TaxTMI Updates e-Newsletter
Jul 31,2024

Mens rea for evasion of tax - penalty under section 129(3) of the UPGST Act - technical/human error in e-way bill - detention and confiscation proceedings under section 129

Mens rea for evasion of tax - penalty under section 129(3) of the UPGST Act - technical/human error in e-way bill - Whether proceedings and penalty under section 129(3) could be sustained where goods were intercepted due to an incorrect place of delivery in the e-way bill arising from a human error and there was no finding of mens rea to evade tax. - HELD THAT: - The Court found that the consignments were accompanied by the requisite documents and that the discrepancy related only to the place of delivery mentioned in the e-way bill, which was attributable to a human/technical error while filling the form. There was no finding by the authorities below that the petitioner had the requisite mens rea to evade tax, nor did the State allege before the Court any intention to evade tax. In absence of any specific finding on mens rea, the initiating of proceedings and imposition of penalty under section 129(3) was not sustainable. The Court applied the principle, as followed in Nancy Trading Company (supra), that without a finding of mens rea the punitive provisions under section 129(3) should not be invoked where only a bona fide/technical error is shown and there is no discrepancy as to quantity or quality in accompanying documents.

Impugned penalty and appellate orders under section 129(3) quashed for lack of any finding of mens rea; orders unsustainable in law.

Final Conclusion: Writ petition allowed; impugned orders dated 21.08.2019 and 30.09.2020 quashed. Any amount deposited in the proceedings shall be refunded to the petitioner on production of a certified copy of this order within one month.

Detention and adjudication under Section 129 of the TSGST Act - Requirement of E-Way bill for movement of goods - Compliance with CBIC circular regarding uploading of MOV notices - Right to personal hearing before adjudication - Release of detained goods on furnishing security

Detention and adjudication under Section 129 of the TSGST Act - Requirement of E-Way bill for movement of goods - Whether the High Court should interfere with the ongoing adjudication arising from detention of the vehicle and consignment under Section 129. - HELD THAT: - The Court observed that proceedings under Section 129 were inchoate and pending adjudication, with the material facts regarding expiry of the E-Way bill and mismatch in vehicle number not disputed. In such circumstances the Court declined to interfere with the pending statutory proceedings. The Court recorded that the authorised officer must conclude the proceedings in accordance with law after giving opportunity of physical hearing to the petitioner and/or the driver, and that failure of the petitioner to cooperate would not preclude the authority from deciding the matter in a time-bound manner. [Paras 6]

No interference with the ongoing adjudication; proceedings to be concluded by the detaining/adjudicating authority in accordance with law after affording opportunity of hearing.

Compliance with CBIC circular regarding uploading of MOV notices - Right to personal hearing before adjudication - Release of detained goods on furnishing security - Directions to the detaining/adjudicating authority concerning compliance with procedural safeguards, further hearing, and conditional release of the vehicle and goods. - HELD THAT: - The Court noted the petitioner's grievance about non-uploading of MOV notices per the CBIC circular and that a personal hearing date was intimated. Rather than quashing proceedings, the Court directed the authorised officer to afford physical hearing within the stipulated time and to take a decision in a time-bound manner. The Court also directed that if the petitioner furnishes security as required under Section 129 in an encashable form, the detaining authority would consider release of the consignments upon being satisfied with such security. These directions require the authority to verify compliance with applicable procedures and to consider release subject to statutory conditions. [Paras 6]

Proceedings remitted to the detaining/adjudicating authority to ensure compliance with procedural safeguards, to afford hearing and to consider release of goods upon satisfactory security being furnished.

Final Conclusion: Writ petition disposed of without interfering in the pending Section 129 adjudication; the detaining/adjudicating authority to afford physical hearing, conclude proceedings in a time bound manner, and consider release of vehicle/consignment on furnishing of appropriate security.

Principle of mutuality - legislative competence under Article 246A and Article 366(12A) - retrospective legislation versus clarificatory amendment - prospective operation of statutory amendment - definition of person for taxing purposes - supply of goods or services - activity-wise assessment - remand for completion of assessment

Principle of mutuality - legislative competence under Article 246A and Article 366(12A) - definition of person for taxing purposes - Challenge to constitutionality of Section 7(1)(aa) and the Explanation r/w Section 2(17)(e) of the CGST/ KGST Acts on the ground that they negate the principle of mutuality and exceed legislative competence - HELD THAT: - The Court held that Article 246A read with Article 366(12A) confers plenary power on Parliament and State Legislatures to make laws in respect of goods and services tax (a tax on the supply of goods and services). Neither Article 246A nor Article 366(12A) restricts the legislature from defining the persons between whom such supply may be deemed to take place. Relying on the principle that the legislature may, for taxation purposes, adopt artificial or deeming classifications (as recognised in Karnataka Bank Ltd. and State of M.P. v. Rakesh Kohli), the Court found that the Parliament is within competence to enact a deeming fiction treating an entity and its members as separate persons for the purposes of levy. The judgment in Calcutta Club (and related mutuality reasoning) does not oust the power of Parliament to amend the taxable event by statutory definition. Consequently the impugned provisions are not ultra vires or manifestly arbitrary merely because they alter the application of the mutuality principle. [Paras 66, 67, 74]

The constitutional challenge to Section 7(1)(aa) and the Explanation is dismissed; the provisions are within legislative competence.

Retrospective legislation versus clarificatory amendment - prospective operation of statutory amendment - Whether Section 7(1)(aa) and its Explanation operate retrospectively from 01.07.2017 or should be given effect prospectively - HELD THAT: - Although the Parliament enacted the insertion with a deeming retrospective date, the Court exercised its interpretative function to prevent retrospective operation in the facts of this case. The Court observed that while legislatures may legislate retrospectively and may make clarificatory amendments retrospective, where the effect would impose an unforeseen liability on taxpayers who had acted in reliance on an established understanding of law, the Court may decline retrospective operation. Applying these considerations to the present petition, the Court concluded that Section 7(1)(aa) should not be given retrospective operation from 01.07.2017 in relation to the petitioner, and instead should operate prospectively from the date of its notification. [Paras 75]

Section 7(1)(aa) and the Explanation shall have prospective operation with effect from 01.01.2022 and not from 01.07.2017.

Supply of goods or services - activity-wise assessment - Whether the various activities and schemes run by the petitioner amount to taxable supplies to members - HELD THAT: - The Court declined to make any generalised finding that all activities of the petitioner involve taxable supply. It recorded that each scheme and activity must be examined independently by the assessing authority to determine whether the statutory elements of supply of goods or services are present. The petitioner remains free to satisfy the assessing authority that particular activities do not constitute taxable supplies. [Paras 76]

Left open for adjudication by the assessing authority; assessment to examine each activity on its merits.

Remand for completion of assessment - Procedure to be followed pending assessment in view of the court's rulings - HELD THAT: - The Court directed the petitioner to file responses to the show-cause notices and remitted the matters to the designated respondents to complete the assessment afresh in accordance with law, taking into account the prospectivity ruling and the requirement for activity-wise determination. The Court directed cooperation from the petitioner and preserved the interim order until completion of assessment. [Paras 77]

Matters remanded to respondents 4 and 5 for completion of assessment; petitioner to respond to show-cause notices; interim order to continue until assessment is complete.

Final Conclusion: The writ petitions contesting the constitutionality of Section 7(1)(aa) and the Explanation are dismissed; however, Section 7(1)(aa) and the Explanation shall operate prospectively from 01.01.2022 (and not retrospectively from 01.07.2017) in relation to the petitioner. The matters are remitted for activity-wise assessment and the petitioner is directed to participate in the assessment proceedings; the interim protection granted earlier remains in force until assessment is completed.

Cancellation of GST registration - Time barred appeal under Section 107 of the Central Goods and Services Tax Act, 2017 - Restoration of GST registration subject to conditions - Filing of retrospective and prospective returns with payment of tax, interest and fee for belated filing - Non utilisation of Input Tax Credit pending departmental scrutiny and approval - Revival of registration on compliance - Direction to effect portal modifications to enable filing and payment

Time barred appeal under Section 107 of the Central Goods and Services Tax Act, 2017 - Cancellation of GST registration - Validity of the appellate authority's rejection of the appeal against cancellation as time barred - HELD THAT: - The Court observed that the appellate authority's rejection of the appeal could not be faulted in view of the language of Section 107 of the Central Goods and Services Tax Act, 2017. While recognising the statutory bar to the appeal, the Court nevertheless addressed the broader equities and available remedies to avoid leaving the petitioner remediless.

The rejection of the appeal as time barred is not set aside on the ground of Section 107; the appellate authority's action is sustainable.

Restoration of GST registration subject to conditions - Filing of retrospective and prospective returns with payment of tax, interest and fee for belated filing - Non utilisation of Input Tax Credit pending departmental scrutiny and approval - Revival of registration on compliance - Whether the petitioner's GST registration should be restored and on what terms - HELD THAT: - Although the statutory appeal was time barred, the Court exercised its writ jurisdiction to direct conditional restoration of registration akin to the order in Suguna Cutpiece. The petitioner was directed to file returns for the period prior to cancellation and for the period subsequent to cancellation, pay the tax dues with interest and the prescribed fee for belated filing within forty five days from receipt of the order, and declare correct values of supplies. The Court expressly prohibited making such payments or adjustments out of any unutilised Input Tax Credit until such credit is scrutinised and approved by a competent officer; only approved Input Tax Credit may thereafter be utilised for future tax liabilities. Revival of registration is made contingent upon payment of tax, penalty and uploading of returns as directed.

Registration to be restored on compliance with the specified conditions; Input Tax Credit not to be utilised until departmental scrutiny and approval; registration revives upon payment and filing as directed.

Direction to effect portal modifications to enable filing and payment - Direction to respondents to enable technological facilitation for compliance - HELD THAT: - The Court directed the respondents to instruct the GST Network, New Delhi to make appropriate changes in the architecture of the GST web portal to permit the petitioner to file returns and pay tax/penalty/fine. The respondents were directed to carry out this exercise within thirty days from receipt of a copy of the order so that the petitioner can comply with the restoration conditions.

Respondents to ensure portal modifications by instructing GST Network within thirty days to enable the petitioner to file returns and make payments necessary for revival.

Final Conclusion: Writ petition disposed by directing conditional restoration of GST registration on payment of past and future tax liabilities, interest and belated filing fee, non utilisation of Input Tax Credit until departmental scrutiny and approval, revival upon compliance, and a direction to respondents to effect portal changes within thirty days; no costs.

Reimbursement of GST liability under government directions - compliance with administrative order - judicial directions for consideration of representation and speaking order - mutatis mutandis application of coordinate bench order

Reimbursement of GST liability under government directions - judicial directions for consideration of representation and speaking order - Direction to respondent Municipal Council, Bhind to consider and decide the petitioner's claim for reimbursement of GST in accordance with the Coordinate Bench order dated 06.10.2023, mutatis mutandis. - HELD THAT: - The petitioner, invoking Article 226, complained that the Municipal Council had not reimbursed GST payable by the contractor despite the Department of Urban Development and Housing, Madhya Pradesh having issued an order entitling contractors to reimbursement of specified percentages of tax liability. The High Court, on review of the petition and annexures and relying upon the Coordinate Bench decision in W.P. No.24647/2023 dated 06.10.2023, directed that the Municipal Council shall follow the same course of action. Concretely, the Municipal Council is to have the petitioner make a fresh representation within the period specified by that order, consider the claim and, if the claimed amount is found to be undisputed and due, release it; if not, pass a reasoned (speaking) order recording the legal impediment to release within the timeline set out in the Coordinate Bench order. The writ petition was disposed by issuing these directions to ensure compliance with the departmental direction through judicially mandated procedural steps.

The writ petition is disposed directing the Municipal Council, Bhind to comply with the directions contained in W.P. No.24647/2023 mutatis mutandis, including consideration of a fresh representation and release of undisputed amounts or passing a speaking order within the prescribed timeframes.

Final Conclusion: Writ petition disposed with directions that the Municipal Council, Bhind shall, following the Coordinate Bench order dated 06.10.2023 mutatis mutandis, consider the petitioner's fresh representation within the stipulated period, release any undisputed reimbursable GST amount or, if not releasing, record reasons in a speaking order within the prescribed timeframe.

Advance ruling - reverse charge - applicant - taxable person - applicability of notification - deeming fiction

Advance ruling - reverse charge - applicant - taxable person - Recipient liable to pay tax on reverse charge basis is entitled to seek an advance ruling - HELD THAT: - The Court examined the definitions in Chapter XVII and observed that an 'applicant' includes any person registered or desirous of registration. A person liable to pay tax under reverse charge is required to register under Section 24 and thus falls within the definition of 'taxable person' and 'applicant'. The definition of 'advance ruling' which refers to supply 'being undertaken or proposed to be undertaken by the applicant' does not operate to exclude a recipient who is liable to pay tax on reverse charge. The deeming fiction created by the reverse charge notification (Section 9(3)) treats the recipient as the person liable to pay tax and must be given full effect so as to bring such recipient within the ambit of Chapter XVII for seeking advance ruling. The opening qualification in the definition section ('unless the context otherwise requires') permits a contextual reading that supports the entitlement of a reverse-charge recipient to apply for advance ruling. The Court rejected the AAR's restrictive interpretation that only the supplier or proposed supplier may seek an advance ruling where reverse charge liability is cast upon the recipient. [Paras 12, 13, 14, 15, 17]

The petitioner's status as a person liable to pay tax under reverse charge brings it within the definition of 'applicant' and entitles it to seek an advance ruling.

Advance ruling - applicability of notification - deeming fiction - Impugned rejection of the application under Section 98(2) set aside and matter remitted for fresh consideration under Section 98(4) - HELD THAT: - The Court noted that Section 98(2) permits the Authority to admit or reject an application after examination and hearing, but an appeal is provided only against orders under Section 98(4). Since the AAR rejected the petitioner's application at the threshold as not maintainable, the Court found that the AAR's interpretation was flawed. Consequently, the Court set aside the AAR order and remitted the matter to the Authority to decide the application afresh on merits under Section 98(4), after examining material and affording opportunity of hearing. [Paras 18, 19]

Impugned order rejecting the application is quashed and the matter is remitted to the AAR for fresh adjudication under Section 98(4).

Final Conclusion: The writ petition is allowed: the AAR's order rejecting the petitioner's advance ruling application is set aside; the petitioner, being liable to pay tax under reverse charge, is entitled to seek an advance ruling; the matter is remitted to the AAR for fresh decision under Section 98(4).

Writ petition under Article 226 - Availability of alternative statutory remedy - Doctrine of exhaustion of alternative remedy - Discretion to entertain writ despite alternative remedy - Jurisdictional error - Violation of principles of natural justice

Writ petition under Article 226 - Availability of alternative statutory remedy - Discretion to entertain writ despite alternative remedy - Jurisdictional error - Violation of principles of natural justice - Whether the High Court should entertain the writ petition challenging the Order-in-Original dated 03.04.2024 despite the availability of an alternative statutory appellate remedy. - HELD THAT: - The Court held that, although a writ under Article 226 may be entertained despite an alternative statutory remedy in exceptional circumstances, such interference is discretionary and not obligatory. The impugned Order-in-Original was at best erroneous and the petitioner did not demonstrate any patent lack of jurisdiction or any issue going to the root of the authority's jurisdiction which would justify bypassing the statutory remedy. Reliance was placed on M/s Godrej Sara Lee Ltd. [2023(2) TMI 64 - SC] for the limited circumstances where a writ may be entertained (noting that there the controversy was confined to interpretation of law and no disputed facts), and the Court referred to PHR Invent Educational Society which emphasises restraint in entertaining writs where an effective remedy exists. The Court observed that mere allegations of violation of principles of natural justice, without showing jurisdictional infirmity or palpable injustice, are insufficient to warrant exercise of writ jurisdiction; earlier precedents such as Whirlpool Corporation and U.P. State Spinning Co. Ltd. v. R.S. Pandey were considered in that context. Because the petitioner failed to establish any of the exceptional ingredients (jurisdictional error, constitutionality challenge, or such palpable injustice), the Court declined to exercise its discretion to entertain the petition and directed the petitioner to pursue the statutory appellate remedy. [Paras 5, 6, 7, 8, 9]

Writ petition not entertained; petitioner relegated to statutory appellate remedy.

