43B - Treatment of opening balances of VAT, Entry Tax and CST pertaining to earlier years - HELD THAT: - The Tribunal agreed with the CIT(A)'s deletion of disallowances insofar as they related to opening balances that pertain to earlier years, holding that additions/disallowances for amounts attributable to a year prior to the relevant assessment year cannot be made in the current year. The Tribunal sustained the deletion of the opening balance portions of VAT and CST in AY 2018-19, while directing the assessing officer (JAO) to verify those opening balances in the earlier years and disallow them there if not paid before filing the respective returns under section 139(1). For Entry Tax the CIT(A) had confirmed the disallowance of the current year portion; the opening balance component was to be similarly verified in earlier years. [Paras 5, 21]

Disallowances in respect of opening balances deleted for AY 2018-19 and directing verification of those opening balances for earlier years by the assessing officer.

Disallowance under section 43B - Validity of disallowance of Entry Tax current year payable that was routed through profit and loss account - HELD THAT: - The Tribunal recorded that the assessee admitted routing the Entry Tax current year payable through the trading/profit and loss account and failed to produce proof of payment before filing the return. Given those facts, the CIT(A)'s confirmation of the AO(CPC)'s adjustment under section 43B in respect of the current year Entry Tax payable was sustained. [Paras 5, 18]

Disallowance of the current year Entry Tax payable under section 43B is confirmed.

Final Conclusion: The assessee's appeal is dismissed insofar as the disallowance of the current year VAT (not paid before filing) and the current year Entry Tax disallowance are concerned; disallowances relating to opening balances (VAT and CST) that pertain to earlier years are deleted for AY 2018-19 with directions to verify and, if necessary, disallow them in the respective earlier years. The revenue's appeal against deletion of opening balances is dismissed.

Quantification of addition for bogus/unverified purchases by aligning gross profit rates - remand for verification and computation of profit element - disallowance of presumptive commission additions in absence of evidence - admissibility of departmental appeal despite monetary ceiling where investigation-origin information is relied upon

Quantification of addition for bogus/unverified purchases by aligning gross profit rates - Restriction of additions in respect of alleged bogus purchases to the profit that would have accrued by procuring goods from the open/grey market by bringing the G.P. rate of such purchases at par with other genuine purchases; matter remitted for verification and computation. - HELD THAT: - The Tribunal observed that both lower authorities' ad-hoc percentage quantifications lacked a basis. Applying the ratio of the jurisdictional ITAT decision (relied upon) and the Bombay High Court authority, the correct mode of quantification is to determine the profit element by bringing the gross profit rate of the bogus/unverified purchases to the same rate as that of the genuine purchases. Given that the assessee produced bifurcated average purchase-rate details for rice, broken rice and paddy which were not before the lower authorities, the matter is restored to the Assessing Officer for fresh computation and verification in the light of that principle, with opportunity to the assessee to be heard. The remand is for application of that legal principle and for limited factual/arithmetical verification, not for re-opening the legal test of bogus purchases. [Paras 20, 21]

Matter remitted to the Assessing Officer to quantify the profit element by bringing the G.P. rate of the bogus/unverified purchases to the same rate as that of genuine purchases, after verification and hearing.

Disallowance of presumptive commission additions in absence of evidence - Whether addition made by the Assessing Officer/CIT(A) towards commission (presumed as cost of accommodation entries) is sustainable. - HELD THAT: - The Tribunal found no material on record proving that the assessee incurred any commission or similar expenditure; the addition was made on a presumptive basis by the lower authorities. In absence of evidence to prove such expenditure, the presumptive addition cannot be sustained and must be vacated. [Paras 22]

The addition made/sustained towards presumed commission is vacated for lack of supporting evidence.

Admissibility of departmental appeal despite monetary ceiling where investigation-origin information is relied upon - Condonation of delay in filing the revenue's appeal and the maintainability of that appeal notwithstanding the monetary ceiling in the cited CBDT circular. - HELD THAT: - The Tribunal, after considering the reasons for delay (pendency relating to limitation matters) condoned the delay. It further accepted the Revenue's submission that the addition arose from information supplied by the Investigation Wing, which falls within the exception to the monetary-ceiling-based exclusion in the CBDT circular invoked by the assessee; accordingly, the departmental appeal was held maintainable and admitted for hearing. [Paras 4, 5, 6, 7, 8]

Delay of the Revenue's appeal condoned and the appeal admitted as maintainable.

Final Conclusion: Both appeals are partly allowed: the addition for bogus/unverified purchases is to be re-quantified by the Assessing Officer by bringing the gross-profit rate of such purchases to the level of genuine purchases (remand for verification and computation), the presumptive commission addition is vacated for lack of evidence, and the Revenue's delayed appeal is condoned and admitted.

