TaxTMI Updates e-Newsletter
Aug 08,2024

Limitation on taking input tax credit under Section 16(4) of the CGST Act - retrospective concession for delayed input tax credit (Financial Years 2017-18 to 2020-21) - remand for fresh adjudication in light of legislative amendment - no refund of tax paid or input tax credit reversed - conditional interim deposit for adjudication (25% of disputed tax)

Limitation on taking input tax credit under Section 16(4) of the CGST Act - retrospective concession for delayed input tax credit (Financial Years 2017-18 to 2020-21) - Validity of assessment orders denying input tax credit availed belatedly beyond the period prescribed under Section 16(4) and relief in light of proposed Clause 114 of the Finance (No.2) Bill, 2024 - HELD THAT: - The Court observed that the petitioners were assessed and denied input tax credit on the ground of belated availing beyond the statutory period under Section 16(4). Noting that Parliament has proposed Clause 114 in the Finance (No.2) Bill, 2024 which would permit availment of input tax credit in respect of invoices/debit notes pertaining to Financial Years 2017-18 to 2020-21 within returns filed up to 30 November 2021, the Court set aside the impugned orders of the Original and Appellate Authorities and remitted the matters to the Assessing Officer for fresh adjudication on merits strictly in accordance with the Finance Act, 2024 if and when the proposals are enacted. The Court recorded that similar corresponding State enactments are likely to follow and directed fresh consideration in conformity with the amended statutory scheme. [Paras 4, 6, 7]

Impugned orders denying the input tax credit were set aside and the matters remitted to the Assessing Officer to decide afresh in accordance with the Finance Act, 2024.

No refund of tax paid or input tax credit reversed - remand for fresh adjudication in light of legislative amendment - Effect of Clause 146 (no refund of tax paid or input tax credit reversed) and treatment pending legislative enactment - HELD THAT: - The Court recorded Clause 146 of the Finance (No.2) Bill, 2024 which provides that no refund shall be made of tax paid or input tax credit reversed which would not have been so paid or reversed had Clause 114 been in force. The Court noted this rider and observed that the benefit under Clause 114 may be extended to petitioners if the proposals are accepted and enacted; the question of refunds or reversal consequences is therefore to be considered in the light of the eventual statutory text. Accordingly, the matters were remitted for fresh consideration under the enacted law. [Paras 5, 7]

Recorded the no-refund rider and remitted adjudication for determination in accordance with the Finance Act, 2024 if enacted.

Conditional interim deposit for adjudication (25% of disputed tax) - Interim condition to be complied with during remand proceedings in respect of demands confirmed (excluding denial of input tax credit for wrongful availing) - HELD THAT: - The Court directed that, apart from issues relating to denial of input tax credit for wrongful availing, the respective petitioners shall deposit 25% of the disputed tax as a condition for orders to be passed on merits. Subject to compliance with this deposit condition, the Assessing Officer was directed to decide the matters on merits and in accordance with law upon remand. [Paras 8]

Petitioners to deposit 25% of the disputed tax (excluding amounts related to wrongful availing of input tax credit) as a condition for further adjudication on merits.

Final Conclusion: Impugned assessment and appellate orders denying belatedly claimed input tax credit are set aside and remitted to the Assessing Officer for fresh adjudication in accordance with the Finance Act, 2024 if the parliamentary proposals are enacted; recorded the no-refund rider in the Bill and directed petitioners (except in respect of wrongful availing of input tax credit) to deposit 25% of the disputed tax as a condition for further proceedings.

Rectification under Section 161 - error apparent on the face of the record - opportunity of personal hearing - reasoned order - remand for fresh consideration

Rectification under Section 161 - opportunity of personal hearing - reasoned order - Validity of the impugned order rejecting the rectification application filed under Section 161 for assessment year 2018-19 - HELD THAT: - The Court examined the impugned order rejecting the rectification application and found that the order was passed without affording the petitioner an opportunity for personal hearing and was devoid of reasoning. Reliance was placed on the earlier decision in Tvl.Podhigai Motors where, in similar circumstances, rejection of a rectification application without hearing and without reasons was held to be improper. In view of the absence of a personal hearing and of a speaking order explaining the basis for rejection, the impugned order could not stand. The matter was therefore remitted to the respondent for fresh adjudication on merits, requiring that the petitioner be heard and that the respondent pass a reasoned order in accordance with law. [Paras 7, 8, 9]

Impugned order set aside and matter remitted to the respondent to decide the rectification application afresh after hearing the petitioner and for disposal within three months.

Final Conclusion: The order rejecting the rectification application under Section 161 was quashed for being non-speaking and for lack of personal hearing; the matter is remitted to the respondent to pass a reasoned order after hearing the petitioner within three months.

Maintainability of writ against statutory order barred by limitation - power of appellate authority to condone delay under an inbuilt limitation provision - scope of Article 226 to relieve against statutory limitation in exceptional cases - restoration of statutory appeal subject to statutory deposits

Maintainability of writ against statutory order barred by limitation - scope of Article 226 to relieve against statutory limitation in exceptional cases - Writ petition challenging dismissal of statutory appeal as time barred is maintainable and entertainable under Article 226. - HELD THAT: - The Court observed that although Section 107 contains a statutory limitation and the appellate authority ordinarily cannot condone delay beyond the periods provided, such limitation does not oust the jurisdiction of the High Court under Article 226. The constitutional power under Article 226 is founded on justice, equity and good conscience and may be exercised for public good; therefore a writ petition seeking relief from a statutory bar of limitation may be entertained in appropriate cases. The Court noted authorities relied upon by the Revenue but distinguished the facts and the scope of those decisions, and concluded that the statutory limitation under Section 107 binds the statutory authority but does not preclude judicial relief by way of writ in the present circumstances. [Paras 5, 6, 7]

Writ petition is maintainable and may be entertained despite the statutory limitation under Section 107.

Power of appellate authority to condone delay under an inbuilt limitation provision - restoration of statutory appeal subject to statutory deposits - Whether the impugned order dismissing the appeal as time barred should be quashed and the appeal restored. - HELD THAT: - Having exercised its writ jurisdiction, the Court quashed the order dated 13th June 2024 in which the Joint Commissioner dismissed the appeal as time barred. The Court recognised that the appellate authority's power to condone delay is circumscribed by Section 107, but in the exercise of writ jurisdiction it restored the statutory appeal to the file with the condition that the petitioner deposit late fee, penalty and other statutory amounts necessary for entertaining the appeal. The consequence is restoration for adjudication on merits subject to payment of statutory dues; the Court did not decide merits of the underlying appeal. [Paras 7]

Impugned order quashed; statutory appeal restored to record subject to deposit of late fee, penalty and other statutory deposits for entertaining the appeal.

Final Conclusion: Writ petition allowed: order dismissing the statutory appeal as time barred quashed and the appeal restored to file on the condition that the petitioner deposits late fee, penalty and other statutory deposits; the High Court exercised Article 226 jurisdiction despite the limitation in Section 107.

Bona fide purchaser - transfer prohibition under Section 81 and proviso carve out for bona fide purchaser - attachment of property to recover tax arrears - abeyance of recovery proceedings - requirement of civil suit to establish bona fides - insufficiency of encumbrance certificate - undervalued consideration as indicia of intent to defeat revenue

Attachment of property to recover tax arrears - transfer prohibition under Section 81 and proviso carve out for bona fide purchaser - Whether the writ court should interfere with the impugned order of attachment of the property - HELD THAT: - The Court refused to interfere with the impugned order of attachment. It observed that Section 81 imposes an embargo on an assessee in default from transferring assets to defeat Government revenue, subject to a proviso which excepts bona fide purchasers. The petitioner must establish bona fides in the manner known to law and such proof cannot be determined in the summary writ proceedings under Article 226. The Court further noted that the sale consideration appears excessively low, which is a relevant factor in assessing intent to defeat revenue, and that mere reliance on an encumbrance certificate is not sufficient to establish bona fide purchaser status. Consequently, no relief against the attachment was granted at this stage. [Paras 7, 8]

No interference with the impugned order of attachment; petitioner must establish bona fide purchaser status by appropriate proceedings

Requirement of civil suit to establish bona fide purchaser - abeyance of recovery proceedings - insufficiency of encumbrance certificate - Procedure to be followed for adjudication of the petitioner's claim of being a bona fide purchaser - HELD THAT: - The Court directed that the petitioner must file a civil suit for a declaration that she is a bona fide purchaser and that the purchase was not intended to defeat the rights of the Government revenue; the merits of bona fides were not decided and are to be determined by the competent civil forum. The petitioner was given 30 days from receipt of the order to institute such suit and was permitted to seek interim relief from that court to stay coercive measures. In the meanwhile, the first respondent was directed to keep all recovery proceedings in abeyance for three months; if the petitioner fails to file the suit within the stipulated time, the first respondent is at liberty to proceed in accordance with law. [Paras 9, 10, 11]

Petitioner to file suit within 30 days to establish bona fide purchaser; recovery proceedings kept in abeyance for three months subject to filing of suit and outcome of civil proceedings

Final Conclusion: Writ petition dismissed in part by refusing immediate interference with the attachment; petitioner directed to establish bona fide purchaser status by filing a civil suit within 30 days, with official respondent's recovery proceedings kept in abeyance for three months pending the suit and any interim orders obtained.

Remand for fresh consideration - rectification of assessment order - input tax credit - credit note adjustment - conflicting orders by different authorities - opportunity of hearing before final order

Remand for fresh consideration - conflicting orders by different authorities - Impugned assessment orders and the consequential rejection of rectification were set aside and remitted to the respondent for fresh disposal. - HELD THAT: - The Court noted that two inconsistent orders existed - one confirming demand and subsequently another order by the Assistant Commissioner dropping most issues - creating a conflict requiring reconciliation. On this basis the Court found the petitioner's submissions reasonable and exercised supervisory jurisdiction to set aside the impugned orders and remit the matters to the respondent for fresh consideration in light of the subsequent orders passed by the Assistant Commissioner. The Court directed that the remand exercise be completed expeditiously, preferably within three months from receipt of this order, and that the petitioner be heard before final orders are passed. [Paras 6, 7]

Impugned orders set aside; cases remitted to respondent to pass fresh orders within three months and after hearing the petitioner.

Input tax credit - credit note adjustment - rectification of assessment order - opportunity of hearing before final order - Allegations concerning reversal of credit, credit notes issued by suppliers and the claim that blocked credits were not availed were not decided on merits but remitted for fresh consideration. - HELD THAT: - The Court observed the petitioner had contended that credits were reversed where notices were returned and suppliers issued credit notes, and that no ineligible blocked credits were availed, with supporting uploads of particulars. Rather than adjudicating these factual and technical contentions on the writ petition record, the Court remitted the issues for the respondent to examine afresh in the remand proceedings, taking into account the subsequent Assistant Commissioner orders and after affording the petitioner an opportunity to be heard. The remand contemplates resolution of these contentions on merits by the assessing authority. [Paras 6]

Contentions regarding credit reversal, credit notes and eligibility of input tax credit remitted to the respondent for fresh adjudication after hearing the petitioner.

Final Conclusion: Writ petitions allowed; impugned assessment and rectification orders set aside and remitted for fresh consideration in the light of the Assistant Commissioner s subsequent orders for the listed assessment years, to be completed expeditiously (preferably within three months) after hearing the petitioner; no costs.

Writ of prohibition - writ of certiorari - supervisory jurisdiction - interim relief - constitution of appellate tribunal under Section 112 of the Goods and Services Tax Act - stay of recovery pending constitution of tribunal

Writ of prohibition - supervisory jurisdiction - writ of certiorari - Whether a writ in the nature of prohibition can be issued by the High Court to restrain enforcement of recovery when the appellate authority's decision has already been rendered and the appellate tribunal is not yet constituted. - HELD THAT: - The Court observed that a writ of prohibition is supervisory and is directed to restrain inferior courts or tribunals from proceeding when they lack jurisdiction or are exceeding their jurisdiction, and ordinarily lies while proceedings are pending. Once a decision is rendered, jurisdictional errors in a concluded proceeding are ordinarily corrected by certiorari, not by prohibition. Applying these principles, the Court found that because the appellate authority under Section 107 had already rendered its decision, there was little scope for issuing prohibition to restrain enforcement of that decision. The petitioner had not sought certiorari nor sought adjudication of his rights against the impugned orders; instead he sought a prohibitory interim order without challenging the appellate decision on the merits. The Court therefore held that issuance of prohibition in these circumstances was not appropriate. [Paras 11, 12, 16, 18, 19]

Prohibition inappropriate where appellate order is already rendered; jurisdictional errors in concluded proceedings are to be corrected by certiorari rather than prohibition.

Interim relief - constitution of appellate tribunal under Section 112 of the Goods and Services Tax Act - stay of recovery pending constitution of tribunal - Whether the High Court should exercise its discretion to grant interim relief deferring recovery of demand on the ground that the appellate tribunal under Section 112 is yet to be constituted and limitation for appeal has been extended. - HELD THAT: - The Court noted the Notification extending the period for filing appeals until the President or State President of the appellate tribunal enters office, thereby preserving the petitioner's right to appeal. However, reliance on precedents where stays were granted was examined and distinguished: in those cases the appellate order itself was challenged or petitioners had come forward to have their rights adjudicated and had complied with conditions imposed by the court (for example by making partial payments). Here the petitioner did not seek to have the merits of the orders adjudicated and only sought an indefinite deferral of recovery until constitution of the tribunal. The Court applied the principle that interim relief ordinarily supplements a pending final adjudication of rights and should not be granted where the petitioner has not invoked the available remedy to have his rights adjudicated. In the exercise of discretion, and having regard to the factual distinction from earlier decisions relied upon, the Court declined to grant the indefinite stay of recovery. [Paras 20, 21, 22, 23, 24]

Discretion to grant interim deferral of recovery refused where petitioner has not sought adjudication of rights and circumstances differ from cases in which stays were granted; preservation of right to appeal under Notification does not, by itself, justify indefinite stay of recovery.

Final Conclusion: Writ petition dismissed. The Court refused to grant a prohibitory interim order deferring recovery of the demand; the petitioner's statutory right of appeal remains preserved but the discretionary relief sought-an indefinite stay of recovery until constitution of the appellate tribunal-was declined for want of a challenge to the appellate order and on the facts before the Court.

Quashing of assessment order and remand for fresh adjudication - remand for de novo consideration on merits - deposit as condition for interim relief - treatment of impugned order as addendum to show cause notice - opportunity of personal hearing before final order

Quashing of assessment order and remand for fresh adjudication - remand for de novo consideration on merits - Impugned assessment order under Section 73(9) of the TNGST Act, 2017 set aside and matter remitted to respondent for fresh adjudication on merits. - HELD THAT: - The High Court, after hearing parties, concluded that the petitioner may have a case on merits and exercised its discretion to quash the impugned order dated 28.06.2023. The matter is remitted to the respondent for reconsideration and passing of fresh orders on merits and in accordance with law. The quashed order is directed to be treated as an addendum to the show cause notice that preceded it, thereby permitting the respondent to proceed afresh after affording the petitioner an opportunity to reply and be heard. [Paras 11, 12]

Impugned order quashed and matter remitted for fresh decision on merits; quashed order to be treated as an addendum to the show cause notice.

Deposit as condition for interim relief - opportunity of personal hearing before final order - Interim procedural directions: requirement of deposit, filing of reply, and time-limits for fresh adjudication. - HELD THAT: - As a condition for granting relief by remand, the Court directed the petitioner to deposit 25% of the disputed tax into the respondent's Electronic Cash Register within 30 days from receipt of the order. Upon such deposit, the petitioner is required to file a reply within 30 days of receiving a copy of this order together with proof of deposit. The respondent is directed to pass a fresh order on merits and in accordance with law preferably within two months, ensuring that the petitioner is heard before final orders are passed. [Paras 11, 13]

Petitioner to deposit 25% of disputed tax within 30 days and file reply within 30 days; respondent to pass fresh order preferably within two months after hearing the petitioner.

Final Conclusion: Writ petition disposed by quashing the impugned assessment order and remitting the matter for fresh adjudication on merits, subject to the petitioner depositing 25% of the disputed tax and complying with the timelines for filing a reply; respondent to decide the matter afresh after affording hearing, preferably within two months.

Input tax credit - benefit of administrative circulars - reconsideration in light of judicial precedent - setting aside assessment order - remand for fresh consideration

Input tax credit - benefit of administrative circulars - reconsideration in light of judicial precedent - setting aside assessment order - remand for fresh consideration - Assessment order rejecting the petitioner's claim of input tax credit set aside and the claim remitted for reconsideration in light of the specified circulars and the Court's decision in M. Trade Links. - HELD THAT: - The Court accepted the petitioner's contention that the supplier had remitted the tax to the Government (albeit belatedly) and noted the relevance of circular Nos. 183/15/2022-GST and 193/05/2023-GST together with the judgment in M. Trade Links. In view of that precedent and the administrative circulars, the Court found it appropriate to set aside Ext.P1 and permit the petitioner to make a written request to the assessing authority seeking the benefit of those circulars. The matter was remitted to the 1st respondent for fresh consideration of the petitioner's claim in the light of the said circulars and judicial decision. The Court directed that if the petitioner lodges the request within two weeks of receipt of the judgment, the 1st respondent shall decide the request expeditiously and, in any event, within three months of receipt of the request.

Ext.P1 assessment order set aside and the claim remitted for fresh consideration; petitioner permitted two weeks to apply and 1st respondent directed to decide within three months in light of the circulars and M. Trade Links.

Final Conclusion: The assessment order denying input tax credit is set aside and the matter is remitted to the assessing authority to reconsider the petitioner's claim in light of the specified administrative circulars and the Court's decision in M. Trade Links; timelines for application and decision have been prescribed.

