TaxTMI Updates e-Newsletter
Jul 28,2025

The Supreme Court, in a partial bench comprising Hon'ble Justices Rajesh Bindal and R. Mahadevan, heard Special Leave Petitions challenging an interim High Court order that relied on the judgment in *K.J. International v. State of Punjab*, 2023 (12) Centax 106 (P&H). The main writ petition remains pending. The Court condoned the delay but held that no case was made out for interference with the impugned order, stating: "We do not find that any case is made out for interference with the impugned order." Accordingly, the Special Leave Petitions were dismissed, and any pending applications were disposed of.

Issues: Whether the writ petition challenging the appellate order should be disposed of by permitting the petitioner to avail the statutory second appeal before the Goods and Services Tax Appellate Tribunal upon its constitution, and whether the statutory stay under the GST law would continue till disposal of such appeal.

Analysis: The petition was filed against an appellate order under Section 107 of the Chhattisgarh Goods and Services Tax Act, 2017 in circumstances where the Goods and Services Tax Appellate Tribunal had been notified but its President or Members had not yet assumed office. The Court took note of the Central Board's order clarifying the computation of limitation for appeals under the GST appellate framework when the Tribunal is not functional, and also relied upon the coordinate bench decision dealing with the same issue. In view of these factors, the Court found it appropriate to allow the petitioner to invoke the statutory appellate remedy after the President or State President enters office, subject to the required statutory deposit. The Court further directed that the appeal, once filed, be decided in accordance with law and that the statutory stay under Section 112(9) would remain operative till disposal of the appeal.

Conclusion: The writ petition was disposed of by directing the petitioner to pursue the statutory second appeal when the Tribunal becomes functional, with the interim statutory protection to continue till the appeal is decided.

ISSUES:

Whether the unilateral blocking of Input Tax Credit (ITC) under Rule 86A of the CGST Rules, 2017 / OGST Rules, 2017 without compliance with principles of natural justice is lawful.Whether the suppliers alleged to be "non-existent" for the purpose of blocking ITC were in fact non-existent or compliant with statutory obligations.Whether the petitioner is entitled to avail ITC when the suppliers have filed returns and discharged tax liabilities fully for the relevant period.Whether the Court should interfere at the stage of investigation and enquiry regarding blocking of ITC or leave the matter to be adjudicated by the statutory authorities.The scope and conditions for exercise of power under Rule 86A of the CGST Rules, 2017 for blocking ITC.Whether the writ jurisdiction under Articles 226 and 227 of the Constitution of India is appropriate for adjudication of disputed factual issues relating to ITC blocking and assessment under the GST Act.

RULINGS / HOLDINGS:

The Court held that the power under Rule 86A to block ITC must be exercised only when the Commissioner or an authorized officer has "reasons to believe" that the credit has been fraudulently availed or is ineligible on specified grounds, and such reasons must be recorded in writing with proper application of mind.The Court found that the suppliers alleged as non-existent had filed statutory returns and discharged their liabilities fully for the period in question, indicating that they were not non-existent as alleged.The Court held that the explanation submitted by the petitioner against blocking of ITC had not been considered by the authority concerned, and therefore the matter requires adjudication by the statutory authority before any interference by the Court.The Court declined to interfere at the stage of investigation and enquiry, noting that the remedy of disallowing debit of electronic credit ledger is extraordinary and must be resorted to with "utmost circumspection and with maximum care and caution."The Court emphasized that the factual and documentary verification required for entitlement to ITC under Section 16(2) and Rule 36 of the CGST Rules is a matter for the adjudicating authority and not for the writ Court to decide on the limited record before it.The Court held that writ jurisdiction under Articles 226 and 227 is not ordinarily available to challenge blocking of ITC or show cause notices issued under the GST Act, except in exceptional circumstances such as breach of fundamental rights, violation of natural justice, excess of jurisdiction, or challenge to vires of the statute.The Court directed the authority to consider the petitioner's reply/explanation within a stipulated time and afford an opportunity of hearing, but refrained from expressing any opinion on the merits of the case.

RATIONALE:

The Court applied the legal framework under the Central Goods and Services Tax Act, 2017 and the Odisha Goods and Services Tax Act, 2017, particularly Section 16 (entitlement to input tax credit), Section 73 (recovery of tax), Rule 36 (documentary requirements for ITC), and Rule 86A (blocking of ITC).The Court relied on authoritative precedent emphasizing that "the burden is upon the purchasing dealer to prove the genuineness of the transaction" and that entitlement to ITC is subject to strict documentary and procedural compliance as prescribed by law.The Court referred to the Supreme Court's interpretation of Section 16 and Section 17(5) of the CGST Act, clarifying the conditions and restrictions on availing ITC and the overriding effect of certain provisions.The Court noted that the power to block ITC under Rule 86A is an extraordinary power that must be exercised on the basis of "reasons to believe" supported by material evidence, not merely on suspicion or unilateral action.The Court recognized the ongoing investigation and factual incongruity between the parties' contentions, concluding that the matter is fit for adjudication by the statutory authority empowered under the GST Act rather than by the writ Court at the admission stage.The Court highlighted the settled principle that writ jurisdiction is not a substitute for statutory remedies, especially when alternate appeal or adjudicatory mechanisms exist under the GST Act, such as appeals under Section 107.The Court cited relevant High Court and Supreme Court decisions underscoring that writ petitions challenging GST assessments or blocking of ITC will not be entertained unless exceptional circumstances are shown.

ISSUES:

Whether penalty under section 129(3) of the GST Act can be imposed for non-filling of Part-B of the e-way bill due to a technical glitch.Whether the absence of intention to evade payment of tax affects the imposition of penalty under section 129(3) of the GST Act.Whether the authorities are required to record a finding of intention to evade tax before imposing penalty under section 129(3) of the GST Act.

RULINGS / HOLDINGS:

The court held that "non-filling of e-way bill will not attract penalty under section 129(3) of the GST Act" where the non-filling is due to a technical glitch and there is no intention to evade payment of tax.The absence of any recorded finding by the authorities regarding intention to evade tax precludes the imposition of penalty under section 129(3) of the GST Act.The impugned penalty orders under section 129(3) of the GST Act were quashed as the petitioner's failure to fill Part-B of the e-way bill was caused by a technical error and there was no evidence of tax evasion.

RATIONALE:

The court applied the statutory framework under section 129(3) of the GST Act, which authorizes penalty for contravention related to e-way bills but requires consideration of intent to evade tax.The court relied on precedent from the Division Bench ruling in M/s Tata Hitachi Construction Machinery Company Private Limited and subsequent judgments in M/s Citykart Retail Private Limited and M/s Roli Enterprises, which established that mere non-filling of e-way bill without intent does not attract penalty.The court emphasized the necessity of a recorded finding of tax evasion intention by the authorities before imposing penalties under section 129(3), marking a consistent doctrinal approach against penalizing technical or inadvertent non-compliance.

Issues: Whether the denial of transitional credit was vitiated for non-compliance with the prescribed verification procedure and violation of natural justice, and whether the writ court ought to have interfered notwithstanding the alternate remedy.

Analysis: The circular governing transitional credit required the jurisdictional tax officer to treat the counterpart officer's verification report as material for consideration, furnish it to the dealer, invite objections, seek comments where necessary, afford personal hearing, and then decide admissibility by a reasoned order. The officer was not bound to mechanically accept the verification report. The impugned order showed that the authority treated the verification report as conclusive and failed to independently consider the rebuttal filed by the appellant. In such circumstances, the case fell within the recognized exceptions to the alternate remedy rule, including violation of natural justice and failure to exercise jurisdiction in the manner prescribed by the governing procedure.

Conclusion: The denial of transitional credit was unsustainable, and interference in writ jurisdiction was justified.

Final Conclusion: The matter was sent back for fresh decision after affording the appellant a proper hearing and passing a speaking order on merits in accordance with the prescribed guideline.

Ratio Decidendi: Where a taxing authority is required to decide transitional credit after independent consideration of a verification report, objections, and personal hearing, a mechanical order treating the report as binding is vitiated by breach of natural justice and is amenable to writ interference despite the availability of an alternate remedy.

ISSUES:

Whether an ex parte assessment order passed under Section 73(9) of the BGST Act, 2017 without a reasoned and detailed order and without service of any notice as contemplated under Section 169 of the BGST Act, 2017 is valid.Whether mere uploading of notices under the heading 'Additional Notices and Orders' on the GST portal constitutes valid service of notice under Section 169 of the BGST Act, 2017.Whether the failure to serve show cause notices and reminders by a valid mode, and the consequent denial of opportunity of hearing under Section 75(4) and 75(5) of the BGST Act, 2017, violates principles of natural justice.Whether the impugned ex parte assessment order is liable to be quashed for non-compliance with statutory procedural requirements and violation of natural justice.

RULINGS / HOLDINGS:

The ex parte assessment order dated 06.02.2025 passed under Section 73(9) of the BGST Act, 2017 without passing a reasoned and detailed order and merely confirming the demand raised in DRC-01 is non-est in the eyes of law and liable to be quashed.Mere uploading of notices under the heading 'Additional Notices and Orders' on the GST portal does not amount to valid service of notice as required under Section 169 of the BGST Act, 2017.Failure to serve show cause notices and reminders by a valid mode and denial of opportunity of hearing under Sections 75(4) and 75(5) of the BGST Act, 2017 amounts to violation of the principles of natural justice, rendering the impugned order liable to be quashed and set aside.The impugned assessment order is an ex parte order as notices were not served in accordance with Section 169 of the BGST Act, 2017 and the petitioner was not granted an opportunity of hearing, thus the order is liable to be set aside.

RATIONALE:

The Court applied the statutory framework under the Bihar Goods and Services Tax Act, 2017, specifically Sections 73(9), 75(4), 75(5), and 169, which govern assessment procedures, service of notices, and the right to hearing.Precedent judgments emphasized that effective service of notice requires at least two modes of communication to ensure the assessee's awareness, and mere uploading on a common portal without additional communication is insufficient.The Court recognized the fundamental principle of natural justice that mandates an opportunity of hearing before passing any adverse order, as conferred by Section 75(4) of the BGST Act, 2017.The absence of a reasoned order and failure to comply with service requirements under Section 169 rendered the impugned order legally unsustainable.No dissent or doctrinal shift was indicated; the Court followed established legal principles and recent judicial pronouncements favoring effective notice and hearing rights.

Issues: Whether the assessment order was prima facie beyond the period of limitation, and whether further proceedings pursuant to the assessment order should be stayed pending counter-affidavit.

Outcome: The Court granted stay of all further proceedings pursuant to the assessment order and directed the matter to be posted after filing of the counter-affidavit.

ISSUES:

Whether writ jurisdiction under Article 226 can be exercised in cases involving allegations of fraudulent availment of Input Tax Credit (ITC) under the CGST Act.Whether the existence of alternate statutory remedy under Section 107 of the CGST Act bars the maintainability of a writ petition challenging demands and penalties for fraudulent ITC.Whether principles of natural justice were complied with in the impugned order and if non-consideration of petitioner's reply affects the legality of the order.Whether an opportunity to file an appeal under Section 107 of the CGST Act should be granted despite the writ petition being dismissed.

RULINGS / HOLDINGS:

Writ jurisdiction ought not to be exercised in cases involving fraudulent availment of ITC, considering the burden on the exchequer and the impact on the GST regime, as such matters require detailed factual analysis beyond the scope of writ proceedings.The existence of an alternate remedy under Section 107 of the CGST Act generally bars writ petitions, except in exceptional circumstances such as breach of fundamental rights, violation of natural justice, excess of jurisdiction, or challenge to the vires of the statute, none of which were established in the present case.The impugned order complied with the basic requirements of principles of natural justice by providing opportunities for personal hearing, and the non-consideration of the petitioner's reply does not vitiate the order as the petitioner failed to appear for the hearings.The petitioner is granted an opportunity to file an appeal under Section 107 of the CGST Act within a stipulated time with the relevant pre-deposit, and such appeal shall be adjudicated on merits without dismissal on limitation grounds.

RATIONALE:

The Court applied the legal framework under Article 226 of the Constitution and the provisions of the Central Goods and Services Tax Act, 2017, particularly Sections 16 (Input Tax Credit), 107 (Appeal), and 122 (Penalty).Precedent was relied upon where writ jurisdiction was declined in cases of fraudulent ITC to prevent misuse of the GST regime and avoid multiplicity of litigation and contradictory findings across forums.The Court emphasized that factual disputes and complex transactions require adjudication by the statutory appellate authority rather than through writ proceedings.Reference was made to Supreme Court authority holding that writ petitions are maintainable only under exceptional circumstances when alternate statutory remedies exist.The Court noted compliance with principles of natural justice through adequate notice and opportunity for personal hearing, and that ex-parte decisions are permissible where parties are non-responsive.No dissent or doctrinal shift was indicated; the judgment follows established jurisprudence restricting writ intervention in GST fraud matters.

ISSUES:

Whether a show cause notice under Section 73 of the WBGST/CGST Act, 2017 can be issued for the same tax period after issuance of a notice and order under Section 74 for that period.Whether the show cause notice under Section 73 is vague and lacking in particulars, especially concerning demand under the reverse charge mechanism (RCM).Whether input tax credit (ITC) availed on inward B2B supplies (including debit notes and amendments) already adjudicated under Section 74 can be included again in a subsequent show cause notice under Section 73.Whether non-disclosure of particulars by the taxpayer permits the proper officer to impose demand without scrutinizing records, particularly when the issue has been adjudicated previously.Whether the petitioner can challenge the demand confirmed by an appellate order when the appellate tribunal is yet to be constituted.

RULINGS / HOLDINGS:

The Court held that the issuance of separate show cause notices under Section 73 and Section 74 for the same period is permissible because the scope of these sections is "entirely different," with Section 74 addressing fraud or wilful misstatement and Section 73 addressing other reasons for tax short payment or erroneous refund.The show cause notice under Section 73 was not vague as it referred to particulars in Form GSTR-1, including details of outward supplies and HSN codes, and complied with Rule 142 of the WBGST/CGST Rules, 2017.The inclusion of ITC availed on inward B2B supplies in the Section 73 notice, which had already been adjudicated under Section 74, was impermissible; "such issue could not have been included in the subsequent notice" and the related demand was quashed.Non-disclosure of supporting documents by the petitioner does not relieve the proper officer of the obligation to scrutinize records nor justify imposing demand when the matter has already been adjudicated.The petitioner cannot avoid challenging the appellate order on the ground of non-constitution of the appellate tribunal; having "chosen to bypass the appellate remedy" and invoked writ jurisdiction, the petitioner cannot reserve the right to question the order later.

RATIONALE:

The Court applied the statutory framework of Sections 73 and 74 of the WBGST/CGST Act, 2017, which distinguish between tax determination for reasons other than fraud (Section 73) and for reasons involving fraud or wilful misstatement (Section 74), with differing procedural safeguards and time limits.The Court relied on the explicit language of the Act and the Explanation clauses clarifying that proceedings under Sections 73 and 74 are distinct and may coexist for the same tax period if based on different grounds.Compliance with procedural requirements under Rule 142 and reference to GSTR-1 tables addressed the vagueness challenge, reinforcing the adequacy of particulars in the notice.The Court emphasized the principle that once an issue has been adjudicated and an appellate order confirmed, it attains finality unless challenged by appropriate statutory remedy, rejecting attempts to relitigate the same issue via writ jurisdiction.No dissent or doctrinal shift was indicated; the judgment reaffirmed established statutory interpretations and procedural norms under the GST framework.