Processing of return under section 143(1) - Second proviso to section 143(1) - intimation and opportunity before making adjustments - Disallowance under section 11(1) in respect of charitable trusts - Finality of assessment under section 143(3) vis-a -vis earlier adjustments under section 143(1) - Condonation of delay in filing return - delegated powers under section 119(2)

Processing of return under section 143(1) - Second proviso to section 143(1) - intimation and opportunity before making adjustments - Finality of assessment under section 143(3) vis-a -vis earlier adjustments under section 143(1) - Disallowance under section 11(1) in respect of charitable trusts - Validity of adjustments made under section 143(1) without issuing intimation and considering the assessee's response, and effect of subsequent acceptance of the same claims in assessment under section 143(3). - HELD THAT: - The Tribunal examined whether the adjustments disallowing expenses claimed under section 11(1) and the amounts accumulated and set apart were lawfully made in the processing under section 143(1) without issuing the statutorily mandated intimation and affording the assessee an opportunity as required by the second proviso to section 143(1). The record showed that the same return and claims were later considered and accepted in proceedings under section 143(3), where the Assessing Officer, after taking the assessee's submissions, accepted the expenses and Form 10B verification. The Tribunal held that the Assessing Officer had violated the second proviso to section 143(1) by making adjustments without giving intimation and considering any response, and that the revenue could not consistently adopt divergent positions in 143(1) and subsequently in 143(3) on the same return. In consequence, the disallowances made in the 143(1) processing were unsustainable and were deleted. [Paras 6, 7]

Adjustments made under section 143(1) without issuing intimation and considering the assessee's response were invalid; the additions/disallowances are deleted.

Final Conclusion: Appeal allowed; additions/disallowances made in the processing under section 143(1) (relating to the claimed expenses under section 11(1) and amounts accumulated and set apart) are deleted and the impugned appellate order is set aside.

Reopening of assessment under section 147 based on recorded reason and 'reason to believe' - Reopening after four years and requirement of valid reasons for concealment of income - Chargeability of surrender value of ULIP to tax as 'income from other sources' vis-a -vis treatment as capital gain/loss - Effect of prior claim(s) under section 80C on taxability of surrender proceeds and interplay with claimed exemptions under section 10(10D)/10(10A)

Reopening of assessment under section 147 based on recorded reason and 'reason to believe' - Reopening after four years and requirement of valid reasons for concealment of income - Validity of reopening assessment under section 147 for AY 2012-13 and AY 2013-14 - HELD THAT: - The Tribunal found that the recorded reasons for issuance of notice under section 148/147 were founded on an erroneous factual assumption that the assessee had claimed exemption under section 10(10A)/10(10D) in respect of the ULIP proceeds and thereby concealed income. The assessee, however, had declared the surrender proceeds in the return and treated them as capital loss; the reopening therefore rested on a wrong premise. The Bench accepted the assessee's additional ground that the reopening after four years was not justified because the recorded reason did not demonstrate failure to disclose fully and truly all material facts necessary for assessment. The revenue did not press a compelling contrary case before the Tribunal. Consequently the Tribunal held that the recorded reason was erroneous and the basis for reopening was vitiated. [Paras 9]

Reopening under section 147 quashed; recorded reasons found to be erroneous and insufficient to sustain reassessment.

Chargeability of surrender value of ULIP to tax as 'income from other sources' vis-a -vis treatment as capital gain/loss - Effect of prior claim(s) under section 80C on taxability of surrender proceeds and interplay with claimed exemptions under section 10(10D)/10(10A) - Sustainability of addition of the surrender proceeds of the ULIP (amount added by AO) in reassessment - HELD THAT: - The Tribunal noted that the entire addition of the surrender proceeds was made by the AO on the basis of the same incorrect assumption that the assessee had claimed exemption under section 10(10A)/10(10D) and had surrendered the policy before the applicable lock-in period. Because the reopening itself was quashed as founded on erroneous reasons, the consequential addition could not stand. The Bench expressly refrained from entering into the factual controversies concerning lock-in period, eligibility under section 10(10D)/10(10A) or the interplay with past section 80C claims, observing those matters would be academic once the foundational reason for reassessment was invalidated. [Paras 4, 9]

Addition of the surrender proceeds deleted; reassessment addition set aside.

Final Conclusion: Both appeals for AY 2012-13 and AY 2013-14 allowed; reopening under section 147 set aside and the addition of the ULIP surrender proceeds deleted.

Summary order. Civil appeals dismissed; delay condoned. The Commissioner of Customs (Import) directed to dispose of the main matter as early as possible. Pending applications, if any, disposed of.