Final Conclusion: The writ petition challenging the Order-in-Original dated 03.04.2024 is dismissed for non-entertainment; liberty granted to the petitioner to pursue the available statutory appellate remedy; no costs.

Transitional arrangements for input tax credit under Section 140 - Centralised registration and transfer of transitional credit - Electronic filing in alternative State portal where branch exists - Department's duty to maintain functional portal and nemo potest commodum - Writ jurisdiction where controversy is a pure question of law

Writ jurisdiction where controversy is a pure question of law - High Court may entertain writ petition despite availability of statutory alternative remedy because the controversy is a pure question of law without disputed facts. - HELD THAT: - The court held that the question whether filing TRAN-1 in a State-portal other than the State of centralised registration is permissible under Section 140 presents a pure legal issue not requiring factual investigation. Reliance was placed on the Supreme Court's reasoning in M/s. Godrej Sara Lee Ltd. that where the controversy is pristinely legal and does not involve disputed questions of fact, the High Court may, in its discretion, entertain a writ petition instead of insisting on exhaustion of statutory remedies. In the facts of this case the material facts were admitted and the dispute centred on legal construction of Section 140, justifying exercise of writ jurisdiction. [Paras 12, 13, 14]

Writ petition entertained on merits; petitioner need not be relegated to statutory appellate remedy.

Transitional arrangements for input tax credit under Section 140 - Centralised registration and transfer of transitional credit - Electronic filing in alternative State portal where branch exists - Department's duty to maintain functional portal and nemo potest commodum - Filing TRAN-1 in the Telangana GST portal by a centrally registered person and transferring the transitional credit the same day to the centralised registration State is permissible under Section 140; demand, interest and penalty founded on contrary assumption are unsustainable. - HELD THAT: - A close reading of Section 140(1) and, in particular, Section 140(8) shows that a person with centralised registration who obtains registration under the Act is entitled to take transitional CENVAT credit in the electronic credit ledger and that such credit 'may be transferred to any of the registered persons having the same Permanent Account Number' for which centralised registration was obtained. The court found no statutory bar to filing the return electronically in a State portal where the assessee had a branch, and noted the admitted facts that the petitioner filed TRAN-1 in Telangana only because of a technical glitch in the Maharashtra portal and that the entire credit was transferred to the Maharashtra registration on the same day. The Revenue was unable to establish that the petitioner obtained any undue benefit or caused revenue loss. Further, where the Department's portal was non-functional, the Department cannot take advantage of its own wrong (nullus commodum). In these circumstances the foundational assumption of the show cause notice and the consequent demand, interest and penalty were held to be bad in law. [Paras 25, 26, 27, 28, 29]

Impugned show-cause notice and Order-in-Original set aside; demand, interest and penalty quashed.

Final Conclusion: Writ petition allowed: the High Court entertained the petition as presenting a pure question of law and held that filing TRAN-1 in the Telangana portal (where the bank had a branch) and transferring the transitional credit the same day to the Maharashtra centralised registration was permissible under Section 140; the show-cause notice and Order-in-Original imposing demand, interest and penalty were quashed.

Rectification of return for bona fide human error - availability of input tax credit despite incorrect GSTIN due to clerical error - digital portal facilitation and manual intervention - limitation period for revision of returns - no prejudice to revenue as test for permitting correction

Rectification of return for bona fide human error - availability of input tax credit despite incorrect GSTIN due to clerical error - limitation period for revision of returns - no prejudice to revenue as test for permitting correction - Petitioner entitled to rectification of returns and facilitation of input tax credit claim despite the clerical error and the lapse of time, subject to verification and without causing prejudice to revenue - HELD THAT: - The Court accepted that the incorrect entry of the awarder's TDS number in place of its GSTIN was a bona fide human error and that the denial of input tax credit arose solely from that wrong GSTIN entry. While the State and Union relied on statutory limitation and the time bound revision mechanism available under the Act, the Court held that digital filing requirements and limitation cannot be allowed to foreclose relief where a venial, clerical mistake causes an otherwise legitimate claim to be declined and where correction would not cause loss to the revenue. The Court applied the principle that facilitation of corrections is permissible if it does not prejudice the revenue, noting that similar relief had been granted by the Jharkhand High Court in comparable circumstances. Consequently, the petitioner was directed to make a representation and the authorities were ordered to permit rectification either by reopening the portal for a limited period or, if not technically possible, by permitting manual correction. [Paras 6, 7, 8, 10, 11]

Writ petition allowed insofar as the petitioner is entitled to have the returns/claims rectified and the input tax credit claim reprocessed, subject to verification and without prejudice to the revenue

Digital portal facilitation and manual intervention - no prejudice to revenue as test for permitting correction - Authorities directed to facilitate correction by opening the portal for a limited period or permitting manual rectification, and the assessing officer to verify claimed deductions before granting refund - HELD THAT: - The Court directed the petitioner to make a representation to respondent authorities and ordered that the portal be opened for a limited period to enable correction; if technical constraints prevent online correction, the authorities must allow manual rectification. The Court clarified that it has not determined the quantum of input tax credit; the assessing officer is empowered to scrutinise the deductions and verify them against the returns filed by the awarder (IDA) and to allow the claim only after such verification, thereby safeguarding revenue interests. [Paras 6, 8, 9, 10, 11]

Respondent authorities to facilitate online correction for a limited period or permit manual correction and the assessing officer to verify the claimed deductions before allowing refund

Final Conclusion: The writ petition is allowed: petitioner to make a representation and the authorities shall permit rectification (by reopening the portal for a limited period or by manual mode) and the assessing officer shall verify the claimed deductions before allowing the input tax credit/refund, ensuring no prejudice to the revenue.

Reopening of assessment - additional reasons after notice - foundational material for initiation of reassessment - Explanation 3 to section 147 - scope of issues in reassessment - change of opinion - assessing officer's jurisdiction to assess other income during reassessment

Additional reasons after notice - foundational material for initiation of reassessment - change of opinion - Validity of initiating reassessment when Assessing Officer records or relies upon reasons or inquiries not disclosed in the original Section 148A(b)/Section 148 notice - HELD THAT: - The Court held that the validity of proceedings initiated under Section 148 must be judged by the reasons and material that existed at the time the Section 148A(b)/Section 148 notice was issued. An Assessing Officer cannot supplement, improve upon or record additional reasons subsequent to issuance of the notice so as to justify reopening. The foundational material disclosed to the assessee at the notice stage is the touchstone; a subsequent change of stance or reliance on fresh reasoning not reflected in the original notice is impermissible. Authorities cited (Living Media and Northern Exim and others) were relied on to reinforce that additional reasons recorded after issuance of notice cannot validate the reassessment initiation. [Paras 6, 7, 9]

Proceedings based on reasons or inquiries not disclosed in the original notice are invalid; the Assessing Officer cannot record additional reasons after issuance of the Section 148A(b)/Section 148 notice.

Explanation 3 to section 147 - scope of issues in reassessment - assessing officer's jurisdiction to assess other income during reassessment - Effect of Explanation 3 to Section 147 on the Assessing Officer's power to assess issues not mentioned in the original reasons for reopening - HELD THAT: - The Court analysed Explanation 3 (as inserted by Finance Act, 2009 and as currently embodied) and held that the Explanation operates only after it is established that reassessment has been validly invoked. Once jurisdiction to reassess has been validly assumed (i.e., the reasons forming the basis of reopening are tenable), the AO may assess or reassess other issues that come to his notice in the course of proceedings. However, Explanation 3 does not empower the AO to deviate from, supplement or supplant the original reasons for initiating reassessment; nor does it permit the AO to rely on other issues when the original basis for reopening has been found to be unsustainable. If, during reassessment, the AO accepts the assessee's objections in respect of the very income that formed the basis of the notice, he cannot independently proceed to assess unrelated income without issuing a fresh notice; the power to assess other issues is contingent upon the original basis surviving scrutiny. [Paras 18, 21, 30, 31, 32]

Explanation 3 permits assessment of additional issues only where reassessment has been validly and properly initiated; it does not allow post-hoc supplementation of reasons or assessment of unrelated items if the original basis for reopening does not survive.

Reopening of assessment - assessing officer's jurisdiction to assess other income during reassessment - Validity of the impugned orders and notices in the three writ petitions and appropriate relief - HELD THAT: - Applying the principles above to the facts, the Court found that the Assessing Officer changed the basis of action after receipt of the assessee's reply and sought to treat repayments as unexplained income though that reasoning was not articulated in the original Section 148A(b) notice. The Court held that such post-notice augmentation of reasons was impermissible and consequently the reassessment action could not be sustained. The Court therefore quashed the impugned Section 148A(d) orders and Section 148 notices for the specified assessment years, while leaving open the respondent's statutory remedies. [Paras 5, 23, 33]

The impugned Section 148A(d) orders and Section 148 notices for AY 2014-2015, AY 2015-16 and AY 2016-2017 are quashed; respondents may take such steps as are otherwise permissible in law.

Final Conclusion: The Court held that initiation of reassessment must rest on the information and reasons existing at the time the Section 148A(b)/Section 148 notice was issued and that the Assessing Officer cannot supplement or change those reasons thereafter; Explanation 3 to Section 147 allows assessment of other issues only after valid reopening and does not permit post-hoc improvement of reasons. Applying these principles, the Court quashed the impugned orders and notices for AY 2014-2015, AY 2015-16 and AY 2016-2017 while leaving the Revenue free to act within law.

Appeal by State Government against sentence under Section 377 Cr.P.C. - Inadequacy of sentence - Special Court for Economic Offences designated under Chapter XXII of the Income tax Act - Special Court constituted by executive notification and presided over by a Magistrate - Triability of offences under Chapter XXII of the Income tax Act as magistrate trials - Maintainability of appeal to High Court versus Court of Sessions - Avoidance of conflicting concurrent adjudication on conviction and enhancement

Appeal by State Government against sentence under Section 377 Cr.P.C. - Maintainability of appeal to High Court versus Court of Sessions - Special Court for Economic Offences designated under Chapter XXII of the Income tax Act - Whether appeals filed by the Income Tax Department under Section 377 Cr.P.C. against sentences imposed by the Special Court for Economic Offences are maintainable to the High Court. - HELD THAT: - The Court examined the character and constitution of the Special Court for Economic Offences established by executive notifications and noted that, although presided over by an officer of the rank of a Judicial Magistrate First Class, the Special Court was constituted to try specified Central enactments for effective and speedy trial. The Court analysed the amended scheme of Section 377 Cr.P.C. which furnishes that appeals on the ground of inadequacy lie (a) to the Court of Session if the sentence is passed by the Magistrate, and (b) to the High Court if the sentence is passed by any other Court. Having regard to the nature of offences under Chapter XXII of the Income tax Act (deemed non cognizable and triable by a Magistrate) and to the fact that the Special Court in question is presided over by a Magistrate (and not by a Sessions Judge), the Court concluded that the sentence rendered by that Special Court is a sentence passed by a Magistrate for the purposes of Section 377. The Court further observed that permitting an appeal to the High Court in parallel with an appeal against conviction pending before the Sessions Court risks conflicting decisions on the same conviction and sentence; to avoid such conflicting adjudication, appeals against sentence in these cases are to be presented to the jurisdictional Sessions Court under the statutory scheme. Applying these principles to the present appeals, the Court found the appeals under Section 377 to the High Court not maintainable and dismissed them. [Paras 19, 20, 21, 22, 23]

Appeals under Section 377 Cr.P.C. brought to the High Court against sentences imposed by the Special Court for Economic Offences presided over by a Magistrate are not maintainable and are dismissed.

Triability of offences under Chapter XXII of the Income tax Act as magistrate trials - Avoidance of conflicting concurrent adjudication on conviction and enhancement - Whether, in the circumstances, the Income Tax Department may prosecute its remedy and where such an appeal should be presented. - HELD THAT: - The Court noted that accused persons retain the statutory right to challenge conviction and sentence by filing appeals under Section 374 Cr.P.C. to the Sessions Court and that Section 377 permits the State (or Central Government in specified cases) to prefer an appeal on inadequacy of sentence to the Court of Sessions where the sentence is passed by a Magistrate. In order to prevent the possibility of inconsistent outcomes (for example, an acquittal on appeal against conviction before the Sessions Court while a High Court allows enhancement), the Court directed that the Income Tax Department is at liberty to present its appeal against sentence before the jurisdictional Sessions Court. The Court granted a limited period of two months from the date of the judgment for presentation of such appeals and clarified that time already spent in these proceedings will not be prejudicial for limitation purposes. [Paras 20, 21, 22, 26]

Liberty granted to the Income Tax Department to present appeals against sentence before the jurisdictional Sessions Court within two months; time spent before the High Court will not prejudice limitation.

Final Conclusion: The High Court held that appeals filed by the Income Tax Department under Section 377 Cr.P.C. to the High Court against sentences imposed by the Special Court for Economic Offences (presided over by a Magistrate) are not maintainable; the Department may instead present appeals to the jurisdictional Sessions Court and was granted two months' time to do so without prejudice to limitation.

Compliance with enquiry and approval requirement under Section 148A(a) - preliminary opportunity and disclosure under Section 148A(b) - decision under Section 148A(d) that it is a fit case to initiate reassessment proceedings - interpretation of 'suggests' vis-a -vis 'reason to believe' - prior approval for reassessment - availability of alternate remedy under the Income Tax Act

Compliance with enquiry and approval requirement under Section 148A(a) - Whether non-conduct of an enquiry under clause (a) vitiates the reassessment initiation - HELD THAT: - Clause (a) is an enabling provision empowering the Assessing Officer to conduct an enquiry if considered desirable; where an enquiry is found necessary the approval of the specified authority is required. The provision does not make holding of an enquiry mandatory in every case and absence of such enquiry, by itself, does not amount to violation of Section 148A(a). The Court therefore rejected the petitioner's contention that the order under clause (d) was unsustainable for want of enquiry or prior approval. [Paras 5]

No mandatory breach of Section 148A(a) is made out; non-holding of an enquiry does not vitiate the proceedings.

Preliminary opportunity and disclosure under Section 148A(b) - Whether the notices under Section 148A(b) were defective for insufficient time and non-disclosure of information - HELD THAT: - The statutory minimum under clause (b) is seven days, which may extend up to thirty days. The record shows notices dated 21.03.2024, 29.03.2024 and 03.04.2024 with extensions and a final date to reply of 13.04.2024; the petitioner filed replies within the prescribed times. The information and the investigation report were furnished with the initial notice and subsequent notice gave detailed particulars of the alleged disallowable expenses. The Court found that the time afforded and disclosure complied with the requirements of Section 148A(b) and the petitioner had not sought a personal hearing prior to issuance of the order under clause (d). [Paras 5, 6, 7, 8, 9]

Notices under Section 148A(b) and the disclosure made therewith were valid; no deficiency in time or disclosure was established.

Decision under Section 148A(d) that it is a fit case to initiate reassessment proceedings - prior approval for reassessment - Whether the order under Section 148A(d) and the requisite approval were invalid for being post-facto or lacking - HELD THAT: - The record indicates that the Principal Chief Commissioner granted approval on 19.04.2024 and the Assistant Commissioner passed the order under Section 148A(d) on the same date. The Court held that the statutory requirement of prior approval was satisfied on the material before it and there was no infirmity in the order under clause (d). The Court also applied the statutory scheme that the assessing officer's decision that it is a 'fit case' to reopen is permissible where there is material that 'suggests' escapement of income. [Paras 7, 12]

Order under Section 148A(d) and the approval were not vitiated; the statutory precondition was met.