Exemption of electrical energy - Taxability of transmission and distribution services - Input tax credit disallowed for exempt supplies - Apportionment of credit under Section 17 - Reversal and attribution under Rule 42 - ITC on capital goods under Rule 43

Exemption of electrical energy - Tax invoice treatment of supply of electricity - Intra-state supply of electrical energy by the applicant is exempt from GST. - HELD THAT: - The Authority found on the facts that the applicant invoiced only for 'supply of Electricity' to its buyer and did not levy any 'delivery' or transmission charges. Electrical energy falls under the tariff item 27160000 and is exempt from GST by the notification cited (Entry at Sr. No.104 of Notification No.2/2017-Central Tax (Rate)). On the basis of the agreement and the invoices produced, the supply performed by the applicant was treated as supply of electrical energy which is exempted from tax.

Applicant is not liable to pay GST on intra-state delivery of electrical energy under the facts presented.

Exemption of electrical energy - Interstate supply and integrated tax exemption - Interstate supply of electrical energy by the applicant is exempt from IGST. - HELD THAT: - The Authority observed that the invoices issued by the applicant to its buyer recorded only the supply of electricity and did not include transmission or delivery charges. Electrical energy is exempt for interstate supplies as well under the notification cited (Entry at Sr. No.104 of Notification No.2/2017-Integrated Tax (Rate)). Given the invoicing and the contractual delivery point, the activity of the applicant in the facts before the Authority was held to be an exempt interstate supply of electrical energy.

Applicant is not liable to pay GST on interstate delivery of electrical energy under the facts presented.

Input tax credit disallowed for exempt supplies - Apportionment of credit under Section 17 - Reversal and attribution under Rule 42 - ITC on capital goods under Rule 43 - Applicant cannot claim/input-utilise CGST and SGST paid on procurement of the solar power plant as input tax credit because its output supplies are exempt. - HELD THAT: - The Authority applied the statutory scheme governing apportionment of credit and blocked credits. Since the output supplies made by the applicant (supply of electrical energy) are exempt, Section 17 read with Rules 42 and 43 requires restriction/reversal of input tax credit attributable to exempt supplies. The procurement of the solar power plant (capital goods) used in generation of electricity therefore does not entitle the applicant to claim ITC where the outputs are wholly exempt under the facts of this case.

Applicant is not entitled to claim or utilise ITC on inward supplies, including the capital goods used for generation of electricity.

Final Conclusion: On the facts presented, the Authority held that the applicant's supply of electrical energy-both intra-state and interstate-is exempt from GST, and accordingly the applicant is not entitled to claim input tax credit on the inward supplies (including the solar power plant) used in generation of that exempt electricity under Section 17 read with Rules 42 and 43.

Exemption under Notification No.12/2017 CT (Rate) Sr. No.3 for pure services relating to functions under Articles 243G/243W - taxability under Heading 9983 / SAC 998399 (other professional, technical and business services) - effect of omission of "Governmental authority or a Government Entity" from Sr. No.3 w.e.f. 01 01 2022 - recipient of service within the meaning of Section 2(93) of the GST Act - time of supply - supplies on or before 31 12 2021 and supplies on or after 01 01 2022 - distinction between implementing agency (MJP/SWSM) and Central/State Governments in payments via PFMS

Taxability under Heading 9983 / SAC 998399 (other professional, technical and business services) - Classification and rate of tax for the applicant's technical consultancy services where exemption is not applicable - HELD THAT: - The Authority held that the services supplied by the applicant are "Technical Consultancy for Project Development and Management support services", which are pure professional/technical services falling under SAC/HSN 998399 (other professional, technical and business services). Such services are taxable at the standard rate prescribed under Notification No.11/2017 CT (Rate) - 18% (9% CGST + 9% SGST) where no exemption applies. [Paras 5]

Services are classifiable under SAC 998399 and taxable at 18% where exemption is not available.

Exemption under Notification No.12/2017 CT (Rate) Sr. No.3 for pure services relating to functions under Articles 243G/243W - Governmental Authority as entity set up by State Legislature - Whether supplies made to Maharashtra Jeevan Pradhikaran (MJP) up to 31 12 2021 are covered by the exemption at Sr. No.3 of Notification No.12/2017 - HELD THAT: - The Authority examined the contract, tender terms and the MJA Act, 1976 and concluded that MJP was established by State legislation and falls within the definition of "Governmental Authority" for the purposes of Sr. No.3 of Notification No.12/2017 as it stood prior to omission w.e.f. 01 01 2022. The services supplied to MJP for water supply schemes (functions enumerated under Articles 243G/243W) are pure services and thus satisfy the conditions of the exemption entry. On that basis, supplies where time of supply occurred on or before 31 12 2021 are found to be exempt. [Paras 5]

Supplies to MJP with time of supply on or before 31 12 2021 are exempt under Sr. No.3 of Notification No.12/2017.

Effect of omission of "Governmental authority or a Government Entity" from Sr. No.3 w.e.f. 01 01 2022 - strict construction of tax exemptions - Whether supplies to MJP on or after 01 01 2022 remain exempt after deletion of "Governmental authority or a Government Entity" from Sr. No.3 - HELD THAT: - The Authority applied the principle that tax exemptions must be plainly conferred and construed strictly. Having noted the omission of the words "Governmental authority or a Government Entity" by Notification No.16/2021 (effective 01 01 2022), and relying on precedents stressing literal interpretation of taxing statutes, the Authority held that post 01 01 2022 supplies to MJP do not fall within Sr. No.3 and therefore are not exempt. Consequently, such supplies are taxable under Notification No.11/2017 at the rate applicable to SAC 998399. [Paras 5]

Supplies to MJP with time of supply on or after 01 01 2022 are not covered by Sr. No.3 and are taxable at 18%.

Recipient of service within the meaning of Section 2(93) of the GST Act - payments through PFMS and identity of payer/recipient - Identity of the service recipient under Section 2(93) in respect of amounts received as grants by MJP and paid to the applicant (both before and after 01 01 2022) - HELD THAT: - The Authority reviewed the contract terms which expressly state that MJP agrees to pay the consultant and the tender provisions governing payments. It analysed the PFMS mechanism and the financial architecture of the Jal Jeevan Mission, and the MJA Act provisions concerning MJP's corporate powers, funds and grants. The Authority found no contractual or statutory evidence that Central/State Governments are the contractual persons liable to pay the consultant; payments processed via PFMS are made from accounts of the implementing agency/nodal account and are not direct payments by the Governments to vendors. The applicant's contention that Governments are the recipients because grants fund the implementing agency was not supported by evidence. Having considered these factors, the Authority concluded that the recipient of service for the relevant supplies is MJP. [Paras 5]

The service recipient within the meaning of Section 2(93) for payments made by grants to MJP and disbursed to the applicant is the Maharashtra Jeevan Authority (MJP) (pre and post 01 01 2022).

Constitutional delegation of functions and adjudicatory limit under Section 97(2) - Whether appointment of MJP as implementing agency amounts to delegation of sovereign functions so as to hold MJP performed functions entrusted under Articles 243G & 243W - HELD THAT: - The Authority declined to decide the constitutional question whether appointment of MJP amounts to delegation of sovereign functions entrusted under Articles 243G/243W. It observed that such a question falls outside the scope of Section 97(2) and is not suitable for determination by the AAR.

Not answered; held to be out of the purview of Section 97(2) of the GST Act.

Final Conclusion: The Authority ruled that the applicant's technical consultancy services are classifiable under SAC 998399 and taxable at 18% where no exemption applies; supplies to Maharashtra Jeevan Pradhikaran up to 31 12 2021 are exempt under Sr. No.3 of Notification No.12/2017, while supplies on or after 01 01 2022 are not exempt (owing to omission of "Governmental authority or a Government Entity") and are taxable at 18%; the service recipient for the grants funded payments made by MJP (both before and after 01 01 2022) is the Maharashtra Jeevan Authority (MJP); and the constitutional question on delegation of sovereign functions was not decided as beyond the AAR's remit.

Composite supply of food as service - Services provided by restaurants, cafes and similar eating facilities - HSN 996331 - Tax rate 5% without input tax credit - Higher tax rate for supplies from specified commercial accommodation premises

Composite supply of food as service - HSN 996331 - Classification of cooked bakery and snack items sold over a counter as goods or services, and appropriate classification code. - HELD THAT: - The Authority applied Clause 6(b) of Schedule II to the CGST Act and concluded that supplies of food items cooked and sold over the counter in ready-to-eat condition constitute a supply of services. The activity falls within the description of services provided by restaurants and similar eating facilities and, on the facts that the items are served at a counter and carry no brand name, the apt classification for the service is HSN 996331. [Paras 7]

The counter sales of the listed cooked items constitute a service and are classifiable under HSN 996331.

Services provided by restaurants, cafes and similar eating facilities - Tax rate 5% without input tax credit - Higher tax rate for supplies from specified commercial accommodation premises - Applicable GST rate on the restaurant service classified under HSN 996331. - HELD THAT: - Relying on the Notification No. 11/2017 (as amended), the Authority held that where the service falls within the restaurant/eating facility category and is not supplied from premises of hotels/inns/guest houses/clubs/campsites or other commercial lodging premises having a declared tariff of Rs. 7,500 or more per unit per day (or equivalent), the applicable rate is 5% (2.5% CGST + 2.5% SGST) provided no input tax credit has been availed on goods and services used in supplying the service. Conversely, if the supply is made from the specified accommodation premises having the declared tariff threshold, the higher tax rate applies (18% total, or 9% CGST + 9% SGST). The Authority thus tied the applicable rate to the location/type of premises and the condition regarding availing of input tax credit. [Paras 7]

The service may attract 5% (2.5% CGST + 2.5% SGST) without input tax credit where the specified accommodation-premises condition does not apply; if supplied from the specified accommodation premises with declared tariff meeting the threshold, the higher rate (18%) applies.

HSN 996331 - Whether the HSN code and tax rate adopted by the applicant are correct. - HELD THAT: - The applicant did not furnish the HSN codes and tax rates under which it had classified the items, nor information on total turnover relevant to composition-scheme considerations. For this reason, the Authority declined to adjudicate or confirm the correctness of any HSN code or tax rate claimed by the applicant and indicated that no ruling could be given on those specific classifications without the missing information. [Paras 7]

No ruling on the correctness of the HSN code or tax rate adopted by the applicant can be given for want of requisite information; the matter remains to be verified upon production of the missing particulars.

Final Conclusion: The counter sale of the listed cooked food items is a service classifiable under HSN 996331; the applicable GST is 5% (2.5% CGST + 2.5% SGST) without input tax credit unless supplied from specified commercial accommodation premises meeting the declared-tariff threshold, in which case the higher rate (18%) applies. No ruling is given on the HSN/tax rate adopted by the applicant due to lack of information.

Input tax credit - Exemption on margin supplies of second-hand vehicles under Notification No. 08/2018-Central Tax (Rate) dated 25.01.2018 - Determination of value of supply for second-hand goods under Rule 32(5) of CGST Rules - Restriction where supplier has availed input tax credit on purchase of such goods - Eligibility of ITC for direct and indirect business expenses subject to Sections 16-21 and Rules 36-45

Input tax credit - Exemption on margin supplies of second-hand vehicles under Notification No. 08/2018-Central Tax (Rate) dated 25.01.2018 - Determination of value of supply for second-hand goods under Rule 32(5) of CGST Rules - Admissibility of input tax credit on inward supplies constituting direct expenditures for repair, refurbishment and spare parts used to enhance the sale value of second hand vehicles - HELD THAT: - The Authority examined Notification No. 08/2018 and sub rule (5) of Rule 32 and held that the notification and rule permit tax on the margin where no input tax credit has been availed on the purchase of the used vehicles themselves. The phrase "such goods" in Para 2 of the notification refers to the used motor vehicles described in the table and limits the exemption where input tax credit has been availed on those vehicles. Neither the notification nor Rule 32(5) mandates non availment of input tax credit on other inward supplies incurred in the business of dealing in second hand vehicles. Sections 16-17 govern entitlement and restrictions of ITC generally, and the Authority found no provision in the notification or Rule 32(5) that bars claiming ITC on direct expenses (spares, repairs, refurbishment) incurred to improve and resell the used vehicles. Accordingly, such input tax paid on direct repair and refurbishment supplies is claimable subject to the statutory conditions and restrictions in sections 16-21 and rules 36-45. [Paras 7]

Available, subject to the conditions prescribed under sections 16 to 21 and rules 36 to 45 of the CGST Act and Rules.

Input tax credit - Restriction where supplier has availed input tax credit on purchase of such goods - Eligibility of ITC for direct and indirect business expenses subject to Sections 16-21 and Rules 36-45 - Admissibility of input tax credit on inward supplies constituting indirect expenses (office/showroom rent, telephone, advertisement, professional charges, capital goods, stationery etc.) used in the business of buying and selling second hand vehicles - HELD THAT: - The Authority reviewed the statutory entitlement to input tax credit under section 16 and the restrictions in section 17 and found that neither those provisions nor Notification No. 08/2018 or Rule 32(5) explicitly prohibit claim of ITC on indirect business inputs. The notification's Para 2 only disqualifies the margin exemption where the supplier has availed ITC on the purchase of the same used goods; it does not operate as a blanket bar on ITC for other inputs or input services. Consequently, ITC on indirect expenses used in the second hand car business is admissible, subject to fulfillment of the conditions and restrictions laid down in sections 16-21 and rules 36-45 of the CGST Act and Rules. [Paras 7]

Available, subject to the conditions prescribed under sections 16 to 21 and rules 36 to 45 of the CGST Act and Rules.

Final Conclusion: The Authority ruled that input tax credit on both direct (spares, repairs, refurbishment) and indirect (rent, telephone, advertisement, professional fees, capital goods, stationery etc.) inward supplies used in the business of dealing in second hand vehicles is admissible; the benefit granted by Notification No. 08/2018 and valuation under Rule 32(5) is not negated by claim of ITC on these other inputs, but all claims remain subject to the conditions and restrictions of sections 16-21 and rules 36-45 of the CGST Act and Rules.

Input Tax Credit - demo vehicles / demonstration purpose - further supply of motor vehicles - overriding effect of Section 17(5) over Section 16(1) - restriction on ITC for motor vehicles used for transportation of persons

Input Tax Credit - demo vehicles / demonstration purpose - further supply of motor vehicles - overriding effect of Section 17(5) over Section 16(1) - Entitlement to claim Input Tax Credit on inward supply of motor vehicles used as demonstration cars in the course of business - HELD THAT: - The Authority accepted that demo cars are used in furtherance of business and satisfy the conditions of Section 16(1) for availing ITC, but held that compliance with Section 16(1) alone is not decisive because Section 17(5) contains an overriding provision. Section 17(5) excludes ITC on motor vehicles for transportation of persons unless one of the specified exceptions applies, including when such vehicles are used for making a further supply of such motor vehicles. The Authority found that the applicant intends to, and in fact disposes of, the demo cars by way of subsequent sale. The use of the cars for demonstration does not preclude eligibility for ITC so long as they are subsequently used for making further supply of those cars. Consequently, ITC on demo cars is permissible provided the cars are later used in making further supply and subject to the provisos in the ruling (for example, ITC is not available if depreciation is claimed on the tax component of cost or if the cars are not used for further supply). [Paras 7]

ITC on motor vehicles used for demonstration is allowable where such vehicles are subsequently used for making further supply; Section 17(5)'s exceptions (including further supply) govern eligibility despite satisfaction of Section 16(1).

Final Conclusion: The Authority ruled that the applicant may claim Input Tax Credit on motor vehicles used for demonstration purposes provided those vehicles are subsequently used for making further supply; the ruling is inapplicable if depreciation is claimed on the tax component of the demo cars or if the cars are not used for further supply.

Revision u/s 263 by CIT - under-assessment by virtue of the fact that the valuation that had been placed by the concerned authority for affixation of stamp duty was higher - As decided by HC [2023 (6) TMI 1133 - DELHI HIGH COURT] it was not the respondent/assessee who effectuated the sale of the subject land. The subject land was sold by the secured lenders to recover from dues owed by the respondent/assessee, that the Tribunal correctly concluded that the PCIT had failed to notice the underlying facts, while invoking his powers under Section 263

HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court. Hence, the Special Leave Petition is dismissed.

Validity of Reopening of assessment u/s 147 - reopening on the base of a factual error pointed out by the audit party - Independent application of mind by AO or not? - As decided by HC [2023 (3) TMI 987 - GUJARAT HIGH COURT] AO without any conviction, when has issued the notice, this surely is not a case where the reopening of the case is on the basis of any factual error pointed out by the audit party - no material worth the name emerging that to indicate any independent application of mind could be noticed. On the contrary, there are glaring facts which have been pointed out that the AO had no subjective satisfaction while issuing the notice of reopening

HELD THAT:- Heard learned counsel for the parties. As similar matter has already been dismissed, the instant petition also stands dismissed.