Contravention under Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992 - Scope of penal liability for attempting or making export/import in contravention - Export obligation under Letter of Permission/Letter of Undertaking - Applicability of penal provisions where there is mere non-fulfilment of export commitment

Contravention under Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992 - Export obligation under Letter of Permission/Letter of Undertaking - Applicability of penal provisions where there is mere non-fulfilment of export commitment - Validity of imposition of penalty under Section 11(2) of the FTDR Act, 1992 for shortfall in export obligations where no contravention of the Act, Rules, Orders or Foreign Trade Policy is alleged. - HELD THAT: - Section 11(2) imposes penalty where a person makes, abets or attempts to make any export or import in contravention of the FTDR Act, the rules or orders made thereunder, or the foreign trade policy. The provision therefore requires an allegation and proof of an attempted or actual export/import in contravention of the statutory scheme. In the present case the petitioner admittedly failed to achieve the contracted export turnover under the LOP/LOU, but there is no allegation that any export or import was attempted or effected in contravention of the Act, Rules, Orders or Foreign Trade Policy. The Supreme Court's decision in M/s Embio Limited was cited and treated as authoritative to the effect that mere failure to fulfil an export obligation within the stipulated period, without any contravention of the statutory export/import regime, does not sustain a penalty under Section 11(2). Applying that principle, the impugned orders imposing penalty on the ground of shortfall in exports lack statutory foundation and are without authority. [Paras 9, 10, 11, 12]

Penalty imposed under Section 11(2) of the FTDR Act, 1992 for non-fulfilment of export obligation was unsustainable in the absence of any contravention of the Act, Rules, Orders or Foreign Trade Policy; impugned orders quashed.

Final Conclusion: The petition is allowed; the orders of the respondents imposing and confirming the penalty are quashed.

Principles of natural justice - right to fair hearing - supply of documents relied upon - privileged or confidential documents - remand for fresh adjudication - extended period of limitation - Rules of Origin

Principles of natural justice - supply of documents relied upon - privileged or confidential documents - remand for fresh adjudication - Whether the impugned adjudication order could be sustained despite non-supply of documents relied upon in the show cause notice and investigation report - HELD THAT: - The Tribunal found that the DRI investigation produced information and documents which were relied upon in the show cause notice and in the adjudication order. The appellant had specifically requested copies of those relied-upon documents before filing its reply but the department declined to supply them. The Tribunal held that withholding such documents, when they were relied upon in issuing and deciding the show cause notice, defeated the appellant's right to a fair hearing and violated the principles of natural justice. It further held that the documents relied upon did not, on the material before it, fall within a protected category of privileged or confidential material so as to justify non-disclosure. For these reasons the Tribunal concluded that the adjudication could not stand and remanded the matter to the Commissioner for fresh adjudication after furnishing the relied-upon documents and complying with natural justice. The Tribunal therefore set aside the impugned order and directed a fresh decision within a limited time-frame. [Paras 6, 7]

Impugned order set aside and matter remanded to the Commissioner for fresh adjudication after supplying to the appellant the documents relied upon and complying with principles of natural justice; fresh order to be passed within three months.

Final Conclusion: Appeal allowed by way of remand: adjudication quashed for breach of natural justice for non-supply of relied-upon documents; matter remitted to the Commissioner to supply the documents and decide afresh within three months from receipt of certified copy.

Penalty under Section 112(a) of the Customs Act, 1962 - Confiscation under Section 111(o) of the Customs Act, 1962 - Post-import condition of re-export under exemption notification - Requirement for speaking and reasoned order - Remand for fresh adjudication

Penalty under Section 112(a) of the Customs Act, 1962 - Requirement for speaking and reasoned order - Remand for fresh adjudication - Whether the imposition of penalties on the appellants was sustainable in view of the adjudicating authority's failure to record discussion and reasons, and whether the matter required remand for fresh consideration. - HELD THAT: - The Tribunal examined the impugned Order-in-Original insofar as it imposed penalties on the appellants and found that the adjudicating authority had not addressed the detailed defenses raised by the appellants nor recorded any discussion or findings specifically dealing with the imposition of penalties. The Tribunal observed that where penalties under the Customs Act are imposed, the adjudicating authority must consider and record reasons addressing the submissions and factual contentions of the affected persons. Because the impugned order contained no such reasoned discussion on the penalty aspect, the Tribunal concluded that the adjudication on penalty could not stand and required reconsideration. Accordingly, the Tribunal set aside the impugned order only for the limited purpose of permitting the adjudicating authority to re-examine the question of imposition of penalty, to consider the appellants' submissions and material, and to pass a fresh speaking and reasoned order; the Tribunal did not pronounce on the merits of the penalty or the underlying liability for confiscation or duty. [Paras 4, 5]

Impugned order set aside and appeals allowed by remand to the adjudicating authority to reconsider and decide the question of imposition of penalty by a speaking and reasoned order.

Final Conclusion: Appeals allowed in part; impugned Order-in-Original set aside and matter remanded to the adjudicating authority to reconsider imposition of penalties and to pass a fresh speaking and reasoned order.