Interpretation of 'suggests' vis-a -vis 'reason to believe' - Whether the post-amendment word 'suggests' imposes the same pre-condition as the earlier 'reason to believe' - HELD THAT: - The Court rejected the petitioner's submission that 'suggests' is pari materia to 'reason to believe' requiring a definite information leading to a concluded belief. Instead, the change of language signifies legislative intent that a conclusion need not be recorded at the preliminary stage; what is required is material from which a prima facie view or suggestion of escapement of income can be formed. Reliance was placed on reasoning in a Division Bench decision explaining that the assessing officer must consider relevant material and the assessee's reply and may record an overall decision that it is a fit case to initiate reassessment without exhaustive pointwise reasons. [Paras 10, 11]

The statutory threshold is a prima facie 'suggestion' from relevant material, not the higher 'reason to believe' test.

Availability of alternate remedy under the Income Tax Act - Whether the writ petition was premature for invocation of writ jurisdiction instead of pursuing statutory remedies - HELD THAT: - The revenue urged that the petition was premature as the Income Tax Act provides a self-contained remedy and appellate hierarchy. The Court observed the line of authority that ordinarily statutory remedies should be pursued, but on the facts the Court found no illegality in the notices and order under challenge. Having examined compliance with the statutory safeguards under Section 148A, the Court concluded that interference by writ was unwarranted. [Paras 13, 14, 15]

Writ petition dismissed as there was no demonstrated illegality warranting interference; statutory remedies remain available but no relief was merited.

Final Conclusion: The High Court dismissed the writ petition: the notices under Section 148A(b), the order under Section 148A(d) and the approval for reassessment in respect of Assessment Year 2017-18 were held to comply with the statutory scheme and not to be vitiated.

Adoption of projected growth rate for valuation - valuation of unquoted shares by discounted cash flow - arm's length price - book profits under section 115JB - deduction under section 80-IB and 80-IC - manufacturing activity and eligibility for deduction - entertainability of substantial question of law

Entertainability of substantial question of law - book profits under section 115JB - Whether the proposed questions of law concerning rates of royalty (Questions 1 and 2) warranted admission of the appeals - HELD THAT: - The Court found that although the assessment on regular basis had been framed, ultimately the taxpayer's liability was quantified in terms of book profits under section 115JB and the income subjected to tax was significantly higher. In view of that quantification, the Court held there was no justification to entertain the appeals on the proposed royalty questions and declined to admit those aspects for adjudication. [Paras 3]

Appeals on the proposed royalty questions are not entertained and therefore not admitted.

Valuation of unquoted shares by discounted cash flow - adoption of projected growth rate for valuation - arm's length price - Whether the ITAT was justified in directing the assessing officer to adopt the assessee's projected growth figure of 19% for valuation of shares of M/s Dabur Overseas Ltd. - HELD THAT: - The ITAT's factual findings recorded that the assessee, having obtained an independent valuation by discounted cash flow method, used a projected sales growth of 19% for years beyond available financials. The Transfer Pricing Officer had adopted an 89% growth figure without cogent reasons and had ignored negative growth years in earlier periods and failed to adjust corresponding expenses, producing an unreasonable valuation. The CIT(A)'s direction to adopt an average of 25% was also not justified in light of the independent valuer's report and the available factual matrix. On these findings the ITAT modified the CIT(A)'s order and directed adoption of the 19% projected growth for valuation, deciding the issue in favour of the assessee. [Paras 4]

ITAT's direction to adopt the assessee's projected growth rate of 19% for valuation of the shares is upheld; issue decided in favour of the assessee.

Deduction under section 80-IB and 80-IC - manufacturing activity and eligibility for deduction - Whether the ITAT was justified in allowing deductions under sections 80-IB and 80-IC in respect of receipts such as sale of scrap, rental and miscellaneous incomes and in respect of activities proximate to the manufacturing undertaking - HELD THAT: - Relying on established authority, the Court noted the legal principle that an eligible industrial undertaking carrying out manufacture or production of articles or things is entitled to claim deduction under section 80-IB and that ancillary receipts - including sale of scrap, job-work or heat-treatment receipts and similar gains derived from the industrial undertaking and proximate to the manufacturing activity - form part of the profits of the industrial undertaking for the purpose of computing the deduction. Applying that principle to the ITAT's findings, the Court found no infirmity in the ITAT's allowance of the deductions and its conclusions that such receipts were not independent income excluded from the eligible undertaking's profits. [Paras 5, 6]

ITAT's conclusions permitting the deductions under sections 80-IB and 80-IC are correct; no substantial question of law arises.

Final Conclusion: Having found no justification to admit the royalty-related appeals and having upheld the ITAT's factual and legal conclusions on valuation of shares and on entitlement to deductions under sections 80-IB/80-IC, the High Court dismissed the appeals.

Provision for liquidated damages - provision for warranty - accrual and matching concept - estimation based on past experience/historical trend - natural justice and opportunity to be heard in rectification under Section 154

Provision for liquidated damages - estimation based on past experience/historical trend - Deletion of disallowance of provision for liquidated damages - HELD THAT: - The ITAT (affirming the CIT(A)) found that the assessee had contractual clauses creating an obligation to pay liquidated damages for delay, had estimated the provision based on period of delay and percentage of contract value, and had a consistent historical practice including reversals when clients waived such damages with the write backs offered to tax. Given that the provision arose from a contractual obligation and was estimated on a reasonable basis supported by past practice and actual payments in earlier years, the disallowance by the Assessing Officer was not sustained. The High Court found no substantial question in the appeal on this point and dismissed Revenue's challenge to the ITAT's conclusion. [Paras 2, 3]

Disallowance deleted; provision for liquidated damages allowed.

Provision for warranty - accrual and matching concept - estimation based on past experience/historical trend - Deletion of disallowance of provision for warranty - HELD THAT: - The ITAT accepted that the assessee was contractually obliged to provide warranty for specified periods and had made provisions based on actual warranty expenses in earlier years, reflecting a reasonable basis and a degree of certainty. The tribunal applied the principle in Rotork Controls India (product warranty accounting) that the accrual and matching concepts require provisioning based on historical trend rather than waiting for cash outflow, and held the provision to be admissible. The High Court concurred with the tribunal's reasoning and did not find a substantial question warranting interference. [Paras 4, 5]

Disallowance deleted; provision for warranty allowed.

Natural justice and opportunity to be heard in rectification under Section 154 - Validity of rectification order passed by TPO without hearing - HELD THAT: - The ITAT held that the Transfer Pricing Officer's rectification order enhancing the assessee's income was passed without giving the assessee an opportunity to be heard, in violation of the statutory requirement under Section 154(3) and fundamental principles of natural justice. Reliance was placed on settled authority that enhancement affecting liability cannot be made without notice and opportunity. The tribunal set aside the rectification order as void ab initio. The High Court found no reason to disagree and upheld the ITAT's conclusion. [Paras 7]

Impugned rectification order set aside as void for failure to afford opportunity of hearing.

Final Conclusion: The High Court upheld the ITAT's deletion of additions made by the Assessing Officer in respect of provisions for liquidated damages and warranty, endorsing estimation on contractual obligation and past experience consistent with accrual and matching concepts; the TPO's rectification order was set aside as void for lack of opportunity to be heard. Two remaining questions relating to suspended contracts and claim in return were adjourned for further hearing.

Assessment framed in the name of a non-existent entity - corporate death upon amalgamation - estoppel against law - correction of clerical error under Section 292B - notice/assessment void for want of substitution of successor

Assessment framed in the name of a non-existent entity - corporate death upon amalgamation - notice/assessment void for want of substitution of successor - estoppel against law - Impugned assessment passed in the name of the amalgamating company which ceased to exist upon amalgamation is void and liable to be quashed - HELD THAT: - The court found that Pharmazell Vizag Pvt. Ltd. had ceased to exist pursuant to an order sanctioning amalgamation and that the assessing authority was informed of the amalgamation on multiple occasions before issuance of the draft and final assessment orders. Reliance was placed on the line of authority in Spice Entertainment and Maruti Suzuki, holding that where the amalgamating entity has ceased to exist and the department was duly notified yet the assessment is framed only in the name of the dissolved/amalgamating company, the assessment is not a curable procedural defect but void. The court distinguished authorities where a mistaken name was treated as a clerical error curable under Section 292B because those decisions turned on their peculiar facts (including presence of substantial material showing the notice was meant for the successor or where both transferor and transferee names appeared). Participation by the amalgamated/resultant company does not operate as estoppel against the law that the amalgamating entity has ceased to exist. The court also noted that failure to deactivate PAN does not justify issuing notices or making assessments in the name of a non-existent entity once the department is aware of the amalgamation. [Paras 6, 10, 33]

Impugned assessment in the name of Pharmazell Vizag Pvt. Ltd. (a non-existent/amalgamating company) is quashed; respondents free to proceed in accordance with law.

Final Conclusion: Writ petition allowed; assessment passed in the name of the amalgamating/non-existent company quashed in view of prior intimation of amalgamation; department may proceed afresh in accordance with law.

Reopening of assessment and requirement to furnish reasons on request - best judgment assessment - GKN Driveshafts principle on disclosure of reasons for reopening

Reopening of assessment and requirement to furnish reasons on request - GKN Driveshafts principle on disclosure of reasons for reopening - Failure to furnish reasons for reopening the assessment on request rendered the reassessment invalid - HELD THAT: - The Court applied the principle in GKN Driveshafts that where an assessee, having filed a return, requests reasons for reopening under the reassessment regime, the Department is obliged to furnish those reasons. The petitioner had filed the return for Assessment Year 2017-2018 and, on receipt of notice under the reassessment process, requested reasons by an e-mail which the assessing officer's own order recorded as the assessee's registered e-mail ID. The assessing officer proceeded to pass a best judgment assessment without disclosing reasons. The Court held that the failure to provide reasons when so requested was fatal to the reassessment and warranted quashing of the order. [Paras 5]

Impugned reassessment order quashed for failure to furnish reasons for reopening

Best judgment assessment - reopening of assessment and requirement to furnish reasons on request - Direction as to further proceedings after quashing the reassessment order - HELD THAT: - Having quashed the impugned order as invalid for failure to disclose reasons, the Court left open the respondent's statutory power to initiate fresh proceedings in accordance with law. The Court made clear that if de novo proceedings are initiated, the petitioner would be entitled to raise all contentions in that process. The order therefore does not preclude reassessment conducted after compliance with the legal requirements identified by the Court. [Paras 6]

Quashment without precluding initiation of de novo proceedings in accordance with law

Final Conclusion: Writ petition allowed; assessment order dated 30.03.2022 quashed for failure to furnish reasons for reopening; respondents permitted to initiate fresh proceedings in accordance with law and petitioner permitted to raise all contentions therein.

Re-opening of assessment - change of opinion - reason to believe - true and full disclosure - application of Section 14A and Rule 8D - non-obstante clause in Section 14A - reassessment with sanction under Section 151

Change of opinion - re-opening of assessment - true and full disclosure - Whether the reasons supplied for re-opening the assessments amounted to mere change of opinion. - HELD THAT: - The Court held that a mere change of opinion does not permit reassessment, but where the assessment was not completed in accordance with law, rules or relevant circulars this provides a valid reason to believe that income has escaped assessment. The assessing officer explained that deductions for interest had been allowed originally despite Section 14A and Rule 8D and Circular No.5/2014 not having been taken into account; moreover the petitioner had not truly and fully disclosed material facts in relation to loans invested into another concern. On these grounds the Court found that the re-opening was not vitiated as a mere change of opinion but was founded on the assessing authority's reason to believe arising from non-application of mandatory provisions and non-disclosure of material facts. [Paras 13, 15, 18, 19]

Re-opening was not a mere change of opinion and was supported by valid reasons to believe.

Application of Section 14A and Rule 8D - non-obstante clause in Section 14A - reassessment with sanction under Section 151 - Whether the re-opened assessments and consequent fresh orders were valid when Section 14A, Rule 8D and Circular No.5/2014 had not been applied in the original assessments. - HELD THAT: - The Court noted that Section 14A (as amended by Finance Act, 2022, with a non-obstante clause) and Rule 8D provide the methodology for disallowing expenditure relating to exempt income, and that Circular No.5/2014 had clarified applicability even where no exempt income was earned in a particular year. The original assessing officer had ignored these provisions and the circular while completing the assessments. Where assessments were not completed in accordance with these legal mandates, the assessing officer legitimately formed a reason to believe and, with requisite sanction, reopened the assessments. The Court found no error of law or jurisdiction in the reassessment and declined to interfere, while observing that statutory appellate remedies remain available to the petitioner. [Paras 16, 17, 19, 20]

Re-assessment and fresh orders were valid as the original assessments had failed to apply Section 14A/Rule 8D and Circular No.5/2014; reassessment proceeded with required sanction and is sustainible.

Final Conclusion: Writ petitions dismissed. The Court upheld the validity of reopening the assessments for 2013-14 and 2014-15 on grounds that mandatory provisions and the CBDT circular were not applied in the original assessments; petitioner may pursue statutory appeal and time spent in these writ petitions shall be condoned if an appeal is filed.

Revision under section 263 - erroneous and prejudicial to the interest of the Revenue - no enquiry versus inadequate enquiry - possible view of the Assessing Officer - duty of the Commissioner to form own opinion before remitting

Revision under section 263 - erroneous and prejudicial to the interest of the Revenue - no enquiry versus inadequate enquiry - possible view of the Assessing Officer - duty of the Commissioner to form own opinion before remitting - Whether the order of the Principal Commissioner of Income Tax initiating revision under section 263 and setting aside the assessment for A.Y. 2017-18 was justified - HELD THAT: - The Tribunal examined the record and found that the Assessing Officer had issued multiple notices and detailed questionnaires under section 142(1) seeking month-wise cash balances, cash sales, pay-in slips, VAT returns, ledger extracts, particulars of unsecured loans and other documentary particulars relating to cash deposited during the demonetisation period. The assessee furnished detailed replies, invoices and stock records and the AO, after considering these replies, accepted the source of the cash deposits and completed the assessment. The Principal CIT, however, without conducting independent examination to demonstrate that the AO's order was legally erroneous, set aside the assessment and directed re-framing of the order. Reliance was placed on authorities distinguishing cases of no enquiry from cases where the AO has made enquiries and taken a possible view; the Tribunal applied the principle that section 263 can be invoked only if the order is both erroneous and prejudicial to revenue, and that the revising authority must record a clear finding of error or itself conduct enquiries to establish such error before remitting. Given that enquiries were made by the AO and a possible view taken, and the Principal CIT did not himself demonstrate the AO's order was erroneous but merely remitted for fresh verification, the exercise of revision jurisdiction was not sustainable. The Tribunal therefore concluded that the Pr.CIT was not justified in invoking section 263 in the facts of this case. [Paras 24, 28]

The revision order passed by the Principal CIT under section 263 is set aside; the appeal of the assessee is allowed.

Final Conclusion: The Tribunal held that the AO had made detailed enquiries and taken a possible view accepting the assessee's explanations for cash deposits during the demonetisation period; the Pr.CIT's setting aside of the assessment under section 263 without forming his own opinion or demonstrating error was unjustified, and the revision order was set aside and the appeal allowed.