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

Validity of reassessment notice under Section 148 read with Section 148A - Escapement of income as precondition for reopening assessments - Supplementation of reasons after issuance of notice impermissible - Requirement of tangible material and prohibition of change of opinion - Right to effective opportunity to object to reassessment - Reliance on prior assessment order as material for reopening - Claim of treaty benefit under Article 13(4) of DTAA and residency challenge - Transfer pursuant to court-sanctioned Scheme of Arrangement and exclusion from capital gains

Validity of reassessment notice under Section 148 read with Section 148A - Escapement of income as precondition for reopening assessments - Impugned show cause notice and consequent reassessment orders were unlawful because foundational reasons in the original notice were factually erroneous and no proper opinion of escapement was formed on the basis of material available at the time of issuance. - HELD THAT: - The original notice under Section 148A(b) proceeded on the premise that the assessee had not filed a return for AY 2016-17, a fact which was incorrect and undisputedly known to the department only after the assessee replied. The reassessment order under Section 148A(d) attempted to treat the return as unassessed and to conclude escapement of income without any prior evaluation of the return or independent material contemporaneous with the notice. Where the foundational allegation in the reopening notice is absent or factually incorrect, the proceedings cannot be sustained. The statutory scheme requires that the information in possession of the AO at the time of issuing the notice must furnish a live link to the belief that income has escaped assessment; mere after-the-fact assertions are insufficient. [Paras 22, 23, 31, 32]

Original SCN dated 24 March 2023, order under Section 148A(d) dated 27 April 2023 and notice under Section 148 dated 27 April 2023 are quashed for want of valid foundational reasons.

Supplementation of reasons after issuance of notice impermissible - Requirement of tangible material and prohibition of change of opinion - Right to effective opportunity to object to reassessment - Assessing Officer could not rely upon new or additional reasons (including denial of DTAA benefits based on a different year's assessment) when disposing objections to justify the earlier notice; doing so deprived the assessee of a fair opportunity to object and is impermissible. - HELD THAT: - The court reaffirmed that validity of reopening must be judged by the reasons and material that existed at the time the Section 148/148A(b) notice was issued. Additional reasons recorded subsequently to bolster the original notice cannot sustain the reassessment. Reliance upon an assessment order for AY 2014-15, which itself was subject to challenge and interim orders, cannot be used as a post hoc foundation unless such material formed part of the basis for the original belief. Allowing supplementation would convert reassessment into a disguised review and would prejudice the assessee's statutory right to effectively object. [Paras 24, 25, 28, 29]

Reassessment cannot be sustained on reasons and material first invoked at the stage of disposal of objections; such supplementation is impermissible and vitiates the proceedings.

Claim of treaty benefit under Article 13(4) of DTAA and residency challenge - Reliance on prior assessment order as material for reopening - Whether the assessee is entitled to treaty benefits under Article 13(4) and whether the sale proceeds are taxable in India was not finally adjudicated by this writ court; the AO did not independently evaluate treaty entitlement in the original notice and relied on findings from a separate year's assessment. - HELD THAT: - The question of entitlement to the DTAA exemption was not part of the reasons disclosed in the original Section 148A(b) notice and was only invoked later in the order disposing objections by reference to an AY 2014-15 assessment order. The impugned order contains no independent examination as to whether the assessee was disentitled to treaty benefits; reliance solely on conclusions from another assessment (which was itself under challenge) is inadequate. The Court abstained from expressing any definitive view on treaty entitlement and noted that such issues must be examined on their own merits with proper opportunity. [Paras 24, 25, 30]

No final adjudication on DTAA entitlement; the matter cannot be sustained on the basis of reasons not disclosed in the original notice and requires fresh consideration if legitimately pursued.

Transfer pursuant to court-sanctioned Scheme of Arrangement and exclusion from capital gains - Right to effective opportunity to object to reassessment - The question whether allotment of shares pursuant to the Scheme of Arrangement amounts to a transfer attractable to capital gains (and excluded by the statutory provision dealing with transfers under sanctioned schemes) was not finally decided by the Court; the Assessing Officer failed to examine or make findings on this point in the original notice. - HELD THAT: - The original show cause notice did not refer to the Scheme of Arrangement under which shares were allotted to the assessee. Section 47(vii) (as addressed in the order) excludes capital gains on transfers effected pursuant to a sanctioned scheme; the AO's order did not examine or reach any conclusion on this statutory exclusion. The Court declined to render a definitive legal determination on the applicability of Section 47(vii) but observed that the AO's failure to consider the Scheme vitiates the reassessment. Given these lacunae, any fresh proceedings must independently evaluate the legal effect of the Scheme and afford the assessee an opportunity to be heard. [Paras 26, 27]

Issue left open for fresh consideration; AO's failure to examine the Scheme in the original notice vitiates the proceedings and requires reconsideration if proceedings are validly reinitiated.

Final Conclusion: Writ petition allowed. The Section 148A(b) show cause notice dated 24 March 2023, the order under Section 148A(d) dated 27 April 2023 and the consequential notice under Section 148 dated 27 April 2023 are quashed and set aside. Liberty granted to the department to initiate fresh proceedings if permissible in law; no observations herein affect the rights of parties in the pending proceedings relating to AY 2014-15.

Electronic filing of Form No.10 as condition for accumulation under Section 11(2) - reassessment under Section 148 requires formation of opinion that income chargeable to tax has escaped assessment - CBDT Circular No.7/2018 permitting condonation of delay on showing reasonable cause - procedural character of digital filing requirement - statement furnished to the Assessing Officer under Section 11(2)

Electronic filing of Form No.10 as condition for accumulation under Section 11(2) - statement furnished to the Assessing Officer under Section 11(2) - Validity of reassessment initiated solely on account of late electronic filing of Form No.10 where the Assessing Officer had received and accepted the Form prior to completion of assessment - HELD THAT: - The Court held that the mere fact that Form No.10 was not digitally filed within the timeline prescribed under Section 139(1) does not, by itself, furnish a basis for reopening completed assessment where the Assessing Officer had the statement contemplated by Section 11(2) on record and had accepted the accumulations in the assessment order. The Tribunal's and Revenue's stance that late digital uploading, as distinct from furnishing the prescribed statement to the AO, justified invoking reassessment was rejected. Reopening requires formation of an opinion that income chargeable to tax has escaped assessment; that primordial condition was absent because the substance of the disclosure was before the AO and acted upon in the assessment dated 01 December 2018. The Court therefore found the reassessment action founded solely on delayed digital filing to be unjustified and arbitrary. [Paras 4, 9, 27, 28]

Reassessment predicated only on belated e-filing of Form No.10, when the AO had received and accepted the statement before completion of assessment, is not sustainable; the impugned reassessment initiation is quashed.

CBDT Circular No.7/2018 permitting condonation of delay on showing reasonable cause - procedural character of digital filing requirement - Legal significance of CBDT Circular No.7/2018 and whether functionality issues and the Board's guidance on condonation of delay affect the validity of reassessment - HELD THAT: - The Court observed that the CBDT Circular recognised representations about non-functionality of the e-filing facility for AY 2016-17 and authorised Commissioners to admit belated Form No.10 filings where assessees were prevented by reasonable cause, also requiring satisfaction regarding investment modes under Section 11(5). The existence of that Circular undermined the Revenue's assertion-based on CPC data of filings-that portal functionality was universally flawless. The Circular therefore reinforced that delayed electronic submissions could, in appropriate cases, be treated as acceptable subject to satisfaction of reasonable cause, and that such procedural difficulties did not ipso facto justify reopening assessments. [Paras 16, 23, 24]

The CBDT Circular is material and supports assessing authorities entertaining belated electronic filings on proof of reasonable cause; it undercuts Revenue's contention that alleged non-filing due to portal issues was baseless.

Procedural character of digital filing requirement - Whether the imposition of mandatory electronic mode for filing Form No.10 by Rule 17(3) converts the requirement into a substantive condition disentitling an assessee from claim if not complied with at the precise stage - HELD THAT: - Relying on precedent and statutory context, the Court held that the change in mode to electronic filing effected by the 2016 Amendment Rules was primarily a change in the manner of furnishing the statement and did not alter the substantive requirement of disclosure to the AO. The Court referred to earlier authorities emphasising that disclosure to the AO (and its availability before completion of assessment) is the determinative element; procedural omissions as to mode or timing, when cured before assessment concludes or when reasonable cause exists, cannot be allowed to defeat substantive claims and cannot, without more, justify reopening. Consequently, the digital filing requirement was characterised as procedural insofar as acceptance of the underlying disclosure by the AO is concerned. [Paras 14, 25, 31, 33]

The electronic mode mandated by Rule 17(3) is procedural; failure to comply with the digital filing requirement, absent a finding that material disclosure was withheld from the AO, does not automatically oust the assessee's claim or validate reassessment.

Final Conclusion: Writ petition allowed; order under Section 148A(d) dated 31 March 2023 and the consequent notice under Section 148 dated the same day issuing reassessment proceedings for AY 2016-17 are quashed.

Correction of party description and impleadment - tax deduction at source and employer's obligation under Section 192(1) of the Income Tax Act as a legal standard for deduction from salary arrears - prima facie vindictive or mala fide conduct by public officers - departmental inquiry by competent authority into alleged misconduct of public officers - award of interest for delayed payment of salary arrears - exemption from personal appearance of officers in court proceedings

Correction of party description and impleadment - Permission to correct the description of opposite party no.1 and to implead the Director Education (Secondary) as opposite party no.6. - HELD THAT: - On an oral application by the petitioner s counsel the Court permitted amendment of the array of parties to correctly describe opposite party no.1 as the State of U.P. through Additional Chief Secretary, Education (Secondary Education) and to implead the Director Education (Secondary) as opposite party no.6. The Court thereby allowed correction of party description and impleadment to enable appropriate adjudication and effective relief against the concerned authorities. [Paras 1]

Application to correct party description and to implead the Director Education (Secondary) allowed.

Tax deduction at source and employer's obligation under Section 192(1) of the Income Tax Act as a legal standard for deduction from salary arrears - prima facie vindictive or mala fide conduct by public officers - Prima facie finding that income tax was deducted at the flat rate of 30% from the petitioner's arrears contrary to the legal standard under Section 192(1), and that such conduct indicated prima facie vindictiveness and incapability requiring further scrutiny. - HELD THAT: - The officers who appeared stated that tax at 30% was deducted from the arrears paid to the petitioner. The Court observed that such deduction, made after litigation and against the provision embodied in Section 192(1) of the Income Tax Act, prima facie indicates a vindictive approach and also reflects incapability in discharge of official duty. The observation is based on the admitted fact of deduction and the timing and manner of payment; a final determination on culpability and correctness of tax treatment was reserved to the appropriate authority following inquiry. [Paras 6]

The deduction at 30% from salary arrears is prima facie inconsistent with the statutory standard and indicative of vindictive conduct and incapability of the officers, warranting further action.

Departmental inquiry by competent authority into alleged misconduct of public officers - Direction to the Additional Chief Secretary, Secondary Education, Government of U.P., to cause an inquiry into the conduct of the officers responsible for payment and deduction. - HELD THAT: - Given the prima facie finding of vindictive conduct and incapability, the Court directed opposite party no.1 to arrange a departmental inquiry by a competent officer and to ensure suitable action in accordance with the inquiry s outcome. The Court confined itself to directing institutional investigation rather than determining disciplinary consequences, which are left to the competent authority after a detailed inquiry. [Paras 7]

Additional Chief Secretary directed to cause inquiry through a competent officer and to take suitable action as per the inquiry s outcome.

Award of interest for delayed payment of salary arrears - personal affidavit / show cause - Direction to the Director of Education (Secondary Education), U.P., to file a personal affidavit showing cause why interest should not be awarded for delay in payment of salary arrears. - HELD THAT: - The Court, having found prima facie deliberate harassment in delay of payment of arrears, directed the Director to file a personal affidavit within four weeks explaining why interest ought not be awarded for the period of delay. This is a show-cause direction addressed to the head of the department to justify denial of interest and to enable the Court to consider grant of interest in the light of the Director s response. [Paras 8]

Director of Education (Secondary) directed to file a personal affidavit within four weeks showing cause why interest should not be awarded for delayed payment of arrears.

Exemption from personal appearance of officers in court proceedings - Grant of exemption from future personal appearance for the District Inspector of Schools, Etawah, and the Finance and Accounts Officer, subject to further call, and the officers need not appear again unless specifically required. - HELD THAT: - The District Inspector of Schools and the Finance and Accounts Officer, having appeared in person and filed affidavits explaining the circumstances of the tax deduction, were granted leave to seek exemption from personal appearance on future dates by filing applications and affidavits. The Court recorded that they need not appear again unless specifically called, thereby relieving them from routine personal attendance while preserving the Court s power to summon if necessary. [Paras 2, 10]

Exemption from future personal appearance granted to the officers; they are not required to appear again unless specifically called.

Final Conclusion: The Court allowed correction of parties and impleadment, recorded affidavits of the officers, found prima facie that an improper 30% deduction from the petitioner s salary arrears was made contrary to the statutory standard and indicative of vindictive conduct, directed a departmental inquiry by the Additional Chief Secretary and a show-cause affidavit by the Director of Education on award of interest, granted exemption from future personal appearance to the officers unless specifically called, and listed the matter for further hearing.

Principles of natural justice - faceless assessment procedure under Section 144B - binding nature of departmental SOP issued by CBDT - opportunity to show-cause - remand for fresh consideration

Opportunity to show-cause - principles of natural justice - faceless assessment procedure under Section 144B - Whether the Faceless Assessment Unit violated principles of natural justice and the departmental SOP by not providing the assessee the minimum response time to the show-cause notice. - HELD THAT: - The Court found that Section 144B(6)(vii) requires that where a variation is proposed the Faceless Assessment Unit must serve a notice calling upon the assessee to show-cause. Although the SOP dated 3 August 2022 lacks statutory force, the Division Bench's decision in Indu Goenka establishes that the Faceless Assessment Unit is bound to adhere to CBDT guidelines. Clause N.1.3 (and N.1.3.1) of the SOP prescribes a seven-day minimum period to respond to a show-cause. In the present case the show-cause allowed less than three days to respond, which the Court held to be contrary to the SOP and not a reasonable opportunity under the principles of natural justice. The petitioner did file a response, but the portal's 'Submit Response' button was deactivated upon expiry of the response period and the petitioner lodged the response with the Grievance Help Desk; irrespective of the Unit's lack of independent access to that Grievance Cell filing, the failure to provide the prescribed minimum time and thereby to consider the petitioner's response vitiated the proceedings. [Paras 2, 3, 8, 10]

Faceless Assessment Unit failed to provide the minimum response time and thereby violated principles of natural justice and the SOP.

Remand for fresh consideration - faceless assessment procedure under Section 144B - Relief to be granted for the procedural infirmity and the manner of disposal on remand. - HELD THAT: - Because the Faceless Assessment Unit proceeded to pass the assessment order without taking into account the petitioner's response and in breach of the SOP and natural justice, the assessment order dated 17 March 2024 was set aside. The matter was remanded to the Faceless Assessment Unit for fresh disposal in accordance with law. The Court noted that the petitioner's response is already on record and directed that the Faceless Assessment Unit shall take note of such response and decide the proceeding expeditiously, preferably within eight weeks from communication of the order. [Paras 11]

Assessment order dated 17 March 2024 set aside; matter remanded to the Faceless Assessment Unit to consider the petitioner's response and dispose of the proceedings within eight weeks.

Final Conclusion: The assessment order for AY 2018-19 dated 17 March 2024 is set aside for breach of the SOP and principles of natural justice; the matter is remanded to the Faceless Assessment Unit to consider the petitioner's response and decide the assessment in accordance with law, preferably within eight weeks.

Notice issued to a deceased assessee - jurisdictional requirement for reopening an assessment - continuance of proceedings against legal representatives under Section 159 of the Act - obligation to place legal representatives on notice before proceeding

Notice issued to a deceased assessee - jurisdictional requirement for reopening an assessment - Notices and assessment actions issued in the name of deceased assessees without being addressed to their legal representatives are invalid and vitiate the jurisdiction to reopen or assess. - HELD THAT: - The Court applied settled precedent holding that issuance of a notice under section 148 (or other jurisdictional notices) in the name of a deceased person is a nullity because service upon the deceased cannot satisfy the jurisdictional requirement for initiating reassessment. The reopening notice is the foundation for jurisdiction under section 147 and must be addressed to the correct person; issuance to a dead person does not fulfil that sine qua non. On the facts before the Court the petitioners had intimated the death yet notices were neither amended nor served on the legal representatives, and the Department proceeded mechanically without invoking any corrective step, resulting in a non-application of mind. In consequence, the impugned notices and consequential orders listed were quashed. [Paras 3, 9]

Impugned notices and assessment actions issued in the name of deceased assessees were set aside.

Continuance of proceedings against legal representatives under Section 159 of the Act - obligation to place legal representatives on notice before proceeding - Section 159 permits continuation or institution of proceedings against legal representatives, but it does not relieve the Department of the requirement to notify the legal representative before proceeding. - HELD THAT: - The Court observed that Section 159(2) creates a deeming fiction enabling proceedings pending at the time of death to be continued against legal representatives and permits fresh proceedings which could have been taken had the deceased survived. However, that statutory scheme presupposes that the legal representative be called upon to face proceedings - i.e., be made aware of and put on notice of the Department's intent to proceed - and be afforded the opportunity to contest and to assert limitations on liability. The limited nature of the representative's liability under subsection (6) reinforces the need to properly notify the representative; the respondents had not taken any conscious decision to invoke Section 159 or to effect corrective measures in the present matters. [Paras 4, 5, 6]

Department may proceed under Section 159 only after properly invoking it and placing legal representatives on notice; failure to do so cannot validate notices issued to the deceased.

Liberty to revenue to proceed against legal heirs - continuance of proceedings against legal representatives under Section 159 of the Act - While quashing the impugned notices/orders issued to deceased assessees, the Court granted the Revenue liberty to initiate or continue proceedings against the legal heirs if permissible by law. - HELD THAT: - Having held that the notices issued to deceased assessees were invalid, the Court nonetheless recognised the statutory power of the Revenue to proceed against legal representatives in accordance with law and with proper application of Section 159. The quashing of the impugned notices does not preclude the Department from instituting proceedings afresh or continuing proceedings against the legal heirs, provided such steps comply with statutory requirements and proper notice is given to the representatives. [Paras 9, 10, 11]

Impugned notices quashed; Revenue granted liberty to proceed against legal heirs in accordance with law.