Resolution Professional as a public servant under the Prevention of Corruption Act - condonation of delay - impleadment of the complainant

Condonation of delay - Delay in filing the petition was condoned. - HELD THAT: - The Court, upon hearing, exercised its discretion to condone the delay in filing the petition and proceeded to hear the matter. No detailed reasoning was recorded in the order beyond the formal grant of condonation. [Paras 1]

Delay condoned.

Resolution Professional as a public servant under the Prevention of Corruption Act - Whether a Resolution Professional under the Insolvency and Bankruptcy Code is to be treated as a public servant for the purposes of the Prevention of Corruption Act was listed for consideration and issued notice. - HELD THAT: - The primary legal question identified for adjudication is the status of a Resolution Professional under the Prevention of Corruption Act. The Court noted that a similar question is pending in SLP (Criminal) No. 7029 of 2023 and directed issuance of notice in the present petition to obtain a considered answer on the point. The order fixes a returnable date for four weeks, signalling that the issue remains sub judice and is to be conclusively determined after further proceedings. [Paras 3, 4]

Notice issued on the question whether a Resolution Professional is a public servant under the Prevention of Corruption Act; returnable in four weeks.

Impleadment of the complainant - The complainant who was a party before the High Court was ordered to be impleaded as respondent No.2. - HELD THAT: - The Court accepted the representation that the complainant had been a party in earlier proceedings before the High Court and therefore ordered that the complainant (Mr. Nishant Bugalia) be impleaded as respondent No.2 to the present petition. This step was taken to ensure proper representation of parties having a direct interest in the dispute. [Paras 5]

Complainant impleaded as respondent No.2.

Final Conclusion: The Court condoned the delay, issued notice on the substantive question whether a Resolution Professional is a public servant under the Prevention of Corruption Act (returnable in four weeks), and ordered impleadment of the complainant as respondent No.2.

Overriding effect of the Insolvency and Bankruptcy Code under Section 238 - Independence of a Section 7 IBC proceeding from recovery proceedings under Section 19 of the RDB Act - Inapplicability of Section 10 CPC to stay or bar subsequent Section 7 proceedings - Requirement for admission under Section 7: existence of debt and default - Res judicata/issue estoppel not operative to bar Section 7 where IBC prevails

Overriding effect of the Insolvency and Bankruptcy Code under Section 238 - Independence of a Section 7 IBC proceeding from recovery proceedings under Section 19 of the RDB Act - Inapplicability of Section 10 CPC to stay or bar subsequent Section 7 proceedings - Res judicata/issue estoppel not operative to bar Section 7 where IBC prevails - Whether the pendency or order in proceedings under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (including the DRT order dated 17.06.2022) and the analogy to Section 10 CPC barred or required staying the Section 7 IBC petition. - HELD THAT: - The Tribunal held that proceedings under Section 7 IBC are independent and the Code has an overriding effect by virtue of Section 238; therefore pendency of, or a prior order in, Section 19 proceedings before the DRT does not operate to bar a Section 7 petition. The Adjudicating Authority erred in invoking the doctrine of Section 10 CPC by analogising to stay a subsequently filed suit, because the IBC expressly contemplates insolvency resolution proceedings proceeding notwithstanding other inconsistent laws. Reliance on DRT findings or pendency of recovery proceedings cannot, in view of the statutory scheme and precedents cited, preclude the Adjudicating Authority from adjudicating a Section 7 petition on its own statutory parameters; issue estoppel/res judicata flowing from DRT proceedings does not override the operation of the IBC where inconsistency arises and Section 238 applies. The Tribunal therefore concluded that the Adjudicating Authority wrongly treated the Section 7 petition as barred by the DRT order. [Paras 16, 32]

Proceedings under Section 19/DRT order do not bar or require staying a Section 7 IBC petition; the Adjudicating Authority erred in applying Section 10 CPC and in holding the Section 7 petition barred.

Requirement for admission under Section 7: existence of debt and default - Independence of a Section 7 IBC proceeding from recovery proceedings under Section 19 of the RDB Act - Whether the Adjudicating Authority's rejection of the Section 7 application was sustainable and what relief should follow. - HELD THAT: - Applying the principle that Section 7 proceedings must be decided on the statutory parameters (existence of financial debt and default) and that such proceedings are independent of recovery proceedings, the Tribunal found the Adjudicating Authority's rejection-premised on the DRT order and the application of Section 10 CPC-unsustainable. The Tribunal observed that the Adjudicating Authority should have proceeded to consider the Section 7 petition on merits in accordance with law instead of rejecting it as barred. In consequence, the Tribunal set aside the impugned order and directed that the Company Petition be revived before the Adjudicating Authority for fresh consideration in accordance with law. [Paras 32, 33]

Order rejecting the Section 7 petition is set aside; the Company Petition is revived for fresh consideration by the Adjudicating Authority.