ISSUES:

Whether Sections 69 and 132 of the Goods and Services Tax Act, 2017 are constitutionally valid and within legislative competence.Whether Sections 69 and 132 violate Articles 14, 20, and 21 of the Constitution of India.Whether the power of arrest under Section 132 of the GST Act can be exercised without completion of assessment proceedings under Section 73.The procedural safeguards and pre-conditions required for passing an order of arrest under Section 132 of the GST Act.The applicability of principles governing legislative entries and the doctrine of pith and substance in relation to Article 246A of the Constitution.

RULINGS / HOLDINGS:

The constitutional validity of Sections 69 and 132 of the GST Act is upheld; these provisions are within legislative competence under Article 246A of the Constitution, which is a "special provision" defining the source of power and field of legislation for GST.The provisions do not violate Articles 14, 20, or 21 of the Constitution as the powers to summon, arrest, and prosecute are "ancillary and incidental" to the power to levy and collect GST.The power under sub-section (5) to Section 132 can be exercised even without completion of assessment under Section 73, provided the Commissioner has "reasons to believe" supported by "relevant and sufficient material" that a non-bailable offence has been committed and the tax evaded falls within specified monetary limits.An order of arrest must be based on a "formulation of the opinion" by the Commissioner, recorded with "foundational reasoning and material," and not on mere suspicion or ipse dixit.The doctrine of liberal construction applies to legislative entries under Article 246A, extending to all "ancillary and subsidiary matters" necessary for effective levy and collection of GST, including penal provisions for tax evasion.

RATIONALE:

The Court applied the constitutional framework under Article 246A, which specifically empowers Parliament and State Legislatures to legislate on GST, including measures to prevent tax evasion.The doctrine of pith and substance was employed to interpret the GST Act provisions as valid exercises of legislative power ancillary to the levy and collection of tax.Precedents emphasizing broad and liberal construction of legislative entries were relied upon, including the principle that entries should not be read narrowly or pedantically but given their "broadest meaning and widest amplitude."The Court clarified procedural safeguards for arrest under Section 132, referencing the necessity of "reasons to believe" supported by material evidence, and rejected the argument that arrest powers are contingent upon completion of assessment proceedings.The judgment reaffirmed existing principles from prior rulings on tax legislation and arrest powers, with no dissent or doctrinal shift indicated.

Issues: Whether a retired partner remained liable for the firm's GST dues where no intimation of retirement was given to the Commissioner within one month, and whether the writ court should interfere with the recovery action.

Analysis: Section 90 of the Central Goods and Services Tax Act, 2017 provides that the firm and its partners are jointly and severally liable for tax dues, and that a retiring partner or the firm must intimate the date of retirement to the Commissioner by notice in writing. If such intimation is not given within one month, the retiring partner's liability continues until the date on which the intimation is received by the Commissioner. The petitioner admitted retirement from the firm but could not show that timely intimation was given to the competent authority. The record also showed that the claimed intimation was made much later, after recovery proceedings had already been initiated. In these circumstances, the petitioner could not avoid liability on the plea that the firm alone was required to intimate the authorities.

Conclusion: The petitioner remained liable under Section 90 until valid intimation of retirement was received, and no ground for interference was made out.

Ratio Decidendi: A retiring partner continues to remain liable for the firm's tax dues until the Commissioner receives written intimation of retirement within the prescribed period.

ISSUES:

Whether multiple assessment orders for the same tax period under different sections of the Goods and Services Tax Act, 2017, result in duplication of proceedings.Whether an assessment order passed under Section 73 can be sustained after an earlier order for the same period was passed under Section 74.The scope and permissibility of initiating fresh proceedings or including differential amounts in existing assessment proceedings under the GST enactments.

RULINGS / HOLDINGS:

The Court held that "there is no scope for duplication of assessment proceedings under the Scheme of the enactment," thereby disallowing multiple assessments for the same tax period under different sections.The impugned assessment order under Section 73 was quashed as it duplicated the earlier order passed under Section 74 for the same period.Liberty was granted to the tax authorities to "initiate appropriate proceedings to include the differential amount in the earlier proceedings if the provisions permit," emphasizing procedural propriety and avoidance of multiplicity of proceedings.

RATIONALE:

The Court applied the statutory framework of the respective Goods and Services Tax Act, 2017, particularly Sections 73 and 74, which govern assessment procedures for tax periods.The decision reflects an interpretation aimed at preventing multiplicity and duplication of assessment proceedings for the same tax period, consistent with the principles of natural justice and statutory scheme.No dissenting or concurring opinions were noted; the judgment reinforces the doctrine that assessment under GST must be singular and consolidated unless otherwise expressly provided.

ISSUES:

Whether fraudulent availment of Input Tax Credit (ITC) through bogus or non-existent firms constitutes a valid ground for raising demand and penalties under the Central Goods and Services Tax (CGST) Act.Whether a typographical error in the financial year mentioned in the demand notice (DRC-07) affects the validity of the adjudication order.Whether writ jurisdiction is appropriate for challenging orders involving complex factual disputes related to fraudulent ITC claims.The applicability of appellate remedies under Section 107 of the CGST Act in cases involving allegations of fraudulent ITC availment.

RULINGS / HOLDINGS:

The Court held that the impugned adjudication order raising demand for fraudulent availment of ITC through bogus invoices is valid and the Petitioner must avail of the appellate remedy; the order is an appealable order under Section 107 of the CGST Act.The typographical error in the financial year mentioned in the DRC-07 is not a sufficient ground to invalidate the order, as such errors can be rectified under Section 161 of the CGST Act.The Court held that writ petitions ordinarily are not to be entertained in cases involving fraudulent availment of ITC through bogus invoicing, as such matters require detailed factual analysis unsuitable for writ jurisdiction.The Petitioner is relegated to file an appeal within 30 days after rectification of the DRC-07, and the appeal shall not be dismissed on the ground of limitation if filed within this period with the pre-deposit.

RATIONALE:

The Court applied the statutory framework under the CGST Act, particularly Sections 16 (Input Tax Credit), 107 (Appeal), 122 (Penalty), and 161 (Rectification of orders), emphasizing the business-friendly intent of Section 16 while recognizing the misuse of ITC provisions through bogus invoicing.The Court relied on precedent establishing that writ jurisdiction is an extraordinary remedy and is generally inappropriate for adjudicating complex factual disputes involving fraudulent tax claims, to prevent multiplicity of litigation and contradictory findings.The decision reflects the doctrinal position that appeals under the CGST Act are the proper forum for contesting such orders, and that typographical errors in demand notices can be corrected without affecting substantive rights.

ISSUES:

Whether Sections 69 and 132 of the Central Goods and Services Tax Act, 2017 (CGST Act) are constitutionally valid and within legislative competence.Whether Sections 69 and 132 of the CGST Act violate Articles 14, 20, and 21 of the Constitution of India.The scope and conditions under which the power of arrest under Section 132(5) of the CGST Act can be exercised.Whether an arrest under Section 132(5) of the CGST Act can be made prior to completion of assessment proceedings under Section 73 of the CGST Act.

RULINGS / HOLDINGS:

The constitutional validity of Sections 69 and 132 of the CGST Act is upheld as these provisions fall within the legislative competence under Article 246A of the Constitution. The Court held that "Article 246-A of the Constitution is a comprehensive provision and the doctrine of pith and substance applies."The provisions do not violate Articles 14, 20, or 21, as the powers to summon, arrest, and prosecute are ancillary and incidental to the power to levy and collect GST and prevent tax evasion.An order of arrest under Section 132(5) of the CGST Act requires the Commissioner to record "reasons to believe" that the person has committed a "non-bailable offence" with reference to "material" forming the basis of such belief; arrest cannot be based on "mere ipse dixit without foundational reasoning and material."The power of arrest under Section 132(5) may be exercised even before completion of assessment proceedings under Section 73, provided the Commissioner has "a sufficient degree of certainty" and records explicit reasons supported by material that the offence is non-bailable and the amount of tax evaded falls within the specified limits.

RATIONALE:

The Court applied the constitutional framework under Article 246A, which grants Parliament and State Legislatures legislative power over GST, including ancillary powers necessary for effective tax collection and prevention of evasion.Precedents emphasizing a broad and liberal interpretation of legislative competence entries were relied upon, including the principle that "the most liberal construction should be put on the words so that they may have effect in their widest amplitude."The Court referred extensively to the Supreme Court's judgment in Radhika Agarwal Vs. Union of India, which upheld the vires of Sections 69 and 132 and clarified procedural safeguards and conditions for arrest under the GST Acts.The Court emphasized procedural safeguards requiring the Commissioner to record reasons to believe based on evidence, not suspicion, and the necessity of compliance with rights of the accused in arrest and detention, paralleling principles under the Customs Act.No dissent or doctrinal shift was noted; the judgment follows binding Supreme Court authority and clarifies the application of arrest powers under the CGST Act.

ISSUES:

Whether secondment of expatriate employees by foreign group entities to an Indian company constitutes a taxable supply of manpower services under the GST regime.Whether salary payments made by the Indian company to seconded expatriates attract Integrated Goods and Services Tax (IGST) under the reverse charge mechanism.Whether the taxable value of supply made by overseas entities/expats to the Indian company can be deemed 'Nil' under Section 15(4) of the CGST Act, 2017 read with Rule 28 of the CGST Rules, 2017, in the absence of invoices.Whether the arrangement falls within the exclusion under Entry 1 of Schedule III to the CGST Act, 2017, i.e., services by an employer to its employee.Whether the CBIC Circular dated 26.06.2024 clarifies valuation and input tax credit (ITC) treatment in related party secondment arrangements.Whether the demand of IGST along with interest and penalty on the alleged import of manpower supply services is sustainable.

RULINGS / HOLDINGS:

The secondment of employees in the present case does not amount to a taxable supply of manpower services under the GST regime and is therefore not amenable to IGST under the reverse charge mechanism.Salary payments made by the Indian company to expatriates, who are on its payroll and under its exclusive administrative and functional control, do not constitute consideration for supply of manpower services and hence do not attract IGST.In the absence of invoices raised by the Indian company for services rendered by the foreign affiliate, the value of such services is deemed to be 'Nil' and treated as the open market value under the second proviso to Rule 28(1) of the CGST Rules, 2017, as clarified by CBIC Circular No. 210/4/2024-GST dated 26.06.2024.The arrangement falls within the exclusion under Entry 1 of Schedule III to the CGST Act, 2017, which excludes services by an employer to its employee from taxable supply.The impugned orders confirming demand of IGST along with interest and penalty on the alleged manpower supply service are quashed and set aside.

RATIONALE:

The Court applied the legal framework under the CGST Act, 2017, particularly Section 15(4), Rule 28 of the CGST Rules, and Entry 1 of Schedule III, alongside the CBIC Circular dated 26.06.2024.The Court relied on the substance-over-form approach established in the Supreme Court's decision in CC, CE & ST v. Northern Operating Systems Pvt. Ltd., which held that secondment arrangements may constitute taxable supply depending on factual control and economic employer status; however, this ruling is fact-specific and does not apply universally.The Court emphasized the dual-contractual framework of secondment arrangements, highlighting that the secondees were fully integrated into the Indian company's workforce, under its control, on its payroll, and subject to Indian tax laws, establishing an employer-employee relationship exempt under Schedule III.The CBIC Circular No. 210/4/2024-GST clarified valuation issues in related party transactions where full ITC is available, providing that in the absence of an invoice, the value may be deemed 'Nil', thus neutralizing tax liability.The Court noted the GST Council's recommendations and CBIC instructions aimed at consistent assessment of secondment cases and conditional waiver of interest and penalties, reflecting a doctrinal shift towards case-by-case evaluation and relief measures.The Court found the Circular binding on authorities, limiting their ability to impose tax demands where the invoice is not raised and full ITC is claimed, reinforcing the legal effect of the 'Nil' value deeming fiction under Rule 28.

Issues: (i) Whether sanction for prosecution under the Income-tax Act, 1961 could validly be granted by the Principal Director of Income-tax. (ii) Whether the complaint was without jurisdiction because it was filed by the Deputy Director of Income-tax (Investigation). (iii) Whether the sanction order was vague or passed without application of mind. (iv) Whether the complaint was premature because assessment proceedings were pending.

Issue (i): Whether sanction for prosecution under the Income-tax Act, 1961 could validly be granted by the Principal Director of Income-tax.

Analysis: The relevant provisions defining "Commissioner" and setting out the cadre structure of income-tax authorities were read together. On that combined reading, the expression "Commissioner" was held to include a Principal Director of Income-tax. The distinction drawn by the petitioner from cases concerning authorization for search was held to be inapposite because the issue here concerned sanction for prosecution, not search authorization.

Conclusion: The sanction was held to have been granted by a competent authority and the challenge failed.

Issue (ii): Whether the complaint was without jurisdiction because it was filed by the Deputy Director of Income-tax (Investigation).

Analysis: The provision governing prosecution showed that complaints could be instituted through officers authorized in that behalf under the statutory scheme and directions issued by the higher authority. At that stage, no conclusive material showed lack of authority in the filing officer, and the objection was treated as premature.

Conclusion: The objection to the competence of the filing officer was rejected as premature.

Issue (iii): Whether the sanction order was vague or passed without application of mind.

Analysis: The sanction order was read as reproducing the relevant part of the offence provision and then according sanction. That was treated as sufficient indication that the sanction related to the relevant prosecution provision, and the record did not support the plea that the authority had acted mechanically or without application of mind.

Conclusion: The sanction was held neither vague nor invalid for want of application of mind.

Issue (iv): Whether the complaint was premature because assessment proceedings were pending.

Analysis: Pendency of assessment or reassessment proceedings was held not to bar institution of criminal prosecution for offences under the Income-tax Act, 1961. The criminal proceedings and assessment proceedings were treated as distinct, and the absence of a completed assessment was not accepted as a precondition to prosecution in the facts of the case.

Conclusion: The plea of prematurity was rejected.

Final Conclusion: The petitions challenging the prosecution and the orders framing charge and dismissing revision were held to be without merit, and the prosecution was allowed to proceed.

Ratio Decidendi: For prosecution under the Income-tax Act, 1961, the statutory definition of "Commissioner" may include a Principal Director where the legislative scheme so provides, and pending assessment proceedings do not by themselves bar criminal prosecution for wilful tax evasion offences.

ISSUES:

Whether Section 54(1) of the Income Tax Act, 1961 allows exemption of capital gains arising from sale of a single residential house against purchase or construction of multiple residential houses.Whether the expression "a residential house" in unamended Section 54(1) includes plural residential houses or restricts exemption to only one residential house.Whether the amendment by Finance (No. 2) Act, 2014 substituting "a residential house" with "one residential house" clarifies the scope of exemption prospectively.Whether multiple residential units connected by common entrance or sharing facilities can be treated as a single residential house for exemption under Section 54(1).Whether the interpretation of Section 54(1) should be liberal and beneficial to the assessee.

RULINGS / HOLDINGS:

The Court held that prior to the 2014 amendment, the phrase "a residential house" in Section 54(1) of the Act was not restrictive to a single residential house but included plural residential houses; hence, exemption against capital gains from sale of one residential house can be claimed for investment in multiple residential houses.The amendment by Finance (No. 2) Act, 2014, which replaced "a residential house" with "one residential house," was a prospective clarification effective from 1st April 2015, explicitly restricting exemption to investment in only one residential house for assessment years thereafter.The judgment in K.C. Kaushik was distinguished as it did not address the issue of multiple residential houses but focused on letting out the second house, and therefore does not support the proposition that exemption is limited to one residential house.The Court agreed with the Karnataka High Court in Arun K. Thiagarajan and Madras High Court in Tilokchand & Sons that the singular "a residential house" includes plural residential houses, and that multiple houses purchased at different addresses out of sale proceeds qualify for exemption under unamended Section 54(1).The Court held that the beneficial provisions of Section 54(1) must be interpreted liberally in favor of the assessee, adopting the view that allows exemption for multiple residential houses purchased from capital gains arising from sale of a single residential house.The Special Bench ITAT decision in ITO Vs. Ms. Sushila M. Jhaveri, which limits exemption to one residential house, is not binding on the Court and was not followed in view of contrary High Court decisions.The Court quashed and set aside the orders denying exemption for the entire capital gains invested in seven row houses and allowed exemption under Section 54(1) of the Act for the full amount invested.