Exemption under section 10(38) - third proviso to section 10(38) - government notification - eligibility for exemption where acquisition not chargeable to STT - exemption under section 10(23FB) and pass-through status under section 115U - finality of addition made in intimation under section 143(1)(a) - exemption under section 10(35)

Exemption under section 10(38) - third proviso to section 10(38) - government notification - eligibility for exemption where acquisition not chargeable to STT - Assessee entitled to claim exemption of long-term capital gains under section 10(38) despite non-payment of STT at acquisition - HELD THAT: - The Tribunal examined the conditions of section 10(38) and found clauses (a) and (b) satisfied (equity shares, sale after 2004, sale charged to STT). The third proviso permits the Central Government to notify acquisitions which need not have suffered STT. Notification S.O. 1789(E) (No.43/2017) was considered: its main paragraph covers "all transactions of acquisition of equity shares ... which are not chargeable to STT" and clauses (a),(b),(c) relate to classes of acquisitions of existing listed shares or delisted shares. The assessee had acquired unlisted shares of the venture capital undertaking; therefore clauses (a)-(c) dealing with existing listed shares are inapplicable and the acquisition falls within the main part of the notification. Consequently, the absence of STT at acquisition does not preclude exemption under section 10(38) for the assessee on the facts of this case. [Paras 18, 19, 20, 21, 22]

Exemption under section 10(38) allowed in respect of the LTCG on the shares sold.

Exemption under section 10(38) - Alternative claim for exemption under section 10(38) made before the assessing officer is not a "fresh claim" barred for being raised after filing the return - HELD THAT: - The assessee had claimed exemption under section 10(23FB) in the return and advanced an alternative claim under section 10(38) before the assessing officer when the AO questioned entitlement under section 10(23FB). The Tribunal held that this amounts to a change of statutory provision for the same relief and is not a fresh claim made for the first time after filing the return. Accordingly, the Revenue's contention that the 10(38) claim was inadmissible as a fresh claim was rejected. [Paras 13]

Grounds asserting that the 10(38) plea was a fresh claim are rejected; the 10(38) claim is admissible.

Exemption under section 10(23FB) and pass-through status under section 115U - VCF's status as a pass-through entity under section 115U does not preclude the trust (assessee) from claiming exemption under section 10(38) where exemption under section 10(23FB) has been rejected - HELD THAT: - The Tribunal observed that pass-through character for a Venture Capital Fund (with taxation in hands of investors under section 115U) arises only if the fund is accorded exemption under section 10(23FB). In the present assessment year the assessee's claim for exemption under section 10(23FB) was rejected and not challenged to finality; hence the fund does not acquire pass-through status for this year. Being a registered trust and a "person" under the Income-tax Act, the assessee remains assessable and entitled to claim any other applicable exemption, including section 10(38), which the Tribunal upheld on merits. [Paras 23, 24, 25]

Claim that only investors could claim the 10(38) exemption under section 115U is rejected for this year; the assessee may claim 10(38) where otherwise eligible.

Finality of addition made in intimation under section 143(1)(a) - exemption under section 10(35) - Relief granted by the CIT(A) in respect of dividend exemption under section 10(35) could not be allowed where the identical disallowance in the intimation under section 143(1)(a) was not challenged - HELD THAT: - The dividend exemption of Rs. 3,97,300 was disallowed in the CPC intimation under section 143(1)(a) and the assessee did not challenge that intimation. The assessment order under section 143(3) merely repeated the earlier disallowance. The Tribunal held that the proper cause of action to challenge the denial of the 10(35) exemption was the 143(1)(a) intimation; failure to challenge it rendered that disallowance final. Therefore the CIT(A) erred in granting relief in an appeal against the section 143(3) assessment when the 143(1)(a) addition stood unchallenged. [Paras 6, 10]

CIT(A)'s allowance of exemption under section 10(35) is set aside and the AO's addition in respect of dividend is restored.

Final Conclusion: The Revenue's appeal is partly allowed: the Tribunal confirmed the CIT(A)'s allowance of exemption under section 10(38) for the assessee's LTCG on the stated reasoning, rejected the Revenue's objections that the 10(38) claim was a fresh claim and that only investors could claim 10(38) under section 115U for this year, but set aside the CIT(A)'s relief on the dividend (section 10(35)) and restored the addition made in the unchallenged 143(1)(a) intimation.

Unexplained credits - genuineness of sale deed - sale consideration - creditworthiness of the buyer - burden of proof on revenue to disprove declared consideration - introduction of own money - requirement not to prove source of source

Unexplained credits - genuineness of sale deed - sale consideration - creditworthiness of the buyer - burden of proof on revenue to disprove declared consideration - Deletion of addition of Rs. 1,58,00,000 treated as unexplained credit in respect of sale of agricultural land - HELD THAT: - The Tribunal examined whether the amount credited to the assessee was rightly treated as unexplained credits or was bona fide sale consideration supported by a registered sale deed. The authorities below had drawn adverse inference from the fact that initial cheques could not be encashed and subsequent cash deposits in the purchaser's bank followed by transfers to the assessee. The Tribunal held that the registered sale deed, executed before an authority and identifying buyer and seller, cannot be negated absent proof disproving its contents. The assessee was not required to prove the "source of source" of the buyer's funds; nevertheless the assessee furnished the purchaser's bank statements which demonstrated deposits and financial capacity. The revenue failed to establish that the credited amount was the assessee's own money or that the declared consideration was other than the sale price. On these facts and applying the principle that the burden is on the revenue to show concealment of consideration, the Tribunal concluded the credit stood explained and the addition was unsustainable. [Paras 8, 9, 10, 11]

The addition of Rs. 1,58,00,000 as unexplained credit is deleted.

Final Conclusion: The appeal is allowed: the Tribunal deleted the addition of Rs. 1,58,00,000 relating to the sale of agricultural land for Assessment Year: 2016-17, holding the credited amount to be explained sale consideration and not unexplained income.

Penalty under section 271D for acceptance of cash in contravention of the provisions of section 269SS - Reasonable cause and genuineness of transaction as defence to penalty - Cash received as gift from family members-effect on levy of penalty - Binding effect of precedent of the jurisdictional High Court on identical facts

Penalty under section 271D for acceptance of cash in contravention of the provisions of section 269SS - Cash received as gift from family members-effect on levy of penalty - Reasonable cause and genuineness of transaction as defence to penalty - Whether the penalty under section 271D is sustainable where cash was received from family members and explained as gift/for purchase of property, and whether such explanation constitutes a reasonable cause negating the penalty under section 271D read with section 269SS. - HELD THAT: - The Tribunal found that the Assessing Officer had recorded and accepted the assessee's explanation that the cash deposits arose from salary, bank loans and amounts received from family (father in law) for purchase of property, and relevant confirmations and bank loan certificates were produced. The ld. CIT(A) rejected the explanation treating the amounts as loan attracting section 269SS and consequential penalty under section 271D. The Tribunal, however, followed the decision in Mani Sundaram v. ITO and the reasoning of the Hon'ble Madras High Court in Ms. Nanda Kumari v. ITO, holding that where cash is received from family members and the transaction is bona fide or explained as gift/for a genuine purpose, the assessee has shown a reasonable cause; thereafter the burden shifts to the revenue to disprove bona fides. In the absence of any finding that the explanation lacked bona fides or was false, levy of penalty under section 271D was held untenable. Applying these precedents to the identical facts, the Tribunal directed deletion of the penalty. [Paras 7, 8]

Penalty levied under section 271D deleted and appeal allowed.

Final Conclusion: The appeal is allowed; following jurisdictional precedent and on the facts that the cash receipts were from family and bona fide/explained, the Tribunal directs deletion of the penalty under section 271D for AY 2016-17.

Revisionary jurisdiction under section 263 - Explanation 2 to section 263 - requirement of inquiry by the Commissioner before exercising revisionary power - scope of "record" available to the Commissioner under section 263 - acceptance of return after inquiry and verification - non-speaking assessment order not ipso facto erroneous

Revisionary jurisdiction under section 263 - Explanation 2 to section 263 - non-speaking assessment order not ipso facto erroneous - Validity of the Pr. CIT's order under section 263 setting aside the assessment order dated 12/06/2020 - HELD THAT: - The Tribunal examined whether the assessment order under section 143(3) dated 12/06/2020 was passed without requisite inquiries or verifications such that it was "erroneous and prejudicial" within the meaning of section 263 and its Explanation 2. The record shows repeated notices under section 143(2) and 142(1), with specific queries raised on multiple dates and detailed replies filed by the assessee which the AO perused before accepting the return. The Tribunal held that an assessment order need not recite every enquiry made; acceptance of returned income after due inquiries is not vitiated merely because the assessment order is not elaborate. Applying the authorities and the statutory record, the Tribunal found that the AO had applied his mind, made enquiries and verifications appropriate to the case, and therefore the condition of an order being passed without requisite inquiry was not satisfied. Consequently, the Pr. CIT's conclusion that the assessment order was erroneous and prejudicial solely on the basis of perceived silence by the AO was held to be untenable. [Paras 16]

Impugned order under section 263 setting aside the AO's assessment dated 12/06/2020 is invalid; the AO had made requisite inquiries and applied his mind and the assessment is not erroneous and prejudicial to revenue.

Scope of "record" under section 263 - requirement of inquiry by the Commissioner before exercising revisionary power - Whether the Pr. CIT was obliged to examine all records available on or before 27/03/2023 (including the subsequent assessment order dated 24/03/2023) and to undertake at least a prima facie inquiry before directing fresh assessment - HELD THAT: - The Tribunal considered the statutory definition of "record" under section 263(1)(b) and noted that the Pr. CIT must examine all records relating to proceedings available at the time of his examination. A subsequent assessment dated 24/03/2023 under section 147 (reassessment) accepting the return was on file prior to the impugned order dated 27/03/2023 and thus formed part of the record. The Pr. CIT confined his examination to the AO's earlier assessment order and did not undertake even a bare minimum inquiry himself nor examine the later order; he also failed to record specific findings demonstrating error and prejudice. The Tribunal held that before remitting the matter the Pr. CIT was required to conduct at least a prima facie inquiry and to consider all records in his possession; failure to do so vitiated the exercise of revisionary power. [Paras 16]

Impugned order is vitiated by failure of the Pr. CIT to examine all available records (including the 24/03/2023 order) and by omission to undertake the minimal inquiry required before exercising powers under section 263; remand to AO without such inquiry was improper.

Final Conclusion: The Tribunal allowed the appeal: the Pr. CIT's order under section 263 dated 27/03/2023 was set aside as illegal and without jurisdiction because the Assessing Officer had conducted requisite inquiries and applied his mind in accepting the return, and because the Pr. CIT failed to examine all records on file (including the subsequent section 147 order) and did not undertake the minimum inquiry required before invoking revisionary jurisdiction.

Grandfathering of capital gains under India Mauritius DTAA - treaty entitlement for Mauritius resident with TRC - long term capital gains on sale of shares - withholding tax/TDS refund claim - parity with coordinate bench decision

Long term capital gains on sale of shares - treaty entitlement for Mauritius resident with TRC - grandfathering of capital gains under India Mauritius DTAA - withholding tax/TDS refund claim - parity with coordinate bench decision - Addition of long term capital gains and rejection of refund of TDS arising from sale of shares for AY 2020-21 was not sustainable - HELD THAT: - The Tribunal found that the assessee, a Mauritius resident holding a valid tax residency certificate, sold part of its shareholding in an Indian company in the impugned assessment year and claimed exemption of resultant long term capital gains in light of Article 13(4) of the India Mauritius DTAA. The factual matrix of the transaction in AY 2020 21 was identical to that considered by a Coordinate Bench in the assessee's own case for AY 2018 19, where, after examining Article 13(4), relevant CBDT press releases and decisions including the Bombay High Court and Supreme Court precedents relied upon by the Coordinate Bench, the Tribunal had held that investments made prior to 01.04.2017 were grandfathered and resultant long term capital gains were not taxable in India. The Revenue did not dispute identity of facts. Applying parity, and following the Coordinate Bench's reasoning that the assessee was entitled to treaty benefits and the capital gains were not taxable in India, the Tribunal allowed the appeal and directed relief in respect of the TDS refund claim. Grounds 2 to 9 were treated as supportive of the primary ground and required no separate adjudication. [Paras 5, 6, 8]

Appeal allowed on parity with the Coordinate Bench's decision; addition set aside and refund claim allowed in terms stated.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2020 21 on the ground of parity with its own Coordinate Bench decision in the preceding year, holding that long term capital gains on the sale of shares were not taxable in India under the India Mauritius DTAA and directing relief in respect of the TDS refund claim.

Interest under Section 244A - Refund arising from advance tax - MAT credit and prohibition on interest under proviso to Section 115JAA - Remand for limited verification

Interest under Section 244A - Refund arising from advance tax - Interest under Section 244A is payable on a refund that has accrued to the assessee from advance payment of tax. - HELD THAT: - The Tribunal recorded that the CIT(A) followed binding decisions (including the Apex Court in CIT v. Tulsyan NEC) in directing allowance of interest under Section 244A on refunds arising from advance tax paid by the assessee. The authorities establish that where a refund is caused by excess advance tax payment, interest under Section 244A is payable to the assessee. The Tribunal therefore affirmed that interest is allowable in respect of such refunds, subject to verification that the refund in the present case in fact arose from advance tax paid. [Paras 6]

Allow interest under Section 244A where the refund has accrued from advance tax payment.

MAT credit and prohibition on interest under proviso to Section 115JAA - No interest under Section 244A is payable on a refund which has arisen solely on account of MAT credit. - HELD THAT: - The Tribunal accepted the Department's contention, based on the proviso to sub section (2) of Section 115JAA, that tax credit allowed under the MAT provisions does not attract payment of interest. The Tribunal noted that if the refund is on account of MAT credit allowed in proceedings under Section 154, interest is not allowable. Consequently, refunds attributable to MAT credit are not to be supplemented by interest under Section 244A. [Paras 3, 6]

If the refund is on account of MAT credit, interest under Section 244A is not allowable.

Remand for limited verification - The question whether the refund in this case arose from advance tax payment or from MAT credit is to be verified afresh by the Assessing Officer. - HELD THAT: - The Tribunal found ambiguity in the CIT(A)'s order, which referred to refunds arising from advance tax in the body but mistakenly mentioned 'refund arising on account of MAT credit' in the concluding line. Given this uncertainty, the Tribunal remanded the matter to the Assessing Officer for limited verification of the source of the refund. The AO is directed to allow interest under Section 244A only if the refund is found to have arisen from advance tax; if it is found to be a refund of MAT credit, no interest is to be allowed. [Paras 6]

Matter remanded to the Assessing Officer for limited verification of the nature of the refund and consequent grant or denial of interest.

Final Conclusion: The departmental appeal is partly allowed for statistical purposes: interest under Section 244A is payable on refunds arising from advance tax but not on refunds attributable to MAT credit; the matter is remanded to the Assessing Officer to verify the source of the refund for AY 2004-05 and act accordingly.

Exoneration in adjudicatory proceedings - continuation of criminal prosecution after adjudicatory exoneration - beneficial owner - abuse of process of law - application of Clause 15.9.2 of the Customs Manual

Exoneration in adjudicatory proceedings - continuation of criminal prosecution after adjudicatory exoneration - application of Clause 15.9.2 of the Customs Manual - Whether criminal prosecution and the complaint based on the same factual matrix as adjudicatory proceedings which have attained finality could be continued - HELD THAT: - The Court examined Clause 15.9.2 of the Customs Manual and the nature of the exoneration in the adjudicatory proceedings. Clause 15.9.2 distinguishes exoneration on technical grounds from exoneration on merits and directs that where exoneration is on merits, criminal prosecution on the same set of circumstances cannot continue. The adjudicatory order of the Additional Commissioner was reversed by the Commissioner (Appeals) but ultimately the CESTAT and the Division Bench declined to disturb the conclusion that the petitioner was not the beneficial owner; the CESTAT's findings were considered to be on merits rather than on a mere technicality. Given that the impugned complaint and summoning order are founded on the same factual matrix which has been finally adjudicated in the petitioner's favour, continuation of criminal proceedings would be impermissible and amount to an abuse of process of law. The Court therefore held that prosecution could not be continued in these circumstances and directed quashing of the complaint and setting aside of the summoning order. [Paras 11, 12, 16, 18, 19]

Complaint and summoning order quashed because adjudicatory exoneration on merits precludes continuation of criminal prosecution under the facts of the case.