Final Conclusion: Writ petitions allowed: notices and assessment actions issued in the name of deceased assessees without being addressed to their legal representatives were quashed; Section 159 permits proceedings against legal representatives but requires proper invocation and notice; Revenue granted liberty to proceed against legal heirs in accordance with law.

Validity of CBDT notification under Section 119 - power of CBDT to impose additional eligibility conditions - eligibility to file settlement application - estoppel against revenue for delayed issuance of notice - quashing of Interim Board of Settlement order

Validity of CBDT notification under Section 119 - power of CBDT to impose additional eligibility conditions - Paragraph 4 of the CBDT Order dated 28 September 2021 imposing an additional eligibility cut off was invalid and beyond the power of the CBDT. - HELD THAT: - The Court accepted the reasoning in Sar Senapati Santaji Ghorpade Sugar Factory Ltd. that while the CBDT has power under Section 119 to issue directions and extend the time for filing, it cannot, by circular, impose an additional condition that an assessee must have been eligible as on a prior cut off date. The Act prescribes a cut off for making applications but contains no provision prescribing a cut off date for an assessee's eligibility; therefore the CBDT could not lawfully introduce such an eligibility requirement. The Court observed that imposing such a condition would be to add to the statutory scheme and was accordingly ultra vires, and further noted that where eligibility depends on the department's action (such as issuance of a notice) the revenue cannot take advantage of its own delay to deny eligibility. [Paras 16]

Paragraph 4 of the CBDT Order dated 28 September 2021 is invalid and bad in law to the extent it lays down an additional eligibility condition.

Eligibility to file settlement application - estoppel against revenue for delayed issuance of notice - The petitioner was eligible to have its settlement application considered despite issuance of notices after the CBDT circular cut off date. - HELD THAT: - Applying the principle that the date on which an assessee becomes eligible to apply is distinct from the statutory cut off for making an application, the Court held that the petitioner's eligibility could not be taken away by the departmental circular. The Court relied on the view that where eligibility turns on the issuance of a notice by the revenue and such notice was issued after inordinate delay, the revenue cannot claim the delayed action defeats the assessee's right; respondent is estopped from asserting the petitioner lost entitlement to approach the Interim Board on account of its own delay. [Paras 16]

The petitioner was eligible for consideration of its settlement application despite the CBDT circular's additional cut off condition.

Quashing of Interim Board of Settlement order - The Interim Board of Settlement's order rejecting the petitioner's settlement application on the ground of non eligibility under Paragraph 4 of the CBDT Order is illegal and is quashed. - HELD THAT: - Because Paragraph 4 of the CBDT Order was held ultra vires, the Interim Board's reliance on that provision to reject the petitioner's application rendered the IBS order illegal. The Court accordingly set aside the impugned IBS order and directed that the petitioner's application be considered on merits by the Interim Board in accordance with law. [Paras 17, 18]

The Interim Board of Settlement's order rejecting the petitioner's application is quashed and set aside; the application must be considered on its merits.

Final Conclusion: Writ petition allowed; Paragraph 4 of the CBDT Order dated 28 September 2021 declared invalid to the extent it imposed an additional eligibility cut off, the Interim Board of Settlement's order rejecting the petitioner's application on that basis is quashed, and the Interim Board is directed to consider the petitioner's settlement application on merits in accordance with law.

Application of Section 22 (income from house property) - Distinction between income from house property and business income - Rule of consistency in income-tax assessments - Assessee's election of head of income

Application of Section 22 (income from house property) - Distinction between income from house property and business income - Classification of rental income derived from the MBC Tower property (owned by the assessee) as income from house property rather than business income. - HELD THAT: - The Court held that Section 22 applies where the property is owned by the assessee and prescribes chargeability of the "annual value" of such property as income from house property. On the facts, the MBC Tower property was owned by the assessee and the statutory prerequisites of Section 22 were satisfied. The mere fact that the assessee is engaged in the broader business of letting or subletting properties does not operate as a bar to treating income from a self owned building as income from house property. To read Section 22 as excluding owners who are in the business of letting would be to import a qualification not found in the provision. The Court contrasted the present factual posture with cases where the assessee itself had chosen to account for the receipts as business income and emphasised that such distinguishable factual choice underpinned those decisions. [Paras 11, 12, 15]

Income received from the assessee's owned MBC Tower property is correctly assessable under the head income from house property.

Assessee's election of head of income - Distinction between income from house property and business income - Effect of the assessee's prior treatment and past acceptance by Revenue on the classification of the MBC Tower receipts. - HELD THAT: - The Court accepted the Tribunal's reliance on the Revenue's prior consistent acceptance of the assessee's treatment of the MBC Tower receipts in earlier assessment years. While res judicata strictly does not apply across assessment years, the Court recognised the settled principle that where a fundamental aspect permeates successive years and has been accepted without challenge, it is inappropriate to alter that position without material change in facts. The Tribunal's application of the rule of consistency in allowing the assessee to continue its earlier classification was held to be appropriate in the absence of any material change justifying a contrary view. [Paras 13, 14]

The Tribunal correctly applied the rule of consistency and was justified in upholding the earlier accepted treatment of the MBC Tower receipts as income from house property.

Distinction between income from house property and business income - Application of Section 22 (income from house property) - Whether the Revenue could be sustained in its broader contention that an assessee engaged in the business of letting properties must be precluded from treating receipts from an owned property as income from house property. - HELD THAT: - The Court rejected the Revenue's contention that a straight jacket rule should be applied denying Section 22 to assessees whose primary business is letting properties. The statutory text of Section 22 contains no such carve out and permits classification to follow the nature of the property and ownership. The Court noted that prior authorities relied upon by Revenue involved different factual matrices (notably where the assessee had itself accounted under business income), and therefore those decisions did not support a general exclusionary principle in the present facts. In consequence, the Revenue's overarching submission that Section 22 is unavailable to letting business assessees was not accepted. [Paras 12, 15]

Revenue's submission that Section 22 is inapplicable to an assessee engaged in letting business is unsustainable on the facts; Section 22 remains available in respect of property owned by the assessee.

Final Conclusion: The appeals are dismissed. The High Court held that receipts from the assessee's owned MBC Tower property satisfy Section 22 and are properly assessable as income from house property; the Tribunal rightly applied the rule of consistency given earlier acceptance by Revenue; no substantial question of law in favour of Revenue was made out.

Reopening of assessment - notice under Section 148 - proviso to Section 147 - failure to truly and fully disclose material facts - reasons to believe - change of opinion - Addition u/s 14A

Notice under Section 148 - proviso to Section 147 - failure to truly and fully disclose material facts - reasons to believe - change of opinion - Validity of the reopening notice dated 30th March 2021 under Section 148 for Assessment Year 2015-2016 - HELD THAT: - The Court held that the proviso to Section 147 is attracted because the notice under Section 148 was issued more than four years after the end of the relevant assessment year and the earlier assessment under Section 143(3) had been completed. The reasons recorded for reopening relied upon perceived discrepancies in the assessee's financials, alleged excess investment, claim of interest on borrowings, utilisation of securities premium, and adjustments under Rule 8D. The material in the reasons demonstrates scrutiny of the financial statements and differences of opinion rather than any failure by the assessee to truly and fully disclose material facts necessary for assessment. The reasons also indicate a change of opinion by the assessing officer. Consequently the statutory threshold in the proviso - that there be a belief of non-disclosure of material facts - is not satisfied on the materials recorded and relied upon by the revenue. [Paras 2, 4, 5, 6]

Reopening notice dated 30th March 2021 issued under Section 148 for Assessment Year 2015-2016 is not sustainable and is quashed.

Final Conclusion: The petition is allowed; the reopening notice and consequential proceedings for Assessment Year 2015-2016 are quashed on the ground that the reasons recorded disclose a change of opinion and do not demonstrate failure to truly and fully disclose material facts.

Unexplained cash deposits and addition under unexplained money provisions - acceptance of closing cash balance in cash book as explained source - burden of proof in respect of cash sales and realization from debtors - estimation of net profit for assessment under best judgment/assessment u/s 144 - use of historical profit data and industry norms to determine reasonable profit rate

Unexplained cash deposits and addition under unexplained money provisions - acceptance of closing cash balance in cash book as explained source - burden of proof in respect of cash sales and realization from debtors - Extent to which cash deposits in specified bank notes (SBNs) during demonetization period were explained and liable to be added as unexplained cash. - HELD THAT: - The Tribunal accepted that the assessee's cash book showed a closing cash balance of Rs. 6,97,209 as on 8.11.2016, which was available with the assessee at the time of demonetization and therefore ought to be treated as explained cash against the total SBN deposits of Rs. 11.24 lakhs. For the remaining cash deposits, the assessee asserted they arose from cash sales and realizations from trade debtors but failed to produce any corroborative documentary evidence in the Paper Book or at the hearing to demonstrate such sources. In the absence of evidence to link the balance deposits to explained sources, the Tribunal sustained the addition in respect of that portion. The result was a partial allowance of the ground by excluding the recorded closing cash balance and confirming the addition for the unexplained balance. [Paras 6]

Closing cash balance of Rs. 6,97,209 as on 8.11.2016 accepted as explained; remaining cash deposits sustained as unexplained and added.

Estimation of net profit for assessment under best judgment/assessment u/s 144 - use of historical profit data and industry norms to determine reasonable profit rate - Appropriate rate of net profit to be applied on total turnover where cash book/VAT returns were not accepted and assessment completed under section 144. - HELD THAT: - The Assessing Officer estimated net profit at 5% on turnover, a figure affirmed by the CIT(A). The assessee produced historical data indicating significantly lower profit rates in its business (including a prior assessment showing a profit rate of 0.375% and submissions that typical profit in the trade is 1-2%). Having regard to the historical data and the admitted industry range, the Tribunal found that a reasonable estimate of net profit is 2% rather than 5%. The Tribunal therefore reduced the estimated profit rate to 2% and partly allowed the appeal on this ground. [Paras 10]

Estimated net profit reduced from 5% to 2% on total turnover; ground partly allowed.

Final Conclusion: The appeal is partly allowed: the assessee's recorded closing cash balance as on 8.11.2016 is accepted as explained and excluded from the addition, the remaining SBN deposits are sustained as unexplained and added; estimation of net profit is reduced from 5% to 2% on the turnover.

Condonation of delay - sufficient cause for delay - substantial justice over technicalities - penalty under section 271(1)(c) - non-prosecution and compliance with section 250(6) - restoration to file for fresh adjudication

Condonation of delay - sufficient cause for delay - substantial justice over technicalities - restoration to file for fresh adjudication - Whether the delay of 1528 days in filing the appeal against the quantum order ought to be condoned and the appeal restored to the file of the CIT(A). - HELD THAT: - The assessee explained that immediately on receipt of the order he entrusted drafting and filing of the appeal to his counsel (or auditor) and, due to their professional preoccupations and the intervening Covid-19 pandemic, the appeal was not filed as promised; the assessee relied on this communication gap as the cause of delay rather than a wanton failure. The Tribunal observed that extraordinary delay ordinarily requires convincing explanation but found the assessee's account-belief in counsels' assurance and pandemic-related lapse-credible in the facts of the case. Balancing technical objections against the delivery of substantial justice, the Tribunal held that affording the assessee an opportunity to prosecute the appeal on merits outweighs dismissal for delay; accordingly the impugned order was set aside and the quantum appeal was restored to the file of the CIT(A) for fresh adjudication in accordance with the procedure under section 250(6), with directions to the assessee to cooperate and to avoid seeking adjournments. [Paras 6, 7, 8]

Delay of 1528 days is condoned and the quantum appeal is restored to the file of the CIT(A) for fresh decision on merits.

Penalty under section 271(1)(c) - non-prosecution and compliance with section 250(6) - restoration to file for fresh adjudication - Whether the CIT(A)'s dismissal of the appeal against levy of penalty under section 271(1)(c) for non-prosecution was valid and whether that order should be retained or set aside. - HELD THAT: - The Tribunal examined the CIT(A)'s dismissal of the penalty appeal for non-prosecution and found that the order did not comply with the requirements of section 250(6). Given that the quantum appeal has been restored for fresh consideration, the Tribunal held it appropriate that the penalty appeal also be set aside and restored to the file of the CIT(A. The Tribunal directed that the penalty appeal be disposed of along with the quantum appeal after affording the assessee a reasonable opportunity of being heard. [Paras 9]

The CIT(A)'s order dismissing the penalty appeal for non-prosecution is set aside and the penalty appeal is restored to the file of the CIT(A) to be disposed of along with the quantum appeal.

Final Conclusion: Both appeals are restored to the file of the CIT(A) for fresh disposal in accordance with section 250(6); the delay in filing the quantum appeal is condoned and the penalty appeal dismissed for non-prosecution is set aside to be decided with the quantum appeal; appeals are treated as allowed for statistical purposes.

Proviso to section 80G(5) - provisional approval - limitation period for filing Form No.10AB - construction to avoid absurdity - reading in/reading down of statutory provision - remand for fresh disposal on merits

Proviso to section 80G(5) - provisional approval - limitation period for filing Form No.10AB - construction to avoid absurdity - Interpretation of clause (iii) of the proviso to section 80G(5) and its applicability where activities commenced before grant of provisional approval. - HELD THAT: - The Tribunal held that a literal reading of clause (iii) - which prescribes filing the application either six months prior to expiry of provisional approval or within six months of commencement of activities, "whichever is earlier" - produces an absurd and unjust result when the institution commenced activities before provisional approval was granted. Applying the settled rule that courts may modify statutory language to effectuate legislative intent and avoid absurdity, the Tribunal read the proviso so that "earlier" is treated as "later", i.e., the application must be made either six months prior to expiry of provisional approval or within six months of commencement of activities, whichever is later. On that construction, where activities commenced well before provisional approval, the deadline becomes six months prior to expiry of the provisional approval, and an application filed before that date is not time barred. The Tribunal relied on the principle in K.P. Varghese (as cited in the order) to justify this remedial construction. [Paras 6, 7, 8, 9, 10]

Clause (iii) of the proviso to section 80G(5) is to be construed so that "whichever is earlier" reads as "whichever is later" in cases where activities commenced before provisional approval; accordingly the application filed by the trust is not barred by limitation.

Remand for fresh disposal on merits - verification of genuineness of activities - compliance with notices issued through ITBA portal - Whether the matter should be remitted to the CIT(Exemptions) for fresh consideration of the application on merits. - HELD THAT: - The Tribunal found that the CIT(Exemptions) had denied approval primarily on the ground of alleged delay and, additionally, recorded inability to conclude on the genuineness of activities in the absence of compliance with portal notices. Having decided that the application is not time barred, the Tribunal concluded that the proper course is to remit the matter to the CIT(Exemptions) for de novo disposal on merits, including verification of compliance with conditions in clauses (i) to (v) of section 80G and any responses to notices issued through the ITBA portal. [Paras 2, 10]

The matter is remanded to the file of the CIT(Exemptions) with a direction to dispose of the application afresh on merits.

Final Conclusion: The appeal is partly allowed: the proviso to section 80G(5) is construed to avoid an absurd result and the application is held not to be time barred; the matter is remitted to the CIT(Exemptions) for fresh disposal on merits.

Deduction under section 80P(2)(a)(i) of the Income Tax Act for cooperative societies - Attribution of interest on surplus investments to the business activities of a cooperative society - Exemption of income from banking operations of cooperative societies

Deduction under section 80P(2)(a)(i) of the Income Tax Act for cooperative societies - Attribution of interest on surplus investments to the business activities of a cooperative society - Exemption under section 80P(2)(d) in relation to interest income - Whether interest income earned on fixed deposits with cooperative banks/scheduled banks is eligible for exemption under section 80P(2)(a)(i) (and section 80P(2)(d)) of the Income Tax Act for the assessee cooperative society for AY 2020-21. - HELD THAT: - The Tribunal noted a divergence of judicial opinion among High Courts on whether interest earned on surplus invested in short-term deposits and securities is attributable to the activities of a cooperative society and therefore eligible for section 80P(2)(a)(i) exemption. Having considered earlier decisions of coordinate benches, and following the view taken by the Hon'ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. and subsequent consistent decisions, the Tribunal held that interest income earned on fixed deposits with cooperative banks/scheduled banks partakes the character of business income of the cooperative society. Consequently such interest is attributable to the society's banking/credit activities and qualifies for deduction under section 80P(2)(a)(i); the Tribunal further directed allowance under section 80P(2)(d) as applicable. The Assessing Officer's addition disallowing the exemption was therefore set aside and the AO was directed to allow the claimed exemption.

Interest on FDs with cooperative/scheduled banks is business income attributable to the society and is eligible for exemption under section 80P(2)(a)(i) and section 80P(2)(d); the Assessing Officer is directed to allow the exemption for AY 2020-21.

Final Conclusion: Appeal allowed; the addition disallowing exemption on interest income is set aside and the Assessing Officer is directed to allow exemption under sections 80P(2)(a)(i) and 80P(2)(d) for Assessment Year 2020-21.

Reopening of assessment under section 147 - Addition as unexplained cash under section 69A - Best judgment assessment under section 144 - Addition based on conjecture and guesswork is unsustainable

Reopening of assessment under section 147 - Prima facie material and newly received information - Validity of reopening the assessments for AY 2015-16 and 2016-17 - HELD THAT: - The Tribunal held that the information received from the ITO (Inv) regarding cash repayments of loan by the assessee constituted newly available material to the AO. The AO recorded reasons, obtained prior approval and re-opened the assessments to verify nature and source of the cash repayments. The assessee did not establish that the information was not new, or that the transactions had already been considered in the original returns. In these circumstances reopening on the basis of prima facie material was held to satisfy the test under section 147, having regard to the principle in Raymond Woollen Mills Ltd. v. ITO. The legal challenge to reopening was therefore rejected. [Paras 5]

Reopening of the assessments was valid and sustainable.