Final Conclusion: The appeal is allowed. The NCLT order dated 21.03.2023 rejecting the Section 7 petition is set aside and the company petition is revived for fresh consideration; parties shall bear their own costs.

Anticipatory bail - setting aside impugned order - non-arrest during investigation - grant of relief subject to trial court's satisfaction

Anticipatory bail - non-arrest during investigation - setting aside impugned order - Grant of anticipatory bail to the appellant and setting aside of the impugned order - HELD THAT: - The Court noted that the appellant had not been arrested during the investigation and that a complaint had been filed. In view of these facts the Court exercised its discretion to set aside the impugned order and to grant anticipatory bail. The grant of anticipatory bail was made subject to terms and conditions to the satisfaction of the trial court.

Impugned order set aside and anticipatory bail granted on terms to the satisfaction of the trial court.

Final Conclusion: Leave granted; appeal allowed by setting aside the impugned order and granting anticipatory bail to the appellant subject to terms to be settled by the trial court.

Electroplating amounts to manufacture - Business Auxiliary Service exclusion for manufacturing processes - composite job-work and service-taxability before 1.6.2007 - coverage under Notification 8/2005-ST

Electroplating amounts to manufacture - Business Auxiliary Service exclusion for manufacturing processes - Interplex Electronics India Pvt. Ltd. - 2013 (5) TMI 451- CESTAT Bangalore - Whether service tax is leviable on electroplating of filter components carried out on job-work basis or the process amounts to manufacture and is excluded from tax as a business auxiliary service - HELD THAT: - The Tribunal examined whether electroplating performed by the appellant on job-work basis is a taxable Business Auxiliary Service or whether it constitutes manufacture. Noting that the question is no longer res integra, the Tribunal followed earlier decisions holding that electroplating amounts to manufacture. The Tribunal referred to its decision in Interplex Electronics (as relied upon) and earlier precedents which, taking note of the reasoning in TISCO, treated electroplating as a process amounting to manufacture. Given that the definition of Business Auxiliary Service specifically excludes processes that amount to manufacture, the activity of electroplating cannot be taxed as service. The Tribunal accordingly set aside the orders demanding service tax in respect of the electroplating activity. [Paras 4, 5, 6]

Electroplating of the filter components amounts to manufacture and is not liable to service tax as a Business Auxiliary Service; the impugned orders demanding service tax in respect of that activity are set aside.

Final Conclusion: Appeal allowed: electroplating held to be manufacture and not exigible to service tax for the period in question, with consequential reliefs as per law.

Supply of Tangible Goods - Deemed Sale - right of possession and effective control - transfer of right to use - taxable service - extended period of limitation - suppression/misrepresentation

Supply of Tangible Goods - Deemed Sale - right of possession and effective control - transfer of right to use - Whether supply of cranes on hire by the appellant constituted a Deemed Sale or a taxable service of Supply of Tangible Goods. - HELD THAT: - The Tribunal applied the statutory test under the Finance Act for STGU and the constitutional concept of deemed sale (Article 366(29A)), and relied on the attributes identified in Bharat Sanchar Nigam Ltd. to determine whether the right of possession and effective control passed to the hirer. After examining the contractual clauses (specifically clauses 3, 4, 8 & 13) and the terms of multiple agreements, the Tribunal found that operators and helpers were to be provided and that repairs, lubricants and responsibility for operation remained with the appellant. These facts demonstrate that possession and effective control of the cranes did not pass to the clients. Accordingly, the transaction meets the statutory conditions for being a taxable service under the definition of STGU rather than a deemed sale under Article 366(29A). [Paras 17]

Supply of cranes on hire by the appellant is a taxable service of Supply of Tangible Goods, not a Deemed Sale.

Taxable service - payment of VAT - transfer of right to use - Whether the clause in the agreements providing for payment of VAT at 5% converted the transactions into Deemed Sale. - HELD THAT: - The Tribunal considered the department's circular relied upon by the appellant and the specific contractual clause mentioning VAT. It held that mere agreement to pay VAT or evidence of VAT being paid is insufficient to establish transfer of possession and effective control required for treated deemed sale. The circular itself distinguishes fact-specific situations and does not confer an automatic benefit where contract terms show retention of possession and effective control by the owner. The Tribunal concluded that the VAT clause reflected at best an intent to characterize the transaction as sale but did not alter the factual conclusion regarding control and possession. [Paras 18, 20]

Payment or agreement to pay VAT does not, by itself, convert the hire transactions into Deemed Sale when possession and effective control remain with the appellant.