RATIONALE:

The Court applied the unamended provisions of Section 54(1) of the Income Tax Act, 1961, relevant for assessment year 1995-96, which used the phrase "a residential house" without the explicit numerical restriction introduced by the 2014 amendment.The Court relied on the principle under Section 13 of the General Clauses Act, 1897, that singular words include plural unless context otherwise requires, supporting a plural interpretation of "a residential house."Precedents from Karnataka High Court (Arun K. Thiagarajan), Madras High Court (Tilokchand & Sons), and Delhi High Court (Gita Duggal) were followed, which held that "a residential house" includes multiple houses and that the 2014 amendment was a clarificatory and prospective legislative change.The Court noted the legislative intent behind the 2014 amendment was to restrict exemption to one residential house prospectively, indicating no such restriction existed before the amendment.The Court distinguished the K.C. Kaushik judgment on its facts and scope, and declined to follow the Special Bench ITAT decision, emphasizing binding High Court precedents and the beneficial nature of the exemption.The Court emphasized that the exemption provisions are benevolent and must be interpreted liberally to encourage residential house purchase activities.

ISSUES:

Whether failure of an eligible Assessee to communicate objections filed before the Dispute Resolution Panel (DRP) to the Assessing Officer, as required under Section 144C(2)(b)(ii) of the Income Tax Act, 1961, invalidates the final assessment order passed under Section 143(3) read with Sections 144C(3) and 144B'Whether the final assessment order passed without the Assessing Officer being aware of the objections filed before the DRP can be quashed to enable the DRP to consider the objections'Whether the timelines prescribed under Section 144C for passing the final assessment order are mandatory and preclude condonation of delay or procedural lapses by the Assessee?

RULINGS / HOLDINGS:

The Court held that the failure to communicate objections filed before the DRP to the Assessing Officer as required under Section 144C(2)(b)(ii) does not preclude setting aside the final assessment order; the order was quashed to enable the Assessing Officer to consider the DRP's views.The final assessment order passed without the Assessing Officer's knowledge of the objections filed before the DRP was set aside on the ground that "the Assessing Officer will also have the benefit of considering the views of the DRP while passing a fresh assessment order."The Court recognized the timelines under Section 144C as "sacrosanct" but found that in the circumstances of inadvertent non-communication by the Assessee, the assessment order could be set aside to avoid rendering the DRP proceedings infructuous.

RATIONALE:

The Court applied the statutory framework under Sections 143(3), 144B, and 144C of the Income Tax Act, 1961, particularly focusing on the procedural requirements for eligible Assessees under Section 144C(2)(b) and the final assessment under Section 144C(3).The decision followed the precedent set by the Court's earlier ruling in Sulzer Pumps India Private Limited, where a similar failure to communicate objections to the Assessing Officer was held to justify setting aside the final assessment order.The Court emphasized the importance of the Assessing Officer having the benefit of the DRP's views before passing the final assessment order, ensuring compliance with the procedural safeguards intended under Section 144C.No dissenting or concurring opinions were noted; the ruling reflects a consistent interpretation aimed at balancing strict adherence to timelines with procedural fairness to the Assessee.

ISSUES:

Whether the transfer of assessment proceedings under Section 127 of the Income Tax Act, 1961, was without jurisdiction, illegal, arbitrary, or violative of Article 14 of the Constitution of India.Whether the petitioners were denied a fair opportunity of hearing as required under Section 127 of the Income Tax Act, 1961.Whether the transfer order was invalid due to the proposing officer and accepting officer being of different ranks, contrary to Section 127(2)(a) of the Income Tax Act, 1961.Whether sufficient reasons were disclosed for the transfer of assessment proceedings.Whether interference with the impugned transfer order is justified after the order has been acted upon and assessment proceedings have been completed or are ongoing.

RULINGS / HOLDINGS:

The transfer order under Section 127 was not without jurisdiction, illegal, or arbitrary and did not violate Article 14 of the Constitution; it was passed strictly in accordance with the provisions of Section 127 of the Income Tax Act.The petitioners were given a "reasonable opportunity of hearing" as mandated by Section 127(1), and the Act does not require a personal hearing; hence, there was no denial of fair opportunity.Section 127(2)(a) does not require the proposing and accepting officers to be of the same rank; the transfer proposal by a Chief Commissioner and acceptance by a Principal Commissioner complies with the statutory requirement.The impugned order disclosed "sufficient reasons" for transfer, including the need for "coordinated investigation" due to incriminating materials found during search and seizure operations and administrative convenience, as reflected in paragraphs 3.1 and 3.2 of the order.Interference with the transfer order is not justified at this stage since the order has been acted upon, assessment proceedings have been completed for one year, and statutory remedies (appeal) are available and pending.

RATIONALE:

The Court applied the statutory framework of Section 127 of the Income Tax Act, 1961, which governs transfer of assessment proceedings, emphasizing that the provision mandates a "reasonable opportunity of hearing" but does not explicitly require a personal hearing.The Court interpreted Section 127(2)(a) pragmatically, holding that the rank difference between the officers proposing and accepting the transfer does not invalidate the transfer order.The Court relied on the principle of "coordinated investigation" to justify the transfer, consistent with precedents recognizing the necessity of harmonizing investigations where incriminating materials are found across jurisdictions.The Court considered prior case law emphasizing that transfer orders are administrative tools to facilitate efficient assessment and do not themselves impose tax liability, balancing inconvenience to the assessee against public interest.The Court noted the petitioners' conduct in allowing the assessment proceedings to continue post-transfer without prompt challenge, leading to an inference of acquiescence and weakening the basis for writ relief at this stage.Reliance was placed on precedents that highlight the discretionary nature of writ jurisdiction under Article 226, especially where statutory procedures have been followed and no prejudice is demonstrated.

Issues: Whether the impugned certificate and the order under Section 197 of the Income-tax Act, 1961 could be sustained when they disregarded a binding Supreme Court decision on taxability of subscription receipts on the ground that a review petition was pending.

Analysis: The order under challenge contained no independent reasoning and proceeded by relying on an assessment order that treated the receipts as royalty under Article 12 of the India-US Double Taxation Avoidance Agreement. The binding effect of the Supreme Court decision in Engineering Analysis Centre of Excellence Pvt. Ltd. was emphasised. It was also noted that the review petition against that decision had already been dismissed, and that a pending review could not justify ignoring a binding precedent. Under Article 141 of the Constitution of India, the decision of the Supreme Court continued to bind the Revenue.

Conclusion: The impugned order could not stand and was set aside.

Final Conclusion: The matter was sent back for fresh consideration by the Assessing Officer in accordance with law, and the petitioner obtained the substantive relief of reconsideration of its withholding-tax application.

Ratio Decidendi: A binding decision of the Supreme Court must be followed by revenue authorities and cannot be disregarded merely because a review petition is pending or has been filed.

ISSUES:

Whether deletion of addition under Section 68 of the Income Tax Act, 1961 on account of unaccounted cash credit of share capital and premium was erroneous due to failure to prove identity, creditworthiness, and genuineness of transactions.Whether the assessee discharged the initial onus under Section 68 of the Income Tax Act, 1961.Whether the Tribunal erred in appreciating the facts in proper perspective in favor of the assessee.Whether the Tribunal failed to follow judicial principles established in a prior High Court decision with precedential value.

RULINGS / HOLDINGS:

The Tribunal correctly deleted the addition of Rs. 5,86,00,000/- under Section 68, finding that the assessee had explained the "identity," "creditworthiness," and "genuineness" of the share subscribers and the transactions.The assessee discharged the initial onus under Section 68 by producing confirmation letters from shareholders and source of share application money, supported by summons evidence under Section 131.The Tribunal properly appreciated the factual matrix, concluding that all three ingredients required under Section 68 stood proved, and the burden shifted to the department which failed to disprove the genuineness.The Tribunal was not in error for not following the prior High Court decision as the matter was factual and did not raise any substantial question of law.

RATIONALE:

The Court applied the legal framework of Section 68 of the Income Tax Act, 1961, which requires the assessee to prove the identity, creditworthiness, and genuineness of the share capital transactions to rebut the presumption of unexplained cash credits.The Tribunal relied on documentary evidence including confirmation letters and summons under Section 131 to establish the three ingredients mandated under Section 68.The burden of proof shifted to the department after the assessee discharged the initial onus, and the department failed to dislodge the same.The Court emphasized that the issue was primarily factual, and no substantial question of law arose, thereby negating the applicability of precedential judicial principles invoked by the revenue.

Issues: Whether the writ petition challenging the show cause notice and draft assessment proceedings under the Income-tax Act, 1961 should be entertained in view of the efficacious remedy before the Dispute Resolution Panel and appellate forums.

Analysis: The petitioner's grievance related to the show cause notice and the draft assessment order said to be inconsistent with the Transfer Pricing Officer's determination of arm's length price. The Court noted that objections could be raised before the Dispute Resolution Panel and that appellate remedies were also available.

Outcome: The Court declined to entertain the petition and disposed of it with liberty to pursue the available statutory remedies, while reserving the petitioner's rights and contentions.

ISSUES:

Whether the addition on account of alleged bogus purchases can be confirmed at a gross profit rate of 12.5% as determined by the Assessing Officer.Whether the gross profit ratio applicable to the alleged bogus purchases should be determined based on the assessee's historical gross profit ratios for preceding and succeeding years.Whether the evidence furnished by the assessee in support of the purchases is sufficient to rebut the presumption of bogus purchases.Whether the principles laid down by the Hon'ble Bombay High Court in the cited precedent apply to restrict the addition on account of alleged bogus purchases.

RULINGS / HOLDINGS:

The addition on account of alleged bogus purchases cannot be confirmed at the gross profit rate of 12.5% determined by the Assessing Officer, as the assessee's average gross profit ratio is 2.73% based on preceding and succeeding years.The gross profit ratio applicable to the alleged purchases is to be restricted to 2.73%, which reflects the assessee's actual business performance, and this rate is liable to be confirmed.The assessee furnished all relevant documents in support of the purchases, and such evidence was not rejected by the Assessing Officer; hence, the purchases cannot be presumed to be bogus solely on suspicion.Respectfully following the decision of the Hon'ble Bombay High Court in the case of M/s. Nikunj Exim Enterprises Pvt. Ltd., the addition on account of alleged bogus purchases is to be restricted in accordance with the actual gross profit ratio rather than an arbitrary higher rate.

RATIONALE:

The Court applied the provisions of the Income-tax Act, 1961, particularly sections 143(3), 147, 148, and 250, relating to reassessment and appeals.The Court relied on the principle that additions for bogus purchases must be supported by cogent evidence and not merely suspicion, especially where the assessee has furnished confirmations, invoices, and bank statements.The Court adopted the approach of determining gross profit ratio based on the assessee's historical data (preceding three years and succeeding one year), thus ensuring consistency and fairness in assessment.The Court followed the precedent set by the Hon'ble Bombay High Court which held that "merely because the suppliers have not appeared before the Assessing Officer CIT(A), one cannot conclude that the purchases were or were not made," emphasizing the need for substantive evidence rather than suspicion.No dissenting opinion was recorded; the decision reflects a doctrinal adherence to evidence-based assessment and proportionality in determining additions for alleged bogus purchases.

ISSUES:

Whether the limitation period for passing penalty order under section 271C of the Income-tax Act, 1961 is to be computed from the date of reference made by the Assessing Officer to the Additional Commissioner of Income-tax for initiation of penalty proceedings or from the date of issuance of the show-cause notice to the assessee.Whether a penalty order passed beyond six months from the end of the month in which the penalty proceedings were initiated is valid under section 275(1)(c) of the Income-tax Act, 1961.Whether the completion of appellate or quantum proceedings affects the limitation period for initiation or passing of penalty proceedings under section 271C of the Income-tax Act, 1961.

RULINGS / HOLDINGS:

The court held that the date on which the reference is made by the Assessing Officer to the Additional Commissioner of Income-tax marks the first step for initiation of penalty proceedings, and the limitation period under section 275(1)(c) must be calculated from this date, not from the date of issuance of the show-cause notice.The penalty order passed beyond six months from the end of the month in which the penalty proceedings were initiated is "bad in law" and therefore barred by limitation under section 275(1)(c) of the Act.The court found that the completion of appellate or quantum proceedings is not relevant for sustaining or not sustaining penalty proceedings under section 271C, as such penalty proceedings are independent of the assessment proceedings and their appellate disposal.

RATIONALE:

The court relied on the statutory framework provided by sections 271C, 274(1), and 275(1)(c) of the Income-tax Act, 1961, which prescribe the procedure and limitation for imposition of penalty.It followed binding precedent from coordinate Benches and the jurisdictional High Court, including the interpretation that the "expiry of 6 months from the month in which penalty proceedings were initiated" refers to the date of reference by the AO to the Additional CIT, not the date of issuance of show-cause notice.The court emphasized the distinction that penalty proceedings under sections like 271C are independent of the assessment and appellate proceedings, hence the limitation period is not impacted by the completion of such proceedings.The decision reaffirmed the principle that delay in issuance of show-cause notice by the Additional CIT cannot extend the limitation period prescribed under section 275(1)(c), and any penalty order passed after expiry of this period is invalid.No substantial question of law was found to arise, and the court respectfully followed the judicial precedents cited, including decisions from the Delhi High Court and ITAT coordinate Benches.

Issues: Whether the assessee was entitled to proportionate exemption in respect of gratuity and leave encashment received on retirement for the period of service rendered with the State Government undertaking, and whether the matter required verification of the working furnished by the assessee.

Analysis: The assessee had served first with Maharashtra State Electricity Board and thereafter with Maharashtra State Electricity Distribution Company Limited. The dispute concerned the taxability of the retirement benefits received as gratuity and leave encashment. The claim for exemption was founded on the distinction between the period of service rendered with the State Government undertaking and the subsequent period with the company. The record showed that the detailed computation of proportionate exemption furnished by the assessee had not been verified by the jurisdictional Assessing Officer. In these circumstances, the earlier view of the Tribunal on identical facts was followed, and the claim was held to be capable of allowance on a proportionate basis subject to verification of the working and supporting details.

Conclusion: The assessee was entitled to proportionate exemption for gratuity and leave encashment attributable to the period of service with the State Government undertaking, and the matter was remitted for verification before granting the relief accordingly.

Final Conclusion: The appeal succeeded to the extent that the assessee's claim was accepted in principle on a proportionate basis, but the exact relief was left to be worked out after verification by the Assessing Officer.

Ratio Decidendi: Where retirement benefits relate to service rendered partly with a State Government undertaking and partly with a PSU, exemption may be allowed on a proportionate basis for the qualifying service, subject to verification of the computation.

ISSUES:

Whether an Association of Persons (AOP)/Charitable Trust not claiming benefits under Section 11 of the Income-tax Act is liable to pay tax at the maximum marginal rate (MMR) under Section 167B or at normal slab rates applicable to individuals.Whether surcharge was correctly levied at 37% instead of 15% on the total income of the AOP/Charitable Trust within the income range of Rs. 1 crore to Rs. 2 crores.Whether interest under Sections 234B and 234C of the Income-tax Act is payable when advance taxes have been paid on or before due dates.