Addition as unexplained cash under section 69A - Addition based on conjecture and guesswork is unsustainable - Burden of proof on revenue to demonstrate absence of disclosed source - Sustenance of additions made under section 69A in the best judgment assessments framed under section 144 read with section 147 - HELD THAT: - On merits the Tribunal found that the Revenue failed to place cogent material to displace the assessee's plea that the cash repayments were from excess cash withdrawals. The AO had not demonstrated concretely that cash withdrawals were fully utilized for construction leaving no balance for repayments. The additions were therefore held to be founded on conjecture and guesswork, contrary to the principle that unexplained cash additions must rest on satisfactory evidence of an absence of source. Applying the principle in Umacharan Shaw Bros. v. CIT, the Tribunal set aside the impugned orders and deleted the additions made under section 69A. [Paras 6]

Additions under section 69A were deleted as being based on conjecture and unsupported by evidence.

Final Conclusion: The Tribunal upheld the validity of reopening the assessments but on merits set aside the best judgment assessments insofar as the additions under section 69A are concerned and deleted those additions; the appeals are allowed.

Permission to furnish Bank Guarantee - Security in lieu of payment - Satisfaction of the Assessing Officer

Permission to furnish Bank Guarantee - Satisfaction of the Assessing Officer - Application for permission to furnish a Bank Guarantee as security in the proceedings - HELD THAT: - The Court, upon hearing counsel and noting that there was no objection to the appellant's prayer, allowed the interim application. The appellant was permitted to furnish a Bank Guarantee as security, subject to it being to the satisfaction of the Assessing Officer. No further reasons were recorded in the order and the application was disposed accordingly.

Application allowed; appellant permitted to furnish Bank Guarantee to the satisfaction of the Assessing Officer and the application stands disposed of.

Final Conclusion: The interim application sanctioning the appellant to furnish a Bank Guarantee in lieu of other security was allowed by the Court, subject to acceptance by the Assessing Officer; the application is disposed of.

Maintainability of suit against public officer and mandatory notice under Section 80 CPC - Limitation for malicious prosecution suit to be filed within one year of acquittal - Two months' waiting period after Section 80 notice is mandatory - Non condonable nature of limitation for suits - Inapplicability of Section 155(2) of the Customs Act to override Section 80 CPC

Limitation for malicious prosecution suit to be filed within one year of acquittal - Maintainability of suit against public officer and mandatory notice under Section 80 CPC - Two months' waiting period after Section 80 notice is mandatory - Non condonable nature of limitation for suits - Whether the suit for malicious prosecution was maintainable when originally filed on the last day of limitation without a prior notice under Section 80 CPC and was re filed after service of notice and expiry of two months. - HELD THAT: - The Court accepted that a suit for malicious prosecution must be instituted within one year of the plaintiff's acquittal. The plaint was filed on the 365th day after acquittal, but no Section 80 notice had been issued at that time. Section 80 CPC requires that suits against the Government or public officers cannot be validly instituted until the two month period after service of the notice has expired. Because the notice was issued only after the first filing and the suit was re filed after the two month waiting period, the re filed suit fell beyond the prescribed one year limitation. The Court emphasised that limitation for such suits is not amenable to condonation and therefore the suit was time barred and not maintainable. [Paras 3, 4, 6, 10, 11]

The suit is not maintainable and is barred by limitation.

Inapplicability of Section 155(2) of the Customs Act to override Section 80 CPC - Maintainability of suit against public officer and mandatory notice under Section 80 CPC - Whether reliance on Section 155(2) of the Customs Act could validate the suit despite non compliance with Section 80 CPC. - HELD THAT: - The High Court had relied on Section 155(2) of the Customs Act to hold the suit within time. This Court held that maintainability must be considered with reference to Section 80 CPC when a suit lies against the Government or public officer. Section 155(2) cannot be read so as to displace the mandatory prior notice and two month waiting requirement of Section 80 CPC, and the High Court erred in upholding maintainability on the basis of Section 155(2). [Paras 5, 7, 9, 11]

Section 155(2) of the Customs Act does not relieve the plaintiff of the mandatory notice and waiting requirement under Section 80 CPC; the High Court's view to the contrary is set aside.

Final Conclusion: The High Court's decree holding the suit maintainable is quashed; the appeal is allowed and the suit is declared barred by limitation for want of compliance with the mandatory Section 80 CPC notice and waiting period.

Classification of goods - interpretation of tariff headings - General Rules for Interpretation of the Import Tariff - rule 3(a) of General Rules for Interpretation of the Import Tariff - residuary entry - scope of show cause notice - section 114A of the Customs Act, 1962 - misdeclaration and confiscation under section 111(m) of the Customs Act, 1962

Classification of goods - interpretation of tariff headings - rule 3(a) of General Rules for Interpretation of the Import Tariff - residuary entry - Whether the imported 'medical grade monitor' is classifiable under heading 8528 rather than heading 9018 - HELD THAT: - The Tribunal found that the impugned goods are indisputably 'monitors' and that heading 8528 comprehensively covers monitors of every kind, including the imported items. The show cause notice proposed classification under the tariff description corresponding to tariff item 8528 5900 and invoked rule 3(a) of the General Rules for Interpretation of the Import Tariff to prefer the more specific heading. Given the absence of a distinct subdivision separating monitors used with data-processing machines from other monitors, the adopted heading (8528) was not a mere residual entry and was properly preferred over the claimed medical-instruments heading. The Tribunal therefore upheld the classification adopted in the show cause notice and confirmed in the impugned order. [Paras 6, 7]

Classification upheld: goods classifiable under heading 8528 and not under heading 9018.

Scope of show cause notice - General Rules for Interpretation of the Import Tariff - section 114A of the Customs Act, 1962 - misdeclaration and confiscation under section 111(m) of the Customs Act, 1962 - Whether the adjudicating authority could proceed beyond the specific proposal in the show cause notice and whether invocation of section 114A and confiscation under section 111(m) was justified - HELD THAT: - The Tribunal observed that the show cause notice confined the dispute to the question of tariff classification under rule 3(a). Notwithstanding this limited scope, the adjudicating authority proceeded to apply rule 1 and other rules, and ventured to suggest confiscation and penal consequences under section 111(m) and section 114A. The Tribunal held that adjudication must remain within the framework of the show cause notice and that a finding of misdeclaration or willful misstatement (necessary to sustain confiscation or invocation of section 114A) was not recorded. Consequently, the matter was remanded to the original authority to apply its mind and make specific findings on whether section 114A could be invoked and on the manner in which any misdeclaration or intent to evade duty had occurred, in light of the proposal actually made in the show cause notice. [Paras 6, 8, 9]

Proceedings remitted for limited purpose: original authority to reconsider and record specific findings on invocation of section 114A and any misdeclaration/penal consequences, within the scope of the show cause notice.

Final Conclusion: The Tribunal upheld the classification of the imported monitors under heading 8528 but remitted the matter to the original authority for limited reconsideration on whether penal provisions (section 114A and confiscation under section 111(m)) can be validly invoked, directing that specific findings on misdeclaration or willful evasion be recorded within the scope of the show cause notice.

Effect of Insolvency and Bankruptcy Code on pending appellate proceedings - no annulling of appellate order without hearing on merits - abatement of proceedings under rule 22 of CESTAT Procedure Rules, 1982 - confiscation under section 111 of the Customs Act, 1962 - personal penalty under section 112 contingent on finding of confiscation and individual culpability

Effect of Insolvency and Bankruptcy Code on pending appellate proceedings - no annulling of appellate order without hearing on merits - Whether the impugned orders could be set aside merely because the appellant-importer underwent proceedings under the Insolvency and Bankruptcy Code, 2016. - HELD THAT: - The Tribunal held that the existence of insolvency proceedings does not furnish a ground to annul the impugned orders without hearing the appeals on their merits, limitation or maintainability. Section 129B (as quoted) permits the Appellate Tribunal to confirm, modify, annul or remit after giving parties an opportunity of being heard; accordingly there is no scope for setting aside the orders solely because another law (IBC) operated in respect of the appellant. Although IBC may affect recovery or enforcement consequences, that consequences lie in a different jurisdiction and do not displace the appellate adjudicatory process under the Customs Act. The appellants could have withdrawn or not prosecuted their appeals if they wished; their corporate existence in a different form means determination on eligibility under the notification may have continuing application. [Paras 4]

The contention that the impugned orders must be set aside by reason of IBC proceedings is rejected; the appeals cannot be annulled on that ground without adjudication.

Abatement of proceedings under rule 22 of CESTAT Procedure Rules, 1982 - Whether the appeals filed by M/s Murli Industries should be abated in view of the insolvency proceedings and the appellants not pressing merits. - HELD THAT: - In light of the insolvency proceedings and the fact that the Learned Counsel did not press the merits of the challenge to confiscation and duty liability, the Tribunal invoked rule 22 of its Procedure Rules to abate the appeals so far as they relate to the corporate appellant. This is a procedural disposition limited to the corporate appellant's pending appeals and does not amount to annulling the impugned orders on merits. [Paras 5]

Proceedings in respect of the appeals filed by M/s Murli Industries are abated.

Confiscation under section 111 of the Customs Act, 1962 - personal penalty under section 112 contingent on finding of confiscation and individual culpability - Whether penalties under section 112 of the Customs Act, 1962 imposed on the two individual appellants are sustainable without a specific adjudication of their individual roles in import, bill of entry filing or procurement of end-use certificates. - HELD THAT: - The Tribunal noted that the first appellate authority sustained penalties on the basis that the two individuals, as managerial officers, were aware of the misuse of imported waste paper and had obtained end-use certificates fraudulently. However, the impugned orders do not specify how each individual contributed to furnishing the end-use certificate or the filing of the bill of entry; the imposition of personal penalties under section 112 must follow a determination of how the individuals were responsible for import-related offences and confiscation. Given that no exercise was undertaken to connect the individuals to the acts leading to confiscation, the statutory precondition for fastening personal penalty was not satisfied. Consequently the penalties could not be upheld. [Paras 6, 7]

Penalties imposed under section 112 on Shri Murli Shobhagamal Maloo and Shri Nandlal B Maloo are set aside for want of requisite findings on their individual culpability.

Final Conclusion: The Tribunal refused to annul the impugned orders solely on account of insolvency proceedings; the corporate appellant's appeals were abated under rule 22, and personal penalties imposed under section 112 on the two individuals were set aside for lack of specific findings linking them to the acts of importation, bill of entry filing or fraudulent procurement of end-use certificates.

Provisional release of seized goods - BIS certification requirement under the Steel and Steel Products (Quality Control) Order, 2020 - prospective effect of change in import policy - Foreign Trade Policy, 2023 - effect of policy change on imports - uniformity of administrative practice across Customs Zones - inspection and testing by CRCL and Chartered Engineer - evidentiary sufficiency

BIS certification requirement under the Steel and Steel Products (Quality Control) Order, 2020 - prospective effect of change in import policy - Foreign Trade Policy, 2023 - effect of policy change on imports - Whether the appellants' consignments filed during July, 2023 to September, 2023 could be refused provisional release for want of BIS certification under the QCO or the Circular dated 20.10.2023 - HELD THAT: - The Tribunal held that the QCO dated 22.12.2020 lists primary stainless steel items and does not specifically mention the non-prime items described in the bills of entry. The Circular dated 20.10.2023 enlarged the scope to require importers to apply for clarification for all steel consignments, but the appellants' B/Es were filed before issuance of that circular. Applying the prospective-effect principle in FTP 2023, a change in import policy is generally prospective from date of notification and does not affect imports already made or B/Es already filed. Consequently the enlarged requirement in the Circular cannot be applied retrospectively to consignments for which B/Es were filed prior to 20.10.2023, and therefore provisional release cannot be denied on that ground. [Paras 5]

The QCO/Circular requirement for BIS certification as enlarged by the 20.10.2023 circular is prospective and does not justify refusing provisional release of consignments for which B/Es were filed in July-September 2023.

Uniformity of administrative practice across Customs Zones - Whether the view taken by another Customs Zone in releasing imports without insisting on NOC could be disregarded by the jurisdictional Commissioner without valid reasons - HELD THAT: - The Tribunal observed that a view taken by one Customs Zone (release without insisting for NOC) cannot be lightly contradicted by another Zone unless valid reasons are given explaining why that view is not applicable. Administrative consistency between Zones is a relevant consideration when similar consignments and timelines are involved, and departure from another Zone's practice requires justification. [Paras 6]

The jurisdictional Commissioner cannot ignore the view taken by another Customs Zone without specifying valid reasons for a contrary approach.

Inspection and testing by CRCL and Chartered Engineer - evidentiary sufficiency - Whether reports of CRCL and the Chartered Engineer established the exact nature, composition or market value of the imported goods so as to justify continued non-release - HELD THAT: - The CRCL reported that it could not ascertain whether the samples were 'end cut, rejected CR strip in coil form' and returned remnant samples; the Chartered Engineer noted that the goods did not fall within the standard chemical composition range of any specific SS grade and estimated a market rate, but no definitive conclusion on nature/composition or true market value was drawn. On this basis the Tribunal found the investigative/testing material inconclusive and insufficient to justify denial of provisional release. [Paras 7]

The test and inspection reports were inconclusive on the exact nature/composition and market value of the goods and therefore do not justify withholding provisional release.

Final Conclusion: Appeals allowed to the extent that appellants are entitled to provisional release of the seized consignments without insisting on BIS certification; the order is confined to provisional release and does not preclude further departmental proceedings.

Right of cross-examination - natural justice - procedure for revoking license or imposing penalty under CBLR, 2018 - reliance on statements recorded under Section 108 of the Customs Act, 1962 - liability of a Customs Broker for acts of its employee/associate

Right of cross-examination - procedure for revoking license or imposing penalty under CBLR, 2018 - natural justice - reliance on statements recorded under Section 108 of the Customs Act, 1962 - Whether the adjudication revoking the Customs Broker licence is vitiated by failure to provide statements/inquiry report and denial of opportunity for cross-examination in breach of Regulation 17 of CBLR, 2018 and principles of natural justice. - HELD THAT: - The Tribunal found that Regulation 17(4)-(7) of CBLR, 2018 prescribes the procedure for inquiry, requires provision of inquiry material and affords the Customs Broker the right to cross-examine witnesses whose statements are relied upon, and mandates recording reasons if the Inquiry Officer denies that right. The appellant had specifically requested copies of statements and opportunity to cross-examine persons whose Section 108 statements were relied upon, but no copies were furnished and no reasons were recorded for refusing cross-examination. Established authority relied upon in the judgment confirms that denial of opportunity to cross-examine a witness relied upon in adjudication vitiates the order unless exceptional circumstances justify denial. The Inquiry Officer did not discharge the onus under Regulation 17(3)/(4), and the Commissioner proceeded to revoke the licence without curing this procedural defect. This denial caused serious prejudice to the appellant and rendered the impugned order unsustainable. [Paras 13, 17]

The revocation of licence and related punitive orders are vitiated for failure to comply with Regulation 17 and denial of the right of cross-examination; the impugned order cannot be sustained on this ground.

Liability of a Customs Broker for acts of its employee/associate - procedure for revoking license or imposing penalty under CBLR, 2018 - natural justice - Whether the Customs Broker can be held liable and have its licence revoked where records show the broker was not appointed, the documents did not bear the broker's name, and the alleged acts were by a different person. - HELD THAT: - The Tribunal observed that the licence is issued to the appellant entity and that a Customs Broker and an employee or another person are distinct legal entities under the CBLR definition. The record shows that import/export documents did not bear the appellant's name and that the operations were undertaken by a different person in his personal capacity. In the absence of evidence of appointment or authorization of the appellant to act as Customs Broker for the transactions in question, the adjudicating authority erred in treating the appellant as responsible for those acts. That separate-entity distinction, together with the lack of documents linking the appellant to the transactions, undermines the basis for licence revocation. [Paras 18, 19, 20]

The appellant cannot be held liable for the acts of the other person in the absence of appointment/authorization and documentary link; licence revocation on this basis is unsustainable.

Final Conclusion: The Tribunal set aside the impugned order revoking the Customs Broker licence, forfeiting the security deposit and imposing penalty, holding that procedural breaches under Regulation 17 (including denial of cross-examination) and the absence of any appointment or documentary link between the appellant and the transactions rendered the revocation and penalties legally unsustainable; the appeal is allowed with consequential relief.

Classification of petroleum products - ASTM D86 standard test method - sub heading Note 4 to Chapter 27 - burden to prove testing method and lab records - right to cross examination of the Chemical Examiner - benefit of exemption under Notification No. 21/2002 Cus.

Classification of petroleum products - sub heading Note 4 to Chapter 27 - benefit of exemption under Notification No. 21/2002 Cus. - Imported goods were held to be 'Naphtha' and not 'other' petroleum products for classification and entitlement to exemption. - HELD THAT: - The tribunal examined the test reports and records produced by the department and the appellant and applied sub heading Note 4 to Chapter 27 which requires use of the ASTM D86 method to determine whether 90% or more by volume distils at 210 C. The factual matrix showed that the department's laboratory records did not specify that the ASTM D86 procedure was followed, while the appellant produced a quality certificate from the port of loading stating the test method as ASTM D86. Given the absence of contemporaneous lab documentation establishing compliance with the prescribed test method, the tribunal was not persuaded by the adjudicating authority's conclusion that the goods were not Naphtha and therefore concluded the classification as 'Naphtha' was justified. [Paras 4]

Finding that the goods are 'Naphtha' and entitled to the classification relied upon by the appellants.