Beneficial owner - effective control - arms-length commercial relationship - Whether the petitioner was the 'beneficial owner' of the seized foreign currency - HELD THAT: - The Court reviewed the findings across the adjudicatory proceedings, CESTAT and subsequent proceedings which recorded that the foreign currency belonged to the event management company and was in the possession of its employee for meeting contractual obligations. The material showed SEMPL acquired and handed over the foreign currency to its employee, invoices were raised by SEMPL and paid by HMC, and there was no agent-principal or master-servant relationship between HMC and SEMPL. The petitioner had no shareholding, directorial position, or financial interest in SEMPL and conceded lack of effective control over the seized currency. The CESTAT's conclusion that the concept of 'beneficial owner' did not arise was based on these factual findings and was treated as a merits-based exoneration. On this basis the conditions necessary to treat the petitioner as the beneficial owner were not satisfied. [Paras 5, 6, 13, 17]

Petitioner is not the 'beneficial owner' of the seized foreign currency and cannot be held liable on that ground.

Final Conclusion: The petition is allowed: the complaint (Ct. Case No. 2012/2022) is quashed and the summoning order dated 01.07.2023 is set aside, since the adjudicatory exoneration of the petitioner on merits (that he was not the beneficial owner) precludes continuation of the criminal prosecution and continuation would be an abuse of process.

Refund of Special Additional Duty paid - recognition of payment by debit to DEPB scrips as discharge of liability - application of Notification No.102/2007-Cus for grant of refund - effect of administrative circular on statutory notification - judicial annulment of administrative circular

Refund of Special Additional Duty paid - recognition of payment by debit to DEPB scrips as discharge of liability - application of Notification No.102/2007-Cus for grant of refund - Appellant entitled to have its claim for refund of 4% Special Additional Duty (SAD) considered where SAD was paid by debiting DEPB scrips and such debit was accepted by Customs as discharge of liability; Circular dated 29.04.2013 cannot operate to deny refund where conditions of Notification No.102/2007-Cus are satisfied. - HELD THAT: - The Court found that the appellant had in fact discharged the liability for 4% SAD at the time of import by debiting DEPB scrips and that the Customs Authorities had accepted that mode of payment as satisfying the import duty obligation. Consequently, the respondents cannot contend that there was no payment of SAD simply because the payment was effected by re-crediting DEPB scrips rather than initial cash payment. Where the conditions specified in Notification No.102/2007-Cus are met, the entitlement to refund arises. Further, the Circular dated 29.04.2013, which sought to impose an additional pre-condition (initial payment in cash), has been judicially annulled by the Delhi High Court, and therefore cannot be relied upon to deny the appellant's claim. The Court therefore held that the refund claim must be considered on the basis of the Notification and the facts of payment admitted by Customs, rather than on the basis of the impugned Circular. [Paras 7]

Refund claim cannot be denied on the ground that SAD was paid by debiting DEPB scrips where such payment was accepted by Customs and conditions of Notification No.102/2007-Cus are satisfied.

Effect of administrative circular on statutory notification - judicial annulment of administrative circular - Respondents directed to reconsider and process the appellant's refund application afresh on merits in light of the annulment of the Circular dated 29.04.2013 and applicability of Notification No.102/2007-Cus. - HELD THAT: - Having held that the Circular cannot be used to deny the refund where payment was accepted and the Notification's conditions are met, the Court required the Customs authorities to process the pending refund application independently and on merits. The respondents are obliged to reassess the claim without applying the additional restriction introduced by the Circular, taking into account the Delhi High Court's annulment of that Circular and determining whether the statutory conditions for refund under Notification No.102/2007-Cus have been satisfied by the appellant. [Paras 7, 8]

Respondents to process the refund application afresh and pass orders on merits within one month after hearing the appellant.

Final Conclusion: Writ Appeal allowed; impugned judgment set aside and respondents directed to consider and dispose of the appellant's refund claim for 4% SAD in accordance with Notification No.102/2007-Cus and in view of the judicial annulment of the Circular dated 29.04.2013, within one month after hearing the appellant.

Maintainability of Revenue appeals under National Litigation Policy (CBIC instructions dated 02.11.2023) - Refund of excess customs duty - Interest on delayed refund

Maintainability of Revenue appeals under National Litigation Policy (CBIC instructions dated 02.11.2023) - Dismissal of appeals without adjudication on merits - Appeals filed by the Revenue are not maintainable in view of the CBIC instructions dated 02.11.2023 and are dismissed without deciding the merits. - HELD THAT: - The Tribunal examined whether the Revenue's appeals against the Commissioner (Appeals) order granting refund with interest were maintainable in light of the National Litigation Policy as embodied in CBIC instructions dated 02.11.2023. Reliance was placed on an earlier Division Bench decision of this Tribunal (Final Order No. 60260-60285/2024 dated 22.05.2024) which rejected Revenue appeals under the same policy. Applying that precedent and the CBIC instructions, the Tribunal concluded that the present two appeals by the Revenue were not maintainable and therefore dismissed them without entering into the merits of the refund or interest claims. The Tribunal expressly left open the question of law arising from the merits for future consideration. [Paras 6]

Both appeals by the Revenue dismissed as not maintainable under the CBIC instructions dated 02.11.2023; merits not adjudicated and question of law kept open.

Final Conclusion: The Tribunal dismissed the Revenue's two appeals as not maintainable under the National Litigation Policy (CBIC instructions dated 02.11.2023), declining to decide the merits of the refund and interest claims; the question of law is left open.

Duty on oil in bunker tanks of ships imported for breaking - integral part of engine or machinery - requirement of a speaking order - remand for fresh adjudication in terms of tribunal precedent - application of Tribunal decision upheld by the Supreme Court

Duty on oil in bunker tanks of ships imported for breaking - requirement of a speaking order - integral part of engine or machinery - remand for fresh adjudication in terms of tribunal precedent - Impugned orders demanding customs duty on oil in ship tanks set aside and matter remanded for fresh adjudication in respect of oil contained in bunker tanks outside the engine room. - HELD THAT: - The Tribunal found that the Order In Original addressed only tanks within the engine room and contained no specific finding on bunker tanks outside the engine room. Paragraph 5.5 of the Tribunal's earlier decision in Navyug Ship Breaking Co. (as relied upon and upheld by the Supreme Court) was held to be apposite: where bunker tanks outside the engine room are connected by pipeline to the engine or machinery they may be treated as an integral part of the engine or machinery, but a speaking order is required on that aspect. Because no speaking order was rendered on the issue of bunker tanks outside the engine room in the impugned order, the Tribunal set aside the impugned orders and remanded the matter to the adjudicating authority to decide the question in accordance with the Navyug Ship Breaking Co. direction, including passing a speaking order regarding duty pertaining to oil in such bunker tanks. [Paras 4, 6]

Impugned orders set aside; matter remanded to adjudicating authority to decide in terms of the Tribunal's Navyug Ship Breaking Co. direction and to pass a speaking order regarding bunker tanks outside the engine room.

Final Conclusion: The appeal succeeds to the extent that the impugned orders are set aside and the matter is remanded to the adjudicating authority for fresh decision on the question of duty on oil in bunker tanks outside the engine room in accordance with the Tribunal's earlier decision in Navyug Ship Breaking Co., including issuance of a speaking order.

Classification of goods under Customs Tariff - General Rules for the Interpretation - Rule 1 - Meaning of "apparatus" and "machines" for tariff classification - Chapter Note 9(b) - definition of "Electronic integrated circuits" / monolithic integrated circuits - Section XVI Notes (Note 2(b), Note 3 and Note 4) - classification of parts and sub-parts - Applicability of exemption notification to goods classifiable under CTH 8542

Classification of goods under Customs Tariff - General Rules for the Interpretation - Rule 1 - Meaning of "apparatus" and "machines" for tariff classification - Chapter Note 9(b) - definition of "Electronic integrated circuits" / monolithic integrated circuits - Section XVI Notes (Note 2(b), Note 3 and Note 4) - classification of parts and sub-parts - Applicability of exemption notification to goods classifiable under CTH 8542 - Imported IC Codecs are classifiable under CTI 8542 39 00 (electronic integrated circuits) and not under CTI 8517 62 90 (other communication apparatus). - HELD THAT: - The Tribunal applied Rule 1 of the General Rules for Interpretation and construed the Chapter Headings and Notes. The imported items are monolithic integrated circuits (IC Codecs) in the form of un diced wafers/rolls and thus fall squarely within the definition of "electronic integrated circuits" in Chapter Note 9(b). The terms "apparatus" and "machines" in CTH 8517 connote complete equipment or stand alone devices; the imported IC chips are not self contained communication apparatus and lack stand alone transmission/reception capability at the time of import, functioning only when mounted on a PCB and powered. The Department did not produce technical material to show that the ICs possessed transmission/reception capability at import; reliance on presumptions and on decisions concerning inherently communicative devices (such as routers) was misplaced. Rule 2(b) (mixtures/combinations) and the Section XVI notes invoked by the Department were inapplicable to classifying monolithic ICs; Notes 3 and 4 concerning parts do not alter the primary classification where Rule 1 and specific Chapter Notes directly apply. Consequentially, the goods are classifiable under CTI 8542 39 00 and entitled to the benefit of the exemption notification for goods falling under CTH 8542. [Paras 28, 29, 30, 32, 33]

Classification under CTI 8542 39 00 accepted; impugned re classification under CTI 8517 62 90 set aside and exemption entitled.

Confiscation and penalty under section 111(m) and section 112(a)(ii) of the Customs Act - Appeal filed by the Department against the finding that the goods are not liable to confiscation and penalty is dismissed. - HELD THAT: - Because the Tribunal has upheld the appellant's primary contention on classification and found the impugned order unsustainable on merits, the Department's appeal against the Principal Commissioner's decision not to order confiscation under section 111(m) or impose penalty under section 112(a)(ii) fails. The Tribunal observed that, in light of the reversal on classification and the absence of sustainable findings to support confiscation or penalty, the departmental appeal deserves dismissal. [Paras 34, 35, 36, 38]

Departmental appeal dismissed; no confiscation or penalty to be imposed.

Final Conclusion: The appeal by the importer is allowed: the IC Codecs are classifiable under CTI 8542 39 00 and eligible for the exemption applicable to CTH 8542; the departmental appeal against the Principal Commissioner's refusal to order confiscation or impose penalty is dismissed.

Subrogation - rights of surety on payment or performance - co-extensive liability of surety and principal debtor - discharge of surety by variance, release or compromise - separate legal entity of holding company and subsidiary - assets of subsidiary excluded from liquidation estate - simultaneous insolvency proceedings against corporate debtor and guarantor - binding effect of an approved resolution plan on creditors and guarantors - Section 140 of the Contract Act

Subrogation - rights of surety on payment or performance - Section 140 of the Contract Act - Effect of payment made under a resolution plan by or on behalf of a corporate guarantor on the creditor's rights and the scope of subrogation available to the payer - HELD THAT: - Section 140 invests a surety who has paid "all that he is liable for" with the creditor's rights against the principal debtor. The words "all that he is liable for" limit subrogation to the amount actually paid by the guarantor or his agent. Where, in a CIRP of a corporate guarantor, a resolution plan results in a partial recovery (here the sum paid under the approved resolution plan), the guarantor (or the person who paid on its behalf) is entitled to subrogation only to the extent of that payment. The creditor's right to recover the remaining debt from the principal borrower is not extinguished by the partial recovery accepted in the guarantor's CIRP. Consequently, payment of the said sum under the guarantor's resolution plan does not discharge the corporate debtor of liability except to the extent of the amount actually paid on behalf of the guarantor. [Paras 24, 25, 26]

Subrogation is confined to the amount paid under the guarantor's resolution plan; the principal borrower's liability for the balance remains intact.

Separate legal entity of holding company and subsidiary - assets of subsidiary excluded from liquidation estate - binding effect of an approved resolution plan on creditors and guarantors - Whether assets of a subsidiary formed part of the CIRP or resolution plan of the holding company and whether such assets could be appropriated in the guarantor's CIRP - HELD THAT: - A holding company and its subsidiary are distinct juristic persons; share ownership does not make the holding company owner of the subsidiary's assets. Section 18 (explanation) and Section 36(4)(d) exclude assets of any Indian subsidiary from the assets to be taken into the corporate debtor's estate or liquidation estate. The information memorandum and approved resolution plan addressed only the holding company's investments in subsidiaries and did not include the subsidiary's assets in the CIRP of the holding company. Therefore, the assets of the subsidiary cannot be treated as part of the CIRP or resolution plan of the holding company and cannot be appropriated by operation of that CIRP. [Paras 20, 21, 22, 23]

Assets of the subsidiary were not part of the holding company's CIRP or resolution plan and cannot be included in that CIRP's estate.

Co-extensive liability of surety and principal debtor - simultaneous insolvency proceedings against corporate debtor and guarantor - binding effect of an approved resolution plan on creditors and guarantors - Whether a financial creditor may initiate separate or simultaneous CIRP proceedings against a corporate debtor and its corporate guarantor and the legal consequences of an approved resolution plan - HELD THAT: - Section 128 of the Contract Act recognises the co-extensive liability of surety and principal debtor and permits the creditor to proceed against either or both. The IBC, through Section 60 (sub-sections (2)-(5)), contemplates and permits separate or simultaneous insolvency proceedings against a corporate debtor and its corporate guarantor and provides for jurisdictional consolidation where proceedings overlap. An approved resolution plan binds creditors and guarantors as specified in Section 31, but approval of a resolution plan for one party (whether guarantor or principal borrower) does not ipso facto extinguish the other party's independent liability except to the extent of amounts actually recovered under that plan. [Paras 19, 28]

A financial creditor may file separate or simultaneous CIRP applications against the corporate debtor and the corporate guarantor; an approved resolution plan binds parties as provided but does not extinguish the other party's liability beyond amounts recovered.

Final Conclusion: The appeal is dismissed; the NCLAT's conclusions are upheld - payment under the guarantor's resolution plan only entitles subrogation to the extent paid, subsidiary assets are not part of the holding company's CIRP, and separate or simultaneous CIRP proceedings against a corporate debtor and its guarantor are permissible.

Reasonable opportunity of being heard - personal hearing - cancellation of certificate under Section 14 - penal consequence of subsection (3) of Section 14 - show cause notice - principles of natural justice

Reasonable opportunity of being heard - personal hearing - cancellation of certificate under Section 14 - penal consequence of subsection (3) of Section 14 - principles of natural justice - Whether, before cancelling registration under Section 14 of the FCRA, the Central Government must afford a personal hearing to the affected person or whether issuing a show cause notice and considering written replies suffices. - HELD THAT: - The Court examined sub section (2) of Section 14 in the light of sub section (3) which imposes a three year disqualification following cancellation and observed that the consequences of cancellation are grave and carry serious civil and economic disability. While recognising the settled principle that an opportunity to be heard does not invariably require a personal hearing, the Court held that the statutory phrase 'reasonable opportunity of being heard' must be read in context and, where the consequences are onerous, may necessitate a personal hearing. The Court distinguished authorities permitting non personal adjudication where no prejudice results or where statutory context does not demand oral hearing, and relied on precedents holding that 'hearing' ordinarily connotes personal hearing when rights of the person are substantially affected. Applying these principles to the facts, the Court concluded that in the peculiar circumstances created by the combined effect of sub sections (2) and (3) of Section 14, the petitioner ought to have been afforded a personal hearing prior to cancellation; mere issuance of a show cause notice and consideration of written reply was insufficient in the case at hand. [Paras 10, 16]

The requirement of a reasonable opportunity of being heard under Section 14(2) includes a personal hearing in the facts of this case; non affording of a personal hearing rendered the cancellation unsustainable.