RULINGS / HOLDINGS:

On the applicability of maximum marginal rate (MMR): The Court held that Section 167B does not apply to a charitable trust or society registered under the Charitable and Religious Trust Act, 1920, as such entities are excluded under Section 167(1). The "rate of MMR under both sub sections (1) and (2) of 167B is not applicable" where the shares of members are not indeterminate or unknown and the organization is not formed for the benefit of a few individuals. Therefore, tax shall be charged at the "normal tax rates applicable to AOP or Body of Individuals" rather than at the MMR.On levy of surcharge: The surcharge levied at 37% was erroneous; the correct surcharge rate applicable to the total income falling between Rs. 1 crore and Rs. 2 crores is 15%, and the surcharge must be recomputed accordingly.On interest under Sections 234B and 234C: Since the advance tax was paid as required by law on or before the due dates, the provisions of Sections 234B and 234C are "not attracted" and the interest charged under these sections is "contrary to the law and unwarranted" and must be deleted.

RATIONALE:

The Court relied on the statutory framework of Sections 167, 167A, and 167B of the Income-tax Act, 1961, which govern the taxation of Associations of Persons (AOPs) and the applicability of maximum marginal rates.The Court referred to CBDT Circular No. 320 dated 11-01-1982, which clarifies that Section 167A (and by extension Section 167B) does not apply to charitable trusts, registered societies, or associations where members or trustees are not entitled to any share in the income, and tax is payable at the rate ordinarily applicable to the AOP.The Court noted that the charitable trust in question is a public charitable trust whose beneficiaries' shares are neither indeterminate nor unknown, and the trust is not for the benefit of a few individuals, thus excluding it from the ambit of Section 167B.The Court followed consistent precedents from various ITAT Benches (Mumbai, Pune, Cochin, Ahmedabad) which held similarly that the MMR under Section 167B is not applicable to charitable trusts and similar entities.The Court emphasized that the provisions of Sections 234B and 234C for interest on shortfall of advance tax are not applicable where advance tax payments are made timely, consistent with statutory requirements.

ISSUES:

Whether penalty under section 271D of the Income Tax Act, 1961 is sustainable when the penalty order is passed beyond the limitation period prescribed under section 275(1)(c) of the Act.Whether the penalty under section 271D can be sustained when the reassessment proceedings under section 147 read with section 144B are invalid due to improper sanction under section 151 of the Act.Whether the approval for issuance of notice under section 148 of the Act issued by a Principal Commissioner instead of the prescribed authority (Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General) for cases beyond three years from the end of the relevant assessment year renders the reassessment proceedings null and void.Whether penalty proceedings under section 271D can be initiated or sustained independently of the validity of the assessment or reassessment proceedings.Whether the Assessing Officer is required to record satisfaction before initiating penalty proceedings under section 271D of the Act.Whether reliance solely on statements of third parties without incriminating material on record suffices to levy penalty under section 271D.

RULINGS / HOLDINGS:

The penalty order under section 271D of the Act passed on 29.03.2023 is barred by limitation as per section 275(1)(c) since the penalty proceedings were initiated on 17.08.2022 and the penalty order was required to be passed on or before 28.02.2023; therefore, the penalty order is "not in accordance with law" and is quashed.The reassessment proceedings under section 147 read with section 144B of the Act are invalid and null and void as the approval under section 151 was obtained from the Principal Commissioner instead of the competent authority prescribed for cases beyond three years, i.e., Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.Since the reassessment proceedings are invalid, penalty proceedings under section 271D initiated in the course of such proceedings "do not survive" and are not sustainable in law.Section 151 mandates that sanction for issuance of notice under section 148 must be obtained from the specified authority according to the elapsed period from the end of the relevant assessment year; failure to comply renders the proceedings invalid.It is not necessary to have valid assessment proceedings for initiation of penalty under section 271D; however, if the assessment or reassessment proceedings are quashed as invalid, penalty proceedings initiated therein are also invalid and liable to be quashed.The Assessing Officer is not required to record separate satisfaction for initiation of penalty proceedings under section 271D when penalty is levied in the course of reassessment proceedings.Reliance solely on statements of third parties without incriminating material on record is insufficient to sustain penalty under section 271D.

RATIONALE:

The Court applied the statutory provisions of the Income Tax Act, 1961, specifically sections 148, 151, 147, 144B, 269SS, 271D, and 275(1)(c), to determine the validity of reassessment and penalty proceedings.Section 275(1)(c) prescribes a strict limitation period for passing penalty orders, which was not adhered to in this case, rendering the penalty order time-barred and void ab initio.Section 151 clearly specifies the competent authority for sanctioning issuance of notice under section 148 based on whether the notice is issued within or beyond three years from the end of the relevant assessment year; this provision was interpreted strictly in line with recent authoritative decisions to uphold procedural sanctity.The Court relied on binding precedents and High Court decisions emphasizing that improper sanction under section 151 vitiates the entire reassessment process, and consequently, penalty proceedings initiated therein cannot survive.The Court acknowledged that penalty under section 271D is intended to ensure compliance with section 269SS prohibiting acceptance of cash loans exceeding Rs. 20,000, but such penalty must be imposed within the prescribed limitation and on a valid assessment/reassessment foundation.The decision reflects a doctrinal adherence to procedural compliance and limitation safeguards in tax proceedings, reinforcing that invalid assessment proceedings cannot serve as a basis for penalty imposition.The Court admitted additional legal grounds raised by the appellant relying on Supreme Court precedents affirming the right to challenge validity of assessment during penalty proceedings.

Issues: (i) Whether the addition made on account of seized jewellery as unexplained income under section 69A was sustainable; (ii) Whether the liability shown outstanding in the name of a labour contractor had ceased so as to justify addition as income; (iii) Whether the disallowance of legal expenses incurred for release of the seized jewellery could survive after the primary addition was deleted.

Issue (i): Whether the addition made on account of seized jewellery as unexplained income under section 69A was sustainable.

Analysis: The jewellery was found in transit from the head office to the branch for business display and approval, and the surrounding records, stock movement details and the explanation accepted by the GST authorities supported the assessee's case that the articles formed part of business stock. Once the source and nature of acquisition were supported by books and documentary material, the statutory condition for treating the jewellery as unexplained jewellery or bullion was not satisfied.

Conclusion: The addition under section 69A was not sustainable and was deleted in favour of the assessee.

Issue (ii): Whether the liability shown outstanding in the name of a labour contractor had ceased so as to justify addition as income.

Analysis: The liability related to labour charges for manufacturing of gold ornaments. It remained unpaid because the ornaments were stated to have manufacturing defects and payment was to be made after resolution of those defects. Mere outstanding balance as on the balance-sheet date did not establish cessation of liability or remission of the debt.

Conclusion: The addition on account of alleged cessation of liability was not justified and was deleted in favour of the assessee.

Issue (iii): Whether the disallowance of legal expenses incurred for release of the seized jewellery could survive after the primary addition was deleted.

Analysis: The legal expenses were incurred only in connection with release of the jewellery seized by the police. Since the jewellery was held to be explained business stock and the addition treating it as unexplained income was deleted, the basis for disallowance of the related legal expenditure also disappeared.

Conclusion: The disallowance of legal expenses was not interfered with and the revenue's challenge failed on this issue.

Final Conclusion: The assessee succeeded on the principal additions, while the revenue's appeals failed on the connected and derivative issues, resulting in partial relief to the assessee and dismissal of the revenue's appeals.

Ratio Decidendi: Where seized jewellery is satisfactorily shown to be recorded business stock supported by books and corroborative records, section 69A cannot be invoked; a mere outstanding liability does not amount to cessation without evidence of remission or extinguishment, and ancillary disallowances fall when the foundation for them is removed.

Issues: Whether interconnectivity usage charges received by a foreign telecom company from Indian entities were taxable in India as fees for technical services or as other income under the Income-tax Act and the India-Oman DTAA.

Analysis: The services were found to be rendered through a fully automated system without human intervention. On that basis, the receipts did not fall within the ambit of fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961. The receipts were also not assessable as other income under the residual treaty provision, because the amounts represented business receipts connected with the assessee's regular operations. In the absence of a permanent establishment in India, the business profits were taxable only in the State of residence under Article 7 of the India-Oman DTAA.

Conclusion: The receipts were not taxable in India either as fees for technical services or as other income, and the issue was decided in favour of the assessee.

ISSUES:

Whether the reopening of assessment under section 147 of the Income Tax Act, 1961 was validly initiated based on recorded reasons and cogent material.Whether the Assessing Officer (AO) has jurisdiction to make additions or disallowances beyond the scope of the reasons recorded for reopening the assessment.Whether the invocation of section 50C for addition on capital gains was justified.Whether the ex-parte dismissal of appeal by Commissioner of Income Tax (Appeals) for non-compliance was appropriate.Whether the disallowance of interest claimed under section 24(b) was justified.Whether the request for referring the case to the Valuation Officer was rightly rejected.

RULINGS / HOLDINGS:

Reopening of assessment under section 147 was valid as there was a "live link between the material" provided by DDIT (I&CI), New Delhi and the belief that income had escaped assessment, satisfying the requirement of "cogent material" leading to an "honest belief" of escapement of income.The AO exceeded jurisdiction by making additions on issues not forming part of the recorded reasons for reopening; "no additions could be made dehorse the reasons recorded before issue of notice u/s 148."Invocation of section 50C additions and disallowance of interest were not upheld as the reassessment order was quashed on jurisdictional grounds.The ex-parte order of the CIT(A) was not decided on merits but the Tribunal proceeded to decide the purely legal ground relating to jurisdiction.The request for referral to the Valuation Officer was rejected by the AO, but this issue became infructuous upon quashing of the reassessment order.

RATIONALE:

The Court applied the statutory framework of sections 147, 148, and 143(3) of the Income Tax Act, 1961, emphasizing the need for recording "reasons to believe" before reopening an assessment and issuing notice under section 148.Precedents from the jurisdictional High Court and Supreme Court were relied upon, including rulings that the "sufficiency or correctness of the material is not to be considered at the stage of issue of notice u/s 148," but the AO's jurisdiction is limited to the issues forming part of the reasons recorded.Explanation 3 to section 147 was discussed, clarifying that it does not grant blanket powers to the AO to make roving inquiries beyond the original reasons for reopening.Judgments cited include Ranbaxy Laboratories Ltd. v. CIT, CIT v. Nova Promoters & Finlease, Rajesh Jhaveri Stock Brokers Pvt. Ltd. v. ACIT, CIT vs Adhunik Niryat Ispat Ltd., ATS Infrastructure Ltd. v. ACIT, and CIT vs Jet Airways (I) Ltd., which collectively establish the principle that additions beyond the scope of recorded reasons require fresh notice under section 148.The Tribunal found that although the AO recorded satisfaction about escapement of income related to unexplained source of investment, no addition was made on that issue, and additions were made on unrelated grounds, thus exceeding jurisdiction.The quashing of the reassessment order rendered other grounds of appeal infructuous.

ISSUES:

Whether the existing procedure under the Baggage Rules, 2016 for detention and disposal of goods by Customs Department requires reconsideration and amendment.The scope and content of a Standard Operating Procedure (SOP) to be followed by Customs pending amendment of the Baggage Rules.Permissible weight and nature of used personal gold jewellery that can be carried or worn by Indian and foreign passengers under the Baggage Rules.Procedural requirements for recording statements under Section 108 of the Customs Act and for timely issuance and disposal of show cause notices.Whether storage charges imposed by Central Warehousing Corporation (CWC) can be waived in light of Court orders.Authority and procedure for release of detained goods, including release through authorized representatives.Whether detained goods claimed as personal jewellery should be released pending final determination of their nature.

RULINGS / HOLDINGS:

The Court directed that the Customs Department and CBIC reconsider the Baggage Rules, 2016, particularly in respect of issues highlighted by the Court, and mandated the formulation of a Standard Operating Procedure (SOP) to be followed until the Rules are amended.The SOP must cover all issues highlighted by the Court, including the manner of recording statements under Section 108 of the Customs Act, and the appraisal and disposal procedures for detained items, with the Court approving a draft SOP subject to modifications.The Court identified specific areas requiring further clarification, including the permissible weight of used gold jewellery for Indian and foreign passengers, and the procedure for issuance of show cause notices within prescribed timeframes under the Customs Act, 1962.The Court granted further time to the Customs Department and CBIC to finalize amendments to the Baggage Rules, acknowledging substantial progress and requiring the draft Rules to be placed on record before the next hearing.Storage charges imposed by the Central Warehousing Corporation were ordered to be waived where the Court had specifically directed such waiver, and the CWC was directed to comply strictly with Court orders, with assurance given by CWC officials.The detained goods may be released to an authorized representative upon receipt of proper communication from the owner, ensuring compliance with Court directions.In the event of factual dispute regarding the nature of detained goods as personal jewellery, the goods are to be produced before the Court, and if confirmed as personal jewellery, they shall be released in accordance with prior directions.

RATIONALE:

The Court relied on its supervisory jurisdiction to ensure that the Customs Department complies with statutory provisions under the Customs Act, 1962, and the Baggage Rules, 2016, emphasizing the need for clarity and uniformity in procedures affecting passengers' goods.The directions to formulate and implement an SOP reflect the Court's approach to provide interim regulatory certainty pending formal amendment of the Baggage Rules by the competent authority, i.e., the Central Board of Indirect Taxes & Customs (CBIC).The Court's insistence on addressing issues such as permissible limits for used gold jewellery and timely issuance of show cause notices aligns with principles of procedural fairness and administrative efficiency under customs law.In respect of storage charges and release of goods, the Court emphasized strict compliance with its orders to prevent undue hardship and delay, underscoring the binding nature of judicial directions on statutory authorities and their agents.The Court's approach to resolving factual disputes regarding the nature of detained goods by directing physical production before the Court demonstrates adherence to evidentiary principles and ensures just adjudication on the merits.The collaborative consultation between various Ministries and agencies, including MEA, Ministry of Tourism, DGFT, DRI, and Customs Authorities, indicates a multi-stakeholder approach to policy formulation consistent with administrative law principles.

ISSUES:

Whether the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) was correct in setting aside the order of confiscation and penalty imposed on the respondent.Whether CESTAT was correct in its observation that in the absence of definitions of the words "antiques" and "art treasures" in the Customs Act 1962, and without primary ascertainment thereof, there can be no finding on prohibition on export and jurisdiction of the Customs Officer to decide on the same.Whether CESTAT was correct in holding that goods being within domestic territory merit no action based on suspicion generated in the minds of customs officials.Whether CESTAT was correct in its observation that once goods are out of the territory, customs officials do not have jurisdiction to re-determine the value of the goods.Whether customs authorities are barred from contending that exported goods were in fact antiques of a value much greater than the value declared.Whether the appeal is maintainable concerning the valuation of goods for assessment purposes.Whether the confiscated antiques should be returned to the respondent pending disposal of the appeal, subject to conditions and undertakings.Whether the pre-deposit amount paid by the respondent should be refunded or deposited with the Court during pendency of the appeal.

RULINGS / HOLDINGS:

CESTAT's setting aside of the confiscation and penalty order is admitted for consideration; the Court has not expressed final opinion on correctness but has admitted the appeal on this substantial question of law.CESTAT's observation that "in the absence of definition of the words 'antiques' and 'art treasures' in Customs Act 1962, and primary ascertainment thereof, there can be no finding on prohibition on export and jurisdiction of the Customs Officer to decide on the same" is a question admitted for adjudication.CESTAT's view that goods within domestic territory merit no action on suspicion alone is admitted for consideration and not finally decided.CESTAT's observation that "once the goods are out of territory, customs officials do not have jurisdiction to re-determine the value of the goods" is admitted for adjudication.Customs authorities are barred from contending that the exported goods were antiques of a value much greater than declared is a question admitted for hearing.The issue of maintainability of the appeal on valuation grounds is kept open at the request of the respondent's counsel.The confiscated antiques shall be returned to the respondent within four weeks, subject to the respondent's undertaking not to deal with the goods until disposal of the appeal, and allowing customs authorities reasonable notice for inspection during pendency.The pre-deposit amount deposited by the respondent shall be deposited by the appellants in Court within six weeks along with accrued interest, to be invested in a Nationalised bank to draw interest pending final disposal.