Extended period of limitation - suppression/misrepresentation - Whether invocation of the extended period of limitation was justified on the ground of suppression or misrepresentation by the appellant. - HELD THAT: - The Tribunal examined the conduct and the contract terms and concluded that the appellant had, by retaining possession and effective control while agreeing VAT payment in the contracts, misrepresented the nature of the transactions and thereby did not register for service tax despite rendering a taxable service. The Tribunal found that this amounted to suppression of facts within the meaning relevant for invoking the extended limitation period. The burden to prove suppression lay on the Department and, on the facts and documents examined, the Tribunal found no deficiency in the Department's conclusion that suppression/misrepresentation existed and that invocation of the extended period was therefore proper. [Paras 21]

Extended period of limitation was rightly invoked because the appellant's misrepresentation/suppression in not registering for service tax was established on the contractual record.

Final Conclusion: The Tribunal upheld the adjudicating authority's order: the hire of cranes was taxable as Supply of Tangible Goods, the VAT clause did not convert the transactions into Deemed Sale, and invocation of the extended period of limitation was justified for suppression/misrepresentation; the appeal is dismissed.

Service of decision/order under Section 37C - service to unauthorized person invalid - date of communication for limitation - time bar for filing appeal and 60-day limitation - no power to condone delay beyond 90 days - remand for adjudication on merits

Service of decision/order under Section 37C - service to unauthorized person invalid - date of communication for limitation - Validity of service of the Order in Original and the date of communication for computing limitation - HELD THAT: - The Tribunal examined Section 37C which requires service to the person for whom the decision is intended or to his authorised agent, and that service is deemed to have occurred on the date the order is tendered, delivered by post or affixed as prescribed. In the present facts the order was delivered to a contract security staff member who was not an authorised representative of the appellant. Reliance was placed on binding precedent that service to a person who is not authorised cannot be treated as valid service. The appellant only became aware of the Order in Original upon receipt of a recovery notice and located the order on 25.10.2023. Given the defective initial service, the Tribunal treated 25.10.2023 as the date of communication of the order for limitation purposes and not the earlier delivery to the unauthorised security personnel. [Paras 5]

Service was invalid as it was not effected on the appellant or an authorised agent; 25.10.2023 is to be treated as the date of communication for limitation.

Time bar for filing appeal and 60-day limitation - no power to condone delay beyond 90 days - remand for adjudication on merits - Sustainability of the Commissioner (Appeals) order dismissing the appeal as time barred and the consequential relief - HELD THAT: - The Commissioner (Appeals) dismissed the appeal solely on the ground that it was filed after 90 days and therefore could not be admitted. Having held that valid service occurred only on 25.10.2023 and that the appeal was filed on 12.12.2023 (within the normal 60 day period), the Tribunal concluded that the rejection on time bar was not sustainable. Since the Commissioner (Appeals) did not examine the merits because of the time bar dismissal, the appropriate relief is to set aside the impugned order and remit the matter to the Commissioner (Appeals) for fresh decision on merits. [Paras 2, 5, 6]

Impugned order dismissing the appeal for delay is set aside and the matter is remanded to the Commissioner (Appeals) for adjudication on merits.

Final Conclusion: The appeal is allowed by setting aside the Commissioner (Appeals) order which dismissed the appeal as time barred; service to an unauthorised security person was invalid, 25.10.2023 is the date of communication for limitation and the matter is remitted to the Commissioner (Appeals) to decide the appeal on merits.

Corporate guarantee - consideration - not a taxable service without consideration - service under Section 65B(44) of the Finance Act, 1994 - place of provision of services

Corporate guarantee - consideration - not a taxable service without consideration - service under Section 65B(44) of the Finance Act, 1994 - Whether corporate guarantees issued by the appellant to overseas entities without any commission, fee or other consideration attract service tax. - HELD THAT: - The Tribunal found on the record of the case, including the show-cause notice and the Order-in-Original, that no monetary or other form of consideration flowed from the appellant to the banks for issuance of corporate guarantees in favour of overseas entities. The Revenue's notional computation of consideration by reference to Income Tax transfer pricing principles and a hypothetical commission was noted in the papers but was not actually reflected as having been declared or assessed by Income Tax authorities in the present proceedings. Relying on earlier decisions of this Tribunal and the Supreme Court cited in the order, which hold that in the absence of consideration an activity of issuing corporate guarantees does not qualify as a 'service' under the relevant statutory definition, the Tribunal concluded that the impugned demand of service tax, interest and penalty could not be sustained. The Tribunal therefore set aside the adjudication without accepting the departmental method of imputing consideration where none was shown to have been received. [Paras 5, 6]

Demand of service tax on corporate guarantees issued without consideration is unsustainable; the adjudication order is set aside.

Final Conclusion: The appeal is allowed and the Order-in-Original confirming service tax, interest and penalty in respect of corporate guarantees issued without consideration for the period 01.04.2011 to 30.06.2017 is set aside with consequential relief, if any.