Cancellation of certificate under Section 14 - show cause notice - restoration of status quo ante - Validity of the orders of suspension and cancellation issued by the respondent and the appropriate relief upon finding procedural infirmity. - HELD THAT: - Having found that the petitioner was not afforded the requisite personal hearing before cancellation, the Court held that the impugned orders cannot be sustained. The Court reviewed the documentary record showing issuance of suspension, a show cause notice and the eventual cancellation, and concluded that failure to provide personal hearing vitiated the cancellation. Consequently, the Court quashed the impugned orders and restored the petitioner to the position antecedent to those orders. The Court nevertheless left open the respondent's statutory power to proceed afresh, subject to compliance with the observations in the judgment and with due process. [Paras 7, 17]

Impugned orders of suspension and cancellation quashed; petitioner restored to status quo ante; Union of India permitted to act afresh in accordance with law and the observations made.

Final Conclusion: Writ petition allowed: the High Court held that, given the grave consequences of cancellation under Section 14(3) of the FCRA, a reasonable opportunity of being heard in the facts of this case required a personal hearing; the orders of suspension and cancellation were quashed and the petitioner restored to status quo ante, with liberty to the Union of India to proceed afresh in accordance with law.

Offence under Section 3 of PMLA dependent on scheduled offence - no money laundering on acquittal or quashing of the predicate offence - requirement of subsisting substratum of scheduled offence for PMLA proceedings - High Courts to decide on law as it stands without awaiting pending Supreme Court reference

Offence under Section 3 of PMLA dependent on scheduled offence - no money laundering on acquittal or quashing of the predicate offence - requirement of subsisting substratum of scheduled offence for PMLA proceedings - Continuation of PMLA prosecution where accused in the predicate (scheduled) offence has been acquitted - HELD THAT: - The Court applied the principle that an offence under Section 3 of the PMLA is dependent on the existence of illegal gain as a result of criminal activity relating to a scheduled offence and therefore cannot be prosecuted on a mere assumption that a scheduled offence has been committed. Relying on the ratio in Vijay Madanlal Choudhary and subsequent High Court decisions, the Court held that where the person allegedly responsible for the scheduled offence has been finally acquitted or the criminal case stands quashed, there can be no offence of money laundering against that person or anyone claiming property through him because the necessary substratum (a subsisting criminal complaint/inquiry or trial) no longer exists. The Court also rejected the submission that proceedings should be kept pending until the Supreme Court decides related SLPs, observing that High Courts must decide matters on the law as it stands and may follow binding Supreme Court precedent unless specifically directed otherwise. Applying these principles to the facts, since the co accused (the principal accused in the predicate offence) was acquitted by the trial court and that acquittal remains unchallenged, the substratum for prosecution under PMLA is absent and the ED's complaint and consequential proceedings cannot survive. [Paras 8, 9, 11, 12, 13]

The impugned order charging the petitioner under PMLA is set aside qua the petitioner and all consequential proceedings arising therefrom are quashed; the Enforcement Directorate is at liberty to initiate appropriate proceedings for revival in case of altered circumstances or a final decision by the Supreme Court in the pending SLP.

Final Conclusion: The petition is allowed; the charge framed against the petitioner under PMLA and consequential proceedings stand quashed in view of the acquittal of the co accused in the predicate offence, subject to the ED's right to revive proceedings on altered facts or following a definitive Supreme Court ruling.

Extended period of limitation - proviso to Section 73(1) of the Finance Act, 1994 - show cause notice - service tax liability - alternative efficacious remedy - appeal under Section 85 of the Finance Act, 1994

Extended period of limitation - proviso to Section 73(1) of the Finance Act, 1994 - show cause notice - Validity of invoking the proviso to Section 73(1) to issue a show cause notice beyond the normal 30 month period - HELD THAT: - The Court examined whether the show cause notice and ensuing adjudication properly invoked the extended five year period under the proviso to Section 73(1). The Court noted that the proviso imposes mandatory requirements and that the revenue bears the onus of disclosing the ingredients justifying invocation of the extended period in the notice. While the notice recited the petitioner's non registration and non payment of service tax and the petitioner replied asserting exemption for agricultural borewell drilling, the Court observed that the show cause notice did not set out cogent particulars fulfilling the statutory proviso. The Court therefore recorded that it did not find good or cogent reasons disclosed by the revenue to justify invocation of the extended period in the present proceedings. [Paras 21, 22, 26]

Invocation of the proviso to Section 73(1) was not supported by sufficient reasons in the proceedings before the Court.

Alternative efficacious remedy - appeal under Section 85 of the Finance Act, 1994 - writ jurisdiction - Maintainability of writ under Article 226 when an alternative statutory appeal remedy exists - HELD THAT: - The Court considered whether the petitioner could seek relief by writ despite the availability of an appellate remedy under Section 85 of the Finance Act, 1994. Relying on the principle that where an alternative efficacious statutory remedy exists the High Court ordinarily refrains from exercising writ jurisdiction, the Court held that the petitioner should challenge the adjudication through the statutory appeal route. Although the Court found deficiencies in the revenue's invocation of the extended period, it concluded that the proper forum to test those contentions is the appellate mechanism provided by the statute. [Paras 23, 25, 26]

Writ petition not maintainable as the petitioner has an alternative efficacious remedy by way of appeal under Section 85.

Final Conclusion: The petition is dismissed on the ground that an alternative statutory appeal remedy exists; the Court noted that the revenue had not furnished cogent reasons to invoke the extended period under the proviso to Section 73(1) but directed that any appeal already filed be decided strictly in accordance with law.

Refund of unutilized CENVAT credit - transitional credit under Section 142(9)(b) of CGST Act, 2017 - carry forward of Cenvat/Krishi Kalyan Cess in Form TRAN-1 - non-utilised CENVAT credit not refundable in cash - precedential effect of Division Bench and Larger Bench rulings

Refund of unutilized CENVAT credit - transitional credit under Section 142(9)(b) of CGST Act, 2017 - non-utilised CENVAT credit not refundable in cash - Entitlement to cash refund of unutilized Krishi Kalyan Cess (KKC) pursuant to revision of pre-GST Service Tax return and claim in TRAN-1 under Section 142(9)(b) of the CGST Act, 2017. - HELD THAT: - The Tribunal considered whether amounts of KKC that became reflected as additional CENVAT credit on revision of ST-3 and carried forward in TRAN-1 could be refunded in cash under Section 142(9)(b). The Bench noted the statutory scheme requires that where a return under the existing law is revised and CENVAT credit is found admissible, the same shall be refunded in cash under the existing law only to the extent permitted by that law. Applying the binding precedents of the Larger/Division Bench authority cited in the record (including the Division Bench decision in Lupin Ltd.), the Tribunal held that the existing law did not permit cash refund of unutilized KKC and that the ratio that non-utilised CENVAT credit of cesses cannot be refunded in cash is controlling. The Tribunal observed that although an earlier Tribunal order (BHEL) had allowed refund and was stayed by the High Court, the Division Bench ruling directly on point is binding and requires rejection of the refund claim for KKC. On that basis the claim for cash refund of the unutilised KKC was denied. [Paras 6, 9, 10]

Refund of the unutilized Krishi Kalyan Cess under Section 142(9)(b) is not allowable; both appeals dismissed.

Final Conclusion: Following binding Division Bench authority and the legal principle that non-utilised CENVAT credit of KKC is not refundable in cash under the existing law, the Tribunal dismissed the appellants' claims for refund of the unutilized KKC.

CENVAT credit on towers and shelters as inputs under Rule 2(k) of the CENVAT Credit Rules, 2004 - CENVAT credit on input services for provision of telecommunication services/passive infrastructure under Rule 2(l) of the CENVAT Credit Rules, 2004 - permanency test - functional utility test - annexation to earth / immovability not determinative of credit eligibility - eligibility to claim credit determined at time of receipt (Rule 4(1) of the CENVAT Credit Rules)

CENVAT credit on towers and shelters as inputs under Rule 2(k) of the CENVAT Credit Rules, 2004 - permanency test - functional utility test - annexation to earth / immovability not determinative of credit eligibility - eligibility to claim credit determined at time of receipt (Rule 4(1) of the CENVAT Credit Rules) - Appellant entitled to avail CENVAT credit on towers and shelters as inputs used in providing output service. - HELD THAT: - The Tribunal applied the approach adopted in M/s Bharati Infratel Limited and followed thereafter in Indus Towers Ltd., observing that towers and shelters, though bolted/fastened to foundations for stability, are not permanently annexed so as to become immovable so as to disentitle credit. The Tribunal noted that the functional utility test demonstrates that towers and shelters form part of the integrated system (BTS, antennae etc.) and are used in conjunction with capital goods to provide the telecommunications service, thereby qualifying as inputs under Rule 2(k). Further, eligibility to take input credit is to be determined at the time of receipt under Rule 4(1), and subsequent erection/fastening or emergence of immovability in an intermediate stage does not negate excisability or the right to credit. Relying on those precedents, the impugned demand was held unsustainable and the credit allowed.

CENVAT credit on towers and shelters allowed and the impugned demand set aside.

CENVAT credit on input services for provision of telecommunication services/passive infrastructure under Rule 2(l) of the CENVAT Credit Rules, 2004 - Appellant entitled to avail CENVAT credit on input services used for providing telecommunication services/passive infrastructure. - HELD THAT: - The Tribunal, following its reliance on the decisions in M/s Bharati Infratel Limited and Indus Towers Ltd., allowed credit for input services utilized in providing telecom services/passive infrastructure under the definition in Rule 2(l). The Tribunal found no sustainable ground to deny credit in view of the integrated nature of the services with the output service and the settled position applied from the cited precedents.

CENVAT credit on input services for provision of telecommunication/passive infrastructure allowed.

Final Conclusion: Appeal allowed; CENVAT credit availed by the appellant in respect of towers, shelters and input services is permitted, the impugned demand is set aside and no demand is sustainable.

Tour Operator Service - Taxability of outbound tours - Business Auxiliary Services - Export of taxable service treated as performed outside India - Destination based consumption tax - Valuation - consideration and incentives not transaction specific - Extended period - suppression and limitation

Tour Operator Service - Taxability of outbound tours - Destination based consumption tax - Export of taxable service treated as performed outside India - Charges received for arranging and operating outbound tours are not liable to service tax for the disputed period - HELD THAT: - The Tribunal applied the statutory definition of "tour" and Tour Operator Service and followed the reasoning that where the tour (the performance of the service) takes place outside India, the consumption occurs outside India and the activity falls outside levy. The internal activities of planning, scheduling and organizing performed in India are incidental to providing a tour abroad and do not convert the outbound tour into a taxable service within India. The Tribunal noted the Export of Service Rules (Rule 3) which treat a service partly performed outside India as performed outside India, the destination based character of service tax as explained in All India Federation of Tax Practitioners, and the subsequent Larger Bench and Principal Bench decisions (including Weldon Tours & Travels) which set aside demands for outbound tours for comparable pre negative list periods. By judicial discipline the Tribunal followed the coordinate decision and held that the demand on outbound tours for the disputed period cannot be sustained and is to be set aside. [Paras 27, 28, 29, 30]

Demand of service tax on charges for outbound tours for the disputed period set aside

Business Auxiliary Services - Valuation - consideration and incentives not transaction specific - Export of taxable service treated as performed outside India - Incentives received from the CRS/Amadeus for ticketing bookings are not exigible to service tax under Business Auxiliary Services - HELD THAT: - The Tribunal applied the valuation principle under Section 67 and the Larger Bench's reasoning in M/s Kafila Hospitality & Travels that incentives are performance based rewards and are not transaction specific consideration for a taxable service. Incentives paid on achievement of targets do not constitute the gross amount charged for rendering a particular service and therefore fall outside the taxable value of the "such" service. Coordinate decisions (including Asveen Air Travels and the appellant's earlier favourable order) were followed to conclude that incentives/charges for use of Amadeus software cannot sustain a demand under Business Auxiliary Services for the periods in dispute. [Paras 31, 32]

Demand of service tax on incentives/charges from Amadeus under Business Auxiliary Services set aside

Final Conclusion: Impugned orders confirmed as unsustainable; both demands (on outbound tours and on incentives from Amadeus) are set aside and the appeals are allowed with consequential reliefs, if any.

Insurance auxiliary service - insurance agent - reverse charge mechanism - business support services - CENVAT credit - input service - short accounting of insurance premium - extended period of limitation

Insurance auxiliary service - insurance agent - reverse charge mechanism - business support services - Whether the amount paid to the Bank under the Memorandum attracts service tax as 'insurance auxiliary service' payable by the appellant under the Reverse Charge Mechanism - HELD THAT: - The Tribunal examined the Memorandum and found the Bank's role was limited to providing space and ancillary infrastructural facilities for the appellant's representatives to solicit business. The Finance Act definitions show that only services provided by a person who is an "insurance agent" licensed under section 42 of the Insurance Act constitute taxable "insurance auxiliary services". The record does not show, and the Commissioner did not find, that the Bank held a licence under section 42; in the absence of such licence the Bank cannot be treated as an "insurance agent" for the purpose of classifying the services as insurance auxiliary services. Further, the services rendered by the Bank fall within infrastructural support and were correctly discharged as "business support services" by the Bank; where service tax has been paid under forward charge, the department cannot recover the same again from the appellant under reverse charge. Applying these conclusions, the demand confirmed under the head of insurance auxiliary service cannot be sustained. [Paras 20, 21, 22, 23]

Demand under 'insurance auxiliary service' and liability on appellant under Reverse Charge Mechanism held unsustainable; impugned demand on this head set aside.

CENVAT credit - input service - group health insurance - Whether CENVAT credit of service tax paid on group health insurance policy for employees is admissible to the appellant - HELD THAT: - The Tribunal noted the Larger Bench decision in Reliance Industries Ltd. v. Commissioner (LTU), Mumbai, which decided in favour of availability of credit in comparable circumstances. Applying that precedent, the Tribunal held the denial of CENVAT credit on group health insurance for employees was not sustainable and therefore the demand on this head cannot be sustained. [Paras 24, 25]

Denial of CENVAT credit on group health insurance policy for employees set aside; appellant entitled to credit as held by the Larger Bench.

Short accounting of insurance premium - Whether the appellant had short accounted insurance premium income attracting additional service tax - HELD THAT: - The appellant produced the audited trial balance for the Regional Office, which showed the correct total premium figure and explained the discrepancy in an annexure as an error. On consideration of the audited figures and the appellant's explanation, the Tribunal accepted that there was no short accounting of premium and that the alleged shortfall arose from a clerical error in the annexure rather than omission in accounting. [Paras 26, 27]

Demand based on alleged short accounting of insurance premium held unsustainable; impugned demand on this head set aside.

Final Conclusion: The order of the Commissioner dated 15.05.2017 is set aside in toto: demands confirmed as arising from alleged 'insurance auxiliary service', denial of CENVAT credit on group health insurance, and alleged short accounting of premium are not sustained; the appeal is allowed. The Tribunal did not find it necessary to decide the contention on invocation of the extended period of limitation under the proviso to section 73(1).