RATIONALE:

The Court admitted the appeals on substantial questions of law arising from the orders of CESTAT, focusing on jurisdictional and definitional issues under the Customs Act 1962, particularly concerning "antiques" and "art treasures."The Court noted the absence of statutory definitions and primary ascertainment as a key factor affecting the Customs Officer's jurisdiction to prohibit export or impose penalties.The Court accepted the respondent's undertaking that the confiscated antiques would not be exported or dealt with pending appeal disposal, thereby mitigating the risk of unlawful export.The Court balanced the interests of justice by ordering return of confiscated antiques with conditions, recognizing two prior authorities favoring the respondent that the allegation of export attempt was not established.The Court allowed customs inspections with reasonable notice to safeguard regulatory interests during pendency.The Court directed the deposit of the pre-deposit amount with accrued interest in Court to preserve the financial interests of the parties pending final adjudication.No dissent or doctrinal shift was recorded; the Court's approach reflects careful procedural management and adherence to statutory interpretation principles under the Customs Act 1962.

ISSUES:

Whether the impugned order by the Principal Commissioner of Customs is wholly without jurisdiction for refusing to follow the Advance Ruling Authority's ruling.Whether the refusal to consider expert evidence and relevant material amounts to a breach of natural justice.Whether the petitioner can bypass the alternative statutory remedy under the Customs Act on grounds of jurisdictional error or breach of natural justice.The scope of the Appellate Tribunal's powers under Sections 129A and 129B of the Customs Act, 1962.

RULINGS / HOLDINGS:

The argument that the impugned order is wholly without jurisdiction is rejected because "investigation into facts, at least to a limited extent, would be necessary" and such fact-finding is best undertaken by the Appellate Tribunal.The refusal to consider expert evidence does not constitute a breach of natural justice as the Petitioner was issued a show cause notice and heard before the order was passed; any grievance regarding non-consideration of material can be addressed in appeal.The principles in Whirlpool Corporation Vs Registrar of Trade Marks and Oberoi Constructions Ltd Vs Union of India apply only if the order is "ex facie without jurisdiction" or the breach of natural justice is "patent and admits of no serious dispute," which was not established in this case.The Appellate Tribunal under Sections 129A and 129B of the Customs Act has "wide and substantial powers" including confirming, modifying, annulling, or remanding the order with directions for fresh adjudication and taking additional evidence, making the statutory remedy efficacious and precluding circumvention.The petition is dismissed with liberty to the Petitioner to avail of the alternate statutory remedy under the Customs Act.

RATIONALE:

The Court applied the statutory framework under the Customs Act, 1962, particularly Sections 129A and 129B, which provide a comprehensive appellate mechanism with broad powers vested in the Appellate Tribunal.The Court emphasized the principle that orders are not to be interfered with on jurisdictional grounds without preliminary fact-finding, which is within the purview of the Appellate Tribunal.The Court relied on established precedents requiring that to bypass alternative remedies, the petitioner must demonstrate that the order is "ex facie without jurisdiction" or that there is a "patent" breach of natural justice, criteria not met here.The Court reaffirmed the principle of exhaustion of alternate statutory remedies and declined to interfere in the absence of a clear, undisputed violation of jurisdiction or natural justice.No dissent or doctrinal shift was noted; the judgment follows settled legal principles concerning jurisdiction, natural justice, and appellate remedies under customs law.

ISSUES:

Whether the petitioner is liable to pay the Duty Drawback amount and penalty imposed under the impugned order-in-original.Whether the principles of natural justice were violated in the impugned order-in-original by not affording the petitioner an opportunity of personal hearing and to submit explanations.Whether the petitioner fulfilled the export obligations in respect of the subject Shipping Bills.Whether the matter requires remand for fresh consideration on merits and in accordance with law.

RULINGS / HOLDINGS:

On liability, the Court held that the petitioner contends they are not liable to pay the Duty Drawback amount and penalty, having fulfilled export obligations and having paid the amounts under protest.The Court found that the principles of natural justice were not adhered to, as the petitioner was not afforded an opportunity of personal hearing or to submit explanations before passing the impugned order-in-original.The Court accepted that the petitioner submitted Export Realization Certificates and other documents substantiating fulfillment of export obligations, which were not considered before passing the impugned order.The Court quashed the impugned order-in-original and remanded the matter back to the respondent for fresh consideration on merits and in accordance with law, explicitly directing adherence to the principles of natural justice and affording personal hearing to the petitioner.

RATIONALE:

The Court applied the principles of natural justice, emphasizing the necessity of affording an opportunity of personal hearing and permitting submission of explanations before passing adverse orders.The Court recognized the payment of Duty Drawback amount and penalty under protest by the petitioner, noting that no revenue loss was caused to the respondent, thereby justifying the grant of opportunity to the petitioner to defend their case on merits.The Court considered the exceptional circumstances arising from the Covid-19 pandemic and closure of the petitioner's office, which impeded proper attendance to hearings and receipt of notices, as relevant to the procedural fairness.The Court refrained from expressing any opinion on the merits of the petitioner's contentions, leaving the determination of liability to the respondent upon fresh consideration in accordance with law.

ISSUES:

Whether the imposition of penalties and confiscation under the Customs Act, 1962 and the Foreign Trade (Development and Regulation) Act, 1992 is justified for smuggling of prohibited and restricted goods disguised as aluminium scrap.Whether statements recorded under Section 108 of the Customs Act, 1962 without granting the right to cross-examination can be relied upon by the Adjudicating Authority.Whether the right to cross-examination is an absolute right in customs adjudication proceedings and under what circumstances it may be denied.Whether destruction of evidence such as emails and mobile phones by a party can be considered as indicative of knowledge and involvement in smuggling activities.Whether a writ petition under Article 226 of the Constitution is maintainable in the presence of an alternative statutory remedy under Section 129A of the Customs Act, 1962.Whether waiver or reduction of pre-deposit for filing an appeal against penalty orders can be granted on the ground of financial incapacity or the substantial amount of penalty imposed.

RULINGS / HOLDINGS:

The Court upheld the imposition of penalties and absolute confiscation of goods under Sections 111(d), 112(a)(i), 114AA, and other relevant provisions of the Customs Act, 1962, finding that the parties were involved in deliberate smuggling of prohibited and restricted goods disguised as aluminium scrap.The Court held that statements recorded under Section 108 of the Customs Act, 1962 can be relied upon even if cross-examination is not granted, provided the circumstances are exceptional and the party is not prejudiced; the right to cross-examination is not an unfettered right but depends on the facts and necessity to prevent prejudice.The Court denied the request for cross-examination of co-noticees, emphasizing that such requests must be supported by cogent reasons and cannot be used to subvert the adjudication process; cross-examination of co-noticees who may incriminate themselves is not permissible.The destruction of emails and mobile phones by a party was held to be a clear indication of awareness and involvement in smuggling activities, amounting to destruction of material evidence under Section 201 of the Indian Penal Code.The Court held that the writ petitions under Article 226 were not maintainable as none of the exceptional grounds such as breach of fundamental rights, violation of natural justice, excess of jurisdiction, or challenge to vires of statute were established; the petitioners were directed to avail the statutory appellate remedy under Section 129A of the Customs Act, 1962.The Court granted limited waiver of pre-deposit for one petitioner considering the substantial value of the consignment and penalties imposed, permitting filing of appeals within one month subject to a total pre-deposit of Rs. 1 Crore; no waiver was granted to the other petitioner.

RATIONALE:

The Court applied the provisions of the Customs Act, 1962, particularly Sections 111(d) (confiscation), 112(a)(i) (penalty for knowingly importing prohibited goods), 114AA (penalty for false declaration), and Section 119 (confiscation for concealment), along with Section 3 of the Foreign Trade (Development and Regulation) Act, 1992.The Court relied on precedents including J&K Cigarettes Ltd. (2009), Sushil Aggarwal v. Principal Commissioner of Customs, and M/s Telestar Travels Pvt. Ltd. v. Special Director of Enforcement, which clarify that the right to cross-examination in adjudication proceedings under customs law is not absolute but contingent upon demonstration of prejudice and necessity.The Court emphasized that cross-examination requests must be specific and justified, rejecting blanket or vague requests, and noted that co-noticees cannot be compelled to participate in proceedings that may incriminate themselves, citing N.S. Mahesh vs. Commissioner of Customs.The Court observed that the destruction of evidence by a party is a strong indicator of culpability and supports imposition of penalties and confiscation.The Court followed the principle that writ jurisdiction under Article 226 is discretionary and should not be exercised where effective alternate statutory remedies exist, referencing the Supreme Court's decision in The Assistant Commissioner of State Tax & Ors. v. M/s Commercial Steel Limited.The Court exercised discretion in granting partial waiver of pre-deposit based on the substantial financial burden and consignment value, balancing the need for compliance with procedural safeguards and access to appellate remedies.

Issues: (i) whether the declared transaction value of the imported goods could be rejected on the basis of a prior enhanced value in one bill of entry and absence of contemporaneous import data; (ii) whether statements recorded during investigation could be relied upon without compliance with Section 138B and without cross-examination.

Issue (i): Whether the declared transaction value of the imported goods could be rejected on the basis of a prior enhanced value in one bill of entry and absence of contemporaneous import data.

Analysis: The Revenue did not produce evidence of contemporaneous imports of identical or similar goods at a higher price. Rejection of the declared value was based essentially on enhancement in one earlier bill of entry and a broad application of that enhanced price to varied imports over time from different suppliers and countries. Such a basis was held to be insufficient. The Customs Valuation Rules require the transaction value to be accepted unless it is shown to be unacceptable on legally recognised grounds, and comparable contemporaneous imports are necessary before the declared value can be displaced.

Conclusion: The rejection of transaction value was unsustainable and the undervaluation finding failed.

Issue (ii): Whether statements recorded during investigation could be relied upon without compliance with Section 138B and without cross-examination.

Analysis: The adjudicating authority relied upon statements recorded under Section 108 of the Customs Act, 1962 without first examining the makers of the statements in the manner required by Section 138B and without allowing cross-examination when sought. The statutory procedure governing admissibility of such statements is mandatory, and non-compliance deprives the statements of evidentiary value for proving their contents.

Conclusion: The statements could not be relied upon and the proceedings were vitiated on this ground as well.

Final Conclusion: The impugned order could not be sustained, and the appeals succeeded with consequential relief according to law.

Ratio Decidendi: In customs valuation disputes, the declared transaction value cannot be rejected without evidence of contemporaneous comparable imports or another legally recognised ground, and statements recorded during investigation are inadmissible for proving their contents unless the mandatory procedure under Section 138B is followed.

ISSUES:

Whether a penalty under Section 114 of the Customs Act, 1962 can be imposed without confiscation of the goods under Section 113 of the Customs Act.Whether the appellant's involvement in export of goods by mis-declaration or overvaluation was established to justify imposition of penalty under Section 114.The applicability and interpretation of Section 114 of the Customs Act, 1962 in relation to acts or omissions rendering goods liable for confiscation under Section 113.

RULINGS / HOLDINGS:

The Court held that "Section 114 is linked to the liability of the goods to confiscation under Section 113" and therefore, "without confiscation under Section 113, no penalty can be imposed under Section 114."The penalty under Section 114 was set aside because the goods exported by the appellant were not confiscated, and thus the penalty was "not imposable in this case."The Court found no evidence or allegation that the appellant was involved in mis-declaration or overvaluation of the exported diamonds, and accordingly held that "no penalty is imposable on the appellant."The Court relied on a recent Tribunal decision which held that penalty under Section 114 is "incorrectly imposed, when the imported goods were never held liable for confiscation under Section 113" and where there was "no involvement of the Appellant in the alleged mis-declaration and overvaluation."

RATIONALE:

The Court applied the statutory framework of the Customs Act, 1962, specifically Sections 113 and 114, where Section 114 penalizes acts or omissions that would render goods liable to confiscation under Section 113, or abet such acts.The Court emphasized the statutory language of Section 114, which conditions penalty imposition on the goods being liable to confiscation under Section 113, thus establishing a direct legal linkage between confiscation and penalty.The Court referred to precedent from the same Tribunal that clarified the non-imposability of penalty under Section 114 absent confiscation under Section 113 and where the appellant lacked direct involvement in the wrongful acts.No doctrinal shift or dissenting opinion was noted; the decision reaffirmed the established interpretation that penalty under Section 114 cannot be sustained without confiscation under Section 113.

ISSUES:

Whether the Customs Act, 1962 and Baggage Rules apply to a transit passenger who has not crossed immigration or passed through the green channel at the airport.Whether gold recovered from a transit passenger who has not cleared customs or immigration is liable for absolute confiscation under the Customs Act, 1962.Whether penalty and redemption fine can be imposed on a transit passenger in respect of gold recovered under the above circumstances.Whether the appellate tribunal has jurisdiction to entertain an appeal in a case involving baggage of a transit passenger.

RULINGS / HOLDINGS:

The Tribunal held that since the appellant had not crossed the green channel and had not gone through immigration, the Baggage Rules are not applicable, and accordingly, the Customs Act, 1962 provisions do not apply to the facts of the case.The confiscation of gold weighing 1215 grams recovered from the appellant was set aside on the ground that the gold was not liable for confiscation as the appellant was a transit passenger who had not cleared customs or immigration.Consequently, no redemption fine or penalty was imposed on the appellant.The Tribunal rejected the preliminary objection regarding lack of jurisdiction, clarifying that the objection raised by the Authorized Representative was turned down because the appellant had not crossed immigration and the Baggage Rules were not applicable.

RATIONALE:

The legal framework applied includes the Customs Act, 1962 and the Baggage Rules governing import and export of goods through customs at airports.The Tribunal emphasized the importance of the passenger crossing immigration and passing through the green channel as a prerequisite for applicability of the Baggage Rules and Customs Act provisions related to baggage.The decision clarified that a transit passenger who has not cleared immigration remains outside the scope of the Customs Act and Baggage Rules for confiscation purposes.The Tribunal exercised suo motu rectification under Section 129B of the Customs Act, 1962 to correct a mistake apparent on the face of the record in its final order, thereby reinforcing the principle that the appellant's status as a transit passenger exempted him from confiscation and penalty.

ISSUES:

• Whether the process of conversion of 'used waste empty toner cartridge' into 'Compatible Cartridge' constitutes "manufacture" under the Central Excise Act, 1944.
• Whether the appellant was entitled to claim exemption under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996, based on the activity being manufacture.
• Whether the demand of customs duty, denial of Cenvat credit, and penalty imposed are sustainable if the activity is held to be manufacture.

RULINGS / HOLDINGS:

• The process of converting used waste empty toner cartridges into compatible cartridges "amounts to manufacture" as it changes the basic character of the used cartridges and results in a new marketable product with warranty and labeling.
• The appellant was entitled to claim exemption under the IGCRDMEG Rules, 1996, since the activity qualifies as manufacture, and the exemption notification was rightly applied.
• The demand of customs duty, denial of Cenvat credit, and penalty imposed, which were premised on the finding that the activity did not amount to manufacture, are "unsustainable" and therefore set aside.

RATIONALE:

• The Tribunal relied on the detailed factual analysis of the manufacturing process, including dismantling, cleaning, refilling toner, replacing old parts, assembling components, labeling, testing, and packaging, which collectively change the basic character of the used cartridge.
• The legal framework applied includes Section 2(f) of the Central Excise Act, 1944, defining "manufacture," and the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996.
• Precedents considered include the Tribunal's earlier decision in the appellant's own case for a prior period and the Supreme Court's ruling in Tecumseh Products India Ltd. v. Commissioner, which held that extensive processing and replacement of parts constitute manufacture.
• The Tribunal distinguished cases involving mere relabeling or minor processing, emphasizing the substantial transformation and creation of a new product in the present case.
• No dissenting or differing opinion was recorded; the decision follows established principles without doctrinal shift.