ASTM D86 standard test method - burden to prove testing method and lab records - The department failed to demonstrate that the prescribed ASTM D86 test conditions and procedures were followed in testing the samples. - HELD THAT: - The tribunal reviewed the 'Standard Test Method for Distillation of Petroleum Products at Atmospheric Pressure' (ASTM D86) and the laboratory registers, reports and cross examination transcript. It found that the laboratory records and reports produced did not record the specific procedural requirements (apparatus preparation, sampling, storage, conditioning and test conditions) mandated by ASTM D86. Oral assertions by the Chemical Examiner that the method was followed were unsupported by contemporaneous records, and therefore inadequate to discharge the burden of proof required to displace the appellants' classification. [Paras 4]

The absence of recorded compliance with ASTM D86 in the laboratory documentation rendered the department's reliance on its test results unsustainable.

Right to cross examination of the Chemical Examiner - burden to prove testing method and lab records - The adjudicating authority's refusal to permit further cross examination on verification of lab records was a procedural defect that prejudiced the appellants' right to a fair adjudication. - HELD THAT: - The tribunal noted that it had earlier remanded the matter for cross examination of the Chemical Examiner to verify lab records proving that ASTM D86 was followed. During cross examination, the witness's oral assertions were not corroborated by the lab records, and the appellants sought further questions to confront the witness and probe procedural aspects of the test method. The Commissioner declined additional oral questioning and simply afforded an opportunity to file written submissions, which the tribunal found inconsistent with judicial discipline in adversarial proceedings. Because the requested further cross examination was material to establishing whether the prescribed test was conducted, the denial impaired the appellants' ability to meet the burden of proof and required setting aside the adjudication. [Paras 4]

Procedural failure to allow adequate cross examination and verification of lab records vitiated the adjudication.

Final Conclusion: Impugned order set aside; appeals allowed and classification in favour of the appellants upheld with consequential relief as per law, on the grounds that the department did not establish compliance with the ASTM D86 test method and procedural opportunity for adequate cross examination was not afforded.

Dismissal of appeal for want of interference with impugned judgment - examination of contentions against the Corporate Insolvency Resolution Process - adjudicating authority to independently consider available issues - disposal of pending applications

Dismissal of appeal for want of interference with impugned judgment - The appeal was dismissed for lack of any good ground to interfere with the impugned judgment. - HELD THAT: - The Supreme Court found no sufficient reason to intervene in the judgment under challenge and therefore refused to disturb the impugned order. The Court expressly recorded that it did not find any good ground or reason to interfere, and on that basis the appeal was dismissed.

Appeal dismissed.

Examination of contentions against the Corporate Insolvency Resolution Process - adjudicating authority to independently consider available issues - disposal of pending applications - The appellant's issues and contentions against the Corporate Insolvency Resolution Process are to be examined independently by the adjudicating authority; pending applications stand disposed of. - HELD THAT: - Notwithstanding the dismissal of the appeal, the Court clarified that any issues or contentions available to the appellant in relation to the Corporate Insolvency Resolution Process remain open for independent consideration by the adjudicating authority. The Court directed that such contentions be examined afresh by the appropriate forum. Further, any pending applications arising from the matter were ordered to be disposed of.

Matters related to challenges against the CIRP remitted to the adjudicating authority for independent consideration; pending applications disposed of.

Final Conclusion: The Supreme Court dismissed the appeal for want of grounds to interfere with the impugned judgment, while directing that the appellant's available contentions against the Corporate Insolvency Resolution Process be independently examined by the adjudicating authority and disposing of any pending applications.

Clean Slate Theory - commercial wisdom of the Committee of Creditors - duty of the Adjudicating Authority under Section 31 to satisfy compliance with Section 30(2) - Explanation I to Section 30(2) - obligation to be fair and equitable to operational creditors - duty of the Interim Resolution Professional/Resolution Professional to collect and disclose relevant information - liability of promoters/suspended board for suppression of creditor claims and lifting of corporate veil - operational creditor's right to property and access to a neutral forum

Clean Slate Theory - operational creditor's right to property - Whether the petitioner can escape payment of pre CIRP electricity arrears to TANGEDCO by relying on the approved resolution plan - HELD THAT: - The court held that the Clean Slate Theory does not operate to extinguish the claim of an undisclosed operational creditor where the corporate debtor (an MSME) participated in the CIRP, failed to disclose the liability to the RP, and the same promoters continued in management after approval of the resolution plan. The Clean Slate Theory protects a third party successful resolution applicant from unforeseen claims, but it is not a licence to permit suppression of liabilities by the suspended board or promoters and thereby defeat the rights of operational creditors. In such circumstances rights of the undisclosed operational creditor remain enforceable against the corporate debtor and against the promoters/suspended board who failed in their disclosure duty. [Paras 49, 50]

Petitioner cannot rely on the resolution plan to extinguish TANGEDCO's pre CIRP arrears; the petition is dismissed as against that claim.

Duty of the Adjudicating Authority under Section 31 to satisfy compliance with Section 30(2) - commercial wisdom of the Committee of Creditors - Explanation I to Section 30(2) - obligation to be fair and equitable to operational creditors - Extent of judicial scrutiny by the Adjudicating Authority of a resolution plan approved by the CoC and the limits of the doctrine of commercial wisdom - HELD THAT: - The court restated that while commercial wisdom of the CoC commands primacy, it is not immune from scrutiny. The Adjudicating Authority must satisfy itself that the resolution plan complies with Section 30(2), including Explanation I, and that the CoC's decision was based on complete and relevant information. The Rajagopalan line of authority requires that the CoC's commercial wisdom be informed by full disclosure; absent that, the Adjudicating Authority may refuse approval. The court identified circumstances where the Adjudicating Authority may withhold approval: incomplete information or lack of due diligence by IRP/RP, lack of transparency to operational creditors, failure to provide the liquidation minimum, or absence of fair and equitable treatment. [Paras 31, 32, 46]

Adjudicating Authority has a revisional type duty to ensure Section 30(2) compliance and may refuse approval where the CoC's assent is vitiated by incomplete information or unfair treatment of operational creditors.

Duty of the Interim Resolution Professional/Resolution Professional to collect and disclose relevant information - transparency as a check against collusion - Whether an operational/statutory creditor must necessarily file a claim pursuant to the public notice for its dues to be considered, and the obligations of IRP/RP and the suspended board to identify creditors - HELD THAT: - The court held that statutory or operational claims need not be lost merely because a creditor did not respond to the public notice. The IRP/RP and the suspended board have a statutory and professional duty to collect, collate and disclose all relevant liabilities when preparing the statement of assets and liabilities and the Information Memorandum. A public notice is a mode of collecting claims but not the sole mode; failure of IRP/RP or suppressed disclosures by the suspended board cannot be permitted to extinguish creditor rights. Transparency and due diligence by IRP/RP are essential to ensure fairness to operational creditors. [Paras 37, 38, 41, 42, 44]

Operational/statutory creditors are not automatically barred for not responding to the public notice where IRP/RP or suspended board failed in their disclosure/due diligence obligations; IRP/RP must gather and disclose relevant information.

Liability of promoters/suspended board for suppression of creditor claims and lifting of corporate veil - Consequences of non disclosure of creditors by the suspended board and whether promoters/directors remain liable for undisclosed claims - HELD THAT: - The court concluded that where the suspended board had the opportunity to disclose creditors and failed to do so, and promoters/directors continue in management after the resolution, the Clean Slate Theory will not extinguish claims against the promoters. In such cases the promoters/suspended board may be held personally liable, jointly and severally, to undisclosed creditors; corporate veil can be pierced where there is suppression, collusion or abuse of the IBC process to defeat creditor rights. Section 32 A protections for managers do not shelter those who conspire to defeat the statute's purpose. [Paras 31, 49]

Promoters/suspended board who suppressed creditor claims remain liable to undisclosed creditors and may face civil and criminal proceedings; corporate veil may be lifted in such cases.

Final Conclusion: The writ petition is dismissed. The court held that TANGEDCO's pre CIRP claim is not extinguished by the approved resolution plan because the liability was undisclosed and the same promoters continued in management; the Adjudicating Authority must ensure Section 30(2) compliance and the IRP/RP and suspended board owe a duty of full disclosure and due diligence to identify creditors. No order as to costs.

Compliance with Section 41A Cr.P.C. - Arrest with warrant under Section 41(2) Cr.P.C. - Arrest without warrant and conditions under Section 41(1)(b)(ii) Cr.P.C. - Non-cooperation/evasive replies as ground for custodial interrogation - Malice in law/insurance arrest - Judicial remand and scope of court's satisfaction on case diary - Inherent power of High Court under Article 226 and Section 482 Cr.P.C. to prevent abuse of process

Compliance with Section 41A Cr.P.C. - Non-cooperation/evasive replies as ground for custodial interrogation - Whether the CBI was required to serve a prior notice under Section 41A Cr.P.C. and whether the petitioner's alleged evasive and non-cooperative replies justified arrest after interrogation - HELD THAT: - The Court examined the statutory scheme introduced by Section 41A Cr.P.C. and its protective object, noting that a notice is required where arrest is not otherwise necessary and that continued compliance with such notice ordinarily bars arrest unless reasons are recorded. The factual sequence-permission sought from the Special Judge to interrogate the petitioner in custody, interrogation conducted on 24.06.2024 and the application for arrest lodged thereafter-was held to fall within the statutory framework. The Court accepted that Section 41A does not create an absolute bar to arrest where, after compliance, the police officer records cogent reasons for arrest; and that interrogation under Section 41A may legitimately lead to an opinion that arrest is necessary for reasons to be recorded. The Court further held that the term "non-cooperative" or "evasive" cannot by itself be a pretext for compelling self-incrimination, but where such descriptors are qualified and supported by particulars in the investigation and case diary (including documentary and witness material), they may form part of justiciable reasons for arrest and custodial interrogation. Having considered the Application for interrogation and the subsequent material placed before the Special Judge, the High Court found no illegality in the course adopted by the CBI under Section 41A. [Paras 79, 80, 81, 82, 102]

Section 41A requirements were not violated in a manner that rendered the arrest illegal; interrogation under Section 41A followed by recorded reasons for arrest was permissible on the material before the court.

Arrest with warrant under Section 41(2) Cr.P.C. - Arrest without warrant and conditions under Section 41(1)(b)(ii) Cr.P.C. - Whether the arrest of the petitioner complied with the law where the CBI procured court permission and effected arrest under the Court's orders rather than by unilateral warrantless arrest - HELD THAT: - The Court distinguished arrests made without warrant (attracting the detailed conditions of Section 41(1)(b)(ii)(a)-(e)) from an arrest effected pursuant to court permission or under Section 41(2). It observed that the additional conditions applicable to warrantless arrests are not applicable where arrest is ordered by a Magistrate or court. The I.O. first sought and obtained leave to interrogate the petitioner in custody, then filed an application for arrest which detailed prima facie evidence, the aspects on which the petitioner was evasive and the need for custodial confrontation. The Special Judge considered the case diary, witness statements and documentary material and recorded reasons in permitting arrest and remand. The High Court accepted that the arrest proceeded pursuant to the Court's order and that the requirements applicable to Section 41(1) warrantless arrests did not apply to an arrest authorised by the court under Section 41(2). The Court held that the material placed before the Special Judge sufficed to show reasonable suspicion and justification for remand. [Paras 98, 100, 101, 104, 106]

The arrest effected with the Special Judge's permission complied with Section 41(2) Cr.P.C.; the additional safeguards for warrantless arrests were not attracted and the order authorising arrest and remand was not shown to be illegal.

Judicial remand and scope of court's satisfaction on case diary - Inherent power of High Court under Article 226 and Section 482 Cr.P.C. to prevent abuse of process - Whether remand to police custody and subsequently to judicial custody was justified on the materials placed before the Special Judge and whether the High Court should interfere under its extraordinary jurisdiction - HELD THAT: - The Court reiterated that courts must ensure arrest and remand powers are not abused but should also respect the investigating agency's prerogative. The Special Judge examined the case diary, the interrogation report and incriminating material (including witness statements, electronic chats and documentary trail) and recorded reasons for police remand and later judicial custody. The High Court reviewed those materials and the Special Judge's reasoning and found that custodial interrogation and judicial remand were sought to confront the petitioner with evidence, to unearth the conspiracy and trace money movement, and to prevent tampering and influencing of witnesses. The High Court observed that interference under Article 226/Section 482 is warranted where arrest/remand is arbitrary or devoid of justiciable reasons; on the facts, no such abuse was made out. [Paras 99, 100, 101, 107, 116]

The remands were adequately justified on the material before the Special Judge and did not warrant interference under Article 226 or Section 482.

Malice in law/insurance arrest - Non-cooperation/evasive replies as ground for custodial interrogation - Whether the arrest was an exercise of malice in law or an 'insurance' arrest to pre-empt the petitioner's release in connected proceedings - HELD THAT: - The petitioner's counsel argued the arrest was an insurance arrest and bore malice because the FIR was two years old without earlier arrest, and because of co-pending ED proceedings and interim releases. The Court examined the prosecution's explanation that material against the petitioner crystallised over time, sanction under Section 17-A was obtained in April 2024, and further incriminating material justified investigation and arrest thereafter. The Court accepted the prosecutorial explanation that steps were taken cautiously given petitioner's high office and that witnesses came forward only after the arrest, some turning approver, indicating the investigation progressed legitimately rather than being malicious. The timing of earlier statements about imminent charge-sheeting did not prove completion of investigations or malice. On the record, the Court found no indicia of malice sufficient to vitiate the arrest. [Paras 109, 112, 114, 115, 116]

No malice in law or insurance arrest was established; the arrest was not shown to be a pretext to frustrate petitioner's release in other proceedings.

Final Conclusion: The Writ Petition seeking to declare the petitioner's arrest and subsequent remands illegal is dismissed. The High Court found that interrogation, arrest (pursuant to court permission) and subsequent remands were supported by justiciable reasons on the material placed before the Special Judge and did not amount to abuse of process.

Unjust enrichment - Refund of service tax on amounts refunded by credit notes - Taxable value - gross amount charged - Burden of tax and passing on

Refund of service tax on amounts refunded by credit notes - Unjust enrichment - Entitlement to refund of service tax paid on additional charges which were subsequently refunded to customers by issuance of credit notes. - HELD THAT: - The Tribunal found as a fact that the appellant had issued credit notes to its customers for the additional service charge together with the service tax charged thereon, and that the customers did not take Cenvat credit of the tax so refunded. Applying established precedents of this Bench and other courts, the Tribunal held that where a service provider returns amounts charged (by credit note) and the recipient has not availed the tax benefit, the doctrine of unjust enrichment cannot be invoked to deny refund to the provider. The Tribunal noted that refund claims in such circumstances are maintainable because the incidence of tax has not been passed on to any other party and the net gross consideration for the service, as reflected after issuance of credit notes, does not include the refunded amount. Reliance on earlier decisions of this Bench and the Allahabad High Court supported the conclusion that issuance of a credit note is sufficient evidence of refund and disentitles the department from invoking unjust enrichment against the claimant. [Paras 4, 6, 7]

Refund of the service tax paid on the additional charges, which were refunded to customers by credit notes and not passed on, is allowable to the appellant.

Taxable value - gross amount charged - Burden of tax and passing on - Application of the statutory test of taxable value (gross amount charged) to the additional service charges which were subsequently reversed. - HELD THAT: - The Tribunal examined Section 67(1)(i) of the Finance Act, 1994, which fixes service tax liability on the gross amount charged for rendering a service. It found that because the additional charges were refunded by the appellant, the effective gross amount charged for the service was reduced accordingly. Consequently, service tax paid on the additional charges that were refunded did not form part of the taxable value of the service and became refundable. The Tribunal treated the Ministry's direction (prohibiting charging of unapproved additional charges) and the consequent refunds as relevant to establish that the extra amounts were not part of the final gross consideration for the taxable service. [Paras 4, 5, 7]

Service tax paid on additional charges that were refunded does not form part of the gross taxable value and is refundable to the appellant.

Final Conclusion: The impugned orders rejecting the refund claim are set aside; the appellant is entitled to refund of the service tax paid on the additional charges which were refunded to customers by issuance of credit notes and where the customers did not take credit, accordingly the appeal is allowed.

Business Auxiliary Service - Maintenance and Handling Service - Service tax liability - inclusive valuation under Section 67(2) of the Finance Act, 1994

Business Auxiliary Service - Maintenance and Handling Service - The services rendered by the appellant do not fall within the definition of "Business Auxiliary Service" and are not liable to service tax under that category. - HELD THAT: - The Tribunal examined the terms of the agreement dated 19.08.2006 and noted that the appellant was engaged as a temporary Maintenance & Handling Contractor to operate a Company Owned Company Operated outlet until appointment of a dealer. The agreement clauses show that the outlet, its furniture and equipment remained the property of IOCL and that ownership, operational management, marketing, advertisement, quality control and other managerial decisions were retained by IOCL. The appellant's obligations were limited to caretaking, maintaining cleanliness and displays, taking delivery of products, keeping prescribed sales records and assisting IOCL in monitoring - activities directed to maintenance and routine operation of the outlet rather than promotion, marketing or sale on behalf of the client. Applying the statutory definition of Business Auxiliary Service, none of the contractual functions performed by the appellant fall within the sub-clauses relating to promotion, marketing, sale or related auxiliary services. Consequently, the demand framed and confirmed under the category of Business Auxiliary Service was held unsustainable and set aside. [Paras 6]

Demand of service tax under the category of Business Auxiliary Service set aside.