Denial of refund of unutilised accumulated CENVAT credit - Place of provision of services - Intermediary - Principal-to-principal relationship - Effect of Constitution (One Hundred and Twenty-second Amendment) Act, 2016 - Article 366 clauses 26A and 29A - meaning of "services" and exclusion of tax on sale or supply of goods from service tax

Denial of refund of unutilised accumulated CENVAT credit - Intermediary - Place of provision of services - Principal-to-principal relationship - Effect of Constitution (One Hundred and Twenty-second Amendment) Act, 2016 - Article 366 clauses 26A and 29A - Whether the denial of refund of unutilised accumulated CENVAT credit for October, 2015 to June, 2017 on the ground that the services were not exported because the Appellant was an "intermediary" and place of provision was in India was sustainable - HELD THAT: - The Tribunal examined the agreement between the Appellant and the foreign principal and noted that commission was contractual and payable only on sales of products by the selling companies in the territory, and Clause 10.1 described the Appellant as an "independent contractor/agent" operating on a principal-to-principal basis. The Tribunal observed that earlier co-ordinate Bench decisions relied upon by the Commissioner (Appeals) were distinguishable on facts, particularly where those authorities involved different consideration mechanisms or services not linked to sale of goods. The Tribunal also took note of the constitutional amendments (Clauses 26A and 29A of Article 366) which, with effect from 08.09.2016, defined "services" as "anything other than goods" and excluded tax on sale or supply of goods from the service tax net, a development bearing on the classification and taxability of the transactions. Having regard to the contractual terms, factual matrix and the constitutional amendment - and in the absence of a successful challenge by the Department to the appellate orders in the Appellant's earlier periods - the Tribunal found the Commissioner (Appeals) order sustaining denial of refund unsustainable and allowed the appeal. [Paras 5, 6, 7]

The appeal is allowed and the Commissioner (Appeals) order dated 11.10.2018 denying the refund is set aside.

Final Conclusion: The Tribunal allowed the appeal for October, 2015 to June, 2017, holding the denial of refund unsustainable on the contractual facts and in view of the constitutional amendment affecting the scope of "services", and set aside the Commissioner (Appeals) order.

Classification of services as works contract services - supply of tangible goods service - CENVAT credit claim and admissibility - maintainability of demand - remand for verification and fresh adjudication

Classification of services as works contract services - supply of tangible goods service - maintainability of demand - Whether the services rendered by the appellant are works contract services or supply of tangible goods services and whether the demand under supply of tangible goods service is maintainable - HELD THAT: - The Tribunal found force in the appellant's contention that the services involved supply of materials along with labour and therefore raised the question whether the transactions fall within works contract services rather than supply of tangible goods service. The adjudicating authority had not examined the documentary materials and the contractual allocation between material and labour to determine the true nature of the service. The Tribunal observed that the demand framed as supply of tangible goods service was prima facie not maintainable where the service transferred only possession and effective control without proper appraisal of the materials-versus-labour matrix. Because the lower authority did not undertake the required fact-finding and verification, the Tribunal declined to decide the classification on merits and directed fresh consideration.

Classification and maintainability remanded to the Adjudicating Authority for fresh verification and adjudication after examination of invoices, work-orders and relevant documents.

CENVAT credit claim and admissibility - remand for verification and fresh adjudication - Whether the appellant's claim to CENVAT credit should have been admitted by the adjudicating authority - HELD THAT: - The Tribunal noted that the appellant had presented a list of input/service invoices and supporting working sheets and contended entitlement to CENVAT credit for the period specified. The adjudicating authority rejected the claim on the ground that invoices were not produced, but the Tribunal held that where a claim is prima facie supported by documentary lists and working sheets the proper course for the adjudicator was to call for the invoices or seek verification rather than reject the claim outright. The Tribunal therefore required the Adjudicating Authority to verify the invoices and records, and to recompute admissible credit in accordance with the findings on classification and other relevant facts.

CENVAT credit claim remanded to the Adjudicating Authority for verification of invoices and fresh decision on admissibility and adjustment.

Final Conclusion: Impugned order set aside and the matter remitted to the Adjudicating Authority for reconsideration and verification of classification of services and CENVAT credit entitlement, with directions to examine invoices, work orders and related documents and to recompute liabilities accordingly.