Issues: (i) Whether the consortium could count the Luv Nest project while claiming experience of delivery of at least 10 lakh sq. ft. super area under the eligibility criteria; (ii) Whether the consortium satisfied the requirement of Rs. 20 crore committed funds under the eligibility criteria.

Issue (i): Whether the consortium could count the Luv Nest project while claiming experience of delivery of at least 10 lakh sq. ft. super area under the eligibility criteria.

Analysis: The eligibility conditions required the prospective resolution applicant to disclose the profile of the consortium members and to substantiate delivery experience with certified completion or occupancy certificates. The Luv Nest project was not shown as a project of either consortium member in the disclosed consortium details, and the threshold was to be judged on the basis of the disclosures made at the time of submission of the expression of interest and resolution plan. The claim of deemed completion for the Urban Woods project was also not accepted, as the record from the local development authority showed that completion or occupancy certificates had not been issued. The materials relied upon did not establish that the claimed project experience met the stipulated standard.

Conclusion: The consortium was not entitled to count the Luv Nest project for satisfying the delivery-experience criterion, and the finding that it failed to meet the 10 lakh sq. ft. requirement was upheld.

Issue (ii): Whether the consortium satisfied the requirement of Rs. 20 crore committed funds under the eligibility criteria.

Analysis: The eligibility condition required proof of committed funds available for deployment, along with the expression of interest. The HDFC communication relied upon by the consortium was only a conditional commitment and not a sanction or proof of available deployable funds. The subsequent clarification from the bank also stated that the document was neither a sanction letter nor evidence of disbursal. On the language of the eligibility condition, the consortium had to demonstrate fund availability, and the material produced did not meet that standard.

Conclusion: The consortium did not satisfy the Rs. 20 crore committed-funds criterion, and the adverse finding on this issue was sustained.

Final Conclusion: The impugned rejection of the resolution plan was found to be justified on both eligibility requirements, and the appeals were liable to fail.

Ratio Decidendi: A resolution applicant must strictly satisfy the disclosed eligibility criteria at the time of submission, and a plan based on inaccurate disclosures or unsupported claims of experience and fund availability cannot be protected by commercial wisdom of the Committee of Creditors.

Issues: Whether the adverse observations recorded against the erstwhile resolution professional in the impugned order, relating to settlement with a third party, delay in seeking fresh valuation, and alleged indifference to duties, were sustainable and liable to be expunged.

Analysis: The Appeal was confined to the remarks made in paragraphs 63, 64 and 67 of the impugned order. The settlement with M/s Shomit Finance Limited had been placed before the Adjudicating Authority pursuant to the committee of creditors' approval, and the record showed that the resolution professional's act of bringing the settlement on record was within the framework approved by the committee of creditors. The observations questioning the involvement of the successful resolution applicant in the settlement, and the distribution of the settlement proceeds, were not supported by the record in the manner suggested in the impugned order. On the issue of valuation, the record showed that the earlier valuation reports were already on file and that the application for approval of the resolution plan was pending consideration when the appellant took over as resolution professional. In those circumstances, the criticism that a fresh valuation was sought only in 2024 did not justify an inference of dereliction of duty. As regards the contractor engagement and the remarks that the appellant remained oblivious to vital aspects, the materials disclosed prior engagement of the contractor and committee of creditors' consideration of its work, so the adverse inference drawn in the impugned order could not be sustained on the facts placed before the Tribunal.

Conclusion: The adverse observations in paragraphs 63, 64 and 67 were not sustainable and were directed to be expunged, with those remarks not to be treated as adverse to the appellant.

Issues: (i) Whether a dissolved company, which is no longer in existence, can still be prosecuted for offences alleged to have been committed during its existence; (ii) Whether the prosecution can array a director or other responsible person as the representative of such dissolved company under the criminal procedure framework.

Issue (i): Whether a dissolved company, which is no longer in existence, can still be prosecuted for offences alleged to have been committed during its existence.

Analysis: Section 305 of the Code of Criminal Procedure, 1973 contemplates prosecution of a corporation through a representative only where the corporation is in existence and capable of appointing one. Where the company has been struck off or dissolved, the Court held that the liability of the company and its officers survives by virtue of the Companies Act, 2013 and the special provisions under the Prevention of Money-Laundering Act, 2002. The Court further reasoned that a dissolved company may be restored to the register and, until appropriate legislative or procedural accommodation is made, the offence committed during its existence cannot be treated as immune from prosecution merely because the company has ceased to exist in the corporate register.

Conclusion: Yes. A dissolved company can still be proceeded against in law, and restoration to existence is the proper course where available.

Issue (ii): Whether the prosecution can array a director or other responsible person as the representative of such dissolved company under the criminal procedure framework.

Analysis: The Court held that, where restoration of the dissolved company is not immediately possible, the prosecution may indicate a person who was in charge of the company in the final report so that the proceedings can continue. The action of the prosecution in showing the petitioner, who had been a director of the company, as the representative of the dissolved company was found to be justified in the interest of justice. The Court also relied on the continuing liability provisions under the Companies Act, 2013 and the deeming scheme under the Prevention of Money-Laundering Act, 2002 to hold that dissolution does not wipe out the underlying liability.

Conclusion: Yes. The prosecution was justified in arraying the director as the representative of the dissolved company for continuation of the case.

Final Conclusion: The challenge to the order refusing removal of the petitioner as representative of the company failed, and the prosecution against the dissolved company was permitted to proceed through the person shown as its representative.

Ratio Decidendi: Dissolution or striking off of a company does not extinguish its criminal liability for offences committed during its existence, and where the procedural law is silent, prosecution may continue by restoring the company or, if necessary, by proceeding through a responsible person shown as its representative.

ISSUES:

Whether the foundational facts for invoking the presumption under Section 24 of the Prevention of Money Laundering Act, 2002 (PMLA) have been established.Whether the attachment of properties under the PMLA is valid in absence of a predicate scheduled offence.Whether the Enforcement Directorate (ED) had "reason to believe" that the attached properties constitute proceeds of crime (PoC) as defined under Section 2(1)(u) of the PMLA.Whether the appellants are bona fide purchasers entitled to protection against attachment under the PMLA.Whether the procedure followed in confirming the Provisional Attachment Order (PAO) complied with the principles of natural justice.Whether the composition and constitution of the Adjudicating Authority (AA) under Section 6 of the PMLA was valid and not suffering from coram non-judice.Whether statements recorded under Section 50 of the PMLA, including those of co-accused, are admissible and sufficient to establish the case.Whether the concept of "equivalent value" property attachment under the PMLA applies to properties acquired prior to the commission of the scheduled offence.Whether the sharing of information by the ED with other law enforcement agencies under Section 66(2) of the PMLA is lawful and proper.Whether the appeals raise any substantial question of law warranting interference with the orders of the AA and Appellate Tribunal.

RULINGS / HOLDINGS:

The Court held that the foundational facts for presumption under Section 24 of the PMLA were established by the material on record, including financial transactions and linkages to the scheduled offence, and the appellants failed to rebut the statutory presumption.The absence of cognizance of the scheduled offence in the initial FIR or charge-sheet does not vitiate the attachment proceedings, as the scheduled offence was subsequently registered and investigated by competent authorities, and the ED's action under the PMLA was lawful and within jurisdiction.The ED had recorded "reason to believe" supported by material evidence, including seized documents, diary entries, and statements under Section 50 of the PMLA, sufficient to provisionally attach the properties as PoC.The appellants claiming to be bona fide purchasers failed to satisfactorily prove the legitimate source of funds for acquisition, and the properties were held to be involved in money laundering, including those acquired through sham transactions or as benami assets.The procedure adopted by the AA in confirming the PAO complied with the principles of natural justice, including issuance of show cause notices and consideration of replies; rejection of cross-examination requests at this stage was justified to prevent delay.The constitution of the AA as a single member bench, including non-judicial members, was held valid and not vitiated by coram non-judice, consistent with judicial precedents.Statements recorded under Section 50 of the PMLA, including those of co-accused, are judicial proceedings and admissible as evidence, though corroboration is necessary; the Court found sufficient corroboration in the case.The concept of attachment of property of "equivalent value" under Section 2(1)(u) of the PMLA applies to properties acquired prior to the commission of the scheduled offence if the actual PoC properties are not available, to prevent frustration of proceedings.The sharing of information by the ED with other investigative agencies under Section 66(2) of the PMLA is lawful, and subsequent FIR registration by those agencies is proper and does not affect the validity of PMLA proceedings.No substantial question of law arose warranting interference; the orders of the AA and Appellate Tribunal were upheld as well-reasoned and based on material evidence.

RATIONALE:

The Court applied the statutory framework of the PMLA, particularly Sections 3 (offence of money laundering), 5 (attachment of property), 8 (adjudication), 24 (burden of proof), and 50 (powers of authorities), along with relevant provisions of the Indian Penal Code (IPC) and procedural laws.The Court recognized that money laundering offences involve complex layering and integration of proceeds of crime, often requiring reliance on circumstantial evidence and financial analysis rather than direct proof.The presumption under Section 24 of the PMLA shifts the burden to the accused to prove innocence regarding PoC, and the Court found the appellants failed to discharge this burden adequately.The Court relied on judicial precedents affirming that attachment of properties prior to commission of offence is permissible under the "equivalent value" doctrine to prevent siphoning off of proceeds.The Court upheld the validity of the AA's composition and procedure, rejecting challenges based on natural justice and quorum, citing authoritative case law confirming single-member benches and administrative members' jurisdiction.Regarding statements under Section 50 of the PMLA, the Court emphasized their judicial nature and admissibility, subject to corroboration, and found sufficient corroboration in the present case.The Court held that the ED's sharing of information under Section 66(2) facilitates coordinated investigation and does not breach jurisdictional or procedural norms.The Court noted that the Appellate Tribunal conducted a detailed and reasoned analysis of individual appellants' cases, rejecting claims of mechanical or non-application of mind.The Court observed that the PMLA's scheme aims to prevent dissipation of illicit assets during investigation and trial, thus the attachment and confirmation orders serve a preventive and protective purpose rather than final adjudication of guilt.The Court rejected appellants' reliance on absence of scheduled offence in initial FIR or charge-sheet, noting subsequent registration and cognizance by competent authorities and Supreme Court observations affirming the continuing investigation.

Issues: Whether the appellant's marketing and support activities amounted to intermediary service or export of service.

Analysis: The dispute turned on the true character of the agreement and the actual nature of the services rendered. Mere use of the words "commercial agent" or "intermediary" in the agreement was held insufficient. The essential attributes of an intermediary are that the person arranges or facilitates a supply between two or more persons, there are at least three parties, and the person does not himself provide the main service on his own account. The agreement did not show that the appellant was authorised to conclude contracts on behalf of the overseas entity, and the consideration was on a cost-plus basis, which did not by itself establish intermediary status. On these facts, the appellant was treated as providing its own service on a principal-to-principal basis, and the service qualified as export of service.

Conclusion: The activity was not intermediary service and the demand of service tax could not be sustained.

Issues: Whether CENVAT credit on input services used in relation to construction and provision of taxable services such as renting of immovable property was admissible for the relevant period.

Analysis: The dispute was confined to eligibility of credit on services such as architects, banking, business support, chartered accountant, commercial or industrial construction, design, insurance, management consultancy and real estate agent services. The relevant period preceded the 01.04.2011 amendment, and the credit claim had to be tested under Rule 2(1) of the Cenvat Credit Rules, 2004, which contained an inclusive definition covering services used in relation to setting up the premises of the provider of output service. The issue had already been decided in the appellant's own case for an earlier period, where credit on similar services was allowed. That view had also been affirmed in departmental challenge by the High Court, and the Tribunal followed the same line of authority.

Conclusion: CENVAT credit on the disputed input services was admissible and the denial of credit was unsustainable.

Final Conclusion: The appellant was entitled to the credit claimed on the impugned input services and the demand, with consequential penalties and related reliefs, could not be sustained.

Ratio Decidendi: For the pre-01.04.2011 regime, services used in relation to setting up or construction of premises used for providing taxable output services fall within the scope of input service under Rule 2(1) of the Cenvat Credit Rules, 2004, and credit cannot be denied when the issue is already covered by binding precedent.

ISSUES:

Whether Secure Socket Layer Certification (SSLC) and Digital Signature Certificate (DSC) services are exempted for the relevant period.Whether the value of export services adopted for reversal of provisional credit was incorrectly taken twice as alleged in the Show Cause Notice.Whether under Rule 6(3A) of the CENVAT Credit Rules, 2004, the total CENVAT credit or only the common input services credit should be subjected to proportionate reversal.Whether the penalty imposed under Rule 15(1) of the CCR, 2004 read with Section 76 of the Finance Act, 1994 is justified.

RULINGS / HOLDINGS:

The Secure Socket Layer Certification (SSLC) and Digital Signature Certificate (DSC) services were held to be exempted for the period from 16-05-2008 till 30-06-2012, covering the period in dispute, and this binding precedent was followed.The appellant's rectification of the export services value, removing the alleged double counting, was accepted and found not to alter the excess reversal of credit already made.The Court held that under Rule 6(3A) of the CCR, 2004, the term "total CENVAT credit" in the formula refers only to the "total common CENVAT credit" attributable to input services commonly used for both taxable and exempted services; it does not include credit on input/input services exclusively used for taxable services. This interpretation is supported by authoritative Tribunal and High Court decisions and the retrospective clarificatory amendment made by Notification dated 01-03-2016.The penalty imposed under Rule 15(1) of the CCR, 2004 read with Section 76 of the Finance Act, 1994 was set aside because the appellant had provisionally reversed the common credit and there was no justification for penalty in light of the main issue being decided in the appellant's favor.

RATIONALE:

The Court applied the provisions of Rule 6(3A) of the CENVAT Credit Rules, 2004, which prescribe the procedure for determination and payment of amounts attributable to exempted services, including the formula for reversal of CENVAT credit.Binding precedent from the Tribunal's own earlier decision held SSLC and DSC services exempted during the relevant period, requiring adherence under judicial discipline.The Court relied on the harmonious reading of Rule 6(1), (2), and (3), and authoritative decisions including CCE v. Reliance Industries Ltd. and E-connect Solutions Pvt. Ltd., as well as the Madras High Court's ruling in Honda Motor India Pvt. Ltd., which clarified that "total CENVAT credit" in Rule 6(3A) means only the credit on common input services, excluding credit exclusively used for taxable services.The retrospective amendment by Notification No. 13/2016-CE(NT) dated 01-03-2016 and the TRU Circular dated 29-02-2016 were held clarificatory, confirming the interpretation that only common input services credit is subject to reversal, thus avoiding disallowance of credit on inputs exclusively used for taxable services.The penalty was found unjustified because the appellant had acted in good faith by provisionally reversing the credit and informing the department, and the principal issue on reversal was decided in their favor, negating the basis for penalty.The matter was remitted for re-computation of the amount of common credit and the credit to be reversed under Rule 6(3A), ensuring correct mathematical application consistent with the clarified legal position.

ISSUES:

Whether the refund claim of unutilized credit of input services in export of services is barred by limitation under Section 11B of the Central Excise Act, 1944.What is the relevant date for the purpose of limitation under Section 11B for filing refund claims in export of services-date of export or date of realization of foreign exchange'Whether the amendment in Notification No.14/2016 CE (NT) dated 01.03.2016, prescribing the period of limitation from the date of realization of foreign exchange, applies retrospectively to refund claims filed before that date.