Service tax liability - Consequences of quashing the service tax demand on interest and penalties. - HELD THAT: - Having held that the impugned demand of service tax under Business Auxiliary Service is not sustainable, the Tribunal concluded that there is no basis for recovery of interest or imposition of penalties that were confirmed in the impugned order. The Tribunal therefore negated the ancillary demands that flowed from the primary demand. [Paras 6]

Confirmed interest and penalties set aside as consequential to the quashed service tax demand.

Service tax liability - Application for bringing additional documents on record. - HELD THAT: - The miscellaneous application filed by the appellant seeking to place additional documents on record was considered and disposed of by the Tribunal in the course of allowing the appeal. [Paras 8]

Miscellaneous application for additional documents disposed of.

Final Conclusion: The impugned order confirming demands of service tax (under Business Auxiliary Service), interest and penalties for the period 2007-08 to 2010-11 is set aside and the appeal is allowed; the application for adducing additional documents is disposed of.

Taxability of transportation charges recovered from sellers under Goods Transport Agency service - Characterisation of payment borne by farmers versus payment by the manufacturer - Reverse charge mechanism - Application of precedent

Taxability of transportation charges recovered from sellers under Goods Transport Agency service - Characterisation of payment borne by farmers versus payment by the manufacturer - Reverse charge mechanism - Application of precedent - Whether the appellant is liable to pay service tax on transportation charges which were paid to transporters and subsequently recovered by deduction from amounts payable to cane growers. - HELD THAT: - The Tribunal found that transportation charges were in substance borne by the farmers and the appellant merely deducted the agreed transport charges from the purchase price payable to farmers and paid those amounts to the transporters. On that factual matrix the appellant could not be regarded as having paid for the transportation so as to attract service tax liability. If the appellant had itself borne and paid the transportation charges, the reverse charge mechanism could have been relevant; however, where the amount is deducted from the farmer's sale proceeds and not paid by the appellant as a principal, it cannot be treated as appellant's taxable payment. The Tribunal applied its earlier decision in Shreenath Mhaskoba Sakhar Karkhana Ltd. and related precedents which held similar facts in favour of the seller/manufacturer, and concluded that the impugned demand was unsustainable. [Paras 6, 7]

The demand for service tax on the transportation charges is set aside and the appeal is allowed with consequential relief as per law.

Final Conclusion: The Tribunal held that where transportation costs are borne by the farmers and merely deducted by the appellant from the purchase price and paid to transporters, such amounts do not attract service tax liability; the impugned order confirming demand is set aside for the period specified.

Manpower Recruitment and Supply Agency Service - Reverse Charge Mechanism - Contract for specific jobs/process of manufacture not conversion to manpower supply - Cenvat Credit - Mode of payment immaterial for service classification

Manpower Recruitment and Supply Agency Service - Contract for specific jobs/process of manufacture not conversion to manpower supply - Mode of payment immaterial for service classification - Classification of services rendered by the contractor for miscellaneous jobs as not constituting Manpower Recruitment and Supply Agency Service and therefore not liable to Service Tax on reverse charge basis in the hands of the appellant for the period 01.07.2012 to 31.03.2013. - HELD THAT: - The Tribunal applied its earlier binding view in the appellant's own matter and relied on Board circulars and consistent precedents to conclude that where a contractor is engaged to carry out specific jobs (scaffolding, ducting, removal of spillage, housekeeping, packing/process related tasks) and the labour remains under the control and supervision of the contractor, the contract does not convert into a manpower supply service merely because payment was made on a lumpsum basis. The mode of payment was held irrelevant to the essential character of the contract. In these circumstances the activity could not be treated as supply of manpower attracting reverse charge in the hands of the appellant; the labour was for miscellaneous/production related jobs and under contractor's control, hence classification as manpower supply was rejected and the impugned demand under RCM was set aside for the period in question.

Service rendered by M/s Bhola Enterprise for the stated period is not Manpower Recruitment and Supply Agency Service; reverse charge demand on the appellant is disallowed for 01.07.2012 to 31.03.2013 and the appeal is allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, holding that the contractor's engagement for specific miscellaneous jobs did not constitute manpower supply and therefore the appellant was not liable to Service Tax under reverse charge for the period 01.07.2012 to 31.03.2013; consequential relief was granted.

Vagueness of show cause notice - onus on department to specify taxable category - indivisible works contract doctrine - segregation of service component - taxability of design services - classification of taxable service - reverse charge

Vagueness of show cause notice - onus on department to specify taxable category - The show cause notice was void for being vague and non specific in simultaneously alleging classification under two taxable categories and failing to specify the precise taxable service. - HELD THAT: - The Tribunal examined the SCN which concurrently alleged that the impugned services were classifiable as both 'Design Services' and 'Commercial and Industrial Construction Service' (paras 13-14). Applying settled principles that the department must give clear and specific notice of the particular taxable service sought to be charged, the Tribunal held that a notice which fails to specify the precise classification and instead proceeds on inconsistent alternative classifications is void ab initio. Reliance was placed on precedents emphasising that an assessee must be put to clear notice of the exact taxable entry so that it can meet the allegation; vague or contradictory allegations render the notice and consequent adjudication invalid (paras 13-16). [Paras 13, 14, 16]

SCN held void ab initio; demand founded on such notice cannot be sustained.

Indivisible works contract doctrine - segregation of service component - reverse charge - The payments described as 'design charges' formed part of an indivisible contract for supply of goods with integral services and could not be separately vivisected to attract reverse charge on an independent design service. - HELD THAT: - On scrutiny of the purchase order and contract terms (clause 9 reproduced), the Tribunal found that supply of Kalzip sheets was accompanied by ancillary services - design, drawings, detailing, calculations, test certificates, technical support and deputation of technicians - which were integral and inseparable from the contract (paras 10-11). The contract did not envisage standalone supply of design services and the department failed to show that the remittances were only for an independent design service. Therefore an attempt to artificially segregate the design component and levy service tax under reverse charge was unsustainable (paras 11-12). [Paras 10, 11, 12]

Design component held integral to an indivisible contract; demand based on vivisection rejected.

Taxability of design services - classification of taxable service - Even if a service were assumed, the disputed activity did not fall within the statutory definition of 'Design Services' relied upon by the department. - HELD THAT: - The Tribunal considered the statutory definition of 'Design Services' and the corresponding entry for 'taxable service' and observed that the definition covers designing of specified items such as furniture, consumer products, industrial products, packages, logos, graphics, websites and production of three dimensional models (para 17). The Kalzip aluminium roofing sheets and related structural items were found to be structural materials made for a specific project and not the kinds of goods envisaged by the 'Design Services' definition. The Commissioner's contrary reasoning was held unsubstantiated, beyond the scope of the SCN and based on conjecture (paras 17-19). [Paras 17, 18, 19]

Disputed activity excluded from 'Design Services' definition; classification and demand under that category unsustainable.

Final Conclusion: The impugned Order in Original confirming service tax, interest and penalties was set aside: the SCN was void for vagueness, the payments were part of an indivisible contract and in any event did not fall within the statutory definition of 'Design Services'; the appeal is allowed with consequential relief.

Works Contract Service - Commercial or Industrial Construction Service - application of Larsen & Toubro principle that services rendered along with supply of materials constitute Works Contract - exemption for services to a local authority under Notification No. 25/2012 ST dated 20.06.2012 - extended period of limitation for wilful evasion not invokable

Works Contract Service - Commercial or Industrial Construction Service - application of Larsen & Toubro principle that services rendered along with supply of materials constitute Works Contract - Classification of the appellant's services as Works Contract Service and not as Commercial or Industrial Construction Service. - HELD THAT: - The Tribunal found from the certificate issued by the Punjab Mandi Board that the contract awarded to the appellant was inclusive of the cost of materials and that no material was supplied by the Board; accordingly the services were rendered along with supply of materials. Applying the ratio of the Hon'ble Supreme Court in Larsen & Toubro, services rendered with materials fall within the ambit of Works Contract Service and cannot be taxed as Commercial or Industrial Construction Service. Reliance was placed on the Tribunal's earlier decisions in Mehta Construction Company and Arvindra Electricals which followed the same principle. On this basis the impugned classification and demand under Commercial or Industrial Construction Service were held unsustainable and set aside. [Paras 7]

The services are Works Contract Service; demand confirmed under Commercial or Industrial Construction Service is quashed.

Exemption for services to a local authority under Notification No. 25/2012 ST dated 20.06.2012 - works carried out for Market Committee as a body corporate / local authority - Applicability of exemption under Notification No. 25/2012 ST to works provided to the Market Committee (Punjab Mandi Board). - HELD THAT: - The appellant contended that the services were provided to the Punjab Mandi Board, which is a body corporate and a local authority under the relevant State Act, and therefore eligible for the exemption in Notification No. 25/2012 ST. The Tribunal noted the submissions and decisions in earlier Tribunal orders which recognized that services provided to government organizations or local authorities are covered by the said notification. In the factual matrix where the recipient is a statutory market committee/local authority, the exemption was held relevant to the appellant's case, supporting the conclusion that the tax demand could not be sustained. [Paras 5, 8]

Service provided to the Market Committee/local authority attracts the exemption under Notification No. 25/2012 ST and therefore militates against the sustained demand.

Extended period of limitation for wilful evasion not invokable - limitation under Section 73 - Whether the extended period of limitation for recovery of service tax is invokable against the appellant. - HELD THAT: - The Tribunal observed there was no specific allegation or material to show that the appellant wilfully evaded payment of service tax. The services were rendered to organizations not engaged in commerce, industry or business, and therefore the conditions for invoking the extended period of limitation were absent. Consequently the Tribunal held that the extended period of limitation could not be invoked to sustain the demand. [Paras 9]

Extended period of limitation is not applicable; limitation bar defeats invocation of extended limitation.

Final Conclusion: The impugned order confirming service tax demand and penalties is unsustainable: the services were Works Contract Service (not Commercial/Industrial Construction Service), applicable exemptions and absence of wilful evasion preclude the sustained demand for the periods in dispute; the appeals are allowed and the impugned order set aside with consequential relief as per law.

Inclusion of reimbursements and free supplies in taxable value under Section 67 of the Finance Act, 1994 - Reverse charge mechanism - Consideration for rendering services - Notional value of rent free accommodation - Ultra vires invalidation of Rule 5 of the Service Tax (Determination of Value) Rules - Limitation and extended period for demand

Inclusion of reimbursements and free supplies in taxable value under Section 67 of the Finance Act, 1994 - Consideration for rendering services - Notional value of rent free accommodation - Reverse charge mechanism - Ultra vires invalidation of Rule 5 of the Service Tax (Determination of Value) Rules - Expenses incurred by the service recipient (reimbursements and facilities such as accommodation, medical, vehicles, telephone, stationery, etc.) are not includible in the gross value of security services provided by CISF for the purpose of service tax under Section 67. - HELD THAT: - The Tribunal held that reimbursements and free supplies made by the service recipient to the service provider do not constitute consideration received by the service provider for assessing service tax under Section 67. The decision follows and is bound by the Supreme Court rulings in Intercontinental Consultants & Technocrats and Bhayana Builders which held that value of free supplies cannot be added over and above the contract value to arrive at taxable value. Identical conclusions of various Benches of this Tribunal and High Courts applying the same principle to CISF engagements were considered and followed. The Tribunal noted that where expenses are reimbursed on actuals and there is MOU/pre arrangement, the Revenue's reliance on alternative precedents does not justify inclusion. Consequently, the demand to include such reimbursements and facilities in the gross value under reverse charge could not be sustained and the impugned order was set aside on merits. [Paras 4, 5, 13]

Allow appeal on merits and hold that the said reimbursements and facilities are not includible in the gross value for service tax under Section 67.

Limitation and extended period for demand - Consideration for rendering services - Demand confirmed for the extended period (01.04.2009 to 31.03.2011) is time barred and unsustainable. - HELD THAT: - The Tribunal found that the appellant is a Government of India undertaking and had bona fide belief, supported by prevailing judicial decisions (Intercontinental and Bhayana Builders), for not including reimbursements and rent free accommodation in taxable value. There was no evidence of fraud, suppression or mens rea warranting invocation of the extended period. In view of the absence of positive concealment and the then existing judicial position, the confirmed demand for the stated period was held to be hit by limitation and was set aside. [Paras 14]

Set aside confirmed demand for the period 01.04.2009 to 31.03.2011 on limitation grounds.

Final Conclusion: The appeal is allowed: on the merits the reimbursements and facilities provided by the service recipient to CISF are not includible in the gross value for service tax under Section 67, and the confirmed demand for 01.04.2009 to 31.03.2011 is also set aside as time barred; consequential reliefs to the appellant shall follow as per law.

Effect of corporate insolvency resolution process on pre CIRP government dues - bar on claims where creditor did not lodge claim during CIRP - application of the ratio in Ghanshyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. - Insolvency and Bankruptcy Code, 2016 - claim procedure and consequences of non claim under CIRP

Effect of corporate insolvency resolution process on pre CIRP government dues - bar on claims where creditor did not lodge claim during CIRP - application of the ratio in Ghanshyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. - Disposal of departmental demands where the company underwent CIRP and the Department did not lodge claims in the insolvency process. - HELD THAT: - The Court recorded that the respondent company was admitted to CIRP (order dated 15.01.2020) and that a resolution plan was approved on 23.12.2022 providing for payments to operational creditors and government dues claimed/lodged in the CIRP. It was further noted that the appellants/Department had not lodged claims in respect of the assessment years under challenge. In view of these facts and by applying the ratio of this Court's decision in Ghanshyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., the Court concluded that the departmental demands could not be sustained where no claim had been made in the CIRP and therefore disposed of the appeals accordingly. The Court expressly left open the question of law on the merits of the case.

Appeals disposed of by applying the ratio of Ghanshyam Mishra (claims not lodged in CIRP cannot be entertained), with the question of law on merits left open.

Final Conclusion: Appeals disposed of in terms of the Court's earlier ratio in Ghanshyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. because the respondent underwent CIRP and the Department did not lodge claims in that process; merits question left open.

Fixation of special rate of value addition - computation of actual value addition from audited financial statements - apportionment of sale value to manufacturing units based on stock transfer/central excise clearances - legitimacy of unit-wise sale value allocation for special rate fixation - area-based exemption and special rate under the exemption notification

Fixation of special rate of value addition - computation of actual value addition from audited financial statements - apportionment of sale value to manufacturing units based on stock transfer/central excise clearances - Whether rejection of applications for fixation of special rate for Financial Year 2010-11 was justified solely because the assessee apportioned company-level sale value to individual manufacturing units on the basis of excise clearances/stock transfer ratio - HELD THAT: - The Tribunal examined the methodology adopted by the appellant whereby sale value for unit-wise computation of actual value addition was derived from audited financial statements of the company and apportioned to respective units on the basis of stock transfer/central excise clearances, noting that the goods were cleared to and sold from depots rather than directly from the manufacturing units. The adjudicating authority had rejected the applications for 2010-11 on the ground that the appellant allocated total company sales to units using excise duty-based apportionment. Observing that the identical controversy had been previously decided by this Tribunal in favour of an assessee adopting an all-India average/stock-transfer based allocation (as extracted in the cited decision), the Tribunal held that computing gross sale value by applying average selling rate to unit clearances and extracting figures from audited balance sheets conforms with the methodology envisaged by the Exemption Notifications for calculating actual value addition. Reliance on that precedent led to the conclusion that mere apportionment of audited company sales to units on the stated basis does not furnish a valid ground for rejection of the special-rate application. Consequently, the impugned orders rejecting fixation of special rates for 2010-11 were found legally untenable and were set aside. [Paras 9, 10]

Impugned orders rejecting fixation of special rate for Financial Year 2010-11 set aside; appeals allowed.

Final Conclusion: The Tribunal allowed the appeals and set aside the Commissioner's orders rejecting fixation of special rates for Financial Year 2010-11, holding that unit-wise sale value derived from audited company financials and apportioned on the basis of stock transfer/clearances is an acceptable basis for computing actual value addition under the Exemption Notifications.

Admissibility of statements recorded under Section 14 without examination-in-chief under Section 9D - Use of electricity consumption for quantification of clandestine production - Remand for de novo adjudication and right to cross-examination

Use of electricity consumption for quantification of clandestine production - Whether the Department's method of working out average electricity consumption for November 2010 to March 2011 and using that average to quantify clandestine manufacture for other periods is permissible - HELD THAT: - The Tribunal examined the distinction between the method rejected in R.A. Castings (which applied a formula by Dr. Batra) and the method employed here. In R.A. Castings the court rejected a formulaic application across diverse manufacturers and machinery. In the present case, Revenue did not apply Dr. Batra's formula; instead it computed actual electricity consumption for five months (November 2010 to March 2011) from seized daily records and derived an average which was used for quantification for the other disputed periods. The Tribunal found this methodology materially different from the rejected formulaic approach and therefore not automatically inapplicable. The seized documents (daily sale/purchase records, dispatch details, lorry receipts and payment slips) provide evidentiary support for clandestine clearance in the five-month period relied upon for computing average consumption. [Paras 8, 9, 10, 11]

The Department's method of computing average electricity consumption from the seized five-month period and using it for quantification in the other disputed periods is not vitiated by the R.A. Castings rationale and is not rejected on that ground.