Exemption under Mega Exemption Notification No.25/2012 (Entry No.9) - services of a statutory regulatory body - not a business activity / charitable purpose - taxability of fees collected by statutory authority - interpretation of the word "business" for tax purposes - relevance of registration under Section 12AA of the Income Tax Act - administrative circulars clarifying exemption (Circular No.177/09/2022-TRU and Circular No.89/7/2006-ST)

Exemption under Mega Exemption Notification No.25/2012 (Entry No.9) - services of a statutory regulatory body - taxability of fees collected by statutory authority - Whether the fees and other receipts collected by the Council of Architecture in discharge of its statutory functions are exempt from service tax under the Mega Exemption Notification and thus not taxable services. - HELD THAT: - The Tribunal found that the Council of Architecture is a creature of statute constituted to perform regulatory functions under the Architects Act, 1972 and that the amounts collected (registration, renewal, inspection and other regulatory fees, sale/distribution of publications supplied largely on no-profit/no-loss basis) are charged in discharge of statutory duties and to self-finance statutory activities. Entry No.9 of Notification No.25/2012 covers services to or by educational institutions and Entry No.6 exempts services provided by a person other than a business entity; the Tribunal held that the appellant's activities squarely fall within the scope of the exemption. The Tribunal also relied on the established interpretation of the term "business" to mean activity with profit motive and observed that the appellant, being registered under Section 12AA of the Income Tax Act and carrying out regulatory, non-commercial functions, does not satisfy that test. Further, departmental circulars (including Circular No.177/09/2022-TRU and Circular No.89/7/2006-ST) and judicial precedents recognising that fees collected by statutory authorities in exercise of sovereign/statutory functions are not taxable were relied upon to support that such receipts are prima facie not business/commercial receipts. The Tribunal noted the caveat in precedent that only if fees are charged at markedly higher rates indicating commercial activity would the receipts be treated as business income; no such finding was made by the adjudicating authority on the facts of this case. For these reasons the demand and penalties confirmed by the adjudicating authorities were held unsustainable. [Paras 5]

The fees and receipts collected by the Council of Architecture in exercise of its statutory regulatory functions are not taxable services and are covered by the exemption; the demands and penalties are set aside.

Final Conclusion: The Tribunal allowed the appeals, set aside the impugned orders-in-original and held that the Council of Architecture's statutory fees and related receipts are exempt from service tax as regulatory/charitable activity covered by the Mega Exemption Notification and circular clarifications.

Binding nature of Board circulars - prevalence of judicial decisions over executive instructions - quasi-judicial authorities not to be influenced by departmental clarifications

Binding nature of Board circulars - prevalence of judicial decisions over executive instructions - Validity and effect of Board's Circular No.98/01/2008-Service Tax (dated 04.01.2008) as against judicial decisions holding that Cenvat credit on inputs/ input services used for construction of immovable property cannot be used to discharge service tax liability on renting of immovable property. - HELD THAT: - The Court examined whether the Board's circular could sustain the assessment impugned before the CESTAT. Relying on the Constitution Bench decision in Commissioner of C.Ex., Bolpur, the Court reiterated that executive circulars represent the administration's understanding of statutory provisions and are not binding on courts where the law has been declared otherwise. The CESTAT had held that the circular was contrary to statute and its proceedings were vitiated by administrative consideration; the Karnataka High Court affirmed that view. Given those judicial determinations, the circular could not be enforced in place of the judicially declared law. Consequently, there was no substantial question of law requiring further adjudication by this Court. [Paras 9, 10, 11]

Board's circular could not prevail over judicial pronouncements; no substantial question of law arises and the appeal is dismissed.

Final Conclusion: The appeal is dismissed as there is no substantial question of law: a Board circular cannot be enforced where judicial decisions have declared the contrary view, and the impugned CESTAT/High Court conclusions stand.

Input service - activities relating to business - integral nexus to manufacture - exclusion clause (personal use or consumption)

Input service - activities relating to business - integral nexus to manufacture - Entitlement to CENVAT credit on disputed services for the period prior to 01/04/2011 - HELD THAT: - The Tribunal held that under the un amended definition of input service (applicable up to 01/04/2011) the inclusive phrase activities relating to business is wide enough to cover services used by the appellant for carrying out manufacturing business and regarded as cost of production. The department did not controvert the appellant's case that the disputed services were used in the manufacturing business. In view of precedents of the Bombay High Court analysing the expression and scope of input service, the Tribunal concluded that the disputed services prior to 01/04/2011 qualified as input service and the CENVAT credit taken should be allowed. [Paras 3]

CENVAT credit on the disputed services prior to 01/04/2011 allowed; demands in respect thereof set aside.

Input service - exclusion clause (personal use or consumption) - Entitlement to CENVAT credit on disputed services w.e.f. 01/04/2011 and treatment of Rent a Cab service post 01/04/2011 - HELD THAT: - Post amendment (w.e.f. 01/04/2011) the definition of input service covers any service used, whether directly or indirectly, in or in relation to manufacture and clearance, unless specifically excluded. The Tribunal found the disputed services were used in or in relation to manufacture and did not fall within the exclusion (notably the exclusion for services used primarily for personal use or consumption of employees). Consequently, CENVAT credit on those services is allowable. Separately, the appellant conceded that CENVAT credit on the Rent a Cab service post 01/04/2011 would not be pressed; the Tribunal accepted this and confirmed the demand (with interest) in respect of Rent a Cab services w.e.f. 01/04/2011 while setting aside the remaining demands. [Paras 4, 7, 8]

CENVAT credit on disputed services w.e.f. 01/04/2011 allowed except that the demand in respect of Rent a Cab services w.e.f. 01/04/2011 is confirmed (with interest) as conceded by the appellant.

Final Conclusion: The appeal is partly allowed: demands in respect of the disputed services are set aside for the period March 2009 to 01/04/2011 and, except for Rent a Cab services w.e.f. 01/04/2011 (confirmed with interest as conceded), the post 2011 demands are also set aside; appeal partly allowed.

Central Excise Valuation under Rule 7 - valuation of goods sent to depot/consignment agents - assessable value - inclusion of insurance charges - liability for differential duty on subsequent resale - penalty for suppression of facts

Central Excise Valuation under Rule 7 - valuation of goods sent to depot/consignment agents - liability for differential duty on subsequent resale - Whether duty paid at factory gate following Rule 7 can be reopened to demand differential duty on account of higher resale prices realised subsequently at depot/consignment agents - HELD THAT: - The Tribunal examined the procedure adopted by the appellant of discharging duty at the time of clearance from the factory by applying the price prevailing at the depot/consignment agents at the same time or at the nearest time, as prescribed by Rule 7 of the Central Excise Valuation Rules. The adjudicating authority had found that the appellant had adopted Rule 7 and that there was no evidence on record to show sales at different prices at the depot/consignment agents at the same time. Applying Rule 7, the Tribunal held that once duty is paid at the factory gate using the price so determined, the appellant is not liable to pay any differential duty merely because the goods were subsequently sold at a higher price by the depot/consignment agents to independent buyers. The Tribunal accordingly set aside the remaining demand confirmed by the lower authority except as to specific admitted errors on assessable value. [Paras 8, 10, 12]

Duty paid in accordance with Rule 7 is final for the purpose of the assessed period and no differential duty is payable on later higher resale prices, and the remaining demand is set aside.

Assessable value - inclusion of insurance charges - Whether non-inclusion of insurance charges in the assessable value gives rise to a confirmed differential duty liability - HELD THAT: - The Tribunal noted that the adjudicating authority confirmed duty on account of non-inclusion of insurance charges in the assessable value. The appellant accepted the omission and agreed to pay the differential amount. The Tribunal therefore upheld the confirmation of duty to the extent relating to non-inclusion of insurance charges and held the appellant liable to pay that differential duty along with interest. [Paras 9, 12]

Upheld the confirmed demand to the extent of the differential duty attributable to non-inclusion of insurance charges, with interest.

Penalty for suppression of facts - Whether penalties imposed on the appellant are sustainable in absence of suppression with intent to evade tax - HELD THAT: - The Tribunal observed that the issue related to valuation of clearances through depot and consignment agents and that there was no material establishing suppression of facts with the intention to evade tax. Given the absence of deliberate suppression, the Tribunal held that penalties confirmed on account of the demand were not imposable and should be set aside. [Paras 11, 12]

Penalties imposed on the appellant are set aside for lack of suppression with intent to evade tax.

Final Conclusion: The appeal is allowed in part: the confirmed demand is sustained only to the extent of differential duty for non-inclusion of insurance charges (with interest); all other demands premised on alleged undervaluation under Rule 7 are set aside, and penalties are vacated.

Abatement of value of bought-out items supplied directly to site - finalisation of provisional assessment under Rule 7 - Office Memorandum dated 22.12.2004 as binding administrative guideline - CENVAT credit availment and its implication on valuation - transaction value - change of opinion by appellate authority

Abatement of value of bought-out items supplied directly to site - finalisation of provisional assessment under Rule 7 - Office Memorandum dated 22.12.2004 as binding administrative guideline - CENVAT credit availment and its implication on valuation - change of opinion by appellate authority - Whether the First Appellate Authority was justified in setting aside the provisional assessments finalised by the Adjudicating Authority. - HELD THAT: - The Tribunal found that the Adjudicating Authority had finalised provisional assessments in terms of the Office Memorandum dated 22.12.2004 after considering and verifying documents placed before it and applying its mind. The Bench relied on its earlier final order in the appellant's own case for earlier periods where (i) the invoicing practice adopted by the appellant for DTS supplies was held to be in consonance with the 2004 Office Memorandum, (ii) the memorandum expressly addressed valuation methodology and practical difficulties in verification at finalisation stage, and (iii) revenue had not shown any contravention of the Office Memorandum or produced incontrovertible evidence of revenue injury. Consequently, the First Appellate Authority's direction to set aside the assessments amounted to a mere change of opinion unsupported by findings of non-compliance or demonstrable revenue loss. The Tribunal held that where the original authority has followed the binding Office Memorandum and no breach or revenue injury is shown, an appellate authority cannot invalidate that decision merely by adopting a different view; such change of opinion is impermissible. The Tribunal therefore set aside the appellate order and restored the finalisation made by the Adjudicating Authority, awarding consequential relief as per law. [Paras 8, 9, 10, 11]

The First Appellate Authority's order setting aside the provisional assessments is unsustainable; the appeals are allowed and the impugned order is set aside with consequential benefits as per law.

Final Conclusion: The Tribunal allowed the appellant's appeals, set aside the First Appellate Authority's order and restored the provisional assessments finalised by the Adjudicating Authority in accordance with the Office Memorandum dated 22.12.2004, awarding consequential benefits as per law.

Refund of unutilised CENVAT credit - Input service - CENVAT credit Rules - definition of input services prior to amendment - eligibility of service tax credit for outward transportation up to place of removal

Input service - refund of unutilised CENVAT credit - definition of input services prior to amendment - CENVAT credit - Refund claims for credit on services (telephone, erection and outward transportation) for the periods October 2009 to June 2010 are allowable under the CENVAT Credit Rules as input services - HELD THAT: - The Tribunal found that the relevant periods fall prior to the amendment to the definition of 'input service' effected by Notification No. 3/2011 (effective 01/04/2011). Before that amendment the definition included the phrase 'activities relating to business' and thus had a wide ambit covering almost all services used for providing output services. There is nothing on record to show that the disputed services were not used for provision of output services. In view of the pre amendment wide definition, and having regard to the modest tax amounts and the appellant's prima facie entitlement to refund, it is appropriate to grant the refund claims rather than restrict the plain scope of the then applicable definition. The Tribunal therefore set aside the impugned order insofar as it rejected the refund claims and allowed the appeals, permitting consequential relief as per law. [Paras 7, 8]

Impugned order set aside; appeals allowed and refund claims for the disputed services for the stated periods permitted with consequential relief

Final Conclusion: Appeals allowed. Refunds of unutilised CENVAT credit in respect of the disputed services for the periods October 2009 to December 2009, January 2010 to March 2010 and April 2010 to June 2010 are granted; impugned order is set aside and consequential relief granted as per law.

Refund under Rule 5 of Cenvat Credit Rules - time-barred refund - extended period for demand - protective show cause notice - recredit of Cenvat amount - beneficial provision

Recredit of Cenvat amount - infructuous appeal - Whether Appeal Nos. E/40488/2015 and E/40035/2016 are maintainable after repayment and recredit by the appellant - HELD THAT: - The appeals against rejection of refund and confirmation of recovery were rendered academical because the appellant repaid the refunded amount and availed recredit on 23.03.2014. The Commissioner (Appeals) had given liberty to the appellant to take recredit and the factual position shows repayment and recredit were effected. In these circumstances there is no live controversy requiring adjudication of the refund claim or the recovery demand. [Paras 17]

Appeals E/40488/2015 and E/40035/2016 are dismissed as infructuous.

Time-barred refund - extended period for demand - refund under Rule 5 of Cenvat Credit Rules - protective show cause notice - beneficial provision - Whether the demand of interest on the refunded amount is sustainable where the department invoked the extended period - HELD THAT: - The department issued a separate show cause notice in 2010 and later a notice dated 23.09.2014 invoking the extended period to demand interest on the refund sanctioned on 27.04.2010. The Tribunal observed that Rule 5 is a beneficial provision facilitating exports and that the facts underlying the refund were within the knowledge of the department. The department did not produce evidence of suppression by the appellant to justify invoking the extended period. In absence of ingredients permitting extended period, the demand of interest is time-barred and cannot be sustained. The Tribunal therefore set aside the order confirming the interest demand, while not disturbing the appellant's repayment or recredit. [Paras 18]

Appeal E/40204/2016 is allowed; the demand of interest is set aside as time-barred.

Final Conclusion: Two appeals (E/40488/2015 and E/40035/2016) dismissed as infructuous following repayment and recredit; appeal E/40204/2016 allowed and the demand of interest set aside as time-barred, with repayment and recredit left undisturbed.

Valuation of goods sold to inter-connected undertakings - Application of Rule 10(b) of the Central Excise Valuation Rules, 2000 - Transaction value under Section 4(1)(a) of the Central Excise Act - Determination of related persons under Section 4(3)(b) of the Central Excise Act - Validity of demand, recovery and penalty under section 11A(4) of the Central Excise Act

Valuation of goods sold to inter-connected undertakings - Application of Rule 10(b) of the Central Excise Valuation Rules, 2000 - Transaction value under Section 4(1)(a) of the Central Excise Act - Determination of related persons under Section 4(3)(b) of the Central Excise Act - Whether the value of goods sold by the assessee to a buyer controlled by the same persons (inter-connected undertaking) for the period April, 2014 to March, 2015 had to be determined other than the declared transaction value or whether Rule 10(b) applied so that declared transaction value under Section 4(1)(a) could be accepted. - HELD THAT: - The Tribunal accepted the Commissioner's (Appeals) conclusion, and the earlier Tribunal decision relied upon, that the assessee and the buyer are inter-connected undertakings within the meaning of Explanation to Section 4(3)(b)(i) since they are controlled by the same persons. However, there is no evidence that the buyer and the assessee are related in the additional senses enumerated in clauses (ii)-(iv) of Section 4(3)(b). In that factual matrix, Rule 10(b) of the Valuation Rules requires that when goods are sold to inter-connected undertakings as per clause (i) but are not related persons under clauses (ii)-(iv), the value shall be determined as if they are not related persons for the purpose of Section 4(1). Applying that principle to the identical factual situation for April 2014-March 2015, the Tribunal held that the transaction value declared by the assessee is the correct assessable value in terms of Section 4(1)(a) read with Rule 10(b). The Tribunal therefore concluded that the adjudicating authority's application of alternative valuation under Section 4(3)(b) read with Rules 8 and 9 was incorrect. [Paras 19, 20, 22, 24, 25]

The declared transaction value is the correct assessable value under Section 4(1)(a) read with Rule 10(b); valuation under Section 4(3)(b) with Rules 8 & 9 was not warranted.

Validity of demand, recovery and penalty under section 11A(4) of the Central Excise Act - Consequences of unsustainable demand - Whether the demand confirmed by the adjudicating authority and the consequential order for recovery, interest and imposition of penalty were sustainable after acceptance of the transaction value. - HELD THAT: - Having held that the transaction value was correctly declared and accepted under Section 4(1)(a) read with Rule 10(b), the Tribunal accepted the Commissioner (Appeals)'s legal conclusion that the demand confirmed by the Joint Commissioner was not sustainable. Because the foundational demand itself was set aside, the Tribunal endorsed that there was no basis for recovery under section 11A(4), nor for interest and penalty which flow from a valid demand. [Paras 12, 13]

The confirmed demand is not sustainable in law; consequently recovery, interest and penalty do not arise.