RULINGS / HOLDINGS:

The refund claim was improperly rejected on the ground of limitation, as the relevant date for the purposes of Section 11B in export of services cases is the end of the quarter in which the Foreign Inward Remittance Certificate (FIRC) is received, not the date of export.The amendment introduced by Notification No.14/2016 CE (NT) dated 01.03.2016, which prescribes reckoning the limitation period from the date of realization of foreign exchange, does not have retrospective application; however, the Larger Bench decision effectively provides the same benefit for claims filed on a quarterly basis before the amendment.The impugned orders upholding the rejection of refund claims on limitation grounds are set aside, and the appeal is allowed with consequential relief.

RATIONALE:

The legal framework centers on Rule 5 of the Cenvat Credit Rules, 2004, read with Notification No.27/2012 CE (NT) dated 18.06.2012, and the limitation period under Section 11B of the Central Excise Act, 1944, made applicable to service tax matters by Section 83 of the Finance Act, 1994.The Larger Bench of the Tribunal interpreted Section 11B's limitation period constructively in the context of export of services, noting the absence of explicit provision for export of services within Section 11B and relying on the Service Tax Rules, 1994 and Export of Services Rules, 2005, which define export completion upon receipt of payment in convertible foreign exchange.The Tribunal held that the relevant date is the end of the quarter in which the FIRC is received for quarterly refund claims, aligning with the objective of facilitating refunds of unutilized Cenvat credit.The decision respects the Supreme Court's guideline in Vatika Township that beneficial amendments may be applied retrospectively, but provisions imposing liability apply prospectively; thus, the amendment notification dated 01.03.2016 is prospective, but the Larger Bench ruling provides equivalent relief for earlier claims.Precedents from the Madras High Court and Andhra Pradesh High Court support the interpretation that receipt of foreign exchange is the relevant date for export of services refund claims.

ISSUES:

Whether the amounts received as lease premium and transfer fees for development rights on immovable property constitute "Renting of Immovable Property Service" or are excluded as transfer of immovable property under the definition of "service".Whether the activity of construction of residential complexes and related transactions attract service tax under "Construction of Residential Complex Service" and whether abatement under Notification No. 29/2010 applies.Whether interest received from buyers on deferred payment of sale consideration forms part of taxable value under service tax law.Whether supply of water by a government authority to occupants of residential complexes is taxable as "Management, Maintenance or Repair Service" or exempt as sovereign function.Whether Cenvat credit availed on input services is rightly denied or reversed and the implications thereof.Whether the appellant qualifies as a "government authority" for exemption purposes under service tax law.Whether the demand and penalties are barred by limitation and whether interest and penalties are justified.

RULINGS / HOLDINGS:

The transaction involving transfer of development rights and lease premium for immovable property is a "transfer of development right i.e. transfer of benefit arising out of immovable property which is out of the scope of ... definition of service" under Section 65B(44) of the Finance Act, 1994, and hence not taxable as "Renting of Immovable Property Service".The activity of construction of residential complexes attracts service tax under "Construction of Residential Complex Service" but the appellant is entitled to the 75% abatement benefit under Notification No. 29/2010 dated 22.06.2010, provided conditions therein are fulfilled and Cenvat credit is reversed.Interest received on deferred payments is akin to liquidated damages or penal consequences and is not includable in the taxable value for service tax purposes, consistent with Circular No. 96/7/2007 dated 23.08.2007.Supply of water by the appellant, being a government authority, is a sovereign function and not taxable as "Management, Maintenance or Repair Service"; further, water supply is treated as supply of goods subject to VAT, not service tax.Cenvat credit availed by the appellant has been reversed; hence, denial of credit is upheld and does not affect the abatement entitlement.The appellant qualifies as a "government authority" under the expanded definition in Notification No. 25/2012-ST dated 20.06.2012, being constituted under a statute and carrying out functions entrusted to a municipality under Article 243W of the Constitution.The demand and penalties confirmed by the adjudicating authority except for the service tax on construction of residential complexes are set aside; interest and penalties on non-taxable activities are not justified.

RATIONALE:

The Court applied the statutory definitions under the Finance Act, 1994, particularly Section 65B(44) defining "service" with specific exclusions for transfer of title in immovable property, relying on the General Clauses Act, 1897 definition of immovable property including "benefits arising out of land".Precedents including decisions of the Supreme Court and various High Courts were relied upon to interpret transfer of development rights as sale of immovable property, excluding such transactions from taxable services.The Court referenced the exemption framework under Notification No. 25/2012-ST and the Clarification Notification redefining "governmental authority" to include bodies constituted under statute with functions entrusted under Article 243W, supported by recent Supreme Court jurisprudence emphasizing strict construction of exemption notifications.The Court distinguished between statutory fees collected as sovereign functions, which are not taxable, and commercial activities undertaken by government authorities which attract service tax liability, as clarified in Circular No. 89/7/2006-ST and affirmed by the Supreme Court in Krishi Upaj Mandi Samiti case.The Court relied on Circular No. 96/7/2007 and relevant Tribunal decisions to exclude penal interest from taxable value.The Court acknowledged the abatement provisions under Notification No. 29/2010 and emphasized reversal of Cenvat credit as a precondition for availing abatement.The adjudicating authority's reliance on unamended definitions and failure to consider the expanded exemption scope was noted as a material error, leading to setting aside of demands except for the construction service tax liability.

ISSUES:

Whether CENVAT credit distributed by an Input Service Distributor (ISD) at the Head Office (HO) on invoices addressed to other ISD registrations located in different territorial zones is permissible under Rule 7 of the CENVAT Credit Rules, 2004.Whether there is any territorial restriction on availment and distribution of CENVAT credit by an ISD under the CENVAT Credit Rules, 2004.Whether denial of CENVAT credit on the ground that invoices are not addressed to the distributing ISD constitutes a valid reason for demand and penalty.Whether procedural irregularities relating to invoice address and ISD registration location justify denial of substantive CENVAT credit benefits.Whether short payment of service tax under Reverse Charge Mechanism (RCM) on Goods Transport Agency (GTA) services based on ledger maintained on accrual basis is sustainable.Whether penalty is imposable under section 73(3) of the Finance Act, 1994 where service tax and interest have been paid prior to issuance of show cause notice.

RULINGS / HOLDINGS:

The distribution of CENVAT credit by the HO ISD on invoices addressed to other ISD registrations located in different territorial zones is permissible as there is "no territorial restriction placed upon the Appellant by the law" and the availment and distribution of credit by an ISD is "not limited to a territorial jurisdiction."The impugned demand based on the ground that invoices do not pertain to the jurisdiction of the East Zone is "legally not sustainable" and is set aside along with interest and penalty imposed.Denial of credit on the sole ground that invoices are not addressed to the distributing ISD is a "mere procedural infirmity" and cannot justify denial of substantive benefit of CENVAT credit.Rule 9(2) of the CENVAT Credit Rules, 2004 clarifies that "the address of the recipient of goods/services is not a mandatory requirement," and thus CENVAT credit cannot be denied on this ground alone.The demand of service tax on GTA services raised on ledger basis (accrual) is not sustainable where payment was made subsequently, supported by a Chartered Accountant's certificate; such certification "cannot be brushed aside without any contrary evidence."No penalty is imposable under section 73(3) of the Finance Act, 1994 where admitted service tax and interest have been paid prior to issuance of the show cause notice.

RATIONALE:

The Court applied the provisions of the CENVAT Credit Rules, 2004, particularly Rule 7 (manner of distribution of credit by ISD) and Rule 9(2) (requirements for invoice particulars), and interpreted the term ISD under Section 2(m) of the Rules.The Court relied on precedents holding that when a situation is "revenue neutral," demands for recovery of credit are "not sustainable," including reliance on rulings where procedural irregularities without substantive misuse do not justify denial of credit.The Court emphasized that the only statutory restriction on ISD distribution is Rule 7 and found no violation thereof; the receipt and use of input services were undisputed, and payment of invoices was made by the HO ISD.The Court gave weight to a Chartered Accountant's certification regarding the timing of service tax payment under RCM, holding that such evidence cannot be disregarded absent contrary proof.The Court applied section 73(3) of the Finance Act, 1994, which precludes penalty where tax and interest have been paid before the show cause notice, thus negating penalty liability on admitted amounts.No dissent or doctrinal shift was noted; the decision follows established principles protecting substantive credit rights against procedural technicalities and ensuring penalties are not imposed where compliance has been rectified pre-litigation.

ISSUES:

Whether the supply of electricity and water by a manufacturer to other entities within its premises constitutes a sale of goods or a taxable service under the category of Business Support Service.Whether the definition of Business Support Service under Section 65(104c) of the Finance Act, 1994, includes the provision of electricity and water as infrastructural support service.Whether service tax can be levied on transactions that amount to sale of goods under the negative list regime post 01.07.2012.Whether demand of service tax is sustainable when the tax charged is available as input credit to the recipient, invoking the principle of revenue neutrality.Whether confirmation of service tax demand based on deleted provisions for the period post 01.07.2012 is legally sustainable.

RULINGS / HOLDINGS:

The supply of electricity and water to entities operating within the factory premises is a transaction amounting to "sale of goods" and not a provision of service; hence, it is not exigible to service tax under the category of Business Support Service.The definition of Business Support Service under Section 65(104c) primarily covers "outsourced activity" and does not include supply of electricity and water as infrastructural support services; thus, the subject transaction does not fall within this taxable service category.Under the negative list regime, Section 65B(44) explicitly excludes "transfer of title in goods by way of sale" from the definition of service, rendering service tax demand on such transactions untenable.The demand of service tax is liable to be set aside on the ground of revenue neutrality since any service tax charged by the recipients is available as input credit to the appellant, making the demand unsustainable.Confirmation of service tax demand for the period post 01.07.2012 based on deleted provisions is legally unsustainable and liable to be set aside.

RATIONALE:

The Court applied the statutory framework under the Finance Act, 1994, including the definitions under Sections 65(104c), 65(105)(zzzq), and 65B(44), to determine the nature of the transaction.Precedents from the Supreme Court and Tribunals were relied upon, including judgments holding electricity and water as goods, and that service tax is not applicable on contracts for sale of goods.The principle of noscitur-a-sociis was invoked to interpret the scope of Business Support Service, emphasizing that it covers only outsourced activities that support the main business, excluding supply of goods essential for the main business operations.The Court recognized the principle of revenue neutrality, referencing relevant case law that demands are unsustainable when the tax is creditable downstream.The Court noted that demands based on provisions repealed or deleted after 01.07.2012 cannot be sustained for periods subsequent to their deletion, ensuring adherence to the correct legal provisions in force during the relevant period.

ISSUES:

Whether service tax is payable for the period 01.04.2006 to 31.03.2010 under the category of 'sale of space or time for advertisement service'.Whether service tax is payable for the period 01.06.2007 to 31.03.2010 under the category of 'renting of immovable property service'.Whether service tax is payable under the category of 'club or association service' for services rendered to members.Whether the appellant is eligible for cenvat credit on LED scoreboard availed as capital goods.Whether the extended period of limitation is invokable for recovery of service tax under the above categories.

RULINGS / HOLDINGS:

Services rendered by letting out space for advertisements fall "squarely within the scope of taxable service of 'sale of space or time for advertisement'" as defined under Section 65(105)(zzzm) of the Finance Act, 1994, and the appellant is liable to discharge service tax for the relevant period.Service tax liability on 'renting of immovable property service' arose due to retrospective amendment by Section 76 of the Finance Act, 2010 effective from 01.06.2007; however, extended period of limitation cannot be invoked, and liability is restricted to the normal period only.Services rendered by the appellant to their members under the category of 'club or association service' are not leviable to service tax, consistent with the ratio of the Hon'ble Supreme Court in State of West Bengal Vs. Calcutta Club Limited, and the demand on this count is set aside.The denial of cenvat credit on the LED scoreboard is not sustainable as the appellant subsequently adjusted the gross block to exclude depreciation benefit, and there exists a nexus between the capital goods and the output taxable services; hence, cenvat credit is admissible.The invocation of extended period of limitation for service tax recovery under the 'sale of space or time for advertisement service' is not sustainable since the Department had issued a show-cause notice specifically alleging such services, limiting recovery to the normal period.Penalty under Section 78 of the Finance Act, 2010 is not warranted as extended period of limitation is not invokable.

RATIONALE:

The Court applied the definition of 'sale of space or time for advertisement service' under Section 65(105)(zzzm) of the Finance Act, 1994, including the wide interpretation of "in relation to" and "in any manner" as supported by precedent, holding that providing space used for advertising attracts service tax liability.Retrospective amendment by Section 76 of the Finance Act, 2010 was recognized as valid to impose service tax liability on renting of immovable property from 01.06.2007, but consistent with settled law, invocation of extended period of limitation is barred in such cases without mala fide.The Court relied on the Hon'ble Supreme Court's decision in State of West Bengal Vs. Calcutta Club Limited to exclude club or association services rendered to members from service tax levy, following binding precedent and prior Tribunal decisions.The admissibility of cenvat credit was examined under the Cenvat Credit Rules, 2004, particularly Rule 4(4), and the nexus requirement between capital goods and output taxable services was affirmed, rejecting denial based on initial depreciation claims.The Court considered the Department's prior knowledge and issuance of a show-cause notice specifically addressing advertisement services, thereby negating the applicability of extended period of limitation for the 'sale of space or time for advertisement service' category.Penalty imposition under Section 78 was rejected as it is contingent upon the extended period of limitation being applicable, which was not upheld.

Issues: Whether the assessee was entitled to refund of unutilised cenvat credit under Notification No. 5/2006-CE(NT) on input services used for export of services, and whether the output activity was correctly classifiable as scientific or technical consultancy service rather than technical testing or analysis service.

Analysis: The appeals were covered by earlier final orders in the assessee's own case on the same agreement and substantially identical facts, where refund had been allowed. The dispute was treated as no longer open, and the earlier rulings had already held that the output activity fell under scientific or technical consultancy service and not technical testing or analysis service. The reasoning also accepted that the input services on which credit was taken had the requisite nexus with the exported output services, and that services such as management, inspection, legal, travel, telecommunication, advertising, database access, company secretary and design services qualified as input services. The cited clarification on testing reinforced that mere testing does not attract service tax in the manner suggested by the department.

Conclusion: The refund claims were held to be allowable, and the appeals succeeded with consequential relief.

ISSUES:

Whether CENVAT credit can be availed on input services such as 'Architect & Interior Designers Service', 'Interior Decorator Service', 'Photography Service', 'Mandap Keeper Service', 'Outdoor Catering Service', 'Works Contract Service', and 'Club or Association Service' used in or in relation to the manufacture of motor vehicles or in the business of the manufacturer.Whether CENVAT credit on 'Repairing of Motor Vehicles' service is admissible as input service in relation to manufacture or business activity.Whether the Show Cause Notices and adjudication orders sufficiently establish the inadmissibility of CENVAT credit on the disputed services.Whether penalties imposed in relation to the disallowed credits are sustainable.

RULINGS / HOLDINGS:

The Court held that all the disputed services, including 'Architect & Interior Designers Service', 'Interior Decorator Service', 'Photography Service', 'Mandap Keeper Service', 'Outdoor Catering Service', 'Works Contract Service', and 'Club or Association Service', are "used in or in relation to the manufacture or in a business activity which is integral to the manufacture of the excisable products" and thus eligible for CENVAT credit.CENVAT credit on 'Repairing of Motor Vehicles' service, initially disallowed, is also admissible as it is integrally connected to the business activity of manufacture and sale of two-wheelers.The Show Cause Notices failed to provide adequate reasons or investigation to justify the disallowance of credit; mere reproduction of the definition of "Input Service" and vague allegations do not sustain the demand.Penalties imposed in respect of the disputed credits are liable to be set aside.Amounts confirmed by the impugned orders and not challenged by the appellants remain payable.