Option to avail exemption - irrevocability of option for the remainder of the financial year - incompatibility of availing CENVAT credit and SSI exemption in same financial year - second show-cause notice on same cause of action - time-bar / limitation for issuance of subsequent proceedings

Option to avail exemption - irrevocability of option for the remainder of the financial year - incompatibility of availing CENVAT credit and SSI exemption in same financial year - Benefit of Notification No.8/2003-C.E. cannot be availed for the remaining part of the financial year after exercising the option to pay duty and availing CENVAT credit. - HELD THAT: - The Tribunal construed clauses 2(i) and 2(ii) of Notification No.8/2003-C.E. dated 01.03.2003 which confer on a manufacturer the option either to avail the exemption under the Notification or to pay normal duty and, if the latter option is exercised, require the option to be communicated before the first clearance and prohibit withdrawal of that option during the remaining part of the financial year. The appellant paid duty in April 2006 utilising available CENVAT credit and thereafter surrendered registration but continued clearances claiming exemption. The Tribunal held that having availed CENVAT credit and paid duty for April 2006 the appellant could not thereafter claim the Notification benefit for the rest of the same financial year; the option, once effectively exercised as per the Notification, precludes switching to nil-rate exemption for May 2006 to March 2007. [Paras 5]

Claim for benefit of Notification No.8/2003-C.E. for the period May 2006 to March 2007 is not allowable.

Second show-cause notice on same cause of action - time-bar / limitation for issuance of subsequent proceedings - Second show-cause notice issued after adjudication on the same audit note and same cause of action is time-barred and vitiates the subsequent adjudication. - HELD THAT: - The Tribunal examined the chronology: audit observations dated 20.03.2007, first show-cause notice issued 04.11.2008 and adjudicated by Order-in-Original dated 19.08.2009, and a later show-cause notice dated 22.09.2009 founded on the same audit note. Relying on the principle that the revenue cannot reopen or initiate fresh proceedings on the same cause of action where all relevant material was available at the time of the first notice, the Tribunal found the second notice unjustified. The Tribunal observed that issuance of a subsequent show-cause notice on the same audit note after final adjudication amounted to reopening the matter without fresh material and was barred by limitation and settled precedent; therefore the impugned order based on the second notice could not stand. [Paras 5]

Second show-cause notice dated 22.09.2009 is time-barred; impugned order is set aside and the appeal is allowed.

Final Conclusion: The Tribunal held that the appellant, having exercised the option to pay duty and availed CENVAT credit in April 2006, could not claim exemption under Notification No.8/2003-C.E. for May 2006 to March 2007; however, the second show-cause notice issued on the same audit note after adjudication of an earlier notice was time-barred, and accordingly the impugned order was set aside and the appeal allowed.

Security deposit - deposit v. payment - pre-condition for release of seized goods - adjustment of security towards disputed tax - Settlement of Disputes (SOD 2020) - remand for fresh consideration

Security deposit - deposit v. payment - adjustment of security towards disputed tax - Characterisation of the Rs. 10,00,000 deposited pursuant to the Tribunal order as a deposit/security and not as a payment liable to be appropriated as tax. - HELD THAT: - The Tribunal's order of 1st February, 2012 directed release of seized articles on condition of depositing security of Rs. 18,00,000, of which Rs. 10,00,000 was to be deposited in cash and Rs. 8,00,000 by bank guarantee. The wording of that order, and the use of the term 'security', indicates the sum was directed to be deposited as security and as a pre-condition for release, and not as a payment of tax or penalty. Accordingly, the department's contention that the cash deposit had lost the character of a deposit and could not be treated as such is not accepted. The court declared that the revenue cannot treat the Rs. 10,00,000 cash deposit as a payment merely because the amount was later sought to be adjusted, since the original direction and intention were to secure the revenue's interest until adjudication. [Paras 3, 7, 8, 10]

The Rs. 10,00,000 deposited under the Tribunal's order is a security deposit and not a payment.

Settlement of Disputes (SOD 2020) - adjustment of security towards disputed tax - remand for fresh consideration - Whether the Tribunal's concession and the department's adjustment of part of the deposit against the SOD liability were valid and whether penalty/payment issues fall within SOD; matter remanded for fresh consideration. - HELD THAT: - The court observed doubts concerning what was actually paid by the respondent initially and what constituted a deposit, and noted that the department's alleged concessions were not placed in writing before the Tribunal. Given these uncertainties and the fact that the respondent availed SOD 2020 with computation of 10% of disputed tax, the High Court set aside the impugned order to permit the Tribunal to re-examine the issues regarding payment of penalty, whether such payments are covered under SOD, and related adjustments. The remit is for the Tribunal to determine these aspects afresh in light of the characterisation of the original sum as security. [Paras 4, 5, 10, 11]

Impugned order set aside; matter remanded to the Tribunal to reconsider payment of penalty, applicability of SOD, and related adjustments.

Final Conclusion: The High Court held that the Rs. 10,00,000 deposited pursuant to the Tribunal's 1st February, 2012 order was a security deposit (not a payment), set aside the impugned order insofar as it permitted adjustment without re-examination, and remanded the matter to the Tribunal to reconsider payment of penalty, whether the penalty is covered under SOD 2020, and related issues.