Final Conclusion: The departmental appeal was dismissed: on the facts the seller and buyer were inter-connected but not 'related' within clauses (ii)-(iv) of Section 4(3)(b), Rule 10(b) applied and the declared transaction value was accepted; the demand and consequential recovery, interest and penalty were therefore not sustainable.

Remand for reassessment - reassessment on remand - limitation under the TVAT Act - principles of natural justice - non speaking revisional order - direction to conclude reassessment within fixed time

Remand for reassessment - non speaking revisional order - Impugned revisional order dated 06.02.2024 set aside the reassessment order dated 14.05.2019 and remitted the matter to the Assessing Authority for fresh reassessment. - HELD THAT: - The Court recorded that the revisional authority has set aside the reassessment order passed on remand and has referred all grounds urged by the petitioner back to the Assessing Authority for fresh consideration. The Court observed that the Assessing Authority must apply its mind to all grounds of law and fact raised by the petitioner for each of the financial years and that the revisional order did not decide the merits. Consequently the matter is remitted for reassessment with a direction to decide the issues afresh rather than the Court adjudicating the merits at this stage. [Paras 2, 6]

Revisional order set aside and matter remanded to the Superintendent of Taxes, Charge IV, Agartala, for fresh reassessment.

Limitation under the TVAT Act - reassessment on remand - Assessment for financial year 2006-07 to be examined first on the question of limitation under the TVAT Act before other merits are considered. - HELD THAT: - A specific ground of limitation had been pleaded by the petitioner in respect of FY 2006-07. The Court directed that the Assessing Authority shall first determine whether the reassessment for FY 2006-07 is barred by limitation in terms of the TVAT Act after hearing the assessee. Only if the Assessing Authority is satisfied that the assessment is not time barred shall it proceed to examine the other grounds on merits for that year. The Court expressly refrained from deciding the limitation issue itself. [Paras 6]

Assessing Authority to determine limitation for FY 2006-07 first; merits to follow only if not barred by limitation.

Direction to conclude reassessment within fixed time - Reassessment to be completed within a time bound period and the assessee directed to cooperate. - HELD THAT: - Noting that the assessment proceedings have protracted for about twelve years, the Court directed the Assessing Authority to conclude the reassessment exercise within three months from receipt of the copy of the order. The Court emphasised that the assessee shall cooperate in the reassessment exercise. The Court made clear that it has not gone into the merits of the parties' contentions and limited its intervention to procedural directions to expedite the reassessment. [Paras 6]

Assessing Authority directed to complete reassessment within three months; petitioner to cooperate.

Procedural disposal of interlocutory applications - Pending interlocutory applications IA No.01/2024 in CRP No.35/2024 and IA No.01/2024 in CRP No.36/2024 disposed of. - HELD THAT: - The Court recorded disposal of the listed interlocutory applications in the respective revision petitions without further adjudication. No substantive rights were finally determined by that disposal beyond the remand and directions already recorded. [Paras 7]

Listed interim applications disposed of.

Final Conclusion: The common revisional order dated 06.02.2024 was upheld insofar as it set aside the reassessment dated 14.05.2019 and remitted the matters relating to FYs 2006-07, 2007-08 and 2008-09 to the Assessing Authority for fresh reassessment; the Assessing Authority is to decide limitation for FY 2006-07 first, then other merits, and to complete the reassessment within three months, with the assessee's cooperation; the Court did not adjudicate the merits.

Ex parte hearing - dismissal for want of prosecution - Order XLI Rule 17 CPC - appellant's default and its Explanation - interpretation of proviso to Rule 63(4) U.P. Value Added Tax Rules, 2008 - Audi alteram partem - rectification under Section 31 U.P. Value Added Tax Act, 2008 - duty of tribunals to afford fair hearing

Dismissal for want of prosecution - Order XLI Rule 17 CPC - appellant's default and its Explanation - Whether the Commercial Tax Tribunal could decide the appeal on merits in the absence of the appellant instead of dismissing it for want of prosecution. - HELD THAT: - The Court held that where the appellant does not appear when the appeal is called on for hearing the proper consequence is dismissal for want of prosecution and not decision on merits. The Explanation to Order XLI Rule 17 CPC (as applied by the Supreme Court in the cited authority) establishes that non-appearance of the appellant empowers dismissal for non-prosecution and does not permit adjudication on merits in the appellant's absence. Accordingly, the Tribunal erred in hearing the State and deciding the appeal on merits when the appellant was absent. [Paras 11, 12, 13]

The appeal could not be decided on merits in the appellant's absence and should have been dismissed for want of prosecution; the Tribunal's order deciding the appeal on merits in the appellant's absence was illegal.

Interpretation of proviso to Rule 63(4) U.P. Value Added Tax Rules, 2008 - ex parte hearing - Meaning of the word 'ex parte' in the proviso to Rule 63(4) of the U.P. Value Added Tax Rules, 2008 and its application when the appellant is absent. - HELD THAT: - Although Rule 63(4) permits an appeal to be heard and decided 'ex parte' if despite proper service either party is not present, the Court interpreted 'ex parte' by reference to the Code of Civil Procedure. The expression is apt to mean proceedings in the absence of the opposite party (i.e., when the respondent/state does not appear) rather than to justify deciding an appeal on merits when the appellant fails to appear. Thus the proviso does not authorize the Tribunal to decide an appeal on merits in the appellant's absence. [Paras 11, 12]

The proviso to Rule 63(4) cannot be read to permit adjudication on merits when the appellant is absent; 'ex parte' contemplates absence of the opposite party.

Audi alteram partem - duty of tribunals to afford fair hearing - Whether deciding the appeal on merits in the appellant's absence without affording an opportunity of hearing violates principles of natural justice. - HELD THAT: - The Court emphasised that deciding a case on merits in the absence of the appellant without giving reasonable opportunity to be heard is contrary to the rule of Audi alteram partem. Administrative and quasi-judicial tribunals must accord fair hearing and give clear reasons for their orders. Hence, adjudication on merits in the appellant's absence was a violation of natural justice. [Paras 13, 14]

Adjudicating the appeal on merits in the appellant's absence violated the rule of fair hearing and was impermissible.

Rectification under Section 31 U.P. Value Added Tax Act, 2008 - Whether a remedy exists to challenge or set aside an ex parte order passed by the Tribunal under the U.P. Value Added Tax Act/Rules framework. - HELD THAT: - Relying on a coordinate-bench decision interpreting the pari materia provision, the Court observed that where an appeal is decided ex parte it is open to the affected party to move for rectification under the relevant statutory provision (Section 31). Thus the statutory scheme contemplates a mechanism to recall or rectify orders rendered in absence of a party, subject to adequate reasons being shown for non-appearance. [Paras 15]

Rectification under Section 31 is available to challenge an ex parte order passed by the Tribunal.

Remand for fresh hearing - Appropriate relief following the finding that the Tribunal erred in deciding the appeal on merits in the appellant's absence. - HELD THAT: - Given the illegality of the Tribunal's decision to decide the appeal on merits in the appellant's absence, the Court set aside the impugned order and remitted the matter to the Tribunal for fresh adjudication after affording opportunity of hearing to the parties. The Court directed expedition by requiring the Tribunal to decide the appeal within three months from production of a certified copy of the order. [Paras 16]

Impugned order set aside and matter remitted to the Tribunal for fresh hearing; Tribunal directed to decide the appeal within three months after service of this order.

Final Conclusion: The High Court set aside the Tribunal's order which had adjudicated the appeal on merits in the absence of the appellant, held that such adjudication was impermissible (the proper course being dismissal for want of prosecution), interpreted the proviso to Rule 63(4) as not authorising merits-adjudication when the appellant is absent, affirmed availability of rectification under Section 31, and remitted the matter to the Tribunal for fresh hearing and decision within three months.

Royalty - taxes on mineral rights - taxes on lands and buildings - limitation imposed by Parliament by law relating to mineral development - MMDR Act as a code for mineral development - measure of tax based on yield or produce of land - pith and substance / Entries 49 and 50 relationship - generalia specialibus non derogant

Royalty - MMDR Act as a code for mineral development - Nature of royalty under Section 9 of the MMDR Act: whether royalty is a tax. - HELD THAT: - The Court holds that royalty under Section 9 of the MMDR Act is not a tax. The majority reasons that royalty is the statutory consideration for the grant and exercise of mineral rights under the MMDR scheme and, on the proper construction of the entries and the Act, royalty cannot be equated to a tax for the purposes of State taxing entries. The opinion treats the statutory framework of the MMDR Act and the definitional and functional character of royalty as determinative of its non tax character in the constitutional distribution of powers. [Paras 342]

Royalty under Section 9 of the MMDR Act is not a tax.

Taxes on mineral rights - limitation imposed by Parliament by law relating to mineral development - MMDR Act as a code for mineral development - Scope of Entry 50 of List II and whether the MMDR Act contains any limitation that denudes State power under Entry 50. - HELD THAT: - The Court decides that Entry 50 remains a State taxing head and that the phrase "subject to any limitations imposed by Parliament by law relating to mineral development" must be given a wide meaning. The majority finds that, as enacted and presently framed, the MMDR Act does not operate as an express limitation that displaces the State power under Entry 50; Parliament may impose limitations by law relating to mineral development, but the existing MMDR Act (as it stands) does not presently denude the States of their Entry 50 taxing competence. [Paras 342, 343]

Entry 50 contemplates parliamentary limitations by law relating to mineral development; the MMDR Act as it stands has not imposed the limitation that denudes State taxing power under Entry 50.

Taxes on lands and buildings - measure of tax based on yield or produce of land - pith and substance / Entries 49 and 50 relationship - Whether Entry 49 of List II covers mineral bearing land and whether mineral produce or royalty may be used as a measure to tax land under Entry 49. - HELD THAT: - The Court holds that Entry 49 (taxes on lands and buildings) includes mineral bearing land and that the yield of a mineral bearing land - measured by mineral produce or by royalty tied to production - may validly be adopted as the measure for a tax on land under Entry 49. The majority reasons that the measure adopted for calculating a land tax does not itself determine the nature of the tax, and that Entries 49 and 50 are distinct legislative fields; using mineral value or production as the basis for a land tax does not automatically convert the land tax into a tax on mineral rights. [Paras 342]

Mineral bearing land falls within Entry 49 and mineral produce or royalty can be used as a measure to tax such land under Entry 49.

Pith and substance / Entries 49 and 50 relationship - generalia specialibus non derogant - Inter relationship between Entry 49 and Entry 50 of List II and whether limitations imposed under Entry 50/Entry 54 operate to subtract mining land from Entry 49. - HELD THAT: - The Court concludes that Entries 49 and 50 address distinct subject matters and operate in separate fields: Entry 49 concerns taxes on lands and buildings as units, and Entry 50 concerns taxes on mineral rights subject to parliamentary limitation. The majority holds that limitations imposed by Parliament under Entry 50 (by law relating to mineral development) do not, absent a specific constitutional stipulation, operate upon Entry 49; consequently Entry 49 is not displaced merely because mineral produce or royalty is used as the measure of a land tax. The specific/general canon therefore does not produce displacement in the circumstances decided. [Paras 342]

Entries 49 and 50 are distinct; parliamentary limitations under Entry 50 do not automatically operate on Entry 49, and mining land is not subtracted from Entry 49 for this reason.

MMDR Act as a code for mineral development - royalty - Effect of precedent and prior decisions (India Cement, Orissa Cement, Kesoram, Mahanadi Coalfields and others) in light of the Court's conclusions. - HELD THAT: - The Court expressly addresses the line of earlier authorities and clarifies their application. In the majority view the decisions listed in India Cement, Orissa Cement, Federation of Mining Associations of Rajasthan, Mahanadi Coalfields and related precedents are overruled to the extent they conflict with the present conclusions - principally the proposition that royalty is a tax and that the MMDR Act presently denudes State taxing power under Entry 50. The judgment therefore settles the issues in the reference by refocusing on the separation of Entries and the permissibility of State land taxes measured by mineral produce. [Paras 342, 343]

Earlier decisions adverse to the majority conclusions are overruled to the extent inconsistent with this judgment; the Court resolves the reference accordingly.

Final Conclusion: The Court answers the reference by holding that (i) royalty under Section 9 of the MMDR Act is not a tax for the purposes of the constitutional distribution of powers, (ii) Entry 50 of List II remains a State taxing head subject to parliamentary law made limitations but the MMDR Act as it stands does not presently operate to denude the State power under Entry 50, (iii) Entry 49 includes mineral bearing land and a tax on land may be measured by mineral produce or royalty where there is a reasonable nexus, (iv) Entries 49 and 50 operate in distinct fields and parliamentary limitations under Entry 50/Entry 54 do not automatically displace Entry 49, and (v) earlier decisions are adjusted to the extent they conflict with these conclusions.

Substantial question of law under Section 100 CPC - Rejection of plaint under Order VII, Rule 11(d) CPC - Ouster of civil jurisdiction by Section 34 of the SARFAESI Act - Requirement of particulars for allegations of fraud under Order VI, Rule 4 CPC - Remedy before Debt Recovery Tribunal for actions under Section 13(4) SARFAESI Act

Substantial question of law under Section 100 CPC - No substantial question of law is involved in the second appeal and the appeal is not entertainable under Section 100 CPC. - HELD THAT: - The High Court examined whether the regular second appeal raised any debatable question of law which would warrant exercise of jurisdiction under Section 100 CPC. The court restated that Section 100 requires formulation of a substantial question of law which must be debatable, emerge from pleadings and findings of fact, and be necessary for just disposal of the case. Applying the settled principles from decisions of the Supreme Court, the court found that the present appeal did not raise any such question of law and that the matter chiefly concerns appreciation of facts and the correctness of the plaint-rejection under Order VII, Rule 11 CPC. Consequently, no substantial question of law being involved, the High Court declined to entertain the second appeal and dismissed it. [Paras 5, 6, 23]

The second appeal involves no substantial question of law and is dismissed.

Rejection of plaint under Order VII, Rule 11(d) CPC - Ouster of civil jurisdiction by Section 34 of the SARFAESI Act - Requirement of particulars for allegations of fraud under Order VI, Rule 4 CPC - Remedy before Debt Recovery Tribunal for actions under Section 13(4) SARFAESI Act - The plaint was rightly rejected under Order VII, Rule 11(d) CPC because the subject-matter falls within the jurisdiction of the Debt Recovery Tribunal/Appellate Tribunal under the SARFAESI Act and the pleaded fraud is bald and lacking particulars. - HELD THAT: - The court considered the plaint seeking declaration and permanent injunction restraining measures taken by the secured creditor under the SARFAESI Act. Section 34 of the SARFAESI Act ousts civil court jurisdiction in respect of matters which the DRT/DRAT are empowered to determine, and Section 13(4) permits the secured creditor to take possession and realise secured assets. Where the plaintiff is aggrieved by actions under Section 13(4), the proper remedy is before the Debt Recovery Tribunal under the Act. The plaintiff relied on allegations of fraud to avoid the ouster; however, the court applied settled law that mere recital of the word "fraud" is insufficient. Particulars of fraud must be pleaded as required by Order VI, Rule 4 CPC. In this case the plaint failed to furnish specific particulars of fraud, and therefore the exception to the ouster clause did not apply. On that basis the Trial Court and the first appellate court correctly allowed the application under Order VII, Rule 11(d) CPC and rejected the plaint. [Paras 12, 18, 22]

The plaint rejection under Order VII, Rule 11(d) CPC is upheld; the civil courts lack jurisdiction due to Section 34 of the SARFAESI Act and the fraud pleading is inadequate.

Final Conclusion: The High Court found no substantial question of law to entertain the second appeal; upheld the rejection of the plaint under Order VII, Rule 11(d) CPC as the dispute falls within the jurisdiction of the Debt Recovery Tribunal under the SARFAESI Act and the allegations of fraud lacked the required particulars; the appeal is dismissed.