RATIONALE:

The Court applied the legal framework governing CENVAT credit on input services, emphasizing the requirement that such services must be "used in or in relation to the manufacture" or "business activity integral to the manufacture" of excisable goods.The Court relied on prior authoritative Bench decisions in the same matter, which clarified that the disputed services have a direct nexus to the manufacturing process and business operations.The Court noted the insufficiency of the Show Cause Notices and adjudication orders, which lacked factual investigation and relied on presumptions rather than concrete evidence to disallow credit.There was no dissent or doctrinal shift; the judgment reaffirmed established principles regarding admissibility of CENVAT credit on input services.

ISSUES:

Whether the extended period of limitation under the proviso to section 11A(4) of the Central Excise Act, 1944 can be invoked for demand of CENVAT credit reversal on supply of exempted goods.Whether non-disclosure or suppression of relevant Notification details in the ER-1 Return for the relevant period amounts to suppression with intent to evade duty, justifying invocation of extended limitation period.Whether the appellant had correctly disclosed the Notification details in the ER-1 Return for the month of February, 2017.Whether demand for CENVAT credit reversal under rule 6(3) of the CENVAT Credit Rules, 2004 is sustainable on the facts.

RULINGS / HOLDINGS:

The extended period of limitation under the proviso to section 11A(4) of the Central Excise Act was held to be improperly invoked because the foundational allegation of non-disclosure of Notification details in the ER-1 Return for February 2017 was factually incorrect.Non-disclosure or suppression with intent to evade duty is a prerequisite for invoking the extended limitation period; since the appellant had disclosed the Notification details in the ER-1 Return, the condition for invoking extended limitation was not met.The appellant had in fact disclosed the relevant Notification No. 20/2016-CE (N-T) in the ER-1 Return for February 2017, as evidenced by remarks in the Return and invoice details, thus negating the department's claim of suppression.The demand for reversal of CENVAT credit under rule 6(3) of the CENVAT Credit Rules, 2004 on inputs used for exempted goods is subject to limitation provisions; since extended limitation was not invokable, the demand could not be sustained for the extended period.

RATIONALE:

The Court applied the proviso to section 11A(4) of the Central Excise Act, 1944, which allows for extended limitation period only in cases involving suppression with intent to evade duty.Rule 6(3) of the CENVAT Credit Rules, 2004 mandates reversal of CENVAT credit on inputs used for exempted goods; however, demand for such reversal must comply with limitation norms under the Central Excise Act.The Court emphasized that invocation of extended limitation requires a factual finding of suppression or concealment, which was negated by the appellant's disclosure in the ER-1 Return for February 2017.The Assistant Commissioner's factual appreciation of the ER-1 Return was upheld, while the Commissioner (Appeals) erred by relying solely on the show cause notice without appreciating documentary evidence provided by the appellant.No doctrinal shift or dissent was noted; the decision reiterates established principles regarding limitation and disclosure under Central Excise law.

ISSUES:

Whether demand of central excise duty can be confirmed solely on the basis of shortages found during audit without considering corresponding excesses in inventory.Whether minor discrepancies in inventory (shortages and excesses) within a negligible percentage constitute clandestine clearance or duty evasion.Whether penalty can be imposed in absence of suppression of facts or intention to evade duty when demand is based on statutory auditors' report.

RULINGS / HOLDINGS:

The demand of duty confirmed solely on shortages without considering excesses is not sustainable as it violates the "principle of natural justice" and ignores the netting of shortages and excesses which results in a negligible difference.Minor variations in inventory, such as a net shortage of 0.25% or less, are to be regarded as "process loss" or accounting discrepancies inherent in complex manufacturing and computerized inventory systems, and do not establish clandestine clearance or duty evasion.In the absence of evidence of suppression or intention to evade duty, no penalty is imposable when demand arises from the statutory auditors' report.

RATIONALE:

The Court applied the legal framework under the Central Excise law and relied on precedents including the Tribunal's decisions in National Engineering Industries Ltd., Maruti Udyog Ltd., and Tata Motors Ltd., which were affirmed by the Apex Court, establishing that netting of shortages with excesses is appropriate.The reasoning recognized the practical realities of large-scale manufacturing with thousands of items and computerized accounting systems, where minor unreconciled variances are inevitable and do not necessarily indicate clandestine clearance.The Court emphasized that physical verification conducted by cost auditors and accepted by the department, without corroborative evidence of unaccounted clearances, cannot justify demand or penalty.The decision reflects a doctrinal stance that tolerates minor inventory variances as "tolerance limits" and rejects demand based solely on physical shortages ignoring excesses, reinforcing the "principle of natural justice."

ISSUES:

Whether coal gas (waste gas) generated during the manufacture of Hard Coke is a manufactured product or an inevitable, involuntary by-product (waste) of the manufacturing process.Whether the generation and use of waste gases for electricity production attract liability under Rule 6(3)(i) of the CENVAT Credit Rules, requiring payment of 6% of the value of exempted goods due to non-maintenance of separate accounts for inputs.Whether the principal input (Coking Coal) used in manufacture of dutiable goods can be considered as input used in manufacture of exempted goods (electricity) for the purpose of CENVAT credit reversal under Rule 6 of the Credit Rules.Whether Explanation 1 to Rule 6(1) of the Credit Rules, which includes non-excisable goods cleared for consideration in the definition of final or exempted goods, applies to waste gases generated as by-products.Whether limitation and penalty provisions are sustainable in the facts where no specific inputs are used for generation of exempted by-product and no suppression or misstatement of facts occurred.

RULINGS / HOLDINGS:

The coal gas (waste gas) generated during manufacture of Hard Coke is an "unavoidable, unintended by-product" and "waste generated" in the manufacturing process, not a manufactured product subject to excise duty or reversal under Rule 6(3) of the CENVAT Credit Rules.The appellant is not liable to pay an amount equivalent to 6% of the value of exempted goods under Rule 6(3)(i) since "no input is used in the manufacture of exempted goods" (electricity) and the principal input (Coking Coal) is used solely for manufacture of dutiable goods (Coke).Since there are "no specific inputs which are used for generation of waste gases" and the generation of waste gases is "completely involuntary and inevitable," the requirement to maintain separate accounts under Rule 6(2) does not arise.Explanation 1 to Rule 6(1) of the Credit Rules does not apply to waste gases as they are not "final products" but by-products, and no inputs can be identified as used exclusively in their generation.Limitation and penalty claims are not sustainable as there is no suppression or misstatement of facts, and the issue is a pure question of law.

RATIONALE:

The Court applied the framework of Rule 6 of the CENVAT Credit Rules, 2004, which restricts CENVAT credit on inputs used in manufacture of exempted goods and requires payment of a specified percentage where separate accounts are not maintained.Precedents establish that by-products generated involuntarily during manufacture, without choice or specific inputs, are not subject to credit reversal under Rule 6(3). The Court relied on decisions including the Kolkata High Court ruling in Commissioner of Central Excise, Bolpur Vs. Indian Iron and Steel Co. Ltd. (2023), which held that coke oven gas is a by-product with no role of inputs in its production and is exempt from demand under Rule 6(3).The Court distinguished the present case from judgments concerning denial of CENVAT credit on inputs used in generation of electricity consumed outside factory premises, emphasizing that the issue here is payment under Rule 6(3) for exempted by-products, not credit eligibility.The Court recognized the practical impossibility of segregating inputs for dutiable and exempted goods when the exempted goods are by-products, consistent with prior Tribunal and High Court decisions.No doctrinal shift or dissent was recorded; the decision aligns with established legal principles and prior authoritative rulings.

Issues: Whether the Tribunal erred in failing to record a finding on the assessee's plea regarding tax on stone dust in the rectification application under Section 31 of the U.P. Value Added Tax Act, 2007.

Analysis: The revision concerned a rectification application in which the Tribunal had dealt with the levy of tax on royalty as regards solemstones and the use of trucks for transport, but had not addressed the specific plea relating to stone dust. As the application expressly raised that ground, the omission to record a finding on that aspect amounted to an incomplete adjudication of the rectification request.

Conclusion: The omission was unsustainable, and the Tribunal's order was set aside with a direction to decide the matter afresh and record a finding on the stone dust issue.

Issues: Whether, in a prosecution under Section 138 of the Negotiable Instruments Act, 1881, amendment of the complaint could be permitted after cognizance had been taken and whether the proposed correction altered the nature of the complaint or caused prejudice to the accused.

Analysis: The settled position is that a criminal court is not powerless to permit amendment of a complaint where the defect is curable, the amendment is formal or otherwise appropriate in the circumstances, and no prejudice is caused to the accused. The governing consideration is whether the amendment is necessary to correct an infirmity that can be cured without altering the essential character of the proceedings. The written complaint requirement under Section 142 of the Negotiable Instruments Act, 1881, does not exclude all amendments as a matter of principle. The test of prejudice, reflected also in the scheme of alteration of charge under the Code of Criminal Procedure, 1973, remains central. On the facts, the amendment related only to the description of the goods supplied, was sought at a stage when the complainant's evidence was incomplete, and did not change the nature of the prosecution. The High Court's focus on GST consequences was extraneous to the issue whether the complaint itself could be corrected.

Conclusion: The amendment was permissible, no prejudice was shown, and the order refusing to sustain the trial court's allowance of amendment could not stand.

Ratio Decidendi: A complaint in a criminal prosecution may be amended to cure a formal or curable defect, even after cognizance, if the amendment does not change the nature of the case and causes no prejudice to the accused.

Issues: Whether the complaint proceedings pending in Calcutta and Jaipur were required to be transferred to one forum, and whether the prayer to shift the Jaipur proceeding to Kolhapur could be granted.

Analysis: The transfer request was considered on the basis that one complaint under Section 138 of the Negotiable Instruments Act, 1881 was instituted at Jaipur on the footing of Section 142(2)(a) of that Act, while the other proceeding was stated to arise from a loan transaction at Kolhapur. Without expressing any opinion on jurisdiction, the Court considered it just and convenient that both matters be heard at the same place, since one proceeding was already pending at Jaipur.

Conclusion: The proceeding pending at Calcutta was directed to be transferred to Jaipur, and the request to transfer the Jaipur proceeding to Kolhapur was rejected.

Issues: Whether the transfer petition should be disposed of in terms of the settlement arrived at between the parties during mediation.

Analysis: The parties were referred to mediation and a Memorandum of Settlement was placed on record. The settlement recorded payment of the agreed amount, withdrawal of the connected complaint, and a complete resolution of all claims and counterclaims arising from the dispute. In view of the settlement, no further adjudication on the transfer request was required.

Conclusion: The transfer petition was disposed of in terms of the Memorandum of Settlement.

Final Conclusion: The dispute was brought to an end through a binding settlement recorded by the Court, and the transfer proceedings stood concluded accordingly.

Issues: Whether the complaint arising from dishonour of electronic funds transfer proceedings was liable to be transferred on the ground that the petitioner's head office and the underlying loan transaction were situated at Delhi, or whether jurisdiction lay at Jaipur where the credit account was located.

Analysis: Section 25(5) of the Payment and Settlement Systems Act, 2007 applies Chapter XVII of the Negotiable Instruments Act, 1881 to dishonour of electronic funds transfer. Section 142(2)(a) of the Negotiable Instruments Act, 1881 governs the place where the complaint may be lodged, and the complaint allegations indicated that the mandate for transfer was given for credit to the complainant's account located within the territorial jurisdiction of the Jaipur court. On that basis, no ground was made out for transfer.

Conclusion: The request for transfer was rejected and jurisdiction was found to lie at Jaipur.

Final Conclusion: The proceeding was retained at the forum where the complaint disclosed the relevant territorial nexus, and the transfer request failed.

Ratio Decidendi: For dishonour proceedings relating to electronic funds transfer, jurisdiction is determined by the statutory scheme applying Chapter XVII of the Negotiable Instruments Act, 1881, and by the complaint's territorial nexus under Section 142(2)(a), not merely by the location of the drawer's head office or the loan transaction.

Issues: Whether a complaint under Section 138 of the Negotiable Instruments Act, 1881 could be sustained where the cheque was issued in the name of one person for a liability said to be due to more than one person, and whether the accused was entitled to relief by way of remand for production of further evidence on authorization.

Analysis: Section 138 contemplates prosecution by the payee or holder in due course. Where the underlying liability is asserted to belong to several persons, the complainant can prosecute only if there is clear authorization from the other persons enabling him to receive the cheque and maintain the complaint on their behalf. In the absence of marked authorization, the conviction could not be sustained on the existing record. Considering the circumstances and the nature of the dispute, the complainant was to be given one more opportunity to produce additional evidence, and the proceedings were therefore sent back to the trial court.

Conclusion: The conviction and sentence were set aside, and the matter was remanded to the trial court for fresh proceedings with liberty to adduce additional evidence.

Final Conclusion: The petitioner obtained relief against the conviction, but the complaint itself was not finally terminated and was restored to the trial court for further adjudication.

Ratio Decidendi: A prosecution under Section 138 of the Negotiable Instruments Act, 1881 by one person for a liability owed to several persons requires proof of authorization from the others; without such authorization, the conviction cannot stand on the existing evidence.

Issues: (i) Whether the reduction in maintenance ordered under Section 127 of the Code of Criminal Procedure, 1973 was sustainable; (ii) Whether the reduced maintenance ought to operate from the date of the order or from the date of retirement.

Issue (i): Whether the reduction in maintenance ordered under Section 127 of the Code of Criminal Procedure, 1973 was sustainable.

Analysis: Maintenance was assessed on a holistic view of the parties' respective financial capacity, actual income, past earnings, assets, social status, medical needs, and the standard of living enjoyed during marriage. The income reflected in income-tax return could not be treated as conclusive, and the Court was entitled to look beyond declared income to ascertain real earning capacity. On that basis, the quantum fixed by the Magistrate was re-evaluated.

Conclusion: The reduction to Rs. 20,000 per month was not sustained, and the maintenance was enhanced to Rs. 25,000 per month with a 5% increase every two years.

Issue (ii): Whether the reduced maintenance ought to operate from the date of the order or from the date of retirement.

Analysis: Section 127 of the Code of Criminal Procedure, 1973 does not prescribe a fixed effective date for modification of maintenance, leaving the operative date to judicial discretion on the facts of the case. No ground was found to disturb the date fixed by the Magistrate.

Conclusion: The order was upheld to the extent that the modified maintenance would take effect from the date of the impugned order.

Final Conclusion: The maintenance amount was modified upward while the operative date remained unchanged, and the connected revisions were disposed of accordingly.

Ratio Decidendi: In proceedings for modification of maintenance, the Court may assess real financial capacity beyond declared income and may fix the effective date of alteration in the absence of a statutory mandate, exercising discretion on the facts of the case.

Issues: Whether the Magistrate could take cognizance on a complaint without first giving the accused an opportunity of being heard under Section 223(1) of the Bharatiya Nagarik Suraksha Sanhita, 2023, and whether the complaint by a public servant attracted the exception to examination of the complainant.

Analysis: Section 223(1) of the Bharatiya Nagarik Suraksha Sanhita, 2023 was treated as the governing pre-cognizance safeguard. The provision requires notice and an opportunity of hearing to the accused before cognizance is taken, while carving out an exception from examination of the complainant where the complaint is made in writing by a public servant acting or purporting to act in discharge of official duties. The order proceeded on the basis that the complainant was a Government agency and dispensed with verification of the complainant, but the accused was not afforded an opportunity of hearing before cognizance was taken. That omission was held to be contrary to the statutory mandate.

Conclusion: The cognizance order was liable to be quashed for breach of the mandatory requirement of hearing the accused under Section 223(1) of the Bharatiya Nagarik Suraksha Sanhita, 2023, and the matter was remitted to the Magistrate for fresh consideration after hearing the petitioner.