Admissibility of statements recorded under Section 14 without examination-in-chief under Section 9D - Remand for de novo adjudication and right to cross-examination - Whether statements recorded under Section 14 can be relied upon in adjudication without examination-in-chief and opportunity for cross-examination, and what remedial course should follow - HELD THAT: - The Tribunal accepted the appellant's contention that several recorded statements were relied upon by Revenue but the makers were not made available for cross-examination during adjudication. The Tribunal referred to authority emphasising that statements recorded during investigation, if not produced for examination-in-chief before the adjudicating authority and made available to the assessee for testing by cross-examination, cannot be relied upon. In view of the absence of opportunity to cross-examine the makers of statements and in the interest of natural justice, the Tribunal directed that the adjudication be reopened so that Revenue may produce and examine-in-chief the makers of such statements, provide copies of that examination-in-chief to the appellant, and permit the appellant to seek and conduct cross-examination. The Tribunal therefore remitted the matter to the Adjudicating Authority for de novo adjudication on an open remand basis and permitted the appellant to advance all merits and documentary evidence. [Paras 12, 13, 14, 15]

The matter is remanded for de novo adjudication; statements recorded under Section 14 which the Revenue intends to rely upon must be produced for examination-in-chief and made available for cross-examination, failing which such statements cannot be admitted in evidence.

Final Conclusion: Appeal remitted to the Adjudicating Authority for de novo adjudication on open remand: Department permitted to produce makers of investigation statements for examination-in-chief and furnish the same to the appellant for cross-examination; appellant may place all merits and documentary evidence before the Adjudicating Authority, which is directed to complete proceedings within four months of receipt of this order.

CENVAT credit - capital goods - parts, components and accessories - user test - eligibility of credit for support structures - pollution control equipment - storage tank versus storage bunker - concrete sleepers and railway sleepers - extended period of limitation - suppression with intent to evade - public sector undertaking and mens rea

Capital goods - parts, components and accessories - user test - eligibility of credit for support structures - pollution control equipment - storage tank versus storage bunker - cable trays - Eligibility of CENVAT credit on structural items (MS angles, sheets, plates, channels, cable trays, storage bunker and support structures) as capital goods or as inputs/components/supports - HELD THAT: - The Tribunal examined end use evidence, including a Chartered Engineer's certificate and annexure verifying that most impugned structural items were fabricated, received and erected to serve as parts, components, accessories or technological/support structures necessary to put capital goods into effective use. Applying the user test as adopted in earlier precedents, items that form integral supports for pollution control equipment, storage functions (storage bunker treated as storage tank for these purposes), cable trays as accessories for machines, and other structural members used on site to assemble or hold machinery were held to qualify for credit. The Tribunal accepted that credit may alternatively be claimed as inputs where the capital goods classification is not met. However, following detailed examination of the Annexure, the Tribunal identified specific invoices/items which were used for main receiving sub station, electrical protective wiring, earthing and other electrical installations, and held those items to be not eligible as capital goods or accessories because they serve electrical/sub station functions distinct from putting manufacturing machinery or pollution control equipment into effective use. [Paras 7, 8, 9, 10, 12]

Credit allowed on the structural items used to put capital goods into effective use except for specifically identified items used for electrical sub station, earthing and concrete sleepers which are not eligible.

Concrete sleepers and railway sleepers - user test - Eligibility of credit on railway sleepers and concrete sleepers - HELD THAT: - The Tribunal reviewed the Annexure and the end use certification and distinguished between railway tracks/sleepers. While railway track installations used for internal transportation may qualify under the user test in some precedents, the Tribunal found that concrete sleepers shown in the appellant's annexure were used in a manner that does not meet the definition of capital goods or accessories and therefore are not admissible for credit on merits. [Paras 11]

Credit disallowed on concrete sleepers; railway track related credit treated as not admissible insofar as concrete sleepers are concerned.

Extended period of limitation - suppression with intent to evade - public sector undertaking and mens rea - Invocation of extended limitation period based on allegation of suppression with intent to evade duty - HELD THAT: - The Show Cause Notice alleged suppression with intent to evade for the period May 2008 to January 2013. The Tribunal found no positive act of suppression on the record: the appellant had filed periodical returns disclosing credit availed, audits were conducted without adverse findings, and the Department did not adduce evidence to rebut the Chartered Engineer's verification. Given the appellant is a public sector undertaking and in the absence of material establishing wilful suppression or mens rea, the extended period could not be invoked. The Tribunal followed authorities requiring clear proof of deliberate suppression before invoking extended limitation. [Paras 13, 14, 15]

Extended period of limitation set aside; demand for the extended period cannot be sustained.

Final Conclusion: The appeal is partly allowed: CENVAT credit is permitted on the majority of the structural items and supports that were certified and found to put capital goods into effective use, while credit is disallowed on specified items used for electrical sub station, earthing and concrete sleepers; the demand raised by invoking the extended period is set aside. Consequential reliefs, if any, to follow.

Exemption under project import - goods meant for Drinking Water Supply Project under International Competitive Bidding - certification by appropriate authority - absence of contrary evidence - binding effect of earlier appellate and Supreme Court decisions on identical facts

Exemption under project import - goods meant for Drinking Water Supply Project under International Competitive Bidding - certification by appropriate authority - absence of contrary evidence - binding effect of earlier appellate and Supreme Court decisions on identical facts - Whether the appellant was entitled to exemption for clearances of HDPE pipes made to the drinking water supply project and whether the demand of duty, interest and penalty could be sustained in view of the earlier appellate and Supreme Court decisions on identical facts. - HELD THAT: - The Tribunal had earlier held that the goods cleared by the appellant were meant for use in a notified Drinking Water Supply Project executed pursuant to international competitive bidding, and that such use was certified by the appropriate authority; in absence of any contrary evidence the exemption under the project import notifications could not be denied. That decision was affirmed by the Hon'ble Supreme Court. The present demand and the impugned order are founded on the same facts and allegations as were considered and decided in the earlier proceedings. Applying the binding effect of the Tribunal's decision as affirmed by the Supreme Court on the identical factual matrix, the demand for duty, interest and penalties cannot be sustained. Consequently the impugned order confirming the demand is set aside. [Paras 6, 7, 8]

The demand confirmed in the impugned order is set aside and the appeal is allowed with consequential relief, the appellant being entitled to the exemption as held earlier and affirmed by the Supreme Court.

Final Conclusion: On the identical facts decided earlier by the Tribunal and affirmed by the Supreme Court that the clearances were for a drinking water supply project (ICB) and certified as such, the present demand for duty, interest and penalty cannot be sustained; the impugned order is set aside and the appeal is allowed with consequential relief.

Refund of unutilized CENVAT credit - Section 142(3) of the CGST Act, 2017 - disposal of transitional refund claims in accordance with existing law - no creation of new substantive right by transition provisions - refund under existing law governed by Section 11B of the Central Excise Act, 1944 and CENVAT Credit Rules, 2004 - remand for fresh disposal on merits

Section 142(3) of the CGST Act, 2017 - refund of unutilized CENVAT credit - disposal of transitional refund claims in accordance with existing law - refund under existing law governed by Section 11B of the Central Excise Act, 1944 and CENVAT Credit Rules, 2004 - no creation of new substantive right by transition provisions - Entitlement to cash refund under Section 142(3) of CGST Act, 2017 for service tax paid under reverse charge mechanism after the appointed day where transitional credit could not be carried forward due to late receipt/booking of bills. - HELD THAT: - A plain reading of Section 142(3) shows that refund claims of CENVAT credit are to be disposed of in accordance with the provisions of the existing law and that any amount eventually accruing is to be paid in cash; the provision does not itself create a new substantive right to refund. The Court examined the CENVAT Credit Rules, 2004 and the Central Excise law and found no provision for cash refund of unutilized/accumulated CENVAT credit except in specified situations (such as export) governed by Rule 5/5A/5B and subject to conditions and timelines. Where the existing law did not permit refund (or where the right under the existing law had been extinguished by failure to claim within prescribed time), Section 142(3) cannot be invoked to confer a new entitlement. The factual matrix here-late receipt/booking of invoices for pre-appointed-day services and payment of service tax under reverse charge after 01.07.2017-does not alter that legal position. The Tribunal held that earlier decisions remanding matters for merits (for example, Ganges International ) do not decide the legal entitlement and that decisions addressing only maintainability (for example, the Bosch reference) are not pertinent to entitlement. Where a High Court decision (Rungta Mines ) has held that Section 142(3) does not create a new right and that refunds under the existing law are governed by Section 11B/Rule 5, that principle is binding and applicable to the facts of this case. Applying that principle, the appellant had no independent right to cash refund under Section 142(3) for the service-tax amount paid under reverse charge post the appointed day merely because transitional credit could not be availed. [Paras 8, 9, 16, 17]

Refund claim dismissed; Section 142(3) does not entitle the appellant to cash refund of the service tax paid under reverse charge where no right to refund existed under the existing law.

Final Conclusion: The appeal is dismissed: Section 142(3) does not create a new right to cash refund of unutilized CENVAT credit paid under reverse charge after the appointed day where the existing law provided no entitlement to such refund.

Admissibility of Cenvat credit - burden of proof under Rule 9(5) of Cenvat Credit Rules, 2004 - user test - components/parts of capital goods - goods embedded to earth and excisability - Chartered Engineer's certificate as evidence

Admissibility of Cenvat credit - user test - goods embedded to earth and excisability - Whether the Tribunal's earlier order in the appellant's own case (for an earlier period) renders the present case no longer res integra and determinative of the present appeal - HELD THAT: - The Tribunal's earlier order for the period September 2010 to July 2012 dealt with similar items and accepted Chartered Engineer's certificate where receipt and use for fabrication were not contested; that order applied the user test. However, the rules and factual matrix for the present period (November 2016 to June 2017) differ, notably because the definition and treatment of capital goods changed after 01.07.2012 and because the present adjudication raised specific doubts about actual usage and the applicability of Rule 9(5). The Tribunal therefore held that the earlier order cannot be applied in toto to the present appeal where (a) rule position differs, (b) the claim here is under the category of capital goods (not inputs as earlier), and (c) the format and particulars of the Chartered Engineer's certificate and the sufficiency of corroborative records are different. The Tribunal also reviewed authorities holding that goods embedded to earth do not automatically disentitle credit where the user test is satisfied, but found that the factual differences and evidentiary gaps in the present case preclude wholesale reliance on the prior decision. [Paras 9, 10, 11, 12]

Earlier Tribunal order is not fully applicable to the present appeal and the plea that the issue is no longer res integra is not tenable

Components/parts of capital goods - admissibility of Cenvat credit - goods embedded to earth and excisability - Whether the impugned items fall within the definition of capital goods and are eligible for Cenvat credit - HELD THAT: - On the material before it, the Tribunal found that the listed items, in principle, could be considered as components or parts of capital goods under Rule 2(a)(A) if actually used as such in the fabrication of capital equipment specified under the rule. The Revenue's contention that goods used in fabrication of equipment embedded to earth cease to be capital goods was rejected as a general proposition: reliance on authorities was noted which hold that embedding to earth does not automatically bar credit if the user test is satisfied. The impugned order tacitly accepted that the items could be components; the real controversy is factual-whether the items were actually used as components (and not for excluded end uses such as foundation/construction). Items used for foundation and excluded uses fall outside the definition and are not admissible. Thus eligibility depends on proof of actual utilisation as components of capital goods used in manufacture of excisable products. [Paras 12, 13, 14]

The items may be capital goods if proved to have been used as components in fabrication of capital equipment; mere embedding to earth does not automatically bar credit, but items used for excluded purposes (e.g., foundation) are not admissible

Chartered Engineer's certificate as evidence - burden of proof under Rule 9(5) of Cenvat Credit Rules, 2004 - admissibility of Cenvat credit - Whether the Chartered Engineer's certificate produced by the appellant suffices to discharge the onus under Rule 9(5) and establish actual usage of the items as components of capital goods - HELD THAT: - The Tribunal examined the Chartered Engineer's certificate and found it linked quantities to main equipment and described intended uses, but lacked critical corroborative particulars - item specifications (size, material grades), records of issuance, verification of registers, drawings/designs, and documentary checks relied upon by the certifying engineer. Given multiple possible uses of such generic items and statutory exclusion of certain end uses by Explanation 2 to the definition of 'input', the Tribunal held that mere production of the certificate is insufficient to discharge the burden placed on the manufacturer by Rule 9(5), which requires maintenance and production of records concerning receipt, issuance, consumption and inventory and casts the burden of proof on the manufacturer. Reliance was placed on precedents holding that a certificate is a piece of evidence that requires corroboration and cannot be acted upon in isolation. Consequently, the Tribunal found that corroborative documents must be verified before admissibility and quantum of credit can be finally determined. [Paras 13, 14, 15, 16, 17]

The Chartered Engineer's certificate alone does not discharge the onus under Rule 9(5); corroborative records are required to prove actual use and admissibility of credit

Final Conclusion: Order of Commissioner (Appeals) set aside; matter remanded to the Original Adjudicating Authority to verify and scrutinise corroborative documents supporting the Chartered Engineer's certificate, redetermine admissibility and quantum of Cenvat credit for the period November 2016 to June 2017, and reconsider imposition of penalty. Appellant to produce necessary documents within three months; Authority to pass a speaking order after hearing within three months thereafter.

Excisability of waste/residue arising during the process of manufacture - treatment of non-excisable goods cleared for consideration as exempted goods for the purpose of reversal of input tax credit - applicability of Rule 6(3) of the Cenvat Credit Rules, 2004 - appropriation of amounts collected in excess of duty under Section 11D(1A) - invocation of extended period of limitation for recovery of duty - effect of rescission of a Board Circular consequent to a decision of the Hon'ble Supreme Court

Treatment of non-excisable goods cleared for consideration as exempted goods for the purpose of reversal of input tax credit - applicability of Rule 6(3) of the Cenvat Credit Rules, 2004 - effect of rescission of a Board Circular consequent to a decision of the Hon'ble Supreme Court - Whether reversal of cenvat credit under Rule 6(3) was exigible on Zinc Ash by treating it as an exempted (non-excisable) good in view of the impugned Circular - HELD THAT: - The adjudication rested upon the Department's reliance on the Supreme Court decision in Union of India v. DSCL Sugar Ltd and Board Circular No. 1027/15/2016, which treated certain by-products/ wastes cleared for consideration as non-excisable and therefore as 'exempted goods' for Rule 6. The Tribunal noted that subsequent to those developments the Supreme Court in Union of India v. Indian Sucrose Limited declared the earlier Circular unsustainable and the Board rescinded Circular No. 1027/15/2016 by issuing Circular No. 1084/05/2022 dated 07.07.2022. Applying that legal change, the Tribunal held that the foundational administrative instruction on which the demand was based has been nullified and that Rule 6(3) could not be applied to require reversal of credit in the facts of this case. The Tribunal also observed related factual aspects (e.g., importers paid CVD and the assessee had paid excise on sales) in rejecting the Department's approach. [Paras 6, 7, 8]

Demand for reversal of cenvat credit under Rule 6(3) based on the rescinded Circular/earlier view was not sustainable and was set aside.

Appropriation of amounts collected in excess of duty under Section 11D(1A) - excisability of waste/residue arising during the process of manufacture - Whether appropriation of the duty collected by the appellant under Section 11D(1A) was legally tenable where the impugned proceedings characterised Zinc Ash as non-excisable - HELD THAT: - The Tribunal examined the nature of Zinc Ash vis-a -vis excisability and the use of Section 11D(1A) to appropriate amounts alleged to have been charged and collected without authority of law. It found an internal inconsistency in the Department's stance: Section 11D applies to excisable goods that are exempt or nil-rated, whereas the Department's case treated Zinc Ash as non-excisable. Further, the Tribunal recorded that the appellant had paid excise/duties on sales (and had paid CVD on imports), and therefore appropriation under Section 11D(1A) founded on the impugned classification was not legally sustainable in the circumstances of this case. [Paras 8]

Appropriation under Section 11D(1A) was not sustainable and was set aside.

Invocation of extended period of limitation for recovery of duty - Whether invocation of the extended period of limitation for the period March 2015 to June 2017 was justified - HELD THAT: - The Tribunal applied settled precedent that extended limitation can be invoked only upon proof of positive acts such as willful suppression, fraud, collusion or deliberate mis-statement. On the material, the assessee had recorded transactions in books, had been subject to audits (including an internal audit report), and had paid duty suo motu; there was no evidence of deliberate suppression or positive mis-conduct. Relying on established case law principles, the Tribunal held that the mens rea required for invoking extended limitation was absent and that the demand was therefore time-barred. [Paras 10]

Invocation of the extended period of limitation was unwarranted; proceedings were time-barred and the extended period could not be applied.

Excisability of waste/residue arising during the process of manufacture - treatment of non-excisable goods cleared for consideration as exempted goods for the purpose of reversal of input tax credit - Whether payment of CVD on import and payment of excise on sale precluded the Department's demand and justified the assessee's conduct in paying duty on Zinc Ash - HELD THAT: - The Tribunal noted that on import the appellant paid CVD and SAD, thereby enabling claim of cenvat credit, and that the appellant also discharged excise duty on sales and on captive consumption. These facts undermined the Department's contention that the assessee had improperly avoided tax or misused credit; payment of duty and availability/use of credit on import/sale indicated no illegality in the assessee's transactions. The Tribunal treated these factual circumstances as reinforcing the legal conclusion that the demand founded on the rescinded Circular and Rule 6 methodology was unsustainable. [Paras 8, 9]

Payment of CVD on import and excise on sale militated against the Department's demand; no illegality found in the assessee's payment of duty.

Final Conclusion: Following the Supreme Court's subsequent decision and the Board's rescission of the earlier Circular, and having found no wilful suppression warranting extended limitation, the Tribunal allowed the appeals, set aside the demand, interest, penalty and appropriation as unsustainable in law and granted consequential relief.